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                                                                   Exhibit 10.16


                                    AGREEMENT

         AGREEMENT, dated this 26th day of May 1999, between First Keystone
Federal Savings Bank (the "Savings Bank"), a federally chartered savings bank,
and Carol Walsh (the "Executive").


                                   WITNESSETH:

         WHEREAS, the Executive is presently an officer of First Keystone
Financial, Inc. (the "Corporation") and the Savings Bank (together, the
"Employers");

         WHEREAS, the Employers desire to be ensured of the Executive's
continued active participation in the business of the Employers;

         WHEREAS, the Employers currently have an agreement with the Executive
dated January 25, 1995, which is being amended and superseded by this Agreement,
and in accordance with the provisions of Office of Thrift Supervision ("OTS")
Regulatory Bulletin 27a, the Corporation and the Savings Bank desire to enter
into separate agreements with the Executive relating to her employment by each
of the Employers; and

         WHEREAS, in order to induce the Executive to remain in the employ of
the Employers and in consideration of the Executive's agreeing to remain in the
employ of the Employers, the parties desire to specify the severance benefits
which shall be due the Executive by the Savings Bank in the event that her
employment with the Savings Bank is terminated under specified circumstances.

         NOW THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereby agree as follows:

         1. DEFINITIONS. The following words and terms shall have the meanings
set forth below for the purposes of this Agreement:

         (a) ANNUAL COMPENSATION. The Executive's "Annual Compensation" for
purposes of this Agreement shall be deemed to mean the highest level of base
salary paid to the Executive by the Employers or any subsidiary thereof during
any of the three calendar years ending during the calendar year in which the
Date of Termination occurs.

         (b) CAUSE. Termination of the Executive's employment for "Cause" shall
mean termination because of personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order.



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         (c) CHANGE IN CONTROL OF THE CORPORATION. "Change in Control of the
Corporation" shall mean a change in control of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), or any successor thereto, whether or not any security of the Corporation
is registered under the Exchange Act; provided that, without limitation, such a
change in control shall be deemed to have occurred if (i) any "person" (as such
term is used in Section 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing 25% or more of the
combined voting power of the Corporation's then outstanding securities; or (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Corporation cease for any
reason to constitute at least a majority thereof unless the election, or the
nomination for election by stockholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period.

         (d) CODE. Code shall mean the Internal Revenue Code of 1986, as
amended.

         (e) DATE OF TERMINATION. "Date of Termination" shall mean (i) if the
Executive's employment is terminated for Cause or for Disability, the date
specified in the Notice of Termination, and (ii) if the Executive's employment
is terminated for any other reason, the date on which a Notice of Termination is
given or as specified in such Notice.

         (f) DISABILITY. Termination by the Savings Bank of the Executive's
employment based on "Disability" shall mean termination because of any physical
or mental impairment which qualifies the Executive for disability benefits under
the applicable long-term disability plan maintained by the Employers or any
subsidiary or, if no such plan applies, which would qualify the Executive for
disability benefits under the Federal Social Security System.

         (g) GOOD REASON. Termination by the Executive of the Executive's
employment for "Good Reason" shall mean termination by the Executive based on:

                  (i) Without the Executive's express written consent, the
         assignment by the Employers to the Executive of any duties which are
         materially inconsistent with the Executive's positions, duties,
         responsibilities and status with the Employers immediately prior to a
         Change in Control of the Corporation, or a material change in the
         Executive's reporting responsibilities, titles or offices as an
         employee and as in effect immediately prior to such a Change in
         Control, or any removal of the Executive from or any failure to
         re-elect the Executive to any of such responsibilities, titles or
         offices, except in connection with the termination of the Executive's
         employment for Cause, Disability or Retirement or as a result of the
         Executive's death or by the Executive other than for Good Reason;

                  (ii) Without the Executive's express written consent, a
         reduction by the Employers in the Executive's base salary as in effect
         on the date of the Change in Control of

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         the Corporation or as the same may be increased from time to time
         thereafter or a reduction in the package of fringe benefits provided to
         the Executive;

                  (iii) Any purported termination of the Executive's employment
         for Cause, Disability of Retirement which is not effected pursuant to a
         Notice of Termination satisfying the requirements of paragraph (i)
         below; or

                  (iv) The failure by the Savings Bank to obtain the assumption
         of and agreement to perform this Agreement by any successor as
         contemplated in Section 6 hereof.

         (h) IRS. IRS shall mean the Internal Revenue Service.

         (i) NOTICE OF TERMINATION. Any purported termination of the Executive's
employment by the Savings Bank for Cause, Disability or Retirement or by the
Executive for Good Reason shall be communicated by written "Notice of
Termination" to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated, (iii)
specifies a Date of Termination, which shall be not less than thirty (30) nor
more than ninety (90) days after such Notice of Termination is given, except in
the case of the Savings Bank's termination of Executive's employment for Cause,
and (iv) is given in the manner specified in Section 7 hereof.

         (j) RETIREMENT. Termination by the Savings Bank of the Executive's
employment based on "Retirement" shall mean voluntary termination by the
Executive in accordance with the Employers' retirement policies, including early
retirement, generally applicable to their salaried employees.

         2. BENEFITS UPON TERMINATION. If the Executive's employment by the
Savings Bank shall be terminated subsequent to a Change in Control of the
Corporation by (i) the Savings Bank other than for Cause, Retirement, or as a
result of the Executive's death, or (ii) the Executive for Good Reason, then the
Employers shall, subject to the provisions of Section 3 hereof, if applicable:

         (a) pay to the Executive, in twenty-four (24) equal monthly
installments beginning with the first business day of the month following the
Date of Termination, a cash amount equal to two (2) times the Executive's Annual
Compensation; and

         (b) maintain and provide for a period ending at the earlier of (i) two
(2) years after the Date of Termination or (ii) the date of the Executive's
full-time employment by another employer (provided that the Executive is
entitled under the terms of such employment to benefits substantially similar to
those described in this subparagraph (b)), at no cost to the Executive, the
Executive's continued participation in all group insurance, life insurance,
health and accident, disability and other employee benefit plans, programs and
arrangements in which the Executive was entitled to

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participate immediately prior to the Date of Termination (other than retirement
plans or stock compensation plans of the Employers), provided that in the event
that the Executive's participation in any plan, program or arrangement as
provided in this subparagraph (b) is barred, or during such period any such
plan, program or arrangement is discontinued or the benefits thereunder are
materially reduced, the Employers arrange to provide the Executive with benefits
substantially similar to those which the Executive was entitled to receive under
such plans, programs and arrangements immediately prior to the Date of
Termination.

         3. LIMITATION OF BENEFITS UNDER CERTAIN CIRCUMSTANCES. If the payments
and benefits pursuant to Section 2 hereof, either alone or together with other
payments and benefits which Executive has the right to receive from the Savings
Bank would constitute a "parachute payment" under Section 28OG of the Code, the
payments and benefits payable by the Savings Bank pursuant to Section 2 hereof
shall be reduced, in the manner determined by the Executive, by the amount, if
any, which is the minimum necessary to result in no portion of the payments and
benefits under Section 2 being non-deductible to the Savings Bank pursuant to
Section 28OG of the Code and subject to the excise tax imposed under Section
4999 of the Code. The parties hereto agree that the payments and benefits
payable pursuant to this Agreement to the Executive upon termination shall be
limited to three times the Executive's Average Annual Compensation in accordance
with the provisions of OTS Regulatory Bulletin 27a. The determination of any
reduction in the payments and benefits to be made pursuant to Section 2 shall be
based upon the opinion of independent tax counsel selected by the Savings Bank's
independent public accountants and paid for by the Savings Bank. Such counsel
shall be reasonably acceptable to the Savings Bank and the Executive; shall
promptly prepare the foregoing opinion, but in no event later than thirty (30)
days from the Date of Termination; and may use such actuaries as such counsel
deems necessary or advisable for the purpose. In the event that the Savings Bank
and/or the Executive do not agree with the opinion of such counsel, (i) the
Savings Bank shall pay to the Executive the maximum amount of payments and
benefits pursuant to Section 2, as selected by the Executive, which such opinion
indicates that there is a high probability do not result in any of such payments
and benefits being non-deductible to the Savings Bank and subject to the
imposition of the excise tax imposed under Section 4999 of the Code and (ii) the
Savings Bank may request, and Executive shall have the right to demand that the
Savings Bank requests, a ruling from the IRS as to whether the disputed payments
and benefits pursuant to Section 2 hereof have such consequences. Any such
request for a ruling from the IRS shall be promptly prepared and filed by the
Savings Bank, but in no event later than thirty (30) days from the date of the
opinion of counsel referred to above, and shall be subject to Executive's
approval prior to filing, which shall not be unreasonably withheld. The Savings
Bank and Executive agree to be bound by any ruling received from the IRS and to
make appropriate payments to each other to reflect any such rulings, together
with interest at the applicable federal rate provided for in Section 7872(f)(2)
of the Code. Nothing contained herein shall result in a reduction of any
payments or benefits to which the Executive may be entitled upon termination of
employment other than pursuant to Section 2 hereof, or a reduction in the
payments and benefits specified in Section 2 below zero.

         4. MITIGATION; EXCLUSIVITY OF BENEFITS.


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         (a) The Executive shall not be required to mitigate the amount of any
benefits hereunder by seeking other employment or otherwise, nor shall the
amount of any such benefits be reduced by any compensation earned by the
Executive as a result of employment by another employer after the Date of
Termination or otherwise.

         (b) The specific arrangements referred to herein are not intended to
exclude any other benefits which may be available to the Executive upon a
termination of employment with the Employers pursuant to employee benefit plans
of the Employers or otherwise.

         5. WITHHOLDING. All payments required to be made by the Savings Bank
hereunder to the Executive shall be subject to the withholding of such amounts,
if any, relating to tax and other payroll deductions as the Savings Bank may
reasonably determine should be withheld pursuant to any applicable law or
regulation.

         6. ASSIGNABILITY. The Savings Bank may assign this Agreement and its
rights and obligations hereunder in whole, but not in part, to any corporation,
bank or other entity with or into which the Savings Bank may hereafter merge or
consolidate or to which the Savings Bank may transfer all or substantially all
of its assets, if in any such case said corporation, bank or other entity shall
by operation of law or expressly in writing assume all obligations of the
Savings Bank hereunder as fully as if it had been originally made a party
hereto, but may not otherwise assign this Agreement or its rights hereunder. The
Executive may not assign or transfer this Agreement or any rights or obligations
hereunder.

         7. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:

         To the Savings Bank:  President
                               First Keystone Federal Savings Bank
                               22 West State Street
                               Media, Pennsylvania 19063

         To the Executive:     Carol Walsh
                               10 Sherwood Lane
                               Aston, Pennsylvania 19014

         8. AMENDMENT; WAIVER. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and such officer or officers as may be
specifically designated by the Board of Directors of the Savings Bank to sign on
its behalf. No waiver by any party hereto at any time of any breach by any other
party hereto of, or compliance with, any condition or provision of this
Agreement to

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be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.

         9. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise the substantive laws of the Commonwealth of
Pennsylvania.

         10. NATURE OF EMPLOYMENT AND OBLIGATIONS.

         (a) Nothing contained herein shall be deemed to create other than a
terminable at will employment relationship between the Savings Bank and the
Executive, and the Savings Bank may terminate the Executive's employment at any
time, subject to providing any payments specified herein in accordance with the
terms hereof.

         (b) Nothing contained herein shall create or require the Savings Bank
to create a trust of any kind to fund any benefits which may be payable
hereunder, and to the extent that the Executive acquires a right to receive
benefits from the Savings Bank hereunder, such right shall be no greater than
the right of any unsecured general creditor of the Savings Bank.

         11. TERM OF AGREEMENT. This Agreement shall terminate two (2) years
after the date first above written; provided that on or prior to the first
anniversary of the date first above written and each anniversary thereafter, the
Board of Directors of the Savings Bank shall consider (with appropriate
corporate documentation thereof, and after taking into account all relevant
factors, including Executive's performance as an employee) renewal of the term
of this Agreement for an additional one (1) year, and the term of this Agreement
shall be so extended unless the Board of Directors of the Savings Bank do not
approve such renewal and provide written notice to the Executive, or the
Executive gives written notice to the Savings Bank, thirty (30) days prior to
the date of any such anniversary, of such party's or parties' election not to
extend the term beyond its then scheduled expiration date; and provided further
that, notwithstanding the foregoing to the contrary, this Agreement shall be
automatically extended for an additional one (1) year upon a Change in Control
of the Corporation.

         12. HEADINGS. The section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

         13. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.

         14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.


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         15. REGULATORY PROHIBITION. Notwithstanding any other provision of this
Agreement to the contrary, the obligations of the Savings Bank hereunder shall
be suspended in the event that the FDIC prohibits or limits, by regulation or
order, any payment hereunder pursuant to Section 18(k) of the FDIA (12 U.S.C.
Section 1828(k)).

         16. REGULATORY ACTIONS. The following provisions shall be applicable to
the parties to the extent that they are required to be included in agreements
between a savings association and its employees pursuant to Section 563.39(b) of
the Regulations Applicable to all Savings Associations, 12 C.F.R.
Section 563.39(b), or any successor thereto, and shall be controlling in the
event of a conflict with any other provision of this Agreement.

         (a) If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Savings Bank's affairs
pursuant to notice served under Section 8(e)(3) or Section 8(g)(1) of the
Federal Deposit Insurance Act ("FDIA")(12 U.S,C. Sections 1818(e)(3) and
1818(g)(1)), the Savings Bank's obligations under this Agreement shall be
suspended as of the date of service, unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, the Savings Bank may, in its
discretion: (i) pay Executive all or part of the compensation withheld while its
obligations under this Agreement were suspended, and (ii) reinstate (in whole or
in part) any of its obligations which were suspended.

         (b) If the Executive is removed from office and/or permanently
prohibited from participating in the conduct of the Savings Bank's affairs by an
order issued under Section 8(e)(4) or Section 8(g)(1) of the FDIA (12 U.S.C,
Sections 1818(e)(4) and (g)(1)), all obligations of the Savings Bank under
this Agreement shall terminate as of the effective date of the order, but vested
rights of the Executive and the Savings Bank as of the date of termination shall
not be affected.

         (c) If the Savings Bank is in default, as defined in Section 3(x)(1) of
the FDIA (12 U.S.C. Section 1813(x)(1)), all obligations under this Agreement
shall terminate as of the date of default, but vested rights of the Executive
and the Savings Bank as of the date of termination shall not be affected.

         (d) All obligations under this Agreement shall be terminated pursuant
to 12 C,F,R, Section 563.39(b)(5) (except to the extent that it is determined
that continuation of the Agreement for the continued operation of the Savings
Bank is necessary): (i) by the Director of the OTS, or his/her designee, at the
time the Federal Deposit Insurance Corporation ("FDIC") enters into an agreement
to provide assistance to or on behalf of the Savings Bank under the authority
contained in Section 13(c) of the FDIA (12 U.S.C. Section 1823(c)); or (ii) by
the Director of the OTS, or his/her designee, at the time the Director or
his/her designee approves a supervisory merger to resolve problems related to
operation of the Savings Bank or when the Savings Bank is determined by the
Director of the OTS to be in an unsafe or unsound condition, but vested rights
of the Executive and the Savings Bank as of the date of termination shall not be
affected.


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         17. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
between the Savings Bank and the Executive with respect to the matters agreed to
herein. All prior agreements between the Savings Bank and the Executive with
respect to the matters agreed to herein, including without limitation the
Agreement between the Employers and the Executive dated January 25, 1995, are
hereby superseded and shall have no force or effect. Notwithstanding the
foregoing, nothing contained in this Agreement shall affect the agreement of
even date being entered into between the Corporation and the Executive.


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         IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.


Attest:                                  FIRST KEYSTONE FEDERAL SAVINGS BANK


/s/ Thomas M. Kelly                      By:/s/ Donald S. Guthrie
---------------------                       ------------------------
Thomas M. Kelly                             Donald S. Guthrie
                                            President


Attest:                                  EXECUTIVE


/s/ Thomas M. Kelly                      By:/s/ Carol Walsh
---------------------                       ------------------------
Thomas M. Kelly                             Carol Walsh, Individually









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