2001 ANNUAL REPORT





                                                            Harleysville Savings
                                                           Financial Corporation






<PAGE>

Mission Statement

   Harleysville Savings Financial Corporation's focus is to be your trusted

   financial partner by providing quality financial products and services to

   families and individuals; by providing a rewarding place for our employees

   to work; by being a responsible corporate citizen of the community; and

   by achieving a fair and reasonable return for our stockholders.




<PAGE>

Selected Consolidated Financial and Other Data

<TABLE>
<CAPTION>

Selected Balance Sheet Data:
(in thousands except per share data)                                           As of September 30,
                                                        2001           2000            1999            1998            1997
------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>             <C>             <C>             <C>
Total Assets                                         $558,388        $488,554        $459,848        $417,533        $345,239
Mortgage-backed securities held to maturity           167,727         116,304         116,778          78,793          18,303
Mortgage-backed securities available-for-sale              --           7,440           7,916           3,695           3,983
Loans receivable - net                                290,213         262,774         252,260         251,729         244,503
Investment securities held to maturity                 62,202          71,281          61,015          50,622          48,461
Investment securities available-for-sale                3,294           3,310           3,202           1,586           3,515
Other investments (1)                                  16,538          10,221           9,155          22,740          18,876
Deposits                                              350,147         309,836         303,660         289,827         273,773
FHLB advances and other borrowings                    171,309         145,134         125,180          99,953          46,414
Total stockholders' equity                             34,264          31,398          28,963          26,100          22,872
Book value per share                                    15.32           14.05           12.83           11.68           10.32
</TABLE>

<TABLE>
<CAPTION>

Selected Operations Data:                                                     Year Ended September 30,
                                                        2001           2000            1999            1998             1997
------------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>             <C>             <C>             <C>
Interest income                                      $ 36,303        $ 33,182        $ 29,716        $ 27,129        $ 24,485
Interest expense                                       26,583          22,795          20,199          17,949          15,362
                                                     --------        --------        --------        --------        --------

Net interest income                                     9,720          10,387           9,517           9,180           9,123
Provision for loan losses                                  --              --              17             120             177
                                                     --------        --------        --------        --------        --------
Net interest income after provision
    for loan losses                                     9,720          10,387           9,500           9,060           8,946

Gain (loss) on sales of loans and securities              191              40              35             101             (10)
Other income                                            1,055             512             451             453             423
Other expense                                           5,832           5,380           4,858           4,528           4,161
                                                     --------        --------        --------        --------        --------

Income before taxes                                     5,134           5,559           5,128           5,086           5,198
Income tax expense                                      1,219           1,702           1,622           1,605           1,784
                                                     --------        --------        --------        --------        --------

Net income                                           $  3,915        $  3,857        $  3,506        $  3,481        $  3,414
                                                     ========        ========        ========        ========        ========

Earnings per share - basic                           $   1.76        $   1.72        $   1.56        $   1.57        $   1.56
Earnings per share - diluted                             1.73            1.70            1.53            1.52            1.52
Dividends per share                                      0.48            0.44            0.36            0.32            0.29

</TABLE>

<TABLE>
<CAPTION>
Selected Other Data:
                                                                             Year Ended September 30,
                                                        2001           2000             1999            1998            1997
------------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>             <C>             <C>             <C>             <C>
Return on average assets (2)                             0.74%           0.81%           0.81%           0.93%           1.04%
Return on average equity (2)                            12.00%          12.82%          12.83%          14.24%          16.14%
Average equity to average assets (2)                     6.15%           6.43%           6.32%           6.52%           6.42%
Interest rate spread (2)                                 1.63%           1.92%           1.91%           2.15%           2.48%
Net yield on interest-earning assets (2)                 1.90%           2.24%           2.25%           2.50%           2.83%
Ratio of non-performing assets to
    total assets at end of period                        0.05%           0.04%           0.07%           0.04%           0.02%
Ratio of interest-earning assets to
    interest-bearing liabilities at end of period         105%            107%            107%            107%            107%
Full service banking offices at
    end of period                                          5                4               4               4               4
</TABLE>

(1) Includes interest-bearing deposits at other depository institutions & stock
    of the Federal Home Loan Bank of Pittsburgh.

(2) All ratios are based on average monthly balances during the indicated
    periods.
                                                                               1

<PAGE>


President's Report to the Stockholders

To our Stockholders:

We are pleased to report to you that fiscal 2001 brought another year of strong
earnings. Net income amounted to $3,915,000, which is the most that Harleysville
Savings has earned in any year in its 86-year history.

Net income amounted to $1.73 per share on a diluted basis. Return on average
equity was 12% and return on average assets was .74% for the year. Stockholders'
equity increased to $15.32 per share from $14.05 per share a year ago. During
fiscal year 2001, assets increased 14.3% to $558 million.

Achieving a fair and reasonable return for our stockholders is one of the four
important pillars in our mission statement. While it is important to remember
that market values may be influenced by many factors that are beyond our
control, nevertheless, we are heartened that the increase in market value plus
cash dividends provided our stockholders with an overall return of 15.4% this
past fiscal year. In addition, the board of directors on October 17, 2001
declared an increase in the regular quarterly cash dividend from $.12 to $.13
per share.

Many of our investors have been with us from the beginning in 1987, when we
converted to a publicly traded company. Through market appreciation and cash
dividends, these long-term stockholders have been rewarded with an average
yearly return of 16.3%. Since 1987, Harleysville Savings has delivered a total
return of 724%, which was more than double the gain in the S & P 500 index of
361% during that same time period.

Using a baseball analogy, it's usually the team that has worked hard on the
fundamentals (hitting, fielding, running and pitching) that wins the game
consistently. We believe that is what has made Harleysville Savings successful
over the years. We have paid attention to the core values that have contributed
so significantly to achieving a reputation as a strong and viable community
banking institution for 86 years. We have not jumped on the latest fad to come
along, but have consistently strived to perform the fundamentals that will
position us to be our customers' "Trusted Financial Partner(TM)".

Last year I wrote to you about the many ways in which we were taking advantage
of the latest technology to give our customers access to their accounts. Online
banking through the Internet, telephone banking, an expanding ATM network and
Master Money cards are the ways that we have given our customers access to their
accounts almost all the time from most anywhere in the world.

We have remained focused on our mission of serving the personal banking needs of
families and individuals in our communities. One of the fundamental needs of
people is a checking and savings account and people need to be able to get cash
when they need it. ATM machines are a cost-effective method of providing a
convenient opportunity for Harleysville Savings Bank customers to get cash when
they need it. We now have ATM machines at sixteen locations throughout our
market area. Our convenient ATM locations are posted on our website at
www.harleysvillesavings.com .



2
<PAGE>


We are very proud of what we do for people in our communities. Savings banks
were created to provide money for people to buy their own homes and that is what
we do best. Savings banks were also created to help people to save money. We
believe that building the habit of saving consistently should begin at an early
age. While most banks have stopped paying interest to accounts with low
balances, we are encouraging kids to join Trusty's Club(TM) and earn interest
from dollar one. These kids are our customers of tomorrow and we are providing
services that make it fun for young people to save money.

In June, we opened our fifth full service office at 640 E. Main Street in
Lansdale, Pa. Customers have been telling us how much they enjoy the outstanding
service that is being provided by branch manager, Dawn Ziegler and her staff.
After only five months, the office has experienced outstanding success by
attracting over $8 million in new deposits.

The success that Harleysville Savings has enjoyed is a tribute to our greatest
asset, the talented and experienced personnel who serve our customers.
Harleysville Savings has a group of employees linked together by the common bond
of pride and dedication, who work diligently to deliver high quality service in
a cost-effective manner. This consistent focus on operating efficiency is an
important contributor to our success. A well-trained and experienced staff
contributes significantly to Harleysville Savings' outstanding efficiency
ratios. Eleven of our employees were recognized this year for long-term service.
Receiving awards for five years were Janice Blair, Nate Clemmer, Karen Freed,
Marge Granahan, and Rebecca Michalak. Receiving awards for ten years were Teresa
Fenstermacher, Beverly Fretz, Sandy Loew and Dawn Ziegler. Receiving an award
for fifteen years was Dorothy Kulp and I received an award for thirty-five years
of service.

Even though many of the ways that Harleysville Savings does business are
changing, our core values remain intact. In carrying out our mission, our desire
is to follow a business philosophy that is consistent with the Proverb that God
has given us: "A good name is to be more desired than great riches."

All of us will never forget September 11th and the grief and sadness that we
felt for the victims and their families as a result of the terrorist attacks on
our country. Our prayer is that God will bring comfort to these families and
will give His wisdom to President Bush and his counselors during this time.

Our nation is strong and resilient and our economy will rebound, as it always
has, from this current downturn. Looking ahead to the year 2002 and beyond, we
are very optimistic about the new opportunities that exist for Harleysville
Savings. We want to express our appreciation to you for the confidence that you
have expressed in the management of this Company. We hope to see you at our
Annual Stockholders' meeting in January.



Sincerely,


/s/ Edward J. Molnar
--------------------
Edward J. Molnar
President and Chief Executive Officer


                                                                               3
<PAGE>

Board of Directors

[GRAPHIC - PHOTO OF BOARD OF DIRECTORS]

Mark R.Cummins, George W. Meschter, Ronald B. Geib, Sanford A. Alderfer, Philip
A. Clemens, David J. Friesen, Edward J. Molnar, Paul W. Barndt

Senior Officers

[GRAPHIC - PHOTOS OF SENIOR OFFICERS]

Edward J. Molnar
President and
Chief Executive Officer

Ronald B. Geib
Executive Vice President and
Chief Operating Officer

Marian Bickerstaff
Senior Vice President and
Chief Lending Officer

Brendan J. McGill
Senior Vice President
and Chief Financial Officer


4

<PAGE>

Managers

[GRAPHIC - PHOTOS OF MANAGERS]

Adrian D. Gordon
Vice President
and Information Systems Manager

Sheri L. Strouse
Vice President
and Branch Administrator

Nathanael J. Clemmer
Assistant Vice President Controller,
and Accounting Department Manager

Diane M. Carlson
Assistant Vice President
and Human Resource Manager

Michelle A. Beck
Assistant Vice President
and Security Officer

Kim A. Licata
Assistant Vice President
and Loan Customer Service
Manager

Lori N. McCausland
Assistant Vice President
and Loan Administration Manager

Jason L. Yoder
Assistant Vice President
and Harleysville Office Manager

Kathlen Clairmont
Assistant Vice President
and West Norriton Office Manager

Dawn Ziegler
Assistant Vice President
and Lansdale
Office Manager

Paul Smolinsky
Assistant Vice President
and Sumneytown
Office Manager

Denise L. Monaghan
Assistant Vice President
and Hartfiled Office Manager

                                                                               5
<PAGE>
<PAGE>

                     Management's Discussion and Analysis of
                  Financial Condition and Results of Operation
General

Harleysville Savings Financial Corporation (the "Company"), a bank holding
company, of which Harleysville Savings Bank is a wholly owned subsidiary, was
formed in February 2000. For purposes of this discussion, the Company, including
its wholly owned subsidiary, will be referred to as the "Company". The Company's
earnings are primarily dependent upon its net interest income, which is
determined by (i) the difference between yields earned on interest-earning
assets and rates paid on interest-bearing liabilities ("interest rate spread")
and (ii) the relative amounts of interest-earning assets and interest-bearing
liabilities outstanding. The Company's interest rate spread is affected by
regulatory, economic and competitive factors that influence interest rates, loan
demand and deposit flows. The Company, like other thrift institutions, is
vulnerable to an increase in interest rates to the extent that interest-bearing
liabilities mature or reprice more rapidly than interest-earning assets. To
reduce the effect of adverse changes in interest rates on its operations, the
Company has adopted certain asset and liability management strategies, described
below. The Company's earnings are also affected by, among other factors, other
non-interest income, other expenses and income taxes.

The Company's total assets at September 30, 2001, amounted to $558.4 million,
compared to $488.6 million and $459.8 million as of September 30, 2000 and 1999,
respectively. Deposits as of September 30, 2001, totaled $350.1 million,
compared to $309.8 million and $303.7 million at September 30, 2000 and 1999,
respectively. Stockholders' equity totaled $34.3 million as of September 30,
2001, compared to $31.4 million and $29.0 million at September 30, 2000 and
1999, respectively.

During fiscal 2001, net interest income decreased $666,000 or 6.41% from the
prior fiscal year. This decrease was the result of a decrease in the interest
rate spread from 1.92% in fiscal 2000 to 1.66% in fiscal 2001, a 10.7% growth in
the interest-earning assets and a 12.4% growth in interest-bearing liabilities.
Earnings for fiscal 2001 were $3.92 million compared to $3.86 million and $3.51
million for the years ended September 30, 2000 and 1999, respectively. The
Company's return on average assets (net income divided by average total assets)
was 0.74% during fiscal 2001 compared to .81% during fiscal 2000 and 1999,
respectively. Return on average equity (net income divided by average equity)
was 12.00% during fiscal 2001 compared to 12.82% during fiscal 2000 and 12.83%
during fiscal 1999.

Results of Operations

The following table sets forth for and as of the periods indicated, information
regarding: (i) the total dollar amounts of interest income from interest-earning
assets and the resulting average yields; (ii) the total dollar amount of
interest expense on interest-bearing liabilities and the resulting average
costs; (iii) net interest income; (iv) interest rate spread; (v) net
interest-earning assets; (vi) the net yield earned on interest-earning assets;
and (vii) the ratio of total interest-earning assets to total interest-bearing
liabilities. Average balances are calculated on a monthly basis.

Interest Income

Interest income on mortgage loans increased by $232,000 or 1.6% in fiscal 2000
and increased by $1.5 million or 10.3% in fiscal 2001 from the respective prior
years. During fiscal 2000, the average balance of mortgage loans increased $6.7
million or 3.5% and the yield decreased by 10 basis points. During fiscal 2001,
the average balance of mortgage loans increased $18.2 million or 9.1% and the
yield increased by 8 basis points. The increase in the balance of mortgage loans
reflects the Company's ability to originate mortgage loans despite an increase
in refinancing of existing loans. The majority of loans originated during the
2001 year were fixed rate mortgages. The interest income on mortgage-backed
securities reflected an increase of $22.9 million or 18.4% in the average
balance, which was partially offset by a 16 basis point decrease in yield earned
during fiscal 2001. The increase in the balance of mortgage-backed securities
reflects the need the Company had for mortgage-related products that the Company
was not able to originate in the local market area. The Company needed a higher
volume of mortgage-backed securities during fiscal 2000 and 2001 to offset the
lower interest rate spread. In 2001, the decrease in interest income on consumer
and other loans reflected a decrease in the average balance of $1.6 million or
 .03%, and a decrease in the yield to 7.66%.

Interest and dividends on investments increased by $811,000 or 18.4% in fiscal
2000 over the respective prior years. During fiscal 2000, the increase resulted
from a $8.0 million or 10.9% growth in the average balance and the yield
increased 0.4%. During fiscal 2001, the average balance increased $10.4 million
or 12.8% and the yield decreased 0.3% to produce the $416,000 or 8.0% increase
in interest and dividends on investments. The increase in the average balance in
2001 reflects funds that will be able to be redeployed into higher earning
assets as the market permits.

Interest Expense

Interest expense on deposits increased $868,000 or 6.1% in fiscal 2000 and
increased by $1.7 million or 11.12% in fiscal 2001 as compared to the respective
prior years. In fiscal 2000, the average balance increased $12.0 million or 4.1%
with a 9 basis point increase in the average rate paid. Likewise, in fiscal
2001, the average balance increased $17.2 million or 5.7% with a 3 basis point
increase in the average rate paid. The increase in the average balance reflects
normal savings activity for the Company. The average rate paid on deposits was
5.2% for the year ended September 30, 2001, compared to 5.0% for the year ended
September 30, 2000.

6

<PAGE>

<TABLE>
<CAPTION>
                                                                                                                         As of
                                                                  For The Year Ended September 30,                      Sept 30,
                                ------------------------------------------------------------------------------------------------
                                            1999                         2000                         2001                2001
                                ---------------------------   --------------------------  ---------------------------     -----
                                 Average             Yield/   Average             Yield/  Average              Yield/
                                 Balance   Interest  Rate     Balance   Interest   Rate   Balance   Interest   Rate       Rate
                                 --------  --------  -----    --------  --------  -----   --------  --------   -----      -----
<S>                              <C>       <C>       <C>      <C>       <C>       <C>     <C>       <C>        <C>        <C>
Interest-earning assets:
  Mortgage loans (2)             $192,388  $ 14,832  7.71%    $199,109  $ 15,065  7.57%   $217,268  $ 16,613   7.65%      7.32%
  Mortgage-backed securities       98,155     6,003  6.12%     124,418     8,427  6.77%    147,301     9,739   6.61%      6.22%
  Consumer and other loans         59,910     4,468  7.46%      58,009     4,467  7.70%     56,336     4,313   7.66%      7.43%
  Investments                      73,255     4,413  6.02%      81,215     5,223  6.43%     91,572     5,639   6.16%      5.79%
                                 --------  --------  -----     -------  --------  -----   --------  --------   -----     ------
Total interest-earning
    assets                        423,708    29,716  7.01%     462,751    33,182  7.17%    512,477    36,304   7.08%      6.75%
                                 --------  --------  -----    --------  --------  -----   --------  --------   -----     ------

Interest-bearing liabilities:
  Deposits                        290,285    14,169  4.88%     302,269    15,037  4.97%    319,487    16,709   5.23%      4.77%
  Borrowings                      105,462     6,031  5.72%     131,514     7,758  5.90%    168,049     9,875   5.88%      5.74%
                                 --------  --------  -----    --------  --------  -----   --------  --------   -----     ------

Total interest-bearing
    liabilities                   395,747    20,200  5.10%     433,783    22,795  5.25%    487,536    26,584   5.45%      5.09%
                                 --------  --------  -----    --------  --------  -----   --------  --------   -----      -----

Net interest income/interest
    rate spread                            $  9,516  1.91%              $ 10,387  1.92%             $  9,720   1.63%      1.66%
                                           ========  =====              ========  ====              ========   =====      =====

Net interest-earning assets/
   net yield on interest-
   earning assets (1)            $ 27,961            2.25%    $ 28,968            2.24%           $   24,941              1.90%
                                 ========            =====    ========            =====           ==========              =====

Ratio of interest-earning
   assets to interest-
  bearing liabilities                               107.1%                       106.7%                                  105.1%
                                                    ======                       ======                                  ======
</TABLE>

(1) Net interest income divided by average interest-earning assets (2) Loan fee
income is immaterial to this analysis

The following table shows, for the periods indicated, the changes in interest
income and interest expense attributable to changes in volume (changes in volume
multiplied by prior year rate) and changes in rate (changes in rate multiplied
by prior year volume). Changes in rate/volume (determined by multiplying the
change in rate by the change in volume) have been allocated to the change in
rate or the change in volume based upon the respective percentages of their
combined totals.

<TABLE>
<CAPTION>
                                                           Fiscal 2000 Compared                    Fiscal 2001 Compared
                                                              to Fiscal 1999                          to Fiscal 2000
                                                            Increase (Decrease)                     Increase (Decrease)
                                                 ------------------------------------------------------------------------------
                                                   Volume         Rate         Total        Volume         Rate          Total
                                                  -------       -------       -------       -------       -------       -------
<S>                                               <C>           <C>           <C>           <C>           <C>           <C>
Interest income on interest-earning assets:
     Mortgage loans                               $   512       $  (279)      $   233       $ 1,387       $   161       $ 1,548
     Mortgage-backed securities                     1,729           695         2,424         1,517          (205)        1,312
     Consumer and other loans                        (144)          143            (1)         (128)          (26)         (154)
     Investments                                      500           310           810           645          (229)          416
                                                  -------       -------       -------       -------       -------       -------

        Total                                       2,597           869         3,466         3,421          (299)        3,122
                                                  -------       -------       -------       -------       -------       -------

Interest expense on interest-bearing liabilities:
     Deposits                                         593           275           868           880           792         1,672
     Borrowings                                     1,531           197         1,728         2,147           (31)        2,116
                                                                                                          -------       -------
                                                                              -------       -------       -------       -------

        Total                                       2,124           472         2,596         3,027           761         3,788
                                                  -------       -------       -------       -------       -------       -------

Net change in net interest income                 $   473       $   397       $   870       $   394       $(1,060)      $  (666)
                                                  =======       =======       =======       =======       =======       =======
</TABLE>

                                                                               7

<PAGE>


Interest expense on borrowings increased by $1.7 million or 28.6% in fiscal 2000
and increased by $2.1 million or 27.3% in fiscal 2001 as compared to the
respective prior years. The increase in interest expense during fiscal 2001 was
the result of a $36.5 million or 27.8% increase in the average balance of
borrowings partially offset by a decrease of 2 basis points in the average rate
paid. Borrowings were primarily obtained during fiscal 2001 to fund the purchase
of mortgage-backed securities and long term fixed-rate mortgages. Long term FHLB
advances were used to match the maturity terms of these mortgage products.

Net Interest Income

Net interest income increased by $870,000 or 9.1% in fiscal 2000, and decreased
by $666,000 or 6.4% in fiscal 2001 over the respective prior periods. The
improvements in the net interest income in 2000 were due to a higher amount of
interest-earning assets and an increase in the interest rate spread. The
decrease in 2001 was a direct result of an increased balance in tax advantageous
investments, which have a lower yield and the rapid drop of 400 basis points in
short term rates by the Federal Reserve.


Provision for Loan Losses

Management establishes reserves for losses on slow loans when it determines that
losses are probable on the underlying properties. The adequacy of loan loss
reserves is based upon a regular monthly review of loan delinquencies and
"classified assets", as well as local and national economic trends. Although
management has currently established no specific reserves for losses, no
assurance can be given as to whether future specific reserves may be required.
The allowance for loan losses totaled $2.0 million at September 30, 2001 and
2000 or 0.8% and 0.7% of total loans at September 30, 2001 and 2000,
respectively.

Other Income

The Company's total other operating income increased to $552,000 in fiscal 2000
and increased to $1.2 million in fiscal 2001. The increase from 1999 to 2000
reflected an increase in other income and gain on the sales of loans which was
based on more loans being sold in fiscal 2000. The increase from 2000 to 2001
reflected an increase in income from Bank Owned Life Insurance ("BOLI") and the
sale of investments designated as available for sale.

Other income, which consists primarily of income from fees on demand accounts,
loan servicing fees, the sale of non-deposit products, insurance commissions,
loan late charges and BOLI income, increased by $61,000 or 13.6% during fiscal
year 2000. During fiscal 2001, other income increased by $543,000 or 106.0% over
the prior comparable fiscal years. The fees which comprise other income are set
by the Company at a level which is intended to cover the cost of providing the
related services and expenses to customers and employees.

Other Expenses

Salaries and employee benefits increased by $341,000 or 14.3% in fiscal 2000 and
by $296,000 or 10.9% in fiscal 2001 as compared to prior respective fiscal
years. The increased expenses of salaries and employee benefits during the
periods are attributable to increased staffing needs, normal salary increases
and increased employee benefit expenses.

Occupancy and equipment expense decreased by $122,000 or 10.6% in fiscal 2000
and increased by $132,000 or 12.8% in fiscal 2001 as compared to the prior
respective fiscal years. The decrease in 2000 was attributable to lower
furniture and fixture expenses. The increase during fiscal 2001 was attributable
to the opening of a new full service branch in June 2001.

Deposit insurance premiums decreased by $80,000 or 46.3% in fiscal 2000, and
decreased by $32,000 or 34.2% in fiscal 2001 over the prior respective fiscal
years. The decrease in 2000 and 2001 is the result of the sharing of FICO bond
interest payments by all FDIC insured institutions resulting in a premium
reduction of an additional 2.2 basis points effective January 1, 2000.

Other expenses, which consist primarily of advertising expenses, directors'
fees, ATM network fees, professional fees, checking account costs, stock holders
expense, and insurance premiums, increased by $383,000 or 33.5% in fiscal 2000,
and increased by $56,000 or 3.6% in fiscal 2001 over the prior respective fiscal
years. The current year increase is partly due to the opening of a new full
service branch in June 2001. As to the additional increases, management
considers these normal increases after the effects of inflation and the growth
in the size of the Company.

Income Taxes

The Company recorded income tax provisions of $1.7 million for fiscal year 2000
and $1.2 million for fiscal year 2001. The primary reason for the decrease in
the percentage of tax expense in fiscal 2001 was the increase in tax-free income
resulting from purchases of tax-exempt securities and BOLI, as the Company
employed various strategies to reduce taxes. See Note 12 of the "Notes to
Financial Statements" which provides an analysis of the provision for income
taxes.

Asset and Liability Management

The Company has instituted programs designed to decrease the sensitivity of its
earnings to material and prolonged increases or decreases in interest rates. The
principal determinant of the exposure of Harleysville Savings' earnings to
interest rate risk is the timing difference between the repricing or maturity of
the Company's interest-earning assets and the repricing or maturity of its
interest-bearing liabilities. If the maturities of such assets and liabilities
were perfectly matched, and if the interest rates borne by its assets and
liabilities were equally flexible and moved concurrently, neither of which is
the case, the impact on net interest income of rapid increases or decreases in
interest rates would be minimized. Harleysville Savings' asset and liability
management policies seek to increase the interest rate sensitivity by shortening
the repricing intervals and the maturities of the Company's interest-earning
assets. Although management of the Company believes that the steps taken have
reduced the Company's overall vulnerability to increases and decreases in
interest rates, the Company remains vulnerable to material and prolonged
increases and decreases in interest rates during periods in which its interest
rate sensitive liabilities exceed its interest rate sensitive assets and
interest rate sensitive assets exceed interest rate sensitive liabilities,
respectively.

8

<PAGE>


The authority and responsibility for interest rate management is vested in the
Company's Board of Directors. The Chief Executive Officer implements the Board
of Directors' policies during the day-to-day operations of the Company. Each
month, the Chief Executive Officer presents the Board of Directors with a report
which outlines the Company's asset and liability "gap" position in various time
periods. The "gap" is the difference between interest-earning assets and
interest-bearing liabilities which mature or reprice over a given time period.
He also meets weekly with the Company's other senior officers to review and
establish policies and strategies designed to regulate the Company's flow of
funds and coordinate the sources, uses and pricing of such funds. The first
priority in structuring and pricing the Company's assets and liabilities is to
maintain an acceptable interest rate spread while reducing the effects of
changes in interest rates and maintaining the quality of the Company's assets.

The following table summarizes the amount of interest-earning assets and
interest-bearing liabilities outstanding as of September 30, 2001, which are
expected to mature, prepay or reprice in each of the future time periods shown.
Except as stated below, the amounts of assets or liabilities shown which mature
or reprice during a particular period were determined in accordance with the
contractual terms of the asset or liability. Adjustable and floating-rate assets
are included in the period in which interest rates are next scheduled to adjust
rather than in the period in which they are due, and fixed-rate loans and
mortgage-backed securities are included in the periods in which they are
anticipated to be repaid.

The passbook accounts, negotiable order of withdrawal ("NOW") accounts and money
market deposit accounts, are included in the "Over 5 Years" categories based on
management's beliefs that these funds are core deposits having significantly
longer effective maturities based on the Company's retention of such deposits in
changing interest rate environments.

Generally, during a period of rising interest rates, a positive gap would result
in an increase in net interest income while a negative gap would adversely
affect net interest income. Conversely, during a period of falling interest
rates, a positive gap would result in a decrease in net interest income while a
negative gap would positively affect net interest income. However, the following
table does not necessarily indicate the impact of general interest rate
movements on Harleysville Savings' net interest income because the repricing of
certain categories of assets and liabilities is discretionary and is subject to
competitive and other pressures. As a result, certain assets and liabilities
indicated as repricing within a stated period may in fact reprice at different
rate levels.

<TABLE>
<CAPTION>

Liquidity and Capital Resources

                                                     1 Year           1 to 3          3 to 5           Over 5
                                                     or less          Years           Years            Years           Total
                                                    ---------       ---------       ---------        ---------       ---------
<S>                                                 <C>             <C>             <C>              <C>             <C>
Interest-earning assets:
  Mortgage loans                                    $  43,591       $  37,451       $  28,591        $ 123,126       $ 232,759
  Mortgage-backed securities                           68,931          18,772          16,005           64,019         167,727
  Consumer and other loans                             26,071          15,906           9,028            5,971          56,976
  Investment securities and other investments          55,130           3,000              --           32,717          90,847
                                                    ---------       ---------       ---------        ---------       ---------

Total interest-earning assets                         193,723          75,129          53,624          225,833         548,309
                                                    ---------       ---------       ---------        ---------       ---------

Interest-bearing liabilities:
   Passbook and Club accounts                              --              --              --           19,139          19,139
   NOW accounts                                            --              --              --            2,535           2,535
   Money Market Deposit accounts                           --              --              --           52,881          52,881
   Choice Savings                                       3,765              --              --           11,296          15,061
   Certificate accounts                               161,243          87,891          11,397               --         260,531
   Borrowed money                                      26,030          41,810          22,574           80,895         171,309
                                                    ---------       ---------       ---------        ---------       ---------

Total interest-bearing liabilities                    191,038         129,701          33,971          166,746         521,456
                                                    ---------       ---------       ---------        ---------       ---------

Repricing GAP during the period                     $   2,685       $ (54,572)      $  19,653        $  59,087       $  26,853
                                                    =========       =========       =========        =========       =========

Cumulative GAP                                      $   2,685       $ (51,887)      $ (32,234)       $  26,853
                                                    =========       =========       =========        =========

Ratio of GAP during the period to total assets           0.49%          -9.96%           3.59%           10.78%
                                                    =========       =========        =========       =========

Ratio of cumulative GAP to total assets                  0.49%          -9.47%          -5.88%            4.90%
                                                    =========       =========        =========       =========
</TABLE>


                                                                               9


<PAGE>


Liquidity and Capital Resources

The Company's assets increased from $459.8 million as of September 30, 1999, to
$488.6 million as of September 30, 2000, and to $558.4 million as of September
30, 2001. Stockholders' equity increased from $29.0 million as of September 30,
1999, to $31.4 million as of September 30, 2000, and to $34.3 million as of
September 30, 2001. As of September 30, 2001, stockholders' equity amounted to
6.1% of Harleysville Savings' total assets under accounting principles generally
accepted in the United States of America ("GAAP").

For a financial institution, liquidity is a measure of the ability to fund
customers' needs for loans and deposit withdrawals. Harleysville Savings
regularly evaluates economic conditions in order to maintain a strong liquidity
position. One of the most significant factors considered by management when
evaluating liquidity requirements is the stability of the Company's core deposit
base. In addition to cash, the Company maintains a portfolio of short-term
investments to meet its liquidity requirements. Harleysville Savings also relies
upon cash flow from operations and other financing activities, generally
short-term and long-term debt. Liquidity is also provided by investing
activities including the repayment and maturity of loans and investment
securities as well as the management of asset sales when considered necessary.
The Company also has access to and sufficient assets to secure lines of credit
and other borrowings in amounts adequate to fund any unexpected cash
requirements.


Impact of Inflation and Changing Prices

The financial statements and related data presented herein have been prepared in
accordance with GAAP which require the measurement of financial position and
operating results in terms of historical dollars, without considering changes in
the relative purchasing power of money over time due to inflation.

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


Forward-Looking Statements

This report contains certain forward-looking statements and information relating
to the Company that are based on the beliefs of management as well as
assumptions made by and information currently available to management. In
addition, in those and other portions of this document, the words "anticipate,"
"believe," "estimate," "except," "intend," "should" and similar expressions, or
the negative thereof, as they relate to the Company or the Company's management,
are intended to identify forward-looking statements. Such statements reflect the
current views of the Company with respect to future-looking events and are
subject to certain risks, uncertainties and assumptions. Should one or more of
these risks or uncertainties materialize or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated, expected or intended. The Company does not
intend to update these forward-looking statements.

10

<PAGE>


INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of Harleysville Savings Financial
Corporation and Subsidiary:

We have audited the accompanying consolidated statements of financial condition
of Harleysville Savings Financial Corporation and subsidiary (the "Company") as
of September 30, 2001 and 2000, and the related consolidated statements of
income, stockholders' equity, and cash flows for each of the three years in the
period ended September 30, 2001. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Harleysville Savings Financial
Corporation and subsidiary as of September 30, 2001 and 2000, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 2001 in conformity with accounting principles generally
accepted in the United States of America.



/s/ Deloitte & Touche LLP
-------------------------
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
October 17, 2001


                                                                              11

<PAGE>


Consolidated Statements of Financial Condition

<TABLE>
<CAPTION>

                                                                                       September 30,
                                                                                 2001                 2000
---------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                 <C>
Assets
Cash and amounts due from depository institutions                            $   1,360,099       $   1,224,634
Interest bearing deposits in other banks                                         7,588,033           2,855,568
                                                                             -------------       -------------

     Total cash and cash equivalents                                             8,948,132           4,080,202

Investment securities held to maturity
     (fair value - 2001, $63,568,000;  2000, $69,463,000)                       62,202,405          71,280,841
Investment securities available-for-sale at fair value                           3,293,981           3,309,736
Mortgage-backed securities held to maturity
     (fair value - 2001, $171,236,000; 2000, $114,182,000)                     167,726,725         116,303,730
Mortgage-backed securities available-for-sale at fair value                             --           7,440,453
Loans receivable (net of allowance for loan losses -
     2001, $2,036,000; 2000, $2,038,000)                                       290,213,221         262,774,378
Accrued interest receivable                                                      3,402,945           3,246,714
Federal Home Loan Bank stock - at cost                                           8,950,200           7,365,200
Office properties and equipment,net                                              5,224,482           4,449,921
Deferred income taxes                                                              260,041             306,761
Prepaid expenses and other assets                                                8,165,985           7,995,955
                                                                             -------------       -------------

TOTAL ASSETS                                                                 $ 558,388,117       $ 488,553,891
                                                                             =============       =============


Liabilities and Stockholders' Equity
Liabilities:
     Deposits                                                                $ 350,146,555       $ 309,835,810
     Advances from Federal Home Loan Bank                                      171,309,384         145,134,283
     Accrued interest payable                                                      727,501             824,672
     Advances from borrowers for taxes and insurance                               979,964             719,591
     Accounts payable and accrued expenses                                         960,825             641,148
                                                                             -------------       -------------

     Total liabilities                                                         524,124,229         457,155,504
                                                                             -------------       -------------

Commitments
Stockholders' Equity:
     Preferred Stock:  $.01 par value;
       7,500,000 shares authorized; none issued
     Common stock:  $.01 par value; 15,000,000
       shares authorized; issued and outstanding,
       2001, 2,306,455 shares; 2000, 2,285,051 shares                               23,065              22,851
     Paid-in capital in excess of par                                            7,358,681           7,119,387
     Treasury stock, at cost (2001, 69,899 shares; 2000, 49,900 shares)         (1,024,733)           (714,163)
     Retained earnings - partially restricted                                   27,922,182          25,076,313
     Accumulated other comprehensive loss                                          (15,307)           (106,001)
                                                                             -------------       -------------

     Total stockholders' equity                                                 34,263,888          31,398,387
                                                                             -------------       -------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                   $ 558,388,117       $ 488,553,891
                                                                             =============       =============
</TABLE>

See notes to consolidated financial statements



12

<PAGE>


Consolidated Statements of Income

<TABLE>
<CAPTION>
                                                                   Year Ended September 30,

                                                            2001              2000             1999
-------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>              <C>
Interest Income:
Interest on mortgage loans                               $16,612,758      $15,064,856      $14,832,086
Interest on mortgage-backed securities                     9,738,939        8,426,701        6,002,879
Interest on consumer and other loans                       4,312,688        4,466,858        4,468,156
Interest and dividends on investments                      5,638,932        5,223,322        4,412,768
                                                         -----------      -----------      -----------

Total interest income                                     36,303,317       33,181,737       29,715,889
                                                         -----------      -----------      -----------

Interest Expense:
Interest on deposits                                      16,709,367       15,037,450       14,169,061
Interest on borrowings                                     9,873,560        7,757,625        6,030,367
                                                         -----------      -----------      -----------

Total interest expense                                    26,582,927       22,795,075       20,199,428
                                                         -----------      -----------      -----------

Net Interest Income                                        9,720,390       10,386,662        9,516,461
Provision for Loan Losses                                         --               --           16,579
                                                         -----------      -----------      -----------

Net Interest Income after Provision for Loan Losses        9,720,390       10,386,662        9,499,882
                                                         -----------      -----------      -----------

Other Income:
Gain on sales of loans                                        39,647           40,245           35,120
Gain on sales of investments                                 151,663
Increase in cash surrender value                             424,262           29,000
Other income                                                 630,968          483,071          450,842
                                                         -----------      -----------      -----------

Total other income                                         1,246,540          552,316          485,962
                                                         -----------      -----------      -----------

Other Expenses:
Salaries and employee benefits                             3,025,304        2,729,174        2,388,307
Occupancy and equipment                                    1,162,742        1,030,401        1,152,407
Deposit insurance premiums                                    60,815           92,439          171,999
Other                                                      1,583,702        1,528,087        1,145,036
                                                         -----------      -----------      -----------

Total other expenses                                       5,832,563        5,380,101        4,857,749
                                                         -----------      -----------      -----------

Income before Income Taxes:                                5,134,367        5,558,877        5,128,095

Income tax expense                                         1,219,200        1,701,980        1,622,000
                                                         -----------      -----------      -----------

Net Income                                               $ 3,915,167      $ 3,856,897      $ 3,506,095
                                                         ===========      ===========      ===========


Earnings Per Share:
   Basic                                                 $      1.76      $      1.72      $      1.56
                                                         ===========      ===========      ===========
   Diluted                                               $      1.73      $      1.70      $      1.53
                                                         ===========      ===========      ===========

Weighted Average Shares Outstanding:
   Basic                                                   2,228,747        2,252,308        2,244,055
                                                         ===========      ===========      ===========
   Diluted                                                 2,257,370        2,275,764        2,294,532
                                                         ===========      ===========      ===========
</TABLE>


See notes to consolidated financial statements.



                                                                              13

<PAGE>


Consolidated Statements of Comprehensive Income

<TABLE>
<CAPTION>
                                                                                     2001              2000             1999
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>               <C>               <C>
Net Income                                                                       $ 3,915,167       $ 3,856,897       $ 3,506,095

Other Comprehensive Income (Loss)

Unrealized (loss) gain on securities net of tax ( benefit) or
expense -- 2001, (55,430); 2000, ($54,606); 1999, ($51,905)                           90,694(1)         (5,245)         (119,351)
                                                                                 -----------       -----------       -----------

Total Comprehensive Income                                                       $ 4,005,861       $ 3,851,652       $ 3,386,744
                                                                                 ===========       ===========       ===========



(1) Disclosure of reclassification amount, net of tax for the years ended:              2001
                                                                                 -----------
     Net unrealized gain arising during the year                                 $   190,792
     Less: Reclassification adjustment for net gains included in net income         (100,098)
                                                                                 -----------
     Net unrealized gain on securities                                           $    90,694
                                                                                 ===========
</TABLE>


Consolidated Statements of Stockholders' Equity

<TABLE>
<CAPTION>
                                                             Paid-in        Retained    Accumulated
                                                             Capital        Earnings-       Other                       Total
                                              Common        in Excess       Partially   Comprehensive   Treasury     Stockholders'
                                              Stock          of Par         Restricted  (Loss) Income     Stock         Equity
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>          <C>              <C>             <C>            <C>          <C>
Balance at October 1, 1998                 $   16,767   $  6,548,303     $ 19,516,132    $   18,595                  $ 26,099,797


Net Income                                                                  3,506,095                                   3,506,095
Issuance of Common Stock                          207        287,085                                                      287,292
Stock Split                                     5,594         (5,594)
Dividends - $. 36 per share                                                  (811,186)                                   (811,186)
Change in unrealized holding gain
  on available-for-sale securities, net
  of tax                                                                                   (119,351)                     (119,351)
                                           ----------   ------------     ------------    ----------   ------------   ------------

Balance at September 30, 1999                  22,568      6,829,794       22,211,041      (100,756)                   28,962,647


Net Income                                                                  3,856,897                                   3,856,897
Issuance of Common Stock                          283        289,593                                                      289,876
Dividends - $.44  per share                                                  (991,625)                                   (991,625)
Treasury stock purchased                                                                                $ (714,163)      (714,163)
Change in unrealized holding loss
  on available-for-sale securities, net
  of tax                                                                                     (5,245)                       (5,245)

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

Balance at September 30, 2000                  22,851      7,119,387       25,076,313      (106,001)      (714,163)    31,398,387

Net Income                                                                  3,915,167                                   3,915,167
Issuance of Common Stock                          214        239,294                                                      239,508
Dividends - $.48  per share                                                (1,069,298)                                 (1,069,298)
Treasury stock purchased                                                                                  (310,570)      (310,570)
Change in unrealized holding loss
  on available-for-sale securities, net
  of tax                                                                                     90,694                        90,694
                                           ----------   ------------     ------------    ----------   ------------   ------------

Balance at September 30, 2001              $   23,065   $  7,358,681     $ 27,922,182    $  (15,307)  $ (1,024,733)  $ 34,263,888
                                           ==========   ============     ============    ==========   ============   ============
</TABLE>

See notes to consolidated financial statements



14
<PAGE>

Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                              Year Ended September 30,
                                                                                      2001              2000                1999
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>               <C>               <C>
Operating Activities:
Net Income                                                                       $   3,915,167     $   3,856,897     $   3,506,095
Adjustments to reconcile net income to net cash provided by
    (used in) operating activities:
    Provision for loan losses                                                                                               16,579
    Depreciation                                                                       474,970           426,771           309,410
    Deferred income taxes                                                               56,076             3,557            90,000
    Realized gain on sales of loans                                                    (39,647)          (40,245)          (35,120)
    Realized gain on sales of mortgage-backed securities                              (151,663)
    Realized gain on sale of real estate owned                                                           (13,606)
    Proceeds from the sale of loans held for sale                                    3,268,895         3,369,004         2,879,561
    Amortization of deferred loan fees                                                 (27,203)         (139,351)         (320,711)
Changes in assets and liabilities which provided (used) cash:
    Increase in accounts payable and accrued expenses
      and income taxes payable                                                         319,677            72,080           131,111
    (Increase) decrease in prepaid expenses and other assets                          (170,030)       (7,624,387)           93,249
    (Increase) decrease in accrued interest receivable                                (156,231)         (351,605)          220,098
    (Decrease) increase in accrued interest payable                                    (97,171)          222,859            77,072
                                                                                 -------------     -------------     -------------

Net cash (used in) provided by operating activities                                  7,392,840          (218,026)        6,967,344
                                                                                 -------------     -------------     -------------


Investing Activities:
Purchase of mortgage-backed securities held to maturity                            (80,175,532)      (13,038,000)      (63,346,162)
Purchase of mortgage-backed securities available-for-sale                                                               (4,902,126)
Purchase of investment securities held to maturity                                 (37,250,830)      (11,747,185)      (47,859,407)
Purchase of investment securities available-for-sale                                  (106,612)         (112,069)       (1,549,213)
Purchase of FHLB stock                                                              (1,585,000)         (892,300)       (1,475,200)
Proceeds from the sale of mortgage-backed securities available-for-sale              7,331,055
Proceeds from maturities of investment securities                                   46,329,291         1,480,926        37,466,988
Principal collected on long-term loans & mortgage-backed securities                106,529,446        60,356,491        84,653,788
Long-term loans originated or acquired                                            (107,985,365)      (60,199,446)      (62,646,388)
Purchases of premises and equipment                                                 (1,249,531)         (198,806)         (947,658)
Proceeds from sale of real estate owned                                                 32,309           133,221
                                                                                 -------------     -------------     -------------

Net cash used in investing activities                                              (68,130,769)      (24,217,168)      (60,605,378)
                                                                                 -------------     -------------     -------------


Financing Activities:
Net increase (decrease) in demand deposits, NOW accounts
    and savings accounts                                                            20,762,070        (5,527,563)       20,773,715
Net increase (decrease) in certificates of deposit                                  19,548,675        11,703,274        (6,940,988)
Cash dividends                                                                      (1,069,298)         (991,625)         (811,186)
Net increase in FHLB advances                                                       26,175,101        19,954,355        25,226,820
Purchase of treasury stock                                                            (310,570)         (714,163)
Net proceeds from issuance of stock                                                    239,508           289,876           287,292
Net increase (decrease) in advances from borrowers for taxes and insurance             260,373          (154,576)          184,273
                                                                                 -------------     -------------     -------------

Net cash provided by financing activities                                           65,605,859        24,559,578        38,719,926
                                                                                 -------------     -------------     -------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     4,867,930           124,384       (14,918,108)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                       4,080,202         3,955,818        18,873,926
                                                                                 -------------     -------------     -------------

CASH AND CASH EQUIVALENTS AT END OF YEAR                                         $   8,948,132     $   4,080,202     $   3,955,818
                                                                                 =============     =============     =============


Supplemental Disclosure of Cash Flow Information-
Cash paid during the period
for:
      Interest (credited and paid)                                               $  26,485,756     $  22,572,216     $  20,122,356
      Non cash transfer from loans to real estate owned                                 32,309           119,615

See notes to consolidated financial statements

</TABLE>


                                                                              15
<PAGE>


1.  Nature of Operations and Organizational Structure

On February 25, 2000, Harleysville Savings Bank (the "Bank") completed its
Agreement and Plan of Reorganization ("Agreement") pursuant to which the Bank
was reorganized into a holding company form of ownership. The Agreement was
subject to approval by the Pennsylvania Department of Banking, the Board of
Governors of the Federal Reserve System and approved by the stockholders of the
Bank. Harleysville Savings Financial Corporation (the "Company") was
incorporated under the laws of the Commonwealth of Pennsylvania. It was formed
for the purpose of becoming the bank holding company of the Bank through the
issuance and exchange of its stock pursuant to the Agreement and the concurrent
acquisition of 100% of the common stock of the Bank. In connection with the
Reorganization, each share of the Bank's common stock, ("Bank Common Stock"),
was converted into one share of the Company's common stock, ("Company Common
Stock"). The result of the Reorganization of the Bank was that the Company
became the owner of all of the outstanding shares of Bank Common Stock and each
stockholder of the Bank became the owner of one share of the Company Common
Stock for each share of bank Common Stock held by him or her immediately prior
thereto.
   The Company is a bank holding company that is regulated by the Federal
Reserve Bank of Philadelphia. The Bank is a wholly owned subsidiary and is
regulated by the FDIC and the Pennsylvania Department of Banking. The Bank is
principally in the business of attracting deposits through its branch offices
and investing those deposits, together with funds from borrowings and
operations, primarily in single family residential and consumer loans.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation - The accompanying consolidated financial statements
include the accounts of the Company, the Bank, and the Bank's wholly owned
subsidiary, HSB Inc. Intercompany accounts and transactions have been eliminated
in consolidation.

Investments and Mortgage-Backed Securities - The Company accounts for debt and
equity securities as follows:
    Held to Maturity - Debt securities that management has the positive intent
and ability to hold until maturity are classified as held to maturity and are
carried at their remaining unpaid principal balance, net of unamortized premiums
or unaccreted discounts. Premiums are amortized and discounts are accreted using
the interest method over the estimated remaining term of the underlying
security.
    Available for Sale - Debt and equity securities that will be held for
indefinite periods of time, including securities that may be sold in response to
changes in market interest or prepayment rates, needs for liquidity and changes
in the availability of and the yield of alternative investments are classified
as available for sale. These assets are carried at fair value, with unrealized
gains and losses excluded from earnings and reported in other comprehensive
income. Fair value is determined using published quotes as of the close of
business.

Interest on Loans - Interest on loans is recognized as income when earned. The
Company does not recognize interest on loans deemed to be uncollectible.

Allowance for Loan Losses - Allowances for loan losses primarily include charges
to reduce the recorded balances of mortgage loans receivable. The charges can
represent a general reserve on the entire mortgage portfolio or specific
reserves for individual loans.
    Allowances are provided for specific loans when losses are probable and can
be estimated. When this occurs, management considers the remaining principal
balance and estimated net realizable value of the property collateralizing the
loan. Current and future operating and/or sales conditions are considered. These
estimates are susceptible to changes that could result in material adjustments
to results of operations. Recovery of the carrying value of such loans is
dependent, to a great extent, on economic, operating and other conditions that
may be beyond management's control.
    Loan loss reserves are established as an allowance for losses based on the
perceived risk of loss in the loan portfolio. In assessing risk, management
considers historical experience, volume and composition of lending conducted by
the Company, industry standards, status of nonperforming loans, general economic
conditions as they relate to the Company's market area, and other factors
related to the collectibility of the Company's loan portfolio. An adjustment to
the carrying value of a loan through the provision for loan losses occurs when
it is probable that a creditor will be unable to collect all amounts due
according to the contractual terms of the loan.

Real Estate Owned - Real estate owned is initially recorded at the lower of
carrying value of the loan or fair value at the date of foreclosure less
estimated costs to dispose. Costs relating to the development and improvement of
the property are capitalized, and those relating to holding the property are
charged to expense.

Office Properties and Equipment - Office properties and equipment are recorded
at cost. Depreciation is computed using the straight-line method over the
expected useful lives of the assets. The costs of maintenance and repairs are
expensed as they are incurred, and renewals and betterments are capitalized.

Deferred Loan Fees - The Company recognizes loan fees and certain direct loan
origination costs in accordance with Statement of Financial Accounting Standards
("SFAS") No. 91, Accounting for Nonrefundable Fees and Costs Associated with
Originating or Acquiring Loans and Indirect Costs of Leases. SFAS No. 91
requires the deferral of all loan fee income, net of certain direct loan
origination costs. Net deferred loan fees are accreted into income as a yield
adjustment over the life of the loan using the interest method. SFAS No. 91
permits the deferral only of direct loan origination costs relating to
successful loan origination efforts, not idle time or overcapacity.

 Income Taxes - Deferred income taxes are recognized for the tax consequences of
 "temporary differences" by applying enacted statutory tax rates applicable to
 future years to differences between the financial statement carrying amounts
 and the tax bases of existing assets and liabilities. The effect on deferred
 taxes of a change in tax rates is recognized in income in the period that
 includes the enactment date.

               Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities - The Company accounts for transfers and servicing of financial
assets in accordance with SFAS No. 140, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities (a replacement of FASB
Statement No. 125). This statement revises the standards for accounting for
securitizations and other transfers of financial assets and collateral and
requires certain disclosures, but it carries over most of SFAS No. 125
provisions without reconsideration. This statement is effective for all fiscal
years ending after December 15, 2000. The adoption of this statement did not
have a material impact on the Company's financial position or results of
operations.
     The statement requires an entity to recognize the financial and servicing
assets it controls and the liabilities it has incurred, derecognize financial
assets when control has been surrendered, and derecognize liabilities when
extinguished. It requires that servicing assets and other retained interests in
the transferred assets be measured by allocating the previous carrying amount
between the asset sold, if any, and retained interest, if any, based on their
relative fair values at the date of transfer. It also provides implementation
guidance for servicing of financial assets, securitizations, loan syndications
and participations and transfers of loan receivables with recourse.


16

<PAGE>

Accounting for Stock Options - The Company accounts for stock-based compensation
in accordance with the Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees. This method calculates compensation
expense using the intrinsic value method, which recognizes as expense the
difference between the market value of the stock and the exercise price at grant
date. The Company has not recognized any compensation expense under this method.
The Company adopted the reporting disclosure requirements of SFAS No. 123,
Accounting for Stock-Based Compensation, which requires the Company to disclose
the pro forma effects of accounting for stock-based compensation using the fair
value method as described in the accounting requirements of SFAS No. 123. As
permitted by SFAS No. 123, the Company continues to account for stock-based
compensation under APB Opinion No. 25. FASB Interpretation No. 44, Accounting
for Certain Transaction involving Stock Compensation ("FIN No. 44") clarifies
the application of APB No. 25 for certain issues. The Company adopted the
provisions of FIN No. 44 in fiscal year 2000. The adoption of the interpretation
did not have a material effect on the consolidated financial statements.

Accounting for Comprehensive Income - In accordance with SFAS No. 130, Reporting
Comprehensive Income, the Company presents, as a component of comprehensive
income, amounts from transactions and other events, which are currently excluded
from the statement of income and are recorded directly to stockholders' equity.

Recent Accounting Principles-In June 2001, the Financial Accounting Standards
Board ("FASB") issued two new pronouncements: SFAS No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS 141
is effective as follows: a) use of the pooling-of-interest method is prohibited
for business combinations initiated after June 30, 2001; and b) the provisions
of SFAS No.141 also apply to all business combinations accounted for by the
purchase method that are completed after June 30, 2001 (that is, the date of the
acquisition is July 2001 or later). There are also transition provisions that
apply to business combinations completed before July 1, 2001, that were
accounted for by the purchase method. SFAS No.142 is effective for fiscal years
beginning after December 15, 2001 to all goodwill and other intangible assets
recognized in an entity's statement of financial position at that date,
regardless of when those assets were initially recognized. The adoption of these
standards will not have a material impact on the Company's consolidated
financial statements.
   In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS No.144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This Statement
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of, and the accounting and reporting
provisions of APB Opinion No. 30, Reporting the Results of Operations--Reporting
the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions, for the disposal of a
segment of a business (as previously defined in that Opinion). This Statement
also amends ARB No. 51, Consolidated Financial Statements, to eliminate the
exception to consolidation for a subsidiary for which control is likely to be
temporary. The Company is currently evaluating the provisions of this
pronouncement and has not yet determined the effect that adoption of this
standard will have on its consolidated financial statements.

Accounting for Earnings Per Share - Basic earnings per common share is computed
based on the weighted average number of shares outstanding. Diluted earnings per
share is computed based on the weighted average number of shares outstanding,
increased by the number of common shares that are assumed to have been purchased
with the proceeds from the exercise of stock options (treasury stock method).
These purchases were assumed to have been made at the average market price of
the common stock. The weighted average shares outstanding used to calculate
earnings per share were as follows:

<TABLE>
<CAPTION>
                                                  Year Ended September 30,
                                              2001           2000            1999
-----------------------------------------------------------------------------------
<S>                                         <C>            <C>            <C>
Average shares outstanding - basic          2,228,747      2,252,308      2,244,055
Increase in shares due to dilutive options     28,623         23,456         50,477
                                            ---------      ---------      ---------
Adjusted shares outstanding - diluted

diluted                                     2,257,370      2,275,764      2,294,532
                                            =========      =========      =========
</TABLE>

Cash Surrender Value of Life Insurance - The Company is the beneficiary of
insurance policies on the lives of officers and some employees of the Bank. The
Company has recognized the amount that could be realized under the insurance
policies as an asset in the statement of financial condition.

Accounting for Derivative Instruments and Hedging Activities - The Company
adopted the provisions of SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities as amended by SFAS Nos. 137 and 138, and as interpreted
by the FASB and the Derivatives Implementation Group through "Statement 133
Implementation Issues", as of October 1, 2000. Currently, no embedded
derivatives require bifurcation. The Company currently does not employ hedging
activities that require designation as either fair value or cash flow hedges, or
hedges of a net investment in a foreign operation.

Interest Rate Risk - The Company is engaged principally in providing first
mortgage loans to individuals and commercial enterprises. At September 30, 2001,
the Company's assets that earned interest at fixed interest rates were funded
primarily with short-term liabilities that have interest rates that vary with
market rates over time.
   The Company is vulnerable to an increase in interest rates to the extent that
interest-bearing liabilities mature or reprice more rapidly than
interest-earning assets. In the current market, the Company primarily originates
long-term fixed rate loans secured by single-family residences. The source of
these funds has been deposits and long-term amortizing advances.
   At September 30, 2001, the Company had interest-earning assets of
approximately $539,975,000 having a weighted average effective yield of 6.75%
and interest-bearing liabilities of approximately $515,302,000 having a weighted
average effective interest rate of 5.09%.

Use of Estimates in Preparation of Financial Statements - The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statement and the reported amounts of income and expenses during the reporting
period. The most significant of these estimates is the allowance for loan
losses. Actual results could differ from those estimates.

Reclassification - Certain items in the 2000 and 1999 financial statements have
been reclassified to conform with the presentation in the 2001 consolidated
financial statements.


                                                                              17
<PAGE>
3. INVESTMENT SECURITIES HELD TO MATURITY
A comparison of cost and approximate fair value of investment securities, by
maturities, is as follows:

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------
                                                                  September 30, 2001
------------------------------------------------------------------------------------------------------
                                                                Gross          Gross
                                              Amortized      Unrealized      Unrealized    Approximate
                                                Cost            Gains          Losses      Fair Value
------------------------------------------------------------------------------------------------------
<S>                                          <C>            <C>            <C>            <C>
U.S. Government Agencies
      Due after 2 years through 5 years      $ 1,000,000    $        --                   $ 1,000,000
      Due after 5 years through 10 years      12,985,052    $   214,948                    13,200,000
      Due after 10 years through 15 years     24,446,500        304,500                    24,751,000
Tax Exempt Obligations
      Due after 15 years                      23,770,853        846,147                    24,617,000
                                             -----------    -----------    -----------    -----------

Total Investment Securities                  $62,202,405    $ 1,365,595    $        --    $63,568,000
                                             ===========    ===========    ===========    ===========

</TABLE>

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------
                                                                  September 30, 2000
------------------------------------------------------------------------------------------------------
                                                                Gross          Gross
                                              Amortized      Unrealized      Unrealized    Approximate
                                                Cost            Gains          Losses      Fair Value
------------------------------------------------------------------------------------------------------
<S>                                         <C>            <C>            <C>            <C>
U.S. Government Agencies
      Due after 2 years through 5 years     $ 16,500,000                  $   (386,000)  $ 16,114,000
      Due after 5 years through 10 years      21,980,911   $     38,090       (971,001)    21,048,000
      Due after 10 years through 15 years     17,418,624         43,263       (703,887)    16,758,000
Tax Exempt Obligations
      Due after 15 years                      15,381,306        232,610        (70,916)    15,543,000
                                            ------------   ------------   ------------   ------------

Total Investment Securities                 $ 71,280,841   $    313,963   $ (2,131,804)  $ 69,463,000
                                            ============   ============   ============   ============
</TABLE>



At September 2000, U.S. Government Agencies include structured note securities
with periodic interest rate adjustments and are callable periodically by the
issuing agency. These structured notes were comprised of step-up bonds with par
values of $998 thousand at September 30, 2000. There were no step-up bonds as of
September 30, 2001.

The Company has the positive intent and the ability to hold these securities to
maturity. At September 30, 2001, neither a disposal, nor conditions that could
lead to a decision not to hold these securities to maturity were reasonably
foreseen.

4.  INVESTMENT SECURITIES AVAILABLE-FOR-SALE
A comparison of cost and approximate fair value of investment securities is as
follows:

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------
                                                                  September 30, 2001
------------------------------------------------------------------------------------------------------
                                                                Gross          Gross
                                              Amortized      Unrealized      Unrealized    Approximate
                                                Cost            Gains          Losses      Fair Value
------------------------------------------------------------------------------------------------------
<S>                                           <C>            <C>            <C>            <C>
ARM Mutual Funds                              $3,317,173     $       --     $  (23,192)    $3,293,981
                                              ----------     ----------     ----------     ----------

Total Investment Securities                   $3,317,173     $       --     $  (23,192)    $3,293,981
                                              ==========     ==========     ==========     ==========
</TABLE>



<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------
                                                                  September 30, 2001
------------------------------------------------------------------------------------------------------
                                                                Gross          Gross
                                              Amortized      Unrealized      Unrealized    Approximate
                                                Cost            Gains          Losses      Fair Value
------------------------------------------------------------------------------------------------------
<S>                                           <C>            <C>            <C>            <C>
ARM Mutual Funds                              $3,354,154     $       --     $  (44,418)    $3,309,736
                                              ----------     ----------     ----------     ----------

Total Investment Securities                   $3,354,154     $       --     $  (44,418)    $3,309,736
                                              ==========     ==========     ==========     ==========
</TABLE>



18

<PAGE>

5. MORTGAGE-BACKED SECURITIES HELD TO MATURITY
A comparison of cost and approximate fair value of mortgage-backed securities is
as follows:


<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------
                                                                  September 30, 2001
------------------------------------------------------------------------------------------------------
                                                                Gross          Gross
                                              Amortized      Unrealized      Unrealized    Approximate
                                                Cost            Gains          Losses      Fair Value
------------------------------------------------------------------------------------------------------
<S>                                         <C>            <C>            <C>            <C>
Collateralized mortgage obligations         $ 68,183,560   $    887,139   $   (181,699)  $ 68,889,000
FHLMC pass-through certificates               14,315,089        544,911             --     14,860,000
FNMA pass-through certificates                19,714,010        528,990             --     20,243,000
GNMA pass-through certificates                65,514,066      1,729,934             --     67,244,000
                                            ------------   ------------   ------------   ------------
Total Mortgage-Backed Securities            $167,726,725   $  3,690,974   $   (181,699)  $171,236,000
                                            ============   ============   ============   ============

</TABLE>

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------
                                                                  September 30, 2000
------------------------------------------------------------------------------------------------------
                                                                Gross          Gross
                                              Amortized      Unrealized      Unrealized    Approximate
                                                Cost            Gains          Losses      Fair Value
------------------------------------------------------------------------------------------------------
<S>                                    <C>             <C>             <C>              <C>
Collateralized mortgage obligations    $ 52,482,502    $    138,918    $   (996,420)    $ 51,625,000
FHLMC pass-through certificates           9,935,756          26,355        (110,111)       9,852,000
FNMA pass-through certificates           21,402,545          33,968        (565,513)      20,871,000
GNMA pass-through certificates           32,482,927           1,654        (650,581)      31,834,000
                                       ------------    ------------    ------------     ------------

Total Mortgage-Backed Securities       $116,303,730    $    200,895    $ (2,322,625)    $114,182,000
                                       ============    ============    ============     ============
</TABLE>


The Company has the positive intent and ability to hold these securities to
maturity. At September 30, 2001, neither a disposal nor conditions that could
lead to a decision not to hold these securities to maturity, were reasonably
foreseen.

6. MORTGAGE-BACKED SECURITIES AVAILABLE-FOR-SALE
A comparison of cost and approximate fair value of mortgage-backed securities is
as follows:

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------
                                                    September 30, 2000
-------------------------------------------------------------------------------------------
                                                    Gross         Gross
                                    Amortized    Unrealized     Unrealized     Approximate
                                       Cost         Gains         Losses       Fair Value
-------------------------------------------------------------------------------------------
<S>                                 <C>          <C>            <C>            <C>
FHLMC pass-through certificates     $2,835,053   $       --     $  (93,580)    $2,741,473
GNMA pass-through certificates       4,721,589                     (22,609)     4,698,980
                                    ----------   ----------     ----------     ----------
Total Mortgage-Backed Securities    $7,556,642   $       --     $ (116,189)    $7,440,453
                                    ==========   ==========     ==========     ==========

</TABLE>

                                                                              19

<PAGE>

7. LOANS RECEIVABLE
Loans receivable consists of the following:
<TABLE>
<CAPTION>

--------------------------------------------------------------------------------
                                                        September 30,
                                                  2001                2000
--------------------------------------------------------------------------------
<S>                                          <C>                 <C>
Residential Mortgages                        $ 233,290,694       $ 207,928,146
Commercial Mortgages                               785,923             807,156
Construction                                    14,649,063           6,579,523
Education                                        1,041,197           1,414,011
Savings Account                                    617,244             618,884
Home Equity                                     43,401,198          44,727,366
Automobile and other                               628,752             639,693
Line of Credit                                   9,806,918           7,888,612
                                             -------------       -------------

Total                                          304,220,989         270,603,391
Undisbursed portion of loans in process         (9,919,306)         (3,844,612)
Deferred loan fees                              (2,052,274)         (1,946,270)
Allowance for loan losses                       (2,036,188)         (2,038,131)
                                             -------------       -------------

Loans Receivable - net                       $ 290,213,221       $ 262,774,378
                                             =============       =============
</TABLE>


The Company originates and purchases both adjustable and fixed interest rate
loans and mortgage-backed securities. At September 30, 2001, the composition of
these loans and mortgage-backed securities, in thousands, is as follows:


                     Fixed-Rate                        Adjustable-Rate
       Term to Maturity       Book Value    Term to Maturity       Book Value
      -----------------------------------------------------------------------
        1 year or less        $  1,536        1 year or less        $ 81,758
          1-3 years              7,340        1-3 years               12,636
          3-5 years             15,806        3-5 years               18,798
          5-15 years            47,609        5-15 years              16,366
        over 15 years          214,485
                             ---------                              --------
                             $ 286,776                              $129,558
                             =========                              ========


The adjustable rate loans have interest rate adjustment limitations and are
generally indexed to the 1-year U.S. Treasury Securities rate. Future market
factors may affect the correlation of the interest rate adjustment with the
rates the Company pays on the short-term deposits that have been primarily
utilized to fund these loans.

At September 30, 2001, 2000 and 1999, the Company was servicing loans for others
amounting to approximately $4,873,000 , $6,586,000 and $7,550,000, respectively.
Servicing loans for others generally consists of collecting mortgage payments,
maintaining escrow accounts, disbursing payments to investors and foreclosure
processing. Loan servicing income is recorded upon receipt and includes
servicing fees from investors and certain charges collected from borrowers, such
as late payment fees. In connection with the loans serviced for others, the
Company held borrowers' escrow balances of approximately $32,000, $31,000, and
$48,000 at September 30, 2001, 2000, and 1999, respectively.

Loans to officers and directors at September 30, 2001 and 2000, were
approximately $301,329 and $229,907, respectively. Additional loans and
repayments for the year ended September 30, 2001, were $75,000 and $3,578,
respectively, and for the year ended September 30, 2000, were approximately $0
and $6,200, respectively.

The Company provides loans primarily in its local market area to borrowers that
share similar attributes. This concentration of credit exposes the Company to a
higher degree of risk in this regard.

The following schedule summarizes the changes in the allowance for loan losses:


--------------------------------------------------------------------------------
                                            Year Ended September 30,
                                    2001              2000              1999
--------------------------------------------------------------------------------
Balance, beginning of year      $ 2,038,131       $ 2,040,000       $ 2,040,000
     Provision for loan losses           --                --            16,579
     Amounts charged off, net        (1,943)           (1,869)          (16,579)
                                -----------       -----------       -----------
Balance, end of year            $ 2,036,188       $ 2,038,131       $ 2,040,000
                                ===========       ===========       ===========


The provision for loan losses charged to expense is based upon past loan and
loss experiences and an evaluation of potential losses in the current loan
portfolio, including the evaluation of impaired loans under SFAS No. 114. A loan
is considered to be impaired when, based upon current information and events, it
is probable that the Company will be


20


<PAGE>

unable to collect all amounts due according
to the contractual terms of the loan. An insignificant delay or insignificant
shortfall in amount of payments does not necessarily result in the loan being
identified as impaired. For this purpose, delays less than 90 days are
considered to be insignificant. As of September 30, 2001, 100% of the impaired
loan balance was measured for impairment based on the fair value of the loans'
collateral. Impairment losses are included in the provision for loan losses.
SFAS No. 114 does not apply to large groups of smaller balance homogeneous loans
that are collectively evaluated for impairment, except for those loans
restructured under a troubled debt restructuring. Loans collectively evaluated
for impairment include consumer loans and residential real estate loans. At
September 30, 2001 and 2000, the Company's impaired loans consisted of smaller
balance residential mortgage loans collectively evaluated for impairment.
Non-performing loans (which include loans in excess of 90 days delinquent) at
September 30, 2001 and 2000, amounted to approximately $298,000 and $184,000,
respectively. The loans were collectively evaluated for impairment.


8. ACCRUED INTEREST RECEIVABLE
Accrued interest receivable consists of the following:


--------------------------------------------------------------------------
                                                      September 30,
                                                  2001            2000
--------------------------------------------------------------------------

Investments and interest-bearing deposits      $1,073,364      $1,110,222
Mortgage-backed securities                        821,006         719,097
Loans receivable                                1,508,575       1,417,395
                                               ----------      ----------

Total                                          $3,402,945      $3,246,714
                                               ==========      ==========


9. OFFICE PROPERTIES AND EQUIPMENT
Office properties and equipment are summarized by major classifications as
follows:

----------------------------------------------------------------------------
                                                      September 30,
                                                 2001              2000
----------------------------------------------------------------------------

Land and buildings                           $ 5,081,110       $ 4,176,671
Furniture, fixtures and equipment              3,243,153         2,898,061
Automobiles                                       56,164            56,164
                                             -----------       -----------

Total                                          8,380,427         7,130,896
Less accumulated depreciation                 (3,155,945)       (2,680,975)
                                             -----------       -----------

Net                                          $ 5,224,482       $ 4,449,921
                                             ===========       ===========

10. DEPOSITS
Deposits are summarized as follows:

-----------------------------------------------------------------------------
                                                   September 30,
                                           2001                   2000
-----------------------------------------------------------------------------
                                               Weighted              Weighted
                                               Interest              Interest
                                     Amount      Rate       Amount     Rate
-----------------------------------------------------------------------------

NOW accounts                     $ 12,280,113   1.00%   $ 10,748,610   1.25%
Checking accounts                   6,859,090   0.03%      5,780,503   0.04%
Money Market Deposit accounts      67,941,336   2.09%     49,928,562   2.54%
Passbook and Club accounts          2,535,083   3.27%      2,395,877   3.78%
Certificate accounts              260,530,933   5.38%    240,982,258   5.79%
                                 ------------   ----    ------------   ----

Total Deposits                   $350,146,555   4.69%   $309,835,810   5.18%
                                 ============   ====    ============   ====


At September 30, 2001, the amounts of scheduled maturities of certificate
accounts were as follows:

For the year ended September 30:           2002                $167,963,633
                                           2003                  65,163,612
                                           2004                  16,006,798
                                           2005                   2,290,190
                                           2006                   9,106,700
                                                           ----------------
                                Total                          $260,530,933
                                                           ================

The aggregate amount of certificate accounts in denominations of $100,000 or
more at September 30, 2001 amounted to approximately $23.2 million. Deposits in
excess of $100,000 are not federally insured.

                                                                              21

<PAGE>


Interest expense on savings deposits is composed of the following:

------------------------------------------------------------------------------
                                                   September 30,
                                        2001           2000           1999
------------------------------------------------------------------------------

NOW accounts and MMDA accounts      $ 2,356,735    $ 1,927,618    $ 1,706,721
Passbook and Club accounts               48,234         53,360         58,320
Certificate accounts                 14,304,398     13,056,472     12,404,020
                                    -----------    -----------    -----------

Total                               $16,709,367    $15,037,450    $14,169,061
                                    ===========    ===========    ===========




11. ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank consists of the following:
---------------------------------------------------------------------------
                                         September 30,
                                2001                       2000
---------------------------------------------------------------------------
                                    Weighted                     Weighted
                                    Interest                     Interest
 Maturing Period          Amount      Rate           Amount        Rate
---------------------------------------------------------------------------

 1 to  12 months      $  5,532,489    6.35%       $ 21,000,000     6.71%
13 to  24 months         4,597,598    6.50%          8,737,521     6.48%
25 to  36 months        20,614,517    5.69%         12,837,096     6.34%
37 to  48 months        34,289,819    6.44%          7,553,686     6.50%
49 to  60 months        10,372,844    5.17%          9,759,185     5.42%
61 to  72 months                --      --%         40,775,291     6.43%
73 to  84 months        55,902,117    5.43%          4,250,767     5.13%
85 to 108 months        40,000,000    5.57%         40,220,737     5.47%
                      ------------    ----        ------------     ----
Total                 $171,309,384    5.74%       $145,134,283     6.10%
                      ============    ====        ============     ====



The advances are collateralized by Federal Home Loan Bank stock and
substantially all first mortgage loans.

The Company has a line of credit of which none of the available $16.5 million
was used at September 30, 2001. At September 30, 2000, $12 million of the
available $16.5 million was used. The line of credit carried a variable market
interest rate which was 6.77% at September 30, 2000.

12. Income Taxes

As of January 1, 1996, the Company changed its method of computing  reserves for
bad debts to the experience method. The bad debt deduction  allowable under this
method is available to small banks with assets less than $500 million. Beginning
October 1, 2000,  the Company  changed its method of computing  reserves for bad
debts to the specific  charge-off method. The bad debt deduction allowable under
this method is available to large banks with assets  greater than $500  million.
Generally,  this method  allows the Company to deduct an annual  addition to the
reserve for bad debts equal to it its net charge-offs.

A thrift institution required to change its method of computing reserves for bad
debts to the  experience  method  treats  such  change  as a change in method of
accounting determined solely with respect to the "applicable excess reserves" of
the institution.  The amount of applicable excess reserves is taken into account
ratably over a six  taxable-year  period,  beginning with the first taxable year
beginning after December 31, 1995. For financial reporting purposes, the Company
has not incurred any  additional tax expense.  Amounts that had been  previously
deferred will be reversed for financial  reporting  purposes and will be include
in the income tax return of the  Company,  increasing  income tax  payable.  The
change  from the  experience  method to the  specific  charge-off  method in the
current  year  will not  result  in a  recapture  of bad debt  reserves  for tax
purposes.   Retained   earnings  at  September   30,  2001  and  2000   includes
approximately  $1,325,000 representing bad debt deductions for which no deferred
income taxes have been provided.


22

<PAGE>

The expense for income taxes differs from that computed at the statutory federal
corporate tax rate as follows:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
                                                                  Year Ended September 30,
                                              2001                         2000                          1999
-------------------------------------------------------------------------------------------------------------------------
                                                  Percentage                    Percentage                     Percentage
                                                   of Pretax                     of Pretax                      of Pretax
                                    Amount          Income        Amount          Income        Amount           Income
-------------------------------------------------------------------------------------------------------------------------
<S>                              <C>                 <C>       <C>                 <C>       <C>                 <C>
At statutory rate                $ 1,745,685         34.0%     $ 1,890,018         34.0%     $ 1,743,552         34.0%
Adjustments resulting from:
Tax-exempt income                   (498,555)        (9.7)        (165,040)        (3.0)        (107,927)        (2.1)
State tax-net of federal
    tax benefit                           --           --              528           --            3,960           --
Other                                (27,930)        (0.6)         (23,526)        (0.4)         (17,585)        (0.3)
                                 -----------         ----      -----------         ----       -----------        ----
Expense per consolidated
   statements of income          $ 1,219,200         23.7%     $ 1,701,980         30.6%     $ 1,622,000         31.6%
                                 ===========         ====      ===========         ====      ===========         ====
</TABLE>



Items that gave rise to significant portions of the deferred tax accounts are as
follows:

                                                      September 30,
                                                  2001             2000
                                                ---------       ---------
Deferred Tax Assets:
  Deferred Loan Fees                            $  80,541       $  54,917
  Unrealized Loss on Investment Securities          7,885          54,607
  Allowance for Loan Losses                       589,089         486,533
  Other                                             9,192              --
                                                ---------       ---------
    Sub-Total                                     686,707         596,057
                                                ---------       ---------
Deferred Tax Liabilities:
  Property                                       (426,667)       (176,885)
  Other                                                --        (112,411)
                                                ---------       ---------
    Sub-Total                                    (426,667)       (289,296)
                                                ---------       ---------
    Total                                       $ 260,040       $ 306,761
                                                =========       =========

Income taxes paid were approximately $957,500,$1,826,500, and $1,704,000 for the
years ended September 30, 2001, 2000, and 1999, respectively.

13. REGULATORY CAPITAL REQUIREMENTS
The Bank is subject to various regulatory capital requirements administered by
the federal Banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory - and possibly additional discretionary - actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities and certain off-balance-sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classification are also
subject to qualitative judgements by the regulators about components, risk
weightings, and other factors. Quantitative measures established by regulation
to ensure capital adequacy require the Bank to maintain minimum amounts and
ratios (set forth in the table below) of total Tier 1 capital (as defined in the
regulations) to risk weighted assets (as defined), and of Tier 1 capital (as
defined) to assets (as defined). Management believes, as of September 30, 2001,
that the Bank meets all capital adequacy requirements to which it is subject.

As of September 30, 2001, the most recent notification from the Federal Deposit
Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based,
and Tier 1 leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the Bank's
category.


                                                                              23

<PAGE>


The Bank's actual capital amounts and ratios are also presented in the table.

<TABLE>
<CAPTION>
                                                                                                         To Be Considered Well
                                                                                                           Capitalized Under
                                                                                     For Capital           Prompt Corrective
                                                               Actual             Adequacy Purposes        Action Provisions
-------------------------------------------------------------------------------------------------------------------------------
As of September 30, 2001                                Amount      Ratio         Amount       Ratio       Amount       Ratio
                                                     -----------    -----       -----------    -----     -----------    -----
<S>                                                  <C>            <C>         <C>            <C>        <C>          <C>
       Tier 1 Capital (to assets)                    $33,951,154     6.12%      $22,190,440     4.00%     $27,738,050    5.00%
       Tier 1 Capital (to risk weighted assets)       33,951,154    13.85%        9,806,400     4.00%      14,709,600    6.00%
       Total Capital (to risk weighted assets)        35,971,154    14.67%       19,612,800     8.00%      24,516,000   10.00%

<CAPTION>

As of September 30, 2000                                Amount      Ratio         Amount       Ratio       Amount       Ratio
                                                     -----------    -----       -----------    -----     -----------    -----
<S>                                                  <C>            <C>         <C>            <C>        <C>          <C>
       Tier 1 Capital (to assets)                    $31,475,071     6.44%      $19,542,156     4.00%     $24,427,695    5.00%
       Tier 1 Capital (to risk weighted assets)       31,475,071    14.05%        8,960,240     4.00%      13,440,360    6.00%
       Total Capital (to risk weighted assets)        33,513,071    14.96%       17,920,480     8.00%      22,400,600   10.00%
</TABLE>


14. PROFIT SHARING PLAN
The Company has a defined contribution plan covering all full-time employees
meeting certain eligibility requirements. Contributions are at the discretion of
the Company's Board of Directors. Profit sharing expense was $165,730, $177,234
and $219,088 for the years ended September 30, 2001, 2000, and 1999,
respectively.


15. STOCK OPTIONS
In 1987, the Company established a stock compensation program for executive
officers and other selected full-time employees and directors of the Company.
The 1987 program consists of four plans that are available for grant: Plan I -
incentive stock options; Plan II - compensatory stock options; Plan III - stock
appreciation rights; and Plan IV - performance share awards.

In January 1996, the stockholders approved the 1995 Stock Option Plan. This plan
consists of two parts: Plan I - incentive stock options and Plan II -
compensatory stock options.

In January 2001, the stockholders approved the 2000 Stock Option Plan. This plan
consists of two parts: Plan I - incentive stock options and Plan II -
compensatory stock options.

As of September 30, 2000, an aggregate of 140,483 shares were authorized and
outstanding of which 120,609 had been issued and 19,873 were unissued. As of
September 30, 2001, an aggregate of 234,043 shares were authorized and
outstanding of which 128,568 had been issued and 105,475 were unissued.

A summary of transactions under this plan follows:

<TABLE>
<CAPTION>

                                                             Year Ended September 30,
                                                2001                   2000                   1999
--------------------------------------------------------------------------------------------------------------
                                                     Weighted               Weighted                Weighted
                                                     Average                Average                 Average
                                         Options      Price     Options      Price      Options      Price
--------------------------------------------------------------------------------------------------------------
<S>                                      <C>       <C>          <C>        <C>           <C>       <C>
      Outstanding,  beginning of year    120,609   $   11.81    139,306    $   11.34     98,434    $    13.92

      Exercised                          (16,439)       9.75    (19,197)        8.70     (7,341)         8.72
      Canceled                            (1,562)      15.67     (6,250)       12.75     (5,500)        12.62
      Stock Split                                                                        32,813
      Granted                             25,960       14.50      6,750        13.50     20,900         16.42
                                        --------      ------   --------    ---------   --------    ----------

      Outstanding, end of year           128,568   $   12.57    120,609    $   11.81    139,306    $    11.34
                                        ========   =========   ========    =========   ========    ==========

Options exercisable, end of year          77,646   $   10.76     63,001    $   10.49     57,551    $     9.66
                                        ========   =========   ========    =========   ========    ==========
</TABLE>
24

<PAGE>


Had compensation cost for the Company's three stock option plans been determined
based on the fair value at the dates of awards under those plans consistent with
the method of SFAS No. 123, the Company's net income and income per share would
have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                Year Ended September 30,
                                                                                            2001          2000           1999
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>            <C>           <C>            <C>
Net income:                                                              As reported    $3,915,167    $3,856,897     $3,506,095
                                                                         Pro forma       3,863,999     3,846,658      3,466,417
Net income per common and common equivalent share:
      Diluted                                                            As reported        $ 1.73        $ 1.70         $ 1.53
                                                                         Pro forma            1.71          1.69           1.51

Significant assumptions used to calculate the above are as follows:
      Risk free interest rate of return                                                      6.50%         5.50%          5.00%
      Expected option life                                                               84 months     84 months      84 months
      Expected volatility                                                                   10.00%        11.00%         11.00%
      Expected dividends                                                                     2.50%         2.50%          2.00%
</TABLE>


The Company also has established an Employee Stock Purchase Plan (the "Purchase
Plan") whereby employees may elect to make contributions to the Purchase Plan in
an aggregate amount not less than 2% nor more than 10% of such employee's total
compensation. These contributions would then be used to purchase stock during an
offering period determined by the Company's Salary and Benefits Committee. The
purchase price of the stock would be the lesser of 85% of the market price on
the first day or the last day of the offering period. The SFAS No. 123 impact of
the Purchase Plan on pro forma net income and income per share was deemed to be
immaterial. During 2001, 4,283 shares were issued to employees. At September 30,
2001, there were 34,181 shares available for future purchase.


16. COMMITMENTS
At September 30, 2001, the Company had approximately $6 million in outstanding
commitments to originate mortgage loans, $5,806,000 of which were at fixed rates
ranging from 6.25 to 7.75%. The unfunded line of credit commitments at September
30, 2001 were $14.8 million. The amounts of undisbursed portions of loans in
process at September 30, 2001 were $9.9 million. Also, at September 30, 2001,
the Company had no outstanding futures or options positions.

The Company leases land for two of its branch offices. Minimum rental
commitments at September 30, 2001, are summarized below:


                                          Fiscal           Rental
                                           Year            Amount
                                          ------           ------
                                           2002            90,724
                                           2003            90,724
                                           2004            90,724
                                           2005            90,724
                                           2006            94,174
                                                           ------
                Total                                   $ 457,070
                                                        =========


17. CONVERSION TO A STOCK SAVINGS BANK
At the time of conversion, in 1987, the Bank established a liquidation account
in an amount equal to the Bank's net worth as reflected in the latest
consolidated statement of financial condition of the Bank contained in the
offering circular utilized in the conversion. The function of the liquidation
account is to establish a priority on liquidation and, except with respect to
the payment of cash dividends on, or the re-purchase of, any of the common stock
by the Bank, the existence of the liquidation account will not operate to
restrict the use or application of any of the net worth accounts of the Bank. In
the event of a complete liquidation of the Bank (and only in such event), each
eligible account holder will be entitled to receive a pro rata distribution from
the liquidation account, based on such holder's proportionate amount of the
total current adjusted balances from deposit accounts then held by all eligible
account holders, before any liquidation distribution may be made with respect to
stockholders. The liquidation account was approximately $2,300,000 at September
30, 2001. Furthermore, the Company may not repurchase any of its stock if the
effect thereof would cause the Company's net worth to be reduced below (i) the
amount required for the liquidation account or (ii) the regulatory capital
requirements.


                                                                              25
<PAGE>

18. FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value amounts have been determined by the Company using
available market information and appropriate valuation methodologies. However,
considerable judgment is necessarily required to interpret the market data to
develop the estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts.

<TABLE>
<CAPTION>
                                                                  ------------------------------------------------------------
                                                                                          September 30,
                                                                            2001                           2000
                                                                    Carrying    Estimated Fair    Carrying      Estimated Fair
                                                                     Amount         Value          Amount           Value
                                                                  ------------------------------------------------------------
<S>                                                               <C>           <C>            <C>               <C>
Assets:
    Cash and cash equivalents                                     $  8,948,132  $  8,948,132   $  4,080,202      $  4,080,202
    Investment securities held to maturity                          62,202,405    63,568,000     71,280,841        69,463,000
    Investment securities available-for-sale at fair value           3,293,981     3,293,981      3,309,736         3,309,736
    Mortgage-backed securities held to maturity                    167,726,725   171,236,000    116,303,730       114,182,000
    Mortgage-backed securities available-for-sale at fair value                                   7,440,453         7,440,453
    Loans receivable - net                                         290,213,221   295,729,868    262,774,378       263,147,068
    Federal Home Loan Bank Stock                                     8,950,200     8,950,200      7,365,200         7,365,200

Liabilities:
    Passbook, Club and NOW accounts                                 21,674,286    21,674,286     18,924,990        18,924,990
    Money Market Demand accounts                                    67,941,336    67,941,336     49,928,562        49,928,562
    Certificate accounts                                           260,530,933   265,745,503    240,982,258       236,187,198
    Advances from Federal Home Loan Bank                           171,309,384   180,285,382    145,134,283       143,911,167

Off Balance Sheet Items:
    Commitments                                                     30,735,000    30,735,000     19,800,000        19,800,000

</TABLE>

The fair value of investment securities and mortgage-backed securities is based
on quoted market prices, dealer quotes, and prices obtained from independent
pricing services. The fair value of loans is estimated based on present value
using approximate current entry-value interest rates applicable to each category
of such financial instruments. Although Federal Home Loan Bank Stock (FHLB) is
an equity interest in FHLB, it is carried at cost because it does not have a
readily determinable fair value as its ownership is restricted and it lacks a
market. The estimated fair value approximates the carrying amount.

The fair value of NOW and money market deposits and savings accounts is the
amount reported in the financial statements. The fair value of savings
certificates and advances from Federal Home Loan Bank are based on a present
value estimate using rates currently offered for instruments of similar
remaining maturity. Fair values for off-balance sheet lending commitments are
based on fees currently charged to enter similar agreements.


The fair value estimates presented herein are based on pertinent information
available to management as of September 30, 2001. Although management is not
aware of any factors that would significantly affect the estimated fair value
amounts, such amounts have not been comprehensively revalued for purposes of
these financial statements since that date and, therefore, current estimates of
fair value may differ significantly from the amounts presented herein.


19. Parent Company Financial Information
Condensed financial statements of Harleysville Savings Financial Corporation are
as follows:


Condensed Statements of Financial Condition

                                                     September 30,
                                                 2001              2000
                                                 ----              ----
Assets
      Cash                                    $   328,751      $ 1,469,111
      Other assets
      Investment in subsidiary                 33,935,137       29,929,276
                                              -----------      -----------
Total Assets                                  $34,263,888      $31,398,387
                                              ===========      ===========

Liabilities & Stockholders' Equity
Liabilities
Stockholders' equity                          $34,263,888      $31,398,387
                                              -----------      -----------
Total liabilities & stockholders' equity      $34,263,888      $31,398,387
                                              ===========      ===========

26

<PAGE>

<TABLE>
<CAPTION>


                                                           For the Year Ended   For the Period Febuary 25, 2000
                                                           September 30, 2001             to September 30, 2000

<S>                                                           <C>                                   <C>
Condensed Statement of Income
Income:

Equity in undistributed income of subsidiary                  $ 3,915,167                           $ 2,908,857
                                                              -----------                           -----------


Net income                                                    $ 3,915,167                           $ 2,908,857
                                                              ===========                           ===========

                                                           For the Year Ended   For the Period Febuary 25, 2000
                                                           Septemberl30, 2001             to September 30, 2000

Net income                                                    $ 3,915,167                           $ 2,908,857
Undistributed income of Harleysville Savings Bank              (3,915,167)                           (2,908,857)
                                                              -----------                           -----------

Net cash provided by operating activities                              --                                    --
                                                              -----------                           -----------

Investing activities:
      Dividends received from subsidiaries                             --                             2,547,183
                                                              -----------                           -----------

Net cash provided by investing activities                              --                             2,547,183
                                                              -----------                           -----------

Financing activities:
      Acquisition of treasury stock                              (310,570)                             (714,163)
      Proceeds from issuance of common stock                      239,508                               129,394
      Dividends paid                                           (1,069,298)                             (493,303)
                                                              -----------                           -----------
Net cash used in financing activities                          (1,140,360)                           (1,078,072)
                                                              -----------                           -----------


Net (decrease) increase in cash and cash equivalents           (1,140,360)                            1,469,111
Cash and cash equivalents at the beginning of the period        1,469,111                                    --
                                                              -----------                           -----------
Cash and cash equivalents at the end of  the period           $   328,751                           $ 1,469,111
                                                              ===========                           ===========
</TABLE>

20.  Quarterly Financial Data (Unaudited)
Unaudited quarterly financial data for the years ended September 30, 2001 and
2000 is as follows:

<TABLE>
<CAPTION>
                                                        2001                                            2000
                                    -------------------------------------------      -------------------------------------------
                                       1st         2nd        3rd          4th        1st         2nd         3rd          4th
                                       QTR         QTR        QTR          QTR        QTR         QTR         QTR          QTR
                                    -------------------------------------------      -------------------------------------------
<S>                                  <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
Interest Income                      $8,899      $9,091      $9,066      $9,248      $8,069      $8,148      $8,374      $8,591
Interest Expense                      6,541       6,658       6,675       6,710       5,496       5,528       5,710       6,061
                                    -------------------------------------------      -------------------------------------------
Net Interest Income                   2,358       2,433       2,391       2,538       2,573       2,620       2,664       2,530
Provision for loan loss
Net interest income after
                                    -------------------------------------------      -------------------------------------------
      provision for loan losses       2,358       2,433       2,391       2,538       2,573       2,620       2,664       2,530
Non-interest income                     224         365         280         378         102         121         126         202
Non-interest expense                  1,362       1,417       1,504       1,550       1,296       1,315       1,367       1,402
                                    -------------------------------------------      -------------------------------------------
Income before income taxes            1,220       1,381       1,167       1,366       1,379       1,426       1,423       1,330
Income tax expense                      320         349         243         307         431         439         455         376
                                    -------------------------------------------      -------------------------------------------
Net income                           $  900      $1,032      $  924      $1,059      $  948      $  987      $  968      $  954
                                    ===========================================      ==========================================

Per Share:
       Earnings per share - basic    $ 0.40      $ 0.46      $ 0.41      $ 0.47      $ 0.42      $ 0.44      $ 0.43      $ 0.43
       Earnings per share - diluted  $ 0.40      $ 0.46      $ 0.41      $ 0.47      $ 0.42      $ 0.43      $ 0.43      $ 0.42

</TABLE>

Earnings per share is computed independently for each period presented
Consequently, the sum of the quarters may not equal the total earnings per share
for the year.

                                                                              27

<PAGE>

Market Information

Harleysville Savings Financial Corporation's Common Stock is traded in the
Over-the-Counter Market and quoted on the NASDAQ National Market System under
the symbol "HARL". The Common Stock was issued at an adjusted price of $2.42 per
share in connection with the Company's conversion from mutual to stock form and
the Common Stock commenced trading on the NASDAQ National Market System on
September 3, 1987. Prices shown below reflect the prices reported by the NASDAQ
systems. The closing price on September 30, 2001, was $16.90 per share. There
were 2,306,455 shares outstanding as of September 30, 2001, held by
approximately 1,000 stockholders.


                                                                CASH DIVIDENDS
For the Quarter Ended       HIGH          LOW          CLOSE       DECLARED
------------------------------------------------------------------------------
September 30, 1999          16.13         14.00        14.00         0.09
December 31, 1999           14.00         12.25        13.38         0.11
March 31, 2000              14.75         14.00        14.00         0.11
June 30, 2000               15.13         14.50        14.50         0.11
September 30, 2000          15.75         15.00        15.06         0.11
December 31, 2000           15.25         14.13        14.25         0.12
March 31, 2001              16.50         14.50        16.00         0.12
June 30, 2001               17.00         15.50        16.00         0.12
September 30, 2001          18.20         15.76        16.90         0.12

<TABLE>
<CAPTION>

Corporate Information

<S>                                                  <C>
Auditors                                             General Counsel
Deloitte & Touche                                    James J. Garrity
1700 Market Street,                                  Wisler, Pearlstine, Talone, Craig, Garrity & Potash
Philadelphia, PA 19103-3984                          Office Court at Walton Point
(215) 246-2300                                       484 Norristown Road
                                                     Blue Bell, PA 19422
                                                     (610) 825-8400
Annual Meeting
Family Heritage Restaurant
Franconia, PA                                        Investor Information
Wednesday, January 23, 2002                          Investors, Analysts and others seeking
9:30 A.M.                                            financial information may contact:

                                                     Chief Financial Officer
Market Makers                                        Harleysville Savings Financial Corporation
F.J. Morrissey & Co., Inc.                           271 Main Street
Ryan Beck & Co., Inc.                                Harleysville, PA 19438
Spear, Leeds & Kellogg                               (215) 256-8828
Midwest Res. First Tennessee

Special Counsel                                      Transfer Agent
Elias, Matz, Tiernan & Herrick                       Direct questions regarding dividend
734 15th Street, N.W.                                checks, address and name changes or
Washington, DC 20005                                 lost certificates to:
(202) 347-0300
                                                     Registrar and Transfer Company
                                                     10 Commerce Drive
Dividend Reinvestment Plan                           Cranford, NJ 07016
The Company has a Dividend Reinvestment and Stock    web site: www.rtco.com
Purchase Plan.  Interested stockholders can          email: invrel@rtco.cm
obtain more information regarding the Plan by
contacting:

                                                     Upon request, the Company's Annual Report or
Registrar and Transfer Company                       form 10-K for the year ended September 30, 2001,
10 Commerce Drive                                    and the exhibits thereto required to be filed with
Cranford, NJ  07016                                  the Securities and Exchange Commission under
(800) 525-7686, extension 2542                       the Securities Act of 1934 will be furnished
                                                     without charge to any stockholder.
</TABLE>

28

<PAGE>


<TABLE>
<CAPTION>

 Board of Directors
<S>                          <C>                         <C>                              <C>
Sanford L. Alderfer          Paul W. Barndt              Philip A. Clemens                Mark R. Cummins, CPA, CFA
President                    Founder                     Chairman/CEO                     Executive Vice President,
Alderfer Auction Co.         The Barndt Agency, Inc.     Clemens Family Corporation       CIO and Treasurer
Hatfield, PA                 Sumneytown,  PA             Hartfield,  PA                   Harleysville Insurnance Companies
                                                                                          Harleysville, PA

David J. Friesen, CPA        George W. Meschter          Edward J. Molnar                 Ronald B. Geib
Director of Development      President                   President/CEO                    Executive Vice President/COO
Penn View Christian School   Meschter Insurance Group    Harleysville Savings             Harleysville Savings
Souderton,  PA               Collegeville, PA            Financial Corporation            Financial Corporation
                                                         Harleysville,  PA                Harleysville,  PA

</TABLE>

<TABLE>
<CAPTION>

Officers
<S>                        <C>                              <C>                          <C>
Edward J. Molnar           Ronald B. Geib                   Marian Bickerstaff            Brendan J. McGill
President and              Executive Vice President and     Senior Vice President         Senior Vice President,
Chief Executive Officer    Chief Operating Officer          Chief Lending Officer         Chief Financial Officer
                                                            and Corporate Secretary       and Treasurer
</TABLE>


Managers
<TABLE>
<CAPTION>
<S>                              <C>                            <C>                          <C>
Adrian D. Gordon                 Sheri L. Strouse               Michell A. Beck              Diane M. Carlson
Vice President                   Vice President and             Assistant Vice President     Assistant Vice President and
and Information                  Branch Administrator           and Security Officer         Human Resource Manager
Systems Manager

Kathleen Clairmont               Nathaneal J. Clemmer           Kim A. Licata                Lori N. McCausland
Assistant Vice President         Assistant Vice President,      Assistant Vice President     Assistant Vice President
and West Norriton                Controller, and Accounting     and Loan Customer            and Loan Administration
Office Manager                   Department Manager             Service Manager              Manager

Denise L. Monaghan               Paul Smolinsky                 Jason L. Yoder               Dawn Ziegler
Assistant Vice President         Assistant Vice President       Assistant Vice President     Assistant Vice President
and Hatfield                     and Sumneytown                 and Harleysville             and Lansdale
Office Manager                   Office Manager                 Office Manager               Office Manager

</TABLE>


<PAGE>


HARLEYSVILLE OFFICE
271 Main Street
Harleysville,  PA 19438
(215) 256-8828


HATFIELD OFFICE
1550 Cowpath Road
Hatfield, PA  19440
(215) 362-0750


LANSDALE OFFICE
640 East Main Street
Lansdale, PA  19446
(215) 855-1011


SUMNEYTOWN OFFICE
3090 Main Street
Sumneytown, PA 18084
(215) 234-8053


WEST NORRITON OFFICE
2301 West Main Street
Norristown, PA 19403
(610) 631-0887


HARLEYSVILLESAVINGS.COM