Harleysville Savings
                             FINANCIAL CORPORATION

                               2000 Annual Report



<PAGE>

Mission Statement

Harleysville Savings Bank'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

Selected Balance Sheet Data:

(in thousands except per share data)

<TABLE>
<CAPTION>
                                                                              As of September 30,
                                                     2000              1999             1998             1997             1996
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>               <C>              <C>              <C>              <C>
Total Assets                                       $488,554          $459,848         $417,533         $345,239         $315,495
Mortgage-backed securities held to maturity         116,304           116,778           78,793           18,303           16,262
Mortgage-backed securities available-for-sale         7,440             7,916            3,695            3,983            4,120
Loans receivable - net                              262,774           252,260          251,729          244,503          233,216
Investment securities held to maturity               71,281            61,015           50,622           48,461           45,265
Investment securities available-for-sale              3,310             3,202            1,586            3,515            6,376
Other investments (1)                                10,221             9,155           22,740           18,876            2,760
Deposits                                            309,836           303,660          289,827          273,773          249,260
FHLB advances and other borrowings                  145,134           125,180           99,953           46,414           43,820
Total stockholders' equity                           31,398            28,963           26,100           22,872           19,617
Book value per share                                  14.05             12.83            11.68            10.32             9.11

</TABLE>

<TABLE>
<CAPTION>

Selected Operations Data:                                                   Year Ended September 30,
                                                     2000              1999             1998             1997             1996
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>               <C>              <C>              <C>              <C>
Interest income                                     $33,182           $29,716          $27,129          $24,485          $20,969
Interest expense                                     22,795            20,199           17,949           15,362           12,964
                                               -------------     -------------    -------------    -------------    -------------

Net interest income                                  10,387             9,517            9,180            9,123            8,005
Provision for loan losses                                 -                17              120              177              200
                                               -------------     -------------    -------------    -------------    -------------
Net interest income after provision
    for loan losses                                  10,387             9,500            9,060            8,946            7,805

Gain (loss) on sales of loans and securities             40                35              101              (10)              11
Other income                                            512               451              453              423              341
FDIC special assessment                                                                                                    1,355
Other expense                                         5,380             4,858            4,528            4,161            4,404
                                               -------------     -------------    -------------    -------------    -------------

Income before taxes                                   5,559             5,128            5,086            5,198            2,398
Income tax expense                                    1,702             1,622            1,605            1,784              840
                                               -------------     -------------    -------------    -------------    -------------

Net income                                          $ 3,857           $ 3,506          $ 3,481          $ 3,414          $ 1,558
                                               =============     =============    =============    =============    =============

Earnings per share - basic                           $ 1.71            $ 1.56           $ 1.57           $ 1.56           $ 0.73
Earnings per share - diluted                           1.70              1.53             1.52             1.52             0.71
Dividends per share                                    0.44              0.36             0.32             0.29             0.24

Selected Other Data:
</TABLE>

<TABLE>
<CAPTION>

(based on monthly balances)                                           Year Ended September 30,
                                            2000              1999             1998             1997             1996
---------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>               <C>              <C>              <C>              <C>    <C>
Return on average assets                   0.81%             0.81%            0.93%            1.04%            0.55%  (2)
Return on average equity                   12.82%            12.83%           14.24%           16.14%           8.07%  (2)
Average equity to average assets           6.43%             6.32%            6.52%            6.42%            6.77%
Interest rate spread                       1.92%             1.91%            2.15%            2.48%            2.52%
Net yield on interest-earning assets       2.24%             2.25%            2.50%            2.83%            2.87%
Ratio of non-performing assets to
    total assets at end of period          0.04%             0.07%            0.04%            0.02%            0.09%
Ratio of interest-earning assets to
    interest-bearing liabilities            107%              107%             107%             107%             108%
Full service banking offices at
    end of period                            4                 4                4                4                4

</TABLE>

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

(2)  Calculations are after the FDIC special  assessment.  Before the assessment
     of $831,365,  net of tax, return on average assets was 0.84% and the return
     on average equity was 12.34%.

                                       1
<PAGE>




To our Stockholders:

         We are pleased to report to you that fiscal 2000  brought  another year
of strong earnings.  Net income amounted to $3,857,000,  an increase of 10% over
the  previous  record  earned  in  fiscal  1999.  This  is the  most  that  that
Harleysville Savings has earned in any year in its 85 year history.

         Net income  amounted to $1.70 per share.  Return on average  equity was
12.82% and return on average assets was .81% for the year.  Stockholders' equity
increased  to $14.05 per share from $12.83 per share a year ago.  During  fiscal
year 2000, assets increased 6.2% to $488 million.

         Providing  a fair and  reasonable  return  for our  stockholders  is an
important goal in our mission statement.  The increase in market value plus cash
dividends  provided our  stockholders  with an overall return of 10.7% this past
fiscal  year.  The board of  directors  increased  the  regular  quarterly  cash
dividend from $.11 per share to $.12 per share,  payable on November 22, 2000 to
stockholders of record on November 8, 2000.

         Long-term  investors have been rewarded during the thirteen year period
that Harleysville Savings has been a public company. Through market appreciation
and cash  dividends,  stockholders  have  experienced  average  yearly return in
excess of 16.5%. Since going public in 1987,  Harleysville Savings has delivered
a total  return of 728%,  a return that was much higher than the S & P 500 index
of 543%.  The cash  dividend  represents  the 53rd  consecutive  quarterly  cash
dividend paid and is the 13th  consecutive  year that the cash dividend has been
increased.

         The most important  financial goal in  Harleysville  Savings' Five Year
Strategic  Plan  is  "Return  on  Equity".  Management  strongly  believes  that
achieving goals on a consistent basis for return on stockholders' equity creates
a solid  foundation  for long-term  value.  Management is proud of the fact that
"return on equity" goals that are commensurate with  Harleysville  Savings' risk
profile  have been  achieved  in every year of our life as a public  company and
have  exceeded  the levels  reached  by our  savings  institution  peer banks in
results reported by America's Community Bankers.

                Return on Average Equity - Harleysville vs Peers

          Year           HSFC         Peer Bank        HSFC Advantage
          ----           ----         ---------        --------------

          1995          13.51%          8.28%               5.23%
          1996*         12.34%          8.22%               4.12%
          1997          16.14%         10.22%               5.92%
          1998          14.24%         11.12%               3.12%
          1999          12.83%          9.52%               3.31%
         Dec-99         12.97%         10.38%               2.59%
         Mar-00         13.21%          9.66%               3.55%
         Jun-00         12.77%           N/A                 N/A
         Sep-00         12.31%           N/A                 N/A

* Percentages do not reflect the FDIC special assessment.
  Source: America's Community Bankers Peer Group Report
  N/A - Not available



         We have steadfastly adhered to our mission of serving the personal
banking needs of families and individuals in our  communities.  We are committed
to being  our  customers'  "Trusted  Financial  Partner"  by  providing  quality
financial products and services.

         In addition to  maintaining  the core values that have  contributed  so
significantly  to  Harleysville  Savings  achieving a reputation as a strong and
viable  community  banking  institution  for more than 85 years,  we are excited
about the advances in new technology that allow us to give our valued  customers
more convenient service and quality financial products.

          *  The  public  may now  visit us at  harleysvillesavings.com  and our
             customers  may use  our  transactional  OnLine  Banking  System  to
             transfer funds and access their account information.

          *  Our Access 24 Telephone  Banking system gives our customers  access
             to their account  information and the ability to move money between
             accounts.

          *  We are  expanding  our ATM network with ATM machines at each branch
             and a growing  network of remote  ATM's.  We currently  have eleven
             convenient locations throughout our communities.

          *  Our  checking  account  customers  enjoy the benefit of using their
             Harleysville  Savings'  MasterMoney  Debit Card to get cash or make
             purchases worldwide.

                                        2
<PAGE>


          *  Our fifth full service  office is being  constructed at 640 E. Main
             Street,  Lansdale,  PA and  will  be  providing  quality  financial
             products and  services to  customers in the Lansdale  area by June,
             2001.

          *  Business  hours have been expanded at several of our present office
             locations  in  order  to  provide  more  convenient  hours  to  our
             customers.

                  Even though many of the ways that  Harleysville  Savings  does
         business are changing,  our core values remain intact.  We believe that
         our  customers  still  want  personal  attention  and it is our goal to
         provide  them  with  outstanding  customer  service.  We  believe  that
         Harleysville  Savings will continue to excel because we can combine our
         personal service with modern electronic delivery systems in a more cost
         effective way than many of our competitors, who may be already burdened
         with the overhead costs of large brick and mortar branch systems.

                  The success that Harleysville Savings has enjoyed is a tribute
         to our greatest asset, the talented and experienced personnel who serve
         our  constituencies.  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  Elaine
         Bergey,  Marie  Fazekas,  Ruth  Ann  Kulp,  Ann  Tomaselli  and  Sherry
         Williamson.  Receiving  awards for ten years were Bonnie Janzen and Sue
         Keeler.  Receiving  awards for fifteen  years were Kathy  Clairmont and
         Barbara Marcy. Receiving an award for twenty years was Bonnie Sames and
         receiving an award for twenty-five years was Ron Geib.

                  The  active   management  of  Harleysville   Savings'  capital
         position  remains a high  priority.  We manage our capital  position to
         allow adequate resources for growth,  while not allowing our capital to
         be  under-utilized.  This  past  year you  approved  the  formation  of
         Harleysville Savings Financial Corporation, a bank holding company. The
         advantages  of a  holding  company  form of  organization  are  already
         evident  in that we have  been  able to put  into  place a  program  to
         repurchase  shares of our common stock  without  incurring  adverse tax
         consequences.  Also,  maintaining  a high  quality loan  portfolio  has
         enabled  Harleysville  Savings to more effectively  utilize its capital
         and retain more of its  earnings in  stockholder's  equity  rather than
         write-offs  for loan losses.  This  strategy has enabled  management to
         operate more  efficiently  and be successful  with tighter net interest
         margins than many of our bank peers.

                  We are  pleased  to report to you that the Y2K issue  that was
         addressed  last  year  in  this  report  is now  history  and  that  we
         encountered absolutely no technology problems because of it.

                  On a more  personal  note, I want to recognize  the service of
         board member Sanford A.  Alderfer,  who will be retiring from our board
         of  directors  in  January  2001.  Sanford  has been an  unselfish  and
         important board member for 36 years.  Also retiring,  after 28 years of
         service,  is Senior Vice  President and Corporate  Secretary,  Diane P.
         Moyer.  Diane began her career with  Harleysville  Savings  when it was
         under $10  million in assets  and has helped it to grow to nearly  $500
         million in assets  today.  We want to thank both  Sanford and Diane for
         their devoted  service for these many years and wish them well in their
         retirement.

                  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".  By
         doing  so,  we hope to  remain  focused  on the core  values  that have
         enabled this Company to be successful.

                  Looking  ahead  to the  year  2001  and  beyond,  we are  very
         optimistic  about the new  opportunities  that  exist for  Harleysville
         Savings.  Quality financial  products,  service and convenience are the
         marks that will distinguish  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]

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

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

Diane P. Moyer
Senior Vice President and
Corporate Secretary

Brendan J. McGill
Senior Vice President, Treasurer
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

Michelle A. Beck
Assistant Vice President
and Security Officer

Diane M. Carlson
Assistant Vice President
and Human Resource Manager

Kathlen Clairmont
Assistant Vice President
and West Norriton Office Manager

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

H. Frances Kline
Assistant Vice President
and Sumneytown Office
Manager

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

Lori N. McCausland
Assistant Vice President
and Loan Administration Manager

Denise L. Monaghan
Assistant Vice President
and Hartfiled Office Manager

                                       5
<PAGE>



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

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, 2000,  amounted to $488.6  million,
compared to $459.8 million and $417.5 million as of September 30, 1999 and 1998,
respectively.  Deposits  as of  September  30,  2000,  totaled  $309.8  million,
compared to $303.7  million and $289.8  million at September  30, 1999 and 1998,
respectively.  Stockholders'  equity  totaled  $31.4 million as of September 30,
2000,  compared to $29.0  million and $26.1  million at  September  30, 1999 and
1998, respectively.

During fiscal 2000,  net interest  income  increased  $870,000 or 9.14% from the
prior  fiscal  year.  This  increase  was the  result  of a 9.2%  growth  in the
interest-earning  assets,  9.6% growth in  interest-bearing  liabilities  and an
increase  in the  interest  rate  spread  from 1.91% in fiscal  1999 to 1.92% in
fiscal  2000.  Earnings  for fiscal  2000 were $3.87  million  compared to $3.51
million  and $3.48  million  for the years  ended  September  30, 1999 and 1998,
respectively.  The  Company's  return on average  assets (net income  divided by
average  total  assets) was 0.81% during  fiscal 2000  compared to .81% and .93%
during fiscal 1999 and 1998, respectively.  Return on equity (net income divided
by average  equity)  was 12.82%  during  fiscal 2000  compared to 12.83%  during
fiscal 1999 and 14.24% during fiscal 1998.

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 loans increased by $271,000 or 1.8% in fiscal 1998, decreased
by $260,000 or 1.7% in fiscal 1999 and  increased  by $233,000 or 1.6% in fiscal
2000  from  the  respective  prior  years.   During  fiscal  1998,  the  Company
experienced an increase in the average balance of mortgage loans of $4.5 million
or 2.4% and an increase of 0.1% and the yield did not change.  Likewise,  during
fiscal  1999,  the Company  experienced  an  increase in the average  balance of
mortgage  loans of $1.9 million or 1.0% and the yield  increased by .2%.  During
fiscal 2000,  the average  balance of mortgage  loans  increased $6.7 million or
3.5% and the yield  decreased  by .1%.  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  year  were  adjustable  rate  mortgages.  The  interest  income  on
mortgage-backed  securities  reflected an increase of $26.3  million or 26.8% in
the average  balance and a 0.7% increase in yield earned during fiscal 2000. 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 loans
during  fiscal  1999 and 2000 to offset  the lower  interest  rate  spread.  The
decrease  in  interest  income on  consumer  and other  loans  reflected a small
decrease  in the  average  balance  of  $2,000 or .03%,  which  was  offset by a
increase in the yield to 7.70%.

Interest and  dividends on  investments  increased by $295,000 or 7.2% in fiscal
1998 and  decreased by $3,000 or 1.0% in fiscal 1999 over the  respective  prior
years.  During fiscal 1998,  the increase  resulted from a $7.3 million or 11.6%
growth in the average  balance  offset by a 0.3%  decrease in the yield  earned.
During fiscal 1999, the decrease  resulted from a $2.5 million or 3.6% growth in
the average  balance and the yield  decreased  0.2%.  During  fiscal  2000,  the
average balance  increased $8.0 million or 10.9% and the yield decreased 0.4% to
produce the $811,000 or 18.4% increase in interest and dividends on investments.
The  increase  in the  average  balance  reflects  funds that will be able to be
redeployed into higher earning assets as the market permits.

Interest Expense

Interest  expense on deposits  increased by $1.2 million or 9.5% in fiscal 1998,
by $13,000 or .09% in fiscal  1999 and  increased  by $868,000 or 6.1% in fiscal
2000 as compared to the  respective  prior years.  In fiscal  1998,  the average
balance  increased  $17.7  million or 6.8% in addition to a 0.1% increase in the
average rate paid. In fiscal 1999, the average  balance  increased $12.4 million
or 4.5% with a 0.2% decrease in the average rate paid. Likewise, in fiscal 2000,
the average balance increased $12.0 million or 4.1% with a 0.09% 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,  2000,  compared to 4.9% and 5.1% for the years ended
September  30, 1999 and 1998,  respectively.  During  fiscal 2000,  the treasury
rates  increased.  Thus,  the average  rate paid on deposits  increased  for the
financial  industry.  This  has  resulted  in a  higher  cost of  funds  for the
financial industry. The successful results the stock market has experienced over
the past five  years has  provided a major  source of  competition  for  savings
deposits.

                                       6

<PAGE>

<TABLE>
<CAPTION>

                                                                 For The Year Ended September 30, As of

                                -------------------------------------------------------------------------------------
                                   1998                                       1999
                                ----------------------------------------  -------------------------------------------
                                  Average                      Yield/        Average                        Yield/
                                  Balance      Interest         Rate         Balance        Interest         Rate
                                -----------   ----------   -------------  -------------   ------------   ------------
<S>                              <C>           <C>                <C>         <C>            <C>               <C>
Interest-earning assets:
  Mortgage loans                 $ 190,535     $ 15,092           7.92%       $192,388       $ 14,832          7.71%
  Mortgage-backed securities        46,360        2,985           6.44%         98,155          6,003          6.12%
  Consumer and other loans          59,559        4,635           7.78%         59,910          4,468          7.46%
  Investments                       70,708        4,416           6.25%         73,255          4,413          6.02%
                                -----------   ----------   -------------  -------------   ------------   ------------
Total interest-earning

    assets                         367,162       27,128           7.39%        423,708         29,716          7.01%
                                -----------   ----------   -------------  -------------   ------------   ------------

Interest-bearing liabilities:
  Deposits                         277,901       14,182           5.10%        290,285         14,169          4.88%
  Borrowings                        64,435        3,767           5.85%        105,462          6,031          5.72%
                                -----------   ----------   -------------  -------------   ------------   ------------

Total interest-bearing

    liabilities                    342,336       17,949           5.24%        395,747         20,200          5.10%
                                -----------   ----------   -------------  -------------   ------------   ------------

Net interest income/interest

    rate spread                                 $ 9,179           2.15%                       $ 9,516          1.91%
                                              ==========   =============                  ============   ============

Net interest-earning assets/
   net yield on interest-
   earning assets (1)             $ 24,826                        2.50%       $ 27,961                         2.25%
                                ===========                =============  =============                  ============

Ratio of interest-earning
   assets to interest-
  bearing liabilities                                            107.3%                                       107.1%
                                                           =============                                 ============
</TABLE>

<TABLE>
<CAPTION>

                                                                                  As of
                                                                                 Sept 30,
                                -----------------------------------------------------------
                                    2000                                          2000
                                 -------------------------------------------  -------------
                                    Average                        Yield/
                                    Balance       Interest          Rate           Rate
                                 ------------   ------------   -------------  -------------
<S>                                 <C>            <C>                <C>            <C>
Interest-earning assets:
  Mortgage loans                    $199,109       $ 15,065           7.57%          7.53%
  Mortgage-backed securities         124,418          8,427           6.77%          7.01%
  Consumer and other loans            58,009          4,467           7.70%          7.94%
  Investments                         81,215          5,223           6.43%          6.92%
                                 ------------   ------------   -------------  -------------
Total interest-earning

    assets                           462,751         33,182           7.17%          7.33%
                                 ------------   ------------   -------------  -------------

Interest-bearing liabilities:
  Deposits                           302,269         15,037           4.97%          5.27%
  Borrowings                         131,514          7,758           5.90%          6.10%
                                 ------------   ------------   -------------  -------------

Total interest-bearing

    liabilities                      433,783         22,795           5.25%          5.54%
                                 ------------   ------------   -------------  -------------

Net interest income/interest

    rate spread                                    $ 10,387           1.92%          1.79%
                                                ============   =============  =============

Net interest-earning assets/
   net yield on interest-
   earning assets (1)               $ 28,968                          2.24%
                                 ============                  =============

Ratio of interest-earning
   assets to interest-
  bearing liabilities                                                106.7%
                                                               =============
</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 1999 Compared                      Fiscal 2000 Compared
                                                           to Fiscal 1998                            to Fiscal 1999
                                                         Increase (Decrease)                      Increase (Decrease)
                                                  ----------------------------------        --------------------------------
                                                    Volume       Rate        Total           Volume      Rate       Total
                                                  ----------   ---------   ---------        ---------   --------  ----------
Interest income on interest-earning assets:
<S>                                                   <C>        <C>         <C>               <C>       <C>          <C>
     Mortgage loans                                   $ 146      $ (406)     $ (260)           $ 512     $ (279)      $ 233
     Mortgage-backed securities                       3,175        (157)      3,018            1,729        695       2,424
     Consumer and other loans                            27        (195)       (168)            (144)       143          (1)
      Investments                                       156        (159)         (3)             500        310         810
                                                  ----------   ---------   ---------        ---------   --------  ----------

        Total                                         3,504        (917)      2,587            2,597        869       3,466
                                                  ----------   ---------   ---------        ---------   --------  ----------

Interest expense on interest-bearing liabilities:

     Deposits                                           618        (631)       (13)             593         275         868
     Borrowings                                       2,348         (85)     2,263             1,531        197       1,728
                                                  ----------   ---------   ---------        ---------   --------  ----------

        Total                                         2,966        (716)      2,250            2,124        472       2,596
                                                  ----------   ---------   ---------        ---------   --------  ----------

Net change in net interest income                     $ 538      $ (201)      $ 337            $ 473      $ 397       $ 870
                                                  ==========   =========   =========        =========   ========  ==========
</TABLE>



                                       7


<PAGE>


Interest  expense on  borrowings  increased  by $1.4  million or 56.2% in fiscal
1998,  increased by $2.3  million or 60.1% in fiscal 1999 and  increased by $1.7
million or 28.6% in fiscal 2000 as compared to the respective  prior years.  The
increase  in  interest  expense  during  fiscal  2000 was the  result of a $26.1
million or 24.7%  increase in the average  balance of borrowings and an increase
of .18% in the average rate paid.  Borrowings  were  primarily  obtained  during
fiscal 2000 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 $56,000 or .6% in fiscal 1998, by $337,000 or
3.7% in fiscal 1999,  and by $870,000 or 9.1% in fiscal 2000 over the respective
prior periods. The improvements in the net interest income in each year were due
to a higher  amount of  interest-earning  assets  offset by a  reduction  in the
interest rate spread.

Provision for Loan Losses

The  provision for loan losses  amounted to $120,000,  and $17,000 for the years
ended September 30, 1998 and 1999, respectively. There was no provision made for
the year ended September 30, 2000. Management establishes reserves for losses on
slow loans and real  estate  acquired by  foreclosure  when it  determines  that
losses are anticipated to be incurred 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 or 0.8% of total
loans at September 30, 1999 and 2000.

Other Income

The Company's  total other  operating  income  decreased from $554,000 in fiscal
1998 to $486,000 in fiscal 1999 and  increased to $552,000 in fiscal  2000.  The
decrease from 1998 to 1999  reflected a slight  decrease in other income and the
gain on sale of loans.  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.

Other income,  which consists  primarily of income from fees on demand accounts,
loan servicing fees, the sale of non-deposit products, insurance commissions and
loan late  charges,  increased by $29,000 or 6.9% and decreased by $2,000 or .4%
during fiscal years 1998 and 1999 respectively. During fiscal 2000, other income
increased by $61,000 or 13.6% 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 to customers.

Other Expenses

Salaries and employee benefits  increased by $145,000 or 6.9% in fiscal 1998, by
$152,000  or 6.8% in fiscal  1999 and by  $341,000  or 14.3% in  fiscal  2000 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  increased by $112,000 or 12.8% in fiscal 1998,
by $171,000 or 17.4% in fiscal 1999 and decreased by $122,000 or 10.6% in fiscal
2000 as compared to the prior  respective  fiscal  years.  The  decrease  during
fiscal 2000 was attributable to lower furniture and fixtures expense.

Deposit  insurance  premiums  increased  by  $48,000  or 38.5% in  fiscal  1998,
decreased by $1,000 or .5% in fiscal 1999,  and decreased by $80,000 or 46.3% in
fiscal 2000 over the prior  respective  fiscal years. The increase during fiscal
1998 is due to the increase in the amount of the  Company's  insurable  deposits
and the payment of the premiums for all four quarters compared with fiscal 1997,
where premiums were due for only three quarters.  The slight decrease in 1999 is
the  result  of the  average  insurable  deposit  balance  remaining  relatively
constant.  The  decrease  in 2000 is the  result  of the  sharing  of FICO  bond
interest payments by all FDIC insured  institutions,  the premium was reduced 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 $63,000 or 5.8% in fiscal 1998,
increased by $8,000 or .7% in fiscal 1999, and increased by $383,000 or 33.5% in
fiscal 2000 over the prior respective fiscal years. The current year increase is
due to additional  stockholders and audit expenses attributable to the formation
of  the  Financial  Corporation.  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 $1.6 million for fiscal year 1998,
$1.6 million for fiscal year 1999 and $1.7 million for fiscal year 2000. Note 11
of the "Notes to Financial Statements" 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 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 in interest rates, the Company
remains vulnerable to material and prolonged  increases in interest rates during
periods in which its interest  rate  sensitive  liabilities  exceed its interest
rate sensitive assets.

                                       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.

Harleysville  Savings has been able to improve the interest rate  sensitivity of
its assets as the result of origination  of ARMs  (Adjustable  Rate  Mortgages).
ARMs  represented  22.7%,  20.8% and 55.9% of the total  mortgage loan portfolio
originations  during  fiscal  years  1998,  1999 and 2000,  respectively.  As of
September  30,  2000,  approximately  $76.1  million  or 35.4% of the  Company's
portfolio  of real estate  loans were ARMs,  compared to being $70.5  million or
35.3% of the portfolio on September 30, 1999.  The increase in the dollar amount
of ARMs was a result of higher interest rates that persisted  throughout  fiscal
2000 which resulted in the consumer favoring adjustable rate mortgages.

The  following  table  summarizes  the  amount of  interest-earning  assets  and
interest-bearing  liabilities  outstanding  as of September 30, 2000,  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
managements  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.

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>


                                                          1 Year        1 to 3       3 to 5         Over 5
                                                         or less         Years        Years          Years              Total
                                                         -------         -----        -----          -----              -----
Interest-earning assets:
<S>                                                     <C>            <C>           <C>            <C>               <C>
  Mortgage loans                                        $ 44,801       $ 34,467      $ 24,998       $ 103,651         $ 207,917
  Mortgage-backed securities                              46,390         19,566        11,551          46,237           123,744
  Consumer and other loans                                24,896         16,383         9,301           6,152            56,732
  Investment securities and other investments             14,491          6,500         7,000          58,046            86,037
                                                        --------       --------      --------       ---------          --------

Total interest-earning assets                            130,578         76,916        52,850         214,086           474,430
                                                        --------       --------      --------       ---------          --------

Interest-bearing liabilities:

   Passbook and Club accounts                                  -              -             -          16,529            16,529
   NOW accounts                                                -              -             -           2,396             2,396
   Money Market Deposit accounts                               -              -             -          25,158            25,158
   Choice Savings                                          6,193                                       18,578            24,771
   Certificate accounts                                  164,656         70,148         6,178               -           240,982
   Borrowed money                                         58,451         50,315        28,703           7,665           145,134
                                                        --------       --------      --------       ---------          --------

Total interest-bearing liabilities                       229,300        120,463        34,881          70,326           454,970
                                                        --------       --------      --------       ---------          --------

Repricing GAP during the period                         $(98,722)      $(43,547)     $ 17,969       $ 143,760          $ 19,460
                                                        ========       ========      ========       =========          ========


Cumulative GAP                                          $(98,722)     $(142,269)    $(124,300)       $ 19,460
                                                        ========      =========     =========        ========

Ratio of GAP during the period to total assets            -20.21%         -8.91%         3.68%          29.43%
                                                        ========      =========     =========        ========

Ratio of cumulative GAP to total assets                   -20.21%        -29.12%       -25.44%           3.98%
                                                        ========      =========     =========        ========
</TABLE>

                                       9

Liquidity and Capital Resources

The Company's  assets increased from $417.5 million as of September 30, 1998, to
$459.8  million as of September 30, 1999,  and to $488.6 million as of September
30, 2000.  Stockholders' equity increased from $26.1 million as of September 30,
1998,  to $29.0  million as of September  30, 1999,  and to $31.4  million as of
September 30, 2000. As of September 30, 2000,  stockholders'  equity amounted to
6.4% of Harleysville  Savings' total assets under generally accepted  accounting
principles ("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  generally  accepted  accounting  principles  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 President,  Board of Directors and  Stockholders of Harleysville  Savings
Financial Corporation and Subsidiary, Harleysville, Pennsylvania:

We  have  audited  the  consolidated   statements  of  financial   condition  of
Harleysville Savings Financial  Corporation and subsidiary (the "Company") as of
September 30, 2000 and 1999, and the related consolidated  statements of income,
comprehensive income,  stockholders' equity and cash flows for each of the three
years in the period ended  September  30,  2000.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

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

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the  financial  position of the Company as of September 30,
2000 and 1999, and the results of their operations and their cash flows for each
of the three years in the period ended  September  30, 2000 in  conformity  with
accounting principles generally accepted in the United States of America.




/s/ Deloitte & Touche LLP
-------------------------
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
October 27, 2000




                                       11
<PAGE>

<TABLE>
<CAPTION>

Consolidated Statements of Financial Condition

                                                                                      September 30,
                                                                             2000                     1999
------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                      <C>
Assets

Cash and amounts due from depository institutions                             $ 1,224,634             $ 1,273,990
Interest bearing deposits in other banks                                        2,855,568               2,681,828
                                                                     ---------------------     -------------------

     Total cash and cash equivalents                                            4,080,202               3,955,818
Investment securities held to maturity
     (fair value - 2000, $69,463,000; 1999, $59,201,000)                       71,280,841              61,014,582
Investment securities available-for-sale at fair value                          3,309,736               3,201,932
Mortgage-backed securities held to maturity
     (fair value - 2000, $114,182,000; 1999, $114,497,000)                    116,303,730             116,778,337
Mortgage-backed securities available-for-sale at fair value                     7,440,453               7,915,919
Loans receivable (net of allowance for loan losses -
     2000, $2,038,000; 1999, $2,040,000)                                      262,774,378             252,259,611
Accrued interest receivable                                                     3,246,714               2,895,109
Federal Home Loan Bank stock - at cost                                          7,365,200               6,472,900
Office properties and equipment,net                                             4,449,921               4,677,886
Deferred income taxes                                                             306,761                 304,060
Prepaid expenses and other assets                                               7,995,955                 371,568
                                                                     ---------------------     -------------------

TOTAL ASSETS                                                                $ 488,553,891            $459,847,722
                                                                     =====================     ===================


Liabilities and Stockholders' Equity
Liabilities:

     Deposits                                                               $ 309,835,810            $303,660,099
     Advances from Federal Home Loan Bank                                     145,134,283             125,179,928
     Accrued interest payable                                                     824,672                 601,813
     Advances from borrowers for taxes and insurance                              719,591                 874,167
     Accounts payable and accrued expenses                                        641,148                 569,068
     Total liabilities                                                        457,155,504             430,885,075
                                                                     ---------------------     -------------------

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,
2000, 2,285,051 shares; 1999, 2,256,750 shares                                     22,851                  22,568
Paid-in capital in excess of par                                                7,119,387               6,829,794
Treasury stock, at cost (49,900 shares)                                          (714,163)                      -
Retained earnings - partially restricted                                       25,076,313              22,211,041
Accumulated other comprehensive loss                                             (106,001)               (100,756)
                                                                     ---------------------     -------------------

Total stockholders' equity                                                     31,398,387              28,962,647
                                                                     ---------------------     -------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                  $ 488,553,891            $459,847,722
                                                                     =====================     ===================
</TABLE>

See notes to consolidated financial statements


                                       12
<PAGE>

Consolidated Statements of Income

<TABLE>
<CAPTION>
                                                                               Year Ended September 30,

                                                                      2000               1999                1998
------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                <C>                 <C>
Interest Income:

Interest on mortgage loans                                           $15,064,856        $14,832,086         $15,091,871
Interest on mortgage-backed securities                                 8,426,701          6,002,879           2,985,183
Interest on consumer and other loans                                   4,466,858          4,468,156           4,635,388
Interest and dividends on investments                                  5,223,322          4,412,768           4,415,987
                                                                -----------------  -----------------   -----------------

Total interest income                                                 33,181,737         29,715,889          27,128,429
                                                                -----------------  -----------------   -----------------

Interest Expense:

Interest on deposits                                                  15,037,450         14,169,061          14,181,937
Interest on borrowings                                                 7,757,625          6,030,367           3,766,997
                                                                -----------------  -----------------   -----------------

Total interest expense                                                22,795,075         20,199,428          17,948,934
                                                                -----------------  -----------------   -----------------

Net Interest Income                                                   10,386,662          9,516,461           9,179,495
Provision for Loan Losses                                                      -             16,579             119,817
                                                                -----------------  -----------------   -----------------

Net Interest Income after Provision for Loan Losses                   10,386,662          9,499,882           9,059,678
                                                                -----------------  -----------------   -----------------

Other Income:

Gain on sales of loans                                                    40,245             35,120             101,052
Other income                                                             512,071            450,842             452,644
                                                                -----------------  -----------------   -----------------

Total other income                                                       552,316            485,962             553,696
                                                                -----------------  -----------------   -----------------

Other Expenses:

Salaries and employee benefits                                         2,729,174          2,388,307           2,236,046
Occupancy and equipment                                                1,030,401          1,152,407             981,434
Deposit insurance premiums                                                92,439            171,999             172,929
Other                                                                  1,528,087          1,145,036           1,137,201
                                                                -----------------  -----------------   -----------------

Total other expenses                                                   5,380,101          4,857,749           4,527,610
                                                                -----------------  -----------------   -----------------

Income before Income Taxes                                             5,558,877          5,128,095           5,085,764

Income tax expense                                                     1,701,980          1,622,000           1,605,000
                                                                -----------------  -----------------   -----------------

Net Income                                                            $3,856,897         $3,506,095          $3,480,764
                                                                =================  =================   =================


Earnings Per Share:

   Basic                                                                  $ 1.71             $ 1.56              $ 1.57
                                                                =================  =================   =================
   Diluted                                                                $ 1.70             $ 1.53              $ 1.52
                                                                =================  =================   =================

Weighted Average Shares Outstanding:

   Basic                                                               2,252,308          2,244,055           2,225,802
                                                                =================  =================   =================
   Diluted                                                             2,275,764          2,294,532           2,300,501
                                                                =================  =================   =================
</TABLE>


See notes to consolidated financial statements


                                       13
<PAGE>

Consolidated Statements of Comprehensive Income
<TABLE>
<CAPTION>
                                                                            2000          1999            1998
-----------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>            <C>            <C>
Net Income                                                             $ 3,856,897    $ 3,506,095    $ 3,480,764

Other Comprehensive Income (Loss)

Unrealized (loss) gain on securities net of tax ( benefit) or
expense -- 2000, ($54,606); 1999, ($51,905); 1998, $9,579                   (5,245)      (119,351)        72,220
                                                                      -------------  -------------    ----------

Total Comprehensive Income                                             $ 3,851,652    $ 3,386,744    $ 3,552,984
                                                                      =============  =============  =============
</TABLE>



Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>


                                                       Paid-in      Retained     Accumulated               Employee
                                                       Capital      Earnings-       Other                   Stock      Total
                                           Common     in Excess     Partially   Comprehensive   Treasury  Ownership Stockholders'
                                            Stock      of Par     Restricted   (Loss) Income     Stock       Plan      Equity
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>        <C>           <C>            <C>                    <C>             <C>
Balance at October 1, 1997              $  16,616  $ 6,199,372   $16,769,611    $  (53,625)             $(60,026)   $22,871,948


Net Income                                                         3,480,764                                          3,480,764
Issuance of Common Stock                      151      348,931                                                          349,082
Dividends - $.32 per share                                          (734,243)                                          (734,243)
Repayment of ESOP debt                                                                                     60,026        60,026
Change in unrealized holding loss
  on available-for-sale securities, net
  of tax                                                                            72,220                               72,220
                                         --------- ------------ -------------  ------------  ----------- --------- -------------

Balance at September 30, 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 (49,900 shares)                                                     $ (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
                                         ========= ============ =============  ============  =========== ========= =============
</TABLE>


See notes to consolidated financial statements.

                                       14


<PAGE>

Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                             Year Ended September 30,
                                                                                      2000             1999                1998
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>              <C>              <C>
Operating Activities:

Net Income                                                                          $ 3,856,897      $ 3,506,095      $ 3,480,764
Adjustments to reconcile net income to
    net cash provided by (used in) operating activities:
    Provision for loan losses                                                                             16,579          119,817
    Depreciation                                                                        426,771          309,410          277,904
    Deferred income taxes                                                                 3,557           90,000            7,641
    Realized gain on sales of loans                                                     (40,245)         (35,120)        (101,052)
    Realized gain on sale of real estate owned                                          (13,606)
    Proceeds from the sale of loans held for sale                                     3,369,004        2,879,561        5,696,900
    Amortization of deferred loan fees                                                 (139,351)        (320,711)        (402,699)
Changes in assets and liabilities which provided (used) cash:
    Increase (decrease) in accounts payable and accrued expenses
      and income taxes payable                                                           72,080          131,111         (773,331)
    (Increase) decrease in prepaid expenses and other assets                         (7,624,387)          93,249          285,724
    (Increase) decrease in accrued interest receivable                                 (351,605)         220,098         (293,512)
    Increase in accrued interest payable                                                222,859           77,072          260,871
                                                                                  --------------   --------------   --------------

Net cash (used in) provided by operating activities                                    (218,026)       6,967,344        8,559,027
                                                                                  --------------   --------------   --------------


Investing Activities:

Purchase of mortgage-backed securities held to maturity                             (13,038,000)     (63,346,162)     (68,025,542)
Purchase of mortgage-backed securities available-for-sale                                             (4,902,126)
Purchase of investment securities held to maturity                                  (11,747,185)     (47,859,407)     (41,562,507)
Purchase of investment securities available-for-sale                                   (112,069)      (1,549,213)
Proceeds from maturities of investment securities available-for-sale                                                    2,000,000
Purchase of FHLB stock                                                                 (892,300)      (1,475,200)      (2,488,200)
Proceeds from maturities of investment securities                                     1,480,926       37,466,988       39,401,215
Principal collected on long-term loans & mortgage-backed securities                  60,356,491       84,653,788       70,048,479
Long-term loans originated or acquired                                              (60,199,446)     (62,646,388)     (74,827,218)
Purchases of premises and equipment                                                    (198,806)        (947,658)        (662,251)
Proceeds from sale of real estate owned                                                 133,221
                                                                                  --------------   --------------   --------------

Net cash used in investing activities                                               (24,217,168)     (60,605,378)     (76,116,024)
                                                                                  --------------   --------------   --------------


Financing Activities:

Net (decrease) increase in demand deposits, NOW accounts
    and savings accounts                                                             (5,527,563)      20,773,715        4,815,751
Net increase (decrease) in certificates of deposit                                   11,703,274       (6,940,988)      11,238,374
Cash dividends                                                                         (991,625)        (811,186)        (734,243)
Net increase in FHLB advances                                                        19,954,355       25,226,820       53,599,175
Purchase of treasury stock                                                             (714,163)
Net proceeds from issuance of stock                                                     289,876          287,292          349,082
Net (decrease) increase in advances from borrowers for taxes and insurance             (154,576)         184,273          (14,438)
                                                                                  --------------   --------------   --------------

Net cash provided by financing activities                                            24,559,578       38,719,926       69,253,701
                                                                                  --------------   --------------   --------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                        124,384      (14,918,108)       1,696,704

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                        3,955,818       18,873,926       17,177,222
                                                                                  --------------   --------------   --------------

CASH AND CASH EQUIVALENTS AT END OF YEAR                                            $ 4,080,202      $ 3,955,818      $18,873,926
                                                                                  ==============   ==============   ==============


Supplemental  Disclosure of Cash Flow  Information-  Cash paid during the period
for:

      Interest (credited and paid)                                                  $22,572,216     $ 20,122,356      $17,688,063
      Non cash transfer from loans to real estate owned                                 119,615
</TABLE>


See notes to consolidated financial statements

                                       15

<PAGE>


Notes to Consolidated Financial Statements

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 though 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.

   Harleysville Savings Financial Corporation (the "Company"), is a bank holding
company  that  is  regulated  by  the  Federal  Reserve  Bank  of  Philadelphia.
Harleysville  Savings 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 Banks  wholly  owned
subsidiary.  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.  Fair value is
determined using published quotes as of the close of business.  Unrealized gains
and losses are excluded  from earnings and are reported net of tax as a separate
component of stockholders' equity until realized.

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.  125,  Accounting  for  Transfers  and  Servicing  of
                                  ----------------------------------------------
Financial Assets and  Extinguishments of Liabilities.  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

                                       16
<PAGE>

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.  In  september  2000,  No.140,
Accounting for Transfers and Serviceing of Financial Assets and  Extinguishments
--------------------------------------------------------------------------------
of Liabilities (a replacement of FASB Statement No. 125) was issued.  This state
-------------------------------------------------------
revises the standards for accounting for  securitizations and other transfers of
financial assets and collateral and requires certain disclusures, 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.  Management  has
not yet determined the impact on the Company's  financial position or results of
results of opetations when SFAS No. 140 is adopted.

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. In March 2000, FASB Interpretation No. 44
Accounting for Certain Transaction  involving  Stock Compensation ("FIN No. 44")
-----------------------------------------------------------------
was issued.  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 - During 1999, the Company adopted SFAS No.
130,  Reporting  Comprehensive  Income,  which  requires  disclosure  of,  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.

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. On January 27, 1999, the Company's Board of Directors declared
a  special   four-for-three   stock  split  effective   February  24,  1999,  to
stockholders of record on February 10, 1999. Accordingly, earnings per share for
the year ended  September  30, 1998 has been  restated to reflect the  increased
number of shares  outstanding.  The weighted average shares  outstanding used to
calculate earnings per share were as follows:

                                            Year Ended September 30,
                                        2000         1999          1998
------------------------------------------------------------------------------

Average shares
outstanding - basic                  2,252,308     2,244,055     2,225,802
Increase in shares due
to options - diluted                    23,456        50,477        74,699
                                     ---------     ---------     ---------

Average shares
outstanding - diluted                2,275,764     2,294,532     2,300,501
                                     ---------     ---------     ---------



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 - In June 1998,
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,  was
              -------------------------------------------------------------
issued.  This  statement  requires that an entity  recognize all  derivatives as
either assets or liabilities in the statement of financial  position and measure
those  instruments at fair value. The Company adopted the provisions of SFAS No.
133, 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. The Company believes that it has properly  identified all
derivative instruments and any embedded derivative  instruments.  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.  The adoption of
SFAS No. 133 on October 1, 2000 did not have a material  effect on the Company's
financial position or results of operations.

Interest  Rate Risk - The  Company is engaged  principally  in  providing  first
mortgage loans to individuals and commercial enterprises. At September 30, 2000,
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.

     At  September  30,  2000,  the  Company  had  interest-earning   assets  of
approximately  $474,430,000  having a weighted average  effective yield of 7.33%
and interest-bearing liabilities of approximately $454,970,000 having a weighted
average  effective   interest  rate  of  5.54%.  The  shorter  duration  of  the
interest-sensitive liabilities indicates that the Company is exposed to interest
rate risk because,  in a rising rate environment,  liabilities will be repricing
faster at higher  interest rates,  thereby  reducing the fair value of long-term
assets and net interest income.

Use of Estimates in  Preparation  of Financial  Statements - The  preparation of
financial statements in conformity with generally accepted accounting principles
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 1999 and 1998 financial  statements have
been  reclassified  to conform with the  presentation  in the 2000  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, 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>

<TABLE>
<CAPTION>

                                                                                     September 30, 1999
---------------------------------------------------------------------------------------------------------------------------
                                                                                  Gross            Gross
                                                                Amortized      Unrealized       Unrealized     Approximate
                                                                  Cost            Gains           Losses       Fair Value
---------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>              <C>            <C>             <C>
U.S. Government Agencies
      Due after 3 years through 5 years                        $11,500,000                      $ (246,000)    $11,254,000
      Due after 5 years through 10 years                        25,002,578        $ 1,281       (1,113,859)     23,890,000
      Due after 10 years through 15 years                       16,389,395         53,218         (491,613)     15,951,000
Tax Exempt Obligations

      Due after 15 years                                         8,122,609         84,835         (101,444)      8,106,000
                                                             --------------   ------------   --------------   -------------

Total Investment Securities                                    $61,014,582      $ 139,334      $(1,952,916)    $59,201,000
                                                             ==============   ============   ==============   =============
</TABLE>


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 and 1999.

The Company has the positive intent and the ability to hold these  securities to
maturity.  At September 30, 2000, 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,  by
maturities, is as follows:

<TABLE>
<CAPTION>

                                                                           September 30, 2000
                                                                        Gross              Gross

                                                 Amortized           Unrealized         Unrealized         Approximate
                                                    Cost                Gain              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>

<TABLE>
<CAPTION>

                                                                            September 30, 1999
--------------------------------------------------------------------------------------------------------------------------
                                                                        Gross              Gross
                                                 Amortized           Unrealized         Unrealized         Approximate
                                                    Cost                Gain              Losses            Fair Value
--------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>                        <C>          <C>                <C>
ARM Mutual Funds                                   $3,242,085                 $ -          $ (40,153)         $ 3,201,932
                                               ---------------      --------------     --------------    -----------------

Total Investment Securities                        $3,242,085                 $ -          $ (40,153)         $ 3,201,932
                                               ===============      ==============     ==============    =================
</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 30,2000
                                                                                  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>

<TABLE>
<CAPTION>

                                                                                     September 30,1999
                                                                                 Gross              Gross
                                                           Amortized          Unrealized         Unrealized           Approximate
                                                             Cost                Gains             Losses             Fair Value
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                  <C>               <C>                 <C>
Collateralized mortgage obligations                         $43,559,590          $ 96,166          $ (908,756)         $ 42,747,000
FHLMC pass-through certificates                               9,136,261            52,811             (94,072)            9,095,000
FNMA pass-through certificates                               26,224,652            79,902            (710,554)           25,594,000
GNMA pass-through certificates                               37,857,834            22,070            (818,904)           37,061,000

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

Total Mortgage-Backed Securities                           $116,778,337          $250,949         $(2,532,286)         $114,497,000
                                                      ==================    ==============    ================    ==================
</TABLE>



The Company has the  positive  intent and  ability to hold these  securities  to
maturity.  At September 30, 2000,  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>

<TABLE>
<CAPTION>

                                                                                  September 30,1999
------------------------------------------------------------------------------------------------------------------------------
                                                                             Gross             Gross
                                                         Amortized         Unrealized        Unrealized           Approximate
                                                           Cost              Gains             Losses             Fair Value
------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>                      <C>        <C>                  <C>
FHLMC pass-through certificates                          $3,125,446               $ -        $ (101,662)          $ 3,023,784
GNMA pass-through certificates                            4,902,981                 -           (10,846)            4,892,135
                                                         ----------    ---------------       ----------           -----------

Total Mortgage-Backed Securities                         $8,028,427               $ -        $ (112,508)          $ 7,915,919
                                                    ================   ===============    ==============    ==================
</TABLE>

                                       19

<PAGE>

7. LOANS RECEIVABLE

Loans receivable consist of the following:

<TABLE>
<CAPTION>
                                                                                 September 30,
                                                            2000                                              1999
------------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                                               <C>
Residential Mortgages                                      $207,928,146                                      $195,126,790
Commercial Mortgages                                            807,156                                           766,627
Construction                                                  6,579,523                                         3,885,232
Education                                                     1,414,011                                         1,347,591
Savings Account                                                 618,884                                           535,036
Home Equity                                                  44,727,366                                        49,240,261
Automobile and other                                            639,693                                           660,504
Line of Credit                                                7,888,612                                         7,175,891
                                                      ------------------                                ------------------

Total                                                       270,603,391                                       258,737,932
Undisbursed portion of loans in process                      (3,844,612)                                       (2,533,342)
Deferred loan fees                                           (1,946,270)                                       (1,904,979)
Allowance for loan losses                                    (2,038,131)                                       (2,040,000)
                                                      ------------------                                ------------------

Loans Receivable - net                                     $262,774,378                                      $252,259,611
                                                      ==================                                ==================
</TABLE>


The Company  originates  and purchases  both  adjustable and fixed interest rate
loans and mortgage-backed  securities. At September 30, 2000, the composition of
these loans and mortgage-backed securities, in thousands, is as follows:

<TABLE>
<CAPTION>
                                        Fixed-Rate                                           Adjustable-Rate
                Term to Maturity                         Book Value            Term to Maturity            Book Value
                ---------------------------------------------------------     ---------------------------------------------
<S>              <C>                                            <C>             <C>                              <C>
                 1 year or less                                 $ 1,418         1 year or less                   $ 65,438
                   1-3 years                                      7,449            1-3 years                       13,695
                   3-5 years                                     13,488            3-5 years                       12,648
                   5-15 years                                    51,163           5-15 years                       21,736
                 over 15 years                                  195,113
                                                      ------------------                                ------------------
                                                              $ 268,631                                         $ 113,517
                                                      ==================                                ==================
</TABLE>


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, 2000, 1999 and 1998, the Company was servicing loans for others
amounting to approximately $6,586,000 , $7,550,000 and $9,500,000, 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  $31,000,  $48,000, and
$32,000 at September 30, 2000, 1999, and 1998, respectively.

Loans  to  officers  and  directors  at  September  30,  2000  and  1999,   were
approximately  $233,867  and  $256,100,   respectively.   Additional  loans  and
repayments  for  the  year  ended  September  30,  2000,  were  $0  and  $6,200,
respectively,  and for the year ended  September  30, 1999,  were  approximately
$6,300 and $18,300, 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,
                                   2000              1999              1998
------------------------------------------------------------------------------
Balance, beginning of year      $ 2,040,000      $ 2,040,000      $ 1,925,000
Provision for loan losses                 -           16,579          119,817
Amounts charged off, net             (1,869)         (16,579)          (4,817)
                                ------------   --------------   --------------
Balance, end of year            $ 2,038,131      $ 2,040,000      $ 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.
Accounting  by Creditors  for  Impairment  of a loan. A loan is considered to be
-----------------------------------------------------
impaired when,  based upon current  information and events,  it is probable that
the  Company  will be  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, 2000,  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


                                       20
<PAGE>

September 30, 2000 and 1999, 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, 2000 and 1999,  amounted to  approximately  $184,000 and $313,000,
respectively. The loans were collectively evaluated for impairment.

8. ACCRUED INTEREST RECEIVABLE

Accrued interest receivable consists of the following:

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

Investments and interest-bearing deposits         $ 1,110,222         $ 863,305
Mortgage-backed securities                            719,097           685,581
Loans receivable                                    1,417,395         1,346,223
                                                 -------------     ------------

Total                                             $ 3,246,714       $ 2,895,109
                                                 =============     ============



9. OFFICE PROPERTIES AND EQUIPMENT

Office  properties  and equipment are  summarized  by major  classifications  as
follows:

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

Land and buildings                           $ 4,176,671            $ 4,139,005
Furniture, fixtures and equipment              2,898,061              2,740,822
Automobiles                                       56,164                 52,263
                                           --------------       ----------------

Total                                          7,130,896              6,932,090
Less accumulated depreciation                 (2,680,975)            (2,254,204)
                                           --------------       ----------------

Net                                          $ 4,449,921            $ 4,677,886
                                           ==============       ================





10. DEPOSITS

Deposits are summarized as follows:
<TABLE>
<CAPTION>
                                                          September 30,
                                              2000                             1999
                                                     Weighted                          Weighted
                                                     Interest                          Interest
                                       Amount          Rate            Amount            Rate
-----------------------------------------------------------------------------------------------
<S>                                <C>                <C>            <C>                 <C>
NOW accounts                       $10,748,610        1.25%          $11,811,986         1.23%
Checking accounts                    5,780,503        0.04%            5,372,003         0.00%
Money Market Deposit accounts       49,928,562        2.54%           54,490,438         3.60%
Passbook and Club accounts           2,395,877        3.78%            2,706,688         2.59%
Certificate accounts               240,982,258        5.79%          229,278,984         5.28%
                                ---------------    ---------      ---------------     ---------

Total Deposits                    $309,835,810        5.18%         $303,660,099         4.70%
                                ===============    =========      ===============     =========
</TABLE>



At  September  30,  2000,  the amounts of scheduled  maturities  of  certificate
accounts were as follows:

For the year ended September 30:         2001                     $164,654,610
                                         2002                       56,383,345
                                         2003                       13,765,926
                                         2004                        3,932,427
                                         2005                        2,245,950
                                                             ------------------
                                                                  $240,982,258
                                                             ==================



                                       21


<PAGE>


The aggregate  amount of certificate  accounts in  denominations  of $100,000 or
more at September 30, 2000 amounted to approximately $17.1 million.  Deposits in
excess of $100,000 are not federally insured.

Interest expense on savings deposits is composed of the following:

                                                  September 30,
                                    2000              1999            1998
--------------------------------------------------------------------------------

NOW Checking and MMDA accounts   $ 1,927,618     $ 1,706,721      $ 1,045,554
Passbook and Club accounts            53,360          58,320           72,328
Certificate accounts              13,056,472      12,404,020       13,064,055
                                -------------   -------------    -------------

Total                           $ 15,037,450    $ 14,169,061     $ 14,181,937
                                =============   =============    =============


11. ADVANCES FROM FEDERAL HOME LOAN BANK

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

                                                     September 30,
                                          2000                        1999
                                        Weighted                     Weighted
                                        Interest                     Interest
  Maturing Period           Amount        Rate           Amount        Rate
-------------------------------------------------------------------------------

 1 to  12 months        $ 21,000,000       6.71%     $ 10,300,000        5.44%
13 to  24 months           8,737,521       6.48%        6,493,431        6.40%
25 to  36 months          12,837,096       6.34%       19,694,729        6.34%
37 to  48 months           7,553,686       6.50%        5,074,137        6.51%
49 to  60 months           9,759,185       5.42%       10,436,527        5.48%
61 to  72 months          40,775,291       6.43%       22,549,949        5.98%
73 to  84 months           4,250,767       5.13%        4,900,846        5.13%
85 to 108 months          40,220,737       5.47%       45,730,309        5.42%
                       --------------   ---------   --------------   ----------
Total                  $ 145,134,283       6.10%    $ 125,179,928        5.76%
                       ==============   =========   ==============   ==========


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 $12  million of the  available  $16.5
million was used at  September  30, 2000,  which has been  included in the above
table.  At September  30, 1999,  $1.8 million of the  available  $12 million was
used. The line of credit carries a variable market interest rate which was 6.77%
and 5.63% at September 30, 2000, and 1999, respectively.


12. INCOME TAXES

As of October 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.
Generally,  this  method  allows  the Bank to deduct an annual  addition  to the
reserve for bad debts equal to the increase in the balance of the Bank's reserve
for bad debts at the end of the year to an  amount  equal to the  percentage  of
total loans at the end of the year, computed using the ratio of the previous six
years  net  chargeoffs  divided  by the  sum of the  previous  six  years  total
outstanding loans at year end.

A thrift institution required to change its method of computing reserves for bad
debts will treat such  change as a change in a method of  accounting  determined
solely with respect to the "applicable excess reserves" of the institution.  The
amount of the applicable excess reserves will be taken into account ratably over
a six-taxable year period, beginning with the first taxable year beginning after
December 31, 1995. For financial reporting  purposes,  the Bank has not incurred
any additional tax expense.  At September 30, 2000 and 1999, under SFAS No. 109,
deferred  taxes were  provided on the  difference  between  the book  reserve at
September 30, 2000 and 1999, respectively,  and the applicable excess reserve in
the amount  equal to the Bank's  increase in the tax reserve  from  December 31,
1987, to September 30, 1996.  Retained  earnings at September 30, 2000, and 1999
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,
                                                  2000                        1999                     1998
                                                       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                      $ 1,890,018        34.0%    $ 1,743,552         34.0%   $ 1,720,660        34.0%
Adjustments resulting from:
State tax-net of federal
    tax benefit                                528          --           3,960           --         16,500         0.3
Tax exempt income
Other                                     (188,566)       (3.4)       (125,512)        (2.4)      (132,160)       (2.6)
                                       -----------        ----     -----------         ----     ----------        ----
Expense per consolidated

   statements of income                $ 1,701,980        30.6%    $ 1,622,000        31.6%    $ 1,605,000        31.7%
                                       ===========        ====     ===========        ====     ===========        ====
</TABLE>


Income tax expense is summarized as follows:

                                        Year Ended September 30,
                                     2000       1999            1998
------------------------------------------------------------------------
Current                      $ 1,701,980     $ 1,622,000     $ 1,695,000
Deferred                            --              --           (90,000)
                             -----------     -----------     -----------
Total Income Tax Expense     $ 1,701,980     $ 1,622,000     $ 1,605,000
                             ===========     ===========     ===========

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

--------------------------------------------------------------------------------
                                                      September 30,
                                                2000                 1999
                                            ------------          ----------
Deferred Tax Assets:
  Deferred Loan Fees                          $ 54,917            $ 80,803
  Unrealized Loss on Investment Securities      54,607              51,905
  Allowance for Loan Losses                    486,533             383,952
                                              --------            --------
    Sub-Total                                  596,057             516,660
                                              --------            --------
Deferred Tax Liabilities:
  Property                                    (176,885)           (119,011)
  Other                                       (112,411)            (93,589)
                                              ---------           --------
    Sub-Total                                 (289,296)           (212,600)
                                              ---------          ---------
    Total                                    $ 306,761           $ 304,060
                                             ==========          =========

Income taxes paid were approximately  $1,826,500, $1,704,000, and $1,908,000 for
the years ended September 30, 2000, 1999, and 1998, 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, 2000,
that the Bank meets all capital adequacy requirements to which it is subject.

As of September 30, 2000, 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
                                                                                Adequacy Purposes           Action Provisions
As of September 30, 2000                            Amount        Ratio        Amount        Ratio         Amount        Ratio
                                                    ------        -----        ------        -----         ------        -----
<S>       <C>                                      <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%

As of September 30, 1999                            Amount        Ratio        Amount        Ratio         Amount        Ratio
                                                    ------        -----        ------        -----         ------        -----
     Tier 1 Capital (to assets)                    $ 29,036,902     6.31%     $ 18,393,909     4.00%      $ 22,992,386     5.00%
     Tier 1 Capital (to risk weighted assets)        29,036,902    14.18%        8,189,800     4.00%        12,284,700     6.00%
     Total Capital (to risk weighted assets)         31,076,902    15.18%       16,379,600     8.00%        20,474,500    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 $177,234, $219,088
and  $202,767  for  the  years  ended  September  30,  2000,   1999,  and  1998,
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.

As of September 30, 1999,  an aggregate of 159,680  shares were  authorized  and
outstanding  of which  139,306 had been issued and 20,374 were  unissued.  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.

A summary of transactions under this plan follows:

<TABLE>
<CAPTION>
                                                                                Year Ended September 30,

                                                      2000                          1999                            1998
                                                          Weighted                      Weighted                        Weighted
                                                           Average                       Average                         Average
                                              Options       Price         Options         Price           Options         Price
---------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>            <C>            <C>            <C>            <C>            <C>
      Outstanding,  beginning of year         139,306        $ 11.34        98,434         $ 13.92        102,651        $ 12.72

      Exercised                               (19,197)          8.70        (7,341)           8.72         (7,780)         11.91
      Canceled                                 (6,250)         12.75        (5,500)          12.62         (3,750)         13.34
      Stock Split                                   -                       32,813
      Granted                                   6,750          13.50        20,900           16.42          7,313          28.35
                                            ----------   ------------     ---------     -----------   ------------   ------------

      Outstanding, end of year                120,609        $ 11.81       139,306         $ 11.34         98,434        $ 13.92
                                            ==========   ============     =========     ===========   ============   ============

Options exercisable, end of year               63,001        $ 10.49        57,551          $ 9.66         32,199        $ 12.05
                                            ==========   ============     =========     ===========   ============   ============
</TABLE>



                                       24
<PAGE>



Had  compensation  cost for the Company's two 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,
                                                                                    2000               1999              1998
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>           <C>              <C>               <C>
Net income:                                                          As reported  $ 3,856,897      $ 3,506,095       $ 3,480,764
                                                                     Pro forma      3,846,658        3,466,417         3,454,544
Net income per common and common equivalent share:

      Diluted                                                        As reported       $ 1.70           $ 1.53            $ 1.52
                                                                     Pro forma           1.69             1.51              1.50

Significant assumptions used to calculate the above are as follows:

      Risk free interest rate of return                                                 5.50%            5.00%             5.50%
      Expected option life                                                          84 months        84 months         84 months
      Expected volatility                                                              11.00%           11.00%            11.00%
      Expected dividends                                                                2.50%            2.00%             2.00%
</TABLE>

The Company also has  established an Employee Stock Purchase Plan (the "Purchase
Plan") whereby employees shall 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.  As of  September  30,  1999,  42,523  shares were
available for future purchase under the Purchase Plan. During 2000, 4,059 shares
were issued to  employees.  At  September  30,  2000,  there were 38,464  shares
available for future purchase.

16. COMMITMENTS

At September 30, 2000, the Company had approximately $4.7 million in outstanding
commitments to originate mortgage loans, $1,944,000 of which were at fixed rates
ranging from 7.38 to 9.00%. The unfunded line of credit commitments at September
30, 2000 were $11.3  million.  The amounts of  undisbursed  portions of loans in
process at September  30, 2000 were $3.8  million.  Also, at September 30, 2000,
the Company had no outstanding futures or options positions.

The  Company  leases  land  for  one  of  its  branch  offices.  Minimum  rental
commitments at September 30, 2000, are summarized below:

             Fiscal                    Rental
             Year                      Amount
            ------                     ------
             2001                   $  23,000
             2002                      23,000
             2003                      23,000
             2004                      23,000
             2005                      23,000
                               --------------
     Total                          $ 115,000
                               ==============



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 repurchase 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,  2000.  Furthermore,  the Bank may not  repurchase  any of its  stock if the
effect  thereof  would  cause the Bank'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 following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107, Disclosures about Fair
                                                          ----------------------
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,
                                                                            2000                                1999
                                                                  Carrying       Estimated Fair        Carrying      Estimated Fair
                                                                   Amount            Value              Amount            Value
                                                                --------------  ----------------   --------------  -----------------
<S>                                                              <C>              <C>                <C>               <C>
Assets:
    Cash and cash equivalents                                    $ 4,080,202      $ 4,080,202        $ 3,955,818       $ 3,955,818
    Investment securities held to maturity                        71,280,841       69,463,000         61,014,582        59,201,000
    Investment securities available-for-sale at fair value         3,309,736        3,309,736          3,201,932         3,201,932
    Mortgage-backed securities held to maturity                  116,303,730      114,182,000        116,778,337       114,497,000
    Mortgage-backed securities available-for-sale at fair value    7,440,453        7,440,453          7,915,919         7,915,919
    Loans receivable - net                                       262,774,378      263,147,068        252,259,611       254,824,930
    Federal Home Loan Bank Stock                                   7,365,200        7,365,200          6,472,900         6,472,900

Liabilities:
    Passbook, Club and NOW accounts                               18,924,990       18,924,990         19,890,677        19,890,677
    Money Market Demand accounts                                  49,928,562       49,928,562         54,490,438        54,490,438
    Certificate accounts                                         240,982,258      236,187,198        229,278,984       229,435,398
    Advances from Federal Home Loan Bank                         145,134,283      143,911,167        125,179,928       123,687,895

Off Balance Sheet Items:
    Commitments                                                   19,800,000       19,800,000         13,600,000        13,600,000
</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, 2000.  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.

                                       26

<PAGE>

19.  Parent Company Financial Information

Condensed financial statements of Harleysville Savings Financial Corporation are
as follows:

<TABLE>
<CAPTION>

                                                                                            September 30, 2000
<S>                                                                                             <C>
Condensed Statements of Financial Condition
Assets
      Cash                                                                                       $ 1,469,111
      Investment in subsidiary                                                                    29,929,276
                                                                                              ---------------
Total Assets                                                                                    $ 31,398,387
                                                                                              ===============

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

Condensed Statement of Income (for the period February 25, 2000 to September 30, 2000)

Income:
Equity in undistributed income of subsidiary                                                     $ 2,908,857
                                                                                              ---------------

Net income                                                                                       $ 2,908,857
                                                                                              ===============

Condensed Statement of Cash Flows (for the period February 25, 2000 to September
30, 2000)
Net income                                                                                       $ 2,908,857
Undistributed income of HSB                                                                       (2,908,857)
                                                                                              ---------------
Net cash provided by operating activities                                                                 --
                                                                                              ---------------
Investing activities:

      Dividends received from subsidiary                                                           2,547,183
                                                                                              ---------------
Net cash provided by investing activities                                                          2,547,183
                                                                                              ---------------
Financing activities:
      Acquisition of treasury stock                                                                 (714,163)
      Proceeds from issuance of common stock                                                         129,394
      Dividends paid                                                                                (493,303)
                                                                                              ---------------

Net cash used in financing activities                                                             (1,078,072)

Net change in cash and cash equivalents                                                             1,469,111
                                                                                              ---------------

Cash and cash equivalents at the beginning of the period                                                  --

Cash and cash equivalents at the end of  the period                                              $ 1,469,111
                                                                                              ===============
</TABLE>

                                       27


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, 2000,  was $15.06 per share.  There
were  2,285,051   shares   outstanding  as  of  September  30,  2000,   held  by
approximately 1,000 stockholders.


                                                                CASH DIVIDENDS
    For the Quarter Ended     HIGH       LOW          CLOSE        DECLARED
------------------------------------------------------------------------------
September 30, 1998         $ 24.56    $ 22.04       $ 22.04       $ 0.08
December 31, 1998            22.59      17.63         17.63         0.09
March 31, 1999               18.63      15.66         17.00         0.09
June 30, 1999                17.00      15.00         15.75         0.09
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


 Corporate Information

<TABLE>
<CAPTION>
<S>                                                     <C>
Auditors                                                General Counsel
Deloitte & Touche                                       James J. Garrity
1700 Market Street, 24th floor                          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 24, 2001                             Investors, Analysts and others seeking
9:30 A.M.                                               financial information may contact:
                                                        Corporate Secretary

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

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
                                                        Cranford, NJ 07016
Dividend Reinvestment Plan                              web site: www.rtco.com
The Company has a Dividend Reinvestment and Stock       email: invrel@rtco.cm
Purchase Plan.  Interested stockholders can
obtain more information regarding the Plan by
contacting:


Registrar and Transfer Company                          Upon  request,   the  Company's   Annual
10 Commerce Drive                                       Report or form  10-K for the year  ended
Cranford, NJ  07016                                     September  30,  2000,  and the  exhibits
(800) 525-7686, extension 2542                          thereto  required  to be filed  with the
                                                        Securities and Exchange Commission under
                                                        the  Securities  Act  of  1934  will  be
                                                        furnished    without   charge   to   any
                                                        stockholder.






</TABLE>

                                       28

<PAGE>

<TABLE>
<CAPTION>

 Board of Directors
<S>                          <C>                         <C>
Sanford A. Alderfer          Paul W. Barndt              Philip A. Clemens
Founder                      Founder                     Chairman/CEO
Sanford A. Alderfer, Inc.    The Barndt Agency,  Inc.    Clemens Family Corporation
Harleysville,  PA            Sumneytown,  PA             Hartfield,  PA

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


Mark R. Cummins, CPA, CFA
Executive Vice President,
CIO, and Treasurer
Harleysville Insurnance Companies
Harleysville, PA

</TABLE>
<TABLE>
<CAPTION>

Officers
<S>                        <C>                              <C>
Edward J. Molnar           Ronald B. Geib                   Marian Bickerstaff
President and              Executive Vice President and     Senior Vice President and
Chief Executive Officer    Corporate Secretary              Chief Lending Officer

Brendan J. McGill          Diane P. Moyer
Senior Vice President,     Senior Vice President and
Treasurer and              Corporate Secretary
Chief Financial Officer

</TABLE>


Managers
<TABLE>
<CAPTION>
<S>                              <C>                            <C>
Adrian D. Gordon                 Sheri L. Strouse               Michelle A. Beck
Vice President and               Vice President and             Assistant Vice President and
Information Systems Manager      Branch Administrator           Security Officer

                                 Nathanial J. Clemmer            H. Frances Kline
Kathleen Clairmont               Assistant Vice President,       Assistant Vice President
Assistant Vice President and     Controller, and Accounting      Sumneytown Office Manager
West Norriton Office Manager     Department Manager

Kim A. Licata                    Lori N. McCausland              Denise L. Monaghan
Assistant Vice President and     Assistant Vice President and    Assistant Vice President and
Loan Customer Service Manager    Loan Administration Manager     Hartfield Office Manager


Diane M. Carlson
Assistant Vice President and
Human Resource Manager

</TABLE>


<PAGE>


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


Hatfield Office
1550 C owpath Road
Hatfield, PA  19440
(215) 362-0750

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

West Norriton Office
2301 West Manin Street
Norristown, PA 19403
(610) 631-0887