<PAGE>

                                                                      Exhibit 13
NSD Bancorp
--------------------------------------------------------------------------------

Consolidated Balance Sheets
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                                    December 31,
                                                                                            ---------------------------
                                                                                                2001           2000
                                                                                            ---------------------------
<S>                                                                                         <C>            <C>
ASSETS
   Cash and Due From Banks ........................................................         $ 15,403,917   $ 14,727,012
   Federal Funds Sold .............................................................           11,300,000      7,500,000
   Investment Securities Available for Sale at Market Value (Amortized Cost of
      $115,597,738 at December 31, 2001 and $97,347,217 at
      December 31, 2000) ..........................................................          117,098,802     97,347,209
   Loans Held for Sale, Net of Reserve for Loan Losses of $48,968 and
      $14,060, Respectively .......................................................            4,570,679      1,312,372
   Loans, Net of Deferred Fees ....................................................          318,649,706    304,189,319
   Unearned Income ................................................................           (1,811,283)    (2,690,909)
   Reserve for Loan Losses ........................................................           (4,090,508)    (3,350,644)
                                                                                            ---------------------------
      Loans, Net ..................................................................          317,318,594    299,460,138
   Premises and Equipment, Net ....................................................            2,502,749      2,489,174
   Accrued Interest Receivable ....................................................            2,442,796      2,504,766
   Other Real Estate Owned and Assets Held for Sale ...............................              288,298        341,390
   Other Assets, Net of Reserve of $200,000 and $0, Respectively ..................           12,914,638     11,249,714
                                                                                            ---------------------------
      Total Assets ................................................................         $479,269,794   $435,619,403
                                                                                            ===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
   Deposits:
      Noninterest Bearing .........................................................         $ 66,992,372   $ 66,075,088
      Interest Bearing ............................................................          273,990,919    241,002,727
                                                                                            ---------------------------
        Total Deposits.............................................................          340,983,291    307,077,815
   Borrowed Funds:
      Advances from Federal Home Loan Bank and Other Borrowings....................           94,000,000     87,000,000
                                                                                            ---------------------------
        Total Borrowed Funds.......................................................           94,000,000     87,000,000
   Accrued Interest Payable........................................................            5,768,912      5,851,977
   Other Liabilities...............................................................            1,844,427      2,049,025
                                                                                            ---------------------------
        Total Liabilities..........................................................          442,596,630    401,978,817
   Common Stock $1 Par Value; 10,000,000 shares authorized, 3,170,288
      issued and 2,944,312 outstanding at December 31, 2001 and 3,167,764
      issued and 3,009,442 outstanding at December 31, 2000........................            3,170,288      3,016,918
   Treasury Stock at cost, 225,976 shares at December 31, 2001 and 157,947
      shares at December 31, 2000.... .............................................           (4,147,792)    (2,935,067)
   Capital Surplus ................................................................           18,386,732     15,744,863
   Accumulated Other Comprehensive Income .........................................              990,703          3,827
   Retained Earnings ..............................................................           18,273,233     17,810,045
                                                                                            ---------------------------
      Total Shareholders' Equity ..................................................           36,673,164     33,640,586
                                                                                            ---------------------------
      Total Liabilities and Shareholders' Equity ..................................         $479,269,794   $435,619,403
                                                                                            ===========================
</TABLE>

See notes to consolidated financial statements.

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

4
<PAGE>

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

Consolidated Statements of Income
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                               For the Years Ended December 31,
                                                                             ------------------------------------
                                                                                2001        2000          1999
                                                                             ------------------------------------
<S>                                                                          <C>         <C>          <C>
INTEREST INCOME
   Loans, Including Fees.................................................    $25,033,929  $23,722,815  $19,962,031
   Investment Securities.................................................
      Taxable............................................................      5,324,124    6,231,700    5,982,224
      Tax-exempt.........................................................        520,290      208,040      245,929
      Dividends..........................................................        394,715      373,728      243,450
   Interest Bearing Deposits.............................................         47,096       14,201       41,496
   Federal Funds Sold....................................................        386,761       57,272       30,505
                                                                             -------------------------------------
      Total Interest Income..............................................     31,706,915   30,607,756   26,505,635
INTEREST EXPENSE
   Deposits..............................................................     10,525,536    9,994,460    8,816,154
   Federal Funds Purchased and Repurchase Agreements.....................             --      202,402      143,045
   FHLB Advances and Other Borrowings....................................      5,413,856    4,509,096    2,346,752
                                                                             -------------------------------------
      Total Interest Expense.............................................     15,939,392   14,705,958   11,305,951
   Net Interest Income...................................................     15,767,523   15,901,798   15,199,684
   Provision for Loan Losses.............................................      1,200,000      825,000      840,000
                                                                             -------------------------------------
   Net Interest Income After Provision for Loan Losses...................     14,567,523   15,076,798   14,359,684
                                                                             -------------------------------------
OTHER INCOME
   Net Investment Securities Gains.......................................        205,424        9,249      265,822
   Service Fees..........................................................      1,155,917      872,283      923,797
   Other Operating Income................................................      2,030,950    1,038,152      622,393
                                                                             -------------------------------------
      Total Other Income.................................................      3,392,291    1,919,684    1,812,012
OTHER EXPENSES
   Salaries and Employee Benefits........................................      4,803,875    4,600,920    4,440,821
   Occupancy Expense.....................................................        923,754      824,206      831,442
   Equipment and Supplies................................................      1,186,721    1,175,264    1,110,108
   Data Processing.......................................................        790,421      730,846      707,550
   FDIC Insurance........................................................         57,738       59,459       39,751
   Advertising...........................................................        283,490      211,475      166,536
   Other Operating Expenses..............................................      2,622,353    2,169,957    1,999,618
                                                                             -------------------------------------
      Total Other Expenses...............................................     10,668,352    9,772,127    9,295,826
   Income Before Income Taxes............................................      7,291,462    7,224,355    6,875,870
   Provision for Income Taxes............................................      2,086,000    2,293,026    2,311,322
                                                                             -------------------------------------
NET INCOME...............................................................    $ 5,205,462  $ 4,931,329  $ 4,564,548
                                                                             =====================================
NET INCOME PER COMMON SHARE /(1)/
Net Income -- Basic......................................................          $1.75        $1.62        $1.47
Net Income -- Diluted....................................................          $1.74        $1.61        $1.46
Common Dividends Declared and Paid Per Share.............................          $0.76        $0.71        $0.64
Weighted Average Shares Outstanding -- Basic.............................      2,967,808    3,044,511    3,101,532
Weighted Average Shares Outstanding -- Diluted...........................      2,991,225    3,055,307    3,130,853
</TABLE>

------------
/(1)/ Adjusted for a 5% stock dividend declared April 24, 2001 and a 5% stock
dividend declared April 25, 2000.

See notes to consolidated financial statements.

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

                                                                               5
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

Consolidated Statements of Cash Flows
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                For the Years Ended December 31,
                                                                        ----------------------------------------------
                                                                            2001              2000             1999
                                                                        ----------------------------------------------
<S>                                                                     <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income ...........................................................  $  5,205,462     $  4,931,329     $  4,564,548
Adjustments to Net Income:
   Provision for Loan Losses .........................................     1,200,000          825,000          840,000
   Gain on Sale of Investment Securities Available for Sale ..........      (205,424)          (9,249)        (265,822)
   Loss (Gain) on Sale of Other Assets ...............................        42,893           (3,731)          29,855
   Gain on Loan Sales ................................................       (19,580)          (8,529)         (37,468)
   (Gain) Loss on Disposition of Premises and Equipment ..............       (10,409)           2,071           63,449
   Depreciation and Amortization .....................................       690,128          702,646          641,981
   Net Premium Amortization ..........................................       245,038           33,676           70,783
   Benefit for Deferred Income Taxes .................................       --                --              (10,454)
   Decrease (Increase) in Accrued Interest Receivable ................        61,971         (280,691)         (94,151)
   (Decrease) Increase in Accrued Interest Payable ...................       (83,065)       1,317,489         (443,092)
   Increase in Cash Surrender Value of Bank-Owned
      Life Insurance .................................................      (289,490)          --               --
   Benefit from Bank-Owned Life Insurance ............................      (558,484)          --               --
   Increase in Other Assets ..........................................    (2,212,112)      (2,218,323)        (353,096)
   Deferred Loan Fees, Net ...........................................        21,640           19,735           25,284
   (Decrease) Increase in Other Liabilities ..........................      (425,865)         634,757       (4,830,996)
                                                                        ----------------------------------------------
Net Cash Provided by Operating Activities ............................     3,662,703        5,946,180          200,821
                                                                        ----------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
   Proceeds from Sale of Investment Securities Available for Sale ....    24,465,453        6,822,727       10,957,629
   Proceeds from Repayments and Maturities of Investment
      Securities Available for Sale ..................................    49,801,915        8,965,773       25,737,157
   Proceeds from Repayments and Maturities of Investment
      Securities Held to Maturity ....................................       --                --            1,171,667
   Purchases of Investment Securities ................................   (92,534,047)      (7,362,234)     (49,775,103)
   Purchase of Bank-Owned Life Insurance .............................       --            (5,000,000)          --
   Proceeds from Bank-Owned Life Insurance ...........................     1,044,254           --               --
   Proceeds from Sales of Other Real Estate Owned ....................       492,171          276,669          509,463
   Net Increase in Loans .............................................   (21,640,832)     (37,094,162)     (39,703,440)
   Proceeds from Loan Sales ..........................................     2,119,984          861,413        3,784,279
   Purchases of Premises and Equipment ...............................      (516,693)        (166,516)        (651,168)
                                                                        ----------------------------------------------
Net Cash Used by Investing Activities ................................   (36,767,795)     (32,696,330)     (47,969,516)
                                                                        ----------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
   Net Increase in Demand and Savings Accounts .......................    26,366,432        8,271,820        4,612,801
   Net Increase in Certificates of Deposit ...........................     7,539,044        9,367,075        4,711,698
   Net (Decrease) Increase in Federal Funds Purchased and
      Repurchase Agreements ..........................................       --            (3,700,000)       3,700,000
   Proceeds from Borrowings ..........................................     7,000,000       77,684,300       47,650,000
   Repayments of Borrowings ..........................................       --           (53,334,300)     (18,000,000)
   Proceeds from the Exercise of Common Stock Options ................       149,337           --              133,996
   Cash Dividends Paid in Lieu of Fractional Shares ..................        (3,755)          (3,122)          (4,102)
   Treasury Stock Purchased ..........................................    (1,212,725)      (1,055,757)      (1,421,360)
   Cash Dividends Paid ...............................................    (2,256,336)      (2,173,976)      (1,971,311)
                                                                        ----------------------------------------------
Net Cash Provided by Financing Activities ............................    37,581,997       35,056,040       39,411,722
                                                                        ----------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents .....................     4,476,905        8,305,890       (8,356,973)
Cash and Cash Equivalents at Beginning of Year .......................    22,227,012       13,921,122       22,278,095
                                                                        ----------------------------------------------
Cash and Cash Equivalents at End of Year .............................  $ 26,703,917     $ 22,227,012     $ 13,921,122
                                                                        ==============================================
</TABLE>

For the years ended December 31, 2001, 2000 and 1999, the Corporation paid
interest of $16,022,457, $13,388,469 and $11,749,044 and income taxes of
$2,300,000, $2,436,000 and $2,150,000, respectively. Noncash investing activity
consisted of transfers of loans in liquidation to foreclosed assets of
approximately $482,000, $339,000 and $495,000 during 2001, 2000 and 1999,
respectively.

See notes to consolidated financial statements.
--------------------------------------------------------------------------------

6
<PAGE>

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

Consolidated Statements of Comprehensive Income
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                            For the Years Ended December 31,
                                                                       --------------------------------------
                                                                           2001         2000          1999
                                                                       --------------------------------------
<S>                                                                    <C>          <C>          <C>
Net Income..........................................................   $ 5,205,462  $ 4,931,329  $  4,564,548
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period.........   $ 1,706,496  $ 2,422,658  $ (4,811,004)
Less: reclassification adjustment for gain realized in net income ..       205,424        9,249       265,822
                                                                       --------------------------------------
Net unrealized gains (losses).......................................     1,501,072    2,413,409    (5,076,826)
                                                                       --------------------------------------
Other Comprehensive Income..........................................     1,501,072    2,413,409    (5,076,826)
Tax Expense (Benefit) at 34%........................................       510,369      820,559    (1,729,952)
                                                                       --------------------------------------
Other Comprehensive Income, Net of Tax..............................       990,703    1,592,850    (3,346,874)
                                                                       --------------------------------------
Net Comprehensive Income............................................   $ 6,196,165  $ 6,524,179  $  1,217,674
                                                                       ======================================
</TABLE>

See notes to consolidated financial statements.

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

                                                                               7
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

Consolidated Statements of Changes in Shareholders' Equity
--------------------------------------------------------------------------------

For the Years Ended December 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                                     Accumulated
                                                                                                        Other
                                                     Common        Treasury            Capital      Comprehensive       Retained
                                                      Stock         Stock              Surplus        Income (Loss)     Earnings
                                                   ------------------------------------------------------------------------------
<S>                                                <C>            <C>             <C>              <C>               <C>
Balance at December 31, 1998....................   $  2,604,172   $    (457,950)  $    7,885,041   $   1,757,851     $ 20,605,251
Net Income......................................        --              --                 --            --             4,564,548
Stock Dividend..................................        260,977         --             5,614,946         --            (5,875,923)
Cash Paid in Lieu of Fractional Shares..........        --              --                 --            --                (4,102)
Cash Dividends Declared
   ($.64 per share)/(1)/........................        --              --                 --            --            (1,971,311)
Stock Options Exercised, Net of
   Tax Benefit..................................          8,256         --               125,740         --               --
Treasury Stock Purchased (67,546 shares)........        --           (1,421,360)          --             --               --
Change in Unrealized Depreciation in
   Securities Available for Sale, Net of Tax....        --              --                --          (3,346,874)         --
                                                   ------------------------------------------------------------------------------
Balance at December 31, 1999....................      2,873,405      (1,879,310)      13,625,727      (1,589,023)      17,318,463
Net Income......................................        --              --                --             --             4,931,329
Stock Dividend..................................        143,513         --             2,119,136         --            (2,262,649)
Cash Paid in Lieu of Fractional Shares..........        --              --                --             --                (3,122)
Cash Dividends Declared
   ($.71 per share)/(1)/........................        --              --                --             --            (2,173,976)
Treasury Stock Purchased (72,639 shares)........        --           (1,055,757)          --             --                --
Change in Unrealized Appreciation in
   Securities Available for Sale, Net of Tax....        --              --                --           1,592,850          --
                                                   ------------------------------------------------------------------------------
Balance at December 31, 2000....................      3,016,918      (2,935,067)      15,744,863           3,827       17,810,045
Net Income......................................        --              --                --             --             5,205,462
Stock Dividend..................................        141,839         --             2,340,344         --            (2,482,183)
Cash Paid in Lieu of Fractional Shares..........        --              --                --             --                (3,755)
Cash Dividends Declared
   ($.76 per share)/(1)/........................        --              --                --             --            (2,256,336)
Stock Options Exercised,
   Net of Tax Benefit...........................         11,531         --               301,525         --               --
Treasury Stock Purchased (68,029 shares)........        --           (1,212,725)          --             --               --
Change in Unrealized Appreciation in
   Securities Available for Sale, Net of Tax....        --              --                --             986,876          --
                                                   ------------------------------------------------------------------------------
Balance at December 31, 2001....................   $  3,170,288   $  (4,147,792)  $   18,386,732   $     990,703     $ 18,273,233
                                                   ==============================================================================
</TABLE>

------------
/(1)/ Adjusted for a 5% stock dividend declared April 24, 2001 and a 5% stock
dividend declared April 25, 2000.

See notes to consolidated financial statements.


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

8
<PAGE>

--------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
--------------------------------------------------------------------------------

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements of NSD Bancorp, Inc. (the
     "Corporation") include the accounts of the Corporation and wholly owned
     subsidiary, NorthSide Bank, a community bank operating eleven branch
     offices located in western Pennsylvania, and NorthSide Bank's wholly owned
     subsidiary, NSB Financial Services, LLC. NSB Financial Services, LLC is a
     limited liability corporation which operates as a licensed title insurance
     agency providing title searches and other real estate settlement services
     to the general public. Material intercompany accounts and transactions
     have been eliminated.

     USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

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

     INVESTMENT SECURITIES

     The investment securities portfolio consists of securities and short-term
     investments which are purchased by the Corporation to enhance the overall
     yield on earning assets and to contribute to the management of interest
     rate risk and liquidity. Investments in debt and equity securities are
     classified into three categories: securities held to maturity, securities
     available for sale and trading securities.

     The Corporation classifies securities as held to maturity when it has both
     the ability and positive intent to hold securities to maturity. Securities
     held to maturity are stated at cost adjusted for amortization of premium
     and accretion of discount, computed primarily under the interest method.

     Securities not classified as held to maturity are designated as available
     for sale. These securities may be sold in response to changes in market
     interest rates, changes in prepayment or extension risk, asset-liability
     management decisions, income tax considerations or other circumstances
     identified by management. Securities available for sale are recorded at
     estimated market value, with the aggregate unrealized holding gains and
     losses reported, net of tax effect, as a separate component of
     shareholders' equity.

     The Corporation's investment policy specifically prohibits the existence
     of a trading account portfolio.

     On a periodic basis, management evaluates each security where amortized
     cost exceeds realizable value. If the decline is judged to be other than
     temporary, the cost of the security is written down to estimated net
     realizable value with the write-down included in net securities gains
     (losses). Realized gains and losses are computed principally under the
     specific identification method.

     LOANS HELD FOR SALE

     The loans available for sale at December 31, 2001 and December 31, 2000
     were entirely comprised of Small Business Administration (SBA) loans.
     These loans are carried at the lower of cost or market value obtained
     through secondary market bid quotations, net of any reserve for loan
     losses. Any realized gains and losses on these loans are included in other
     operating income.

     LOANS AND RESERVE FOR LOAN LOSSES

     Loans are stated at face value, net of unearned income and deferred fees.
     Installment loan unearned income is recognized over the loan term using
     the interest method. Interest on all other loans is recognized based on
     the outstanding principal balance of the loans. The accrual of interest is
     discontinued when, in management's judgment, it is determined that the
     collectibility of interest, but not necessarily principal, is doubtful.
     When a loan is classified as nonaccrual, all previously accrued and unpaid
     interest is reversed. Interest receipts on nonaccrual loans are applied to
     principal. Net loan fees are deferred and amortized over the term of the
     related loan using the interest method.

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

                                                                               9
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

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

     The reserve for loan losses is maintained at a level considered adequate
     by management to provide for loan losses. The reserve is increased by
     provisions charged to expense and reduced by loan losses net of
     recoveries. The amount of reserve is based on management's evaluation of
     the loan portfolio as well as prevailing and anticipated economic
     conditions, specific problem loans and other factors.

     Within the context of Statement of Financial Accounting Standards (SFAS)
     No. 114, "Accounting by Creditors for Impairment of a Loan," a loan is
     considered to be impaired when, based upon current information and events,
     it is probable that the Corporation will be unable to collect all amounts
     due for principal and interest according to the contractual terms of the
     loan agreement. Impairment is measured based on the present value of
     expected future cash flows discounted at a loan's effective interest rate,
     or as a practical expedient, the observable market price or, if the loan
     is collateral dependent, the fair value of the underlying collateral. When
     the measurement of an impaired loan is less than the recorded investment
     in the loan, the impairment is recorded in a specific valuation allowance
     through a charge to provision for loan losses. This specific valuation
     allowance is periodically adjusted for significant changes in the amount
     or timing of expected future cash flows, observable market price or fair
     value of the collateral. The valuation allowance, or reserve for impaired
     loan losses, is part of the total reserve for loan losses. Upon
     disposition of an impaired loan, any related allowance is reversed through
     a charge to the impaired reserve for loan losses. Cash payments received
     on impaired loans are recorded as a direct reduction of the loan
     principal. Subsequent amounts collected are recognized as interest income.
     Impaired loans are not returned to accruing status until all amounts due,
     both principal and interest are current and there has been a demonstrated,
     sustained payment history.

     Generally, management considers all major nonaccrual loans and certain
     renegotiated loans for impairment. The minimum period without payment that
     typically can occur before a loan is considered for impairment is ninety
     days. SFAS No. 114 does not apply to large groups of smaller balance,
     homogenous loans that are collectively evaluated for impairment. The
     Corporation collectively reviews leases and consumer loans under $50,000,
     and residential and commercial real estate under $250,000 for
     impairment.

     PREMISES AND EQUIPMENT

     Premises and equipment are carried at original cost less accumulated
     depreciation. Premises and equipment are depreciated over their useful
     lives using either the straight-line or an accelerated method. Leasehold
     improvements are amortized over the terms of the respective lease or the
     estimated useful lives of the improvements, whichever is shorter. Costs
     for maintenance and repairs are expensed currently. Major improvements are
     capitalized. When premises and equipment are disposed of, the accounts are
     relieved of the cost and accumulated depreciation or amortization, and any
     resulting gains or losses are credited to or charged agains tincome.

     BANK-OWNED LIFE INSURANCE

     In December 2000, the Corporation purchased insurance on the lives of a
     certain group of employees. The policies accumulate asset values to meet
     future liabilities including the payment of employee benefits such as
     health care. A premium of $5,000,000 is shown in the Consolidated
     Statements of Cash Flows for 2000. Increases in the cash surrender value
     and proceeds are recorded as other income in the Consolidated Statements
     of Income. The cash surrender value of bank-owned life insurance is
     reflected in "other assets" on the Consolidated Balance Sheets.

     FORECLOSED ASSETS

     Foreclosed assets are comprised of other real estate owned and repossessed
     collateral, which are carried at the lower of the outstanding loan balance
     or estimated fair value less estimated costs to sell at the date of
     foreclosure.

     INCOME TAXES

     Deferred income taxes result from temporary differences between financial
     and tax reporting. Deferred tax assets and liabilities are determined
     based on differences between financial reporting and tax basis of assets
     and liabilities and are measured using the statutory tax rates. Deferred
     tax assets are reduced, if necessary, by the amount of such benefits that
     are not expected to be realized based upon available evidence.

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

10
<PAGE>

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

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

     INTANGIBLE ASSETS

     Included in other assets at December 31, 2000 is a deposit premium of
     approximately $176,601, net of accumulated amortization. At December 31,
     2001, the deposit premium was fully amortized. The premium was amortized
     using the straight-line method over a five year period.

     CASH EQUIVALENTS

     The Corporation has defined cash equivalents as cash and due from banks
     and short-term federal funds sold.

     EARNINGS PER SHARE

     The Corporation accounts for earnings per share in accordance with
     Statement of Financial Accounting Standards No. 128, "Earnings Per Share".
     This statement requires the disclosure of basic and diluted earnings per
     share and revised the method required to calculate these amounts.

     Basic earnings per common share is calculated by dividing net income by
     the sum of the weighted average number of shares of common stock
     outstanding during each period. Diluted earnings per common share is
     calculated by dividing net income by the sum of the weighted average
     number of shares of common stock outstanding and the number of shares of
     common stock which would be issued assuming the exercise of stock options
     during each period.

     Basic and diluted earnings per share calculations include the retroactive
     effect of a 5% stock dividend declared on April 24, 2001 and a 5% stock
     dividend declared April 25, 2000.

     LOAN FEES

     Loan origination and commitment fees, net of associated direct costs, are
     deferred and the net amount is amortized as an adjustment to the related
     loan yield on the interest method, generally over the contractual life of
     the related loans or commitments.

     OTHER REAL ESTATE OWNED

     Real estate, other than bank premises, is recorded at the lower of cost or
     fair value less selling costs at the time of acquisition. Expenses related
     to holding the property, net of rental income, are generally charged
     against earnings in the current period.

     ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS

     The Corporation reviews long-lived assets, such as premises and equipment
     and intangibles, for impairment whenever events or changes in
     circumstances, such as a significant decrease in the market value of an
     asset or the extent or manner in which an asset is used, indicate that the
     carrying amount of an asset may not be recoverable. If there is an
     indication that the carrying amount of an asset may not be recoverable,
     future discounted cash flows expected to result from the use of the asset
     are estimated. If the sum of the expected cash flows is less than the
     carrying value of the asset, a loss is recognized for the difference
     between the carrying value and fair market value of the asset.

     COMPREHENSIVE INCOME DISCLOSURES

     For all periods presented, "other comprehensive income" (comprehensive
     income excluding net income) includes only one component, which is the
     change in unrealized holding gains and losses on available for sale
     securities, net of related tax effects.

     RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standards No. 133, "Accounting for Derivative
     Instruments and Hedging Activities" ("SFAS No. 133"). This statement
     establishes accounting and reporting standards for derivative
     instruments, including certain derivative instruments embedded in
     other contracts and for hedging activities. It applies to all entities and
     requires that any entity recognize all derivatives as either assets or
     liabilities in the statement of financial position and measure those
     instruments at fair value. Under SFAS No. 133, the change in fair
     value is reflected in the income statement or as an element of other
     comprehensive income. In June 2000, the FASB issued SFAS No. 138,
     "Accounting for Certain Derivative Instruments

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

                                                                              11
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

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

     and Certain Hedging Activities", which amended SFAS No. 133,
     and along with SFAS No. 133, is effective for fiscal year 2001. The
     Corporation adopted SFAS 133 and 138, effective January 1, 2001. The
     adoption of this statement did not have a material impact on the
     Corporation's financial condition or results of operations.

     In September 2000, the Financial Accounting Standards Board issued SFAS
     No. 140, "Accounting for Transfers and Servicing of Financial Assets and
     Extinguishments of Liabilities", effective for transfers and servicing of
     financial assets and extinguishments of liabilities occurring after March
     31, 2001. This statement replaces SFAS No. 125, "Accounting for Transfers
     and Servicing of Financial Assets and Extinguishments of Liabilities"
     issued in June 1996 and revises the standards of accounting for
     securitizations and other transfers of financial assets and collateral.
     While management is currently in the process of evaluating the impact of
     this statement, it anticipates that the adoption of SFAS No. 140 did not
     have a material impact on the Corporation's financial condition or results
     of operations.

     In July 2001, FASB issued SFAS No. 141, "Business Combinations". SFAS No.
     141 requires the purchase method of accounting for business combinations
     initiated after June 30, 2001 and eliminates the pooling-of interests
     method. SFAS No. 141 also specifies the types of acquired intangible
     assets that are required to be recognized and reported separately from
     goodwill and those acquired intangible assets that are required to be
     included in goodwill. Additional provisions of SFAS No. 141 include the
     reclassification of certain existing recognized intangibles to goodwill
     and reclassification of certain intangibles out of previously reported
     goodwill upon adoption. Implementation of SFAS No. 141 did not have a
     material impact on the Corporation's financial condition or results of
     operations.

     In July 2001, FASB issued SFAS No. 142, "Goodwill and Other Intangible
     Assets", which is effective for fiscal years beginning after December 15,
     2001. SFAS No. 142 requires, among other things, the discontinuance of
     goodwill amortization. In addition, the standard includes provisions upon
     adoption for the reclassification of certain existing recognized
     intangibles as goodwill, reassessment of the useful lives of existing
     recognized intangibles, reclassification of certain intangibles out of
     previously reported goodwill and the testing for impairment of existing
     goodwill and other intangibles. Implementation of SFAS No. 142 is not
     expected to have a material impact on the Corporation's financial
     condition or results of operations.

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
     Retirement Obligations", which is effective for financial statements
     issued for fiscal years beginning after June 15, 2002. The statement
     addresses financial accounting and reporting for obligations associated
     with the retirement of tangible long-lived assets and associated asset
     retirement costs. SFAS No. 143 requires that the fair value of a liability
     for an asset retirement obligation be recognized in the period in which it
     is incurred if a reasonable estimate of fair value can be made. The
     associated asset retirement costs are capitalized as part of the carrying
     amount of the long-lived asset and subsequently allocated to expense over
     the asset's useful life. Implementation of SFAS No. 143 is not expected to
     have a material impact on the Corporation's financial condition or results
     of operations.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
     Impairment or Disposal of Long-Lived Assets", which is effective for
     financial statements issued for fiscal years beginning after December 15,
     2001, including interim periods. This statement supersedes SFAS No. 121
     "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
     Assets to be Disposed of", and the accounting and reporting provisions of
     APB Opinion No. 30, "Reporting the Results of Operations -- Reporting the
     Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
     and Infrequently Occurring Events and Transactions". SFAS No. 144 requires
     that long-lived assets be reviewed for impairment whenever events or
     changes in circumstances, such as a significant decrease in the market
     value of an asset or the extent or manner in which an asset is used
     indicate that the carrying amount of an asset may not recoverable. If
     there is an indication that the carrying amount of an asset may not be
     recoverable, future undiscounted cash flows expected to result from the use
     and disposition of the asset are estimated. If the sum of the expected cash
     flows is less than the carrying value of the asset, a loss is
     recognized for the difference between the carrying value and the market
     value of the asset. This statement also requires measurement of long-lived
     assets classified as held for sale at the lower of their carrying amount
     or fair value less cost to sell and to cease depreciation or amortization
     on these assets. Implementation of SFAS No. 144 is not expected to have a
     material impact on the Corporation's financial condition or results of
     operations.

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

12
<PAGE>

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

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

     Reclassifications

     For comparative purposes, reclassifications have been made to certain
     amounts previously reported in the Consolidated Financial
     Statements.

NOTE 2 -- SUPPLEMENTAL COMPREHENSIVE INCOME DISCLOSURES

     The following table identifies the related tax effects allocated to each
     component of other comprehensive income in the Statements of Changes in
     Shareholders' Equity:

<table>
<caption>
                                                       December 31, 2001                     December 31, 2000
                                            ---------------------------------------    ---------------------------------
                                                            Tax        Net of                        Tax       Net of
                                              Pre-Tax     (Expense)     Tax           Pre-Tax     (Expense)     Tax
                                              Amount       Benefit     Amount         Amount        Benefit    Amount
                                            ----------------------------------------------------------------------------

                                         <c>           <c>          <c>           <c>          <c>         <c>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
    arising during the period.............. $1,706,496    $(580,209)   $1,126,287    $2,422,658   $(823,704)  $1,598,954
Less: reclassification adjustment for gain
     realized in net income................    205,424      (69,844)      135,580         9,249      (3,145)       6,104
                                            ----------------------------------------------------------------------------
Net unrealized gains (losses)..............  1,501,072     (510,365)      990,707     2,413,409    (820,559)   1,592,850
                                            ----------------------------------------------------------------------------
Other Comprehensive Income................. $1,501,072    $(510,365)   $  990,707    $2,413,409   $(820,559)  $1,592,850
                                            ============================================================================
<CAPTION>

                                                     December 31, 1999
                                            -----------------------------------------
                                                               Tax          Net of
                                              Pre-Tax       (Expense)        Tax
                                              Amount         Benefit       Amount
                                            -----------------------------------------

                                         <c>            <c>           <c>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses)
    arising during the period.............. $(4,811,004)   $1,635,741    $(3,175,263)
Less: reclassification adjustment for gain
     realized in net income................     265,822       (90,379)       175,443
                                            -----------------------------------------
Net unrealized gains (losses)..............  (5,076,826)    1,726,120     (3,350,706)
                                            -----------------------------------------
Other Comprehensive Income................. $(5,076,826)   $1,726,120    $(3,350,706)
                                            =========================================
</table>

NOTE 3 -- INVESTMENT SECURITIES

     A summary of investment securities available for sale is as follows:

<TABLE>
<CAPTION>
                                                                                    December 31, 2001
                                                                   -----------------------------------------------------
                                                                                     Gross Unrealized
                                                                                         Holding
                                                                                     ----------------
                                                                     Amortized                                   Fair
                                                                       Cost          Gains        Losses        Value
                                                                   -----------------------------------------------------
<S>                                                                <C>            <C>          <C>          <C>

U.S. Treasury Securities........................................   $  1,658,992        -       $   47,902   $  1,611,090
Obligations of U.S. Government Agencies.........................      6,553,153   $   91,531         -         6,644,684
Mortgage-Backed Securities......................................     66,223,953      523,611      242,102     66,505,462
Obligations of State and Political Subdivisions.................     14,722,070       48,975       98,034     14,673,011
Other Bonds.....................................................     21,181,632       60,383      818,569     20,423,446
Marketable Equity Securities....................................      5,257,938    1,984,064          893      7,241,109
                                                                   -----------------------------------------------------
  Total Investment Securities Available for Sale................   $115,597,738   $2,708,564   $1,207,500   $117,098,802
                                                                   =====================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                               December 31, 2000
                                                             -------------------------------------------------------
                                                                               Gross Unrealized
                                                                                   Holding
                                                                         ---------------------------
                                                              Amortized                                     Fair
                                                                 Cost         Gains         Losses          Value
                                                             -------------------------------------------------------
<S>                                                          <C>           <C>            <C>            <C>
U.S. Treasury Securities.................................... $ 3,707,761        -         $    3,915     $ 3,703,846
Obligations of U.S.
   Government Agencies......................................  29,781,606   $      970        386,126      29,396,450
Mortgage-Backed Securities..................................  46,974,936       28,832        786,179      46,217,589
Obligations of State and Political Subdivisions.............   4,587,417       23,217         38,650       4,571,984
Other Bonds.................................................   7,111,810        6,919        447,250       6,671,479
Marketable Equity Securities................................   5,183,687    1,609,694          7,520       6,785,861
                                                             -------------------------------------------------------
  Total Investment Securities Available for Sale............ $97,347,217   $1,669,632     $1,669,640     $97,347,209
                                                             =======================================================
</TABLE>

     The amortized cost and estimated market value of the investment portfolio
     available for sale at December 31, 2001, by contractual maturity, is shown
     below. Mortgage-backed securities are presented in the schedule below at
     contractual maturity without consideration given to scheduled repayments
     or accelerated prepayments. Expected maturities will differ from
     contractual maturities because borrowers have the right to call or prepay
     obligations with or without call or prepayment penalties.

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

                                                                              13
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

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

     The contractual maturity of the investment portfolio available for sale is
     as follows:

                                                  December 31, 2001
                                            ------------------------------
                                               Amortized          Fair
                                                 Cost             Value
                                            ------------------------------
Within one year...........................       -                -
After one year, within five years.........  $   3,966,755    $   3,975,408
After five years, within ten years........     15,917,703       15,853,839
After ten years...........................     95,713,280       97,269,555
                                            ------------------------------
                                            $ 115,597,738    $ 117,098,802
                                            ==============================


     The fair value of securities is based on quoted market prices or bid
     quotations received from securities dealers. Proceeds from the sale of
     available for sale securities during 2001, 2000 and 1999 were $24,465,453,
     $6,822,727 and $10,957,629, respectively. Gross gains of $251,724, $20,706
     and $278,156 and gross losses of $46,300 $12,223 and $12,922 were realized
     on sales of available for sale securities in 2001, 2000 and 1999,
     respectively. Gross gains of $819 and $588 in 2000 and 1999, respectively,
     and gross losses of $53 in 2000 were realized on calls of investment
     securities. There were no gross gains realized on calls of investment
     securities during 2001 and there were no gross losses realized on calls
     ofinvestment securities during 2001 and 1999. Investment securities with a
     total par value of $7,088,234 and $36,805,693 at December 31, 2001 and
     2000, respectively, were pledged as collateral for public and trust funds
     and long-term borrowings.

     As a member of the Federal Home Loan Bank of Pittsburgh (FHLB), the
     Corporation is required to maintain a minimum investment in FHLB stock.
     The minimum amount is calculated based on the level of assets, residential
     real estate loans and outstanding FHLB advances. At December 31, 2001 and
     2000, the Corporation held $4,700,000 and $4,622,800, respectively, of
     FHLB stock.

NOTE 4 -- LOANS

     Loans are summarized as follows:



                                                         December 31,
                                                ------------------------------
                                                     2001             2000
                                                ------------------------------
Consumer Loans to Individuals.................  $ 135,108,602     $123,076,928
Mortgage
    Nonresidential............................     73,702,504       71,523,130
    Residential...............................     58,586,008       61,008,430
Commercial, Financial and Agricultural........     31,573,057       26,399,606
Lines of Credit...............................      6,028,986        4,845,245
Lease Financing...............................     13,419,933       17,197,580
Nonaccrual Loans..............................        634,659          520,804
                                                ------------------------------
Total Loans...................................    319,053,749      304,571,723
Deferred Fees.................................       (404,043)        (382,404)
                                                ------------------------------
    Total Loans, Net of Deferred Fees.........  $ 318,649,706     $304,189,319
                                                ==============================

     At December 31, 2001 and 2000, the Corporation had $1,150,634 and
     $420,205, respectively, in loans which were 90 days or more past due, but
     were still accruing interest. If interest on loans classified as
     nonaccrual had been recognized, such income would have approximated
     $42,653, $51,058 and $78,836 for the years ended 2001, 2000 and 1999,
     respectively. The Corporation did not record interest on any nonaccrual
     loans during 2001, 2000 or 1999.

     The Corporation collectively reviews leases and consumer loans under
     $50,000 and residential real estate and commercial real estate loans under
     $250,000. The Corporation had no recorded investment in loans for which
     impairment has been recognized in accordance with SFAS No. 114 as of
     December 31, 2001 or 2000. There were no loans considered impaired and,
     consequently, no recorded investment in impaired loans at any time during
     2001 or 2000. The Corporation did not recognize any interest on impaired
     loans during 2001 or 2000.

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

14
<PAGE>

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

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

NOTE 5 -- RESERVE FOR LOAN LOSSES

     The following is a summary of activity in the reserve for loan losses
     encompassing both reserves attributable to loans held for investment and
     also loans held for sale:

<TABLE>
<CAPTION>

                                                                         December 31,
                                                   ----------------------------------------------
                                                       2001                2000          1999
                                                   ----------------------------------------------
<S>                                                 <C>                 <C>           <C>
Balance at Beginning of Year.....................   $3,364,704          $3,088,257    $2,756,502
Provision for Loan Losses........................    1,200,000             825,000       840,000
Losses Charged Against Reserve...................     (499,846)           (591,259)     (554,095)
Recoveries on Loans Previously Charged-Off.......       74,618              42,706        45,850
                                                   ----------------------------------------------
Balance at End of Year...........................   $4,139,476          $3,364,704    $3,088,257
                                                   ==============================================
</TABLE>

NOTE 6 -- PREMISES AND EQUIPMENT

     Premises and equipment, at cost, consist of the following:

                                                      December 31,
                                           ---------------------------------
                                              2001                  2000
                                           ---------------------------------
Land.....................................  $   472,801          $   472,801
Buildings................................    1,943,873            1,943,873
Equipment................................    3,531,285            3,367,876
Leasehold Improvements...................    1,149,874            1,018,463
                                           ---------------------------------
                                             7,097,833            6,803,013
                                           ---------------------------------
Accumulated Depreciation.................   (4,595,084)          (4,313,839)
                                           ---------------------------------
Premises and Equipment, Net..............  $ 2,502,749          $ 2,489,174
                                           =================================

     There were no significant gains or losses on disposals of premises and
     equipment during 2001 or 2000. During 1999, equipment with a book value of
     $164,263 was rendered obsolete primarily due to Year 2000 related issues.
     As a result, total losses on disposals of $164,063 were recorded during
     1999. Also in 1999, the Corporation sold land with a book value of
     $199,186 for $300,000 resulting in a gain of $100,814, which has been
     included in other operating income in the consolidated statement of
     income. Depreciation expense, principally calculated using a straight-line
     method, was $513,527, $526,045 and $465,380 in 2001, 2000 and 1999,
     respectively. The Corporation leases certain offices under various
     operating leases.

     These leases contain various renewal option periods extending through
     January 2006. Certain leases require adjustment of the rent based on cost
     escalations. The following is a summary of the future minimum lease
     payments under these operating leases:

For the Year Ending
   December 31,
-------------------
       2002 ...........................................   $369,610
       2003 ...........................................    258,701
       2004 ...........................................    197,978
       2005 ...........................................    104,840
       2006 ...........................................      5,850
                                                          --------
                                                          $936,979
                                                          ========

     Rental expense under all operating leases was $351,611, $304,652 and
     $274,854 for the years ended December 31, 2001, 2000 and 1999,
     respectively.

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

                                                                              15
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

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

NOTE 7 -- INCOME TAXES

     The provision (benefit) for income taxes is comprised of the
     following:

                                 For the Years Ended December 31,
                     ---------------------------------------------------------
                           2001               2000                1999
                     ---------------------------------------------------------
Current
   Federal .......     $ 2,471,389         $2,403,443          $2,280,776
   State .........          (3,758)           (42,311)             41,000
Deferred..........        (381,631)           (68,106)            (10,454)
                     ---------------------------------------------------------
                       $ 2,086,000         $2,293,026          $2,311,322
                     =========================================================

     Reconciliations of the federal statutory and effective tax rates are as
     follows:

<TABLE>
<CAPTION>
                                                           For the Years Ended December 31,
                                                ------------------------------------------------------------
                                                      2001                2000                1999
                                                ------------------- ------------------ ---------------------
                                                  Amount    Percent   Amount    Percent     Amount   Percent
                                                ------------------------------------------------------------

                                             <c>                  <c>         <c>      <c>          <c>
Federal Statutory Tax Rate .................    $ 2,479,097  34.0%   $2,456,281  34.0%    $2,337,795   34.0%
Tax-exempt Interest Income .................       (219,510) (3.0)     (117,950) (1.6)      (112,545)  (1.6)
Interest Expense Disallowed.................         31,557   0.4        14,276   0.2         12,742    0.2
State Income Taxes .........................         (2,480) (0.1)      (27,925) (0.4)        27,060    0.4
Bank-Owned Life Insurance...................       (288,311) (4.0)         -      -            -         -
Other, Net .................................         85,647   1.3       (31,656) (0.5)        46,270    0.6
                                                ------------------------------------------------------------
                                                $ 2,086,000  28.6%   $2,293,026  31.7%    $2,311,322   33.6%
                                                ============================================================
</TABLE>

     The tax effects of deductible and taxable differences that give rise to
     significant portions of the deferred tax assets and deferred tax
     liabilities, respectively, are as follows:

<TABLE>
<CAPTION>

                                                                                December 31,
                                                                         ------------------------
                                                                             2001         2000
                                                                         ------------------------
<S>                                                                      <C>           <C>
Deferred Tax Assets:
  Net Unrealized Holding Losses on Securities Available for Sale......          -            -
  Provision for Loan Losses...........................................   $ 1,230,183   $  906,515
  Loan Origination Fees/Costs.........................................         8,627       17,255
  Other...............................................................       181,577      144,871
                                                                         ----------------------
     Gross Deferred Tax Assets........................................     1,420,387    1,068,641
Deferred Tax Liabilities:
  Net Unrealized Holding Gains on Securities Available for Sale.......       510,362      140,726
  Bond Discount Accretion.............................................       171,057      181,471
  Depreciation........................................................        16,275       30,603
  Other...............................................................          -           5,144
                                                                         ----------------------
     Gross Deferred Tax Liabilities...................................       697,694      357,944
                                                                         ------------------------
     Net Deferred Tax Assets (Liabilities)............................   $   722,693    $ 710,697
                                                                         ========================
</TABLE>

     Net deferred tax assets are classified as other assets and net deferred
     tax liabilities are classified as other liabilities on the Consolidated
     Balance Sheets.

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

16
<PAGE>

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

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

NOTE 8 -- EMPLOYEE BENEFITS

     The Corporation maintains a profit sharing retirement plan which covers
     substantially all employees meeting minimum age and service requirements.
     Expense for the profit sharing plan was $156,300 in 2001, $150,000 in
     2000 and $136,000 in 1999. During 2001, 2000 and 1999, respectively, the
     Corporation expensed $80,229, $66,664 and $59,159 related to 401(k) plan
     matching contributions.

     Profit sharing assets are primarily invested in mutual funds which are
     selected at the discretion of the employee. The plan was also invested in
     11,116 shares of NSD Bancorp, Inc. common stock with a market value of
     $223,987 at December 31, 2001. Total cash dividends received from plan
     investments in common stock of the Corporation were $8,508 in 2001.

NOTE 9 -- STOCK OPTION PLANS

     The Corporation has two fixed option plans. Under the 1994 Employee Stock
     Option Plan, the Corporation may grant options to its employees for up to
     234,653 shares of common stock. Under the 1994 Non-employee Director
     Stock Option Plan, the Corporation may grant options to its non-employee
     directors for up to 78,218 shares of common stock. Under both plans, the
     exercise price of each option is equal to the fair market price of the
     Corporation's stock on the date of grant with each option having a
     maximum term of 10 years. The total shares reserved for issuance, options
     granted and the option exercise price per share have been adjusted for
     the five percent stock dividend declared April 24, 2001 for holders of
     record on May 1, 2001 and the five percent stock dividend declared April
     25, 2000 for holders of record on May 1, 2000.

     A summary of the status of the Corporation's two fixed stock option plans
     as of December 31, 2001, 2000 and 1999 and changes during the years
     ending on those dates is presented below:

<TABLE>
<CAPTION>
                                                      2001                     2000                     1999
                                              -----------------------  -----------------------  -----------------------
                                                         Weighted-                Weighted-                Weighted-
                                                          Average                  Average                  Average
Fixed Options                                 Shares   Exercise Price  Shares   Exercise Price  Shares   Exercise Price
                                              -------------------------------------------------------------------------
<S>                                           <C>          <C>         <C>          <C>         <C>          <C>
Outstanding at Beginning of Year............  149,380      $16.34      129,860      $17.48      116,987      $16.55
Granted.....................................   28,768       17.22       27,617       14.20       27,176       20.17
Exercised...................................   11,531       12.95         --          --          9,916       13.51
Forfeited...................................      408       15.24        8,097       27.43        4,387       18.37
                                              -------------------------------------------------------------------------
Outstanding at End of Year..................  166,209      $16.73      149,380      $16.34      129,860      $17.48
Options Exercisable at Year-end.............  166,209                  149,380                  129,860
Weighted-Average Fair Value of Options
  Granted During the Year...................               $10.74                   $ 7.83                   $ 5.69
                                              =========================================================================
</TABLE>

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

                                                                              17
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

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

     The following table summarizes information about fixed stock options
     outstanding at December 31, 2001:

<TABLE>
<CAPTION>
                              Options Outstanding and Exercisable
-------------------------------------------------------------------------------------------
   Range of       Number Outstanding and      Weighted-Average Remaining   Weighted-Average
Exercise Prices   Exercisable at 12/31/2001   Contractual Life (in Years)  Exercise Price
-------------------------------------------------------------------------------------------
<S>                         <C>                         <C>                    <C>
$11.38 --$12.62              50,318                     3.6                    $11.92
 14.20 -- 17.22              71,826                     7.9                     15.77
 20.10 -- 20.65              25,780                     7.4                     20.17
 28.61 -- 29.02              18,285                     6.5                     28.96
-------------------------------------------------------------------------------------------
$11.38 --$29.02             166,209                     6.4                    $17.15
===========================================================================================
</TABLE>

     On January 1, 1996, the Corporation adopted SFAS No. 123, "Accounting
     for Stock Based Compensation". As permitted by SFAS No. 123, the
     Corporation has chosen to apply Accounting Pronouncements Bulletin (APB)
     No. 25, "Accounting for Stock Issued to Employees" and related
     interpretations in accounting for its plans. Accordingly, no compensation
     cost has been recognized for options granted under either Plan. Had
     compensation expense included stock option plan costs, determined based
     on the fair value at the grant date for options granted under these plans
     consistent with SFAS No. 123, proforma net income and earnings per share
     would have been as follows:

                                                     Reported    Proforma
                                                    ----------------------

Net Income
  2001............................................  $5,205,462  $5,001,543
  2000............................................   4,931,329   4,800,595
  1999............................................   4,564,548   4,466,784
Basic Earnings Per Share
  2001............................................       $1.75       $1.69
  2000............................................        1.62        1.57
  1999............................................        1.47        1.44
Diluted Earnings Per Share
  2001............................................       $1.74       $1.67
  2000............................................        1.61        1.57
  1999............................................        1.46        1.43
                                                    ======================

     For purposes of computing proforma results as if the above plans were
     accounted for under the fair value method, the Corporation estimated the
     fair value of stock options using the Black-Scholes options pricing model
     with dividends paid every quarter at the current rate at the date of the
     grant. The following assumptions were used:

<TABLE>
<CAPTION>
                                             Director                       Employee
                                  ------------------------------  ------------------------------
                                    2001       2000      1999       2001       2000      1999
                                  ------------------------------  ------------------------------
<S>                                <C>       <C>        <C>        <C>       <C>        <C>
Risk Free Interest Rate........     5.16%      5.14%     6.44%      5.16%      5.14%     6.44%
Volatility.....................    69.91%     73.74%    51.55%     69.91%     73.74%    51.55%
Expected Lives.................    7 Years   7 Years    7 Years    7 Years   7 Years    7 Years
                                  ==============================  ==============================
</TABLE>

NOTE 10 -- TRANSACTIONS WITH RELATED PARTIES

     In the ordinary course of business, the Corporation has transactions,
     including loans, with the Corporation's employees, principal officers and
     directors and their related interests. Approximately 91% of related party
     loans are with three Board members. A summary of loan activity for
     directors, executive officers and their associates with loan balances in
     excess of $60,000 is as follows:

                                                   2001            2000
                                               ---------------------------
Balance, January 1 ..........................  $ 7,239,207     $ 7,519,008
New Loans ...................................    4,737,563       1,594,997
Repayments ..................................   (2,663,528)     (1,874,798)
                                               ---------------------------
Balance, December 31.........................  $ 9,313,242     $ 7,239,207
                                               ===========================

--------------------------------------------------------------------------------
18
<PAGE>

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

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

NOTE 11 -- COMMITMENTS, CONTINGENCIES AND
           FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

     The Corporation incurs off-balance sheet risk in the normal course of
     business in order to meet financing needs of its customers. These
     financial instruments include commitments to extend credit and standby
     letters of credit which involve, to varying degrees, elements of credit
     and interest rate risk in excess of the amount recognized in the
     consolidated financial statements.

     At December 31, 2001, there are various outstanding commitments to extend
     credit of approximately $45,608,779 and standby letters of credit of
     approximately $766,813. The majority of standby letters of credit expire
     within the next fifteen months. Commitments to extend credit are
     commitments to lend to a customer as long as there is no violation of any
     condition established in the loan agreement. Commitments generally have
     fixed expiration dates or other termination clauses and may require
     payment of a fee. Since many of the commitments are expected to expire
     without being drawn upon, the total commitment amounts do not necessarily
     represent future cash requirements. The Corporation evaluates each
     customer's creditworthiness on a case-by-case basis.

     Standby letters of credit are conditional commitments issued by the
     Corporation to guarantee the performance of a customer to a third party.
     Those guarantees are primarily issued to support public and private
     borrowing arrangements, including normal business activities, bond
     financing and similar transactions. The credit risk involved in issuing
     letters of credit is essentially the same as that involved in extending
     loans to customers.The Corporation requires collateral supporting those
     commitments as deemed necessary.

     The Corporation's exposure to credit loss in the event of nonperformance by
     the other party to the financial instrument for commitments to extend
     credit and standby letters of credit is represented by the contractual
     amount of those instruments. The Corporation uses the same credit and
     collateral policies in making commitments and conditional obligations as
     for all other lending. Collateral for these types of commitments is similar
     to collateral obtained on other commercial loans.

     Additionally, the Corporation is subject to certain asserted and
     unasserted potential claims encountered in the normal course of business.
     In the opinion of management, neither the resolution of these claims nor
     the funding of those credit commitments will have a material adverse
     effect on the Corporation's consolidated financial position, results of
     operations or cash flows.

NOTE 12 -- CONCENTRATIONS OF CREDIT

     The Corporation grants commercial, residential and consumer loans
     primarily to customers in the Western Pennsylvania area. The Corporation
     has a diversified loan portfolio which is not dependent upon any
     particular economic sector. Substantially all of the Corporation's
     investments in municipal securities are obligations of state or political
     subdivisions located within Pennsylvania. As a whole, the Corporation's
     loan and investment portfolios could be affected by the general economic
     conditions of Pennsylvania. In addition, at December 31, 2001, a
     significant portion of the Corporation's "cash and due from banks" and
     "federal funds sold" is maintained with a large financial institution
     located in southwestern Pennsylvania.

NOTE 13 -- FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following methods and assumptions were used to estimate the fair
     value of each class of financial instruments for which it is practical to
     estimate that value:

     CASH AND FEDERAL FUNDS SOLD

     For those short-term instruments, the carrying amount is a reasonable
     estimate of fair value.

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

                                                                              19
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

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

     INVESTMENT SECURITIES

     The estimated fair value of securities and marketable equity securities
     is based on quoted market prices or dealer quotes. If a quoted market
     price is not available, fair value is estimated using quoted market
     prices for similar securities.

     LOAN RECEIVABLES

     Fair values were estimated for loan portfolios with similar financial
     characteristics by discounting contractual cash flows considering
     prepayments, credit risk, overhead and other factors.

     Assumptions regarding credit risk, cash flows and discount rates were
     judgmentally determined using available market and internal information
     which management believes to be reasonable. However, because there are no
     active markets for many loan types, the Corporation has no basis to
     determine whether the estimated fair value presented would be indicative
     of the value negotiated in an actual sale.

     LOANS HELD FOR SALE

     Loans available for sale are carried at the lower of cost or market value
     obtained through secondary market bid quotations, net of any reserve for
     loan losses. Therefore, the carrying amount is a reasonable estimate of
     fair value.

     OTHER EARNING ASSETS

     Other earning assets are comprised entirely of Bank-Owned Life Insurance
     and outstanding Cashflow Maximizer receivables purchased. Bank-Owned Life
     Insurance fair value is based on the cash surrender value of premiums.
     Due to the short-term nature of Cashflow Maximizer receivables, the
     carrying amount is a reasonable estimate of fair value.

     DEPOSIT LIABILITIES

     The fair value of demand deposits, savings accounts and certain money
     market deposits is the amount payable on demand as of December 31, 2001.
     The fair value of the fixed-maturity certificates of deposit is estimated
     using the rates currently offered as of December 31, 2001 for deposits of
     similar maturities. Fair value estimates do not include the value of
     depositor relationships or the value of the low-cost funding provided by
     deposits.

     FEDERAL HOME LOAN BANK BORROWINGS

     The fair value is estimated using the rates currently offered for
     borrowings with similar terms and remaining maturities.

     COMMITMENTS TO EXTEND CREDIT, STANDBY LETTERS OF CREDIT AND FINANCIAL
     GUARANTEES

     The fair value of commitments is estimated using the fees currently
     charged to enter into similar agreements, taking into account the
     remaining terms of the agreements and the present creditworthiness of the
     counterparties. For fixed-rate loan commitments, fair value also
     considers the difference between current levels of interest rates and the
     committed rates. The fair value of guarantees and letters of credit is
     based on fees currently charged for similar agreements or on the
     estimated cost to terminate them or otherwise settle the obligations with
     the counterparties at the reporting date.

     The fair value of commitments, guarantees and letters of credit is
     insignificant after considering the aforementioned factors.

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

20
<PAGE>

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

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

     The estimated fair values of the Corporation's financial instruments are
     as follows (in thousands):

<TABLE>
<CAPTION>
                                                                    December 31,
                                                    -----------------------------------------
                                                             2001                 2000
                                                    -------------------   -------------------
                                                     Carrying    Fair      Carrying    Fair
                                                      Amount     Value      Amount     Value
                                                    -------------------   -------------------
<S>                                                 <C>        <C>        <C>        <C>
Financial Assets:
  Cash and Federal Funds Sold ....................  $ 26,704   $ 26,704   $ 22,227   $ 22,227
  Investment Securities ..........................   115,598    117,099     97,347     97,347
  Loans ..........................................   316,838    327,053    301,498    304,260
    Less: Reserve for Loan Losses ................    (4,091)     --        (3,351)     --
  Loans Held for Sale, Net .......................     4,571      4,620      1,312      1,326
  Other Earning Assets ...........................     7,292      7,292      6,966      6,966
                                                    -------------------   -------------------
        ..........................................  $466,912   $482,768   $425,999   $432,126
                                                    ===================   ===================
Financial Liabilities:
  Deposits .......................................  $340,983   $343,535   $307,077   $307,489
  Federal Home Loan Bank Borrowings ..............    94,000    103,656     87,000     98,349
        ..........................................  -------------------   -------------------
                                                    $434,983   $447,191   $394,077   $405,838
                                                    ===================   ===================
Off-Balance Sheet Financial Instruments:
Commitments to Extend Credit .....................  $ 45,609      --      $ 35,462      --
                                                    ===================   ===================
</TABLE>

NOTE 14 -- REGULATORY RESTRICTIONS

     The Corporation and the Bank are subject to the regulations of certain
     federal and state agencies and undergo periodic examinations by such
     regulatory authorities. Failure to meet minimum capital requirements can
     initiate certain mandatory and possibly additional discretionary actions
     by regulators that, if undertaken, could have a direct material effect on
     the Corporation's and Bank's financial statements. Neither the
     Corporation nor the Bank are subject to written regulatory agreements.

     Under capital adequacy regulatory guidelines and the regulatory framework
     for prompt corrective action, the Bank must meet specific capital
     requirements taking into consideration quantitative measures of assets,
     liabilities and certain off-balance sheet items. Such measures are
     subject to qualitative judgments by the regulators with regard to
     composition, risk weightings and other factors.

     Minimum regulatory risk-based capital ratios for tier I, total capital
     and leverage are 4%, 8% and 4%, respectively. Failure to meet minimum
     capital requirements can initiate certain mandatory and possible
     additional discretionary actions by regulators that, if undertaken, could
     have a direct material effect on both the Corporation and the Bank
     financial statements. Management believes, as of December 31, 2001, that
     the Corporation and the Bank meet all capital adequacy requirements to
     which it is subject.

     The Bank is considered to be well capitalized under the regulatory
     framework for prompt corrective action. To be considered well
     capitalized, an institution must maintain risk-based capital ratios for
     tier I, total capital and leverage ratios of at least 6%, 10% and 5%,
     respectively.

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

                                                                              21
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

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

     The following represents tier I, total risk-based capital and leverage
     ratios for the Corporation and also its subsidiary, NorthSide Bank, as of
     December 31, 2001 and 2000:

<TABLE>
<CAPTION>
                                                                                               To Be Well Capitalized Under
                                                                         For Capital Adequacy   Prompt Corrective Action
                                                        Actual                  Purposes               Provisions
                                                  --------------------- ---------------------- ----------------------------
                                                   Amount        Ratio    Amount        Ratio    Amount        Ratio
                                                  --------------------- ---------------------- ----------------------------
<S>                                               <C>            <C>     <C>            <C>     <C>            <C>
AS OF DECEMBER 31, 2001:
   NSD Bancorp, Inc.
      Total Capital (to Risk Weighted Assets).... $40,714,364    11.52%  $28,280,837    8.00%       n/a         n/a
      Tier I Capital (to Risk Weighted Assets)...  35,682,461    10.09    14,140,418    4.00        n/a         n/a
      Tier I Capital (to Average Assets).........  35,682,461     7.89    18,089,495    4.00        n/a         n/a
   NorthSide Bank
      Total Capital (to Risk Weighted Assets)....  41,366,995    11.68    28,339,083    8.00    $35,423,854    10.00%
      Tier I Capital (to Risk Weighted Assets)...  37,093,613    10.47    14,169,541    4.00     21,254,312     6.00
      Tier I Capital (to Average Assets).........  37,093,613     8.18    18,132,944    4.00     22,666,180     5.00
AS OF DECEMBER 31, 2000:
   NSD Bancorp, Inc.
      Total Capital (to Risk Weighted Assets)....  37,545,839    11.93    25,175,877    8.00        n/a         n/a
      Tier I Capital (to Risk Weighted Assets)...  33,460,158    10.63    12,587,939    4.00        n/a         n/a
      Tier I Capital (to Average Assets).........  33,460,158     8.15    16,431,332    4.00        n/a         n/a
   NorthSide Bank
      Total Capital (to Risk Weighted Assets)....  38,033,907    12.09    25,172,422    8.00     31,465,528    10.00
      Tier I Capital (to Risk Weighted Assets)...  34,496,508    10.96    12,586,211    4.00     18,879,317     6.00
      Tier I Capital (to Average Assets).........  34,496,508     8.38    16,473,754    4.00     20,592,192     5.00
</TABLE>

     Under regulations of the Federal Reserve, the Bank is required to
     maintain certain average reserve balances, which include both cash on
     hand, and deposits with the Federal Reserve. These deposits are included
     in cash and due from banks in the accompanying consolidated balance
     sheet. At December 31, 2001, the Corporation was required to maintain
     $466,000 of such balances.

     Dividends and loans to the Corporation from NorthSide Bank are subject to
     regulatory limitations. Dividends are limited to retained earnings of
     NorthSide Bank. Loans must be collateralized by specific obligations and
     cannot exceed 10% of NorthSide Bank's capital. The maximum amount
     available to the Corporation at December 31, 2001 from NorthSide Bank in
     the form of dividends and loans, individually, was approximately $32.2
     million and $3.7 million, respectively.

NOTE 15 -- STOCK DIVIDENDS AND STOCK SPLITS

     On April 24, 2001, the Corporation's Board of Directors declared a stock
     dividend payable on May 31, 2001 to shareholders of record at May 1, 2001.

     On April 25, 2000, the Corporation's Board of Directors declared a stock
     dividend payable on May 31, 2000 to shareholders of record at May 1, 2000.

     Earnings per share and dividends per share amounts appearing in these
     consolidated financial statements have been restated to reflect all of
     the above described stock dividends and stock splits.

NOTE 16 -- TREASURY STOCK

     In September of 1998, the Corporation's Board of Directors authorized the
     repurchase of up to 4.9% of the outstanding common stock of the
     Corporation, to be made available for issuance pursuant to stock option
     plans and for general corporate purposes. During 2000, the Corporation
     completed the repurchase of 4.9% of shares outstanding. In September of
     2000, the Corporation's Board of Directors authorized the repurchase of
     up to an additional 4.9% of the outstanding common stock of the
     Corporation. There were 68,029 and 72,639 shares repurchased during 2001
     and 2000, respectively.

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

22
<PAGE>

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

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

NOTE 17 -- BORROWED FUNDS

     Borrowed funds at December 31, 2001 and 2000 were as follows:

<TABLE>
<CAPTION>
                                      2001                                   2000
                        ----------------------------------    ----------------------------------
                         Balance     Weighted Average Rate       Balance   Weighted Average Rate
                        ----------------------------------    ----------------------------------
<S>                     <C>                 <C>               <C>                   <C>
                        ----------------------------------    ----------------------------------
Advances Due In:2004    $ 5,000,000         5.27%             $ 5,000,000           5.27%
                2008      4,000,000         5.11                4,000,000           5.11
                2009     10,000,000         5.33               10,000,000           5.33
                2010     68,000,000         5.98               68,000,000           5.98
                2011      7,000,000         4.44                  --                 --
                        ==================================    ==================================
</TABLE>

     Advances from the Federal Home Loan Bank (FHLB) are collateralized by
     qualifying securities and loans.  Qualifying collateral includes U.S.
     Treasury, government agency and mortgage-backed securities and real estate
     loans based upon the amount of outstanding advances. These advances are
     subject to restrictions or penalties related to prepayments.

     At December 31, 2001, the Corporation had approximately $75.0 million in
     available credit under its collateralized borrowing agreement with the
     Federal Home Loan Bank.

NOTE 18 -- CONDENSED FINANCIAL INFORMATION OF NSD BANCORP, INC. (PARENT COMPANY
ONLY)

Balance Sheets
                                                            December 31,
                                                      -------------------------
                                                           2001        2000
                                                      -------------------------
ASSETS
 Cash...............................................  $    78,807   $    10,315
 Securities Available for Sale at Market Value
   (Amortized Cost of $471,383 at December 31, 2001
   and $474,333 at December 31, 2000)...............    2,156,985     1,692,739
 Investment in Bank Subsidiary......................   36,125,739    31,875,743
 Other Assets.......................................       10,423        42,311
                                                      -------------------------
     Total Assets...................................  $38,371,954   $33,621,108
                                                      =========================
LIABILITIES
 Accounts Payable...................................  $   968,400   $   563,307
 Loan Payable.......................................    1,000,000     1,000,000
 Deferred Tax Liability.............................      409,385       410,427
 Other Liabilities..................................        3,363        --
                                                      -------------------------
     Total Liabilities..............................    2,381,148     1,973,734
 Shareholders' Equity...............................   35,990,806    31,647,374
                                                      -------------------------
     Total Liabilities and Shareholders' Equity.....  $38,371,954   $33,621,108
                                                      =========================

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

                                                                              23
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

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

Statements of Income

<TABLE>
<CAPTION>
                                                                        For the Years Ended December 31,
                                                                 ------------------------------------------
                                                                      2001           2000           1999
<S>                                                              <C>            <C>            <C>
                                                                 ------------------------------------------
Cash Dividends from Bank Subsidiary............................  $  2,960,716   $  2,195,083   $  2,011,129
Dividends from Securities Available for Sale...................        80,106         72,786         67,720
Net Investment Securities Gains................................        24,950         --            202,893
Other Income...................................................            59         --             --
Other Expenses.................................................       114,536         55,239         71,654
                                                                 ------------------------------------------
Income Before Taxes and Equity in Undistributed Net Income of
  Bank Subsidiary..............................................     2,951,295      2,212,630      2,210,088
Provision for Income Taxes.....................................         2,617        (42,311)        17,000
                                                                 ------------------------------------------
Income Before Equity in Undistributed Net Income
  of Bank Subsidiary...........................................     2,948,678      2,254,941      2,193,088
Equity in Undistributed Net Income of Bank Subsidiary..........     2,256,784      2,676,388      2,371,460
                                                                 ------------------------------------------
     Net Income................................................  $  5,205,462      4,931,329   $  4,564,548
                                                                 ==========================================

Statements of Cash Flows
                                                                        For the Years Ended December 31,
                                                                 ------------------------------------------
                                                                      2001           2000           1999
                                                                 ------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income.....................................................  $  5,205,462   $  4,931,329   $  4,564,548
Adjustments to Net Income:
  Equity in Undistributed Net Income of Subsidiary.............    (2,256,784)    (2,676,388)    (2,371,460)
  Decrease (Increase) in Other Assets..........................        31,888        (41,307)         1,004
Gains on Investment Securities.................................       (24,950)        --           (202,893)
  Increase (Decrease) in Other Liabilities.....................       408,455        (37,264)       585,066
                                                                 ------------------------------------------
    Net Cash Provided by Operating Activities..................     3,364,071      2,176,370      2,576,265
                                                                 ------------------------------------------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES
Purchases of Investment Securities Available for Sale..........        --            (97,125)        --
Proceeds from Sale of Investment Securities Available for Sale.        27,900         --            215,193
                                                                 ------------------------------------------
    Net Cash Provided (Used) by Investing Activities...........        27,900        (97,125)       215,193
                                                                 ------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Short-Term Borrowings............................        --          1,000,000         --
Proceeds from the Issuance of Common Stock.....................       149,337         --            133,996
Cash Dividends Paid............................................    (2,256,336)    (2,173,976)    (1,971,311)
Treasury Stock Purchased.......................................    (1,212,725)    (1,055,757)    (1,421,360)
Cash Dividends Paid in Lieu of Fractional Shares...............        (3,755)        (3,122)        (3,918)
                                                                 ------------------------------------------
    Net Cash Used by Financing Activities......................    (3,323,479)    (2,232,855)    (3,262,593)
                                                                 ------------------------------------------
Net Increase (Decrease) in Cash................................        68,492       (153,610)      (471,135)
Cash at Beginning of Year......................................        10,315        163,925        635,060
                                                                 ------------------------------------------
    Cash at End of Year........................................  $     78,807   $     10,315   $    163,925
                                                                 ==========================================
</TABLE>

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

24
<PAGE>

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

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

NOTE 19 -- EARNINGS PER SHARE

     Income and shares in thousands:

<TABLE>
<CAPTION>
                                                                For the Years Ended December 31,
                                -------------------------------------------------------------------------------------------
                                          2001                            2000                           1999
                                ----------------------------    ----------------------------   ----------------------------
                                         Weighted                        Weighted                       Weighted
                                         Average   Per Share             Average   Per Share            Average   Per Share
                                Income  Shares/(1)/  Amount     Income  Shares/(1)/  Amount    Income  Shares/(1)/  Amount
                                ----------------------------    ----------------------------   ----------------------------
<S>                             <C>         <C>        <C>      <C>         <C>        <C>     <C>         <C>       <C>
Basic earnings per share:
  Income available to
    shareholders..............  $5,205      2,968      $1.75    $4,931      3,045      $1.62   $4,565      3,102     $1.47
Effect of dilutive securities:
  Stock options...............    --           23       --        --           10        --      --           29       --
                                ----------------------------    ----------------------------   ---------------------------
Diluted earnings per share:
  Income available to
    shareholders..............  $5,205      2,991      $1.74    $4,931      3,055      $1.61   $4,565      3,131     $1.46
                                ============================    ============================   ===========================
</TABLE>

____________
/(1)/ Adjusted for a 5% stock dividend declared April 24, 2001 and a 5% stock
dividend declared April 25, 2000.

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

                                                                             25
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

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

NOTE 20 -- QUARTERLY EARNINGS SUMMARY (UNAUDITED)

    Quarterly earnings for the years ended December 31, 2001 and 2000 are as
    follows (in thousands):

                                                  2001
                              ------------------------------------------------
                               March 31    June 30   September 30 December 31
                              ------------------------------------------------
Interest Income.............      $7,964     $7,995        $7,981       $7,767
Interest Expense............       4,031      4,021         3,975        3,912
                              ------------------------------------------------
Net Interest Income.........       3,933      3,974         4,006        3,855
Provision for Loan Losses...         225        225           225          525
                              ------------------------------------------------
Net Interest Income After
Provision for Loan Losses...       3,708      3,749         3,781        3,330
Other Income................         698        666           662        1,365
Other Expenses..............       2,549      2,664         2,588        2,867
                              ------------------------------------------------
Income Before Taxes.........       1,857      1,751         1,855        1,828
Income Taxes................         622        526           547          391
                              ------------------------------------------------
Net Income..................      $1,235     $1,225        $1,308       $1,437
                              ================================================
Per Share: /(1)/
Net Income (Basic)..........       $0.41      $0.41         $0.44        $0.49
Dividends...................       $0.18      $0.19         $0.19        $0.20
Weighted Average Shares
Outstanding (Basic).........   2,995,977  2,971,052     2,957,488    2,946,716
                              ================================================

                                                  2000
                              ------------------------------------------------
                               March 31    June 30   September 30 December 31
                              ------------------------------------------------
Interest Income.............      $7,175     $7,467        $7,934       $8,032
Interest Expense............       3,259      3,514         3,922        4,011
                              ------------------------------------------------
Net Interest Income.........       3,916      3,953         4,012        4,021
Provision for Loan Losses...         225        225           225          150
                              ------------------------------------------------
Net Interest Income After
Provision for Loan Losses...       3,691      3,728         3,787        3,871
Other Income................         458        429           480          552
Other Expenses..............       2,436      2,434         2,429        2,473
                              ------------------------------------------------
Income Before Taxes.........       1,713      1,723         1,838        1,950
Income Taxes................         581        558           583          571
                              ------------------------------------------------
Net Income..................      $1,132     $1,165        $1,255       $1,379
                              ================================================
Per Share: /(1)/
Net Income (Basic)..........       $0.37      $0.38         $0.41        $0.46
Dividends...................       $0.17      $0.18         $0.18        $0.18
Weighted Average Shares
Outstanding (Basic).........   3,078,071  3,061,929     3,029,480    3,008,562

____________
/(1)/ Adjusted for a 5% stock dividend declared April 24, 2001 and a 5% stock
dividend declared April 25, 2000.

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

26
<PAGE>

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

Comparative Financial Data
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                     For the Years Ended December 31,
                                                   --------------------------------------------------------------------------
                                                      2001           2000           1999           1998            1997
                                                   --------------------------------------------------------------------------
<S>                                                <C>             <C>            <C>            <C>             <C>
EARNINGS
Interest Income................................... $ 31,706,915   $ 30,607,756   $ 26,505,635   $ 24,401,043    $ 23,812,738
Interest Expense..................................   15,939,392     14,705,958     11,305,951     10,123,896       9,980,576
                                                   --------------------------------------------------------------------------
Net Interest Income...............................   15,767,523     15,901,798     15,199,684     14,277,147      13,832,162
Provision for Loan Losses.........................    1,200,000        825,000        840,000        780,000         720,000
Other Income......................................    3,392,291      1,919,684      1,812,012      1,649,903       1,586,414
Other Expense.....................................   10,668,352      9,772,127      9,295,826      9,027,644       8,950,416
                                                   --------------------------------------------------------------------------
Income Before Taxes...............................    7,291,462      7,224,355      6,875,870      6,119,406       5,748,160
Income Taxes......................................    2,086,000      2,293,026      2,311,322      1,951,715       1,843,450
                                                   --------------------------------------------------------------------------
Net Income........................................ $  5,205,462   $  4,931,329   $  4,564,548   $  4,167,691    $  3,904,710
                                                   ==========================================================================
YEAR END BALANCES
Assets............................................ $479,269,794   $435,619,403   $392,285,472   $357,167,992    $320,329,570
Loans.............................................  323,269,353    305,515,751    269,823,486    234,932,527     236,459,224
Investment Securities.............................  117,098,802     97,347,209    103,253,784     96,226,921      63,466,743
Deposits..........................................  340,983,291    307,077,815    289,439,659    280,115,160     268,726,614
Repurchase Agreements and Federal Funds Purchased.       --            --           3,700,000         --             --
FHLB Advances and Other Borrowings................   94,000,000     87,000,000     62,650,000     33,000,000      15,000,000
Shareholders' Equity..............................   36,673,164     33,640,586     30,349,262     32,394,365      30,339,571
Number of Shareholders............................          388            402            409            431             453

AVERAGE BALANCES
Assets............................................ $452,329,776   $411,052,219   $371,682,636   $327,576,185    $312,219,530
Loans.............................................  312,473,557    287,954,213    245,736,893    228,648,794     226,006,573
Investment Securities.............................  103,611,472     99,405,751    104,678,538     68,665,948      66,767,405
Deposits..........................................  315,768,544    294,064,581    283,363,352    265,197,427     261,385,203
Repurchase Agreements and Federal Funds Purchased.       --          3,087,765      2,753,907         --           2,558,518
FHLB Advances and Other Borrowings................   93,126,027     76,648,635     45,825,207     23,523,288      12,354,466
Shareholders' Equity..............................   33,931,393     29,536,016     31,625,424     31,729,974      28,739,768

PER SHARE DATA /(1)/
Basic Earnings Per Share..........................        $1.75          $1.62          $1.47          $1.34           $1.25
Basic Weighted Average Shares Outstanding.........    2,967,808      3,044,511      3,101,532      3,111,719       3,128,256
Diluted Earnings Per Share........................        $1.74          $1.61          $1.46          $1.32           $1.24
Diluted Weighted Average Shares Outstanding.......    2,991,225      3,055,307      3,130,853      3,159,577       3,150,406
Dividends.........................................        $0.76          $0.71          $0.64          $0.57           $0.53
Book Value........................................       $12.46         $11.21          $9.88         $10.33           $9.67

RATIOS
Return on Average Assets..........................         1.15%          1.20%          1.23%          1.27%           1.25%
Return on Average Equity..........................        15.34          16.70          14.43          13.13           13.59
Net Interest Margin /(2)/.........................         3.76           4.14           4.37           4.69            4.81
Equity to Assets..................................         7.65           7.72           7.74           9.07            9.47
Dividend Payout Ratio.............................        43.33          44.08          43.19          42.31           43.50
</TABLE>
____________
/(1)/ Adjusted for a 5% stock dividend declared April 24, 2001 and a 5% stock
dividend declared April 25, 2000.
/(2)/ Tax equivalent basis.

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                                                                              27
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

INDEPDENT AUDITORS' REPORT
--------------------------------------------------------------------------------

To the Board of Directors and Shareholders of
NSD Bancorp, Inc.
Pittsburgh, Pennsylvania

We have audited the accompanying consolidated balance sheets of NSD Bancorp,
Inc. and subsidiary (the "Corporation") as of December 31, 2001 and 2000, and
the related consolidated statements of income, cash flows, comprehensive
income, and changes in shareholders' equity 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, such consolidated financial statements present fairly, in all
material respects, the financial position of NSD Bancorp, Inc. and subsidiary
at December 31, 2001 and 2000, and the results of their operations, cash flows,
and comprehensive income 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.

/s/ Deloitte & Touche LLP.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
January 25, 2002

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28
<PAGE>

--------------------------------------------------------------------------------
Management's Discussion and Analysis of
Financial Condition and Results of Operations
--------------------------------------------------------------------------------

  The following discussion is an analysis of NSD Bancorp, Inc.'s (the
"Corporation's") financial condition and results of operations and should be
read in conjunction with the Consolidated Financial Statements.

RESULTS OF OPERATIONS FOR THE YEAR

  Net income increased to $5,205,462 or $1.75 (basic) per share in 2001, from
$4,931,329 or $1.62 in 2000 and $4,564,548 or $1.54 in 1999. Contributing to
the increase in net income were increases in total interest income, total other
income and service fees of $1,099,159, $1,472,607, and $283,634, respectively,
and a decline in the provision for income taxes of $207,026. These
contributions to the overall net income increase were offset by increases in
the provision for loan losses of $375,000, salaries and employee benefits of
$202,955, occupancy expenses of $99,548, equipment and supplies of $11,457,
data processing costs of $59,575, advertising of $72,015 and other operating
expenses of $452,396.

  Contributing to the increase in 2000 net income over 1999 were increases in
net interest income of $702,114 and other operating income of $415,759 and a
decline in occupancy expenses of $51,384. These contributions to the overall
net income increase were offset by decreases in net investment securities gains
and service fees of $256,573 and $51,514, respectively, and increases in
salaries and employee benefits of $160,099, equipment and supplies of $109,304,
data processing costs of $23,296, FDIC insurance of $19,708, advertising of
$44,939 and other operating expenses of $170,339.

  Return on average assets (ROA) was 1.15% for 2001 compared to 1.20% for 2000
and 1.23% for 1999. The decrease in ROA from 2000 to 2001 was primarily due to
the impact of a decline in net interest margin from 4.14% in 2000 to 3.76% in
2001. The decrease from 1999 to 2000 reflects the impact of a decline in net
interest margin from 4.37% in 1999 to 4.14% in 2000. Return on average equity
(ROE) was 15.34% for 2001 compared to 16.70% for 2000 and 14.43% for 1999. The
decrease in 2001 ROE compared to 2000 largely relates to net income increases,
the effect of Independent Auditors' Report treasury stock purchases and an
increase in accumulated other comprehensive income. The increase in 2000 ROE
reflects the overall increase in net income and the impact on average equity of
treasury stock purchases offset by an improvement in accumulated other
comprehensive income.

NET INTEREST INCOME

  The primary component of the Corporation's earnings is net interest income,
which is the difference between interest earned on loans, investments and other
earning assets and the interest expense on deposits and other interest bearing
liabilities which fund those assets. Tax-exempt securities and loans carry
pre-tax yields lower than comparable taxable assets. Therefore, it is more
meaningful to analyze net interest income on a tax-equivalent basis.

  Total tax-equivalent interest income increased $1,247,038 during 2001 due to
an increase in average earning assets of $39,654,654 offset by a decline in the
average yield on earning assets from 7.92% in 2000 to 7.48% in 2001. Interest
expense increased due to an increase in average outstanding interest bearing
deposits of $21,019,101 in 2001 offset by a decline in the average cost of
deposit funding to 4.14% in 2001 from 4.28% in 2000. In addition, interest
expense on borrowings increased $904,760 as average outstanding balances
increased $16,477,392 offset by a decline in the average cost of borrowings to
5.81% in 2001 compared to 5.88% in 2000.

  Total tax-equivalent interest income increased $4,110,360 during 2000 due to
an increase in average earning assets of $36,677,466 and improvement in the
yield on corresponding assets to 7.92% in 2000 from 7.58% in 1999. Interest
expense increased due to an increase in average outstanding interest bearing
deposits of $7,922,298 in 2000 and also due to the rising average cost of
deposit funding to 4.28% in 2000 from 3.91% in 1999. In addition, interest
expense on federal funds purchased and borrowings increased $2,221,701 as
average outstanding balances increased $31,157,286 and the average cost of
federal funds purchased and borrowings increased to 5.91% in 2000 compared to
5.13% in 1999.

  Net tax-equivalent interest income was $16,094,957 at December 31, 2001,
compared to $16,081,352 at December 31, 2000 and $15,370,999 at December 31,
1999. This consistent improvement has been largely due to increases in average
earning assets, which were $428,183,869 in 2001 compared to $388,529,215 and
$351,851,749 in 2000 and 1999, respectively.

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                                                                              29
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

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

  To provide a more in-depth analysis of net interest income, the following
average balance sheet and net interest income analysis details the contribution
of earning assets to overall net interest income and the impact of cost of
funds. The rate/volume analysis shows the portions of the net change in
interest income due to changes in volume or rate on a tax equivalent basis
using the statutory federal income tax rate of 34%. Changes in net interest
income due to both rate and volume in the accompanying rate and volume analysis
have been allocated to changes due to volume and rate in proportion to the
absolute amount of the change in each.

Rate/Volume Analysis

<TABLE>
<CAPTION>
                                                                    From 2000 to 2001                    From 1999 to 2000
                                                          ------------------------------------  ----------------------------------
                                                              Change in Income/                   Change in Income/
                                                                Expense Due To      Total          Expense Due To          Total
                                                          -----------------------               -------------------
                                                             Volume         Rate   Change         Volume        Rate      Change
                                                          ------------------------------------------------------------------------
<S>                                                       <C>         <C>           <C>         <C>         <C>        <C>
Interest Earning Assets
Loans
   Industrial Revenue and Tax-Exempt Financing..........  $   13,676  $   (51,846)  $  (38,170) $   15,427 $   66,208  $    81,635
   All Other Loans......................................   1,970,142     (633,835)   1,336,307   3,463,732    243,173    3,706,905
                                                          ------------------------------------  ----------------------------------
     Total Loans........................................   1,983,818     (685,681)   1,298,137   3,479,159    309,381    3,788,540
Investment Securities
   Taxable..............................................    (190,766)    (695,823)    (886,589)   (301,674)   681,428      379,754
   Tax-Exempt...........................................     502,298      (29,192)     473,106     (45,501)   (11,905)     (57,406)
                                                          ------------------------------------  ----------------------------------
     Total Investment Securities........................     311,532     (725,015)    (413,483)   (347,175)   669,523      322,348
Due From Banks..........................................      42,478       (9,583)      32,895     (37,004)     9,709      (27,295)
Federal Funds Sold......................................     361,490      (32,001)     329,489      19,077      7,690       26,767
                                                          ------------------------------------  ----------------------------------
     Total Interest Earning Assets......................   2,699,318   (1,452,280)   1,247,038   3,114,057    996,303    4,110,360

Interest Bearing Liabilities
Interest Bearing Deposits
   Savings and Interest Bearing Demand Deposits.........     434,937     (212,841)     222,096     (42,653)   261,555      218,902
   Time Deposits........................................     373,456      (64,477)     308,979     527,252    432,151      959,403
                                                          ------------------------------------  ----------------------------------
     Total Interest Bearing Deposits....................     808,393     (277,318)     531,075     484,599    693,706    1,178,305
Federal Funds Purchased and Repurchase Agreements.......    (101,201)    (101,201)    (202,402)     18,779     40,578       59,357
FHLB Advances and Other Borrowings......................     958,503      (53,743)     904,760   1,770,767    391,577    2,162,344
                                                          ------------------------------------  ----------------------------------
     Total Interest Bearing Deposits....................   1,665,695     (432,262)   1,233,433   2,274,145  1,125,861    3,400,006
                                                          ------------------------------------  ----------------------------------
Change in Net Interest Income...........................  $1,033,623  $(1,020,018)  $   13,605  $  839,912 $ (129,558)  $  710,354
                                                          ====================================  ==================================
</TABLE>

------------
/(1)/ Tax-exempt income on loans and investments and related yields are shown on
a fully tax-equivalent basis computed using the statutory rate of 34%.
/(2)/ For purposes of calculating loan yields, average loan balances include
nonaccrual loans.

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

30
<PAGE>

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

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

Average Balance Sheet/Net Income Analysis

<TABLE>
<CAPTION>
                                                     For the Years Ended December 31,
                               ----------------------------------------------------------------------------------------------------
                                               2001                             2000                           1999
                               ---------------------------------    -------------------------------   -----------------------------
                                 Average                Average     Average                Average    Average                Average
                                 Balance      Interest   Yield      Balance    Interest     Yield     Balance      Interest   Yield
                               ----------------------------------------------------------------------------------------------------
<S>                            <C>           <C>          <C>    <C>           <C>          <C>    <C>           <C>          <C>
ASSETS
Loans
  Industrial Revenue and Tax
    Exempt...................  $  1,920,960  $   174,717  9.10%  $   1,798,994 $   212,887 11.83%  $   1,623,544  $    131,252 8.08%
  All Other Loans............   310,552,597   24,918,616  8.02     286,155,219  23,582,309  8.24     244,092,219    19,875,404 8.14
                               ----------------------------------------------------------------------------------------------------
    Total....................   312,473,557   25,093,333  8.03     287,954,213  23,795,196  8.26     245,715,763    20,006,656 8.14
Investment Securities
  Taxable....................    92,537,609    5,718,839  6.18      95,356,958   6,605,428  6.93     100,049,387    6,225,674  6.22
  Tax-Exempt.................    11,073,863      788,319  7.12       4,048,793     315,213  7.79       4,629,151      372,619  8.05
                               ----------------------------------------------------------------------------------------------------
    Total....................   103,611,472    6,507,158  6.28      99,405,751   6,920,641  6.96     104,678,538    6,598,293  6.30
Due from Banks,
  Interest Earning...........     1,395,328       47,096  3.38         222,530      14,201  6.38         843,174       41,496  4.29
Federal Funds Sold...........    10,703,512      386,761  3.61         946,721      57,272  6.05         614,274       30,505  4.79
                               ----------------------------------------------------------------------------------------------------
     Total Earning Assets....   428,183,869  $32,034,348  7.48%    388,529,215 $30,787,310  7.92%    351,851,749  $26,676,950  7.58%
Reserve for Loan Losses......   (3,589,347)                        (3,266,961)                       (2,932,704)
Cash and Due From Banks......    11,367,994                         14,161,304                        13,148,351
Premises and Equipment.......     2,467,362                          2,602,589                         2,581,996
Other Assets.................    13,899,898                          9,026,072                         7,033,244
                               ----------------------------------------------------------------------------------------------------
TOTAL ASSETS.................  $452,329,776                      $ 411,052,219                      $371,682,636
                               ====================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest Bearing Deposits
  Savings Deposits...........  $ 58,613,751  $ 1,928,812  3.29%  $  39,411,781 $   985,415  2.50%   $ 38,371,347  $   936,000  2.44%
  Interest Checking and
    Money Market.............    85,195,681    2,104,996  2.47      89,738,860   2,826,297  3.15      92,061,809    2,656,810  2.89
  Time Deposits..............   110,727,679    6,491,727  5.86     104,367,369   6,182,748  5.92      95,162,556    5,223,344  5.49
                               ----------------------------------------------------------------------------------------------------
    Total Interest Bearing
      Deposits...............   254,537,111   10,525,535  4.14     233,518,010   9,994,460  4.28     225,595,712    8,816,154  3.91
Federal Funds Purchased and
  Repurchase Agreements......      --             --       --        3,087,765     202,402  6.55       2,753,907      143,045  5.19
FHLB Advances and
  Other Borrowings...........    93,126,027    5,413,856  5.81      76,648,635   4,509,096  5.88      45,825,207    2,346,752  5.12
                               ----------------------------------------------------------------------------------------------------
    Total Interest
      Bearing Liabilities....   347,663,138  $15,939,391  4.58%    313,254,410 $14,705,958  4.69%    274,174,826  $11,305,951  4.12%
Demand Deposits..............    61,231,433                         60,546,571                        57,767,640
Other Liabilities............     9,503,812                          7,715,222                         8,114,746
  Shareholders' Equity.......    33,931,393                         29,536,016                        31,625,424
                               ----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
  SHAREHOLDERS' EQUITY.......  $452,329,776                       $411,052,219                      $371,682,636
                               ====================================================================================================
Interest Spread..............                             2.90%                             3.23%                             3.47%
Interest Margin..............                             3.76%                             4.14%                             4.37%
</TABLE>

/(1)/ Tax-exempt income on loans and investments and related yields are shown on
      a fully tax-equivalent basis computed using a statutory rate of 34%.

/(2)/ For purposes of calculating loan yields, average loan balances include
      nonaccrual loans.

/(3)/ Average yields on available for sale investment securities are calculated
      based on average estimated market values for the years 2001, 2000 and
     1999.

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

                                                                              31
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

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

PROVISION FOR LOAN LOSSES

     The Corporation's provision for loan losses was $1,200,000 in 2001,
$825,000 in 2000 and $840,000 in 1999. Net charge-offs for 2001 were $425,228,
compared to $548,553 and $508,245 for 2000 and 1999, respectively. There were no
charge-offs to any individual borrower that represented more than 10% of the
annual total in 2001, 2000 and 1999. Provisions for loan losses are charged to
income to maintain the reserve for loan losses at a level that management
considers appropriate based on the factors discussed below in the "Reserve for
Loan Losses'' section. For additional information, see the Reserve for Loan
Losses and Non-Performing Assets sections of this discussion.

     The provision for loan losses for the year ended December 31, 2001,
compared to the 2000 provision was affected by the following factors:

..    The overall increase in total loans outstanding.

..    An increase in loans 90 days past due and still accruing interest of
     $730,429 and a $113,855 increase in outstanding loans on nonaccrual status.
     In addition, total loans delinquent 30 days or more increased to 1.65% of
     total outstanding loans at December 31, 2001 compared to 1.17% at December
     31, 2000.

..    The Corporation's recent loan performance can be closely correlated to
     industry statistics, which indicate a trend toward rising loan
     delinquencies and bankruptcy filings throughout the industry as a whole.

..    Management's expectation that local and national economies will continue
     to exhibit characteristics of a recessionary trend impacting business
     growth and employment projections.

..    The continued improvement in net loan loss experience in relation to
     average loans outstanding, further supporting the use of existing
     individual loan portfolio loss factor assignments in calculating required
     formula reserves.

..    The Corporation's consistent application of strict standards to the
     definitions of potential and well-defined weaknesses in the loan portfolio
     and the ongoing loan review process, which resulted in a $2,715,235
     increase in loans classified as substandard, doubtful or loss. Of this
     increase, $2,596,754 can be attributed to classifying loans associated with
     three business banking relationships as substandard.

OTHER INCOME

     Total other income increased $1,472,607 to $3,392,291 in 2001 from
$1,919,684 in 2000. Sales and calls of investment securities available for sale
during 2001 resulted in net gains of $205,424 compared to net gains of $9,249
in 2000. Service fees increased to $1,155,917 in 2001, from $872,283 in 2000
principally due to $220,289 more in NSF charges collected in 2001 and also due
to increases  in checking account fees and savings account service charges of
$24,380 and $35,865, respectively. Other operating income increased $992,798 to
$2,030,950 in 2001, from $1,038,152 in 2000. Contributing to this improvement
was $847,973 in income generated from bank-owned life insurance, which was
purchased in December 2000. Of this increase, $558,484 was attributable to a
death benefit claim related to one of the Bank's key managers. Higher average
outstanding accounts receivable balances, purchased through NorthSide Bank's
Cashflow Maximizer program, resulted in additional revenue of $27,234.
Increases in title insurance premiums and ATM fees contributed $61,094 and
$46,396, respectively, in additional income compared to 2000 due principally to
increased transaction volume. Also contributing to the overall increase was an
$11,051 increase in gains realized on the sale of mortgage loans. Offsetting
these increases was a $17,259 increase in net losses recognized on the sale of
other assets and a decrease in checkbook commissions of $13,781 during 2001
compared to 2000.

     Other income increased $107,672 to $1,919,684 in 2000 from $1,812,012 in
1999. The increase was largely attributable to a $415,759 increase in other
operating income related to a $95,192 increase in ATM surcharge fees and a
$265,923 increase in Cashflow Maximizer revenue, the Bank's commercial business
receivables financing program, in its first full year of operation. Also
impacting the increase in other operating income were $164,263 and $29,855 in
net losses, recognized during 1999, on the disposal of Year 2000 non-compliant
computer hardware and software and on the sale of other assets held for sale,
respectively, partially offset by a 1999 gain on the sale of land of $100,814
and a $37,468 gain on the sale of student loans. Net investment securities
gains of $9,249 in 2000 represents a $256,573 decline from 1999 gains of
$265,822. A decline of $51,514 in service fee income in 2000 was due to a
$75,344 decrease in overdraft fees off set by an increase in checking and
savings account fees of $16,101 compared to 1999.

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

32
<PAGE>

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

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

OTHER EXPENSES

      Total other expenses increased $896,225 to $10,668,352 in 2001 from
$9,772,127 in 2000. Salaries and employee benefits increased $202,955
reflecting normal salary and benefit increases, additional incentive
compensation accruals and increased life insurance costs to the Corporation.
Also contributing to this increase were additional costs incurred to staff
NorthSide Bank's new Franklin Park branch office, opened during the second
quarter of 2001. Occupancy expense increased $99,548 in 2001, compared to the
prior year, principally due to a $35,241 increase in rent related primarily to
the new branch opening and a $47,642 increase in insurance expense which were
offset by a $13,346 reduction in building maintenance expense related to
non-recurring charges incurred during 2000. Equipment and supplies expense
increased $11,457 due to $27,669 and $16,881 increases in stationery and
supplies and equipment maintenance contract expenses, respectively, partially
offset by a $17,526 decrease in office expense compared to the prior year. The
$59,575 increase in data processing was due to $39,333 in additional expenses
related to increased automated teller machine transaction volume and also due
to an expected $20,242 increase in charges incurred for third party data
processing. FDIC insurance declined slightly in 2001 compared to 2000
reflecting the impact of a slightly lower premium assessment rate in 2001
partially offset by growth in the Bank's BIF insured deposit base. Advertising
expense increased $72,015 corresponding to the Bank's emphasis on promoting its
new savings account product during the first quarter of 2001, additional
marketing related to the Franklin Park branch office opening and the Bank's new
business banking marketing campaign. Contributing to the $452,396 increase in
other operating expenses was a $211,356 increase in Cashflow Maximizer expense
as an additional loss reserve of $200,000 was established during 2001 to
provide for potential losses related to receivables purchases from one
customer. The Corporation has taken additional measures to further secure its
position with that customer limiting the need for future provisions. Title
insurance related expenses increased $42,549 corresponding to higher
transaction volumes, postage increased $26,342 due to the pre-funding of a new
postage delivery system and telephone expense increased $30,469 primarily due
to an upgrade of data communication lines. Protection expense increased $38,656
due to enhanced security contracted during renovation of the Cranberry Township
branch facility and education expense increased $19,939 while implementing a
bank-wide sales and service training program during 2001. An increase in asset
recovery expenses of $56,752 is attributed to unforeseen costs associated with
maintaining and preparing certain other real estate owned for disposition.
Pennsylvania Shares tax increased $22,303 corresponding to overall company
growth and state income tax increased due to the recording of a $42,311 tax
refund in 2000 versus net taxes paid of $2,617 in 2001. These increases were
offset by decreases of $51,043, $12,230 and $27,358 in legal expense, audit
expense and checking account and general losses, respectively, during 2001
compared to 2000.

      Total other expenses increased $476,301 from $9,295,826 in 1999 to
$9,772,127 in 2000. Salary and employee benefits increased $160,099 to
$4,600,920 in 2000 from $4,440,821 in 1999. Salary expense increased $119,349
due to normal inflation adjustments and growth of the organization. Employee
health insurance premium expense decreased $50,543 due to a change in provider
and also the renegotiation of existing contracts. Pension and profit sharing
expenses increased $7,505 and $14,377, respectively, in relation to increases
in salaries and net profits of the Corporation. An increase in the employer
portion of payroll taxes of $9,883 corresponded to the increase in salary
expense while a $53,771 increase in temporary employee expense contributed to
the overall increase.

      Occupancy expense decreased $7,236 to $824,206 from $831,442 due to
$26,309 and $8,351 decreases in real estate taxes and related depreciation,
respectively, due to the sale of real property in 1999 and a reduction to
corresponding expense accruals, and a $25,813 decrease in related insurance
expense, offset by an additional $27,461 in scheduled building maintenance at
select branch office locations. Equipment and supplies expense increased
$65,156 due to a $63,412 increase in equipment depreciation expense largely
related to equipment purchased late in 1999 and an increase in equipment
repairs and rent of $31,681 and $6,839, respectively, offset by decreases to
stationery and supplies expense of $24,732 and general office expense of
$19,247. Data processing expense increased $23,296. Of this increase, $12,328
and $10,968 was due to normal volume related charges for core processing and
ATM transactions, respectively. FDIC insurance premiums increased $19,708
corresponding to overall deposit growth and also an increase in system-wide
assessment factors for both SAIF and BIF insured

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

                                                                              33
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

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

deposits. Advertising increased $44,939 with additional emphasis on promotions
supported by radio and television in 2000. Other operating expenses increased
$170,339 to $2,169,957 in 2000 from $1,999,618 in 1999. There were several
factors contributing to this change. Most significant was $117,217 in
additional 2000 expenses related to offering the Cashflow Maximizer, the Bank's
commercial receivable financing program in 2000, which was first implemented in
November 1999. An increase in legal expense of $26,335 was incurred primarily
in the process of routine loan collections, while asset recovery expense also
increased $17,982. During 2000, emphasis was placed on improving internal
training programs and providing enhanced external educational opportunities,
which resulted in additional education and activities expense of $20,690 and
$16,204, respectively. Costs incurred for external financial services increased
$32,433 due to Pennsylvania Department of Banking assessment increases in
proportion to overall asset growth and other additional services which had been
contracted for during the year. Nonrecurring losses from transaction processing
and normal operations increased $55,794. The increase in average shareholders'
equity and average assets during 2000 resulted in an increase in Pennsylvania
shares tax of $54,621. The Bank established a title insurance subsidiary during
2000 resulting in $16,257 in operating expenses for the year. Offsetting these
increases to other operating expenses were reductions in several expense
categories. Student loan processing fees were $74,388 less than the prior year
due to completing the sale of student loans during 2000, discontinuing internal
student loan originations and establishing a system of referring related
business to external providers. New telephone systems were purchased and new
provider contracts were negotiated resulting in a savings of $12,310. State
capital stock tax expense was reduced by $42,200 over 1999 expense principally
due to elimination of the Bank's real estate holding company, 100 Federal
Street, Inc., and the corresponding tax impact associated with operating that
subsidiary and also by applying prior year tax credits to offset 2000 tax
expenses. Enhancements made to treasury management practices resulted in a
$20,358 reduction in correspondent bank service charges and directors fees were
reduced $18,488 due to final distribution to one of the two remaining
participants in the Bank's deferred compensation program during the year.

INCOME TAXES

     The Corporation recorded an income tax provision of $2,086,000,
$2,293,026 and $2,311,322 in 2001, 2000 and 1999, respectively. For 2001, a
reduction in tax provision was the result of growth in tax-free revenue
sources, principally from municipal bonds and bank-owned life insurance. A
reduction in state corporate net income tax, compared to 2000 expense, also
contributed to the overall reduction due to the application of prior year tax
credits to offset 2001 tax expenses. For 2000, a slight reduction in tax
provision was the result of growth in tax-free revenue sources and also a
reduction in state corporate net income tax compared to 1999 expense,
principally due to the elimination of the Bank's real estate holding company,
100 Federal Street, Inc., and the corresponding tax impact associated with
operating that subsidiary and also by applying prior year tax credits to offset
2000 tax expenses. The effective tax rates for 2001, 2000 and 1999 were 28.6%,
31.7% and 33.6%, respectively. These rates were below the 34% statutory tax
rate primarily due to the tax benefits from tax-exempt interest income.

FINANCIAL CONDITION

     The Corporation's total assets increased $43,650,391 from $435,619,403 at
December 31, 2000 to $479,269,794 at December 31, 2001. Federal funds sold
increased $3,800,000 and securities available for sale increased $19,751,593.
Loans held for sale increased to $4,619,647 at December 31, 2001 from
$1,326,432 at December 31, 2000. Loans held for sale were entirely comprised of
small business administration loans. Net loans increased from $298,133,706 at
December 31, 2000 to $312,698,947 at December 31, 2001.

INVESTMENT SECURITIES

     Investment securities available for sale increased $19,751,593 in 2001 to
$117,098,802 from $97,347,209 in 2000. Decreases in U.S. Treasury Securities
and Obligations of U.S. Government agencies of $2,092,756 and $22,751,766,
respectively, were due to reallocation of maturity and call proceeds to fund
growth in the loan portfolio. Increases in mortgage-backed securities,
obligations of state and political subdivisions and corporate bonds of
$20,287,873, $10,101,027, and $13,751,967, respectively, were due to normal
purchasing activity net of any sales, calls, maturities and changes in
unrealized gains (losses). During 2001, there were no investment

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

34
<PAGE>

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

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

securities classified as held to maturity. The Corporation experienced a
significant overall change in net, unrealized gains (losses) on fixed income
securities principally due to a dramatic shift in overall market pricing during
2001. As a member of the Federal Home Loan Bank (FHLB), the Corporation is
required to maintain a minimum investment in FHLB stock which is calculated
based on the level of assets, residential real estate loans and outstanding
FHLB advances. Marketable equity securities increased $455,248 during 2001
almost entirely due to the improvement in the valuation of bank stocks held
within the portfolio.

     The following summarizes the book value (excluding net unrealized holding
gains) and weighted average yields of the Corporation's securities available
for sale at December 31, 2001 by contractual maturity. Mortgage backed
securities are presented in the schedule below at contractual maturity without
consideration given to scheduled repayments or accelerated prepayments.

<TABLE>
<CAPTION>
                                                                        After One           After Five
                                                                       But Within           But Within
                                                 Within One Year       Five Years            Ten Years           After Ten Years
                                                ----------------  ------------------  ---------------------   --------------------
                                                 Amount   Yield     Amount     Yield     Amount       Yield     Amount       Yield
                                                -----------------------------------------------------------------------------------
<S>                                             <C>        <C>   <C>            <C>     <C>           <C>    <C>             <C>
U.S. Treasury Securities.....................   $   -      -%          -         -      $ 1,658,992   4.00%        -          -
Obligations of U.S.Government................
   Agencies..................................       -      -           -         -        5,999,377   6.32     $   553,776   7.40%
Mortgage-Backed Securities...................       -      -           -         -            -        -        66,223,953   5.94
Obligations of State and Political...........
   Subdivisions..............................       -      -       $   25,000   6.20%       936,008   4.47      13,761,063   4.70
Other Bonds..................................       -      -        3,941,755   5.18      7,323,326   5.89       9,916,551   4.43
Marketable Equity Securities.................       -      -           -         -            -        -         5,257,938   7.87
                                                -----------------------------------------------------------------------------------
Total Investment Securities
   Available for Sale........................   $   -      -%      $3,966,755   5.19%   $15,917,703   5.77%    $95,713,281   5.72%
                                                ===================================================================================
</TABLE>

     All yields represent weighted average yields computed on the basis of cost,
adjusted for amortization of premium and accretion of discount. For purposes of
calculating yields on obligations of state and political subdivisions and
marketable equity securities, taxable equivalent adjustments were included to
provide a basis for comparison. The taxable equivalent adjustments were
calculated using the current statutory federal income tax rate of 34%. For
federal income tax purposes, corporations are allowed to exclude 70% of certain
dividend income.

LOANS

     Loans net of deferred fees, increased $14,460,387 during 2001 from
$304,189,319 at December 31, 2000 to $318,649,706 at December 31, 2001.
Improved commercial loan development efforts resulted in a combined increase of
$7,352,825 in nonresidential mortgage and commercial, financial and
agricultural loans during 2001. Consumer loans outstanding increased
$12,031,674 partially due to expansion of the Bank's automobile dealer network
and most significantly, to improvement in existing indirect automobile lending
relationships. A lease financing decline of $3,777,647 was due to lower new
business activity combined with the repayment of leases resulting from a market
trend toward more traditional commercial financing. Residential mortgages
declined by $2,422,422 corresponding to slower general market activity while
lines of credit and nonaccrual loans increased by $1,183,741 and $113,855,
respectively.

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

                                                                              35
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                  December 31,
                                                        --------------------------------------------------------------------
                                                           2001           2000          1999         1998           1997
                                                        --------------------------------------------------------------------
<S>                                                     <C>           <C>           <C>           <C>           <C>
Residential Mortgage Loans..........................    $ 58,586,008  $ 61,008,430  $ 47,823,758  $ 52,695,286  $ 55,125,240
Nonresidential Mortgage Loans.......................      73,702,504    71,523,130    47,730,295    28,060,867    29,385,042
Commercial, Financial and Agricultural Loans........      31,573,057    26,399,606    45,667,833    40,445,049    37,831,540
Consumer Loans to Individuals.......................     135,108,602   123,076,928   108,847,393    92,000,264    95,357,873
Lines of Credit.....................................       6,028,986     4,845,245     4,922,717     5,376,848     5,487,417
Lease Financing.....................................      13,419,933    17,197,580    13,399,797    11,910,754     8,900,409
Loans Held for Sale.................................       4,619,647     1,326,432       630,777     3,995,483     3,419,440
Nonaccrual Loans....................................         634,659       520,804       777,961       785,360     1,355,617
                                                        --------------------------------------------------------------------
     Total Loans....................................     323,673,396   305,898,155   269,800,531   235,269,911   236,862,578
Deferred Fees.......................................        (404,043)     (382,404)     (362,669)     (337,384)     (403,354)
                                                        --------------------------------------------------------------------
     Loans, Net of Deferred Fees....................     323,269,353   305,515,751   269,437,862   234,932,527    36,459,224
Unearned Income.....................................      (1,811,283)   (2,690,909)   (1,947,108)   (1,984,393)   (1,290,389)
                                                        --------------------------------------------------------------------
     Total Loans, Net of Unearned Income and Fees...     321,458,070   302,824,842    67,490,754   232,948,134   235,168,835
Reserve for Loan Losses.............................      (4,139,476)   (3,364,704)   (3,088,257)   (2,756,502)   (2,914,329)
                                                        --------------------------------------------------------------------
Net Loans...........................................    $317,318,594  $299,460,138  $264,402,497  $230,191,632  $232,254,506
                                                        ====================================================================
</TABLE>

The following table shows the Corporation's loan maturities as of December 31,
2001 (in thousands).

<TABLE>
<CAPTION>
                                               One Year  After One Year  After Five
                                               and Less   To Five Years    Years
                                              -------------------------------------
<S>                                            <C>          <C>         <C>
Residential Mortgage Loans.................... $ 2,215      $ 8,399     $ 47,972
Nonresidential Mortgage Loans.................   6,616       21,650       45,437
Commercial, Financial and Agricultural Loans..  17,523        9,900        4,150
Consumer Loans to Individuals
(net of unearned income)......................  33,479       86,421       15,209
Lease Financing (net of unearned income)......   3,650        6,381        1,578
</TABLE>

NON-PERFORMING ASSETS

     At December 31, 2001, nonaccrual loans were $634,659 compared to $520,804
in 2000. Other real estate owned decreased $131,829 to $76,454 in 2001 from
$208,283 in 2000 primarily due to the disposition of several properties during
2001. Loans 90 days past due and still accruing interest increased $730,429
during 2001, due largely to increases in commercial leasing and mortgages of
$84,000 and $562,000, respectively. A significant portion of the increase in
mortgage loans past due 90 days and still accruing interest is related to two
individual borrowers whose loans are considered well secured and in the process
of collection.

     The current quality of the loan portfolio can be demonstrated by the
following table which details total non-performing loans and past due loans:

<TABLE>
<CAPTION>
                                                                        December 31,
                                               ---------------------------------------------------------------
                                                    2001        2000         1999         1998       1997
                                               ---------------------------------------------------------------
                                               <S>           <C>          <C>         <C>          <C>
Nonaccrual Loans ............................  $    634,659  $  520,804   $  777,961  $   785,360  $ 1,355,617
                                               ---------------------------------------------------------------
Other Real Estate Owned......................        76,454     208,283      132,092      191,552      182,133
Other Assets Held for Sale...................       211,844     133,106      130,068      115,069      187,283
   Total Non-Performing Assets...............       922,957     862,193    1,040,121    1,091,981    1,725,033
Loans 90 Days Past Due and Still Accruing....     1,150,634     420,205      599,955      813,677    1,213,225
   Total Non-Performing Assets and
                                               ---------------------------------------------------------------
      Past Due Loans.........................  $  2,073,591  $1,282,398   $1,640,076  $ 1,905,658  $ 2,938,258
                                               ===============================================================
</TABLE>

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36
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

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

RESERVE FOR LOAN LOSSES

     The Corporation's policies provide for loan loss reserves to adequately
protect against potential unidentified and/or identified loan losses consistent
with sound and prudent banking practice. These policies consider historical
data of actual losses and loans classified by specific loan credit evaluation.
They also consider loan delinquency and economic conditions.

     The Corporation follows a loan review program to evaluate the credit risk
in its loan portfolio for substantially all loans greater than $50,000. Through
the loan review process, the Corporation maintains a classified account list,
which, along with the delinquency list of loans, helps management assess the
overall quality of the loan portfolio and the adequacy of the reserve for loan
losses. Loans classified as " substandard'' are those loans with clear and
defined weaknesses such as highly leveraged positions, unfavorable financial
ratios, uncertain repayment sources or poor financial condition, which may
jeopardize recoverability of the asset. Loans classified as "doubtful'' are
those loans which have characteristics similar to substandard accounts but with
an increased risk that a loss may occur, or at least a portion of the loan may
require charge-off if immediately liquidated. Although loans classified as
substandard do not duplicate loans classified as doubtful, both substandard and
doubtful loans include some loans that are delinquent or on nonaccrual status.
As of December 31, 2001, substandard loans totaled $3,800,592 and doubtful
loans totaled $747,799. All substandard and doubtful loans were designated as
delinquent or nonaccrual as of December 31, 2001.

     In addition to its classified account list and delinquency list of loans,
the Corporation maintains a separate "watch list," which further aids the
Corporation in monitoring its loan portfolio. Watch list loans show warning
elements where the present status portrays one or more deficiencies requiring
attention in the short run, or pertinent ratios of the loan account have
weakened to a point that more frequent monitoring is warranted. These loans do
not have all the characteristics of a classified loan (substandard or doubtful)
but do show weakened elements as compared with those of a satisfactory credit.
The Corporation reviews these loans while assessing the adequacy of the reserve
for loan losses.

     The Corporation establishes specific reserves for potential problem loans
as determined by its loan review program described above. The specific reserves
on these loans are determined in accordance with Statement of Financial
Accounting Standards (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" taking into account the credit's current
operating status, pledged collateral and plans of action for resolving any
deficiencies. The specific reserves are usually only considered for the
Corporation's commercial loan portfolio.

     The Corporation maintains formula reserves for all loans not considered by
the specific reserve method. Formula reserves are calculated for each pool of
homogeneous loans based on a loan's risk rating, delinquency status and the
historical charge-off experience pertaining to each loan type. The loss factors
used in calculating formula reserves for substandard, doubtful and loss credits
are based upon management's judgment of inherent risks associated within these
loan classifications. Formula reserves, relative to loan delinquency status,
are based on the type of loan and delinquency aging and are determined by
management's judgment of the inherent risk of loss from these delinquency
categories. The Corporation also establishes formula reserves for all loan
types by applying a factor, based on corresponding historical charge-off
percentages, to homogeneous pools of loans.

     These formula reserves are based on the Corporation's historical charge-
off experience. If current charge-off levels deviate from the Corporation's
historical experience, the deviation will be reflected in the Corporation's
ongoing formula reserves and the allowance for loan losses is adjusted
accordingly. The Corporation maintains an unallocated reserve taking into
consideration the following factors:

     .    General local and national economic and business conditions
          affecting key loan portfolios,
     .    Credit quality trends (including current and expected trends in non-
          performing loans under existing conditions),
     .    Seasoning of the loan portfolio,
     .    Specific industry conditions within portfolio
          segments,
     .    Duration of the current business cycle,
     .    Delinquency and nonaccrual trends,
     .    Recent loss experience in particular segments of
          the portfolio,
     .    Changes in lending and collection practices,
     .    Trends in volume and terms of loans,

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

                                                                              37
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

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

     .    Management's experience,
     .    Other external factors that could affect the ability of the
          Corporation's customers to repay their obligations.

     Management reviews these conditions to determine if any of these conditions
is evidenced by a specifically identified problem credit or portfolio segment.
Management's estimate of this condition may be reflected as a specific
allowance applicable to this credit or portfolio segment. Where any of these
conditions is not evidenced by a specifically identifiable problem credit or
portfolio segment as of the evaluation date, management's evaluation of the
potential risk concerning this condition is reflected in the unallocated
reserve.

     The composition of the Corporation's reserve for loan losses, including
reserves attributable to loans held for sale, is as follows at December 31,
2001 and 2000:

                                                December 31,
                                       ---------------------------
                                            2001            2000
                                       ---------------------------
Specific Reserves..................... $ 1,140,972     $   579,818
Formula Reserves .....................   2,481,142       2,323,047
Unallocated Reserves .................     517,362         461,839
                                       ---------------------------
     Total ........................... $ 4,139,476     $ 3,364,704
                                       ===========================
     The Corporation made no changes in estimation methods or assumptions that
affected the methodology for assessing the appropriateness of the reserves for
loan losses. Changes in assumptions regarding the effects of economic and
business conditions on borrowers and other factors, which are described below,
have affected the assessment of the unallocated allowance. Estimation risk,
which continues to be present in the allowance for loan losses, is included as
part of attributed factors within the unallocated reserve for loan losses.

     Specific reserves increased $561,154 from $579,818 at December 31, 2000,
to $1,140,972 at December 31, 2001, principally due to a $2,641,470 increase in
loans classified as substandard, primarily resulting from the downgrading of
loans associated with three significant business banking relationships
Management does not consider the downgrading of loans attributable to these
relationships to be indicative of an adverse trend in overall loan portfolio
performance or credit quality. Loans classified as doubtful also increased by
$81,811 compared to the prior year. At December 31, 2001, total classified
loans were $4,555,345 compared to $1,840,110 at December 31, 2000. Management
believes that current reserves appropriately reflect the level of risk and
potential loss of these credits. The reserve amount specified for these loans
may change in the event that there is evidence of an improvement or further
deterioration in a customer's ability to satisfy contractual requirements.

     The formula reserve portion of the reserve for loan losses increased
$158,095 to $2,481,142 at December 31, 2001 from $2,323,047 at December 31,
2000, corresponding to the overall increase in loans outstanding and most
notable, increases in commercial and installment loans.

     At December 31, 2001, the unallocated reserve portion of the reserve for
loan losses increased $55,523 to $517,362 from $461,839 due to continued
concern regarding the impact of sustained local and national economic
conditions on certain borrowers. The Corporation's loan loss experience
improved $122,000 with net loan losses in 2001 of $426,000 compared to $548,000
for 2000. As a percentage of average loans outstanding, net loan losses
decreased from .19% in 2000 to .14% in 2001. Total loans delinquent more than
30 days as a percentage of total loans outstanding increased to 1.65% at
December 31, 2001 compared to 1.17% at December 31, 2000. Although the
Corporation's delinquency ratios remain strong compared to industry averages,
industry statistics indicate that the Corporation's experience in 2001 is
similar to delinquency performance trends of the industry as a whole.
Consequently, management feels that market uncertainty and low growth
expectations in the local and national economy are such that recent delinquency
performance and loss experience have the potential to be more significantly
impacted in the relative near term. New loan volumes and loan terms appear
consistent with historical trends with regard to credit quality and
proportionate composition. In evaluating the appropriateness of the unallocated
reserve, the following factors were considered:

      .   Specific and inherent loss estimates, which are periodically
          adjusted based upon the most recent available information. There
          is, however, a possibility that the amount of actual losses may
          vary for estimated amounts. Consequently, estimation risk is
          present and should be provided for in assessing the appropriateness
          of the reserve for loan losses,

      .   The adverse effects of changes in the current economic and interest
          rate environment on those borrowers who have a more leveraged
          financial profile,
      .   The adverse effects of projected slowing trends, by certain external
          parties, on automobile manufacturers and the impact on consumer
          demand and consumption.

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

38
<PAGE>

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

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

     The following schedule sets forth the allocation of the reserve for loan
losses among individual loan categories. A portion is allocated to general risk
to protect the Corporation against potential yet undetermined losses and is
based on historical experience. The entire reserve for loan losses, including
reserves attributable to loans held for sale, is available to absorb future
loan losses in any category.

<TABLE>
<CAPTION>
                                                       For the Years Ended December 31, (In thousands)
                                        -----------------------------------------------------------------------------------------
                                             2001               2000             1999               1998             1997
                                        -----------------------------------------------------------------------------------------
                                                 % of                % of              % of               % of              % of
                                        Amount  Total    Amount     Total   Amount    Total   Amount     Total  Amount     Total
                                        -----------------------------------------------------------------------------------------
<S>                                     <C>              <C>        <C>     <C>       <C>     <C>        <C>     <C>       <C>
Commercial, Financial and
  Agricultural Loans .................  $1,700   41.1%   $  1,265   37.6%   $   948   30.7%   $    740   26.8%   $    926   31.8%
Real Estate Mortgage Loans ...........     241    5.8         129    3.8        243    7.9         320   11.6         320   11.0
Installment Loans ....................   1,340   32.4       1,275   37.9      1,239   40.1         885   32.1         991   34.0
Lease Financing ......................     340    8.2         234    7.0        197    6.4         277   10.0         239    8.2
Allocation to General Risk ...........     518   12.5         462   13.7        461   14.9         535   19.4         438   15.0
                                        -----------------------------------------------------------------------------------------
Total ................................  $4,139           $  3,365           $ 3,088           $  2,757           $  2,914
                                        =========================================================================================
</TABLE>

     The Corporation's net charge-offs by loan type and changes in the reserve
for loan losses, including those attributable to loans held for sale, for
each of the past five years were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                   For the Years Ended December 31,
                                                                               --------------------------------------
                                                                                2001    2000    1999    1998    1997
                                                                               --------------------------------------
<S>                                                                            <C>     <C>     <C>     <C>     <C>
Reserve for Loan Losses at Beginning of Year.................................. $3,365  $3,088  $2,757  $2,914  $2,579
Charge-offs:
  Commercial, Financial, and Agricultural Loans ..............................     40     105      78     455      78
  Real Estate Mortgage Loans .................................................     --      24      40      --      30
  Installment Loans ..........................................................    410     359     386     483     367
  Lease Financing ............................................................     50     103      50      36      48
                                                                               --------------------------------------
     Total Charge-offs........................................................    500     591     554     974     523
Recoveries:
 Commercial, Financial, and Agricultural Loans ...............................     13      --      --      --      94
 Real Estate Mortgage Loans ..................................................      1      --       1      --       2
 Installment Loans ...........................................................     58      42      42      34      42
 Lease Financing .............................................................      2       1       2       3      --
                                                                               --------------------------------------
     Total Recoveries.........................................................     74      43      45      37     138
                                                                               --------------------------------------
Net Charge-offs ..............................................................    426     548     509     937     385
Provision for Loan Losses ....................................................  1,200     825     840     780     720
                                                                               --------------------------------------
Reserve for Loan Losses at End of Year ....................................... $4,139  $3,365  $3,088  $2,757  $2,914
                                                                               ======================================
Net Loan Charge-offs to Average Loans ........................................   0.14%   0.19%   0.21%   0.41%   0.17%
Loan Loss Reserve to Non-Performing Assets ................................... 448.50% 358.19% 296.91% 252.43% 168.94%
</TABLE>

LIABILITIES

     Total liabilities were $442,596,630 at December 31, 2001, an increase of
$40,617,813 from December 31, 2000. Increases in total deposits and total
borrowed funds of $33,905,476 and $7,000,000, respectively, were principally
used to fund significant loan growth during 2001.

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

                                                                              39
<PAGE>

NSD Bancorp
--------------------------------------------------------------------------------

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

DEPOSITS

     Total deposits increased $33,905,476 from $307,077,815 at December 31,
2000 to $340,983,291 at December 31, 2001. Noninterest bearing and interest
bearing deposits increased during 2001 by $917,284 and $32,988,192 due to
continued emphasis on the development of small business relationships and
strategic retail deposit promotions.

     Average deposits and the average cost of deposits for the past three
     years were as follows:

<TABLE>
<CAPTION>
                                                2001                      2000                     1999
                                       -----------------------   ----------------------   ----------------------
                                         Average      Average      Average     Average      Average     Average
                                         Balance       Rate        Balance      Rate        Balance      Rate
                                       -------------------------------------------------------------------------
<S>                                    <C>             <C>       <C>            <C>       <C>            <C>
Noninterest Bearing Deposits ......... $ 61,231,433     --       $ 60,546,571    --       $ 57,767,640    --
Interest Bearing Deposits ............   85,195,681    2.47%       89,738,860   3.15%       92,061,809   2.89%
Savings Deposits .....................   58,613,751    3.29        39,411,781   2.50        38,371,347   2.44
Time Deposits ........................  110,727,679    5.86       104,367,369   5.92        95,162,556   5.49
                                       -------------------------------------------------------------------------
   Total Deposits .................... $315,768,544    3.33%     $294,064,581   3.40%     $283,363,352   3.11%
                                       =========================================================================
</TABLE>

     At December 31, 2001, outstanding Certificates of Deposit are scheduled
     to mature as follows (in thousands):

                                                     $100,000   Less then
                                                     and over    $100,000
                                                     --------   ---------
Three Months or Less ............................... $  4,753   $ 16,918
Over Three Months Through Six Months ...............    3,561     11,250
Over Six Months Through Twelve Months ..............    5,602     29,816
Over Twelve Months .................................    6,439     37,054
                                                     --------   ---------
     Total ......................................... $ 20,355   $ 95,038
                                                     ====================

REPURCHASE AGREEMENTS

     At December 31, 2001, the Corporation had no outstanding repurchase
     agreements.

FHLB ADVANCES AND OTHER BORROWED FUNDS

     At December 31, 2001, the Corporation had outstanding borrowings of
$94,000,000 consisting entirely of advances from the Federal Home Loan Bank
which are collateralized by qualifying securities and loans and are subject to
restrictions or penalties related to prepayments. There are no borrowings
scheduled to mature during 2002. The Corporation borrowed these funds to
provide liquidity for specific asset-liability management strategies and to
provide supplemental funding for loan growth. At December 31, 2001 there were
no outstanding overnight borrowings.

SHAREHOLDERS' EQUITY

     Consolidated shareholders' equity increased $3,032,578 from $33,640,586
at December 31, 2000 to $36,673,164 at December 31, 2001. This increase was the
result of earnings retention and an increase in net unrealized holding gains on
securities available for sale partially offset by the purchase of treasury
stock and by dividends paid to shareholders.

     The Corporation continues to maintain a strong capital position.
Risk-based capital ratios exceed current regulatory requirements. The
Corporation's Tier I risk-based capital ratio at December 31, 2001 was 10.09%
compared to 10.63% at December 31, 2000. The Corporation's total risk-based
capital ratio at December 31, 2001 was 11.52% compared to 11.93% at December
31, 2000. Regulatory requirements for Tier I and total risk-based capital
ratios are 4.00% and 8.00%, respectively.

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

40
<PAGE>

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

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

SALES PRICE AND CASH DIVIDENDS PER SHARE

     The following table sets forth the high and low sale prices and cash
dividends declared for the Corporation's common stock as reported by the NASDAQ
National Market system. Prices and dividends set forth below have been adjusted
to reflect a 5% stock dividend declared April 24, 2001 and payable on May 31,
2001 to shareholders of record on May 1, 2001 and a 5% stock dividend declared
April 25, 2000 and payable on May 31, 2000 to shareholders of record on May 1,
2000.

                            Sales Price     Cash Dividends
                       -------------------    Declared Per
                         High         Low        Share
                       -------      ------   --------------

2001
First Quarter          $ 17.14      $13.10      $ 0.18
Second Quarter           19.05       15.24        0.19
Third Quarter            21.00       16.60        0.19
Fourth Quarter           21.10       19.00        0.20

2000
First Quarter          $ 18.14      $12.02      $ 0.17
Second Quarter           15.42       13.33        0.18
Third Quarter            15.60       13.57        0.18
Fourth Quarter           14.76       12.14        0.18

MARKET RISK

     The Corporation operates as a traditional commercial banking institution
investing in securities and loans with funding primarily provided by retail
deposits and wholesale borrowings. The primary source of revenue is the net
spread between interest earned on investments and the cost of related funding.
Inherent in this business is market risk or the risk of an adverse impact on
earnings from changes in market interest rates. Other types of market risks
such as foreign currency exchange rate risk and commodity price risk do not
arise in the normal course of the Corporation's business activities. The
Corporation has an asset/liability management process in place to monitor and
control risks associated with changing interest rates and the potential impact
on future financial performance. Management's objective is to provide an
optimum return while maintaining an appropriate mix of earning assets and
funding sources consistent with acceptable exposure to market risk. Ultimately,
the Corporation seeks to produce consistent profitability in all interest rate
environments.

     Simulation modeling enables management to quantify the extent of the
Corporation's interest rate exposure by forecasting how net interest income,
and consequently net income, varies under alternative interest rate scenarios
based on the Corporation's current position. At December 31, 2001, a simulation
analysis assuming a one-time 200 basis point increase in interest rates,
results in a positive impact of approximately 2.7% or approximately $472,000 on
projected net interest income over a one-year period. Conversely, a 200 basis
point decrease in interest rates may result in a decrease in projected net
interest income of 3.6% or approximately $634,000 over the same period. These
findings are the result of normal projected growth in interest earning assets
and interest related liability levels based on the Corporation's position at
December 31, 2001. The results reflect the impact of a relatively short
repricing or rate adjustment period of the Corporation's loan products and the
effect of investment security prepayments matched with the relative short term
nature of interest sensitive deposit and borrowing liabilities. In a rising
rate environment, the increased cost of funding would be offset by increases in
yields on prime rate, LIBOR and Treasury indexed loans and securities and the
repricing of significant cash flow in the consumer loan portfolio. In a
declining rate environment, the declining yield on loans and securities due to
prepayments and index adjustments would be offset by a shortening of deposit
maturities and the repricing of a significant interest bearing demand deposit
portfolio. In any event, a sudden, substantial and protracted shift in interest
rates may adversely impact the Corporation's earnings to the extent that the
interest rates on interest earning assets and interest bearing liabilities
change at varying frequencies and market forces may limit the ability to
appropriately respond to such changes.

     Interest rate risk is also analyzed by comparing the maturity and
repricing relationships between interest earning assets and interest bearing
liabilities at specific points in time or "GAP" analysis. Management, however,
recognizes that a simplified GAP analysis may not adequately reflect the degree
to which assets and liabilities with similar repricing characteristics react to
changes in market interest rates. In addition, repricing characteristics
identified under a specific GAP position may vary significantly under different
interest rate environments. Therefore, simulation modeling is also performed to
evaluate the extent and direction of the Corporation's interest rate exposure
under upward and downward changes in interest rates.

     Based upon historical trends, the Corporation has typically considered
all demand and savings deposits as core deposits and relatively non-rate
sensitive. The following table has been prepared, as required,

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NSD Bancorp
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presenting interest bearing demand deposits and savings deposits as repricing
within the earliest period. As a result, the table reflects a negative, or
liability sensitive, cumulative interest GAP position of $158,227 in the first
one-year GAP. Results of simulation modeling and historical experience
indicate, however that the overall potential effect on net interest income
should not have an adverse result on future financial performance.

     The following table summarizes the Corporation's interest rate
sensitivity or GAP position, which is the estimated aggregate
maturity/repricing structure of interest earning assets and interest bearing
liabilities, at December 31, 2001 (in thousands):

<TABLE>
<CAPTION>
                                               3 months    Over 3 to   Over 6 to   Over 1 to   Over 5
                                                or less    6 months    12 months   5 Years     Years         Total
                                               --------------------------------------------------------------------
<S>                                            <C>         <C>         <C>         <C>         <C>        <C>
Loans, Net of Unearned Income ...............  $  39,291   $  19,199   $  36,712   $ 174,548   $  47,569  $ 317,319
Securities Available for Sale ...............     24,404       5,337       7,534      33,612      46,212    117,099
Other Interest Earning Assets ...............     13,788      --           4,804      --          --         18,592
Noninterest Earning Assets ..................     --          --          --          --          26,260     26,260
                                               --------------------------------------------------------------------
     Total Assets ...........................  $  77,483   $  24,536   $  49,050   $ 208,160   $ 120,041  $ 479,270
                                               ====================================================================
Interest Bearing Demand Deposits ............  $  87,787      --          --          --          --      $  87,787
Savings Deposits ............................     70,811      --          --          --          --         70,811
Time Deposits * $100,000 ....................     18,106   $  11,645   $  29,810   $  36,717   $     643     96,921
Time Deposits **** $100,000 .................      4,665       2,066       5,608       5,921         212     18,472
Other Borrowed Funds ........................     77,000      10,000      --           7,000      --         94,000
Other Liabilities ...........................      1,675       1,675       3,350      26,796      41,110     74,606
Shareholders' Equity ........................     --          --          --          --          36,673     36,673
                                               --------------------------------------------------------------------
Total Liabilities and Shareholders' Equity ..  $ 260,044   $  25,386   $  38,768   $  76,434   $  78,638  $ 479,270
                                               ====================================================================
Period GAP ..................................  $(182,561)  $    (850)  $  10,282   $ 131,726   $  41,403
Cumulative GAP ..............................  $(182,561)  $(183,411)  $(173,129)  $ (41,403)  $  --
</TABLE>
* means less than
**** means greater than or equal

LIQUIDITY AND CASH FLOWS

     Liquidity is the ability to generate cash flows or obtain funds at a
reasonable cost to satisfy customer credit needs and the requirements of
depositors. Liquid assets include cash, federal funds sold, investments
maturing in less than one year and loan repayments. The Corporation's ability
to obtain deposits and purchase funds at reasonable rates determines its
liability liquidity. As a result of liquid asset management and the ability to
generate liquidity through deposit funding, management feels that the
Corporation maintains overall liquidity sufficient to satisfy customer needs.
In the event that such measures are not sufficient, the Corporation has
established alternative sources of funds in the form of wholesale borrowings
and repurchase agreements.

     Operating activities provided net cash of $3,662,703 during 2001 compared
to $5,946,180 and $200,821 for 2000 and 1999, respectively. The primary source
of operating cash flows for 2001 was net income adjusted for the effect of
noncash expenses such as the provision for loan losses, depreciation of
premises and equipment and amortization of intangible assets. These sources of
operating cash flows were offset by a $2,212,112 increase in other assets
primarily attributed to prepaid construction expenses corresponding to
renovation of the Cranberry Township branch office and a $521,508 increase in
outstanding Cashflow Maximizer balances.

     Investing activities used cash of $36,767,795 during 2001, compared to
$32,696,330 and $47,969,516 for 2000 and 1999, respectively. In 2001, as in
2000 and 1999, cash was used to fund loan growth, as well as, the purchase of
investment securities available for sale. Proceeds from the sales, repayments
and maturities of investment securities available for sale were reinvested
primarily in investment securities available for sale.

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     Financing activities provided cash of $37,581,997, $35,056,040 and
$39,411,722 during 2001, 2000 and 1999, respectively. During 2001, increases in
demand and savings accounts, time deposits and borrowings provided cash while
cash was used by the payment of cash dividends and the purchase of treasury
stock. During 2000 and 1999, increases in demand and savings accounts, time
deposits and borrowings provided cash while cash was used by the repayment of
borrowings, the payment of cash dividends and the purchase of treasury stock.
Net proceeds from borrowings were used to fund growth in the loan and
investment portfolios during 2001, 2000 and 1999.

     Certain information in this discussion and other statements contained in
this report, which are not historical facts, may be forward-looking statements
that involve risks and uncertainties. Such statements are subject to important
factors that could cause actual results to differ materially from those
contemplated by such statements, including without limitation, the effect of
changing regional and national economic conditions; changes in interest rates;
credit risks of commercial, real estate, consumer and other lending activities;
changes in federal and state regulations; the presence in the Corporation's
market area of competitors with greater financial resources than the
Corporation or other unanticipated external developments materially impacting
the Corporation's operational and financial performance.

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