<PAGE>

                     U.S. Securities and Exchange Commission

                             Washington, D.C. 20549

                                   FORM 10-KSB

(Mark One)
    [ X ]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2001
                          -----------------

    [   ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934

             For the transition period from _________ to __________

                         Commission file number: 0-27980
                                                 -------

                          POTTERS FINANCIAL CORPORATION
                          -----------------------------
                 (Name of small business issuer in its charter)

                 OHIO                                    34-1817924
     ---------------------------              ---------------------------------
    (State or other jurisdiction of                   (I.R.S. Employer
     incorporation or organization)                  Identification No.)

                    519 Broadway, East Liverpool, Ohio 43920
                    ----------------------------------------
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number: (330) 385-0770
                                               --------------

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

      Securities registered pursuant to Section 12(g) of the Exchange Act:
                           Common Shares, no par value
                           ---------------------------
                                (Title of Class)

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

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

           The issuer's revenues for the fiscal year ended December 31, 2001,
totaled $11,352,000.

           Based upon information regarding the last sales price provided by
The Nasdaq Stock Market, the aggregate market value of the voting stock held by
non-affiliates of the Registrant on March 11, 2002, was $16,229,039.

                      As of March 11, 2002, 998,614 of the
               issuer's common shares were issued and outstanding.


                                       1
<PAGE>


                                     PART I


ITEM 1.       DESCRIPTION OF BUSINESS

GENERAL

On September 6, 2001, an Agreement and Plan of Merger was executed among Potters
Financial Corporation ("PFC"), Potters Bank, United Community Financial Corp.
and The Home Savings and Loan Company of Youngstown, Ohio. Under the terms of
the Agreement and Plan of Merger, United Community agreed to pay $22.00 per
share in cash to PFC shareholders. At a special meeting of shareholders held on
January 24, 2002, the shareholders of PFC approved the transaction. Regulatory
approval has been received, and the parties are preparing to close the
transaction on April 1, 2001, although no assurance can be provided that the
closing will, in fact, occur or when it will occur. Upon the closing, a
subsidiary of Home Savings will merge into PFC, and PFC will dissolve into Home
Savings. Potters Bank will then merge into Home Savings, and Potters Bank
branches will become branches of Home Savings.

PFC is a unitary savings and loan holding company, incorporated on August 30,
1995 under the laws of the State of Ohio. Potters Bank is a state-chartered
savings bank also incorporated under Ohio law. Potters Bank provides financial
products and services through its three offices in and near East Liverpool,
Ohio, a full-service banking facility in Beaver, Pennsylvania and a loan
production office in Boardman, Ohio. Potters Bank was incorporated in 1889 as
The Potters Savings and Loan Company but changed its name in August 1998 to
Potters Bank. Both entities are headquartered at 519 Broadway in East Liverpool,
Ohio.

PFC's activities have been limited primarily to holding the common shares of
Potters Bank. Consequently, the following discussion focuses primarily on the
business of Potters Bank.

As a unitary savings and loan holding company, PFC is subject to regulation,
supervision and examination by the Office of Thrift Supervision of the United
States Department of the Treasury (the "OTS"). As a savings bank, Potters Bank
is regulated, supervised and examined by the Federal Deposit Insurance
Corporation (the "FDIC") and the Ohio Division of Financial Institutions of the
Ohio Department of Commerce (the "Division"). Deposits are insured by the FDIC
up to applicable limits. Potters Bank is also a member of the Federal Home Loan
Bank ("FHLB") of Cincinnati.

Primary lending products are residential and commercial real estate loans, home
equity lines of credit, and commercial and consumer loans. Substantially all
loans are secured by specific collateral. In addition to loans, funds are
invested in securities, a portfolio of which is maintained for liquidity
management purposes. Lending activities are primarily funded through deposits.
Primary deposit products include a variety of checking, savings and certificate
of deposit accounts. See "Lending Activities". At December 31, 2001, Potters
Bank employed a total of 62 individuals and had 47 full-time employees.

Income is derived primarily from interest and fees earned in connection with its
lending activities, and its principal expenses are interest paid on deposits and
borrowings and operating expenses.

In addition to the historical financial information included herein, the
disclosures in this Form 10-KSB contain forward-looking statements that involve
risks and uncertainties. Economic circumstances, operations and its actual
results could differ significantly from those discussed in these forward-looking
statements. Some of the factors that could cause or contribute to such
differences are discussed herein but also include changes in the economy and
interest rates in the nation and PFC's general market area. See Exhibit 99,
"Safe Harbor Under the Private Securities Litigation Reform Act of 1995," which
is incorporated herein by reference.




                                       2
<PAGE>


MARKET AREA

Headquartered in East Liverpool, Ohio, Potters Bank conducts business through
three branch offices located in and near East Liverpool, a full-service banking
facility in Beaver, Pennsylvania and a loan production office in Boardman, Ohio.
The primary market area consists of the City of East Liverpool, Ohio and
includes portions of Columbiana and Jefferson Counties in northeastern Ohio,
northern Hancock County in West Virginia and Beaver and northern Allegheny
County in Pennsylvania. The Boardman loan production office focuses on
originating loans in Mahoning and Trumbull Counties in northeastern Ohio and the
Beaver office focuses on Beaver and Allegheny Counties in Pennsylvania. Potters
Bank opened its Beaver office in July 2001.








                                       3
<PAGE>


SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA

The following table sets forth certain information concerning the financial
condition, earnings and other data at the dates and for the periods indicated:

<TABLE>
<CAPTION>
                                                               At December 31,
                                      ---------------------------------------------------------------
                                          2001          2000         1999         1998         1997
                                      -----------  -----------  -----------  -----------  -----------
                                                           (Dollars in thousands)
<S>                                   <C>          <C>          <C>          <C>          <C>
SELECTED FINANCIAL CONDITION
DATA:

Total amount of:
   Assets                             $   146,610  $   151,435  $   143,736  $   134,474  $   122,637
   Cash and cash equivalents                6,951        4,820        7,280       11,867        3,816
   Securities available for sale           17,849       21,177       22,751       23,714        5,474
   Securities held to maturity (1)          1,362        1,274        1,184          991       28,017
   Loans receivable, net                  115,500      119,903      108,360       94,911       82,093
   Deposits                               114,651      117,792      110,335      104,644      100,094
   Federal Home Loan Bank
    advances                               17,500       19,500       21,300       17,247        9,993
   Shareholders' equity,
    substantially restricted               13,277       12,333       11,020       11,157       11,006
</TABLE>

-------------

(1)  Securities held to maturity include investment in stock in the FHLB.

<TABLE>
<CAPTION>
                                                         Years ended December 31,
                                      -------------------------------------------------------------
                                        2001         2000          1999         1998         1997
                                      ---------    ---------    ---------    ---------    ---------
                                                          (Dollars in thousands)
<S>                                   <C>          <C>          <C>          <C>          <C>
SUMMARY OF OPERATIONS:

Interest income                       $  10,691    $  11,341    $  10,147    $   9,262    $   8,558
Interest expense                          5,848        6,340        5,241        5,032        4,671
                                      ---------    ---------    ---------    ---------    ---------
Net interest income                       4,843        5,001        4,906        4,230        3,887
Provision for loan losses                    60           --          (75)          --         (485)
                                      ---------    ---------    ---------    ---------    ---------
Net interest income after
 provision for loan losses                4,783        5,001        4,981        4,230        4,372
Noninterest income:
 Gain on sales of loans,
  securities and other assets                73           17           43          167           33
 Other noninterest income                   588          595          502          409          348
                                      ---------    ---------    ---------    ---------    ---------
Total noninterest income                    661          612          545          576          381
Total noninterest expense                 3,688        3,581        3,460        3,098        2,927
                                      ---------    ---------    ---------    ---------    ---------
Income before income tax                  1,756        2,032        2,066        1,708        1,826
Income tax expense                          518          585          720          596          629
                                      ---------    ---------    ---------    ---------    ---------

Net income                            $   1,238    $   1,447    $   1,346    $   1,112    $   1,197
                                      =========    =========    =========    =========    =========

Earnings per share:
  Basic                               $    1.25    $    1.46    $    1.32    $    1.03    $    1.08
                                      =========    =========    =========    =========    =========

  Diluted                             $    1.20    $    1.43    $    1.29    $     .99    $    1.05
                                      =========    =========    =========    =========    =========
</TABLE>



                                       4
<PAGE>

<TABLE>
<CAPTION>
SELECTED FINANCIAL RATIOS
 AND OTHER DATA:

                                                  At or for the year ended December 31,
                                      -------------------------------------------------------------
                                        2001         2000          1999         1998         1997
                                      ---------    ---------    ---------    ---------    ---------
<S>                                      <C>          <C>           <C>          <C>          <C>
Performance ratios:
 Return on assets
  (ratio of net income
   to average total assets)              0.83%        0.96%         0.97%        0.87%        1.00%

Interest rate spread
 information:
 Average during period                   3.31         3.30          3.56         3.28         3.19
 End of period                           3.93         3.77          3.92         3.64         3.37

Net interest margin (ratio of
 net interest income to average
 interest-earning assets)                3.50         3.50          3.73         3.49         3.43

Ratio of operating expense
 to average total assets                 2.47         2.39          2.49         2.43         2.45

Return on equity
 (ratio of net income
 to average equity)                      9.21        12.10         11.85         9.58        10.72

Dividend payout ratio (ratio of
 dividends declared per share to
 net income per share)                  37.91        26.90         23.56        20.14        14.23

Asset quality ratios:
 Nonperforming assets
  to total assets at end
  of period                              0.78         0.72          0.22         0.17          0.17

Allowance for loan losses
 to nonperforming loans                193.54       233.53        644.62       987.05      1,035.27

Allowance for loan losses
 to total loans                          1.48         1.61          1.85         2.28          2.54

Capital ratios:
 Shareholders' equity to total
  assets at end of period                9.06         8.14          7.67         8.30          8.97

Average shareholders' equity
 to average assets                       9.00         7.97          8.17         9.10          9.34

Ratio of average interest-
 earning assets to average
 interest-bearing liabilities          104.60%      104.04%       104.07%      105.13%       105.60%

Number of full-service offices           4            3             3            3            3
</TABLE>



                                       5
<PAGE>


LENDING ACTIVITIES

GENERAL. Potters Bank concentrates on the origination and purchase of
conventional real estate loans secured by one-to-four family homes. Loans to
individuals to finance the construction of their primary residence and real
estate loans on multifamily properties containing five units or more are also
offered. In addition, Potters Bank makes loans secured by nonresidential real
estate, commercial loans and a limited amount of acquisition and development and
commercial construction loans.

Special real estate loans are originated for homebuyers recommended by the
Community Action Agency of Columbiana County, Ohio. One such program provides
loans to first time homebuyers with 3% down, each of which is insured by private
mortgage insurance up to 80% of the property value. In addition to real estate
lending, loan originations also include commercial loans and consumer loans,
including home equity lines of credit, automobile loans, loans secured by
deposit accounts and unsecured loans.

In order to maintain planned loan growth, loans have been purchased over the
last three years to supplement local loan originations. At December 31, 2001,
the loan portfolio included approximately $16.4 million, or 14.0% of total
loans, of one-to-four family real estate loans purchased. Of such purchased
loans, $8.2 million were secured by properties located in northwestern Ohio,
$1.7 million were secured by properties in southwestern Ohio and $2.7 million
were secured by properties located in Hilton Head, South Carolina. As of
December 31, 2001, multifamily and nonresidential real estate loan purchases
totaling $2.0 million were secured by properties located in southwest Ohio, $4.6
million in northwest Ohio, $8.8 million locally. The loan portfolio also
contains a number of loans purchased from a bank in Indiana, including $3.7
million in one-to-four family real estate loans, $4.6 million of first mortgage
home equity loans and $2.9 million of second mortgage loans from various parts
of the country.

The economic environment of the East Liverpool, Ohio area has remained stable
over the last few years with some inflow of new business. Area efforts continue
in the revitalization of East Liverpool, and business and residential
construction has increased, especially in the Calcutta area.


                                       6
<PAGE>


LOAN PORTFOLIO COMPOSITION. The following table presents certain information in
respect of the composition of the loan portfolio at the dates indicated:

<TABLE>
<CAPTION>
                                                              At December 31,
                                            ------------------------------------------------
                                                     2001                       2000
                                                     ----                       ----
                                                           Percent                   Percent
                                                          of total                  of total
                                              Amount        loans       Amount        loans
                                              ------        -----       ------        -----
Type of loan and security:                                (Dollars in thousands)
<S>                                        <C>              <C>       <C>             <C>
Secured by real estate (1):
  One-to-four family residences            $   65,649       55.57%    $   78,463      63.17%
  Loans held for sale                             464         .39             96        .08
  Multifamily residential (over 4 units)        3,599        3.05          2,839       2.28
  Nonresidential property                      29,786       25.21         19,572      15.76
                                           ----------     -------     ----------    -------
Total real estate loans                        99,498       84.22        100,970      81.29
Consumer and other loans:
  Home equity loans                            11,365        9.62         13,282      10.69
  Purchased second mortgage loans               2,945        2.49          4,631       3.73
  Consumer loans and lines of credit            1,333        1.13          1,920       1.55
  Commercial business                           1,537        1.30          1,555       1.25
  Other                                         1,466        1.24          1,854       1.49
                                           ----------     -------     ----------    -------
Total consumer and other loans                 18,646       15.78         23,242      18.71
                                           ----------     -------     ----------    -------
Total loans                                   118,144      100.00%       124,212     100.00%
                                                          =======                   =======
Less:
  Loans in process                             (1,364)                    (2,909)
  Premiums on purchased loans
    and net deferred loan (fees) costs            458                        564
  Allowance for loan losses                    (1,738)                    (1,964)
                                           ----------                 ----------
Total loans receivable, net                $  115,500                 $  119,903
                                           ==========                 ==========
</TABLE>


-------------
(1) Includes construction loans secured by various types of real estate. The
amount of construction loans is not material.

                                       7
<PAGE>


LOAN MATURITY SCHEDULE. The following table sets forth certain information at
December 31, 2001 regarding the net dollar amount of loans maturing in the
portfolio, based on contractual terms to maturity. Demand loans, loans having no
stated schedule of repayments and no stated maturity and overdrafts are reported
as due in one year or less.

<TABLE>
<CAPTION>
                                           Real Estate                                Consumer and Other            Total
                  --------------------------------------------------------------     --------------------     ------------------
                One-to-four family (1)     Nonresidential         Multifamily
                ----------------------     --------------         -----------
                            Weighted                Weighted            Weighted                 Weighted              Weighted
                             Average                Average              Average                  Average               Average
                   Amount     Rate      Amount        Rate      Amount    Rate       Amount         Rate      Amount      Rate
                   ------     ----      ------        ----      ------    ----       ------         ----      ------      ----
                                                             (Dollars in thousands)
Due during
years ending
December 31,
------------

<S>               <C>         <C>      <C>            <C>       <C>        <C>       <C>            <C>      <C>           <C>
2002              $   886     8.27%    $ 2,481        7.88%                          $ 5,885        7.61%    $   9,252     7.92%
2003 through
  2006              1,113     8.34         608        6.93      $    11    9.38        2,348       10.45         4,080    11.04
2007 and
  following        64,114     7.84      26,697        7.98        3,588    7.70       10,413        9.26       104,812     7.99
                  -------              -------                  -------              -------                   -------

                  $66,113              $29,786                  $ 3,599              $18,646                 $ 118,144
                  =======              =======                  =======              =======                 =========
</TABLE>


----------------------
(1) Includes Construction Loans and Loans Held for Sale

The total amount of loans due after December 31, 2002 which have predetermined
interest rates is $47.2 million, while the total amount of loans due after such
date which have floating or adjustable rates is $61.7 million.





                                       8
<PAGE>


         The next table sets forth the composition of the loan portfolio by type
of security and by predetermined interest rates and floating or adjustable
interest rates at the dates indicated:

<TABLE>
<CAPTION>
                                                                 At December 31,
                                            ------------------------------------------------------
                                                        2001                        2000
                                            -------------------------    -------------------------
                                                Amount       Percent         Amount       Percent
                                                ------       -------         ------       -------
Fixed-rate loans:                                            (Dollars in thousands)
<S>                                         <C>               <C>        <C>               <C>
  Real estate (1):
    One-to-four family                      $    36,199       30.64%     $    34,556       27.82%
    Multifamily (over 4 units)                    2,047        1.73            1,452        1.17
    Nonresidential                                4,222        3.58            3,486        2.81
                                            -----------      ------      -----------     -------
      Total real estate loans                    42,468       35.95           39,494       31.80
  Consumer and other loans                        9,916        8.39           14,168       11.40
                                            -----------      ------      -----------     -------

      Total fixed-rate loans                     52,384       44.34           53,662       43.20

Adjustable-rate loans:
  Real estate (1):
     One-to-four family                          29,912       25.32           44,003       35.42
     Multifamily (over 4 units)                   1,553        1.31            1,387        1.12
     Nonresidential                              25,565       21.64           16,086       12.95
                                            -----------      ------      -----------     -------
       Total real estate loans                   57,030       48.27           61,476       49.49
  Consumer and other loans                        8,730        7.39            9,074        7.31
                                            -----------      ------      -----------     -------

       Total adjustable-rate loans               65,760       55.66           70,550       56.80
                                            -----------      ------      -----------     -------
       Total loans receivable                   118,144      100.00%         124,212      100.00%
                                                             ======                       ======

Less:
  Loans in process                               (1,364)                      (2,909)
  Premiums on purchased loans
    and net deferred loan (fees) costs              458                          564
  Allowance for loan losses                      (1,738)                      (1,964)
                                            ------------                 -----------

       Total loans receivable, net          $   115,500                  $   119,903
                                            ===========                  ===========
</TABLE>


-----------------------
(1) Includes construction loans secured by various types of real estate. The
amount of construction loans is not material.

LOANS SECURED BY ONE-TO-FOUR FAMILY RESIDENTIAL REAL ESTATE. Potters Bank
concentrates on the origination of permanent conventional real estate loans
secured by one-to-four family residences, primarily single-family residences,
located within the primary market area and the purchase of real estate loans,
primarily adjustable-rate mortgages ("ARMs"). Loans are also originated to
individuals to finance the construction of their primary residences. Each loan
is secured by a mortgage on the underlying real estate and improvements thereon,
if any. At December 31, 2001, the one-to-four family residential real estate
loan portfolio was approximately $66.1 million, or 56.0% of total gross loans.

Fixed-rate loans on one-to-four family residences are made up to 97% of the
value of the real estate and improvements (the "Loan-to-Value Ratio" or "LTV").
The principal amount of any loan which exceeds an 85% LTV at the time of
origination is usually covered by private mortgage insurance at the expense of
the borrower.

As of December 31, 2001, approximately 54.8% of loans secured by one-to-four
family residences had interest accruing at a fixed rate. Fixed-rate loans are
offered for terms of up to 30 years. The majority of 30-year fixed-rate loans
are sold servicing released in the secondary mortgage market. Recently, Potters



                                       9
<PAGE>


Bank received approval to sell such loans to the Federal Home Loan Mortgage
Corporation ("FHLMC"), which will enable the retention of the servicing on the
loans.

ARMs are offered for terms of up to 30 years. One-year, three-year and five-year
ARMs are originated, with interest rate adjustments tied to U.S. Treasury issues
adjusted to constant maturities. For a limited time during 1996, a seven-year
ARM product was offered. Interest rate adjustments on pre-1995 real estate loans
are tied to an index of the FHLB. The maximum allowable adjustment at each
repricing date is from 1.5% to 2.0% for ARMs, with a maximum adjustment on all
products of 6% over the term of the loan. The initial interest rate quoted on
ARMs is often lower than the fully-indexed rate to make adjustable-rate products
more appealing to customers. The initial rate on three-year and five-year ARMs
is typically higher than the initial rate on a one-year ARM to compensate for
the increased interest rate sensitivity. At December 31, 2001, $29.9 million, or
45.3%, of one-to-four family real estate loans had adjustable rates.

Potters Bank offers two nonconforming real estate loan programs, with a maximum
LTV of 89%. Potters Bank charges a slightly higher interest rate on single
family residential mortgage loans to persons who are considered slightly higher
credit risks. Such loans involve greater underwriting and default risk than
conforming real estate loans. The increased risk is somewhat mitigated by
charging a higher interest rate than on conforming loans, by following stringent
loan collection procedures, and by adhering to regulatory limitations on the
total of such loans and regulatory reporting requirements to the Board of
Directors. Such loans are also specifically identified and addressed in
management's ongoing review of the allowance for loan losses, and a larger
percentage of the allowance is allocated to the nonconforming products than to
conforming real estate loans. At December 31, 2001, such nonconforming real
estate loans totaled $6.2 million, of which no loans were 90 or more days
delinquent.

Construction loans are made to individuals for the construction and permanent
financing of their primary residences. Such loans are offered with both fixed
and adjustable rates for terms of up to 30 years. While the residence is being
constructed, the borrower is required to pay only interest. Thereafter, the
loans amortize over the remaining term.

Construction loans generally involve greater underwriting and default risks than
do loans secured by mortgages on existing properties due to the advance of loan
funds and the inherent uncertainties in estimating construction costs and loan
value prior to the completion of the project. In the event a default on a
construction loan occurs and foreclosure follows, control of the project would
be taken and attempts made either to arrange for completion of construction or
to dispose of the unfinished project. The increased risks inherent in
construction lending are not significant because construction loans, in the
aggregate, comprise less than 3% of the loan portfolio.

Loans are also made secured by land to be used in the eventual construction of a
borrowers' primary residence. Such loans are offered with fixed and adjustable
interest rates for terms of up to 5 years and a maximum LTV of 75%. Although
land loans are subject to greater risks than residential real estate loans,
attempts to mitigate such risks are made by basing the lending decision on an
evaluation of the past performance and credit history of the borrower and on the
market value of the underlying real estate.

LOANS SECURED BY MULTIFAMILY RESIDENTIAL REAL ESTATE. In addition to loans on
one-to-four family properties, loans secured by multifamily properties
containing over four units are offered. Multifamily loans are usually offered
for terms of up to 20 years and a maximum LTV of 80%. Such loans are currently
offered, predominantly with adjustable interest rates tied to the composite
prime rate of 75% of the 30 largest U.S. banks, as reported in THE WALL STREET
JOURNAL (the "Prime Rate").

Multifamily lending is generally considered to involve a higher degree of risk
than one-to-four family residential lending because the borrower typically
depends upon income generated by the apartment project to cover operating
expenses and debt service. The profitability of a project can be affected by
economic conditions, government policies and other factors beyond the control of
the borrower. Attempts


                                       10
<PAGE>


to reduce the risk associated with multifamily lending include evaluating the
creditworthiness of the borrower and the projected income from the project and
obtaining personal guarantees on loans made to corporations and partnerships.
Borrowers are required to submit rent rolls and annual financial statements to
enable monitoring of the loan.

At December 31, 2001, loans secured by multifamily properties totaled
approximately $3.6 million, or 3.1% of total loans. Of such loans, none were
delinquent at December 31, 2001.

LOANS SECURED BY NONRESIDENTIAL REAL ESTATE. At December 31, 2001, approximately
$29.8 million, or 25.2% of total loans, were secured by nonresidential real
estate properties. The majority of such loans have adjustable rates tied to the
Prime Rate with terms of up to 25 years. A portion of such loans have balloon
payments at the end of the loan term with payments amortized over a maximum term
of 25 years. Among the properties securing nonresidential real estate loans are
office buildings, retail centers, restaurants, warehouses, residential
development and special purpose properties.

Although loans secured by nonresidential real estate typically have higher
interest rates and shorter terms to maturity than one-to-four family residential
real estate loans, nonresidential real estate lending is generally considered to
involve a higher degree of risk than residential lending due to the relatively
larger loan amounts and the effects of general economic conditions on the
successful operation of income-producing properties. Endeavors to reduce such
risk include evaluating the credit history and past performance of the borrower,
the location of the real estate, the quality of the borrower, the quality and
characteristics of the income stream generated by the property, personal
guarantees of the principals and appraisals supporting the property's valuation.
At December 31, 2001, one nonresidential loan totaling $80,000 was 90 or more
days delinquent or considered impaired. See "Delinquent Loans, Nonperforming
Assets and Classified Assets."

CONSUMER LOANS. A range of secured and unsecured consumer loans are offered to
area borrowers. Secured loans include home equity lines of credit, those made to
depositors on the security of their deposit accounts and automobile loans.
Secured and unsecured personal loans to homeowners and nonhomeowners and an
unsecured check overdraft line of credit are available to accommodate the credit
needs of the primary market area. Consumer loans, other than home equity and
overdraft lines of credit, are made primarily at fixed rates of interest and for
varying terms based on the type of loan.

At December 31, 2001, Potters Bank had approximately $18.6 million, or 15.8% of
total loans, invested in consumer loans.

Home equity lines of credit are secured by a first or second mortgage on the
borrowers' principal residence. Home equity lines of credit have a five- or
ten-year draw-down period followed by a corresponding five- or ten-year
repayment period and bear variable rates of interest. Home equity loan
promotions offer a low introductory interest rate that reverts to a margin over
the Prime Rate after a limited period of time. Home equity lines of credit can
be made up to 100% of the real estate value, depending upon the credit history,
including credit score, and past performance of the borrower.

Consumer loans, particularly consumer loans that are unsecured or are secured by
assets such as automobiles or mobile homes, which depreciate at a faster rate
than real estate, may entail greater risk than do residential real estate loans.
Repossessed collateral for a defaulted consumer loan may not provide an adequate
source of repayment of the outstanding loan balance. The risk of default on
consumer loans increases during periods of recession, high unemployment and
other adverse economic conditions. Of such loans, no locally originated consumer
loans were over 90 days delinquent, but $238,000 of purchased consumer loans
were 90 or more days delinquent at December 31, 2001.

COMMERCIAL LOANS. At December 31, 2001, the loan portfolio included
approximately $1.5 million in commercial loans and lines of credit. All such
loans have been made to businesses in the market area. The maximum amount of
principal committed to be advanced under such loans was $300,000 at


                                       11
<PAGE>


December 31, 2001. The loans are secured by equipment, receivables or vehicles
and are indexed to the Prime Rate.

Commercial loans have a higher degree of risk because the primary source of
repayment is the collateral pledged to secure such loans, if any, and the
borrower's income. The collateral pledged to secure such loans, if any, is
typically non-real estate collateral for which there may be no established
market. Attempts to limit the risk of loss on commercial loans involve
evaluating the financial condition of the business and its principals, valuing
the collateral, requiring personal guarantees and limiting the aggregate dollar
amount of such loans to any one borrower. Of such loans, none were delinquent at
December 31, 2001.

LOAN SOLICITATION AND PROCESSING. Loan originations are developed from a number
of sources, including continuing business with depositors, other borrowers, real
estate brokers and developers, solicitations by the lending staff, advertising
and walk-in customers.

Before a real estate loan is extended, risks related to the borrower's ability
and willingness to repay the loan are assessed through a review of the
borrowers' credit report, verification of employment and other documentation. A
fee appraiser approved by the Board of Directors prepares an appraisal of the
fair market value of the collateral used to secure the loan. The application for
a loan is then reviewed in accordance with underwriting guidelines and approved
or denied. A tiered structure of credit authority levels based on loan amount
has been granted to loan officers and two members of senior management with
respect to loan approval. Specific loans exceeding lending authority levels are
taken to the Executive Committee of the Board of Directors, which is comprised
of three Board members. Any nonresidential real estate or commercial loan
exceeding $50,000 must be reviewed and approved or rejected by the President and
Chief Executive Officer, the Senior Lending Officer or the full Board of
Directors.

If a real estate loan application is approved, a title guaranty, title insurance
or an attorney's opinion of title is obtained on the real estate that will
secure the mortgage loan. Borrowers are required to carry satisfactory fire and
casualty insurance and flood insurance, if applicable, and to name Potters Bank
as an insured mortgagee.

The procedure for approval of construction loans is the same as for residential
real estate loans, except that an appraiser evaluates the building plans,
construction specifications and estimates of construction costs. The feasibility
of the proposed construction project and the experience and record of the
builder are evaluated.

Consumer loans are underwritten on the basis of the borrower's credit history
and an analysis of the borrower's income and expenses, ability to repay the loan
and the value of the collateral, if any.

LOANS TO ONE BORROWER. Under current regulations, the aggregate amount of loans
that can be made to any one borrower (including related entities), with certain
exceptions, is limited in general to 15% of unimpaired capital and unimpaired
surplus. Based on such limits, Potters Bank could lend $2.2 million to any one
borrower at December 31, 2001. No outstanding loans were in excess of such
limits at December 31, 2001.

LOAN ORIGINATION AND OTHER FEES. Potters Bank realizes loan origination fee and
other fee income from lending activities, such as late payment charges,
application fees and fees for other miscellaneous services. Loan origination and
other fees are a volatile source of income, varying with the volume of lending,
loan repayments and general economic conditions. All nonrefundable loan
origination fees and certain direct loan origination costs are deferred and
recognized in accordance with Statement of Financial Accounting Standards
("SFAS") No. 91 as an adjustment to yield over the life of the related loan.

DELINQUENT LOANS, NONPERFORMING ASSETS AND CLASSIFIED ASSETS. A loan is
considered delinquent when a borrower fails to make a contractual payment on the
loan within 15 days of the payment due date and does not cure the delinquency
promptly. Normal collection procedures involve contact with the



                                       12
<PAGE>


borrower in an effort to bring the loan to a current status. When loan payments
have not been made by the fifteenth day, late notices are sent. If payment is
not received by the thirtieth day, second notices are sent or telephone calls
are made to borrowers. Each loan bears a late payment penalty which is assessed
as soon as such loan is more than ten or fifteen days delinquent. The late
penalty is generally 5% of the principal and interest payment.

Although collection procedures usually cure delinquencies in a timely manner,
additional measures are instituted to remedy the default if the delinquency
exceeds the 30- and 60-day categories. When any loan is delinquent 90 days,
interest is no longer accrued. At that time, previously accrued but unpaid
interest is deducted from interest income.

When a loan secured by real estate becomes delinquent more than 90 days,
foreclosure action or the acceptance from the mortgagor of a voluntary deed to
the property in lieu of foreclosure is instituted. If a foreclosure action is
instituted and the loan is not reinstated, paid in full or refinanced, the
property is sold at a judicial sale and usually purchased. An appraisal of the
collateral is conducted when foreclosed real estate is acquired. If the
appraisal indicates that the value of the collateral is less than the carrying
value of the loan, a valuation allowance is established for such loan.

When a consumer loan secured by an automobile or other collateral becomes more
than 90 days past due, an estimate is made of the value of the collateral. If
the estimate of value indicates that the value of the collateral is less than
the carrying value of the loan, a specific allowance for loss is established.

SFAS No. 114, "Accounting by Creditors for Impairment of a Loan" and SFAS No.
118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures," require recognition of loan impairment. No loans were impaired at
December 31, 2001 or 2000. See Notes 1 and 3 to the Consolidated Financial
Statements in Item 7. Financial Statements for information on impaired loans.

Nonperforming assets include nonaccrual loans, accruing loans delinquent 90 days
or more, restructured loans, real estate acquired by foreclosure or by
deed-in-lieu thereof and repossessed assets. For a discussion of nonperforming
loans, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Allowance and Provision for Loan Losses" in Item 6.
Management's Discussion and Analysis or Plan of Operation.

For the year ended December 31, 2001, gross interest income that would have been
recorded had the nonaccruing and restructured loans been current in accordance
with their original terms amounts to $90,000. The amount that was included in
interest income on such loans was $29,000 for the year ended December 31, 2001.
Other loans that are performing, but where known information causes management
to have serious doubts as to the ability of the borrower to comply with present
loan repayment terms totaled $308,000.

Real estate acquired as a result of foreclosure proceedings is classified as
foreclosed real estate until it is sold. When property is so acquired, it is
recorded at the estimated fair value of the real estate at the date of
acquisition and any write-down resulting therefrom is charged to the allowance
for loan losses. Interest accrual, if any, ceases no later than the date of
acquisition of the real estate, and all costs incurred from such date in
maintaining the property are expensed. Costs relating to the development and
improvement of the property are capitalized to the extent they are realizable.
Subsequent to acquisition, the property is carried at the lower of the initial
balance or estimated fair value less selling costs.

ALLOWANCE FOR LOAN LOSSES. Senior management, with oversight by the Board,
reviews, on a monthly basis, the allowance for loan losses as it relates to a
number of relevant factors, including but not limited to, trends in the level of
nonperforming and classified loans, current economic conditions in the primary
lending area, past loss experience and probable losses arising from specific
problem assets. To a lesser extent, management also considers loan
concentrations to single borrowers and changes in the composition of the loan
portfolio. While management believes that it uses the best information available
to



                                       13
<PAGE>


determine the allowance for loan losses, unforeseen market conditions could
result in adjustments, and net earnings could be significantly affected if
circumstances differ substantially from the assumptions used in making the final
determination.

The following table sets forth an analysis of the allowance for losses on loans
for the periods indicated:

<TABLE>
<CAPTION>
                                                                2001              2000
                                                                ----              ----
                                                                (Dollars in thousands)
<S>                                                           <C>               <C>
Balance at beginning of period                                $   1,964         $  2,037
Loans charged-off:
  Residential real estate loans                                    (116)             (39)
  Nonresidential real estate loans
  Consumer and other loans                                         (196)             (74)
                                                              ---------         --------
Total charge-offs                                                  (312)            (113)
Recoveries:
  Residential real estate loans                                      13                5
  Nonresidential real estate loans
  Consumer and other loans                                           13               35
                                                              ---------         --------
Total recoveries                                                     26               40
                                                              ---------         --------
Net charge-offs                                                    (286)             (73)
Provision for loan losses                                            60
                                                              ---------         --------
Balance at end of period                                      $   1,738         $  1,964
                                                              =========         ========

Ratio of net charge-offs
  to average loans                                                 0.26%            0.10%
</TABLE>

The following table sets forth the allocation of the allowance for loan losses
at the dates indicated:

<TABLE>
<CAPTION>
                                                    2001                      2000
                                                    ----                      ----
                                                       Percent of                Percent of
                                                      loans in each             loans in each
                                                       category to               category to
                                             Amount    total loans      Amount   total loans
                                             ------    -----------      ------   -----------
                                                          (Dollars in thousands)
<S>                                         <C>          <C>           <C>         <C>
One-to-four family real estate loans        $     390     55.96%       $     474    63.24%
Multifamily and nonresidential
 real estate loans                                656     28.26              475    15.76
Consumer and other loans                          416     15.78              739    21.00
Unallocated                                       276                        276
                                            ---------    ------        ---------   ------

Total                                       $   1,738    100.00%       $   1,964   100.00%
                                            =========    ======        =========   ======
</TABLE>

The allowance for loan losses at December 31, 2001 represented 193.54% of
nonperforming loans. Because the loan loss allowance is based on estimates, it
is monitored monthly and adjusted as necessary to provide an adequate allowance.

MORTGAGE-BACKED SECURITIES. Potters Bank invests some funds in mortgage-backed
securities, including Government National Mortgage Association ("GNMA"), FHLMC
and Federal National Mortgage Association ("FNMA") pass-through certificates.
The purchase of such certificates entitles the holder to receive a portion of
the cash flows from an identified pool of mortgages. GNMA, FHLMC and FNMA
securities are each guaranteed by their respective agencies as to principal and
interest.

At December 31, 2001, mortgage-backed securities totaled approximately $8.5
million. All mortgage-backed securities at December 31, 2001 and 2000 were
designated as available for sale. In accordance with



                                       14
<PAGE>


SFAS No. 115, available-for-sale mortgage-backed securities are carried on the
balance sheet at fair market value.

Because mortgage-backed securities have a lower yield relative to current loan
market rates, retention of such investments could adversely affect earnings,
particularly in a rising interest rate environment. Adjustable-rate
mortgage-backed securities were purchased as part of an effort to reduce
interest rate risk. In a period of declining interest rates, there is prepayment
risk on such adjustable-rate mortgage-backed securities. Attempts to mitigate
this prepayment risk include purchasing mortgage-backed securities at or near
par. If interest rates rise in general, the interest rates on the loans backing
the mortgage-backed securities will also adjust upward, subject to the interest
rate caps in the underlying adjustable-rate mortgage loans. However, interest
rate risk exists on such securities if interest rates rise faster than the 1% to
2% maximum annual interest rate adjustments on the underlying loans.

At December 31, 2001, $4.5 million, or 53.8%, of Potters Bank's mortgage-backed
securities had adjustable rates. Although adjustable-rate securities generally
have a lower yield at the time of origination than fixed-rate securities, the
interest rate risk associated with adjustable-rate securities is lower. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Asset/Liability Management" in Item 6. Management's Discussion and
Analysis or Plan of Operation. The following table sets forth certain
information regarding mortgage-backed securities at the dates indicated:

<TABLE>
<CAPTION>
                                                  At December 31,
                                                  ---------------
                                              2001                      2000
                                              ----                      ----
                                                 Estimated                 Estimated
                                    Amortized      Fair       Amortized      Fair
                                      Cost         Value         Cost        Value
                                      ----         -----         ----        -----
                                                 (Dollars in thousands)

<S>                                 <C>          <C>          <C>          <C>
Mortgage-backed securities          $  8,363     $   8,463    $   9,176    $   9,123
                                    ========      ========    =========    =========
</TABLE>

The combined estimated fair value of mortgage-backed securities designated as
available for sale at December 31, 2001, by contractual terms to maturity are
shown below. Actual maturities will differ from contractual maturities because
borrowers generally may prepay obligations without prepayment penalties.

<TABLE>
<CAPTION>
                                                             At December 31, 2001
                                                             --------------------
                                                          Estimated         Weighted
                                                            Fair             Average
                                                            Value             Yield
                                                            -----             -----
                                                            (Dollars in thousands)
<S>                                                       <C>                 <C>
Due after one year through three years                    $    131             5.50%
Due after three years through five years                         7            10.00
Due after five years through ten years                       1,291             6.23
Due after ten years                                          7,034             6.44
                                                          --------         --------
Total                                                     $  8,463             6.39%
                                                          ========         ========
</TABLE>


INVESTMENT ACTIVITIES

Federal and state regulations require that a prudent amount of liquid assets be
maintained in order to protect the safety and soundness of Potters Bank. Ohio
law specifies the types of investments Potters Bank may make, which include, but
are not limited to, obligations of specified federal and state governmental
entities and agencies, deposits in insured financial institutions and certain
amounts of specified real estate and equity investments. Such investment
authority may be limited by the FDIC. Liquid assets include U.S. governmental
agency obligations, certificates of deposit, bankers acceptances and federal
funds.


                                       15
<PAGE>


No security or group of securities, with the exception of securities issued by
the U.S. government or its agencies, exceeded 10% of Potters Bank's equity at
December 31, 2001.

The following table sets forth the composition of the investment portfolio at
the dates indicated:

<TABLE>
<CAPTION>
                                                              At December 31,
                                            -------------------------------------------------
                                                   2001                         2000
                                                   ----                         ----
                                                          Estimated                 Estimated
                                            Amortized       Fair       Amortized      Fair
                                               Cost         Value        Cost         Value
                                               ----         -----        ----         -----
                                                          (Dollars in thousands)
<S>                                         <C>           <C>          <C>          <C>
Securities available for sale:
         U.S. Treasury and U.S.
           Government agencies              $   5,322     $  5,334     $   9,496    $   9,395
         States and municipalities              3,830        3,835         2,282        2,377
         Other                                    184          186           259          260
                                            ---------     --------     ---------    ---------
         Total debt securities                  9,336        9,355        12,037       12,032
         Equity securities                         22           31            22           22
                                            ---------     --------     ---------    ---------
                                            $   9,358     $  9,386     $  12,059    $  12,054
                                            =========     ========     =========    =========
</TABLE>

The maturities of debt securities are indicated in the following table:

<TABLE>
<CAPTION>
                                                            At December 31, 2001
                                      ------------------------------------------------------------------
                                                                                   Total debt securities
                                                                                           Estimated
                                                  1 to 5     5 to 10     Over               Fair
                                                   years      years    10 years             Value
                                                   -----      -----    --------             -----
                                                            (Dollars in thousands)

<S>                                              <C>        <C>        <C>                <C>
Securities available for sale (1):
U.S. Treasury and U.S
  Government agencies                            $   3,544             $   1,790          $  5,334
States and municipalities                              405  $   1,502      1,928             3,835
Other                                                                        186               186
                                                 ---------  ---------  ---------          --------

                                                 $   3,949  $   1,502  $   3,904          $  9,355
                                                 =========  =========  =========          ========

Weighted average yield (2)                            5.55%      7.51%      7.29%             6.60%

</TABLE>

(1) Amounts reflected for maturities of securities available for sale are based
on the estimated fair value while the yield is based on amortized cost.
(2)Since investments in nontaxable obligations are minimal, yields are not
stated on a taxable equivalent basis.

DEPOSITS AND BORROWINGS

GENERAL. Deposits have traditionally been the primary source of funds for use in
lending and other investment activities. In addition to deposits, funds are
derived from interest payments and principal repayments on loans and securities
and income on earning assets. Loan payments are a relatively stable source of
funds, while deposit inflows and outflows fluctuate more in response to general
interest rates and money market conditions. Funds are also borrowed from the
FHLB.


                                       16
<PAGE>

DEPOSITS. Deposits are attracted principally from within the primary market area
through the offering of a broad selection of deposit instruments, including NOW
and demand accounts, money market deposit accounts, regular passbook savings
accounts, statement savings accounts, a statement savings account indexed to the
90-day U.S. Treasury bill, holiday club accounts, term certificate accounts and
Individual Retirement Accounts. Interest rates paid, maturity terms, service
fees and withdrawal penalties for the various types of accounts are established
periodically by management and are based on liquidity requirements, growth goals
and local and national interest rates. No brokered deposits existed at December
31, 2001. The amount of deposits from outside the primary market area is not
significant.

At December 31, 2001, certificates of deposit totaled $53.7 million, or 46.9% of
total deposits. Of such amount, approximately $38.1 million in certificates of
deposit mature within one year. Based on past experience and pricing strategies
used, management believes that a substantial percentage of such certificates
will renew at maturity. If there is a significant deviation from historical
experience, borrowings from the FHLB can be used as an alternative to this
source of funds.

The following table sets forth average deposits in the various types of deposit
programs offered at the dates indicated:

<TABLE>
<CAPTION>
                                                               At December 31,
                                            -------------------------------------------------
                                                     2001                   2000
                                                     ----                  -----
                                                           Percent                   Percent
                                              Average     of average    Average     of average
                                              Balance     deposits      Balance     deposits
                                            ---------     --------      -------     --------
                                                          (Dollars in thousands)
<S>                                          <C>              <C>       <C>             <C>
Transaction accounts:
  Demand, NOW, and Super NOW
    accounts (1)                             $ 16,572         14.2%     $ 16,343        13.8%
  Savings and club accounts (2)                40,016         34.2        40,508        34.3
  Money market deposit
    accounts (3)                                1,224          1.1         1,272         1.3
                                             --------        -----      --------       -----
  Total transaction accounts                   57,812         49.5        58,123        49.4
Certificates of deposit (4)                    59,054         50.5        59,669        50.6
                                             --------        -----      --------       -----

Total deposits                               $116,866        100.0%     $117,792       100.0%
                                             ========        =====      ========       =====
</TABLE>

---------------

(1) The weighted average interest rate paid on demand, NOW and Super NOW
accounts fluctuates with the general movement of interest rates. At December 31,
2001, the weighted average rate on such accounts was 1.09%.

(2) The weighted average rate on savings and club accounts, including Treasury
index savings accounts, was 2.32% at December 31, 2001.

(3) The weighted average interest paid on money market accounts fluctuates with
the general movement of interest rates. At December 31, 2001, the weighted
average rate on such accounts was 2.10%.

(4) The weighted average rate on certificates of deposit at December 31, 2001
was 5.19%.

See Item 6. Management's Discussion and Analysis or Plan of Operation for
information relating to the average balance and the average rates paid on
various deposit products for the past three years.



                                       17
<PAGE>


The following table presents the amount of certificates of deposit of $100,000
or more and other certificates of deposit by the time remaining until maturity
as of December 31, 2001:

<TABLE>
<CAPTION>
                                                              Maturity
                                    -------------------------------------------------------------
                                    3 months     Over 3 to    Over 6 to     Over 12
                                     or less     6 months     12 months      months       Total
                                    --------     ---------    ---------    ---------    ---------
                                                       (Dollars in thousands)

<S>                                 <C>          <C>          <C>          <C>          <C>
Certificates of deposit
  less than $100,000                $  8,332     $   8,622    $  10,784    $  14,014    $  41,752
Certificates of deposit
  $100,000 or more                     3,521         2,014        2,373        1,606        9,514
Public funds (1)                       2,318           141            8                     2,467
                                    --------     ---------    ---------    ---------    ---------

Total certificates of deposit       $ 14,171     $  10,777    $  13,165    $  15,620    $  53,733
                                    ========     =========    =========    =========    =========
</TABLE>


-----------------------

(1)  Includes deposits from governmental and other public entities.

BORROWINGS. The FHLB System functions as a central reserve bank providing credit
for its member institutions and certain other financial institutions. See
"REGULATION - Federal Home Loan System." As a member in good standing of the
FHLB of Cincinnati, Potters Bank is authorized to apply for advances from the
FHLB of Cincinnati, provided certain standards of creditworthiness have been
met. Under current regulations, an association must meet certain qualifications
to be eligible for FHLB advances. The extent to which an association is eligible
for such advances will depend upon whether it meets the Qualified Thrift Lender
Test (the "QTL Test"). See "REGULATION - Holding Company Regulation". If an
association meets the QTL Test, it will be eligible for 100% of the advances
possible for the association. If an association does not meet the QTL Test, it
will be eligible for such advances only to the extent it holds specified QTL
Test assets. At December 31, 2001, Potters Bank was in compliance with the QTL
Test. During 2001, a total of $1.6 million was received in FHLB advances and
$3.6 million was repaid. At December 31, 2001, FHLB advances totaled $17.5
million. During 2001, FHLB advances were used primarily in managing liquidity.

The average amounts of FHLB advances outstanding during the last three years and
the weighted average interest rate thereon are detailed in Item 6. Management's
Discussion and Analysis or Plan of Operation.

SUBSIDIARY ACTIVITIES

PFC has one wholly-owned subsidiary, Potters Bank. Potters Bank has one
wholly-owned subsidiary, Potters Financial Services Corporation, which is
inactive.

COMPETITION

Competition for deposits includes other savings associations, commercial banks
and credit unions and with the issuers of commercial paper and other securities,
such as shares in money market mutual funds. The primary factors in competing
for deposits are interest rates and convenience of office location. In making
loans, the competition is with other savings associations, savings banks,
commercial banks, consumer finance companies, credit unions, leasing companies
and other lenders. Competition for loan originations occurs primarily through
the interest rates and loan fees charged and through the efficiency and quality
of services provided to borrowers. Competition is intense and is affected by,
among other things, the general availability of lendable funds, general and
local economic conditions, current interest rate levels and other factors that
are not readily predictable.



                                       18
<PAGE>


                                   REGULATION
                                   ----------

GENERAL

As of January 3, 2000, Potters Bank converted from an Ohio-chartered savings and
loan association to an Ohio-chartered state savings bank. As a state chartered
savings bank that is not a member of the Federal Reserve System, Potters Bank is
subject to regulation by the Division and the FDIC. In connection within that
conversion, PFC elected to continue to be regulated as a savings and loan
holding company within the meaning of the Home Owners' Loan Act, as amended. PFC
is, therefore, subject to regulation, examination and supervision by the OTS.

PFC and Potters Bank must file periodic reports with these governmental
agencies, as applicable, concerning their activities and financial condition.
Examinations are conducted periodically by the applicable regulators to
determine whether PFC and Potters Bank are in compliance with various regulatory
requirements and are operating in a safe and sound manner. Potters Bank is a
member of the FHLB of Cincinnati and is also subject to certain regulations of
the Board of Governors of the Federal Reserve Bank (the "FRB").

On November 12, 1999, the Gramm-Leach-Bliley Act (the "GLB Act") was enacted
into law. The GLB Act repealed prior laws that had generally prevented banks
from affiliating with securities and insurance firms and made other significant
changes in the financial services in which various types of financial
institutions may engage.

Prior to the GLB Act, unitary savings and loan holding companies that met
certain requirements were the only financial institution holding companies
permitted to engage in any type of business activity, whether or not the
activity was a financial service. The GLB Act continues those broad powers for
unitary thrift holding companies in existence on May 4, 1999, including PFC. Any
thrift holding company formed after May 4, 1999, however, will be subject to the
same restrictions as multiple thrift holding companies, which generally are
limited to activities considered incidental to banking.

OHIO REGULATION OF POTTERS BANK

Both as a savings and loan association incorporated under Ohio law and as an
Ohio savings bank, Potters Bank has been and continues to be subject to
regulation, examination and oversight by the Division. Such regulation affects
Potters Bank's savings, lending and investment activities. Ohio law requires
that Potters Bank maintain at least 60% of its assets in housing-related and
other specified investments. At December 31, 2001, Potters Bank had more than
60% of its assets in such investments. The ability of Ohio savings banks to
engage in certain state-authorized investments is subject to oversight and
approval by the FDIC.

Ohio law generally limits the aggregate amount that a savings bank can lend to
one borrower to an amount equal to 15% of the institution's unimpaired capital
and surplus. A savings bank may lend to one borrower an additional amount not to
exceed 10% of the institution's unimpaired capital and surplus, if the
additional amount is fully secured by certain forms of "readily marketable
collateral". Real estate is not considered "readily marketable collateral".

The Division is responsible for the regulation and supervision of Ohio savings
banks in accordance with the laws of the State of Ohio. Periodic examinations by
the Division are usually conducted on a joint basis with the FDIC. Ohio law
requires that Potters Bank maintain federal deposit insurance as a condition of
doing business. The Division may initiate certain supervisory measures or formal
enforcement actions against Ohio savings banks. Ultimately, if the grounds
provided by law exist, the Division may place an Ohio savings bank in
conservatorship or receivership. Any mergers or acquisitions of control of Ohio
savings banks must be approved by the Division.



                                       19
<PAGE>


In addition to being governed by the laws of Ohio specifically related to
savings banks, Potters Bank is also governed by Ohio corporate law, to the
extent such law does not conflict with the laws specifically governing savings
banks.

FEDERAL REGULATION OF POTTERS BANK

SUPERVISION AND EXAMINATION. The FDIC is responsible for the regulation and
supervision of all commercial banks and state savings banks that are not members
of the Federal Reserve System ("Non-member Banks"). The FDIC issues regulations
governing the operations of Non-member Banks, examines such institutions and may
also initiate enforcement actions against such institutions and certain persons
affiliated with them for violations of laws and regulations or for engaging in
unsafe or unsound practices. If the grounds provided by law exist, the FDIC may
appoint a conservator or a receiver for a Non-member Bank.

Non-member Banks are subject to regulatory oversight under various consumer
protection and fair lending laws. These laws govern, among other things,
truth-in-lending disclosure, equal credit opportunity, fair credit reporting and
community reinvestment. Failure to abide by federal laws and regulations
governing community reinvestment could limit the ability of an institution to
open a new branch or engage in a merger transaction.

STANDARDS FOR SAFETY AND SOUNDNESS. FDIC regulations and guidelines for
Non-member Banks establish standards for (a) internal controls, information
systems and internal audit systems; (b) loan documentation; (c) credit
underwriting; (d) interest rate exposure; (e) asset growth; and (f)
compensation, fees and benefits. These standards provide general guidance on
what operational systems and procedures the FDIC believes Non-member Banks
should have in place in each of these areas. A Non-member Bank that fails to
meet these standards may be required by the FDIC to submit an acceptable plan to
achieve compliance.

STATE-CHARTERED BANK ACTIVITIES. The ability of state-chartered savings banks,
including Potters Bank, to engage in any state-authorized activities or make any
state-authorized investments, as principal, is limited to the extent that such
activity is conducted or investment is made in a manner different than that
permitted for, or subject to different terms and conditions than those imposed
on, national banks. Any such activity or investment, as principal, not
permissible for a national bank is subject to approval by the FDIC. Such
approval will not be granted unless certain capital requirements are met and
there is not a significant risk to the FDIC insurance fund. Most equity and real
estate investments (excluding office space and REO) authorized by state law are
not permitted for national banks. Certain exceptions are granted, including one
for any activity deemed to be closely related to banking by the FRB and,
therefore, permissible for bank holding companies and another for FDIC-approved
subsidiary activities.

LIQUIDITY. The FDIC requires that Potters Bank maintain an amount of liquid
assets that will insure the safety and soundness of Potters Bank. The eligible
liquidity of Potters Bank for December 2001, was approximately $12.4 million, or
10.78%.

REGULATORY CAPITAL REQUIREMENTS. Under FDIC regulation, Potters Bank is required
by applicable law and regulations to meet certain minimum capital requirements,
which include a leverage, or core, capital requirement and a risk-based capital
requirement.

If Potters Bank has the highest regulatory examination rating, well-diversified
risk and minimal anticipated growth or expansion, the leverage capital
requirement is a minimum level of 3% Tier 1 capital to average total
consolidated assets. However, the leverage capital requirement rises to between
4% and 5% of average total consolidated assets if it does not meet those
criteria. "Tier 1" capital includes, generally, common stockholders' equity,
noncumulative perpetual preferred stock and minority interests in the accounts
of consolidated subsidiaries, less all intangibles, other than includable
purchased mortgage servicing rights and credit card relationships, and other
deductions not applicable to Potters Bank.



                                       20
<PAGE>


Pursuant to the risk-based capital requirement, Potters Bank must maintain total
capital, which consists of Tier 1 capital and certain general valuation
reserves, of 8% of risk-weighted assets. The FDIC may, however, set higher
capital requirements when particular circumstances warrant higher capital
levels, including the presence of excessive interest rate risk. For purposes of
computing risk-based capital, assets and certain off-balance sheet items are
weighted at percentage levels ranging from 0% to 100%, depending on the relative
risk.

The following table presents the minimum capital requirements for Non-member
Banks and Potters Bank's capital levels at December 31, 2001:

<TABLE>
<CAPTION>
                                                    Amount               %
                                                    ------               -

<S>                                                <C>                 <C>
         Tier 1 capital (1)                        $  12,766            8.7%
         Leverage capital requirement                  7,331            5.0 (2)
                                                   ---------            ----
         Excess                                    $   5,435            3.7%
                                                   =========            ===

         Total capital (1)                         $  13,989           14.4%
         Risk-based capital requirement                7,784            8.0
                                                   ---------            ---
         Excess                                    $   6,205            6.4%
                                                   =========            ===
</TABLE>


----------------------

         (1) Tier 1 capital and risk-based capital reflect capital computed in
  accordance with generally accepted accounting principles. Risk-based capital
  includes a $1.2 million general loan loss allowance.
         (2) Non-member Banks that meet certain requirements may be permitted to
maintain a leverage ratio of less than 5%.

The FDIC also has a market risk component to the capital requirements of
Non-member Banks. Such component would require additional capital for general or
specific market risk or trading portfolios of debt and equity securities and
other investments or assets. The policy applies to an institution with less than
$5 billion in assets only if its trading portfolio constitutes at least 10% of
the institution's assets. PFC has no trading portfolio. The FDIC may also
require additional capital to address interest-rate risk, concentrations of
credit and non-traditional activities on a case-by-case basis.

The FDIC has adopted regulations governing prompt corrective action to resolve
the problems of capital deficient and otherwise troubled Non-member Banks. At
each successively lower defined capital category, an institution is subject to
more restrictive and numerous mandatory or discretionary regulatory actions or
limits, and the applicable agency has less flexibility in determining how to
resolve the problems of the institution. In addition, the FDIC generally can
downgrade an institution's capital category, notwithstanding its capital level,
if, after notice and opportunity for hearing, the institution is deemed to be in
an unsafe and unsound condition or because it has not corrected deficiencies
noted in the most recent examination. Potters Bank's capital levels at December
31, 2001, meet the standards for the highest level, a "well-capitalized"
institution.

TRANSACTIONS WITH INSIDERS AND AFFILIATES. All transactions between Potters Bank
and PFC or any other affiliate must comply with Sections 23A and 23B of the
Federal Reserve Act (the "FRA"). An affiliate is any company or entity that
controls, is controlled by or is under common control with the financial
institution. In a holding company context, the parent holding company of an
insured institution and any companies that are controlled by such parent holding
company are affiliates of the institution. Generally, Section 23A and 23B of the
FRA (i) limit the extent to which a financial institution or its subsidiaries
may engage in "covered transactions" with any one affiliate to an amount equal
to 10% of such institution's capital stock and surplus for any one affiliate and
20% of such capital stock and surplus for the aggregate of such transactions
with all affiliates, and (ii) require that all such transactions be on terms
substantially the same, or at least as favorable to the institution or the
subsidiary, as those provided to a non-affiliate.


                                       21
<PAGE>


The term "covered transaction" includes the making of loans, purchase of assets,
issuance of a guarantee and other similar types of transactions. In addition,
because it is a subsidiary of a savings and loan holding company, Potters Bank
may not make any loan or other extension of credit to an affiliate unless the
affiliate is engaged only in activities permissible for a bank holding company
and may not purchase or invest in securities of any affiliate, except shares of
a subsidiary. Potters Bank was in compliance with these requirements and
restrictions at December 31, 2001.

Loans to all insiders of Potters Bank and PFC may not exceed in the aggregate
the institution's total regulatory capital plus additional loan reserves (or 20%
of such capital amount for qualifying institutions with less than $100 million
in deposits). Most loans to directors, executive officers and greater than 10%
shareholders of an institution, and their respective affiliates, must be
approved in advance by a majority of the board of directors of the institution
with any "interested" director not participating in the voting. All loans to
directors, executive officers and principal shareholders must be made on terms
substantially the same as offered in comparable transactions to the general
public or as offered to all employees in a company-wide benefit plan. In
addition, loans generally may not be made to an executive officer, except loans
for specific authorized purposes, such as financing the education of the
officer's children or the purchase of the officer's primary residence.

DEPOSIT INSURANCE. The FDIC is an independent federal agency that insures the
deposits, up to prescribed statutory limits, of federally insured banks and
savings and loan associations and safeguards the safety and soundness of the
banking and savings and loan industries. The FDIC administers two separate
insurance funds, the Bank Insurance Fund ("BIF") for commercial banks and state
savings banks and the Savings Association Insurance Fund ("SAIF") for savings
associations.

Potters Bank is a member of the SAIF and its deposit accounts are insured, up to
prescribed limits, by the FDIC. The FDIC has examination authority over all
insured depository institutions, including Potters Bank, and has authority to
initiate enforcement actions against federally-insured savings associations if
the FDIC does not believe the OTS has taken appropriate action to safeguard
safety and soundness and the deposit insurance fund.

The FDIC is required to maintain designated levels of reserves in the SAIF and
the BIF. The FDIC may increase assessment rates for either fund if necessary to
restore the fund's ratio of reserves to insured deposits to its target level
within a reasonable time and may decrease such rates if such target level has
been met. The FDIC has established a risk-based assessment system for both SAIF
and BIF members. Under this system, assessments vary based on the risk the
institution poses to its deposit insurance fund. The risk level is determined
based on the institution's capital level and the FDIC's level of supervisory
concern about the institution.

CHANGES IN CONTROL

FEDERAL LAW. The Federal Deposit Insurance Act (the "FDIA") provides that no
person, acting directly or indirectly or in concert with one or more persons,
shall acquire control of any insured depository institution or holding company
unless 60 days prior written notice has been given to the primary federal
regulator for that institution and such regulator has not issued a notice
disapproving the proposed acquisition. Control, for purposes of the FDIA, means
the power, directly or indirectly, alone or acting in concert, to direct the
management or policies of an insured institution or to vote 25% or more of any
class of securities of such institution. Control exists in situations in which
the acquiring party has direct or indirect voting control of at least 25% of the
institution's voting shares, controls in any manner the election of a majority
of the directors of such institution or is determined to exercise a controlling
influence over the management or policies of such institution. In addition,
control is presumed to exist, under certain circumstances where the acquiring
party (which includes a group "acting in concert") has voting control of at
least 10% of the institution's voting stock.


                                       22
<PAGE>


Under OTS regulations, no person, directly or indirectly, or acting in concert
with others, may acquire control of Potters Bank or PFC without sixty days'
prior notice to the OTS. For purposes of OTS regulations, control is generally
defined as having more than 25% ownership or voting power; however, ownership or
voting power of more than 10% may be deemed control if certain factors are in
place. If the acquisition of control is by a company, the acquiror must obtain
approval, rather than give notice, of the acquisition.

OHIO LAW. A statutory limitation on the acquisition of control of an Ohio
savings bank requires the written approval of the Division prior to the
acquisition by any person or entity of a controlling interest in an Ohio
association. Control exists, for purposes of this law, when any person or entity
which, either directly or indirectly, or acting in concert with one or more
other persons or entities, owns, controls, holds with power to vote, or holds
proxies representing, more than 25% of the voting shares or rights of an
association, or controls in any manner the election or appointment of a majority
of the directors. A director will not be deemed to be in control by virtue of an
annual solicitation of proxies voted as directed by a majority of the board of
directors. Ohio corporate law also requires that certain acquisitions of voting
securities that would result in the acquiring shareholder owning 20%, 33-1/3% or
50% of the outstanding voting securities of PFC must be approved in advance by
the holders of at least a majority of the outstanding voting shares represented
at a meeting at which a quorum is present and a majority of the portion of the
outstanding voting shares represented at such a meeting, excluding the voting
shares held by the acquiring shareholder. This statute was intended, in part, to
protect shareholders of Ohio corporations from coercive tender offers.

Under certain circumstances, interstate mergers and acquisitions involving
savings banks incorporated under Ohio law are permitted by Ohio law. A financial
institution or financial institution holding company with its principal place of
business in another state may acquire a savings and loan association or savings
and loan holding company incorporated under Ohio law if, in the discretion of
the Division, the laws of such other state give an Ohio institution or an Ohio
holding company reciprocal rights.

HOLDING COMPANY REGULATION. PFC is a unitary savings and loan holding company
subject to the regulatory oversight, examination and enforcement authority of
the OTS. Although Potters Bank is not a savings association, it has elected to
be treated as such for holding company purposes, so that PFC does not become a
bank holding company. As a savings and loan holding company, PFC is required to
register and file periodic reports with the OTS. If the OTS determines that the
continuation of a particular activity by a savings and loan holding company
constitutes a serious threat to the financial condition of its subsidiary
institutions, the OTS may impose restrictions on the holding company. Such
restrictions may include limiting the payment of dividends, transactions with
affiliates or any other activities deemed to pose a serious threat to the
savings associations.

In order for PFC to retain its status as a savings and loan holding company,
Potters Bank must meet one of two tests in order to be a qualified thrift lender
("QTL"). The first test requires Potters Bank to maintain a specified level of
investments in assets that are designated as qualifying thrift investments
("QTIs"). Generally, QTI's are assets related to domestic residential real
estate and manufactured housing, although they also include credit card, student
and small business loans and stock issued by an FHLB, the FHLMC or the FNMA.
Under the QTL test, 65% of an institution's "portfolio assets" (total assets
less goodwill and other intangibles, property used to conduct business and 20%
of liquid assets) must consist of QTI on a monthly average basis in nine out of
every 12 months. The second test permits a savings association to qualify as a
QTL by meeting the definition of "domestic building and loan association" under
the Internal Revenue Code of 1986, as amended (the "Code"). In order for an
institution to meet the definition of a "domestic building and loan association"
under the Code, at least 60% of its assets must consist of specified types of
property, including cash loans secured by residential real estate or deposits,
educational loans and certain governmental obligations. The OTS may grant
exceptions to the QTL tests under certain circumstances. If Potters Bank fails
to meet either one of the QTL tests, Potters Bank and PFC become subject to
certain operating and regulatory restrictions and the savings bank will not be
eligible for new FHLB advances. At December 31, 2001, Potters Bank qualified as
a QTL.



                                       23
<PAGE>

Generally, no savings and loan holding company may (i) acquire or retain control
of a savings association or another savings and loan holding company or control
the assets thereof or (ii) acquire or retain more than 5% of the voting shares
of a savings association or holding company thereof which is not a subsidiary
without the prior written approval of the Director of the OTS. Except with the
prior approval of the Director of the OTS, no director or officer of a savings
and loan holding company or person owning or controlling by proxy, or otherwise,
more than 25% of such company's stock may also acquire control of any savings
institution, other than a subsidiary institution, or any other savings and loan
holding company.

FEDERAL RESERVE BANK RESERVE REQUIREMENTS. FRB regulations currently
require savings associations to maintain reserves of 3% of net transaction
accounts (primarily NOW accounts) up to $41.3 million, subject to an exemption
of up to $5.7 million, and to maintain reserves of 10% of net transaction
accounts in excess of $41.3 million. These percentages are subject to revision
by the FRB. At December 31, 2001, Potters Bank was in compliance with the FRB's
reserve requirement.

FEDERAL HOME LOAN BANK RESERVE REQUIREMENT. As a member of the FHLB, Potters
Bank is required to maintain a certain amount of capital stock of the FHLB.
Potters Bank is in compliance with this reserve requirement with an investment
in FHLB of Cincinnati stock having a book value of $1.4 million at December 31,
2001.

Upon the origination or renewal of a loan or advance, the FHLB of Cincinnati is
required by law to obtain and maintain a security interest in certain
collateral.

                                    TAXATION

FEDERAL TAXATION

PFC and Potters Bank are each subject to the federal tax laws and regulations
that apply to corporations in general. In addition to the regular income tax, an
alternative minimum tax may also apply. An alternative minimum tax is imposed at
a minimum tax rate of 20% on "alternative minimum taxable income" (which is the
sum of a corporation's regular taxable income, with certain adjustments, and tax
preference items), less any available exemption. Such tax preference items
include interest on certain tax-exempt bonds issued after August 7, 1986. In
addition, 75% of the amount by which a corporation's "adjusted current earnings"
exceeds its alternative minimum taxable income computed without regard to this
preference item and prior to reduction by net operating losses, is included in
alternative minimum taxable income. Net operating losses can offset no more than
90% of alternative minimum taxable income. The alternative minimum tax is
imposed to the extent it exceeds the corporation's regular income tax. Payments
of alternative minimum tax may be used as credits against regular tax
liabilities in future years. However, The Taxpayer Relief Act of 1997 repealed
the alternative minimum tax for certain "small corporations" for tax years
beginning after December 31, 1997. A corporation initially qualifies as a small
corporation if it had average gross receipts of $5 million or less for the three
tax years ending with its first tax year beginning after December 31, 1997. Once
a corporation is recognized as a small corporation, it will continue to be
exempt from the alternative minimum tax for as long as its average gross
receipts for the prior three-year period do not exceed $7.5 million. In
determining if a corporation meets this requirement, the first year that it
achieved small corporation status is not taken into consideration.

Potters Bank's average gross receipts for the three tax years ending on December
31, 2001, were approximately $11,332,000. As a result, neither Potters Bank nor
PFC qualifies as a small corporation exempt from the alternative minimum tax.

Certain thrift institutions are allowed deductions for bad debts under methods
more favorable than those granted to other taxpayers. Qualified thrift
institutions may compute deductions for bad debts using either the specific
charge off method of Section 166 of the Code or the experience method of Section
593 of the Code.


                                       24
<PAGE>


The "experience" method is also available to small banks. Under the experience
method, a thrift institution is generally allowed a deduction for an addition to
its bad debt reserve equal to the greater of (i) an amount based on its actual
average experience for losses in the current and five preceding taxable years,
or (ii) an amount necessary to restore the reserve to its balance as of the
close of the base year.

Thrift institutions that are treated as small banks are allowed to utilize the
experience method applicable to such institutions, while thrift institutions
that are treated as large banks are required to use only the specific charge off
method.

A thrift institution required to change its method of computing reserves for bad
debt will treat such change as a change in the method of accounting, initiated
by the taxpayer and having been made with the consent of the Secretary of the
Treasury. Section 481(a) of the Code requires certain amounts to be recaptured
with respect to such change. Generally, the amounts to be recaptured will be
determined solely with respect to the "applicable excess reserves" of the
taxpayer. The amount of the applicable excess reserves will be taken into
account ratably over a six-taxable year period, beginning with the first taxable
year beginning after 1995, subject to the residential loan requirement described
below. In the case of a thrift institution that is treated as a large bank, the
amount of the institution's applicable excess reserves generally is the excess
of (i) the balances of its reserve for losses on qualifying real property loans
(generally loans secured by improved real estate) and its reserve for losses on
nonqualifying loans (all other types of loans) as of the close of its last
taxable year beginning before January 1, 1996, over (ii) the balances of such
reserves as of the close of its last taxable year beginning before January 1,
1988 (i.e., the "pre-1988 reserves"). In the case of a thrift institution that
is treated as a small bank, like Potters Bank, the amount of the institution's
applicable excess reserves generally is the excess of (i) the balances of its
reserve for losses on qualifying real property loans and its reserve for losses
on nonqualifying loans as of the close of its last taxable year beginning before
January 1, 1996, over (ii) the greater of the balance of (a) its pre-1988
reserves or (b) what the thrift's reserves would have been at the close of its
last year beginning before January 1, 1996, had the thrift always used the
experience method.

For taxable years that begin after December 31, 1995, and before January 1,
1998, if a thrift meets the residential loan requirement for a tax year, the
recapture of the applicable excess reserves otherwise required to be taken into
account as a Code Section 481(a) adjustment for the year will be suspended. A
thrift meets the residential loan requirement if, for the tax year, the
principal amount of residential loans made by the thrift during the year is not
less than its base amount. The "base amount" generally is the average of the
principal amounts of the residential loans made by the thrift during the six
most recent tax years beginning before January 1, 1996. A residential loan is a
loan as described in Section 7701(a)(19)(C)(v) (generally a loan secured by
residential real or church property and certain mobile homes), but only to the
extent that the loan is made to the owner of the property.

The balance of the pre-1988 reserves is subject to the provisions of Section
593(e), as modified by the Small Business Act, which require recapture in the
case of certain excessive distributions to shareholders. The pre-1988 reserves
may not be utilized for payment of cash dividends or other distributions to a
shareholder (including distributions in dissolution or liquidation) or for any
other purpose (except to absorb bad debt losses). Distribution of a cash
dividend by a thrift institution to a shareholder is treated as made: first, out
of the institution's post-1951 accumulated earnings and profits; second, out of
the pre-1988 reserves; and third, out of such other accounts as may be proper.
To the extent a distribution by Potters Bank to the Company is deemed paid out
of its pre-1988 reserves under these rules, the pre-1988 reserves would be
reduced and Potters Bank's gross income for tax purposes would be increased by
the amount which, when reduced by the income tax, if any, attributable to the
inclusion of such amount in its gross income, equals the amount deemed paid out
of the pre-1988 reserves. As of December 31, 2001, pre-1988 reserves for tax
purposes totaled approximately $2.5 million. Approximately $843,000 of
accumulated earnings and profits for tax purposes remained as of December 31,
2001, which would be available for dividend distributions, provided regulatory
restrictions applicable to the payment of dividends


                                       25
<PAGE>


are met. No representation can be made as to whether Potters Bank will have
current or accumulated earnings and profits in subsequent years.

Tax returns have been audited or closed without audit through fiscal year 1999.
In the opinion of management, any examination of open returns would not result
in a deficiency which could have a material adverse effect on financial
condition.

OHIO TAXATION

PFC is subject to the Ohio corporation franchise tax, which, as applied to PFC,
is a tax measured by both net earnings and net worth. The rate of tax is the
greater of (i) 5.1% on the first $50,000 of computed Ohio taxable income and
8.5% of computed Ohio taxable income in excess of $50,000, or (ii) 0.4% of
taxable net worth.

A special litter tax is also applicable to all corporations, including PFC,
subject to the Ohio corporation franchise tax other than "financial
institutions". If the franchise tax is paid on the net income basis, the litter
tax is equal to .11% of the first $50,000 of computed Ohio taxable income and
..22% of computed Ohio taxable income in excess of $50,000. If the franchise tax
is paid on the net worth basis, the litter tax is equal to 0.014% of taxable net
worth.

PFC may elect to be a "qualifying holding company" and as such be exempt from
the net worth tax. A corporation franchise tax based solely on net earnings
would still apply. To be exempt, PFC must satisfy all the requirements of the
applicable statute, including making related member adjustments that could
affect the taxable net worth of PFC's subsidiary, Potters Bank.

Potters Bank is a "financial institution" for State of Ohio tax purposes. As
such, it is subject to the Ohio corporate franchise tax on "financial
institutions," imposed annually at a rate of 1.3% of apportioned book net worth
determined in accordance with generally accepted accounting principles, less
statutory deductions. As a "financial institution," Potters Bank is not subject
to any tax based upon net income or net profits imposed by the State of Ohio.



                                       26
<PAGE>


ITEM 2.             PROPERTIES

         The following table sets forth certain information at December 31,
2001, regarding the properties on which the main office, each branch office and
the loan production office of Potters Bank is located:

<TABLE>
<CAPTION>
                                      Owned             Date acquired            Net
       Location                     or leased             or leased         book value(1)
       --------                     ---------             ---------         ----------

<S>                                   <C>              <C>                    <C>
CORPORATE OFFICE:
519 Broadway (2)                                       January 8, 1903
East Liverpool, Ohio 43920            Owned              May 2, 1978          $453,000

BRANCH OFFICES:
530 Broadway
East Liverpool, Ohio 43920            Owned             June 18, 1982          497,000

46635 Y&O Road
Glenmoor, Ohio 43920                  Owned             June 3, 1975           170,000

15575 State Rte. 170
Calcutta, Ohio 43920 (3)             Leased           February 1, 1983         247,000

998 Third Street
Beaver, PA  15009                     Owned           January 10, 2001        1,060,000

LOAN PRODUCTION OFFICE:
7330 Southern Boulevard
Boardman, Ohio 44512 (4)             Leased             April 1, 1998           1,000
</TABLE>

-----------------------

   1)    At December 31, 2001, office premises and equipment had a total net
         book value of $3.0 million.
   2)    Includes two parcels.
   3)    The lease agreement with a former director of Potters Bank expires on
         January 31, 2008, subject to five five-year renewal periods at Potters
         Bank's option.
   4)    The lease agreement is currently on a month-to-month basis.

ITEM 3.    LEGAL PROCEEDINGS.

There is presently no involvement in any legal proceedings of a material nature.
Legal proceedings to enforce a security interest in collateral pledged to secure
loans occur from time to time.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

During the quarter ended December 31, 2001, there were no submissions of matters
to the shareholders of PFC.


                                       27
<PAGE>



                                     PART II

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.

                                  COMMON SHARES

As of March 11, 2002, 998,614 common shares were outstanding and held by
approximately 296 shareholders of record. Prices for common shares are quoted on
The Nasdaq SmallCap Market ("Nasdaq") under the symbol "PTRS". Four brokerage
firms currently serve as market makers: Tucker Anthony Incorporated, F.J.
Morrissey & Co., Inc., Herzog, Heine, Geduld, Inc. and Knight Securities L.P.

PRICE RANGE OF COMMON SHARES

The table below shows the range of high and low sales prices for the common
shares of PFC as quoted by Nasdaq. Such prices do not include retail markups,
markdowns or commissions. Also shown are dividends per share declared during
each quarter presented. See Note 16 of the consolidated financial statements for
a discussion of dividend restrictions.

<TABLE>
<CAPTION>
                                                 2001                               2000
                                                 ----                               ----
                                                          Dividends                          Dividends
Quarter Ended                         High        Low    Per  Share      High        Low     Per Share
                                      ----        ---    ----------      ----        ---     ---------

<S>                                 <C>        <C>        <C>          <C>        <C>        <C>
March 31                            $ 14.250   $  7.750   $  0.110     $ 11.310   $  8.452   $  0.095
June 30                               15.670     12.000      0.120        9.584      8.050      0.095
September 30                          21.650     13.000      0.120        9.875      8.750      0.100
December 31                           21.860     21.380      0.120        9.188      8.250      0.100
</TABLE>



                                       28
<PAGE>

ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

                          POTTERS FINANCIAL CORPORATION

                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                                December 31, 2001

GENERAL

The following discussion and financial information are presented to provide
shareholders with a more comprehensive review of the financial position and
operating results than could be obtained from an examination of the financial
statements alone. The review should be read in conjunction with the consolidated
financial statements and accompanying notes.

In the following pages, management presents an analysis of financial condition
as of December 31, 2001, and the results of operations for fiscal 2001, as
compared to prior years. In addition to this historical information, the
following discussion contains forward-looking statements that involve risks and
uncertainties. Economic circumstances, operations and actual results could
differ significantly from those discussed in the forward-looking statements.
Some of the factors that could cause or contribute to such differences are
discussed herein but also include changes in the economy and interest rates in
the nation and in local market areas.

Without limiting the foregoing, some of the forward-looking statements included
herein are the statements under the following headings and regarding the
following matters:

         ALLOWANCE AND PROVISION FOR LOAN LOSSES - Management's statements
         regarding the amount and adequacy of the allowance for loan losses.

         LIQUIDITY AND CAPITAL RESOURCES - Management's belief that liquidity
         and capital positions are adequate to fund outstanding short- and
         long-term needs.

         Management's expectation that cash flow and borrowing capacity are
         sufficient to fund all outstanding commitments and maintain desired
         levels of liquidity.

PENDING MERGER

On September 6, 2001, an Agreement and Plan of Merger was executed among Potters
Financial Corporation ("PFC"), Potters Bank, United Community Financial Corp.
and The Home Savings and Loan Company of Youngstown, Ohio. Under the terms of
the Agreement and Plan of Merger, United Community agreed to pay $22.00 per
share in cash to PFC shareholders. At a special meeting of shareholders held on
January 24, 2002, the shareholders of PFC approved the transaction. Regulatory
approval has been received, and the parties are preparing to close the
transaction on April 1, 2001, although no assurance can be provided that the
closing will, in fact, occur or when it will occur. Upon the closing, a
subsidiary of Home Savings will merge into PFC, and PFC will dissolve into Home
Savings. Potters Bank will then merge into Home Savings, and Potters Bank
branches will become branches of Home Savings.

RESULTS OF OPERATIONS

NET INCOME

The composition of assets and liabilities, the interest rate environment,
fiscal, monetary and regulatory policies of government agencies and the general
state of the economy all affect operating results. Income is generated on
interest-earning assets, primarily loans and securities, while expense is
incurred on interest-bearing liabilities, including deposits and borrowings. Net
interest income is the difference


                                       29
<PAGE>


between the two. Provisions for losses, fee and other noninterest income and
noninterest expense also contribute to net income.

Net income of $1.2 million was recorded in 2001, $209,000 lower than net income
of $1.4 million in 2000. Lower net interest income and higher noninterest
expense were the primary components of the decrease in earnings. Interest rates
declined throughout 2001, causing significant repayments and refinancing of
higher rate loans and calls of higher-yielding securities. Both negatively
impacted 2001 interest income. Lower rates also reduced interest expense as
market-indexed deposits, most checking and savings accounts and new rates on
certificates of deposit declined. Also contributing to lower net income in 2001
were the costs of operating the new full-service office in Beaver, Pennsylvania
and expenses relating to the pending merger. Net interest income declined
$158,000, or 3.2%, and noninterest expense increased $107,000, or 3.0%. Net
income of $1.4 million in 2000 represented a $101,000, or 7.5%, increase over
net income of $1.3 million during 1999, despite a declining net interest rate
margin through most of the year resulting from rising funding costs.

Diluted earnings per share of $1.20 during 2001 declined $.23 per share, or
16.1%, from $1.43 for 2000, which was a $.14, or 10.9%, increase over diluted
earnings per share of $1.29 for 1999. The return on average shareholders' equity
was 9.21% during 2001, 12.10% during 2000 and 11.85% in 1999, while the returns
on average assets were .83% in 2001, .96% in 2000 and .97% during 1999.

Unusual or nonrecurring events occurred in each of the last three years. During
2001, $138,000 after tax additional expense was incurred relating to the merger,
decreasing earnings per diluted share by $.13. During 2000, the check kiting
after tax loss of $74,000 was offset by a $19,000 after tax payment from a
shareholder pursuant to an order of the Office of Thrift Supervision under its
change of control regulations, cumulatively causing a decrease of $55,000 in net
income, or $.05 per diluted share. During 1999, a negative loan loss provision
and a refund on previous years' franchise taxes caused an after tax increase of
$74,000 in net income, or $.07 per diluted share. Excluding all such items, net
income for 2001 was $126,000, or 8.4%, lower than during 2000 and earnings per
diluted share declined $.16, or 10.8%. Adjusted net income during 2000 was
$147,000 higher than during 1999, while earnings per diluted share increased
$.18, or 14.8%.

During 2000, net interest income increased $95,000, or 1.9%, compared to 1999.
Excluding nonrecurring income during both years, fees from loans, deposits and
other customer services, plus increased rental income from corporate office
leases, were responsible for an increase of 21.7% in noninterest income during
2000 over 1999. Noninterest expense increased $121,000, or 3.5%, during 2000
compared to 1999, primarily from the check fraud loss net of the settlement and
increased legal fees relating to the lawsuit. Excluding the net settlement,
noninterest expense increased only $9,000 during 2000 compared to 1999.

YIELDS EARNED AND RATES PAID

Net interest income is the difference between interest income generated on loans
and securities and interest expense on deposits and borrowings. The composition,
volumes and interest rates of interest-earning assets and interest-bearing
liabilities are the primary determinants of net interest income.

The following table sets forth certain average balance sheet information and
reflects the average yield on interest-earning assets and the average cost of
interest-bearing liabilities for the periods presented. Average balances are
derived from average daily balances for all periods presented, and include
nonaccruing loans in the loan portfolio, net of the allowance for loan losses.
Average balances of securities available for sale are based on the carrying
value while the yield is based on the amortized cost. Interest income is
presented on a taxable equivalent basis to reflect the impact of tax-exempt
interest income.


                                       30
<PAGE>


<TABLE>
<CAPTION>
(Dollars in thousands)                     ----------------------------------Years ended December 31,-------------------------------
                                                                             ------------------------
                                                        2001                          2000                           1999
                                                        ----                          ----                           ----
                                            Average   Interest           Average    Interest            Average    Interest
                                          Outstanding  Earned/  Yield/ Outstanding   Earned/   Yield/ Outstanding   Earned/   Yield/
                                            Balance     Paid     Rate    Balance      Paid      Rate    Balance      Paid     Rate
                                            -------     ----     ----    -------      ----      ----    -------      ----     ----
<S>                                         <C>        <C>        <C>    <C>         <C>        <C>     <C>         <C>       <C>
Interest-earnings assets:
    Loans  (1)                              $111,593   $ 9,091    8.15% $117,946     $ 9,772    8.29%   $103,699    $ 8,537   8.23%
    Securities (2)                            22,780     1,386    6.49    22,566       1,447    6.28      25,078      1,460   5.82
    Other                                      6,687       214    3.21     2,024         122    6.04       2,633        150   5.70
                                            --------   -------          --------     -------            --------    -------
        Total interest-earning assets        141,060    10,691    7.65   142,536      11,341    7.93     131,410     10,147   7.72
Noninterest-earning assets:
    Cash and cash equivalents                  3,295                       3,196                           3,076
    Premises and equipment                     2,894                       2,070                           2,039
    Other nonearning assets                    2,059                       2,274                           2,541
                                            --------                    --------                        --------
        Total assets                        $149,308                    $150,076                        $139,066
                                            ========                    ========                        ========
Interest-bearing liabilities:
    Certificates of deposit                 $ 59,054     3,329    5.64   $59,947       3,396    5.67    $ 52,180      2,784   5.34
    Savings and club accounts                 40,016     1,198    2.99    38,811       1,434    3.70      37,154      1,124   3.03
    Demand, NOW and Super NOW
     accounts                                 16,572       208    1.26    16,129         242    1.50      15,184        232   1.53
    Money market accounts                      1,224        27    2.22     1,291          32    2.48       1,830         46   2.51
    Borrowings                                17,989     1,086    6.04    20,818       1,236    5.93      19,480      1,055   5.42
                                            --------   -------          --------     -------            --------    -------
        Total interest-bearing liabilities   134,855     5,848    4.34   136,996       6,340    4.63     125,828      5,241   4.16
                                                       -------                       -------                        -------
Noninterest-bearing liabilities:
    Other liabilities                          1,016                       1,114                           1,883
    Shareholders' equity                      13,437                      11,966                          11,355
                                            --------                    --------                        --------
        Total liabilities and equity        $149,308                    $150,076                        $139,066
                                            ========                    ========


    Net interest income                                $ 4,843                       $ 5,001                        $ 4,906
                                                       =======                       =======                        =======

    Interest rate spread                                          3.31%                         3.30%                         3.56%
                                                                 =====                         =====                         =====
    Net interest-earning assets             $  6,205                     $ 5,540                        $  5,582
                                             =======                     =======                        ========
    Net yield on average interest-
      earning assets                                              3.50%                         3.50%                         3.73%
                                                                 =====                         =====                         =====
    Ratio of average interest-earning
      assets to average interest-
      bearing liabilities                     104.60%                     104.04%                        104.44%
                                              ======                      ======                         ======
</TABLE>

------------------
(1) Net of deferred loan fees, loan premiums and discounts, loans in process and
    allowance for loan losses.
(2) Includes Federal Home Loan Bank stock.



                                       31
<PAGE>


The following table presents the dollar amount of changes in interest income and
interest expense for major components of interest-earning assets and
interest-bearing liabilities. For each category, information is provided on
changes attributable to changes in volume and changes in rate. For purposes of
this table, changes attributable to both rate and volume that cannot be
segregated have been allocated proportionately based on the absolute value of
the change due to volume and the change due to rate.

<TABLE>
<CAPTION>
                                                        2001 vs. 2000                        2000 vs. 1999
                                                        -------------                        -------------
                                                          Increase                             Increase
                                                         (decrease)                           (decrease)
                                                           due to                               due to
                                                           ------                               ------
(Dollars in thousands)
                                              Volume        Rate        Total       Volume        Rate         Total
                                              ------        ----        -----       ------        ----         -----
<S>                                          <C>          <C>          <C>          <C>          <C>          <C>
Interest-earning assets:
    Loans                                    $  (520)     $  (161)     $  (681)     $ 1,180      $    55      $ 1,235
    Securities                                   (78)          17          (61)        (117)         104          (13)
Other                                            172          (80)          92          (36)           8          (28)
                                             -------      -------      -------      -------      -------      -------

      Total interest-earning assets          $  (426)     $  (224)        (650)     $ 1,027      $   167        1,194
                                                                       =======      =======      =======      =======

Interest-bearing liabilities:
    Certificates of deposit                  $   (49)     $   (18)         (67)     $   432      $   180          612
    Savings and club accounts                     43         (279)        (236)          52          258          310
    Demand, NOW and Super NOW
      accounts                                     6          (40)         (34)          14           (4)          10
    Money market accounts                         (2)          (3)          (5)         (13)          (1)         (14)
    Borrowed funds                              (171)          21         (150)          76          105          181
                                             -------      -------      -------      -------      -------      -------

      Total interest-bearing liabilities     $  (173)     $  (319)        (492)     $   561      $   538        1,099
                                             =======      =======      =======      =======      =======      -------

Net interest income                                                    $  (158)                               $    95
                                                                       =======                                =======
</TABLE>

NET INTEREST INCOME

Net interest income for the year ended December 31, 2001 of $4.8 million was
$158,000, or 3.2%, lower than during 2000, with a decrease of $650,000 in
interest income and a decrease of $492,000 in interest expense. Market interest
rates declined throughout 2001 as the Federal Reserve reduced the discount rate
on eleven separate occasions for a total decrease of 4.75%. Customers refinanced
higher rate debt, causing significant repayments in the loan portfolio, and
$12.1 million in securities were called. Liquidity generated by these events was
used to fund new loans and purchase securities at lower rates, pay off a Federal
Home Loan Bank ("FHLB") advance and fund deposit outflows, with the excess
placed in other short-term, lower yielding instruments.

Loan income decreased $681,000, or 7.0%, during 2001, primarily from a reduction
of $6.4 million in the average balance of loans, along with a reduction in the
yield on loans, from 8.29% during 2000, to 8.15% during 2001. Overall loan
principal balances declined $6.1 million during 2001, with reductions of $12.8
million in one-to-four family residences, and $3.6 million in home equity and
purchased second mortgage loans. Somewhat offsetting these declining loan
balances was an increase of $11.0 million in multifamily and nonresidential
loans. Average balances of securities remained relatively constant during 2001
as proceeds from calls and maturities were reinvested, while the average balance
of other short-term investments increased significantly from excess liquidity.
Yields on securities increased marginally during 2001, primarily from the
continued purchase of municipal and mortgage-backed securities, while the yield
on short-term investments declined almost 3%. The declining rate environment
caused the overall asset yield to decline during 2001, from 7.93% during 2000,
to 7.65% during 2001. Interest on deposits declined $342,000 during 2001,
primarily from a reduction in the overall rate paid, from 4.39% during 2000, to
4.08% during 2001. The average balance of certificates of deposit declined by
$893,000, while transaction and savings account average balances increased $1.6
million. FHLB advance interest also




                                       32
<PAGE>


declined by $150,000 during 2001 due to the maturity and repayment of one of the
advances. The cost of funds also declined during 2001, from 4.63% during 2000,
to 4.34% during 2001. The overall result of changing rates and balances in
assets and liabilities during 2001 was a largely unchanged interest rate spread,
from 3.30% during 2000, to 3.31% during 2001.

Net interest income increased $95,000, or 1.9%, during 2000 compared to 1999,
primarily from interest on loans, which increased $1.2 million, or 14.5%. The
year 2000 showed a continued effort to diversity the loan portfolio to include
higher yielding commercial and consumer loans. A large package of purchased
loans was acquired early in 2000 and several individual loans were purchased
throughout the year, but the remaining loan growth resulted from internal loan
originations in market areas served by Potters Bank. One-to-four family real
estate loans increased $7.7 million, or 10.9%, while commercial real estate
loans increased $5.3 million, or 37.3%, during 2000. The increase in loan
interest income was primarily the result of a $14.2 million, or 13.7%, increase
in the average balance of loans and, to a lesser extent, an increase in yield
from 8.23% during 1999, to 8.29% during 2000. Securities and other interest
income declined marginally during 2000, primarily from lower balances, offset by
increases in the yields on these instruments. During the fourth quarter of 2000,
$2.1 million of municipal securities were purchased, part of an overall plan to
reduce income tax expense. Due to the rising interest rate environment
throughout much of 2000, the yields on all earning assets increased, from 7.72%
during 1999, to 7.93% during 2000.

The most negative aspect of rising rates during 2000 was an increase in the cost
of funds. Interest expense increased $1.1 million, or 21.0% during 2000. Rates
on market-indexed deposit products increased rapidly and the local certificate
of deposit market became extremely competitive. Interest on deposits increased
$918,000 during 2000 compared to 1999, primarily from an increase of $9.8
million in the average balance of deposits and an increase in average yield on
deposits, from 3.94% during 1999, to 4.39% during 2000. FHLB advance interest
increased $181,000 during 2000 from an increase of $1.3 million in the average
balance and an increase in cost from an average of 5.42% during 1999, to 5.93%
during 2000. The overall cost of funds during 2000 increased to 4.63%, compared
to 4.16% during 1999, and was the primary cause of a narrowing of the interest
rate spread. The interest rate spread declined during 2000 to 3.30%, from 3.56%
during 1999.

The competition for deposits from financial institutions and a wide array of
alternative deposit investments continues to impact the availability and cost of
funds. A "Really Free" checking product and a Treasury Index savings account
that earns competitive market yields based on U.S. Treasury rates have been a
source of funds for Potters Bank and have enabled it to retain funds it could
have otherwise lost. A tiered interest rate pricing structure and special term
products are utilized for certificates and most checking and statement savings
products in order to encourage higher balance accounts and reduce the impact of
paying higher deposit rates.

ALLOWANCE AND PROVISION FOR LOAN LOSSES

Management maintains an allowance for loan losses that, in its judgment, is
adequate to absorb credit losses from loans. As part of management's ongoing
review of the loan portfolio with respect to the adequacy of the allowance for
loan losses, a portion of the allowance is allocated to each major loan type. A
periodic analysis of the percentages allocated to various types of real estate,
consumer and commercial loans is conducted, at least annually, and percentages
changed to reflect the risk and delinquency status of various loan types.
Provisions of $60,000 were recorded during 2001 to address the increase in
multifamily and nonresidential loans and continued higher delinquency levels. No
provisions were recorded during 2000, and during 1999, a negative provision of
$75,000 was recorded relating to a payoff and recovery of a problem loan in
Colorado, which increased net income and decreased the allowance for loan
losses. The negative provision in 1999 was recorded to remove excess allowances
for loan losses resulting from the decreased risk from the loan payoff.

The allowance for loan losses decreased $226,000 during 2001, with $312,000 in
charge-offs and $26,000 in recoveries. Charge-offs during 2001 consisted of
$116,000 in the real estate portfolio and $196,000 in the consumer loan
portfolio. The allowance for loan losses decreased $73,000 during 2000, to $2.0
million at December 31, 2000. Charge-offs of $113,000 during 2000, in both
consumer and real estate loans, were offset by $40,000 in recoveries. The
allowance for loan losses decreased $174,000, to $2.0 million, during 1999, from
charge-offs of $125,000, primarily consumer loans, and the $75,000

                                       33
<PAGE>


negative loan loss provision, offset by recoveries totaling $26,000. Unallocated
general valuation allowances have declined from $746,000 at December 31, 1999,
to $276,000 at December 31, 2000 and December 31, 2001. The continuing decline
in unallocated general loan loss reserves is due primarily to growth in the
loan portfolio, especially in multifamily and nonresidential real estate
loans, and increased reserve percentages allocated to higher risk home equity
loans, selected consumer loans, second mortgage loans and a nonconforming real
estate loan product available to persons who are considered slightly higher
credit risks, and to an increase in nonperforming loans.

The following table sets forth the amounts and categories of nonperforming
assets. Nonperforming assets consist of nonaccrual loans, accruing loans that
are delinquent 90 days or more, restructured loans, real estate acquired by or
instead of foreclosure and repossessed assets. Loans are placed on nonaccrual
status when the collection of principal and/or interest becomes doubtful.
Foreclosed assets include assets acquired in settlement of loans.


<TABLE>
<CAPTION>
                                                              -------------------December 31,-------------------
                                                                                 ------------
                                                                   2001               2000              1999
                                                                   ----               ----              ----
                                                                            (Dollars in thousands)
<S>                                                           <C>                 <C>              <C>
Nonaccrual loans                                              $         898       $         841    $         316
                                                              -------------       -------------    -------------
Total nonperforming loans                                               898                 841              316
Foreclosed and repossessed assets                                       242                 243
                                                              -------------       -------------    -------------
Total nonperforming assets                                    $       1,140       $       1,084    $         316
                                                              =============       =============    =============

Total assets                                                  $     146,552       $     151,435    $     143,736

Total nonperforming assets as
  a percent of total assets                                             .78%                .72%             .22%

Allowance for loan losses                                     $       1,738       $       1,964    $       2,037

Allowance as a percentage of
  nonperforming loans                                                193.54%             233.53%          644.62%
</TABLE>


Nonperforming loans increased marginally, by $57,000, during 2001 and increased
$525,000 during 2000, but remained less than 1% of total assets over the last
three years. Nonperforming loans at December 31, 2001 consisted primarily of
one-to-four family real estate secured loans, with approximately 71% from
purchased real estate and consumer loan packages, 20% from internally generated
one-to-four family real estate loans and 9% from commercial real estate loans.
At December 31, 2001, there were no nonperforming loans in the nonconforming
loan programs.

Nonaccrual loans include impaired loans. A loan is considered impaired when it
is probable that all principal and interest will not be collected according to
the terms of the loan contract. There were no impaired loans at December 31,
2001, 2000 or 1999.

Restructured loans are those that have been renegotiated at concessionary terms
as a result of a borrowers' troubled financial condition. At year-ends 2001,
2000 and 1999, there were no restructured loans.

Management uses its best judgment and information available in reviewing changes
in the financial condition or operating results of borrowers, economic
conditions and business trends to determine the adequacy of the allowance for
credit losses. The ultimate adequacy of the allowance depends on many factors,
including the performance of the loan portfolio, generally prevailing economic
conditions, changes in real estate values, interest rates and regulatory
requirements. There can be no assurance that the allowance for loan losses will
be adequate to cover future losses. The provision for loan losses is the amount
periodically charged to earnings and added to the allowance for loan losses. The
amount of the provision is based on management's regular review of the loan
portfolio considering such factors as historical loss experience, the amount of
nonperforming and delinquent loans, changes in the size and composition of the
loan portfolio, and specific borrower considerations such as the ability of the
borrower to repay the loan and the estimated value of the underlying collateral.
See Note 3 to Consolidated Financial Statements for activity with respect to the
allowance for loan losses.


                                       34
<PAGE>


GAINS ON SALES OF LOANS, SECURITIES AND OTHER ASSETS

Gains on sales of assets increased from $17,000 during 2000, to $73,000 during
2001, an increase of $56,000. The declining rate environment during 2001
prompted consumers to refinance real estate loans to obtain long-term fixed
interest rate loans, which Potters Bank sells in the secondary mortgage market.
Also sold during 2001 were commercial real estate loans where the servicing was
retained, generating gains of $10,000. No securities gains were recorded during
2001. Gains on sales of assets totaled $17,000 during 2000, a decline of $26,000
from 1999. During 2000, securities gains totaled $9,000 and an $8,000 gain was
recorded on the sale of real estate loans sold while retaining the servicing on
the loans. The rising rate environment of 2000 made the long-term fixed-rate
real estate loans sold on a servicing-released basis not as attractive. During
1999, securities gains totaled $3,000 and $40,000 was recorded on
servicing-released loan sales.

NONINTEREST INCOME

Noninterest income decreased $7,000 during the year, from $595,000 during 2000
to $588,000 during 2001. Excluding nonrecurring income during 2000, noninterest
income actually increased $22,000, primarily from a $90,000, or 20.4%, increase
in loan, deposit and customer service fees. Offsetting those increases were a
decrease of $18,000 in rental income on leased office space and a $32,000
decrease in other noninterest income.

Noninterest income increased $93,000, or 18.5%, during 2000 compared to 1999.
Excluding nonrecurring PFC miscellaneous income of $29,000 from 2000 and the
$37,000 franchise tax refund from 1999, noninterest income grew $101,000, or
21.7%, during 2000 over 1999. Specific areas of improvement over the last three
years included service charges on checking and savings accounts and increases in
automated teller machine and VISA Check Card fee income.

NONINTEREST EXPENSE

Noninterest expense increased $107,000, or 3.0%, during 2001. Excluding
nonrecurring items in each year, the $209,000 in merger related costs during
2001 and the check fraud loss of $112,000 during 2000, noninterest expense
increased $10,000, or .3%, despite the opening of a full-service office in
Beaver, Pennsylvania in July 2001. The closing of the Mentor loan production
office in 2000 had a positive impact on all noninterest expense items in 2001,
as did cost controls, while the Beaver office had a negative impact on
noninterest expense compared to 2000. Salaries and employee benefits costs
increased $198,000, or 13.1%, during 2001, primarily from increases in salaries
and performance-based incentives, the staffing of the Beaver office and lower
loan cost deferrals from reduced loan originations. Occupancy and equipment
costs decreased marginally during 2001 with increases in office building
depreciation and expense offset by lower rental expense from the absence of the
Mentor loan production office and lower depreciation expense from the completion
of depreciation on teller equipment purchased several years ago. Professional
services decreased $6,000 during 2001, with increased legal and investment
banking fees relating to the pending merger during 2001 replacing legal expenses
relating to the check fraud and technology consulting fees during 2000. Other
noninterest expense increased $25,000 during 2001, primarily from higher
advertising, communication, courier, processing and other operating costs from
the addition of the Beaver office, and an increase in the net loss relating to a
low-income housing project in which Potters Bank participates. Reduced servicing
costs of ATM/VISA check cards from a renegotiated contract and lower franchise
tax somewhat offset these increases.

Noninterest expense increased $121,000, or 3.5%, during 2000 compared to 1999.
Excluding the net check fraud loss, noninterest expense increased only $9,000
during 2000 over the prior year. Salaries and employee benefits costs declined
$121,000, primarily from the closing of the Mentor loan production office during
the second quarter of 2000 and higher loan deferral costs, offset by increased
performance-based compensation. Occupancy and equipment costs increased $31,000
with technology purchases and the renovation of the Calcutta branch office and
expansion of its drive through facility. Professional services increased
$141,000, primarily as a result of the additional fees paid to resolve the
lawsuit and the utilization of a consultant during 2000 to aid in the
development of a technology plan. Other noninterest



                                       35
<PAGE>


expense increased $100,000 during 2000 over 1999, but excluding the $112,000
check fraud loss, actually declined $9,000 during the year. Savings were
realized from lower deposit insurance premiums and regulatory supervisory fees,
offset by higher employee training and ATM/Check Card costs.

INCOME TAXES

Income tax expense of $518,000 during 2001 represented a $67,000 decline from
$585,000 during 2000. A $135,000 decrease in income tax expense also occurred
during 2000, from $720,000 recorded in 1999. The decrease in income taxes during
2001 was primarily the result of a decline in net income offset by no historical
tax credits during 2001 compared to $83,000 during 2000. The decrease in income
taxes during 2000 compared to 1999 was primarily the result of the $83,000 in
historical tax credits and an additional credit of $17,000 relating to a
low-income housing project. Other variances over the three years were primarily
from the net increase or decrease in net income for each year.

Legislation requires the recapture, over time, of a portion of the bad debt
reserve previously deducted for income tax reporting purposes. Since deferred
taxes have been recorded on those bad debt reserves, this recapture will not
affect net income.

FINANCIAL CONDITION

Assets declined $4.8 million, or 3.2%, during 2001, from $151.4 million at
December 31, 2000, to $146.6 million at December 31, 2001. In a year of
declining interest rates, significant refinancing, repayments and calls caused a
$4.4 million reduction in net loans and a $3.3 million reduction in securities
during 2001. Funds provided by these activities were used to originate and
purchase new loans, to replace called securities, repay an FHLB advance and fund
deposit outflows. Excess liquidity was invested in short-term instruments,
causing an increase of $2.1 million in cash and cash equilavents.

Securities activities during 2001 included the purchase of $7.9 million in
agency securities, $2.0 million in mortgage-backed securities and $1.6 in
municipal securities, with calls of $12.1 million, maturities of $8,000 and
repayments of $3.6 million. No securities were sold during 2001. Purchases of
highly rated, insured municipal securities continued as part of a strategy to
reduce income tax expense. At year-end 2001, the portfolio consisted primarily
of mortgage-backed securities, U.S. government agency securities and municipal
securities. All securities are designated available for sale and are carried at
their fair values, with resulting unrealized gains or losses added to or
deducted from other comprehensive income and shareholders' equity, net of tax.
The unrealized loss on securities available for sale decreased significantly
during 2001, from $58,000 at year-end 2000 to an unrealized gain of $128,000 at
year-end 2001, primarily from rising prices on mortgage-backed securities and
municipal securities. The after-tax component of equity relating to securities
available for sale decreased from an unrealized loss of $39,000 at December 31,
2000, to an unrealized gain of $84,000 at December 31, 2001.

Net loans declined to $115.5 million at December 31, 2001, compared to $119.9
million at December 31, 2000. Loan purchases of $15.2 million during 2001 and
$6.9 million in originations of loans held for sale were more than offset by
sales of $6.6 million in loans held for sale and a net reduction of $19.5
million in net loan payments. Loans sold during 2001 included $1.5 million where
the servicing was retained, generating gains of $10,000, and $63,000 of gains on
loans sold on a servicing released basis. One-to-four family real estate loans
decreased $12.8 million, or 16.3%, during 2001, while multifamily and commercial
real estate loans increased $11.0 million. Consumer and other loans decreased
$4.6 million, with home equity and second mortgage loans responsible for $3.6
million of the decrease.

The Asset/Liability Management Committee ("ALCO") monitors the pricing of loan
products, loan purchase decisions and the overall interest rate risk of the loan
portfolio. A majority of commercial real estate loans were originated with
variable rates of interest. The ratio of loans to deposits decreased to 102.3%
at December 31, 2001, from 103.5% at December 31, 2000.

Total deposits decreased $3.1 million, or 2.7%, from $117.8 million at year-end
2000, to $114.7 million at December 31, 2001. Outflows resulted primarily from a
less aggressive pricing strategy on interest rates offered for public funds and
certificates of deposit. Certificates of deposits declined $5.9 million, while



                                       36
<PAGE>


savings and checking accounts increased $3.0 million. At December 31, 2001,
certificates of deposit represented 46.9% of total deposits, compared to 50.6%
at December 31, 2000. The ALCO continues to focus on strategies for reduced
interest rate risk and responsible deposit management, such as the competitive
pricing of selected certificates of deposit with maturities exceeding one year
and the use of a tiered pricing system on the basis of amount of deposit.

In accordance with its asset/liability policy, management does not match the
highest rates offered on deposits by competitors. Deposits from retail sources
are emphasized and no brokered deposit accounts existed at December 31, 2001.

At December 31, 2001, FHLB advances totaled $17.5 million, compared to $19.5
million at year-end 2000. Advances totaling $1.6 million received during 2001
were used primarily for liquidity management. Advances totaling $3.6 million
were repaid during 2001 to utilize excess liquidity.

Shareholders' equity increased $944,000 during 2001, primarily from net income
of $1.2 million. Other significant changes included the payment of $469,000, or
$.47 per share, in dividends to shareholders and a $123,000 increase in the
unrealized gain on securities available for sale.

ASSET/LIABILITY MANAGEMENT

Asset/liability management is the process by which a company manages its
vulnerability to movements in interest rates. This process is carried out
through weekly meetings of the ALCO. Although interest rate risk is a normal
part of operations, excessive interest rate risk can significantly affect income
and expense on interest-sensitive assets and interest-sensitive liabilities, and
can also affect the underlying value of an institution's assets. The goal in
managing interest rate sensitivity is to maintain an appropriate balance between
interest-sensitive assets and liabilities in order to minimize the impact of
volatility in market interest rates.

Potters Bank, a state-chartered savings bank, is regulated by the State of Ohio
and the Federal Deposit Insurance Corporation ("FDIC"). The FDIC requires all
banks to utilize a system to measure interest rate risk and sensitivity, manage
interest rate risk, communicate that risk to the Board of Directors and
demonstrate quarterly compliance with board-approved limits. The FDIC defines
risk in terms of the Economic Value of Equity ("EVE"). The FDIC requires the
monitoring and reporting of EVE in relation to board approved limits, and
measurement and ongoing monitoring of the change in net income from a 200 basis
point increase or decrease in interest rates.

The ALCO utilizes the EVE approach and simulation modeling to aid in making
decisions relating to pricing and the relative mix of interest rate sensitive
assets and liabilities. EVE is the difference between the present value of
expected cash flows from assets and expected cash flows from liabilities as well
as off-balance sheet contracts, such as loan commitments, under various interest
rate scenarios. The interest rate sensitivity measure is the largest number of
basis points lost in the EVE ratio when interest rates increase or decrease 200
basis points.

During 2000, internally generated reports using commercial software were
utilized to measure interest rate risk during the first half of the year. During
the third quarter of 2000, interest rate risk software was purchased. The
software utilizes call report data to generate interest rate risk position
reports and peer comparisons. Potters Bank continued to use the software during
2001 to measure interest rate risk.

Presented below, as of December 31, 2001 and December 31, 2000, is an analysis
of interest rate risk as measured by the projected EVE for instantaneous and
sustained parallel shifts in the yield curve in 100 basis point increments up
and down 200 basis points, compared to current policy limits of the Board of
Directors. The EVE is calculated by subtracting the present value of liabilities
from the present value of assets and dividing such difference by the present
value of assets. Generally, Potters Bank's EVE is more sensitive to rising rates
than declining rates. In a rising rate environment, fixed-rate loans decline in
market value because of the rise in rate and slowing prepayments. A rise in
market value for fixed-rate loans is not experienced in a declining rate
environment because borrowers will prepay at relatively faster rates.



                                       37
<PAGE>

<TABLE>
<CAPTION>
Change in          Minimum           December 31,      Minimum        December 31,
Interest Rate       Board              2001             Board             2000
(Basis Points)       EVE               EVE               EVE              EVE
 ------------        ---               ---               ---              ---

<S>                  <C>               <C>               <C>              <C>
       +200          6.40%             6.63%             6.40%            6.77%
       +100          7.20              7.84              7.20             7.60
          0          8.00              9.08              8.00             8.35
       -100          7.20             10.27              7.20             8.86
       -200          6.40             11.10              6.40             9.00
</TABLE>

<TABLE>
<CAPTION>
Change in          Minimum          December 31,       Minimum         December 31,
Net Income          Board              2001             Board             2000
(Basis Points)      Change            Change           Change            Change
 ------------       ------            ------           ------            ------

<S>                 <C>               <C>              <C>               <C>
       +200         (10.00)%          (2.46)%          (10.00)%          (6.15)%
       -200         (10.00)           (5.96)           (10.00)            7.33
</TABLE>

At December 31, 2001, the EVE ratio assuming no change in current rates was
9.08%, higher than the 8.35% NPV at December 31, 2000. At year-end 2001, an
assumed 200 basis point increase in interest rates caused the EVE ratio to
decline from 9.08% to 6.63%. At year-end 2000, the EVE ratio declined from 8.35%
to 6.77% after the same 200 basis point increase in interest rates. During 2001,
exposure to interest rate risk was impacted primarily by the interest rate
environment. The Federal Reserve reduced interest rates eleven separate times
during 2001 for a total decrease of 4.75%. During 2000, the U.S. Treasury Yield
Curve, which details the rates offered by the U.S. government on instruments of
varying maturities, was somewhat flatter than normal, with not much difference
between the rates offered on short-term instruments versus those with
longer-term maturities. During 2001, interest rates on instruments with
shorter-term maturities declined to a greater degree than longer-term
maturities, causing a steeper, more normal shaped yield curve. At December 31,
2001, interest rates on instruments with long-term maturities were actually
higher than at year-end 2000, while very short-term maturities were
significantly lower at year-end 2001 than at the end of the prior year. This
movement in interest rates was the primary cause of the 14 basis point decrease
in the projected EVE at year-end 2001 compared to the EVE at year-end 2000,
during a 200 basis point upward shift in rates.

Interest rate sensitivity increased during 2001 compared to 2000. The
sensitivity measure, or change in the EVE ratio, increased from a negative 158
basis points at year-end 2000, to a negative 235 basis points at December 31,
2001. Contributing to the increase in sensitivity during 2001 was an increase in
fixed-rate loans as a percentage of the loan portfolio and continued repayments
of adjustable rate mortgage-backed securities. The percentage change in EVE
under all scenarios was within the Board-imposed limits at both period ends.

As with any method of measuring interest rate risk, certain shortcomings are
inherent in the EVE approach. Certain assets and liabilities with similar
characteristics may react in different degrees to changes in market interest
rates. In addition, the interest rates on certain assets and liabilities may
fluctuate in advance, or lag behind, changes in market interest rates. A change
in interest rates can also invalidate the prepayment and other assumptions used
in EVE calculations.

The Board of Directors approves and monitors compliance with its interest rate
risk management policy on a quarterly basis.


                                       38
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

Liquidity refers to the ability to generate sufficient cash to fund current loan
demand, meet deposit withdrawals and pay operating expenses. Liquidity is
influenced by financial market conditions, fluctuations in interest rates,
general economic conditions and regulatory requirements. Liquid assets,
primarily represented by cash equivalents and interest-bearing deposits in other
financial institutions, are a result of operating, investing and financing
activities. These activities are summarized below for the years ended December
31, 2001 and 2000:

<TABLE>
<CAPTION>
                                                                   Years ended December 31,
                                                                    2001                2000
                                                                    ----                ----
                                                                    (Dollars in thousands)

<S>                                                             <C>                <C>
           Net income                                           $    1,238         $     1,447
           Adjustments to reconcile net income
             to net cash from operating activities                    (401)                812
                                                                ----------         -----------
           Net cash from operating activities                          837               2,259
           Net cash from investing activities                        6,981              (9,806)
           Net cash from financing activities                       (5,687)              5,087
                                                                ----------         -----------
           Net change in cash and cash equivalents                   2,131              (2,460)
           Cash and cash equivalents at the
             beginning of the year                                   4,820               7,820
                                                                ----------         -----------
           Cash and cash equivalents at the end of
             the year                                           $    6,951         $     4,820
                                                                ==========         ===========
</TABLE>

The adjustments to reconcile net income to net cash from operating activities
consists mainly of the origination and sale of mortgage loans, provisions for
losses, depreciation and amortization and changes in accrued income and expense.
Significant operating activities during 2001 included $6.9 million in
originations of loans held for sale, offset by the sale of $6.6 million of such
loans. Investing activities during 2001 included maturities, repayments and
calls on securities totaling $15.0 million and net repayments of $19.5 million
in the loan portfolio, somewhat offset by securities purchases of $11.5 million
and loan purchases of $15.2 million. Significant components of investing
activities during 2000 were loan purchases of $8.1 million, net loan
originations of $3.8 million and securities repayments and calls totaling $3.9
million, offset by purchases of $2.1 million of municipal securities.

Cash flows from financing activity during 2001 included net deposit outflows of
$3.1 million and net repayments of FHLB advances totaling $2.0 million. During
2000, net deposit inflows totaled $7.5 million and net repayments of FHLB
advances of $1.8 million.

Normal, recurring sources of funds are primarily customer deposits, sale,
maturities, calls and repayments of securities, loan repayments and other funds
provided by operations. Potters Bank has the ability to borrow from the FHLB
when needed as a secondary source of liquidity. Investments in liquid assets are
maintained based upon management's assessment of the need for funds, expected
deposit flows, the yields available on short-term liquid assets and the
objectives of the asset/liability management program. Federal regulation
requires the maintenance of an average daily balance of liquid assets (generally
including cash, deposits in other financial institutions, and qualifying U.S.
government securities) at a minimum of 4% of the sum of its average daily
balance of net withdrawable deposit accounts and borrowings payable in one year
or less. During December 2001, the average regulatory liquidity ratio was
10.78%. At year-end 2001, commitments to originate loans and unused credit lines
totaled $7.1 million. Management considers liquidity and capital reserves to be
sufficient to fund its outstanding short- and long-term needs on a timely basis.
Sufficient cash flow and borrowing capacity exists to fund all outstanding
commitments and to maintain desired levels of liquidity.

At December 31, 2001, capital was in excess of all capital requirements set
forth by regulation for all federally insured savings institutions. Note 16 of
the consolidated financial statements sets forth information with respect to
regulatory capital and the corresponding regulatory capital requirements
applicable to thrift institutions.


                                       39
<PAGE>


FAIR VALUES OF FINANCIAL INSTRUMENTS

Estimated fair values and related carrying values of its financial instruments
at year-end 2001 and 2000 are disclosed in Note 17 of the consolidated financial
statements. The difference between the carrying values and the estimated fair
values of financial instruments is primarily a function of the interest rate
environment and the characteristics of the financial instruments.

The estimated fair value of loans receivable represented 100.8% and 100.0% of
the carrying values at December 31, 2001 and 2000. At December 31, 2001 and
2000, the estimated fair value of deposits was 100.9% and 100.0% of its carrying
value.

IMPACT OF INFLATION AND CHANGING PRICES

The financial statements and related data presented herein have been prepared in
accordance with generally accepted accounting principles ("GAAP"), which require
the measurement of financial position and results of operations primarily in
terms of historical dollars without considering changes in the relative
purchasing power of money over time because of inflation.

Unlike most industrial companies, virtually all assets and liabilities are
monetary in nature. As a result, interest rates have a more significant impact
on performance than the effects of general levels of inflation. Interest rates
do not necessarily move in the same direction or in the same magnitude as the
prices of goods and services.

ACCOUNTING PRONOUNCEMENTS

SFAS No. 41, Business Combinations, requires all business combinations within
its scope to be accounted for using the purchase method, rather than the
pooling-of-interests method. The provisions of this Statement apply to all
business combinations initiated after June 30, 2001. The adoption of this
statement will impact the financial statements of the Company's acquirers.

SFAS No. 142, Goodwill and Other Intangible Assets, requires the accounting for
such assets arising from prior and future business combinations. Upon the
adoption of this Statement, goodwill arising from business combinations will no
longer be amortized, but rather will be assessed regularly for impairment, with
any such impairment recognized as a reduction to earnings in the period
identified. Other identified intangible assets, such as core deposit intangible
assets, will continue to be amortized over their estimated useful lives. The
Company is required to adopt this Statement on January 1, 2002. The adoption of
this Statement will not impact the Company's financial statements, as it has no
intangible assets.



                                       40
<PAGE>


ITEM 7.    FINANCIAL STATEMENTS.

                          POTTERS FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2001 and 2000
                             (Dollars in thousands)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                       2001            2000
                                                    ---------       ---------

<S>                                                 <C>             <C>
ASSETS

      Cash and due from financial institutions      $   4,288       $   3,930
      Interest-bearing deposits                           359             401
      Federal funds sold                                2,304             489
                                                    ---------       ---------
         Cash and cash equivalents                      6,951           4,820
      Securities available for sale                    17,849          21,177
      Federal Home Loan Bank stock                      1,362           1,274
      Loans, net                                      115,500         119,903
      Accrued interest receivable                       1,016           1,349
      Premises and equipment, net                       2,956           2,016
      Other assets                                        918             896
                                                    ---------       ---------

                                                    $ 146,552       $ 151,435
                                                    =========       =========


LIABILITIES AND SHAREHOLDERS' EQUITY

      Liabilities
      Deposits                                      $ 114,651       $ 117,792
      Federal Home Loan Bank advances                  17,500          19,500
      Accrued expenses and other liabilities            1,124           1,810
                                                    ---------       ---------

         Total liabilities                            133,275         139,102


      Shareholders' equity
      Common stock, no par value;
        2,000,000 shares authorized;
        1,116,528 shares issued
      Paid-in capital                                   5,317           5,288
      Retained earnings                                 9,336           8,567
      Accumulated other
        comprehensive income (loss)                        84             (39)
      Unearned compensation on
        recognition and retention plan shares             (31)            (46)
      Treasury stock, at cost:  117,914 shares
        in 2001 and 118,539 in 2000                    (1,429)         (1,437)
                                                    ---------       ---------

         Total shareholders' equity                    13,277          12,333
                                                    ---------       ---------

                                                    $ 146,552       $ 151,435
                                                    =========       =========
</TABLE>


                                       41
<PAGE>


                          POTTERS FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF INCOME AND
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                   For the three years ended December 31, 2001
                  (Dollars in thousands, except per share data)

--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
                                                       2001           2000           1999
                                                       ----           ----           ----
<S>                                                  <C>            <C>            <C>
INTEREST AND DIVIDEND INCOME
      Loans, including fees                          $  9,091       $  9,772       $  8,537
      Securities                                        1,386          1,447          1,460
      Federal funds sold and other                        214            122            150
                                                     --------       --------       --------
                                                       10,691         11,341         10,147
INTEREST EXPENSE
      Deposits                                          4,762          5,104          4,186
      Federal Home Loan Bank advances                   1,086          1,236          1,055
                                                     --------       --------       --------
                                                        5,848          6,340          5,241
                                                     --------       --------       --------

NET INTEREST INCOME                                     4,843          5,001          4,906

Provision for loan losses                                  60                           (75)
                                                     --------       --------       --------

NET INTEREST INCOME AFTER
  PROVISION FOR LOAN LOSSES                             4,783          5,001          4,981
Gains on sales of loans and securities                     73             17             43
Noninterest income                                        588            595            502
Noninterest expense                                     3,688          3,581          3,460
                                                     --------       --------       --------

INCOME BEFORE INCOME TAX                                1,756          2,032          2,066

Income tax expense                                        518            585            720
                                                     --------       --------       --------

NET INCOME                                           $  1,238       $  1,447       $  1,346
                                                     ========       ========       ========
Earnings per common share
      Basic                                          $   1.25       $   1.46       $   1.32
                                                     ========       ========       ========

      Diluted                                        $   1.20       $   1.43       $   1.29
                                                     ========       ========       ========

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                                         2001           2000           1999
                                                     --------       --------       --------

NET INCOME                                           $  1,238       $  1,447       $  1,346

Other comprehensive income (net of tax):
      Unrealized holding gains (losses) on
       securities available for sale                      123            507           (497)
      Reclassification adjustment for
       accumulated gains included
       in net income                                                      (6)            (2)
                                                     --------       --------       --------

      Total other comprehensive income                    123            501           (499)
                                                     --------       --------       --------

COMPREHENSIVE INCOME                                 $  1,361       $  1,948       $    847
                                                     ========       ========       ========
</TABLE>


                                       42
<PAGE>


                          POTTERS FINANCIAL CORPORATION
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                   For the three years ended December 31, 2001
                  (Dollars in thousands, except per share data)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                 Accumulated
                                                                                    other      Recognition
                                                        Paid-in     Retained     comprehensive     and       Treasury
                                                        capital      earnings       income    retention plan  shares        Total
                                                        -------      --------       ------    --------------  ------        -----
<S>                                                      <C>          <C>          <C>            <C>        <C>          <C>
BALANCE - JANUARY 1,1999                                 $5,218       $8,233       $     (41)     $  (74)    $ (2,179)    $ 11,157
Net income                                                             1,346                                                 1,346
924 common shares issued from treasury
 for stock option exercises                                  (7)                                                   11            4
Purchase of 44,077 treasury shares                                                                               (726)        (726)
Cash dividends declared ($.309 per common share)                        (318)                                                 (318)
Stock dividend declared                                     176       (1,316)                                   1,140
Recognition and retention plan shares earned                                                          14                        14
Tax benefit arising from stock option
 and recognition and retention plan shares                   42                                                                 42
Change in unrealized gain/( loss) on securities
 available for sale                                                                     (499)                                 (499)
                                                      ---------     --------       ---------      ------     --------    ---------
BALANCE - DECEMBER 31, 1999                               5,429        7,945            (540)        (60)      (1,754)      11,020
Net income                                                             1,447                                                 1,447
Purchase of 28,850 treasury shares                                                                               (281)        (281)
Cash dividends declared ($.39 per common share)                         (394)                                                 (394)
Stock dividend declared                                    (167)        (431)                                     598
Recognition and retention plan shares earned                                                          14                        14
Tax benefit arising from stock option
 and recognition and retention plan shares                   26                                                                 26
Change in unrealized gain/( loss) on securities
 available for sale                                                                      501                                   501
                                                      ---------     --------       ---------      ------     --------    ---------
BALANCE - DECEMBER 31, 2000                               5,288        8,567             (39)        (46)      (1,437)      12,333
Net income                                                             1,238                                                 1,238
625 common shares issued from treasury
 for stock option exercises                                  (1)                                                    8            7
Cash dividends declared ($.47 per common share)                         (469)                                                 (469)
Recognition and retention plan shares earned                                                          15                        15
Tax benefit arising from stock option
 and recognition and retention plan shares                   30                                                                 30
Change in unrealized gain/(loss) on securities
 available for sale                                                                      123                                   123
                                                      ---------     --------       ---------      ------     --------    ---------
BALANCE - DECEMBER 21, 2001                           $   5,317     $  9,336       $      84      $  (31)    $ (1,429)   $  13,277
                                                      =========     ========       =========      ======     ========    =========
</TABLE>

--------------------------------------------------------------------------------
                             See accompanying notes.


                                       43
<PAGE>



                          POTTERS FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   For the three years ended December 31, 2001
                             (Dollars in thousands)

--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                           2001           2000          1999
                                                           ----           ----          ----

<S>                                                      <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES

      Net income                                         $  1,238       $  1,447       $  1,346
      Adjustments to reconcile net income to net
        cash from operating activities
         Depreciation and amortization                        318            303            296
         Provision for losses                                  60                           (75)
         Net amortization of securities                         5             43             87
         Net realized gain on:
             Sales of securities                                              (9)            (3)
             Sales of loans                                   (73)            (8)           (40)
             Sales of foreclosed real estate and
               repossessed assets                             (23)            (3)
         Stock dividend on Federal Home Loan
           Bank stock                                         (88)           (90)           (77)
         Loans originated for sale                         (6,864)          (809)        (5,577)
         Proceeds from sales of loans held for sale         6,569            776          6,359
         Net change in:
             Deferred taxes                                    59             36             68
             Other assets and liabilities                    (364)           573           (991)
                                                         --------       --------       --------

                Net cash from operating activities            837          2,259          1,393
                                                         --------       --------       --------

CASH FLOWS FROM INVESTING ACTIVITIES

      Activity in available-for-sale securities:
         Sales                                                               550            577
         Maturities, repayments and calls                  14,962          3,884          8,101
         Purchases                                        (11,453)        (2,135)        (8,556)
      Purchase of Federal Home Loan Bank stock                                             (116)
      Loan originations and payments, net                  19,534         (3,784)         3,216
      Loan purchases                                      (15,152)        (8,061)       (17,407)
      Proceeds from sale of foreclosed real estate
        and repossessed assets                                261             40
      Additions to property and equipment                  (1,171)          (300)          (535)
                                                         --------       --------       --------

         Net cash from investing activities                 6,981         (9,806)       (14,720)
                                                         --------       --------       --------
</TABLE>

--------------------------------------------------------------------------------
                                   (Continued)



                                       44
<PAGE>



                          POTTERS FINANCIAL CORPORATION
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                   For the three years ended December 31, 2001
                             (Dollars in thousands)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                               2001           2000           1999
                                                             --------       --------       --------

<S>                                                          <C>            <C>            <C>
CASH FLOWS FROM FINANCING ACTIVITIES

      Net change in deposits                                   (3,141)         7,457          5,691
      Proceeds from Federal Home Loan Bank advances             1,550          4,150         15,300
      Repayments of Federal Home Loan Bank advances            (3,550)        (5,950)       (11,247)
      Repurchase of common stock                                                (281)          (726)
      Proceeds from exercise of stock options                       7                             4
      Cash dividends paid                                        (469)          (394)          (318)
      Other financing activities                                  (84)           105             36
                                                             --------       --------       --------

         Net cash from financing activities                    (5,687)         5,087          8,740
                                                             --------       --------       --------

Net change in cash and cash equivalents                         2,131         (2,460)        (4,587)

Cash and cash equivalents at beginning of year                  4,820          7,280         11,867
                                                             --------       --------       --------

CASH AND CASH EQUIVALENTS AT END OF YEAR                     $  6,951       $  4,820       $  7,280
                                                             ========       ========       ========


Supplemental cash flow information:

      Interest paid                                          $  6,022       $  6,198       $  5,204
      Income taxes paid                                           568            363            887

Supplemental noncash disclosures:

      Transfer from loans to foreclosed real estate and
        repossessed assets                                   $    242       $    279
      Recognition and retention plan shares earned                 15             14       $     14
</TABLE>


--------------------------------------------------------------------------------
                             See accompanying notes.


                                       45
<PAGE>


                          POTTERS FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION: The consolidated financial
statements include Potters Financial Corporation and its wholly-owned
subsidiary, Potters Bank, together referred to as "the Corporation".
Intercompany transactions and balances have been eliminated in consolidation.

The Corporation provides financial products and services through its three
offices in and near East Liverpool, Ohio, a full-service facility in Beaver,
Pennsylvania and its loan production office in Boardman, Ohio. Primary lending
products are residential and commercial real estate loans, home equity lines of
credit, commercial and consumer loans. Substantially all loans are secured by
specific collateral. Real estate loans are secured by both residential and
commercial real estate. Commercial loans are expected to be repaid from cash
flows of the business. Lending activities are primarily funded by attracting
deposits. Primary deposit products include a variety of checking, savings and
certificate of deposit accounts. The primary source of income is interest on
loans and securities.

BUSINESS SEGMENTS: While the Corporation's chief decision makers monitor the
revenue streams of the various Corporation products and services, operations are
managed and financial performance is evaluated on a company-wide basis.
Accordingly, all banking operations are considered by management to be
aggregated in one reportable operating segment.

USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS: Management makes
estimates and assumptions in preparing financial statements in conformity with
accounting principles generally accepted in the United States of America. These
estimates and assumptions affect the amount reported in the financial statements
and disclosures required, and future results could differ. The allowance for
loan losses, fair values of certain securities, the determination and carrying
value of impaired loans and the carrying value of loans held for sale are all
particularly subject to change.

CASH FLOWS: Cash and cash equivalents include cash on hand, interest-bearing
deposits and federal funds sold. Net cash flows are reported for loan and
deposit transactions.

SECURITIES: Securities are classified as held to maturity, trading or available
for sale. Held-to-maturity securities are those that management has the positive
intent and ability to hold to maturity, and are carried at amortized cost.
Available-for-sale securities are those that may be sold before maturity, and
are carried at fair value, with unrealized gains and losses reported in other
comprehensive income. Trading securities are those which are held for short
periods of time and are carried at fair value with unrealized gains and losses
reflected in earnings. No trading securities were held during any period
presented. Federal Home Loan Bank stock is carried at cost. Realized gains or
losses on dispositions are based on net proceeds and the adjusted carrying
amount of securities sold, using the specific identification method. Interest
income on securities includes the amortization and accretion of purchased
premiums and discounts using the level yield method. Securities are written down
to fair value when a decline in value is not temporary.

LOANS: Loans are reported at the principal balance outstanding, net of deferred
loan fees and costs, unearned interest and an allowance for loan losses. Loans
held for sale are carried at the lower of cost or market in the aggregate. Net
unrealized losses are recognized in a valuation allowance by charges to income.

Interest income is reported on the interest method and includes amortization of
net deferred loan fees and costs over the life of the loan. Interest is no
longer reported when serious doubt exists as to the repayment of the loan,
typically when a loan is impaired or when the loan becomes 90 days past due.
Payments received on these loans are reported as principal reductions.

                                   (Continued)
--------------------------------------------------------------------------------


                                       46
<PAGE>

                          POTTERS FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

--------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

ALLOWANCE FOR LOAN LOSSES: An allowance for loan losses is maintained for
probable incurred credit losses. Provisions and recoveries increase the
allowance, while it is decreased by charge-offs. Management maintains the
allowance at a level considered adequate to cover losses that are currently
anticipated, based on past loss experience, general economic conditions, risk in
the portfolio, information about specific borrower situations, collateral
values, and other factors and estimates which are subject to change over time.
While portions of the allowance are allocated for specific problem loan
situations, the entire allowance is available for any loan charge-offs that
occur. A loan is charged-off against the allowance when deemed uncollectible,
although collection efforts continue and future recoveries may occur.

A loan is considered impaired when full payment under the loan terms is not
expected. Smaller-balance loans with similar characteristics, such as
residential real estate and consumer loans, are evaluated for impairment in
total. Commercial loans and nonresidential real estate loans are evaluated
individually for impairment. A portion of the allowance for loan losses is
allocated to impaired loans so they are reported at the present value of
expected future cash flows, discounted using the loan's effective interest rate,
or at the fair value of collateral if repayment is expected from the collateral.

FORECLOSED ASSETS: Assets acquired through or instead of foreclosure are
recorded at fair value when acquired, with any reduction in the carrying value
reflected as a charge-off. Any subsequent decline in value is recorded through
expense. Costs after acquisition are expensed.

PREMISES AND EQUIPMENT: Land is stated at cost. Buildings, furniture, fixtures
and equipment are stated at cost less accumulated depreciation. Depreciation is
computed based on the straight-line method over the estimated useful lives of
the assets.

SERVICING RIGHTS: Mortgage servicing rights are recognized as assets for the
allocated value of retained servicing rights on loans sold. Servicing rights are
expensed in proportion to, and over the period of, estimated net servicing
revenues. Impairment is evaluated based on the fair value of the rights, using
groupings of the underlying loans as to interest rates and then, secondarily, as
to geographic and prepayment characteristics. Any impairment of a grouping is
reported as a valuation allowance.

INCOME TAXES: Income tax expense includes the current year income tax due or
refundable and the change in deferred tax assets and liabilities. Deferred tax
assets and liabilities are the expected future tax amounts for the temporary
differences between carrying amounts and tax bases of assets and liabilities,
computed using enacted tax rates. A valuation allowance, if needed, reduces
deferred tax assets to the amount expected to be realized.

FINANCIAL INSTRUMENTS: Financial instruments include credit instruments, such as
commitments to make loans and standby letters of credit, issued to meet customer
financing needs. The face amount for these items represents the exposure to
loss, before considering customer collateral or ability to repay.

STOCK DIVIDEND: A 5% stock dividend was distributed in July 2000 and a 10% stock
dividend was distributed in March 1999. Share data has been adjusted to reflect
the stock dividends. Stock dividends are recorded at the fair market value of
the shares issued.

                                   (Continued)
--------------------------------------------------------------------------------


                                       47
<PAGE>


                          POTTERS FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

--------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

EARNINGS PER COMMON SHARE: Basic earnings per share ("EPS") is computed by
dividing net income by the weighted average number of common shares outstanding
during the year. Diluted EPS includes the potential dilution resulting from the
issuance of common shares upon stock option exercises and vesting of recognition
and retention plan shares. All references to common shares, earnings and
dividends per share reflect all stock dividends and stock splits. Following is a
summary of shares used in computing EPS:

<TABLE>
<CAPTION>
                                                                       2001           2000            1999
                                                                       ----           ----            ----
                                                                             (Dollars in thousands)
<S>                                                                 <C>             <C>            <C>
         Weighted average common shares
          outstanding for basic EPS                                   989,191         993,423      1,016,740
         Add:  Dilutive effects of assumed exercises
          of stock options and recognition and
          retention plan vesting                                       39,078          18,635         28,738
                                                                  -----------     -----------    -----------
         Average shares and dilutive potential
          common shares                                             1,028,269       1,012,058      1,045,478
                                                                  ===========     ===========    ===========
</TABLE>

As of December 31, 2001, no stock options were antidilutive, but at December 31,
2000, options for 31,078 shares were antidilutive and at December 31, 1999,
options for 32,655 shares were antidilutive. Antidilutive stock options are
those in which the exercise price of the option exceeds the fair market value of
the underlying stock. Antidilutive stock options were excluded from the above
calculation.

COMPREHENSIVE INCOME: Comprehensive income consists of net income and other
comprehensive income. Other comprehensive income includes unrealized gains and
losses on securities available for sale, which are also recognized as a separate
component of equity.

LOSS CONTINGENCIES: Loss contingencies, including claims and legal actions
arising in the ordinary course of business, are recorded as liabilities when the
likelihood of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there now are such matters that will have
a material effect on the financial statements.

DIVIDEND RESTRICTIONS: Financial institution regulations require the maintenance
of certain capital levels and may limit the dividends paid by the financial
institution or by the holding company to shareholders.

FAIR VALUE OF FINANCIAL INSTRUMENTS: Fair values of financial instruments are
estimated using relevant market information and other assumptions, as more fully
disclosed in a separate note. Fair value estimates involve uncertainties and
matters of significant judgment regarding interest rates, credit risk,
prepayments and other factors, especially in the absence of broad markets for
particular items. Changes in assumptions or in market conditions significantly
affect the estimates.

FINANCIAL STATEMENT PRESENTATION: Certain items in the 1999 and 2000 financial
statements have been reclassified to correspond with the 2001 presentation.


                                   (Continued)
--------------------------------------------------------------------------------


                                       48
<PAGE>


                          POTTERS FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

--------------------------------------------------------------------------------

NOTE 2 - SECURITIES

Securities available for sale at year-end were as follows:

<TABLE>
<CAPTION>
                                                                     Gross            Gross           Estimated
                                                                  Unrealized       Unrealized           Fair
                                                                     Gains           Losses             Value
                                                                     -----           ------             -----
                                                                   (Dollars in thousands)
<S>                                                             <C>               <C>              <C>
2001
----
       U.S. government and
         federal agencies                                       $        44       $       (32)     $     5,334
       States and municipalities                                         55               (50)           3,835
       Other                                                              2                                186
       Mortgage-backed securities                                       109                (9)           8,463
                                                                -----------       -----------      -----------
       Total debt securities                                            210               (91)          17,818

       Equity securities                                                  9                                 31
                                                                -----------       -----------      -----------
                                                                $       219       $       (91)     $    17,849
                                                                ===========       ===========      ===========

2000
----
       U.S. government and
         federal agencies                                       $         9       $      (110)     $     9,395
       States and municipalities                                         95                              2,377
       Other                                                              1                                260
       Mortgage-backed securities                                        22               (75)           9,123
                                                                -----------       -----------       ----------
       Total debt securities                                            127              (185)          21,155

       Equity securities                                                                                    22
                                                                -----------       -----------      -----------
                                                                $       127       $      (185)     $    21,177
                                                                ===========       ===========      ===========
</TABLE>

Contractual maturities of debt securities available for sale at year-end 2001
were as follows. Securities not due at a single maturity date, primarily
mortgage-backed securities, are shown separately. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
                                                                                    Estimated
                                                                                   Fair Value
                                                                                   ----------
                                                                              (Dollars in thousands)
<S>                                                                               <C>
     Due in one year or less                                                      $        61
     Due after one year through five years                                              3,888
     Due after five years through ten years                                             1,502
     Due after ten years                                                                3,904
     Mortgage-backed securities                                                         8,463
                                                                                  -----------
                                                                                  $    17,818
                                                                                  ===========
</TABLE>


--------------------------------------------------------------------------------
                                   (Continued)


                                       49
<PAGE>


                          POTTERS FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

--------------------------------------------------------------------------------


NOTE 2 - SECURITIES (Continued)

Securities totaling $12.1 million were called during 2001, resulting in no gains
or losses. No securities were sold during 2001. Securities totaling $550,000
were sold during 2000, resulting in a gross gain of $9,000, while calls totaled
$1.0 million with no gain or loss. Securities totaling $577,000 were sold during
1999, resulting in gross gains of $4,000 and gross losses of $2,000. Securities
totaling $3.0 million were called during 1999, resulting in a gain of $1,000.

As of December 31, 2001 and 2000, securities totaling $10.3 million and $14.0
million were pledged to collateralize public funds.

NOTE 3 - LOANS

Loans at year-end were as follows:
<TABLE>
<CAPTION>
                                                                                        2001              2000
                                                                                        ----              ----
                                                                                        (Dollars in thousands)
<S>                                                                                 <C>              <C>
Real estate mortgage loans
        One-to-four family residences                                               $    65,649      $    78,463
        Loans held for sale                                                                 464               96
        Nonresidential property                                                          29,786           19,572
        Multifamily and other                                                             3,599            2,839
                                                                                    -----------      -----------
                                                                                         99,498          100,970
Consumer and other loans
        Home equity loans                                                                11,365           13,282
        Purchased second mortgages                                                        2,945            4,631
        Consumer loans and lines of credit                                                1,333            1,920
        Commercial business loans                                                         1,537            1,555
        Other                                                                             1,466            1,854
                                                                                    -----------      -----------
                                                                                         18,646           23,242
                                                                                    -----------      -----------

        Total loan principal balances                                                   118,144          124,212
        Undisbursed loan funds                                                           (1,364)          (2,909)
        Premiums on purchased loans
        and net deferred loan costs                                                         458              564
        Allowance for loan losses                                                        (1,738)          (1,964)
                                                                                    -----------      -----------

                                                                                    $   115,500      $   119,903
                                                                                    ===========      ===========

</TABLE>

Activity in the allowance for loan losses for the year was as follows:
<TABLE>
<CAPTION>

                                                                       2001           2000            1999
                                                                       ----           ----            ----
                                                                             (Dollars in thousands)

<S>                                                                  <C>            <C>            <C>
      Beginning balance                                              $  1,964       $   2,037      $   2,211
      Provision for loan losses                                            60                            (75)
      Recoveries                                                           26              40             26
      Charge-offs                                                        (312)           (113)          (125)
                                                                     --------       ---------      ---------

      Ending balance                                                 $  1,738       $   1,964      $   2,037
                                                                     ========       =========      =========
</TABLE>



                                   (Continued)
--------------------------------------------------------------------------------


                                       50
<PAGE>


                          POTTERS FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

--------------------------------------------------------------------------------


NOTE 3 - LOANS (Continued)

Nonaccrual and renegotiated loans totaled $898,000 and $841,000 at December 31,
2001 and 2000. Interest income that would have been recorded on such loans under
their original terms totaled approximately $90,000 and $77,000 for the years
ended December 31, 2001 and 2000. The amounts included in interest income for
such loans totaled approximately $29,000 during 2001 and $29,000 during 2000.
Potters Bank is not committed to lend additional funds to debtors whose loans
have been modified. Impaired loans were not material at any date or during any
period presented.

NOTE 4 - ACCRUED INTEREST RECEIVABLE

Accrued interest receivable at year-end was as follows:
<TABLE>
<CAPTION>

                                                                       2001           2000
                                                                       ----           ----
                                                                      (Dollars in thousands)

<S>                                                                  <C>            <C>
           Loans                                                     $    830       $   1,082
           Securities                                                     136             205
           Mortgage-backed securities                                      50              62
                                                                     --------       ---------

                                                                     $  1,016       $   1,349
                                                                     ========       =========
</TABLE>

NOTE 5 - PREMISES AND EQUIPMENT

Premises and equipment at year-end was as follows:
<TABLE>
<CAPTION>

                                                                       2001           2000
                                                                       ----           ----
                                                                      (Dollars in thousands)

<S>                                                                  <C>            <C>
           Land                                                      $    716       $     177
           Buildings and improvements                                   3,237           2,748
           Furniture and equipment                                      1,542           1,399
                                                                     --------       ---------
                                                                        5,495           4,324
           Less: Accumulated depreciation                               2,539           2,308
                                                                     --------       ---------

                                                                     $  2,956       $   2,016
                                                                     ========       =========
</TABLE>

NOTE 6 - DEPOSITS

Deposits at year-end were as follows:
<TABLE>
<CAPTION>
                                                                       2001                        2000
                                                                       ----                        ----
                                                                  Amount      Percent         Amount      Percent
                                                                  ------      -------         ------      -------
                                                                              (Dollars in thousands)
<S>                                                           <C>                 <C>     <C>                 <C>
Demand, NOW, and Super NOW accounts
  (Noninterest bearing deposits:  2001 -
  $2,272,000; 2000 - $2,009,000)                              $    17,915         15.6%   $    16,343         13.8%
Savings and club accounts                                          41,976         36.6         40,508         34.3
Money market demand accounts                                        1,027          0.9          1,272          1.3
Certificates of deposit                                            53,733         46.9         59,669         50.6
                                                              -----------       ------    -----------       ------

                                                              $   114,651        100.0%   $   117,792        100.0%
                                                              ===========       ======    ===========       ======
</TABLE>

                                   (Continued)
--------------------------------------------------------------------------------


                                       51
<PAGE>



                          POTTERS FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

--------------------------------------------------------------------------------


NOTE 6 - DEPOSITS (Continued)

Certificates of deposit with a minimum denomination of $100,000 were
approximately $11,968,000 and $15,645,000 at year-end 2001 and 2000.

Scheduled maturities of certificates of deposit were as follows:

                                                               Maturities
                                                               ----------
                                                         (Dollars in thousands)
                                    2002                     $    38,113
                                    2003                           8,570
                                    2004                           3,129
                                    2005                           2,129
                                    2006                           1,792
                                                             -----------

                                                             $    53,733
                                                             ===========

NOTE 7 - FEDERAL HOME LOAN BANK ADVANCES

Federal Home Loan Bank ("FHLB") advances at year-end were as follows:
<TABLE>
<CAPTION>

                                                                          2001             2000
                                                                          ----             ----
                                                                          (Dollars in thousands)
<S>                                                                     <C>            <C>
Maturities March 2001 through May 2010, primarily
 convertible fixed-rate, from 5.54% to 6.50%, averaging 5.99%                          $   19,500

Maturities March 2002 through May 2010, primarily
 convertible fixed-rate, from 5.61% to 6.50%, averaging 6.04%           $   17,500
                                                                        ----------     ----------

                                                                        $   17,500     $   19,500
                                                                        ==========     ==========
</TABLE>

FHLB advances are payable at maturity, or prior to maturity with prepayment
penalties. At year-end 2001, advances totaling $12,000,000 were convertible
fixed-rate advances which, at the FHLB's option, can be converted to the London
Interbank Offering Rate, on a quarterly basis after the first year of the
advances. If the FHLB exercises its option, the advances may be repaid in whole
or in part on any of the quarterly repricing dates without prepayment penalty.
Collateral for advances include all shares of FHLB stock and 100% of the
qualified real estate loan portfolio.

Scheduled maturities of advances were as follows:

                                                                Maturities
                                                                ----------
                                                       (Dollars in thousands)
                                    2002                      $     5,500
                                    2003
                                    2004
                                    2005
                                    2006
                                    Thereafter                     12,000
                                                              -----------

                                                              $    17,500
                                                              -----------


--------------------------------------------------------------------------------
                                  (Continued)
                                       52


<PAGE>



                          POTTERS FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

--------------------------------------------------------------------------------


NOTE 8 - EMPLOYEE BENEFITS PLANS

A 401(k) plan allows employee contributions up to 15% of each participant's
compensation, with a match equal to 50% of the first 6% of the compensation
contributed. Participants may also receive discretionary and profit sharing
contributions. Expense was $60,000 in 2001, $63,000 in 2000 and $60,000 in 1999.
PFC common shares are available as an investing option to all participants of
the plan. The 401(k) plan purchased 2,341 common shares for participants during
2001, 4,763 shares during 2000 and 2,611 shares during 1999.

A Recognition and Retention Plan provides for the award of shares to directors
and certain key employees. Compensation expense is recognized over a five-year
vesting period. Of the 36,659 shares available to be awarded under the plan,
47,163 shares have been awarded and 10,534 shares forfeited upon the termination
of employment by participants. During 2001, 3,119 shares were earned of the
16,747 shares awarded during 1998 and 200 shares were earned of the 1,000 shares
awarded during 2000. At December 31, 2001, 30 shares were available to be
awarded. Compensation expense totaled $42,000, $41,000 and $56,000 for 2001,
2000 and 1999. Unearned compensation is reported as a reduction of shareholders'
equity until earned.

NOTE 9 - EMPLOYEE STOCK OWNERSHIP PLAN

Employees participate in an Employee Stock Ownership Plan ("ESOP"). ESOP expense
consists of discretionary and profit sharing contributions made to the ESOP
during the year. ESOP shares are included in weighted average shares outstanding
for purposes of calculating earnings per common share. Dividends on allocated
ESOP shares are recorded as a reduction of retained earnings and increase
participant accounts. Upon termination of employment, each participant may
choose to receive distributions in shares or cash.

ESOP contribution and expense totaled $59,000, $34,000 and $66,000 for 2001,
2000 and 1999. At year-end 2001, 22,087 shares of PFC common stock were owned by
the ESOP, of which 21,397 shares were allocated to employee accounts and 690
shares were purchased in 2001 and will be allocated to participants in future
periods based on plan criteria. At year-end 2000, the ESOP owned 21,397 shares
of PFC common stock, of which 14,640 shares were allocated to employee accounts
and 6,757 shares were allocated to plan participants in 2001. At year-end 2001,
the estimated fair value of shares subject to the cash distribution option,
based on the last sales price quoted in 2001 on the Nasdaq SmallCap Market,
totaled $481,000.

NOTE 10 - STOCK OPTION PLANS

Options to buy stock are granted to directors, officers and other key employees.
In addition to the outstanding stock options summarized below, 4,774 shares were
available to be granted as of December 31, 2001. The exercise price is the
market price at the date of grant. All options have a term of 10 years and are
immediately exercisable.




--------------------------------------------------------------------------------
                                  (Continued)
                                       53


<PAGE>


                          POTTERS FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

--------------------------------------------------------------------------------


NOTE 10 - STOCK OPTION PLANS (Continued)

A summary of activity in the plan was as follows:
<TABLE>
<CAPTION>
                                             2001                      2000                      1999
                                             ----                      ----                      ----
                                                 Weighted                   Weighted                  Weighted
                                                  Average                    Average                   Average
                                                 Exercise                   Exercise                  Exercise
                                     Shares        Price       Shares         Price       Shares        Price
                                     ------        -----       ------         -----       ------        -----
<S>                                  <C>            <C>         <C>           <C>         <C>           <C>
Outstanding - beginning
 of year                             106,069        $7.86        85,078        $7.89       54,502        $5.20
Granted                                                          26,351         8.57       31,500        12.44
Forfeited                               (787)       12.44        (5,360)       11.80
Exercised                               (625)       11.82                                    (924)        4.33
                                    --------                  ---------                 ---------

Outstanding - year-end               104,657         7.81       106,069         7.86       85,078         7.89
                                    ========                  =========                 =========
Weighted average fair value
 of options granted during
 the year                                                                      $2.02                     $3.68
</TABLE>

Options outstanding at year-end 2001 were as follows:

                                                      Weighted
                                                      Remaining
                                                     Contractual
Range of exercise price               Number             Life

$5-$10                                77,096              4.3 yrs
$11-$20                               27,561              7.3
                                    --------

Outstanding and exercisable
 at year-end                         104,657              5.1 yrs
                                     =======

Financial Accounting Standards Board ("FASB") Statement No. 123 allows adhering
to prior accounting guidance, under which no compensation expense is recognized
because the exercise price of employee stock options equals the market price on
the date of grant. Had compensation cost for stock options been measured using
FASB Statement No. 123, net income and earnings per share would have been the
pro forma amounts indicated below. The pro forma effect may increase in the
future if more options are granted.
<TABLE>
<CAPTION>

                                                   2001                       2000                      1999
                                                   ----                       ----                      ----
                                                          (Dollars in thousands, except per share data)
<S>                                              <C>                       <C>                       <C>
Net income as reported                           $  1,238                  $   1,447                 $   1,346
Pro forma net income                                1,238                      1,412                     1,273

Basic earnings per share as reported             $   1.25                  $    1.46                 $    1.32
Pro forma basic earnings per share                   1.25                  $    1.40                 $    1.25

Diluted earnings per share as reported           $   1.20                  $    1.43                 $    1.29
Pro forma diluted earnings per share                 1.20                       1.38                      1.22

</TABLE>

--------------------------------------------------------------------------------
                                  (Continued)
                                       54


<PAGE>


                          POTTERS FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

--------------------------------------------------------------------------------


NOTE 10 - STOCK OPTION PLANS (Continued)

The pro forma effects are computed using option pricing models, using the
following weighted-average assumptions as of grant date. No options were granted
during 2001.

                                               2000                     1999
                                               ----                     ----
Risk free interest rate                        6.30%                    5.70%
Expected option life                           6 yrs                    6 yrs
Expected stock price volatility               29.16%                   28.04%
Dividend yield                                 4.73%                    1.24%

NOTE 11 - INCOME TAXES

Income tax expense was as follows:
<TABLE>
<CAPTION>
                                                        2001             2000              1999
                                                        ----             ----              ----
                                                                (Dollars in thousands)
<S>                                                <C>               <C>              <C>
        Current                                    $       459       $       549      $       652
        Deferred                                            59                36               68
                                                   -----------       -----------      -----------

                                                   $       518       $       585      $       720
                                                   ===========       ===========      ===========
</TABLE>

Deferred tax assets and liabilities at year-end were due to the following:
<TABLE>
<CAPTION>

                                                                  2001           2000
                                                                  ----           ----
                                                                 (Dollars in thousands)

<S>                                                            <C>            <C>
Deferred tax assets:
  Allowance for loan losses                                    $       581    $       593
  Depreciation                                                           9             15
  Unrealized loss on securities available for sale                                     20
  Other                                                                 30             16
                                                               -----------    -----------
                                                                       620            644
                                                               -----------    -----------

Deferred tax liabilities:
  FHLB stock dividends                                                (277)          (247)
  Unrealized gain on securities available for sale                     (44)
  Other                                                                (69)           (44)
                                                               -----------    -----------
                                                                      (390)          (291)
                                                               -----------    -----------

Net deferred tax asset                                         $       230    $       353
                                                               ===========    ===========
</TABLE>

Taxes paid in the current and prior years were adequate to warrant recording the
full deferred tax asset without a valuation allowance.

Federal income tax laws permitted additional bad debt deductions through 1987,
totaling $2,480,000. Accounting standards do not require a deferred tax
liability to be recorded on this amount, which would otherwise be $843,000 at
December 31, 2001. If Potters Bank were liquidated or otherwise ceased to exist,
or if tax laws changed, this amount would be expensed. Under 1996 tax law
changes, bad debts are based on actual loss experience and tax bad debt reserves
accumulated since 1987 are to be reduced. This requires payment of approximately
$32,000 over six years beginning in 1998.



--------------------------------------------------------------------------------
                                  (Continued)
                                       55


<PAGE>


                          POTTERS FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

--------------------------------------------------------------------------------


NOTE 11 - INCOME TAXES (Continued)

Effective tax rates differ from federal statutory rate of 34% applied to
financial statement income due to the following:
<TABLE>
<CAPTION>
                                                                       2001             2000              1999
                                                                       ----             ----              ----
                                                                              (Dollars in thousands)
<S>                                                               <C>               <C>              <C>
        Federal statutory rate
         times financial income                                   $       597       $       691      $       703
        Effect of:
           Tax exempt income                                              (54)               (7)              (4)
           Tax credits                                                    (33)             (103)
           Other                                                            8                 4               21
                                                                  -----------       -----------      -----------

           Total                                                  $       518       $       585      $       720
                                                                  ===========       ===========      ===========
</TABLE>

NOTE 12 - RELATED PARTY TRANSACTIONS

Loans to principal officers, directors and their affiliates in 2001 were as
follows:
<TABLE>
<CAPTION>

                                                                             (Dollars in thousands)

<S>                                                                                 <C>
      Balance at beginning of year                                                  $   1,191
      New loans and advances                                                               75
      Repayments                                                                         (175)
                                                                                    ---------

      Balance at end of year                                                        $   1,091
                                                                                    =========
</TABLE>

Deposits from principal officers, directors and their affiliates at year-end
2001 and 2000 were $333,000 and $451,000.

NOTE 13 - COMMITMENTS

LOAN COMMITMENTS: Some financial instruments, such as loan commitments, credit
lines, letters of credit and overdraft protection are issued to meet customer
financing needs. These are agreements to provide credit or to support the credit
of others, as long as conditions established in the contract are met, and
usually have expiration dates. Commitments may expire without being used.
Off-balance sheet risk of credit loss exists up to the face amount of these
instruments, although material losses are not anticipated. The same credit
policies used to make commitments are also used for loans, including obtaining
collateral at exercise of the commitment.

Financial instruments with off-balance sheet risk at year-end were as follows:
<TABLE>
<CAPTION>

                                                           2001                               2000
                                                           ----                               ----
                                                             (Dollars in thousands)
                                                  Fixed           Variable           Fixed           Variable
                                                  Rate              Rate             Rate              Rate
                                                  ----              ----             ----              ----
<S>                                            <C>              <C>               <C>              <C>
Commitments to make loans
 (at market rates)                             $       700      $       654       $       730      $       521
Unused lines of credit and
 letters of credit                                                    5,805                              6,535
</TABLE>



--------------------------------------------------------------------------------
                                  (Continued)
                                       56


<PAGE>


                          POTTERS FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

--------------------------------------------------------------------------------

NOTE 13 - COMMITMENTS (Continued)

Commitments to make loans are generally made for periods of 60 days or less.
Fixed-rate loan commitments at December 31, 2001 had interest rates ranging from
6.75% to 8.75%, with maturities up to 30 years.

CASH RESERVE REQUIREMENTS: The Company is required to keep approximately
$498,000 of cash on hand or on deposit with the Federal Reserve Bank to meet
regulatory reserve requirements at December 31, 2001. Such balances do not earn
interest.

NOTE 14 - NONINTEREST INCOME AND EXPENSE

Noninterest income and expense amounts at year end included the following:
<TABLE>
<CAPTION>

                                                                       2001           2000            1999
                                                                       ----           ----            ----
                                                                             (Dollars in thousands)
<S>                                                                  <C>            <C>            <C>
Noninterest income
         Service charges                                             $    332       $     282      $     232
         Other                                                            256             313            270
                                                                     --------       ---------      ---------
             Total                                                   $    588       $     595      $     502
                                                                     ========       =========      =========

Noninterest expense
         Salaries and employee benefits                              $  1,715       $   1,517      $   1,638
         Occupancy and equipment                                          468             471            440
         Federal deposit insurance                                         22              23             61
         Data processing                                                  219             213            205
         Professional services                                            361             367            188
         Check fraud loss                                                                 112
         Other                                                            903             878            928
                                                                     --------       ---------      ---------
             Total                                                   $  3,688       $   3,581      $   3,460
                                                                     ========       =========      =========
</TABLE>

NOTE 15 - CONCENTRATIONS OF CREDIT RISK

Current local loan origination activities are with customers located within the
immediate lending area which includes portions of Columbiana and Jefferson
Counties in northeastern Ohio and northern Hancock County in West Virginia. The
Boardman loan production office focuses on originating loans in Mahoning and
Trumbull Counties in northeastern Ohio and the Beaver, Pennsylvania full-service
office focuses on originating loans in Beaver and Allegheny Counties in
northwestern Pennsylvania. Loan purchases have been used to supplement local
loan originations and have resulted in the following concentrations as of
December 31, 2001.
<TABLE>
<CAPTION>
                                      Northwest    Southwest   Hilton                     Local
                                        Ohio         Ohio     Head, SC     Indiana(1)   and other  Total
                                        ----         ----     --------     -------      ---------  -----
                                                              (Dollars in thousands)
<S>                                   <C>          <C>         <C>         <C>          <C>      <C>
One-to-four family residences         $   8,155    $   1,740   $ 2,746     $   3,723             $  16,364
Multifamily and nonresidential            4,550        1,962                            $ 8,787     15,299
First mortgage home equity                                                     4,607                 4,607
Second mortgages                                                               2,945                 2,945
                                      ---------    ---------   -------     ---------    -------  ---------
    Total Purchased Loans             $  12,705    $   3,702   $ 2,746     $  11,275    $ 8,787  $  39,215
                                      =========    =========   =======     =========    =======  =========
</TABLE>



------------------------------------

(1) Loans from various parts of the country purchased from a bank in Indiana.


--------------------------------------------------------------------------------
                                  (Continued)
                                       57


<PAGE>


                          POTTERS FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

--------------------------------------------------------------------------------


NOTE 15 - CONCENTRATIONS OF CREDIT RISK

Two nonconforming real estate loan programs, which charge a slightly higher
interest rate on single-family residential mortgage loans, are available to
borrowers who are considered slightly higher credit risks. Such loans totaled
$6.2 million at December 31, 2001, $284,000 of which were purchased loans from
southwestern Ohio also reported above.

NOTE 16 - REGULATORY MATTERS

Potters Bank is subject to regulatory capital requirements administered by
federal regulatory agencies. Capital adequacy guidelines and prompt corrective
action regulations involve quantitative measures of assets, liabilities and
certain off-balance-sheet items calculated under regulatory accounting
practices. Capital amounts and classifications are also subject to qualitative
judgments by regulators. Failure to meet various capital requirements can
initiate regulatory action.

Prompt corrective action regulations provide five classifications:
well-capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized, although these terms are not
used to represent overall financial condition. If adequately capitalized,
regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and capital restoration plans are required.

Actual and required capital amounts and ratios are presented below at year end.
<TABLE>
<CAPTION>

                                                                                       Minimum Required
                                                             Minimum Required       to be Well-Capitalized
                                                                For Capital         Under Prompt Corrective
                                       Actual                Adequacy Purposes        Action Regulations
                                       ------                -----------------        ------------------
                                 Amount        Ratio       Amount        Ratio       Amount        Ratio
                                 ------        -----       ------        -----       ------        -----
                                                          (Dollars in thousands)
2001
----
<S>                            <C>             <C>        <C>             <C>       <C>            <C>
Total capital to risk-
 weighted assets               $  13,989       14.4%      $  7,784        8.0%      $   9,730      10.0%
Core capital to risk-
 weighted assets                  12,766       13.1          3,892        4.0           5,838       6.0
Core capital to
 adjusted total assets            12,766        8.7          4,399        3.0           7,331       5.0
Tangible capital to
 adjusted total assets            12,766        8.7          2,199        1.5             N/A

2000
----
Total capital to risk-
 weighted assets               $  13,233       14.1%      $  7,527        8.0%      $   9,409      10.0%
Core capital to risk-
 weighted assets                  12,048       12.8          3,763        4.0           5,645       6.0
Core capital to
 adjusted total assets            12,048        8.0          4,533        3.0           7,554       5.0
Tangible capital to
 adjusted total assets            12,048        8.0          2,266        1.5             N/A
</TABLE>



--------------------------------------------------------------------------------
                                  (Continued)
                                       58


<PAGE>


                          POTTERS FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

--------------------------------------------------------------------------------



NOTE 16 - REGULATORY MATTERS (Continued)

Regulations limit capital distributions by savings banks such as Potters Bank.
Generally, capital distributions are limited to the current year-to-date
undistributed net income and prior two years' undistributed net income, as long
as the institution remains well capitalized after the proposed distribution. At
year-end 2001, approximately $2.5 million was available for Potters Bank to pay
dividends to the holding company. Potters Bank is considered well capitalized.

The Qualified Thrift Lender test requires at least 65% of assets be maintained
in housing-related finance and other specified areas. If this test is not met,
limits are placed on growth, branching, new investments, FHLB advances and
dividends, or Potters Bank must convert to a commercial bank charter. Management
believes this test is met.

Upon Potters Bank's conversion from a mutual thrift to a stock thrift, a
liquidation account of $4,748,000 was established, which was equal to the net
worth of Potters Bank reported in the conversion prospectus. Eligible depositors
who have maintained their accounts, less annual reductions to the extent they
have reduced their deposits, would receive a distribution from this account in
the event of a liquidation of Potters Bank. Dividends may not reduce
shareholders' equity below the required liquidation account balance.

NOTE 17 - FAIR VALUES OF FINANCIAL INSTRUMENTS

Year-end carrying values and estimated fair values of financial instruments were
as follows:
<TABLE>
<CAPTION>

                                                       December 31, 2001              December 31, 2000
                                                       -----------------              -----------------
                                                   Carrying        Estimated      Carrying       Estimated
                                                   --------        ---------      --------       ---------
                                                     Value         Fair Value       Value       Fair Value
                                                     -----         ----------       -----       ----------
Financial assets:                                                    (Dollars in thousands)
----------------
<S>                                              <C>            <C>             <C>            <C>
Cash and cash equivalents                        $     6,951    $     6,951     $    4,820     $     4,820
Securities available for sale                         17,849         17,849         21,177          21,177
Loans, net                                           115,500        116,462        119,903         119,923
Federal Home Loan Bank stock                           1,362          1,362          1,274           1,274
Accrued interest receivable                            1,016          1,016          1,349           1,349

Financial liabilities:
---------------------
Deposits                                         $  (114,651)   $  (115,654)    $ (117,792)    $  (117,813)
Federal Home Loan Bank advances                      (17,500)       (17,902)       (19,500)        (20,178)
Accrued interest payable                                (104)          (104)          (278)           (278)
</TABLE>

The methods and assumptions used to estimate fair value are described as
follows:

Carrying values are the estimated fair value for cash and cash equivalents,
Federal Home Loan Bank stock, accrued interest receivable and payable, demand
deposits and variable-rate loans or deposits that reprice frequently and fully.
Security fair values are based on market prices or dealer quotes, and if no such
information is available, on the rate and term of the security and information
about the issuer. For fixed-rate loans or deposits and for variable-rate loans
or deposits with infrequent repricing or repricing limits, fair value is based
on discounted cash flows using current market rates applied to the estimated
life and credit risk. Fair values for impaired loans are estimated using
discounted cash flow analysis or underlying collateral values. Fair value of
loans held for sale is based on market quotes. Fair value of debt is based on
current rates for similar financing. The fair value of unrecorded commitments
was not material at year-end 2001 or 2000.

--------------------------------------------------------------------------------
                                  (Continued)
                                       59


<PAGE>


                          POTTERS FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

--------------------------------------------------------------------------------

NOTE 18 - CONDENSED PARENT-ONLY FINANCIAL STATEMENTS

Condensed financial information of Potters Financial Corporation follows:

CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>

December 31:                                                    2001            2000
                                                                ----            ----
                                                               (Dollars in thousands)
ASSETS

<S>                                                           <C>            <C>
    Cash and cash equivalents                                 $     323      $     309
    Equity securities available for sale                             31             22
    Investment in subsidiary                                     12,844         12,009
    Other assets                                                    154
                                                              ---------      ---------

         Total assets                                         $  13,352      $  12,340
                                                              =========      =========

LIABILITIES AND EQUITY

    Other liabilities                                         $      75      $       7
    Shareholders' equity                                         13,277      $  12,333
                                                              ---------      ---------

         Total liabilities and shareholders' equity           $  13,352      $  12,340
                                                              =========      =========

<CAPTION>
CONDENSED STATEMENTS OF INCOME

Year ended December 31:                                         2001            2000           1999
                                                                ----            ----           ----
                                                                       (Dollars in thousands)
<S>                                                           <C>            <C>             <C>
    INCOME
    Dividends from subsidiary                                 $     800      $     375       $    708
    Interest income and dividends                                     2              2              5
    Net gain on sales of securities                                                                 4
    Other                                                                           29
                                                              ---------      ---------       --------
                                                                    802            406            717
    EXPENSE                                                         350            157             58
                                                              ---------      ---------       --------

    INCOME BEFORE INCOME TAXES AND
      UNDISTRIBUTED SUBSIDIARY INCOME                               452            249            659

    Income tax benefit                                             (110)           (43)           (18)
    Equity in undistributed
     subsidiary income                                              676          1,155            669
                                                              ---------      ---------       --------

    NET INCOME                                                $   1,238      $   1,447       $  1,346
                                                              =========      =========       ========

</TABLE>



--------------------------------------------------------------------------------
                                  (Continued)
                                       60


<PAGE>


                          POTTERS FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                December 31, 2001

--------------------------------------------------------------------------------

NOTE 18 - CONDENSED PARENT-ONLY FINANCIAL STATEMENTS (Continued)


CONDENSED STATEMENTS OF CASH FLOWS
Year ended December 31:
<TABLE>
<CAPTION>
                                                                2001            2000           1999
                                                                ----            ----           ----
                                                                       (Dollars in thousands)
<S>                                                           <C>            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                                $   1,238      $   1,447       $  1,346
    Adjustments:
       Equity in undistributed subsidiary income                   (676)        (1,155)          (669)
       Net realized gain on sales of securities                                                    (4)
       Change in other assets and other liabilities                 (86)            40            (12)
                                                              ---------      ---------       --------
       Net cash from operating activities                           476            332            661
CASH FLOWS FROM INVESTING ACTIVITIES
    Sale of equity securities available for sale                                                   57
                                                              ---------      ---------       --------
      Net cash from investing activities                                                           57

CASH FLOWS FROM FINANCING ACTIVITIES
    Purchase of common stock                                                      (281)          (726)
    Proceeds from exercise of stock options                           7                             4
    Dividends paid                                                 (469)          (394)          (318)
                                                              ---------      ---------       --------
      Net cash from financing activities                           (462)          (675)        (1,040)
                                                              ---------      ---------       --------

Net change in cash and cash equivalents                              14           (343)          (322)

Beginning cash and cash equivalents                                 309            652            974
                                                              ---------      ---------       --------

ENDING CASH AND CASH EQUIVALENTS                              $     323      $     309       $    652
                                                              =========      =========       ========
</TABLE>

NOTE 19 - PENDING MERGER

On September 6, 2001, an Agreement and Plan of Merger was executed among the
Corporation, Potters Bank, United Community Financial Corp. and The Home Savings
and Loan Company of Youngstown, Ohio. Under the terms of the Agreement and Plan
of Merger, United Community agreed to pay $22.00 per share in cash to the
Corporation's shareholders. At a special meeting of shareholders held on January
24, 2002, the shareholders of the Corporation approved the transaction.
Regulatory approval has been received, and the parties are preparing to close
the transaction on April 1, 2001, although no assurance can be provided that the
closing will, in fact, occur or when it will occur. Upon the closing, a
subsidiary of Home Savings will merge into the Corporation, and the Corporation
will dissolve into Home Savings. Potters Bank will then merge into Home Savings,
and Potters Bank branches will become branches of Home Savings.

Pending merger costs to be recorded prior to the effective time of the closing
include $976,000 in payments under change in control agreements, $1.5 million
in payments for stock options, $155,000 in payments for recognition and
retention plan awards and $146,000 in remaining investment banker's fees.

--------------------------------------------------------------------------------
                                       61


<PAGE>

                         REPORT OF INDEPENDENT AUDITORS



Shareholders and Board of Directors
Potters Financial Corporation
East Liverpool, Ohio


We have audited the accompanying consolidated balance sheets of Potters
Financial Corporation as of December 31, 2001 and 2000, and the related
consolidated statements of income, comprehensive income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of
the Corporation's management. Our responsibility is to express an opinion on
these financial statements based on our 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 consolidated financial position of Potters
Financial Corporation as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States of America.




                                                Crowe, Chizek and Company LLP

Columbus, Ohio
February 15, 2002

















                                       62
<PAGE>


ITEM 8.    CHANGE IN ACCOUNTANTS.

No changes or disagreements with the independent accountants have occurred.

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.


                               BOARD OF DIRECTORS

         The following directors serve as directors for the terms indicated:
<TABLE>
<CAPTION>

                                                                  Director        Director of
                                                                  of PFC          Potters Bank     Term
Name                           Age        Position Held           Since(1)        Since            Expires
----                           ---        -------------           -----           -----            -------

<S>                            <C>        <C>                     <C>             <C>              <C>
William L. Miller              61         Chairman of the
                                          Board and Director      1995            1982             2003
Edward L. Baumgardner          58         Chief Executive
                                          Officer, President
                                          and Director            1995            1995             2003
Arthur T. Doak                 52         Director                1995            1990             2002
Suzanne B. Fitzgerald          63         Director                1997            1997             2003
Timothy M. O'Hara              51         Director                1995            1988             2002
James R. Platte                56         Director                2000            2000             2003
Peter D. Visnic                54         Director                1995            1992             2002
</TABLE>

-------------------------------

(1)  Messrs. Miller, Baumgardner, Doak, O'Hara and Visnic became directors of
     PFC in connection with the 1996 reorganization of Potters Bank into a
     wholly owned subsidiary of PFC and the cancellation of Potters Bank common
     shares in exchange for PFC common shares.

         MR. MILLER has served as the Chairman of the Board of Potters Bank
since September 1991. Since 1983, Mr. Miller has been the President and Chairman
of the Board of MVP Enterprises, Inc., a nursing home provider in East
Liverpool. In addition, Mr. Miller has been a partner in Miller & Stacey, an
independent public accounting firm, since 1977.

         MR. BAUMGARDNER has been the Chief Executive Officer, the President and
a Director of Potters Bank since February 1995 and of PFC since the
Reorganization. From August 1984 to October 1992, Mr. Baumgardner was the
President of Citizens Loan & Building Company of Lima, Ohio ("Citizens"). After
Citizens merged into American Community Bank, N.A. ("AmeriCom"), Mr. Baumgardner
served as the President of AmeriCom, from November 1992 to January 1995.

         MR. DOAK has been President of The Milligan Hardware & Supply Company
in East Liverpool since 1985.



                                       63
<PAGE>

         MS. FITZGERALD has served as Dean of the East Liverpool Campus of Kent
State University since 1987. Prior to 1987, Ms. Fitzgerald, a registered nurse,
served three years as Director of the Nursing Program at that Campus.

         MR. O'HARA has been the Vice President of Operations of W.C. Bunting
Co., Inc., a supplier of decorative pottery in East Liverpool, since 1975.

         MR. PLATTE has been the Vice President of Manufacturing at The Hall
China Company, a manufacturer of ceramic hotel cookingware in East Liverpool,
for twenty years.

         MR. VISNIC has been the Vice President, the Licensed Administrator and
a director of MVP Enterprises, Inc. since 1983. From 1977 through 1992, Mr.
Visnic was a partner in Crable, Miller & Visnic, the predecessor of Miller &
Stacey.



                               EXECUTIVE OFFICERS

         In addition to Mr. Baumgardner, the following persons are executive
officers of PFC and/or Potters Bank and hold the designated positions:

<TABLE>
<CAPTION>
Name                                Age                       Position(s) Held
----                                ---                       ----------------

<S>                                  <C>             <C>
Anne S. Myers                        49              Senior Vice  President, Secretary and Chief Operating/Financial
                                                     Officer of PFC and Potters Bank

Albert E. Sampson                    57              Senior Vice President of PFC and Senior Vice President and
                                                     Chief Lending Officer of Potters Bank

Stephen A. Beadnell                  39              Vice President and Treasurer of PFC and Vice President,
                                                     Treasurer, Controller and Internal Auditor of Potters Bank
</TABLE>

         Ms. Myers has served as Vice President and Chief Operating Officer of
Potters Bank since July 1992, and was named Secretary in October 1996, Chief
Financial Officer in March 1997 and Senior Vice President in April 1998. Ms.
Myers became Vice President and Chief Operating Officer of PFC in connection
with the Reorganization, and was named Chief Financial Officer in March 1997 and
Senior Vice President in April 1999.

         Mr. Sampson became Vice President and Chief Lending Officer of Potters
Bank in July 1996 and was named Senior Vice President in April 1998. Mr. Sampson
has been a Vice President of PFC since July 1996 and was named Senior Vice
President in April 1999. From 1992 through July 1996, Mr. Sampson served as Vice
President of Lending of Home Federal Bank in Hamilton, Ohio.

         Mr. Beadnell has served as Internal Auditor of Potters Bank since April
1992. Mr. Beadnell became Controller in September 1996. In May 1998, Mr.
Beadnell was named Vice






                                       64
<PAGE>

President and Treasurer of Potters Bank. In April 2000, Mr. Beadnell was named
Vice President and Treasurer of PFC.

ITEM 10.   EXECUTIVE COMPENSATION.

                COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

DIRECTOR COMPENSATION

         PFC does not pay fees to directors. Each non-employee director of
Potters Bank receives a fee of $4,000 per year for service as a director of
Potters Bank and an additional $325 for each meeting of the full Board of
Directors and $175 for each committee meeting attended by the director. The
Chairman of the Board receives an annual fee of $8,000 for services as Chairman
and an additional $650 for each meeting of the full Board of Directors attended,
but receives no fees for his attendance at committee meetings.

EXECUTIVE COMPENSATION

         The following table presents certain information regarding compensation
received by Edward L. Baumgardner, the President and Chief Executive Officer of
PFC and Potters Bank, for the fiscal year ended December 31, 2001. Mr.
Baumgardner received the compensation included in the following table from
Potters Bank and received no compensation from PFC. No other executive officer
of Potters Bank or PFC earned salary and bonus in excess of $100,000 during the
fiscal year ended December 31, 2001.
<TABLE>
<CAPTION>

                                                 Summary Compensation Table
                                                 --------------------------

-------------------------------------------------------------------------------------------------------------------
                                                   Annual Compensation(1)            Awards          All Other
                                                                                                     Compensation
-------------------------------------------------------------------------------------------------------------------

                                                                                   Securities
                                                                                   underlying
Name and Principal                  Year         Salary($)         Bonus($)      options/SARs(#)
   Position
-------------------------------------------------------------------------------------------------------------------

<S>                                 <C>          <C>              <C>                    <C>         <C>
   Edward L. Baumgardner            2001         $129,000         $  13,050              --          $    3,892(2)
   President and Chief              2000         $125,500         $  10,150              4,200       $   11,562(3)
   Executive Officer                1999         $122,000         $   9,400              4,200       $   14,658(3)
</TABLE>


------------------------------

(1)      Amounts reported do not include amounts attributable to perquisites
         received. The cost of such benefits was less than 10% of Mr.
         Baumgardner's salary and bonus.

(2)      Consists of the matching portion only of Potters Bank's contribution to
         Mr. Baumgardner's 401(k) Plan account. The additional discretionary
         portion of Potters Bank's contribution to Mr. Baumgardner's 401(k) Plan
         account and the allocation to Mr. Baumgardner's ESOP account are not
         yet available.




                                       65
<PAGE>

(3)      Consists of Potters Bank's contribution to (a) Mr. Baumgardner's 401(k)
         Plan account in the amounts of $7,783 in 2000 and $7,328 in 1999 and
         (b) Mr. Baumgardner's ESOP account in the aggregate values of $3,779
         and $7,330 in 2000 and 1999 at the dates of allocation.

STOCK OPTION PLANS

         Shareholders approved two stock option plans, the first at its 1994
Annual Meeting of Shareholders and the second at its 1998 Annual Meeting of
Shareholders. Under the plan approved in 1994, 122,199 shares (as adjusted to
give effect to a stock split in the form of a stock dividend effective in
December 1997, a 10% stock dividend effective in March 1999 and a 5% stock
dividend effective in July 2000) have been reserved for issuance upon the
exercise of options to be granted to directors, officers and other key
employees. Options to purchase 122,103 shares have been granted under the 1994
plan, and options to purchase 52,420 of such shares are currently unexercised.
Pursuant to the plan approved in 1998, 56,387 shares were reserved for issuance.
Options totaling 31,500 shares were granted during 1999, with 27,561 shares
unexercised at December 31, 2001, while 26,351 shares were granted during 2000,
with 24,676 shares unexercised. In total, 4,774 shares remain available for
grants.

         Both plans are administered by the Stock Option Committee of the Board
of Directors of PFC. Under both plans, the Stock Option Committee may grant
options to officers and key employees at such times as it deems most beneficial
to PFC and Potters Bank based upon the officer's or key employee's
responsibility, tenure and future potential to PFC and Potters Bank. While the
plan adopted in 1998 also provides for discretionary awards to directors, the
Potters Plan provides for automatic grants to directors which were effective at
the time of the conversion of Potters Bank from the mutual form of ownership to
the stock form of ownership (the "Conversion") or will become effective upon a
new director becoming a member of the Board of Directors.

         The following table sets forth information regarding the number and
value of unexercised options held by Mr. Baumgardner at December 31, 2001. No
stock appreciation rights have been granted under the Stock Option Plan.
<TABLE>
<CAPTION>

                          Aggregated Option/SAR Exercises in Last Fiscal Year and at 12/31/01      Option/SAR Values
---------------------------------------------------------------------------------------------------------------------------
                                                                    Number of                   Value of
                                                                    Securities Underlying       In-the-Money
                                                                    Options/SARs at             Options/SARs at
                                                                    12/31/01(#)                 12/31/01($)(2)

                               Shares Acquired     Value            Exercisable/                Exercisable/
Name                           on Exercise(#)      Realized ($)(1)                              Unexercisable Unexercisable
----------------------------------------------------------------------------------------------------------------------------

<S>                                  <C>              <C>            <C>                        <C>
Edward L. Baumgardner               -0-               -0-            20,527/-0-                 $271,367/-0-
</TABLE>


-----------------------------

(1)  The figure represents the value of shares received upon the exercise of
     options and is determined by multiplying the number of shares exercised by
     the difference between the exercise price and the fair market value on the
     date of exercise.






                                       66
<PAGE>

(2)  An option is "in-the-money" if the fair market value of the underlying
     stock exceeds the exercise price of the option. The figure represents the
     value of 20,527 of such options determined by multiplying the number of
     shares subject to the option by the difference between the $8.58 weighted
     average exercise price and the fair market value of the common shares
     subject to the option, which was $21.80 per share on December 31, 2001,
     based upon the closing sales price reported by The Nasdaq Stock Market.

RECOGNITION AND RETENTION PLAN


         Shareholders approved the RRP at the 1994 Annual Meeting of
Shareholders of Potters Bank. In connection with the Conversion, 36,659 common
shares (as adjusted to give effect to a stock split in the form of a stock
dividend effective in December 1997, a 10% stock dividend effective in March
1999 and a 5% stock dividend effective in July 2000) were purchased by the RRP
trust with funds contributed by Potters Bank, and 47,163 common shares (as
adjusted) were awarded under the RRP to directors and executive officers. Since
such awards were made, 29,591 common shares have been earned and distributed to
participants and 10,534 common shares have been forfeited by the termination of
employment of participants.

         The RRP is administered by the RRP Committee of the Board of Directors,
which determines awards of common shares to be made under the RRP. One-fifth of
the common shares awarded under the RRP are earned by a recipient on each
anniversary of the date of the award. Awarded but unearned common shares are
held by the RRP trust. A recipient may direct the voting of all common shares
awarded to him or her, regardless of whether such common shares have been
earned, and will be entitled to receive any dividends or other distributions
paid on all awarded but unearned common shares.

EMPLOYMENT AGREEMENT

           PFC and Potters Bank entered into a three-year severance agreement
with Mr. Baumgardner, effective July 27, 2000. The agreement provides that if
the employment of Mr. Baumgardner is terminated at any time during such
three-year term (i) without Mr. Baumgardner's written consent, (ii) for any
reason other than "just cause" (as defined in the agreement), and (iii) in
connection with or within one year of a change in control, Mr. Baumgardner will
be entitled to receive, within 10 days of such termination, a payment equal to
2.9 times his annual compensation for the prior year plus, if permissible under
the benefit plans, continued health insurance and other benefits for the
remainder of the three-year term of the agreement. If in connection with or
within one year of a change in control of PFC or Potters Bank, Mr. Baumgardner's
compensation is reduced, certain conditions of his employment are changed or Mr.
Baumgardner's duties or responsibilities are materially changed, Mr. Baumgardner
will be entitled to voluntarily terminate his employment and receive the same
payment and benefits. If the change of control occurs during the last year of
the term of the agreement, the term of the agreement will be extended to fifteen
months from the date of the change of control. Any payment under the agreement
will be subject to reduction, to the extent necessary, to comply with certain
provisions of the Internal Revenue Code of 1986, as amended. Assuming
termination for other than "just cause" and in connection with such a change in
control, Mr. Baumgardner would receive $411,945, plus other benefits, based on
his compensation for fiscal 2001.





                                       67
<PAGE>


ITEM 11.   OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

                   VOTING SECURITIES AND OWNERSHIP OF CERTAIN
                        BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information with respect to the
only persons known to PFC to own beneficially more than five percent of the
outstanding common shares of PFC as of March 11, 2002:
<TABLE>
<CAPTION>

                                                  Amount and Nature of                      Percent of
Name and Address                                  Beneficial Ownership                  Shares Outstanding
----------------                                  --------------------                  ------------------
<S>                                                     <C>                                    <C>
Jeffrey L. Gendell,                                     90,216(1)                              9.03%
Tontine Financial Partners, L.L.P. and
Tontine Management, L.L.C.
200 Park Avenue, Suite 3900
New York, NY 10166

Wm. Gaylord Billingsley                                 58,800(2)                              5.89%
P.O. Box  2108
1110 Dairy Lane
East Liverpool, OH 43920

Towle & Co.                                             53,823(3)                              5.39%
12855 Flushing Meadow Drive
St. Louis, MO  63131
</TABLE>

-----------------------------------

(1)   As reported in a Schedule 13G filed by Mr. Gendell, consists of 57,981
      shares over which Mr. Gendell has sole voting and dispositive power and
      32,235 shares with respect to which Mr. Gendell has shared voting and
      dispositive power.

(2)   Consists of 56,490 shares with respect to which Mr. Billingsley has sole
      voting and dispositive power and 2,310 shares owned by Mr. Billingsley's
      wife.

(3)   Consists of 22,869 shares with respect to which Towle & Co. has sole
      voting and dispositive power and 30,954 shares with respect to which Towle
      & Co. has shared dispositive power.
















                                       68

<PAGE>



         The following table sets forth certain information with respect to the
number of common shares of PFC beneficially owned by each director of PFC and by
all directors and executive officers of PFC as a group as of March 11, 2002:
<TABLE>
<CAPTION>

                                                  Amount and Nature of                      Percent of
Name and Address(1)                              Beneficial Ownership(2)                Shares Outstanding
-------------------                              -----------------------                ------------------

<S>                                                        <C>                                 <C>
Edward L. Baumgardner                                      32,404(3)                           3.18%
Arthur  T. Doak                                            25,763(4)                           2.55%
Suzanne B. Fitzgerald                                       5,101(5)                           0.51%
William L. Miller                                          39,593(6)                           3.91%
Timothy M. O'Hara                                          21,113(6)                           2.09%
James R. Platte                                             2,879(7)                           0.29%
Peter D. Visnic                                            35,029(8)                           3.50%
All directors and executive officers
 as a group (10 persons)                                  211,621(9)                          19.37%
</TABLE>

-------------------------

(1)   Each of the persons listed in this table may be contacted at the address
      of PFC, 519 Broadway, East Liverpool, Ohio 43920.

(2)   Each person has sole voting power and sole dispositive power unless
      otherwise indicated. Each director's number of shares, except Mr.
      Baumgardner's and Mr. Platte's, includes 462 shares awarded but not yet
      earned under the Potters Savings and Loan Company's Recognition and
      Retention Plan (the "RRP"), with respect to which the director has voting
      power, but not dispositive power. Mr. Baumgardner's unearned RRP shares
      total 1,386. Mr. Platte's unearned RRP shares total 800.

(3)   Includes 20,527 shares that may be acquired pursuant to options granted
      under The Potters Savings and Loan Company Stock Option Plan (the "Potters
      Plan"); 4,353 shares with respect to which Mr. Baumgardner has sole
      investment power as a participant in Potters Bank's 401(k) Retirement
      Savings Plan (the "401(k) Plan"); 2,327 shares allocated under Potters
      Financial Corporation's Employee Stock Ownership Plan (the "ESOP"), with
      respect to which Mr. Baumgardner has sole voting but not dispositive
      power; and 1,155 shares owned by Mr. Baumgardner's wife.

(4)   Includes 13,377 shares that may be acquired pursuant to options granted
      under the Potters Plan; 30 shares not yet awarded under the RRP, with
      respect to which Mr. Doak, as co-trustee of the RRP, has shared voting
      power; and 9,240 shares with respect to which Mr. Doak has shared voting
      and dispositive power with his wife.

(5)   Includes 2,992 shares that may be acquired pursuant to options granted
      under the Potters Plan and 30 shares not yet awarded under the RRP, with
      respect to which Ms. Fitzgerald, as co-trustee of the RRP, has shared
      voting power.

(6)   Includes 13,377 shares that may be acquired pursuant to options granted
      under the Potters Plan.





                                       69
<PAGE>

(7)   Includes 1,417 shares that may be acquired pursuant to options granted
      under the Potters Plan and 462 shares with respect to which Mr. Platte has
      shared voting and dispositive power with his wife.

(8)   Includes 2,992 shares that may be acquired pursuant to options granted
      under the Potters Plan.

(9)   Includes 93,997 shares that may be acquired pursuant to options granted
      under the Potters Plan; 7,051 shares allocated to the ESOP accounts of
      officers, with respect to which such officers have sole voting power; and
      9,554 shares held in the 401(k) Plan, with respect to which four officers
      have sole dispositive power as participants.

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Potters Bank has made loans to certain of PFC's directors and executive
officers, their affiliates and members of their families. All loans to directors
and executive officers are made on the same terms as offered to employees in a
company-wide benefit program. Loans to all directors and employees, other than
commercial and nonowner-occupied residential loans, are made with an interest
rate 1% below the interest rate for comparable transactions with other persons,
and no document preparation fees are collected. Commercial and nonowner-occupied
residential loans are made at market interest rates and on the same terms as
offered to the general public. The following table sets forth certain
information regarding loans to executive officers and directors whose
indebtedness to Potters Bank exceeded $60,000 at any time during the two-year
period ended December 31, 2001:
<TABLE>
<CAPTION>

                                                                                                Largest Balance
                                                                                                during the two      Balance at
                                               Loan                                   Rate of     years ended      December 31,
Name                       Position      Origination Date       Collateral           Interest  December 31, 2001       2001
------------------------------------------------------------------------------------------------------------------------------
<S>                  <C>                     <C>         <C>                          <C>         <C>               <C>
William L. Miller     Director, Chairman      9/15/97       Personal Residence         6.125%     $ 356,786         $259,658
William L. Miller     Director, Chairman      4/30/98     Commercial Real Estate       8.50%        310,200          291,688
William L. Miller     Director, Chairman      9/16/97    Home Equity Line of Credit    8.00%             50                0
Suzanne B. Fitzgerald      Director           5/29/98       Personal Residence         5.25%         75,817           61,708
Suzanne B. Fitzgerald      Director           6/11/98    Home Equity Line of Credit    8.00%         15,469           15,469
Timothy M. O'Hara          Director           3/31/98       Personal Residence        6.375%         63,766           56,986
Timothy M. O'Hara          Director           3/31/98    Home Equity Line of Credit    8.00%         32,007                0
Peter D. Visnic            Director           4/07/98       Personal Residence        6.375%         93,361           83,961
Peter D. Visnic            Director           4/04/98    Home Equity Line of Credit    8.00%             50                0
Albert E. Sampson    Senior Vice President    3/31/99       Personal Residence        5.875%         86,914           85,790
Albert E. Sampson    Senior Vice President    7/27/98         Rental Property          8.50%         96,360           93,854
Albert E. Sampson    Senior Vice President   11/15/96    Home Equity Line of Credit    8.00%          5,199            4,735
Stephen A. Beadnell     Vice President        9/23/98       Personal Residence         5.50%        140,001          136,065
Stephen A. Beadnell     Vice President        9/23/98    Home Equity Line of Credit    8.00%          4,600            1,487
</TABLE>

None of the outstanding loans to directors and executive officers involve more
than the normal risk of collectibility or present other unfavorable features,
and all are current in their payments.




                                       70
<PAGE>


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

           (a)    Exhibits

                  Item 2.          Agreement and Plan of Merger

                  Item 3.1         Amended Articles of Incorporation

                  Item 3.2         Code of Regulations

                  Item 10.1        The Potters Savings and Loan Company
                                   Stock Option Plan

                  Item 10.2        The Potters Savings and Loan Company
                                   Recognition and Retention Plan and Trust
                                   Agreement

                  Item 10.3        Lease dated February 1, 1983, by and
                                   between Billingsley, Incorporated and The
                                   Potters Savings and Loan Company

                  Item 10.4        Employment Contract with Edward L.
                                   Baumgardner

                  Item 10.5        Employment Contract with Albert E. Sampson

                  Item 10.6        Employment Contract with Anne S. Myers

                  Item 10.7        Employment Contract with Stephen A. Beadnell

                  Item 10.8        Potters Financial Corporation 1998 Stock
                                   Option and Incentive Plan

                  Item 10.9        Engagement Letter with Keefe, Bruyette
                                   and Woods

                  Item 11.         Statement re: computation of per
                                   share earnings

                  Item 21.         Subsidiaries of Registrant

                  Item 23.         Consent of Independent Accountants

                  Item 99.         Safe Harbor Under the Private Securities
                                   Litigation Reform Act of 1995

           (b)    Reports on Form 8-K

                  None.


                                       71


<PAGE>



                                   SIGNATURES


         In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                         Potters Financial Corporation



                                         By /s/  Edward L. Baumgardner
                                           -------------------------------------
                                             Edward L. Baumgardner
                                             President, Chief Executive Officer
                                             and Director

         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.


By   /s/  Arthur T. Doak                 By /s/  Suzanne B. Fitzgerald
     --------------------------------       -----------------------------------
     Arthur T. Doak                          Suzanne B. Fitzgerald
     Director                                Director

Date:  March 20, 2002                    Date:  March 20, 2002


By   /s/  William L. Miller              By /s/  Timothy M. O'Hara
     --------------------------------       -----------------------------------
     William L. Miller                       Timothy M. O'Hara
     Chairman of the Board                   Director

Date:  March 20, 2002                    Date:  March 20, 2002


By   /s/  James R. Platte                By /s/  Peter D. Visnic
     --------------------------------       -----------------------------------
     James R. Platte                         Peter D. Visnic
     Director                                Director

Date:  March 20, 2002                    Date:  March 20, 2002


By /s/  Anne S. Myers
   -----------------------------------
     Anne S. Myers
     Senior Vice President, Secretary,
     Chief Operating/Financial  Officer

Date:  March 20, 2002








                                       72
<PAGE>


<TABLE>
<CAPTION>

                                INDEX TO EXHIBITS
EXHIBIT
NUMBER     DESCRIPTION                                                           PAGE NUMBER
------     -----------                                                           -----------

<S>   <C>                                                                <C>
   2    Agreement and Plan of Merger                                  Incorporated by reference to the
                                                                      definitive Proxy Statement for the
                                                                      Special Meeting of Shareholders,
                                                                      filed on Form DEF 14A with the
                                                                      SEC on December 3, 2001.

  3.1   Articles of Incorporation of Potters Financial                Incorporated by reference to the Corporation
                                                                      Form 8-A filed with the Securities and Exchange
                                                                      and Exchange Commission (the "SEC") on March 4,
                                                                      1996 (SEC File No. 0-27980).

  3.2   Code of Regulations of Potters Financial Corporation          Incorporated by reference to the
                                                                      Form 8-A filed with the SEC on
                                                                      March 4, 1996 (SEC File No. 0-27980).

 10.1   The Potters Savings and Loan Company                          Incorporated by reference to the
        Stock Option Plan                                             Annual Report on Form 10-KSB for the fiscal
                                                                      year ended December 31, 1995, filed with the SEC on
                                                                      March 28, 1996 (SEC File No. 0-27980), Exhibit 10.1.

 10.2   The Potters Savings and Loan Company                          Incorporated by reference to the
        Recognition and Retention Plan and                            Annual Report on Form 10-KSB for the
        Trust Agreement                                               fiscal year ended December 31, 1995,
                                                                      filed with the SEC on March 28, 1996
                                                                      (SEC File No. 0-27980), Exhibit 10.2.

 10.3   Lease dated February 1, 1983, by and                          Incorporated by reference to the
        between Billingsley, Incorporated and The                     Annual Report on Form 10-KSB
        Potters Savings and Loan Company                              for the fiscal year ended December 31, 1995,
                                                                      filed with the SEC on March 28, 1996 (SEC File
                                                                      No. 0-27980), Exhibit 10.5.

 10.4   Employment Contract with Edward L. Baumgardner                Incorporated by reference to the Quarterly Report
                                                                      on Form 10-QSB for the fiscal quarter ended September
                                                                      30, 2000, filed with the SEC on November 9, 2000 (SEC
                                                                      File No. 0-27980), Exhibit 10.1.
</TABLE>





                                       73
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER     DESCRIPTION                                                                     PAGE NUMBER
------     -----------                                                                     -----------

<S>     <C>                                                           <C>
 10.5   Employment Contract with Albert E. Sampson                    Incorporated by reference to
                                                                      the Quarterly Report on Form 10-QSB for the
                                                                      fiscal quarter ended September 30, 2000,
                                                                      filed with the SEC on
                                                                      November 9, 2000 (SEC File No. 0-27980),
                                                                      Exhibit 10.2.

 10.6   Employment Contract with Anne S. Myers                        Incorporated by reference to  the Quarterly
                                                                      Report on Form
                                                                      10-QSB for the fiscal quarter ended June 30,
                                                                      2000, filed with the SEC on August 7, 2000
                                                                      (SEC File No. 0-27980), Exhibit 10.2.

 10.7   Employment Contract with Stephen A. Beadnell                  Incorporated by reference to the Quarterly
                                                                      Report on Form 10-QSB for the fiscal quarter
                                                                      ended June 30, 2000, filed with the SEC on
                                                                      August 7, 2000 (SEC File No. 0-27980),
                                                                      Exhibit 10.3

 10.8   Potters Financial Corporation 1998 Stock                      Incorporated by reference to the definitive
        Option and Incentive Plan                                     Proxy Statement for the 1998 Annual Meeting
                                                                      of Shareholders, filed on Form DEF 14A with
                                                                      the SEC on March 13, 1998 (SEC File No.
                                                                      0-27980).

 10.9   Engagement Letter with Keefe, Bruyette and Woods              Included herewith.

  11    Statement re:  computation of earnings per share              See Note 1 to the consolidated financial
                                                                      statements included herewith.

  21    Subsidiaries of Registrant                                    Incorporated by reference to the Annual
                                                                      Report on Form 10-KSB for the fiscal year
                                                                      ended December 31, 1995, filed with the SEC
                                                                      on March 28, 1996 (SEC File No. 0-27980),
                                                                      Exhibit 21.

  23    Consent of Independent Accountants                            Included herewith.
</TABLE>




                                       74

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER     DESCRIPTION                                                   PAGE NUMBER
------     -----------                                                   -----------

<S>     <C>                                                           <C>
  99    Safe Harbor Under the Private Securities                      Included herewith.
        Litigation Reform Act of 1995
</TABLE>




















                                       75