##### 



Laurel Capital Group, Inc.




Report of Independent
Registered Public Accounting Firm








The Board of Directors and
Stockholders 
 Laurel Capital Group, Inc.

























---



##### 



Laurel Capital Group, Inc.




Consolidated Statements of
Financial Condition





At June 30, 2005 and 2004


|                                                                                          |                                       |                                           |         |         |         |   |         |         |         | 
|----------------------------------------------------------------------------------------- | ------------------------------------- | ----------------------------------------- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|(in thousands)                                                                            |                                       | 2005                                      |         |         | 2004    |  
|                                                                                         
|Assets                                                                                    |                                       |                                           |         |         |         |   |         |        
|Cash                                                                                      |                                       | $                                         | 2,146   |         |         | $ | 1,991   |        
|Money market investments                                                                  |                                       |                                           |        |         |         |   | 283     |        
|Interest-earning deposits with other institutions                                         |                                       |                                           | 10,825  |         |         |   | 25,401  |        
|                                                                                         
|                                                                                          | Total Cash and Cash Equivalents       |                                           |         | 12,971  |         |   |         | 27,675  |        
|Investment securities available for sale (note 2)                                         |                                       |                                           | 45,539  |         |         |   | 47,669  |        
|Investment securities held to maturity (market value of $10,845
    and $12,183) (note 2) |                                       |                                           | 10,918  |         |         |   | 12,210  |        
|Mortgage-backed securities available for sale
    (note 3)                                |                                       |                                           | 13,002  |         |         |   | 21,024  |        
|Loans receivable, held for sale (note 4)                                                  |                                       |                                           | 947     |         |         |   | 1,130   |        
|Loans receivable                                                                          |                                       |                                           | 211,738 |         |         |   | 175,323 |        
|Allowance for loan losses                                                                 |                                       |                                           | (1,989  | )       |         |   | (2,032  | )      
|                                                                                         
|                                                                                          | Loans receivable, net (notes 4 and 5) |                                           |         | 209,749 |         |   |         | 173,291 |        
|Federal Home Loan Bank stock (note 6)                                                     |                                       |                                           | 1,878   |         |         |   | 1,879   |        
|Real estate owned                                                                         |                                       |                                           | 37      |         |         |   |        |        
|Accrued interest receivable:                                                              |                                       |                                           |         |         |         |   |         |        
|                                                                                          |                                       | Loans                                     |         |         | 733     |   |         |         | 659     | 
|                                                                                          |                                       | Interest-earning deposits and investments |         |         | 287     |   |         |         | 384     | 
|                                                                                          |                                       | Mortgage-backed securities                |         |         | 66      |   |         |         | 80      | 
|Office properties and equipment, net of accumulated depreciation
    (note 7)             |                                       |                                           | 2,277   |         |         |   | 2,243   |        
|Goodwill (note 19)                                                                        |                                       |                                           | 2,158   |         |         |   | 2,158   |        
|Other intangible assets (note 19)                                                         |                                       |                                           | 1,170   |         |         |   | 1,511   |        
|Prepaid income tax (note 10)                                                              |                                       |                                           |        |         |         |   | 129     |        
|Prepaid expenses and sundry assets (note 12)                                              |                                       |                                           | 8,069   |         |         |   | 7,333   |        
|                                                                                         
|                                                                                          |                                       | Total Assets                              |         | $       | 309,801 |   |         | $       | 299,375 | 




|                                              |                                                                                                                    |                                            |       |         |         |  |       |         |         | 
|--------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ----- | ------- | ------- |  | ----- | ------- | ------- | 
|Liabilities
    and Stockholders Equity      |                                                                                                                    |                                            |       |         |         |  |       |        
|Liabilities:                                  |                                                                                                                    |                                            |       |         |         |  |       |        
|                                              | Savings deposits (note 8)                                                                                          |                                            | $     | 254,891 |         |  | $     | 246,179 |        
|                                              | FHLB advances (note 9)                                                                                             |                                            |       | 21,602  |         |  |       | 21,609  |        
|                                              | Advance deposits by borrowers for taxes and insurance                                                              |                                            |       | 2,713   |         |  |       | 2,142   |        
|                                              | Accrued interest payable on savings deposits                                                                       |                                            |       | 765     |         |  |       | 619     |        
|                                              | Accrued income tax (note 10)                                                                                       |                                            |       | 90      |         |  |       |        |        
|Other accrued expenses and sundry liabilities |                                                                                                                    |                                            | 1,936 |         |         |  | 1,701 |        
|                                             
|                                              | Total Liabilities                                                                                                  |                                            |       | 281,997 |         |  |       | 272,250 |        
|                                             
|Stockholders Equity (note 11)                |                                                                                                                    |                                            |       |         |         |  |       |        
|                                              | Common stock, $.01 par value; 5,000,000 shares authorized;
    2,467,670 and 2,453,274 shares issued, respectively |                                            |       | 25      |         |  |       | 24      |        
|                                              | Additional paid-in capital                                                                                         |                                            |       | 6,465   |         |  |       | 6,243   |        
|                                              | Treasury stock, at cost (524,670 shares)                                                                           |                                            |       | (8,238  | )       |  |       | (8,238  | )      
|                                              | Retained earnings                                                                                                  |                                            |       | 29,878  |         |  |       | 29,380  |        
|                                              | Accumulated other comprehensive income, net of tax of $91 and
    $112, respectively                               |                                            |       | 176     |         |  |       | 218     |        
|                                              | Stock held in deferred compensation trust (31,452 shares)                                                          |                                            |       | (502    | )       |  |       | (502    | )      
|                                             
|                                              | Total Stockholders Equity                                                                                         |                                            |       | 27,804  |         |  |       | 27,125  |        
|                                             
|                                              |                                                                                                                    | Total Liabilities and Stockholders Equity |       | $       | 309,801 |  |       | $       | 299,375 | 




See accompanying notes to consolidated financial
statements.










---



##### 



Laurel Capital Group, Inc.




Consolidated Statements of
Operations





For the years ended June 30, 2005, 2004, and 2003


|                                                     |                                                                                      |                          |       |        |        |   |       |        |        |   |       |        |        | 
|---------------------------------------------------- | ------------------------------------------------------------------------------------ | ------------------------ | ----- | ------ | ------ | - | ----- | ------ | ------ | - | ----- | ------ | ------ | 
|(in thousands, except for per share data)            |                                                                                      | 2005                     |       |        | 2004   |   |       | 2003   |       
|                                                    
|Interest income:                                     |                                                                                      |                          |       |        |        |   |       |        |        |   |       |       
|                                                     | Loans receivable                                                                     |                          | $     | 10,705 |        |   | $     | 10,093 |        |   | $     | 11,956 |       
|                                                     | Mortgage-backed securities                                                           |                          |       | 649    |        |   |       | 479    |        |   |       | 558    |       
|                                                     | Investment securities:                                                               |                          |       |        |        |   |       |        |        |   |       |        |       
|                                                     |                                                                                      | Taxable                  |       |        | 1,255  |   |       |        | 864    |   |       |        | 1,011  | 
|                                                     |                                                                                      | Tax-exempt               |       |        | 814    |   |       |        | 1,057  |   |       |        | 1,149  | 
|                                                     | Interest-earning deposits                                                            |                          |       | 339    |        |   |       | 573    |        |   |       | 523    |       
|                                                    
|                                                     |                                                                                      | Total interest income    |       |        | 13,762 |   |       |        | 13,066 |   |       |        | 15,197 | 
|Interest expense:                                    |                                                                                      |                          |       |        |        |   |       |        |        |   |       |       
|                                                     | Savings deposits (note 8)                                                            |                          |       | 5,020  |        |   |       | 4,844  |        |   |       | 6,358  |       
|                                                     | FHLB advances (note 9)                                                               |                          |       | 1,274  |        |   |       | 1,286  |        |   |       | 1,293  |       
|                                                    
|                                                     |                                                                                      | Total interest expense   |       |        | 6,294  |   |       |        | 6,130  |   |       |        | 7,651  | 
|                                                    
|Net interest income before provision for loan losses |                                                                                      |                          | 7,468 |        |        |   | 6,936 |        |        |   | 7,546 |       
|Provision for loan losses                            |                                                                                      |                          | 9     |        |        |   | 12    |        |        |   | 12    |       
|                                                    
|Net interest income after provision for loan losses  |                                                                                      |                          | 7,459 |        |        |   | 6,924 |        |        |   | 7,534 |       
|                                                    
|Other income:                                        |                                                                                      |                          |       |        |        |   |       |        |        |   |       |       
|                                                     | Service charges                                                                      |                          |       | 1,068  |        |   |       | 1,088  |        |   |       | 823    |       
|                                                     | Gain on the sale of investment and mortgage-backed securities
    available for sale |                          |       | 15     |        |   |       | 35     |        |   |       | 4      |       
|                                                     | Gain on the sale of loans held for sale                                              |                          |       | 9      |        |   |       | 14     |        |   |       | 11     |       
|                                                     | Income from bank owned life insurance                                                |                          |       | 254    |        |   |       | 284    |        |   |       |       |       
|                                                     | Other income                                                                         |                          |       | 95     |        |   |       | 88     |        |   |       | 86     |       
|                                                    
|                                                     |                                                                                      | Total other income       |       |        | 1,441  |   |       |        | 1,509  |   |       |        | 924    | 
|                                                    
|Operating expenses:                                  |                                                                                      |                          |       |        |        |   |       |        |        |   |       |       
|                                                     | Compensation and employee benefits (note 12)                                         |                          |       | 2,968  |        |   |       | 2,933  |        |   |       | 2,246  |       
|                                                     | Premises and occupancy costs                                                         |                          |       | 841    |        |   |       | 798    |        |   |       | 628    |       
|                                                     | Federal insurance premiums                                                           |                          |       | 36     |        |   |       | 39     |        |   |       | 37     |       
|                                                     | Net (gain) loss on real estate owned                                                 |                          |       | (12    | )      |   |       | (22    | )      |   |       | 22     |       
|                                                     | Data processing expense                                                              |                          |       | 425    |        |   |       | 420    |        |   |       | 347    |       
|                                                     | Professional fees                                                                    |                          |       | 272    |        |   |       | 296    |        |   |       | 158    |       
|                                                     | Amortization of core deposit intangible                                              |                          |       | 340    |        |   |       | 394    |        |   |       | 102    |       
|                                                     | Other operating expenses                                                             |                          |       | 1,244  |        |   |       | 1,292  |        |   |       | 1,259  |       
|                                                    
|                                                     |                                                                                      | Total operating expenses |       |        | 6,114  |   |       |        | 6,150  |   |       |        | 4,799  | 
|                                                    
|Income before income taxes                           |                                                                                      |                          | 2,786 |        |        |   | 2,283 |        |        |   | 3,659 |       
|                                                    
|Provision for income taxes (note 10):                |                                                                                      |                          |       |        |        |   |       |        |        |   |       |       
|                                                     | Federal                                                                              |                          |       | 554    |        |   |       | 488    |        |   |       | 921    |       
|                                                     | State                                                                                |                          |       | 183    |        |   |       | 108    |        |   |       | 204    |       
|                                                    
|                                                     |                                                                                      | Total income taxes       |       |        | 737    |   |       |        | 596    |   |       |        | 1,125  | 
|                                                    
|Net income                                           |                                                                                      | $                        | 2,049 |        |        | $ | 1,687 |        |        | $ | 2,534 |       




|                             |         |                                      |  |   |           |  |  |   |           |  |  |   |           | 
|---------------------------- | ------- | ------------------------------------ |  | - | --------- |  |  | - | --------- |  |  | - | --------- | 
|Earnings per share (note 1): |         |                                      |  |   |           |  |  |   |           |  |  |  
|                             | Basic   |                                      |  |   |           |  |  |   |           |  |  |   |          
|                             |         | Net income                           |  | $ | 1.06      |  |  | $ | 0.89      |  |  | $ | 1.35      | 
|                             |         | Average number of shares outstanding |  |   | 1,937,086 |  |  |   | 1,897,091 |  |  |   | 1,880,815 | 
|                            
|                             | Diluted |                                      |  |   |           |  |  |   |           |  |  |   |          
|                             |         | Net income                           |  | $ | 1.03      |  |  | $ | 0.85      |  |  | $ | 1.28      | 
|                             |         | Average number of shares outstanding |  |   | 1,987,843 |  |  |   | 1,985,116 |  |  |   | 1,981,934 | 




|                         |  |   |      |  |  |   |      |  |  |   |      | 
|------------------------ |  | - | ---- |  |  | - | ---- |  |  | - | ---- | 
|Dividends paid per share |  | $ | 0.80 |  |  | $ | 0.80 |  |  | $ | 0.76 | 




See accompanying notes to consolidated financial
statements.










---



##### 



Laurel Capital Group, Inc.




Consolidated Statements of
Stockholders Equity





For the years ended June 30, 2005, 2004, and 2003


|                                               |                                                |        |    |            |         |   |       |          |  |               |          |   |            |             |        |       |              |   |      |               |   |   |      |   |  |   |        |       |  
|---------------------------------------------- | ---------------------------------------------- | ------ | -- | ---------- | ------- | - | ----- | -------- |  | ------------- | -------- | - | ---------- | ----------- | ------ | ----- | ------------ | - | ---- | ------------- | - | - | ---- | - |  | - | ------ | ----- | -
|                                               |                                                |        |    |            |         |   |       |          |  | Accumulated   |          |   |            |             |       
|                                               |                                                |        |    |            |         |   |       |          |  | Other         |          |   |            |             |       
|                                               |                                                |        |    |            |         |   |       |          |  | Comprehensive |          |   | Stock Held |             |        |      
|                                               |                                                |        |    | Additional |         |   |       |          |  |               | Income   |   |            | in Deferred |        |       | Total        |  
|                                               |                                                | Common |    |            | Paid-in |   |       | Treasury |  |               | Retained |   |            | (Loss)      |        |       | Compensation |   |      | Stockholders |  
|(in thousands)                                 |                                                | Stock  |    |            | Capital |   |       | Stock    |  |               | Earnings |   |            | Net of Tax  |        |       | Trust        |   |      | Equity        |  
|                                              
|Balance, June 30, 2002                         |                                                | $      | 24 |            |         | $ | 5,389 |          |  | $             | (7,157   | ) |            | $           | 28,103 |       |              | $ | 632  |               |   | $ | (438 | ) |  | $ | 26,553 |      
|Comprehensive income:                          |                                                |        |    |            |         |   |       |          |  |               |          |   |            |             |        |       |              |   |      |               |   |   |      |   |  |   |        |      
|                                               | Net income                                     |        |    |           |         |   |       |         |  |               |          |  |            |             |        | 2,534 |              |   |      |              |   |   |      |  |  |   |        | 2,534 |  
|                                               | Other comprehensive income, net of tax of $116 |        |    |           |         |   |       |         |  |               |          |  |            |             |        |      |              |   |      | 221           |   |   |      |  |  |   |        | 221   |  
|                                               | Reclassification adjustment, net of tax of $1  |        |    |           |         |   |       |         |  |               |          |  |            |             |        |      |              |   |      | 3             |   |   |      |  |  |   |        | 3     |  
|                                              
|Total comprehensive income                     |                                                |        |   |            |         |   |      |          |  |               |         |   |            |             | 2,534  |       |              |   | 224  |               |   |   |     |   |  |   | 2,758  |      
|Stock options exercised (17,505 shares)        |                                                |        |   |            |         |   | 176   |          |  |               |         |   |            |             |       |       |              |   |     |               |   |   |     |   |  |   | 176    |      
|Dividends paid                                 |                                                |        |   |            |         |   |      |          |  |               |         |   |            |             | (1,429 | )     |              |   |     |               |   |   |     |   |  |   | (1,429 | )    
|Treasury stock purchased (18,000 shares)       |                                                |        |   |            |         |   |      |          |  |               | (395     | ) |            |             |       |       |              |   |     |               |   |   |     |   |  |   | (395   | )    
|Stock sold by deferred compensation trust      |                                                |        |   |            |         |   |      |          |  |               |         |   |            |             |       |       |              |   |     |               |   |   | 21   |   |  |   | 21     |      
|                                              
|Balance, June 30, 2003                         |                                                |        | 24 |            |         |   | 5,565 |          |  |               | (7,552   | ) |            |             | 29,208 |       |              |   | 856  |               |   |   | (417 | ) |  |   | 27,684 |      
|Comprehensive income:                          |                                                |        |    |            |         |   |       |          |  |               |          |   |            |             |        |       |              |   |      |               |   |   |      |   |  |   |        |      
|                                               | Net income                                     |        |    |           |         |   |       |         |  |               |          |  |            |             |        | 1,687 |              |   |      |              |   |   |      |  |  |   |        | 1,687 |  
|                                               | Other comprehensive loss, net of tax of $(329) |        |    |           |         |   |       |         |  |               |          |  |            |             |        |      |              |   |      | (661          | ) |   |      |  |  |   |        | (661  | )
|                                               | Reclassification adjustment, net of tax of $12 |        |    |           |         |   |       |         |  |               |          |  |            |             |        |      |              |   |      | 23            |   |   |      |  |  |   |        | 23    |  
|                                              
|Total comprehensive income                     |                                                |        |   |            |         |   |      |          |  |               |         |   |            |             | 1,687  |       |              |   | (638 | )             |   |   |     |   |  |   | 1,049  |      
|Stock options exercised (90,197 shares)        |                                                |        |   |            |         |   | 678   |          |  |               |         |   |            |             |       |       |              |   |     |               |   |   |     |   |  |   | 678    |      
|Dividends paid                                 |                                                |        |   |            |         |   |      |          |  |               |         |   |            |             | (1,515 | )     |              |   |     |               |   |   |     |   |  |   | (1,515 | )    
|Treasury stock purchased (32,995 shares)       |                                                |        |   |            |         |   |      |          |  |               | (686     | ) |            |             |       |       |              |   |     |               |   |   |     |   |  |   | (686   | )    
|Stock purchased by deferred compensation trust |                                                |        |   |            |         |   |      |          |  |               |         |   |            |             |       |       |              |   |     |               |   |   | (85  | ) |  |   | (85    | )    
|                                              
|Balance, June 30, 2004                         |                                                |        | 24 |            |         |   | 6,243 |          |  |               | (8,238   | ) |            |             | 29,380 |       |              |   | 218  |               |   |   | (502 | ) |  |   | 27,125 |      
|Comprehensive income:                          |                                                |        |    |            |         |   |       |          |  |               |          |   |            |             |        |       |              |   |      |               |   |   |      |   |  |   |        |      
|                                               | Net income                                     |        |    |           |         |   |       |         |  |               |          |  |            |             |        | 2,049 |              |   |      |              |   |   |      |  |  |   |        | 2,049 |  
|                                               | Other comprehensive loss, net of tax of $(22)  |        |    |           |         |   |       |         |  |               |          |  |            |             |        |      |              |   |      | (52           | ) |   |      |  |  |   |        | (52   | )
|                                               | Reclassification adjustment, net of tax of $5  |        |    |           |         |   |       |         |  |               |          |  |            |             |        |      |              |   |      | 10            |   |   |      |  |  |   |        | 10    |  
|                                              
|Total comprehensive income                     |                                                |        |   |            |         |   |      |          |  |               |         |   |            |             | 2,049  |       |              |   | (42  | )             |   |   |     |   |  |   | 2,007  |      
|Stock options exercised (14,396 shares)        |                                                |        | 1  |            |         |   | 222   |          |  |               |         |   |            |             |       |       |              |   |     |               |   |   |     |   |  |   | 223    |      
|Dividends paid                                 |                                                |        |   |            |         |   |      |          |  |               |         |   |            |             | (1,551 | )     |              |   |     |               |   |   |     |   |  |   | (1,551 | )    
|                                              
|Balance, June 30, 2005                         |                                                | $      | 25 |            |         | $ | 6,465 |          |  | $             | (8,238   | ) |            | $           | 29,878 |       |              | $ | 176  |               |   | $ | (502 | ) |  | $ | 27,804 |      




See accompanying notes to consolidated financial
statements.










---



##### 



Laurel Capital Group, Inc.




Consolidated Statement of
Cash Flows





For the years ended June 30, 2005, 2004, and 2003


|                                                 |                                                                                          |                                                                                  |                                                  |         |      |         |         |         |      |         |        |         |      |        |  
|------------------------------------------------ | ---------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | ------------------------------------------------ | ------- | ---- | ------- | ------- | ------- | ---- | ------- | ------ | ------- | ---- | ------ | -
|(in thousands)                                   |                                                                                          | 2005                                                                             |                                                  |         | 2004 |         |         | 2003    |     
|                                                
|Net income:                                      |                                                                                          | $                                                                                | 2,049                                            |         |      | $       | 1,687   |         |      | $       | 2,534  |        
|                                                 | Adjustments to reconcile net income to net cash provided by
    operating activities:    |                                                                                  |                                                  |         |      |         |         |         |      |         |        |         |     
|                                                 |                                                                                          | Depreciation                                                                     |                                                  |         | 281  |         |         |         | 275  |         |        |         | 258  |       
|                                                 |                                                                                          | Provision for loan losses                                                        |                                                  |         | 9    |         |         |         | 12   |         |        |         | 12   |       
|                                                 |                                                                                          | Net (gain) loss on the sale of real estate owned                                 |                                                  |         | (11  | )       |         |         | (32  | )       |        |         | 5    |       
|                                                 |                                                                                          | Net gain on the sale of investment securities available for sale                 |                                                  |         | (15  | )       |         |         | (63  | )       |        |         |     |       
|                                                 |                                                                                          | Net loss (gain) on the sale of mortgage-backed securities
    available for sale |                                                  |         |     |         |         |         | 28   |         |        |         | (4   | )     
|                                                 |                                                                                          | Gain on the sale of loans held for sale                                          |                                                  |         | (9   | )       |         |         | (14  | )       |        |         | (11  | )     
|                                                 |                                                                                          | Net accretion of deferred loan costs                                             |                                                  |         | 230  |         |         |         | 124  |         |        |         | 76   |       
|                                                 |                                                                                          | Origination of loans held for sale                                               |                                                  |         | (371 | )       |         |         | (526 | )       |        |         | (669 | )     
|                                                 |                                                                                          | Proceeds from the sale of loans held for sale                                    |                                                  |         | 563  |         |         |         | 849  |         |        |         | 612  |       
|                                                 |                                                                                          | Decrease in accrued interest receivable                                          |                                                  |         | 37   |         |         |         | 222  |         |        |         | 297  |       
|                                                 |                                                                                          | Increase (decrease) in accrued interest payable                                  |                                                  |         | 146  |         |         |         | 76   |         |        |         | (11  | )     
|                                                 |                                                                                          | Amortization of the core deposit intangible                                      |                                                  |         | 340  |         |         |         | 394  |         |        |         | 101  |       
|                                                 |                                                                                          | Increase in cash surrender value                                                 |                                                  |         | (207 | )       |         |         | (253 | )       |        |         |     |       
|                                                 |                                                                                          | Increase (decrease) in taxes payable                                             |                                                  |         | 219  |         |         |         | 132  |         |        |         | (344 | )     
|                                                 |                                                                                          | Othernet                                                                        |                                                  |         | (113 | )       |         |         | 351  |         |        |         | 25   |       
|                                                
|                                                 |                                                                                          |                                                                                  | Net cash provided by operating activities        |         |      | 3,148   |         |         |      | 3,262   |        |         |      | 2,881  |  
|                                                
|Investing activities:                            |                                                                                          |                                                                                  |                                                  |         |      |         |         |         |      |         |        |        
|                                                 | Purchase of investment securities held to maturity                                       |                                                                                  |                                                  | (12,020 | )    |         |         | (18,899 | )    |         |        | (19,950 | )   
|                                                 | Purchase of investment securities available for sale                                     |                                                                                  |                                                  | (3,157  | )    |         |         | (10,748 | )    |         |        | (5,365  | )   
|                                                 | Purchase of mortgage-backed securities available for sale                                |                                                                                  |                                                  |        |      |         |         | (16,907 | )    |         |        | (5,487  | )   
|                                                 | Proceeds from the sale of investment securities available for
    sale                   |                                                                                  |                                                  | 582     |      |         |         | 2,272   |      |         |        |        |     
|                                                 | Proceeds from the sale of mortgage-backed securities available
    for sale              |                                                                                  |                                                  |        |      |         |         | 1,457   |      |         |        | 963     |     
|                                                 | Principal repayments and maturities of investment securities
    held to maturity        |                                                                                  |                                                  | 13,315  |      |         |         | 15,835  |      |         |        | 22,700  |     
|                                                 | Principal repayments and maturities of investment securities
    available for sale      |                                                                                  |                                                  | 4,740   |      |         |         | 6,697   |      |         |        | 5,180   |     
|                                                 | Principal repayments and maturities of mortgage-backed
    securities available for sale |                                                                                  |                                                  | 7,958   |      |         |         | 7,576   |      |         |        | 6,574   |     
|                                                 | Principal repayments and maturities of mortgage-backed
    securities held to maturity   |                                                                                  |                                                  |        |      |         |         | 4       |      |         |        | 13      |     
|                                                 | Purchase of FHLB stock                                                                   |                                                                                  |                                                  | (239    | )    |         |         | (110    | )    |         |        | (248    | )   
|                                                 | Sale of FHLB stock                                                                       |                                                                                  |                                                  | 240     |      |         |         | 402     |      |         |        | 52      |     
|                                                 | Net (increase) decrease in loans                                                         |                                                                                  |                                                  | (31,190 | )    |         |         | 28,542  |      |         |        | 21,343  |     
|                                                 | Loans purchased                                                                          |                                                                                  |                                                  | (5,910  | )    |         |         | (20,832 | )    |         |        |        |     
|                                                 | Proceeds from the sale of real estate owned                                              |                                                                                  |                                                  | 389     |      |         |         | 82      |      |         |        | 152     |     
|                                                 | Acquisition  net of cash and cash equivalents                                           |                                                                                  |                                                  |        |      |         |         |        |      |         |        | (247    | )   
|                                                 | Purchase of bank owned life insurance                                                    |                                                                                  |                                                  | (193    | )    |         |         |        |      |         |        | (5,500  | )   
|                                                 | Purchase of office properties and equipment                                              |                                                                                  |                                                  | (315    | )    |         |         | (152    | )    |         |        | (635    | )   
|                                                
|                                                 |                                                                                          |                                                                                  | Net cash (used) provided by investing activities |         |      | (25,800 | )       |         |      | (4,781  | )      |         |      | 19,545 |  
|                                                
|Financing activities:                            |                                                                                          |                                                                                  |                                                  |         |      |         |         |         |      |         |        |        
|                                                 | Net (decrease) increase in demand and club accounts                                      |                                                                                  |                                                  | (2,612  | )    |         |         | (4,161  | )    |         |        | 4,041   |     
|                                                 | Net increase (decrease) in time deposit accounts                                         |                                                                                  |                                                  | 11,324  |      |         |         | (15,240 | )    |         |        | (5,033  | )   
|                                                 | Repayments of FHLB advances                                                              |                                                                                  |                                                  | (7      | )    |         |         | (3,063  | )    |         |        | (5      | )   
|                                                 | Net increase (decrease) in advance deposits by borrowers
    for taxes and insurance     |                                                                                  |                                                  | 571     |      |         |         | (244    | )    |         |        | (219    | )   
|                                                 | Stock options exercised                                                                  |                                                                                  |                                                  | 223     |      |         |         | 678     |      |         |        | 176     |     
|                                                 | Acquisition of treasury stock                                                            |                                                                                  |                                                  |        |      |         |         | (686    | )    |         |        | (395    | )   
|                                                 | Dividends paid                                                                           |                                                                                  |                                                  | (1,551  | )    |         |         | (1,515  | )    |         |        | (1,429  | )   
|                                                
|                                                 |                                                                                          |                                                                                  | Net cash provided (used) by financing activities |         |      | 7,948   |         |         |      | (24,231 | )      |         |      | (2,864 | )
|                                                
|Net change in cash and cash equivalents          |                                                                                          |                                                                                  | (14,704                                          | )       |      |         | (25,750 | )       |      |         | 19,562 |        
|Cash and cash equivalents at beginning of period |                                                                                          |                                                                                  | 27,675                                           |         |      |         | 53,425  |         |      |         | 33,863 |        
|                                                
|Cash and cash equivalents at end of period       |                                                                                          | $                                                                                | 12,971                                           |         |      | $       | 27,675  |         |      | $       | 53,425 |        




|                                                                                                                                                                                      |                              |  |     |       |  |  |    |       |  |  |    |       | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------- |  | --- | ----- |  |  | -- | ----- |  |  | -- | ----- | 
|Supplemental Disclosure of
    Cash Flow Information                                                                                                                                 
|                                                                                                                                                                                     
|Cash paid during the period for:                                                                                                                                                      |                              |  |     |       |  |  |    |       |  |  |    |      
|                                                                                                                                                                                      | Interest on savings deposits |  | $   | 4,874 |  |  | $  | 4,768 |  |  | $  | 6,337 | 
|                                                                                                                                                                                      | Interest on FHLB advances    |  |     | 1,274 |  |  |    | 1,344 |  |  |    | 1,293 | 
|                                                                                                                                                                                      | Income taxes                 |  |     | 460   |  |  |    | 581   |  |  |    | 1,383 | 
|Transfer of loans to real estate owned                                                                                                                                                |                              |  | 403 |       |  |  | 50 |       |  |  | 26 |      
|Cash paid during the period for interest includes interest
    credited on deposits of $4,046, $3,943, and $5,268 for the years
    ended June 30, 2005, 2004, and 2003, respectively




See accompanying notes to consolidated financial
statements.










---



##### 



Laurel Capital Group, Inc.




Notes to Consolidated
Financial Statements





(Dollar amounts in thousands, except per share data)


(1) Summary
of Significant Accounting Policies


Nature of Operation and
Use of Estimates


| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Laurel Capital is a registered bank holding company pursuant to
    the Bank Holding Company Act of 1956, as amended. Laurel
    Capitals only significant asset is the stock of its
    wholly-owned subsidiary, Laurel Savings Bank, a
    Pennsylvania-chartered state savings bank. The Bank conducts
    business through its eight offices located in Allegheny and
    Butler counties. Additionally, the Bank has one active
    subsidiary, Laurel Financial Group, Inc., headquartered in
    Wilmington, Delaware.
|
| | The preparation of financial statements in conformity with U.S.
    generally accepted accounting principles requires management to
    make estimates and assumptions that affect the reported amounts
    of certain assets and liabilities and disclosure of contingent
    assets and liabilities at the date of the financial statements
    and the reported amounts of related revenue and expense during
    the reporting period. Actual results could differ from those
    estimates.                              

Consolidation


| |                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The consolidated financial statements include the accounts of
    Laurel Capital Group, Inc. and its wholly-owned subsidiary,
    Laurel Savings Bank, after elimination of inter-company accounts
    and transactions.

Investment and
Mortgage-backed Securities


| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Statement of Financial Accounting Standards (SFAS)
    No. 115 requires that investments be classified as either:
    (1) Securities Held to Maturity  debt securities
    that the Company has the positive intent and ability to hold to
    maturity and reported at amortized cost; (2) Trading
    Securities  debt and equity securities bought and
    held principally for the purpose of selling them in the near
    term and reported at fair value, with unrealized gains and
    losses included in the current period earnings; or
    (3) Securities Available for Sale  debt and
    equity securities not classified as either Securities Held to
    Maturity or Trading Securities and reported at fair value, with
    unrealized gains and losses included in accumulated other
    comprehensive income. The cost of securities sold is determined
    on a specific identification basis.

Real Estate
Owned


| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Real estate owned consists of properties acquired through
    foreclosure and are recorded at the lower of cost (principal
    balance of the former mortgage loan plus costs of obtaining
    title and possession) or fair value at the date of acquisition.
    Costs relating to development and improvement of the property
    are capitalized, whereas costs of holding such real estate are
    expensed as incurred. Additional write-downs are charged to
    income, and the carrying value of the property reduced, when the
    fair value of the property, less costs to sell, is less than the
    carrying value.

Provisions for Loan
Losses


| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Provisions for loan losses are charged to operations in amounts
    that result in an allowance appropriate, in managements
    judgment, to cover probable losses inherent in the loan
    portfolio. Managements judgment takes into consideration
    general economic conditions, diversification of loan portfolios,
    historic loss experience, identified credit problems,
    delinquency levels and adequacy of collateral. Although
    management believes it has used the best information available
    to it in making such determinations, and that the present
    allowance for loan losses is adequate, future adjustments to the
    allowance may be necessary, and net income may be adversely
    affected if circumstances differ substantially from the
    assumptions used in determining the level of the allowance. In
    addition, as an integral part of their periodic examination,
    certain regulatory agencies review the adequacy of the
    Banks allowance for loan losses and may direct the Bank to
    make additions to the allowance based on their judgments about
    information available to them at the time of their examination.



Note continued










---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)


Goodwill and Other
Intangibles


| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As prescribed by SFAS 142, Goodwill and Other
    Intangibles (SFAS 142), goodwill is not amortized to
    expense, but rather is tested for impairment periodically. At
    least annually, management reviews goodwill and evaluates events
    or changes in circumstances that may indicate impairment in the
    carrying amount of goodwill. If the sum of the expected
    undiscounted future cash flows is less than the carrying amount
    of the net assets, an impairment loss will be recognized.
    Impairment, if any, is measured on a discounted future cash flow
    basis. During the current fiscal year the Company hired an
    independent third party to perform an impairment analysis of
    goodwill and other intangible assets. Based on their analysis,
    it was determined that the estimated fair value of the goodwill
    and other intangible assets exceeded the carrying amount.

Core Deposit
Intangible


| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Upon acquiring another financial institution, the Company
    engages an independent third party of experts to analyze and
    prepare a core deposit study. This study reflects the cumulative
    present value benefit of acquiring deposits versus an
    alternative source of funding. Based upon this analysis, the
    amount of the premium related to the core deposits of the
    business purchased is calculated along with the estimated life
    of the acquired deposits. The core deposit intangible is then
    amortized to expense on an accelerated basis over its estimated
    useful life.

Bank-Owned Life
Insurance


| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company owns insurance on the lives of certain key
    employees. The policies were purchased to help offset the cost
    of increases in various fringe benefit plans including
    healthcare. The cash surrender value of these policies is
    included in prepaid expenses and sundry assets on the
    consolidated statements of financial condition and any increases
    in the cash surrender value are recorded as other operating
    income on the consolidated statements of operations. In the
    event of the death of an insured individual under these
    policies, the Company would receive a death benefit which would
    be recorded as other income.

Office Properties and
Equipment


| |                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Office properties and equipment are stated at cost less
    accumulated depreciation. Depreciation is computed on the
    straight-line method over the estimated useful lives of the
    related assets. Estimated useful lives range from three to
    thirty years.

Interest on
Savings


| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Interest on savings deposits is accrued and charged to expense
    daily and is paid or credited in accordance with the terms of
    the respective accounts.

Cash and Cash
Equivalents


| |                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | For purposes of reporting cash flows, the Company has defined
    cash and cash equivalents as cash, money market investments and
    interest-earning deposits with other institutions.

Loans


| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Loans receivable are stated at unpaid principal balances net of
    the allowance for loan losses and net of deferred loan fees and
    discounts. In accordance with SFAS Nos. 114 and 118, the
    Bank considers all one-to-four family residential mortgage loans
    and all consumer loans (as presented in Note 4) to be
    smaller homogeneous loans. As such, these loans are collectively
    evaluated for impairment. Loans within the scope of these
    statements are considered impaired when, based on current
    information and events, it is probable that all principal and
    interest will not be collected in accordance with the
    contractual terms of the loans. Management determines the
    impairment of loans based on knowledge of the borrowers
    ability to repay the loan according to the contractual
    agreement, the borrowers repayment history and the fair
    value of collateral for certain collateral dependent loans.
    Pursuant to SFAS 114, management does not consider an
    insignificant delay or insignificant shortfall to impair a



Note continued










---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | loan. Management has determined that a delay less than
    90 days will be considered an insignificant delay and that
    an amount less than $5 will be considered an insignificant
    shortfall. The Bank does not apply SFAS 114 using major
    risk classifications but on a loan by loan basis. All loans are
    charged off when management determines that principal and
    interest are not collectible.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| | Any excess of the Banks recorded investment in the loans
    over the measured value of the loans in accordance with SFAS 114
    is provided for in the allowance for loan losses. The Bank
    reviews its loans for impairment on a quarterly basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| | The recognition of interest income on all loans is discontinued
    when, in managements opinion, the borrower may be unable
    to meet payments as they become due or when the loan becomes
    90 days past due, whichever occurs first. All unpaid
    accrued interest on such loans is reserved. Such interest
    ultimately collected is credited to income in the period of
    recovery or applied to reduce principal if there is sufficient
    doubt about the collectibility of principal. Consumer loans more
    than 120 days or 180 days delinquent (depending on the
    nature of the loan) are generally required to be written off.                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | The Company is a party to financial instruments with off-balance
    sheet risk (commitments to extend credit) in the normal course
    of business to meet the financing needs of its customers.
    Commitments to extend credit are agreements to lend to a
    customer as long as there is no violation of any condition
    established in the commitment. Commitments generally have fixed
    expiration dates or other termination clauses and may require
    payment of a fee. Since some of the commitments are expected to
    expire without being drawn upon, the total commitment amount
    does not necessarily represent future cash requirements. The
    Company evaluates each customers credit worthiness on a
    case-by-case basis using the same credit policies in making
    commitments and conditional obligations as it does for
    on-balance sheet instruments. The amount of collateral obtained,
    if deemed necessary by the Company upon extension of credit, is
    based on managements credit evaluation of the
    counter-party.
|
| | Loans receivable classified as held for sale are recorded in the
    financial statements at the lower of cost or market.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

Income Taxes


| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company utilizes the asset and liability method of
    accounting for income taxes. Under the asset and liability
    method, deferred tax assets and liabilities are recognized for
    the future tax consequences attributable to differences between
    the financial statement carrying amounts of existing assets and
    liabilities and their respective tax bases and operating loss
    and tax credit carry forwards. Deferred tax assets and
    liabilities are measured using enacted tax rates expected to
    apply to taxable income in the years in which those temporary
    differences are expected to be recovered or settled. The effect
    on deferred tax assets and liabilities of a change in tax rates
    is recognized in income in the period that includes the
    enactment date.

Earnings Per Share
(EPS)


| |                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Basic EPS is computed by dividing income available to common
    stockholders by the weighted average number of common shares
    outstanding for the period. Diluted EPS reflects the potential
    dilution that could occur if securities or other contracts to
    issue common stock were exercised or converted into common stock
    or resulted in the issuance of common stock that then shared in
    the earnings of the entity.



Note continued










---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)




| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | The following table sets forth the computation of basic and
    diluted earnings per share:

|                                            |                                           |          |           |           |      |  |           |           |  |  |           |           | 
|------------------------------------------- | ----------------------------------------- | -------- | --------- | --------- | ---- |  | --------- | --------- |  |  | --------- | --------- | 
|                                            |                                           | June 30, |          
|                                            |                                           | 2005     |           |           | 2004 |  |           | 2003      | 
|                                           
|Basic earnings per share:                   |                                           |          |           |           |      |  |           |           |  |  |           |          
|                                            | Net income                                |          | $         | 2,049     |      |  | $         | 1,687     |  |  | $         | 2,534     | 
|                                            | Weighted average shares outstanding       |          |           | 1,937,086 |      |  |           | 1,897,091 |  |  |           | 1,880,815 | 
|                                            | Earnings per share                        |          | $         | 1.06      |      |  | $         | 0.89      |  |  | $         | 1.35      | 
|Diluted earnings per share:                 |                                           |          |           |           |      |  |           |           |  |  |           |          
|                                            | Net income                                |          | $         | 2,049     |      |  | $         | 1,687     |  |  | $         | 2,534     | 
|                                            | Weighted average shares outstanding       |          |           | 1,937,086 |      |  |           | 1,897,091 |  |  |           | 1,880,815 | 
|                                            | Dilutive effect of employee stock options |          |           | 50,757    |      |  |           | 88,025    |  |  |           | 101,119   | 
|                                           
|Diluted weighted average shares outstanding |                                           |          | 1,987,843 |           |      |  | 1,985,116 |           |  |  | 1,981,934 |          
|                                            | Earnings per share                        |          | $         | 1.03      |      |  | $         | 0.85      |  |  | $         | 1.28      | 




Stock
Compensation


| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | SFAS 123, Accounting for Stock-Based Compensation,
    allows companies to expense an estimated fair value of stock
    options or to continue to measure compensation expense for stock
    option plans using the intrinsic value method prescribed by
    Accounting Principles Board Opinion No. 25 (APB
    No. 25). Entities that elect to continue to measure
    compensation expense based on APB No. 25 must provide pro
    forma disclosures of net income and earnings per share as if the
    fair value method of accounting had been applied. The Company
    has elected to continue to measure compensation cost using the
    intrinsic value method prescribed by APB No. 25. Had the
    Company used the fair value method, net income and earnings per
    share would have been as follows:

|                                           |                                                                                                                       |          |       |       |      |   |       |       |   |   |       |       |  
|------------------------------------------ | --------------------------------------------------------------------------------------------------------------------- | -------- | ----- | ----- | ---- | - | ----- | ----- | - | - | ----- | ----- | -
|                                           |                                                                                                                       | June 30, |      
|                                           |                                                                                                                       | 2005     |       |       | 2004 |   |       | 2003  |  
|                                          
|Net income
    As reported                 |                                                                                                                       | $        | 2,049 |       |      | $ | 1,687 |       |   | $ | 2,534 |      
|                                           | Deduct total stock-based compensation expense determined under
    fair-value based method for all awards, net of tax |          |       |      |      |   |       | (4    | ) |   |       | (51   | )
|                                           | Pro forma                                                                                                             |          | $     | 2,049 |      |   | $     | 1,683 |   |   | $     | 2,483 |  
|                                          
|Basic earnings per share
    As reported   |                                                                                                                       | $        | 1.06  |       |      | $ | 0.89  |       |   | $ | 1.35  |      
|                                           | Pro forma                                                                                                             |          | $     | 1.06  |      |   | $     | 0.89  |   |   | $     | 1.32  |  
|                                          
|Diluted earnings per share
    As reported |                                                                                                                       | $        | 1.03  |       |      | $ | 0.85  |       |   | $ | 1.28  |      
|                                           | Pro forma                                                                                                             |          | $     | 1.03  |      |   | $     | 0.85  |   |   | $     | 1.25  |  

Comprehensive
Income


| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company reports comprehensive income in accordance with SFAS
    No. 130 which establishes standards for reporting and
    display of comprehensive income and its components (revenues,
    expenses, gains and losses) in a full set of general purpose
    financial statements. SFAS No. 130 requires that all items
    that are required to be recognized under accounting standards as
    components of comprehensive income be reported in a financial
    statement that is displayed with the same prominence as other
    financial statements. SFAS No. 130 requires that an
    enterprise (a) classify items of other comprehensive income
    by their nature in a financial statement and (b) display
    the accumulated balance of other comprehensive income separately
    from retained earnings and additional paid-in capital in the
    equity section of a statement of financial position. For the
    fiscal years ended June 30, 2005, 2004 and 2003, the
    Companys total comprehensive income was $2,007, $1,049 and
    2,758, respectively. Total comprehensive income is comprised of
    net income of $2,049, $1,687 and $2,534, respectively, and other
    comprehensive (loss) income of $(42), $(638) and $224, net
    of tax,



Note continued










---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)




| |                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | respectively. Other comprehensive income consists of unrealized
    gains and losses on investment securities and mortgage-backed
    securities available for sale.

Recent Accounting
Developments


| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In March 2004, the Financial Accounting Standards Board
    (FASB) reached consensus on the guidance provided by
    Emerging Issues Task Force Issue 03-1 (EITF 03-1),
    The Meaning of Other-Than-Temporary Impairment and Its
    Application to Certain Investments.The guidance is
    applicable to debt and equity securities that are within the
    scope of FASB Statement of Financial Accounting Standard
    (SFAS) No. 115, Accounting for Certain
    Investments In Debt and Equity Securities and certain other
    investments. EITF 03-1 specifies that an impairment would be
    considered other than temporary unless: (a) the investor
    has the ability and intent to hold an investment for a
    reasonable period of time sufficient for the recovery of the
    fair value up to (or beyond) the cost of the investment, and
    (b) evidence indicating the cost of the investment is
    recoverable within a reasonable period of time outweighs
    evidence to the contrary. EITF 03-1 cost method investment and
    disclosure provisions were effective for reporting periods
    ending after June 15, 2004. The measurement and recognition
    provisions relating to debt and equity securities have been
    delayed until the FASB issues additional guidance. The Company
    adopted cost method investment and disclosure provisions of EITF
    03-1 on June 30, 2004. The adoption did not have a material
    impact on the consolidated financial statements, results of
    operations or liquidity of the Company.
|
| | In October 2003, the American Institute of Certified Public
    Accountants issued Statement of Position (SOP) 03-3,
    Accounting for Loans or Certain Debt Securities Acquired in a
    Transfer. SOP 03-3 applies to a loan that is acquired
    where it is probable, at acquisition, that a transferee will be
    unable to collect all contractually required payments
    receivable. SOP 03-3 requires the recognition, as accretable
    yield, of the excess of all cash flows expected at acquisition
    over the investors initial investment in the loan as
    interest income on a level-yield basis over the life of the
    loan. The amount by which the loans contractually required
    payments exceed the amount of its expected cash flows at
    acquisition may not be recognized as an adjustment to yield, a
    loss accrual, or a valuation allowance for credit risk. SOP 03-3
    is effective for loans acquired in fiscal years beginning after
    December 31, 2004. Early adoption is permitted. The
    adoption of SOP 03-3 is not expected to have a material
    impact on the consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                
|
| | In December 2004, the Financial Accounting Standards Board
    (FASB) issued Statement of Financial Accounting
    Standards No. 123 (revised 2004), Share-Based
    Payment (FAS No. 123R). FAS No. 123R revised FAS
    No. 123, Accounting for Stock-Based Compensation,
    and supersedes APB Opinion No. 25, Accounting for Stock
    Issued to Employees, and its related implementation
    guidance. FAS No. 123R will require compensation costs related
    to share-based payment transactions to be recognized in the
    financial statement (with limited exceptions). The amount of
    compensation cost will be measured based on the grant-date fair
    value of the equity or liability instruments issued.
    Compensation cost will be recognized over the period that an
    employee provides service in exchange for the award.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| | In April, the Securities and Exchange Commission adopted a new
    rule that amends the compliance dates for FAS No. 123R. The
    Statement requires that compensation cost relating to
    share-based payment transactions be recognized in financial
    statements and that this cost be measured based on the fair
    value of the equity or liability instruments issued. FAS
    No. 123R covers a wide range of share-based compensation
    arrangements including share options, restricted share plans,
    performance-based awards, share appreciation rights, and
    employee share purchase plans. The Company will adopt FAS
    No. 123R on July 1, 2005. Management has determined
    that unless additional options are granted, there will be no
    impact on future earnings as a result of the adoption.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | In March 2005, the Securities and Exchange Commission
    (SEC) issued Staff Accounting Bulletin No. 107
    (SAB No. 107), Share-Based Payment,
    providing guidance on option valuation methods, the accounting
    for income tax effects of share-based payment arrangements upon
    adoption of FAS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



Note continued










---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | No. 123R, and the disclosures in MD&A subsequent to the
    adoption. The Company will provide SAB No. 107 required
    disclosures upon adoption of FAS No. 123R on July 1,
    2005. Management has determined that unless additional options
    are granted, there will be no impact on the Companys
    financial statements as a result of the adoption.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | In December 2004, FASB issued FAS No. 153, Exchanges of
    Nonmonetary Assets  An Amendment of APB Opinion
    No. 29. The guidance in APB Opinion No. 29,
    Accounting for Nonmonetary Transactions, is based on the
    principle that exchanges of nonmonetary assets should be
    measured based on the fair value of the assets exchanged. The
    guidance in that Opinion, however, included certain exceptions
    to that principle. FAS No. 153 amends Opinion No. 29
    to eliminate the exception for nonmonetary exchanges of similar
    productive assets and replaces it with a general exception for
    exchanges of nonmonetary assets that do not have commercial
    substance. A nonmonetary exchange has commercial substance if
    the future cash flows of the entity are expected to change
    significantly as a result of the exchange. The provisions of
    FAS No. 153 are effective for nonmonetary asset
    exchanges occurring in fiscal periods beginning after June 15,
    2005. Early application is permitted, and companies must apply
    the standard prospectively. The adoption of this standard is not
    expected to have a material effect on the Companys results
    of operations or financial position.
|
| | In June 2005, the FASB issued FAS No. 154, Accounting
    Changes and Errors Corrections, a replacement of APB Opinion
    No. 20 and FAS No. 3. The Statement applies to all
    voluntary changes in accounting principle, and changes the
    requirements for accounting for and reporting of a change in
    accounting principle. FAS No. 154 requires retrospective
    application to prior periods financial statements of a
    voluntary change in accounting principle unless it is
    impractical. APB Opinion No. 20 previously required that
    most voluntary changes in accounting principle be recognized by
    including in net income of the period of the change the
    cumulative effect of changing to the new accounting principle.
    FAS No. 154 improves the financial reporting because its
    requirements enhance the consistency of financial reporting
    between periods.                                                                                                                                                                                                                                                                                                                                                   

Reclassification


| |                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------
| | Certain items previously reported have been reclassified to
    conform with the current years reporting presentation.

(2) Investment
Securities




|                  |                              |          |   |           |      |       |            |        |       |            |        |   |        |       |   |    |  |  |   |        | 
|----------------- | ---------------------------- | -------- | - | --------- | ---- | ----- | ---------- | ------ | ----- | ---------- | ------ | - | ------ | ----- | - | -- |  |  | - | ------ | 
|                  |                              |          |   |           |      | Gross |            |        | Gross |            |        |  
|                  |                              |          |   | Amortized |      |       | Unrealized |        |       | Unrealized |        |   | Market |      
|                  |                              | Face/Par |   |           | Cost |       |            | Gains  |       |            | Losses |   |        | Value |  
|                 
|At June 30, 2005: |                              |          |   |           |      |       |            |        |       |            |        |   |        |       |   |    |  |  |   |       
|                  | U.S. Government Agency Notes |          | $ | 10,920    |      |       | $          | 10,918 |       |            | $      | 7 |        |       | $ | 80 |  |  | $ | 10,845 | 




|                  |                                      |  |   |        |  |  |   |        |  |  |   |    |  |  |   |    |  |  |   |        | 
|----------------- | ------------------------------------ |  | - | ------ |  |  | - | ------ |  |  | - | -- |  |  | - | -- |  |  | - | ------ | 
|At June 30, 2004: |                                      |  |   |        |  |  |   |        |  |  |   |    |  |  |   |    |  |  |   |       
|                  | Corporate notes and commercial paper |  | $ | 12,215 |  |  | $ | 12,210 |  |  | $ | 40 |  |  | $ | 67 |  |  | $ | 12,183 | 






Note continued










---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)


|                                                                                              |                                        |          |         |           |      |  |         |         |  |  |         |         | 
|--------------------------------------------------------------------------------------------- | -------------------------------------- | -------- | ------- | --------- | ---- |  | ------- | ------- |  |  | ------- | ------- | 
|                                                                                              |                                        |          |         | Amortized |      |  | Market  |        
|                                                                                              |                                        | Face/Par |         |           | Cost |  |         | Value   | 
|                                                                                             
|At June 30, 2005, the contractual maturities of
    the debt securities held to maturity are: |                                        |          |         |          
|                                                                                              | Due in 12 months or less               |          |         | $ 2,900   |      |  |         | $ 2,900 |  |  |         | $ 2,886 | 
|                                                                                              | Due after one year through five years  |          |         | 7,020     |      |  |         | 7,020   |  |  |         | 6,962   | 
|                                                                                              | Due after five years through ten years |          |         |          |      |  |         |        |  |  |         |        | 
|                                                                                              | Due after ten years                    |          |         | 1,000     |      |  |         | 998     |  |  |         | 997     | 
|                                                                                             
|                                                                                              |                                        |          | $10,920 |           |      |  | $10,918 |         |  |  | $10,845 |        






|                  |                                            |          |         |           |      |       |            |        |       |            |        |      |        |       |      |     |  |  |         |        | 
|----------------- | ------------------------------------------ | -------- | ------- | --------- | ---- | ----- | ---------- | ------ | ----- | ---------- | ------ | ---- | ------ | ----- | ---- | --- |  |  | ------- | ------ | 
|                  |                                            |          |         |           |      | Gross |            |        | Gross |            |        |     
|                  |                                            |          |         | Amortized |      |       | Unrealized |        |       | Unrealized |        |      | Market |      
|                  |                                            | Face/Par |         |           | Cost |       |            | Gains  |       |            | Losses |      |        | Value |     
|                 
|At June 30, 2005: |                                            |          |         |           |      |       |            |        |       |            |        |      |        |       |      |     |  |  |         |       
|                 
|                  | Municipal obligations                      |          |         | $8,315    |      |       |            | $7,628 |       |            |        | $575 |        |       |      | $  |  |  |         | $8,203 | 
|                  | Freddie Mac preferred stock                |          |         | 750       |      |       |            | 750    |       |            |        | 18   |        |       |      |    |  |  |         | 768    | 
|                  | Fannie Mae stock                           |          |         | 583       |      |       |            | 583    |       |            |        | 43   |        |       |      | 42  |  |  |         | 584    | 
|                  | Freddie Mac stock                          |          |         | 684       |      |       |            | 684    |       |            |        | 229  |        |       |      |    |  |  |         | 913    | 
|                  | Corporate and U.S. Government Agency Notes |          |         | 10,450    |      |       |            | 10,459 |       |            |        |     |        |       |      | 68  |  |  |         | 10,391 | 
|                  | CRA Qualified Investment Fund              |          |         | 1,000     |      |       |            | 1,000  |       |            |        |     |        |       |      | 10  |  |  |         | 990    | 
|                  | Other                                      |          |         | 220       |      |       |            | 220    |       |            |        |     |        |       |      | 5   |  |  |         | 215    | 
|                  | Shay Financial Services ARM Fund           |          |         | 23,931    |      |       |            | 23,931 |       |            |        |     |        |       |      | 456 |  |  |         | 23,475 | 
|                 
|                  |                                            |          | $45,933 |           |      |       | $45,255    |        |       |            | $865   |      |        |       | $581 |     |  |  | $45,539 |       




|                  |                                                  |  |         |         |  |  |         |         |  |  |      |      |  |  |      |     |  |  |         |         | 
|----------------- | ------------------------------------------------ |  | ------- | ------- |  |  | ------- | ------- |  |  | ---- | ---- |  |  | ---- | --- |  |  | ------- | ------- | 
|At June 30, 2004: |                                                  |  |         |         |  |  |         |         |  |  |      |      |  |  |      |     |  |  |         |        
|                 
|                  | Municipal obligations                            |  |         | $11,055 |  |  |         | $10,308 |  |  |      | $433 |  |  |      | $80 |  |  |         | $10,661 | 
|                  | Freddie Mac preferred stock                      |  |         | 750     |  |  |         | 750     |  |  |      | 17   |  |  |      | 2   |  |  |         | 765     | 
|                  | Fannie Mae stock                                 |  |         | 583     |  |  |         | 583     |  |  |      | 131  |  |  |      |    |  |  |         | 714     | 
|                  | Freddie Mac stock                                |  |         | 684     |  |  |         | 684     |  |  |      | 202  |  |  |      |    |  |  |         | 886     | 
|                  | Corporate Notes and U.S. Government Agency Notes |  |         | 10,500  |  |  |         | 10,517  |  |  |      | 21   |  |  |      | 55  |  |  |         | 10,483  | 
|                  | CRA Qualified Investment Fund                    |  |         | 1,000   |  |  |         | 1,000   |  |  |      |     |  |  |      | 36  |  |  |         | 964     | 
|                  | Other                                            |  |         | 220     |  |  |         | 220     |  |  |      |     |  |  |      | 8   |  |  |         | 212     | 
|                  | Shay Financial Services ARM Fund                 |  |         | 23,274  |  |  |         | 23,274  |  |  |      |     |  |  |      | 290 |  |  |         | 22,984  | 
|                 
|                  |                                                  |  | $48,066 |         |  |  | $47,336 |         |  |  | $804 |      |  |  | $465 |     |  |  | $47,669 |        




|                                                                                                |                                        |          |         |           |      |  |         |         |  |  |         |       | 
|----------------------------------------------------------------------------------------------- | -------------------------------------- | -------- | ------- | --------- | ---- |  | ------- | ------- |  |  | ------- | ----- | 
|                                                                                                |                                        |          |         | Amortized |      |  | Market  |        
|                                                                                                |                                        | Face/Par |         |           | Cost |  |         | Value   | 
|                                                                                               
|At June 30, 2005, the contractual maturities of the debt
    securities available for sale are: |                                        |          |         |          
|                                                                                                | Due in 12 months or less               |          |         | $ 1,000   |      |  |         | $ 1,000 |  |  |         | $ 998 | 
|                                                                                                | Due after one year through five years  |          |         | 5,000     |      |  |         | 5,000   |  |  |         | 4,969 | 
|                                                                                                | Due after five years through ten years |          |         | 4,000     |      |  |         | 3,336   |  |  |         | 3,570 | 
|                                                                                                | Due after ten years                    |          |         | 8,765     |      |  |         | 8,751   |  |  |         | 9,057 | 
|                                                                                               
|                                                                                                |                                        |          | $18,765 |           |      |  | $18,087 |         |  |  | $18,594 |      








Note continued










---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)










|                         |                                       |                     |        |        |                   |   |    |        |       |   |            |        |  |        |     |     |            |   |        |        |  |   |     |     | 
|------------------------ | ------------------------------------- | ------------------- | ------ | ------ | ----------------- | - | -- | ------ | ----- | - | ---------- | ------ |  | ------ | --- | --- | ---------- | - | ------ | ------ |  | - | --- | --- | 
|                         |                                       | Less than 12 months |        |        | 12 months or more |   |    | Total  |      
|                         |                                       |                     |        | Gross  |                   |   |    |        | Gross |   |            |        |  | Gross  |    
|                         |                                       | Market              |        |        | unrealized        |   |    | Market |       |   | unrealized |        |  | Market |     |     | unrealized |  
|                         |                                       | value               |        |        | losses            |   |    | value  |       |   | losses     |        |  | value  |     |     | losses     |  
|                        
|U.S. Government Agencies |                                       | $                   | 15,787 |        |                   | $ | 80 |        |       | $ | 2,959      |        |  | $      | 41  |     |            | $ | 18,746 |        |  | $ | 121 |    
|Corporate Notes          |                                       |                     | 483    |        |                   |   | 27 |        |       |   |           |        |  |        |    |     |            |   | 483    |        |  |   | 27  |    
|Equity Securities        |                                       |                     | 292    |        |                   |   | 42 |        |       |   | 24,679     |        |  |        | 471 |     |            |   | 24,971 |        |  |   | 513 |    
|                        
|                         | Total temporarily impaired securities |                     | $      | 16,562 |                   |   | $  | 149    |       |   | $          | 27,638 |  |        | $   | 512 |            |   | $      | 44,200 |  |   | $   | 661 | 






(3)
Mortgage-Backed Securities




|                                                |  |           |         |       |            |  |       |            |  |  |        |  |  |  |         | 
|----------------------------------------------- |  | --------- | ------- | ----- | ---------- |  | ----- | ---------- |  |  | ------ |  |  |  | ------- | 
|                                                |  |           |         | Gross |            |  | Gross |            |  | 
|                                                |  | Amortized |         |       | Unrealized |  |       | Unrealized |  |  | Market | 
|                                                |  | Cost      |         |       | Gains      |  |       | Losses     |  |  | Value  | 
|                                               
|At June 30, 2005:                               |  |           |         |       |            |  |       |            |  |  |        |  |  |  |         | 
|                                               
|Government National Mortgage Association (GNMA) |  |           | $   823 |       |            |  | $13   |            |  |  | $ 13   |  |  |  | $   823 | 
|Fannie Mae                                      |  |           | 7,462   |       |            |  | 24    |            |  |  | 65     |  |  |  | 7,421   | 
|Freddie Mac                                     |  |           | 2,074   |       |            |  | 9     |            |  |  | 23     |  |  |  | 2,060   | 
|Freddie Mac REMIC                               |  |           | 721     |       |            |  | 2     |            |  |  | 5      |  |  |  | 718     | 
|Fannie Mae REMIC                                |  |           | 1,939   |       |            |  | 41    |            |  |  |       |  |  |  | 1,980   | 
|                                               
|                                                |  |           | $13,019 |       |            |  | $89   |            |  |  | $106   |  |  |  | $13,002 | 




|                  |  |  |         |  |  |  |      |  |  |  |      |  |  |  |         | 
|----------------- |  |  | ------- |  |  |  | ---- |  |  |  | ---- |  |  |  | ------- | 
|At June 30, 2004: |  |  |         |  |  |  |      |  |  |  |      |  |  |  |         | 
|                 
|GNMA              |  |  | $ 1,390 |  |  |  | $ 25 |  |  |  | $ 21 |  |  |  | $ 1,394 | 
|Fannie Mae        |  |  | 10,288  |  |  |  | 53   |  |  |  | 86   |  |  |  | 10,255  | 
|Freddie Mac       |  |  | 2,673   |  |  |  | 15   |  |  |  | 16   |  |  |  | 2,672   | 
|Freddie Mac REMIC |  |  | 2,308   |  |  |  | 12   |  |  |  | 11   |  |  |  | 2,309   | 
|Fannie Mae REMIC  |  |  | 4,373   |  |  |  | 35   |  |  |  | 14   |  |  |  | 4,394   | 
|                 
|                  |  |  | $21,032 |  |  |  | $140 |  |  |  | $148 |  |  |  | $21,024 | 












Note continued










---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)






|                  |                                       |                     |    |       |                   |   |   |        |       |   |            |       |  |        |    |     |            |   |       |       |  |   |    |     | 
|----------------- | ------------------------------------- | ------------------- | -- | ----- | ----------------- | - | - | ------ | ----- | - | ---------- | ----- |  | ------ | -- | --- | ---------- | - | ----- | ----- |  | - | -- | --- | 
|                  |                                       | Less than 12 months |    |       | 12 months or more |   |   | Total  |      
|                  |                                       |                     |    | Gross |                   |   |   |        | Gross |   |            |       |  | Gross  |   
|                  |                                       | Market              |    |       | unrealized        |   |   | Market |       |   | unrealized |       |  | Market |    |     | unrealized |  
|                  |                                       | value               |    |       | losses            |   |   | value  |       |   | losses     |       |  | value  |    |     | losses     |  
|                 
|GNMA              |                                       | $                   |   |       |                   | $ |  |        |       | $ | 496        |       |  | $      | 13 |     |            | $ | 496   |       |  | $ | 13 |    
|Fannie Mae        |                                       |                     | 44 |       |                   |   | 1 |        |       |   | 4,443      |       |  |        | 64 |     |            |   | 4,487 |       |  |   | 65 |    
|Freddie Mac       |                                       |                     |   |       |                   |   |  |        |       |   | 1,529      |       |  |        | 23 |     |            |   | 1,529 |       |  |   | 23 |    
|Freddie Mac REMIC |                                       |                     |   |       |                   |   |  |        |       |   | 416        |       |  |        | 5  |     |            |   | 416   |       |  |   | 5  |    
|                 
|                  | Total temporarily impaired securities |                     | $  | 44    |                   |   | $ | 1      |       |   | $          | 6,884 |  |        | $  | 105 |            |   | $     | 6,928 |  |   | $  | 106 | 






(4) Loans
Receivable




|                                |                                    |                         |         |        |         |   |         |        |         | 
|------------------------------- | ---------------------------------- | ----------------------- | ------- | ------ | ------- | - | ------- | ------ | ------- | 
|                                |                                    | June 30,                |        
|                                |                                    | 2005                    |         |        | 2004    |  
|                               
|First mortgage loans:           |                                    |                         |         |        |         |   |         |       
|                                | Conventional:                      |                         |         |        |         |   |         |        |        
|                                |                                    | 1 to 4 family dwellings |         | $      | 165,844 |   |         | $      | 125,304 | 
|                                |                                    | Multi-family dwellings  |         |        | 1,462   |   |         |        | 1,616   | 
|                                |                                    | Commercial              |         |        | 4,437   |   |         |        | 6,322   | 
|                               
|                                |                                    |                         | 171,743 |        |         |   | 133,242 |       
|                                | Construction and development loans |                         |         | 5,095  |         |   |         | 5,247  |        
|                               
|                                |                                    |                         | 176,838 |        |         |   | 138,489 |       
|Less: Loans in process          |                                    |                         | (3,290  | )      |         |   | (3,459  | )     
|Deferred loan costs             |                                    |                         | 684     |        |         |   | 317     |       
|                               
|                                |                                    |                         | 174,232 |        |         |   | 135,347 |       
|                               
|Commercial and other loans      |                                    |                         | 665     |        |         |   | 1,475   |       
|Consumer loans:                 |                                    |                         |         |        |         |   |         |       
|                                | Loans secured by savings accounts  |                         |         | 155    |         |   |         | 285    |        
|                                | Installment loans                  |                         |         | 36,483 |         |   |         | 38,010 |        
|                               
|                                |                                    |                         | 37,303  |        |         |   | 39,770  |       
|Less: Deferred loan costs       |                                    |                         | 203     |        |         |   | 206     |       
|                               
|                                |                                    |                         | 37,506  |        |         |   | 39,976  |       
|                               
|                                |                                    |                         | 211,738 |        |         |   | 175,323 |       
|Less: Allowance for loan losses |                                    |                         | (1,989  | )      |         |   | (2,032  | )     
|                               
|                                |                                    | $                       | 209,749 |        |         | $ | 173,291 |       






Note continued










---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)




|                          |                                                    |          |       |       |      |   |        |       | 
|------------------------- | -------------------------------------------------- | -------- | ----- | ----- | ---- | - | ------ | ----- | 
|                          |                                                    | June 30, |      
|                          |                                                    | 2005     |       |       | 2004 |  
|                          |                                                   
|First mortgage loans:     |                                                    |          |       |       |      |   |        |      
|                          | Fixed rates (5.25% to 6.88% and 5.25% to 6.50%)    |          | $     | 1,258 |      |   | $      | 1,740 | 
|                          | Variable rates (4.75% to 6.25% and 3.75% to 5.00%) |          |       | 641   |      |   |        | 6,741 | 
|                         
|                          |                                                    |          | 1,899 |       |      |   | 8,481  |      
|Other loans  fixed rates |                                                    |          | 601   |       |      |   | 905    |      
|Unused lines of credit    |                                                    |          | 4,088 |       |      |   | 4,424  |      
|                         
|                          |                                                    | $        | 6,588 |       |      | $ | 13,810 |      












(5) Allowance
For Loan Losses




|                                                              |  |   |       |  
|------------------------------------------------------------- |  | - | ----- | -
|                                                             
|Balance at June 30, 2002                                      |  | $ | 1,803 |  
|Provision for losses                                          |  |   | 12    |  
|Charge-offs                                                   |  |   | (30   | )
|Recoveries                                                    |  |   | 12    |  
|Allowance on loans acquired from Stanton Federal Savings Bank |  |   | 209   |  
|                                                             
|Balance at June 30, 2003                                      |  |   | 2,006 |  
|Provision for losses                                          |  |   | 12    |  
|Charge-offs                                                   |  |   | (30   | )
|Recoveries                                                    |  |   | 44    |  
|                                                             
|Balance at June 30, 2004                                      |  |   | 2,032 |  
|Provision for losses                                          |  |   | 9     |  
|Charge-offs                                                   |  |   | (67   | )
|Recoveries                                                    |  |   | 15    |  
|                                                             
|Balance at June 30, 2005                                      |  | $ | 1,989 |  






Note continued










---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)








(6) Federal
Home Loan Bank Stock




(7) Office
Properties And Equipment




|                                  |                |          |        |       |      |   |        |       | 
|--------------------------------- | -------------- | -------- | ------ | ----- | ---- | - | ------ | ----- | 
|                                  |                | June 30, |       
|                                  |                | 2005     |        |       | 2004 |  
|                                 
|Land and land improvements        |                | $        | 592    |       |      | $ | 592    |      
|Office buildings and improvements |                |          | 3,206  |       |      |   | 3,069  |      
|Furniture, fixtures and equipment |                |          | 2,440  |       |      |   | 2,262  |      
|                                 
|                                  | Total, at cost |          |        | 6,238 |      |   |        | 5,923 | 
|Less accumulated depreciation     |                |          | (3,961 | )     |      |   | (3,680 | )    
|                                 
|                                  |                | $        | 2,277  |       |      | $ | 2,243  |      
















---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)


(8) Savings
Deposits




|                             |                                       |               |              |                  |               |  |      |          |   |  |      |      |   |      |         |        |  |   |         |        | 
|---------------------------- | ------------------------------------- | ------------- | ------------ | ---------------- | ------------- |  | ---- | -------- | - |  | ---- | ---- | - | ---- | ------- | ------ |  | - | ------- | ------ | 
|                             |                                       |               |              | Weighted Average |               |  |      |          |  
|                             |                                       | Interest Rate |              |                  | Interest Rate |  |      |         
|                             |                                       | At            |              |                  | At June 30,   |  |      | June 30, |  
|                             |                                       | June 30, 2005 |              |                  | 2005          |  |      | 2004     |   |  | 2005 |      |   | 2004 |        
|                            
|Demand and savings accounts: |                                       |               |              |                  |               |  |      |          |   |  |      |      |   |      |         |        |  |   |         |       
|                             | Passbook and club accounts            |               |              | 0 to 0.20        | %             |  |      | 0.20     | % |  |      | 0.20 | % |      | $       | 44,749 |  |   | $       | 46,790 | 
|                             | Money market deposit accounts         |               |              | 0 to 0.65        |               |  |      | 0.55     |   |  |      | 0.55 |   |      |         | 18,406 |  |   |         | 19,527 | 
|                             | Interest-bearing checking accounts    |               |              | 0 to 0.10        |               |  |      | 0.10     |   |  |      | 0.10 |   |      |         | 22,198 |  |   |         | 23,390 | 
|                             | Noninterest-bearing checking accounts |               |              |                  |               |  |      |          |   |  |      |      |   |      |         | 17,065 |  |   |         | 15,272 | 
|                            
|                             |                                       |               |              |                  |               |  |      |          |   |  |      |      |   |      | 102,418 |        |  |   | 104,979 |       
|                            
|Time deposits:               |                                       |               | 0.75 to 0.99 |                  |               |  |      |          |   |  |      |      |   |      |        |        |  |   | 1,161   |       
|                             |                                       |               | 1.00 to 1.99 |                  |               |  |      |          |   |  |      |      |   |      | 13,378  |        |  |   | 42,490  |       
|                             |                                       |               | 2.00 to 2.99 |                  |               |  |      |          |   |  |      |      |   |      | 43,522  |        |  |   | 25,717  |       
|                             |                                       |               | 3.00 to 3.99 |                  |               |  |      |          |   |  |      |      |   |      | 50,679  |        |  |   | 29,881  |       
|                             |                                       |               | 4.00 to 4.99 |                  |               |  |      |          |   |  |      |      |   |      | 21,066  |        |  |   | 18,890  |       
|                             |                                       |               | 5.00 to 5.99 |                  |               |  |      |          |   |  |      |      |   |      | 18,395  |        |  |   | 16,114  |       
|                             |                                       |               | 6.00 to 6.99 |                  |               |  |      |          |   |  |      |      |   |      | 4,614   |        |  |   | 6,158   |       
|                             |                                       |               | 7.00 to 7.99 |                  |               |  |      |          |   |  |      |      |   |      | 819     |        |  |   | 789     |       
|                            
|                             |                                       |               |              |                  |               |  | 3.46 |          |   |  | 3.10 |      |   |      | 152,473 |        |  |   | 141,200 |       
|                            
|                             |                                       |               |              |                  |               |  | 2.15 | %        |   |  | 1.87 | %    |   | $    | 254,891 |        |  | $ | 246,179 |       








|                       |  |          |         |  |      |   |         | 
|---------------------- |  | -------- | ------- |  | ---- | - | ------- | 
|                       |  | June 30, |        
|                       |  | 2005     |         |  | 2004 |  
|                      
|Under 12 months        |  | $        | 65,944  |  |      | $ | 62,710  | 
|12 months to 24 months |  |          | 40,605  |  |      |   | 23,939  | 
|24 months to 36 months |  |          | 12,232  |  |      |   | 23,074  | 
|36 months to 48 months |  |          | 4,703   |  |      |   | 4,504   | 
|48 months to 60 months |  |          | 6,506   |  |      |   | 4,741   | 
|Over 60 months         |  |          | 22,483  |  |      |   | 22,232  | 
|                      
|                       |  | $        | 152,473 |  |      | $ | 141,200 | 






|                                   |  |                      |       |  |      |   |       |      |  |   |       | 
|---------------------------------- |  | -------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                                   |  | Years ended June 30, |      
|                                   |  | 2005                 |       |  | 2004 |   |       | 2003 | 
|                                  
|Passbook and club accounts         |  | $                    | 89    |  |      | $ | 119   |      |  | $ | 135   | 
|Money market deposit accounts      |  |                      | 104   |  |      |   | 127   |      |  |   | 182   | 
|Interest-bearing checking accounts |  |                      | 23    |  |      |   | 24    |      |  |   | 44    | 
|Time deposits                      |  |                      | 4,804 |  |      |   | 4,574 |      |  |   | 5,997 | 
|                                  
|                                   |  | $                    | 5,020 |  |      | $ | 4,844 |      |  | $ | 6,358 | 














---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)


(9) Federal
Home Loan Bank Advances




|                  |  |          |      |   |          |   |        |      |  |   |        | 
|----------------- |  | -------- | ---- | - | -------- | - | ------ | ---- |  | - | ------ | 
|                  |  | Interest |      |   | June 30, |  
|Due date          |  | Rate     |      |   | 2005     |   |        | 2004 | 
|                 
|February 20, 2008 |  |          | 5.48 | % |          | $ | 3,000  |      |  | $ | 3,000  | 
|December 18, 2008 |  |          | 5.15 |   |          |   | 3,000  |      |  |   | 3,000  | 
|June 30, 2010     |  |          | 6.18 |   |          |   | 10,500 |      |  |   | 10,500 | 
|December 1, 2010  |  |          | 5.64 |   |          |   | 5,000  |      |  |   | 5,000  | 
|November 13, 2015 |  |          | 6.51 |   |          |   | 102    |      |  |   | 109    | 
|                 
|                  |  |          |      |   |          | $ | 21,602 |      |  | $ | 21,609 | 








(10) Income
Taxes




|          |         |      |     |     |      |   |     |      |  |   |       |     | 
|--------- | ------- | ---- | --- | --- | ---- | - | --- | ---- |  | - | ----- | --- | 
|          |         | 2005 |     |     | 2004 |   |     | 2003 | 
|         
|Current:  |         |      |     |     |      |   |     |      |  |   |       |    
|          | Federal |      | $   | 612 |      |   | $   | 433  |  |   | $     | 885 | 
|          | State   |      |     | 183 |      |   |     | 108  |  |   |       | 204 | 
|         
|          |         |      | 795 |     |      |   | 541 |      |  |   | 1,089 |    
|         
|Deferred: |         |      |     |     |      |   |     |      |  |   |       |    
|          | Federal |      |     | (58 | )    |   |     | 55   |  |   |       | 36  | 
|         
|          |         | $    | 737 |     |      | $ | 596 |      |  | $ | 1,125 |    






|                      |                                               |      |     |     |      |   |     |      |   |   |       |     | 
|--------------------- | --------------------------------------------- | ---- | --- | --- | ---- | - | --- | ---- | - | - | ----- | --- | 
|                      |                                               | 2005 |     |     | 2004 |   |     | 2003 |  
|                     
|Income                |                                               | $    | 737 |     |      | $ | 596 |      |   | $ | 1,125 |    
|Stockholders equity: |                                               |      |     |     |      |   |     |      |   |   |       |    
|                      | Accumulated other comprehensive (loss) income |      |     | (22 | )    |   |     | (329 | ) |   |       | 116 | 
|                     
|                      |                                               | $    | 715 |     |      | $ | 267 |      |   | $ | 1,241 |    






Note continued










---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)




|                                        |  |      |      |   |      |  |      |      |  |  |      |  
|--------------------------------------- |  | ---- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                                        |  | 2005 |      |   | 2004 |  |      | 2003 | 
|                                       
|Expected federal tax rate               |  |      | 34.0 | % |      |  | 34.0 | %    |  |  | 34.0 | %
|State taxes, net of federal tax benefit |  |      | 4.3  |   |      |  | 3.1  |      |  |  | 3.7  |  
|Cash Surrender Value of Life Insurance  |  |      | (2.5 | ) |      |  | (3.8 | )    |  |  |     |  
|Other, net                              |  |      | (4.7 | ) |      |  | (0.9 | )    |  |  | (.01 | )
|Tax exempt income, net                  |  |      | (3.4 | ) |      |  | (6.3 | )    |  |  | (6.9 | )
|                                       
|                                        |  |      | 26.5 | % |      |  | 26.1 | %    |  |  | 30.7 | %






|                             |                                 |      |      |       |      |   |      |       |  
|---------------------------- | ------------------------------- | ---- | ---- | ----- | ---- | - | ---- | ----- | -
|                             |                                 | 2005 |      |       | 2004 |  
|                            
|Deferred Tax Assets:         |                                 |      |      |       |      |   |      |      
|                             | Loan loss reserve               |      | $    | 676   |      |   | $    | 691   |  
|                             | Net operating loss carryforward |      |      | 162   |      |   |      | 306   |  
|                             | Deferred Compensation           |      |      | 264   |      |   |      | 211   |  
|                             | Other                           |      |      | 36    |      |   |      | 6     |  
|                            
|                             | Gross deferred tax assets       |      |      | 1,138 |      |   |      | 1,214 |  
|                             | Valuation allowance             |      |      |      |      |   |      |      |  
|                            
|                             | Net deferred tax asset          |      |      | 1,138 |      |   |      | 1,214 |  
|Deferred Tax Liabilities:    |                                 |      |      |       |      |   |      |      
|                             | Property, plant and equipment   |      |      | (70   | )    |   |      | (69   | )
|                             | Prepaid expense                 |      |      | (63   | )    |   |      | (74   | )
|                             | Investment securities           |      |      | (90   | )    |   |      | (112  | )
|                             | Purchase Accounting             |      |      | (326  | )    |   |      | (466  | )
|                             | Other                           |      |      | (91   | )    |   |      | (75   | )
|                            
|Gross deferred tax liability |                                 |      | (640 | )     |      |   | (796 | )    
|                            
|Net deferred tax asset       |                                 | $    | 498  |       |      | $ | 418  |      








(11) Stockholders
Equity




Note continued










---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)










|                                                                                              |                           |               |        |        |               |   |         |         |  |   |         |        |  |         |         |        |         |   |        |        |  |   |        |        | 
|--------------------------------------------------------------------------------------------- | ------------------------- | ------------- | ------ | ------ | ------------- | - | ------- | ------- |  | - | ------- | ------ |  | ------- | ------- | ------ | ------- | - | ------ | ------ |  | - | ------ | ------ | 
|                                                                                              |                           | June 30, 2005 |        |        | June 30, 2004 |  
|                                                                                              |                           |               |        | Tier I |               |   | Tier II |         |  |   |         | Tier I |  |         | Tier II |       
|                                                                                              |                           | Tier I        |        |        | Risk-         |   |         | Risk-   |  |   | Tier I  |        |  | Risk-   |         |        | Risk-   |  
|                                                                                              |                           | Core          |        |        | Based         |   |         | Based   |  |   | Core    |        |  | Based   |         |        | Based   |  
|                                                                                              |                           | Capital       |        |        | Capital       |   |         | Capital |  |   | Capital |        |  | Capital |         |        | Capital |  
|                                                                                             
|Equity capital (1)                                                                            |                           | $             | 24,159 |        |               | $ | 24,159  |         |  | $ | 24,159  |        |  | $       | 23,170  |        |         | $ | 23,170 |        |  | $ | 23,170 |       
|Plus general valuation allowances (2)                                                         |                           |               |        |        |               |   |         |         |  |   | 1,970   |        |  |         |         |        |         |   |        |        |  |   | 1,853  |       
|Plus allowable unrealized gains                                                               |                           |               |        |        |               |   |         |         |  |   |        |        |  |         |         |        |         |   |        |        |  |   | 6      |       
|                                                                                             
|                                                                                              | Total regulatory capital  |               |        | 24,159 |               |   |         | 24,159  |  |   |         | 26,129 |  |         |         | 23,170 |         |   |        | 23,170 |  |   |        | 25,029 | 
|Minimum required capital                                                                      |                           |               | 12,215 |        |               |   | 6,302   |         |  |   | 12,605  |        |  |         | 11,938  |        |         |   | 5,930  |        |  |   | 11,861 |       
|                                                                                             
|                                                                                              | Excess regulatory capital |               | $      | 11,944 |               |   | $       | 17,857  |  |   | $       | 13,524 |  |         | $       | 11,232 |         |   | $      | 17,240 |  |   | $      | 13,169 | 
|                                                                                             
|Minimum required capital to be well capitalized under Prompt
    Corrective Action Provisions |                           | $             | 15,269 |        |               | $ | 9,452   |         |  | $ | 15,754  |        |  | $       | 14,922  |        |         | $ | 8,885  |        |  | $ | 14,808 |       




|                                                                                                         |                                      |  |      |      |   |  |       |       |   |  |       |      |   |  |      |      |   |  |       |       |   |  |       |      |  
|-------------------------------------------------------------------------------------------------------- | ------------------------------------ |  | ---- | ---- | - |  | ----- | ----- | - |  | ----- | ---- | - |  | ---- | ---- | - |  | ----- | ----- | - |  | ----- | ---- | -
|Regulatory capital as a percentage (3)                                                                   |                                      |  | 7.91 | %    |   |  | 15.34 | %     |   |  | 16.59 | %    |   |  | 7.76 | %    |   |  | 15.65 | %     |   |  | 16.90 | %   
|Minimum required capital percentage                                                                      |                                      |  | 4.00 |      |   |  | 4.00  |       |   |  | 8.00  |      |   |  | 4.00 |      |   |  | 4.00  |       |   |  | 8.00  |     
|                                                                                                        
|                                                                                                         | Excess regulatory capital percentage |  |      | 3.91 | % |  |       | 11.34 | % |  |       | 8.59 | % |  |      | 3.76 | % |  |       | 11.65 | % |  |       | 8.90 | %
|                                                                                                        
|Minimum required capital percentage to be well capitalized under
    Prompt Corrective Action Provisions |                                      |  | 5.00 | %    |   |  | 6.00  | %     |   |  | 10.00 | %    |   |  | 5.00 | %    |   |  | 6.00  | %     |   |  | 10.00 | %   






|    |                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents equity capital of the Bank as reported to the Federal
    Financial Institutions Examination Council on Form 041 for
    the quarters ended June 30, 2005 and 2004.                                                                                                                                                             
|   
|(2) | Limited to 1.25% of risk-weighted assets.                                                                                                                                                                                                                                                                                                  
|   
|(3) | Tier I capital is calculated as a percentage of adjusted total
    average assets of $305,382 and $298,438 at June 30, 2005
    and 2004, respectively. Tier I and Tier II risk-based
    capital are calculated as a percentage of adjusted risk-weighted
    assets of $157,542 and $148,079 at June 30, 2005 and 2004,
    respectively.

(12) Employee
Benefit Plans




Note continued










---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)








(13) Stock
Compensation Programs










Note continued










---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)




|                                                 |  |         |         |         |          |   |       |          |  |         |               |   |      |          |       |         |          |  |               |          |  |         |          |  |      |          |        |         |          |   |       |      |         |   |          |   |  |   |       |  |  |  |        |   |  |   |       | 
|------------------------------------------------ |  | ------- | ------- | ------- | -------- | - | ----- | -------- |  | ------- | ------------- | - | ---- | -------- | ----- | ------- | -------- |  | ------------- | -------- |  | ------- | -------- |  | ---- | -------- | ------ | ------- | -------- | - | ----- | ---- | ------- | - | -------- | - |  | - | ----- |  |  |  | ------ | - |  | - | ----- | 
|                                                 |  |         |         | Average |          |   | 1993  |          |  | Average |               |   | 1993 |          |       | Average |          |  | 1996          |          |  | Average |          |  | 1996 |          |        | Average |          |   |       |      | Average |  
|                                                 |  | 1988    |         |         | Exercise |   |       | Employee |  |         | Exercise      |   |      | Director |       |         | Exercise |  |               | Employee |  |         | Exercise |  |      | Director |        |         | Exercise |   |       | 2000 |         |   | Exercise |  
|                                                 |  | Program |         |         | Price    |   |       | Program  |  |         | Price         |   |      | Plan     |       |         | Price    |  |               | Program  |  |         | Price    |  |      | Plan     |        |         | Price    |   |       | Plan |         |   | Price    |  
|                                                 | 
|June 30, 2002                                    |  |         | 19,982  |         |          | $ | 7.96  |          |  |         | 96,781        |   |      | $        | 9.55  |         |          |  | 46,236        |          |  | $       | 13.27    |  |      |          | 48,500 |         |          | $ | 15.75 |      |         |   | 28,332   |   |  | $ | 10.59 |  |  |  | 23,718 |   |  | $ | 14.00 | 
|Granted                                          |  |         |        |         |          |   |      |          |  |         |              |   |      |          |      |         |          |  |              |          |  |         |         |  |      |          |       |         |          |   |      |      |         |   |         |   |  |   |      |  |  |  |       |   |  |   |      | 
|Exercised                                        |  |         | (3,130  | )       |          |   | 7.62  |          |  |         | (2,500        | ) |      |          | 8.44  |         |          |  | (6,875        | )        |  |         | 7.66     |  |      |          | (5,000 | )       |          |   | 15.75 |      |         |   |         |   |  |   |      |  |  |  |       |   |  |   |      | 
|Forfeited                                        |  |         |        |         |          |   |      |          |  |         |              |   |      |          |      |         |          |  |              |          |  |         |         |  |      |          |       |         |          |   |      |      |         |   |         |   |  |   |      |  |  |  |       |   |  |   |      | 
|                                                
|June 30, 2003                                    |  |         | 16,852  |         |          | $ | 8.02  |          |  |         | 94,281        |   |      | $        | 9.58  |         |          |  | 39,361        |          |  | $       | 14.25    |  |      |          | 43,500 |         |          | $ | 15.75 |      |         |   | 28,332   |   |  | $ | 10.59 |  |  |  | 23,718 |   |  | $ | 14.00 | 
|Granted                                          |  |         |        |         |          |   |      |          |  |         |              |   |      |          |      |         |          |  |              |          |  |         |         |  |      |          |       |         |          |   |      |      |         |   |         |   |  |   |      |  |  |  |       |   |  |   |      | 
|Exercised                                        |  |         | (15,072 | )       |          |   | 7.84  |          |  |         | (54,069       | ) |      |          | 8.78  |         |          |  | (7,381        | )        |  |         | 13.58    |  |      |          | (5,000 | )       |          |   | 15.75 |      |         |   | (4,722   | ) |  |   | 10.59 |  |  |  | (3,953 | ) |  |   | 14.00 | 
|Forfeited                                        |  |         | (768    | )       |          |   |      |          |  |         |              |   |      |          |      |         |          |  |              |          |  |         |         |  |      |          |       |         |          |   |      |      |         |   |         |   |  |   |      |  |  |  |       |   |  |   |      | 
|                                                
|June 30, 2004                                    |  |         | 1,012   |         |          | $ | 11.00 |          |  |         | 40,212        |   |      | $        | 10.66 |         |          |  | 31,980        |          |  | $       | 14.41    |  |      |          | 38,500 |         |          | $ | 15.75 |      |         |   | 23,610   |   |  | $ | 10.59 |  |  |  | 19,765 |   |  | $ | 14.00 | 
|Granted                                          |  |         |        |         |          |   |      |          |  |         |              |   |      |          |      |         |          |  |              |          |  |         |         |  |      |          |       |         |          |   |      |      |         |   |         |   |  |   |      |  |  |  |       |   |  |   |      | 
|Exercised                                        |  |         | (450    | )       |          |   | 11.00 |          |  |         | (275          | ) |      |          | 10.92 |         |          |  | (7,375        | )        |  |         | 9.60     |  |      |          |       |         |          |   |      |      |         |   | (6,296   | ) |  |   | 10.59 |  |  |  |       |   |  |   |      | 
|Forfeited                                        |  |         |        |         |          |   |      |          |  |         |              |   |      |          |      |         |          |  |              |          |  |         |         |  |      |          |       |         |          |   |      |      |         |   |         |   |  |   |      |  |  |  |       |   |  |   |      | 
|                                                
|June 30, 2005                                    |  |         | 562     |         |          | $ | 11.00 |          |  |         | 39,937        |   |      | $        | 10.66 |         |          |  | 24,605        |          |  | $       | 15.85    |  |      |          | 38,500 |         |          | $ | 15.75 |      |         |   | 17,314   |   |  | $ | 10.59 |  |  |  | 19,765 |   |  | $ | 14.00 | 
|                                                
|Actual contractual life remaining in years       |  |         | 0.2     |         |          |   |       |          |  |         | 0.1           |   |      |          |       |         |          |  | 2.6           |          |  |         |          |  |      |          | 3.9    |         |          |   |       |      |         |   | 1.4      |   |  |   |       |  |  |  | 5.3    |   |  |   |       | 
|Option price per share                           |  |         | $11.00  |         |          |   |       |          |  |         | $10.00-$10.92 |   |      |          |       |         |          |  | $10.59-$19.50 |          |  |         |          |  |      | $        | 15.75  |         |          |   |       |      |         | $ | 10.59    |   |  |   |       |  |  |  | $14.00 |   |  |   |       | 
|Options available to be granted at June 30, 2004 |  |         |        |         |          |   |       |          |  |         |              |   |      |          |       |         |          |  |              |          |  |         |          |  |      |          | 35,511 |         |          |   |       |      |         |   |         |   |  |   |       |  |  |  | 71,161 |   |  |   |       | 
















---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)


(14) Selected
Quarterly Financial Data (Unaudited)


|                                                     |  |                           |        |  |             |  |        |          |  |  |         |  |  |  |        | 
|---------------------------------------------------- |  | ------------------------- | ------ |  | ----------- |  | ------ | -------- |  |  | ------- |  |  |  | ------ | 
|                                                     |  | Three Month Periods Ended |       
|2004/2005                                            |  | September 30              |        |  | December 31 |  |        | March 31 |  |  | June 30 | 
|                                                    
|Interest income                                      |  |                           | $3,324 |  |             |  | $3,424 |          |  |  | $3,525  |  |  |  | $3,489 | 
|Interest expense                                     |  |                           | 1,516  |  |             |  | 1,563  |          |  |  | 1,578   |  |  |  | 1,637  | 
|                                                    
|Net interest income before provision for loan losses |  |                           | 1,808  |  |             |  | 1,861  |          |  |  | 1,947   |  |  |  | 1,852  | 
|Provision for loan losses                            |  |                           | 3      |  |             |  | 3      |          |  |  | 3       |  |  |  |       | 
|Other income                                         |  |                           | 369    |  |             |  | 359    |          |  |  | 353     |  |  |  | 360    | 
|Operating expenses                                   |  |                           | 1,472  |  |             |  | 1,549  |          |  |  | 1,533   |  |  |  | 1,560  | 
|                                                    
|Income before income taxes                           |  |                           | 702    |  |             |  | 668    |          |  |  | 764     |  |  |  | 652    | 
|Provision for income taxes                           |  |                           | 214    |  |             |  | 207    |          |  |  | 242     |  |  |  | 74     | 
|                                                    
|Net income                                           |  |                           | $ 488  |  |             |  | $ 461  |          |  |  | $ 522   |  |  |  | $ 578  | 




|                    |         |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|------------------- | ------- |  |  | ------ |  |  |  | ------ |  |  |  | ------ |  |  |  | ------ | 
|Earnings per share: |         |  |  |        |  |  |  |        |  |  |  |        |  |  |  |       
|                    | Basic   |  |  | $ 0.25 |  |  |  | $ 0.24 |  |  |  | $ 0.27 |  |  |  | $ 0.30 | 
|                    | Diluted |  |  | $ 0.25 |  |  |  | $ 0.23 |  |  |  | $ 0.26 |  |  |  | $ 0.29 | 




|                    |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|------------------- |  |  | ------ |  |  |  | ------ |  |  |  | ------ |  |  |  | ------ | 
|Dividends per share |  |  | $ 0.20 |  |  |  | $ 0.20 |  |  |  | $ 0.20 |  |  |  | $ 0.20 | 




|                                                     |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|---------------------------------------------------- |  |  | ------ |  |  |  | ------ |  |  |  | ------ |  |  |  | ------ | 
|2003/2004                                            |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|                                                    
|Interest income                                      |  |  | $3,467 |  |  |  | $3,168 |  |  |  | $3,316 |  |  |  | $3,115 | 
|Interest expense                                     |  |  | 1,700  |  |  |  | 1,532  |  |  |  | 1,471  |  |  |  | 1,427  | 
|                                                    
|Net interest income before provision for loan losses |  |  | 1,767  |  |  |  | 1,636  |  |  |  | 1,845  |  |  |  | 1,688  | 
|Provision for loan losses                            |  |  | 3      |  |  |  | 3      |  |  |  | 3      |  |  |  | 3      | 
|Other income                                         |  |  | 420    |  |  |  | 358    |  |  |  | 361    |  |  |  | 370    | 
|Operating expenses                                   |  |  | 1,510  |  |  |  | 1,583  |  |  |  | 1,577  |  |  |  | 1,480  | 
|                                                    
|Income before income taxes                           |  |  | 674    |  |  |  | 408    |  |  |  | 626    |  |  |  | 575    | 
|Provision for income taxes                           |  |  | 204    |  |  |  | 55     |  |  |  | 193    |  |  |  | 144    | 
|                                                    
|Net income                                           |  |  | $ 470  |  |  |  | $ 353  |  |  |  | $ 433  |  |  |  | $ 431  | 




|                    |         |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|------------------- | ------- |  |  | ------ |  |  |  | ------ |  |  |  | ------ |  |  |  | ------ | 
|Earnings per share: |         |  |  |        |  |  |  |        |  |  |  |        |  |  |  |       
|                    | Basic   |  |  | $ 0.25 |  |  |  | $ 0.19 |  |  |  | $ 0.23 |  |  |  | $ 0.22 | 
|                    | Diluted |  |  | $ 0.24 |  |  |  | $ 0.18 |  |  |  | $ 0.22 |  |  |  | $ 0.22 | 




|                    |  |  |        |  |  |  |        |  |  |  |        |  |  |  |        | 
|------------------- |  |  | ------ |  |  |  | ------ |  |  |  | ------ |  |  |  | ------ | 
|Dividends per share |  |  | $ 0.20 |  |  |  | $ 0.20 |  |  |  | $ 0.20 |  |  |  | $ 0.20 | 




As a result of rounding, the sum of quarterly amounts may not
equal the annual amounts.


(15) Disclosures
About Fair Value Of Financial Instruments


Disclosure about Fair Value of Financial
Instruments,






Note continued










---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)






|                      |                       |                  |          |         |                  |  |          |          |  |  |            |         |  |  |          |         | 
|--------------------- | --------------------- | ---------------- | -------- | ------- | ---------------- |  | -------- | -------- |  |  | ---------- | ------- |  |  | -------- | ------- | 
|                      |                       | At June 30, 2005 |          |         | At June 30, 2004 | 
|                      |                       | Carrying         |          |         | Estimated        |  |          | Carrying |  |  | Estimated  |        
|                      |                       | Amount           |          |         | Fair Value       |  |          | Amount   |  |  | Fair Value |        
|                     
|Non-interest-bearing: |                       |                  |          |         |                  |  |          |          |  |  |            |         |  |  |          |        
|                      | Demand accounts       |                  |          | $17,065 |                  |  |          | $17,065  |  |  |            | $15,272 |  |  |          | $15,272 | 
|Interest-bearing:     |                       |                  |          |         |                  |  |          |          |  |  |            |         |  |  |          |        
|                      | Now and MMDA accounts |                  |          | 40,604  |                  |  |          | 40,604   |  |  |            | 42,917  |  |  |          | 42,917  | 
|                      | Passbook accounts     |                  |          | 44,749  |                  |  |          | 44,749   |  |  |            | 46,790  |  |  |          | 46,790  | 
|                      | Time deposits         |                  |          | 152,473 |                  |  |          | 152,129  |  |  |            | 141,200 |  |  |          | 140,434 | 
|                     
|Total Deposits        |                       |                  | $254,891 |         |                  |  | $254,547 |          |  |  | $246,179   |         |  |  | $245,413 |        








|                |               |                  |  |          |                  |  |  |          |  |  |            |          |  |  |  |          | 
|--------------- | ------------- | ---------------- |  | -------- | ---------------- |  |  | -------- |  |  | ---------- | -------- |  |  |  | -------- | 
|                |               | At June 30, 2005 |  |          | At June 30, 2004 | 
|                |               | Carrying         |  |          | Estimated        |  |  | Carrying |  |  | Estimated  |         
|                |               | Amount           |  |          | Fair Value       |  |  | Amount   |  |  | Fair Value |         
|               
|Borrowed funds: |               |                  |  |          |                  |  |  |          |  |  |            |          |  |  |  |         
|                | FHLB advances |                  |  | $ 21,602 |                  |  |  | $ 23,225 |  |  |            | $ 21,609 |  |  |  | $ 23,495 | 




















---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)




|     |                                                                                 
|---- | --------------------------------------------------------------------------------
|(16) | Laurel
    Capital Group, Inc. 
     (Parent Company Only) Financial Information

|                                  |              |          |         |         |      |  |         |         | 
|--------------------------------- | ------------ | -------- | ------- | ------- | ---- |  | ------- | ------- | 
|                                  |              | June 30, |        
|                                  |              |          |        
|Statement Of Financial Condition  |              | 2005     |         |         | 2004 | 
|                                 
|Assets                            |              |          |         |         |      |  |         |        
|Cash                              |              |          | $   277 |         |      |  | $   556 |        
|Money market investments          |              |          |        |         |      |  | 8       |        
|Prepaid Income Tax                |              |          | 122     |         |      |  |        |        
|Other assets                      |              |          | 9       |         |      |  | 8       |        
|Investment in Laurel Savings Bank |              |          | 27,428  |         |      |  | 26,564  |        
|                                 
|                                  | Total assets |          |         | $27,836 |      |  |         | $27,136 | 




|                                         |                                            |  |        |         |  |  |        |         | 
|---------------------------------------- | ------------------------------------------ |  | ------ | ------- |  |  | ------ | ------- | 
|Liabilities And
    Stockholders Equity |                                            |  |        |         |  |  |        |        
|Liabilities                              |                                            |  | $   32 |         |  |  | $   11 |        
|Stockholders equity                     |                                            |  | 27,804 |         |  |  | 27,125 |        
|                                        
|                                         | Total liabilities and stockholders equity |  |        | $27,836 |  |  |        | $27,136 | 




|                                                      |  |                             |        |   |      |  |        |      |  |  |        |  
|----------------------------------------------------- |  | --------------------------- | ------ | - | ---- |  | ------ | ---- |  |  | ------ | -
|                                                      |  | For the year ended June 30, |       
|                                                      |  |                             |       
|Statement Of Operations                               |  | 2005                        |        |   | 2004 |  |        | 2003 | 
|                                                     
|Dividends from subsidiary                             |  |                             | $1,300 |   |      |  | $1,800 |      |  |  | $1,716 |  
|Equity in undistributed income of Laurel Savings Bank |  |                             | 907    |   |      |  | (1     | )    |  |  | 910    |  
|                                                     
|                                                      |  |                             | 2,207  |   |      |  | 1,799  |      |  |  | 2,626  |  
|                                                     
|Operating expenses                                    |  |                             | 164    |   |      |  | 162    |      |  |  | 133    |  
|                                                     
|Income before income tax benefit                      |  |                             | 2,043  |   |      |  | 1,637  |      |  |  | 2,493  |  
|Income tax benefit                                    |  |                             | (6     | ) |      |  | (50    | )    |  |  | (41    | )
|                                                     
|Net income                                            |  |                             | $2,049 |   |      |  | $1,687 |      |  |  | $2,534 |  




|                                                       |                                                                                       |                             |         |        |      |   |         |        |      |   |         |        |     | 
|------------------------------------------------------ | ------------------------------------------------------------------------------------- | --------------------------- | ------- | ------ | ---- | - | ------- | ------ | ---- | - | ------- | ------ | --- | 
|                                                       |                                                                                       | For the year ended June 30, |        
|                                                       |                                                                                       |                             |        
|Statement Of Cash Flows                                |                                                                                       | 2005                        |         |        | 2004 |   |         | 2003   |     
|                                                      
|Net income                                             |                                                                                       |                             | $ 2,049 |        |      |   | $ 1,687 |        |      |   | $ 2,534 |       
|Undistributed income of Laurel Savings Bank            |                                                                                       |                             | (907    | )      |      |   | 1       |        |      |   | (910    | )     
|                                                       | Adjustments to reconcile net income to net cash provided by
    operating activities: |                             |         |        |      |   |         |        |      |   |         |        |    
|                                                       |                                                                                       | Other  net                 |         |        | (101 | ) |         |        | (239 | ) |         |        | 284 | 
|                                                      
|                                                       | Net cash provided by operating activities                                             |                             |         | 1,041  |      |   |         | 1,449  |      |   |         | 1,908  |    
|                                                      
|Financing activities:                                  |                                                                                       |                             |         |        |      |   |         |        |      |   |         |       
|                                                       | Acquisition of treasury stock                                                         |                             |         |       |      |   |         | (686   | )    |   |         | (395   | )  
|                                                       | Stock options exercised                                                               |                             |         | 223    |      |   |         | 678    |      |   |         | 176    |    
|                                                       | Dividends paid                                                                        |                             |         | (1,551 | )    |   |         | (1,515 | )    |   |         | (1,429 | )  
|                                                      
|                                                       | Net cash used by financing activities                                                 |                             |         | (1,328 | )    |   |         | (1,523 | )    |   |         | (1,648 | )  
|                                                      
|Net change in cash and cash equivalents                |                                                                                       |                             | (287    | )      |      |   | (74     | )      |      |   | 260     |       
|Cash and cash equivalents at the beginning of the year |                                                                                       |                             | 564     |        |      |   | 638     |        |      |   | 378     |       
|                                                      
|Cash and cash equivalents at the end of the year       |                                                                                       |                             | $   277 |        |      |   | $   564 |        |      |   | $   638 |       














---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)


(17) Contingent
Liabilities




(18) Acquisition










|               |                                        |                           |   |        |        | 
|-------------- | -------------------------------------- | ------------------------- | - | ------ | ------ | 
|              
|March 31, 2003 |                                        |                           |   |       
|               | Cash and cash equivalents              |                           | $ | 9,083  |       
|               | Interest earning assets                |                           |   | 39,081 |       
|               | Property and equipment                 |                           |   | 805    |       
|               | Intangible assets                      |                           |   | 2,006  |       
|               | Goodwill                               |                           |   | 2,158  |       
|               | Other assets                           |                           |   | 1,576  |       
|              
|               |                                        | Total assets acquired     |   |        | 54,709 | 
|              
|               | Interest bearing deposits              |                           |   | 37,707 |       
|               | Non-interest bearing deposits          |                           |   | 3,505  |       
|               | Short-term debt                        |                           |   | 3,097  |       
|               | Other non-interest bearing liabilities |                           |   | 1,070  |       
|              
|               |                                        | Total liabilities assumed |   |        | 45,379 | 
|              
|               | Net assets acquired                    |                           | $ | 9,330  |       






Note continued










---



##### 



Laurel Capital Group, Inc.


Notes to Consolidated
Financial Statements (continued)





(Dollar amounts in thousands, except per share data)




|                           |  |        |       |  |  |  |  | 
|-------------------------- |  | ------ | ----- |  |  |  |  | 
|                           |  | Fiscal |       |  | 
|                           |  | Year   |       |  | 
|                           |  | 2003   |       |  | 
|                          
|Net Interest Income        |  | $      | 8,571 |  |  |  |  | 
|Net Income                 |  |        | 1,682 |  |  |  |  | 
|Earnings Per ShareBasic   |  |        | 0.89  |  |  |  |  | 
|Earnings Per ShareDiluted |  |        | 0.85  |  |  |  |  | 

(19) Goodwill
and Other Intangible Assets




|                             |                                 |         |   |       |      |  |   |       |  
|---------------------------- | ------------------------------- | ------- | - | ----- | ---- |  | - | ----- | -
|                             |                                 | June 30 |  
|                             |                                 | 2005    |   |       | 2004 | 
|                            
|Amortized intangible assets: |                                 |         |   |       |      |  |   |      
|                             | Core deposit intangible  gross |         | $ | 2,006 |      |  | $ | 2,006 |  
|                             | Less: accumulated amortization  |         |   | (836  | )    |  |   | (495  | )
|                            
|                             | Core deposit intangible  net   |         | $ | 1,170 |      |  | $ | 1,511 |  






|                                  |  |   |     | 
|--------------------------------- |  | - | --- | 
|                                 
|For the fiscal year ended 6/30/05 |  | $ | 340 | 
|                                 
|For the fiscal year ended 6/30/06 |  | $ | 290 | 
|                                 
|For the fiscal year ended 6/30/07 |  | $ | 243 | 
|                                 
|For the fiscal year ended 6/30/08 |  | $ | 199 | 
|                                 
|For the fiscal year ended 6/30/09 |  | $ | 158 | 
|                                 
|For the fiscal year ended 6/30/10 |  | $ | 120 | 














---



##### 



Laurel Capital Group, Inc.




Selected Five Year
Financial Data





(Dollar amounts in thousands, except per share amounts)


Financial Condition Data:


|                                              |  |          |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|--------------------------------------------- |  | -------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- |  |  | ---- | ------- |  |  | - | ------- | 
|                                              |  | June 30, |        
|                                              |  | 2005     |         |  | 2004 |   |         | 2003 |  |   | 2002    |  |  | 2001 |        
|                                             
|Total assets                                  |  | $        | 309,801 |  |      | $ | 299,375 |      |  | $ | 322,783 |  |  | $    | 278,061 |  |  | $ | 258,012 | 
|Loans, net                                    |  |          | 209,749 |  |      |   | 173,291 |      |  |   | 181,202 |  |  |      | 178,322 |  |  |   | 176,908 | 
|Loans held for sale                           |  |          | 947     |  |      |   | 1,130   |      |  |   | 1,439   |  |  |      | 1,371   |  |  |   | 1,701   | 
|Mortgage-backed securities held to maturity   |  |          |        |  |      |   |        |      |  |   | 27      |  |  |      | 40      |  |  |   | 150     | 
|Mortgage-backed securities available for sale |  |          | 13,002  |  |      |   | 21,024  |      |  |   | 13,478  |  |  |      | 7,998   |  |  |   | 9,998   | 
|Investment securities held to maturity        |  |          | 10,918  |  |      |   | 12,210  |      |  |   | 9,207   |  |  |      | 11,909  |  |  |   | 13,937  | 
|Investment securities available for sale      |  |          | 45,539  |  |      |   | 47,669  |      |  |   | 46,603  |  |  |      | 39,156  |  |  |   | 39,762  | 
|Money market investments                      |  |          |        |  |      |   | 283     |      |  |   | 137     |  |  |      |        |  |  |   |        | 
|Deposits                                      |  |          | 254,891 |  |      |   | 246,179 |      |  |   | 265,580 |  |  |      | 225,419 |  |  |   | 205,636 | 
|FHLB advances                                 |  |          | 21,602  |  |      |   | 21,609  |      |  |   | 24,672  |  |  |      | 21,620  |  |  |   | 21,626  | 
|Stockholders equity                          |  |          | 27,804  |  |      |   | 27,125  |      |  |   | 27,684  |  |  |      | 26,553  |  |  |   | 26,138  | 

Operating Data:


|                                                                                     |  |                             |        |  |      |   |        |      |  |   |        |  |  |      |        |  |  |   |        | 
|------------------------------------------------------------------------------------ |  | --------------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ------ |  |  | - | ------ | 
|                                                                                     |  | For the year ended June 30, |       
|                                                                                     |  | 2005                        |        |  | 2004 |   |        | 2003 |  |   | 2002   |  |  | 2001 |       
|                                                                                    
|Interest income                                                                      |  | $                           | 13,762 |  |      | $ | 13,066 |      |  | $ | 15,197 |  |  | $    | 16,450 |  |  | $ | 18,380 | 
|Interest expense                                                                     |  |                             | 6,294  |  |      |   | 6,130  |      |  |   | 7,651  |  |  |      | 8,815  |  |  |   | 10,256 | 
|                                                                                    
|Net interest income before provision for loan losses                                 |  |                             | 7,468  |  |      |   | 6,936  |      |  |   | 7,546  |  |  |      | 7,635  |  |  |   | 8,124  | 
|Provision for loan losses                                                            |  |                             | 9      |  |      |   | 12     |      |  |   | 12     |  |  |      | 18     |  |  |   | 18     | 
|                                                                                    
|Net interest income after provision for loan losses                                  |  |                             | 7,459  |  |      |   | 6,924  |      |  |   | 7,534  |  |  |      | 7,617  |  |  |   | 8,106  | 
|Net gain on investments, loans and mortgage-backed securities
    available for sale |  |                             | 24     |  |      |   | 49     |      |  |   | 15     |  |  |      | 76     |  |  |   | 96     | 
|Other income                                                                         |  |                             | 1,417  |  |      |   | 1,460  |      |  |   | 909    |  |  |      | 890    |  |  |   | 1,135  | 
|Operating expenses                                                                   |  |                             | 6,114  |  |      |   | 6,150  |      |  |   | 4,799  |  |  |      | 4,081  |  |  |   | 4,035  | 
|                                                                                    
|Income before income taxes                                                           |  |                             | 2,786  |  |      |   | 2,283  |      |  |   | 3,659  |  |  |      | 4,502  |  |  |   | 5,302  | 
|Income tax expense                                                                   |  |                             | 737    |  |      |   | 596    |      |  |   | 1,125  |  |  |      | 1,427  |  |  |   | 1,663  | 
|                                                                                    
|Net income                                                                           |  | $                           | 2,049  |  |      | $ | 1,687  |      |  | $ | 2,534  |  |  | $    | 3,075  |  |  | $ | 3,639  | 
|                                                                                    
|Diluted earnings per share                                                           |  | $                           | 1.03   |  |      | $ | 0.85   |      |  | $ | 1.28   |  |  | $    | 1.51   |  |  | $ | 1.79   | 
|                                                                                    

Statistical Profile:


|                                       |  |          |       |   |      |  |       |      |  |  |       |   |  |      |       |   |  |  |       |  
|-------------------------------------- |  | -------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | - |  | ---- | ----- | - |  |  | ----- | -
|                                       |  | June 30, |      
|                                       |  | 2005     |       |   | 2004 |  |       | 2003 |  |  | 2002  |   |  | 2001 |      
|                                      
|Return on average assets               |  |          | 0.67  | % |      |  | 0.55  | %    |  |  | 0.89  | % |  |      | 1.18  | % |  |  | 1.42  | %
|Return on average equity               |  |          | 7.45  | % |      |  | 6.19  | %    |  |  | 9.32  | % |  |      | 11.50 | % |  |  | 14.73 | %
|Average equity to average assets ratio |  |          | 8.96  | % |      |  | 8.89  | %    |  |  | 9.52  | % |  |      | 10.24 | % |  |  | 9.63  | %
|Dividend payout ratio                  |  |          | 77.59 | % |      |  | 94.13 | %    |  |  | 59.38 | % |  |      | 47.68 | % |  |  | 37.99 | %
|                                      









---



##### 



Laurel Capital Group, Inc.




Managements
Discussion and Analysis





Overview










Asset and
Liability Management
















---



##### 



Laurel Capital Group, Inc.


Managements
Discussion and Analysis (continued)







|                                               |  |          |         |    |          |  |         |         |  |  |         |    |  |  |         |   
|---------------------------------------------- |  | -------- | ------- | -- | -------- |  | ------- | ------- |  |  | ------- | -- |  |  | ------- | --
|                                               |  | Increase |         |    | Decrease | 
|                                               |  |          |         |    |          | 
|Simulated impact in the next 12 months         |  | +100 bp  |         |    | +200 bp  |  |         | -100 bp |  |  | -200 bp |   
|Compared with June 30, 2005:                   |  |          |         |    |          |  |         |         |  |  |         |   
|Net interest income increase/ (decrease)       |  |          | (1.10)  | %  |          |  | (3.80)  | %       |  |  | (5.60)  | %  |  |  | (13.30) | % 
|Return on average equity increase/(decrease)   |  |          | (33)    | bp |          |  | (113)   | bp      |  |  | (163)   | bp |  |  | (388)   | bp
|Diluted earnings per share increase/(decrease) |  |          | $(0.05) |    |          |  | $(0.16) |         |  |  | $(0.23) |    |  |  | $(0.54) |   
|                                               |  |          |         |    |          |  |         |         |  |  |         |   



|                                        |                                      |                |         |         |         |   |        |        |        |   |         |         |        |       |        |         |        |   |         |         |         | 
|--------------------------------------- | ------------------------------------ | -------------- | ------- | ------- | ------- | - | ------ | ------ | ------ | - | ------- | ------- | ------ | ----- | ------ | ------- | ------ | - | ------- | ------- | ------- | 
|                                        |                                      | 3              |         |         |         |   |        |        |        |   |        
|                                        |                                      | Months         |         |         | 4-12    |   |        | 1-5    |        |   | Over 5  |         |        |      
|Interest Sensitivity Period             |                                      | Or Less        |         |         | Months  |   |        | Years  |        |   | Years   |         |        | Total |       
|                                        |                                     
|                                        |                                      | (In Thousands) |        
|Rate sensitive assets:                  |                                      |                |         |         |         |   |        |        |        |   |         |         |        |       |        |         |        |   |         |        
|                                        | Loans and mortgage-backed securities |                |         | $21,409 |         |   | $      | 47,563 |        |   | $       | 107,921 |        |       | $      | 48,793  |        |   | $       | 225,686 |        
|                                        | Investment securities                |                |         | 10,685  |         |   |        | 31,744 |        |   |         | 13,765  |        |       |        | 14,395  |        |   |         | 70,589  |        
|                                       
|Total rate sensitive assets             |                                      |                | $32,094 |         |         | $ | 79,307 |        |        | $ | 121,686 |         |        | $     | 63,188 |         |        | $ | 296,275 |        
|                                       
|Rate sensitive liabilities:             |                                      |                |         |         |         |   |        |        |        |   |         |         |        |       |        |         |        |   |         |        
|Deposits:                               |                                      |                |         |         |         |   |        |        |        |   |         |         |        |       |        |         |        |   |         |        
|                                        | Certificates of deposit              |                |         | $16,788 |         |   | $      | 49,146 |        |   | $       | 64,041  |        |       | $      | 22,483  |        |   | $       | 152,458 |        
|                                        | NOW and money funds                  |                |         | 1,079   |         |   |        | 2,933  |        |   |         | 10,488  |        |       |        | 26,202  |        |   |         | 40,702  |        
|                                        | Passbooks                            |                |         | 1,287   |         |   |        | 3,492  |        |   |         | 12,542  |        |       |        | 30,185  |        |   |         | 47,506  |        
|                                       
|                                        |                                      | Total deposits |         |         | $19,154 |   |        | $      | 55,571 |   |         | $       | 87,071 |       |        | $       | 78,870 |   |         | $       | 240,666 | 
|Borrowings                              |                                      |                |        |         |         |   |       |        |        |   | 16,500  |         |        |       | 5,102  |         |        |   | 21,602  |        
|                                       
|Total rate sensitive liabilities        |                                      |                | $19,154 |         |         | $ | 55,571 |        |        | $ | 103,571 |         |        | $     | 83,972 |         |        | $ | 262,268 |        
|                                       
|Interest sensitivity gap:               |                                      |                |         |         |         |   |        |        |        |   |         |         |        |       |        |         |        |   |         |        
|                                        | Interval                             |                |         | 12,940  |         |   |        | 23,736 |        |   |         | 18,115  |        |       |        | (20,784 | )      |   |         | 34,007  |        
|                                        | Cumulative                           |                |         | $12,940 |         |   | $      | 36,676 |        |   | $       | 54,791  |        |       | $      | 34,007  |        |   |         |         |        
|                                       
|Ratio of cumulative gap to total assets |                                      |                | 4.18    | %       |         |   | 11.84  | %      |        |   | 17.69   | %       |        |       | 10.98  | %       |        |   |         |        
|                                       









---



##### 



Laurel Capital Group, Inc.


Managements
Discussion and Analysis (continued)















---



##### 



Laurel Capital Group, Inc.


Managements
Discussion and Analysis (continued)





Financial
Condition






|                              |                              |                        |      |                     |         |   |         |          |  |       |        |         |         |         |      |      |          |       |         |         |         |  |         |       |  |          |      |      |      |   |         |         |  |  |        |       |  |  |      |      |  
|----------------------------- | ---------------------------- | ---------------------- | ---- | ------------------- | ------- | - | ------- | -------- |  | ----- | ------ | ------- | ------- | ------- | ---- | ---- | -------- | ----- | ------- | ------- | ------- |  | ------- | ----- |  | -------- | ---- | ---- | ---- | - | ------- | ------- |  |  | ------ | ----- |  |  | ---- | ---- | -
|                              |                              |                        |      | Year ended June 30, |        
|                              |                              | At                     |      |                     | 2005    |   |         | 2004     |  |       | 2003   |        
|                              |                              | June 30,               |      |                     |         |   |         |          | 
|                              |                              | 2005                   |      |                     |         |  
|                              |                              | Average                |      |                     |         |   | Average |          |  |       |        | Average |         |         |      |      | Average  |      
|                              |                              | Yield                  |      |                     | Average |   |         |          |  | Yield |        |         | Average |         |      |      |          | Yield |         |         | Average |  |         |       |  | Yield    |     
|                              |                              | Rate                   |      |                     | Balance |   |         | Interest |  |       | Rate   |         |         | Balance |      |      | Interest |       |         | Rate    |         |  | Balance |       |  | Interest |      |      | Rate |  
|                              |                             
|                              |                              | (Dollars in Thousands) |     
|Interest-earning assets:      |                              |                        |      |                     |         |   |         |          |  |       |        |         |         |         |      |      |          |       |         |         |         |  |         |       |  |          |      |      |      |   |         |         |  |  |        |       |  |  |      |     
|                              | Mortgage loans (1)           |                        |      | 5.21                | %       |   | $       | 158,982  |  |       | $      | 8,559   |         |         |      | 5.38 | %        |       | $       | 125,186 |         |  | $       | 7,668 |  |          |      | 6.13 | %    |   | $       | 135,988 |  |  | $      | 9,333 |  |  |      | 6.86 | %
|                              | Consumer and other loans (1) |                        |      | 5.44                |         |   |         | 38,987   |  |       |        | 2,146   |         |         |      | 5.50 |          |       |         | 42,072  |         |  |         | 2,425 |  |          |      | 5.75 |      |   |         | 39,320  |  |  |        | 2,623 |  |  |      | 6.67 |  
|                             
|Total loans                   |                              |                        | 5.24 |                     |         |   | 197,969 |          |  |       | 10,705 |         |         |         | 5.41 |      |          |       | 167,258 |         |         |  | 10,093  |       |  |          | 6.03 |      |      |   | 175,308 |         |  |  | 11,956 |       |  |  | 6.82 |     
|                              | Mortgage-backed securities   |                        |      | 4.11                |         |   |         | 17,167   |  |       |        | 649     |         |         |      | 3.78 |          |       |         | 12,555  |         |  |         | 479   |  |          |      | 3.82 |      |   |         | 10,562  |  |  |        | 558   |  |  |      | 5.28 |  
|                              | Investment securities        |                        |      | 3.94                |         |   |         | 59,496   |  |       |        | 2,069   |         |         |      | 3.48 |          |       |         | 58,496  |         |  |         | 1,921 |  |          |      | 3.28 |      |   |         | 55,183  |  |  |        | 2,160 |  |  |      | 3.91 |  
|                              | Interest-earning deposits    |                        |      | 2.42                |         |   |         | 17,459   |  |       |        | 339     |         |         |      | 1.94 |          |       |         | 51,092  |         |  |         | 573   |  |          |      | 1.12 |      |   |         | 34,758  |  |  |        | 523   |  |  |      | 1.52 |  
|                             
|Total interest-earning assets |                              |                        | 4.81 | %                   |         |   | 292,091 |          |  |       | 13,762 |         |         |         | 4.71 | %    |          |       | 289,401 |         |         |  | 13,066  |       |  |          | 4.51 | %    |      |   | 275,811 |         |  |  | 15,197 |       |  |  | 5.51 | %   
|Non-interest-earning assets   |                              |                        |      |                     |         |   | 14,905  |          |  |       |        |         |         |         |      |      |          |       | 17,121  |         |         |  |         |       |  |          |      |      |      |   | 9,847   |         |  |  |        |       |  |  |      |     
|                             
|Total assets                  |                              |                        |      |                     |         | $ | 306,996 |          |  |       |        |         |         |         |      |      |          | $     | 306,522 |         |         |  |         |       |  |          |      |      |      | $ | 285,658 |         |  |  |        |       |  |  |      |     




|                                                                                         |                  |  |      |      |  |   |         |         |  |   |       |       |  |  |      |      |   |   |         |         |  |   |       |       |  |  |      |      |   |   |         |         |  |   |       |       |  |  |      |      |  
|---------------------------------------------------------------------------------------- | ---------------- |  | ---- | ---- |  | - | ------- | ------- |  | - | ----- | ----- |  |  | ---- | ---- | - | - | ------- | ------- |  | - | ----- | ----- |  |  | ---- | ---- | - | - | ------- | ------- |  | - | ----- | ----- |  |  | ---- | ---- | -
|Interest-bearing liabilities:                                                            |                  |  |      |      |  |   |         |         |  |   |       |       |  |  |      |      |   |   |         |         |  |   |       |       |  |  |      |      |   |   |         |         |  |   |       |       |  |  |      |     
|                                                                                         | Savings deposits |  |      | 2.26 |  |   | $       | 235,823 |  |   | $     | 5,020 |  |  |      | 2.13 | % |   | $       | 236,427 |  |   | $     | 4,844 |  |  |      | 2.05 | % |   | $       | 217,953 |  |   | $     | 6,358 |  |  |      | 2.92 | %
|                                                                                         | Borrowings       |  |      | 5.82 |  |   |         | 21,605  |  |   |       | 1,274 |  |  |      | 5.90 |   |   |         | 22,716  |  |   |       | 1,286 |  |  |      | 5.67 |   |   |         | 22,372  |  |   |       | 1,293 |  |  |      | 5.78 |  
|                                                                                        
|Total interest-bearing liabilities                                                       |                  |  | 2.57 | %    |  |   | 257,428 |         |  | $ | 6,294 |       |  |  | 2.44 | %    |   |   | 259,143 |         |  | $ | 6,130 |       |  |  | 2.36 | %    |   |   | 240,325 |         |  | $ | 7,651 |       |  |  | 3.18 | %   
|Non-interest-bearing liabilities                                                         |                  |  |      |      |  |   | 22,061  |         |  |   |       |       |  |  |      |      |   |   | 20,118  |         |  |   |       |       |  |  |      |      |   |   | 18,140  |         |  |   |       |       |  |  |      |     
|                                                                                        
|Total liabilities                                                                        |                  |  |      |      |  |   | 279,489 |         |  |   |       |       |  |  |      |      |   |   | 279,261 |         |  |   |       |       |  |  |      |      |   |   | 258,465 |         |  |   |       |       |  |  |      |     
|Stockholders equity                                                                     |                  |  |      |      |  |   | 27,507  |         |  |   |       |       |  |  |      |      |   |   | 27,261  |         |  |   |       |       |  |  |      |      |   |   | 27,193  |         |  |   |       |       |  |  |      |     
|                                                                                        
|Total liabilities and stockholders equity                                               |                  |  |      |      |  | $ | 306,996 |         |  |   |       |       |  |  |      |      |   | $ | 306,522 |         |  |   |       |       |  |  |      |      |   | $ | 285,658 |         |  |   |       |       |  |  |      |     
|                                                                                        
|Net earning assets                                                                       |                  |  |      |      |  | $ | 34,663  |         |  |   |       |       |  |  |      |      |   | $ | 30,258  |         |  |   |       |       |  |  |      |      |   | $ | 35,486  |         |  |   |       |       |  |  |      |     
|Net interest income/average interest rate spread                                         |                  |  | 2.24 | %    |  |   |         |         |  | $ | 7,468 |       |  |  | 2.27 | %    |   |   |         |         |  | $ | 6,936 |       |  |  | 2.15 | %    |   |   |         |         |  | $ | 7,546 |       |  |  | 2.33 | %   
|Net yield on interest-earning assets                                                     |                  |  |      |      |  |   |         |         |  |   |       |       |  |  | 2.56 | %    |   |   |         |         |  |   |       |       |  |  | 2.39 | %    |   |   |         |         |  |   |       |       |  |  | 2.74 | %   
|Average interest-earning assets as a percent of average
    interest-bearing liabilities |                  |  |      |      |  |   | 113.47  | %       |  |   |       |       |  |  |      |      |   |   | 111.68  | %       |  |   |       |       |  |  |      |      |   |   | 114.77  | %       |  |   |       |       |  |  |      |     






Cash and
Cash Equivalents












---



##### 



Laurel Capital Group, Inc.


Managements
Discussion and Analysis (continued)





Investment
Securities Held to Maturity and Investment Securities Available
for Sale




Mortgage-Backed
Securities Held to Maturity and Mortgage-Backed Securities
Available for Sale




Loan
Portfolio








Deposit
Portfolio






Borrowings




Stockholders
Equity












---



##### 



Laurel Capital Group, Inc.


Managements
Discussion and Analysis (continued)







Results of
Operations




Rate/Volume
Analysis




|                                                  |                            |                            |       |       |        |   |        |        |       |   |       |       |      |   |     |      |     | 
|------------------------------------------------- | -------------------------- | -------------------------- | ----- | ----- | ------ | - | ------ | ------ | ----- | - | ----- | ----- | ---- | - | --- | ---- | --- | 
|                                                  |                            | Fiscal 2005                |      
|                                                  |                            | Compared to Fiscal 2004    |      
|                                                  |                            | Increase (Decrease) due to |      
|                                                  |                           
|                                                  |                            | Rate/                      |       |       |       
|                                                  |                            | Rate                       |       |       | Volume |   |        | Volume |       |   | Total |      
|                                                  |                           
|                                                  |                            | (In Thousands)             |      
|Interest income on interest-earning assets:       |                            |                            |       |       |        |   |        |        |       |   |       |       |      |   |     |     
|                                                  | Mortgage loans             |                            |       | $(928 | )      |   |        | $2,070 |       |   |       | $(251 | )    |   | $   | 891  |    
|                                                  | Consumer loans             |                            |       | (109  | )      |   |        | (178   | )     |   |       | 8     |      |   |     | (279 | )  
|                                                  | Mortgage-backed securities |                            |       | (4    | )      |   |        | 176    |       |   |       | (2    | )    |   |     | 170  |    
|                                                  | Investment securities      |                            |       | 113   |        |   |        | 33     |       |   |       | 2     |      |   |     | 148  |    
|                                                  | Interest-earning deposits  |                            |       | 419   |        |   |        | (377   | )     |   |       | (276  | )    |   |     | (234 | )  
|                                                 
|                                                  |                            | Total                      |       |       | (509   | ) |        |        | 1,724 |   |       |       | (519 | ) |     |      | 696 | 
|                                                 
|Interest expense on interest-bearing liabilities: |                            |                            |       |       |        |   |        |        |       |   |       |       |      |   |     |     
|                                                  | Deposits                   |                            |       | 188   |        |   |        | (12    | )     |   |       |      |      |   |     | 176  |    
|                                                  | Borrowings                 |                            |       | 54    |        |   |        | (63    | )     |   |       | (3    | )    |   |     | (12  | )  
|                                                 
|                                                  |                            | Total                      |       |       | 242    |   |        |        | (75   | ) |       |       | (3   | ) |     |      | 164 | 
|                                                 
|Net change in net interest income                 |                            |                            | $(751 | )     |        |   | $1,799 |        |       |   | $(516 | )     |      | $ | 532 |     












---



##### 



Laurel Capital Group, Inc.


Managements
Discussion and Analysis (continued)





|                                                  |                            |                            |    |        |        |   |      |        |      |   |       |      |      |   |      |        |        |  
|------------------------------------------------- | -------------------------- | -------------------------- | -- | ------ | ------ | - | ---- | ------ | ---- | - | ----- | ---- | ---- | - | ---- | ------ | ------ | -
|                                                  |                            | Fiscal 2004                |   
|                                                  |                            | Compared to Fiscal 2003    |   
|                                                  |                            | Increase (Decrease) due to |   
|                                                  |                           
|                                                  |                            | Rate/                      |    |        |       
|                                                  |                            | Rate                       |    |        | Volume |   |      | Volume |      |   | Total |     
|                                                  |                           
|                                                  |                            | (In Thousands)             |   
|Interest income on interest-earning assets:       |                            |                            |    |        |        |   |      |        |      |   |       |      |      |   |      |       
|                                                  | Mortgage loans             |                            | $  | (1,004 | )      |   | $    | (741   | )    |   | $     | 80   |      |   | $    | (1,665 | )     
|                                                  | Consumer loans             |                            |    | (389   | )      |   |      | 186    |      |   |       | (27  | )    |   |      | (230   | )     
|                                                  | Mortgage-backed securities |                            |    | (155   | )      |   |      | 105    |      |   |       | (29  | )    |   |      | (79    | )     
|                                                  | Investment securities      |                            |    | (305   | )      |   |      | (62    | )    |   |       | 8    |      |   |      | (359   | )     
|                                                  | Interest-earning deposits  |                            |    | (37    | )      |   |      | 266    |      |   |       | (27  | )    |   |      | 202    |       
|                                                 
|                                                  |                            | Total                      |    |        | (1,890 | ) |      |        | (246 | ) |       |      | 5    |   |      |        | (2,131 | )
|                                                 
|Interest expense on interest-bearing liabilities: |                            |                            |    |        |        |   |      |        |      |   |       |      |      |   |      |       
|                                                  | Deposits                   |                            |    | (1,893 | )      |   |      | 539    |      |   |       | (160 | )    |   |      | (1,514 | )     
|                                                  | Borrowings                 |                            |    | (27    | )      |   |      | 20     |      |   |       |     |      |   |      | (7     | )     
|                                                 
|                                                  |                            | Total                      |    |        | (1,920 | ) |      |        | 559  |   |       |      | (160 | ) |      |        | (1,521 | )
|                                                 
|Net change in net interest income                 |                            | $                          | 30 |        |        | $ | (805 | )      |      | $ | 165   |      |      | $ | (610 | )     




Interest
Income on Loans and Loans Held for Sale












---



##### 



Laurel Capital Group, Inc.


Managements
Discussion and Analysis (continued)





Interest
Income on Mortgage-Backed Securities Available for Sale




Interest
Income on Investments Held to Maturity and Investments Available
for Sale




Interest
Income on Interest-Earning Deposits












---



##### 



Laurel Capital Group, Inc.


Managements
Discussion and Analysis (continued)





Interest
Expense on Savings Deposits




Interest
Expense on Borrowings




Net
Interest Income














---



##### 



Laurel Capital Group, Inc.


Managements
Discussion and Analysis (continued)





Provision
for Loan Losses








Other
Income
















---



##### 



Laurel Capital Group, Inc.


Managements
Discussion and Analysis (continued)





Operating
Expenses
















Income
Taxes




Net Income












---



##### 



Laurel Capital Group, Inc.


Managements
Discussion and Analysis (continued)







Off-Balance
Sheet Arrangements






|  |                                                                                                                                                                      
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the origination, purchase or sale of loans;                                                                                                                          
| | the purchase of investment securities;                                                                                                                               
| | the fulfillment of commitments under letters-of-credit on home
    equity lines of credit, construction loans, and predetermined
    overdraft protection limits; and
| | the commitment to fund withdrawals of certificates of deposit at
    maturity.                                                                                       







|  |                                                                                                     
|- | ----------------------------------------------------------------------------------------------------
| | total approved loan origination commitments outstanding
    amounting to $2.5 million;              
| | rate lock agreements with customers of $2.7 million;                                                
| | unadvanced portion of construction loans of $3.3 million;                                           
| | unused lines of credit of $4.1 million which included those
    designated for overdraft protection;
| | outstanding standby letters of credit of $30,000; and                                               
| | certificates of deposit scheduled to mature in one year or less
    totaling $65.9 million.         



Contractual
Obligations




|                                   |  |                |        |  |       |   |        |       |  |   |           |  |  |       |        |  |  |   |         | 
|---------------------------------- |  | -------------- | ------ |  | ----- | - | ------ | ----- |  | - | --------- |  |  | ----- | ------ |  |  | - | ------- | 
|                                   |  | Less Than      |        |  | 1-3   |   |        | 3-5   |  |   | More than |  |  |      
|                                   |  | 1 year         |        |  | years |   |        | years |  |   | 5 years   |  |  | Total |       
|                                   | 
|                                   |  | (In Thousands) |       
|Certificates of deposit maturities |  | $              | 65,944 |  |       | $ | 52,837 |       |  | $ | 11,209    |  |  | $     | 22,483 |  |  | $ | 152,473 | 
|FHLB advances maturities           |  |                |       |  |       | $ | 3,000  |       |  | $ | 13,500    |  |  | $     | 5,102  |  |  | $ | 21,602  | 

Liquidity
And Capital Resources
















---



##### 



Laurel Capital Group, Inc.


Managements
Discussion and Analysis (continued)















Impact Of
Inflation And Changing Prices




Critical
Accounting Policies












---



##### 



Laurel Capital Group, Inc.


Managements
Discussion and Analysis (continued)









Allowance for Loan Losses.






Other Than Temporary Decline.


Deferred Income Taxes. Accounting for Income Taxes.