IBT BANCORP, INC.                                             2004 ANNUAL REPORT

                                 The Spirit of
                                   Community
                                  Banking.....

                               [GRAPHIC OMITTED]


                                                                        From Our
                                                                   Home In Irwin
                                                                 To the Heart of
                                                                    Westmoreland
                                                                          County


                                                                          [LOGO]
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                                IBT BANCORP, INC.
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TOTAL ASSETS AS OF 12/31 (IN MILLIONS)
[Bar graph with following data points:

        2000    $496.4
        2001    $524.0
        2002    $584.0
        2003    $629.5
        2004    $675.9]

TOTAL EQUITY (IN THOUSANDS)
[Bar graph with following data points:

        2000    $44,615
        2001    $49,725
        2002    $56,151
        2003    $59,606
        2004    $59,843]

NET INCOME (IN THOUSANDS)
[Bar graph with following data points:

        2000    $6,705
        2001    $7,465
        2002    $8,937
        2003    $9,646
        2004    $6,085]


DILUTED EARNINGS PER SHARE
[Bar graph with following data points:

        2000    $2.23
        2001    $2.49
        2002    $2.99
        2003    $3.19
        2004    $2.02]

DIVIDEND PER SHARE
[Bar graph with following data points:

        2000    $.92
        2001    $1.04
        2002    $1.20
        2003    $1.40
        2004    $1.60]


SELECTED FINANCIAL INFORMATION

IBT BANCORP, INC & SUBSIDIARY
<TABLE>
<CAPTION>
                                                                       AT OR FOR THE YEARS ENDED
                                                     2004           2003            2002            2001          2000
                                                              (Dollars in thousands, except per share amounts)
<S>                                                <C>            <C>             <C>             <C>           <C>
SELECTED BALANCE SHEET DATA:
Assets                                             $ 675,857      $ 629,530      $ 584,035       $ 524,044       $ 496,379
Cash and cash equivalents                             16,187         15,829         15,066          25,218          21,746
Securities available for sale                        196,891        172,448        186,718         162,968         167,874
Loans receivable (net)                               436,548        416,286        359,872         315,132         291,914
Deposits                                             526,217        492,158        468,257         422,462         409,638
Repurchase agreements                                 15,157         12,611         14,526          11,207           9,022
Federal funds purchased                                    -          7,900              -               -               -
FHLB advances                                         70,265         53,308         40,000          35,000          28,000
Shareholders' equity                                  59,843         59,606         56,151          49,725          44,615

SELECTED RESULTS OF OPERATIONS
Interest income                                    $  33,726      $  33,398      $  33,560       $  35,185       $  33,787
Net interest income                                   21,918         22,083         20,732          18,226          17,200
Provision for loan losses                                600            600          1,100             500             300
Net interest income after provision
      for loan losses                                 21,318         21,483         19,632          17,726          16,900
Other income                                           2,690          5,891          5,317           4,009           2,946
Other expense                                         15,095         14,300         12,831          11,284          10,181
Net income                                             6,085          9,646          8,937           7,465           6,705

PER SHARE DATA:
Net Income
      Basic                                           $ 2.05         $ 3.24         $ 3.00          $ 2.49          $ 2.23
      Diluted                                           2.02           3.19           2.99            2.49            2.23
Cash dividends declared                                 1.60           1.40           1.20            1.04            0.92

SELECTED RATIOS:
Return on average assets                                0.92%          1.59%          1.61%           1.45%           1.44%
Return on average equity                               10.25%         16.54%         16.95%          15.57%          16.87%
Ratio of avg. equity to avg. assets                     9.02%          9.59%          9.47%           9.31%           8.52%
Dividend payout                                        78.01%         43.21%         40.00%          41.77%          41.26%
</TABLE>


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                               2004 ANNUAL REPORT
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A Message To Our Stockholders

As  the  landscape  of  community   banking  changes,   our  commitment  to  our
shareholders  and  customers  remains  constant.  Eighty-three  years ago,  with
$200,000 in capital,  our Company entered the banking business serving the needs
of the small  community of Irwin,  Pennsylvania.  Today,  with  $676,000,000  in
assets, we have grown to be the largest financial  institution  headquartered in
Westmoreland  County.  We are today  considered  "local" far beyond our original
location,  yet we remain  driven by the  traditional  values  that have  defined
community banking for nearly a century.

2004 presented some unique challenges for IBT Bancorp,  Inc. and its subsidiary,
Irwin Bank & Trust Company. Net income declined,  brought on by several factors.
Regulatory guidelines adversely affected the investment portfolio.  In addition,
pressure on the net interest  margin,  caused by the interest rate  environment,
continue to impact Company earnings and the banking industry as a whole.

Despite  these  challenges,  the Company is pleased to report  growth in assets,
deposits and loans while maintaining control of expenses.

Performance Summary.
Earnings  for 2004  were  $6.1  million.  Assets  increased  by  7.4%,  deposits
increased  by 6.9% and net loan  growth  was $20  million.  Shareholder  benefit
improved with a dividend increase of 14.28% to $1.60 per share.

Certain investment  securities in the Company's investment portfolio were deemed
to be other than  temporarily  impaired,  resulting in a $2.4 million  after tax
charge to earnings.  United States Securities and Exchange  Commission rules and
generally  accepted  accounting  procedures  require that all Company investment
securities  be  assessed  on  a  quarterly   basis,  for  other  than  temporary
impairment.  When the market  value of a  security  is less than its cost over a
period  of time,  it can be  considered  other  than  temporarily  impaired.  If
management  believes that the investment  will not regain its original cost in a
reasonable  amount of time  then the  amount of the  decrease  in value  must be
recognized  through earnings.  In 2004, widely reported  accounting  problems at
both Federal Home Loan Mortgage  Corporation  (Freddie Mac) and Federal National
Mortgage  Corporation  (Fannie Mae) had a negative  impact on the value of those
investments.  Consequently  certain IBT Bancorp,  Inc. perpetual preferred stock
investments  in Freddie Mac and Fannie Mae have been  categorized  as other than
temporarily impaired due to the decline in their market value.

In addition,  pressure on the net interest margin  continued to adversely affect
earnings  results for 2004. The interest rate  environment  was unlike that seen
for the past 50 years. The resulting downward trend in loan pricing continued to
assert  pressure on the net interest  margin.  Deposit rates rose throughout the
year while mortgage rates remained relatively flat.  Refinancing appears to have
peaked after two years of record numbers of originations,  causing a decrease in
loan volume.

Other factors had a favorable  impact on performance.  Maximum  Checking,  a new
account  launched in late 2003,  proved to be popular in the marketplace  having
gathered  $19  million in  deposits.  Debit card  income and income from the new
Overdraft Advantage program contributed to a 12.5% gain over 2003 levels.

Irwin Bank & Trust Company continues to aggressively control costs. Three of our
offices will be consolidated in 2005. The three  locations,  within a 1-1/2 mile
corridor,  provided  an  overlap  of  services  in a  common  market  area.  The
consolidation  into one location  will present a  significant  cost savings with
little customer impact.

2004 Initiatives
Our commitment to community banking values defines our core banking  philosophy.
However,  the definition of community banking is changing every day,  influenced
by rapid changes in technology,  regulation and customer  expectations.  In this
challenging  arena lies our  commitment to provide our customers  with products,
services and overall  banking  value that is second to none. We are pleased with
the progress  made over recent  years that has given Irwin Bank & Trust  Company
state-of-the-art  capability in check imaging,  customer electronic  transaction
and account information delivery, customer

                                       1
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                               IBT BANCORP, INC.
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[GRAPHIC OMITTED]

relationship  management (CRM), and product offerings.  That effort continued in
2004 with several major marketing and operational initiatives.

For business banking, a new account structure was developed and bundled with the
Company's  advanced  electronic and debit card  capabilities.  Personal  Banking
received a new student  account and a new direct deposit account that comes with
free  electronic  banking.  Both  personal  and  business  accounts  are clearly
presented  in colorful  new  brochures  that  provide  easy  comparison  for the
customer.

Last September, a second banking location was opened in Greensburg.
The new office,  located in the downtown business district near the Westmoreland
County Courthouse, provides convenience to the professional community.

In late September, Overdraft Advantage was introduced,  providing customers with
the assurance that overdrafts  would be paid within  structured  guidelines.  In
addition to providing the customer with a service  enhancement,  service  charge
income from the product is showing great potential.

Throughout the year, sales development continued within our branch network. This
initiative  has  brought  us  closer  to our  customers,  helping  us to  better
understand  and meet their  changing  needs.  The  Company  will  continue to be
proactive and prudent in its approach  toward product  development,  operational
enhancements and market expansion.

Changes on the Board of  Directors J. Curt  Gardner  resigned  from the Board of
Directors  in November of 2004.  Mr.  Gardner's  wisdom and  leadership  as past
President and Chairman of the Board are greatly appreciated.  Mr. Robert Rebich,
Jr.,  who has been a Director for over 13 years  replaced  him as Chairman.  Two
other Directors also retired in 2004. Mr. Edwin A. Paulone's 40-year tenure as a
Company Director  deserves special  recognition.  We also thank Mr. Thomas Beter
for his 8 years of service to the Board.  We extend our very best  wishes to all
of our departing Directors.

We are  pleased to welcome new  Directors  Mr. John N.  Brenzia,  Mr.  Thomas E.
Deger, and Mr. Charles W.  Hergenroeder to the Board.  Their fresh point of view
and  years of  professional  experience  will  add  strength  to the  leadership
process.

Moving Ahead
Irwin Bank is well  positioned to meet the  challenges  of the future.  Loan and
deposit  growth  will  continue  to be  spurred  by our good mix of  competitive
product  offerings.  The new Greensburg market area is showing steady growth and
offers great potential.  We continue to consider prudent opportunities to expand
our  franchise.  And, the training and technology are in place for our employees
to maximize customer banking relationships.

We sincerely appreciate having you as an investor in IBT Bancorp, Inc.



/s/Charles G. Urtin                             /s/Robert Rebich, Jr.
Charles G. Urtin                                Robert Rebich, Jr.
President & Chief Executive Officer             Chairman of the Board
IBT Bancorp, Inc.                               IBT Bancorp, Inc.

                                       2
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                               2004 ANNUAL REPORT
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Board of Directors / Management

[GRAPHIC OMITTED]

Irwin Bank & Trust Company Management
(Back row:) David A. Finui, Senior Vice President/COO
Raymond G. Suchta, Senior Vice President/CFO
(Front row:) Charles G. Urtin, President/CEO
Robert A. Bowell, Executive Vice President/Secretary-Treasurer/CLO




IBT Bancorp, Inc. / Irwin Bank & Trust Company Board of Directors
(Back  row:)  Charles W.  Hergenroeder,  Director;  Thomas E.  Deger,  Director;
Charles G. Urtin, President/CEO;  Richard J. Hoffman, Director; John N. Brenzia,
Director; Dr. Grant J. Shevchik,  Director;  (Seated front row) Richard L. Ryan,
Director; Robert Rebich, Jr., Chairman; Robert C. Whisner, Director.

[GRAPHIC OMITTED]

(Not pictured,  Directors  Emeritus) Thomas Beter,  William D. Fawcett,  Sr., J.
Curt Gardner, Edwin A. Paulone, Vincent V. Rodgers.

                                       3
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                               IBT BANCORP, INC.
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A Fresh Look at Our Product Offerings
An important  part of community  banking is a commitment  to deliver the highest
level of value in products and services.  Building on the outstanding success of
Maximum  Checking,  launched late in 2003,  Irwin Bank & Trust Company's  entire
product line-up was  repositioned in 2004.  Free Checking,  a company  signature
product,  remains in place with one change,  applicable  to new  accounts  only.
Check Safekeeping is now a default feature,  with a $2.00 monthly service charge
required for check images. Following implementation of this change, new accounts
choosing Check  Safekeeping have increased to 90%, an increase of over 30%. This
will provide the Company with noteworthy  savings in the printing and postage of
monthly statements.

[GRAPHIC OMITTED]

Also new in 2004 was the  introduction  of Overdraft  Advantage,  a program that
provides eligible  customers with assurance that qualifying  overdrafts would be
paid, avoiding embarrassment and additional fees charged by the check recipient.

Next,  two  new  personal  accounts  were  created.  Free  Checking  Plus is for
customers utilizing direct deposit.  The "Plus" feature is free internet banking
with a discounted service charge for bill payment. The other new account is Free
Student  Checking.  This account is essentially  the same as Free Checking Plus,
but it waives the direct deposit  requirement  for students.  Both accounts come
with all of the basic features of standard Free Checking.  Free internet banking
was also added to Extra Checking in 2004.  Irwin Bank & Trust Company now offers
a variety of incentives  for customers to utilize the  convenience of electronic
banking.

Business banking also enjoyed a major makeover.  In addition to a new free small
business checking account, a new and unique  "relationship"  account was created
that bundles a larger quantity of items  processed with our advanced  electronic
banking solution for business.  The monthly service charge is waived if a higher
monthly balance is maintained. Next, our Business Analysis Account was made part
of the line up,  in order to inform  business  customers  of Irwin  Bank & Trust
Company's  capabilities  for higher  volume  businesses.  As part of our overall
capabilities presentation, the Company's sophisticated debit card and electronic
banking  service  options were added to the mix,  providing  the customer with a
full range of banking and financial management solutions.

As a community bank,  Irwin Bank & Trust Company is sometimes  challenged by the
false perception in the market place of "not being as capable as the big banks."
Our new business banking strategy effectively addresses this misconception.

[GRAPHIC OMITTED]

New account guides clearly  present  account  features and  comparisons for both
personal  and business  accounts.  Additional  services,  such as debit card and
electronic  banking are  positioned  as a part of the complete  deposit  banking
experience.

                                       4
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                               2004 ANNUAL REPORT
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[GRAPHIC OMITTED]

Robert A. Bowell,  Executive  Vice  President  and Chief  Lending  Officer,  and
Barbara A. Burzio, Vice  President/Commercial  Loans, take a tour of the home of
Ms. Lois Runzo, constructed with the help of Irwin Bank financing.  Mortgage and
construction  loans  continue  to be an  important  part of the  Company's  loan
business.

Lending
With  interest  rates  remaining  at  record  low  levels  throughout  the year,
borrowers  continued to take advantage of opportunities to refinance.  A decline
in the number of  originations  indicates that the  refinancing  boom appears to
have peaked in 2004.  For the year,  Irwin Bank & Trust Company loan  portfolios
grew $20  million  or nearly  5%.  All three  lending  categories,  installment,
commercial and mortgages  reached record highs.  Our market area continues to be
one of the fastest growing residential markets in Western  Pennsylvania,  and we
see continuing  potential for new  construction  and mortgage  financing for the
upcoming  year.  However,  with  the  decrease  in  refinancing  activity,   the
competitive environment has become more challenging.  By continuing to offer the
market the best  overall  lending  value,  we will  maintain a favorable  market
share.

Although  pricing  and fees play a major  role  when it comes to loans,  service
plays an  ever-important  role.  We especially  see this in Commercial  Lending,
where borrowers tell us they do not appreciate lending decisions made across the
state and in some cases even  out-of-state.  Because our loan decisions are made
locally and quickly,  Irwin Bank & Trust Company  enjoys a distinct  competitive
advantage.  With the entire loan process being local,  borrowers  appreciate the
personal  relationship  they have with us as their local bank and our ability to
respond to their specific needs.

[GRAPHIC OMITTED]

Mr. David Rosenblatt, President of Green Valley Dry Cleaners, Inc., explains the
operation of a new Water Economizer System to Stacey G. Winfield, Vice President
/Commercial  Lending.  The  equipment,  which saves energy and reduces water and
sewage costs, was financed by Irwin Bank & Trust Company, participating with the
Pennsylvania   Department  of  Community  and  Economic  Development  (Pollution
Prevention  Assistance) and the  Southwestern  Pennsylvania  Corporation  (Small
Business First Program).

                                       5
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                               IBT BANCORP, INC.
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Wealth Management Gains
Wealth  management  is becoming  an  increasingly  important  part of the Bank's
business portfolio due to growing demand from our customers.

The Trust  Division  and UVest  Investment  Division  work  together  to provide
customers with comprehensive  investment,  estate and employee benefits planning
and implementation.

2004 saw impressive gains in non-interest income generated from both areas.

[GRAPHIC OMITTED]

Mr. James Wolff,  President of General Press,  shows the  capabilities  of a new
printing press to Scott Fisher,  Vice  President/Trust  Division.  The Company's
Trust Division manages the employee benefits plan for General Press.

Developing a Relationship Culture
Unlocking the potential of our employees was an important  initiative  for 2004.
Our  strategy  was  simple:   by  learning  to  better  understand  the  banking
relationships of our customers, we would improve our retention and cross-selling
ratios.  The  implementation of this  sales-oriented  program included training,
monthly "sales" meetings and deployment of customer marketing information (MCIF)
to the customer service staff. As a result,  thousands of customer contact calls
have been made for a variety of reasons such as maturing  loans and CDs, as well
as  good  will  calls  to  high  value   customers.   Customers  have  expressed
appreciation  for the program.  To their  credit,  our  platform  staff has also
embraced the program and as a result, the "relationship  culture" initiative has
enjoyed a successful introduction.

[GRAPHIC OMITTED]

The Irwin Bank & Trust Company training facility provides a productive  learning
environment  for a variety of operational  functions.  Teller and sales platform
training is now a hands-on  experience for trainees.  The multiple  workstations
are also an ideal way to train users of the Marketing Customer  Information File
and other administrative software programs.

                                       6

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                               2004 ANNUAL REPORT
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Community Leadership
Community banking requires community involvement and leadership,  and Irwin Bank
& Trust  Company's  employees  are quick to serve.  Company  employees  serve as
members  and  directors  of  several  organizations,   ranging  from  hospitals,
universities  and major charities and foundations to local service clubs,  youth
organizations,  school  and church  groups,  and other  institutions.  Financial
support is also provided through contributions made to a variety of fund raising
efforts.

Some of the year's highlight activities best tell the story.
-    Throughout the year employees made a substantial contribution to the United
     Way of Westmoreland County through payroll deductions.
-    In the fall of 2004, Irwin Bank's Employee Club raised funds for victims of
     the Hurricane Ivan floods.  During the holiday  season,  the group was also
     active in several  charitable causes including the Salvation Army, Toys for
     Tots and the Make-A-Wish Foundation.
-    Irwin Bank & Trust Company  financially  supports a very long list of local
     causes  through  sponsorship,  donation  or  participation  in  fundraising
     events.

In 2004, the Company played a pivotal role in a major revitalization  initiative
in its  hometown  of Irwin,  PA,  called the "Irwin  Project."  Building  on the
inspiration  provided by a study of Irwin conducted by Penn State University and
the  Lincoln  Highway  Heritage  Corridor,   Irwin  Bank  &  Trust  Company  was
instrumental  in stimulating the start of the effort known as the Irwin Project.
The Irwin Project operating  committee is a citizen's  advisory board in support
of Irwin Borough Council and has produced some early results. As a result of the
committee's effort, the Westmoreland Cultural Trust has designated Main Street's
Thompson Building for major historical  renovation.  The committee is working to
update  Irwin's  Comprehensive  Plan and  finance the study  through  grants and
private  fund  raising.  Company  support  and  leadership  has helped the Irwin
Project get off to a robust start.

[GRAPHIC OMITTED]

Irwin Bank & Trust Company is a major supporter of the Norwin Public Library,  a
new, state-of-the-art community institution.

[GRAPHIC OMITTED]

With  financial  and  leadership  stimulus  from Irwin Bank & Trust  Company,  a
community revitalization  initiative known as the "Irwin Project" began in 2004.
As part of the program,  the  Westmoreland  Trust has  designated  Main Street's
Thompson Building for historical renovation.

                                       7
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                               IBT BANCORP, INC.
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Changes in Our Branch Office Network
In order to continue establishing our commitment to the Greensburg market, Irwin
Bank & Trust Company opened a second banking  facility in the downtown  business
district.  The new Pennsylvania Commons office, located next to the Westmoreland
County  Courthouse,   is  conveniently  located  in  the  heart  of  the  city's
professional  community.  The location is adjacent to our Trust Division  office
and is  designed  for the  walk-to  convenience  of local  attorneys  and  other
professionals.  Pennsylvania  Commons  operates  as a  satellite  of the primary
Greensburg office, opened last year at Triangle Drive.

In  2004,  we  recognized  an  opportunity  to  further  improve  efficiency  by
consolidating  three  branch  locations.  Pitcairn,  Haymaker  Village  and  the
Haymaker  Village Irwin Bank Extra  offices are located in very close  proximity
and provided  redundant services to a common market area. The three offices will
be consolidated into our Haymaker Village office. Hours of operation at Haymaker
Village will be expanded.  As a courtesy to the patrons of the Pitcairn  office,
we will  provide a shuttle bus service  from  Pitcairn to the  Haymaker  Village
office.  Pitcairn  residents  will also  benefit  from the  additional  services
available at Haymaker  Village,  including  drive-up,  automated teller machine,
safe deposit boxes and evening and Saturday  hours.  The  consolidation  will be
completed on April 15, 2005.

Employee Milestones, Promotions &
New Hires
 Irwin Bank & Trust  Company's  success  would not be possible  without the hard
work and  dedication of its employees.  In 2004,  Beverly A. Hahn was recognized
for her 40 years of  service.  Edwin A.  Paulone  and  Robert C.  Whisner,  both
Directors of the Board, were recognized for their 35 years of service.  M. Diane
Jones and Maurine J. Peer were recognized for their 30 years of service and Lori
B.  Gumbert was  recognized  for her 25 years of service.  We are proud to honor
these employees for their many years of dedicated  service to Irwin Bank & Trust
Company.  We are also pleased to recognize our officers who achieved higher rank
and those who joined Irwin Bank & Trust Company last year.


[GRAPHIC OMITTED]
Douglas L. Appel
Assistant Vice President /
Network Administration
Promoted April, 2004

[GRAPHIC OMITTED]
Barbara A. Burzio
Vice President /
Commercial Lending
Promoted April, 2004

[GRAPHIC OMITTED]
William E. Killian
Vice President /
Business Development
Hired January, 2004

[GRAPHIC OMITTED]
Alan Lazar
Senior Vice President /
Commercial Lending
Promoted April, 2004

[GRAPHIC OMITTED]
Anna Mauro
Manager /
TA of Irwin Title Insurance
Hired June, 2004

[GRAPHIC OMITTED]
Robert G. Michaud
Vice President /
Marketing
Promoted April, 2004

[GRAPHIC OMITTED]
John A. Pauls, Jr.
Assistant Vice President /
Auditor
Hired May, 2004

[GRAPHIC OMITTED]
Barbara A. Ruffner
Assistant Vice President /
Consumer Lending
Promoted June, 2004

                                       8

<PAGE>

         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS

         The Private  Securities  Litigation  Reform Act of 1995  contains  safe
harbor  provisions  regarding  forward-looking  statements.  When  used  in this
discussion, the words "believes", "anticipate",  "contemplates",  "expects", and
similar expressions are intended to identify  forward-looking  statements.  Such
statements  are subject to certain  risks and  uncertainties,  which could cause
actual  results to differ  materially  from  those  projected.  Those  risks and
uncertainties  include  changes in interest  rates,  risks  associated  with the
effect of opening new branches,  the ability to control costs and expenses,  and
general  economic  conditions.  IBT Bancorp,  Inc.  undertakes  no obligation to
update those forward-looking statements to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.

GENERAL

         IBT Bancorp,  Inc. is a bank holding  company  headquartered  in Irwin,
Pennsylvania,  which  provides a full  range of  commercial  and retail  banking
services  through its wholly owned  banking  subsidiary,  Irwin Bank & Trust Co.
(collectively,  the  "Company").  The Company's  stock is traded on the American
Stock Exchange under the symbol IRW.


CRITICAL ACCOUNTING POLICIES

         The most significant  accounting  policies  followed by the Company are
presented in Note 1 to the  consolidated  financial  statements.  The  Company's
accounting  and  reporting  policies  conform  with  the  accounting  principles
generally  accepted in the United States of America and general practices within
the financial  services  industry.  The preparation of the financial  statements
requires  management to make estimates and  assumptions  that affect the amounts
reported in the financial  statements and the accompanying notes. Actual results
could differ from those estimates.

         Allowance for loan losses: The Company considers that the determination
of the  allowance  for loan  losses  involves a higher  degree of  judgment  and
complexity than its other significant  accounting  policies.  The balance in the
allowance  for loan  losses  is  determined  based on  management's  review  and
evaluation of the loan portfolio in relation to past loss  experience,  the size
and composition of the portfolio,  current  economic events and conditions,  and
other pertinent factors.  All of these factors may be susceptible to significant
change  to the  extent  actual  outcomes  differ  from  management's  estimates.
Additional  provisions  for loan  losses may be  required  that would  adversely
impact earnings in future periods.

         Accounting  for stock  options:  As of  January 1,  2003,  the  Company
adopted SFAS 123 as amended by SFAS 148 in regards to the  accounting  for stock
options.  As required by this  statement,  the Company  recognized  compensation
expense in the income statement based on the estimated fair value of the options
on the  date of the  grant.  Prior  to  this  date  the  Company  accounted  for
stock-based  compensation in accordance with Accounting Principles Board Opinion
(APB) No. 25. Under APB No. 25, no  compensation  expense is  recognized  in the
income statement related to any options granted under the Company's stock option
plans.  The pro forma  impact to net  income and  earnings  per share that would
occur if compensation expense was recognized,  based on the estimated fair value
of the  options  on the date of the  grant,  is  disclosed  in the  notes to the
consolidated financial statements.

         Other-than-temporary    impairment:   Generally   accepted   accounting
principles require management to examine the investment  portfolio for losses on
investments,  which may be  determined to be other than  temporary.  The Company
currently owns certain  preferred stocks issued by the Federal National Mortgage
Corporation (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie
Mac).  These preferred  stocks contain  attributes of both debt and equity.  The
dividend  paid is tied to an index plus or minus a margin,  and the payment rate
adjusts bi-annually.  Recent, ongoing,  negative publicity concerning accounting
practices  at  both  agencies  have  negatively  impacted  the  value  of  these
investments. Management determined that the losses were other than temporary and
the Company recorded a non-cash write-down of $2.4 million on these investments.

                                       1

<PAGE>

FINANCIAL CONDITION

     At December 31, 2004,  total assets  increased  $46.4 million,  or 7.4%, to
$675.9  million from $629.5  million at December 31, 2003. The increase in total
assets was  primarily  the result of an increase of $23.3  million in securities
available for sale and $20.2 million net loans.  Growth in securities  available
for sale and the loan portfolio was primarily  funded by a net increase of $34.0
million in total deposits and $17.0 million in FHLB advances.

     The  increase in  available  for sale  securities  was mainly the result of
purchases of $111.6 million offset by net proceeds from maturities and the sales
of   securities   of  $85.1   million.   This   resulted  in  net  increases  of
mortgage-backed  securities and obligations of state and political sub-divisions
of $27.3  million and $8.5  million,  respectively,  offset by net  decreases in
obligations of U.S. government agencies of $11.9 million.

     The increase in the loan  portfolio  was primarily due to increases of $7.2
million  in real  estate  secured  mortgage  loans,  $6.4  million  in  consumer
installment  loans,  and $3.8  million  in  loans  made to  municipalities.  The
increase in real estate  secured  mortgage  loans was mainly due to increases in
multi-family  properties and commercial  mortgages,  which rose $2.7 million and
$3.8 million,  respectively.  Such  increases  were offset by a decrease of $1.4
million in 1-4 family  residential  mortgages.  This  decrease is  attributed to
customer  refinancings,  principal  repayments,  and  sales  into the  secondary
mortgage  market.  The 1-4 family  residential  mortgage loans originated by the
Company  are  periodically  sold  to the  Pennsylvania  Housing  Finance  Agency
("PHFA") or PHH Mortgage Services to mitigate the interest-rate  risk associated
with holding long-term,  low rate loans in the portfolio. In 2004, loans sold to
PHFA and PHH were $1.5 million and $6.1 million, respectively.

     Consumer  installment  and municipal  loans reached $84.7 million and $10.1
million,  respectively,  at December 31, 2004 compared to $78.3 million and $6.3
million,  respectively at December 31, 2003. The Company's  competitive offering
rates supported this growth.

     At December 31, 2004, total liabilities  increased $46.1 million,  or 8.1%,
to $616.0  million from $569.9  million at December  31, 2003.  The increase was
primarily related to the increase in total deposits and additional FHLB advances
of $34.0  million  and $17.0  million,  respectively  offset  by a $7.9  million
decrease in overnight  borrowings.  The change in total deposits was a result of
non-interest bearing and interest-bearing  deposit increases of $6.1 million and
$27.9  million,   respectively.  The  interest-bearing  deposit  increases  were
primarily in certificates  of deposit and interest  bearing  checking  accounts,
which rose $15.1 million and $11.7  million,  respectively.  Such increases were
attributed to a growing deposit base and competitive pricing.

     Non-interest  bearing  deposits  increased $6.1 million to $87.2 million at
December  31,  2004 from $81.1  million at December  31,  2003.  Such  increases
reflect  additions to non-interest  bearing deposits of $8.7 million offset by a
$2.6 million  increase in investments  in repurchase  agreements at December 31,
2004. Under the terms of the agreements,  deposits in designated demand accounts
of the  customer  are put into an  investment  vehicle  which  is used  daily to
purchase an interest in designated U.S. Government or Agencies' securities.  The
Company in turn agrees to repurchase these  investments on a daily basis and pay
the customers the daily  interest  earned based on the current  market rate. See
Note 8 to the consolidated financial statements.

     At December 31, 2004,  total  stockholders'  equity  increased  $237,000 to
$59.8  million  from $59.6  million at  December  31,  2003.  The  increase  was
primarily  due to net income of $6.1  million  for the period and an increase of
$171,000 in accumulated other comprehensive  income (net of income taxes) offset
by dividends paid of $4.7 million and an increase in treasury stock purchased of
$1.0  million.  In addition,  surplus  (additional  paid-in  capital)  decreased
$326,000  due to stock  options  exercised  and  increased  $59,000 due to stock
options  granted in accordance with the adoption of FASB 123, as amended by FASB
148. See Note 19 to the consolidated  financial  statements.  Accumulated  other
comprehensive income increased as a result of changes in the net unrealized gain
on the available for sale  securities  due to  fluctuations  in interest  rates.
Because  of  interest  rate   volatility,   the  Company's   accumulated   other
comprehensive  income could  materially  fluctuate  for each interim  period and
year-end. See Note 2 to the consolidated financial statements.

                                       2

<PAGE>

RESULTS OF OPERATIONS

         Net Income: Net income decreased  approximately $3.5 million, or 36.5%,
to $6.1 million  ($2.02 per diluted  share) for the year ended December 31, 2004
from $9.6  million  ($3.19 per diluted  share) for the year ended  December  31,
2003.  The  decrease in net income for fiscal  2004  compared to fiscal 2003 was
primarily due to a $2.4 million  non-cash  charge  resulting  from a decrease in
value of certain agency preferred stocks, which was determined by management, to
be other than  temporary as well as  decreases in net interest  income and total
other income of $165,000 and $775,000,  respectively and an increase of $795,000
in total  other  expenses.  Net  interest  income  decreased  primarily  because
interest expense rose $493,000,  or 4.4%, offset by an increase of $328,000,  or
1.0% in interest  income.  Increases in interest  expense were  attributed to an
increase of $39.5 million in  interest-bearing  liabilities offset by a 12-basis
point decline in average yield.  Other income  declined due to lower  investment
securities gains and lower gains on sales of foreclosed real estate.

         For  the  year  ended   December   31,  2003,   net  income   increased
approximately  $709,000, or 7.9%, to $9.6 million ($3.19 per diluted share) from
$8.9 million ($2.99 per diluted share) for the year ended December 31, 2002. The
increase in net income for fiscal 2003 compared to fiscal 2002 was primarily due
to a $1.9 million increase in net interest income, a $574,000  increase in other
income and a $500,000  decrease in the provision  for loan losses.  Net interest
income increased  primarily  because interest expense declined $1.5 million,  or
11.8%,  while  interest  income  remained  relatively  stable,   declining  only
$162,000,  or 0.5%.  The  Company  was able to  maintain  its levels of interest
income due to a $50.0 million increase in the average volume of interest-earning
assets, which more than offset a 58-basis point decline in average yield.

         Net  Interest  Income:  Net  interest  income  is the most  significant
component of the Company's  income from  operations.  Net interest income is the
difference between interest received on interest-earning assets (primarily loans
and investment  securities)  and interest paid on  interest-bearing  liabilities
(primarily  deposits and borrowed  funds).  Net interest  income  depends on the
volume and rate earned on  interest-earning  assets and the volume and  interest
rate paid on interest-bearing liabilities.

         Net interest income  decreased  $165,000,  or 0.7% to $21.9 million for
2004  compared to $22.1  million for 2003.  The decrease was primarily due to an
increase in average  interest-bearing  liabilities  of $46.6 million offset by a
12-basis point decrease in the average cost of funds. Such increases were mainly
in certificates  of deposit,  which rose an average of $24.7 million offset by a
21-basis  point  decline  in  average  cost.  Average  interest  earning  assets
increased  $47.8 million in fiscal 2004 offset by a 40-basis  point  decrease in
the average  yield of interest  earning  assets.  This increase was primarily in
average loans and  investment  securities  available for sale,  which grew $36.8
million  and $15.4  million,  respectively  offset by  decreases  in the average
yields of 52-basis points and 24-basis points, respectively.

         Net interest income  increased $1.4 million,  or 6.76% to $22.1 million
for 2003 compared to $20.7  million for 2002.  The increase was primarily due to
the increase in average loans of $56.1 million and average investment securities
available  for sale of $4.1  million  offset  by a  decrease  in  average  other
interest-earning  assets  (primarily  federal funds sold) of $10.2 million and a
58-basis point decrease in the yield on average interest earning assets to 5.80%
for 2003 from 6.38% for 2002.  The  decrease  in the yield on  average  interest
earning assets was primarily the result of yield  decreases in average loans and
average   investment   securities  of  68-basis   points  and  89-basis   point,
respectively.  Average  interest-bearing  liabilities increased $40.2 million in
fiscal 2003 offset by a 58-basis point decrease in the average cost of funds.

         The  following  table sets forth  certain  information  relating to the
Company's  average  balance sheet and,  reflects the average yield on assets and
average cost of  liabilities  for the periods  indicated and the average  yields
earned and rates paid.  Such yields and costs are derived by dividing  income or
expense by the average balance of assets or liabilities,  respectively,  for the
periods presented. Average balances are derived from daily balances.

                                       3

<PAGE>

<TABLE>
<CAPTION>
                                                              Year Ended December 31,
                              ---------------------------------------------------------------------------------------------
                                         2004                           2003                          2002
                              -----------------------------  -----------------------------  -------------------------------
                              Average             Average    Average             Average    Average              Average
                              Balance  Interest  Yield/Cost  Balance  Interest  Yield/Cost  Balance  Interest   Yield/Cost
                              -------  --------  ----------  -------  --------  ----------  -------  --------   ----------
                                                                                             (Dollars in Thousands)
Interest-earning assets:
<S>                         <C>        <C>        <C>      <C>        <C>        <C>      <C>       <C>           <C>
  Loans receivable (1)       $430,543   $26,313    6.11%    $393,743   $26,097    6.63%    $337,600  $24,687       7.31%
  Investment securities (2)   192,934     7,403    3.84%     177,557     7,244    4.08%     173,472    8,615       4.97%
  Other interest-earning
    assets (3)                    540        10    1.82%       4,926        57    1.16%      15,086      258       1.71%
                             --------   -------  ------     --------   -------  ------     --------  -------     ------
     Total interest
       earning assets        $624,017   $33,726    5.40%    $576,226   $33,398    5.80%    $526,158  $33,560       6.38%

Non-interest earning
  assets (4)                   34,156                         31,441                         30,550
                             --------                       --------                       --------
     Total assets            $658,173                       $607,667                       $556,708
                             ========                       ========                       ========

Interest-bearing liabilities:
  Money market accounts        58,103       516    0.89%      61,138       645    1.05%      60,735    1,234       2.03%
  Certificates of deposit     245,881     7,595    3.09%     221,186     7,303    3.30%     208,789    7,935       3.80%
  Other liabilities (5)       210,096     3,697    1.76%     185,117     3,367    1.82%     157,629    3,660       2.32%
                             --------   -------  ------     --------   -------  ------     --------  -------     ------
     Total interest-bearing
       liabilities           $514,080   $11,808    2.30%    $467,441   $11,315    2.42%    $427,153  $12,829       3.00%
                                        -------  ------                -------  ------               -------     ------
Non-interest-bearing
  liabilities (4)              84,704                         81,918                         76,818
                             --------                       --------                       --------
     Total liabilities       $598,784                       $549,359                       $503,971
 Stockholders' Equity (6)      59,389                         58,308                         52,737
                             --------                       --------                       --------
     Total liabilities and
       stockholders' equity  $658,173                       $607,667                       $556,708
                             ========                       ========                       ========
Net interest income                     $21,918                        $22,083                       $20,731
                                        =======                        =======                       =======
Interest rate spread (7)                           3.10%                          3.38%                            3.38%
                                                 ======                         ======                           ======
Net interest margin(8)                             3.51%                          3.83%                            3.94%
                                                 ======                         ======                           ======
Ratio of average
  interest-earning
  assets to average
  interest-bearing liabilities                   121.38%                        123.27%                          123.18%
                                                 ======                         ======                           ======
</TABLE>

(1)  Average  balances include  non-accrual  loans, and are net of deferred loan
     fees. [must note if material amount of loans fees included in interest
(2)  Includes  investment   securities,   interest-bearing   deposits  in  other
     financial institutions and FHLB stock.
(3)  Includes Federal funds sold.
(4)  Includes  net  deferred  income taxes in excess of deferred tax benefits on
     AFS securities  (SFAS 115),  stock options (SFAS 123/148) and deferred fees
     (SFAS 109).
(5)  Includes  FHLB  advances  and  Federal  funds  purchased,   and  repurchase
     agreements.
(6)  Includes  capital stock,  surplus and unrealized  holding gains on SFAS 115
     AFS securities.
(7)  Interest-rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.
(8)  Net  interest  margin  represents  net interest  income as a percentage  of
     average interest earning assets.

                                       4

<PAGE>

         The following table shows the effect of changes in volumes and rates on
interest  income  and  interest  expense.  The  changes in  interest  income and
interest  expense  attributable  to  changes  in both  volume and rate have been
allocated to the changes due to rate.  Tax-exempt income was not recalculated on
a tax  equivalent  basis  due to the  immateriality  of the  change to the table
resulting from a recalculation.

<TABLE>
<CAPTION>

                                                   Year Ended December 31,       Year Ended December 31,
                                            -------------------------------  -------------------------------
                                                        2004 vs. 2003                2003 vs. 2002
                                            -------------------------------  -------------------------------
                                                     Increase (Decrease)           Increase (Decrease)
                                                          Due to                         Due to
                                            -------------------------------  -------------------------------
                                              Volume       Rate        Net     Volume      Rate        Net
                                            ----------------------------------------------------------------
                                                                   (In Thousands)
<S>                                        <C>        <C>        <C>        <C>        <C>        <C>
Interest income:
     Loans receivable                        $ 2,439    $(2,223)   $   216    $ 4,105    $(2,696)   $ 1,409
     Investment securities                       627       (468)       159        203     (1,574)    (1,371)
     Other interest-earning assets               (51)         4        (47)      (174)       (27)      (201)
                                             -------    -------    -------    -------    -------    -------
        Total interest-earning assets          3,015     (2,687)       328      4,134     (4,297)      (163)
                                             -------    -------    -------    -------    -------    -------

Interest expense:
     Money market accounts                       (32)       (97)      (129)         9       (597)      (588)
     Certificates of deposit                     816       (524)       292        471     (1,103)      (632)
     Other liabilities                           454       (124)       330        642       (936)      (294)
                                             -------    -------    -------    -------    -------    -------
        Total interest-bearing liabilities     1,238       (745)       493      1,122     (2,636)    (1,514)
                                             -------    -------    -------    -------    -------    -------

Net change in net interest income            $ 1,777    $(1,942)   $  (165)   $ 3,012    $(1,661)   $ 1,351
                                             =======    =======    =======    =======    =======    =======
</TABLE>


         Provision  for Loan Losses:  The Company  recorded a provision for loan
losses  of  $600,000,  $600,000  and $1.1  million  for  2004,  2003,  and 2002,
respectively. The table below sets forth information with respect to activity in
the Company's allowance for loan losses for the years indicated:

<TABLE>
<CAPTION>
                                                         At December 31,
                                             ---------------------------------------
                                                 2004          2003         2002
                                              ---------     ---------     ---------
                                                      (Dollars in Thousands)
<S>                                           <C>           <C>           <C>
Total loans outstanding                       $ 439,142     $ 419,571     $ 362,744
                                              =========     =========     =========
Average loans outstanding                     $ 430,543     $ 393,743     $ 337,600
                                              =========     =========     =========

Allowance balances (at beginning of period)   $   3,285     $   2,873     $   2,114
Provision (credit):
     Mortgage                                       430           430           930
     Installment                                     38            38            25
     Commercial                                     132           132           145
     Home equity lines of credit                      -             -             -
     PHEAA                                            -             -             -
     Municipal                                        -             -             -
     Credit cards                                     -             -             -
     Other                                            -             -             -

                                       5

<PAGE>

Net (Charge-offs) recoveries:                         -             -             -
     Mortgage                                    (1,204)          (11)         (219)
     Installment                                   (125)          (64)          (59)
     Commercial                                      38          (113)          (63)
     Home equity lines of credit                      -             -             -
     PHEAA                                            -             -             -
     Municipal                                        -             -             -
     Credit cards                                     -             -             -
     Other                                            -             -             -
                                              ---------     ---------     ---------
Allowance balance (at end of period)          $   2,594     $   3,285     $   2,873
                                              =========     =========     =========

Allowance for loan losses as a percent of
Total loans outstanding                            0.59%         0.78%         0.79%

Net loans charged off as a percentage of
Average loans outstanding                          0.30%         0.05%         0.10%

</TABLE>

         The  provision  for loan losses is charged to  operations  to bring the
total  allowance for loan losses to a level that  represents  management's  best
estimate of the losses  inherent in the portfolio,  based on a monthly review by
management of the following factors:

o    Historical experience
o    Volume
o    Type of lending conducted by the Bank
o    Industry standards
o    The level and status of past due and non-performing loans
o    The general economic conditions in the Bank's lending area; and
o    Other factors affecting the collectability of the loans in the portfolio

         Large groups of homogeneous  loans,  such as  residential  real estate,
small  commercial  real  estate  loans and home  equity and  consumer  loans are
evaluated in the aggregate  using  historical  loss factors and other data.  The
amount of loss  reserve  is  calculated  using  historical  loss  rates,  net of
recoveries on a five year rolling weighted average,  adjusted for environmental,
and other  qualitative  factors  such as  industry,  geographical,  economic and
political factors that can effect loss rates or loss measurements.

         Large  balance  and/or  more  complex  loans such as  multi-family  and
commercial  real estate loans may be evaluated  on an  individual  basis and are
also  evaluated in the  aggregate to determine  adequate  reserves.  As specific
loans are determined to be impaired,  specific  reserves are assigned based upon
collateral  value,  market value, if  determinable,  or the present value of the
estimated future cash flows of the loan.

         The  allowance  is  increased  by a  provision  for loan loss  which is
charged to expense,  and reduced by  charge-offs,  net of recoveries.  Loans are
placed on  non-accrual  status  when they are 90 days past due,  unless they are
adequately collateralized and in the process of collection.

         The allowance for loan losses is maintained at a level that  represents
management's best estimate of losses in the portfolio at the balance sheet date.
However,  there  can be no  assurance  that the  allowance  for  losses  will be
adequate to cover losses which may be realized in the future and that additional
provisions for losses will not be required.

                                       6

<PAGE>

         Other Income: Total other income decreased  approximately $3.2 million,
or 54.3% to $2.7 million for the year ended  December 31, 2004 from $5.9 million
for the year ended December 31, 2003. The decrease in other income was primarily
attributable to investment securities losses. Management evaluates its available
for sale  securities  portfolio  on a quarterly  basis for other than  temporary
impairment  in fair  value.  Based  on this  analysis,  at  December  31,  2004,
adjustable rate preferred  stocks were written down to fair market value,  which
resulted in a $2.4 million after tax charge to earnings.  Other income decreased
$548,000  primarily due to a gain from the sale of other real estate of $351,000
recorded in fiscal 2003.

         Total other income increased  approximately  $574,000, or 10.8% to $5.9
million  for the year ended  December  31,  2003 from $5.3  million for the year
ended  December  31, 2002.  Such  increase was mainly the result of net security
gains of $466,000.  Other income increased $316,000 primarily due to a gain from
the sale of other real estate of $351,000.

         Other Expenses:  Total other expense  increased  $795,000,  or 5.6%, to
$15.1  million  for  2004  from  $14.3  million  for  2003.  Of  this  increase,
approximately  $222,000 is attributed to increased salaries,  which reached $5.9
million for 2004 from $5.7 million for 2003.  Such  increases  in salaries  were
mainly the result of staff  additions  and annual merit  increases.  Pension and
other employee  benefits  increased  $177,000 to $1.8 million for 2004 primarily
due to  increases  in pension  costs and health  insurance  premiums.  Occupancy
expense increased $218,000 to $1.8 million,  for 2004 from $1.5 million for 2003
primarily  due to  increases  in  depreciation  expenses of $261,000  related to
building  construction and equipment  purchases for technological  improvements.
Other expenses increased $155,000 to $3.9 million for 2004 from $3.8 million for
2003.

          Total other expense increased $1.5 million, or 11.7%, to $14.3 million
for 2003 from $12.8 million for 2002. Of this increase,  approximately  $355,000
is  attributed to increased  salaries,  which reached $5.7 million for 2003 from
$5.3 million for 2002.  Salary increases were due to additions to staff,  annual
merit increases,  and commissions paid to commission based lenders.  Pension and
other employee  benefits  increased  $324,000 to $1.6 million for 2003 primarily
due to increases in pension costs and health  insurance  premiums of $96,000 and
$129,000,  respectively.  Occupancy expense increased  $221,000 to $1.5 million,
for 2003 from $1.3 million for 2002  primarily due to an increase of $153,000 in
depreciation  expense related to the  construction of a new branch and equipment
purchases for  technological  improvements.  Rental  expense  increased  $42,000
mainly due to the relocation of the Company's item processing department.  Other
expenses increased $396,000 to $3.8 million for 2003 from $3.4 million for 2002.
This  increase  was  comprised of numerous  items  related to the normal cost of
doing business, non-material in nature.

         Income Taxes:  Income tax expense for 2004 was $2.8 million compared to
$3.4 million in 2003 and $3.2 million in 2002.  The change in income tax expense
was  principally  attributable  to the change in  earnings in each  period.  The
Company's  effective tax rates were 31.7%,  26.2%,  and 26.2% for 2004, 2003 and
2002,  respectively.  The  Company's  effective  tax  rate has  been  below  the
statutory rate of 34% primarily due to interest  earned on obligations of states
and political subdivisions, which is exempt from federal taxation. The Company's
effective  tax rate  increased  to 31.7% in 2004  from  26.2% in 2003.  The rate
increased  because of the  insignificant  tax effect concerning the $2.4 million
write down of certain  preferred  stocks  that was  determined  to be other than
temporary.  The loss on these  investments is a capital loss,  which can only be
used to offset  capital  gains.  The Company had very little in capital gains to
offset and the tax benefit related to the $2.4 million write down was $45,000, a
tax effect of 1.875%.


LIQUIDITY AND CAPITAL RESOURCES

         The Company's primary sources of funds include savings,  deposits, loan
repayments and prepayments, cash from operations and borrowings from the Federal
Home Loan Bank. The Company uses its capital resources  principally to fund loan
originations  and  purchases,   to  repay  maturing   borrowings,   to  purchase
investments,  and for short-term liquidity needs. The Company expects to be able
to  fund  or  refinance,  on a  timely  basis,  its  commitments  and  long-term
liabilities.  As of December 31,  2004,  the Company had  commitments  to extend
credit of $22.9 million.

                                       7

<PAGE>

         The Company's liquid assets consist of cash and cash equivalents, which
include short-term investments.  The levels of these assets are dependent on the
Company's  operating,  financing,  and  investment  activities  during any given
period. At December 31, 2004, cash and cash equivalents totaled $16.2 million.

         Net cash from operating  activities for 2004 totaled $11.3 million,  as
compared to net cash from  operating  activities of $10.1 million for 2003.  The
increase  in 2004 was  primarily  the result of $2.4  million in  write-down  of
equity  securities.  Net cash from  operating  activities for 2003 totaled $10.1
million,  as compared to net cash from operating  activities of $8.7 million for
2002.  The increase in 2003 was primarily  the result of a $709,000  increase in
net income  offset by a decrease  of $921,000  in other  assets and  $500,000 in
provision for loan losses.

         Net cash used by investing  activities  for 2004 totaled $50.5 million,
as compared to cash used of $47.9  million for 2003 and $69.1  million for 2002.
The change for 2004 was due to an increase in purchases of securities  available
for sale and Federal  Home Loan Bank stock of $34.8  million  and $1.7  million,
respectively offset by decreases in the proceeds from the sale and maturities of
securities  available for sale of $4.2  million,  net loans made to customers of
$34.4 million and purchases of premises and equipment of $1.7 million.  Net cash
used by investing activities for 2003 totaled $47.9 million, as compared to cash
used of $69.1  million  for 2002.  The  decrease  of $21.2  million for 2003 was
primarily due to a decrease of $48.4 million in securities purchased.

         Net cash from financing activities for the year ended December 31, 2004
totaled  $39.6  million,  as compared to net cash from  financing  activities of
$38.5  million for 2003 and $50.3  million for 2002.  The change in 2004 was the
result of  increased  proceeds  from FHLB  advances of $12.0  million  offset by
increased  repayments  of $8.3  million and  increases  in net deposits of $10.2
million.  Such increases were offset by the repayment of $7.9 million in federal
funds purchased.  Net cash from financing activities for the year ended December
31,  2003  totaled  $38.5  million,  as  compared  to net  cash  from  financing
activities  of $50.3 million for 2002.  The $11.8 million  decrease in cash from
financing activities in 2003 was primarily due to a decrease in the net increase
in deposits of $21.9 million.

         Liquidity  may be adversely  affected by unexpected  deposit  outflows,
excessive  interest rates paid by competitors,  and similar matters.  Management
monitors projected liquidity needs and determines the level desirable,  based in
part on the Company's  commitment to make loans and  management's  assessment of
the Company's  ability to generate funds. The Company is also subject to federal
regulations that impose certain minimum capital requirements.

         The table below sets forth certain information  regarding the Company's
contractual  obligations.  See Note 4,  Note 7 and  Note 10 to the  consolidated
financial statements

<TABLE>
<CAPTION>
                                             Payments Due By Period
                            -------------------------------------------------------
                                        Less than      1 - 3     3 - 5   More than
Contractual Obligations        Total      1 year       years     years    5 years
-----------------------------------------------------------------------------------
                                          (In Thousands)
-----------------------------------------------------------------------------------
<S>                          <C>        <C>        <C>        <C>        <C>
Long-Term Debt Obligations    $ 70,265   $  1,615   $  7,579   $ 28,071   $ 33,000
Operating Lease Obligations        718        191        162        120        245
Certificates of Deposit        253,298    150,260     57,834     31,597     13,607

</TABLE>

OFF-BALANCE SHEET ARRANGEMENTS

      In the normal  course of  business,  the  Company  engages in a variety of
financial  transactions that, in accordance with generally  accepted  accounting
principles,  are not recorded in its consolidated  financial  statements.  These
transactions involve, to varying degrees,  elements of credit, interest rate and
liquidity  risk.  Such  transactions  are used  primarily  to manage

                                       8

<PAGE>

customers'  requests for funding and take the form of loan commitments and lines
of credit.  At December 31, 2004 and 2003, the Company had commitments to extend
credit in the amount of $22.9 million and $77.0  million,  respectively.  During
the year ended December 31, 2004, the Company did not engage in any  off-balance
sheet  transactions   reasonably  likely  to  have  a  material  effect  on  its
consolidated financial condition, results of operations or cash flows.


MARKET RISK

         Market risk is the risk of loss from adverse  changes in market  prices
and rates.  The Company's  market risk arises  primarily from interest rate risk
inherent in its lending, investment and deposit taking activities. The Company's
profitability  is  affected by  fluctuations  in  interest  rates.  A sudden and
substantial  increase  in  interest  rates may  adversely  impact the  Company's
earnings to the extent that the interest  rates borne by assets and  liabilities
do not change at the same speed,  to the same  extent or on the same  basis.  To
that end,  management  actively  monitors  and  manages its  interest  rate risk
exposure.

         The principle  objective of the Company's interest rate risk management
is to  evaluate  the  interest  rate risk  inherent  in  certain  balance  sheet
accounts,  determine the appropriate level of risk given the Company's  business
strategy, operating environment, capital and liquidity requirements, performance
objectives, and manage the risk consistent with the Board of Directors' approved
guidelines.   Through  such  management,  the  Company  seeks  to  minimize  the
vulnerability  of its  operations  to changes in interest  rates.  The Company's
Asset/Liability  Committee is comprised of the Company's senior management under
the direction of the Board of Directors,  with senior management responsible for
reviewing with the Board of Directors its activities and strategies,  the effect
of those  strategies on the Company's net interest  margin,  the market value of
the  portfolio  and the effect that  changes in interest  rates will have on the
Company's portfolio and the Company's exposure limits.

The Company utilizes the following strategies to manage interest rate risk:

o    When market  conditions  permit,  to  originate  and hold in its  portfolio
     adjustable  rate loans;
o    Sell fixed rate mortgage  loans that conform to Federal  National  Mortgage
     Association guidelines when sales can be achieved on terms favorable to the
     Company;
o    Lengthen  the  maturities  of its  liabilities  when deemed cost  effective
     through the utilization of Federal Home Loan Bank advances;
o    Purchase  mortgage-backed  securities for the available for sale securities
     portfolio  with  cash  flows  that  can be  reinvested  in  higher  earning
     instruments when interest rates rise; and
o    Generally, maintain securities in the available for sale portfolio that are
     short term to offset the risk of long term fixed rate  mortgage  loans in a
     rising rate environment.

         The following table shows the Company's financial  instruments that are
sensitive  to changes in interest  rates,  categorized  by expected  maturity or
repricing  maturity,  and the  instruments'  fair values at December  31,  2004.
Market risk sensitive  instruments  are generally  defined as those  instruments
that can be adversely  impacted by changes in market interest rates. The Company
currently does not participate in hedging programs, interest rate swaps or other
activities   involving  the  use  of  off-balance  sheet  derivative   financial
instruments,  but  may do so in the  future  to  mitigate  interest  rate  risk.
Expected  maturities  are  contractual  maturities  adjusted for  prepayments of
principle.  The Company uses  certain  assumptions  to estimate  fair values and
expected maturities.  For assets, expected maturities are based upon contractual
maturity, call dates and projected repayments of principle. For interest earning
assets,  no  prepayments  are assumed.  Interest  bearing  liabilities,  such as
negotiable order of withdrawal  ("NOW")  accounts,  money market  accounts,  and
similar interest bearing demand accounts are subject to immediate  withdrawal or
repricing and are therefore presented in the earliest period in the table.

                                       9

<PAGE>

Expected Maturity/Principal Repayment at December 31,

<TABLE>
<CAPTION>
                                                                               Total     Book      Fair
                              2005      2006      2007      2008      2009   Thereafter  Value     Value
                             ------    ------    ------    ------    ------   -------   -------   -------
                                                            (Dollars in thousands)
<S>                         <C>       <C>       <C>       <C>       <C>      <C>       <C>       <C>
Interest-earning assets
-----------------------
Mortgage loans               11,734    14,588    16,156    13,239    14,569   181,828   252,114   250,648
Home equity loans,
    second mortgage
    loans, student loans,
    other loans              15,545    15,022    14,386    13,064     9,805    48,307   116,129   116,586

Commercial loans,
    municipal loans          14,098     7,667     4,313     3,661     2,203    39,248    71,190    69,338
Investment securities         1,500         -     1,748       364     1,032   184,738   189,383   191,208


Interest-bearing
-----------------------
liabilities
-----------------------
NOW and other
    transaction accounts     32,343         -         -         -         -         -    32,343    32,343
Money market and
    other savings
    accounts                153,327         -         -         -         -         -   153,327   153,327

Certificates of deposit     150,260    37,382    20,452    20,103    11,495    13,607   253,298   252,915

Federal Home Loan
    Bank of Pittsburgh
    advance                   1,614     4,162     3,418    10,071    18,000    33,000    70,265    75,046
</TABLE>

IMPACT OF INFLATION AND CHANGING PRICES

         The  consolidated  financial  statements  and  related  financial  data
presented in this Annual Report have been prepared in accordance  with generally
accepted  accounting   principles  in  the  United  States,  which  require  the
measurement of financial  position and operating  results in terms of historical
dollars without considering the change in the relative purchasing power of money
over time due to  inflation.  The primary  impact of inflation on the  Company's
operations is reflected in increased  operating  costs.  Unlike most  industrial
companies,  virtually all the assets and liabilities of a financial  institution
are  monetary  in nature.  As a result,  interest  rates  generally  have a more
significant  impact on a  financial  institution's  performance  than do general
levels  of  inflation.  Interest  rates  do not  necessarily  move  in the  same
direction or to the same extent as the prices of goods and services.

RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

         In 2004, the Financial  Accounting Standards Board issued SFAS No. 153,
Exchange of Nonmonetary Assets - an amendment of APB Opinion No. 29. The Company
does not believe the  statement  will have a material  impact on the Bank or its
operations.

                                       10

<PAGE>

                      MANAGEMENT'S REPORT TO SHAREHOLDERS

The  consolidated  financial  statements  presented  are the  responsibility  of
management  and are prepared in accordance  with generally  accepted  accounting
principles.  The financial  information contained elsewhere in the annual report
is consistent with that in the consolidated financial statements.  The financial
statements  necessarily  include  amounts  that are based on  management's  best
judgments and estimates.  In the opinion of management the accounting  practices
utilized are  appropriate  in the  circumstances  and the  financial  statements
fairly reflect the financial position and results of operation of the Company.

IBT  Bancorp,  Inc.  maintains  a system of  internal  controls  over  financial
reporting,  which is designed to provide  reasonable  assurance to the Company's
management  and  board of  directors  regarding  the  reliability  of  financial
reporting and the preparation of financial  statements for external  purposes in
accordance with generally accepted accounting  principles.  The Company assessed
its internal control over financial  reporting as of December 31, 2004, based on
the  criteria  for  effective  internal  control  over  financial  reporting  as
described in Internal  Control--Integrated Framework  issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based upon that assessment,
the Company  believes  that,  as of December  31,  2004,  its system of internal
controls over financial reporting met those criteria.

The Company's independent auditors, Edwards Sauer and Owens, P.C. have issued an
attestation report on management's assessment of the Company's internal controls
over  financial  reporting.  Their  attestation  is included  elsewhere  in this
report.




/s/Charles G. Urtin                           /s/Raymond G. Suchta

Charles G. Urtin                              Raymond G. Suchta
President &                                   Senior Vice President &
Chief Executive Officer                       Chief Financial Officer

                                       11
<PAGE>

EDWARDS       Certified Public Accountants & Business Advisors
SAUER &       ------------------------------------------------
OWENS, P.C.   500 Warner Centre, 332 Fifth Avenue, Pittsburgh, PA 15222
              Phone: 412-281-9211  Fax: 412-281-2407  A Professional Corporation
              www.esocpa.com                          Direct  Dial:


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



   To the Board of Directors
   IBT Bancorp, Inc.
   Irwin, Pennsylvania

  We have audited the accompanying  consolidated  balance sheets of IBT Bancorp,
Inc.  (the  Bancorp) and  subsidiary  as of December 31, 2004 and 2003,  and the
related consolidated  statements of income,  changes in stockholders' equity and
cash flows for each of the years in the  three-year  period  ended  December 31,
2004. opinlso have audited management's assessment, included in the accompanying
Management's  Report to  Shareholders,  that IBT Bancorp,  Inc.  and  subsidiary
maintained  effective  internal control over financial  reporting as of December
31,  2004,  based  on  criteria  established  in  Internal   Control--Integrated
Framework  issued by the Committee of Sponsoring  Organizations  of the Treadway
Commission (COSO).  The Bancorp's  management is responsible for these financial
statements, for maintaining effective internal control over financial reporting,
and for its assessment of the  effectiveness  of internal control over financial
reporting.  Our  responsibility  is to express  an  opinion  on these  financial
statements,  an  opinion  on  management's  assessment,  and an  opinion  on the
effectivesss of the Bancorp's internal control over financial reporting based on
our audits.

  We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
financial  statements are free of material  misstatement  and whether  effective
internmstaontrol  over  financial  reporting  was  maintained  in  all  material
respects. Our audit of financial statements included examining, on a test basis,
evidence  supporting the amounts and  disclosures  in the financial  statements,
assessing the  accounting  principles  used and  significant  estimates  made by
management,  and evaluating the overall financial  statement  presentation.  Our
audit of  internal  control  over  financial  reporting  included  obtaining  an
understanding   of  internal  control  over  financial   reporting,   evaluating
management's  assessment,  testing  and  evaluating  the  design  and  operating
effectiveness  of internal  control,  and performing such other procedures as we
considered necessary in the circumstances.  We believe that our audits provide a
reasonable basis for our opinions.



<PAGE>
EDWARDS
SAUER &
OWENS, P.C.


  A company's internal control over financial reporting is a process designed to
provide reasonable  assurance  regarding the reliability of financial  reporting
and the preparation of financial  statements for external purposes in accordance
with generally  accepted  accounting  principles.  A company's  internal control
ovsrasinancial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail,  accurately and fairly
reflect the  transactions  and  dispositions  of the assets of the company;  (2)
provide  reasonable  assurance  that  transactions  are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the Bancorp are
being made only in accordance with authorizations of management and directors of
the Bancorp; and (3) provide reasonable assurance regarding prevention or timely
detection of  unauthorized  acquisition,  use, or  disposition  of the Bancorp's
assets that could have a material effect on the financial statements.

  Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements.  Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate  because of changes in  conditions,  or that the degree of compliance
with the policies or procedures may deteriorate.

  In our  opinion,  the  consolidated  financial  statements  referred  to above
present fairly, in all material respects, the financial position of IBT Bancorp,
Inc. and  subsidiary  as of December  31, 2004 and 2003,  and the results of its
operations  and its cash  flows for each of the years in the  three-year  period
ended  Derol--er 31, 2004 in conformity  with  accounting  principles  generally
accepted in the United  States of America.  Also,  in our opinion,  management's
assessment that IBT Bancorp,  Inc. and subsidiary  maintained effective internal
control over financial  reporting as of December 31, 2004 is fairly  stated,  in
all   material   respects,   based   on   criteria   established   in   Internal
Control--Integrated   Framework   issued   by  the   Committee   of   Sponsoring
Organizations of the Treadway  Commission (COSO).  Furthermore,  in our opinion,
IBT Bancorp, Inc. and subsidiary maintained, in all material respects, effective
internal  control over  financial  reporting  as of December 31, 2004,  based on
criteria  established  in Internal  Control--Integrated Framework  issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).

/s/Edwards Sauer & Owens, P.C.

Pittsburgh, Pennsylvania
February 8, 2005


<PAGE>

                          CONSOLIDATED BALANCE SHEETS

                        IBT BANCORP, INC. AND SUBSIDIARY

<TABLE>
<CAPTION>
                                                                       December 31,
                                                              ------------------------------
                                                                    2004             2003
                                                              -------------    -------------
<S>                                                         <C>              <C>
 ASSETS
      Cash and due from banks                                 $  14,641,942    $  15,391,714
      Interest-bearing deposits in banks                            515,229          436,981
      Federal funds sold                                          1,030,000                -
      Certificate of deposit                                        100,000          100,000
      Securities available for sale                             191,208,214      167,907,113
      Federal Home Loan Bank stock, at cost                       5,682,700        4,540,500
      Loans, net of allowance for loan losses of
          $2,593,642 in 2004 and $3,284,830 in 2003             436,548,276      416,286,455
      Premises and equipment, net                                 6,232,280        6,468,749
      Other assets                                               19,898,464       18,398,092
                                                              -------------    -------------

Total Assets                                                  $ 675,857,105    $ 629,529,604
                                                              =============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
      Deposits
          Non-interest bearing                                $  87,248,485    $  81,053,392
          Interest-bearing                                      438,968,463      411,104,137
                                                              -------------    -------------

          Total deposits                                        526,216,948      492,157,529

      Federal funds purchased                                             -        7,900,000
      Repurchase agreements                                      15,157,257       12,610,877
      Accrued interest and other liabilities                      4,374,824        3,947,390
      FHLB advances                                              70,265,314       53,307,767
                                                              -------------    -------------

      Total liabilities                                         616,014,343      569,923,563

Stockholders' Equity
      Capital stock, par value $1.25,
          50,000,000 shares authorized,
          3,023,799 shares issued, 2,955,455
          and 2,977,655 shares outstanding
          at December 31, 2004 and 2003 respectively              3,779,749        3,779,749
      Surplus                                                     1,417,755        1,684,258
      Retained earnings                                          55,789,915       54,451,662
      Accumulated other comprehensive income                      1,204,744        1,033,638
                                                              -------------    -------------
                                                                 62,192,163       60,949,307
      Less:  Treasury stock, at cost (2004 - 68,344 shares;
          2003 - 46,144 shares)                                  (2,349,401)      (1,343,266)
                                                              -------------    -------------
      Total stockholders' equity                                 59,842,762       59,606,041
                                                              -------------    -------------

Total Liabilities and Stockholders' Equity                    $ 675,857,105    $ 629,529,604
                                                              =============    =============

</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       3
<PAGE>

                       CONSOLIDATED STATEMENTS OF INCOME

                        IBT BANCORP, INC. AND SUBSIDIARY

<TABLE>
<CAPTION>

                                                            Years Ended December 31,
                                              --------------------------------------------
                                                  2004            2003            2002
                                              ------------    ------------    ------------
<S>                                         <C>             <C>             <C>
Interest Income
        Loans, including fees                 $ 26,312,685    $ 26,096,559    $ 24,687,048
        Investment securities                    7,403,199       7,244,174       8,614,876
        Federal funds sold                           9,835          57,110         258,302
                                              ------------    ------------    ------------

        Total interest income                   33,725,719      33,397,843      33,560,226

Interest Expense
        Deposits                                 8,703,234       8,666,938      10,537,258
        Federal funds purchased                     92,982          25,933             193
        FHLB advances                            2,858,623       2,487,363       2,113,678
        Repurchase agreements                      152,970         134,546         177,464
                                              ------------    ------------    ------------

        Total interest expense                  11,807,809      11,314,780      12,828,593
                                              ------------    ------------    ------------

Net Interest Income                             21,917,910      22,083,063      20,731,633

Provision for Loan Losses                          600,000         600,000       1,100,000
                                              ------------    ------------    ------------

Net Interest Income after Provision
for Loan Losses                                 21,317,910      21,483,063      19,631,633

Other Income (Losses)
        Service fees                             2,595,941       2,370,065       2,370,568
        Investment security gains                  383,290         533,155         158,670
        Investment security losses              (2,789,571)        (67,636)        (24,925)
        Increase in cash surrender value
          of life insurance                        466,923         513,066         584,847
        Debit card fees                            680,600         614,475         615,517
        Other income                             1,352,459       1,927,933       1,612,378
                                              ------------    ------------    ------------

        Total other income                       2,689,642       5,891,058       5,317,055

Other Expenses
        Salaries                                 5,875,511       5,653,310       5,297,750
        Pension and other employee benefits      1,820,031       1,642,651       1,318,944
        Occupancy expense                        1,767,950       1,549,532       1,329,170
        Data processing expense                    916,939         843,074         729,548
        Advertising expense                        309,032         412,702         406,898
        Pennsylvania shares tax                    496,802         446,041         391,557
        Other expenses                           3,908,424       3,752,672       3,357,211
                                              ------------    ------------    ------------

        Total other expenses                    15,094,689      14,299,982      12,831,078
                                              ------------    ------------    ------------

Income Before Income Taxes                       8,912,863      13,074,139      12,117,610

Provision for Income Taxes                       2,828,125       3,427,893       3,180,311
                                              ------------    ------------    ------------

Net income                                    $  6,084,738    $  9,646,246    $  8,937,299
                                              ============    ============    ============

Basic Earnings per Share                      $       2.05    $       3.24    $       3.00
                                              ============    ============    ============

Diluted Earnings per Share                    $       2.02    $       3.19    $       2.99
                                              ============    ============    ============
</TABLE>

             The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       4
<PAGE>

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                        IBT BANCORP, INC. AND SUBSIDIARY

   Years Ended December 31, 2004, 2003 and 2002

<TABLE>
<CAPTION>
                                                                              Accumulated
                                                                                Other
                                   Capital                      Retained      Comprehensive    Treasury
                                    Stock         Surplus       Earnings        Income          Stock           Total
                                ------------   ------------   -------------   ------------   ------------    ------------
<S>                           <C>            <C>            <C>             <C>            <C>             <C>
   Balance at
   December 31, 2001            $  3,779,749   $  2,073,102   $  43,613,936   $  1,342,672   $ (1,084,753)   $ 49,724,706

   Comprehensive Income
     Net income                                                   8,937,299                                     8,937,299
     Other comprehensive
       income, net of tax:
       Change in net
         unrealized holding
         gains on securities
         available for sale,
         net of deferred
         income tax of
         $718,036                                                                1,393,742                      1,393,742

       Reclassification
         adjustment, net of
         deferred income
         tax benefit of ($35,524)                                                  (68,958)                       (68,958)
                                                                                                              ------------
                                                                                                                1,324,784
                                                                                                              ------------
         Total Comprehensive
            Income                                                                                             10,262,083

   Cash dividends ($1.20)                                        (3,577,098)                                   (3,577,098)

   Purchase of
     Treasury Stock                                                                              (258,513)       (258,513)
                                -------------  -------------  --------------  -------------  -------------   -------------
   Balance at
   December 31, 2002            $  3,779,749   $  2,073,102   $  48,974,137   $  2,667,456   $ (1,343,266)   $ 56,151,178
</TABLE>

             The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       5

<PAGE>

     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

   Years Ended December 31, 2004, 2003 and 2002

<TABLE>
<CAPTION>
                                                                            Accumulated
                                                                              Other
                                    Capital                    Retained     Comprehensive    Treasury
                                     Stock       Surplus       Earnings       Income          Stock            Total
                                 ------------ ------------   -------------  ------------   ------------    -------------
<S>                           <C>            <C>            <C>             <C>            <C>            <C>
   Balance at
   December 31, 2002              $ 3,779,749  $ 2,073,102   $ 48,974,137   $   2,667,456   $ (1,343,266)  $  56,151,178

   Comprehensive Income
     Net income                                                 9,646,246                                      9,646,246
     Other comprehensive
       income, net of tax:
       Change in net
         unrealized holding
         gains on securities
         available for sale,
         net of deferred
         income tax benefit
         of ($739,040)                                                         (1,434,608)                    (1,434,608)

       Reclassification
         adjustment, net of
         deferred income tax
         benefit of ($102,624)                                                   (199,210)                      (199,210)
                                                                                                            -------------
                                                                                                              (1,633,818)
                                                                                                            -------------
         Total Comprehensive
            Income                                                                                             8,012,428

   Cash dividends ($1.40)                                      (4,168,721)                                    (4,168,721)
   Stock options granted / vested                  102,154                                                       102,154
   Exercise of stock options                      (490,998)                                                     (490,998)
   Purchase of
     Treasury Stock                                                                                    -               -
                                  ------------ ------------  -------------  --------------  -------------  --------------
   Balance at
   December 31, 2003              $ 3,779,749  $ 1,684,258   $ 54,451,662   $   1,033,638   $ (1,343,266)  $  59,606,041
</TABLE>

             The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       6

<PAGE>

     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002

<TABLE>
<CAPTION>
                                                                        Accumulated
                                                                          Other
                                  Capital                   Retained    Comprehensive    Treasury
                                   Stock        Surplus     Earnings      Income          Stock         Total
                               ------------  ------------ ------------- ------------   ------------  ------------
<S>                           <C>           <C>          <C>           <C>           <C>            <C>
Balance at
December 31, 2003               $ 3,779,749  $ 1,684,258  $ 54,451,662  $  1,033,638  $ (1,343,266)  $ 59,606,041

Comprehensive Income
   Net income                                                6,084,738                                  6,084,738
   Other comprehensive
     income, net of tax:
     Change in net
       unrealized holding
       gains on securities
       available for sale,
       net of deferred
       income tax benefit
       of ($688,712)                                                      (1,336,912)                  (1,336,912)

     Reclassification
       adjustment, net of
       deferred income tax
       of $776,858                                                         1,508,018                    1,508,018
                                                                                                     -------------
                                                                                                          171,106
                                                                                                     -------------
       Total Comprehensive
         Income                                                                                         6,255,844

Cash dividends ($1.60)                                      (4,746,485)                                (4,746,485)
Stock options granted / vested                    59,141                                                   59,141
Exercise of stock options                       (325,644)                                                (325,644)
Purchase of
   Treasury Stock                                                                       (1,006,135)    (1,006,135)
                                ------------ ------------ ------------- ------------- -------------  -------------
Balance at
December 31, 2004               $ 3,779,749  $ 1,417,755  $ 55,789,915  $  1,204,744  $ (2,349,401)  $ 59,842,762
                                ============ ============ ============= ============= =============  =============
</TABLE>

             The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       7

<PAGE>
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                        IBT BANCORP, INC. AND SUBSIDIARY

<TABLE>
<CAPTION>
                                                                              Years Ended December 31,
                                                                  -----------------------------------------------
                                                                       2004             2003             2002
                                                                  -------------    -------------    -------------
<S>                                                             <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
      Net income                                                  $   6,084,738    $   9,646,246    $   8,937,299
      Adjustments to reconcile net cash
      from operating activities:
        Depreciation                                                  1,009,989          832,770          684,731
        Increase in cash surrender value of insurance                  (466,923)        (513,066)        (584,847)
        Net amortization/accretion of
          premiums and discounts                                      1,046,467        1,129,046          429,379
        Net investment security gains                                   (19,896)        (465,519)        (133,745)
        Loss on write-down of equity securities                       2,426,177                -                -
        Provision for loan losses                                       600,000          600,000        1,100,000
        Stock options granted / vested                                   59,141          102,154                -
        Increase (decrease) in cash due to
          changes in assets and liabilities:
        Other assets                                                    223,003         (921,069)        (540,772)
        Accrued interest and other liabilities                          339,288         (311,325)      (1,232,409)
                                                                  -------------    -------------    -------------

        Net Cash From Operating Activities                           11,301,984       10,099,237        8,659,636

CASH FLOWS FROM INVESTING ACTIVITIES
      Purchase of certificate of deposit                               (100,000)        (100,000)               -
      Proceeds from maturity of certificate of deposit                  100,000          100,000                -
      Proceeds from sales of securities available for sale           61,556,451       34,800,655       31,725,398
      Proceeds from maturities of securities available for sale      23,575,354       54,553,305       72,493,575
      Purchase of securities available for sale                    (111,626,403)     (76,835,123)    (125,205,572)
      Net loans made to customers                                   (22,118,272)     (56,458,544)     (46,265,045)
      Purchases of premises and equipment                              (773,520)      (2,542,504)        (788,236)
      Proceeds from Federal Home Loan Bank stock                      3,763,900        1,772,400                -
      Purchase of Federal Home Loan Bank stock                       (4,906,100)      (3,160,300)      (1,050,800)
                                                                  -------------    -------------    -------------

      Net Cash Used By Investing Activities                         (50,528,590)     (47,870,111)     (69,090,680)

CASH FLOWS FROM FINANCING ACTIVITIES
      Net increase in deposits                                       34,059,419       23,900,202       45,795,234
      Net increase(decrease) in securities sold
        under agreements to repurchase                                2,546,380       (1,914,959)       3,318,764
      Net (decrease) increase in federal funds purchased             (7,900,000)       7,900,000                -
      Dividends                                                      (4,746,485)      (4,168,721)      (3,577,098)
      Proceeds from FHLB advances                                    28,000,000       16,000,000        7,000,000
      Repayment of FHLB advances                                    (11,042,453)      (2,692,233)      (2,000,000)
      Purchase of treasury stock                                     (1,006,135)               -         (258,513)
      Exercised stock options                                          (325,644)        (490,998)               -
                                                                  -------------    -------------    -------------

      Net Cash From Financing Activities                             39,585,082       38,533,291       50,278,387
                                                                  -------------    -------------    -------------

Net Change in Cash and Cash Equivalents                                 358,476          762,417      (10,152,657)

Cash and Cash Equivalents at Beginning of Year                       15,828,695       15,066,278       25,218,935
                                                                  -------------    -------------    -------------

Cash and Cash Equivalents at End of Year                          $  16,187,171    $  15,828,695    $  15,066,278
                                                                  =============    =============    =============
</TABLE>

             The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       8
<PAGE>

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

<TABLE>
<CAPTION>
                                                        Years Ended December 31,
                                               -------------------------------------------
                                                   2004            2003           2002
                                               ------------    ------------   ------------
<S>                                          <C>             <C>            <C>
SUPPLEMENTAL DISCLOSURES

       Cash payments for:
           Interest                            $ 11,446,837    $ 11,446,828   $ 13,225,782

           Income taxes                        $  2,634,965    $  3,671,847   $  3,543,379


NON CASH TRANSACTIONS

       Recorded unrealized gains on
           securities available for sale       $  1,825,368    $  1,566,116   $  4,041,600
           at December 31

       Deferred income taxes on recorded
           unrealized gains on securities
           available for sale at December 31   $    620,625    $    532,479   $  1,374,144

       Loans transferred to foreclosed real
           estate during the year              $  1,557,735    $    301,284   $    857,681

       Recorded nonmonetary (loss) gain on
           securities available for sale
           at December 31                      $ (2,426,177)   $     11,960   $      1,986
</TABLE>

             The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       9
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002


NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations: IBT Bancorp, Inc. (the Bancorp), is a bank holding company
whose  principal  activity is the ownership  and  management of its wholly owned
subsidiary,  Irwin Bank and Trust Company (the Bank). The Bank is a full service
state  chartered  commercial  banking  institution  and  provides  a variety  of
financial  services to  individuals  and corporate  customers  through its seven
branch offices, a loan center, a trust division,  five supermarket  branches and
main office located in  Southwestern  Pennsylvania.  The Bank's primary  deposit
products  are  non-interest  and  interest-bearing  checking  accounts,  savings
accounts  and  certificates  of  deposit.   Its  primary  lending  products  are
single-family  and  multi-family   residential  loans,   installment  loans  and
commercial loans.

Principles of Consolidation:  The consolidated  financial statements include the
accounts of the Bancorp and the Bank. All significant intercompany accounts have
been eliminated in the consolidation.

Use of Estimates:  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
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.


Material  estimates that are  particularly  susceptible  to  significant  change
relate to the  determination  of the allowance for loan losses and the valuation
of real estate  acquired in connection  with  foreclosures or in satisfaction of
loans.  In connection with the  determination  of the allowances for loan losses
and  foreclosed  real estate,  management  obtains  independent  appraisals  for
significant properties.

Investment  Securities:  All investments in debt and equity securities are to be
classified  into three  categories.  Securities  which  management  has positive
intent and ability to hold until  maturity are  classified  as held to maturity.
Securities  held to maturity are stated at cost,  adjusted for  amortization  of
premium and  accretion of discount  computed on a level yield basis.  Securities
that are bought and held principally for the purpose of selling them in the near
term are classified as trading  securities.  All other securities are classified
as  available  for sale  securities.  Unrealized  holding  gains and  losses for
trading securities are included in earnings. Unrealized holding gains and losses
for available for sale securities are excluded from earnings and reported net of
income taxes as a separate component of stockholders' equity until realized.  At
this time,  management  has no intention of  establishing  a trading  securities
classification.

Interest and dividends on securities are reported as interest income.  Gains and
losses  realized on sales of securities  represent the  differences  between net
proceeds and carrying values determined by the specific identification method.

Advertising  Costs:  Advertising  costs are  expensed as  incurred.  Advertising
expense totaled $309,032 for 2004, $412,702 for 2003 and $406,898 for 2002.

Loans  and  Allowance  for Loan  Losses:  Loans are  stated at unpaid  principal
balances, less the allowance for loan losses and net deferred loan fees.

                                       10

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002



NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Loan  origination  and commitment  fees, as well as certain  direct  origination
costs,  are deferred and amortized as a yield  adjustment  over the lives of the
related loans using the interest  method.  Amortization of deferred loan fees is
discontinued when a loan is placed on nonaccrual status.

The allowance for loan losses is  maintained at a level which,  in  management's
judgement,  is  adequate  to  absorb  potential  losses  inherent  in  the  loan
portfolio.  The amount of the allowance is based on  management's  evaluation of
the collectibility of the loan portfolio, including the nature of the portfolio,
credit concentrations,  trends in historical loss experience,  specific impaired
loans,  and economic  conditions.  Large groups of smaller  balance  homogeneous
loans are valued  collectively  for  impairment.  The amount of loss  reserve is
calculated  using  historical  loss  rates,  net  of  recoveries,  adjusted  for
environmental,  and other  qualitative  factors such as industry,  geographical,
economic and politcal factors that can affect loss rates or loss measurements.

Allowances for losses on specifically identified loans that are determined to be
impaired  are  calculated  based  upon  collateral   value,   market  value,  if
determinable,  or the present  value of the  estimated  future  cash flows.  The
allowance  is  increased  by a provision  for loan  losses,  which is charged to
expense,  and reduced by  charge-offs,  net of  recoveries.  Loans are placed on
nonaccrual  status when they are 90 days past due,  unless  they are  adequately
collateralized and in the process of collection.

Premises  and  Equipment:  Premises  and  equipment  are  stated  at  cost  less
accumulated  depreciation  computed on both the  straight-line  and  accelerated
methods over the estimated useful lives of the assets. Costs for maintenance and
repairs are expensed  currently.  Costs of major additions or  improvements  are
capitalized.

Other Real Estate Owned (OREO):  Real estate  properties  acquired through or in
lieu of loan  foreclosure  are  initially  recorded  at the lower of the  Bank's
carrying  amount  or fair  value  less  estimated  selling  cost at the  date of
foreclosure.  Any  write-downs  based on the  asset's  fair value at the date of
acquisition  are charged to the  allowance for loan losses.  After  foreclosure,
these assets are carried at the lower of their new cost basis or fair value less
cost to sell.  Costs  of  significant  property  improvements  are  capitalized,
whereas  costs  relating  to  holding  property  are  expensed.  Valuations  are
periodically  performed  by  management,  and  any  subsequent  write-downs  are
recorded as a charge to operations,  if necessary,  to reduce the carrying value
of a property to the lower of its cost or fair value less cost to sell.

Income  Taxes:  The Bancorp  uses an asset and  liability  approach to financial
accounting and reporting for income taxes.  Deferred tax assets and  liabilities
are  recognized  for the future tax  consequences  attributable  to  differences
between  the  financial  statement  carrying  amounts  of  existing  assets  and
liabilities and their respective tax bases.  Deferred tax assets and liabilities
are measured  using enacted tax rates expected to apply to taxable income in the
years in which those  temporary  differences  are  expected to be  recovered  or
settled. Valuation allowances are established, when necessary to reduce deferred
tax assets to the amount expected to be realized.  Income tax expense is the tax
payable or refundable  for the period plus or minus the change during the period
in deferred tax assets and liabilities.  The Bancorp files consolidated  Federal
income tax returns with its subsidiary.

Earnings  per  Share:  Earnings  per  share are  calculated  on the basis of the
weighted  average  number of shares  outstanding.  The weighted  average  shares
outstanding was 2,966,409,  2,977,655 and 2,980,282 for the years ended December
31, 2004, 2003 and 2002, respectively.

                                       11

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002


NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cash  Equivalents:  For purposes of the  Statements  of Cash Flows,  the Bancorp
considers all highly liquid debt instruments  purchased with a maturity of three
months  or less to be cash  equivalents.  The  Bancorp  considers  all  cash and
amounts due from  depository  institutions,  interest-bearing  deposits in other
banks, except certificates of deposit with maturities of more than three months,
and federal funds sold to be cash  equivalents for purposes of the statements of
cash flows.

Reclassification  of Prior Year's Statements:  Certain previously reported items
have been  reclassified  to conform to the current year's  classifications.  The
reclassifications  have  no  effect  on  total  assets,  total  liabilities  and
stockholders' equity, or net income.

NOTE 2 -- INVESTMENT SECURITIES

Investment securities available for sale consist of the following:

<TABLE>
<CAPTION>
                                                       December 31, 2004
                                 ---------------------------------------------------------------
                                                    Gross             Gross
                                   Amortized      Unrealized        Unrealized        Market
                                     Cost           Gains             Losses           Value
                                 -------------   -------------    -------------    -------------
<S>                            <C>             <C>              <C>              <C>
Obligations of
  U.S. Government Agencies   $  70,946,760   $     212,077    $     (56,170)   $  71,102,667
Obligations of State and
  political sub-divisions       44,986,435       1,697,812         (238,524)      46,445,723
Mortgage-backed securities      64,928,907         422,687         (347,944)      65,003,650
Other securities .........         713,965           2,023                -          715,988
Equity securities ........       7,806,779         133,407                -        7,940,186
                             -------------   -------------    -------------    -------------

                             $ 189,382,846   $   2,468,006    $    (642,638)   $ 191,208,214
                             =============   =============    =============    =============

</TABLE>

<TABLE>
<CAPTION>
                                                       December 31, 2003
                                 ---------------------------------------------------------------
                                                    Gross             Gross
                                   Amortized      Unrealized        Unrealized        Market
                                     Cost           Gains             Losses           Value
                                 -------------   -------------    -------------    -------------
<S>                         <C>             <C>              <C>              <C>
Obligations of
  U.S. Government Agencies   $  82,462,153   $     824,768    $    (318,174)   $  82,968,747
Obligations of State and
  political sub-divisions       35,863,808       2,057,452                -       37,921,260
Mortgage-backed securities      37,012,318         735,791          (91,604)      37,656,505
Other securities .........         710,005          29,553                -          739,558
Equity securities ........      10,292,713         140,507       (1,812,177)       8,621,043
                             -------------   -------------    -------------    -------------

                             $ 166,340,997   $   3,788,071    $  (2,221,955)   $ 167,907,113
                             =============   =============    =============    =============
</TABLE>

                                       12

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002


NOTE 2 -- INVESTMENT SECURITIES (CONTINUED)

Gross  realized  gains  and  losses  on calls  and  sales of  available-for-sale
securities were:

<TABLE>
<CAPTION>
                                                            Years Ended December 31,
                                                     ------------------------------------
                                                        2004         2003         2002
                                                     ----------   ----------   ----------
<S>                                                <C>          <C>          <C>
Gross realized gains:
  Obligations of U.S. Government Agencies            $  204,102   $   75,646   $   42,922
  Obligations of state and political sub-divisions       91,855       26,250          760
  Mortgage-backed securities                                  -      279,457      113,002
  Equity securities                                      87,333      151,802        1,986
                                                     ----------   ----------   ----------

                                                     $  383,290   $  533,155   $  158,670
                                                     ==========   ==========   ==========

Gross realized losses:
  Obligations of U.S. Government Agencies            $  363,394   $        -   $        -
  Mortgage-backed securities                                  -       67,636       24,925
  Equity securities                                   2,426,177            -            -
                                                     ----------   ----------   ----------
                                                     $2,789,571   $   67,636   $   24,925
                                                     ==========   ==========   ==========
</TABLE>

In 2004, the Company recorded a $2,426,177 non-cash write-down of certain agency
preferred  stocks due to an impairment in value that was  determined to be other
than temporary.

The  amortized  cost and  estimated  market value of the  investment  securities
available  for sale at December 31, 2004,  by  contractual  maturity,  are shown
below.  Expected  maturities  will differ from  contractual  maturities  because
issuers  have the right to call or prepay  obligations  with or without  call or
prepayment penalties.

                                                    Amortized        Market
                                                      Cost           Value
                                                  ------------   ------------

Due in one year or less                           $  1,499,784   $  1,508,367
Due after one year through five years                3,144,351      3,377,645
Due after five years through ten years              95,774,287     96,071,854
Due after ten years, includes equity securities     88,964,424     90,250,348
                                                  ------------   ------------

                                                  $189,382,846   $191,208,214
                                                  ============   ============


As a member of the  Federal  Home Loan Bank of  Pittsburgh  (FHLB),  the Bank is
required to  maintain a minimum  amount of FHLB  stock.  The  minimum  amount is
calculated  based  on  level  of  assets,  residential  real  estate  loans  and
outstanding FHLB advances. The Bank held $5,682,700 and $4,540,500 of FHLB stock
at December 31, 2004 and 2003, respectively.

                                       13

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002


NOTE 2 -- INVESTMENT SECURITIES (CONTINUED)

Temporarily impaired investments consist of the following:

<TABLE>
<CAPTION>
                                                                 December 31, 2004
                                -----------------------------------------------------------------------------------
                                   Less Than 12 Months          12 Months or Longer                Total
                                -------------------------    -------------------------    -------------------------
                                  Market       Unrealized       Market      Unrealized      Market       Unrealized
                                  Value          Losses         Value         Losses        Value          Losses
                                -----------   -----------    -----------   -----------    -----------   -----------
<S>                           <C>           <C>            <C>           <C>            <C>           <C>
Obligations of U.S.
     Government Agencies        $11,969,450   $   (30,550)   $ 1,974,380   $   (25,620)   $13,943,830   $   (56,170)
Mortgage-backed securities       44,556,122      (309,683)     1,524,343       (38,261)    46,080,465      (347,944)
Obligations of state and
     political sub-divisions      9,700,008      (238,524)             -             -      9,700,008      (238,524)
                                -----------   -----------    -----------   -----------    -----------   -----------
     Total temporarily
          impaired securities   $66,225,580   $  (578,757)   $ 3,498,723   $   (63,881)   $69,724,303   $  (642,638)
                                ===========   ===========    ===========   ===========    ===========   ===========
</TABLE>

Investments  are  reviewed for  declines in value on a quarterly  basis.  Common
stocks currently have market values that are in excess of carrying  values.  All
other  investments are interest rate sensitive.  These investments earn interest
at fixed or adjustable  rates.  The adjustable  rate  instruments  are generally
linked to an index,  such as the 3 month libor  rate,  plus or minus a variable.
The value of these  instruments  fluctuates with interest  rates,  therefore the
changes in value are deemed to be temporary.

NOTE 3 -- LOANS

Major classifications of loans are as follows:

                                                December 31,
                                         ---------------------------
                                             2004           2003
                                         ------------   ------------

Mortgage                                 $252,114,219   $244,923,121
Home equity credit                         23,201,124     21,963,205
Installment                                84,673,524     78,326,060
Commercial                                 61,139,895     59,591,433
PHEAA                                       7,354,534      7,833,861
Municipal                                  10,050,265      6,267,974
Credit cards                                   44,882         37,890
Other                                         854,685        965,493
                                         ------------   ------------
                                          439,433,128    419,909,037
Less:
Allowance for loan losses                   2,593,642      3,284,830
Deferred loan fees                            291,210        337,752
                                         ------------   ------------

                                         $436,548,276   $416,286,455
                                         ============   ============


                                       14

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002


NOTE 3 -- LOANS (CONTINUED)

The aggregate  amount of demand deposit  accounts with  overdrawn  balances that
were  reclassified  as loan  balances at December 31, 2004 and 2003  amounted to
$715,870 and $407,581, respectively and are included in other loans.


The total  recorded  investment  in impaired  loans  amounted to  $1,535,834  at
December  31, 2004 and $567,564 at December 31,  2003.  The  allowance  for loan
losses  related to impaired  loans amounted to $412,470 and $283,781 at December
31, 2004 and 2003, respectively.

Changes in the allowance for loan losses were as follows:

                                           Years Ended December 31,
                                  -----------------------------------------
                                      2004           2003           2002
                                  -----------    -----------    -----------

Balance, beginning of year        $ 3,284,830    $ 2,873,067    $ 2,113,806
Provision charged to operations       600,000        600,000      1,100,000
Loans charged off                  (1,338,749)      (242,711)      (440,728)
Recoveries                             47,561         54,474         99,989
                                  -----------    -----------    -----------

Balance, end of year              $ 2,593,642    $ 3,284,830    $ 2,873,067
                                  ===========    ===========    ===========


NOTE 4 -- PREMISES AND EQUIPMENT

Premises and equipment which are stated at cost are as follows:

                                                    December 31,
                                             -------------------------
                                                 2004          2003
                                             -----------   -----------
Land                                         $   921,559   $   791,559
Buildings and improvements                     5,955,107     5,889,215
Furniture and equipment                        7,413,916     7,298,169
                                             -----------   -----------
                                              14,290,582    13,978,943
Less:  Accumulated depreciation                8,058,302     7,510,194
                                             -----------   -----------

                                             $ 6,232,280   $ 6,468,749
                                             ===========   ===========



Depreciation  expense was  $1,009,989 in 2004,  $832,770 in 2003 and $684,731 in
2002.

Nine of the Bank's  commercial  branch office  buildings and/or land, the Bank's
trust division office and an operations  facility are leased by the Bank.  These
leases have initial terms of 1 to 20 years,  and all contain renewal options for
additional years.

                                       15

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002


NOTE 4 -- PREMISES AND EQUIPMENT (CONTINUED)

The  following is a summary of the future  minimum  lease  payments  under these
operating leases:

For the year ended December 31,
                                2005                       $ 191,186
                                2006                          99,737
                                2007                          62,265
                                2008                          59,116
                                2009                          61,099
                                2010 and thereafter          244,861
                                                           ---------

                                                           $ 718,264
                                                           =========

Rental expense under these operating leases was $250,464,  $220,981 and $183,005
for the years ended December 31, 2004, 2003 and 2002, respectively.

NOTE 5 -- JOINT VENTURE

The Bancorp has an 85% limited partnership  interest in T.A. of Irwin, L.P. This
partnership provides title insurance to the general public. The Bancorp uses the
equity method to account for its investment in the  partnership.  As of December
31, 2004 and 2003,  the  partnership is reflected in the other assets section of
the balance sheet at $20,083 and $21,309, respectively.





NOTE 6 -- BANK OWNED LIFE INSURANCE

In 2001, the Bank purchased  single premium life insurance  policies on officers
of the Bank at a cost of  $10,000,000.  At December 31, 2004 and 2003,  the cash
surrender value of these policies was $11,509,239 and $11,068,593, respectively,
and is included in the other assets section of the balance  sheet.  The increase
in cash surrender value of these policies is recorded as other income.

NOTE 7 -- DEPOSITS

Time deposits  maturing in years ending December 31, as of December 31, 2004 are
summarized as follows:

                               2005                       $ 150,259,826
                               2006                          37,381,552
                               2007                          20,452,448
                               2008                          20,102,546
                               2009                          11,494,868
                               2010 and thereafter           13,607,045
                                                          --------------

                                                          $ 253,298,285
                                                          ==============

                                       16

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002

NOTE 7 -- DEPOSITS (CONTINUED)

The Bank held related party deposits of approximately  $2,571,000 and $2,750,000
at December 31, 2004 and 2003, respectively.

The  Bank  held  time  deposits  that  exceeded   $100,000  of  $52,560,047  and
$42,550,077 at December 31, 2004 and 2003, respectively.

NOTE 8 -- REPURCHASE AGREEMENTS

The Bank offers its corporate  customers an investment  product fashioned in the
form of a repurchase  agreement.  Under the terms of the agreement,  deposits in
designated  demand  accounts of the customer are put into an investment  vehicle
which is used daily to purchase an interest in  designated  U.S.  Government  or
Agencies'  securities  owned by the Bank.  The Bank in turn agrees to repurchase
these  investments  on a daily  basis and pay the  customer  the daily  interest
earned  on them.  The  amount  of  repurchase  agreements  was  $15,157,257  and
$12,610,877 at December 31, 2004 and 2003, respectively.

NOTE 9 -- PLEDGED ASSETS

At December 31, 2004 and 2003, U.S.  Government  Agency  obligations  carried at
approximately $48,257,000 and $25,500,000 respectively,  were pledged to qualify
for fiduciary powers, to secure public monies and for other purposes required or
permitted  by law.  At  December  31,  2004 and  2003,  the  carrying  amount of
securities pledged to secure repurchase agreements was approximately $23,525,000
and $9,300,000 respectively.

NOTE 10 -- FHLB ADVANCES

At December  31, 2004 and 2003,  the Bank had the  following  advances  from the
Federal Home Loan Bank (FHLB).
<TABLE>
<CAPTION>

     2004               2003              Interest Rate                   Maturity Date
--------------   ----------------   ----------------------------    -------------------------

<S>               <C>              <C>                                      <C> <C>
 $          -       $ 10,000,000     5.86% Fixed w/Strike Rate           July 22, 2004
    1,250,000                  -     2.54% Fixed                         February 21, 2006
    1,250,000                  -     2.83% Fixed                         August 21, 2006
    2,233,153                  -     2.99% Amortizing-Fixed              August 20, 2007
    2,000,000          2,000,000     3.67% Fixed                         September 5, 2007
    2,532,161          3,307,767     2.79% Amortizing-Fixed              January 28, 2008
    5,000,000          5,000,000     5.63% Fixed to Float                July 21, 2008
    5,000,000          5,000,000     4.86% Fixed to Float                October 23, 2008
    8,000,000                  -     3.48% Fixed w/Strike rate           January 20, 2009
   10,000,000                  -     4.06% Fixed w/Strike rate           July 22, 2009
    4,000,000          4,000,000     5.18% Fixed w/Strike Rate           February 23, 2011
    4,000,000          4,000,000     4.98% Fixed to Float                March 23, 2011
    5,000,000          5,000,000     4.947% Fixed w/Strike Rate          August 29, 2011
    5,000,000          5,000,000     4.6% Fixed w/Strike Rate            January 30, 2012
    5,000,000          5,000,000     3.51% Fixed w/Strike Rate           January 28, 2013
    5,000,000          5,000,000     3.47% Fixed w/Strike Rate           March 18, 2013
    5,000,000                  -     4.05% Fixed to Float                August 20, 2014
-------------       ------------
 $ 70,265,314       $ 53,307,767
=============       ============
</TABLE>

Interest only is payable until maturity on all FHLB advances except for the FHLB
advances with maturity dates of August 20, 2007 and January 28, 2008. Collateral
for all advances includes all qualifying mortgages.

                                       17

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002


NOTE 10 -- FHLB ADVANCES (CONTINUED)

The  following is a summary of the  principal  payments  due on FHLB  amortizing
advances at December 31, 2004.

<TABLE>
<CAPTION>
<S>                                                   <C>                     <C>
      Original loan amount                              $          4,000,000    $        2,500,000
      Interest rate                                                     2.79%                 2.99%
      Monthly payment (includes interest)               $             71,502    $           72,692
      Number of payments                                                  60                    36
      Maturity date                                         January 28, 2008       August 20, 2007

      Principal payments due December 31:     2005      $            797,525    $          816,664
                                              2006                   820,063               841,420
                                              2007                   843,237               575,069
                                              2008                    71,336                     -
                                                        ---------------------     ----------------
      Balance of loan at December 31, 2004              $          2,532,161    $        2,233,153
                                                        =====================   ==================
</TABLE>

In 2004,  the Bank renewed its line of credit with the Federal Home Loan Bank in
the  amount of  $20,000,000.  The  interest  rate is  variable  and was 2.24% at
December 31, 2004.  The line of credit has an  expiration  date of May 11, 2005.
There was no balance outstanding on the line of credit as of December 31, 2004.

The Bank had maximum borrowing capacity with FHLB, including the line of credit,
of  approximately  $308,386,000  and $282,428,000 at December 31, 2004 and 2003,
respectively.

NOTE 11 -- INCOME TAXES

The provision for income taxes consists of:

<TABLE>
<CAPTION>
                                                     Years Ended December 31,
                                           -----------------------------------------
                                               2004           2003           2002
                                           -----------    -----------    -----------
<S>                                      <C>            <C>            <C>
      Currently payable                    $ 2,643,614    $ 3,424,374    $ 3,527,269
      Deferred tax (benefit)                   184,511          3,519       (346,958)
                                           -----------    -----------    -----------

      Total                                $ 2,828,125    $ 3,427,893    $ 3,180,311
                                           ===========    ===========    ===========
</TABLE>

The significant  components of temporary differences for 2004, 2003 and 2002 are
as follows:

<TABLE>
<CAPTION>
                                                      Years Ended December 31,
                                           -----------------------------------------
                                               2004           2003           2002
                                           -----------    -----------    -----------
<S>                                      <C>            <C>            <C>
      Provision for loan losses            $   153,231    $  (201,201)   $  (299,256)
      Depreciation                             (14,169)       143,959         32,400
      Pension                                   85,095         28,457         28,461
      Deferred loan fees                        15,825         74,418        (96,222)
      Other                                    (55,471)       (42,114)       (12,341)
                                           -----------    -----------    -----------

      Total                                $   184,511    $     3,519    $  (346,958)
                                           ===========    ===========    ===========
</TABLE>

                                       18
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002


NOTE 11 -- INCOME TAXES (CONTINUED)

A  reconciliation  of the federal  statutory  tax rate to the effective tax rate
applicable to income before income taxes is as follows:

                                           Years Ended December 31,
                                         -----------------------------
                                             % of Pretax Income
                                         -----------------------------
                                          2004       2003        2002
                                         ------     ------      ------

Provision at statutory rate              34.0 %      34.0 %     34.0 %
Effect of tax free income                (6.3)       (5.2)      (5.4)
Other                                     4.0        (2.6)      (2.4)
                                         ----        ----       ----

Effective tax rate                       31.7 %      26.2 %     26.2 %
                                         ====        ====       ====

The deferred tax assets and  deferred  tax  liabilities  recorded on the balance
sheet as of December 31, 2004 and 2003 are as follows:

                                     2004                     2003
                            -----------------------   -----------------------
                                  Deferred Tax             Deferred Tax
                            -----------------------   -----------------------
                              Assets    Liabilities    Assets    Liabilities
                            ----------  -----------   ----------  -----------
Provision for loan losses   $  881,838   $        -   $1,035,069   $        -
Depreciation                         -      294,849            -      309,018
Pension expense                      -      236,052            -      150,957
Other                          337,330       28,247      269,437            -
SFAS 115                             -      620,625            -      532,479
                            ----------   ----------   ----------   ----------

                            $1,219,168   $1,179,773   $1,304,506   $  992,454
                            ==========   ==========   ==========   ==========

NOTE 12 -- SHAREHOLDER RIGHTS PLAN

On  November  18,  2003,  the  Board  of  Directors  of the  Bancorp  adopted  a
Shareholder Rights Plan. The Board declared a dividend distribution of one Right
for each  outstanding  share of common  stock to  stockholders  of record at the
close of  business  on  December  1, 2003.  Each Right  initially  entitled  the
registered  holder to purchase  from the Bancorp  common stock worth $410 on the
date of exercise, for a purchase price of $205, subject to adjustment.

Initially,  the  Rights  will  be  attached  to all  common  stock  certificates
representing shares then outstanding, and no separate Rights certificate will be
distributed.  The Rights will separate from the common stock and a  distribution
date will occur upon the  earlier of (i) 10  business  days  following  a public
announcement  that a person or group of  affiliated  or  associated  persons (an
"Acquiring Person"), has acquired, or obtained the Right to acquire,  beneficial
ownership  of 10% or more of the  outstanding  shares  of common  stock  ("stock
acquisition  date") or (ii) 10 business  days  following the  commencement  of a
tender  offer  or  exchange  offer  that  would  result  in a  person  or  group
beneficially owning 10% or more of such outstanding shares of common stock.

The Rights are not exercisable  until the  distribution  date and will expire at
the close of business on December 1, 2013,  unless earlier redeemed or exchanged
by the Bancorp.

                                       19

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002


NOTE 12 -- SHAREHOLDER RIGHTS PLAN (CONTINUED)


In the event that at any time following the Rights dividend  declaration date, a
person  becomes  the  beneficial  owner  of 10% or more of the  then-outstanding
shares of common  stock,  each holder of a Right  (other than Rights held by the
party  triggering  the Rights and certain  transferees  which are  voided)  will
thereafter  have the right to  receive,  upon  exercise,  common  stock (or,  in
certain  circumstances,  cash,  property,  or other  securities  of the  Bancorp
subject to certain  limitations)  having a value equal to two times the exercise
price of the Right. However, Rights are not exercisable following the occurrence
of the  event set  forth  above  until  such  time as the  Rights  are no longer
redeemable by the Bancorp.

NOTE 13 -- COMMITMENTS AND CONTINGENCIES

In the normal course of business,  there are various outstanding commitments and
certain  contingent  liabilities  which are not  reflected  in the  accompanying
financial  statements.  These commitments and contingent  liabilities  represent
financial  instruments  with  off-balance-sheet  risk.  The contract or notional
amounts of those  instruments  were  comprised of  commitments  to extend credit
approximating  $22,872,000  and  $76,971,000  as of December  31, 2004 and 2003,
respectively, and approximate fair value.

The instruments  involve,  to varying  degrees,  elements of credit and interest
rate risk in excess of the amount  recognized  in the  balance  sheet.  The same
credit policies are used in making  commitments  and conditional  obligations as
for on-balance-sheet  instruments.  The amount of collateral obtained, if deemed
necessary upon extension of credit,  is based on management's  credit evaluation
of the  counterparty.  The terms are  typically  for a one year period,  with an
annual renewal option subject to prior approval by management.

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the loan agreement.  These
commitments are comprised  primarily of available  commercial and personal lines
of credit.

The exposure to loss under these  commitments  is limited by subjecting  them to
credit approval and monitoring procedures.  Substantially all of the commitments
to extend credit are  contingent  upon  customers  maintaining  specific  credit
standards at the time of the loan  funding.  Since many of the  commitments  are
expected to expire  without being drawn upon, the total  contractual  amounts do
not necessarily represent future funding requirements.

The Bancorp and Bank are involved in various legal actions from normal  business
activities.  Management  believes that the liability,  if any, arising from such
actions will not have a material adverse effect on the financial position of the
Bancorp and Bank.

NOTE 14 -- CONCENTRATION OF CREDIT

The Bank  primarily  grants  loans to  customers  in Western  Pennsylvania,  and
maintains a diversified  loan  portfolio and the ability of its debtors to honor
their  contracts  is not  substantially  dependent  on any  particular  economic
business sector. A portion of the Bank's investments in municipal securities are
obligations of state or political subdivisions located within Pennsylvania. As a
whole,  the Bank's  loan and  investment  portfolios  could be  affected  by the
general economic conditions of Pennsylvania.  In addition,  at December 31, 2004
and 2003,  a  significant  portion of the Bank's "due from  banks" and  "federal
funds  sold" is  maintained  with two large  financial  institutions  located in
Southwestern  Pennsylvania.  The Bank maintains a cash balance and federal funds
sold at financial  institutions  that exceed the $100,000 amount that is insured
by the FDIC. Amounts in excess of insured limits, per the institutions' records,
were  approximately  $3,552,000  and  $1,201,000  at December 31, 2004 and 2003,
respectively.

                                       20

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002


NOTE 15 -- EMPLOYEE BENEFIT PLANS

Defined Benefit Plans

The Bank  maintained one  non-contributory  defined benefit pension plan for its
employees  prior to 1995 (Plan  #1).  In 1995,  various  plan  assumptions  were
changed  which  resulted in a reduction in benefits for older and  long-standing
employees.  To  compensate  for  this,  a  supplemental  non-qualified  plan was
installed for those  employees so affected  (Plan #2). The Bank's funding policy
is to  contribute  annually the maximum  amount that can be deducted for federal
income tax purposes for Plan #1.  Contributions are intended to provide not only
for  benefits  attributed  to service to date but also for those  expected to be
earned  in the  future.  Assets  for the plans are  primarily  invested  in U.S.
Government  obligations,  corporate obligations,  equity securities,  and mutual
funds whose valuations are subject to fluctuations of the securities' market.

The actuarial  measurement period of October 15, through October 14, was used to
determine  the  components  of the net periodic  pension cost and the  financial
disclosures  for both plans.  The actuarial  measurement  date of October 15 was
used in determining the plans' liabilities and asset information.  The following
is a combined summary of the plans' components as of December 31, 2004, 2003 and
2002,  even  though  the  information  has  been  compiled  on the  basis of the
actuarial measurement period.
<TABLE>
<CAPTION>
                                                       2004           2003           2002
                                                    -----------    -----------    -----------
<S>                                             <C>            <C>            <C>
Change in Projected Benefit Obligation:
  Benefit obligation at beginning of year           $ 3,331,356    $ 2,739,116    $ 2,253,576
  Service cost                                          256,712        210,043        179,307
  Interest cost                                         216,129        184,275        162,431
  Actuarial loss due to settlements                       8,099              -              -
  Benefits paid                                        (350,346)       (35,897)      (161,570)
  Other - net                                           193,061        233,819        305,372
                                                    -----------    -----------    -----------
      Benefit obligation at end of year             $ 3,655,011    $ 3,331,356    $ 2,739,116
                                                    ===========    ===========    ===========

Change in Fair Value of Plan Assets:
  Plan assets at estimated
      fair value at beginning of year               $ 2,736,071    $ 2,201,346    $ 2,350,244
  Actual return on plan assets, net of expenses         146,318        305,653       (207,196)
  Plan settlements                                      (42,197)             -              -
  Benefits paid                                        (350,346)       (35,897)      (161,570)
  Employer contributions                                293,275        264,969        219,868
                                                    -----------    -----------    -----------
      Fair value of plan assets at end of year      $ 2,783,121    $ 2,736,071    $ 2,201,346
                                                    ===========    ===========    ===========

  Funded status                                     $  (871,890)   $  (595,285)   $  (537,770)
  Unrecognized net loss from actuarial experience     1,352,122      1,115,107      1,057,676
  Unrecognized prior service cost                      (165,438)      (183,700)      (201,962)
  Unamortized net asset existing at date
      of adoption of SFAS No. 87                        (21,774)       (27,075)       (31,173)
  Effect of settlements                                  (5,989)             -              -
                                                    -----------    -----------    -----------
      Prepaid pension cost                          $   287,031    $   309,047    $   286,771
                                                    ===========    ===========    ===========
</TABLE>

                                       21

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002


NOTE 15 -- EMPLOYEE BENEFIT PLANS (CONTINUED)

Defined Benefit Plans (continued)

Net periodic pension cost included the following
 components:
<TABLE>
<CAPTION>
                                                              Years Ended December 31,
                                                        -----------------------------------
                                                           2004         2003         2002
                                                        ---------    ---------    ---------
<S>                                                 <C>          <C>          <C>
  Service cost                                          $ 256,712    $ 210,043    $ 179,307
  Interest cost                                           216,129      184,275      162,431
  Expected return on plan assets                         (206,976)    (167,906)    (175,875)
  Amortization of prior service cost                      (18,262)     (18,262)     (18,262)
  Amortization of transition asset                         (4,098)      (4,098)      (4,098)
  Recognized net actuarial loss                            45,043       44,196        8,199
                                                        ---------    ---------    ---------

Net periodic pension cost                               $ 288,548    $ 248,248    $ 151,702
                                                        =========    =========    =========
</TABLE>

<TABLE>
<CAPTION>
Amounts recognized in the consolidated
balance sheets consist of:
                                                                  December 31,
                                                      -----------------------------------
                                                         2004         2003         2002
                                                      ---------    ---------    ---------
<S>                                                  <C>          <C>          <C>
Prepaid benefit cost                                  $ 713,304    $ 536,653    $ 500,022
                                                      =========    =========    =========
</TABLE>

In the months of December 2004,  2003 and 2002, the Bank  contributed  $480,360,
$293,275 and $264,969  respectively,  to the plans  subsequent  to the actuarial
measurement  dates of October 15, 2004,  2003 and 2002.  Because these  employer
contributions were paid after the actuarial measurement period ended, the Bank's
prepaid pension cost at December 31, 2004, 2003 and 2002 was $713,304,  $536,653
and $500,002, respectively.

The combined  accumulated  benefit  obligation for both plans was $2,675,106 and
$2,417,536 at December 31, 2004, and 2003, respectively.

Weighted-average assumptions used to determine
both the benefit obligations and net periodic pension
costs were as follows:
<TABLE>
<CAPTION>
                                                             Years Ended December 31,
                                             ---------------------------------------------------------
                                                 2004                  2003                2002
                                             -----------------  ------------------  ------------------
<S>                                          <C>                   <C>                 <C>
Plan #1
  Discount rate                                    6.25%                 6.50%               6.75%
  Expected long-term return on plan assets         7.00%                 7.00%               7.00%
  Rate of compensation increase               3.50% - 5.50%         3.50% - 5.50%       3.50% - 5.50%

Plan #2
  Discount rate                                    7.00%                 7.00%               7.00%
  Expected long-term return on plan assets         6.00%                 7.00%               7.00%
  Rate of compensation increase                    3.50%                 3.50%               3.50%
</TABLE>

The interest rate assumption  utilized for the plan valuation methods is 7%. The
interest rate assumption is reasonable  considering  historical  rates of return
and the asset allocation mix of the plan.

                                       22

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002


NOTE 15 -- EMPLOYEE BENEFIT PLANS (CONTINUED)

Defined Benefit Plans (continued)

Pension plan weighted-average asset allocations
  by investment category are as follows:

                                                   December 31,
                                         -------------------------------
                                           2004        2003        2002
                                           ----        ----        ----
Cash and cash equivalents                    9%         17%          9%
Stocks                                      22%         24%         32%
Bonds                                       12%         16%         13%
Mutual funds                                33%         30%         29%
Government securities                       24%         13%         17%
                                           ---         ---         ---

Total                                      100%        100%        100%
                                           ===         ===         ===

The Bank's  pension plan funds are managed and held in trust by the Bank's Trust
Division.  The investment objective and strategy for investing plan assets calls
for  a  "Moderate  Growth  Income  Objective".  This  objective  provides  for a
preservation of the principal's purchasing power and moderate growth and income.
The  range  of  equity  exposure  is  from 40 to 80  percent  and  fixed  income
maturities  to 30 years.  The targeted  asset  allocation  percentages  for each
category of plan assets would reveal a strategy to acquire a higher  position in
equities to a level of between 50 to 55 percent  over the course of the next one
to two year period.  The investment  policies of the plan trustees  prohibit the
use of derivatives.  In addition, the plan assets are diversified  appropriately
across  different  business  sections  for  individual  securities  and the plan
trustees have further  diversified  plan assets by  maintaining an investment in
mutual funds.

Other Employee Benefit Plans

The Bank also maintains  non-qualified  deferred  compensation plans for certain
directors, which are generally funded by life insurance. Prior to 2002, premiums
on those  policies were paid for by the Bank.  In 2002,  the Bank elected to pay
those premiums with dividends  accruing on the insurance  policies.  The present
value of these  benefits to be paid under the programs is being accrued over the
estimated remaining service period of the participants.  The liability for these
future  obligations  was  $588,611  and  $473,567 at December 31, 2004 and 2003,
respectively.

In addition,  the Bank maintains a qualified 401(k) - deferred compensation plan
for eligible employees. The plan is designed to provide a predetermined matching
contribution by the Bank based on compensation  deferrals by participants in the
plan. The Bank contributions,  including administrative fees, for 2004, 2003 and
2002 amounted to $77,362, $68,479 and $57,304, respectively.


NOTE 16 -- RELATED-PARTY TRANSACTIONS

At December 31, 2004 and 2003, certain officers and directors of the Bancorp and
the Bank, and companies in which they have beneficial  ownership,  were indebted
to the Bank in the aggregate amount of approximately $11,565,000 and $10,810,000
respectively.  During 2004, new loans to such related parties were approximately
$2,352,000 and repayments approximated $1,597,000.

                                       23

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002


NOTE 17 -- DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS

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

Cash and cash equivalents:  The carrying amount is a reasonable estimate of fair
value.

Certificates of deposit:  The carrying  amounts of these short term  investments
approximate their fair value.

Investment  securities:  The fair value of  securities is equal to the available
quoted  market  price.  If no quoted  market price is  available,  fair value is
estimated using the quoted market price for similar securities.

Federal  Home  Loan  Bank  stock:  The  carrying  value of the  FHLB  stock is a
reasonable estimate of fair value due to restrictions on the securities.

Loans  receivable:  For certain  homogeneous  categories of loans, fair value is
estimated using the quoted market prices for securities  backed by similar loans
adjusted for differences in loan characteristics.  The fair value of other types
of loans is  estimated  by  discounting  the future cash flows using the current
rates at which similar  loans would be made to borrowers for the same  remaining
maturities.

Deposit  liabilities:  The fair value of demand  deposits,  savings accounts and
money market deposits is the amount payable on demand at the reporting date. The
fair value of fixed-maturity certificates of deposit is estimated by discounting
the future cash flows using the rates currently  offered for deposits of similar
remaining maturities.

Short-term  borrowings:  The carrying  amounts of federal  funds  purchased  and
borrowings under repurchase agreements are short-term borrowings and approximate
their fair values.

FHLB advances: The fair value of FHLB advances was determined using a discounted
cash flow analysis based on current FHLB advance rates for advances with similar
maturities.

The estimated fair value of the Bancorp's  financial  instruments as of December
31, 2004 are as follows:

                                              Carrying                Fair
                                               Amount                 Value
                                            ------------          ------------
Financial Assets:
      Cash and cash equivalents             $ 16,187,171          $ 16,187,171

      Certificate of deposit                $    100,000          $    100,000

      Investment securities                 $191,208,214          $191,208,214

      Federal Home Loan Bank stock          $  5,682,700          $  5,682,700

      Loans receivable                      $436,548,276          $436,572,276

Financial liabilities:
      Deposits                              $526,216,948          $525,831,948

      Short-term borrowings                 $ 19,532,081          $ 19,532,081

      FHLB advances                         $ 70,265,314          $ 75,046,314

The market values of investments, which are based upon quoted market prices, are
contained in Note 2.

                                       24

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002


NOTE 18 -- REGULATORY MATTERS

The Bank is subject to legal  limitations on the amount of dividends that can be
paid to the Bancorp.  The  Pennsylvania  Banking Code  restricts  the payment of
dividends, generally to the extent of its retained earnings.

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  judgments  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,  as set forth below, of
total  and Tier 1 capital  (as  defined  in the  regulations)  to  risk-weighted
assets,  and of Tier 1 capital to average  assets.  Management  believes,  as of
December  31,  2004  and  2003,  that  the  Bank  meets  all  capital   adequacy
requirements to which it is subjected.

The Bank's actual  capital  ratios as of December 31, 2004 and 2003, the minimum
ratios  required for capital  adequacy  purposes,  and the ratios required to be
considered  well  capitalized  under the Federal Deposit  Insurance  Corporation
Improvement Act of 1991 provisions are as follows:

<TABLE>
<CAPTION>
                                              December 31,                 Minimum                 Well
                                      -----------------------------        Capital             Capitalized
                                          2004            2003           Requirements          Requirements
                                      -------------   -------------   --------------------   ----------------

<S>                                     <C>             <C>             <C>                 <C>
Risk-based capital ratio                  14.5%           15.1%           8.0%                10.0% or higher
Leverage capital ratio                     8.5%            9.1%           3.0% to 4.0%        5.0% or higher
Tier 1 risk-based capital  ratio          13.9%           14.3%           4.0%                6.0% or higher
</TABLE>

Included in cash and due from banks are required  federal reserves of $7,032,000
and $4,740,000 at December 31, 2004 and 2003, respectively, for facilitating the
implementation  of monetary policy by the Federal  Reserve System.  The required
reserves  are computed by applying  prescribed  ratios to the classes of average
deposit balances. These reserves are held in the form of due from banks.


NOTE 19 -- STOCK OPTION PLAN

The Bank's Stock Option Plan  authorizes  the granting of stock  options to Bank
directors  and employees  for up to 300,000  shares of common  stock.  The stock
option plan provides for a term of ten years, after which no awards can be made.
Under the plan,  the  exercise  price of each option  equals the closing  market
price of the Bank's stock on the grant date, and an option's maximum term is ten
years. Options constitute both incentive and non-incentive stock options and are
generally granted annually in the month of May. Options granted to directors are
vested  immediately  and are  exercisable  six  months  from the grant  date and
options granted to employees generally vest over three years.


As of December 31, 2004, a total of 150,000 stock options have been granted,  of
which,  85,223 are vested and exercisable,  16,866 have not vested,  38,710 have
been exercised and 9,201 have been forfeited.

                                       25

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002


NOTE 19 -- STOCK OPTION PLAN (CONTINUED)

A summary of the status of the Bank's stock option plan is presented below:

<TABLE>
<CAPTION>
                                                                                 December 31,
                                              --------------------------------------------------------------------------------------
                                                         2004                         2003                          2002
                                              --------------------------   ---------------------------   ---------------------------
                                                              Weighted                      Weighted                     Weighted
                                                              Average                       Average                       Average
                                                              Exercise                      Exercise                     Exercise
                                                 Shares        Price           Shares        Price           Shares        Price
                                                 ------        -----           ------        -----           ------        -----
<S>                                            <C>        <C>                <C>         <C>                <C>       <C>
      Outstanding at beginning of year           118,054    $    30.94         119,709     $   26.53          94,000    $    23.97
      Granted                                          -    $        -          20,500     $   51.40          35,500    $    32.88
      Forfeitures                                 (5,034)   $    39.34          (1,001)    $   29.58          (3,166)   $    23.79
      Exercised                                  (10,931)   $    25.35         (21,154)    $   25.85          (6,625)   $    25.58
                                                --------                      --------                      --------

      Outstanding at December 31,                102,089    $    31.13         118,054     $   30.94         119,709    $    26.53
                                                ========                      ========                      ========

      Exercisable at December 31,                 85,223    $    28.71          73,887     $   25.54          66,513    $    25.70
                                                ========                      ========                      ========
</TABLE>

The  options   outstanding   at  December  31,   2004,   2003  and  2002  had  a
weighted-average  contractual maturity of 6.68 years, 7.66 years, and 8.2 years,
respectively.

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions:

                                                     December 31,
                                   -------------------------------------------
                                       2004             2003           2002
                                   --------------   ------------   -----------
      Dividend yield               None granted          2.72%         3.79%
      Expected life                                    7 years       7 years
      Expected volatility                                20%           19%
      Risk-free interest rate                            4.00%         3.75%
      Weighted-average fair value                       $10.75         $7.46

Prior to  2003,  the Bank  accounted  for  stock-based  compensation  under  the
recognition  and  measurement  provisions of APB Opinion No. 25,  Accounting for
Stock Issued to Employees, and related interpretations.  No stock-based employee
compensation cost is reflected in 2002 net income, as all options granted during
2002 had an exercise  price equal to the market value of the  underlying  common
stock on the date of grant. Effective January 1, 2003, the Bank adopted the fair
value  recognition  provisions  of Statement of Financial  Accounting  Standards
(SFAS)  123,  Accounting  for  Stock-Based  Compensation,  prospectively  to all
employee awards granted in 2003. Awards under the plan vest over periods ranging
from six months to three  years.  Therefore,  the cost  related  to  stock-based
compensation  included in the  determination of net income for 2003 is less than
that which would have been  recognized  if the fair value based  method had been
applied to all awards since the original effective date of Statement 123.

                                       26

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002

NOTE 19 -- STOCK OPTION PLAN (CONTINUED)

The following table  illustrates the effect on net income and earnings per share
if the fair value based method had been applied to all  outstanding and unvested
awards in each year.

<TABLE>
<CAPTION>
                                                                          Years Ended December 31,
                                                                    -------------------------------------
                                                                      2004         2003            2002
                                                                  -----------   -----------   -----------
<S>                                                              <C>           <C>           <C>
Net income, as reported                                           $ 6,084,738   $ 9,646,246   $ 8,937,299
Add: Stock-based employee compensation expense
    included in reported net income, net of related tax effects        39,034        67,422             -
Deduct: Total stock-based employee compensation
    expense determined under fair value based method for
    all awards, net of related tx effects                              85,525       151,518       327,483
                                                                  -----------   -----------   -----------

Pro-forma net income                                              $ 6,038,247   $ 9,562,150$    8,609,816
                                                                  ===========   ===========   ===========

Earnings per share:
      Basic-as reported                                           $      2.05   $      3.24   $      3.00
                                                                  ===========   ===========   ===========
      Basic-pro forma                                             $      2.04   $      3.21   $      2.84
                                                                  ===========   ===========   ===========

      Diluted-as reported                                         $      2.02   $      3.19   $      2.99
                                                                  ===========   ===========   ===========
      Diluted-pro forma                                           $      2.01   $      3.17   $      2.84
                                                                  ===========   ===========   ===========
</TABLE>

Weighted-average  number of shares outstanding  assuming dilution of exercisable
stock  options  using the treasury  stock method was  3,005,367,  3,020,075  and
2,991,043 for the years ended December 31, 2004, 2003 and 2002, respectively.

NOTE 20 -- TREASURY STOCK

In 2004 and 2002, the Bancorp  repurchased  22,200 and 8,040 shares of its stock
for $1,006,135 and $258,513,  respectively, and is being held as treasury stock.
The Bancorp did not repurchase any shares of its own stock during 2003.

NOTE 21 -- RECENT ACCOUNTING PRONOUNCEMENTS


In 2004,  the FASB issued  SFAS No.  153,  Exchanges  of  Nonmonetary  Assets-an
amendment of APB Opinion No. 29.  Management does not believe the statement will
have a material impact on the Bank or its operations.

In December  2004 the FASB revised SFAS no. 123 Share Based  Payments-Supercedes
APB Opinion No. 25. The statement eliminates the alternative to use Opinion 25's
intrinsic  value  method of  accounting  that was  provided in  Staement  123 as
originally  issued.  This statement  requires  entities to recognize the cost of
employee services received in exchage for awards of equity  instruments based on
the grant-date fair value of those awards (with limited exceptions). The Company
adopted the  provisions  of Statement  123 in 2003 and is curently in compliance
with this statement. See Note 19-Stock Option Plans.

                                       27

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002

NOTE 22 -- PARENT COMPANY FINANCIAL INFORMATION

The condensed  financial  information  for IBT Bancorp,  Inc. as of December 31,
2004 and 2003 and for the years ended  December  31,  2004,  2003 and 2002 is as
follows:

BALANCE SHEETS
                                                       December 31
                                                  -------------------------
                                                      2004          2003
                                                  -----------   -----------
ASSETS
     Cash in bank                                 $   264,390   $    60,813
     Investment in subsidiary                      58,868,856    58,771,455
     Securities available for sale                    513,157       578,603
     Other assets                                     241,717       242,943
                                                  -----------   -----------

     Total Assets                                 $59,888,120   $59,653,814
                                                  ===========   ===========


LIABILITIES AND STOCKHOLDERS' EQUITY
     Liabilities                                  $    45,358   $    47,773

     Stockholders' Equity                          59,842,762    59,606,041
                                                  -----------   -----------

     Total Liabilities and Stockholders' Equity   $59,888,120   $59,653,814
                                                  ===========   ===========

STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                Years Ended December 31,
                                                          ------------------------------------
                                                             2004         2003         2002
                                                          ----------   ----------   ----------
<S>                                                     <C>          <C>          <C>
Income
     Dividends from subsidiary                            $5,900,000   $3,600,000   $4,000,000
     Other dividends                                          11,916       14,156       14,069
     Investment security gains                                87,333      151,802        1,986
     Income from joint ventures                               55,139      218,307      185,541

Expenses
     Professional fees                                        97,126      167,658       72,371
     Loss on joint venture                                         -            -            -
     Miscellaneous                                            60,636       62,954       33,203
                                                          ----------   ----------   ----------

Income Before Income Taxes
     and Equity in Undistributed Earnings of Subsidiary    5,896,626    3,753,653    4,096,022

Equity in Undistributed
     Earnings of Subsidiary                                  188,112    5,892,593    4,841,277
                                                          ----------   ----------   ----------

Net Income                                                $6,084,738   $9,646,246   $8,937,299
                                                          ==========   ==========   ==========
</TABLE>

                                       28

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002


NOTE 22 -- PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                               Years Ended December 31,
                                                        -----------------------------------------
                                                           2004           2003           2002
                                                        -----------    -----------    -----------
<S>                                                   <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES

      Net income                                        $ 6,084,738    $ 9,646,246    $ 8,937,299
      Adjustments to reconcile net income to
         net cash provided by operating activities:
         Net undistributed earnings of joint ventures       (55,139)      (218,307)      (185,541)
         Investment security gains                          (87,333)      (151,802)        (1,986)
         Decrease in cash due to changes
             in assets and liabilities:
                Equity in undistributed earnings
                  of subsidiary                            (188,112)    (5,892,593)    (4,841,277)
                                                        -----------    -----------    -----------

Net Cash From Operating Activities                        5,754,154      3,383,544      3,908,495

CASH FLOWS FROM INVESTING ACTIVITIES

      Distributions from joint ventures                      56,365        279,137        157,105
      Proceeds from sale of securities
         available for sale                                 168,033        166,846              -
      Purchase of securities available for sale             (22,355)        (1,577)       (74,095)
                                                        -----------    -----------    -----------

Net Cash From Investing Activities                          202,043        444,406         83,010


CASH FLOWS FROM FINANCING ACTIVITIES

      Dividends paid                                     (4,746,485)    (4,168,721)    (3,577,098)
      Purchase of Treasury Stock                         (1,006,135)             -       (258,513)
                                                        -----------    -----------    -----------

Net Cash Used by Financing Activities                    (5,752,620)    (4,168,721)    (3,835,611)
                                                        -----------    -----------    -----------

Net Change in Cash and Cash Equivalents                     203,577       (340,771)       155,894


Cash and Cash Equivalents at Beginning
      of Year                                                60,813        401,584        245,690
                                                        -----------    -----------    -----------

Cash and Cash Equivalents at End of Year                $   264,390    $    60,813    $   401,584
                                                        ===========    ===========    ===========
</TABLE>

                                       29

<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        IBT BANCORP, INC. AND SUBSIDIARY

Years Ended December 31, 2004, 2003 and 2002


NOTE 23 -- CONDENSED CONSOLIDATED SELECTED QUARTERLY FINANCIAL DATA  (Unaudited)

                                            Quarters Ended 2004
                          -----------------------------------------------------
                            March 31      June 30     September 30  December 31
                          -----------   -----------   ------------  -----------

Interest income           $ 8,310,564   $ 8,372,018   $ 8,401,372   $ 8,641,765
Interest expense            2,852,344     2,877,888     2,969,697     3,107,880
                          -----------   -----------   -----------   -----------
Net interest income         5,458,220     5,494,130     5,431,675     5,533,885
Provision for loan
  losses                      125,000       125,000        40,000       310,000
Non-interest income         1,348,055     1,336,940     1,269,911     1,160,913
Non-interest expense        3,649,837     3,867,618     3,714,607     6,288,804
                          -----------   -----------   -----------   -----------
Income before income
  taxes                     3,031,438     2,838,452     2,946,979        95,994
Income tax expense            678,843       750,216       785,605       613,461
                          -----------   -----------   -----------   -----------

Net income                $ 2,352,595   $ 2,088,236   $ 2,161,374   $  (517,467)
                          ===========   ===========   ===========   ===========

Net income per Share of
  Capital Stock           $      0.79   $      0.70   $      0.73   $     (0.17)
                          ===========   ===========   ===========   ===========


                                            Quarters Ended 2003
                          -----------------------------------------------------
                            March 31      June 30     September 30  December 31
                          -----------   -----------   ------------  -----------

Interest income           $ 8,493,556   $ 8,338,858   $ 8,381,878   $ 8,183,551
Interest expense            2,973,791     2,826,082     2,736,619     2,778,289
                          -----------   -----------   -----------   -----------
Net interest income         5,519,765     5,512,776     5,645,259     5,405,262
Provision for loan
  losses                      150,000       150,000       150,000       150,000
Non-interest income         1,440,540     1,686,128     1,581,936     1,182,452
Non-interest expense        3,246,494     3,744,055     3,581,862     3,727,570
                          -----------   -----------   -----------   -----------
Income before income
  taxes                     3,563,811     3,304,849     3,495,333     2,710,144
Income tax expense            934,406       849,268       933,405       710,813
                          -----------   -----------   -----------   -----------

Net income                $ 2,629,405   $ 2,455,581   $ 2,561,928   $ 1,999,331
                          ===========   ===========   ===========   ===========

Net income per Share of
  Capital Stock           $      0.88   $      0.82   $      0.86   $      0.67
                          ===========   ===========   ===========   ===========

                                       30

<PAGE>

                                IBT BANCORP, INC.
                                CORPORATE PROFILE

                       IBT BANCORP, INC. CORPORATE PROFILE


IBT Bancorp,  Inc. (the  "Company"),  a  Pennsylvania  corporation,  is the bank
holding company for Irwin Bank & Trust Company ("Irwin Bank"). Irwin Bank is the
principal subsidiary of the Company.

Irwin  Bank &  Trust  Company  was  incorporated  in  1922  under  the  laws  of
Pennsylvania  as  a  commercial  bank.  The  bank  is  headquartered  in  Irwin,
Pennsylvania  and  conducts  business  through  8  full  service   branches,   5
supermarket  branches,  a loan office,  and a trust  office in the  Pennsylvania
counties of Westmoreland  and Allegheny.  Irwin Bank is a diversified  financial
services  institution  providing a broad range of commercial  and retail banking
services,  as well as trust  services to consumers and  businesses.  Deposits in
Irwin Bank are insured by the Federal deposit Insurance  Corporation ("FDIC") to
applicable limits.


Stock Market Information

The Company's  common stock is listed on the American  Stock  Exchange  ("AMEX")
under the symbol "IRW". As of March 1, 2005, IBT Bancorp, Inc. had approximately
1,250  shareholders of record and 2,955,455 shares of common stock  outstanding.
The number of  stockholders  does not reflect persons or entities who hold their
stock in nominee or "street" name through various brokerage firms

                                Price Range                Cash Dividends
                           High ($)       Low ($)        Declared Per Share ($)

2004
First Quarter               62.60           47.85                .40
Second Quarter              48.09           44.87                .40
Third Quarter               51.00           45.50                .40
Fourth Quarter              50.25           45.20                .40

2003
First Quarter               41.41           37.25                .35
Second Quarter              50.05           41.00                .35
Third Quarter               52.25           44.09                .35
Fourth Quarter              62.48           49.65                .35


                                       31

<PAGE>
                               IBT BANCORP, INC.
                               CORPORATE PROFILE


The ability of the Company to pay  dividends  is  dependent  upon the ability of
Irwin bank to pay  dividends to the Company.  Because Irwin Bank is a depository
institution  insured by the FDIC it may not pay dividends or distribute  capital
assets if it is in default on any assessment due the FDIC.

Additionally,  Irwin Bank is also subject to certain state banking  regulations.
Under  Federal  Reserve  Policy,  the Company is  required to maintain  adequate
regulatory  capital and is expected to act as a source of financial  strength to
Irwin Bank and to commit resources to support Irwin Bank in circumstances  where
it might not do so absent  such a policy.  The  policy  could have the effect of
reducing the amount of dividends declarable by the Company.

Annual Shareholders Meeting

The annual meeting of shareholders of IBT Bancorp, Inc., will be held on Tuesday
April 19, 2005 at 2:00 PM local time, at the Irwin Masonic Hall,  located at 417
Main Street, Irwin Pennsylvania 15642.

Form 10-K

The Annual Report for the year ended December 31, 2004 filed with the Securities
and Exchange  Commission on Form 10-K, is available  without charge upon written
request. For a copy of the Form 10-K please contact:  Raymond G. Suchta,  Senior
Vice President and Chief Financial Officer, IBT Bancorp,  Inc., 309 Main Street,
Irwin, PA 15642.

Transfer Agent                              Independent Auditors
Registrar and Transfer Company              Edwards Sauer & Owens, P.C.
Investor Relations                          500 Warner Centre
10 Commerce Drive                           Pittsburgh, PA 15222
Cranford, New Jersey 07016-3572
1-800-368-5948

Special Counsel
Malizia, Spidi & Fisch, PC
1100 New York Avenue, NW
Suite 340 West
Washington, D.C. 20005



                                       32
<PAGE>

<TABLE>
<CAPTION>

                               2004 ANNUAL REPORT

IRWIN BANK & TRUST COMPANY OFFICERS

<S>                                                               <C>                            <C>
Robert Rebich, Jr., Chairman  of the  Board                            IRWIN BANK & TRUST COMPANY LOCATIONS
Charles G.  Urtin,  President/CEO
Robert A. Bowell,  Executive Vice President/                           Main Office                  Monroeville
    Secretary-Treasurer/CLO                                            309 Main Street              Haymaker Village
David A. Finui, Senior Vice President/COO                              Irwin, PA 15642              4580 Broadway Blvd.
Raymond G. Suchta, Senior Vice President/CFO                           724-863-3100                 Monroeville, PA 15146
Alan Lazar, Senior Vice President/Commercial Loans                                                  412-858-4450
Louis C. Bouchat, Vice President/Commercial Loans                      Loan Center
Barbara A. Burzio, Vice President/Commercial Loans                     319 Main Street              Penn Township
Lisa A. Dawson, Vice President/Loan Administration                     Irwin, PA 15642              4021 Route 130
Scott J. Fisher, Vice President/Trust                                  724-863-3100                 Irwin, PA 15642
Jay Gordon, Vice President/Commercial Loans                                                         724-744-2176
Donald D. Henderson III, Vice President/Operations                     Trust Division
Debra S. Hopper, Vice President/Human Resources                        Suite 204                    Pitcairn
William E. Killian, Vice President/Business Development                20 N. Pennsylvania Avenue    512 Broadway Blvd.
Robert G. Michaud, Vice President-Marketing                            Greensburg, PA 15601         Pitcairn, PA 15140
Scott D. Porterfield, Vice President/Branch Administration/            724-836-2010                 412-372-3838
    Business Development
Kristin S. Robertucci, Vice President/Accounting                       Branch Offices               Route 30
James W. Thompson, Vice President/Commercial Loans                     Greensburg                   9570 Route 30
Stacey G. Winfield, Vice President/Commercial Loans                    4 Triangle Drive             Irwin, PA 15642
John R. Winter, Vice President/Commercial Loans                        Greensburg, PA 15601         724-863-2510
Douglas L. Appel, Vice President/Network Administration                724-837-5000
Jeffrey Branthoover, Assistant Vice President/                                                      White Oak
    Trust Division                                                     Greensburg (PA Commons)      Oak Park Mall
Barbara J. DelBene, Assistant Vice President/                          20 N. Pennsylvania Avenue    2003 Lincoln Way
    Branch Manager - White Oak                                         Greensburg, PA 15601         White Oak, PA 15131
Mary Ann Ernette, Assistant Vice President-UVEST Financial Services    724-837-5000                 412-678-3000
Keith M. Frid,  Assistant  Vice President/Auditor
Sheli L. Fyock, Assistant Vice President/
     Marketing/Assistant Secretary                                            Irwin Bank Extra Locations
Beverly A. Hahn, Assistant Vice President/                                    Ft. Allen
     Branch Manager - Penn Township                                           Inside Hempfield Shop N' Save
Nancy J. McCullough, Assistant Vice President/                                Greensburg, PA 15601
     Branch Manager - Route 30                                                724-853-8540
John A. Pauls, Jr., Assistant Vice President/Auditor
Maurine J. Peer, Assistant Vice President/                                    Irwin-North Huntingdon
     Branch Manager - Main Office                                             Inside Scozio's Shop N' Save
Darwin H. Poole, Assistant Vice President/                                    Norwin Hills Shopping Center
     Data Processing                                                          8775 Norwin Avenue
Barbara A. Ruffner, Assistant Vice President/Consumer Loans                   North Huntingdon, PA 15642
Linda D. Shaner, Assistant Vice President/                                    724-861-8701
     Commercial Loans
Nancy A. Smith, Assistant Vice President/                                     Monroeville
     Mortgage Lending                                                         Inside Haymaker Village Giant Eagle
Thomas R. Stephenson, Assistant Vice President/                               4548 Broadway Blvd.
     Loan Review                                                              Monroeville, PA 15146
Kathleen T. Jaquette-Tosh, Assistant Vice President/                          412-856-5330
     Branch Manager - Greensburg
Eugene S. Bender, Assistant Trust Officer                                     Penn Crossing
Carolyn Sue Bozzick, Retail Banking Officer/Manager -                         Inside Scozio's Festival Foods
     Haymaker Village                                                         2000 Penny Lane
Deborah L. Kukic, Training Officer                                            Jeannette, PA 15644
Denise Y. Poole, Operations Officer                                           724-744-6111
Sandra L. Schwaderer, Retail Banking Officer/
     Manager - Pitcairn                                                       White Oak
Richard Zelazny, Assistant Vice President/UVEST Financial Services            Inside Scozio's Shop N' Save
                                                                              Oak Park Mall
                                                                              2001 Lincoln Way
                                                                              White Oak, PA 15131
                                                                              412-664-0984
</TABLE>

<PAGE>



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                                      & TRUST COMPANY


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