SECURITY OF PENNSYLVANIA FINANCIAL CORP, SB-2, 1998-09-11

SECURITY OF PENNSYLVANIA FINANCIAL CORP
SB-2, 1998-09-11

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<PAGE> 1
As filed with the Securities and Exchange Commission on September 11, 1998
Registration No. 333-__________

================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

SECURITY OF PENNSYLVANIA FINANCIAL CORP.
(NAME OF SMALL BUSINESS ISSUER IN ITS CERTIFICATE OF INCORPORATION)

<TABLE>
<S> <C> <C>
DELAWARE 6036 BEING APPLIED FOR
(State or Other Jurisdiction of Incorporation or (Primary Standard Industrial (IRS Employer Identification No.)
Organization) Classification Code Number)
</TABLE>

<TABLE>
<S> <C>
SECURITY SAVINGS ASSOCIATION OF HAZLETON
31 W. BROAD STREET 31 W. BROAD STREET
HAZLETON, PENNSYLVANIA 18201 HAZLETON, PENNSYLVANIA 18201
(717) 454-0824 (717) 454-0824
(Address and Telephone Number of Principal Executive Offices) (Address of Principal Place of Business or Intended
Principal Place of Business)
</TABLE>

RICHARD C. LAUBACH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SECURITY SAVINGS ASSOCIATION OF HAZLETON
31 W. BROAD STREET
HAZLETON, PENNSYLVANIA 18201
(717) 454-0824
(Name, Address and Telephone Number of Agent for Service)

Copies to:
DOUGLAS P. FAUCETTE, ESQUIRE
THOMAS J. HAGGERTY, ESQUIRE
SCOTT A. BROWN, ESQUIRE
MULDOON, MURPHY & FAUCETTE
5101 WISCONSIN AVENUE, N.W.
WASHINGTON, D.C. 20016
(202) 362-0840

APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC: As soon as practicable
after this Registration Statement becomes effective.

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective Registration Statement for the same offering. /___/

If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act Registration Statement number of the earlier effective Registration
Statement for the same offering. /___/

If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act Registration Statement number of the earlier effective Registration
Statement for the same offering. /___/

If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. /___/

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
=========================================================================================================================
Title of each Class of Amount to Proposed Maximum Proposed Maximum Amount of
Securities to be Registered be Registered Offering Price Aggregate Offering Registration Fee
Per Unit Price (1)
- ------------------------------- ------------------- ---------------------- ------------------------- -----------------
<S> <C> <C> <C> <C>
Common Stock 1,944,075
$.01 par Value Shares(2) $10.00 $19,440,750 $5,736
=========================================================================================================================
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes shares to be issued to Security Savings Charitable Foundation, a
privately-formed charitable foundation.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.

<PAGE> 2

[To be used in connection with the Syndicated Community Offering only]

SYNDICATED PROSPECTUS SUPPLEMENT

SECURITY OF PENNSYLVANIA FINANCIAL CORP.
(PROPOSED HOLDING COMPANY FOR
SECURITY SAVINGS ASSOCIATION OF HAZLETON)

__________ SHARES OF COMMON STOCK

Security of Pennsylvania Financial Corp. (the "Company"), a
Delaware corporation, is offering for sale in a syndicated community offering
(the "Syndicated Community Offering") __________ shares, at a per share price
of $10.00, of its common stock, par value $.01 per share (the "Common Stock"),
to be sold upon the conversion (the "Conversion") of Security Savings
Association of Hazleton, Hazleton, Pennsylvania (the "Association") from a
mutual to a stock association and the issuance of the Association's outstanding
capital stock to the Company pursuant to a plan of conversion, as amended (the
"Plan of Conversion"). The remaining __________ shares of the Common Stock to
be sold in the Conversion have been subscribed for in subscription and
community offerings (the "Subscription and Community Offerings") by holders of
deposit accounts with the Association with a balance of $50 or more as of March
31, 1997, by the Security Savings Association of Hazleton Employee Stock
Ownership Plan, a tax-qualified employee benefit plan, and related trust (the
"ESOP"), by holders of deposit accounts with the Association with a balance of
$50 or more as of ______________, 1998, by certain other account holders and
borrowers of the Association and, then, by certain members of the general
public. See "The Conversion - General." Contained herein is the Prospectus in
the form used in the Subscription and Community Offerings. The purchase price
for all shares sold in the Syndicated Community Offering will be the same as
the price paid by subscribers in the Subscription and Community Offerings (the
"Purchase Price"). The Purchase Price of $10.00 per share is the amount to be
paid for each share at the time a purchase order is submitted. See the cover
page of the Prospectus and the table below for information as to the method by
which the range within which the number of shares offered may vary and the
method of subscribing for shares of the Common Stock.

Funds submitted to the Association with purchase orders will
earn interest at the Association's passbook rate of interest from the date of
receipt until completion or termination of the Conversion. The Syndicated
Community Offering will expire no later than _______________, 199_, unless
extended by the Association and the Company with the approval of the Office of
Thrift Supervision. Such extensions may not go beyond _______________, 199_.
If an extension of time has been granted, all subscribers will be notified of
such extension, and of their rights to confirm their subscriptions, or to
modify or rescind their subscriptions and have their funds returned promptly
with interest, and of the time period within which the subscriber must notify
the Association of his intention to confirm, modify or rescind his
subscription. If an affirmative response to any resolicitation is not received
by the Association and the Company from subscribers,

<PAGE> 3
such orders will be rescinded and all funds will be returned promptly with
interest. The minimum number of shares which may be purchased is 25 shares.
Except for the ESOP, which may purchase up to 10% of the total number of shares
of Common Stock issued in the Conversion, no person, together with associates
of and persons acting in concert with such person, may purchase in the
Community Offering or Syndicated Community Offering more than the total number
of shares offered that could be purchased for $150,000 at the Purchase Price;
provided however, that shares of Common Stock purchased in the Community
Offering by any persons, together with associates of and persons acting in
concert with such persons, will be aggregated with purchases in the Syndicated
Community Offering and be subject to an overall maximum purchase limitation of
the greater of (i) $150,000 or (ii) 1.0% of the shares offered. See "The
Conversion - Subscription Offering and Subscription Rights," "- Syndicated
Community Offering" and "-Limitations on Common Stock Purchases." The Company
reserves the right, in its absolute discretion, to accept or reject, in whole
or in part, any or all subscriptions in the Syndicated Community Offering.

The Company and the Association have engaged Sandler O'Neill &
Partners, L.P. ("Sandler O'Neill") as financial advisors to assist them in the
sale of the Common Stock in the Syndicated Community Offering. It is
anticipated that Sandler O'Neill will use the services of other registered
broker-dealers ("Selected Dealers") and that fees to Sandler O'Neill and such
Selected Dealers will not exceed 2% of the aggregate Purchase Price of the
shares sold in the Syndicated Community Offering. Neither Sandler O'Neill nor
any Selected Dealer shall have any obligation to take or purchase any shares of
Common Stock in the Syndicated Community Offering.

The Company has applied to have its Common Stock listed on the
American Stock Exchange ("AMEX") under the symbol "__." Prior to this
offering, there has not been a public market for the Common Stock, and there
can be no assurance that an active and liquid trading market for the Common
Stock will develop. The absence or discontinuance of a market may have an
adverse impact on both the price and liquidity of the stock.

FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED
BY EACH PARTICIPANT, SEE "RISK FACTORS" ON PAGES __ TO __ OF THE PROSPECTUS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE OFFICE OF THRIFT
SUPERVISION, THE PENNSYLVANIA DEPARTMENT OF BANKING OR ANY OTHER STATE OR
FEDERAL AGENCY, NOR HAS SUCH OFFICE OR OTHER AGENCY PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

THE SHARES ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE
FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY NOR
ARE THEY INSURED OR GUARANTEED BY THE ASSOCIATION OR THE COMPANY. THE COMMON
STOCK IS SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL
INVESTED.

2
<PAGE> 4
<TABLE>
<CAPTION>
MAXIMUM
MINIMUM AS ADJUSTED
1,190,000 1,851,500
PER SHARE SHARES SHARES
----------- ------------- -------------
<S> <C> <C> <C>
Public offering price . . . . . . . . . . . . $10.00 $11,900,000 $18,515,000
Estimated underwriting commissions
and other expenses . . . . . . . . . . . 774,118 894,972

Estimated proceeds to Company . . . . . . . . $11,125,882 $17,620,028
</TABLE>

SANDLER O'NEILL & PARTNERS, L.P.

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

The date of this Prospectus Supplement is _______________, 1998.

3
<PAGE> 5

Prospectus Subject to Completion

SECURITY OF PENNSYLVANIA FINANCIAL CORP.
(Proposed Holding Company for
Security Savings Association of Hazleton)

UP TO 1,851,500 SHARES OF COMMON STOCK

This offering is made as part of the plan of conversion of Security
Savings Association of Hazleton, Hazleton, Pennsylvania, from a mutual to a
stock association. In this conversion, the Association will become a
wholly-owned subsidiary of Security of Pennsylvania Financial Corp., a Delaware
corporation. No shares will be sold if the minimum number of shares are not
subscribed for or if the necessary approvals from the banking regulatory
authorities and the members of the Association are not received.

There is currently no public market for the common stock. The Company
has applied for the common stock to be listed on the American Stock Exchange,
under the symbol "_____", upon completion of the conversion.

Investing in the common stock involves certain risks. See "Risk
Factors" beginning on page __.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED
UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

THESE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE OFFICE OF
THRIFT SUPERVISION, THE PENNSYLVANIA DEPARTMENT OF BANKING OR ANY OTHER FEDERAL
AGENCY, NOR HAS SUCH OFFICE OR OTHER AGENCY PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

<TABLE>
<CAPTION>
MAXIMUM
MINIMUM AS ADJUSTED
1,190,000 1,851,500
PER SHARE SHARES SHARES
---------------- ------------------ -------------------
<S> <C> <C> <C>
Public offering price . . . . . . . . . . . . . . . . . $10.00 $11,900,000 $18,515,000
Estimated underwriting commissions
and other expenses . . . . . . . . . . . . . . . . 774,118 894,972
Estimated proceeds to Company . . . . . . . . . . . . . 11,125,882 17,620,028
</TABLE>

The shares are being offered in a Subscription Offering to persons who have
specified priorities of subscription rights based on their relationship with
the Association. IN ORDER TO PURCHASE SHARES PURSUANT TO A SUBSCRIPTION RIGHT,
YOU MUST SUBMIT A PROPERLY COMPLETED SUBSCRIPTION ORDER FORM AND CERTIFICATION,
TOGETHER WITH PAYMENT FOR THE SHARES, TO THE ASSOCIATION PRIOR TO THE
EXPIRATION DATE, ____________, EASTERN TIME, ON _______________, 1998, UNLESS
EXTENDED.

To the extent sufficient shares to complete the conversion are not sold in
the Subscription Offering, the remaining shares will be offered for sale in a
Community Offering and, if necessary, a Syndicated Community Offering or other
offering. The Community Offering may be commenced prior to completion of the
Subscription Offering.

Sandler O'Neill & Partners, L.P. has agreed to assist the Company in
selling the shares, but does not guarantee that at least the minimum number of
shares will be sold.

----------------------------------
SANDLER O'NEILL & PARTNERS, L.P.
----------------------------------

The date of this Prospectus is _____________, 1998.
<PAGE> 6

INSERT MAP PAGE HERE

2
<PAGE> 7
SUMMARY

This summary highlights selected information from this document and
does not contain all the information that you need to know before making an
informed investment decision. To understand the stock offering fully, you
should read carefully this entire Prospectus, including the financial
statements and the notes to the financial statements of Security Savings
Association of Hazleton included elsewhere herein. References in this document
to the "Association" refer to Security Savings Association of Hazleton.
References in this document to the "Company" refer to Security of Pennsylvania
Financial Corp.

<TABLE>
<S> <C>
SECURITY OF PENNSYLVANIA
FINANCIAL CORP. . . . . . . . The Company was recently organized to become a savings and loan holding company and own
all of the capital stock of the Association to be issued upon its conversion from mutual
to stock form. To date, the Company has not engaged in any business.

The Company's office is located at 31 W. Broad Street, Hazleton, Pennsylvania and its
telephone number is (717) 454-0824. The Association's executive office has the same
address and phone number.

SECURITY SAVINGS ASSOCIATION
OF HAZLETON . . . . . . . . . The Association is a Pennsylvania mutual savings and loan association. At June 30,
1998, the Association had total assets of $112.0 million, total deposits of $102.6
million and total equity of $9.2 million.

The Association operates four banking offices in Luzerne and Carbon counties in Northeast
Pennsylvania. The Association historically has operated as a community-oriented banking
institution offering primarily one- to four- family residential mortgage loans and
consumer loans and a variety of retail deposit products.

THE CONVERSION . . . . . . . . The Association has adopted a Plan of Conversion (the "Plan") which is subject to
requirements of the Office of Thrift Supervision (the "OTS") and the Pennsylvania
Department of Banking (the "Pennsylvania Department"). The conversion, which hereafter is
referred to as the "Conversion," is governed by the Plan and has three major components,
as follows:

(i) The conversion of the Association to stock form;

(ii) The acquisition by the Company of all of the outstanding capital stock of the
Association;

(iii) The sale by the Company of its common stock, par value $0.01 per share (the "Common
Stock").

SECURITY SAVINGS CHARITABLE
FOUNDATION . . . . . . . . . The Association intends to establish a charitable foundation, Security Savings Charitable
Foundation, or the "Foundation." The Company intends to contribute to the Foundation
common stock equal to 5% of the common stock sold in the conversion. The authority for
the affairs of the Foundation is vested in its Board of Directors, all of whom are
existing Directors or officers of the Company and the Association.
</TABLE>

3
<PAGE> 8

<TABLE>
<S> <C>
TERMS OF THE OFFERING . . . . . The shares of Common Stock are offered at a fixed price of $10.00 per share (the
"Purchase Price") in the Subscription Offering pursuant to subscription rights in the
following order of priority to:

(i) Eligible Account Holders in the Association as of March 31, 1997;

(ii) the Security Savings Association of Hazleton Employee Stock Ownership Plan (the
"ESOP");

(iii) Supplemental Eligible Account Holders in the Association as of ____ who are not
entitled to a first priority subscription right; and

(iv) Other Members in the Association as of ______ who are not entitled to a higher
priority subscription right. See "The Conversion--Subscription Offering and Subscription
Rights" for the complete qualifications of each of the subscription right priorities.

Shares of Common Stock not subscribed for by persons having priority subscription rights
will be offered to certain members of the general public in a Community Offering.

EXPIRATION DATE OF
SUBSCRIPTION OFFERING . . . . Subscription rights will expire if not exercised and all orders to purchase Common Stock
in the Subscription Offering must be received by __:__ ____, Eastern time, on ________,
1998, unless extended, __________ which is the "Expiration Date."

NONTRANSFERABILITY OF
SUBSCRIPTION RIGHTS . . . . . The subscription rights are not transferable.

NUMBER OF SHARES OFFERED . . . The Company is offering between a minimum of 1,190,000 shares and a maximum of 1,610,000
shares of Common Stock, or up to an adjusted maximum of 1,851,500 shares if the maximum
number of shares is increased.

The number of shares offered is based upon an independent appraisal prepared by Keller &
Company, Inc. ("Keller") dated as of August 14, 1998, which estimates that the aggregate
pro forma market value of the Common Stock to be sold ranged from $11.9 million to $16.1
million. (This range is referred to as the "Estimated Price Range"). Keller is an
independent appraisal firm experienced in appraisals of savings institutions.
Establishing the Foundation in connection with the Conversion will result in a lower
aggregate market valuation than if the Conversion were completed without the Foundation.

The final aggregate estimated pro forma market value of the Common Stock to be sold will
be determined at the time of closing of the Subscription Offering, or if all shares are
not sold in the Subscription Offering, the closing of the Community Offering or other
subsequent offering. The Subscription Offering, Community Offering and any other
subsequent offerings are referred to collectively as the "Offerings." Such estimated
aggregate pro forma market value is subject to change due to changes in market and
general financial and economic conditions.

The maximum number of shares to be sold may be increased up to the adjusted maximum, a
15% increase above the maximum, if the aggregate estimated pro forma market value of the
Common Stock to be sold is increased.
</TABLE>

4
<PAGE> 9

<TABLE>
<S> <C>
HOW DO I ORDER STOCK? . . . . . If you are entitled to a subscription right, you may order shares in the Subscription
Offering by delivering to the Association a properly executed stock order form and
certification ("order form") together with full payment for the shares ordered on or
prior to the Expiration Date. ONCE TENDERED, SUBSCRIPTION ORDERS CANNOT BE REVOKED OR
MODIFIED WITHOUT THE CONSENT OF THE ASSOCIATION. All order forms must be accompanied or
preceded by a Prospectus. Please make sure you review the Prospectus carefully prior to
submitting an order form. To ensure that each purchaser receives a Prospectus at least
48 hours prior to the Expiration Date in accordance with Rule 15c2-8 of the Securities
Exchange Act of 1934, no Prospectus will be mailed any later than five days prior to the
Expiration Date or hand delivered any later than two days prior to such date. The
Association is not obligated to accept subscriptions not submitted on an original stock
order form.

Persons wishing to order shares offered in the Community Offering also must submit a
properly executed order form and certification prior to the expiration date to be set for
the Community Offering.

FORM OF PAYMENT FOR SHARES . . Payment for subscriptions may be made:

(i) in cash (if delivered in person at any banking office of the Association);
(ii) by check, bank draft or money order; or
(iii) by authorization of withdrawal from deposit accounts maintained at the Association.

Orders for Common Stock in the Subscription Offering which aggregate $50,000 or more must
be paid by official bank or certified check or by withdrawal authorization from a deposit
account at the Association.

NUMBER OF SHARES THAT MAY
BE ORDERED . . . . . . . . Minimum: 25 shares ($250).

Maximum:

- No Eligible Account Holder, Supplemental Eligible Account Holder or Other Member may
purchase in the Subscription Offering more than $150,000 of Common Stock.

- No person, together with associates or persons acting in concert with such person,
may purchase in the Community Offering more than $150,000 of Common Stock.

- No person, together with associates or persons acting in concert with such person,
may purchase in the aggregate more than the greater of: (i) $150,000 of Common Stock
or (ii) 1% of the Common Stock to be sold. However, the ESOP may purchase up to 10%
of the Common Stock to be issued in connection with the Conversion, including shares
issued to the Foundation. It is intended that the ESOP will purchase 8% of the
Common Stock issued, including shares issued to the Foundation.

USE OF PROCEEDS . . . . . . . . The Company will use 50% of the net proceeds from the sale of Common Stock to purchase
all of the Common Stock of the Association to be issued in the Conversion. The portion
of net proceeds retained by the Company will be used for general business activities,
including the lending of funds to the ESOP (to the extent such loan is not funded by a
third party) to enable the ESOP to
</TABLE>

5
<PAGE> 10

<TABLE>
<S> <C>
purchase up to 8% of the stock issued in connection with the Conversion, including shares
issued to the Foundation. The Company intends initially to invest the remaining net
proceeds in federal funds and securities, primarily mortgage-related securities and
federal agency obligations. The Association intends to utilize the net proceeds from the
sale of its stock to the Company for general business purposes, including investment in
loans and mortgage-related securities.

DIVIDEND POLICY . . . . . . . . No decision has been made by the Company with respect to the payment of dividends if any.
Additionally, in connection with the Conversion, the Company and the Association have
committed to the OTS that during the one-year period following the Conversion, the
Company will not make any distribution to stockholders that, for federal tax purposes,
would be treated as a return of capital without the prior approval of the OTS.

BENEFITS OF THE CONVERSION TO
MANAGEMENT . . . . . . . . . Among the benefits to the Association and the Company anticipated from the Conversion is
the ability to attract and retain personnel through the use of stock options and other
stock-related benefit programs. Subsequent to the Conversion, the Company intends to
adopt a Stock-Based Incentive Plan for the benefit of directors, officers and employees
of the Company and Association. If the Stock-Based Incentive Plan is adopted within one
year after the Conversion, the plan will be subject to stockholders' approval at a
meeting of stockholders which may not be held earlier than six months after the
Conversion. The Stock-Based Incentive Plan would provide for the award at no cost to the
recipients of shares of Common Stock in an amount equal to 4% of the Common Stock issued
in connection with the Conversion, including shares issued to the Foundation, and the
grant of options to purchase Common Stock in an amount equal to 10% of the Common Stock
issued in the Conversion, including shares issued to the Foundation.

Additionally, certain officers of the Company and the Association will be provided with
employment agreements or change in control agreements which provide such officers with
employment rights and/or payments upon their termination of service following a change in
control. The Stock-Based Incentive Plan may also provide participants with benefits upon
a change in control of the Company or the Association.

VOTING CONTROL OF OFFICERS
AND DIRECTORS . . . . . . . . Directors and executive officers of the Association and the Company expect to purchase
approximately 6.06% or 4.48% of shares of Common Stock to be issued in the Conversion,
including shares issued to the Foundation, based on the estimated minimum and maximum
number of shares issued, respectively. Additionally, assuming the implementation of the
ESOP and the Stock-Based Incentive Plan (and the exercise of all options which may be
granted under that plan), directors, executive officers and employees have the potential
to control the voting of approximately 28.06% or 26.48% of the Common Stock to be issued
in the Conversion, including shares issued to the Foundation, based on the minimum and
maximum of such shares, respectively.

NO BOARD RECOMMENDATIONS . . . The Association's and the Company's Board of Directors make no recommendation to
depositors or other potential investors regarding whether such persons should purchase
the Common Stock. An investment in the Common Stock must be made pursuant to each
investor's evaluation of his or her best interests and financial capability.
</TABLE>

6
<PAGE> 11
<TABLE>
<S> <C>
CONVERSION CENTER . . . . . . . If you have any questions regarding the Conversion, please call the Conversion Center at
(717) ___-____.
</TABLE>

7
<PAGE> 12
SELECTED FINANCIAL AND OTHER DATA OF THE ASSOCIATION

The selected financial and other data of the Association set forth
below is derived in part from, and should be read in conjunction with, the
Financial Statements of the Association and Notes thereto presented elsewhere
in this Prospectus.

<TABLE>
<CAPTION>
AT JUNE 30,
--------------------------------------------------------------
1998 1997 1996 1995 1994
--------- ---------- --------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL DATA:

Total assets . . . . . . . . . . . . . . . $111,990 $107,447 $107,943 $104,326 $102,108
Cash and due from banks . . . . . . . . . 3,272 2,867 1,910 1,543 4,599
Interest-bearing deposits with banks . . . 8,586 6,167 8,196 7,429 13,163
Loans, net (1) . . . . . . . . . . . . . . 69,211 66,738 65,071 63,943 57,347
Securities held-to-maturity (2):
Mortgage-related securities, net . . . 2,281 4,706 5,565 6,414 7,577
Investment securities, net . . . . . . 18,502 20,136 18,509 18,411 12,787
Securities available-for-sale (2):
Mortgage-related securities, net . . . 1,353 1,672 2,246 995 1,253
Investment securities, net . . . . . . 6,548 2,576 4,056 3,438 3,352
Deposits . . . . . . . . . . . . . . . . . 102,604 98,465 99,348 96,398 94,817
Total equity . . . . . . . . . . . . . . . 9,231 8,583 8,325 7,741 7,004
Foreclosed real estate, net . . . . . . . 221 531 171 -- 107
Nonperforming assets and
troubled debt restructurings . . . . . . 2,085 2,117 2,041 1,591 1,624
</TABLE>

<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED JUNE 30,
---------------------------------------------------------------
1998 1997 1996 1995 1994
------- -------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA:
Total interest income..................... $7,740 $7,440 $7,459 $7,121 $6,575
Interest expense.......................... 4,260 4,029 4,230 3,717 3,373
------ ------ ------ ------ ------
Net interest income ................... 3,480 3,411 3,229 3,404 3,202
Provision for loan losses................. 176 34 102 249 46
------ ------ ------ ------ ------
Net interest income after provision
for loan losses..................... 3,304 3,377 3,127 3,155 3,156
Noninterest income:
Net gain on sale of securities......... 1 17 -- -- --
Other.................................. 303 267 258 239 265
Noninterest expenses...................... 2,485 3,107(3) 2,426 2,378 2,101
------ ------ ------ ------ ------
Income before provision for income taxes.. 1,123 554 959 1,016 1,320
Provision for income taxes................ 506 344 362 366 506
------ ------ ------ ------ ------
Net income............................. $ 617 $ 210 $ 597 $ 650 $ 814
====== ====== ====== ====== ======
</TABLE>

(See footnotes on next page)

8
<PAGE> 13

<TABLE>
<CAPTION>
AT OR FOR THE FISCAL YEAR ENDED JUNE 30,
----------------------------------------------------------------
1998 1997 1996 1995 1994
-------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING RATIOS AND OTHER DATA (4):
PERFORMANCE RATIOS:
Average yield on interest-earning assets (5) .......... 7.40% 7.28% 7.28% 7.32% 7.42%
Average rate paid on interest-bearing liabilities ..... 4.24 4.11 4.31 3.91 3.65
Average interest rate spread (6) ...................... 3.16 3.17 2.97 3.41 3.77
Net interest margin (7) ............................... 3.33 3.34 3.15 3.50 3.61
Ratio of interest-earning assets to
interest-bearing liabilities ........................ 104.27 104.22 104.31 102.36 95.90
Net interest income after provision for loan
losses to noninterest expense ....................... 132.96 108.69 128.90 132.67 150.21
Noninterest expense as a percent of
average assets ...................................... 2.26 2.91 2.27 2.31 2.11
Return on average assets .............................. 0.56 0.20 0.56 0.63 0.82
Return on average equity .............................. 6.89 2.52 7.40 8.81 11.97
Ratio of average equity to average assets ............. 8.16 7.79 7.56 7.17 6.83
REGULATORY CAPITAL RATIOS: (8)
Tangible capital ratio ................................ 8.35 8.13 7.89 7.59 7.11
Core capital ratio .................................... 8.35 8.13 7.89 7.59 7.11
Risk-based capital ratio .............................. 16.92 21.70 21.15 18.31 16.85
ASSET QUALITY RATIOS:
Nonperforming loans and troubled debt
restructurings as a percent of total loans (9) ...... 2.69 2.38 2.87 2.49 2.65
Nonperforming assets and troubled debt
restructurings as a percent of total assets (10) .... 1.86 1.97 1.89 1.53 1.59
Allowance for loan losses as a percent
of total loans ...................................... 0.65 0.64 0.69 0.63 0.37
Allowance for loan losses as a percent of
nonperforming loans and troubled debt
restructurings (1)(9) ............................... 24.25 27.05 23.90 25.20 14.17
Net loans charged-off to average interest-
earning loans ....................................... 0.22 0.05 0.02 0.09 0.05
FULL SERVICE OFFICES AT END OF PERIOD .................... 4 4 4 4 4
</TABLE>

- -------------------------
(1) Loans, net, represents gross loans receivable net of the allowance for
loan losses, loans in process and deferred loan origination fees. The
allowance for loan losses at June 30, 1998, 1997, 1996, 1995 and 1994 was
$452,000, $429,000, $447,000, $401,000 and $215,000, respectively.
(2) The Association adopted Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," during fiscal 1994.
(3) Includes a one-time special assessment of $620,000 in order to
recapitalize the Savings Association Insurance Fund ("SAIF") fund in
fiscal 1997.
(4) Asset Quality Ratios and Regulatory Capital Ratios are end of period
ratios. With the exception of end of period ratios, all ratios are based
on average monthly balances during the indicated periods.
(5) Calculations of yield for tax-exempt investments are not presented on a
tax equivalent basis due to the average balance of tax-exempt investments
in 1998 not being material. There were no securities exempt from federal
or state taxes in previous years.
(6) The average interest rate spread represents the difference between the
weighted average yield on average interest-earning assets and the weighted
average cost of average interest-bearing liabilities.
(7) The net interest margin represents net interest income as a percent of
average interest-earning assets.
(8) For definitions and further information relating to the Association's
regulatory capital requirements, see "Regulation -- Capital Requirements."
See "Regulatory Capital Compliance" for the Association's pro forma capital
levels as a result of the Offerings.
(9) Non-performing loans consist of all non-accrual loans and all other loans
90 days or more past due. It is the policy of the Association to cease
accruing interest on loans 90 days or more past due (unless the loan
principal and interest are determined by management to be fully secured
and in the process of collection) and to charge off all accrued interest.
See "Business of the Association--Delinquent Loans, Classified Assets, and
Foreclosed Real Estate."
(10) Non-performing assets consist of non-performing loans and foreclosed real
estate.

9
<PAGE> 14
RISK FACTORS

The following risk factors should be considered by investors in
deciding whether to purchase the Common Stock.

SENSITIVITY TO CHANGES IN INTEREST RATES

The Association's profitability is dependent to a large extent upon
its net interest income, which is the difference between its interest income on
interest-earning assets, such as loans and investments, and its interest
expense on interest-bearing liabilities, such as deposits and borrowings.
Accordingly, the Association's profitability will be significantly affected by
changes in market interest rates and its ability to manage its assets and
liabilities in response to such changes.

The Association anticipates that an increase in interest rates could
have an adverse effect on the Association. The Association primarily monitors
its interest rate sensitivity through the use of a model which estimates the
change in the Association's net portfolio value ("NPV") over a range of
interest rate scenarios. NPV is the present value of expected cash flows from
assets, liabilities and off-balance sheet contracts. As of June 30, 1998,
based on assumptions utilized by the Association, it is estimated that a 200
basis point increase in market interest rates would result in a 12% decrease in
NPV, compared to a 8% estimated increase in NPV as a result of a 200 basis
point decrease in market interest rates. NPV estimated changes do not provide
a precise forecast of the effect of changes in market interest rates on the
Association's net interest income. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Management of Interest Rate
Risk and Market Risk Analysis."

Increases in interest rates also could adversely affect the type
(fixed-rate or adjustable-rate) and amount of loans originated by the
Association and the average life of loans and securities which, in turn, could
adversely impact the yields earned on the Association's loan and securities
portfolios.

POTENTIAL LOW RETURN ON EQUITY FOLLOWING THE CONVERSION

At June 30, 1998, the Association's ratio of equity to total assets
was 8.2%. The Company's equity position will be significantly increased as a
result of the Conversion. On a pro forma basis as of June 30, 1998, assuming
the sale of Common Stock at the midpoint of the Estimated Price Range, the
Company's ratio of equity to assets would approximate 16.92%. The Company's
ability to invest this new capital in interest- earning assets, such as loans
and securities, which bear rates of return comparable to its current loans and
securities investments will be significantly affected by industry competition.
The Company currently anticipates that it will take time to prudently deploy
such capital. As a result, the Company's return on equity initially is
expected to be below its historical return on equity and may be below peer
group institutions after the Conversion. No assurances can be made as to when
or if the Company will achieve returns on its equity that are comparable to
industry peers or industry averages. Additionally, due to the implementation
of stock-based benefit plans such as the ESOP and Stock-Based Incentive Plan,
the Company's future compensation expense will be increased, thereby, adversely
affecting its net income and return on equity.

WEAKNESS OF REGIONAL AND LOCAL ECONOMY

Economic conditions at the local and national levels, as well as
government policies and regulations concerning, among other things, monetary
and fiscal affairs, significantly affect the operations of financial
institutions such as the Association. The population of the market in which
the Association operates is relatively small and in recent years has remained
relatively static. In addition, the population of Luzerne County has one of
the oldest average ages of all counties in the United States and the
unemployment rate in the Association's market area is greater than the national
average. Further, because of the significant number of financial institutions
competing for funds in the market, the Association has experienced increased
competition for loan and deposit customers. Accordingly, the Association could
be exposed to a higher cost of funds and/or a decreased net interest margin in
the future.

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<PAGE> 15
LENDING RISKS

REAL ESTATE LOANS

ONE- TO FOUR-FAMILY LOANS. Due to the current relatively low interest
rate environment, a significant portion of the Association's originations of
one- to four-family real estate mortgage loans (65% during the first six months
of calendar 1998) relate to refinancings of existing mortgage loans either with
the Association or other lenders. Refinancing of existing loans at lower rates
tends to compress the Association's net interest margin and may result in
reduced profitability.

Commencing in 1996, the Association experienced an increase in the
aggregate amount of its nonperforming assets and troubled debt restructurings
which it attributes in significant part to a general decline in real estate
values in its market area during that period. Initially, the Association was
slow to handle the increased number of loans which warranted foreclosure. The
Association has improved its procedures for addressing delinquent loans. As a
result, while its level of nonperforming assets at June 30, 1998 of 1.86% of
total assets is relatively high compared to its peers, the Association
anticipates that such level will decrease in future periods. At June 30, 1998,
loans 60-89 days delinquent had been reduced to 0.18% of total loans compared
to 1.14% at June 30, 1997.

MULTI-FAMILY AND COMMERCIAL REAL ESTATE LOANS. The Association's
multi-family and commercial real estate loans aggregated $4.8 million or 6.8%
of total loans at June 30, 1998. Multi-family and commercial real estate loans
generally are considered to have a higher degree of risk and involve larger
principal amounts than one- to four-family mortgage loans. In addition,
because multi-family and commercial real estate loans often are dependent on
successful operation and management of the properties, repayment of such loans
may be subject to adverse conditions in the real estate market or the economy
to a greater extent than one-to four-family loans.

CONSTRUCTION LOANS. At June 30, 1998, construction loans totalled
$523,000, or 0.8% of total loans. During fiscal 1998 the Association
originated $2.1 million of construction loans for one- to four-family
properties, or 13.5% of total loan originations for that year. Construction
loans are generally considered to involve a higher degree of credit risk than
long-term financing on improved, owner-occupied real estate because the risk of
loss on such loans is dependent largely upon the accuracy of the initial
estimate of the property's value at completion of construction or development
compared to the estimated cost (including interest) of construction. If the
estimate of value proves to be inaccurate, the property securing the loan, when
completed, may have a value which is insufficient to assure full repayment of
the loan.

CONSUMER LOANS

At June 30, 1998, the Association's consumer loan portfolio totalled
$9.9 million, or 14.2% of total loans. These consumer loans include home equity
loans and lines of credit, which although secured by one- to four-family real
property, generally are secured by a second lien rather than a first mortgage
on such property. In addition, consumer loans generally are dependent on the
borrower's continuing financial stability and, therefore, are more likely to be
adversely affected by unemployment, divorce, illness or personal bankruptcy.

COMMERCIAL LOANS

The Association does not currently originate any commercial loans.
However, the Association is actively considering the commencement of commercial
lending on a limited basis as part of the long-term deployment of proceeds from
the Conversion. The Association would only commence such commercial lending
after it hired an experienced commercial lending officer. Commercial loans are
generally considered to involve a higher degree of risk compared to first
mortgage loans on one- to four-family real property. Risk of loss on
commercial business lending is dependent in significant part on the business
success of the borrower and on general economic conditions in the region or
industry in which the borrower operates. Commercial business loans also
require continued review and evaluation regarding the performance of the
borrower.

11
<PAGE> 16
ESTABLISHMENT OF THE CHARITABLE FOUNDATION

The Company intends to establish the Foundation and to contribute to
it shares of Common Stock equal to 5% of the shares to be sold in the
Conversion. Establishment of the Foundation is subject to the approval of the
Association's members at a special meeting of members (the "Special Meeting").
If approved by members, the establishment of the Foundation will be dilutive to
the voting and ownership interests of stockholders and will have an adverse
impact on the operating results of the Company for its fiscal year ending June
30, 1999, possibly resulting in an operating loss for that year.

DILUTION OF STOCKHOLDERS' INTERESTS. At the minimum, midpoint and
maximum of the Estimated Price Range, the contribution to the Foundation would
be 59,500, 70,000 and 80,500 shares, with a value of $595,000, $700,000 and
$805,000, respectively, based on the Purchase Price of $10.00 per share for the
shares of Common Stock to be sold in the Conversion. Upon completion of the
Conversion and establishment of the Foundation, the Company will have 1,690,500
shares issued and outstanding at the maximum of the Estimated Price Range, of
which the Foundation will own 80,500 shares, or 4.8% AS A RESULT, PERSONS
PURCHASING SHARES IN THE CONVERSION WILL HAVE THEIR OWNERSHIP AND VOTING
INTERESTS IN THE COMPANY DILUTED BY 4.8%. SEE "PRO FORMA DATA."

ADVERSE IMPACT ON EARNINGS. The Company will recognize an expense in
the amount of the contribution to the Foundation in the quarter in which it
occurs, which is expected to be the second quarter of fiscal 1999. Such
expense will reduce earnings and have a material adverse impact on the
Company's earnings for the fiscal year. The amount of the contribution will
range from $595,000 to $805,000, depending on the amount of Common Stock sold
in the Conversion. The contribution expense will be partially offset by the
tax deductibility of the expense. The Company has been advised by its
independent accountants that the contribution to the Foundation will be
deductible for federal income tax purposes, subject to a limitation based on
10% of the Company's annual taxable income. Assuming a contribution of $805,000
in Common Stock, based on the maximum of the Estimated Price Range, the Company
estimates a net tax effected expense of $470,000. If the Foundation had been
established at June 30, 1998, the Association would have reported net income of
$147,000 for fiscal 1998 rather than reporting net income of $617,000. In
addition to the contribution to the Foundation, the Association may in the
future continue to make ordinary charitable contributions within its community.

POSSIBLE NONDEDUCTIBILITY OF THE CONTRIBUTION. Based on the maximum
of the Estimated Price Range, the Company estimates that substantially all of
the contribution to the Foundation should be deductible for federal tax
purposes over the permissible six-year period. However, no assurance can be
made that the Company will have sufficient pre-tax income over the five-year
period following the year in which the contribution is initially made to fully
utilize the carryover related to the excess contribution. Furthermore,
although the Company and the Association have received an opinion of their
independent accountants that the Company will be entitled to the deduction for
the contribution to the Foundation, there can be no assurance that the IRS will
recognize the Foundation as a Section 501(c)(3) exempt organization or that the
deduction will be permitted. In such event, there would be no tax benefit
related to the Foundation.

POTENTIAL ANTI-TAKEOVER EFFECT. If approved by the Association's
members, upon completion of the Conversion, the Foundation will own 4.8% of the
total shares of the Company's Common Stock outstanding. However, pursuant to
the terms of the contribution as mandated by the OTS, the shares of Common
Stock held by the Foundation must be voted in the same ratio as all other
shares of the Company's Common Stock on all proposals considered by the
stockholders of the Company. As a result, the Company does not believe the
Foundation will have an anti-takeover effect on the Company. In the event,
however, that the OTS were to waive this voting restriction and not impose
other restrictions and requirements with respect to the Foundation, the
Foundation's board of directors would exercise sole voting power over such
shares. See "The Conversion--Establishment of the Charitable
Foundation--Regulatory Conditions Imposed on the Foundation." If the
Foundation's shares are combined with shares purchased directly by officers and
directors of the Company, shares held by the proposed stock benefit plan, if
approved by stockholders, and shares held in the ESOP, the aggregate of such
shares could exceed 20% of the Company's outstanding Common Stock, which could
enable management to defeat stockholder proposals requiring 80% approval.
Consequently, in the event the voting restriction was waived, this potential
voting control might preclude takeover attempts that certain stockholders

12
<PAGE> 17
deem to be in their best interest, and might tend to perpetuate management.
Since the ESOP shares are allocated to all eligible employees of the
Association, and any unallocated shares will be voted by an independent
trustee, and because awards under the proposed stock benefit plan may be
granted to employees other than executive officers and directors, management of
the Company does not expect to have voting control of all shares held or
allocated by the ESOP or other stock benefit plans. See "--Certain
Anti-Takeover Provisions Which May Discourage Takeover Attempts--Voting Control
of Officers and Directors."

There will be no agreements or understandings, written or tacit, with
respect to the exercise of either direct or indirect control over the
management or policies of the Company by the Foundation which may discourage
takeover attempts, including agreements related to voting, acquisition or
disposition of the Company's Common Stock. Finally, as the Foundation sells
its shares of Common Stock over time, its ownership interest and voting power
in the Company are expected to decrease.

POTENTIAL CHALLENGES. The establishment and funding of a charitable
foundation as part of a conversion is innovative and has been done in only a
limited number of instances. As such, the Foundation may be subject to
potential challenges notwithstanding that the Boards of Directors of the
Company and the Association have carefully considered the various factors
involved in the establishment of the Foundation. See "The
Conversion--Establishment of the Charitable Foundation--Purpose of the
Foundation." If anyone were to institute an action seeking to require that the
Association eliminate establishment of the Foundation, no assurances can be
made that the resolution of such action would not result in a delay in the
consummation of the Conversion or that any objecting persons would not be
ultimately successful in obtaining the elimination of the Foundation or other
equitable relief or monetary damages against the Company or the Association.
Additionally, if the Company and the Association are forced to eliminate the
Foundation, the Company may be required to resolicit subscribers in the
Offerings.

APPROVAL OF MEMBERS. Establishment of the Foundation is subject to
the approval of a majority of the total outstanding votes of the Association's
members eligible to be cast at a Special Meeting. The Foundation will be
considered as a separate matter from approval of the Plan of Conversion. If
the Association's members approve the Plan of Conversion, but not the
establishment of the Foundation, the Association intends to complete the
Conversion without the establishment of the Foundation. Failure to approve the
Foundation may materially increase the aggregate pro forma market value of the
Common Stock to be sold in the Conversion since the estimate of such amount
takes into account the dilutive impact of the issuance of shares to the
Foundation. If the aggregate pro forma market value of the Common Stock
without the Foundation is either greater than $18.5 million or less than $11.9
million, the Association will establish a new Estimated Price Range and
commence a resolicitation of subscribers (i.e., subscribers will be permitted
to continue their orders, in which case they will need to affirmatively
reconfirm their subscriptions prior to the expiration of the resolicitation
offering or their subscriptions funds will be promptly refunded with interest
at the Association's passbook rate of interest, or be permitted to increase,
decrease, or cancel their subscriptions). Any change in the Estimated Price
Range must be approved by the OTS. See "The Conversion--Stock Pricing." A
resolicitation, if any, following the conclusion of the Subscription and
Community Offerings would not exceed 45 days unless further extended by the OTS
for periods of up to 90 days not to extend beyond ________, 2000.

HIGHLY COMPETITIVE INDUSTRY

The Association faces significant competition in its market area both
in attracting deposits and in originating loans. The population of the market
is relatively small and population growth is relatively static in the county in
which the Association is headquartered. This competition arises from
commercial banks, savings banks, mortgage brokers, mortgage banking companies,
credit unions, and other providers of financial services, many of which are
significantly larger than the Association and, therefore, have greater
financial and marketing resources than those of the Association. Also, many of
such competitors have a statewide or even a national presence. The
Association's competitive environment raises the possibility of the
Association's need to increase the rates paid and lower the yields on its
deposits and loans, respectively, in order to remain competitive, thus
potentially reducing its profitability. See "Business of the Association--
Market Area and Competition."

13
<PAGE> 18
FINANCIAL INSTITUTION REGULATION AND POSSIBLE LEGISLATION

The Association is subject to extensive federal and state regulation
and supervision as a state savings and loan association. In addition, the
Company, as a savings and loan holding company, is subject to regulation and
supervision. Such regulations, which affect the Association and the Company on
a daily basis, may be changed at any time, and the interpretation of the
relevant law and regulations is also subject to change by the authorities who
examine the Association and interpret those laws and regulations. Any change
in the regulatory structure or the applicable statutes or regulations, whether
by the OTS, the Pennsylvania Department, the Federal Deposit Insurance
Corporation ("FDIC") or the Congress, could have a material impact on the
Company, the Association, its operations or the Association's Conversion. See
"Regulation."

THRIFT RECHARTERING

The Deposit Insurance Funds Act of 1996 (the "Funds Act"), which was
enacted in September 1996, provides that the BIF (the deposit insurance fund
that covers most commercial bank deposits) and the SAIF will merge on January
1, 1999, if there are no more savings associations as of that date. Several
bills have been introduced in the current Congress that would eliminate the
federal thrift charter and the OTS. A bill originally reported by the House
Banking Committee would have required federal thrifts to become national banks
or state banks within two years of enactment or they would have become national
banks by operation of law. The OTS would have been abolished and its functions
transferred to the bank regulatory agencies. State savings associations would
have become subject to the same federal regulation as state banks. The bill as
passed by the House of Representatives, however, did not provide for the
elimination of the federal thrift charter or OTS or revise the federal
regulation of state associations, but did provide that unitary savings and loan
holding companies existing or applied for after March 31, 1998 would not have
the ability to engage in unlimited activities but would be subject to the
activities restrictions applicable to multiple savings and loan holding
companies. Unitary holding companies existing or applied for before such date
would be grandfathered and could continue to engage in unlimited activities and
could transfer the grandfather rights to acquirors of the holding company. The
Senate has not acted on the legislation but if such legislation is enacted, the
Company would not qualify for unlimited activities but would be subject to the
activities restrictions applicable to multiple savings and loan holding
companies. The Association is unable to predict whether the legislation will
be enacted or, given such uncertainty, determine the extent to which the
legislation, if enacted, would affect its business. The Association is also
unable to predict whether the SAIF and BIF will eventually be merged, the
federal thrift charter eliminated or the regulation of state associations
revised, and what effect, if any, such legislation would have on the
Association.

STOCK-BASED BENEFITS TO MANAGEMENT AND DIRECTORS, EMPLOYMENT CONTRACTS AND
CHANGE IN CONTROL PAYMENTS

STOCK-BASED INCENTIVE PLAN. The Company intends to adopt a
Stock-Based Incentive Plan which would provide for the granting of options to
purchase Common Stock ("Stock Options"), awards of Common Stock ("Stock
Awards"), and certain related rights to eligible officers, employees and
directors of the Company and Association. While the Company currently
anticipates granting Stock Options and Stock Awards under a single plan, it may
establish separate plans to provide for such awards. In the event such plan is
adopted within one year after conversion, OTS regulations require the plan to
be approved by stockholders at a meeting of stockholders which may be held no
earlier than six months after completion of the Conversion. It is anticipated
the Stock-Based Incentive Plan will provide for the granting of options to
purchase shares of Common Stock equal to 10% of the shares of Common Stock
issued in the Conversion, including shares issued to the Foundation (124,950
shares and 169,050 shares at the minimum and maximum of the Estimated Price
Range, respectively) and the granting of Stock Awards in an amount equal to 4%
of the shares of Common Stock issued in the Conversion, including shares issued
to the Foundation (49,980 shares and 67,620 shares at the minimum and maximum
of the Estimated Price Range, respectively).

Under the Stock-Based Incentive Plan, Stock Awards would be granted in
the form of non-transferable, non-assignable shares of Common Stock. The
shares of Common Stock used as Stock Awards would be acquired by the
Stock-Based Incentive Plan or a trust established for the Stock-Based Incentive
Plan, either through open market purchases or from authorized but unissued
Common Stock. The Board of Directors intends to appoint an independent

14
<PAGE> 19
trustee who will vote unallocated Stock Awards in the same proportion as it
receives instructions from recipients with respect to allocated shares which
have not been earned and distributed. The trustee will not vote allocated
shares which have not been distributed if it does not receive instructions from
the recipient.

It is anticipated that the exercise price of Stock Options granted
under the Stock-Based Incentive Plan will be equal to the fair market value of
the underlying Common Stock on the date of grant. Such options will permit
such officers and directors to benefit from any increase in the market value of
the shares in excess of the exercise price at the time of exercise. Officers
and directors receiving Stock Options will not be required to pay for the
shares until the date of exercise. The granting of Stock Awards and the
exercise of non-statutory Stock Options (and disqualifying dispositions of
stock acquired through the exercise of incentive Stock Options) will result in
additional compensation expense to the Company and, accordingly, may result in
an increase in overall compensation expense in future periods. See "Management
of the Association--Other Benefit Plans."

Although no specific determinations have been made, the Company
anticipates that it will provide Stock Awards and/or Stock Options to
directors, officers and employees to the extent permitted by applicable
regulations. Current OTS regulations provide that, with respect to any non-tax
qualified stock benefit plan, such as the Stock-Based Incentive Plan, which is
implemented within one year after consummation of the Conversion, no individual
may receive more than 25% of the shares or options under any such plan and
non-employee directors may not receive more than 5% individually, or 30% in the
aggregate, of the shares or options awarded under any such plan. Such
regulations also provide that any awards granted under such a plan may not vest
at a rate greater than 20% per year except in limited circumstances. It is
also anticipated that the Stock-Based Incentive Plan may under certain
circumstances provide for cash payments to participants in lieu of the benefit
provided by the Stock Award or Stock Option in the event of a change in control
of the Company or Association.

The Board of Directors, in determining specific allocations and grants
of Stock Awards and Stock Options, will consider various factors, including but
not limited to, the financial condition of the Company, current and past
performance of plan participants and tax and securities law and regulation
requirements.

EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL PROVISIONS. Employment and
change in control agreements proposed to be entered into with certain officers
and the employee severance compensation plan expected to be adopted provide for
benefits and cash payments in the event of a change in control of the Company
or the Association. The provisions in such agreements and plan would provide
the recipient with a change in control payment in the event of the recipient's
involuntary or, in certain circumstances, voluntary termination of employment
subsequent to a change in control of the Company or the Association. In
addition to any payments which may be made under the Stock-Based Incentive Plan
upon a change in control, these provisions may have the effect of increasing
the cost of acquiring the Company, thereby discouraging future attempts to take
over the Company or the Association. Based on current salaries, cash payments
to be paid in the event of a change in control pursuant to the terms of the
employment agreements, change in control agreements and an employee severance
compensation plan would be approximately $1.1 million. However, the actual
amount to be paid in the event of a change in control of the Company or
Association cannot be estimated at this time because the actual amount is based
on the average compensation of the employee and other factors existing at the
time of the change in control. See "Restrictions on Acquisition of the Company
and the Association--Restrictions in the Company's Certificate of Incorporation
and Bylaws," "Management of the Association--Employment Agreements," "-- Change
in Control Agreements," "-- Employee Severance Compensation Plan" and "-- Other
Benefit Plans."

POSSIBLE DILUTIVE EFFECT OF STOCK-BASED INCENTIVE PLAN

Following the Conversion, the Stock-Based Incentive Plan will acquire
an amount of shares equal to 4% of the shares of Common Stock issued in the
Conversion, including shares issued to the Foundation, either through open
market purchases or the issuance of authorized but unissued shares of Common
Stock from the Company. If the Stock- Based Incentive Plan is funded by the
issuance of authorized but unissued shares, the voting interests of existing
stockholders at that time will be diluted by 3.8%. Also following the
Conversion, directors, officers and employees will

15
<PAGE> 20
be granted stock options under the Stock-Based Incentive Plan in an amount
equal to 10% of the Common Stock issued in the Conversion, including shares
issued to the Foundation. The exercise of such Stock Options may be satisfied
by the issuance of authorized but unissued shares. If all of the Stock Options
were to be exercised using authorized but unissued Common Stock and the Stock
Awards granted under the Stock-Based Incentive Plan were funded with authorized
but unissued shares, the voting interests of existing stockholders at that time
would be diluted at that time by 12.3%.

CERTAIN ANTI-TAKEOVER PROVISIONS WHICH MAY DISCOURAGE TAKEOVER ATTEMPTS

PROVISIONS IN THE COMPANY'S AND THE ASSOCIATION'S GOVERNING
INSTRUMENTS. Certain provisions of the Company's Certificate of Incorporation
and Bylaws, particularly a provision limiting voting rights, and the
Association's Stock Articles of Incorporation and Bylaws, as well as certain
federal regulations, may assist the Company in maintaining its status as an
independent publicly owned corporation. These provisions provide for, among
other things, supermajority voting on certain matters, staggered boards of
directors, non-cumulative voting for directors, limits on the calling of
special meetings, limits on voting shares in excess of 10% of outstanding
shares, and certain uniform price provisions for certain business combinations.
These provisions in the Company's governing instruments may discourage
potential proxy contests and other potential takeover attempts, particularly
those which have not been negotiated with the Board of Directors, and thus,
generally may serve to perpetuate existing management. For a more detailed
discussion of these provisions, see "Restrictions on Acquisitions of the
Company and the Association."

VOTING CONTROL OF OFFICERS AND DIRECTORS. Directors and officers of
the Association and the Company expect to purchase approximately 6.06% or 4.48%
of the shares of Common Stock to be issued in the Conversion, including shares
issued to the Foundation, based upon the minimum and the maximum of the
Estimated Price Range, respectively. The ESOP may be viewed as giving
directors, officers and employees the potential to control the voting of an
additional 8% of the Company's Common Stock. In addition, the Foundation will
be funded with a contribution by the Company equal to 5% of the Common Stock
sold in the Conversion. If a waiver of the voting restriction imposed on such
Common Stock is obtained from the OTS and the OTS does not impose other
restrictions, the Foundation shares may be voted as determined by the directors
of the Foundation who also will be directors or officers of the Company and
Association. Management's potential voting control could, together with
additional stockholder support, defeat stockholder proposals requiring 80%
approval of stockholders. As a result, this potential voting control may
preclude takeover attempts that certain stockholders deem to be in their best
interest and may tend to perpetuate existing management. See "Restrictions on
Acquisition of the Company and the Association--Restrictions in the Company's
Certificate of Incorporation and Bylaws."

ABSENCE OF MARKET FOR COMMON STOCK

The Company and the Association have never issued capital stock. The
Company has applied to have its Common Stock listed on the American Stock
Exchange ("AMEX") under the symbol "___" upon completion of the Conversion.
However, there can be no assurance that an active and liquid trading market for
the Common Stock will develop or, once developed, will continue, nor can there
be any assurances that purchasers of the Common Stock will be able to sell
their shares at or above the purchase price. The absence or discontinuance of
a market for the Common Stock would have an adverse impact on both the price
and liquidity of the Common Stock. See "Market for the Common Stock."

POSSIBLE INCREASE IN ESTIMATED PRICE RANGE AND NUMBER OF SHARES ISSUED

The number of shares to be issued in the Conversion, including shares
issued to the Foundation may be increased as a result of an increase in the
Estimated Price Range of up to 15% to reflect changes in market and financial
conditions following the commencement of the Subscription and Community
Offerings. In the event that the Estimated Price Range is so increased, it is
expected that the Company will issue up to 1,851,500 shares of Common Stock for
an aggregate purchase price of up to $18.5 million. An increase in the number
of shares issued will decrease a subscriber's pro forma net earnings per share
and stockholders' equity per share and will increase the Company's pro forma

16
<PAGE> 21
consolidated stockholders' equity and net earnings. Such an increase will also
increase the purchase price as a percentage of pro forma stockholders' equity
per share and net earnings per share.

POSSIBLE ADVERSE INCOME TAX CONSEQUENCES OF THE DISTRIBUTION OF SUBSCRIPTION
RIGHTS

The Association has received an opinion of Keller that, pursuant to
Keller's Valuation, subscription rights granted to Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members have no value. However,
such valuation is not binding on the IRS. If the subscription rights granted
to Eligible Account Holders, Supplemental Eligible Account Holders and Other
Members are deemed to have an ascertainable value, receipt of such rights could
result in taxable gain to those Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members who receive and/or exercise the subscription
rights in an amount equal to such value. Additionally, the Association could
recognize a gain for tax purposes on such distribution. Whether subscription
rights are considered to have ascertainable value is an inherently factual
determination. See "The Conversion--Effects of Conversion" and "-- Tax
Aspects."

YEAR 2000 COMPLIANCE

As the year 2000 approaches, an important business issue has emerged
regarding how existing application software programs and operating systems can
accommodate this date value. Many existing application software products were
designed to accommodate only two-digits. For example, "96" is stored on the
system and represents 1996. The Association relies significantly on an outside
service bureau. That service bureau has completed its inventory and assessment
of its "Year 2000" compliance and is scheduled to have resolved all identified
problems by the end of 1998. This will provide for a full year of testing for
compliance. The Association has also completed its inventory and assessment
and has completed upgrading its internal system to handle the "Year 2000"
problem. The Association currently is testing its upgraded system and will
perform extensive tests with the service bureau system. The cost to the
Association for the internal system upgrade, not including staff time, has been
less than $50,000. There can be no assurances, however, that the performance
by the Association and its service bureau will be effective to remedy all
potential problems. To the extent the Company's systems are not fully Year
2000 compliant, there can be no assurance that potential systems interruptions
or the cost necessary to update software would not have a materially adverse
effect on the Company's business, financial condition, results of operations
and business prospects.

SECURITY OF PENNSYLVANIA FINANCIAL CORP.

The Company was organized in Delaware at the direction of the Board of
Directors of the Association for the purpose of acquiring all of the capital
stock to be issued by the Association in the Conversion. The Company has
applied to the OTS for approval to become a savings and loan holding company.
The Company will acquire the Common Stock of the Association and sell its
Common Stock only if such approval is received. As a savings and loan holding
company, the Company will be subject to regulation by the OTS. See "The
Conversion--General." Upon consummation of the Conversion, the Company will
conduct business initially as a unitary savings and loan holding company. See
"Regulation--Holding Company Regulation." After completion of the Conversion,
the Company's assets will consist of all of the outstanding shares of the
Association's capital stock issued to the Company in the Conversion and 50% of
the net proceeds of the Offerings to be retained by the Company. The Company
intends to use part of such net proceeds to loan funds to the ESOP to enable
the ESOP to purchase 8% of the Common Stock issued in the Conversion, including
shares issued to the Foundation. The Company and Association may, however,
alternatively choose to fund the ESOP through a loan to the ESOP trust by a
third-party financial institution. The Company intends initially to utilize
the remaining proceeds for investments in mortgage-related securities and
federal agency obligations. See "Use of Proceeds." Immediately after the
Conversion, the Company will have no significant liabilities. The management
of the Company is set forth under "Management of the Company." Initially, the
Company will neither own nor lease any property, but will instead use the
premises, equipment and furniture of the Association. At the present time, the
Company does not intend to employ any persons other than officers of the
Company who are also officers of the Association, but will utilize the support
staff of the Association from time to time. Additional employees will be hired
as appropriate to the extent the Company expands its business in the future.

17
<PAGE> 22
Management believes that the holding company structure will provide
the Company with additional flexibility to diversify, should it decide to do
so, its business activities through existing or newly-formed subsidiaries, or
through acquisitions of other financial institutions and financial services
related companies. In addition, management believes that the Company will be
in a position after the Conversion, subject to regulatory limitations and the
Company's financial position, to take advantage of any acquisition and
expansion opportunities that may arise. There are no current arrangements,
understandings or agreements, written or oral, regarding any such opportunities
or transactions. The initial activities of the Company are anticipated to be
funded by the net proceeds retained by the Company and earnings thereon or,
alternatively, through dividends from the Association.

The Company's executive offices are located at 31 W. Broad Street,
Hazleton, Pennsylvania 18201 and its telephone number is (717) 454-0824.

SECURITY SAVINGS ASSOCIATION OF HAZLETON

The Association was originally incorporated in 1889 as a
state-chartered building and loan association under the name The Middle Coal
Field Building and Loan Association of Hazleton, Pennsylvania. In January
1987, the Association acquired through merger Anthracite Building and Loan
Association of Weatherly, Pennsylvania. The Association currently maintains
four banking offices in Luzerne and Carbon counties in Northeast Pennsylvania.

The Association operates as a community savings association and its
corporate philosophy has traditionally been focused on providing a competitive
array of financial products and services to consumers within its market area.
The Association's business primarily consists of accepting deposits from
customers and investing those funds primarily in mortgage loans secured by one-
to four-family residences, consumer loans and, to a lesser extent, other types
of loans and securities. At June 30, 1998, the Association had $69.9 million,
or 62.4% of total assets, invested in loans, consisting of: $54.7 million, or
48.9% of total assets, of one- to four-family mortgage loans; $9.9 million, or
8.9% of total assets, of consumer loans (consisting primarily of home equity
loans and lines of credit, automobile and education loans); $4.8 million, or
4.2% of total assets, of multi-family and commercial real estate loans; and
$523,000, or 0.47% of total assets, of construction loans. See "Business of
the Association -- Lending Activities."

The Association's investment activities primarily consist of
mortgage-related and investment securities. At June 30, 1998, the
Association's securities portfolio totalled $28.7 million, or 25.6% of total
assets, of which $20.8 million was categorized as held-to-maturity. At June
30, 1998, the Association's debt investments totalled $24.4 million, or 21.8%
of total assets, $18.5 million of which was classified as held-to-maturity and
consisted primarily of investments in various certificates of deposit. At June
30, 1998, the Association's equity investments totalled $594,000, or 0.5% of
total assets, all of which was classified as available-for-sale and consisted
of an investment in FHLB stock. At June 30, 1998, the Association's
mortgage-backed securities, consisting primarily of U.S. Government and agency
obligations, totalled $6.3 million, or 5.6% of total assets, of which $2.8
million was categorized as held-to-maturity. At June 30, 1998, the
Association's mortgage-related securities portfolio totalled $3.6 million, or
3.2% of total assets, of which $2.3 million was classified as held-to-maturity
and consisted primarily of securities guaranteed or issued by
Government-sponsored and federal agencies such as Fannie Mae ("FNMA"), Freddie
Mac ("FHLMC"), and Ginnie Mae ("GNMA"). See "Business of the Association --
Investment Activities."

At June 30, 1998, the Association's deposit accounts totalled $102.6
million, or 99.8% of total liabilities, of which $42.1 million, or 41.1%, were
comprised of core deposits (savings, NOW and money market accounts). In
addition to core deposits, the Association had $60.5 million of certificate
accounts, or 58.9% of total liabilities, of which $38.8 million were
certificates of deposit with maturities of one year or less and $13.5 million
were jumbo certificates of deposit.

The Association is subject to extensive regulation, supervision and
examination by the Pennsylvania Department, the OTS, and the FDIC. As of June
30, 1998, the Association exceeded all regulatory capital requirements with
tangible, core and risk-based capital of $9.4 million, $9.4 million and $9.8
million, respectively. Additionally, the Association's regulatory capital was
in excess of the amount necessary for the Association to be deemed "well

18
<PAGE> 23
capitalized" under the Federal Deposit Insurance Corporation Improvement Act of
1991 ("FDICIA"). See "Regulatory Capital Compliance" and "Regulation." The
Association is a member of the FHLB of Pittsburgh which is one of the twelve
regional banks which comprise the FHLB system. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business of
the Association."

The Association's executive offices are located at 31 W. Broad Street,
Hazleton, Pennsylvania 18201 and its telephone number is (717) 454-0824.

19
<PAGE> 24
REGULATORY CAPITAL COMPLIANCE

At June 30, 1998, the Association exceeded all regulatory capital
requirements. See "Regulation--Federal Regulation of Savings
Institutions--Capital Requirements." Set forth below is a summary of the
Association's compliance with the regulatory capital standards as of June 30,
1998, on a historical and pro forma basis assuming that the indicated number of
shares were sold as of such date and receipt by the Association of 50% of the
net proceeds.

<TABLE>
<CAPTION>
HISTORICAL AT
JUNE 30, 1998
-----------------------
PERCENT
OF
AMOUNT ASSETS (2)
-----------------------
<S> <C> <C>
GAAP Capital (3) ............. $9,231 8.2%
======
TANGIBLE CAPITAL:
Capital Level .............. $9,362 8.4%
Requirement ................ 1,682 1.5
----- ---
Excess ..................... $7,680 6.9%
======
CORE CAPITAL:
Capital Level .............. $9,362 8.4%
Requirement (4) ............ 4,485 4.0
----- ---
Excess ..................... $4,877 4.4%
======
RISK-BASED CAPITAL:
Capital Level (5)(6) ....... $9,814 16.9%
Requirement ................ 4,641 8.0
----- ---
Excess ..................... $5,173 8.9%
======

<CAPTION>
SECURITY SAVINGS ASSOCIATION OF HAZLETON
PRO FORMA AT JUNE 30, 1998 BASED UPON THE SALE AT $10.00 PER SHARE
--------------------------------------------------------------------------------------------------
1,190,000 SHARES 1,400,000 SHARES 1,610,000 SHARES 1,851,500 SHARES
(MINIMUM (MIDPOINT (MAXIMUM 15% ABOVE
OF OF OF MAXIMUM OF
ESTIMATED ESTIMATED ESTIMATED ESTIMATED
PRICE RANGE) PRICE RANGE) PRICE RANGE) PRICE RANGE)(1)
------------------------ -------------------------------------------------------------------------
PERCENT PERCENT PERCENT PERCENT
OF OF OF OF
AMOUNT ASSETS (2) AMOUNT ASSETS (2) AMOUNT ASSETS (2) AMOUNT ASSETS (2)
----------- ------------ ----------- ------------------------------------------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP Capital (3) ........ $14,794 12.6% $15,825 13.3% $16,856 14.1% $18,041 14.9%
======= ======= ======= =======
TANGIBLE CAPITAL:
Capital Level ......... $14,925 12.7% $15,956 13.4% $16,987 14.2% $18,172 15.0%
Requirement ........... 1,765 1.5 1,781 1.5 1,796 1.5 1,814 1.5
----- --- ----- --- ----- --- ----- ---
Excess ................ $13,160 11.2% $14,175 11.9% $15,191 12.7% $16,358 13.5%
======= ======= ======= =======
CORE CAPITAL:
Capital Level ......... $14,925 12.7% $15,956 13.4% $16,987 14.2% $18,172 15.0%
Requirement (4) ....... 4,707 4.0 4,749 4.0 4,790 4.0 4,837 4.0
----- --- ----- --- ----- --- ----- ---
Excess ................ $10,218 8.7% $11,207 9.4% $12,197 10.2% $13,335 11.0%
======= ======= ======= =======
RISK-BASED CAPITAL:
Capital Level (5)(6)... $15,377 25.3% $16,408 26.8% $17,439 28.2% $18,624 29.8%
Requirement ........... 4,864 8.0 4,905 8.0 4,946 8.0 4,994 8.0
----- --- ----- --- ----- --- ----- ---
Excess ................ $10,513 17.3% $11,503 18.8% $12,493 20.2% $13,630 21.8%
======= ======= ======= =======
</TABLE>

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

(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Price Range of up to 15% as
a result of regulatory considerations or changes in market or general
financial and economic conditions following the commencement of the
Subscription and Community Offerings.
(2) Tangible capital levels are shown as a percentage of tangible assets. Core
capital levels are shown as a percentage of total adjusted assets.
Risk-based capital levels are shown as a percentage of risk-weighed assets.
(3) GAAP Capital includes unrealized loss on available-for-sale securities,
net, which is not included as regulatory capital.
(4) The current OTS core capital requirement for savings associations is 3% of
total adjusted assets. The OTS has proposed core capital requirements which
would require a core capital ratio of 3% of total adjusted assets for
thrifts that receive the highest supervisory rating for safety and soundness
and a 4% to 5% core capital ratio requirement for all other thrifts. See
"Regulation--Federal Regulation of Savings Institutions--Capital
Requirements."
(5) Assumes net proceeds are invested in assets that carry a 50%
risk-weighting.
(6) The difference between equity under generally accepted accounting
principles ("GAAP") and regulatory risk-based capital is attributable to
the addition of the general valuation allowance of $452,000 at June 30,
1998 (in addition to the exclusion of unrealized gain on available-for-sale
securities, net).

20
<PAGE> 25
USE OF PROCEEDS

Although the actual net proceeds from the sale of the Common Stock
cannot be determined until the Conversion is completed, it is presently
anticipated that the net proceeds from the sale of the Common Stock will be
between $11.1 million and $15.2 million (or $17.6 million if the Estimated
Price Range is increased by 15%). See "Pro Forma Data" and "The
Conversion--Stock Pricing" as to the assumptions used to arrive at such
amounts. The Company will be unable to utilize any of the net proceeds of the
Offerings until the consummation of the Conversion.

The Company will purchase all of the outstanding capital stock of the
Association to be issued upon Conversion in exchange for 50% of the net
proceeds, with the remaining net proceeds to be retained by the Company. Based
on the midpoint of the Estimated Price Range, the Company expects to utilize
the $6.6 million of net proceeds to purchase the Common Stock of the
Association. Such portion of net proceeds will be added to the Association's
general funds which the Association currently intends to utilize for general
corporate purposes, including investments in loans, mortgage-related and
investment securities, and the funding of the Stock-Based Incentive Plan. The
Association may also use such funds for the expansion of its facilities, and to
expand operations through acquisitions of other financial institutions, branch
offices or other financial services companies. Additionally, the Association
may explore expanding the types of lending products it offers. This may be
accomplished, in part, by the hiring of a commercial lending officer. The
Association has not yet determined the approximate amount of net proceeds to be
used for any of the purposes mentioned above.

The Company intends to use a portion of the net proceeds to make a
loan directly to the ESOP to enable the ESOP to purchase 8% of the Common Stock
issued in the Conversion, including shares issued to the Foundation. The
Company and Association may alternatively choose to fund the ESOP's stock
purchases through a loan by a third-party financial institution. The remaining
net proceeds retained by the Company will initially be invested in
mortgage-related securities and federal agency obligations. Based upon the
sale of 1,190,000 shares or 1,610,000 shares at the minimum and maximum of the
Estimated Price Range, and the issuance of shares to the Foundation, the amount
of the loan to the ESOP would be $999,600 or $1.4 million, respectively (or
$1.6 million if the Estimated Price Range is increased by 15%) to be repaid
over a 12-year period at the prevailing prime rate of interest, which currently
is 8.5%. See "Management of the Association -- Other Benefit Plans--Employee
Stock Ownership Plan."

The net proceeds retained by the Company may also be used to support
the future expansion of operations through branch acquisitions, the
establishment of branch offices and the acquisition of other financial
institutions or their assets, including those located within the Association's
market area or diversification into other banking related businesses. The
Company has no current arrangements, understandings or agreements regarding any
such opportunities or transactions. The Company, upon the Conversion, will be
a unitary savings and loan holding company, which under existing laws would
generally not be restricted as to the types of business activities in which it
may engage, provided that the Association continues to be a qualified thrift
lender ("QTL"). See "Regulation--Holding Company Regulation" for a description
of certain regulations applicable to the Company.

Upon completion of the Conversion, the Board of Directors of the
Company will have the authority to adopt stock repurchase plans, subject to
statutory and regulatory requirements. Unless approved by the OTS, the
Company, pursuant to OTS regulations, will be prohibited from repurchasing any
shares of Common Stock for three years except (i) for an offer to all
stockholders on a pro rata basis, or (ii) for the repurchase of qualifying
shares of a director. Notwithstanding the foregoing and except as provided
below, beginning one year following completion of the Conversion, the OTS
regulations permit the Company to repurchase its Common Stock so long as: (i)
the repurchases within the following two years are part of an open-market
program not involving greater than 5% of its outstanding capital stock during a
12-month period; (ii) the repurchases do not cause the Association to become
"undercapitalized" within the meaning of the OTS prompt corrective action
regulation; and (iii) the Company provides to the Regional Director of the OTS
no later than 10 days prior to the commencement of a repurchase program written
notice containing a full description of the program to be undertaken and such
program is not disapproved by the Regional Director. See "Regulation--Prompt
Corrective Regulatory Action." In addition, under current OTS policies,
repurchases may be allowed in the first year following Conversion and in
amounts greater than 5% in the second and third years following

21
<PAGE> 26
Conversion provided there are valid and compelling business reasons for such
repurchases and the OTS approves such repurchases.

Based upon facts and circumstances following Conversion and subject to
applicable regulatory requirements, the Board of Directors may determine to
repurchase stock in the future. Such facts and circumstances may include but
are not limited to: (i) market and economic factors such as the price at which
the Common Stock is trading in the market, the volume of trading, the
attractiveness of other investment alternatives in terms of the rate of return
and risk involved in the investment, the ability to increase the book value
and/or earnings per share of the remaining outstanding shares, and the
opportunity to improve the Company's return on equity; (ii) the avoidance of
dilution to stockholders by not having to issue additional shares to cover the
exercise of stock options or to fund employee stock benefit plans; and (iii)
any other circumstances in which repurchases would be in the best interests of
the Company and its stockholders. Although the Company has no current plans to
repurchase its stock, in the event the Company does determine to repurchase
stock, such repurchases may be made at market prices which may be in excess of
the Purchase Price in the Conversion.

Any stock repurchases will be subject to the determination of the
Board of Directors that both the Company and the Association will be
capitalized in excess of all applicable regulatory requirements after any such
repurchases and that such capital will be adequate, taking into account, among
other things, the level of non-performing and other risk assets, the Company's
and the Association's current and projected results of operations and
asset/liability structure, the economic environment, tax and other
considerations. See "The Conversion-- Certain Restrictions on Purchase or
Transfer of Shares After Conversion."

Additionally, in connection with the Conversion, the Company and
Association have committed to the OTS that during the one-year period following
the consummation of the Conversion, the Company will not make any distribution
to stockholders that, for federal tax purposes, would be treated as a return of
capital without prior approval of the OTS.

DIVIDEND POLICY

Upon Conversion, the Board of Directors of the Company will have the
authority to declare dividends on the Common Stock, subject to statutory and
regulatory requirements. In the future, the Board of Directors intends to
consider a policy of paying cash or stock dividends on the Common Stock.
However, no decision has been made with respect to the payment of dividends.
Declarations of dividends by the Board of Directors, if any, will depend upon a
number of factors, including the amount of net proceeds retained by the Company
in the Conversion, investment opportunities available to the Company or the
Association, capital requirements, regulatory limitations, the Company's and
the Association's financial condition and results of operations, tax
considerations and general economic conditions. No assurances can be given,
however, that any dividends will be paid or, if commenced, will continue to be
paid.

The Association will not be permitted to pay dividends to the Company
on its capital stock if its stockholders' equity would be reduced below the
amount required for the liquidation account. See "The Conversion-- Liquidation
Rights." For information concerning regulations which apply to the Association
in determining the amount of proceeds which may be retained by the Company and
regarding a savings institution's ability to make capital distributions,
including payment of dividends to its holding company, see "Federal and State
Taxation--Federal Taxation--Distributions" and "Regulation--Federal Regulation
of Savings Institutions--Limitation on Capital Distributions."

Unlike the Association, the Company is not subject to OTS regulatory
restrictions on the payment of dividends to its stockholders, although the
source of such dividends will be dependent on the net proceeds retained by the
Company and earnings thereon and may be dependent, in part, upon dividends from
the Association. The Company is subject, however, to the requirements of
Delaware law, which generally limits dividends to an amount equal to the excess
of the net assets of the Company (the amount by which total assets exceed total
liabilities) over its statutory capital (generally defined as the aggregate par
value of the outstanding shares of the Company's capital stock having

22
<PAGE> 27
a par value plus the amount of the consideration paid for shares of the
Company's capital stock without par value) or, if there is no such excess, to
its net profits for the current and/or immediately preceding fiscal year.

MARKET FOR THE COMMON STOCK

The Company and Association have not previously issued capital stock
and, consequently, there is no established market for the Common Stock. The
Company has applied to have its Common Stock listed on the AMEX under the
symbol "___" upon completion of the Conversion. Such approval is subject to
various conditions, including completion of the Conversion and the satisfaction
of applicable listing criteria. There can be no assurance that the Common
Stock will be able to meet the applicable listing criteria in order to maintain
its listing on the AMEX or that an active and liquid trading market will
develop or, if developed, will be maintained. A public market having the
desirable characteristics of depth, liquidity and orderliness, however, depends
upon the presence in the marketplace of both willing buyers and sellers of
Common Stock at any given time, which is not within the control of the Company.
No assurance can be given that an investor will be able to resell the Common
Stock at or above the Purchase Price of the Common Stock after the Conversion.

23
<PAGE> 28
CAPITALIZATION

The following table presents the unaudited historical consolidated
capitalization of the Association at June 30, 1998, and the pro forma
consolidated capitalization of the Company after giving effect to the
Conversion, including the issuance of shares to the Foundation, based upon the
sale of the number of shares indicated in the table and the other assumptions
set forth under "Pro Forma Data."

<TABLE>
<CAPTION>
COMPANY PRO FORMA BASED UPON SALE AT $10.00 PER SHARE
--------------------------------------------------------
1,851,500
SHARES
1,190,000 1,400,000 1,610,000 (15% ABOVE
SHARES SHARES SHARES MAXIMUM
(MINIMUM (MIDPOINT (MAXIMUM OF
OF OF OF ESTIMATED
ASSOCIATION ESTIMATED ESTIMATED ESTIMATED PRICE
HISTORICAL PRICE RANGE) PRICE RANGE) PRICE RANGE) RANGE) (1)
------------ -------------- -------------- ------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Borrowings:
Deposits (2).............................................. $102,604 $102,604 $102,604 $102,604 $102,604
FHLB advances and other borrowings........................ -- -- -- -- --
-------- -------- -------- -------- --------
Total................................................... $102,604 $102,604 $102,604 $102,604 $102,604
======== ======== ======== ======== ========
Stockholders' equity:
Preferred Stock, $.01 par value, 1,000,000
shares authorized; none to be issued.................... $ -- $ -- $ -- $ -- $ --
Common Stock, $.01 par value, 5,000,000
shares authorized; shares to be issued
as reflected............................................ -- 12 15 17 19
Additional paid-in capital(3)............................. -- 11,114 13,173 15,233 17,601
Retained earnings(4)...................................... 9,362 9,362 9,362 9,362 9,362
Unrealized loss on available-for-sale securities, net..... (131) (131) (131) (131) (131)
Less: Expense of contribution to the
Foundation, net of taxes(5)........................ -- (357) (420) (483) (555)
Plus: Shares issued to the Foundation.................... -- 595 700 805 926
Less: Common Stock acquired by the ESOP(6)............... -- (1,000) (1,176) (1,352) (1,555)
Less: Common Stock acquired by
the Stock-Based Incentive Plan (7)................. -- (500) (588) (676) (778)
-------- ------- ------- ------- -------
Total stockholders' equity............................ $ 9,231 $19,095 $20,935 $22,775 $24,889
======== ======== ======== ======== ========
</TABLE>

- ------------------------------------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Price Range of up to 15% as
a result of regulatory considerations or changes in market or general
financial and economic conditions following the commencement of the
Subscription and Community Offerings.
(2) Does not reflect withdrawals from deposit accounts for the purchase of
Common Stock in the Conversion. Such withdrawals would reduce pro forma
deposits by the amount of such withdrawals.
(3) No effect has been given to the issuance of additional shares of Common
Stock to the Foundation at a value of $10.00 per share or to the issuance
of additional shares for option grants under the Stock-Based Incentive Plan
intended to be adopted by the Company. An amount equal to 10% of the
shares of Common Stock issued in the Conversion, including shares issued to
the Foundation, will be reserved for issuance upon the exercise of options
to be granted under the Stock-Based Incentive Plan. See "Risk
Factors--Possible Dilutive Effect of Stock-Based Incentive Plan," Footnote
4 to the tables under "Pro Forma Data" and "Management of the
Association--Other Benefit Plans."
(4) The retained earnings of the Association will be substantially restricted
after the Conversion. See "The Conversion--Liquidation Rights" and
"Regulation--Federal Savings Institution Regulation--Limitations on Capital
Distributions."
(5) Represents the value of the contribution of Common Stock to the Foundation
at $10.00 per share reduced by the associated tax benefit of $238,000,
$280,000, $322,000 and $370,300 at the minimum, midpoint, maximum and 15%
above the maximum of the range, respectively. The realization of the
federal tax benefit is limited annually to 10% of the Company's annual
taxable income, subject to the ability of the Company to carry forward any
unused portion of the deduction for five years following the year in which
the contribution is made. For state income tax purposes, the Company will
be able to deduct the contribution and to carry forward any unused portion
of the deduction for a five-year period following the year in which the
contribution is initially made. Such deductions by the Company for
Pennsylvania income tax purposes can be utilized only if the Company
generates sufficient state taxable income on an unconsolidated basis, and
also are subject to the limitation of 10% of unconsolidated income of the
Company.
(6) Assumes that 8% of the shares issued in connection with the Conversion,
including shares issued to the Foundation, will be purchased by the ESOP
and that the funds used to acquire such shares will be borrowed from the
Company. The Common Stock acquired by the ESOP is reflected as a reduction
of stockholders' equity. See "Management of the Association--Other Benefit
Plans--Employee Stock Ownership Plan."
(7) Assumes an amount equal to 4% of the shares of Common Stock sold in the
Conversion and issued to the Foundation, is purchased by the Stock-Based
Incentive Plan through open market purchases at the Purchase Price. The
Common Stock purchased by the Stock-Based Incentive Plan is reflected as a
reduction of stockholders' equity. See "Risk Factors--Possible Dilutive
Effect of Stock-Based Incentive Plan," Footnote 3 to the table under "Pro
Forma Data" and "Management of the Association--Other Benefit Plans."

24
<PAGE> 29
PRO FORMA DATA

The actual net proceeds from the sale of the Common Stock cannot be
determined until the Conversion is completed. However, net proceeds are
currently estimated to be between $11.1 million and $15.2 million (or $17.6
million in the event the Estimated Price Range is increased by 15%) based upon
the following assumptions: (i) 100% of the shares of Common Stock will be sold
in the Subscription Offering to Eligible Account Holders, the ESOP and
Supplemental Eligible Account Holders; (ii) directors, officers and employees
of the Association and members of their immediate families (collectively,
"Insiders") will purchase an aggregate of $757,500 of Common Stock and the ESOP
will purchase 8% of the Common Stock issued in connection with the Conversion,
including shares issued to the Foundation; (iii) Sandler O'Neill & Partners,
L.P. ("Sandler O'Neill") will receive a fee equal to 2.0% of the aggregate
Purchase Price of shares sold in the Subscription and Community Offerings,
excluding shares purchased by directors, officers, employees and any immediate
family member thereof and the ESOP for which Sandler O'Neill will not receive a
fee; and (iv) Conversion expenses, excluding the marketing fees paid to Sandler
O'Neill, will be approximately $570,000 Actual Conversion expenses may vary
from those estimated.

Pro forma consolidated net income of the Company for the fiscal year
ended June 30, 1998, has been calculated as if the Common Stock had been sold
at the beginning of the fiscal year and the net proceeds had been invested at
5.23%, which is the arithmetic average of the weighted average yield earned by
the Association on its interest-earning assets and the weighted average rate
paid on its deposits during such period (as required by OTS regulations). The
tables below do not reflect the effect of withdrawals from deposit accounts for
the purchase of Common Stock or the effect of any possible use of the net
Conversion proceeds. The pro forma after-tax yield for the Company and the
Association is assumed to be 3.14% for the fiscal year ended June 30, 1998,
based on an effective tax rate of 40.0%. Historical and pro forma net earnings
per share amounts have been calculated by dividing historical and pro forma
amounts by the indicated number of shares of Common Stock issued, as adjusted
to give effect to the purchase of shares by the ESOP and the issuance of shares
to the Foundation. Historical and pro forma stockholders' equity per share
amounts have been calculated by dividing historical and pro forma amounts by
the indicated number of shares of Common Stock issued.

The following pro forma information may not be representative of the
financial effects of the foregoing transactions at the dates on which such
transactions actually occur and should not be taken as indicative of future
results of operations. Pro forma consolidated stockholders' equity represents
the difference between the stated amount of assets and liabilities of the
Company. The pro forma stockholders' equity is not intended to represent the
fair market value of the Common Stock and may be stated in an amount greater
than amounts that would be available for distribution to stockholders in the
event of liquidation.

The following tables summarize historical data of the Association and
pro forma data of the Company at or for the fiscal year ended June 30, 1998,
based on the assumptions set forth above and in the table and should not be
used as a basis for projections of market value of the Common Stock following
the Conversion. The tables below give effect to Stock Awards reserved for
grant under the Stock-Based Incentive Plan, which is expected to be adopted by
the Company following the Conversion. See Footnote 3 to the table and
"Management of the Association-- Other Benefit Plans." No effect has been
given in the tables to the possible issuance of additional shares of Common
Stock upon the exercise of stock options to be granted under the Stock-Based
Incentive Plan, nor does book value give any effect to the liquidation account
to be established for the benefit of Eligible Account Holders and Supplemental
Eligible Account Holders or, in the event of liquidation of the Association, to
the tax effect of the bad debt reserve and other factors. See Footnote 5 to
the table below, "The Conversion-- Liquidation Rights" and "Management of the
Association-- Other Benefit Plans." THE FOLLOWING TABLE ASSUMES THAT THE
FOUNDATION IS APPROVED AS PART OF THE CONVERSION AND THEREFORE GIVES EFFECT TO
THE ISSUANCE OF AUTHORIZED BUT UNISSUED SHARES OF THE COMPANY'S COMMON STOCK TO
THE FOUNDATION CONCURRENTLY WITH THE COMPLETION OF THE CONVERSION. THE
ESTIMATED PRICE RANGE, AS SET FORTH HEREIN AND IN THE TABLE BELOW, TAKES INTO
ACCOUNT THE DILUTIVE IMPACT OF THE ISSUANCE OF SHARES TO THE FOUNDATION.

25
<PAGE> 30

<TABLE>
<CAPTION>
AT OR FOR THE FISCAL YEAR ENDED JUNE 30, 1998
----------------------------------------------------------------------------
1,190,000 SHARES 1,400,000 SHARES 1,610,000 SHARES 1,851,500 SHARES
SOLD AT $10.00 SOLD AT $10.00 SOLD AT $10.00 SOLD AT $10.00
PER SHARE PER SHARE PER SHARE PER SHARE (15%
(MINIMUM (MIDPOINT (MAXIMUM ABOVE MAXIMUM
OF ESTIMATED OF ESTIMATED OF ESTIMATED OF ESTIMATED
PRICE RANGE) PRICE RANGE) PRICE RANGE) PRICE RANGE) (7)
------------------ ------------------ ----------------- -----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Gross Proceeds ..................................... $11,900 $14,000 $16,100 $18,515
Plus: Shares issued to Foundation (equal to
5% of the stock sold in the Conversion)... 595 700 805 926
--- --- --- ---
Pro forma market capitalization .................... $12,495 $14,700 $16,905 $19,441
======= ======= ======= =======
Gross proceeds ..................................... $11,900 $14,000 $16,100 $18,515
Less: Offering expenses and commissions ........... (774) (812) (851) (895)
------- ------- ------- -------
Estimated net proceeds ............................. 11,126 13,188 15,249 17,620
Less: Common Stock purchased by ESOP .............. (1,000) (1,176) (1,352) (1,555)
Common Stock purchased by Stock-Based
Incentive Plan ........................... (500) (588) (676) (778)
Estimated net proceeds, as adjusted ............. $ 9,626 $11,424 $13,221 $15,287
======= ======= ======= =======
Consolidated net earnings (1):
Historical ...................................... $617 $ 617 $ 617 $ 617
Pro forma earnings on net proceeds .............. 302 359 415 480
Less: Pro forma ESOP adjustment (2) ............ (50) (59) (68) (78)
Pro forma Stock-Based Incentive Plan
adjustment (3) ........................ (60) (71) (81) (93)
------ ------ ------ ------
Pro forma net earnings .......................... $ 809 $ 846 $ 883 $ 926
======= ======= ======= =======
Per share net earnings (1):
Historical ...................................... $0.53 $0.45 $0.39 $0.34
Pro forma earnings on net proceeds .............. 0.26 0.26 0.27 0.27
Less: Pro forma ESOP adjustment (2) ............ (0.04) (0.04) (0.04) (0.04)
Pro forma Stock-Based Incentive Plan
adjustment (3) ........................ (0.05) (0.05) (0.05) (0.05)
----- ----- ----- -----
Pro forma net earnings per share ................ $0.70 $0.62 $0.57 $0.52
===== ===== ===== =====
Stockholders' equity:
Historical ...................................... $ 9,231 $ 9,231 $ 9,231 $ 9,231
Estimated net proceeds .......................... 11,126 13,188 15,249 17,620
Plus: Tax Benefit of Foundation(4) ............. 238 280 322 371
Less: Common Stock acquired by ESOP (2) ........ (1,000) (1,176) (1,352) (1,555)
Common Stock acquired by Stock-Based
Incentive Plan (3) .................... (500) (588) (676) (778)
------ ------- ------- -------
Pro forma stockholders' equity (3)(4)(5)(6) ..... $19,095 $20,935 $22,774 $24,889
======= ======= ======= =======
Stockholders' equity per share:
Historical ...................................... $7.39 $6.28 $5.46 $4.75
Estimated net proceeds .......................... 8.91 8.97 9.02 9.06
Plus: Tax Benefit of Foundation(4) ............. 0.19 0.19 0.19 0.19
Less: Common Stock acquired by ESOP (2) ........ (0.80) (0.80) (0.80) (0.80)
Common Stock acquired by Stock-Based
Incentive Plan (3) .................... (0.40) (0.40) (0.40) (0.40)
------ ------- ------- -------
Pro forma stockholders' equity
per share (3)(4)(5)(6) ....................... $15.29 $14.24 $13.47 $12.80
====== ====== ====== ======
Offering price as a percentage of pro forma
stockholders' equity per share ................... 65.43% 70.22% 74.23% 78.11%
Offering price to pro forma net earnings per share.. 14.31x 16.10x 17.73x 19.49x
</TABLE>

(footnotes on next page)

26
<PAGE> 31
- ------------------------
(1) Does not give effect to the non-recurring expense that is expected to be
recognized in the second quarter of fiscal 1999 if the establishment of the
Foundation is approved. In that event, the Company will recognize an
after-tax expense for the amount of the contribution to the Foundation
which is expected to be $357,000, $420,000, $483,000 and $555,000 at the
minimum, midpoint, maximum, and maximum as adjusted, of the Estimated Price
Range, respectively.

(2) It is assumed that 8% of the shares of Common Stock issued in the
Conversion, including shares issued to the Foundation, will be purchased by
the ESOP. For purposes of this table, the funds used to acquire such
shares are assumed to have been borrowed by the ESOP from the Company. The
amount to be borrowed is reflected as a reduction of stockholders' equity.
The Association intends to make annual contributions to the ESOP in an
amount at least equal to the principal and interest requirement of the
debt. The Association's total annual payment of the ESOP debt is based
upon 12 equal annual installments of principal, with an assumed interest
rate at 8.5%. The pro forma net earnings assume: (i) that the
Association's contribution to the ESOP is equivalent to the debt service
requirement for the year ended June 30, 1998, and was made at the end of
the period; (ii) that 8,330, 9,800, 11,270 and 12,961 shares at the
minimum, midpoint, maximum and 15% above the maximum of the range,
respectively, were committed to be released during the year ended June 30,
1998 at an average fair value of $10.00 per share in accordance with
Statement of Position ("SOP") 93-6; and (iii) only the ESOP shares
committed to be released were considered outstanding for purposes of the
net earnings per share calculations. See "Management of the Association--
Other Benefit Plans--Employee Stock Ownership Plan."

(3) Gives effect to the Stock Awards available for grant under the Stock-Based
Incentive Plan expected to be adopted by the Company following the
Conversion and presented for approval at a meeting of stockholders. The
Stock-Based Incentive Plan intends to acquire an amount of Common Stock
equal to 4% of the shares of Common Stock sold in the Conversion and
issued to the Foundation, or 49,980, 58,800, 67,620 and 77,763 shares of
Common Stock at the minimum, midpoint, maximum and 15% above the maximum of
the Estimated Price Range, respectively, either through open market
purchases, if permissible, or from authorized but unissued shares of Common
Stock or treasury stock of the Company, if any. Funds used by the Stock-
Based Incentive Plan to purchase the shares will be contributed to the
Stock-Based Incentive Plan by the Company. In calculating the pro forma
effect of the Stock-Based Incentive Plan, it is assumed that the shares
were acquired by the Stock- Based Incentive Plan at the beginning of the
period presented in open market purchases at the Purchase Price and that
20% of the amount contributed was an amortized expense during such period.
The issuance of authorized but unissued shares of the Company's Common
Stock to the Stock-Based Incentive Plan instead of open market purchases
would dilute the voting interests of existing stockholders by approximately
3.8% and pro forma net earnings per share would be $0.68, $0.61, $0.55 and
$0.51 at the minimum, midpoint, maximum, and 15% above the maximum of the
range, respectively, and pro forma stockholders' equity per share would be
$15.08, $14.08, $13.34 and $12.70 at the minimum, midpoint, maximum, and 15%
above the maximum of the range, respectively. There can be no assurance
that stockholder approval of the Stock-Based Incentive Plan will be
obtained, or that the actual purchase price of the shares will be equal to
the Purchase Price. See "Management of the Association--Other Benefit
Plans."

(4) Assumes a combined federal and state effective income tax rate of 40%.

(5) No effect has been given to the issuance of additional shares of Common
Stock upon the exercise of options to be granted under the Stock-Based
Incentive Plan. An amount equal to 10% of the Common Stock issued in the
Conversion, including shares issued to the Foundation, or 124,950, 147,000,
169,050 and 194,408 shares at the minimum, midpoint, maximum and 15% above
the maximum of the Estimated Price Range, respectively, will be reserved
for future issuance upon the exercise of options to be granted under the
Stock-Based Incentive Plan. The issuance of Common Stock pursuant to the
exercise of options under the Stock-Based Incentive Plan will result in the
dilution of existing stockholders' interests. Assuming all options were
exercised at the end of the period at an exercise price of $10.00 per
share, the pro forma net earnings per share would be $0.66, $0.59, $0.54 and
$0.49, respectively, and the pro forma stockholders' equity per share would
be $14.80, $13.86, $13.16 and $12.55, respectively. See "Management of the
Association--Other Benefit Plans."

(6) The retained earnings of the Association will continue to be substantially
restricted after the Conversion. See "Dividend Policy," "The
Conversion--Liquidation Rights" and "Regulation--Federal Regulation of
Savings Institutions--Limitation on Capital Distributions."

(7) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Price Range of up to 15% as
a result of regulatory considerations or changes in market or general
financial and economic conditions following the commencement of the
Subscription and Community Offerings.

27
<PAGE> 32
COMPARISON OF VALUATION AND
PRO FORMA INFORMATION WITH NO FOUNDATION

In the event that the Foundation was not being established as part of
the Conversion, Keller has estimated that the pro forma market capitalization
of the Association would be approximately $15.4 million, at the midpoint, which
is approximately $700,000 greater than the pro forma market capitalization of
the Association if the Foundation is approved by members of the Association and
would result in approximately a $1.4 million increase, or 10.0%, in the amount
of Common Stock offered for sale in the Conversion. The pro forma price to
book ratio and pro forma price to earnings ratio would be approximately the
same under both the current appraisal and the estimate of the value of the
Company without the Foundation. Further, assuming the midpoint of the
Estimated Price Range, pro forma stockholders' equity per share and pro forma
earnings per share would be substantially the same with the Foundation as
without the Foundation. In this regard, pro forma stockholders' equity and pro
forma net income per share would be $14.25 and $0.62, respectively, at the
midpoint of the estimate, assuming no Foundation, and $14.24 and $0.62
respectively, with the Foundation. The pro forma price to book ratio and the
pro forma price to earnings ratio are 70.18% and 16.21x, respectively, at the
midpoint of the estimate, assuming no Foundation and are 70.22% and 16.10x,
respectively, with the Foundation. This estimate by Keller was prepared at the
request of the OTS and is solely for purposes of providing members with
sufficient information with which to make an informed decision on the
Foundation. There is no assurance that in the event the Foundation is not
approved at the Special Meeting of members that the appraisal prepared at that
time would conclude that the pro forma market value of the Company would be the
same as that estimated herein. Any appraisal prepared at that time would be
based on the facts and circumstances existing at that time, including, among
other things, market and economic conditions.

For comparative purposes only, set forth below are certain pricing
ratios and financial data and ratios, at the minimum, midpoint, maximum and
maximum, as adjusted, of the Estimated Price Range, assuming the Conversion was
completed at June 30, 1998.

<TABLE>
<CAPTION>
AT THE MINIMUM AT THE MIDPOINT
-------------------------- --------------------------
WITH NO WITH NO
FOUNDATION FOUNDATION FOUNDATION FOUNDATION
------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Estimated offering amount ................ $11,900 $13,090 $14,000 $15,400
Pro forma market capitalization .......... 12,495 13,090 14,700 15,400
Total assets ............................. 121,854 122,713 123,694 124,703
Total liabilities ........................ 102,759 102,759 102,759 102,759
Pro forma stockholders' equity ........... 19,095 19,954 20,935 21,944
Pro forma consolidated net
earnings ............................... 809 838 846 880
Pro forma stockholders' equity
per share .............................. 15.29 15.24 14.24 14.25
Pro forma consolidated net
earnings per share ..................... 0.70 0.69 0.62 0.62
Pro Forma Pricing Ratios:
Offering Price as a percentage
of pro forma stockholders'
equity per share ..................... 65.43% 65.60% 70.22% 70.18%
Offering price to pro forma net
earnings per share ................... 14.31x 14.47x 16.10x 16.21x
Offering price to assets .............. 10.25% 10.67% 11.88% 12.35%
Pro Forma Financial Ratios:
Return on assets ...................... 0.66% 0.68% 0.68% 0.71%
Return on stockholders' equity ........ 4.24% 4.20% 4.04% 4.01%
Stockholders' equity to assets ........ 15.67% 16.26% 16.92% 17.60%

<CAPTION>
AT THE MAXIMUM
AT THE MAXIMUM AS ADJUSTED
-------------------------- ----------------------------
WITH NO WITH NO
FOUNDATION FOUNDATION FOUNDATION FOUNDATION
------------ ------------ ------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Estimated offering amount ................ $16,100 $17,710 $18,515 $20,367
Pro forma market capitalization .......... 16,905 17,710 19,441 20,367
Total assets ............................. 125,533 126,693 127,648 128,982
Total liabilities ........................ 102,759 102,759 102,759 102,759
Pro forma stockholders' equity ........... 22,774 23,934 24,889 26,223
Pro forma consolidated net
earnings ............................... 883 923 926 971
Pro forma stockholders' equity
per share .............................. 13.47 13.51 12.80 12.88
Pro forma consolidated net
earnings per share ..................... 0.57 0.56 0.52 0.52
Pro Forma Pricing Ratios:
Offering Price as a percentage
of pro forma stockholders'
equity per share ..................... 74.23% 74.00% 78.11% 77.67%
Offering price to pro forma net
earnings per share ................... 17.73x 17.79x 19.49x 19.42x
Offering price to assets .............. 13.47% 13.98% 15.23% 15.79%
Pro Forma Financial Ratios:
Return on assets ...................... 0.70% 0.73% 0.73% 0.75%
Return on stockholders' equity ........ 3.88% 3.85% 3.72% 3.70%
Stockholders' equity to assets ........ 18.14% 18.89% 19.50% 20.33%
</TABLE>

28
<PAGE> 33
SECURITY SAVINGS ASSOCIATION OF HAZLETON
STATEMENTS OF INCOME

The following Statement of Income of the Association for the fiscal
years ended June 30, 1998, 1997 and 1996 have been audited by Parente,
Randolph, Orlando, Carey & Associates, independent auditors, whose report
thereon is included elsewhere in this Prospectus. These Statements of Income
should be read in conjunction with the Financial Statements and notes thereto
and Management's Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED JUNE 30,
-------------------------------------
1998 1997 1996
------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest income:
Loans .................................................... $5,415 $5,181 $5,134
Interest and dividends on securities:
Taxable interest income(1) ............................ 1,887 1,805 1,717
Nontaxable interest income ............................ 3 -- --
Dividends ............................................. 37 35 33
Interest-bearing deposits with banks ..................... 398 419 575
------ ------ ------
Total interest income .............................. 7,740 7,440 7,459
Interest expense:
Deposits ................................................. 4,260 4,029 4,230
------ ------ ------
Net interest income ......................................... 3,480 3,411 3,229
Provision for loan losses ................................... 176 34 102
------ ------ ------
Net interest income after provision
for loan losses .......................................... 3,304 3,377 3,127
------ ------ ------
Noninterest income:
Other loan fees and service charges ...................... 266 241 234
Net realized gain on sale of securities .................. 1 17 --
Other .................................................... 37 26 24
------ ------ ------
Total noninterest income ........................ 304 284 258
------ ------ ------
Noninterest expenses:
Salaries and employee benefits ........................... 1,299 1,269 1,222
Occupancy and equipment expenses ......................... 234 214 250
FDIC deposit insurance premiums .......................... 64 753 220
Data processing .......................................... 138 133 141
Professional fees ........................................ 104 98 85
Foreclosed real estate expenses, net ..................... 136 142 4
Other noninterest expenses .............................. 510 498 504
------ ------ ------
Total noninterest expenses ............................ 2,485 3,107 2,426
------ ------ ------
Income before provision for income taxes .................... 1,123 554 959
Provision for income taxes .................................. 506 344 362
------ ------ ------
Net income .................................................. $ 617 $ 210 $ 597
====== ====== ======
</TABLE>

- -------------------------
(1) Includes interest earned on FHLB demand accounts.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

29
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Company has only recently been formed and, accordingly, has no
results of operations. The Association's results of operations are dependent
primarily on net interest income, which is the difference between the income
earned on its loan and investment portfolios and its cost of funds, consisting
of the interest paid on deposits. Results of operations are also affected by
the Association's provision for loan losses, security sales activities, service
charges and other fee income, and noninterest expense. The Association's
noninterest expense principally consists of compensation and employee benefits,
office occupancy and equipment expense, federal deposit insurance premiums,
data processing, professional fees, advertising and business promotion and
other expenses. Results of operations are also significantly affected by
general economic and competitive conditions, particularly changes in interest
rates, government policies and actions of regulatory authorities.

FORWARD-LOOKING STATEMENTS

This Prospectus contains certain forward-looking statements which are
based on certain assumptions and describe future plans, strategies and
expectations of the Company. These forward-looking statements are generally
identified by use of the words "believe," "expect," "intend," "anticipate,"
"estimate," "project," or similar expressions. The Company's ability to predict
results or the actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material adverse effect on the
operations of the Company and the subsidiaries include, but are not limited to,
changes in: interest rates, general economic conditions,
legislative/regulatory changes, monetary and fiscal policies of the U.S.
Government, including policies of the U.S. Treasury and the Federal Reserve
Board, the quality or composition of the loan or investment portfolios, demand
for loan products, deposit flows, competition, demand for financial services in
the Company's market area and accounting principles and guidelines. These
risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements. The
Company does not undertake -- and specifically disclaims any obligation -- to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.

MANAGEMENT STRATEGY

The Association's operating strategy has been that of a
community-based banking institution, offering a wide variety of savings
products to its retail customers, while concentrating on residential and
consumer lending and, to a lesser extent, multi-family and commercial real
estate and construction lending. In order to promote long-term financial
strength and profitability, the Association's operating strategy has focused
on: (i) maintaining strong asset quality by originating primarily one- to
four-family mortgage loans and home equity loans and lines of credit secured by
residential real estate located in its market area; (ii) managing its interest
rate risk within the context of its significant fixed-rate one- to four-family
mortgage lending activity; (iii) providing products and delivery systems
directed at the needs and expectations of its customer base, including through
taking advantage of technological advances when appropriate; and (iv)
maintaining a strong regulatory capital position.

MANAGEMENT OF INTEREST RATE RISK AND MARKET RISK ANALYSIS

The Association's interest rate risk management has involved the
evaluation of the interest rate risk included in certain balance sheet
accounts, the determination of the level of interest rate risk appropriate
given the Association's business strategy, operating environment, capital and
liquidity requirements and performance objectives, and management of its
interest rate risk pursuant to strategies approved by the Board of Directors to
achieve a level of interest rate risk consistent with guidelines approved by
the Board of Directors. Through such management, the Association seeks to
reduce the vulnerability of its operations to changes in interest rates. The
Board of Directors has established an Investment/Asset Liability Committee
("ALCO"), which is responsible for reviewing asset/liability

30
<PAGE> 35
policies and the interest rate risk position. The extent of the movement of
interest rates is an uncertainty that could have a negative impact on the
earnings of the Association. See "Risk Factors--Sensitivity to Changes in
Interest Rates."

In recent years, the Association has utilized the following strategies
to manage interest rate risk: (i) originating shorter-term (20 years or less)
fixed-rate mortgage loans, in addition to 30-year fixed-rate loans; (ii)
originating consumer loans which have a generally shorter term and may have a
variable interest rate; (iii) promoting longer-term deposits, particularly
three-year certificates of deposit; and (iv) investing in shorter-term
investment and mortgage-related securities.

Management believes that limiting its exposure to interest rate risk
fluctuations enhances long-term profitability. However, the Association's
strategies also can adversely impact net interest income due to lower yields on
shorter-term investments in comparison to longer-term fixed-rate investments
and whole loans. To promote a higher yield on its investment securities while
at the same time addressing the Association's interest rate risk management
policies, the Association has invested a significant portion of its portfolio
of investment securities in longer-term (more than five years) federal agency
obligations which have call features. Given the rates of such securities in
comparison to current market interest rates, the Association anticipates the
substantial majority of such securities will be called prior to their
contractual maturity. However, if changes in interest rates exceed ranges
anticipated by the Association in estimating the anticipated life of such
callable securities, the Association would be subject to increased interest
rate or reinvestment risk, depending on the direction of the change in market
interest rates.

31
<PAGE> 36

NET PORTFOLIO VALUE. The Association's interest rate sensitivity is
primarily monitored by management through the use of a model which generates
estimates of the change in the Association's NPV over a range of interest rate
scenarios. Such model is prepared by a third party for the Association. The
OTS also prepares and sends to the Association a NPV model based upon the
Association's quarterly financial reports to the OTS and assumptions utilized
by the OTS. NPV is the present value of expected cash flows from assets,
liabilities, and off-balance sheet contracts. The NPV ratio, under any interest
rate scenario, is defined as the NPV in that scenario divided by the market
value of assets in the same scenario. The OTS model makes assumptions, among
the other things regarding the annual prepayment rates for residential mortgage
loans, adjustable-rate and fixed-rate, prepayment rates ranged from 4% to 30%
annually. Mortgage-related securities were assumed to prepay at rates between
6% and 62% annually. Investment securities, which include callable federal
agency obligations, are presented based on their stated maturities. Savings
accounts, negotiable order of withdrawal ("NOW") accounts and Money Market Cash
accounts are assumed by the OTS to decay at 14%, 17%, and 31%, respectively,
for each of the following periods: one year, one to two years, two to three
years, three to four years, four to five years and over five years. The
results of the OTS model may vary from the Association's model primarily due to
differences in assumptions utilized, including estimated loan prepayment rates,
reinvestment rates and deposit decay rates. See "Regulation--Federal
Regulation of Savings Institutions." The following table sets forth the OTS's
NPV as of June 30, 1998.

<TABLE>
<CAPTION>
NPV AS % OF PORTFOLIO
CHANGE IN VALUE OF ASSETS
INTEREST RATES NET PORTFOLIO VALUE --------------------------
IN BASIS POINTS ------------------------------------------------------ NPV
(RATE SHOCK) AMOUNT $ CHANGE % CHANGE RATIO CHANGE (1)
- ----------------------- ------------ --------------- -------------------- ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
400 $8,608 (3,611) (30)% 7.92% (270)
300 9,728 (2,491) (20) 8.81 (182)
200 10,789 (1,430) (12) 9.62 (100)
100 11,687 (532) (4) 10.27 (35)
Static 12,219 -- -- 10.62 --
(100) 12,847 528 5 11.03 41
(200) 13,232 1,013 8 11.25 63
(300) 13,872 1,653 14 11.64 203
(400) 14,725 2,506 21 12.28 257
</TABLE>
- ----------------------
(1) Expressed in basis points.

Certain shortcomings are inherent in the methodology used in the above
interest rate risk measurements. Modeling changes in NPV require the making of
certain assumptions which may or may not reflect the manner in which actual
yields and costs respond to changes in market interest rates. In this regard,
the NPV model presented assumes that the composition of the Association's
interest sensitive assets and liabilities existing at the beginning of a period
remains constant over the period being measured and also assumes that a
particular change in interest rates is reflected uniformly across the yield
curve regardless of the duration to maturity or repricing of specific assets
and liabilities. Accordingly, although the NPV table provides an indication of
the Association's interest rate risk exposure at a particular point in time,
such measurements are not intended to and do not provide a precise forecast of
the effect of changes in market interest rates on the Association's net
interest income and will differ from actual results.

ANALYSIS OF NET INTEREST INCOME

Net interest income represents the difference between income on
interest-earning assets and expense on interest-bearing liabilities. Net
interest income also depends upon the relative amounts of interest-earning
assets and interest-bearing liabilities and the interest rate earned or paid on
them.

32
<PAGE> 37
AVERAGE BALANCE SHEET. The following table sets forth certain
information relating to the Association at and for the fiscal years ended June
30, 1998, 1997 and 1996. The average yields and costs are derived by dividing
income or expense by the average balance of interest-earning assets or
interest-bearing liabilities, respectively, for the periods shown, except where
noted, otherwise and reflect annualized yields and costs. Average balances are
derived from average monthly balances. The yields and costs include fees which
are considered adjustments to yields.

<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED JUNE 30,
-----------------------------------
AT JUNE 30, 1998 1998
------------------------- -----------------------------------
AVERAGE
YIELD/ AVERAGE YIELD/
BALANCE RATE BALANCE INTEREST RATE
--------- ------ --------- ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Loans (1):
Real estate(2) . . . . . . . . . . . . . . . . $ 55,782 7.81% $ 55,841 $4,358 7.80%
Consumer . . . . . . . . . . . . . . . . . . . 9,935 8.30 10,331 825 7.99
Commercial real estate . . . . . . . . . . . . 3,946 5.88 3,131 232 7.41
--------- --------- -------
Total loans . . . . . . . . . . . . . . . 69,663 7.77 69,303 5,415 7.81
Mortgage-related securities (3) . . . . . . . . . 2,196 7.24 2,629 159 6.05
Investment securities (4)(5) . . . . . . . . . . 26,487 6.67 26,723 1,768 6.62
Interest-bearing deposits . . . . . . . . . . . 8,586 4.64 5,995 398 6.64
--------- --------- -------
Total interest-earning assets . . . . . . . . 106,932 7.24 104,650 7,740 7.40
--------- ------ --------- ------- ------
NONINTEREST-EARNING ASSETS:
Cash and due from banks . . . . . . . . . . . . . 3,272 3,092
Premises and equipment . . . . . . . . . . . . . 1,364 1,327
Other, less allowance for loan losses . . . . . . 422 767
--------- ---------
Total noninterest-earning assets . . . . . . . 5,058 5,186
--------- ---------
Total assets . . . . . . . . . . . . . . . . . . . $111,990 $109,836
========= =========
INTEREST-BEARING LIABILITIES:
Deposits:
Passbook and statement savings . . . . . . . . $ 29,053 2.74 $ 28,788 795 2.76
Money market . . . . . . . . . . . . . . . . . 2,084 2.54 2,151 53 2.46
NOW . . . . . . . . . . . . . . . . . . . . . 10,983 1.38 10,081 152 1.51
Certificates of deposit . . . . . . . . . . . 60,484 5.39 59,342 3,260 5.49
--------- --------- -------
Total interest-bearing deposits . . . . . . 102,604 4.15 100,362 4,260 4.24
------ ------- ------
NONINTEREST-BEARING LIABILITIES:
Other liabilities . . . . . . . . . . . . . . . . 155 513
--------- ---------
Total liabilities . . . . . . . . . . . . . . . . . 102,759 100,875
Equity . . . . . . . . . . . . . . . . . . . . . . 9,231 8,961
--------- ---------
Total liabilities and equity . . . . . . . . . . . $ 111,990 $ 109,836
========= =========
Net interest-earning assets . . . . . . . . . . . $ 4,288
Net interest income/interest rate spread (6) . . 3.09% $ 3,480 3.16%
==== ======== ====
Net interest margin as a percentage
of interest-earning assets (7) . . . . . . . . 3.33%
====
Ratio of interest-earning assets to interest-
bearing liabilities . . . . . . . . . . . . . . 104.22% 104.27%
====== ======

<CAPTION>
FOR THE FISCAL YEARS ENDED JUNE 30,
-----------------------------------------------------------------------
1997 1996
----------------------------------- ---------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE
--------- ------- ------ --------- ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Loans (1):
Real estate(2) . . . . . . . . . . . . . . . . $ 53,399 $4,031 7.55% $ 52,447 $3,995 7.62%
Consumer . . . . . . . . . . . . . . . . . . . 11,212 1,018 9.08 10,932 910 8.32
Commercial real estate . . . . . . . . . . . . 2,080 132 6.35 1,657 229 13.82
--------- ------- --------- -------
Total loans . . . . . . . . . . . . . . . 66,691 5,181 7.77 65,036 5,134 7.89
Mortgage-related securities (3) . . . . . . . . . 4,846 196 4.04 6,562 266 4.05
Investment securities (4)(5) . . . . . . . . . . 24,405 1,644 6.74 21,957 1,484 6.76
Interest-bearing deposits . . . . . . . . . . . 6,282 419 6.67 8,880 575 6.48
--------- ------- --------- -------
Total interest-earning assets . . . . . . . . 102,224 7,440 7.28 102,435 7,459 7.28
--------- ------- ------ --------- ------- ------
NONINTEREST-EARNING ASSETS:
Cash and due from banks . . . . . . . . . . . . . 2,691 2,533
Premises and equipment . . . . . . . . . . . . . 1,101 1,132
Other, less allowance for loan losses . . . . . . 919 579
--------- ---------
Total noninterest-earning assets . . . . . . . 4,711 4,244
--------- ---------
Total assets . . . . . . . . . . . . . . . . . . . $106,935 $106,679
========= =========
INTEREST-BEARING LIABILITIES:
Deposits:
Passbook and statement savings . . . . . . . . $ 30,996 827 2.67 $ 32,747 931 2.84
Money market . . . . . . . . . . . . . . . . . 2,374 60 2.53 2,692 74 2.75
NOW . . . . . . . . . . . . . . . . . . . . . 9,065 135 1.49 9,106 190 2.09
Certificates of deposit . . . . . . . . . . . 55,653 3,007 5.40 53,653 3,035 5.66
--------- ------- --------- -------
Total interest-bearing deposits . . . . . . 98,088 4,029 4.11 98,198 4,230 4.31
------- ------ ------- ------
NONINTEREST-BEARING LIABILITIES:
Other liabilities . . . . . . . . . . . . . . . . 513 416
--------- ---------
Total liabilities . . . . . . . . . . . . . . . . . 98,601 98,614
Equity . . . . . . . . . . . . . . . . . . . . . . 8,334 8,065
--------- ---------
Total liabilities and equity . . . . . . . . . . . $ 106,935 $ 106,679
========= =========
Net interest-earning assets . . . . . . . . . . . $ 4,136 $ 4,237
Net interest income/interest rate spread (6) . . $ 3,411 3.17% $3,229 2.97%
======== ==== ====== ====
Net interest margin as a percentage
of interest-earning assets (7) . . . . . . . . 3.34% 3.15%
==== ====
Ratio of interest-earning assets to interest-
bearing liabilities . . . . . . . . . . . . . . 104.22% 104.31%
====== ======

</TABLE>

- --------------------------
(1) Balances are net of deferred loan origination costs, undisbursed proceeds
of construction loans in process, and include nonperforming loans.
(2) Includes in addition to one- to four-family real estate loans, multi-family
and construction real estate loans which at June 30, 1998
totalled $811,000 and $523,000, respectively.
(3) Includes mortgage-related securities available-for-sale and
held-to-maturity.
(4) Includes investment securities available-for-sale and held-to-maturity and
stock in the FHLB of Pittsburgh.
(5) The average balance of tax-exempt investments in 1998 was not material.
There were no tax-exempt investments owned in 1997 or 1996.
(6) Net interest rate spread represents the difference between the weighted
average yield on interest-earning assets and the weighted average cost of
interest-bearing liabilities.
(7) Net interest margin represents net interest income as a percentage of
average interest-earning assets.

33
<PAGE> 38
RATE/VOLUME ANALYSIS. The following table presents the extent to
which changes in interest rates and changes in the volume of interest-earning
assets and interest-bearing liabilities have affected the Association's
interest income and interest expense during the periods indicated. Information
is provided in each category with respect to: (i) changes attributable to
changes in volume (changes in volume multiplied by prior rate); (ii) changes
attributable to changes in rate (changes in rate multiplied by prior volume);
and (iii) the net change. The changes attributable to the combined impact of
volume and rate have been allocated on a proportional basis between changes in
rate and volume.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED
JUNE 30, 1998 JUNE 30, 1997
COMPARED TO COMPARED TO
FISCAL YEAR ENDED FISCAL YEAR ENDED
JUNE 30, 1997 JUNE 30, 1996
--------------------------------- --------------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO DUE TO
---------------------- ----------------------
RATE VOLUME NET RATE VOLUME NET
-------- ---------- ------- -------- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans:
Real estate(1) . . . . . . . . . . . . . . $ 138 $ 189 $ 327 $ (37) $ 73 $ 36
Consumer . . . . . . . . . . . . . . . . . (117) (76) (193) 85 23 108
Commercial real estate . . . . . . . . . . 25 75 100 (145) 48 (97)
------ ------- ------- ------- ------- -------
Total. . . . . . . . . . . . . . . . 46 188 234 (97) 144 47
Mortgage-related securities. . . . . . . . . . 74 (111) (37) (1) (69) (70)
Investment securities (2). . . . . . . . . . . (29) 153 124 (4) 164 160
Interest-earning deposits. . . . . . . . . . . (2) (19) (21) 17 (173) (156)
------ ------- ------- ------- ------- -------
Total interest-earning assets. . . . . . 89 211 300 (85) 66 (19)
------ ------- ------- ------- ------- -------
INTEREST-BEARING LIABILITIES:
Deposits:
Passbook and statement savings. . . . . . . 28 (60) (32) (55) (49) (104)
Money market. . . . . . . . . . . . . . . . (2) (5) (7) (6) (8) (14)
NOW . . . . . . . . . . . . . . . . . . . . 2 15 17 (54) (1) (55)
Certificate of deposit. . . . . . . . . . . 51 202 253 (141) 113 (28)
------ ------- ------- ------- ------- -------
Total interest-bearing liabilities . . . 79 152 231 (256) 55 (201)
------ ------- ------- ------- ---- -- -------
Increase in net interest income . . . . . . . . . $ 10 $ 59 $ 69 $ 171 $ 11 $ 182
====== ======= ======= ======= ======= =======
</TABLE>

- ------------------------
(1) Includes in addition to one- to four-family real estate loans, multi-family
and construction real estate loans which at June 30, 1998 totalled $811,000
and $523,000, respectively.
(2) Calculations of rate/volume changes are not presented on a tax equivalent
basis due to the volume of tax-exempt investments in 1998 not being
material. There were no tax-exempt investments owned in 1997 or 1996.

COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1998 AND JUNE 30, 1997.

Total assets increased by $4.6 million, or 4.3%, from $107.4 million
at June 30, 1997 to $112.0 million at June 30, 1998. The growth in assets was
primarily due to loan growth, which was funded through increased deposits and
retained earnings. Cash and due from banks also increased due to the growth in
deposits during 1998 exceeding the growth in loans and investment securities.

Real estate loans increased by $2.9 million, or 5.1%, from $57.1
million at June 30, 1997 to $60.0 million at June 30, 1998 primarily due to
increases in the origination of one- to four-family loans, including the
conversion of construction loans to permanent financing, and multi-family and
commercial real estate loans. One- to four-family loans increased $1.0 million
from $53.7 million at June 30, 1997 to $54.7 million at June 30, 1998.
Multi-family and commercial real estate loans increased $1.5 million from $3.3
million at June 30, 1997 to $4.8 million at June 30, 1998,

34
<PAGE> 39
a 45.5% increase, primarily due to the Association's increased business
development efforts. Consumer loans decreased by $400,000, or 3.9%, from $10.3
million at June 30, 1997 to $9.9 million at June 30, 1998.

Nonperforming loans increased from $1.6 million at June 30, 1997 to
$1.9 million at June 30, 1998, representing 2.4% and 2.7%, respectively, of
total loans at such dates. Nonperforming assets and troubled debt
restructurings remained stable at $2.1 million for both June 30, 1998 and 1997,
representing 1.9% and 2.0%, respectively, of total assets at such dates.

Total deposits increased by $4.1 million, or 4.2%, from $98.5 million
at June 30, 1997 to $102.6 million at June 30, 1998. The increase was
primarily due to an increase of $3.2 million, or 5.6%, in certificates of
deposit from $57.3 million at June 30, 1997 to $60.5 million at June 30, 1998.
The increase in certificates of deposit was primarily due to the Association's
strategy of offering more competitive rates on such deposits.

Total equity increased $600,000, or 7.0%, from $8.6 million at June
30, 1997 to $9.2 million at June 30, 1998. The increase in equity was a result
of net income of $600,000 for the fiscal year.

COMPARISON OF OPERATING RESULTS FOR THE FISCAL YEARS ENDED JUNE 30, 1998 AND
JUNE 30, 1997.

GENERAL. Net income for fiscal 1998 increased by $407,000, or 193.8%,
to $617,000 from $210,000 for fiscal year 1997. The increase was primarily due
to a decrease in noninterest expense resulting from the absence of the one time
special assessment of $620,000 to recapitalize the SAIF which occurred in the
second quarter of fiscal 1997. Net income also increased due to an increase in
net interest income. These items were slightly offset by an increase in the
provision for loan losses and an increase in noninterest expenses.

INTEREST INCOME. Total interest income increased by $300,000, or
4.1%, from $7.4 million for fiscal 1997 to $7.7 million for fiscal 1998,
primarily due to a $2.4 million, or 2.3%, increase in the average balance of
interest-earning assets and a slight increase in the weighted average yield on
interest-earning assets, which increased from 7.28% for fiscal 1997 to 7.40%
for fiscal 1998. Interest income on real estate loans increased $300,000, or
7.5%, from $4.0 million for fiscal year 1997 to $4.3 million for fiscal year
1998, primarily due to a $2.4 million increase in the average balance of real
estate loans and a slight increase in the weighted average yield from 7.55% for
fiscal 1997 to 7.80% for fiscal 1998. Interest income on consumer loans
decreased $175,000, from $1.0 million for fiscal year 1997 to $825,000 for
fiscal year 1998. This was principally due to decreases in the average balance
of consumer loans from $11.2 million in 1997 to $10.3 million in 1998 and a
decrease in the yield on such loans from 9.08% in 1997 to 7.99% in 1998.
Interest income on mortgage-related securities decreased $37,000 from $196,000
for fiscal 1997 to $159,000 for fiscal 1998 due to the increase in weighted
average yield from 4.04% in 1997 to 6.05% in 1998 being offset by a decrease of
$2.2 million in the average balance of such securities from $4.8 million in
1997 to $2.6 million in 1998. Interest income on investment securities
increased slightly by $100,000, from $1.6 million for fiscal year 1997 to $1.7
million for fiscal year 1998 due to an increase in the average balance of
investment securities from $24.4 million in 1997 to $26.7 million in 1998,
offset by a decrease in the yield on such investments.

INTEREST EXPENSE. Interest expense increased by $200,000, or 5.0%,
from $4.0 million for fiscal 1997 to $4.2 million for fiscal 1998. The
increase in interest expense was primarily the result of increased expense on
certificates of deposit, which was a result of a $3.7 million, or 6.7% increase
in the average balance of such accounts from $55.6 million for fiscal 1997 to
$59.3 million for fiscal 1998. These net increases were partially offset by a
decrease in interest expense on savings accounts of $32,000 due to the
decrease in the average balance of such accounts, which declined from an
average balance of $30.1 million for fiscal 1997 to $28.8 million for fiscal
1998. The increase in the average balance of certificates of deposit and the
decrease in the average balance of savings accounts was due primarily to the
Association's efforts to solicit certificate accounts by more competitively
pricing such accounts and by customers shifting funds from lower-yielding
savings accounts to higher-yielding certificates of deposit.

35
<PAGE> 40
PROVISION FOR LOAN LOSSES. The Association's provision for loan
losses for fiscal 1998 was $176,000, compared to $34,000 for fiscal 1997. The
increase in the provision for loan losses and corresponding increase in the
Association's allowance for loan losses reflected an increase in the amount of
delinquent and substandard loans. As a result, at June 30, 1998, the allowance
for loan losses was 0.65% of total loans, compared to 0.64% at June 30, 1997.
The Association anticipates that, as a result of its increasing emphasis on
consumer and multi-family and commercial real estate loans, it may need to
maintain an allowance for loan losses in the future at a level that is higher
than that which it maintained in recent periods to offset any greater risk
resulting from the shifting composition of its loan portfolio. See "Business
of the Association - Delinquent Loans, Classified Assets and Foreclosed Real
Estate" and "Allowance for Loan Losses."

NONINTEREST INCOME. In fiscal 1998, the Association experienced a
$20,000 increase in noninterest income from $284,000 in fiscal year 1997 to
$304,000 for fiscal year 1998 due primarily to an increase in loan fees and
service charges associated with the implementation of surcharges on ATM
transactions and the increase in the average balance of loans originated.

NONINTEREST EXPENSE. Total noninterest expense decreased from $3.1
million for fiscal 1997 to $2.5 million for fiscal 1998 due primarily to a
reduction in the FDIC deposit insurance premiums in fiscal 1998 and the absence
of a one-time charge of $620,000 in order to recapitalize the SAIF fund which
occurred in the fourth quarter of 1997. As a result of the FDIC premium
reduction and absence of the SAIF assessment in fiscal 1998, FDIC insurance
assessments and premiums decreased from $750,000 for fiscal 1997 to $64,000 for
fiscal 1998. Noninterest expense other than FDIC premiums and the SAIF special
assessment increased approximately $66,000 for fiscal 1998 compared to fiscal
1997. Compensation and employee benefits increased $30,000, or 2.4%, primarily
due to normal increases in salaries as well as increases in benefit costs.

PROVISION FOR INCOME TAXES. Income tax expense totaled $506,000 for
fiscal 1998, compared to $344,000 for fiscal 1997, resulting in an effective
tax rate of 45.1 % for fiscal 1998 compared to 62.1% for fiscal 1997. The
increase in income tax expense in fiscal 1998 was attributable to higher
pre-tax income, which increased from $554,000 in 1997 to $1.1 million in 1998,
offset in part by a lower effective tax rate. The fiscal 1997 effective tax
rate of 62.1% was inordinately high as a result of a one time recognition of a
deferred tax liability of $136,000 for the recapture of certain of the
Association's bad debt reserve as a result of a change in federal income tax
law. The 1997 effective tax rate was also impacted by a reduced state income
tax rate also attributable to the deferred federal tax expense recognition.
Without the one-time adjustment, the fiscal 1997 effective tax rate would
approximate the fiscal 1998 effective tax rate.

COMPARISON OF OPERATING RESULTS FOR THE FISCAL YEARS ENDED JUNE 30, 1997 AND
JUNE 30, 1996.

GENERAL. Net income decreased $387,000, or 64.8%, from $597,000 for
fiscal 1996 to $210,000 for fiscal 1997. The decrease was primarily
attributable to a one-time special assessment of $620,000 from the FDIC in
order to recapitalize the SAIF, which was offset, in part, by a $182,000
increase in net interest income.

INTEREST INCOME. Interest income remained stable at $7.4 million for
fiscal 1997 and fiscal 1996, primarily due to the average balance of
interest-earning assets and weighted average yield remaining stable for fiscal
1997 and 1996. Interest income on loans also remained stable at $5.1 million
for fiscal 1997 and 1996 due to the higher average balance of loans being
offset by a decrease in the weighted average yield of loans from 7.89% for
fiscal 1996 to 7.77% for fiscal 1997.

INTEREST EXPENSE. Interest expense decreased by $200,000, or 4.8%,
from $4.2 million for fiscal 1996 to $4.0 million for fiscal 1997 primarily due
to a $200,000 decrease in the average balance of deposits and a decrease in the
weighted average costs of such liabilities from 4.31% for 1996 to 4.11% for
1997, due primarily to the Association's decision to reduce the rate paid on
its savings accounts during 1997 as part of the Association's determination to
extend the maturity of its deposit portfolio by competitively pricing its time
deposit products. The Association's revised deposit pricing strategy of
competitively pricing certificates of deposit and reducing the rate paid on
savings accounts resulted

36
<PAGE> 41
in an increase in the average balance of certificates of deposit for 1997
compared to 1996, which was more than offset by the $1.7 million decrease in
the average balance of savings accounts for 1997 compared to 1996. This
movement to certificates of deposit also extended the average maturity of the
Association's deposits.

PROVISION FOR LOAN LOSSES. During 1997, the provision for loan
losses decreased by $68,000 from the prior year's level of $102,000. The
lower provision was based on management's evaluation of existing real estate
market conditions, the level of charge-offs and nonperforming loans, as well as
an evaluation of the general economic conditions in the Association's market
areas. At June 30, 1996, the Association's allowance for loan losses to total
nonperforming loans and to total loans was 23.9% and 0.69% respectively,
compared to 27.1% and 0.64% at June 30, 1997.

NONINTEREST INCOME. Noninterest income increased by $26,000, or
10.1%, from $258,000 in 1996 to $284,000 in 1997. The increase was primarily
attributable to the increase in loan fees and service charges and gains on sale
of securities available-for-sale. The increase in loan fees and service
charges was primarily due to an increase in the average balance of loans and
the implementation of surcharges on ATM transactions.

NONINTEREST EXPENSE. Noninterest expense increased $700,000, or
29.2%, in 1997 to $3.1 million compared to $2.4 million in 1996. The increase
primarily related to the special assessment by the FDIC for the SAIF
recapitalization of $620,000. Compensation and employee benefits also
increased $47,000, or 3.8%, due to normal annual increases in salaries and
benefit costs.

PROVISION FOR INCOME TAXES. Income tax expense decreased by $18,000,
or 5.0%, from $362,000 in fiscal 1996 to $344,000 in fiscal 1997, resulting in
an effective tax rate of 62.1% for fiscal year 1997 compared to 37.8% for
fiscal 1996. The decrease in income tax expense in fiscal 1997 was
attributable to a decrease in the Association's pre-tax earnings for fiscal
1997 compared to fiscal 1996, offset by a $136,000 deferred tax expense related
to the change in income tax law relating to the Association's tax bad debt
reserve. The 1997 effective tax rate was also impacted by a reduced state
income tax rate also attributable to the deferred federal income tax expense
recognition. The Association's effective tax rate for fiscal 1997 was 62.1% as
compared to 37.8% for fiscal 1996 as a result of this change.

LIQUIDITY AND CAPITAL RESOURCES

The Association's primary sources of funds are deposits, principal and
interest payments on loans, mortgage-backed and investment securities. The
Association uses the funds generated to support its lending and investment
activities as well as any other demands for liquidity such as deposit outflows.
While maturities and scheduled amortization of loans are predictable sources of
funds, deposit flows, mortgage prepayments and the exercise of call features
are greatly influenced by general interest rates, economic conditions and
competition. The Association has continued to maintain the required levels of
liquid assets as defined by OTS regulations. This requirement of the OTS,
which may be varied at the direction of the OTS depending upon economic
conditions and deposit flows, is based upon a percentage of deposits and
short-term borrowings. The Association's currently required liquidity ratio is
4.0%. At June 30, 1998, 1997, 1996, 1995, and 1994, the Association's
liquidity ratios were 22.9%, 21.1%, 21.1%, 19.4% and 25.6%, respectively.

At June 30, 1998, the Association exceeded all of its regulatory
capital requirements with a tangible capital level of $9.4 million, or 8.4% of
total adjusted assets, which is above the required level of $1.7 million, or
1.5%; core capital of $9.4 million, or 8.4%, of total adjusted assets, which is
above the required level of $4.5 million, or 4.0% and risk-based capital of
$9.8 million, or 16.9%, of risk-weighted assets, which is above the required
level of $4.6 million, or 8.0%. See "Regulatory Capital Compliance."

37
<PAGE> 42
The Association has other sources of liquidity if a need for
additional funds arises, including FHLB advances. At June 30, 1998, the
Association did not have any advances outstanding from the FHLB, and at June
30, 1998 had an overall borrowing capacity from the FHLB of $5.9 million.

The Association's most liquid assets are cash and due from banks,
interest-bearing deposits with banks and its investment and mortgage-related
securities available-for-sale. The levels of these assets are dependent on the
Association's operating, financing, lending and investing activities during any
given period. At June 30, 1998, cash and due from banks, interest-bearing
deposits with banks and investment securities available for sale totalled $19.8
million, or 17.7% of total assets.

At June 30, 1998, the Association had commitments to originate loans
and unused outstanding lines of credit and undisbursed proceeds of construction
mortgages totaling $2.0 million. The Association anticipates that it will have
sufficient funds available to meet its current loan origination commitments.
Certificate accounts, which are scheduled to mature in less than one year from
June 30, 1998, totalled $38.8 million. The Association expects that
substantially all of the maturing certificate accounts will be retained by the
Association at maturity.

The initial impact of the Conversion on the liquidity and capital
resources of the Company will be significant as it will substantially increase
the liquid assets of the Company and the capital base on which the Company
operates. Additionally, the Company expects the substantial majority of
Conversion proceeds will initially be invested in readily marketable investment
grade securities which, if liquidity needs developed, could be sold by the
Company to provide additional liquidity. Further, the additional capital
resulting from the Offerings is expected to increase the capital base of the
Company. At June 30, 1998, the Association had total equity, determined in
accordance with GAAP, of $9.2 million, or 8.2% of total assets, which
approximated the Association's regulatory tangible capital at that date of 8.4%
of assets. An institution with a ratio of tangible capital to total assets of
greater than or equal to 5% is considered to be "well-capitalized" pursuant to
OTS regulations. Assuming that the Company uses 50% of the net proceeds at
the maximum of the Estimated Price Range to purchase the stock of the
Association, the Association's GAAP capital will increase to $16.9 million or a
ratio of GAAP capital to adjusted assets, on a pro forma basis, of 14.1% after
the Conversion. In the event that the holding company form of organization is
not utilized and all of the net Conversion proceeds, at the midpoint of the
Estimated Price Range, are retained by the Association, the Association's
ratios of tangible and core capital to adjusted assets, on a pro forma basis,
will both increase to 18.0% after Conversion. The investment of the net
proceeds from the sale of the Common Stock is expected to provide the
Association with additional income to increase further its capital position.
The additional capital may also assist the Association in offering new programs
and expanded services to its customers. See "Use of Proceeds."

YEAR 2000 COMPLIANCE

As the year 2000 approaches, an important business issue has emerged
regarding how existing application software programs and operating systems can
accommodate this date value. Many existing application software products were
designed to accommodate only two-digits. For example, "96" is stored on the
system and represents 1996. The Association relies significantly on an outside
service bureau. That service bureau has completed its inventory and assessment
of its "Year 2000" compliance and is scheduled to have resolved all identified
problems by the end of 1998. This will provide for a full year of testing for
compliance. The Association has also completed its inventory and assessment
and has completed upgrading its internal system to handle the "Year 2000"
problem. The Association currently is testing its upgrades and will perform
extensive tests with the service bureau system. The cost to the Association
for the internal upgrade, not including staff time, has been less than $50,000.
There can be no assurances, however, that the performance by the Association
and its service bureau will be effective to remedy all potential problems. To
the extent the Company's systems are not fully Year 2000 compliant, there can
be no assurance that potential systems interruptions or the cost necessary to
update software would not have a materially adverse effect on the Company's
business, financial condition, results of operations and business prospects.

38
<PAGE> 43
IMPACT OF INFLATION AND CHANGING PRICES

The Financial Statements and Notes thereto presented herein have been
prepared in accordance with GAAP, which require the measurement of financial
position and operating results generally in terms of historical dollar amounts
without considering the changes in the relative purchasing power of money over
time due to inflation. The impact of inflation is reflected in the increased
cost of the Association's operations. Unlike industrial companies, nearly all
of the assets and liabilities of the Association are monetary in nature. As a
result, interest rates have a greater impact on the Association's performance
than do the effects of 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.

IMPACT OF NEW ACCOUNTING STANDARDS

ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND
EXTINGUISHMENTS OF LIABILITIES. In June 1996, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" ("SFAS No. 125"). This Statement provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities based on consistent application of a
financial-components approach that focuses on control. It distinguishes
transfers of financial assets that are sales from transfers that are secured
borrowings. Under the financial-components approach, after a transfer of
financial assets, an entity recognizes all financial and servicing assets it
controls and liabilities it has incurred and derecognizes financial assets it
no longer controls and liabilities that have been extinguished. The
financial-components approach focuses on the assets and liabilities that exist
after the transfer. If a transfer does not meet the criteria for a sale, the
transfer is accounted for as a secured borrowing with a pledge of collateral.
The Statement became effective for transfers and servicing of financial assets
and extinguishments of liabilities occurring after December 31, 1996, and is to
be applied prospectively. Adoption of this Statement did not have a material
impact on the net income, equity, or financial position of the Association.

ACCOUNTING FOR EARNINGS PER SHARE. In February 1997, the FASB issued
SFAS No. 128, "Earnings Per Share." This statement establishes standards for
computing and presenting earnings per share ("EPS") and applies to entities
with publicly-held common stock or potential common stock. This statement
simplifies the standards for computing earnings per share previously found in
APB Opinion No. 15, "Earnings Per Share," and makes them comparable to
international EPS standards. It replaces the presentation of primary EPS with
a presentation of basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. This statement is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods, and earlier application is not permitted.

REPORTING COMPREHENSIVE INCOME. In September 1997, the FASB issued
SFAS No. 130, "Reporting Comprehensive Income." This statement establishes
standards for the reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. SFAS No. 130
requires that all items that are required to be recognized as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. The statement does not
require a specific format for that financial statement but requires that an
enterprise display an amount representing total comprehensive income for the
period in that financial statement. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. The Association will make the appropriate
disclosures in the applicable financial statements, as required.

DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION.
In September 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information." SFAS No. 131 establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services,

39
<PAGE> 44
geographic areas, and major customers. SFAS No. 131 is effective for financial
statements for periods beginning after December 15, 1997. Management has not
yet determined the impact, if any, of this statement on the Association.

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. In
June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. In
connection with the implementation of SFAS No. 133, the Association may
transfer debt securities classified as held-to-maturity to the
available-for-sale category. Such a transfer will not call into question the
Association's intention to hold other debt to maturity in the future. SFAS No.
133 is effective for financial statements for periods beginning after June 15,
1999. Management has not yet determined the impact, if any, of this statement
on the Association.

BUSINESS OF THE ASSOCIATION

GENERAL

The Association's principal business has been and continues to be
attracting retail deposits from the general public in the areas surrounding its
four banking offices and investing those deposits, together with funds
generated from operations, primarily in one- to four-family mortgage loans and
consumer loans. The Association currently originates, for investment,
adjustable- and fixed-rate one- to four-family mortgage loans, as well as a
variety of consumer loans, including home equity loans, lines of credit,
automobile and education loans. To a lesser extent, the Association also
originates multi-family and commercial real estate loans and construction
loans. The Association also invests in mortgage-related and investment
securities, primarily U.S. government and agency obligations, and certificates
of deposit in other financial institutions and other permissible investments.
The Association's revenues are derived principally from interest on its loans,
and to a lesser extent, interest and dividends on its investment and
mortgage-related securities and certificates of deposit investments, and other
noninterest income. The Association's primary sources of funds are deposits
and principal and interest payments on loans and mortgage-related securities.

MARKET AREA AND COMPETITION

The Association is a community-oriented banking institution offering a
variety of financial products and services to meet the needs of the communities
it serves. The Association's lending and deposit gathering is concentrated in
its market area consisting of Luzerne and Carbon counties in Northeast
Pennsylvania. The Association invests primarily in loans secured by first and
second mortgages on properties located in its market area.

The Association maintains two banking branch offices in Hazleton (in
Luzerne County), one in Weatherly (in Carbon County), and one in Drums (in
Luzerne County). Hazleton is situated approximately 100 miles from
Philadelphia and New York City and approximately 50 miles from Allentown and
the Wilkes-Barre/Scranton area.

The economy of the greater Hazleton area is characterized by
diversified light manufacturing and is the site of production facilities for
several manufacturers including Union Camp, Hershey-Cadbury Chocolates,
Quebacor and Hazleton Pumps, Inc. As a consequence, the manufacturing sector
employs more than one third of the area's work force. The Hazleton area has
excellent access to major highway transportation routes including Interstates
80 and 81 as well as rail transportation. The population of Luzerne County has
remained relatively static and has one of the oldest average ages for all
counties in the United States. The unemployment rate in the area is greater
than the national average.

The Association faces significant competition both in generating loans
and in attracting deposits. The Association's primary market area is highly
competitive and the Association faces direct competition from a significant
number of financial institutions, many with a state wide or regional presence
and, in some cases, a national presence.

40
<PAGE> 45
Many of these financial institutions are significantly larger and have greater
financial resources than the Association. The Association's competition for
loans comes principally from commercial banks, savings banks, credit unions,
mortgage brokers, mortgage banking companies and insurance companies. Its most
direct competition for deposits has historically come from savings banks and
associations, commercial banks and credit unions. In addition, the Association
faces increasing competition for deposits from non-bank institutions such as
brokerage firms and insurance companies in such instruments as short-term money
market funds, corporate and government securities funds, mutual funds and
annuities. Competition may also increase as a result of the removal of
restrictions on the interstate operations of financial institutions. See "Risk
Factors--Highly Competitive Industry and Geographic Area."

In addition, the Association recognizes that its customer base
increasingly focuses on convenience and access to services. The Association
has addressed these customer desires recently through the implementation of
telephone banking system and the introduction of a new debit card.
Additionally, the Association intends to expand its telephone banking system to
promote bill payment services and install automated teller machines ("ATMs").
The Association will continue to evaluate and enhance its service delivery
system.

LENDING ACTIVITIES

LOAN PORTFOLIO COMPOSITION. The Association's loan portfolio consists
primarily of mortgage loans secured by one- to four-family residential real
estate, consumer loans and multi-family and commercial real estate loans. At
June 30, 1998, the Association's loans totalled $69.9 million, of which $54.7
million, or 78.2%, were one- to four-family residential mortgage loans. Total
real estate mortgage loans included 28.7% of adjustable-rate loans, which are
indexed primarily to the United States Treasury Bill rates and the prime rate
as reported in The Wall Street Journal.

The Association's consumer loans at June 30, 1998 aggregated $9.9
million, or 14.2% of total loans. Such consumer loans included $6.3 million of
home equity loans and lines of credit, $1.0 million of automobile loans,
$345,000 of education loans and $2.3 million of other consumer loans. At June
30, 1998, the Association also had $5.3 million, or 7.6% of total loans, in
multi-family and commercial real estate loans and construction loans.

The types of loans that the Association may originate are subject to
federal and state laws and regulations. Interest rates charged by the
Association on loans are affected by the demand for such loans and the supply
of money available for lending purposes and the rates offered by competitors.
These factors are, in turn, affected by, among other things, economic
conditions, monetary policies of the federal government, including the Federal
Reserve Board, and legislative tax policies.

41
<PAGE> 46
The following table sets forth the composition of the Association's
loan portfolio in dollar amounts and as a percentage of the portfolio at the
dates indicated.

<TABLE>
<CAPTION>
AT JUNE 30,
-----------------------------------------------------------
1998 1997
------------------------------ --------------------------
PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL
------ -------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Real estate loans:

One- to four-family.......................... $54,722 78.24% $53,685 79.59%

Multi-family and commercial.................. 4,757 6.80 3,263 4.84

Construction................................. 523 0.75 194 0.29
------- ------ ------- ------
Total real estate loans................ 60,002 85.79 57,142 84.72
------- ------ ------- ------
Consumer loans:

Home equity loans and
lines of credit............................ 6,306 9.02 6,848 10.15

Automobile................................... 967 1.38 1,067 1.58

Education.................................... 345 0.49 16 0.02

Secured by deposits.......................... 907 1.30 937 1.39

Other........................................ 1,410 2.02 1,441 2.14
------- ------ ------- ------
Total consumer loans................... 9,935 14.21 10,309 15.28
------- ------ ------- ------
Total loans............................... 69,937 100.00% 67,451 100.00%
====== ======
Less:

Deferred loan origination fees
and discounts.............................. 274 284

Allowance for loan losses.................... 452 429
------- -------
Total loans, net.......................... $69,211 $66,738
======= =======

<CAPTION>
AT JUNE 30,
-------------------------------------------------------------
1996 1995
------------------------------ ----------------------------
PERCENT PERCENT
AMOUNT OF TOTAL AMOUNT OF TOTAL
------ -------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Real estate loans:

One- to four-family.......................... $51,561 78.36% $50,494 78.11%

Multi-family and commercial.................. 2,955 4.49 2,538 3.93

Construction................................. 298 0.45 505 0.78
------- ------ ------- ------
Total real estate loans................ 54,814 83.30 53,537 82.82
------- ------ ------- ------
Consumer loans:

Home equity loans and
lines of credit............................ 6,820 10.37 7,208 11.14

Automobile................................... 1,245 1.89 1,362 2.11

Education.................................... 711 1.08 568 0.88

Secured by deposits.......................... 858 1.30 812 1.26

Other........................................ 1,353 2.06 1,159 1.79
------- ------ ------- ------
Total consumer loans................... 10,987 16.70 11,109 17.18
------- ------ ------- ------
Total loans............................... 65,801 100.00% 64,646 100.00%
====== ======= ======
Less:

Deferred loan origination fees
and discounts.............................. 283 302

Allowance for loan losses.................... 447 401
------- -------
Total loans, net.......................... $65,071 $63,943
======= =======

<CAPTION>
AT JUNE 30,
------------------------------
1994
------------------------------
PERCENT
AMOUNT OF TOTAL
------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Real estate loans:

One- to four-family.......................... $47,015 81.28%

Multi-family and commercial.................. 2,143 3.71

Construction................................. 407 0.70
------- -----

Total real estate loans................ 49,565 85.69
------- -----

Consumer loans:

Home equity loans and
lines of credit............................ 5,361 9.27

Automobile................................... 796 1.38

Education.................................... 341 0.59

Secured by deposits.......................... 685 1.18

Other........................................ 1,092 1.89
------ ------

Total consumer loans................... 8,275 14.31
------ ------

Total loans............................... 57,840 100.00%
======

Less:

Deferred loan origination fees
and discounts.............................. 278

Allowance for loan losses.................... 215
------

Total loans, net.......................... $57,347
=======
</TABLE>

42
<PAGE> 47
LOAN MATURITY. The following table shows the remaining contractual
maturity of the Association's total loans at June 30, 1998. The table does not
include the effect of future principal prepayments.

<TABLE>
<CAPTION>
AT JUNE 30, 1998
-----------------------------------------------------------
MULTI-
ONE- TO FAMILY AND
FOUR- COMMERCIAL TOTAL
FAMILY(1) REAL ESTATE CONSUMER LOANS
------------- --------------- ------------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Amounts due in:
One year or less.......................................... $ 11 $ -- $ 242 $ 253
After one year:
More than one year to three years................ 330 426 1,589 2,345
More than three years to five years.............. 1,313 327 2,888 4,528
More than five years to 10 years ................ 8,393 360 5,095 13,848
More than 10 years to 15 years .................. 16,920 2,633 81 19,634
More than 15 years .............................. 27,377 1,912 40 29,329
------- ------ ------ -------
Total amount due.............................. $54,344 $5,658 $9,935 $69,937
======= ====== ====== =======
</TABLE>
- ---------------------------
(1) Includes construction loans for the construction of one- to four-family
residences, which generally convert to permanent financing upon completion
of the construction phase.

The following table sets forth, at June 30, 1998, the dollar amount of
loans contractually due after June 30, 1999, and whether such loans have fixed
interest rates or adjustable interest rates.

<TABLE>
<CAPTION>
DUE AFTER JUNE 30, 1999
-----------------------------------------
FIXED ADJUSTABLE TOTAL
---------- -------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Real estate loans:
One- to four-family(1)............................ $40,904 $13,263 $54,167
Multi-family and commercial ...................... 1,893 3,931 5,824
------- ------- -------
Total real estate loans........................ 42,797 17,194 59,991
Consumer loans ...................................... 8,235 1,458 9,693
------- ------- -------
Total loans.................................... $51,032 $18,652 $69,684
======= ======= =======
</TABLE>
- ---------------------------
(1) Includes construction loans for the construction of one- to
four-family residences, which generally convert to permanent financing
upon completion of the construction phase.

ORIGINATION AND SALE OF LOANS. The Association's mortgage lending
activities are conducted primarily by its loan personnel operating at its
banking offices. All loans originated by the Association are underwritten
pursuant to the Association's policies and procedures. For fiscal 1998 and
1997, the Association originated $14.8 million and $13.4 million of loans,
respectively. The Association originates both adjustable- and fixed-rate
loans. The Association's ability to originate fixed- or adjustable-rate loans
is dependent upon the relative customer demand for such loans, which is
affected by the current and expected future level of interest rates. All real
estate loans originated by the Association are originated for investment.

During fiscal years 1998 and 1997, the Association originated $8.6
million and $7.1 million, respectively, of one- to four-family mortgage loans.
In addition, during fiscal years 1998 and 1997, the Association originated $2.1
million and $1.4 million, respectively, of construction loans, all of which
were for owner financing of single-family properties, which, upon completion of
the construction phase, generally will convert to permanent financing. Also,
the Association originated $1.0 million and $872,000, respectively, of
multi-family and commercial real estate loans during fiscal 1998 and 1997.

43
<PAGE> 48
Also, during fiscal 1998 and 1997, respectively, the Association
originated $3.6 million and $4.0 million of consumer loans, consisting of $1.4
million and $2.0 million, respectively, of home equity loans and lines of
credit, $813,000 and $713,000, respectively, of automobile loans, $457,000 and
$191,000, respectively, of education loans, and $913,000 and $1.1 million,
respectively, of other consumer loans.

The following table sets forth the Association's loan originations and
principal repayments and prepayments for the periods indicated:

<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED JUNE 30,
-----------------------------------------------
1998 1997 1996
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Loans at beginning of period........................ $68,882 $66,604 $65,282
Originations:
Real estate:
One- to four-family........................ 8,567 7,109 6,500
Multi-family and commercial................ 1,034 872 681
Construction .............................. 2,060 1,362 1,269
------ ------ ------
Total real estate loans ................ 11,661 9,343 8,450
------ ------ ------

Consumer:
Home equity loans and lines of credit...... 1,374 1,974 1,367
Automobile ................................ 813 713 919
Education.................................. 457 191 210
Unsecured lines of credit.................. -- -- --
Other...................................... 913 1,168 947
------ ------ ------
Total consumer loans.................... 3,557 4,046 3,443
------ ------ ------

Total loans originated.................. 15,218 13,389 11,893
------ ------ ------

Deduct:
Principal loan repayments and prepayments........ 12,335 10,593 10,326
Transfers to foreclosed real estate.............. 718 518 245
------ ------ ------
Total deductions........................ 13,053 11,111 10,571
------ ------ ------
Net loan activity .................................. 2,165 2,278 1,322
------ ------ ------
Loans at end of period (1).................... $71,047 $68,882 $66,604
====== ====== ======
</TABLE>
- ------------------------
(1) Loans at end of period include loans in process of $1.1 million, $1.4
million and $803,000 for fiscal years 1998, 1997 and 1996, respectively.

ONE- TO FOUR-FAMILY MORTGAGE LENDING. One- to four-family mortgage
loan originations are generally obtained by the Association's in-house loan
representatives, from existing or past customers, and through referrals from
members of the Association's local community. At June 30, 1998, the
Association's one- to four-family mortgage loans totalled $54.7 million, or
78.2% of total loans. Of the one- to four-family mortgage loans outstanding at
that date, 75.5% were fixed-rate mortgage loans and 24.5% were adjustable-rate
mortgage ("ARM") loans.

The Association currently offers a variety of fixed-rate mortgage
loans, including 30-year and 15-year mortgage loans. The Association also
currently offers ARM loans with a term of 30 years and an interest rate which
adjusts annually from the outset of the loan. The interest rates for the
Association's ARM loans adjust in accordance with an index based on United
States Treasury Bill rates. The Association originates ARM loans with
initially discounted rates, often known as "teaser rates." The Association's
ARM loans generally provide for periodic (not more

44
<PAGE> 49
than 2%) caps on the increase or decrease in the interest at any adjustment
date. Currently, the Association has a contractual rate ceiling of 5% over the
life of the loan.

The origination of ARM loans, as opposed to fixed-rate residential
mortgage loans, helps reduce the Association's exposure to increases in
interest rates. However, adjustable-rate loans generally pose credit risks not
inherent in fixed-rate loans, primarily because as interest rates rise, the
underlying payments of the borrower rise, thereby increasing the potential for
default. Periodic and lifetime caps on interest rate increases help to reduce
the credit risks associated with adjustable-rate loans but also limit the
interest rate sensitivity of such loans.

Most one-to-four-family mortgage loans are underwritten according to
FNMA and FHLMC guidelines. Generally, the Association originates
one-to-four-family residential mortgage loans in amounts up to 80% of the lower
of the appraised value or the selling price of the property securing the loan
and up to 95% of the appraised value or selling price if private mortgage
insurance ("PMI") is obtained. Mortgage loans originated by the Association
generally include due-on-sale clauses which provide the Association with the
contractual right to deem the loan immediately due and payable in the event the
borrower transfers ownership of the property without the Association's consent.
Due-on-sale clauses are an important means of adjusting the yields on the
Association's fixed-rate mortgage loan portfolio and the Association has
generally exercised its rights under these clauses. The Association requires
fire, casualty, title and, in certain cases, flood insurance on all properties
securing real estate loans made by the Association.

MULTI-FAMILY AND COMMERCIAL REAL ESTATE LENDING. The Association
originates adjustable-rate multi-family and commercial real estate loans that
generally are secured by properties used for a combination of residential and
retail purposes. Also, the Association participates in commercial real estate
loans promoted by a local regional development agency. At June 30, 1998, the
Association had $4.8 million of multi-family and commercial real estate loans.
At that date, the Association's largest multi-family or commercial real estate
loan were five commercial real estate loans which ranged from $264,000 to
$395,000 and were secured by commercial real estate a combination of lease
assignments, rents and equipment.

A multi-family mortgage loan may be made to an amount up to 70% of the
lower of the appraised value or sales price of the underlying property with a
term of up to 30 years. The Association's adjustable-rate multi-family loans
are offered at interest rates which adjust annually. The Association also
generally requires an appraisal on the property conducted by an independent
appraiser and title insurance.

The Association's underwriting procedures for commercial real estate
loans provide that such loans generally may be made in amounts up to 70% of the
lower of the appraised value or purchase price of the property unless the
property is owned by an individual who lives more than 50 miles from the
property. In those cases, a commercial real estate loan may only be made in
amounts up to 65% of the lower of the appraised value or purchase price of the
property. The Association may request PMI on a case by case basis. These
adjustable-rate loans may be made with terms up to 20 years and are generally
offered at interest rates which adjust every five years, in accordance with an
index based on the prime rate as published in The Wall Street Journal. The
factors considered by the Association include: the net operating income of the
mortgaged premises before debt service and depreciation; the debt coverage
ratio (the ratio of net earnings to debt service); and the ratio of loan amount
to appraised value.

Multi-family and commercial real estate loans generally are considered
to involve a higher degree of credit risk than financing on improved,
owner-occupied real estate. Multi-family and commercial real estate loans
generally involve larger principal amounts than one- to four-family residential
mortgage loans. In addition, because multi-family and commercial real estate
loans often are dependent on successful operation and management of the
properties, repayment of such loans may be subject to adverse conditions in the
real estate market or the economy to a greater extent than one- to four-family
residential loans.

CONSTRUCTION LENDING. The Association also offers residential
construction loans. Such lending has consisted primarily of loans for the
construction of presold one- to four-family residences which convert into
permanent financing upon the completion of construction. The Association
generates residential construction loans primarily through direct contact with
the borrower or home builders, and these loans involve properties located in
the Association's market area.

45
<PAGE> 50
Such loans require that an appraisal be conducted by a qualified appraiser and
the Association review plans, specifications and cost estimates. The appraiser
must also conduct an inspection following completion of the work. The amount of
construction advances to be made, together with the sum of previous
disbursements, may not exceed the percentage of completion of the construction.
The maximum loan-to-value ratio for such loans is 95%. Furthermore, borrowers
have six months to complete the home and only pay interest on amounts disbursed
during the construction process. The Association requires that it possess the
first and only lien on these types of loans. At June 30, 1998, the
Association's largest construction loan was a performing loan with an aggregate
commitment of $396,000 secured by a single-family residence located in Luzerne
County. At that date, construction loans totalled $523,000 (net), or 0.8% of
the Association's total loans. Risk of loss on a construction loan is
dependent largely upon the accuracy of the initial estimate of the property's
value at completion of construction or development.

CONSUMER LENDING. Consumer loans at June 30, 1998 amounted to $9.9
million or 14.2% of the Association's total loans. These loans include home
equity loans and lines of credit, automobile loans, education loans and other
consumer loans. Such loans are generally originated in the Association's
primary market area and if over $5,000 must be secured by real estate,
automobiles or a titled vehicle. These loans are typically shorter term and
generally have higher interest rates than one- to four-family mortgage loans.
The maximum limit on consumer loans, excluding home equity loans and home
equity lines of credit, is $50,000.

At June 30, 1998, home equity loans and lines of credit accounted for
$6.3 million, or 9.0% of total loans and 63.5% of consumer loans. The
Association generally offers home equity loans with terms of up to 120 months.
The Association also offers home equity lines of credit with terms up to 120
months with adjustable rates of interest which adjust on a quarterly basis.
The adjustable rate of interest is indexed to the prime rate as reported in The
Wall Street Journal on the last day of the month preceding adjustment.
Generally, the maximum loan-to-value ratio on both home equity loans and home
equity lines of credit is 75%.

The Association also offers automobile loans on both new and used
cars. Loans are offered with 60 month terms and loan-to-value ratios of 80% on
new cars. The Association will also finance high dollar new cars for an
extended term greater than 60 months. For used cars, the maximum loan-to-value
ratio is the lesser of the retail value shown in the NADA Used Car Guide or the
contract price and the terms for such loans are determined based on the age of
the vehicle, but are generally limited to 60 months. However, the Association
will not make a loan on an automobile over five years old unless such
automobile is deemed an investment property. In those cases, an inspection is
required and the valuation is determined by the retail value as listed in the
Cars of Particular Interest booklet. The Association also offers loans on
recreational vehicles with terms up to 15 years for new and 84 months for used
vehicles and loan-to- value ratios of 80% for new and used recreational
vehicles.

Other consumer loans include education loans which are federally
guaranteed and originated under regulations of the Pennsylvania Higher
Education Assistance Agency, deposit-secured loans, and other personal and
unsecured loans. During the last two years, it has become the policy of the
Association to sell its education loans once the borrower has left school to
Sallie Mae with servicing released.

Loans secured by rapidly depreciable assets such as automobiles or
that are unsecured entail greater risks than one- to four-family mortgage
loans. In such cases, repossessed collateral for a defaulted loan may not
provide an adequate source of repayment of the outstanding loan balance, since
there is a greater likelihood of damage, loss or depreciation of the underlying
collateral. Further, consumer loan collections on these loans are dependent on
the borrower's continuing financial stability and, therefore, are more likely
to be adversely affected by job loss, divorce, illness or personal bankruptcy.
Finally, the application of various federal and state laws, including federal
and state bankruptcy and insolvency laws, may limit the amount which can be
recovered on such loans in the event of a default.

LOAN APPROVAL PROCEDURES AND AUTHORITY. The Board of Directors
establishes the lending policies and loan approval limits of the Association.
Such policies provide that all mortgage loans will be reviewed and either
approved or rejected by the Executive Committee of the Board of Directors or
the full Board of Directors, except those loans made under consumer lending
guidelines. Additionally, the Board of Directors has authorized the following
persons to approve loans up to the amounts indicated: branch managers may
approve loans up to $5,000; the Vice President,

46
<PAGE> 51
Lending may approve loans up to $10,000; loans up to $20,000 may be approved by
the Association's President and Chief Executive Officer; two officers
signatures are required for loans over $20,000 but less than $30,000; and loans
over $30,000 require the approval of the Board of Directors. All approved
loans are reported monthly to the Board of Directors.

DELINQUENT LOANS, CLASSIFIED ASSETS AND FORECLOSED REAL ESTATE

DELINQUENCIES AND CLASSIFIED ASSETS. Reports listing all delinquent
accounts are generated and reviewed by management and the Board of Directors on
a monthly basis. The procedures taken by the Association with respect to
delinquencies vary depending on the nature of the loan, period and cause of
delinquency and whether the borrower has been habitually delinquent. When a
borrower fails to make a required payment on a loan, the Association takes a
number of steps to have the borrower cure the delinquency and restore the loan
to current status. The Association generally sends the borrower a written
notice of non-payment after the loan is first past due. The Association's
guidelines provide that telephone, written correspondence and/or face-to-face
contact will be attempted to ascertain the reasons for delinquency and the
prospects of repayment. When contact is made with the borrower at any time
prior to foreclosure, the Association will attempt to obtain full payment, work
out a repayment schedule with the borrower to avoid foreclosure or, in some
instances, accept a deed in lieu of foreclosure. In the event payment is not
then received or the loan not otherwise satisfied, additional letters and
telephone calls generally are made. If the loan is still not brought current
or satisfied and it becomes necessary for the Association to take legal action,
which typically occurs after a loan is 90 days or more delinquent, the
Association will commence foreclosure proceedings against any real or personal
property that secures the loan. If a foreclosure action is instituted and the
loan is not brought current, paid in full, or refinanced before the foreclosure
sale, the property securing the loan generally is sold at foreclosure and, if
purchased by the Association, becomes foreclosed real estate.

Applicable regulations and the Association's Asset Classification
Policy require that the Association utilize an internal asset classification
system as a means of reporting problem and potential problem assets. The
Association has incorporated the OTS internal asset classifications as a part
of its credit monitoring system. The Association currently classifies problem
and potential problem assets as "Substandard," "Doubtful" or "Loss" assets. An
asset is considered "Substandard" if it is inadequately protected by the
current net worth and paying capacity of the obligor or of the collateral
pledged, if any. "Substandard" assets include those characterized by the
"distinct possibility" that the insured institution will sustain "some loss" if
the deficiencies are not corrected. Assets classified as "Doubtful" have all
of the weaknesses inherent in those classified "Substandard" with the added
characteristic that the weaknesses present make "collection or liquidation in
full," on the basis of currently existing facts, conditions, and values,
"highly questionable and improbable." Assets classified as "Loss" are those
considered "uncollectible" and of such little value that their continuance as
assets without the establishment of a specific loss reserve is not warranted.
Assets which do not currently expose the insured institution to sufficient risk
to warrant classification in one of the aforementioned categories but possess
weaknesses are required to be designated "Special Mention."

When an insured institution classifies one or more assets, or portions
thereof, as Substandard or Doubtful, it is required to establish a general
valuation allowance for loan losses in an amount deemed prudent by management.
General valuation allowances represent loss allowances which have been
established to recognize the inherent risk associated with lending activities,
but which, unlike specific allowances, have not been allocated to particular
problem assets. When an insured institution classifies one or more assets, or
portions thereof, as "Loss," it is required either to establish a specific
allowance for losses equal to 100% of the amount of the asset so classified or
to charge off such amount.

A savings institution's determination as to the classification of its
assets and the amount of its valuation allowances is subject to review by the
OTS which can order the establishment of additional general or specific loss
allowances. The OTS, in conjunction with the other federal banking agencies,
has adopted an interagency policy statement on the allowance for loan and lease
losses. The policy statement provides guidance for financial institutions on
both the responsibilities of management for the assessment and establishment of
adequate allowances and guidance for banking agency examiners to use in
determining the adequacy of general valuation guidelines. Generally, the
policy statement recommends that institutions have effective systems and
controls to identify, monitor and address asset quality

47
<PAGE> 52
problems; that management has analyzed all significant factors that affect the
collectibility of the portfolio in a reasonable manner; and that management has
established acceptable allowance evaluation processes that meet the objectives
set forth in the policy statement. Although management believes that, based on
information currently available to it at this time, its allowance for loan
losses is adequate, actual losses are dependent upon future events and, as
such, further additions to the level of allowances for loan losses may become
necessary. In addition, the OTS or other banking agencies may require the
Association to recognize additions to the allowance, based on their judgments
about information available to them at the time of their examination.

The Board of Directors and management review the results of the
reports on a monthly basis. The Association classifies assets in accordance
with the management guidelines described above. At June 30, 1998, the
Association had $1.9 million of assets designated as Substandard which
consisted of mortgage and consumer loans. At that same date the Association
had $6,000 of assets classified as Loss consisting of four loans. All assets
designated Loss by the Association are fully reserved. The following table
sets forth the delinquencies in the Association's loan portfolio as of the
dates indicated.

<TABLE>
<CAPTION>
JUNE 30, 1998 JUNE 30, 1997
--------------------------------------------- -------------------------------------------------
60-89 DAYS 90 DAYS OR MORE 60-89 DAYS 90 DAYS OR MORE
------------------- ------------------------ -------------------- ---------------------------
NUMBER PRINCIPAL NUMBER PRINCIPAL NUMBER PRINCIPAL NUMBER PRINCIPAL
OF BALANCE OF OF BALANCE OF OF BALANCE OF OF BALANCE OF
LOANS LOANS LOANS LOANS LOANS LOANS LOANS LOANS
------- ---------- --------- ------------- ------- ----------- ---------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate Loans:
One- to four-family ...... 3 $112 21 $1,443 9 $717 19 $1,188
Multi-family and
commercial.............. -- -- 6 247 -- -- 5 174
Consumer Loans:
Home equity loans and
lines of credit ........ -- -- 11 200 1 40 10 200
Automobile................ 2 9 -- -- 1 1 2 13
Other .................... 4 7 4 6 1 -- 2 11
------ ------ ------ ------ ----- ------- ------ ------
Total.................. 9 $ 128 42 $1,896 12 $758 38 $1,586
====== ====== ====== ====== ===== ======= ====== ======
Delinquent Loans to
Total Loans .............. 0.18% 2.74% 1.14% 2.38%
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------------------------------------
60-89 DAYS 90 DAYS OR MORE
--------------------------- ----------------------------
NUMBER PRINCIPAL NUMBER PRINCIPAL
OF BALANCE OF OF BALANCE OF
LOANS LOANS LOANS LOANS
----------- ------------ ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Real Estate Loans:
One- to four-family .............................. 6 $146 17 $1,050
Multi-family and commercial ...................... -- -- 6 304
Consumer Loans:
Home equity loans and lines of credit ............ 2 21 5 116
Automobile........................................ 1 -- 2 8
Other ............................................ 7 12 4 14
------ ------ ------ ------
Total.......................................... 16 $179 34 $1,492
====== ====== ====== ======
Delinquent Loans to Total Loans...................... 0.27% 2.29%
</TABLE>

NONPERFORMING ASSETS AND IMPAIRED LOANS. The following table sets
forth information regarding nonaccrual loans, foreclosed real estate (including
a $66,000 loan which was a troubled debt restructuring effect in 1998) and
troubled debt restructurings. At June 30, 1998, nonaccrual loans and troubled
debt restructurings totalled $1.9 million and consisted of 42 loans. At such
date, foreclosed real estate totalled $221,000 and consisted of seven one- to
four-

48
<PAGE> 53
family properties. It is the policy of the Association to cease accruing
interest on loans 90 days or more past due (unless the loan principal and
interest are determined by management to be fully secured and in the process of
collection) and to charge off all accrued interest. For the year ended June
30, 1998, the amount of additional interest income that would have been
recognized on nonaccrual loans if such loans had continued to perform in
accordance with their contractual term was approximately $102,000. At June 30,
1998, the Association had a $291,000 recorded investment in impaired loans
which had specific allowances of $35,000. At June 30, 1997, there were
$175,000 of impaired loans with specific loan loss allowances of $60,000.

<TABLE>
<CAPTION>
AT JUNE 30,
-------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans:
One- to four-family real estate ........................ $1,477 $1,188 $1,055 $1,087 $1,220
Consumer ............................................... 206 224 138 178 146
Multi-family and commercial ............................ 181 174 304 326 151
------ ------ ------ ------ ------
Total(1) ............................................ 1,864 1,586 1,497 1,591 1,517
Foreclosed real estate(2) ................................. 221 531 171 -- 107
------ ------ ------ ------ ------
Total nonperforming assets(3) ....................... 2,085 2,117 1,668 1,591 1,624

Troubled debt restructurings .............................. -- -- 373 -- --
------ ------ ------ ------ ------
Troubled debt restructurings and
total nonperforming assets .............................. $2,085 $2,117 $2,041 $1,591 $1,624
====== ====== ====== ====== ======
Total nonperforming loans and
troubled debt restructurings as a
percentage of total loans ............................... 2.69% 2.38% 2.87% 2.49% 2.65%
Total nonperforming assets and
troubled debt restructurings as a
percentage of total assets .............................. 1.86% 1.97% 1.89% 1.53% 1.59%
</TABLE>

- -------------------------------
(1) Total nonaccrual loans equals total nonperforming loans.
(2) Foreclosed real estate balances are shown net of related loss allowances.
(3) Nonperforming assets consist of nonperforming loans (and impaired loans)
and foreclosed real estate.

ALLOWANCE FOR LOAN LOSSES. The allowance for loan losses is
established through a provision for loan losses based on management's
evaluation of the risks inherent in its loan portfolio and the general economy.
The allowance for loan losses is maintained at an amount management considers
adequate to cover estimated losses in loans receivable which are deemed
probable and estimable based on information currently known to management. The
allowance is based upon a number of factors, including current economic
conditions, actual loss experience and industry trends. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Association's allowance for loan losses. Such agencies
may require the Association to make additional provisions for estimated loan
losses based upon their judgments about information available to them at the
time of their examination. As of June 30, 1998, the Association's allowance for
loan losses was 0.65% of total loans compared to 0.64% as of June 30, 1997.
The Association had nonaccrual loans of $1.9 million and $1.6 million at June
30, 1998 and June 30, 1997, respectively. The increase in the allowance from
June 30, 1997 to June 30, 1998 was the result of an increase in the average
amount of loans from $66.7 million at June 30, 1997 to $69.3 million at June
30, 1998, as well as an increase in charge-off experience. The Association
will continue to monitor and modify its allowances for loan losses as
conditions dictate. While management believes the Association's allowance for
loan losses at June 30, 1998 is sufficient to cover losses inherent in its loan
portfolio, no assurances can be given that the Association's level of allowance
for loan

49
<PAGE> 54
losses will be sufficient to cover future loan losses incurred by the
Association or that future adjustments to the allowance for loan losses will
not be necessary if economic and other conditions differ substantially from the
economic and other conditions used by management to determine the current level
of the allowance for loan losses.

The following table sets forth activity in the Association's allowance
for loan losses for the periods indicated.

<TABLE>
<CAPTION>
AT OR FOR THE FISCAL YEARS ENDED JUNE 30,
----------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Allowance for loan losses, beginning of year .............. $429 $447 $401 $215 $182
Charged-off loans:
One- to four-family real estate ............... 165 -- -- -- --
Multi-family and commercial real estate ....... 6 -- -- -- --
Consumer ...................................... 7 41 24 59 31
---- ---- ---- ---- ----
Total charged-off loans ..................... 178 41 24 59 31
---- ---- ---- ---- ----
Recoveries on loans previously charged off:
One- to four-family real estate ............... 22 -- -- -- --
Consumer ...................................... 3 9 12 1 1
---- ---- ---- ---- ----
Total recoveries ............................ 25 9 12 1 1
---- ---- ---- ---- ----
Net loans charged-off ..................................... (153) (32) (12) (58) (30)
Provision for loan losses ................................. 176 34 102 249 46
Transfers to allowance for loss on
foreclosed assets ....................................... -- (20) (44) (5) 17
---- ---- ---- ---- ----

Allowance for loan losses, end of period .................. $452 $429 $447 $401 $215
==== ==== ==== ==== ====
Net loans charged-off to average
interest-earning loans .................................. 0.22% 0.05% 0.02% 0.09% 0.05%
---- ---- ---- ---- ----
Allowance for loan losses to total loans .................. 0.65% 0.64% 0.69% 0.63% 0.37%
---- ---- ---- ---- ----
Allowance for loan losses to nonperforming
loans and troubled debt restructuring ................... 24.25% 27.05% 23.90% 25.20% 14.17%
----- ----- ----- ----- -----
Net loans charged-off to allowance for
loan losses ............................................. (33.85)% (7.46)% (2.68)% (14.46)% (13.95)%
------ ----- ----- ------ ------
Recoveries to charge-offs ................................. 14.04% 21.95% 50.00% 1.69% 3.23%
----- ----- ----- ---- ----
</TABLE>

50
<PAGE> 55
The following table sets forth the Association's allowance for loan
losses in each of the categories listed at the dates indicated and the
percentage of such amounts to the total allowance and to total loans.

<TABLE>
<CAPTION>
AT JUNE 30,
---------------------------------------------------------------------------------------------------------
1998 1997 1996
---------------------------------- -------------------------------- ----------------------------------
% OF PERCENT % OF PERCENT % OF PERCENT
ALLOWANCE OF LOANS ALLOWANCE OF LOANS ALLOWANCE OF LOANS
IN EACH IN EACH IN EACH IN EACH IN EACH IN EACH
CATEGORY TO CATEGORY CATEGORY TO CATEGORY CATEGORY TO CATEGORY
TO TOTAL TO TOTAL TO TOTAL TO TOTAL TO TOTAL TO TOTAL
AMOUNT ALLOWANCE LOANS AMOUNT ALLOWANCE LOANS AMOUNT ALLOWANCE LOANS
-------- ----------- -------- -------- ----------- -------- -------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Real estate(1) ......... $273 60.40% 80.08% $278 64.80% 80.95% $298 66.67% 80.17%
Consumer ............... 135 29.87 14.25 120 27.97 15.35 125 27.96 16.77
Multi-family and
commercial ............ 39 8.63 5.67 27 6.30 3.70 22 4.92 3.06
Unallocated ............ 5 1.10 -- 4 0.93 -- 2 0.45 --
---- ------ ------ ---- ------ ----- ---- ------ ------
Total allowance
for loan losses ...... $452 100.00% 100.00% $429 100.00% 100.00% $447 100.00% 100.00%
==== ====== ====== ==== ====== ====== ==== ====== ======
</TABLE>

<TABLE>
<CAPTION>
AT JUNE 30,
----------------------------------------------------------------------
1995 1994
---------------------------------- --------------------------------
% OF PERCENT % OF PERCENT
ALLOWANCE OF LOANS ALLOWANCE OF LOANS
IN EACH IN EACH IN EACH IN EACH
CATEGORY TO CATEGORY CATEGORY TO CATEGORY
TO TOTAL TO TOTAL TO TOTAL TO TOTAL
AMOUNT ALLOWANCE LOANS AMOUNT ALLOWANCE LOANS
-------- ----------- -------- -------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Real estate(1) ......... $275 68.58% 80.31% $139 64.65% 82.85%
Consumer ............... 110 27.43 17.27 67 31.16 14.38
Multi-family and
commercial ............ 13 3.24 2.42 5 2.33 2.77
Unallocated ............ 3 0.75 -- 4 1.86 --
---- ------ ----- ---- ------ ------
Total allowance
for loan losses ...... $401 100.00% 100.00% $215 100.00% 100.00%
==== ====== ====== ==== ====== ======
</TABLE>
- ---------------------
(1) Includes one- to four-family real estate loans and construction loans.

51
<PAGE> 56
FORECLOSED REAL ESTATE. At June 30, 1998, the Association had
$221,000 of foreclosed real estate consisting of seven one-to four-family
properties. When the Association acquires property through foreclosure or deed
in lieu of foreclosure, it is initially recorded at the lesser of carrying
value of the loan or fair value of the property at the date of acquisition less
costs to sell. Thereafter, if there is a further deterioration in value, the
Association provides for a specific valuation allowance and charges operations
for the diminution in value. It is the policy of the Association to have
obtained an appraisal or broker's price opinion on all real estate subject to
foreclosure proceedings prior to the time of foreclosure. It is the
Association's policy to require appraisals on a periodic basis on foreclosed
properties and conducts inspections on foreclosed properties.

INVESTMENT ACTIVITIES

Pennsylvania-chartered savings institutions have the authority to
invest in various types of liquid assets, including United States Treasury
obligations, securities of various federal agencies and certificates of deposit
of insured banks and savings institutions. Subject to various restrictions,
state-chartered savings institutions may also invest their assets in
investment-grade corporate debt securities and mutual funds whose assets
conform to the investments that a state-chartered savings institution is
otherwise authorized to make directly. Additionally, the Association must
maintain minimum levels of investments that qualify as liquid assets under OTS
regulations. See "Regulation -Federal Regulation of Savings
Institutions-Liquidity." Historically, the Association has maintained liquid
assets above the minimum OTS requirements and at a level considered to be
adequate to meet its normal daily activities.

The investment policy of the Association, as approved by the Board of
Directors, requires management to maintain adequate liquidity, generate a
favorable return on investments without incurring undue interest rate and
credit risk and to complement the Association's lending activities. The
Association primarily utilizes investments in securities for liquidity
management and as a method of deploying excess funding not utilized for loan
originations. Generally, the Association's investment policy is more
restrictive than the OTS regulations allow and, accordingly, the Association
has invested primarily in U.S. Government and agency securities, which qualify
as liquid assets under the OTS regulations, and U.S. Government sponsored
agency issued mortgage-backed securities. As required by SFAS No. 115, the
Association has established an investment portfolio of securities that are
categorized as held-to-maturity, available- for-sale or held for trading. The
Association generally invests in securities as a method of utilizing funds not
utilized for loan origination activity and as a method of maintaining liquidity
at levels deemed appropriate by management. The Association does not currently
maintain a portfolio of securities categorized as held for trading. At June
30, 1998, the available-for-sale securities portfolio totalled $7.9 million, or
7.1% of assets and the held-to-maturity portfolio totalled $20.8 million, or
18.6% of assets.

At June 30, 1998, the Association had invested $3.6 million in FNMA,
FHLMC and GNMA mortgage-related securities, or 3.2% of total assets, of which
62.8% were classified as held-to-maturity. In addition, $6.3 million, or 22.0%
of the Association's securities, were debt obligations issued by federal
agencies which generally have stated maturities from 3 to 15 years but which
also have call features. Such callable securities allow the issuer, after a
certain time period, to repay the security prior to its stated maturity. Based
on interest rate ranges anticipated by the Association, the Association
estimates that the substantial majority of such securities will be called prior
to their stated maturities. The Association is subject to additional interest
rate risk and reinvestment risk compared to its evaluation of that risk if
changes in interest rates exceed ranges anticipated by the Association in
estimating the anticipated life of such callable investment securities.
Investments in mortgage-related securities involve a risk that actual
prepayments will be greater than estimated prepayments over the life of the
security, which may require adjustments to the amortization of any premium or
accretion of any discount relating to such instruments thereby changing the net
yield on such securities. There is also reinvestment risk associated with the
cash flows from such securities or in the event such securities are redeemed by
the issuer. In addition, the market value of such securities may be adversely
affected by changes in interest rates. Of the Association's investment in
mortgage-related securities at June 30, 1998, 62.8% were being
held-to-maturity.

52
<PAGE> 57
The following table sets forth certain information regarding the
amortized cost and fair value of the Association's securities at the dates
indicated.

<TABLE>
<CAPTION>
AT JUNE 30,
------------------------------------------------------------------
1998 1997 1996
-------------------- --------------------- --------------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE COST VALUE
--------- -------- -------- --------- --------- --------
Investment securities: (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Debt securities held-to-maturity:
Obligations of U.S. government agencies.................. $ 2,801 $ 2,810 $ 7,425 $ 7,395 $ 5,947 $ 5,876
Certificates of deposit.................................. 15,457 15,457 12,595 12,595 11,477 11,474
Other securities......................................... 244 242 116 114 1,085 1,076
-------- -------- -------- -------- -------- --------

Total.............................................. 18,502 18,509 20,136 20,104 18,509 18,426
-------- -------- -------- -------- -------- --------

Debt securities available-for-sale:
Obligations of U.S. Treasury and U.S.
government agencies.................................... 3,548 3,548 -- -- 1,074 1,120
Other securities......................................... 2,561 2,406 2,188 2,010 2,636 2,394
-------- -------- -------- -------- -------- --------

Total.............................................. 6,109 5,954 2,188 2,010 3,710 3,514
-------- -------- -------- -------- -------- --------

Equity securities available-for-sale:
FHLB stock............................................... 594 594 566 566 542 542
-------- -------- -------- -------- -------- --------

Total investment securities........................ 25,205 25,057 22,890 22,680 22,761 22,482
-------- -------- -------- -------- -------- --------

Mortgage-related securities:
Mortgage-related securities held-to-maturity:
FHLMC.................................................... 472 477 1,698 1,698 1,058 1,067
FNMA..................................................... 1,450 1,458 1,904 1,905 1,676 1,665
GNMA..................................................... 200 203 267 273 314 314
Collateralized mortgage obligations...................... 159 159 837 831 2,517 2,498
-------- -------- -------- -------- -------- --------
Total mortgage-related securities held-to-
maturity.......................................... 2,281 2,297 4,706 4,707 5,565 5,544
-------- -------- -------- -------- -------- --------

Mortgage-related securities available-for-sale:
FHLMC.................................................... -- -- -- -- 342 343
FNMA..................................................... 578 582 678 656 764 739
GNMA..................................................... 740 771 982 1,016 1,132 1,164
-------- -------- -------- -------- -------- --------
Total mortgage-related securities available-
for-sale......................................... 1,318 1,353 1,660 1,672 2,238 2,246
-------- -------- -------- -------- -------- --------
Total mortgage-related securities.................. 3,599 3,650 6,366 6,379 7,803 7,790
-------- -------- -------- -------- -------- --------
Total securities................................... $28,804 $28,707 $29,256 $29,059 $30,564 $30,272
======== ======== ======== ======== ======== ========
</TABLE>

53
<PAGE> 58
The following table sets forth the Association's securities activities
for the periods indicated.

<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED JUNE 30,
----------------------------------------
1998 1997 1996
--------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
MORTGAGE-RELATED SECURITIES:
Mortgage-related securities, beginning of period(1) ............... $ 6,378 $ 7,811 $ 7,409
======== ======== ========
Purchases,
Mortgage-related securities - held-to-maturity .................. 650 1,850 1,850
Maturities and calls,
Mortgage-related securities - held-to-maturity .................. (2,300) (1,941) --
Repayments and prepayments,
Mortgage-related securities ..................................... (1,125) (1,350) (1,407)
Increase(decrease) in net premium ................................. 8 4 (45)
Increase in unrealized gain ....................................... 23 4 4
-------- -------- --------

Net increase (decrease) in mortgage-related securities .......... (2,744) (1,433) 402
-------- -------- --------

Mortgage-related securities, end of period ........................ $ 3,634 $ 6,378 $ 7,811
======== ======== ========
INVESTMENT SECURITIES (2):
Investment securities, beginning of period(3) ..................... $ 22,712 $ 22,565 $ 21,849
======== ======== ========
Purchases,
Investment securities - held-to-maturity ........................ 12,571 11,597 13,291
Investment securities - available-for-sale ...................... 3,949 25 --
Sales,
Investment securities - available-for-sale ...................... -- (1,021) --
Repayments and prepayments ........................................ (22) (833) (680)
Maturities and calls:
Investment securities - held-to-maturity ........................ (14,176) (9,625) (11,646)
Investment securities - available-for-sale ...................... -- -- (266)
Increase (decrease) in net premium ................................ (7) (14) 16
Increase in unrealized gain ....................................... 23 18 1
-------- -------- --------

Net increase in investment securities ........................... 2,338 147 716
-------- -------- --------
Investment securities, end of period .............................. $ 25,050 $ 22,712 $ 22,565
======== ======== ========
</TABLE>
- -------------------
(1) Includes mortgage-related securities available-for-sale.
(2) Includes certificates of deposit.
(3) Includes investment securities available-for-sale.

54
<PAGE> 59
The table below sets forth certain information regarding the carrying
value, weighted average yields and contractual maturities of the Association's
investment securities and mortgage-related securities as of June 30, 1998.

<TABLE>
<CAPTION>
AT JUNE 30, 1998
-------------------------------------------------------------------------
MORE THAN ONE YEAR MORE THAN 5 YEARS
ONE YEAR OR LESS TO FIVE YEARS TO 10 YEARS
------------------------ ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD VALUE YIELD VALUE YIELD
----------- ------------ ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Held-to-maturity securities:
Investment securities:
Municipal securities(1) ...... $ -- --% $ -- --% $ -- --%
Obligations of U.S.
Government agencies ....... 250 5.70 500 6.45 1,500 7.14
Certificates of deposit ...... 11,498 5.88 3,959 6.23 -- --
Corporate obligations ........ -- -- -- -- -- --
Mortgage-related securities .... 670 5.04 431 6.92 508 7.33
------- ---- ------ ---- ------ ----
Total securities
at amortized cost ......... $12,418 5.83% $4,890 6.31% $2,008 7.19%
======= ==== ====== ==== ====== ====

Available-for-sale securities:
Investment securities:
Municipal securities(1) ...... $ -- --% $ -- --% $ 198 4.38%
Obligations of the U.S.
government agencies ....... -- -- 750 6.17 2,298 6.63
Equity securities ............ 595 4.96 -- -- -- --
Mutual funds ................. 2,187 -- -- -- -- --
Mortgage-related
securities .................... -- -- 279 6.56 3 8.99
------- ---- ------ ---- ------ ----
Total securities
at fair value ............. $ 2,782 4.96% $ 1,029 6.27% $ 2,499 6.45%
======= ==== ======= ==== ======= ====
</TABLE>

<TABLE>
<CAPTION>
AT JUNE 30, 1998
-----------------------------------------------

MORE THAN 10 YEARS TOTAL
----------------------- -----------------------
WEIGHTED WEIGHTED
CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD VALUE YIELD
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Held-to-maturity securities:
Investment securities:
Municipal securities(1) ...... $ 165 4.55% $ 165 4.55%
Obligations of U.S.
Government agencies ....... 551 7.39 2,801 6.94
Certificates of deposit ...... -- -- 15,457 5.97
Corporate obligations ........ 79 6.20 79 6.20
Mortgage-related securities .... 672 7.20 2,281 6.54
------ ---- ------- ----
Total securities
at amortized cost ......... $1,467 6.92% $20,783 6.15%
====== ==== ======= ====

Available-for-sale securities:
Investment securities:
Municipal securities(1) ...... 175 4.48% $ 373 4.42%
Obligations of the U.S.
government agencies ....... 500 6.99 3,548 6.58
Equity securities ............ -- -- 595 4.96
Mutual funds ................. -- -- 2,187 --
Mortgage-related
securities .................... 1,036 7.80 1,318 7.54
------ ---- ------- ----
Total securities
at fair value ............. $1,711 7.22% $ 8,021 6.47%
====== ==== ======= ====
</TABLE>

- ----------------------
(1) Weighted average yield data for municipal securities is not presented on a
tax equivalent basis due to the immaterial amount of municipal securities
at June 30, 1998.

SOURCES OF FUNDS

GENERAL. Deposits, loan repayments and prepayments and cash flows
generated from operations are the primary sources of the Association's funds
for use in lending, investing and for other general purposes.

DEPOSITS. The Association offers a variety of deposit accounts with a
range of interest rates and terms. The Association's deposits consist of
checking, money market, savings, NOW, club accounts, certificate accounts and
Individual Retirement Accounts. More than 58% of the funds deposited in the
Association are in certificate of deposit accounts. At June 30, 1998, core
deposits (savings, NOW and money market accounts) represented 41.1% of total
deposits. The flow of deposits is influenced significantly by general economic
conditions, changes in money market rates, prevailing interest rates and
competition. Deposits have remained relatively static in recent years.
Deposits increased $4.1 million, or 4.2%, from $98.5 million at June 30, 1997
to $102.6 million at June 30, 1998 and decreased $800,000, or 0.8%, the
previous year, from $99.3 million at June 30, 1996 to $98.5 million at June 30,
1997.

The Association's deposits are obtained predominantly from the areas
in which its branch offices are located. The Association has historically
relied primarily on customer service and long-standing relationships with
customers to attract and retain these deposits; however, market interest rates
and rates offered by competing financial institutions significantly affect the
Association's ability to attract and retain deposits. The Association uses
traditional means of advertising its deposit products, including radio and
print media and generally does not solicit deposits from outside its market
area. The Association has not actively solicited certificate accounts in
excess of $100,000 or used brokers to

<PAGE> 60
obtain deposits in recent years. However, the Association has used brokers to
obtain deposits in the past and if circumstances warranted, would in the future
seek deposits through those methods. At June 30, 1998, 64.2% of the
Association's certificate of deposit accounts were to mature within one year.
Further increases in short-term certificate of deposit accounts, which tend to
be more sensitive to movements in market interest rates than core deposits, may
result in the Association's deposit base being less stable than if it had a
large amount of core deposits which, in turn, may result in further increases
in the Association's cost of deposits.

The following table presents the deposit activity of the Association
for the periods indicated:

<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED JUNE 30,
---------------------------------------------------
1998 1997 1996
--------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Increase (decrease) before interest credited .................... $ 977 $(4,077) $ (436)
Interest credited ............................................... 3,162 3,194 3,386
------- ------- -------
Net increase (decrease) ......................................... $ 4,139 $ (883) $ 2,950
======= ======= =======
</TABLE>

At June 30, 1998, the Association had $13.6 million in certificate
accounts in amounts of $100,000 or more maturing as follows:

<TABLE>
<CAPTION>
MATURITY PERIOD AMOUNT
--------------- ------
(IN THOUSANDS)
<S> <C>
Three months or less.................................... $2,095

Over 3 through 6 months................................. 3,342

Over 6 through 12 months................................ 2,729

Over 12 months.......................................... 5,385
------

Total........................................... $13,551
=======
</TABLE>

56
<PAGE> 61
The following table sets forth the distribution of the Association's
average deposit accounts for the periods indicated and the weighted average
interest rates on each category of deposits presented and such information at
June 30, 1998. Averages for the periods presented utilize month-end balances.

<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED JUNE 30,
------------------------------------------------
AT JUNE 30, 1998 1998 1997
------------------------------------ -------------------------------------- ---------
PERCENT OF
PERCENT TOTAL
OF TOTAL AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE DEPOSITS RATE PAID BALANCE DEPOSITS RATE PAID BALANCE
------------ ---------- ---------- -------------- --------------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Passbook and statement savings........... $ 29,053 28.32% 2.74% $ 28,788 28.68% 2.76% $ 30,996
Money market............................. 2,084 2.03 2.54 2,151 2.14 2.46 2,374
NOW...................................... 10,983 10.70 1.38 10,081 10.04 1.51 9,065
Certificates of deposit.................. 60,484 58.95 5.39 59,342 59.14 5.49 55,653
-------- ------ -------- ------ --------
Total average deposits............. $102,604 100.00% 4.15% $100,362 100.00% 4.24% $ 98,088
======== ====== ==== ======== ====== ==== ========
</TABLE>

<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED JUNE 30,
-------------------------------------------------------------------
1997 1996
----------------------------- ------------------------------------
PERCENT OF PERCENT OF
TOTAL TOTAL
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
DEPOSITS RATE PAID BALANCE DEPOSITS RATE PAID
----------- --------- --------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Passbook and statement savings........... 31.60% 2.67% $ 32,747 33.35% 2.84%
Money market............................. 2.42 2.53 2,692 2.74 2.75
NOW...................................... 9.24 1.49 9,106 9.27 2.09
Certificates of deposit.................. 56.74 5.40 53,653 54.64 5.66
------ -------- ------
Total average deposits............. 100.00% 4.11% $ 98,198 100.00% 4.31%
====== ==== ======== ====== ====
</TABLE>

57
<PAGE> 62
The following table presents by various rate categories, the amount of
certificate accounts outstanding at the dates indicated and the periods to
maturity of the certificate accounts outstanding at June 30, 1998.

<TABLE>
<CAPTION>
PERIOD TO MATURITY FROM JUNE 30, 1998
------------------------------------------------------------
LESS ONE TWO TO OVER
THAN ONE TO TWO THREE THREE
YEAR YEARS YEARS YEARS TOTAL
---------- ------- ---------- ------- -------
(DOLLARS IN THOUSANDS)
CERTIFICATE ACCOUNTS:
<S> <C> <C> <C> <C> <C>
2.60 to 4.00% . . . . . . . . . . . . . . $ 103 $ -- $ -- $ -- $ 103
4.01 to 5.00% . . . . . . . . . . . . . . 11,280 6 -- -- 11,286
5.01 to 6.00% . . . . . . . . . . . . . . 24,418 4,446 2,507 2,337 33,708
6.01 to 7.00% . . . . . . . . . . . . . . 3,006 5,005 1,865 4,574 14,450
7.01 to 8.00% . . . . . . . . . . . . . . -- 100 -- 837 937
---------- ------- ---------- ------- -------

Total certificate accounts . . . . . . $38,807 $9,557 $4,372 $7,748 $60,484
======= ====== ====== ====== =======
</TABLE>

PROPERTIES

The Association currently conducts its business through four full
service banking offices located in Luzerne and Carbon counties in Northeast
Pennsylvania. The following table sets forth the Association's offices as of
June 30, 1998.

<TABLE>
<CAPTION>
NET BOOK VALUE
ORIGINAL OF PROPERTY OR TOTAL
YEAR DATE OF LEASEHOLD DEPOSITS AT
LEASED OR LEASED OR LEASE IMPROVEMENTS AT JUNE 30,
LOCATION OWNED ACQUIRED EXPIRATION JUNE 30, 1998 1998
- --------- ------------ ------------ ------------ --------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ADMINISTRATIVE/HOME OFFICE:
31 W. Broad Street
Hazleton, Pennsylvania 18201 . . . . . . . . . Owned 1968 -- $103 $64,556

25 W. Broad Street (1)
Hazleton, Pennsylvania 18201 . . . . . . . . . Owned 1987 -- 272 --

BRANCH OFFICES:
Laurel Mall Office Building
345 Laurel Mall owned, land June 1,
Hazleton, Pennsylvania 18201 . . . . . . . . . leased 1980 2000 333 20,269

Weatherly Office
140 Carbon Street
Weatherly, Pennsylvania 18252 . . . . . . . . Owned 1975 -- 38 10,736

Drums Office
P.O. Box 4040
Drums, Pennsylvania 18222 . . . . . . . . . . Owned 1994 -- 419 7,043
</TABLE>
- ------------

(1) This building, which houses the home office's loan department, is adjacent
and connected to the property at 31 W. Broad Street.

58
<PAGE> 63
LEGAL PROCEEDINGS

The Association is not involved in any pending legal proceedings other
than routine legal proceedings occurring in the ordinary course of business.
Such routine legal proceedings, in the aggregate, are believed by management to
be immaterial to the Company's financial condition or results of operations.

PERSONNEL

As of June 30, 1998, the Association had 39 authorized full-time
employee positions. The employees are not represented by a collective
bargaining unit and the Association considers its relationship with its
employees to be good. See "Management of the Association--Other Benefit Plans"
for a description of certain compensation and benefit programs offered to the
Association's employees.

FEDERAL AND STATE TAXATION

FEDERAL TAXATION

GENERAL. The Company and the Association will report their income on
a calendar year basis using the accrual method of accounting and will be
subject to federal income taxation in the same manner as other corporations
with some exceptions, including particularly the Association's reserve for bad
debts discussed below. The following discussion of tax matters is intended
only as a summary and does not purport to be a comprehensive description of the
tax rules applicable to the Association or the Company. The Association has
not been audited by the IRS in the past five years.

BAD DEBT RESERVE. For taxable years beginning after December 31, 1995,
the Association is entitled to take a bad debt deduction for federal income tax
purposes which is based on its current or historic net charge-offs. For tax
years beginning prior to December 31, 1995, the Association as a qualifying
thrift had been permitted to establish a reserve for bad debts and to make
annual additions to such reserve, which were deductible for federal income tax
purposes. Under such prior tax law, generally the Association recognized a bad
debt deduction equal to 8% of taxable income.

Under the 1996 Tax Act, the Association is required to recapture all
or a portion of its additions to its bad debt reserve made subsequent to the
base year (which is the Association's last taxable year beginning before
January 1, 1988). This recapture is required to be made, after a deferral
period based on certain specified criteria, ratably over a six-year period
commencing in the Association's calendar 1998 tax year. The Association, in
fiscal 1997, recorded a deferred tax liability for this bad debt recapture. As
a result, the recapture is not anticipated to effect on the Association's
future net income or federal income tax expense for financial reporting
purposes.

POTENTIAL RECAPTURE OF BASE YEAR BAD DEBT REVENUE. The Association's
bad debt reserve as of the base year is not subject to automatic recapture as
long as the Association continues to carry on the business of banking. If the
Association no longer qualifies as a bank, the balance of the pre-1988 reserves
(the base year reserves) are restored to income ratio over a six-year period
beginning in the tax year the Association no longer qualifies as a bank. Such
base year bad debt reserve subject to recapture to the extent that the
Association makes "non-dividend distributions" that are considered as made from
the base year bad debt. To the extent that such reserves exceed the amount
that would have been allowed under the experience method ("Excess
Distributions"), then an amount based on the amount distributed will be
included in the Association's taxable income. Non-dividend distributions
include distributions in excess of the Association's current and accumulated
earnings and profits, distributions in redemption of stock, and distributions
in partial or complete liquidation. However, dividends paid out of the
Association's current or accumulated earnings and profits, as calculated for
federal income tax purposes, will not be considered to result in a distribution
from the Association's bad debt reserve. Thus, any dividends to the Company
that would reduce amounts appropriated to the Association's bad debt reserve
and deducted for federal income tax purposes would create a tax liability for
the Association. The amount of additional taxable income created from an
Excess Distribution is an amount that, when reduced by the tax attributable to
the income, is equal to the amount of the distribution. Thus, if, after the
Conversion, the Association makes a "non-dividend distribution," then
approximately one and one-half times the amount so used

59
<PAGE> 64
would be includable in gross income for federal income tax purposes, assuming a
34% corporate income tax rate (exclusive of state and local taxes). See
"Regulation" and "Dividend Policy" for limits on the payment of dividends of
the Association. The Association does not intend to pay dividends that would
result in a recapture of any portion of its bad debt reserve.

CORPORATE ALTERNATIVE MINIMUM TAX. The Code imposes a tax on
alternative minimum taxable income ("AMTI") at a rate of 20%. The excess of
the bad debt reserve deduction claimed by the Association over the deduction
that would have been allowable under the experience method is treated as a
preference item for purposes of computing the AMTI. Only 90% of AMTI can be
offset by net operating loss carryovers of which the Association currently has
none. AMTI is increased by an amount equal to 75% of the amount by which the
Association's adjusted current earnings exceeds its AMTI (determined without
regard to this preference and prior to reduction for net operating losses). In
addition, for taxable years beginning after June 30, 1986 and before January 1,
1996, an environmental tax of 0.12% of the excess of AMTI (with certain
modifications) over $2.0 million is imposed on corporations, including the
Association, whether or not an Alternative Minimum Tax ("AMT") is paid. The
Association does not expect to be subject to the AMT.

DIVIDENDS RECEIVED DEDUCTION AND OTHER MATTERS. The Company may
exclude from its income 100% of dividends received from the Association as a
member of the same affiliated group of corporations. The corporate dividends
received deduction is generally 70% in the case of dividends received from
unaffiliated corporations with which the Company and the Association will not
file a consolidated tax return, except that if the Company or the Association
own more than 20% of the stock of a corporation distributing a dividend then
80% of any dividends received may be deducted.

STATE AND LOCAL TAXATION

The Company and its non-thrift Pennsylvania subsidiaries are subject
to the Pennsylvania Corporate Net Income Tax and Capital Stock and Franchise
Tax. The Corporate Net Income Tax rate for 1998 is 9.99% and is imposed on the
Company's and its non-thrift subsidiaries' unconsolidated taxable income for
federal purposes with certain adjustments. In general, the Capital Stock Tax
is a property tax imposed at the rate of 1.275% of a corporation's capital
stock value, which is determined in accordance with a fixed formula. The
Company is also required to file an annual report with and pay an annual
Franchise tax to the State of Delaware.

The Association is taxed under the Pennsylvania Mutual Thrift
Institutions Tax Act (the "MTIT"), as amended, to include thrift institutions
having capital stock. Pursuant to the MTIT, the Company's tax rate is 11.5%.
The MTIT exempts the Company from all other taxes imposed by the Commonwealth
of Pennsylvania for state income tax purposes and from all local taxation
imposed by political subdivisions, except taxes on real estate and real estate
transfers. The MTIT is a tax upon net earnings, determined in accordance with
generally accepted accounting principals ("GAAP") with certain adjustments.
The MTIT, in computing GAAP income, allows for the deduction of interest earned
on Pennsylvania and federal securities, while disallowing a percentage of a
thrift's interest expense deduction in the proportion of interest income on
those securities to the overall interest income of the Company. Net operating
losses, if any, thereafter can be carried forward three years for MTIT
purposes. The Association has not been audited by the Commonwealth of
Pennsylvania in the last five years.

REGULATION

GENERAL

The Association is subject to extensive regulation, examination and
supervision by the Pennsylvania Department, as its chartering agency, the OTS,
as its federal banking regulator, and the FDIC, as the deposit insurer. The
Association is a member of the FHLB System. The Association's deposit accounts
are insured up to applicable limits by the SAIF managed by the FDIC. The
Association must file reports with the Commissioner of the Pennsylvania
Department, the OTS and the FDIC concerning its activities and financial
condition in addition to obtaining regulatory approvals prior to entering into
certain transactions such as mergers with, or acquisitions of, other financial
institutions. There are periodic examinations by the Pennsylvania Department,
the OTS and the FDIC to test the Association's compliance with various
regulatory requirements. This regulation and supervision establishes a
comprehensive

60
<PAGE> 65
framework of activities in which an institution can engage and is intended
primarily for the protection of the insurance fund and depositors. The
regulatory structure also gives the regulatory authorities extensive discretion
in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes. Any
change in such policies, whether by the Pennsylvania Department, the OTS, the
FDIC or the Congress, could have a material adverse impact on the Company, the
Association and their operations. The Company, as a savings and loan holding
company, will also be required to file certain reports with, and otherwise
comply with the rules and regulations of the OTS and of the Securities and
Exchange Commission (the "SEC") under the federal securities laws.

Any change in the regulatory structure or the applicable statutes or
regulations, whether by the Pennsylvania Department, the OTS, the FDIC or the
Congress, could have a material impact on the Company, the Association, their
operations or the Conversion and Reorganization. Congress currently has under
consideration various proposals to eliminate the federal thrift charter,
abolish the OTS and restrict the activities of savings and loan holding
companies. The outcome of such legislation is uncertain. Therefore, the
Association is unable to determine the extent to which legislation, if enacted,
would affect its business.

Certain of the regulatory requirements applicable to the Association
and to the Company are referred to below or elsewhere herein. The description
of statutory provisions and regulations applicable to savings associations set
forth in this Prospectus do not purport to be complete descriptions of such
statutes and regulations and their effects on the Association and the Company
and is qualified in its entirety by reference to such statutes and regulations.

FEDERAL REGULATION OF SAVINGS INSTITUTIONS

BUSINESS ACTIVITIES. The activities of Pennsylvania chartered, FDIC
insured savings institutions are governed by the Pennsylvania Savings
Association Code of 1967, as amended (the "Savings Association Code"), the Home
Owners' Loan Act, as amended (the "HOLA") and, in certain respects, the Federal
Deposit Insurance Act ("FDI Act") and the regulations issued by the agencies to
implement these statutes. These laws and regulations delineate the nature and
extent of the activities in which savings associations may engage.

ACTIVITIES AND INVESTMENTS. The FDI Act imposes certain restrictions
on the activities and investments of state savings associations such as the
Association. No state savings association may engage as principal in any
activity that is not permissible for federally chartered savings associations
unless the association is in compliance with federal regulatory capital
requirements and the FDIC has determined that the activity does not pose a
significant risk to the deposit insurance fund. A state savings association
may engage in an activity that is permissible for a federal savings
association, but in a greater amount, only if the institution is in capital
compliance and the FDIC had not determined that engaging in that amount of
activity does not pose a risk to the affected deposit insurance fund. Also, a
state savings association may not acquire directly an equity investment of a
type or in an amount that is not permissible for a federal association.
However, a state savings association may acquire shares of service corporations
so long as the institution is in capital compliance and the FDIC determines
that no significant risk to the deposit insurance fund is posed by the amount
that the institution seeks to acquire or the activities of the savings
association.

LOANS-TO-ONE BORROWER. Under the HOLA, savings institutions are
generally subject to the national bank limit on loans-to-one borrower.
Generally, this limit is 15% of the Association's unimpaired capital and
surplus, plus an additional 10% of unimpaired capital and surplus, if such loan
is secured by readily-marketable collateral, which is defined to include
certain financial instruments and bullion. At June 30, 1998, the Association's
general policy is to limit loans-to-one borrower to $500,000. At June 30,
1998, the Association's largest aggregate amount of loans-to-one borrower
consisted of $630,000.

QTL TEST. The HOLA requires savings institutions to meet a QTL test.
Under the QTL test, a savings association is required to maintain at least 65%
of its "portfolio assets" (total assets less: (i) specified liquid assets up
to 20% of total assets; (ii) intangibles, including goodwill; and (iii) the
value of property used to conduct business) in certain "qualified thrift
investments" (primarily residential mortgages and related investments,
including certain

61
<PAGE> 66
mortgage-backed and related securities) in at least nine months out of each 12
month period. A savings association that fails the QTL test must either
convert to a bank charter or operate under certain restrictions. As of June
30, 1998, the Association maintained 78.11% of its portfolio assets in
qualified thrift investments and, therefore, met the QTL test. Recent
legislation has expanded the extent to which education loans, credit card loans
and small business loans may be considered as "qualified thrift investments."

LIMITATION ON CAPITAL DISTRIBUTIONS. OTS regulations impose
limitations upon all capital distributions by a savings institution, such as
cash dividends, payments to repurchase or otherwise acquire its shares,
payments to shareholders of another institution in a cash-out merger and other
distributions charged against capital. The rule establishes three tiers of
institutions, which are based primarily on an institution's capital level. An
institution that exceeds all fully phased-in regulatory capital requirements
before and after a proposed capital distribution ("Tier 1 Association") and has
not been advised by the OTS that it is in need of more than normal supervision,
could, after prior notice to, but without the approval of the OTS, make capital
distributions during a calendar year equal to the greater of: (i) 100% of its
net earnings to date during the calendar year plus the amount that would reduce
by one-half its "surplus capital ratio" (the excess capital over its fully
phased-in capital requirements) at the beginning of the calendar year; or (ii)
75% of its net earnings for the previous four quarters. Any additional capital
distributions would require prior OTS approval. In the event the Association's
capital fell below its capital requirements or the OTS notified it that it was
in need of more than normal supervision, the Association's ability to make
capital distributions could be restricted. In addition, the OTS could prohibit
a proposed capital distribution by any institution, which would otherwise be
permitted by the regulation, if the OTS determines that such distribution would
constitute an unsafe or unsound practice.

LIQUIDITY. The Association is required to maintain an average daily
balance of specified liquid assets equal to a monthly average of not less than
a specified percentage (currently 4%) of its net withdrawable deposit accounts
plus short-term borrowings. Monetary penalties may be imposed for failure to
meet these liquidity requirements. The Association's average liquidity ratio
for the year ended June 30, 1998 was 22.9%, which exceeded the applicable
requirements. The Association has never been subject to monetary penalties for
failure to meet its liquidity requirements. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."

ASSESSMENTS. Savings institutions are required by regulation to pay
assessments to the OTS and the Pennsylvania Department to fund the various
agencies' operations. The assessments paid by the Association to these
agencies for the years ended June 30, 1998 and 1997 totaled $59,000 and
$57,000, respectively.

TRANSACTIONS WITH RELATED PARTIES. The Association's authority to
engage in transactions with related parties or "affiliates" (i.e., any company
that controls or is under common control with an institution, including the
Company and any non-savings institution subsidiaries that the Company may
establish) is limited by Sections 23A and 23B of the Federal Reserve Act.
Section 23A restricts the aggregate amount of covered transactions with any
individual affiliate to 10% of the capital and surplus of the savings
institution and also limits the aggregate amount of transactions with all
affiliates to 20% of the savings institution's capital and surplus. Certain
transactions with affiliates are required to be secured by collateral in an
amount and of a type described in Section 23A and the purchase of low quality
assets from affiliates is generally prohibited. Section 23B generally requires
that certain transactions with affiliates, including loans and asset purchases,
must be on terms and under circumstances, including credit standards, that are
substantially the same or at least as favorable to the institution as those
prevailing at the time for comparable transactions with non-affiliated
companies.

ENFORCEMENT. Under the FDI Act, the OTS has primary federal
enforcement responsibility over savings institutions and has the authority to
bring action against all "institution-affiliated parties," including
stockholders, and any attorneys, appraisers and accountants who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on
an insured institution. Formal enforcement action may range from the issuance
of a capital directive or cease and desist order to removal of officers or
directors, receivership, conservatorship or termination of deposit insurance.
Civil penalties cover a wide range of violations and can amount to $25,000 per
day, or $1 million per day in especially egregious cases. Under the FDI Act,
the FDIC has the authority to recommend to the Director of the OTS

62
<PAGE> 67
that enforcement action be taken with respect to a particular savings
institution. If action is not taken by the Director, the FDIC has authority to
take such action under certain circumstances. Federal and state law also
establishes criminal penalties for certain violations.

STANDARDS FOR SAFETY AND SOUNDNESS. The FDI Act requires each federal
banking agency to prescribe for all insured depository institutions standards
relating to, among other things, internal controls, information systems and
audit systems, loan documentation, credit underwriting, interest rate risk
exposure, asset growth, and compensation, fees and benefits and such other
operational and managerial standards as the agency deems appropriate. The
federal banking agencies have adopted final regulations and Interagency
Guidelines Establishing Standards for Safety and Soundness ("Guidelines") to
implement these safety and soundness standards. The Guidelines set forth the
safety and soundness standards that the federal banking agencies use to
identify and address problems at insured depository institutions before capital
becomes impaired. The Guidelines address internal controls and information
systems; internal audit system; credit underwriting; loan documentation;
interest rate risk exposure; asset growth; asset quality; earnings; and
compensation, fees and benefits. If the appropriate federal banking agency
determines that an institution fails to meet any standard prescribed by the
Guidelines, the agency may require the institution to submit to the agency an
acceptable plan to achieve compliance with the standard, as required by the FDI
Act. The final regulations establish deadlines for the submission and review
of such safety and soundness compliance plans.

CAPITAL REQUIREMENTS. The OTS capital regulations require savings
institutions to meet three capital standards: a 1.5% tangible capital standard,
a 3% leverage ("core" or "Tier 1" capital) ratio and an 8% risk based capital
standard. Core (Tier 1) capital is defined as common stockholder's equity
(including retained earnings), certain non-cumulative perpetual preferred stock
and related surplus, minority interests in equity accounts of consolidated
subsidiaries less intangibles other than certain mortgage servicing rights and
credit card relationships. The OTS regulations require that, in meeting the
leverage ratio, tangible and risk-based capital standards institutions
generally must deduct investments in and loans to subsidiaries engaged in
activities not permissible for a national bank. In addition, the OTS prompt
corrective action regulation provides that a savings institution that has a
leverage capital ratio of less than 4% (3% for institutions receiving the
highest examination rating) will be deemed to be "undercapitalized" and may be
subject to certain restrictions. See "- Prompt Corrective Regulatory Action."

The risk-based capital standard for savings institutions requires the
maintenance of total capital (which is defined as core capital and
supplementary capital) to risk-weighted assets of 8%. In determining the
amount of risk-weighted assets, all assets, including certain off-balance sheet
assets, are multiplied by a risk-weight of 0% to 100%, as assigned by the OTS
capital regulation based on the risks OTS believes are inherent in the type of
asset. The components of core capital are equivalent to those discussed
earlier under the 3% leverage standard. The components of supplementary
capital currently include cumulative preferred stock, long-term perpetual
preferred stock, mandatory convertible securities, subordinated debt and
intermediate preferred stock and, within specified limits, the allowance for
loan and lease losses. Overall, the amount of supplementary capital included
as part of total capital cannot exceed 100% of core capital.

The OTS has incorporated an interest rate risk component into its
regulatory capital rule. The final interest rate risk rule also adjusts the
risk-weighting for certain mortgage derivative securities. Under the rule,
savings associations with "above normal" interest rate risk exposure would be
subject to a deduction from total capital for purposes of calculating their
risk-based capital requirements. A savings association's interest rate risk is
measured by the decline in the net portfolio value of its assets (i.e., the
difference between incoming and outgoing discounted cash flows from assets,
liabilities and off-balance sheet contracts) that would result from a
hypothetical 200-basis point increase or decrease in market interest rates
divided by the estimated economic value of the association's assets, as
calculated in accordance with guidelines set forth by the OTS. A savings
association whose measured interest rate risk exposure exceeds 2% must deduct
an interest rate component in calculating its total capital under the
risk-based capital rule. The interest rate risk component is an amount equal
to one-half of the difference between the institution's measured interest rate
risk and 2%, multiplied by the estimated economic value of the association's
assets. That dollar amount is deducted from an association's total capital in
calculating compliance with its risk-based capital requirement. Under the
rule, there is a two quarter lag between the reporting date of an institution's
financial data and the effective date for the new capital

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requirement based on that data. A savings association with assets of less than
$300 million and risk-based capital ratios in excess of 12% is not subject to
the interest rate risk component, unless the OTS determines otherwise. The
rule also provides that the Director of the OTS may waive or defer an
association's interest rate risk component on a case-by-case basis. The OTS
has postponed the date that the component will first be deducted from an
institution's total capital to provide it with an opportunity to review the
interest rate risk approaches taken by the other federal banking agencies.

At June 30, 1998, the Association met each of its capital
requirements, in each case on a fully phased-in basis. See "Regulatory Capital
Compliance" for a table which sets forth in terms of dollars and percentages
the OTS tangible, leverage and risk-based capital requirements, the
Association's historical amounts and percentages at June 30, 1998, and pro
forma amounts and percentages based upon the issuance of the shares within the
Estimated Price Range and assuming that a portion of the net proceeds are
retained by the Company.

PROMPT CORRECTIVE REGULATORY ACTION

Under the OTS prompt corrective action regulations, the OTS is
required to take certain supervisory actions against undercapitalized
institutions, the severity of which depends upon the institution's degree of
capitalization. Generally, a savings institution that has a total risk-based
capital of less than 8.0% or a leverage ratio or a Tier 1 capital to risk-based
assets ratio that is less than 4.0% is considered to be undercapitalized. A
savings institution that has a total risk-based capital less than 6.0%, a Tier
1 risk-based capital ratio of less than 3.0% or a leverage ratio that is less
than 3.0% is considered to be "significantly undercapitalized" and a savings
institution that has a tangible capital to assets ratio equal to or less than
2.0% is deemed to be "critically undercapitalized." Subject to a narrow
exception, the banking regulator is required to appoint a receiver or
conservator for an institution that is critically undercapitalized. The
regulation also provides that a capital restoration plan must be filed with the
OTS within 45 days of the date an association receives notice that it is
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." Compliance with the plan must be guaranteed by any parent
holding company. In addition, numerous mandatory supervisory actions may
become immediately applicable to the institution depending upon its category,
including, but not limited to, increased monitoring by regulators, restrictions
on growth, and capital distributions and limitations on expansion. The OTS
could also take any one of a number of discretionary supervisory actions,
including the issuance of a capital directive and the replacement of senior
executive officers and directors.

INSURANCE OF DEPOSIT ACCOUNTS

The FDIC has adopted a risk-based insurance assessment system. The
FDIC assigns an institution to one of three capital categories based on the
institution's financial information, as of the reporting period ending seven
months before the assessment period. The capital categories are (1) well
capitalized, (2) adequately capitalized or (3) undercapitalized. An institution
is also placed in one of three supervisory subcategories within each capital
group. The supervisory subgroup to which an institution is assigned is based on
a supervisory evaluation provided to the FDIC by the institution's primary
federal regulator and information that the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance funds. An institution's assessment rate depends on the capital
category and supervisory category to which it is assigned with the most well
capitalized, healthy institutions receiving the lowest rates.

Deposits of the Association are presently insured by the SAIF. Both
the SAIF and the BIF are statutorily required to be recapitalized to a 1.25% of
insured reserve deposits ratio. Until recently, members of the SAIF and BIF
were paying average deposit insurance assessments of between 24 and 25 basis
points. The BIF met the required reserve in 1995, whereas the SAIF was not
expected to meet or exceed the required level until 2002 at the earliest. This
situation was primarily due to the statutory requirement that SAIF members make
payments on bonds issued in the late 1980s by the Financing Corporation
("FICO") to recapitalize the predecessor to the SAIF.

In view of the BIF's achieving the 1.25% ratio, the FDIC ultimately
adopted a new assessment rate schedule of from 0 to 27 basis points under which
92% of BIF members paid an annual premium of only $2,000. With respect to SAIF
member institutions, the FDIC adopted a final rule retaining the previously
existing assessment rate schedule

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applicable to SAIF member institutions of 23 to 31 basis points. As long as the
premium differential continued, it may have had adverse consequences for SAIF
members, including reduced earnings and an impaired ability to raise funds in
the capital markets. In addition, SAIF members, such as the Association could
have been placed at a substantial competitive disadvantage to BIF members with
respect to pricing of loans and deposits and the ability to achieve lower
operating costs.

On September 30, 1996, the President of the United States signed into
law the Deposit Insurance Funds Act of 1996 (the "Funds Act") which, among
other things, imposed a special one-time assessment on SAIF member
institutions, including the Association, to recapitalize the SAIF. As required
by the Funds Act, the FDIC imposed a special assessment of 65.7 basis points on
SAIF assessable deposits held as of March 31, 1995, payable November 27, 1996
(the "SAIF Special Assessment"). The SAIF Special Assessment was recognized by
the Association as an expense in the quarter ended June 30, 1997 and is
generally tax deductible. The SAIF Special Assessment recorded by the
Association amounted to $619,763 on a pre-tax basis and $372,000 on an
after-tax basis.

The Funds Act also spread the obligations for payment of the FICO
bonds across all SAIF and BIF members. Beginning on January 1, 1997, BIF
deposits were assessed for a FICO payment of 1.3 basis points, while SAIF
deposits pay 6.48 basis points. Full pro rata sharing of the FICO payments
between BIF and SAIF members will occur on the earlier of January 1, 2000 or
the date the BIF and SAIF are merged.

As a result of the Funds Act, the FDIC voted to effectively lower SAIF
assessments to 0 to 27 basis points as of January 1, 1997, a range comparable
to that of BIF members. SAIF members will also continue to make the FICO
payments described above. The FDIC also lowered the SAIF assessment schedule
for the fourth quarter of 1996 to 18 to 27 basis points. Management cannot
predict the level of FDIC insurance assessments on an on-going basis, whether
the federal thrift charter will be eliminated or whether the BIF and SAIF will
eventually be merged.

The Association's assessment rate for fiscal 1998 ranged from 15.3 to
15.8 basis points, and the regular premium paid for this period was $62,000.

The FDIC is authorized to raise the assessment rates in certain
circumstances. The FDIC has exercised this authority several times in the past
and may raise insurance premiums in the future. If such action is taken by the
FDIC, it could have an adverse effect on the earnings of the Association.

FEDERAL HOME LOAN BANK SYSTEM

The Association is a member of the FHLB System, which consists of 12
regional FHLBs. The FHLB provides a central credit facility primarily for
member institutions. The Association, as a member of the FHLB, is required to
acquire and hold shares of capital stock in the FHLB in an amount at least
equal to 1% of the aggregate principal amount of its unpaid residential
mortgage loans and similar obligations at the beginning of each year, or 1/20
of its advances (borrowings) from the FHLB, whichever is greater. The
Association was in compliance with this requirement with an investment in FHLB
stock at June 30, 1998 of $594,600. FHLB advances must be secured by specified
types of collateral and all long-term advances may only be obtained for the
purpose of providing funds for residential housing finance. At June 30, 1998,
the Association had no FHLB advances and repurchase agreements.

The FHLBs are required to provide funds for the resolution of
insolvent thrifts and to contribute funds for affordable housing programs.
These requirements could reduce the amount of dividends that the FHLBs pay to
their members and could also result in the FHLBs imposing a higher rate of
interest on advances to their members. For the years ended June 30, 1998, 1997
and 1996, dividends from the FHLB to the Association amounted to approximately
$37,000, $35,000 and $34,000, respectively. If dividends were reduced, the
Association's net interest income would likely also be reduced. Further, there
can be no assurance that the impact of recent or future legislation on the
FHLBs will not also cause a decrease in the value of the FHLB stock held by the
Association.

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<PAGE> 70
FEDERAL RESERVE SYSTEM

The Federal Reserve Board regulations require savings institutions to
maintain noninterest-earning reserves against their transaction accounts
(primarily NOW and regular checking accounts). The Federal Reserve Board
regulations generally require that reserves be maintained against aggregate
transaction accounts as follows: for accounts aggregating $47.8 million or
less (subject to adjustment by the Federal Reserve Board) the reserve
requirement is 3%; and for accounts greater than $47.8 million, the reserve
requirement is $1.4 million, plus 10% (subject to adjustment by the Federal
Reserve Board between 8% and 14%) against that portion of total transaction
accounts in excess of $47.8 million. The first $4.7 million of otherwise
reservable balances (subject to adjustment by the Federal Reserve Board) are
exempted from the reserve requirements. The Association is in compliance with
the foregoing requirements. Because required reserves must be maintained in the
form of either vault cash, a noninterest-bearing account at a Federal Reserve
Bank or a pass-through account as defined by the Federal Reserve Board, the
effect of this reserve requirement is to reduce the's interest-earning assets.
FHLB System members are also authorized to borrow from the Federal Reserve
"discount window," but Federal Reserve Board regulations require institutions
to exhaust all FHLB sources before borrowing from a Federal Reserve Bank.

PENNSYLVANIA LAW

INTERSTATE ACQUISITIONS AND BRANCHES. In 1986, Pennsylvania Act No.
260 (the "Pennsylvania Act") became law. The Pennsylvania Act: (1) permits
federal or state savings and loan associations, federal savings banks, and bank
or savings and loan holding companies (collectively, "Thrift Entities") that
are "located" (as defined below) in a state that offers reciprocal rights to
similar Thrift Entities located in Pennsylvania, to acquire 5% or more of a
Pennsylvania Thrift Entity's voting stock, merge or consolidate with a
Pennsylvania Thrift Entity or purchase the assets and assume the liabilities of
the Pennsylvania Thrift Entity and (2) permits a federal or state savings and
loan association or federal savings bank to establish and maintain branches in
Pennsylvania, provided that the state where such foreign Thrift Entity is
located offers reciprocal rights to similar entities located in Pennsylvania
and provided that each state where any bank holding company or savings and loan
holding company owning or controlling 5% or more of the foreign Thrift Entity's
shares is also located in a state that offers reciprocal rights. The
legislation also provides for nationwide branching by Pennsylvania chartered
savings banks and savings and loan associations, subject to the Pennsylvania
Department's approval and certain other conditions.

Under the Pennsylvania Act, a depository is "located" where its
deposits are largest and a holding company is generally "located" where the
aggregate deposits of its subsidiaries are largest. Whether a foreign state's
laws are "reciprocal" is determined by the Pennsylvania Department, which may
impose limitations and conditions on the branching and acquisition activities
of a Thrift Entity located in a foreign state in order to make the laws of such
state reciprocal to Pennsylvania law with respect to the type of transaction at
issue. In determining whether to approve an interstate thrift acquisition, the
Pennsylvania Department is directed to consider the effects the proposed
acquisition would have on the availability in Pennsylvania of basic banking and
transaction account services. If the Pennsylvania Department determines that
the overall performance of any Pennsylvania Thrift Entity involved in the
transaction has not been materially deficient in providing suitable credit and
financial services to its communities, it may approve the application without
imposing any terms or conditions. Otherwise, the Pennsylvania Department may
impose such terms and conditions as it deems appropriate to improve such
overall performance over a stated period of time. Additionally, the
Pennsylvania Department may impose requirements, both before and after approval
of an acquisition, to assure the availability to the public of those basic
transaction account services deemed necessary by the Pennsylvania Department.

PENNSYLVANIA SAVINGS ASSOCIATION CODE. The Association is
incorporated under the Savings Association Code which contains detailed
provisions governing the organization, location of offices, rights and
responsibilities of directors, officers, employees and members, as well as
corporate powers, savings and investment operations and other aspects of the
Association and its affairs. The Savings Association Code delegates extensive
rulemaking power and administrative discretion to the Pennsylvania Department
so that the supervision and regulation of Pennsylvania chartered association
may be flexible and readily responsive to changes in economic conditions and in
savings and lending practices. The Pennsylvania Department exercises its power
through the Savings Association Bureau.

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One of the purposes of the Savings Association Code is to provide
associations with the opportunity to be competitive with each other and with
other financial institutions existing under other state, federal and foreign
laws. To this end, the Savings Association Code provides Pennsylvania chartered
savings associations with all of the powers enjoyed by federal savings
associations, subject to regulation by the Pennsylvania Department.

A Pennsylvania savings association may locate or change the location
of its principal place of business, and may establish an office anywhere in the
Commonwealth or in certain states within the Pennsylvania region, with the
prior approval of the Pennsylvania Department. See "--Interstate Acquisitions
and Branches."

The Pennsylvania Department shall examine each savings association at
least once each year. The Savings Association Code permits the Pennsylvania
Department to accept the examinations and reports of the Federal Savings and
Loan Insurance Corporation (now the OTS) in lieu of their own examination. The
Pennsylvania Department may order any association to discontinue any violation
of law or unsafe or unsound business practice and may direct any director,
officer, attorney or employee of an association engaged in an objectionable
activity, after the Pennsylvania Department has ordered the activity to be
terminated, to show cause at a hearing before the Savings Association Bureau of
the Pennsylvania Department why such person should not be removed.

HOLDING COMPANY REGULATION

The Company will be a non-diversified unitary savings and loan holding
company within the meaning of the HOLA. As such, the Company will be required
to register with the OTS and will be subject to OTS regulations, examinations,
supervision and reporting requirements. In addition, the OTS has enforcement
authority over the Company and its non-savings institution subsidiaries. Among
other things, this authority permits the OTS to restrict or prohibit activities
that are determined to be a serious risk to the subsidiary savings institution.
The Association must notify the OTS 30 days before declaring any dividend to
the Company.

As a unitary savings and loan holding company, the Company generally
will not be restricted under existing laws as to the types of business
activities in which it may engage, provided that the Association continues to
be a QTL. See "- Federal Regulation of Savings Institutions - QTL Test" for a
discussion of the QTL requirements. Upon any non-supervisory acquisition by
the Company of another savings association, the Company would become a multiple
savings and loan holding company (if the acquired institution is held as a
separate subsidiary) and would be subject to extensive limitations on the types
of business activities in which it could engage. The HOLA limits the
activities of a multiple savings and loan holding company and its non-insured
institution subsidiaries primarily to activities permissible for bank holding
companies under Section 4(c)(8) of the Bank Holding Company ("BHC") Act,
subject to the prior approval of the OTS, and to other activities authorized by
OTS regulation. Recently proposed legislation would limit the activities of
unitary savings and loan holding companies to those permissible for multiple
savings and loan holding companies. See "Risk Factors - Financial Institution
Regulation and Possible Legislation".

The HOLA prohibits a savings and loan holding company, directly or
indirectly, or through one or more subsidiaries, from acquiring more than 5% of
the voting stock of another savings institution, or holding company thereof,
without prior written approval of the OTS; from acquiring or retaining, with
certain exceptions, more than 5% of a non-subsidiary holding company or savings
association. The HOLA also prohibits a multiple savings and loan holding
company from acquiring more than 5% of a company engaged in activities other
than those authorized for multiple savings and loan holding companies by the
HOLA; or acquiring or retaining control of a depository institution that is not
insured by the FDIC. In evaluating applications by holding companies to
acquire savings institutions, the OTS must consider the financial and
managerial resources and future prospects of the company and institution
involved, the effect of the acquisition on the risk to the insurance funds, the
convenience and needs of the community and competitive factors.

The OTS is prohibited from approving any acquisition that would result
in a multiple savings and loan holding company controlling savings institutions
in more than one state, except: (i) the approval of interstate supervisory
acquisitions by savings and loan holding companies, and (ii) the acquisition of
a savings institution in another state if

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the laws of the state of the target savings institution specifically permit
such acquisitions. "See -- Interstate Acquisitions and Branches."

The Secretary of Banking for the Pennsylvania Department (the
"Secretary") may require any savings and loan holding company to furnish such
reports as the Secretary deems appropriate to the proper supervision of such
companies. Unless the Secretary deems otherwise, reports prepared by Federal
authorities are satisfactory to meet such requirement. The Secretary may make
examinations of the Company, the cost of which shall be assessed against and
paid by the Company. Additionally, the Secretary shall have the authority to
issue rules, regulations and orders as may be necessary and the authority to
order a savings and loan holding company to cease and desist from engaging in
an activity which constitutes a services risk to the financial safety,
soundness or stability of the savings association.

FEDERAL SECURITIES LAWS

The Company has filed with the SEC a registration statement under the
Securities Act of 1933, as amended ("Securities Act"), for the registration of
the Common Stock to be issued pursuant to the Conversion. Upon completion of
the Conversion, the Company's Common Stock will be registered with the SEC
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Company will then be subject to the information, proxy solicitation,
insider trading restrictions and other requirements under the Exchange Act.

The registration under the Securities Act of shares of the Common
Stock to be issued in the Conversion does not cover the resale of such shares.
Shares of the Common Stock purchased by persons who are not affiliates of the
Company may be resold without registration. Shares purchased by an affiliate
of the Company will be subject to the resale restrictions of Rule 144 under the
Securities Act. If the Company meets the current public information
requirements of Rule 144 under the Securities Act, each affiliate of the
Company who complies with the other conditions of Rule 144 (including those
that require the affiliate's sale to be aggregated with those of certain other
persons) would be able to sell in the public market, without registration, a
number of shares not to exceed, in any three-month period, the greater of (i)
1% of the outstanding shares of the Company or (ii) the average weekly volume
of trading in such shares during the preceding four calendar weeks. Provision
may be made in the future by the Company to permit affiliates to have their
shares registered for sale under the Securities Act under certain
circumstances.

MANAGEMENT OF THE COMPANY

The Board of Directors' of the Company is divided into three classes,
each of which contains approximately one-third of the Board. The directors
shall be elected by the stockholders of the Company for staggered three year
terms, or until their successors are elected and qualified. One class of
directors, consisting of Messrs. Richard C. Laubach and John J. Raynock, has a
term of office expiring at the first annual meeting of stockholders, a second
class, consisting of Messrs. Frederick L. Barletta, Peter B. Deisroth and
George J. Hayden, has a term of office expiring at the second annual meeting of
stockholders, and a third class, consisting of Messrs. Joseph E. Lundy, Vincent
L. Marusak and Anthony P. Sidari, has a term of office expiring at the third
annual meeting of stockholders. Information concerning the principal
occupations, employment and other information concerning the directors and
officers of the Company during the past five years is set forth under
"Management of the Association--Biographical Information."

The following individuals are the executive officers of the Company
and hold the offices set forth below opposite their names.

<TABLE>
<CAPTION>
POSITION(S) HELD WITH
EXECUTIVE COMPANY
--------- ---------------------
<S> <C>
Richard C. Laubach President and Chief Executive Officer

David P. Marchetti, Sr. Chief Financial Officer and Treasurer

Nancy Latoff Corporate Secretary
</TABLE>

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The executive officers of the Company are elected annually and hold
office until their respective successors have been elected and qualified or
until death, resignation or removal at the discretion of the Board of
Directors.

DIRECTOR COMPENSATION

Since the formation of the Company, none of the executive officers,
directors or other personnel has received remuneration from the Company. For
information regarding fees paid to the Association's Board of Directors see
"Management of the Association--Director Compensation."

MANAGEMENT OF THE ASSOCIATION

DIRECTORS

The following table sets forth certain information regarding the Board
of Directors of the Association.

POSITION(S) HELD DIRECTOR TERM
NAME AGE(1) WITH THE ASSOCIATION SINCE EXPIRES
- ------- ------ ---------------------- -------- ---------
<S> <C> <C> <C> <C>
Vincent L. Marusak 74 Chairman of the Board 1972 1998
Richard C. Laubach 60 Director, President and Chief Executive 1989 1998
Officer
Frederick L. Barletta 64 Director 1983 1998
Peter B. Deisroth 60 Director 1980 1998
George J. Hayden 61 Director 1984 1998
Joseph E. Lundy 75 Director 1964 1998
John J. Raynock 67 Director 1987 1998
Anthony P. Sidari 67 Director 1964 1998
</TABLE>
- ------------------------
(1) As of June 30, 1998

EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

The following table sets forth certain information regarding the
executive officers of the Association who are not also directors.
<TABLE>
<CAPTION>
AGE POSITION(S) HELD WITH
NAME (1) ASSOCIATION
---- --- ---------------------
<S> <C> <C>
David P. Marchetti, Sr. 45 Vice President, Chief Operating Officer
Joseph P. Correale 46 Vice President - Lending

</TABLE>
- -----------------------
(1) As of June 30, 1998

Each of the executive officers of the Association will retain his/her
office in the converted Association until their re-election at the annual
meeting of the Board of Directors of the Association, held immediately after
the first annual meeting of stockholders subsequent to the Conversion, and
until their successors are elected and qualified or until they are removed or
replaced. Officers are subject to re-election by the Board of Directors
annually.

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BIOGRAPHICAL INFORMATION

DIRECTORS

Vincent L. Marusak was an executive at Lehigh Gas and Oil Company and
a partner at Lehigh Supply prior to his retirement in 1991. Mr. Marusak has
served on the Association's Board of Directors since 1972 and has served as
Chairman of the Board since 1989.

Richard C. Laubach joined the Association in 1982 as Chief Lending
Officer and continued in that position until 1987 when he was named Chief
Executive Officer. In 1989, Mr. Laubach was also named President of the
Association. Mr. Laubach has been a director since 1989.

Frederick L. Barletta was President and Chief Executive Officer of the
Pines Golf Course and Restaurant in Edgewood, Pennsylvania prior to his
retirement in 1997. Mr. Barletta has been a director of the Association since
1983.

Peter B. Deisroth has been a manager of Peton Fashions, a retail
company, and Advanced Mailing Services, a mail fulfillment house since 1994.
Prior to 1994, Mr. Deisroth was the general merchandise manager of Peton
Fashions. Mr. Deisroth is also a general partner of several retail companies
and the sole proprietor of Dizzy's Pizza. He has served on the Association's
Board of Directors since 1980.

George J. Hayden is the President of George J. Hayden, Inc., an
electrical contracting firm. Mr. Hayden is also the President of several
Wendy's fast food restaurants. Mr. Hayden has served as a director of the
Association since 1984.

Joseph E. Lundy worked in the insurance industry for over 45 years
prior to his retirement in 1991. Mr. Lundy has been a director of the
Association since 1964.

John J. Raynock is secretary and treasurer of E and R Plumbing and
Heating Inc. Mr. Raynock has served on the Association's Board of Directors
since the Association's merger with Anthracite Building and Loan Association of
Weatherly, Pennsylvania in 1987.

Anthony P. Sidari has been an attorney for over 40 years. Mr. Sidari
has served as a director of the Association since 1964. He also serves as a
solicitor for the Association.

EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

David P. Marchetti, Sr. joined the Association in 1986 and served as
branch office coordinator and later controller until 1991, when he was named
Vice-President, Chief Operating Officer.

Joseph P. Correale joined the Association in 1986 as a loan officer
until 1989 when he was named Assistant Vice President, Lending. In 1992, Mr.
Correale was named Vice-President, Lending.

COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS OF THE ASSOCIATION AND THE
COMPANY

The Association's Board of Directors meets twice per month and may
have additional special meetings called in the manner specified in the Bylaws.

The Board of Directors of the Association has established the
following committees:

The Executive Committee consists of Messrs. Laubach (President and
Chairman), Marusak (Vice President), Deisroth (Treasurer), Sidari (Solicitor),
Barletta and Hayden. The purpose of this committee is to formulate internal
policies, set long-term objectives and evaluate issues of major importance to
the Association and then to make

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recommendations to the whole Board. The committee meets when necessary and did
not meet during the fiscal year ended June 30, 1998.

The Audit and Compliance Committee consists of Messrs. Lundy
(Chairman), Deisroth, Hayden, Laubach and Sidari. The purpose of this
committee is to oversee external audit activities, review the procedures used
to establish the loan loss provision and approve the classification of assets.
The Audit and Compliance Committee meets quarterly and met three times during
the fiscal year ended June 30, 1998.

The Budget Committee consists of Messrs. Lundy (Chairman and
Compliance Officer), Barletta, Hayden, Laubach and Marusak. The purpose of
this committee is to review the Compliance Officer's report and to review and
approve the Association's annual budget. This committee meets semi-annually
and met two times during the fiscal year ended June 30, 1998.

The Investment, Asset/Liability Management Committee consists of,
Messrs. Laubach (Chairman), Barletta, Deisroth, Hayden and Raynock. The
Investment, Asset/Liability Management Committee meets quarterly and approves
all investments, the sale of assets and the borrowing of monies by the
Association and reviews the Association's interest rate risk. The Investment,
Asset/Liability Management Committee met 11 times during the fiscal year ended
June 30, 1998.

The Loan Committee consists of Messrs. Marusak (Chairman), Barletta,
Deisroth, Laubach, Lundy and Raynock. The Loan Committee reviews the lending
guidelines, loan portfolio and delinquency reports. The Loan Committee meets
semi-annually and met five times during the fiscal year ended June 30, 1998.

The Property Committee consists of Messrs. Marusak (Chairman),
Barletta, Hayden, Laubach and Raynock. The Property Committee meets as needed
and is responsible for overseeing the structure and maintenance of the
Association's physical properties. The Property Committee met three times
during the fiscal year ended June 30, 1998.

Additionally, the Association has a number of other management
committees including the Evaluation, Salary and Bonus Committee, Personnel
Committee and Security Committee.

The Board of Directors of the Company has established the following
committees: the Audit Committee consisting of Messrs. Deisroth, Hayden and
Lundy; the Compensation Committee consisting of Messrs. Barletta, Hayden,
Lundy, Marusak and Sidari; the Nominating Committee consisting of Messrs.
Barletta, Deisroth and Raynock; and the Pricing Committee consisting of Messrs.
Barletta, Marusak and Raynock.

DIRECTOR COMPENSATION

All directors receive $400 for each Board meeting attended and for a
maximum of three unattended meetings. All outside directors of the Association
also receive $250 for each committee meeting attended. In addition, the
treasurer of the Board of Directors receives a $3,000 annual retainer. The
Association also provides life insurance for all of the directors. The
Association pays $550 annually for a $90,000 policy for Mr. Laubach, $306
annually for $50,000 policies for Messrs. Barletta, Deisroth and Hayden, $199
annually for $32,500 policies for Messrs. Marusak, Raynock and Sidari and $130
annually for a $21,125 policy for Mr. Lundy.

DIRECTOR EMERITUS

The Association has one Director Emeritus. Pursuant to the
Association's Bylaws, a director may not serve beyond the Annual Meeting of
Members immediately following his or her attainment of age 75 with the
exception of all directors serving on January 2, 1988. Any director who
retires because of the age limitation may be appointed as Director Emeritus.
The Directors Emeritus shall be compensated for each meeting attended, at the
same rate of compensation as the Directors, but may not vote at any meeting of
the Board of Directors or be counted in determining a quorum.

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EXECUTIVE COMPENSATION

Summary Compensation. The following table sets forth the cash
compensation paid by the Association for services rendered in all capacities
during the fiscal year ended June 30, 1998, to the Chief Executive Officer and
to executive officers of the Association who received cash compensation in
excess of $100,000 ("Named Executive Officers").

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION(1) AWARDS PAYOUTS
------------------------- -------------------------- --------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITIONS YEAR ($) ($) ($)(2) ($) (#) ($) ($)
- -------------------- --------- -------- ------- ------------ ---------- ------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard C. Laubach
President and Chief
Executive Officer 1998 $123,400 10,000 -- -- -- -- --

</TABLE>
- ----------------------
(1) Under Annual Compensation, the column titled "Salary" includes director's
fees.
(2) For fiscal year 1998, there were no (a) perquisites over the lesser of
$50,000 or 10% of the individual's total salary and bonus for the year; (b)
payments of above-market preferential earnings on deferred compensation;
(c) payments of earnings with respect to long-term incentive plans prior to
settlement or maturation; (d) tax payment reimbursements; or (e)
preferential discounts on stock. For fiscal year 1998, the Association had
no restricted stock or stock related plans in existence.

EMPLOYMENT AGREEMENTS

Upon consummation of the Conversion, the Association and the Company
intend to enter into employment agreements (collectively, the "Employment
Agreements") with Messrs. Laubach and Marchetti (individually, the
"Executive"). The Employment Agreements are subject to the review and approval
of the OTS and may be amended as a result of such OTS review. Review of
compensation arrangements by the OTS does not indicate, and should not be
construed to indicate, that the OTS has passed upon the merits of such
arrangements. The Employment Agreements are intended to ensure that the
Association and the Company will be able to maintain a stable and competent
management base after the Conversion. The continued success of the Association
and the Company depends to a significant degree on the skills and competence of
Messrs. Laubach and Marchetti.

The Employment Agreements will provide for a three-year term. The
Association Employment Agreements will provide that, commencing on the first
anniversary date of entering into the agreement and continuing each such
anniversary date thereafter, the Board of Directors of the Association may
extend the agreement for an additional year so that the remaining term shall be
three years, unless written notice of non-renewal is given by the Board of
Directors of the Association after conducting a performance evaluation of the
Executive. The terms of the Company Employment Agreements shall automatically
renew on a daily basis, unless written notice of non-renewal is given by the
Board of Directors of the Company. The Association and Company Employment
Agreements provide that the Association and Company will review the Executive's
base salary annually. Initially, the Employment Agreements will provide for
base salaries of $133,400 and $61,490, for Messrs. Laubach and Marchetti,
respectively. In addition to the base salary, the Employment Agreements will
provide for, among other things, participation in various employee benefit
plans and arrangements, stock-based benefits plans, and fringe benefits
applicable to similarly situated executive personnel.

The Employment Agreements provide for termination of the Executive by
the Association or the Company for cause (as described in the agreements) at
any time. In the event the Association or the Company chooses to terminate the
Executive's employment for reasons other than for cause or, in the event of the
Executive's resignation from the Association or the Company upon: (i) failure
to re-elect the Executive to his current offices; (ii) a material change in the
Executive's functions, duties or responsibilities; (iii) a relocation of the
Executive's principal place of employment by more than 25 miles; (iv)
liquidation or dissolution of the Association or the Company; or (v) a breach
of the Employment Agreements by the Association or the Company, the Executive
or, in the event of the Executive's

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death, his beneficiary, would receive an amount equal to the base salary
payments due to the Executive and the contributions that would have been made
on the Executive's behalf to any employee benefit plans of the Association or
the Company during the remaining term of the Employment Agreement. The
Association and the Company would also continue or pay for the Executive's
life, health and disability coverage for the remaining term of the Employment
Agreement. Upon any termination of the Executive, the Executive is subject to
a covenant not to compete with the Company or the Association for one year.

Under the Employment Agreements, if involuntary termination or, under
certain circumstances, voluntary termination, follows a change in control of
the Association or the Company, the Executive or, in the event of the
Executive's death, his beneficiary, would receive a severance and/or liquidated
damages payment equal to the greater of: (i) the payments due under the
agreement for the remaining terms of the agreement; or (ii) three times the
average of the five preceding taxable years' annual compensation (subject to
certain limitations contained in the Association Employment Agreement). The
Association and the Company would also continue the Executive's life, health,
and disability coverage for thirty-six months from the date of termination.
Notwithstanding that both agreements provide for a severance payment in the
event of a change in control, the Executive may receive a severance payment
under only one agreement.

The Company will guarantee payments to the Executive under the
Association Employment Agreement in the event that payments or benefits are not
paid by the Association. The Company will make any payment required under the
Company Employment Agreements. Pursuant to the Employment Agreements, the
Company or Association will pay all reasonable costs and legal fees paid or
incurred by the Executive pursuant to any dispute or question of interpretation
relating to the Employment Agreements, if the Executive is successful on the
merits pursuant to a legal judgment, arbitration or settlement. The Employment
Agreements also provide that the Association and Company shall indemnify the
Executive to the fullest extent allowable under federal, Pennsylvania and
Delaware law, respectively. In the event of a change in control of the
Association or Company, the total amount of payments due under the Employment
Agreements, based solely on the base salaries to be paid to Messrs. Laubach and
Marchetti, under the agreements upon the consummation of the Conversion and
excluding any benefits under any employee benefit plan which may otherwise
become payable would equal approximately $298,000 and $161,000, respectively.

CHANGE IN CONTROL AGREEMENTS

Upon Conversion, the Association intends to enter into three-year
Change in Control Agreements (the "CIC Agreements") with two vice presidents of
the Association, none of whom will be covered by an Employment Agreement.
Commencing on the first anniversary date of a CIC Agreement and continuing on
each anniversary thereafter, the Board of Directors may renew the agreement for
an additional year. Each CIC Agreement will provide that in the event
voluntary or involuntary termination follows a change in control of the
Association or the Company, as the case may be, the officer covered by the
agreement would receive a severance payment equal to three times the officer's
average annual compensation for the 36 months preceding his termination
(subject to certain limitations contained in the Association's Change in
Control Agreement). The Association would also continue to pay for the
officer's life, health and disability coverage for 36 months following
termination. In the event of a change in control of the Association or the
Company the total payments that would be due under the CIC Agreements, based
solely on the current annual compensation paid to the two vice presidents
covered by the CIC Agreements and excluding any benefits under any employee
benefit plan which may be payable; would be approximately $210,000.

EMPLOYEE SEVERANCE COMPENSATION PLAN

The Association's Board of Directors, upon consummation of the
Conversion, intends to establish the Security Savings Association of Hazleton
Employee Severance Compensation Plan ("Severance Plan") to provide eligible
employees with severance pay benefits in the event of a change in control of
the Association or the Company. Management personnel with employment or CIC
Agreements are not eligible to participate in the Severance Plan. Generally,
employees will participate in the Severance Plan if they have completed at
least one (1) year of service with the Association. The Severance Plan vests
in each participant a contractual right to the benefits such participant is
entitled to thereunder. Under the Severance Plan, in the event of a change in
control of the Association or the Company,

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<PAGE> 78
eligible employees who terminate employment within one year of the change in
control (for reasons specified under the Severance Plan), will receive a
severance payment. If the participant, whose employment has terminated, has
completed at least six months of service, the participant will be entitled to
cash equal to one-twelfth of their current annual compensation for each year of
service completed with the Association, up to a maximum of 199% of current
annual compensation. In the event the provisions of the Severance Plan were
triggered, the total amount of payments that would be due thereunder, based
solely upon current salary levels, would be approximately $414,000.

INSURANCE PLANS

All full-time employees of the Association, upon completion of the
applicable introductory period, are covered as a group for comprehensive
hospitalization, including major medical and long-term disability insurance.
Life insurance is also provided to employees and directors.

OTHER BENEFIT PLANS

PENSION PLAN. The Association participates in the Financial
Institutions Retirement Fund (the "Retirement Fund") to provide retirement
benefits for eligible employees. Employees are eligible to participate in the
Retirement Plan after the completion of 12 consecutive months of employment
with the Association and the attainment of age 21. Hourly paid employees are
excluded from participating in the Retirement Plan. Benefits payable to a
participant under the Retirement Plan are based on the participant's years of
service and salary. The formula for normal retirement benefits payable
annually under the Retirement Plan is 2% multiplied by years of benefit service
multiplied by the average of the participant's highest five years of salary
paid by the Association. A participant may elect early retirement as early as
age 45. However, such participant's normal retirement benefits will be reduced
by an early retirement factor based on age at early retirement. Participants
generally have no vested interest in Retirement Plan benefits prior to the
completion of five years of service with the Association. Following the
completion of five years of vesting service, or in the event of a participant's
attainment of age 65, death or termination of employment due to disability, a
participant will become 100% vested in the accrued benefits under the
Retirement Plan. The table below reflects the pension benefit payable to a
participant assuming various levels of earnings and years of service.

The following table sets forth the estimated annual benefits payable
upon retirement at age 65.

<TABLE>
<CAPTION>
FIVE YEAR YEARS OF BENEFIT SERVICE
AVERAGE -------------------------------------------------------------------
COMPENSATION 15 20 25 30 35
------------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
$ 25,000 $ 7,500 $10,000 $12,500 $15,000 $ 17,500
50,000 15,000 20,000 25,000 30,000 35,000
75,000 22,500 30,000 37,500 45,000 52,500
100,000 30,000 40,000 50,000 60,000 70,000
125,000 37,500 50,000 62,500 75,000 87,500
150,000 45,000 60,000 75,000 90,000 105,000
160,000 48,000 64,000 80,000 96,000 112,000
</TABLE>

The benefits listed in the table above for the Retirement Plan are not
subject to a deduction for Social Security benefits or any other offset amount.
As of June 30, 1998, Richard C. Laubach had 15 years of credited service.

EMPLOYEE STOCK OWNERSHIP PLAN. The Association intends to establish a
tax-qualified employee stock ownership plan (the "ESOP") in connection with the
Conversion. Generally, employees will become participants in the ESOP upon the
completion of one year of service with the Association (with credit given for
service with the Association prior to adoption of the plan) and attainment of
age 21. With the consent of the Association, an affiliate of the Association
may also adopt the ESOP for the benefit of its employees.

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<PAGE> 79
The Association expects a committee of the Board of Directors to serve
as the administrative committee of the ESOP (the "ESOP Committee"). The ESOP
Committee will appoint an unrelated corporate trustee for the ESOP prior to the
Conversion. Among other matters, the ESOP Committee may generally instruct the
trustee regarding the investment of funds contributed to the ESOP, subject to
the terms of the plan document and the trust agreement. The Association
expects the ESOP to purchase 8% of the Common Stock issued in the Conversion.
As part of the Conversion, and in order to fund the ESOP's purchase of the
Common Stock issued in the Conversion, the ESOP will borrow 100% of the
aggregate purchase price of the Common Stock from either the Company or a
third-party lender.

The trustee of the ESOP will repay the loan principally from the
Association's annual contributions to the ESOP over an expected period of 12
years. Subject to receipt of any necessary regulatory approvals or opinions,
the Association may make contributions to the ESOP for repayment of the loan
since some participants in the ESOP will be employees of the Association or,
alternatively, the Association may reimburse the Company for contributions made
by the Company with respect to employees of the Association. The Association
expects the initial interest rate (which may be fixed or variable) for the loan
to be at or near the prime rate on or about the date of Conversion.

The trustee of the ESOP will pledge the shares of Common Stock
purchased by the ESOP in connection with the Conversion as collateral for the
loan and will hold the shares in a suspense account under the plan. As the
trustee repays the loan, the trustee will release a portion of the shares from
the suspense account and allocate them to the accounts of active participants
in the ESOP based on each participant's compensation (as determined under the
terms of the plan) relative to all participants' compensation for the plan
year. In the event of a change in control of the Association or the Company
prior to complete repayment of the loan, the ESOP trustee, in accordance with
the terms of the plan document, will sell enough shares of Common Stock held in
the suspense account to repay the loan in full. Upon repayment of the loan, the
ESOP trustee will then allocate all remaining shares of Common Stock held in
the suspense account to the accounts of active participants based on each
participant's account balance as of a specific date or based on some other
method set forth in the plan document.

Participants will become vested in contributions made to the ESOP by
the Association at the rate of twenty percent per year of vesting service (with
credit given for service with the Association prior to its adoption of the
ESOP). Accordingly, participants will become fully vested in their accounts
under the ESOP after completing five years of vesting service. The Association
expects that participants will also become fully vested in their accounts under
the ESOP upon the attainment of their early or normal retirement age while an
employee of the Association, upon their death, upon a change in control of the
Association or the Company, or upon termination of the plan. Benefits
generally become distributable under the ESOP and potentially become subject to
income tax upon death, retirement, disability or other separation from service.

The ESOP trustee will vote all allocated shares held in the ESOP in
accordance with the instructions of the plan participants. The ESOP trustee,
subject to its fiduciary duties under ERISA, will vote the unallocated shares
(i.e., those held in the suspense account) and allocated shares for which it
receives no proper voting instructions in a manner calculated to most
accurately reflect the instructions it receives from participants regarding the
allocated stock. In the event no shares have been allocated under the ESOP at
the time such shares are to be voted, each participant shall be deemed to have
one share allocated to his or her account for voting purposes.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Code limits the amount of
compensation the Association may consider in providing benefits under its
tax-qualified retirement plans, such as the Pension Plan and the ESOP. The
Code further limits the amount of contributions and benefit accruals under such
plans on behalf of any employee. To provide benefits to make up for the
reduction in benefits flowing from these limits in connection with the Pension
Plan and ESOP, the Association intends to implement a non-qualified deferred
compensation arrangement known as a "Supplemental Executive Retirement Plan"
("SERP"). The SERP will generally provide benefits to eligible individuals
(designated by the Board of Directors of the Association or its affiliates)
that cannot be provided under the Pension Plan and/or ESOP as a result of the
limitations imposed by the Code, but that would have been provided under the
Pension Plan and/or ESOP but for such limitations. In addition to providing
for benefits lost under tax-qualified plans as a result of limitations imposed
by the Code, the SERP will also make up lost ESOP benefits to designated
individuals who retire,

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<PAGE> 80
who terminate employment in connection with a change in control, or whose
participation in the ESOP ends due to termination of the ESOP in connection
with a change in control (regardless of whether the individual terminates
employment) prior to the complete scheduled repayment of the ESOP loan.
Generally, upon the retirement of an eligible individual or upon a change in
control of the Association or the Company prior to complete repayment of the
ESOP Loan, the SERP will provide the individual with a benefit equal to what
the individual would have received under the ESOP had he remained employed
throughout the term of the ESOP or had the ESOP not been terminated prior to
the scheduled repayment of the ESOP loan. An individual's benefits under the
SERP become payable upon the participant's retirement (in accordance with the
standard retirement policies of the Association), upon the change in control of
the Association or the Company or as determined under the ESOP and Pension
Plan.

The Association may establish a grantor trust in connection with the
SERP to satisfy the obligations of the Association with respect to the SERP.
The assets of the grantor trust would remain subject to the claims of the
Association's general creditors in the event of the Association's insolvency
until paid to the individual pursuant to the terms of the SERP.

STOCK-BASED INCENTIVE PLAN. Following the Conversion, the Board of
Directors of the Company intends to adopt the Stock-Based Incentive Plan which
will provide for the grant of options to purchase Common Stock ("Stock
Options"), and the award of restricted shares of Common Stock ("Stock Awards")
to eligible officers, employees, and directors of the Company and Association.
Stock Options granted under the Plan may be intended to qualify as Incentive
Stock Options under Section 422 of the Code ("Incentive Stock Options") or
options that do not so qualify ("Non-Statutory Stock Options"). The plan may
also provide for certain limited rights that, in the event of a change in
control, may permit the option holder to receive a cash payment in lieu of
exercise of the option or distribution of the Stock Award. The Company expects
to provide such stock-based benefits under the Stock-Based Incentive Plan or,
in the alternative, under one or more separate stock benefit plans.

In the event the Stock-Based Incentive Plan (or any separate plan(s))
is adopted within one year after the Conversion, OTS regulations require such
plan to be approved by a majority of the Company's stockholders at a meeting of
stockholders to be held no earlier than six months after the completion of the
Conversion. The Company intends to grant Stock Options in an amount up to 10%
of the shares of Common Stock issued in connection with the Conversion,
including shares issued to the Foundation (169,050 shares based upon the
maximum of the Estimated Price Range), and intends to grant Stock Awards in an
amount up to 4% of the shares of Common Stock issued in connection with the
Conversion, including shares issued to the Foundation (67,620 shares based upon
the maximum of the Estimated Price Range). Stock Awards will be granted under
the Stock-Based Incentive Plan at no cost to the recipients. While no decision
has been made, as yet, it is possible that the grants of Stock Options and
Stock Awards could involve a substantial portion or all of the options and
awards available under the Stock-Based Incentive Plan. The Company may fund the
plan through the purchase of Common Stock by a trust established in connection
with the Stock-Based Incentive Plan (or any separate plan(s)) or from
authorized but unissued shares. The Board of Directors of the Company intends
to appoint an independent fiduciary to serve as trustee of any trust
established in connection with the Stock-Based Incentive Plan. In the event
that additional authorized but unissued shares are acquired by the Stock-Based
Incentive Plan or its participants after the Conversion, the interests of
existing shareholders would be diluted. See "Pro Forma Data."

The Company expects to design the grants of Stock Options and Stock
Awards to attract and retain qualified personnel in key positions, provide
officers and key employees with a propriety interest in the Company as an
incentive to contribute to the success of the Company, and reward key employees
for outstanding performance. All employees of the Company and its
subsidiaries, including the Association, will be eligible to participate in the
Stock-Based Incentive Plan. It is expected that the committee administering
the plan will determine the terms of awards granted to officers and employees.
The committee will also determine whether Stock Options will qualify as
Incentive Stock Option or Non-Statutory Stock Options, as described below, the
number of shares subject to each Stock Option and Stock Award, the exercise
price of each Stock Option, the method of exercising Stock Options, and when
Stock Options become exercisable or Stock Awards vest. Only employees may
receive grants of Incentive Stock Options. Directors who are not employees may
receive only grants of Non-Statutory Stock Options. If the Stock-Based
Incentive Plan (or other separate plans) is adopted within one year after
conversion, OTS regulations provide that no individual officer or

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<PAGE> 81
employee of the Association may receive more than 25% of the Stock Options
available under the Stock-Based Incentive Plan (or any separate plan for
officers and employees) and non-employee directors may not receive more than 5%
individually, or 30% in the aggregate, of the Stock Options available under the
Stock-Based Incentive Plan (or any separate plan for directors). OTS
regulations also provide that no individual officer or employee of the
Association may receive more than 25% of the Stock Awards available
under the Stock-Based Incentive Plan (or any separate plan for officers and
employees) and non-employee directors may not receive more than 5%
individually, or 30% in the aggregate, of the Stock Awards available
under the Stock-Based Incentive Plan (or any separate plan for directors).

Unless sooner terminated, the Stock-Based Incentive Plan will remain
in effect for a period of ten years from the earlier of adoption by the Board
of Directors of the Company or approval by the Company's stockholders. Subject
to stockholder approval, the Company anticipates granting Stock Options under
the plan at an exercise price equal to at least the fair market value of the
underlying Common Stock on the date of grant.

An individual will not recognize taxable income upon the grant of a
Non-Statutory Stock Option or Incentive Stock Option or upon the exercise of an
Incentive Stock Option, provided the individual does not dispose of the shares
received through the exercise of the Incentive Stock Option such option for at
least one year after the date the individual receives the shares in connection
with the stock option exercise and two years after the date of grant of the
stock option (a "disqualifying disposition"). No compensation deduction will
generally be available to the Company as a result of the exercise of Incentive
Stock Options unless there has been a disqualifying disposition. In the case
of a Non-Statutory Stock Option and in the case of a disqualifying disposition
of share received in connection with the exercise of an Incentive Stock Option,
an individual will recognize ordinary income upon exercise of the stock option
(or upon the disqualifying disposition) in an amount equal to the amount by
which the exercise price exceeds the fair market value of the Common Stock
purchased by exercising the stock option on the date of exercise. The amount
of any ordinary income recognized by an optionee upon the exercise of a
Non-Statutory Stock Option or due to a disqualifying disposition of an
Incentive Stock Option will be a deductible expense to the Company for tax
purposes. In the case of limited rights, the holder will recognize any amount
paid to him or her upon exercise in the year in which the payment is made and
the Company will be entitled to a deduction for federal income tax purposes of
the amount paid.

Grants of Stock Awards may be made in the form of base grants and/or
performance grants (the vesting of which would be contingent upon performance
goals established by the committee administering the plan). In establishing
any performance goals, the committee may utilize the annual financial results
of the Company, actual performance of the Company as compared to targeted goals
such as the ratio of the Association's net worth to total assets, the Company's
return on average assets, or such other performance standards as determined by
the committee with the approval of the Board of Directors of the Company.

When a participant becomes vested with respect to Stock Award, the
participant will recognize ordinary income equal to the fair market value of
the Common Stock at the time of vesting (unless the participant made an
election pursuant to Section 83(b) of the Code). The amount of income
recognized by the participant will be a deductible expense for tax purposes for
the Company. When restricted Stock Awards become vested and shares of Common
Stock are actually distributed to participants, the participants receive
amounts equal to any accrued dividends with respect thereto, if not earlier
received. Prior to vesting, recipients of Stock Awards may direct the voting
of the shares awarded to them. Shares not subject to grants and shares
allocated subject to the achievement of performance goals will be voted by the
trustee in proportion to the directions provided with respect to shares subject
to grants. Vested shares will be distributed to recipients as soon as
practicable following the day on which they vest.

The vesting periods for awards under the Stock-Based Incentive Plan
will be determined by the committee administering the Plan. If the Company
adopts the Stock-Based Incentive Plan (or any separate plans for employees and
directors) within one year after conversion, awards would become vested and
exercisable subject to applicable OTS

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regulations, which require that any awards begin vesting no earlier than one
year from the date of shareholder approval of the plan and, thereafter, vest at
a rate of no more than 20% per year and may not be accelerated except in the
case of death or disability. Stock Options could be exercisable for a period
of time (likely three months) following the date on which the employee or
director ceases to perform services for the Association or the Company, except
that in the event of death or disability, options accelerate and become fully
vested and could be exercisable for up to one year thereafter or such other
period of time as determined by the Company. In the case of death or
disability, Stock Options may be exercised for a period of 12 months or such
other period of time as determined by the committee. However, any Incentive
Stock Options exercised more than three months following the date the employee
ceases to perform services as an employee would be treated essentially as a
Non-Statutory Stock Option. In the event of retirement, if the optionee
continues to perform services as a director or consultant on behalf of the
Association, the Company or an affiliate, unvested options and awards would
continue to vest in accordance with their original vesting schedule until the
optionee ceases to serve as a consultant or director. In the event of death,
disability or normal retirement, the Company, if requested by the optionee, or
the optionee's beneficiary, could elect, in exchange for vested options, to pay
the optionee, or the optionee's beneficiary in the event of death, the amount
by which the fair market value of the Common Stock exceeds the exercise price
of the options on the date of the employee's termination of employment.

Subject to any applicable regulatory requirements, the Stock-Based
Incentive Plan (or any separate plans for employees and directors) may be
amended subsequent to the expiration of the one-year period to provide for
accelerated vesting of previously granted Stock Options or Stock Awards in the
event of a change in control of the Company or the Association. A change in
control would generally be considered to occur when a person or group of
persons acting in concert acquires beneficial ownership of 20% or more of any
class of equity security of the Company or the Association or in the event of a
tender or exchange offer, merger or other form of business combination, sale of
all or substantially all of the assets of the Company or the Association or
contested election of directors which resulted in the replacement of a majority
of the Board of Directors by persons not nominated by the directors in office
prior to the contested election.

TRANSACTIONS WITH CERTAIN RELATED PERSONS

The Association offers officers and full-time employees of the
Association who satisfy the general underwriting standards of the Association,
loans with interest rates up to 1% below the current interest rate in effect,
the Insider Loan Rate ("ILR"); provided, however, that the ILR shall not be
below the Association's cost of funds at the time of the approval of the loan.
All ILR loans requested by officers must be approved by the Board of Directors.
The ILR normally ceases upon termination of employment. Upon termination of
the ILR, the interest rate reverts to the contract rate currently in effect.
All other terms and conditions contained in the original mortgage and note
continue to remain in effect. As of June 30, 1998, seven of the Association's
directors and officers had loans with outstanding balances totalling $273,000
in the aggregate. All such loans were made by the Association in the ordinary
course of business, with no favorable terms (except for ILR loans) and such
loans do not involve more than the normal risk of collectibility or present
unfavorable features.

The Company intends that all transactions in the future between the
Company and its executive officers, directors, holders of 10% or more of the
shares of any class of its Common Stock and affiliates thereof, will contain
terms no less favorable to the Company than could have been obtained by it in
arm's length negotiations with unaffiliated persons and will be approved by a
majority of independent outside directors of the Company not having any
interest in the transaction.

SUBSCRIPTIONS BY EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth the number of shares of Common Stock
the Association's officers and directors and their associates propose to
purchase, assuming shares of Common Stock are issued at the minimum and maximum
of the Estimated Price Range, including the effect of shares issued to the
Foundation, and that sufficient shares will be

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available to satisfy their subscriptions. The table also sets forth the total
expected beneficial ownership of Common Stock as to all directors and officers
as a group.

<TABLE>
<CAPTION>
AT THE MINIMUM OF THE AT THE MAXIMUM OF THE
ESTIMATED PRICE RANGE ESTIMATED PRICE RANGE
-------------------------- --------------------------
AS A
PERCENT OF AS A PERCENT
NUMBER OF SHARES NUMBER OF OF SHARES
NAME AMOUNT(1) SHARES SOLD SHARES SOLD
- ------ ---------- -------- ----------- -------- --------------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:

Vincent L. Marusak $150,000 15,000 1.20% 15,000 0.89%
Richard C. Laubach 50,000 5,000 0.40 5,000 0.29
Frederick L. Barletta 150,000 15,000 1.20 15,000 0.89
Peter B. Deisroth 30,000 3,000 0.24 3,000 0.18
George J. Hayden 150,000 15,000 1.20 15,000 0.89
Joseph E. Lundy 15,000 1,500 0.12 1,500 0.09
John J. Raynock 50,000 5,000 0.40 5,000 0.29
Anthony P. Sidari 150,000 15,000 1.20 15,000 0.89
David P. Marchetti, Sr. 5,000 500 0.04 500 0.03
Joseph P. Correale 7,500 750 0.06 750 0.04
-------- ------ ---- ------ ----

All Directors and Executive
Officers as a Group (10 persons)... $757,500 75,750 6.06% 75,750 4.48%
======== ====== ==== ====== ====

</TABLE>
---------------------
(1) Includes proposed subscriptions, if any, by associates. Does not include
subscription orders by the ESOP. Intended purchases by the ESOP are
expected to be 8% of the shares issued in the Conversion, including shares
issued to the Foundation.

THE CONVERSION

THE BOARD OF DIRECTORS OF THE ASSOCIATION, AND THE OTS HAVE APPROVED
THE PLAN OF CONVERSION, SUBJECT TO APPROVAL BY THE MEMBERS OF THE ASSOCIATION
ENTITLED TO VOTE ON THE MATTER AND THE SATISFACTION OF CERTAIN OTHER
CONDITIONS. SUCH OTS APPROVAL, HOWEVER, DOES NOT CONSTITUTE A RECOMMENDATION OR
ENDORSEMENT OF THE PLAN BY SUCH AGENCY. THE OTS NEITHER APPROVED NOR
DISAPPROVED THE ESTABLISHMENT OF THE FOUNDATION. THE PLAN OF CONVERSION IS
ALSO SUBJECT TO RECEIPT OF THE APPROVAL OF THE PENNSYLVANIA DEPARTMENT, WHICH
WILL ONLY CONSIDER SUCH APPROVAL BASED UPON APPROVAL OF THE PLAN OF CONVERSION
BY THE MEMBERS OF THE ASSOCIATION.

GENERAL

The Plan was adopted unanimously on June 26, 1998 and amended on
September 8, 1998 by the Association's Board of Directors, subject to approval
by the Pennsylvania Department and the OTS. Pursuant to the Plan, the
Association will be converted from a Pennsylvania-chartered mutual savings
association to a Pennsylvania-chartered capital stock savings association. It
is currently intended that all of the outstanding capital stock of the
Association will be held by the Company, which is incorporated under Delaware
law. The Plan was approved by the OTS, subject to, among other things,
approval of the Plan by the Association's members. A Special Meeting of
members has been called for this purpose to be held on ________, 1998. The
Pennsylvania Department will only consider approval of the Plan subsequent to
its approval by members of the Association.

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The Company has received the approval of the OTS to become a savings
and loan holding company and to acquire all of the Common Stock of the
Association to be issued in the Conversion. The Company plans to purchase the
shares of issued and outstanding capital stock of the Association in exchange
for 50% of the net proceeds and retain the remaining net proceeds. The
Conversion will be effected only upon completion of the sale of all of the
shares of Common Stock of the Company or the Association, if the holding
company form of organization is not utilized, to be issued pursuant to the
Plan.

The Plan provides that the Board of Directors of the Association may,
at any time prior to the issuance of the Common Stock and for any reason,
decide not to use a holding company form. Such reasons may include possible
delays resulting from overlapping regulatory processing or policies which could
adversely affect the Association's or the Company's ability to consummate the
Conversion and transact its business as contemplated herein and in accordance
with the Association's operating policies. In the event such a decision is
made, the Association will withdraw the Company's registration statement from
the SEC and take steps necessary to complete the Conversion without the
Company, including filing any necessary documents with the OTS. In such event,
and provided there is no regulatory action, directive or other consideration
upon which basis the Association determines not to complete the Conversion, if
permitted by the OTS, the Association will issue and sell the Common Stock of
the Association and subscribers will be notified of the elimination of a
holding company and resolicited (i.e., be permitted to affirm their orders, in
which case they will need to affirmatively reconfirm their subscriptions prior
to the expiration of the resolicitation offering or their funds will be
promptly refunded with interest at the Association's passbook rate of interest;
or be permitted to modify or rescind their subscriptions), and notified of the
time period within which the subscriber must affirmatively notify the
Association of his intention to affirm, modify or rescind his subscription.
The following description of the Plan assumes that a holding company form of
organization will be used in the Conversion. In the event that a holding
company form of organization is not used, all other pertinent terms of the Plan
as described below will apply to the conversion of the Association from the
mutual to stock form of organization and the sale of the Association's Common
Stock.

The Plan provides generally that (i) the Association will convert from
a mutual savings association to a capital stock savings association and (ii)
the Company will offer shares of Common Stock for sale in the Subscription
Offering to the Association's Eligible Account Holders, the ESOP, Supplemental
Eligible Account Holders, and Other Members. Subsequent to the Subscription
Offering, any remaining shares will be offered in a Community Offering with
preference given to certain members of the general public with preference given
to natural persons residing in Luzerne and Carbon counties, Pennsylvania (the
Association's "Local Community") (such natural persons are herein referred to
as "Preferred Subscribers"). The Community Offering may be commenced prior to
completion of the Subscription Offering. It is anticipated that all shares not
subscribed for in the Subscription and Community Offerings will be offered for
sale by the Company to the general public in a Syndicated Community Offering,
or in another offering. The Association has the right to accept or reject, in
whole or in part, any orders to purchase shares of the Common Stock received in
the Community Offering or in the Syndicated Community Offering. See
"--Community Offering" and "--Syndicated Community Offering."

The aggregate price of the shares of Common Stock to be sold in the
Conversion within the Estimated Price Range, currently estimated to be between
$11.9 million and $16.1 million, will be determined based upon an independent
appraisal, prepared by Keller of the estimated pro forma market value of the
Common Stock of the Company. All shares of Common Stock to be issued and sold
in the Conversion, will be sold at the same price. The independent appraisal
will be affirmed or, if necessary, updated at the completion of the
Subscription and Community Offerings, if all shares are subscribed for, or at
the completion of the Syndicated Community Offering. The appraisal has been
performed by Keller, a consulting firm experienced in the valuation and
appraisal of savings institutions. See "--Stock Pricing" for additional
information as to the determination of the estimated pro forma market value of
the Common Stock.

The following is a brief summary of the material aspects of the
Conversion. The summary is qualified in its entirety by reference to the
provisions of the Plan, as amended. A copy of the Plan is available for
inspection at each branch of the Association and at the Northeast Region and
Washington, D.C. offices of the OTS.

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ESTABLISHMENT OF THE CHARITABLE FOUNDATION

GENERAL. In furtherance of the Association's long-standing commitment to
its local community, the Association's Plan of Conversion provides for the
establishment of a charitable foundation in connection with the Association's
Conversion. The Plan provides that the Association and the Company will
establish the Foundation, which will be incorporated under Delaware law as a
non-stock corporation, and will fund the Foundation with Common Stock of the
Company, as further described below. The Company and the Association believe
that the funding of the Foundation with Common Stock of the Company is a means
of establishing a common bond between the Association and the communities in
which the Association operates and thereby enables such communities to share in
the potential growth and success of the Company and the Association over the
long term. By further enhancing the Association's visibility and reputation in
the communities in which it operates, the Association believes that the
Foundation will enhance the long-term value of the Association's community
Banking franchise.

The Foundation would be dedicated to the promotion of charitable purposes
within the communities in which the Association operates, including, but not
limited to, providing grants or donations to support housing assistance, not-
for-profit medical facilities, community groups and other types of organizations
or projects. Establishment of the Foundation is subject to the approval of a
majority of the total outstanding votes of the Association's members eligible to
be cast at the Special Meeting. The Foundation will be considered as a separate
matter from approval of the Plan of Conversion. If the Association's members
approve the Plan of Conversion, but not the Foundation, the Association intends
to complete the Conversion without the establishment of the Foundation. Failure
to approve the establishment of the Foundation may materially affect the pro
forma market value of the Common Stock. In such an event, the Association may
establish a new Estimated Price Range and commence a resolicitation of
subscribers. In the event of a resolicitation, unless an affirmative response is
received within a specified period of time, all funds will be promptly returned
to investors, as described elsewhere herein. See "--Stock Pricing."

PURPOSE OF THE FOUNDATION. The purpose of the Foundation is to provide
funding to support charitable purposes within the communities in which the
Association operates. The Association has long emphasized community lending and
community development activities and currently has a satisfactory Community
Reinvestment Act ("CRA") rating. The Foundation is being formed as a complement
to the Association's existing community activities, not as a replacement for
such activities. Indeed, the Association intends to continue to emphasize
community lending and community development activities following the Conversion.
However, such activities are not the Association's sole corporate purpose. The
Foundation, conversely, will be completely dedicated to community activities and
the promotion of charitable causes, and may be able to support such activities
in ways that are not presently available to the Association. Since the
Association already engages in community development activities, the Association
believes that the Foundation will enable the Company and the Association to
assist their local community in areas beyond community development and lending.
In this regard, the Board of Directors believes the establishment of a
charitable foundation is consistent with the Association's commitment to
community service. The Boards of Directors of the Association and Company also
believe that the funding of the Foundation with Common Stock of the Company is a
means of enabling the communities in which the Association operates to share in
the potential growth and success of the Company long after completion of the
Conversion. The Foundation accomplishes that goal by providing for continued
ties between the Foundation and Association, thereby forming a partnership with
the Association's community. The establishment of the Foundation would also
enable the Company and the Association to develop a unified charitable donation
strategy and would centralize the responsibility for administration and
allocation of corporate charitable funds. The Association, however, does not
expect the contribution to the Foundation to take the place of the Association's
traditional community lending and charitable activities. The Association expects
in future periods to continue making charitable contributions within its
communities.

STRUCTURE OF THE FOUNDATION. The Foundation will be incorporated under
Delaware law as a non-stock corporation. It is currently anticipated that the
Foundation's board of directors will be comprised of four members, all of whom
will be individuals elected from existing directors and officers of the
Association. As a result, it is expected that less than a majority of the
Association's directors will also serve as directors of the Foundation. The
officers and

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directors of the Association and Company that are expected to serve on the Board
of Directors of the Foundation consist of Messrs. Deisroth, Hayden, Marchetti
and Raynock, who intend to purchase 3,000, 15,000, 500 and 5,000 shares of
Common Stock in the Conversion, respectively. At the supermaximum of the
Estimated Price Range, such purchases equal 0.15%, 0.77%, 0.03% and 0.26%,
respectively, or 1.21% in the aggregate of the total number of shares to be
issued in the Conversion, including shares issued to the Foundation. On an
on-going basis, a Nominating Committee of the board of directors of the
Foundation, will nominate individuals eligible for election to the board of
directors of the Foundation. The members of the Foundation, who are comprised of
its board members, will elect the directors at the annual meeting of the
Foundation from those nominated by the Nominating Committee. Only persons
serving as directors of the Foundation qualify as members of the Foundation with
voting authority. Directors will be divided into three classes with each class
appointed for three-year terms. The certificate of incorporation of the
Foundation will provide that the Foundation is organized exclusively for
charitable purposes as set forth in Section 501(c)(3) of the Code. The
Foundation's certificate of incorporation further will provide that no part of
the net earnings of the Foundation will inure to the benefit of, or be
distributable to, its directors, officers or members. A person who is a
director, officer or employee of the Association, or has the power to direct its
management or policies, or otherwise owes a fiduciary duty to the Association,
and who will also serve as a director or employee of the Foundation would be
subject to the requirements of OTS Conflicts of Interest Regulations.

The authority for the affairs of the Foundation will be vested in the
board of directors of the Foundation. The directors of the Foundation will be
responsible for establishing the policies of the Foundation with respect to
grants or donations by the Foundation, consistent with the stated purposes for
which the Foundation is established. Although no formal policy governing
Foundation grants exists at this time, the Foundation's board of directors will
adopt such a policy upon establishment of the Foundation. The directors will
also be responsible for directing the assets of the Foundation. Pursuant to the
terms of the contribution as mandated by the OTS, all shares of Common Stock
held by the Foundation must be voted in the same ratio as all other shares of
the Company's Common Stock on all proposals considered by stockholders of the
Company; provided, however, that the OTS will waive this voting restriction
under certain circumstances if compliance with the restriction would: (i) cause
a violation of the law of the State of Delaware and the OTS determines that
federal law would not preempt the application of the laws of the State of
Delaware to the Foundation; (ii) would cause the Foundation to lose its
tax-exempt status or otherwise have a material and adverse tax consequence on
the Foundation; or (iii) would cause the Foundation to be subject to an excise
tax under Section 4941 of the Code. In order for the OTS to waive such voting
restriction, the Company's or the Foundation's legal counsel must render an
opinion satisfactory to OTS that compliance with the voting restriction would
have the effect described in clauses (i), (ii) or (iii) above. Under those
circumstances, the OTS will grant a waiver of the voting restriction upon
submission of such legal opinion(s) by the Company or the Foundation. In the
event that the OTS waived the voting restriction, the directors would direct the
voting of the Common Stock held by the Foundation. However, a condition to the
OTS approval of the Conversion provides that in the event such voting
restriction is waived or becomes unenforceable, the Director of the OTS, or his
designees, at that time may impose conditions on the composition of the board of
directors of the Foundation or such other conditions or restrictions relating to
the control of the Common Stock held by the Foundation, any of which could limit
the ability of the board of directors of the Foundation to control the voting of
the Common Stock held by the Foundation. There will be no agreements or
understandings with directors of the Foundation regarding the exercise of
control, directly or indirectly, over the management or policies of the Company
or the Association, including agreements related to voting, acquisition or
disposition of the Company's stock. As directors of a nonprofit corporation,
directors of the Foundation will at all times be bound by their fiduciary duty
to advance the Foundation's charitable goals, to protect the assets of the
Foundation and to act in a manner consistent with the charitable purpose for
which the Foundation is established.

The Company will provide office space and administrative support
services to the Foundation. Initially, the Foundation is expected to have no
employees. The board of directors of the Foundation will appoint such officers
as may be necessary to manage the operations of the Foundation. It is
anticipated that initially such officers will be selected from the board of
directors of the Foundation. Any transaction between the Association and the
Foundation will comply with the affiliate transaction restrictions set forth in
Sections 23A and 23B of the Federal Reserve Act, as amended.

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The Company proposes to capitalize the Foundation with Company Common
Stock in an amount equal to 5% of the total amount of Common Stock to be sold in
connection with the Conversion. At the minimum, midpoint and maximum of the
Estimated Price Range, the contribution to the Foundation would equal 59,500,
70,000 and 80,500 shares, which would have a market value of $595,000, $700,000
and $805,000, respectively, based on the Purchase Price. Such contribution, once
made, will not be recoverable by the Company or the Association. The Company and
the Association determined to fund the Foundation with Common Stock rather than
cash because it desired to form a bond with its community in a manner that would
allow the community to share in the potential growth and success of the Company
and the Association over the long term. The funding of the Foundation with stock
also provides the Foundation with a potentially larger endowment than if the
Company contributed cash to the Foundation since, as a shareholder, the
Foundation will share in the potential growth and success of the Company. As
such, the contribution of stock to the Foundation has the potential to provide a
self-sustaining funding mechanism which reduces the amount of cash that the
Company, if it were not making the stock contribution, would have to contribute
to the Foundation in future years in order to maintain a level amount of
charitable grants and donations.

The Foundation would receive working capital from any dividends that may
be paid on the Common Stock in the future, and subject to applicable federal and
state laws, loans collateralized by the Common Stock or from the proceeds of the
sale of any of the Common Stock in the open market from time to time as may be
permitted to provide the Foundation with additional liquidity. As a private
foundation under Section 501(c)(3) of the Code, the Foundation will be required
to distribute annually in grants or donations, a minimum of 5% of the average
fair market value of its net investment assets. One of the conditions imposed on
the gift of Common Stock by the Company is that the amount of Common Stock that
may be sold by the Foundation in any one year shall not exceed 5% of the average
market value of the assets held by the Foundation, except where the board of
directors of the Foundation determines that the failure to sell an amount of
Common Stock greater than such amount would result in a long-term reduction of
the value of the Foundation's assets or would otherwise jeopardize the
Foundation's capacity to carry out its charitable purposes. While there may be
a greater risk associated with a one-stock portfolio in comparison to a
diversified portfolio, the Company believes any such risk is mitigated by the
ability of the Foundation's directors to sell more than 5% of its stock in such
circumstances. Upon completion of the Conversion and the contribution of shares
to the Foundation immediately following the Conversion, the Company would have
1,249,500, 1,470,000 and 1,690,500 shares issued and outstanding at the
minimum, midpoint and maximum of the Estimated Price Range. Because the Company
will have an increased number of shares outstanding, the voting and ownership
interests of shareholders in the Company's Common Stock would be diluted by
4.8%, as compared to their interests in the Company if the Foundation was not
established. For additional discussion of the dilutive effect, see "Comparison
of Valuation and Pro Forma Information With No Foundation" and "Pro Forma
Data."

COMPARISON OF VALUATION AND OTHER FACTORS ASSUMING THE FOUNDATION IS NOT
ESTABLISHED AS PART OF THE CONVERSION. The Company proposes to capitalize the
Foundation with Common Stock in an amount equal to 5% of the total amount of
Common Stock sold in connection with the Conversion. At the minimum, midpoint,
maximum and 15% above the maximum of the Estimated Price Range, the contribution
to the Foundation would equal 59,500, 70,000, 80,500 and 92,575 shares,
respectively, which would have a market value of $595,000, $700,000, $805,000
and $925,750, respectively, based on the Purchase Price. Such contribution, once
made, will not be recoverable by the Company or the Association. As a result of
the establishment of the Foundation, the Estimated Price Range, as estimated by
Keller, has decreased and the amount of stock available for sale in the
Offerings has also correspondingly decreased. The amount of the decrease is
119,000, 140,000, 161,000 and 185,150 shares, or $1.2 million, $1.4 million,
$1.6 million and $1.9 million at the minimum, midpoint, maximum and 15% above
the maximum of the Estimated Price Range, respectively. See "Pro Forma Data" and
"Comparison of Valuation and Pro Forma Data Information with No Foundation."

TAX CONSIDERATIONS. The Company and the Association have been advised by
their independent accountants that an organization created for the above
purposes will qualify as a 501(c)(3) exempt organization under the Code, and
will be classified as a private foundation rather than a public charity. A
private foundation typically receives its support from one person or one
corporation whereas a public charity receives its support from the public. The
Foundation will submit a request to the IRS to be recognized as an exempt
organization after approval of the Foundation by the

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Association's members at the Special Meeting being held to consider the
Conversion. As long as the Foundation files its application for tax-exempt
status within 15 months from the date of its organization, and provided the IRS
approves the application, the effective date of the Foundation's status as a
Section 501(c)(3) organization will be the date of its organization. The
Company's independent accountants, however, have not rendered any advice on the
condition of the gift which requires that all shares of Common Stock of the
Company held by the Foundation must be voted in the same ratio as all other
shares of the Company's Common Stock, on all proposals considered by
stockholders of the Company. In the event that the Company or the Foundation
receives an opinion of their tax counsel satisfactory to the OTS that compliance
with the voting restriction would cause the Foundation to lose its tax-exempt
status, otherwise have a material adverse tax consequence on the Foundation or
subject the Foundation to an excise tax under Section 4941 of the Code, the OTS
will waive such condition upon submission of such opinion(s) by the Company or
the Foundation. See "--Regulatory Conditions Imposed on the Foundation."

A legal opinion of the OTS which addresses the establishment of
charitable foundations by savings associations opines that as a general rule
funds contributed to a charitable foundation should not exceed the deductible
limitations set forth in the Code, and if an association's contributions exceed
the deductible limit, such action must be justified by the board of directors.
In addition, under Delaware law, the Company is authorized by statute to make
charitable contributions and case law has recognized the benefits of such
contributions to a Delaware corporation. In this regard, Delaware case law
provides that a charitable gift must merely be within reasonable limits as to
amount and purpose to be valid. Under the Code, the Company may deduct up to 10%
of its taxable income in any one year and any contributions made by the Company
in excess of the deductible amount will be deductible for federal tax purposes
over each of the five succeeding taxable years. The Company and the Association
believe that the Conversion presents a unique opportunity to establish and fund
a charitable foundation given the substantial amount of additional capital being
raised in the Conversion. In making such a determination, the Company and the
Association considered the dilutive impact of the Foundation on the amount of
Common Stock available to be offered for sale in the Conversion. See "Comparison
of Valuation and Pro Forma Information with No Foundation." Based on such
consideration, the Company and Association believe that the contribution to the
Foundation in excess of the 10% annual limitation is justified given the
Association's capital position and its earnings, the substantial additional
capital being raised in the Conversion and the potential benefits of the
Foundation to the Association's community. In this regard, assuming the sale of
the Common Stock at the midpoint of the Estimated Price Range, the Company would
have pro forma consolidated capital of $20.9 million, or 16.9% of consolidated
assets and the Association's pro forma tangible, core and risk-based capital
ratios would be 13.4%, 13.4% and 26.8%, respectively. See "Regulatory Capital
Compliance," "Capitalization," and "Comparison of Valuation and Pro Forma
Information with No Foundation." Thus, the amount of the contribution will not
adversely impact the financial condition of the Company and the Association and
the Company and the Association therefore believe that the amount of the
charitable contribution is reasonable given the Company and the Association's
pro forma capital positions. As such, the Company and the Association believe
that the contribution does not raise safety and soundness concerns.

The Company and the Association have received an opinion of their
independent accountants that the Company's contribution of its own stock to the
Foundation will not constitute an act of self-dealing, and that the Company will
be entitled to a deduction in the amount of the fair market value of the stock
at the time of the contribution less the nominal par value that the Foundation
is required to pay to the Company for such stock, subject to a limitation based
on 10% of the Company's annual taxable income. The Company, however, would be
able to carry forward any unused portion of the deduction for five years
following the year in which the contribution is made for federal tax purposes.
Thus, while the Company expects, based on the maximum of the Estimated Price
Range, to be able to utilize for federal income tax purposes a charitable
contribution deduction of approximately $141,953 in fiscal year 1999, the
Company is permitted under the Code to carryover the excess of the total
contribution over such 1999 deduction over a five-year period for federal
income tax purposes. For Commonwealth of Pennsylvania state income tax
purposes, the Company also would be able to deduct its contribution to the
Foundation and to carry forward any unused portion over a five-year period,
subject to the limitation based on 10% of the Company's unconsolidated annual
taxable income, and provided the Company generates sufficient state taxable
income on an unconsolidated basis. Assuming the close of the Offerings at the
maximum of the Estimated Price Range, the Company estimates that all of the
federal tax deduction should be deductible over the six-year period. However,
no assurances can be made that the

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<PAGE> 89

Company will have sufficient pre-tax income over the five year period following
the year in which the contribution was made to fully utilize the carryover
related to the excess contribution. Neither the Company nor the Association
expects to make any further contributions to the Foundation within the first
five years following the initial contribution. After that time, the Company and
the Association may consider future contributions to the Foundation. Any such
decisions would be based on an assessment of, among other factors, the financial
condition of the Company and the Association at that time, the interests of
shareholders and depositors of the Company and the Association, and the
financial condition and operations of the Foundation.

Although the Company and the Association have received an opinion of
their independent accountants that the Company is entitled to a deduction for
the charitable contribution, there can be no assurances that the IRS will
recognize the Foundation as a Section 501(c)(3) exempt organization or that the
deduction will be permitted. In such event, the Company's contribution to the
Foundation would be expensed without tax benefit, resulting in a reduction in
earnings in the year in which the IRS makes such a determination. See "Risk
Factors--Establishment of the Charitable Foundation." In cases of willful,
flagrant or repeated acts or failures to act which result in violations of the
IRS rules governing private foundations, a private foundation's status as a
private foundation may be involuntarily terminated by the IRS. In such event,
the managers of a private foundation could be liable for excise taxes based on
such violations and the private foundation could be liable for a termination
tax under the Code. The Foundation's certificate of incorporation provides that
it shall have a perpetual existence. In the event, however, the Foundation were
subsequently dissolved as a result of a loss of its tax exempt status, the
Foundation would be required under the Code and its certificate of
incorporation to distribute any assets remaining in the Foundation at that time
for one or more exempt purposes within the meaning of Section 501(c)(3) of the
Code, or to distribute such assets to the federal government, or to a state or
local government, for a public purpose.

As a private foundation, earnings and gains, if any, from the sale of
Common Stock or other assets are exempt from federal and state corporate
taxation. However, investment income, such as interest, dividends and capital
gains, will be subject to a federal excise tax of 2.0%. The Foundation will be
required to make an annual filing with the IRS within four and one-half months
after the close of the Foundation's fiscal year to maintain its tax-exempt
status. The Foundation will be required to publish a notice that the annual
information return will be available for public inspection for a period of 180
days after the date of such public notice. The information return for a private
foundation must include, among other things, an itemized list of all grants made
or approved, showing the amount of each grant, the recipient, any relationship
between a grant recipient and the Foundation's managers and a concise statement
of the purpose of each grant.

REGULATORY CONDITIONS IMPOSED ON THE FOUNDATION. Establishment of the
Foundation is subject to the following conditions imposed by the OTS: (i) the
Foundation will be subject to examination by the OTS, at the Foundation's own
expense; (ii) the Foundation must comply with supervisory directives imposed by
the OTS; (iii) the Foundation will provide annual reports to the OTS describing
grants made and grant recipients; (iv) the Foundation will operate in accordance
with written policies adopted by the board of directors, including a conflict of
interest policy; (v) the Foundation will not engage in self-dealing and will
comply with all laws necessary to maintain its tax-exempt status; (vi) any
purchases of Common Stock by the Foundation following that Conversion will be
subject to OTS regulations on stock repurchases; and (vii) any shares of Common
Stock of the Company held by the Foundation must be voted in the same ratio as
all other shares of the Company's Common Stock on all proposals considered by
stockholders of the Company; provided, however, that the OTS will waive this
voting restriction under certain circumstances if compliance with the voting
restriction would: (a) cause a violation of the law of the State of Delaware and
the OTS determines the federal law does not preempt the application of the laws
of the State of Delaware to the Foundation; (b) cause the Foundation to lose its
tax-exempt status or otherwise have a material and adverse tax consequence on
the Foundation; or (c) cause the Foundation to be subject to an excise tax under
Section 4941 of the Code. In order for the OTS to waive such voting restriction,
the Company's or the Foundation's legal counsel must render an opinion
satisfactory to OTS that compliance with the voting restriction would have the
effect described in clauses (a), (b) or (c) above. Under those

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circumstances, the OTS will grant a waiver of the voting restriction upon
submission of such opinion(s) by the Company or the Foundation. There can be no
assurances that either a legal or tax opinion addressing these issues will be
rendered, or if rendered, that the OTS will grant an unconditional waiver of the
voting restriction. In this regard, a condition to the OTS approval of the
Conversion provides that in the event such voting restriction is waived or
becomes unenforceable, the Director of the OTS, or his designees, at that time
may impose conditions on the composition of the board of directors of the
Foundation or such other conditions or restrictions relating to the control of
the Common Stock held by the Foundation, any of which could limit the ability of
the board of directors of the Foundation to control the voting of Common Stock
held by the Foundation. In no event will the voting restriction survive the sale
of shares of the Common Stock held by the Foundation.

In addition, establishment of the Foundation is subject to the approval
of a majority of the total outstanding votes of the Association's members
eligible to be cast at the special meeting being held to consider the
Conversion. The Foundation will be considered as a separate matter from approval
of the Plan of Conversion. If the Association's members approve the Plan of
Conversion, but not the Foundation, the Association intends to complete the
Conversion without the establishment of the Foundation. Failure to approve the
Foundation may materially increase the pro forma market value of the Common
Stock being offered for sale in the Offering since the Estimated Price Range,
as set forth herein, takes into account the dilutive impact of the issuance of
shares to the Foundation. See "Comparison of Valuation and Pro Forma
Information With No Foundation."

PURPOSES OF CONVERSION

The Association, as a Pennsylvania-chartered mutual savings and loan
association, does not have shareholders and has no authority to issue capital
stock. By converting to the capital stock form of organization, the Association
will be structured in the form used by commercial banks, other business entities
and a growing number of savings institutions. The Conversion will enhance the
Association's ability to access capital markets, expand its current operations,
acquire other financial institutions or branch offices, provide affordable home
financing opportunities to the communities it serves or diversify into other
financial services to the extent allowable by applicable law and regulation. The
Conversion would also position the Association for a conversion to a commercial
bank charter if the Board of the Association chooses to do so in the future.

The holding company form of organization, if used, would provide
additional flexibility to diversify the Association's business activities
through existing or newly formed subsidiaries, or through acquisitions of or
mergers with both mutual and stock institutions, as well as other companies.
Although there are no current arrangements, understandings or agreements
regarding any such opportunities, the Company will be in a position after the
Conversion, subject to regulatory limitations and the Company's financial
position, to take advantage of any such opportunities that may arise.

The potential impact of the Conversion upon the Association's capital
base is significant. The Conversion will significantly increase the
Association's capital position to a level whereby the Association will be better
positioned to take advantage of business opportunities and engage in activities
which, prior to Conversion, would have been more difficult for the Association
to engage in and still continue to meet its status as a "well capitalized"
institution. At June 30, 1998, the Association had total equity, determined in
accordance with GAAP, of $9.2 million, or 8.2% of total assets, which
approximated the Association's regulatory tangible capital at that date of 8.4%
of assets. An institution with a ratio of tangible capital to total assets of
greater than or equal to 5.0% is considered to be "well-capitalized" pursuant to
OTS regulations. Assuming that the Company uses 50% of the net proceeds at the
maximum of the Estimated Price Range to purchase the stock of the Association,
the Association's GAAP capital will increase to $15.8 million or a ratio of GAAP
capital to adjusted assets, on a pro forma basis, of 13.3% after the Conversion.
In the event that the holding company form of organization is not utilized and
all of the net Conversion proceeds, at the midpoint of the Estimated Price
Range, are retained by the Association, the Association's ratios of tangible and
core capital to adjusted assets, on a pro forma basis, will both increase to
18.0% after Conversion. The investment of the net proceeds from the sale of the
Common Stock is expected to provide the Association with additional income to
increase further

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its capital position. The additional capital may also assist the Association in
offering new programs and expanded services to its customers. See "Use of
Proceeds."

After completion of the Conversion, the unissued common and preferred
stock authorized by the Company's Certificate of Incorporation will permit the
Company, subject to market conditions and any required regulatory approval of an
offering, to raise additional equity capital through further sales of
securities, and to issue securities in connection with possible acquisitions. At
the present time, the Company has no plans with respect to additional offerings
of securities, other than the possible issuance of additional shares upon
exercise of Stock Options under the Stock-Based Incentive Plan or the possible
issuance of authorized but unissued shares to the Stock-Based Incentive Plan for
Stock Awards. Following the Conversion, the Company will also be able to use
stock-related incentive plans to attract and retain executive and other
personnel for itself and its subsidiaries. See "Management of the
Association--Executive Compensation."

EFFECTS OF CONVERSION

GENERAL. Each depositor in a mutual savings institution has both a
deposit account in the institution and a pro rata ownership interest in the net
worth of the institution based upon the balance in his or her account, which
interest may only be realized in the event of a liquidation of the institution
or in the event the institution declares a capital distribution to depositors,
subject to applicable regulations of the OTS and the Pennsylvania Department.
However, this ownership interest is tied to the depositor's account and has no
tangible market value separate from such deposit account. Any depositor who
opens a deposit account obtains a pro rata ownership interest in the net worth
of the institution without any additional payment beyond the amount of the
deposit. A depositor who reduces or closes his account receives a portion or all
of the balance in the account but nothing for his ownership interest in the net
worth of the institution, which is lost to the extent that the balance in the
account is reduced.

Consequently, mutual savings institution depositors normally have no way
to realize the value of their ownership interest, which has realizable value
only in the unlikely event that the mutual savings institution is liquidated or
in the event the institution declares a capital distribution to depositors,
subject to applicable regulations of the OTS. In such event, the depositors of
record at that time, as owners, would share pro rata in any residual surplus and
reserves after other claims, including claims of depositors to the amounts of
their deposits, are paid.

When a mutual savings institution converts to stock form, permanent
nonwithdrawable capital stock is created to represent the ownership of the
institution's net worth. THE COMMON STOCK IS SEPARATE AND APART FROM DEPOSIT
ACCOUNTS AND CANNOT BE AND IS NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL
AGENCY. Certificates are issued to evidence ownership of the capital stock. The
stock certificates are transferable and, therefore, the stock may be sold or
traded if a purchaser is available with no effect on any account the seller may
hold in the institution.

CONTINUITY. While the Conversion is being accomplished, the normal
business of the Association of accepting deposits and making loans will continue
without interruption. The Association will continue to be subject to regulation
by the OTS and the FDIC. After the Conversion, the Association will continue to
provide services for depositors and borrowers under current policies by its
present management and staff.

The Directors serving the Association at the time of Conversion will
serve initially as Directors of the Association after the Conversion. The
Directors of the Company will consist initially of individuals currently serving
on the Board of Directors of the Association. All officers of the Association at
the time of Conversion will retain their positions immediately after Conversion.

EFFECT ON DEPOSIT ACCOUNTS. Under the Plan, each depositor in the
Association at the time of Conversion will automatically continue as a depositor
after the Conversion, and each such deposit account will remain the same with
respect to deposit balance, interest rate and other terms. Each such account
will be insured by the FDIC to the same extent as before the Conversion (i.e.,
up to $100,000 per depositor). Depositors will continue to hold their existing
certificates, passbooks and other evidences of their accounts.

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EFFECT ON LOANS. No loan outstanding from the Association will be
affected by the Conversion, and the amount, interest rate, maturity and security
for each loan will remain as they were contractually fixed prior to the
Conversion.

EFFECT ON VOTING RIGHTS OF MEMBERS. At present, all depositors and
certain borrowers of the Association are members of, and have voting rights in,
the Association as to all matters requiring membership action. Upon Conversion,
depositors and borrowers will cease to be members and will no longer be entitled
to vote at meetings of the Association. Upon Conversion, all voting rights in
the Association will be vested in the Company as the sole stockholder of the
Association. Exclusive voting rights with respect to the Company will be vested
in the holders of Common Stock. Depositors and borrowers of the Association will
not have voting rights after the Conversion except to the extent that they
become stockholders of the Company through the purchase of Common Stock.

TAX EFFECTS. The Association has received an opinion from Muldoon, Murphy
& Faucette with regard to federal income taxation and an opinion from Parente,
Randolph, Orlando, Carey & Associates with regard to Pennsylvania income
taxation which provide that the adoption and implementation of the Plan of
Conversion set forth herein will not be taxable for federal or Pennsylvania
income tax purposes to the Association, its Eligible Account Holders, or its
Supplemental Eligible Account Holders or the Company, except as discussed below.
See "--Tax Aspects."

EFFECT ON LIQUIDATION RIGHTS. If a mutual savings institution were to
liquidate, all claims of creditors (including those of depositors, to the extent
of deposit balances) would be paid first. Thereafter, if there were any assets
remaining, depositors would be entitled to such remaining assets, pro rata,
based upon the deposit balances in their deposit accounts immediately prior to
liquidation. In the unlikely event that the Association were to liquidate after
Conversion, all claims of creditors (including those of depositors, to the
extent of their deposit balances) would also be paid first, followed by
distribution of the "liquidation account" to certain depositors (see
"--Liquidation Rights"), with any assets remaining thereafter distributed to the
Company as the holder of the Association's capital stock. Pursuant to the rules
and regulations of the OTS, a post-Conversion merger, consolidation, sale of
bulk assets or similar combination or transaction with another insured savings
institution would not be considered a liquidation and, in such a transaction,
the liquidation account would be assumed by the surviving institution.

STOCK PRICING

The Plan of Conversion requires that the aggregate purchase price of the
Common Stock must be based on the appraised pro forma market value of the Common
Stock, as determined on the basis of an independent valuation. The Association
and the Company have retained Keller to make such valuation. For its services in
making such appraisal, Keller will receive a fee of $21,000 plus reasonable
expenses not to exceed $1,000. The Association and the Company have agreed to
indemnify Keller and its employees and affiliates against certain losses
(including any losses in connection with claims under the federal securities
laws) arising out of its services as appraiser, except where Keller's liability
results from its negligence, willful misconduct or bad faith.

An appraisal has been made by Keller in reliance upon the information
contained in this Prospectus, including the Financial Statements. Keller also
considered the following factors, among others: the present and projected
operating results and financial condition of the Company and the Association and
the economic and demographic conditions in the Association's existing marketing
area; certain historical, financial and other information relating to the
Association; a comparative evaluation of the operating and financial statistics
of the Association with those of other similarly situated publicly-traded
savings banks and savings institutions located in the Association's market area
and the Midwest and the Mid-Atlantic areas of the United States; the aggregate
size of the offering of the Common Stock; the impact of Conversion on the
Association's net worth and earnings potential; the proposed dividend policy of
the Company and the Association; and the trading market for securities of
comparable institutions and general conditions in the market for such
securities.

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On the basis of the foregoing, Keller has advised the Company and the
Association that, in its opinion, dated August 14, 1998, the estimated pro forma
market value of the Common Stock, being offered for sale ranged from a minimum
of $11.9 million to a maximum of $16.1 million with a midpoint of $14.0 million.
Based upon the Valuation Range and the Purchase Price for the Common Stock
established by the Board of Directors, the Board of Directors has established
the Estimated Price Range of $11.9 million to $16.1 million, with a midpoint of
$14.0 million, and the Company expects to issue between 1,190,000 and 1,610,000
shares of Common Stock. The Board of Directors of the Company and the
Association have reviewed the appraisal of Keller and in determining the
reasonableness and adequacy of such appraisal consistent with OTS regulations
and policies, have reviewed the methodology and reasonableness of the
assumptions utilized by Keller in the preparation of such appraisal. The
Estimated Price Range may be amended with the approval of the OTS (if required),
if necessitated by subsequent developments in the financial condition of the
Company or the Association or market conditions generally. The $10.00 per share
price for the Common Stock was based on the consideration of a number of
factors, including the potential after market liquidity of the stock, stock
exchange or AMEX listing requirements and other marketing conditions.

SUCH APPRAISAL, HOWEVER, IS NOT INTENDED, AND MUST NOT BE CONSTRUED, AS A
RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING COMMON STOCK IN
THE OFFERINGS. KELLER DID NOT INDEPENDENTLY VERIFY THE FINANCIAL STATEMENTS AND
OTHER INFORMATION PROVIDED BY THE ASSOCIATION, NOR DID KELLER VALUE
INDEPENDENTLY THE ASSETS OR LIABILITIES OF THE ASSOCIATION. THE APPRAISAL
CONSIDERS THE ASSOCIATION AS A GOING CONCERN AND SHOULD NOT BE CONSIDERED AS AN
INDICATION OF THE LIQUIDATION VALUE OF THE ASSOCIATION. MOREOVER, BECAUSE SUCH
APPRAISAL IS NECESSARILY BASED UPON ESTIMATES AND PROJECTIONS OF A NUMBER OF
MATTERS, ALL OF WHICH ARE SUBJECT TO CHANGE FROM TIME TO TIME, NO ASSURANCE CAN
BE GIVEN THAT PERSONS PURCHASING COMMON STOCK IN THE CONVERSION WILL THEREAFTER
BE ABLE TO SELL COMMON STOCK AT PRICES AT OR ABOVE THE PURCHASE PRICE OR IN THE
RANGE OF THE FOREGOING VALUATION OF THE PRO FORMA MARKET VALUE THEREOF. SEE
"RISK FACTORS--ABSENCE OF MARKET FOR COMMON STOCK."

Following commencement of the Subscription Offering, the maximum of the
Estimated Price Range may be increased up to 15% and the number of shares of
Common Stock to be issued in the Conversion may be increased to 1,851,500 shares
due to regulatory considerations, changes in the market and general financial
and economic conditions, without the resolicitation of subscribers. See
"--Limitations on Common Stock Purchases" as to the method of distribution and
allocation of additional shares that may be issued in the event of an increase
in the Estimated Price Range to fill unfilled orders in the Subscription
Offering.

No sale of shares of Common Stock may be consummated unless, prior to
such consummation, Keller confirms to the Association and the OTS that, to the
best of its knowledge, nothing of a material nature has occurred which, taking
into account all relevant factors, would cause Keller to conclude that the value
of the Common Stock at the price so determined is incompatible with its estimate
of the pro forma market value of the Common Stock at the conclusion of the
Subscription Offering.

If the pro forma market value of the Common Stock is either more than 15%
above the maximum of the Estimated Price Range or less than the minimum of the
Estimated Price Range, the Association and the Company, after consulting with
the OTS, may terminate the Plan and return all funds promptly with interest at
the Association's passbook rate of interest on payments made by check, bank
draft or money order, extend or hold a new Subscription Offering and/or
Community Offering, establish a new Estimated Price Range, commence a
resolicitation of subscribers or take such other actions as permitted by the OTS
in order to complete the Conversion. In the event that a resolicitation is
commenced, unless an affirmative response is received within a reasonable period
of time, all funds will be promptly returned to investors as described above. A
resolicitation, if any, following the conclusion of the Subscription Offering
would not exceed 45 days unless further extended by the OTS for periods of up to
90 days not to extend beyond March 30, 2000.

If all shares of Common Stock are not sold through the Subscription
Offering or Community Offering, then the Association and the Company expect to
offer the remaining shares in a Syndicated Community Offering which would occur
as soon as practicable following the close of the Subscription Offering but may
commence during the Subscription Offering subject to prior rights of
subscribers. All shares of Common Stock will be sold at the same price

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per share in the Syndicated Community Offering as in the Subscription Offering
and Community Offering. See "--Syndicated Community Offering."

No sale of shares of Common Stock may be consummated unless, prior to
such consummation, Keller confirms to the Association, the Company and the OTS
that, to the best of its knowledge, nothing of a material nature has occurred
which, taking into account all relevant factors, including those which would be
involved in a cancellation of the Syndicated Community Offering, would cause
Keller to conclude that the aggregate value of the Common Stock at the Purchase
Price is incompatible with its estimate of the pro forma market value of the
Common Stock of the Company at the time of the Syndicated Community Offering.
Any change which would result in an aggregate purchase price which is below or
more than 15% above the Estimated Price Range would be subject to OTS approval.
If such confirmation is not received, the Association may extend the Conversion,
extend, reopen or commence a new Subscription Offering, Community Offering or
Syndicated Community Offering, establish a new Estimated Price Range and
commence a resolicitation of all subscribers with the approval of the OTS or
take such other actions as permitted by the OTS in order to complete the
Conversion, or terminate the Plan and cancel the Subscription and Community
Offerings and/or the Syndicated Community Offering. In the event market or
financial conditions change so as to cause the aggregate purchase price of the
shares to be below the minimum of the Estimated Price Range or more than 15%
above the maximum of such range, and the Company and the Association determine
to continue the Conversion, subscribers will be resolicited (i.e., be permitted
to continue their orders, in which case they will need to affirmatively
reconfirm their subscriptions prior to the expiration of the resolicitation
offering or their subscription funds will be promptly refunded with interest at
the Association's passbook rate of interest, or be permitted to decrease or
cancel their subscriptions). Any change in the Estimated Price Range must be
approved by the OTS. A resolicitation, if any, following the conclusion of the
Subscription Offering would not exceed 45 days unless further extended by the
OTS for periods up to 90 days not to extend beyond ________, 2000. If such
resolicitation is not effected, the Association will return all funds promptly
with interest at the Association's passbook rate of interest on payments made by
check, bank draft or money order.

Copies of the appraisal report of Keller, including any amendments
thereto, and the detailed memorandum of the appraiser setting forth the method
and assumptions for such appraisal are available for inspection at the main
office of the Association and the other locations specified under "Additional
Information."

NUMBER OF SHARES TO BE ISSUED

Depending upon market or financial conditions following the commencement
of the Subscription Offering, the total number of shares to be issued in the
Conversion may be increased or decreased without a resolicitation of
subscribers, provided that the product of the total number of shares times the
price per share is not below the minimum of the Estimated Price Range or more
than 15% above the maximum of the Estimated Price Range. Based on a fixed
purchase price of $10.00 per share and Keller's estimate of the pro forma market
value of the Common Stock ranging from a minimum of $11.9 million to a maximum,
as increased by 15%, of $18.5 million, the number of shares of Common Stock
expected to be sold in the Conversion is between a minimum of 1,190,000 shares
and a maximum, as adjusted by 15%, of 1,851,500 shares. The actual number of
shares sold between this range will depend on a number of factors and shall be
determined by the Association and Company subject to OTS approval, if necessary.

In the event market or financial conditions change so as to cause the
aggregate purchase price of the shares to be below the minimum of the Estimated
Price Range or more than 15% above the maximum of the Estimated Price Range, if
the Plan is not terminated by the Company and the Association after consultation
with the OTS, purchasers will be resolicited (i.e., permitted to continue their
orders, in which case they will need to affirmatively reconfirm their
subscriptions prior to the expiration of the resolicitation offering or their
subscription funds will be promptly refunded, or be permitted to modify or
rescind their subscriptions). Any change in the Estimated Price Range must be
approved by the OTS. If the number of shares issued in the Conversion is
increased due to an increase of up to 15% in the Estimated Price Range to
reflect changes in market or financial condition, persons who subscribed for the
maximum number of shares will not be given the opportunity to subscribe for an
adjusted maximum number of shares, except for the ESOP which will be able to
subscribe for such adjusted amount. See "--Limitations on Common Stock
Purchases."

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In the event the members of the Association approve the establishment of
the Foundation, the number of shares to be issued and outstanding following the
Conversion will be increased by a number of shares equal to 5.0% of the Common
Stock sold in the Conversion. Assuming the sale of shares in the Offerings at
the maximum of the Estimated Price Range, the Company will issue 80,500 shares
of its Common Stock from authorized but unissued shares to the Foundation
immediately following the completion of the Conversion. In that event, the
Company will have total shares of Common Stock outstanding of 1,690,500 shares.
Of that amount, the Foundation will own 4.8%. Funding the Foundation with
authorized but unissued shares will have the effect of diluting the ownership
and voting interests of persons purchasing shares in the Conversion by 4.8%
since a greater number of shares will be outstanding upon completion of the
Conversion than would be if the Foundation were not established. See "Pro Forma
Data."

An increase in the number of shares to be issued in the Conversion as a
result of an increase in the estimated pro forma market value would decrease
both a subscriber's ownership interest and the Company's pro forma net earnings
and stockholders' equity on a per share basis while increasing pro forma net
earnings and stockholders' equity on an aggregate basis. A decrease in the
number of shares to be issued in the Conversion would increase both a
subscriber's ownership interest and the Company's pro forma net earnings and
stockholders' equity on a per share basis while decreasing pro forma net
earnings and stockholder's equity on an aggregate basis. For a presentation of
the effects of such changes, see "Pro Forma Data."

SUBSCRIPTION OFFERING AND SUBSCRIPTION RIGHTS

In accordance with the Plan of Conversion, rights to subscribe for the
purchase of Common Stock have been granted under the Plan of Conversion to the
following persons in the following order of descending priority: (1) holders of
deposit accounts with a balance of $50 or more as of March 31, 1997 ("Eligible
Account Holders"); (2) the ESOP; (3) holders of deposit accounts with a balance
of $50 or more as of _______________, 1998 ("Supplemental Eligible Account
Holders"); and (4) members of the Association, consisting of depositors of the
Association as of __________, 1998, (the "Voting Record Date"), and borrowers
with loans outstanding as of _______________, 1998, which continue to be
outstanding as of the Voting Record Date other than Eligible Account Holders and
Supplemental Eligible Account Holders ("Other Members"). All subscriptions
received will be subject to the availability of Common Stock after satisfaction
of all subscriptions of all persons having prior rights in the Subscription
Offering and to the maximum and minimum purchase limitations set forth in the
Plan of Conversion and as described below under "--Limitations on Common Stock
Purchases."

Deposit accounts which will provide subscription rights to holders
thereof consist of any "savings account," as defined by the Plan of Conversion
consistent with OTS regulations. Pursuant to the Plan and federal regulation,
certain deposits do not qualify as "savings accounts," including but not limited
to noninterest-bearing demand accounts, (primarily noninterest-bearing checking
accounts) and mortgage escrow deposits, maintained at the Association.

PRIORITY 1: ELIGIBLE ACCOUNT HOLDERS. Each Eligible Account Holder will
receive, without payment therefor, first priority, nontransferable subscription
rights to subscribe for in the Subscription Offering up to the greater of (1)
the amount permitted to be purchased in the Community Offering, currently
$150,000 of Common Stock; (2) one-tenth of one percent (.10%) of the total
offering of shares of Common Stock; or (3) fifteen times the product (rounded
down to the next whole number) obtained by multiplying the total number of
shares of Common Stock to be issued by a fraction of which the numerator is the
amount of the Eligible Account Holder's Qualifying Deposit (defined by the Plan
as any deposit account in the Association with a balance of $50 or more as of
March 31, 1997) and the denominator is the total amount of Qualifying Deposits
of all Eligible Account Holders, in each case on the Eligibility Record Date,
subject to the overall purchase limitation and exclusive of an increase in the
shares issued pursuant to an increase in the Estimated Price Range of up to 15%.
See "--Limitations on Common Stock Purchases."

In the event that Eligible Account Holders exercise subscription rights
for a number of shares of Conversion Stock in excess of the total number of such
shares eligible for subscription, the shares of Conversion Stock shall be
allocated among the subscribing Eligible Account Holders so as to permit each
subscribing Eligible Account Holder, to the extent possible, to purchase a
number of shares sufficient to make his or her total allocation of Conversion
Stock

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equal to the lesser of 100 shares or the number of shares subscribed for by the
Eligible Account Holder. Any shares remaining after that allocation will be
allocated among the subscribing Eligible Account Holders whose subscriptions
remain unsatisfied in the proportion that the amount of the Qualifying Deposit
of each Eligible Account Holder whose subscription remains unsatisfied bears to
the total amount of the Qualifying Deposits of all Eligible Account Holders
whose subscriptions remain unsatisfied. If the amount so allocated exceeds the
amount subscribed for by any one or more Eligible Account Holders, the excess
shall be reallocated (one or more times as necessary) among those Eligible
Account Holders whose subscriptions are still not fully satisfied on the same
principle until all available shares have been allocated or all subscriptions
satisfied.

To ensure proper allocation of stock, each Eligible Account Holder must
list on his subscription order form all accounts in which he has an ownership
interest. Failure to list an account could result in less shares being allocated
than if all accounts had been disclosed. The subscription rights of Eligible
Account Holders who are also Directors or Officers of the Association or their
associates will be subordinated to the subscription rights of other Eligible
Account Holders to the extent attributable to increased deposits in the 12
months preceding June 30, 1997.

PRIORITY 2: EMPLOYEE STOCK OWNERSHIP PLAN. To the extent that there are
sufficient shares remaining after satisfaction of the subscriptions by Eligible
Account Holders, the ESOP will receive, without payment therefor, second
priority, nontransferable subscription rights to purchase, in the aggregate, up
to 10% of Common Stock issued in the Conversion, including shares issued to the
Foundation, and any increase in the number of shares of Common Stock to be
issued in the Conversion after the date hereof as a result of an increase of up
to 15% in the maximum of the Estimated Price Range. The ESOP intends to purchase
8% of the shares to be issued in the Conversion, including shares issued to the
Foundation, or 99,960 shares and 135,240 shares, based on the minimum and
maximum of the Estimated Price Range, respectively. Subscriptions by the ESOP
will not be aggregated with shares of Common Stock purchased directly by or
which are otherwise attributable to any other participants in the Subscription
Offering, including subscriptions of any of the Association's directors,
officers, employees or associates thereof. See "Management of the
Association--Other Benefit Plans--Employee Stock Ownership Plan."

PRIORITY 3: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. Each Supplemental
Eligible Account Holder will receive, without payment therefor, third priority,
nontransferable subscription rights to subscribe for in the Subscription
Offering up to the greater of the amount permitted to be purchased in the
Community Offering, currently $150,000 of Common Stock, one-tenth of one percent
(.10%) of the total offering of shares of Common Stock or fifteen times the
product (rounded down to the next whole number) obtained by multiplying the
total number of shares of Common Stock to be issued by a fraction of which the
numerator is the amount of the Supplemental Eligible Account Holder's Qualifying
Deposit and the denominator is the total amount of Qualifying Deposits of all
Supplemental Eligible Account Holders, in each case on the Supplemental
Eligibility Record Date, subject to the overall purchase limitation and
exclusive of an increase in the shares issued pursuant to an increase in the
Estimated Price Range of up to 15%. See "--Limitations on Common Stock
Purchases."

In the event that Supplemental Eligible Account Holders exercise
subscription rights for a number of shares of Conversion Stock in excess of the
total number of such shares eligible for subscription, the shares of Conversion
Stock shall be allocated among the subscribing Supplemental Eligible Account
Holders so as to permit each subscribing Supplemental Eligible Account Holder,
to the extent possible, to purchase a number of shares sufficient to make his or
her total allocation of Conversion Stock equal to the lesser of 100 shares or
the number of shares subscribed for by the Supplemental Eligible Account Holder.
Any shares remaining after that allocation will be allocated among the
subscribing Supplemental Eligible Account Holders whose subscriptions remain
unsatisfied in the proportion that the amount of the Qualifying Deposit of each
Supplemental Eligible Account Holder whose subscription remains unsatisfied
bears to the total amount of the Qualifying Deposits of all Supplemental
Eligible Account Holders whose subscriptions remain unsatisfied. If the amount
so allocated exceeds the amount subscribed for by any one or more Supplemental
Eligible Account Holders, the excess shall be reallocated (one or more times as
necessary) among those Supplemental Eligible Account Holders whose subscriptions
are still not fully satisfied on the same principle until all available shares
have been allocated or all subscriptions satisfied.

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To ensure proper allocation of stock, each Supplemental Eligible Account
Holder must list on his subscription order form all accounts in which he has an
ownership interest. Failure to list an account could result in less shares being
allocated than if all accounts had been disclosed. The subscription rights
received by Eligible Account Holders will be applied in partial satisfaction to
the subscription rights to be received as a Supplemental Eligible Account
Holder.

PRIORITY 4: OTHER MEMBERS. To the extent that there are sufficient shares
remaining after satisfaction of subscriptions by the Eligible Account Holders,
the ESOP and the Supplemental Eligible Account Holders, each Other Member will
receive, without payment therefor, fourth priority nontransferable subscription
rights to subscribe for Common Stock in the Subscription Offering up to the
greater of the amount permitted to be purchased in the Community Offering,
currently $150,000 of Common Stock, or one-tenth of one percent (.10%) of the
total offering of shares of Common Stock, subject to the overall purchase
limitation and exclusive of an increase in shares issued pursuant to an increase
in the Estimated Price Range of up to 15%.

In the event that Other Members subscribe for a number of shares of
Conversion Stock which, when added to the shares of Conversion Stock subscribed
for by the Eligible Account Holders, the Employee Plans and the Supplemental
Eligible Account Holders is in excess of the total number of shares of
Conversion Stock being issued, the subscriptions of such Other Members will be
allocated among the subscribing Other Members so as to permit each subscribing
Other Member, to the extent possible, to purchase a number of shares sufficient
to make his or her total allocation of Conversion Stock equal to the lesser of
100 shares or the number of shares subscribed for by the Other Member. Any
shares remaining after that allocation will be allocated among the subscribing
Other Members whose subscriptions remain unsatisfied pro rata in the same
proportion that the number of votes of a subscribing Other Member on the Voting
Record Date bears to the total votes on the Voting Record Date of all
subscribing Other Members whose subscriptions remain unsatisfied. If the amount
so allocated exceeds the amount subscribed for by any one or more remaining
Other Members, the excess shall be reallocated (one or more times as necessary)
among those remaining Other Members whose subscriptions are still not fully
satisfied on the same principle until all available shares have been allocated
or all subscriptions satisfied.

EXPIRATION DATE FOR THE SUBSCRIPTION OFFERING. The Subscription Offering
will terminate at __:__ _.m., Eastern time on ______________, 1998 (the
"Expiration Date"), unless extended for up to 45 days by the Association or such
additional periods with the approval of the OTS. Subscription rights which have
not been exercised prior to the Expiration Date will become void.

The Association will not execute orders until all shares of Common Stock
have been subscribed for or otherwise sold. If all shares have not been
subscribed for or sold within 45 days after the Expiration Date, unless such
period is extended with the consent of the OTS, all funds delivered to the
Association pursuant to the Subscription Offering will be returned promptly to
the subscribers with interest and all withdrawal authorizations will be
canceled. If an extension beyond the 45 day period following the Expiration Date
is granted, the Association will notify subscribers of the extension of time and
of any rights of subscribers to modify or rescind their subscriptions and have
their funds returned promptly with interest, and of the time period within which
subscribers must affirmatively notify the Association of their intention to
confirm, modify, or rescind their subscription. If an affirmative response to
any resolicitation is not received by the Company from a subscriber, such order
will be rescinded and all subscription funds will be promptly returned with
interest. Such extensions may not go beyond ________, 2000.

COMMUNITY OFFERING

To the extent that shares remain available for purchase after
satisfaction of all subscriptions of the Eligible Account Holders, the ESOP, the
Supplemental Eligible Account Holders and Other Members, the Association has
intends to offer shares pursuant to the Plan to certain members of the general
public in a Community Offering. The Community Offering may be commenced prior to
the expiration of the Subscription Offering. In the event a Community Offering
is held, a preference will be given to Preferred Subscribers, subject to the
right of the Company to accept or reject any such orders, in whole or in part,
in their sole discretion. Persons purchasing stock in the Community Offering,
together with associates of and persons acting in concert with such persons, may
purchase up to

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$150,000 of Common Stock subject to the maximum purchase limitation and
exclusive of shares issued pursuant to an increase in the Estimated Price Range
by up to 15%. See "--Limitations on Common Stock Purchases." This amount may be
increased to up to a maximum of 5% or decreased to less than $150,000 at the
sole discretion of the Company and the Association. THE OPPORTUNITY TO SUBSCRIBE
FOR SHARES OF COMMON STOCK IN THE COMMUNITY OFFERING CATEGORY IS SUBJECT TO THE
RIGHT OF THE ASSOCIATION AND THE COMPANY, IN ITS SOLE DISCRETION, TO ACCEPT OR
REJECT ANY SUCH ORDERS IN WHOLE OR IN PART EITHER AT THE TIME OF RECEIPT OF AN
ORDER OR AS SOON AS PRACTICABLE FOLLOWING THE EXPIRATION DATE.

Subject to the foregoing, if the amount of stock remaining is
insufficient to fill the orders of Preferred Subscribers after completion of the
Subscription Offering and Community Offering, such stock will be allocated first
to each Preferred Subscriber whose order is accepted by the Association, in an
amount equal to the lesser of 100 shares or the number of shares subscribed for
by each such Preferred Subscriber, if possible. Thereafter, unallocated shares
will be allocated among the Preferred Subscribers whose order remains
unsatisfied on a 100 shares per order basis until all such orders have been
filled or the remaining shares have been allocated. If there are any shares
remaining, shares will be allocated to other persons of the general public who
purchase in the Community Offering applying the same allocation described above
for Preferred Subscribers.

PERSONS IN NONQUALIFIED STATES OR FOREIGN COUNTRIES

The Company and the Association will make reasonable efforts to comply
with the securities laws of all states in the United States in which persons
entitled to subscribe for stock pursuant to the Plan reside. However, the Plan
provides that the Association and the Company are not required to offer stock in
the Subscription Offering to any person who resides in a foreign country or
resides in a state of the United States with respect to which both of the
following apply: (i) a small number of persons otherwise eligible to subscribe
for shares of Common Stock reside in such state; and (ii) the Company or the
Association determines that compliance with the securities laws of such state
would be impracticable for reasons of cost or otherwise, including but not
limited to a request that the Company and the Association or their officers,
directors or trustees register as a broker, dealer, salesman or selling agent,
under the securities laws of such state, or a request to register or otherwise
qualify the subscription rights or Common Stock for sale or submit any filing
with respect thereto in such state. Where the number of persons eligible to
subscribe for shares in one state is small, the Association and the Company will
base their decision as to whether or not to offer the Common Stock in such state
on a number of factors, including the size of accounts held by account holders
in the state, the cost of registering or qualifying the shares or the need to
register the Company, its officers, directors or employees as brokers, dealers
or salesmen.

MARKETING AND UNDERWRITING ARRANGEMENTS

The Association and the Company have engaged Sandler O'Neill as a
consultant and financial advisor in connection with the offering of the Common
Stock, and Sandler O'Neill has agreed to use its best efforts to solicit
subscriptions and purchase orders for shares of Common Stock in the Offerings.
Based upon negotiations between the Association and the Company concerning fee
structure, Sandler O'Neill will receive a fee equal to 2% of the aggregate
Purchase Price of the shares sold in the Subscription and Community Offerings,
excluding shares purchased by directors, officers, employees, and any immediate
family member thereof, and any employee benefit plan of the Company or
Association, including the ESOP for which Sandler O'Neill will not receive a
fee. In the event that a selected dealers agreement is entered into in
connection with a Syndicated Community Offering, the Association will pay a fee
(to be negotiated at such time under such agreement) to such selected dealers,
any sponsoring dealers fees, and a management fee to Sandler O'Neill of 1.5% for
shares sold by a National Association of Securities Dealers, Inc. member firms
pursuant to a selected dealers agreement; provided, however, that any fees
payable to Sandler O'Neill for Common Stock sold by them pursuant to such a
selected dealers agreement shall not exceed 2% of the Purchase Price and
provided, further, however, that the aggregate fees payable to Sandler O'Neill
and the selected dealers will not exceed 5% of the aggregate purchase price of
the Common Stock sold by selected dealers. Fees to Sandler O'Neill and to any
other broker-dealer may be deemed to be underwriting fees, and Sandler O'Neill
and such broker-dealers may be deemed to be underwriters. The Company and the
Association have agreed to indemnify Sandler O'Neill for reasonable costs and

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expenses in connection with certain claims or liabilities, including certain
liabilities under the Securities Act. Sandler O'Neill has received advances
towards its fees totaling $25,000. Total marketing fees to Sandler O'Neill are
expected to be $204,118 and $280,860 at the minimum and the maximum of the
Estimated Price Range, respectively. See "Pro Forma Data" for the assumptions
used to arrive at these estimates.

Sandler O'Neill will perform proxy solicitation services, conversion
agent services and records management services for the Association in the
Conversion and will receive a fee for these services of $10,000. Reasonable
out-of-pocket expenses shall not exceed $50,000. Directors and executive
officers of the Company and Association may participate in the solicitation of
offers to purchase Common Stock. Questions of prospective purchasers will be
directed to executive officers or registered representatives. Other employees of
the Association may participate in the Offering in ministerial capacities or
providing clerical work in effecting a sales transaction. Such other employees
have been instructed not to solicit offers to purchase Common Stock or provide
advice regarding the purchase of Common Stock. The Company will rely on Rule
3a4-1 under the Exchange Act, and sales of Common Stock will be conducted within
the requirements of Rule 3a4-1, so as to permit officers, directors and
employees to participate in the sale of Common Stock. No officer, director or
employee of the Company or the Association will be compensated in connection
with his participation by the payment of commissions or other remuneration based
either directly or indirectly on the transactions in the Common Stock.

PROCEDURE FOR PURCHASING SHARES IN THE SUBSCRIPTION AND COMMUNITY OFFERINGs

To ensure that each purchaser receives a prospectus at least 48 hours
before the Expiration Date in the case of the Subscription Offering or the
termination of the Community Offering in accordance with Rule 15c2-8 of the
Exchange Act, no prospectus will be mailed any later than five days prior to
such date or hand delivered any later than two days prior to such date.
Execution of the stock order form and certification form will confirm receipt or
delivery in accordance with Rule 15c2-8. Stock order and certification forms
will only be distributed with a prospectus.

To purchase shares in the Offerings, an executed stock order form and
certification form with the required payment for each share subscribed for, or
with appropriate authorization for withdrawal from the Association's deposit
account (which may be given by completing the appropriate blanks in the stock
order form), must be received by the Association at any of its offices by 12:00
noon, Eastern time, on the Expiration Date in the case of the Subscription
Offering or the termination of the Community Offering. Stock order forms which
are not received by such time or are executed defectively or are received
without full payment (or appropriate withdrawal instructions) are not required
to be accepted. In addition, the Association and Company are not obligated to
accept orders submitted on photocopied or facsimilied stock order forms and will
not accept stock order forms unaccompanied by an executed certification form.
Notwithstanding the foregoing, the Company shall have the right, in its sole
discretion, to permit institutional investors to submit irrevocable orders
together with a legally binding commitment for payment and to thereafter pay for
the shares of Common Stock for which they subscribe in the Community Offering at
any time prior to 48 hours before the completion of the Conversion. The Company
and the Association have the right to waive or permit the correction of
incomplete or improperly executed forms, but do not represent that they will do
so. Once received, an executed stock order form may not be modified, amended or
rescinded without the consent of the Association unless the Conversion has not
been completed within 45 days after the end of the Subscription Offering, unless
such period has been extended.

In order to ensure that Eligible Account Holders, Supplemental Eligible
Account Holders and Other Members are properly identified as to their stock
purchase priorities, depositors as of the Eligibility Record Date (March 31,
1997) and/or the Supplemental Eligibility Record Date (_______________, 1998)
and/or the Voting Record Date (__________, 1998) must list all accounts on the
stock order form giving all names in each account and the account number.

Payment for subscriptions may be made (i) in cash if delivered in person
at any branch office of the Association, (ii) by check, bank draft or money
order, or (iii) by authorization of withdrawal from deposit accounts maintained
with the Association. No wire transfers will be accepted. Interest will be paid
on payments made by cash, check, bank draft or money order at the Association's
passbook rate of interest from the date payment is received until

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the completion or termination of the Conversion. Orders for Common Stock
submitted by subscribers in the Subscription Offering which aggregate $50,000 or
more must be paid by official or certified check or by withdrawal authorization
from a deposit account of the Association. If payment is made by authorization
of withdrawal from deposit accounts, the funds authorized to be withdrawn from a
deposit account will continue to accrue interest at the contractual rates until
completion or termination of the Conversion, but a hold will be placed on such
funds, thereby making them unavailable to the depositor until completion or
termination of the Conversion.

If a subscriber authorizes the Association to withdraw the amount of the
purchase price from his deposit account, the Association will do so as of the
effective date of the Conversion. The Association will waive any applicable
penalties for early withdrawal from certificate accounts. If the remaining
balance in a certificate account is reduced below the applicable minimum balance
requirement at the time that the funds actually are transferred under the
authorization, the certificate will be canceled at the time of the withdrawal,
without penalty, and the remaining balance will earn interest at the
Association's passbook rate.

If the ESOP subscribes for shares during the Subscription Offering, the
ESOP will not be required to pay for the shares subscribed for at the time it
subscribes, but rather, may pay for such shares of Common Stock subscribed for
at the Purchase Price upon consummation of the Subscription Offering, if all
shares are sold, or upon consummation of the Community Offering or Syndicated
Community Offering if shares remain to be sold in such offerings; provided, that
there is in force from the time of its subscription until such time, a loan
commitment from an unrelated financial institution or the Company to lend to the
ESOP, at such time, the aggregate Purchase Price of the shares for which it
subscribed.

Owners of self-directed Individual Retirement Accounts ("IRAs") and
Qualified Plans may use the assets of such IRAs and Qualified Plans to purchase
shares of Common Stock in the Subscription Offering and/or Community Offering,
provided that such IRAs are not maintained at the Association. Persons with
self-directed IRAs and Qualified Plans maintained at the Association must have
their accounts transferred to an unaffiliated institution or broker to purchase
shares of Common Stock in the Subscription Offering and/or Community Offering.
In addition, the provisions of ERISA and IRS regulations require that officers,
directors and ten percent shareholders who use self-directed IRA funds and
Qualified Plans to purchase shares of Common Stock in the Subscription Offering
and/or Community Offering, make such purchases for the exclusive benefit of the
IRAs and Qualified Plans.

Certificates representing shares of Common Stock purchased will be mailed
to purchasers at the address specified in properly completed stock order forms,
as soon as practicable following consummation of the sale of all shares of
Common Stock. Any certificates returned as undeliverable will be disposed of in
accordance with applicable law.

RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES

Prior to the completion of the Conversion, the OTS conversion regulations
prohibit any person with subscription rights, including the Eligible Account
Holders, the ESOP, the Supplemental Eligible Account Holders and Other Members
of the Association, from transferring or entering into any agreement or
understanding to transfer the legal or beneficial ownership of the subscription
rights issued under the Plan or the shares of Common Stock to be issued upon
their exercise. Such rights may be exercised only by the person to whom they are
granted and only for his account. Each person exercising such subscription
rights will be required to certify that he is purchasing shares solely for his
own account and that he has no agreement or understanding regarding the sale or
transfer of such shares. The regulations also prohibit any person from offering
or making an announcement of an offer or intent to make an offer to purchase
such subscription rights or shares of Common Stock prior to the completion of
the Conversion.

THE ASSOCIATION AND THE COMPANY WILL PURSUE ANY AND ALL LEGAL AND
EQUITABLE REMEDIES (INCLUDING FORFEITURE) IN THE EVENT THEY BECOME AWARE OF THE
TRANSFER OF SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS KNOWN BY THEM TO
INVOLVE THE TRANSFER OF SUCH RIGHTS.

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SYNDICATED COMMUNITY OFFERING

As a final step in the Conversion, the Plan provides that, if feasible,
all shares of Common Stock not purchased in the Subscription and Community
Offerings, if any, will be offered for sale to the general public in a
Syndicated Community Offering through a syndicate of registered broker-dealers
to be formed and managed by Sandler O'Neill acting as agent of the Company to
assist the Company and the Association in the sale of the Common Stock. The
Company and the Association have the right to reject orders in whole or in part
in their sole discretion in the Syndicated Community Offering. Neither Sandler
O'Neill nor any registered broker-dealer shall have any obligation to take or
purchase any shares of the Common Stock in the Syndicated Community Offering,
however, Sandler O'Neill has agreed to use its best efforts in the sale of
shares in the Syndicated Community Offering.

The price at which Common Stock is sold in the Syndicated Community
Offering will be determined as described above under "--Stock Pricing." Subject
to overall purchase limitations, no person, together with any associate or group
of persons acting in concert, will be permitted to subscribe in the Syndicated
Community Offering for more than $150,000 of the Common Stock, exclusive of an
increase in shares issued pursuant to an increase in the Estimated Price Range
of up to 15%; provided, however, that shares of Common Stock purchased in the
Community Offering by any persons, together with associates of or persons acting
in concert with such persons, will be aggregated with purchases in the
Syndicated Community Offering and be subject to an overall maximum purchase
limitation of the greater of (i) $150,000 or (ii) 1.0% of the shares offered,
exclusive of an increase in shares issued pursuant to an increase in the
Estimated Price Range by up to 15%.

Payments made in the form of a check, bank draft, money order or in cash
will earn interest at the Association's passbook rate of interest from the date
such payment is actually received by the Association until completion or
termination of the Conversion.

In addition to the foregoing, if a syndicate of broker-dealers ("selected
dealers") is formed to assist in the Syndicated Community Offering, a purchaser
may pay for his shares with funds held by or deposited with a selected dealer.
If an order form is executed and forwarded to the selected dealer or if the
selected dealer is authorized to execute the order form on behalf of a
purchaser, the selected dealer is required to forward the order form and funds
to the Association for deposit in a segregated account on or before noon of the
business day following receipt of the order form or execution of the order form
by the selected dealer. Alternatively, selected dealers may solicit indications
of interest from their customers to place orders for shares. Such selected
dealers shall subsequently contact their customers who indicated an interest and
seek their confirmation as to their intent to purchase. Those indicating an
intent to purchase shall execute order forms and forward them to their selected
dealer or authorize the selected dealer to execute such forms. The selected
dealer will acknowledge receipt of the order to its customer in writing on the
following business day and will debit such customer's account on the third
business day after the customer has confirmed his intent to purchase (the "debit
date") and on or before noon of the next business day following the debit date
will send order forms and funds to the Association for deposit in a segregated
account. Although purchasers' funds are not required to be in their accounts
with selected dealers until the debit date in the event that such alternative
procedure is employed once a confirmation of an intent to purchase has been
received by the selected dealer, the purchaser has no right to rescind his
order.

Certificates representing shares of Common Stock purchased, together with
any refund due, will be mailed to purchasers at the address specified in the
order form, as soon as practicable following consummation of the sale of the
Common Stock. Any certificates returned as undeliverable will be disposed of in
accordance with applicable law.

The Syndicated Community Offering will terminate no more than 45 days
following the Subscription Offering Expiration Date, unless extended by the
Company with the approval of the OTS. Such extensions may not be beyond
________, 2000. See "--Stock Pricing" above for a discussion of rights of
subscribers, if any, in the event an extension is granted.

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LIMITATIONS ON COMMON STOCK PURCHASES

The Plan includes the following limitations on the number of shares of
Common Stock which may be purchased during the Conversion:

(1) No less than 25 shares;

(2) Each Eligible Account Holder may subscribe for and purchase in the
Subscription Offering up to the greater of: 1) the amount
permitted to be purchased in the Community Offering, currently
$150,000 of Common Stock; 2) one-tenth of one percent (.10%) of
the total offering of shares of Common Stock; or 3) fifteen times
the product (rounded down to the next whole number) obtained by
multiplying the total number of shares of Common Stock to be
issued by a fraction of which the numerator is the amount of the
Qualifying Deposit of the Eligible Account Holder and the
denominator is the total amount of Qualifying Deposits of all
Eligible Account Holders, in each case on the Eligibility Record
Date subject to the overall maximum purchase limitation in (8)
below and exclusive of an increase in the total number of shares
issued due to an increase in the Estimated Price Range of up to
15%;

(3) The ESOP is permitted to purchase in the aggregate up to 10% of
the shares of Common Stock issued in the Conversion, including
shares issued to the Foundation, including shares issued in the
event of an increase in the Estimated Price Range of 15%, and
intends to purchase 8% of the shares of Common Stock issued in the
Conversion, including shares issued to the Foundation;

(4) Each Supplemental Eligible Account Holder may subscribe for and
purchase in the Subscription Offering up to the greater of: 1) the
amount permitted to be purchased in the Community Offering,
currently $150,000 of Common Stock; 2) one-tenth of one percent
(.10%) of the total offering of shares of Common Stock; or 3)
fifteen times the product (rounded down to the next whole number)
obtained by multiplying the total number of shares of Common Stock
to be issued by a fraction of which the numerator is the amount of
the Qualifying Deposit of the Supplemental Eligible Account Holder
and the denominator is the total amount of Qualifying Deposits of
all Supplemental Eligible Account Holders, in such case on the
Supplemental Eligibility Record Date subject to the overall
maximum purchase limitation in (8) below and exclusive of an
increase in the total number of shares issued due to an increase
in the Estimated Price Range of up to 15%;

(5) Each Other Member may subscribe for and purchase in the
Subscription Offering up to the greater of: 1) the amount
permitted to be purchased in the Community Offering, currently
$150,000 of Common Stock; or 2) one-tenth of one percent (.10%) of
the total offering of shares of Common Stock, in each case subject
to the overall maximum purchase limitation in (8) below and
exclusive of an increase in the total number of shares issued due
to an increase in the Estimated Price Range of up to 15%;

(6) Persons purchasing shares of Common Stock in the Community
Offering, together with associates of and groups of persons acting
in concert with such persons, may purchase in the Community
Offering up to $150,000 of Common Stock, subject to the overall
maximum purchase limitation in (8) below and exclusive of an
increase in the total number of shares issued due to an increase
in the Estimated Price Range of up to 15%;

(7) Persons purchasing shares of Common Stock in the Syndicated
Community Offering, together with associates of and persons acting
in concert with such persons, may purchase in the Syndicated
Offering up to $150,000 of Common Stock, subject to the overall
maximum purchase limitation in (8) below and exclusive of an
increase in the total number of shares issued due to an increase
in the Estimated Price Range of up to 15% and, provided further
that shares of Common Stock purchased

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in the Community Offering by any persons, together with associates
of or persons acting in concert with such persons, will be
aggregated with purchases in the Syndicated Community Offering in
applying the $150,000 purchase limitation;

(8) Except for the ESOP, the overall maximum number of shares of
Common Stock subscribed for or purchased in all categories of the
Conversion by any person, together with associates of or persons
acting in concert with such persons, shall not exceed the greater
of (i) $150,000 or (ii) 1.0% of the shares of Common Stock offered
in the Conversion exclusive of an increase in the total number of
shares issued due to an increase in the Estimated Price Range of
up to 15%; and

(9) No more than 30% of the total number of shares offered for sale in
the Conversion may be purchased by directors and officers of the
Association and their associates in the aggregate, excluding
purchases by the ESOP.

Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the members of
the Association, both the individual amount permitted to be subscribed for and
the overall maximum purchase limitation may be increased to up to a maximum of
5% at the sole discretion of the Company and the Association. If such amount is
increased, subscribers for the maximum amount will be, and certain other large
subscribers in the sole discretion of the Association may be, given the
opportunity to increase their subscriptions up to the then applicable limit. In
addition, the Boards of Directors of the Company and the Association may, in
their sole discretion, increase the maximum purchase limitation referred to
above up to 9.99%, provided that orders for shares exceeding 5% of the shares
being offering in the Subscription and Community Offerings shall not exceed, in
the aggregate, 10% of the shares being offered in the Subscription and Community
Offerings. Requests to purchase additional shares of Common Stock under this
provision will be determined by the Boards of Directors and, if approved,
allocated on a pro rata basis giving priority in accordance with the priority
rights set forth herein.

The overall maximum purchase limitation may not be reduced to less than
1% but the individual amount permitted to be subscribed for may be reduced by
the Association to less than $150,000 subject to paragraphs (2), (4) and (5)
above without the further approval of members or resolicitation of subscribers.
An individual Eligible Account Holder, Supplemental Eligible Account Holder or
Other Member may not purchase individually in the Subscription Offering the
overall maximum purchase limit of 1.0% of the shares offered, but may make such
purchase, together with associates of and persons acting in concert with such
person, by also purchasing in other available categories of the Conversion,
subject to availability of shares and the overall maximum purchase limit for
purchases in the Conversion.

In the event of an increase in the total number of shares offered in the
Conversion due to an increase in the Estimated Price Range of up to 15% (the
"Adjusted Maximum"), the additional shares will be allocated in the following
order or priority in accordance with the Plan: (i) to fill the ESOP's
subscription of 8% of the amount of Common Stock issued in the Conversion,
including shares issued to the Foundation, at the Adjusted Maximum number of
shares; (ii) in the event that there is an oversubscription by Eligible Account
Holders, to fill unsatisfied subscriptions of Eligible Account Holders,
exclusive of the Adjusted Maximum; (iii) in the event that there is an
oversubscription by Supplemental Eligible Account Holders, to fill unsatisfied
subscriptions of Supplemental Eligible Account Holders, exclusive of the
Adjusted Maximum; (iv) in the event that there is an oversubscription by Other
Members, to fill unsatisfied subscriptions of Other Members exclusive of the
Adjusted Maximum; and (v) to fill unsatisfied subscriptions in the Community
Offering to the extent possible, exclusive of the Adjusted Maximum, with
preference to institutional investors then a preference to Preferred
Subscribers.

The term "associate" of a person is defined to mean: (i) any corporation,
partnership (other than the Association or a majority-owned subsidiary of the
Association) of which such person is an officer, partner or 10% stockholder;
(ii) any trust or other estate in which such person has a substantial beneficial
interest or serves as a trustee or in a similar fiduciary capacity; provided,
however, such term shall not include any employee stock benefit plan of the
Association in which such person has a substantial beneficial interest or serves
as a trustee or in a similar fiduciary capacity; and (iii) any relative or
spouse of such person, or any relative of such spouse, who either has the same
home

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as such person or who is a director or officer of the Association. Directors are
not treated as associates of each other solely because of their Board
membership. For a further discussion of limitations on purchases of a converting
institution's stock at the time of Conversion and subsequent to Conversion, see
"Management of the Association--Subscriptions by Executive Officers and
Directors," "--Certain Restrictions on Purchase or Transfer of Shares After
Conversion" and "Restrictions on Acquisition of the Company and the
Association."

LIQUIDATION RIGHTS

In the unlikely event of a complete liquidation of the Association in its
present mutual form, each depositor would receive his pro rata share of any
assets of the Association remaining after payment of claims of all creditors
(including the claims of all depositors to the withdrawal value of their
accounts). Each depositor's pro rata share of such remaining assets would be in
the same proportion as the value of his deposit account was to the total value
of all deposit accounts in the Association at the time of liquidation. After the
Conversion, each depositor, in the event of a complete liquidation, would have a
claim as a creditor of the same general priority as the claims of all other
general creditors of the Association. However, except as described below, his
claim would be solely in the amount of the balance in his deposit account plus
accrued interest. He would not have an interest in the value or assets of the
Association above that amount.

The Plan provides for the establishment, upon the completion of the
Conversion, of a special "liquidation account" for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in an amount equal to
the surplus and reserves of the Association as of the date of its latest balance
sheet contained in the final Prospectus used in connection with the Conversion.
Each Eligible Account Holder and Supplemental Eligible Account Holder, if he
were to continue to maintain his deposit account at the Association, would be
entitled, on a complete liquidation of the Association after the Conversion, to
an interest in the liquidation account prior to any payment to the stockholders
of the Association. Each Eligible Account Holder and Supplemental Eligible
Account Holder would have an initial interest in such liquidation account for
each deposit account, including regular accounts, transaction accounts such as
NOW accounts, money market deposit accounts, and certificates of deposit, with a
balance of $50 or more held in the Association on March 31, 1997 and
_______________, 1998, respectively. Each Eligible Account Holder and
Supplemental Eligible Account Holder will have a pro rata interest in the total
liquidation account based on the proportion that the balance of his Qualifying
Deposits on the Eligibility Record Date or Supplemental Eligibility Record Date,
respectively, bore to the total amount of all Qualifying Deposits of all
Eligible Account Holders and Supplemental Eligible Account Holders in the
Association. For deposit accounts in existence at both dates separate
subaccounts shall be determined on the basis of the Qualifying Deposits in such
deposit accounts on such respective record dates.

If, however, on any annual closing date subsequent to the Eligibility
Record Date or Supplemental Eligibility Record Date, the amount of the
Qualifying Deposit of an Eligible Account Holder or Supplemental Eligible
Account Holder is less than the amount of the Qualifying Deposit of such
Eligible Account Holder or Supplemental Eligible Account Holder as of the
Eligibility Record Date or Supplemental Eligibility Record Date, respectively,
or less than the amount of the Qualifying Deposits as of the previous annual
closing date, then the interest in the liquidation account relating to such
Qualifying Deposit would be reduced from time to time by the proportion of any
such reduction, and such interest will cease to exist if such Qualifying Deposit
accounts are closed. In addition, no interest in the liquidation account would
ever be increased despite any subsequent increase in the related Qualifying
Deposit. Any assets remaining after the above liquidation rights of Eligible
Account Holders and Supplemental Eligible Account Holders are satisfied would be
distributed to the Company as the sole stockholder of the Association.

TAX ASPECTS

Consummation of the Conversion is expressly conditioned upon the receipt
by the Association of either a favorable ruling from the IRS or an opinion with
respect to federal income taxation, and an opinion with respect to Pennsylvania
income taxation, to the effect that the Conversion will not be a taxable
transaction to the Company, the Association, Eligible Account Holders, or
Supplemental Eligible Account Holders except as noted below. The federal

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and Pennsylvania income tax consequences will remain unchanged in the event that
a holding company form of organization is not utilized.

No private ruling will be received from the IRS with respect to the
proposed Conversion. Instead, the Association has received an opinion of its
counsel, Muldoon, Murphy & Faucette, to the effect that for federal income tax
purposes, among other matters: (i) the Association's change in form from mutual
to stock ownership will constitute a reorganization under section 368(a)(1)(F)
of the Code and neither the Association nor the Company will recognize any gain
or loss as a result of the Conversion; (ii) no gain or loss will be recognized
to the Association or the Company upon the purchase of the Association's capital
stock by the Company or to the Company upon the purchase of its Common Stock in
the Conversion; (iii) no gain or loss will be recognized by Eligible Account
Holders or Supplemental Eligible Account Holders upon the issuance to them of
Deposit Accounts in the Association in its stock form plus their interests in
the liquidation account in exchange for their deposit accounts in the
Association; (iv) the tax basis of the depositors' accounts in the Association
immediately after the Conversion will be the same as the basis of their deposit
accounts immediately prior to the Conversion; (v) the tax basis of each Eligible
Account Holder's and Supplemental Eligible Account Holder's interest in the
liquidation account will be zero; (vi) no gain or loss will be recognized by
Eligible Account Holders or Supplemental Eligible Account Holders upon the
distribution to them of nontransferable subscription rights to purchase shares
of the Common Stock, provided that the amount to be paid for the Common Stock is
equal to the fair market value of such stock; and (vii) the tax basis to the
stockholders of the Common Stock of the Company purchased in the Conversion will
be the amount paid therefor and the holding period for the shares of Common
Stock purchased by such persons will begin on the date on which their
subscription rights are exercised. Parente, Randolph, Orlando, Carey &
Associates has opined that the Conversion will not be a taxable transaction to
the Company, the Association, Eligible Account Holders or Supplemental Eligible
Account Holders for Pennsylvania income tax purposes. Certain portions of both
the federal and the state income tax opinions are based upon the assumption that
the subscription rights issued in connection with the Conversion will have no
value.

Unlike private rulings, an opinion of counsel or an opinion of an
independent accountant is not binding on the IRS and the IRS could disagree with
conclusions reached therein. In the event of such disagreement, there can be no
assurance that the IRS would not prevail in a judicial or administrative
proceeding.

Keller has issued an opinion stating that, pursuant to its valuation,
Keller is of the opinion that the subscription rights do not have any value,
based on the fact that such rights are acquired by the recipients without cost,
are nontransferable and of short duration, and afford the recipients the right
only to purchase the Common Stock at a price equal to its estimated fair market
value, which will be the same price as the Purchase Price for the shares of
Common Stock sold in the Community Offering. Such valuation is not binding on
the IRS. If the subscription rights granted to Eligible Account Holders or
Supplemental Eligible Account Holders are deemed to have an ascertainable value,
receipt of such rights could be taxable to those Eligible Account Holders or
Supplemental Eligible Account Holders who receive and/or exercise the
subscription rights in an amount equal to such value and the Association could
recognize gain on such distribution. Eligible Account Holders and Supplemental
Eligible Account Holders are encouraged to consult with their own tax advisor as
to the tax consequences in the event that such subscription rights are deemed to
have an ascertainable value.

INTERPRETATION AND AMENDMENT OF THE PLAN OF CONVERSION

To the extent permitted by law, all interpretations of the Plan by the
Board of Directors of the Association will be final. The Plan provides that the
Association's Board of Directors shall have the discretion to interpret and
apply the provisions of the Plan to particular circumstances and that such
interpretation or application shall be final. This includes any and all
interpretations, applications and determinations made by the Board of Directors
on the basis of such information and assistance as was then reasonably available
for such purpose.

The Plan provides that, if deemed necessary or desirable by the Board of
Directors, the Plan may be substantively amended at any time prior to
solicitation of proxies from members to vote on the Plan by a two-thirds vote of
the Association's Board of Directors. After submission of the proxy materials to
the members, the Plan may be

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amended by a two-thirds vote of the Association's Board of Directors at any time
prior to the Special Meeting with the concurrence of the OTS. The Plan may be
amended at any time after the approval of members with the approval of the OTS
and no further approval of the members will be necessary unless otherwise
required by the OTS. By adoption of the Plan, the Association's members will be
deemed to have authorized amendment of the Plan under the circumstances
described above.

The establishment of the Foundation will be considered as a separate
matter from approval of the Plan of Conversion. If the Association's members
approve the Plan of Conversion, but not the creation of the Foundation, the
Association intends to complete the Conversion without the Foundation. Failure
to approve the establishment of the Foundation may materially increase the pro
forma market value of the Common Stock since the Valuation Range, as set forth
herein, takes into account the dilutive impact of the issuance of shares to the
Foundation. In such an event, the Association may establish a new Estimated
Price Range and commence a resolicitation of subscribers. In the event of a
resolicitation, unless an affirmative response is received within a specified
period of time, all funds will be promptly returned to investors, as described
elsewhere herein. See "--Stock Pricing."

CERTAIN RESTRICTIONS ON PURCHASE OR TRANSFER OF SHARES AFTER CONVERSION

All shares of Common Stock purchased in connection with the Conversion by
a director or an officer of the Association will be subject to a restriction
that the shares not be sold for a period of one year following the Conversion,
except in the event of the death of such director or officer. Each certificate
for restricted shares will bear a legend giving notice of this restriction on
transfer, and instructions will be issued to the effect that any transfer within
such time period of any certificate or record ownership of such shares other
than as provided above is a violation of the restriction. Any shares of Common
Stock issued at a later date as a stock dividend, stock split, or otherwise,
with respect to such restricted stock will be subject to the same restrictions.
The directors and officers of the Association will also be subject to the
insider trading rules promulgated pursuant to the Exchange Act and any other
applicable requirements of the federal securities laws.

Purchases of outstanding shares of Common Stock of the Company by
directors, officers (or any person who was an officer or director of the
Association after adoption of the Plan of Conversion) and their associates
during the three-year period following Conversion may be made only through a
broker or dealer registered with the SEC, except with the prior written approval
of the OTS. This restriction does not apply, however, to negotiated transactions
involving more than 1.0% of the Company's outstanding Common Stock or to the
purchase of stock pursuant to any stock option plan to be established after the
Conversion.

Unless approved by the OTS, the Company, pursuant to OTS regulations,
will be prohibited from repurchasing any shares of the Common Stock for three
years after the Conversion except: (i) for an offer to all stockholders on a pro
rata basis; or (ii) for the repurchase of qualifying shares of a director.
Notwithstanding the foregoing, beginning one year following completion of the
Conversion the Company may repurchase its Common Stock so long as: (i) the
repurchases within the following two years are part of an open-market program
not involving greater than 5% of its outstanding capital stock during a
twelve-month period; (ii) the repurchases do not cause the Company to become
undercapitalized; and (iii) the Company provides to the Regional Director of the
OTS no later than 10 days prior to the commencement of a repurchase program
written notice containing a full description of the program to be undertaken and
such program is not disapproved by the Regional Director. In addition, under
current OTS policies, repurchases may be allowed in the first year following
Conversion and in amounts greater than 5% in the second and third years
following Conversion, provided there are valid and compelling business reasons
for such repurchases and the OTS approves such repurchases.

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RESTRICTIONS ON ACQUISITION OF THE COMPANY
AND THE ASSOCIATION

GENERAL

The Association's Plan of Conversion provides for the Conversion of the
Association from the mutual to the stock form of organization and, in connection
therewith, a new Stock Articles of Incorporation and Bylaws to be adopted by
members of the Association. The Plan also provides for the concurrent formation
of a holding company, which form of organization may or may not be utilized at
the option of the Board of Directors of the Association. See "The
Conversion--General." In the event that the holding company form of organization
is utilized, as described below, certain provisions in the Company's Certificate
of Incorporation and Bylaws and in its management remuneration entered into in
connection with the Conversion, together with provisions of Delaware corporate
law, may have anti-takeover effects. In the event that the holding company form
of organization is not utilized, the Association's Stock Charter and Bylaws and
management remuneration entered into in connection with the Conversion may have
anti-takeover effects as described below. In addition, regulatory restrictions
may make it difficult for persons or companies to acquire control of either the
Company or the Association.

RESTRICTIONS IN THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS

A number of provisions of the Company's Certificate of Incorporation and
Bylaws deal with matters of corporate governance and certain rights of
stockholders. The following discussion is a general summary of the material
provisions of the Company's Certificate of Incorporation and Bylaws and certain
other statutory and regulatory provisions relating to stock ownership and
transfers, the Board of Directors and business combinations, which might be
deemed to have a potential "anti-takeover" effect. These provisions may have the
effect of discouraging a future takeover attempt which is not approved by the
Board of Directors but which individual Company stockholders may deem to be in
their best interests or in which shareholders may receive a substantial premium
for their shares over then current market prices. As a result, stockholders who
might desire to participate in such a transaction may not have an opportunity to
do so. Such provisions will also render the removal of the current Board of
Directors or management of the Company more difficult. The following description
of certain of the provisions of the Certificate of Incorporation and Bylaws of
the Company is necessarily general and reference should be made in each case to
such Certificate of Incorporation and Bylaws, which are incorporated herein by
reference. See "Additional Information" as to how to obtain a copy of these
documents.

LIMITATION ON VOTING RIGHTS. The Certificate of Incorporation of the
Company provides that in no event shall any record owner of any outstanding
Common Stock which is beneficially owned, directly or indirectly, by a person
who beneficially owns in excess of 10% of the then outstanding shares of Common
Stock (the "Limit") be entitled or permitted to any vote in respect of the
shares held in excess of the Limit. Beneficial ownership is determined pursuant
to Rule 13d-3 of the General Rules and Regulations promulgated pursuant to the
Exchange Act, and includes shares beneficially owned by such person or any of
his affiliates (as defined in the Certificate of Incorporation), shares which
such person or his affiliates have the right to acquire upon the exercise of
conversion rights or options and shares as to which such person and his
affiliates have or share investment or voting power, but shall not include
shares beneficially owned by the ESOP or directors, officers and employees of
the Association or Company or shares that are subject to a revocable proxy and
that are not otherwise beneficially owned, or deemed by the Company to be
beneficially owned, by such person and his affiliates. The Certificate of
Incorporation of the Company further provides that this provision limiting
voting rights may only be amended upon the vote of 80% of the outstanding shares
of voting stock (after giving effect to the limitation on voting rights).

BOARD OF DIRECTORS. The Board of Directors of the Company is divided into
three classes, each of which shall contain approximately one-third of the whole
number of members of the Board. Each class shall serve a staggered term, with
approximately one-third of the total number of directors being elected each
year. The Company's Certificate of Incorporation and Bylaws provide that the
size of the Board shall be determined by a majority of the directors. The
Certificate of Incorporation and the Bylaws provide that any vacancy occurring
in the Board, including a vacancy

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created by an increase in the number of directors or resulting from death,
resignation, retirement, disqualification, removal from office or other cause,
shall be filled for the remainder of the unexpired term exclusively by a
majority vote of the directors then in office. The classified Board is intended
to provide for continuity of the Board of Directors and to make it more
difficult and time consuming for a stockholder group to fully use its voting
power to gain control of the Board of Directors without the consent of the
incumbent Board of Directors of the Company. The Certificate of Incorporation of
the Company provides that a director may be removed from the Board of Directors
prior to the expiration of his term only for cause, upon the vote of 80% of the
outstanding shares of voting stock.

In the absence of these provisions, the vote of the holders of a majority
of the shares could remove the entire Board, with or without cause, and replace
it with persons of such holders' choice.

CUMULATIVE VOTING, SPECIAL MEETINGS AND ACTION BY WRITTEN CONSENT. The
Certificate of Incorporation does not provide for cumulative voting for any
purpose. Moreover, special meetings of stockholders of the Company may be called
only by the Board of Directors of the Company. The Certificate of Incorporation
also provides that any action required or permitted to be taken by the
stockholders of the Company may be taken only at an annual or special meeting
and prohibits stockholder action by written consent in lieu of a meeting.

AUTHORIZED SHARES. The Certificate of Incorporation authorizes the
issuance of 5,000,000 shares of Common Stock and 1,000,000 shares of Preferred
Stock. The shares of Common Stock and Preferred Stock were authorized in an
amount greater than that to be issued in the Conversion to provide the Company's
Board of Directors with as much flexibility as possible to effect, among other
transactions, financings, acquisitions, stock dividends, stock splits and
employee Stock Options. However, these additional authorized shares may also be
used by the Board of Directors consistent with its fiduciary duty to deter
future attempts to gain control of the Company. The Board of Directors also has
sole authority to determine the terms of any one or more series of Preferred
Stock, including voting rights, conversion rates, and liquidation preferences.
As a result of the ability to fix voting rights for a series of Preferred Stock,
the Board has the power, to the extent consistent with its fiduciary duty, to
issue a series of Preferred Stock to persons friendly to management in order to
attempt to block a post-tender offer merger or other transaction by which a
third party seeks control, and thereby assist management to retain its position.
The Company's Board of Directors currently has no plans for the issuance of
additional shares, other than the issuance of additional shares pursuant to the
terms of the Stock Program and upon exercise of Stock Options to be issued
pursuant to the terms of the Stock Option Plan, all of which are to be
established and presented to stockholders at the first annual meeting after the
Conversion.

STOCKHOLDER VOTE REQUIRED TO APPROVE BUSINESS COMBINATIONS WITH PRINCIPAL
STOCKHOLDERS. The Certificate of Incorporation requires the approval of the
holders of at least 80% of the Company's outstanding shares of voting stock to
approve certain "Business Combinations," as defined therein, and related
transactions. Under Delaware law, absent this provision, Business Combinations,
including mergers, consolidations and sales of all or substantially all of the
assets of a corporation must, subject to certain exceptions, be approved by the
vote of the holders of only a majority of the outstanding shares of Common
Stock of the Company and any other affected class of stock. Under the
Certificate of Incorporation, at least 80% approval of shareholders is required
in connection with any transaction involving an Interested Stockholder (as
defined below) except (i) in cases where the proposed transaction has been
approved in advance by a majority of those members of the Company's Board of
Directors who are unaffiliated with the Interested Stockholder and were
directors prior to the time when the Interested Stockholder became an
Interested Stockholder or (ii) if the proposed transaction meets certain
conditions set forth therein which are designed to afford the shareholders a
fair price in consideration for their shares in which case, if a stockholder
vote is required, approval of only a majority of the outstanding shares of
voting stock would be sufficient. The term "Interested Stockholder" is defined
to include any individual, corporation, partnership or other entity (other than
the Company or its subsidiary) which owns beneficially or controls, directly or
indirectly, 10% or more of the outstanding shares of voting stock of the
Company. This provision of the Certificate of Incorporation applies to any
"Business Combination," which is defined to include (i) any merger or
consolidation of the Company or any of its subsidiaries with or into any
Interested Stockholder or Affiliate (as defined in the Certificate of
Incorporation) of an Interested Stockholder; (ii) any sale, lease, exchange,
mortgage, pledge, transfer, or other disposition to or with any Interested
Stockholder or Affiliate of 25% or more of the

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assets of the Company or combined assets of the Company and its subsidiary;
(iii) the issuance or transfer to any Interested Stockholder or its Affiliate by
the Company (or any subsidiary) of any securities of the Company in exchange for
any assets, cash or securities the value of which equals or exceeds 25% of the
fair market value of the Common Stock of the Company; (iv) the adoption of any
plan for the liquidation or dissolution of the Company proposed by or on behalf
of any Interested Stockholder or Affiliate thereof; and (v) any reclassification
of securities, recapitalization, merger or consolidation of the Company which
has the effect of increasing the proportionate share of Common Stock or any
class of equity or convertible securities of the Company owned directly or
indirectly by an Interested Stockholder or Affiliate thereof. The directors and
executive officers of the Association are purchasing in the aggregate
approximately 4.48% of the shares of the Common Stock to be issued in the
Conversion, including shares to be issued to the Foundation, at the maximum of
the Estimated Price Range. In addition, the ESOP intends to purchase 8% of the
Common Stock issued in connection with the Conversion, including shares issued
to the Foundation. Additionally, if at a meeting of stockholders following the
Conversion stockholder approval of the proposed Stock-Based Incentive Plan is
received, the Company expects to acquire 4% of the Common Stock issued in
connection with the Conversion, including shares issued to the Foundation, on
behalf of the Stock-Based Incentive Plan and expects to issue options to
purchase up to 10% of the Common Stock issued in connection with the Conversion,
including shares issued to the Foundation, under the Stock-Based Incentive Plan
to directors and executive officers. As a result, at the maximum of the
Estimated Price Range, assuming the Stock-Based Incentive Plan is approved by
Stockholders, directors, executive officers and employees have the potential to
control the voting of approximately 26.48% of the Company's Common Stock, if the
shares held by the Foundation and the ESOP are aggregated with the shares
purchased in the Conversion by management and acquired for award under the
Stock-Based Incentive Plan (without giving effect to any exercise of options
granted under the Stock-Based Incentive Plan), thereby enabling them to prevent
the approval of the transactions requiring the approval of at least 80% of the
Company's outstanding shares of voting stock described hereinabove.

EVALUATION OF OFFERS. The Certificate of Incorporation of the Company
further provides that the Board of Directors of the Company, when evaluating any
offer of another "Person" (as defined therein) to (i) make a tender or exchange
offer for any equity security of the Company, (ii) merge or consolidate the
Company with another corporation or entity, or (iii) purchase or otherwise
acquire all or substantially all of the properties and assets of the Company,
may, in connection with the exercise of its judgment in determining what is in
the best interest of the Company, the Association and the stockholders of the
Company, give due consideration to all relevant factors, including, without
limitation, the social and economic effects of acceptance of such offer on the
Company's customers and the Association's present and future account holders,
borrowers and employees; on the communities in which the Company and the
Association operate or are located; and on the ability of the Company to fulfill
its corporate objectives as a savings and loan holding company and on the
ability of the Association to fulfill the objectives of a federally-chartered
stock savings association under applicable statutes and regulations. By having
these standards in the Certificate of Incorporation of the Company, the Board of
Directors may be in a stronger position to oppose such a transaction if the
Board concludes that the transaction would not be in the best interest of the
Company, even if the price offered is significantly greater than the then market
price of any equity security of the Company.

AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS. Amendments to the
Company's Certificate of Incorporation must be approved by a majority vote of
its Board of Directors and also by a majority of the outstanding shares of its
voting stock; provided, however, that an affirmative vote of at least 80% of the
outstanding voting stock entitled to vote (after giving effect to the provision
limiting voting rights) is required to amend or repeal certain provisions of the
Certificate of Incorporation, including the provision limiting voting rights,
the provisions relating to approval of certain business combinations, calling
special meetings, the number and classification of directors, director and
officer indemnification by the Company and amendment of the Company's Bylaws and
Certificate of Incorporation. The Company's Bylaws may be amended by its Board
of Directors, or by a vote of 80% of the total votes eligible to be voted at a
duly constituted meeting of stockholders.

CERTAIN BYLAW PROVISIONS. The Bylaws of the Company also require a
stockholder who intends to nominate a candidate for election to the Board of
Directors, or to raise new business at a stockholder meeting to give at least 90
days advance notice to the Secretary of the Company. The notice provision
requires a stockholder who desires to raise new business to provide certain
information to the Company concerning the nature of the new business, the
stockholder

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and the stockholder's interest in the business matter. Similarly, a stockholder
wishing to nominate any person for election as a director must provide the
Company with certain information concerning the nominee and the proposing
stockholder.

ANTI-TAKEOVER EFFECTS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND BYLAWS
AND MANAGEMENT REMUNERATION ADOPTED IN CONVERSION

The provisions described above are intended to reduce the Company's
vulnerability to takeover attempts and certain other transactions which have not
been negotiated with and approved by members of its Board of Directors. The
provisions of the Employment Agreements, CIC Agreements, Employee Severance
Compensation Plan, Stock Program or Stock Option Plan to be established may
also discourage takeover attempts by increasing the costs to be incurred by the
Association and the Company in the event of a takeover. See "Management of the
Association--Employment Agreements."

The Company's Board of Directors believes that the provisions of the
Certificate of Incorporation, Bylaws and management remuneration plans to be
established are in the best interest of the Company and its stockholders. An
unsolicited non-negotiated proposal can seriously disrupt the business and
management of a corporation and cause it great expense. Accordingly, the Board
of Directors believes it is in the best interests of the Company and its
stockholders to encourage potential acquirors to negotiate directly with
management and that these provisions will encourage such negotiations and
discourage non-negotiated takeover attempts. It is also the Board of Directors'
view that these provisions should not discourage persons from proposing a merger
or other transaction at a price that reflects the true value of the Company and
that otherwise is in the best interest of all stockholders.

DELAWARE CORPORATE LAW

The state of Delaware has a statute designed to provide Delaware
corporations with additional protection against hostile takeovers. The takeover
statute, which is codified in Section 203 of the Delaware General Corporate Law
("Section 203"), is intended to discourage certain takeover practices by
impeding the ability of a hostile acquiror to engage in certain transactions
with the target company.

In general, Section 203 provides that a "Person" (as defined therein) who
owns 15% or more of the outstanding voting stock of a Delaware corporation (an
"Interested Stockholder") may not consummate a merger or other business
combination transaction with such corporation at any time during the three-year
period following the date such "Person" became an Interested Stockholder. The
term "business combination" is defined broadly to cover a wide range of
corporate transactions including mergers, sales of assets, issuances of stock,
transactions with subsidiaries and the receipt of disproportionate financial
benefits.

The statute exempts the following transactions from the requirements of
Section 203: (i) any business combination if, prior to the date a person became
an Interested Stockholder, the Board of Directors approved either the business
combination or the transaction which resulted in the stockholder becoming an
Interested Stockholder; (ii) any business combination involving a person who
acquired at least 85% of the outstanding voting stock in the transaction in
which he became an Interested Stockholder, with the number of shares outstanding
calculated without regard to those shares owned by the corporation's directors
who are also officers and by certain employee stock plans; (iii) any business
combination with an Interested Stockholder that is approved by the Board of
Directors and by a two-thirds vote of the outstanding voting stock not owned by
the Interested Stockholder; and (iv) certain business combinations that are
proposed after the corporation had received other acquisition proposals and
which are approved or not opposed by a majority of certain continuing members of
the Board of Directors. A corporation may exempt itself from the requirements of
the statute by adopting an amendment to its Certificate of Incorporation or
Bylaws electing not to be governed by Section 203. At the present time, the
Board of Directors does not intend to propose any such amendment.

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RESTRICTIONS IN THE ASSOCIATION'S NEW ARTICLES OF INCORPORATION AND BYLAWS

Although the Board of Directors of the Association is not aware of any
effort that might be made to obtain control of the Association after the
Conversion, the Board of Directors believes that it is appropriate to adopt
certain provisions permitted by federal regulations to protect the interests of
the converted Association and its stockholders from any hostile takeover. Such
provisions may, indirectly, inhibit a change in control of the Company, as the
Association's sole stockholder. See "Risk Factors--Certain Anti-Takeover
Provisions."

The Association's Stock Articles of Incorporation contain a provision
whereby shareholders will not be permitted to call a special meeting of
shareholders relating to a change of control of the Association or a charter
amendment or to cumulate their votes in the election of directors. Furthermore,
the staggered terms of the Board of Directors could have an anti-takeover effect
by making it more difficult for a majority of shares to force an immediate
change in the Board of Directors since only one-third of the Board is elected
each year. The purpose of these provisions is to assure stability and continuity
of management of the Association in the years immediately following the
Conversion.

Although the Association has no arrangements, understandings or plans at
the present time, except as described in "Description of Capital Stock of the
Company--Preferred Stock," for the issuance or use of the shares of undesignated
Preferred Stock proposed to be authorized, the Board of Directors believes that
the availability of such shares will provide the Association with increased
flexibility in structuring possible future financings and acquisitions and in
meeting other corporate needs which may arise. In the event of a proposed
merger, tender offer or other attempt to gain control of the Association of
which management does not approve, it might be possible for the Board of
Directors to authorize the issuance of one or more series of Preferred Stock
with rights and preferences which could impede the completion of such a
transaction. An effect of the possible issuance of such Preferred Stock,
therefore, may be to deter a future takeover attempt. The Board of Directors
does not intend to issue any Preferred Stock except on terms which the Board
deems to be in the best interest of the Association and its then existing
stockholders.

REGULATORY RESTRICTIONS

The Plan of Conversion prohibits any person, prior to the completion of
the Conversion, from transferring, or from entering into any agreement or
understanding to transfer, to the account of another, legal or beneficial
ownership of the subscription rights issued under the Plan or the Common Stock
to be issued upon their exercise. The Plan also prohibits any person, prior to
the completion of the Conversion, from offering, or making an announcement of an
offer or intent to make an offer, to purchase such subscription rights or Common
Stock.

For three years following the Conversion, OTS regulations prohibit any
person from acquiring or making an offer to acquire more than 10% of the stock
of any converted savings institution, except for: (i) offers that, if
consummated, would not result in the acquisition by such person during the
preceding 12-month period of more than 1% of such stock; (ii) offers for up to
25% in the aggregate by the ESOP or other tax qualified plans of the Association
or the Company; or (iii) offers which are not opposed by the Board of Directors
of the Association and which receive the prior approval of the OTS. Such
prohibition is also applicable to the acquisition of the stock of the Company.
Such acquisition may be disapproved by the OTS if it is found, among other
things, that the proposed acquisition (a) would frustrate the purposes of the
provisions of the regulations regarding conversions; (b) would be manipulative
or deceptive; (c) would subvert the fairness of the conversion; (d) would be
likely to result in injury to the savings institution; (e) would not be
consistent with economical home financing; (f) would otherwise violate law or
regulation; or (g) would not contribute to the prudent deployment of the savings
institution's conversion proceeds. In the event that any person, directly or
indirectly, violates this regulation, the securities beneficially owned by such
person in excess of 10% shall not be counted as shares entitled to vote and
shall not be voted by any person or counted as voting shares in connection with
any matters submitted to a vote of stockholders. Ownership of more than 10% of a
class of stock for purposes of this prohibition extends to persons holding a
combination of stock and revocable or irrevocable proxies for the Company's
stock under circumstances that give rise to a conclusive or rebuttable
determination of control under the OTS regulations.

107
<PAGE> 112

In addition, any acquisition, direct or indirect, of more than 10% of any
class of equity security of the Company by a person or group of persons acting
in concert may require prior notice to and non-objection by the OTS under the
Change in Bank Control Act and/or the approval of the OTS under the Savings and
Loan Holding Company Act, as an acquisition of control. Any company that
acquires control of a savings association or a savings and loan holding company
under the standards set forth in OTS regulations becomes a "savings and loan
holding company" subject to registration, examination, and regulation by the
OTS. Pursuant to OTS regulations, "control" of a savings association or a
savings and loan holding company, subject to the requirements of the Change in
Bank Control Act and/or the savings and Loan Holding Company Act, is
conclusively deemed to have been acquired by, among other things, the
acquisition of more than 25% of any class of voting stock of the company or
irrevocable proxies representing more than 25% of any class of voting stock of
the company or the ability to control the election of a majority of the
directors. The regulations also establish a rebuttable presumption of "control"
upon the acquisition of more than 10% of any class of voting stock, or of more
than 25% of any class of stock, of a savings and loan holding company, where
certain enumerated "control factors" are also present in the acquisition. The
OTS may prohibit an acquisition by a person of "control" if (i) it would result
in a monopoly or substantially lessen competition, (ii) the financial condition
of the acquiring person might jeopardize the financial stability of the
institution, or (iii) the competence, experience, or integrity of the acquiring
person indicates that it would not be in the interest of the depositors or the
public to permit the acquisition of control by such person or (iv) the proposed
acquisition would have an adverse effect on the deposit insurance funds.
Applications by a company to acquire "control" of a savings and loan holding
company are evaluated by OTS based upon factors such as the financial and
managerial resources and future prospects of the acquirer and the institution
involved, competitive factors and the convenience and needs of the community
involved. The foregoing restrictions do not apply to the acquisition of the
Company's capital stock by one or more tax-qualified employee stock benefit
plans, provided that the plan or plans do not have beneficial ownership in the
aggregate of more than 25% of any class of equity security of the Company.

DESCRIPTION OF CAPITAL STOCK OF THE COMPANY

GENERAL

The Company is authorized to issue 5,000,000 shares of Common Stock
having a par value of $.01 per share and 1,000,000 shares of preferred stock
having a par value of $.01 per share (the "Preferred Stock"). Based on the sale
of Common Stock in connection with the Conversion and issuance of authorized but
unissued Common Stock in an amount equal to 5.0% of the Common stock sold in the
Conversion, the Company currently expects to issue up to 1,690,500 shares of
Common Stock (or 1,944,075 in the event of an increase of 15% in the Estimated
Price Range) and no shares of Preferred Stock in the Conversion. Except as
discussed above in "Restriction on Acquisition of the Company and the
Association," each share of the Company's Common Stock will have the same
relative rights as, and will be identical in all respects with, each other share
of Common Stock. Upon payment of the Purchase Price for the Common Stock, in
accordance with the Plan, all such stock will be duly authorized, fully paid and
non-assessable.

THE COMMON STOCK OF THE COMPANY WILL REPRESENT NON-WITHDRAWABLE CAPITAL,
WILL NOT BE AN ACCOUNT OF AN INSURABLE TYPE, AND WILL NOT BE INSURED BY THE
FDIC.

COMMON STOCK

DIVIDENDS. The Company can pay dividends out of statutory surplus or from
certain net profits if, as and when declared by its Board of Directors. The
payment of dividends by the Company is subject to limitations which are imposed
by law and applicable regulation. See "Dividend Policy" and "Regulation." The
holders of Common Stock of the Company will be entitled to receive and share
equally in such dividends as may be declared by the Board of Directors of the
Company out of funds legally available therefor. If the Company issues Preferred
Stock, the holders thereof may have a priority over the holders of the Common
Stock with respect to dividends.

108
<PAGE> 113

VOTING RIGHTS. Upon Conversion, the holders of Common Stock of the
Company will possess exclusive voting rights in the Company. They will elect the
Company's Board of Directors and act on such other matters as are required to be
presented to them under Delaware law or the Company's Certificate of
Incorporation or as are otherwise presented to them by the Board of Directors.
Except as discussed in "Restrictions on Acquisition of the Company and the
Association," each holder of Common Stock will be entitled to one vote per share
and will not have any right to cumulate votes in the election of directors. If
the Company issues Preferred Stock, holders of the Preferred Stock may also
possess voting rights. Certain matters require an 80% shareholder vote. See
"Restrictions on Acquisition of the Company and the Association."

As a Pennsylvania-chartered mutual savings and loan association,
corporate powers and control of the Association are vested in its Board of
Directors, who elect the officers of the Association and who fill any vacancies
on the Board of Directors as it exists upon Conversion. Subsequent to
Conversion, voting rights will be vested exclusively in the owners of the shares
of capital stock of the Association, which will be the Company, and voted at the
direction of the Company's Board of Directors. Consequently, the holders of the
Common Stock will not have direct control of the Association.

LIQUIDATION. In the event of any liquidation, dissolution or winding up
of the Association, the Company, as holder of the Association's capital stock,
would be entitled to receive, after payment or provision for payment of all
debts and liabilities of the Association (including all deposit accounts and
accrued interest thereon) and after distribution of the balance in the special
liquidation account to Eligible Account Holders and Supplemental Eligible
Account Holders (see "The Conversion--Liquidation Rights"), all assets of the
Association available for distribution. In the event of liquidation, dissolution
or winding up of the Company, the holders of its Common Stock would be entitled
to receive, after payment or provision for payment of all its debts and
liabilities, all of the assets of the Company available for distribution. If
Preferred Stock is issued, the holders thereof may have a priority over the
holders of the Common Stock in the event of liquidation or dissolution.

PREEMPTIVE RIGHTS. Holders of the Common Stock of the Company will not be
entitled to preemptive rights with respect to any shares which may be issued.
The Common Stock is not subject to redemption.

PREFERRED STOCK

None of the shares of the Company's authorized Preferred Stock will be
issued in the Conversion. Such stock may be issued with such preferences and
designations as the Board of Directors may from time to time determine. The
Board of Directors can, without stockholder approval, issue preferred stock with
voting, dividend, liquidation and conversion rights which could dilute the
voting strength of the holders of the Common Stock and may assist management in
impeding an unfriendly takeover or attempted change in control.

DESCRIPTION OF CAPITAL STOCK OF THE ASSOCIATION

GENERAL

The Stock Articles of Incorporation of the Association, to be effective
upon the Conversion, authorizes the issuance of capital stock consisting of
5,000,000 shares of Common Stock, par value $1.00 per share, and 1,000,000
shares of preferred stock, par value $1.00 per share, which preferred stock may
be issued in series and classes having such rights, preferences, privileges and
restrictions as the Board of Directors may determine. Each share of Common Stock
of the Association will have the same relative rights as, and will be identical
in all respects with, each other share of Common Stock. After the Conversion,
the Board of Directors will be authorized to approve the issuance of Common
Stock up to the amount authorized by the Stock Articles of Incorporation without
the approval of the Association's stockholders. Assuming that the holding
company form of organization is utilized, all of the issued and outstanding
Common Stock of the Association will be held by the Company as the Association's
sole stockholder. THE CAPITAL STOCK OF THE ASSOCIATION WILL REPRESENT
NON-WITHDRAWABLE CAPITAL, WILL NOT BE AN ACCOUNT OF AN INSURABLE TYPE, AND WILL
NOT BE INSURED BY THE FDIC.

109
<PAGE> 114

COMMON STOCK

DIVIDENDS. The holders of the Association's Common Stock will be entitled
to receive and to share equally in such dividends as may be declared by the
Board of Directors of the Association out of funds legally available therefor.
See "Dividend Policy" for certain restrictions on the payment of dividends and
"Federal and State Taxation--Federal Taxation" for a discussion of the
consequences of the payment of cash dividends from income appropriated to bad
debt reserves.

VOTING RIGHTS. Immediately after the Conversion, the holders of the
Association's Common Stock will possess exclusive voting rights in the
Association. Each holder of shares of Common Stock will be entitled to one vote
for each share held, subject to the right of shareholders to cumulate their
votes for the election of directors. During the five-year period after the
effective date of the Conversion, cumulation of votes will not be permitted. See
"Restrictions on Acquisition of the Company and the Association--Anti-Takeover
Effects of the Company's Certificate of Incorporation and Bylaws and Management
Remuneration Adopted in Conversion."

LIQUIDATION. In the event of any liquidation, dissolution, or winding up
of the Association, the holders of Common Stock will be entitled to receive,
after payment of all debts and liabilities of the Association (including all
deposit accounts and accrued interest thereon), and distribution of the balance
in the special liquidation account to Eligible Account Holders and Supplemental
Eligible Account Holders, all assets of the Association available for
distribution in cash or in kind. If preferred stock is issued subsequent to the
Conversion, the holders thereof may also have priority over the holders of
Common Stock in the event of liquidation or dissolution.

PREEMPTIVE RIGHTS; REDEMPTION. Holders of the Common Stock of the
Association will not be entitled to preemptive rights with respect to any shares
of the Association which may be issued. The Common Stock will not be subject to
redemption. Upon receipt by the Association of the full specified purchase price
therefor, the Common Stock will be fully paid and non-assessable.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is _______________.

EXPERTS

The financial statements of the Association as of June 30, 1998 and 1997
and for the years ended June 30, 1998, 1997 and 1996 have been included in this
Prospectus in reliance upon the report of Parente, Randolph, Orlando, Carey &
Associates, independent auditors, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.

Keller has consented to the publication herein of the summary of its
report to the Association and Company setting forth its opinion as to the
estimated pro forma market value of the Common Stock upon Conversion and its
valuation with respect to subscription rights.

LEGAL AND TAX OPINIONS

The legality of the Common Stock and the federal income tax consequences
of the Conversion will be passed upon for the Association and the Company by
Muldoon, Murphy & Faucette, Washington, D.C., special counsel to the Association
and the Company. Muldoon, Murphy & Faucette will rely as to certain matters of
Delaware law on the opinion of Morris, Nichols, Arsht & Tunnel. The Commonwealth
of Pennsylvania income tax consequences of the Conversion and certain matters
related to the Foundation will be passed upon for the Association and the
Company by Parente, Randolph, Orlando, Carey & Associates. Certain legal matters
will be passed upon for Sandler O'Neill by Elias, Matz, Tiernan and Herrick
L.L.P.

110
<PAGE> 115

ADDITIONAL INFORMATION

The Company has filed with the SEC a registration statement under the
Securities Act with respect to the Common Stock offered hereby. As permitted by
the rules and regulations of the SEC, this Prospectus does not contain all the
information set forth in the registration statement. Such information can be
examined without charge at the public reference facilities of the SEC located at
450 Fifth Street, N.W., Washington, D.C. 20549, and copies of such material can
be obtained from the SEC at prescribed rates. Information on the operation of
the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.
In addition, the SEC maintains a web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC including the Company. This
Prospectus contains a description of the material terms and features of all
material contracts, reports or exhibits to the Registration Statement required
to be described. The statements contained in this Prospectus as to the contents
of any contract or other document filed as an exhibit to the registration
statement are, of necessity, brief descriptions thereof and are not necessarily
complete; each such statement is qualified by reference to such contract or
document.

The Association has filed an application for conversion with the OTS with
respect to the Conversion. Pursuant to the rules and regulations of the OTS,
this Prospectus omits certain information contained in that application. The
application may be examined at the principal office of the OTS, 1700 G Street,
N.W., Washington, D.C. 20552 and at the Office of the Regional Director of the
OTS located at 10 Exchange Place, 18th Floor, Jersey City, New Jersey 07302.

The Association will file articles of conversion with the Pennsylvania
Department with respect to the Conversion following the Special Meeting. The
application may be examined at the principal office of the Pennsylvania
Department, Department of State, Corporation Bureau, 308 North Office Building,
Harrisburg, Pennsylvania 17120-0029.

In connection with the Conversion, the Company will register its Common
Stock with the SEC under Section 12(b) of the Exchange Act and, upon such
registration, the Company and the holders of its stock will become subject to
the proxy solicitation rules, reporting requirements and restrictions on stock
purchases and sales by directors, officers and greater than 10% stockholders,
the annual and periodic reporting and certain other requirements of the Exchange
Act. Under the Plan, the Company has undertaken that it will not terminate such
registration for a period of at least three years following the Conversion. In
the event that the Association amends the Plan to eliminate the concurrent
formation of the Company as part of the Conversion, the Association will
register its stock with the OTS under Section 12(b) of the Exchange Act and,
upon such registration, the Association and the holders of its stock will become
subject to the same obligations and restrictions.

A copy of the Certificate of Incorporation and the Bylaws of the Company
and the Stock Articles of Incorporation and Bylaws of the Association and the
Certificate of Incorporation and Bylaws of the Foundation are available without
charge from the Association.

111
<PAGE> 116

SECURITY SAVINGS ASSOCIATION OF HAZLETON
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report............................................ F-2

Balance Sheet as of June 30, 1998 and 1997.............................. F-3

Statements of Income for the Years Ended
June 30, 1998, 1997 and 1996.......................................... 29

Statements of Changes in Equity for the Years Ended
June 30, 1998, 1997 and 1996.......................................... F-4

Statements of Cash Flows for the Years Ended
June 30, 1998, 1997 and 1996.......................................... F-5 - F-6

Notes to Financial Statements........................................... F-7 - F-30
</TABLE>

All schedules are omitted because they are not required or applicable, or
the required information is shown in the financial statements or notes thereto.

The financial statements of Security of Pennsylvania Financial Corp. have
been omitted because Security of Pennsylvania Financial Corp. has not yet issued
any stock, has no assets and no liabilities, and has not conducted any business
other than of an organizational nature.

F-1
<PAGE> 117
[PARENTE - RANDOLPH - ORLANDO-
CAREY & ASSOCIATES LOGO]

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Security Savings Association of Hazleton
Hazleton, Pennsylvania

We have audited the accompanying balance sheet of Security Savings
Association of Hazleton (the "Association") as of June 30, 1998 and 1997, and
the related statements of income, changes in equity, and cash flows for each of
the three years in the period ended June 30, 1998. These financial statements
are the responsibility of the Association's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Security Savings
Association of Hazleton as of June 30, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
June 30, 1998 in conformity with generally accepted accounting principles.

/s/ PARENTE RANDOLPH ORLANDO CAREY & ASSOCIATES
--------------------------------------------

Hazleton, Pennsylvania
July 24, 1998

- F-2 -
<PAGE> 118

SECURITY SAVINGS ASSOCIATION OF HAZLETON

BALANCE SHEET
JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------

1998 1997
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
======
<S> <C> <C>
Cash and due from banks $ 3,272,263 $ 2,867,171
Interest-bearing deposits with banks 8,585,785 6,166,551
Held-to-maturity securities (fair value of $20,806,552
in 1998 and $24,810,869 in 1997) 20,782,740 24,841,688
Available-for-sale securities 7,900,600 4,247,778
Loans receivable (net of allowance for loan losses
of $451,856 in 1998 and $428,857 in 1997) 69,211,264 66,737,536
Office premises and equipment, net 1,364,352 1,178,504
Accrued interest receivable 618,656 665,002
Foreclosed real estate (net of $12,000 allowance
in 1998 and $24,852 in 1997) 220,889 530,919
Other assets 33,948 211,687
------------- -------------

TOTAL ASSETS $ 111,990,497 $ 107,446,836
============= =============

LIABILITIES AND EQUITY
======================

Deposits $ 102,603,545 $ 98,464,717
Advances from borrowers for taxes and
insurance 34,468 130,914
Accrued interest payable and other liabilities 121,614 267,766
------------- -------------

Total liabilities 102,759,627 98,863,397
------------- -------------

Retained earnings - substantially restricted 9,362,089 8,744,865
Net unrealized holding losses on
available-for-sale securities (131,219) (161,426)
------------- -------------

Equity, net 9,230,870 8,583,439
------------- -------------

TOTAL LIABILITIES
AND EQUITY $ 111,990,497 $ 107,446,836
============= =============

- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements

- F-3 -
<PAGE> 119
SECURITY SAVINGS ASSOCIATION OF HAZLETON

STATEMENT OF CHANGES IN EQUITY
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------

UNREALIZED
HOLDING LOSSES
ON AVAILABLE-
RETAINED FOR-SALE EQUITY,
EARNINGS SECURITIES NET
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, JUNE 30, 1995 $ 7,938,309 $ (196,901) $ 7,741,408

INCREASE IN UNREALIZED
HOLDING LOSSES ON
AVAILABLE-FOR-SALE
SECURITIES (13,772) (13,772)

NET INCOME 597,005 597,005
----------- ---------- -----------

BALANCE, JUNE 30, 1996 8,535,314 (210,673) 8,324,641

DECREASE IN UNREALIZED
HOLDING LOSSES ON
AVAILABLE-FOR-SALE
SECURITIES 49,247 49,247

NET INCOME 209,551 209,551
----------- ---------- -----------

BALANCE, JUNE 30, 1997 8,744,865 (161,426) 8,583,439

DECREASE IN UNREALIZED
HOLDING LOSSES ON
AVAILABLE-FOR-SALE
SECURITIES 30,207 30,207

NET INCOME 617,224 617,224
----------- ---------- -----------

BALANCE, JUNE 30, 1998 $ 9,362,089 $ (131,219) $ 9,230,870
=========== ========== ===========
- ---------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements

- F-4 -
<PAGE> 120
SECURITY SAVINGS ASSOCIATION OF HAZLETON

STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------

1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 617,224 $ 209,551 $ 597,005
------------ ------------ ------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan and foreclosed
real estate losses 197,626 94,336 101,997
Amortization and accretion on
investment securities (186) 10,532 28,988
Depreciation and amortization 98,071 82,109 112,629
Deferred income taxes 46,160 148,892 23,665
(Gain) loss on sale of foreclosed real estate 47,894 62,985 (1,293)
Net realized gain on sales of securities (701) (16,776) -
Changes in assets and liabilities:
Accrued interest receivable 46,346 39,421 (77,978)
Other assets 162,399 225,285 (84,567)
Accrued interest payable and other
liabilities (192,312) (96,869) 63,359
------------ ------------ ------------

Net cash provided by operating
activities 405,297 549,915 166,800
------------ ------------ ------------

INVESTMENT ACTIVITIES:
Purchases of held-to-maturity securities (13,221,443) (13,447,016) (15,100,592)
Purchases of securities available-for-sale (3,948,894) (24,900) (40,200)
Proceeds from maturities of held-to-maturity
securities 16,270,943 11,565,915 11,646,490
Proceeds from the call of held-to-maturity securities 204,758 - -
Proceeds from maturities and principal paydowns
on available-for-sale securities 340,561 1,075,920 505,417
Proceeds from principal paydowns of
held-to-maturity securities 806,635 1,106,292 1,848,163
Proceeds from the sale of available-for-sale
securities - 1,038,300 -
Loans made to customers, net of principal collected (3,128,008) (2,459,676) (1,411,992)
Acquisition of office premises and equipment (283,919) (155,210) (36,532)
Proceeds from sale of foreclosed real estate 718,790 276,144 11,783
Decrease in interest-bearing deposits with banks (2,419,234) 2,028,989 (766,724)
------------ ------------ ------------

Net cash (used in) provided by
investing activities (4,659,811) 1,004,758 (3,344,187)
------------ ------------ ------------
</TABLE>

- F-5 -
<PAGE> 121

SECURITY SAVINGS ASSOCIATION OF HAZLETON
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------

1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Net change in deposit accounts $ 4,138,828 $ (883,425) $ 2,949,870
Net (decrease) increase in advances
from borrowers for taxes
and insurance (96,446) 76,095 (2,598)
----------- ----------- -----------

Net cash provided
by (used in)
financing activities 4,042,382 (807,330) 2,947,272
----------- ----------- -----------

INCREASE IN CASH AND DUE
FROM BANKS 405,092 956,894 366,890

CASH AND DUE FROM BANKS,
BEGINNING OF YEAR 2,867,171 1,910,277 1,543,387
----------- ----------- -----------

CASH AND DUE FROM BANKS,
END OF YEAR $ 3,272,263 $ 2,867,171 $ 1,910,277
=========== =========== ===========

SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Interest paid on deposits $ 4,207,744 $ 4,007,074 $ 4,188,942
Income taxes paid $ 422,408 $ 139,732 $ 376,569

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES,
The Association foreclosed on mortgage loans and transferred
$717,928, $517,672 and $245,340 from loans to foreclosed real estate
during the years ended June 30, 1998, 1997 and 1996, respectively.

- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements

- F-6 -
<PAGE> 122

SECURITY SAVINGS ASSOCIATION OF HAZLETON

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

1. NATURE OF OPERATIONS AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

Security Savings Association of Hazleton (the "Association") provides a
variety of financial services to individual and corporate customers
through four offices in Hazleton, Weatherly and Butler Township,
Pennsylvania. These communities have diversified economies. The primary
deposit products are regular savings accounts, certificates of deposit,
and checking accounts. Its primary lending products are single-family
residential loans and secured consumer loans. The Association is subject
to competition from other financial institutions and other companies that
provide financial services. The Association is subject to the regulations
of certain federal and state agencies and undergoes periodic examinations
by those regulatory authorities.

RISKS AND UNCERTAINTIES

In the normal course of its business, the Association encounters two
significant types of risk: economic and regulatory. There are three main
components of economic risk: interest rate risk, credit risk, and market
risk. The Association is subject to interest rate risk to the degree that
its interest-bearing liabilities mature or reprice at different speeds,
or on different bases from its interest-earning assets. The Association's
primary credit risk is the risk of default on the Association's loan
portfolio that results from the borrowers inability or unwillingness to
make contractually required payments. The Association's lending
activities are concentrated in Pennsylvania. The largest concentration of
the Association's loan portfolio is located in Northeastern Pennsylvania.
The ability of the Association's borrowers to repay amounts owed is
dependent on several factors, including the economic conditions in the
borrower's geographic region and the borrower's financial condition.
Market risk reflects changes in the value of collateral underlying loans
and valuation of real estate held by the Association.

The Association is subject to the regulations of various government
agencies. These regulations can and do change significantly from period
to period. The Association also undergoes periodic examinations by the
regulatory agencies which may subject it to further changes with respect
to asset valuations, amounts of required loss allowances, and operating
restrictions resulting from the regulators' judgements based on
information available to them at the time of their examination.

- F-7 -
<PAGE> 123

SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

The Association has an ongoing program designed to ensure that its
operational and financial systems will not be adversely affected by year
2000 software failures due to processing errors arising from calculations
using the year 2000 date. While the Association believes it is acting
prudently to assure year 2000 compliance, it is to some extent dependent
upon vendor cooperation. The Association is requiring its computer
systems and software vendors to represent that the products provided are
or will be year 2000 compliant and has planned a program of testing for
compliance. It is recognized that any year 2000 compliance failures,
either internal or on the part of the Association's customers, could
result in additional expense or loss to the Association.

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 for the allowance for loan losses and
the valuation of property acquired in connection with foreclosures or in
satisfaction of loans. In connection with the determination of allowances
for loan losses and foreclosed assets, management obtains independent
appraisals for significant properties.

A majority of the Association's loan portfolio consist of single-family
residential loans in the Hazleton, Weatherly and Butler Township areas.
Although these local economies are diversified and fairly stable, a
substantial portion of its debtor's ability to honor their contracts is
dependent on the economic sector in which the Association operates.

While management uses available information to recognize losses on loans
and foreclosed assets, future additions to the allowances may be
necessary based on changes in local economic conditions. In addition,
regulatory agencies, as an integral part of their examination process,
periodically review the Association's allowances for losses on loans and
foreclosed assets. Such agencies may require the Association to recognize
additions to the allowances based on their judgments about information
available to them at the time of their examination. Association
management has no reason to believe that the allowances for loan losses
and foreclosed assets will change materially in the near term.

- F-8 -
<PAGE> 124
SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, cash and cash equivalents
include cash on hand and amounts due from banks.

DEBT AND EQUITY SECURITIES

The Association classifies each of its investments in debt and equity
securities into one of two categories:

Held-To-Maturity Securities - Securities that the institution has the
positive intent and ability to hold to maturity.

Available-For-Sale Securities - Securities that are not eligible for
classification as held-to-maturity.

Held-to-Maturity Securities are carried at amortized cost. Those
securities classified as Available-For-Sale are carried at fair value.
The change in net unrealized holding gain or loss on available-for-sale
securities, net of taxes is included in a separate component of equity.

LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans are stated at the amount of unpaid principal, reduced by
unamortized loan fees and an allowance for loan losses. Interest on loans
is calculated by using the simple interest method on daily balances of
the principal amount outstanding.

The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for
loan losses when management believes that the collectibility of the
principal is unlikely. The allowance is an amount that management
believes will be adequate to absorb possible losses on existing loans
that may become uncollectible, based on evaluations of the collectibility
of loans and prior loan loss experience. The evaluations take into
consideration such factors as changes in the nature and volume of the
loan portfolio, overall portfolio quality, review of specific impaired
loans, and current economic conditions and trends that may affect the
borrowers' ability to pay.

Loans are deemed to be "impaired" if management's assessment of the
relevant facts and circumstances, it is probable that the bank will be
unable to collect all proceeds due according to the contractual terms of
the loan agreement. For purposes of applying the measurement criteria for
impaired loans, the Association excludes large groups of smaller balance
homogeneous loans, primarily consisting of residential real estate and
consumer loans.

- F-9 -
<PAGE> 125
SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

Accrual of interest on impaired loans is discontinued when payments are
past due ninety days or more when collateral is inadequate to cover
principal and interest or immediately if management believes, after
considering economic and business conditions and collection efforts, that
the borrowers' financial condition is such that collection is doubtful.

Nonrefundable loan origination fees and certain direct loan origination
costs for loans are recognized over the life of the related loans as an
adjustment of yield. Prior to 1988, such fees and costs were recognized
when received or incurred.

FORECLOSED REAL ESTATE

Foreclosed real estate comprised of property acquired in the settlement
of loans, is recorded at the lower of the related principal balance and
accrued interest upon foreclosure or its fair value. Costs of developing
and improving such properties are capitalized. Expenses related to
holding such real estate, net of rental and other income, are charged
against income as incurred.

OFFICE PREMISES AND EQUIPMENT
AND DEPRECIATION

Office premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using straight-line and
accelerated methods over the estimated useful lives of the assets.

INCOME TAXES

Deferred tax assets and liabilities are reflected at currently enacted
income tax rates applicable to the period in which the deferred tax
assets or liabilities are expected to be realized or settled. As changes
in tax laws or rates are enacted, deferred tax assets and liabilities are
adjusted through the provision for income taxes.

ADVERTISING COSTS

The Association follows the policy of charging the production costs of
advertising to expense as incurred.

- F-10 -
<PAGE> 126

SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

DERIVATIVES

The Association has no derivative financial instruments requiring
disclosure under Statement of Financial Accounting Standards ("SFAS")
No. 119.

RECLASSIFICATIONS

Certain items in the 1997 and 1996 financial statements have been
reclassified to conform to the 1998 financial statement presentation
format. These reclassifications had no effect on net income.

2. DEBT AND EQUITY SECURITIES

Held-to-maturity securities at June 30, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
1998
-----------------------------------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
U. S. government agency
securities $ 2,801,355 $ 9,127 $ 2,810,482
Certificates of deposit 15,456,963 15,456,963
Corporate obligations 79,012 79,012
Mortgage-backed
securities 2,281,088 16,893 $ 649 2,297,332
State and political
subdivisions 164,322 1,559 162,763
----------- ------- -------- -----------
Total $20,782,740 $26,020 $ 2,208 $20,806,552
=========== ======= ======== ===========

<CAPTION>
1997
-----------------------------------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
U. S. government agency
securities $ 7,425,322 $ 8,056 $ 37,709 $ 7,395,669
Certificates of deposit 12,594,699 12,594,699
Corporate obligations 115,915 2,010 113,905
Mortgage-backed
securities 4,705,752 17,741 16,897 4,706,596
----------- -------- -------- -----------

Total $24,841,688 $ 25,797 $ 56,616 $24,810,869
=========== ======== ======== ===========
</TABLE>

- F-11 -
<PAGE> 127
SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

Available-for-sale securities at June 30, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
1998
-----------------------------------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
U. S. Government agency
securities $3,547,627 $ 2,293 $ 2,313 $3,547,607
Mortgage-backed securities 1,317,978 34,546 1,352,524
State and political
subdivisions 373,558 3,767 369,791
Mutual funds 2,187,598 151,520 2,036,078
Federal Home Loan Bank
of Pittsburgh stock 594,600 594,600
----------- -------- -------- -----------

Total $8,021,361 $36,839 $157,600 $7,900,600
=========== ======== ======== ===========

<CAPTION>
1997
-------------------------------------------------------------------------------
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
GNMA certificates $ 981,752 $34,228 $1,015,980
FNMA certificates 393,488 $ 19,026 374,462
FNMA balloon 284,748 3,471 281,277
Mutual funds 2,187,598 178,039 2,009,559
Federal Home Loan Bank
of Pittsburgh stock 566,500 566,500
----------- -------- -------- -----------

Total $4,414,086 $34,228 $200,536 $4,247,778
=========== ======== ======== ===========
</TABLE>

Unamortized premiums on mortgage-backed securities held-to-maturity were
$2,868 and $9,956 at June 30, 1998 and 1997, respectively. Unaccreted
discounts on mortgage-backed securities held-to-maturity were $11,089
and $10,106 at June 30, 1998 and 1997, respectively.

- F-12 -
<PAGE> 128

SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

The amortized cost and fair value of held-to-maturity and
available-for-sale securities at June 30, 1998, by contractual maturity,
are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
SECURITIES SECURITIES
------------------------------ ------------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
---- ----- ---- -----
<S> <C> <C> <C> <C>

Due in one year or less $12,417,691 $12,417,504 $2,782,198 $2,630,678
Due after one year through
five years 4,889,685 4,894,016 1,028,564 1,031,382
Due after five years
through ten years 2,008,276 2,018,945 2,499,545 2,499,772
Due after ten years 1,467,088 1,476,087 1,711,054 1,738,768
----------- ----------- ---------- ----------

Total $20,782,740 $20,806,552 $8,021,361 $7,900,600
=========== =========== ========== ==========

</TABLE>

Gross gains of $701 were realized on the call of a held-to-maturity
security in 1998.

Gross gains of $47,038 and gross losses of $30,262 were realized on the
sale of available-for-sale securities in 1997.

Securities with an amortized cost of $1,057,559 and $1,342,997 at June
30, 1998 and 1997, respectively were pledged as collateral on public
deposits and for other purposes as required or permitted by law.

- F-13 -
<PAGE> 129
SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

3. LOANS RECEIVABLE

Loans receivable at June 30, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Real estate $56,056,778 $54,658,451
Commercial real estate 3,945,708 2,484,206
Consumer 9,934,736 10,307,977
----------- -----------

69,937,222 67,450,634
Less:
Net deferred loan-origination fees (274,102) (284,241)
Allowance for loan losses (451,856) (428,857)
----------- -----------

Loans receivable, net $69,211,264 $66,737,536
=========== ===========
</TABLE>

The recorded investment in impaired loans, not requiring an allowance for
loan losses, was $1,572,855 and $1,410,742 at June 30, 1998 and 1997,
respectively. The recorded investment in impaired loans requiring an
allowance for loan losses was $291,027 and $175,258 at June 30, 1998 and
1997, respectively. At June 30, 1998 and 1997, the related allowance
associated with those loans was $35,000 and $60,000, respectively. For
the years ended June 30, 1998 and 1997, the average recorded investment
in these impaired loans was approximately $1,864,000 and $1,612,000,
respectively. There was no interest income recognized on impaired loans
in 1998 or 1997. Interest income that would have been recognized on
impaired loans would have approximated $102,000 and $134,000 in 1998 and
1997, respectively. The Association has no commitments to lend additional
funds to borrowers whose loans were classified as nonperforming or
troubled debt restructuring.

- F-14 -
<PAGE> 130
SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

An analysis of the allowance for loan losses for the years ended June 30,
1998, 1997 and 1996 is summarized as follows:

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance, beginning $428,857 $447,000 $401,000
Provision for loan losses 175,626 34,450 101,997
Loans charged off (177,505) (41,763) (23,823)
Transfers to allowance for foreclosed
real estate - (20,000) (44,000)
Recoveries of loans charged off 24,878 9,170 11,826
-------- -------- --------

Balance, ending $451,856 $428,857 $447,000
======== ======== ========
</TABLE>

At June 30, 1998 and 1997, the Association serviced loans for others of
$140,000 and $162,000, respectively.

An analysis of the activity in loans to directors and executive officers
for the year ended June 30, 1998, follows:

<TABLE>
<S> <C>
Balance, beginning of year $219,364

New loans 51,972

Repayments (41,700)

Loan balance of new executive officer 43,626
--------

Balance, end of year $273,262
========
</TABLE>

- F-15 -
<PAGE> 131
SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

4. OFFICE PREMISES AND EQUIPMENT

Office premises and equipment at June 30, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Land and building $ 938,870 $ 915,120
Improvements 848,784 693,690
Furniture and equipment 883,490 778,173
---------- ----------

Total 2,671,144 2,386,983

Less accumulated depreciation and
amortization 1,306,792 1,208,479
---------- ----------

Office premises and equipment, net $1,364,352 $1,178,504
========== ==========
</TABLE>

5. FORECLOSED REAL ESTATE

An analysis of the allowance for foreclosed real estate for the years
ended June 30, 1998, 1997 and 1996 is summarized as follows:

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance, beginning $24,852 $44,000 $ -
Provision for foreclosed real estate losses 22,000 59,886 -
Writedowns (63,546) (99,034) -
Recoveries 28,694 - -
Transfer from allowance for loan losses - 20,000 44,000
------- ------- -------

Balance, ending $12,000 $24,852 $44,000
======= ======= =======
</TABLE>

- F-16 -
<PAGE> 132
SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

6. DEPOSITS

Deposits at June 30, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
1998
-----------------------------------------------------
WEIGHTED
AVERAGE
AMOUNT PERCENT RATE
------ ------- ----
<S> <C> <C> <C>
Passbook and statement savings $ 29,052,601 28.32% 2.61%
Variable rate money market 2,083,512 2.03 2.56%
Negotiable order of withdrawal 10,983,296 10.70 1.74%
Certificates of deposit 60,484,136 58.95 5.59%
------------ -----

Total $102,603,545 100.0%
============ =====

<CAPTION>
1997
-----------------------------------------------------
WEIGHTED
AVERAGE
AMOUNT PERCENT RATE
------ ------- ----
<S> <C> <C> <C>
Passbook and statement savings $ 30,240,180 30.71% 2.61%
Variable rate money market 2,181,747 2.22 2.56%
Negotiable order of withdrawal 8,758,384 8.89 1.75%
Certificates of deposit 57,284,406 58.18 5.53%
------------- -----

Total $ 98,464,717 100.0%
============= =====
</TABLE>

Scheduled maturities of certificates of deposits at June 30, 1998 are as
follows:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30:
-------------------
<S> <C>
1999 $38,806,970
2000 9,556,810
2001 4,372,052
2002 2,596,145
2003 3,566,569
Thereafter 1,585,590
-----------

Total $60,484,136
===========
</TABLE>

- F-17 -
<PAGE> 133
SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

Certificates of deposit in denominations of $100,000 or more amounted to
$13,552,029 and $12,235,268 at June 30, 1998 and 1997, respectively.

Interest expense on deposits for the years ended June 30, 1998 and 1997
is summarized as follows:

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Certificates of deposit $3,260,039 $3,007,740 $3,035,503
Passbook savings 795,011 826,597 930,815
Money market 53,142 59,527 73,710
NOW 151,766 135,109 189,624
---------- ---------- ----------

Total $4,259,958 $4,028,973 $4,229,652
========== ========== ==========
</TABLE>

- F-18 -
<PAGE> 134
SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

7. INCOME TAXES

The Small Business Job Protection Act of 1996, enacted August 20, 1996,
provided for the repeal of the tax bad debt deduction computed under the
percentage of taxable income method. The repeal of the use of this method
was effective for tax years beginning after December 31, 1995. Prior to
the change in law, the Association had qualified under the provisions of
the Internal Revenue Service Code which permitted it to deduct from
taxable income an allowance for bad debts based on 8% of taxable income.

The Association is required to recapture into income, over a six year
period, the portion of its tax bad debt reserves that exceed its base
year reserves (i.e., tax reserves for tax years beginning before 1988).
The base year tax reserves, which may be subject to recapture if the
Association ceases to qualify as a Association for federal income tax
purposes, are restricted with respect to certain distributions. The
Association's total tax bad debt reserves at June 30, 1998, are
approximately $2.3 million, of which $1.9 million represents the base
year amount and $400,000 is subject to recapture. The Association has
previously recorded a deferred tax liability for the amount to be
recaptured; therefore, this recapture will not impact the statement of
income.

The provision for income taxes is comprised of the following:

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Currently payable $460,140 $195,089 $338,635
Deferred 46,160 148,892 23,665
-------- -------- --------

Total provision $506,300 $343,981 $362,300
======== ======== ========
</TABLE>

- F-19 -
<PAGE> 135
SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

The effective income tax rate for the years ended June 30, 1998, 1997 and
1996 was 45.1%, 62.1% and 37.8%, respectively. A reconciliation between
the expected statutory income tax rate and the effective income tax rate
on income before taxes follows (in thousands):

<TABLE>
<CAPTION>
1998 1997 1996
----------------------- --------------------------- --------------------------
AMOUNT % AMOUNT % AMOUNT %
------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
Provision at
statutory
rate $382 34.0% $188 34.0% $326 34.0%
State income
tax, net
of federal 118 10.5 17 3.1 51 5.3
benefit
Other, primarily
bad debt
deduction 6 .6 139 25.0 (15) (1.5)
---- ---- ---- ---- ---- ----

Total $506 45.1% $344 62.1% $362 37.8%
==== ==== ==== ==== ==== ====
</TABLE>

The components of the net deferred tax (liability) asset are as follows
at June 30:

<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax asset:
Deferred loan fees, net $ 60,959 $ 95,072
Deferred tax liabilities:
Allowance for loan losses (141,052) (135,981)
Depreciation (17,993) (11,017)
Unrealized holding gains (losses) (10,458) (4,881)
--------- --------

Total $(108,544) $(56,807)
========= ========
</TABLE>

The deferred tax (liability) asset is included in other (liabilities)
assets on the balance sheet.

- F-20 -
<PAGE> 136
SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

8. OTHER NONINTEREST EXPENSE

Other noninterest expense amounts are summarized as follows for the years
ended June 30, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Outside service fees $210,924 $200,053 $192,320
Advertising and promotion 50,725 44,014 39,491
All other expenses 247,789 254,109 272,071
-------- -------- --------

Total $509,438 $498,176 $503,882
======== ======== ========
</TABLE>

9. PENSION PLAN

The Association participates in a contributory defined benefit
multi-employer pension plan administered through Pentegra. The
Association makes annual contributions to the Plan equal to amounts
accrued for pension expense. Total pension expense for the years ended
June 30, 1998, 1997 and 1996 was $3,581, $29,364 and $67,851,
respectively. The relative position of the Association regarding the
accumulated plan benefits and net assets of the Plan is not readily
determinable by the Association.

10. FEDERAL DEPOSIT INSURANCE CORPORATION
(FDIC) SPECIAL ASSESSMENT

On September 30, 1996, legislation was enacted to bring the funding level
of the Savings Association Insurance Fund (of which the Association is a
member) of the FDIC to the same level as the Bank Insurance Fund of the
FDIC. As a result of that legislation, the Association paid a single
premium payment of $619,763 for the year ended June 30, 1997. The impact
of this single premium payment, net of estimated federal and state taxes
on 1997 net income tax was approximately $372,000. The single premium
payment was assessed at 65.7 basis points of the March 31, 1995 deposit
base of the Association. With the enactment of the legislation, the
regular assessment rate for the fourth quarter, October 1 to December 31,
1996, was lowered retroactively from 57.5 to 16.25 basis points.
Beginning January 1, 1997, annual premium assessments further decreased
to an annual premium level of 15.75 basis points.

- F-21 -
<PAGE> 137
SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

11. RELATED PARTY TRANSACTIONS

The Association retains a law firm, in which a member of the
Association's Board of Directors also is a member, that provides general
legal counsel to the Association. The Association paid $25,513, $25,874
and $43,330, in legal fees to this firm for the years ended June 30,
1998, 1997 and 1996, respectively.

12. FINANCIAL INSTRUMENTS WITH
OFF-BALANCE-SHEET RISK

The Association is a party to financial instruments with
off-balance-sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments are
commitments to extend credit. These commitments involve, to varying
degrees, elements of credit, interest rate or liquidity risk in excess of
the amount recognized in the balance sheet. The contract or notional
amounts of these commitments express the extent of involvement the
Association has in particular classes of financial instruments.

The Association's exposure to credit loss from nonperformance by the
other party to the financial instruments for commitments to extend credit
is represented by the contractual amount of those instruments. The
Association uses the same credit policies in making commitments as it
does for on-balance-sheet instruments.

The Association's contract amounts of commitments to extend credit which
represent credit risk at June 30, 1998 and 1997 were $2,011,917 and
$1,977,048, respectively. These amounts exclude undisbursed portions of
loans in process amounting to $1,109,499 and $1,431,532 at June 30, 1998
and 1997, respectively.

Commitments to extend credit are legally binding agreements to lend to
customers. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of fees. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future liquidity
requirements. The Association evaluates each customer's credit-worthiness
on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Association on extension of credit, is based on
management's credit assessment of the counterparty.

- F-22 -
<PAGE> 138
SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

13. REGULATORY MATTERS

The Association is subject to various regulatory capital requirements
administered by federal and state 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 Association's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Association must
meet specific capital guidelines that involve quantitative measures of
the Association's assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The
Association'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 Association to maintain minimum amounts and ratios
(set forth in the table below) of total and Tier I capital (as defined in
the regulations) to risk-weighted assets (as defined), and of Tier I
capital (as defined) to total assets (as defined). Management believes,
as of June 30, 1998, that the Association meets all capital adequacy
requirements to which it is subject.

As of December 31, 1997, the most recent notification from the Office of
Thrift Supervision categorized the Association as well capitalized under
the regulatory framework for prompt corrective action. There are no
conditions or events since that notification that management believes
have changed the Association's category.

- F-23 -
<PAGE> 139

SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

To be categorized as well capitalized the Association must maintain
minimum total risk-based, Tier I risk-based, and Tier I leverage ratios
as set forth in the following table. The Association's actual capital
amounts and ratios are presented in the following table. No deductions
were made in either year from capital for interest-rate risk.

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
---------------------------------------------------------------------------------
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ACTUAL ADEQUACY PROMPT CORRECTIVE
PURPOSES ACTION PROVISIONS
------------------------- ------------------------- ------------------------
JUNE 30, 1998 AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------------- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk Weighted
Assets) (risk-based capital ratio) $9,814 16.9% $4,641 >_8.0% $5,801 >_10.0%

Tier I Capital (to Risk Weighted
Assets) $9,362 16.1% $2,321 >_4.0% $3,481 >_6.0%

Tier I Capital (to Total Assets)
(core capital ratio) $9,362 8.4% $4,485 >_4.0% $5,606 >_5.0%

<CAPTION>
(DOLLARS IN THOUSANDS)
---------------------------------------------------------------------------------
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ACTUAL ADEQUACY PROMPT CORRECTIVE
PURPOSES ACTION PROVISIONS
------------------------- ------------------------- ------------------------
JUNE 30, 1997 AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------------- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk Weighted
Assets) (risk-based capital ratio) $9,173 21.7% $3,382 >_8.0% $4,228 >_10.0%

Tier I Capital (to Risk Weighted
Assets) $8,744 20.7% $1,691 >_4.0% $2,537 >_6.0%

Tier I Capital (to Total Assets)
(core capital ratio) $8,744 8.1% $4,298 >_4.0% $5,372 >_5.0%
</TABLE>

- F-24 -
<PAGE> 140

SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

14. FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires that the Association disclose estimated fair values for its
financial instruments. Fair value estimates are made at a specific point
in time, based on relevant market information and information about the
financial instrument. These estimates do not reflect any premium or
discount that could result from offering for sale at one time the
Association's entire holdings of a particular financial instrument. Also,
it is the Association's general practice and intention to hold most of
its financial instruments to maturity and not to engage in trading or
sales activities. Because no market exists for a significant portion of
the Association's financial instruments, fair value estimates are based
on judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments and
other factors. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore cannot be
determined with precision. Changes in assumptions can significantly
affect the estimates.

Estimated fair values have been determined by the Association using
historical data, as generally provided in the Association's regulatory
reports, and an estimation methodology suitable for each category of
financial instruments. The estimated fair value of the Association's
investment securities is described in Note 2. The Association's fair
value estimates, methods and assumptions are set forth below for the
Association's other financial instruments.

Cash and due from banks and interest-bearing deposits with banks:

The carrying amounts for cash and due from banks and interest-bearing
deposits with banks approximate fair value because they mature in 90
days or less and do not present unanticipated credit concerns.

- F-25 -
<PAGE> 141
SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

Loans:

Fair values are estimated for portfolios of loans with similar
financial characteristics. Loans are segregated by type such as
commercial, commercial real estate, residential mortgage, credit card
and other consumer. Each loan category is further segmented into
fixed and adjustable rate interest terms and by performing and
nonperforming categories.

The fair value of performing loans, except residential mortgage is
calculated by discounting schedules cash flows through the estimated
maturity using estimated market discount rates that reflect the
credit and interest rate risk inherent in the loan. The estimate of
maturity is based on the Association's historical experience with
repayments for each loan classification, modified, as required, by an
estimate of the effect of current economic and lending conditions.
For performing residential mortgage loans, fair value is estimated
using discounted rates based on secondary market sources adjusted to
reflect differences in servicing and credit costs.

Fair value for significant nonperforming loans is based on recent
external appraisals. If appraisals are not available, estimated cash
flows are discounted using a rate commensurate with the risk
associated with the estimated cash flows. Assumptions regarding
credit risk, cash flows, and discounted rates are judgmentally
determined using available market information and specific borrower
information.

Deposits:

The fair value of deposits with no stated maturity, such as
noninterest bearing demand deposits, savings and NOW accounts, and
money market and checking accounts, is equal to the amount payable on
demand as of the valuation date. The fair value of certificates of
deposit is based on the discounted value of contractual cash flows.
The discount rate is estimated using the rates currently offered for
deposits of similar remaining maturities.

The fair value estimates above do not include the benefit that
results from the low-cost funding provided by the deposit liabilities
compared to the cost of borrowing funds in the market, commonly
referred to as the core deposit intangible.

- F-26 -
<PAGE> 142
SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

Accrued Interest:

The carrying amounts of accrued interest approximate their fair values.

The estimated fair values of the Association's financial instruments are
as follows at June 30 (in thousands):

<TABLE>
<CAPTION>
1998 1997
------------------------------ -------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from
banks $ 3,272 $ 3,272 $ 2,868 $ 2,868
Interest-bearing deposits
with banks 8,586 8,586 6,167 6,167
Held-to-maturity
securities 20,783 20,807 24,842 24,811
Available-for-sale
securities 7,901 7,901 4,414 4,248
Loans, net of allowance 69,211 70,123 66,738 67,021
Accrued interest
receivable 619 619 665 665

Financial liabilities:
Deposits 102,604 102,672 98,465 98,133

Accrued interest payable 206 206 154 154
</TABLE>

- F-27 -
<PAGE> 143
SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

15. RECENT ACCOUNTING PRONOUNCEMENTS

In September 1997, the Financial Accounting Standard Board ("FASB")
issued SFAS No. 130, "Reporting Comprehensive Income." This statement
establishes standards for the reporting and display of comprehensive
income and its components in a full set of general-purpose financial
statements. SFAS No. 130 requires that all items that are required to be
recognized as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. The statement does not require a specific format
for that financial statement but requires that an enterprise display an
amount representing total comprehensive income for the period in that
financial statement. SFAS No. 130 is effective for fiscal years beginning
after December 15, 1997. The Association will make the appropriate
disclosures in the applicable financial statements, as required.

In September 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information." SFAS No. 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products and
services, geographic areas, and major customers. SFAS No. 131 is
effective for financial statements for periods beginning after December
15, 1997. Management has not yet determined the impact, if any, of this
statement on the Association.

In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging
activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and
measure those instruments at fair value. SFAS No. 133 is effective for
financial statements for periods beginning after June 15, 1999. In
connection with the implementation of SFAS No. 133, the Association may
transfer debt securities classified as held-to-maturity to the
available-for-sale category. Such a transfer will not call into question
the Association's intention to hold other debt to maturity in the future.
Management has not yet determined the impact, if any, of this statement
on the Association.

- F-28 -
<PAGE> 144
SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

16. PLAN OF CONVERSION

On June 26, 1998, the Board of Directors of the Association adopted a
plan of conversion (the "Plan") pursuant to which the Association will
convert from a state chartered mutual savings and loan association to a
state chartered stock capital savings association. All of the outstanding
common stock of the Association will be acquired in exchange for a
portion of the net conversion proceeds (the "Conversion") by a holding
company formed expressly for such purpose (the "Company"). All of the
stock to be issued in the Conversion is being offered to eligible account
holders as of March 31, 1997.

The Association plans to establish an ESOP for the benefit of eligible
employees, to become effective upon the conversion. The ESOP intends to
purchase up to 8% of the common stock issued in the conversion utilizing
proceeds of a loan from a wholly-owned subsidiary of the company or a
third party lender. The loan will be repaid over a period of 12 years and
the collateral for the loan will be the common stock purchased by the
ESOP.

Pursuant to the Plan, the Company intends to establish a charitable
foundation ("Foundation") in connection the conversion. The Plan provides
that the Association and the Company will create the Foundation and
donate an amount of the Company's common stock equal to 5% of the common
stock to be sold in the conversion. The Foundation will be dedicated to
charitable purposes within the communities in which the Association
operates and to complement the Association's existing community
activities. Establishment of the Foundation is subject to the approval of
the Association's members at the special meeting being held to vote upon
the Conversion.

The Foundation will submit a request to the Internal Revenue Service to
be recognized as a tax-exempt organization and would likely be classified
as a private foundation. A contribution of common stock to the Foundation
by the Company would be tax deductible, subject to a limitation based on
10 percent of the Company's taxable income. The Company, however, would
be able to carry forward any unused portion of the deduction for five
years following the contribution. Upon funding the Foundation, the
Company will recognize an expense in the full amount of the contribution,
offset in part by the corresponding benefit for the tax deduction, during
the quarter in which the contribution is made.

- F-29 -
<PAGE> 145
SECURITY SAVINGS ASSOCIATION OF HAZLETON
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

The Association may provide support services to the Foundation including,
but not limited to, employee time, office space and accounting support.
The Association expects to provide these services without compensation,
however, expenses incurred on behalf of the Foundation are not expected
to be significant to the operations of the Association.

At the time of Conversion, the Association will establish a liquidation
account in an amount equal to its equity as reflected in the latest
balance sheet used in the final conversion prospectus. The liquidation
account will be maintained for the benefit of eligible account holders
and supplemental eligible account holders who continue to maintain their
accounts at the Association after the conversion. The liquidation account
will be reduced annually to the extent that eligible account holders and
supplemental eligible account holders have reduced their qualifying
deposits as of each anniversary date. Subsequent increases will not
restore an eligible account holder's or supplemental account holder's
interest in the liquidation account. In the event of a completed
liquidation of the Association, each eligible account holder and
supplemental eligible account holder will be entitled to receive a
distribution from the liquidation account in an amount proportionate to
the current adjusted qualifying balances for accounts then held.

The costs associated with Conversion will be deferred and will be
deducted from the proceeds upon the sale and issuance of stock. In the
event the Conversion is not consummated, costs incurred will be charged
to expense. At June 30, 1998 deferred conversion costs totaled $20,000.

After the conversion, the Association may not declare or pay dividends on
its stock if such declaration and payment would violate statutory or
regulatory requirements.

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

- F-30 -
<PAGE> 146

================================================================================

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY SECURITY OF PENNSYLVANIA FINANCIAL CORP., THE ASSOCIATION OR
SANDLER O'NEILL & PARTNERS, L.P. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF SECURITY OF PENNSYLVANIA
FINANCIAL CORP. OR THE ASSOCIATION SINCE ANY OF THE DATES AS OF WHICH
INFORMATION IS FURNISHED HEREIN OR SINCE THE DATE HEREOF.
------------------------------

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary
Selected Consolidated Financial and.....................................
Other Data of the Association.......................................
Risk Factors............................................................
Security of Pennsylvania Financial Corp.................................
Security Savings Association of Hazleton................................
Regulatory Capital Compliance...........................................
Use of Proceeds.........................................................
Dividend Policy.........................................................
Market for the Common Stock.............................................
Capitalization..........................................................
Pro Forma Data..........................................................
Comparison of Valuation and Pro Forma Information.......................
With No Foundation...................................................
Security Savings Association of Hazleton Statements.....................
of Income.............................................................
Management's Discussion and Analysis of Financial.......................
Condition and Results of Operations.................................
Business of the Association.............................................
Federal and State Taxation..............................................
Regulation..............................................................
Management of the Company...............................................
Management of the Association...........................................
The Conversion..........................................................
Restrictions on Acquisition of the Company..............................
and the Association.................................................
Description of Capital Stock of the Company.............................
Description of Capital Stock of the Association.........................
Transfer Agent and Registrar............................................
Experts.................................................................
Legal and Tax Opinions..................................................
Additional Information..................................................
Index of Financial Statements...........................................
</TABLE>

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

UNTIL __________, 1998 OR 25 DAYS AFTER COMMENCEMENT OF THE COMMUNITY OFFERING
AND/OR SYNDICATED COMMUNITY OFFERING, IF ANY, WHICHEVER IS LATER, ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

================================================================================

1,851,500 Shares

SECURITY OF PENNSYLVANIA
FINANCIAL CORP.

(Proposed Holding Company for
Security Savings Association of Hazleton)

COMMON STOCK

______________

PROSPECTUS
______________

_____________, 1998

Sandler O'Neill & Partners, L.P.

================================================================================
<PAGE> 147

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

In accordance with the General Corporation Law of the State of Delaware (being
Chapter 1 of Title 8 of the Delaware Code), Articles 10 and 11 of the
Registrant's Certificate of Incorporation provide as follows:

TENTH:

A. Each person who was or is made a party or is threatened to be made a party to
or is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was a Director or an Officer of the
Corporation or is or was serving at the request of the Corporation as a
Director, Officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a Director, Officer,
employee or agent, or in any other capacity while serving as a Director,
Officer, employee or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than such law permitted the
Corporation to provide prior to such amendment), against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered by
such indemnitee in connection therewith; provided, however, that, except as
provided in Section C hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.

B. The right to indemnification conferred in Section A of this Article TENTH
shall include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a Director or Officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, services to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section or otherwise. The rights to indemnification and to the advancement of
expenses conferred in Sections A and B of this Article TENTH shall be contract
rights and such rights shall continue as to an indemnitee who has ceased to be a
Director, Officer, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.

C. If a claim under Section A or B of this Article TENTH is not paid in full by
the Corporation within sixty days after a written claim has been received by the
Corporation, except in the case of a claim for an advancement of expenses, in
which case the applicable period shall be twenty days, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expenses of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) in any suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking the Corporation
shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met any applicable standard for indemnification set forth in
the Delaware General Corporation Law. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an

<PAGE> 148

advancement of expenses hereunder, or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses under this Article TENTH, or otherwise shall be on the
Corporation.

D. The rights to indemnification and to the advancement of expenses conferred in
this Article TENTH shall not be exclusive of any other right which any person
may have or hereafter acquire under any statute, the Corporation's Certificate
of Incorporation, Bylaws, agreement, vote of stockholders or Disinterested
Directors or otherwise.

E. The Corporation may maintain insurance, at its expense, to protect itself and
any Director, Officer, employee or agent of the Corporation or subsidiary or
Affiliate or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.

F. The Corporation may, to the extent authorized from time to time by the Board
of Directors, grant rights to indemnification and to the advancement of expenses
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article TENTH with respect to the indemnification and
advancement of expenses of Directors and Officers of the Corporation.

ELEVENTH:

A Director of this Corporation shall not be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
Director, except for liability: (i) for any breach of the Director's duty of
loyalty to the Corporation or its stockholders; (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law; (iii) under Section 174 of the Delaware General Corporation Law; or (iv)
for any transaction from which the Director derived an improper personal
benefit. If the Delaware General Corporation Law is amended to authorize
corporate action further eliminating or limiting the personal liability of
Directors, then the liability of a Director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended.

Any repeal or modification of the foregoing paragraph by the stockholders of the
Corporation shall not adversely affect any right or protection of a Director of
the Corporation existing at the time of such repeal or modification.

<PAGE> 149

<TABLE>
<CAPTION>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<S> <C>
SEC filing(1)......................................................................................................$ 5,735
OTS filing fee.......................................................................................................14,400
Pennsylvania filing fees..............................................................................................2,052
NASD filing fee(1)....................................................................................................2,445
Stock Market listing fee(1)..........................................................................................15,000
Printing, postage and mailing.......................................................................................150,000
Legal fees and expenses (including underwriter's
counsel)..........................................................................................................200,000
Accounting fees and expenses.........................................................................................65,000
Appraisers' fees and expenses (including
business plan).....................................................................................................28,000
Marketing fees and selling commissions..............................................................................324,972
Underwriter's expenses...............................................................................................10,000
Conversion agent fees and expenses...................................................................................20,000
Transfer agent fees and expenses.....................................................................................10,000
Certificate printing..................................................................................................5,000
Telephone, temporary help and other equipment........................................................................10,000
Miscellaneous.................................................................................................... 32,368
--------
TOTAL............................................................................................................ $894,972
========
</TABLE>

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

(1) Unless otherwise noted, based upon the registration and issuance of
1,944,075 shares at $10.00 per share.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

None.

<PAGE> 150

ITEM 27. EXHIBITS.

The exhibits filed as a part of this Registration Statement are as follows:

<TABLE>
<CAPTION>
(a) List of Exhibits (filed herewith unless otherwise noted)
<S> <C>
1.1 Engagement Letter between Security Savings Association of Hazleton and Sandler O'Neill & Partners, L.P.
1.2 Draft Form of Agency Agreement*
2.1 Amended Plan of Conversion (including the Stock Articles of Incorporation and Bylaws of Security Savings Association
of Hazleton)
3.1 Certificate of Incorporation of Security of Pennsylvania Financial Corp.
3.2 Bylaws of Security of Pennsylvania Financial Corp.
3.3 Stock Articles of Incorporation and Bylaws of Security Savings Association of Hazleton
(See Exhibit 2.1 hereto)
4.0 Draft Stock Certificate of Security of Pennsylvania Financial Corp.
5.0 Draft Opinion of Muldoon, Murphy & Faucette re: legality
5.1 Draft Opinion of Morris, Nichols, Arsht & Tunnell re: legality
8.0 Draft Opinion of Muldoon, Murphy & Faucette re: Federal Tax Matters
8.1 Draft Opinion of Parente, Randolph, Orlando, Carey & Associates re: State Tax Matters
10.1 Form of Security Savings Association of Hazleton Trust Agreement
10.2 Draft ESOP Loan Commitment Letter and ESOP Loan Documents
10.3 Form of Security Savings Association of Hazleton Employment Agreement
10.4 Form of Security of Pennsylvania Financial Corp. Employment Agreement
10.5 Form of Security Savings Association of Hazleton Change in Control Agreement
10.6 Form of Security Savings Association of Hazleton Supplemental Executive Retirement Plan
10.7 Form of Security Savings Association of Hazleton Employee Severance Compensation Plan
23.1 Consent of Parente, Randolph, Orlando, Carey & Associates
23.2 Consent of Muldoon, Murphy & Faucette
23.3 Consent of Morris, Nichols, Arsht & Tunnell
23.4 Consent and Subscription Rights Opinion of Keller & Company, Inc.
24.1 Powers of Attorney
27.0 Financial Data Schedule
99.1 Appraisal Report of Keller & Company, Inc.(P)
99.2 Form of Security Savings Charitable Foundation Gift Instrument
</TABLE>

- --------------------
*To be filed by amendment
(P) Filed pursuant to Rule 202 of Regulation S-T.

<PAGE> 151

ITEM 28. UNDERTAKINGS.

The small business issuer will:

(1) File, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:

(i) Include any prospectus required by section 10(a)(3) of
the Securities Act;

(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental
change in the information in the registration
statement; and

(iii) Include any additional or changed material information
on the plan of distribution.

(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that
time to be the initial bona fide offering.

(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.

The small business issuer will provide to the underwriter at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriter to permit prompt
delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

<PAGE> 152

CONFORMED
SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Hazleton, Commonwealth of Pennsylvania, on September 11, 1998.

Security of Pennsylvania Financial Corp.

By: /s/ Richard C. Laubach
--------------------------
Richard C. Laubach
President, Chief Executive Officer and Director

In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.

<TABLE>
<CAPTION>
Name Title Date
---- ----- ----

<S> <C> <C>
/s/ Richard C. Laubach President, Chief Executive September 11, 1998
- ------------------------------ Officer and Director
Richard C. Laubach (principal executive
officer)

/s/ David P. Marchetti, Sr. Chief Financial Officer September 11, 1998
- ------------------------------ and Treasurer
David P. Marchetti, Sr. (principal accounting and
financial officer)

/s/ Vincent L. Marusak Director September 11, 1998
- ------------------------------
Vincent L. Marusak

/s/ Frederick L. Barletta Director September 11, 1998
- --------------------------------
Frederick L. Barletta

/s/ Peter B. Deisroth Director September 11, 1998
- ---------------------------------
Peter B. Deisroth

/s/ George J. Hayden Director September 11, 1998
- -------------------------------
George J. Hayden

/s/ Joseph E. Lundy Director September 11, 1998
- --------------------------------
Joseph E. Lundy

/s/ John J. Raynock Director September 11, 1998
- ---------------------------------
John J. Raynock

/s/ Anthony P. Sidari Director September 11, 1998
- --------------------------------
Anthony P. Sidari
</TABLE>

<PAGE> 153

TABLE OF CONTENTS

LIST OF EXHIBITS (FILED HEREWITH UNLESS OTHERWISE NOTED)

The exhibits filed as a part of this Registration Statement are as follows:

<TABLE>
<CAPTION>
(a) List of Exhibits (filed herewith unless otherwise noted)
<S> <C>
1.1 Engagement Letter between Security Savings Association of Hazleton and Sandler O'Neill & Partners, L.P.
1.2 Draft Form of Agency Agreement*
2.1 Amended Plan of Conversion (including the Stock Articles of Incorporation and Bylaws of Security Savings
Association of Hazleton)
3.1 Certificate of Incorporation of Security of Pennsylvania Financial Corp.
3.2 Bylaws of Security of Pennsylvania Financial Corp.
3.3 Stock Articles of Incorporation and Bylaws of Security Savings Association of Hazleton
(See Exhibit 2.1 hereto)
4.0 Draft Stock Certificate of Security of Pennsylvania Financial Corp.
5.0 Draft Opinion of Muldoon, Murphy & Faucette re: legality
5.1 Draft Opinion of Morris, Nichols, Arsht & Tunnell re: legality
8.0 Draft Opinion of Muldoon, Murphy & Faucette re: Federal Tax Matters
8.1 Draft Opinion of Parente, Randolph, Orlando, Carey & Associates re: State Tax Matters
10.1 Form of Security Savings Association of Hazleton Trust Agreement
10.2 Draft ESOP Loan Commitment Letter and ESOP Loan Documents
10.3 Form of Security Savings Association of Hazleton Employment Agreement
10.4 Form of Security of Pennsylvania Financial Corp. Employment Agreement
10.5 Form of Security Savings Association of Hazleton Change in Control Agreement
10.6 Form of Security Savings Association of Hazleton Supplemental Executive Retirement Plan
10.7 Form of Security Savings Association of Hazleton Employee Severance Compensation Plan
23.1 Consent of Parente, Randolph, Orlando, Carey & Associates
23.2 Consent of Muldoon, Murphy & Faucette
23.3 Consent of Morris, Nichols, Arsht & Tunnell
23.4 Consent and Subscription Rights Opinion of Keller & Company, Inc.
24.1 Powers of Attorney
27.0 Financial Data Schedule
99.1 Appraisal Report of Keller & Company, Inc.(P)
99.2 Form of Security Savings Charitable Foundation Gift Instrument
</TABLE>

- ------------------
*To be filed by amendment
(P) Filed pursuant to Rule 202 of Regulation S-T.

<PAGE> 1
Exhibit 1.1

[LETTERHEAD SANDLER O'NEILL]

June 25, 1998

Mr. Richard C. Laubach
President and Chief Executive Officer
Security Savings Association of Hazleton
31 West Broad Street
Hazleton, Pennsylvania 18201

Dear Mr. Laubach:

Sandler O'Neill & Partners, L.P. ("Sandler O'Neill") is pleased to act
as conversion agent to Security Savings Association of Hazleton (the
"Association") in connection with the Association's proposed conversion from
mutual to stock form (the "Conversion"). This letter is to confirm the terms and
conditions of our engagement.

SERVICES AND FEES

In our role as Conversion Agent, we anticipate that our services will
include the services outlined below, each as may be necessary and as the
Association may reasonably request:

I. Consolidation of Accounts and Development of a Central File

II. Preparation of Proxy, Order and/or Request Forms

III. Organization and Supervision of the Conversion Center

IV. Proxy Solicitation and Special Meeting Services

V. Subscription Services

Each of these services is further described in Appendix A to this agreement.

For its services hereunder, the Association agrees to pay Sandler
O'Neill a fee of $10,000. This fee is based upon a total number of
unconsolidated accounts of approximately 15,000. No change in fees will occur as
long as the variance in the number of accounts does not exceed 5%. In the event
the actual number of accounts exceeds the number specified above by more than
5%, the fee will be proportionately increased.
<PAGE> 2
Security Savings Association of Hazleton
June 25, 1998
Page 2

The fee set forth above is based upon the requirements of current
regulations and the Plan of Conversion as currently contemplated. Any unusual or
additional items or duplication of service required as a result of a material
change in the regulations or the Plan of Conversion or a material delay or other
similar events may result in extra charges which will be covered in a separate
agreement if and when they occur.

All fees under this agreement shall be payable in cash, as follows: (a)
$5,000 payable upon execution of this agreement by the Association, which shall
be non-refundable; and (b) the balance upon the completion of the Conversion.

COSTS AND EXPENSES

In addition to any fees that may be payable to Sandler O'Neill
hereunder, the Association agrees to reimburse Sandler O'Neill, upon request
made from time to time, for its reasonable out-of-pocket expenses incurred in
connection with its engagement hereunder regardless of whether the Conversion is
consummated, including, without limitation, travel, lodging, food, telephone,
postage, listings, forms and other similar expenses; provided, however, that
Sandler O'Neill shall document such expenses to the reasonable satisfaction of
the Association. The provisions of this paragraph are not intended to apply to
or in any way impair the indemnification provisions of this agreement.

In addition, all taxes however designated, arising from or based upon
this agreement or the payments made to Sandler O'Neill pursuant hereto,
including, but not limited to, any applicable sales, use, excise and similar
taxes, shall be paid by the Association as the same become due, and the
Association shall, upon request by Sandler O'Neill, pay the same either to
Sandler O'Neill or to the appropriate taxing authority at any time during, or
after the termination of, this Agreement; provided, however, that the
Association shall not be responsible for the payment of any state, federal, or
local franchise or income taxes based upon the net income of Sandler O'Neill.

RELIANCE ON INFORMATION PROVIDED

The Association will provide Sandler O'Neill with such information as
Sandler O'Neill may reasonably require to carry out its duties. The Association
recognizes and confirms that Sandler O'Neill (a) will use and rely on such
information in performing the services contemplated by this agreement without
having independently verified the same, and (b) does not assume responsibility
for the accuracy or completeness of the information. The Association will also
inform Sandler O'Neill within a reasonable period of time of any changes in the
Plan which require changes in
<PAGE> 3
Security Savings Association of Hazleton
June 25, 1998
Page 3

Sandler O'Neill's services. If a substantial expense results from any such
change, the parties shall negotiate an equitable adjustment in the fee.

LIMITATIONS

Sandler O'Neill, as Conversion Agent hereunder, (a) shall have no
duties or obligations other than those specifically set forth herein; (b) will
be regarded as making no representations and having no responsibilities as to
the validity, sufficiency, value or genuineness of any order form or any stock
certificates or the shares represented thereby, and will not be required to and
will make no representations as to the validity, value or genuineness of the
offer; (c) all not be liable to any person, firm or corporation including the
Association by reason of any error of judgment or for any act done by it in good
faith, or for any mistake of law or fact in connection with this agreement and
the performance hereof unless caused by or arising out of its own willful
misconduct, bad faith or gross negligence; (d) will not be obliged to take any
legal action hereunder which might in its judgment involve any expense or
liability, unless it shall have been furnished with reasonable indemnity
satisfactory to it; and (e) may rely on and shall be protected in acting in
reliance upon any certificate, instrument, opinion, notice, letter, telex,
telegram, or other document or security delivered to it and in good faith
believed by it to be genuine and to have been signed by the proper party or
parties.

Anything in this agreement to the contrary notwithstanding, in no event
shall Sandler O'Neill be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits), even
if Sandler O'Neill has been advised of the likelihood of such loss or damage and
regardless of form of action.

INDEMNIFICATION

The Association agrees to indemnify and hold Sandler O'Neill and its
affiliates and their respective partners, directors, officers, employees, agents
and controlling persons (Sandler O'Neill and each such person being an
"Indemnified Party") harmless from and against any and all losses, claims,
damages and liabilities, joint or several, to which such Indemnified Party may
become subject under applicable federal or state law, or otherwise, related to
or arising out of the engagement of Sandler O'Neill pursuant to, and the
performance by Sandler O'Neill of the services contemplated by this letter, and
will reimburse any Indemnified Party for all expenses (including reasonable
counsel fees and expenses) as they are incurred, including expenses incurred in
connection with the investigation of, preparation for or defense of any pending
or threatened claim or any action or proceeding arising therefrom, whether or
not such Indemnified Party is a party. The Association will
<PAGE> 4
Security Savings Association of Hazleton
June 25, 1998
Page 4

not be liable under the foregoing indemnification provision to the extent that
any loss, claim, damage, liability or expense is found in a final judgment by a
court of competent jurisdiction to have resulted primarily from Sandler
O'Neill's willful misconduct, bad faith or gross negligence.

MISCELLANEOUS

The following addresses shall be sufficient for written notices to each
other:

If to you: Security Savings Association of Hazleton
31 West Broad Street
Hazleton, Pennsylvania 18201

Attention: Mr. Richard C. Laubach

If to us: Sandler O'Neill & Partners, L.P.
747 Middle Neck Road
Great Neck, New York 11024

Attention: Mr. Mark B. Cohen

The Agreement and appendix hereto constitute the entire Agreement
between the parties with respect to the subject matter hereof and can be altered
only by written consent signed by the parties. This Agreement is governed by the
laws of the State of New York.
<PAGE> 5
Security Savings Association of Hazleton
June 25, 1998
Page 5

Please confirm that the foregoing correctly sets forth our agreement by
signing and returning to Sandler O'Neill the duplicate copy of this letter
enclosed herewith.

Very truly yours,

Sandler O'Neill & Partners, L.P.
By: Sandler O'Neill & Partners Corp.,
the sole general partner

By: /s/ Mark B. Cohen
----------------------------
Mark B. Cohen
Principal

Accepted and agreed to as of
the date first above written:

Security Savings Association of Hazleton

By: /s/ Richard C. Laubach
--------------------------
Mr. Richard C. Laubach
President and Chief Executive Officer

cc: Thomas J. Haggerty, Esq.
Muldoon, Murphy & Faucette
<PAGE> 6
APPENDIX A

OUTLINE OF CONVERSION AGENT SERVICES

I. Consolidation of Accounts

1. Consolidate files in accordance with regulatory guidelines.

2. Accounts from various files are all linked together. The resulting
central file can then be maintained on a regular basis.

3. Our EDP format will be provided to your data processing people.

II. Proxy/Order Form/Request Card Preparation

1. Vote calculation.

2. Any combination of proxies, request cards and stock order forms for
voting and ordering stock.

3. Target group identification for subscription offering.

III. Organization and Supervision of Conversion Center

1. Advising on and supervising the physical organization of the Conversion
Center, including materials requirements.

2. Assist in the training of all Association personnel who will be staffing
the conversion center.

3. Establish reporting procedures.

4. On-site supervision of the Conversion Center during the
solicitation/offering period.

IV. Special Meeting Services

1. Direct proxy solicitation.

2. Proxy and ballot tabulation.

3. Act as or support inspector of election.

4. Delete voting record date accounts closed prior to special meeting.

5. Produce final report of vote.

V. Subscription Services

1. Produce list of depositors by state (Blue Sky report).

2. Production of subscription rights and research books.

3. Stock order form processing.

4. Acknowledgment letter to confirm receipt of stock order.

5. Daily reports and analysis.

6. Proration calculation and share allocation in the event of an
oversubscription.

7. Produce charter shareholder list.

8. Interface with Transfer Agent for Stock Certificate issuance.

9. Refund and interest calculations.

10. Confirmation letter to confirm purchase of stock.

11. Notification of full/partial rejection of orders.

12. Production of 1099/Debit tape.

A - 1
<PAGE> 7
[LETTERHEAD SANDLER O'NEILL]

June 25, 1998

Mr. Richard C. Laubach
President and Chief Executive Officer
Security Savings Association of Hazleton
31 West Broad Street
Hazleton, Pennsylvania 18201

Dear Mr. Laubach:

Sandler O'Neill & Partners, L.P. ("Sandler O'Neill") is pleased to act
as an independent financial advisor to Security Savings Association of Hazleton
(the "Association") in connection with the Association's proposed conversion
from mutual to stock form (the "Conversion"), including the offer and sale of
certain shares of the common stock of the proposed new holding company for the
Association (the "Holding Company") to the Association's eligible account
holders in a Subscription Offering, to members of the Association's community in
a Direct Community Offering and, under certain circumstances, to the general
public in a Syndicated Community Offering (collectively, the "Offerings"). For
purposes of this letter, the term "Actual Purchase Price" shall mean the price
at which the shares of the Holding Company's common stock are sold in the
Conversion. This letter is to confirm the terms and conditions of our
engagement.

ADVISORY SERVICES

Sandler O'Neill will act as a consultant and advisor to the Association
and the Holding Company and will work with the Association's management,
counsel, accountants and other advisors in connection with the Conversion and
the Offerings. We anticipate that our services will include the following, each
as may be necessary and as the Association may reasonably request:

1. Consulting as to the securities marketing implications of any
aspect of the Plan of Conversion or related corporate documents;

2. Reviewing with the Board of Directors the independent appraiser's
appraisal of the common stock, particularly with regard to aspects
of the appraisal involving the methodology employed;

3. Reviewing all offering documents, including the Prospectus, stock
order forms and related offering materials (it being understood
that preparation and filing of such
<PAGE> 8
Security Savings Association of Hazleton
June 25, 1998
Page 2

documents will be the responsibility of the Association and the
Holding Company and their counsel);

4. Assisting in the design and implementation of a marketing strategy
for the Offerings;

5. Assisting in obtaining all requisite regulatory approvals;

6. Assisting Association management in scheduling and preparing for
meetings with potential investors and broker-dealers; and

7. Providing such other general advice and assistance as may be
requested to promote the successful completion of the Conversion.

FEES

If the Conversion is consummated, the Association agrees to pay Sandler
O'Neill for its services hereunder the fees set forth below:

1. a fee of two percent (2.00%) of the aggregate Actual Purchase
Price of the shares of common stock sold to in the Subscription
Offering and in the Direct Community Offering, excluding in each
case shares purchased by (i) any employee benefit plan of the
Holding Company or the Association established for the benefit of
their respective directors, officers and employees, and (ii) any
director, officer or employee of the Holding Company or the
Association or members of their immediate families; and

2. with respect to any shares of the Holding Company's common stock
sold by an NASD member firm (other than Sandler O'Neill) under any
selected dealers agreement in the Syndicated Community Offering,
(a) the sales commission payable to the selected dealer under such
agreement, (b) any sponsoring dealer's fees, and (c) a management
fee to Sandler O'Neill of one and one half percent (1.50%). Any
fees payable to Sandler O'Neill for common stock sold by Sandler
O'Neill under any such agreement shall be limited to an aggregate
of two percent (2.00%) of the Actual Purchase Price of such
shares.

If (i) Sandler O'Neill's engagement hereunder is terminated for any of
the reasons provided for under the second paragraph of the section of this
letter captioned "Definitive Agreement," or (ii) the Conversion is terminated by
the Association, no fees shall be payable by the Association to Sandler O'Neill
hereunder; however, the Association shall reimburse Sandler O'Neill for its
reasonable out-of-pocket expenses incurred in connection with its engagement
hereunder.
<PAGE> 9
Security Savings Association of Hazleton
June 25, 1998
Page 3

All fees payable to Sandler O'Neill hereunder shall be payable in cash
at the time of the closing of the Conversion. In recognition of the long lead
times involved in the conversion process, the Association agrees to make advance
payments to Sandler O'Neill in the aggregate amount of $50,000, $25,000 of which
shall be payable upon execution of this letter and the remaining $25,000 of
which shall be payable upon commencement of the Subscription Offering, which
shall be credited against any fees or reimbursement of expenses payable
hereunder.

SYNDICATED COMMUNITY OFFERING

If any shares of the Holding Company's common stock remain available
after the expiration of the Subscription Offering and the Direct Community
Offering, at the request of the Association and subject to the continued
satisfaction of the conditions set forth in the second paragraph under the
caption "Definitive Agreement" below, Sandler O'Neill will seek to form a
syndicate of registered dealers to assist in the sale of such common stock in a
Syndicated Community Offering on a best efforts basis, subject to the terms and
conditions set forth in a selected dealers agreement. Sandler O'Neill will
endeavor to limit the aggregate fees to be paid by the Association under any
such selected dealers agreement to an amount competitive with gross underwriting
discounts charged at such time for underwritings of comparable amounts of stock
sold at a comparable price per share in a similar market environment, which
shall not exceed 5% of the aggregate Actual Purchase Price of the shares sold
under such agreements. Sandler O'Neill will endeavor to distribute the common
stock among dealers in a fashion which best meets the distribution objectives of
the Association and the requirements of the Plan of Conversion, which may result
in limiting the allocation of stock to certain selected dealers. It is
understood that in no event shall Sandler O'Neill be obligated to act as a
selected dealer or to take or purchase any shares of the Holding Company's
common stock.

COSTS AND EXPENSES

In addition to any fees that may be payable to Sandler O'Neill
hereunder and the expenses to be borne by the Association pursuant to the
following paragraph, the Association agrees to reimburse Sandler O'Neill, upon
request made from time to time, for its reasonable out-of-pocket expenses
incurred in connection with its engagement hereunder, regardless of whether the
Conversion is consummated, including, without limitation, legal fees (to a
maximum of $50,000), advertising, promotional, syndication, and travel expenses;
provided, however, that Sandler O'Neill shall document such expenses to the
reasonable satisfaction of the Association. The provisions of this paragraph are
not intended to apply to or in any way impair the indemnification provisions of
this letter.

As is customary, the Association will bear all other expenses incurred
in connection with the Conversion and the Offerings, including, without
limitation, (i) the cost of obtaining all securities and bank regulatory
approvals, including any required NASD filing fees; (ii) the cost of printing
and
<PAGE> 10
Security Savings Association of Hazleton
June 25, 1998
Page 4

distributing the offering materials; (iii) the costs of blue sky qualification
(including fees and expenses of blue sky counsel) of the shares in the various
states; (iv) listing fees; and (v) all fees and disbursements of the
Association's and the Holding Company's counsel, accountants, conversion agent
and other advisors. In the event Sandler O'Neill incurs any such fees and
expenses on behalf of the Association or the Holding Company, the Association
will reimburse Sandler O'Neill for such fees and expenses whether or not the
Conversion is consummated; provided, however, that Sandler O'Neill shall not
incur any substantial expenses on behalf of the Association or the Holding
Company pursuant to this paragraph without the prior approval of the
Association.

POST-CONVERSION GENERAL ADVISORY SERVICES

If the Conversion is consummated, Sandler O'Neill agrees to act as an
independent financial advisor to the Holding Company and its subsidiaries in
connection with the Holding Company's general strategic planning ("General
Advisory Services"). In connection with such General Advisory Services, we would
expect to work with the Holding Company's management, its counsel, accountants
and other advisors to assess the Holding Company's strategic alternatives and
help implement a tactical plan to enhance the value of the Holding Company. We
anticipate that our activities would include, as appropriate, those activities
outlined in Exhibit A hereto. Sandler O'Neill shall provide such services at the
Holding Company's request for a period of one year following the completion of
the Conversion. The Holding Company shall not be required to pay any additional
fees to Sandler O'Neill in connection with such services rendered during such
year; provided, however, that the Holding Company shall reimburse Sandler
O'Neill for its reasonable out-of-pocket expenses incurred in connection with
providing such services. Thereafter, if both parties wish to continue the
relationship, the parties will enter into a separate advisory services agreement
on terms and conditions to be negotiated at such time. Notwithstanding the above
the Association and Holding Company are under no obligation to receive or
request such services.

DUE DILIGENCE REVIEW

Sandler O'Neill's obligation to perform the services contemplated by
this letter shall be subject to the satisfactory completion of such
investigation and inquiries relating to the Association and the Holding Company,
and their respective directors, officers, agents and employees, as Sandler
O'Neill and its counsel in their sole discretion may deem appropriate under the
circumstances. In this regard, the Association agrees that, at its expense, it
will make available to Sandler O'Neill all information which Sandler O'Neill
requests, and will allow Sandler O'Neill the opportunity to discuss with the
Association's and the Holding Company's management the financial condition,
business and operations of the Association and the Holding Company. The
Association and the Holding Company acknowledge that Sandler O'Neill will rely
upon the accuracy and completeness of all information received from the
Association and the Holding Company and their directors, trustees, officers,
employees, agents, independent accountants and counsel.
<PAGE> 11
Security Savings Association of Hazleton
June 25, 1998
Page 5

BLUE SKY MATTERS

The Association agrees that if Sandler O'Neill's counsel does not serve
as counsel with respect to blue sky matters in connection with the Offerings,
the Association will cause the counsel performing such services to prepare a
Blue Sky Memorandum related to the Offerings including Sandler O'Neill's
participation therein and shall furnish Sandler O'Neill a copy thereof addressed
to Sandler O'Neill or upon which such counsel shall state Sandler O'Neill may
rely.

CONFIDENTIALITY

Other than disclosure to other firms made part of any syndicate of
selected dealers or as required by law or regulation, Sandler O'Neill agrees
that it will not disclose any Confidential Information relating to the
Association obtained in connection with its engagement hereunder (whether or not
the Conversion is consummated). As used in this paragraph, the term
"Confidential Information" shall not include information which (i) is or becomes
generally available to the public other than as a result of a disclosure by
Sandler O'Neill, (ii) was available to Sandler O'Neill on a non-confidential
basis prior to its disclosure to Sandler O'Neill by the Association, or (iii)
becomes available to Sandler O'Neill on a non-confidential basis from a person
other than the Association who is not otherwise known to Sandler O'Neill to be
bound not to disclose such information pursuant to a contractual, legal or
fiduciary obligation.

INDEMNIFICATION

Since Sandler O'Neill will be acting on behalf of the Association and
the Holding Company in connection with the Conversion, the Holding Company and
the Association agree to indemnify and hold Sandler O'Neill and its affiliates
and their respective partners, directors, officers, employees, agents and
controlling persons within the meaning of Section 15 of the Securities Act of
1933 or Section 20 of the Securities Exchange Act (Sandler O'Neill and each such
person being an "Indemnified Party") harmless from and against any and all
losses, claims, damages and liabilities, joint or several, to which such
Indemnified Party may become subject under applicable federal or state law, or
otherwise, related to or arising out of the Conversion or the engagement of
Sandler O'Neill pursuant to, or the performance by Sandler O'Neill of the
services contemplated by, this letter, and will reimburse any Indemnified Party
for all expenses (including reasonable legal fees and expenses) as they are
incurred, including expenses incurred in connection with the investigation of,
preparation for or defense of any pending or threatened claim or any action or
proceeding arising therefrom, whether or not such Indemnified Party is a party;
provided, however, that the Association and the Holding Company will not be
liable in any such case to the extent that any such loss, claim, damage,
liability or expense (i) arises out of or is based upon any untrue statement of
a material fact
<PAGE> 12
Security Savings Association of Hazleton
June 25, 1998
Page 6

or the omission of a material fact required to be stated therein or necessary to
make not misleading any statements contained in any proxy statement or
prospectus (preliminary or final), or any amendment or supplement thereto, or
any of the applications, notices, filings or documents related thereto made in
reliance on and in conformity with written information furnished to the
Association by Sandler O'Neill expressly for use therein, or (ii) is primarily
attributable to the gross negligence, willful misconduct or bad faith of Sandler
O'Neill. If the foregoing indemnification is unavailable for any reason, the
Association and the Holding Company agree to contribute to such losses, claims,
damages, liabilities and expenses in the proportion that its financial interest
in the Conversion bears to that of Sandler O'Neill.

DEFINITIVE AGREEMENT

Sandler O'Neill and the Association agree that (a) except as set forth
in clause (b), the foregoing represents the general intention of the Association
and Sandler O'Neill with respect to the services to be provided by Sandler
O'Neill in connection with the Offerings, which will serve as a basis for
Sandler O'Neill commencing activities, and (c) the only legal and binding
obligations of the Association, the Holding Company and Sandler O'Neill with
respect to the subject matter hereof shall be (1) the Association's obligation
to reimburse costs and expenses pursuant to the section captioned "Costs and
Expenses," (2) those set forth under the captions "Confidentiality" and
"Indemnification," and (3) as set forth in a duly negotiated and executed
definitive Agency Agreement to be entered into prior to the commencement of the
Subscription Offering relating to the services of Sandler O'Neill in connection
with the Offerings. Such Agency Agreement shall be in form and content
satisfactory to Sandler O'Neill, the Association and the Holding Company and
their respective counsel and shall contain standard indemnification provisions
mutually acceptable to the Association, the Holding Company and Sandler O'Neill.
Sandler O'Neill agrees to furnish a draft of its Agency Agreement including
applicable exhibits to the Association and its counsel on or before August 1,
1998.

Sandler O'Neill's execution of such Agency Agreement shall also be
subject to (i) Sandler O'Neill's satisfaction with its investigation of the
Association's business, financial condition and results of operations, (ii)
preparation of offering materials that are satisfactory to Sandler O'Neill and
its counsel, (iii) compliance with all relevant legal and regulatory
requirements to the reasonable satisfaction of Sandler O'Neill's counsel, (iv)
agreement that the price established by the independent appraiser is reasonable
and (v) market conditions at the time of the proposed offering. Sandler O'Neill
may terminate this agreement if such Agency Agreement is not entered into prior
to December 31, 1999.
<PAGE> 13
Security Savings Association of Hazleton
June 25, 1998
Page 7

ELIMINATION OF HOLDING COMPANY

If the Board of Directors of the Association, for any reason, elects
not to proceed with the formation of the Holding Company but determines to
proceed with the Conversion and substitute the common stock of the Association
for the common stock of the Holding Company, all of the provisions of this
letter relating to the common stock of the Holding Company will be deemed to
pertain to the common stock of the Association on the same terms and conditions
that such provisions pertain to the common stock of the Holding Company and all
of the references in this letter to the Holding Company shall be deemed to refer
to the Association or shall have no effect, as the context of the reference
requires.

Please confirm that the foregoing correctly sets forth our agreement by
signing and returning to Sandler O'Neill the duplicate copy of this letter
enclosed herewith.

Very truly yours,

Sandler O'Neill & Partners, L.P.
By: Sandler O'Neill & Partners Corp.,
the sole general partner

By: /s/ Mark B. Cohen
---------------------
Mark B. Cohen
Principal

Accepted and agreed to as of
the date first above written:

Security Savings Association of Hazleton

By: /s/ Richard C. Laubach
------------------------
Mr. Richard C. Laubach
President and Chief Executive Officer

cc: Thomas J. Haggerty, Esq.
Muldoon, Murphy & Faucette
<PAGE> 14
EXHIBIT A

GENERAL ADVISORY SERVICES

1. A review and analysis of the Holding Company's current business and
financial characteristic, including its operating strategies, balance
sheet composition, historical operating performance, branch structure and
market share, and the Holding Company's competitive position relative to
selected peer groups;

2. Creation of a base case financial model to serve as a benchmark for
analyzing alternative strategies and market environments;

3. An analysis of the impact on the franchise value of altering the Holding
Company's dividend policy, implementing a stock repurchase program, or
changing the asset mix or other operating activities;

4. An analysis of the Holding Company's acquisition resources, objectives
and capacity to compete for acquisition opportunities;

5. A summary of recent merger and acquisition trends in the financial
services industry, including tactics employed by others and typical terms
and values involved;

6. A review of other strategic alternatives which could provide long-term
benefits and enhanced value to the Holding Company;

7. A review of the Holding Company's advance defensive preparation plans,
including a comprehensive financial valuation and an analysis of stock
ownership and trading activities;

8. A review with the Board of Directors of the Holding Company of Sandler
O'Neill's findings, with periodic updates as may be requested;

9. Ongoing general advice and counsel to management and the Board of
Directors of the Holding Company with respect to strategic and tactical
issues; and

10. Rendering such other financial advisory and investment banking services
as may from time to time be agreed upon by Sandler O'Neill and the
Holding Company.

<PAGE> 1
EXHIBIT 2.1

AMENDED
PLAN OF CONVERSION
FOR
SECURITY SAVINGS
ASSOCIATION OF HAZLETON

1. INTRODUCTION

This Amended Plan of Conversion ("Plan") provides for the conversion of
Security Savings Association of Hazleton ("ASSOCIATION") from a state-chartered
mutual savings association to a state-chartered capital stock savings
association. The Board of Directors of the ASSOCIATION currently contemplates
that all of the stock of the ASSOCIATION shall be held by a corporation (the
"Holding Company"). The Board of Directors has carefully considered the
alternatives available to the ASSOCIATION with respect to its corporate
structure and has determined that a mutual to stock conversion as described in
this Plan (the "Conversion") is in the best interests of the ASSOCIATION, its
depositors and the community served by the ASSOCIATION. The Board of Directors
believes that the decline in mutuality is placing mutual savings associations,
such as the ASSOCIATION, at a disadvantage to the increasing base of stock
thrift and commercial bank institutions. The restructuring of the ASSOCIATION
into the capital stock form of organization will enable the ASSOCIATION to
compete more effectively with commercial banks and other financial institutions
for new business opportunities, and, as a stock institution, to increase its
equity capital base and access the capital markets when needed and to enhance
the ASSOCIATION'S ability to expand its franchise and the products it offers.
The use

<PAGE> 2

of the Holding Company, if so utilized, would also provide greater
organizational and operating flexibility. Shares of capital stock of the
ASSOCIATION will be sold to the Holding Company and the Holding Company will
offer the Conversion Stock upon the terms and conditions set forth herein to the
Eligible Account Holders, the Employee Plans established by the ASSOCIATION or
Holding Company, the Supplemental Eligible Account Holders and the Other Members
in the respective priorities set forth in this Plan. Any shares of Conversion
Stock not subscribed for by the foregoing classes of persons will be offered for
sale to certain members of the public either directly by the ASSOCIATION and the
Holding Company through a Community Offering or a Syndicated Community Offering
or through an underwritten firm commitment public offering or through a
combination thereof. In the event that the ASSOCIATION decides not to utilize
the Holding Company in the Conversion, Conversion Stock of the ASSOCIATION, in
lieu of the Holding Company, will be sold as set forth above and in the
respective priorities set forth in this Plan. In addition to the foregoing, the
ASSOCIATION and the Holding Company, as part of this Plan, intend to implement
stock option plans and other stock benefit plans and will provide employment or
severance agreements to certain management employees and certain other
compensation to the directors, officers and employees of the ASSOCIATION as
described in the prospectus for the Conversion Stock.

In furtherance of the ASSOCIATION's long term commitment to its community,
this Plan provides for the establishment of a foundation (the "Foundation") as
part of the Conversion. The Foundation is intended to complement the
ASSOCIATION's existing community reinvestment activities in a manner that will
allow the communities in which the ASSOCIATION operates to share in the
potential growth and profitability of the Holding Company and the ASSOCIATION

<PAGE> 3

over the long term. Consistent with the ASSOCIATION's goal, the Holding Company
intends to donate to the Foundation from its authorized but unissued common
stock up to 8% of the number of shares sold in the Conversion. The establishment
of the Foundation is subject to the approval of the Voting Members of the
ASSOCIATION. In the event the Foundation is not approved, the ASSOCIATION may
determine to complete the Conversion without the Foundation.

This Plan, which has been unanimously approved by the Board of Directors
of the ASSOCIATION, must also be approved by the affirmative vote of a majority
of the total number of outstanding votes entitled to be cast by Voting Members
of the ASSOCIATION at a special meeting to be called for that purpose. Prior to
the submission of this Plan to the Voting Members for consideration, the Plan
must be approved by the Office of Thrift Supervision and the Pennsylvania
Department of Banking, to the extent required.

2. DEFINITIONS

For the purposes of this Plan, the following terms have the following
meanings:

Account Holder - The term Account Holder means any Person holding a
Savings Account in the ASSOCIATION.

Acting in Concert - The term "Acting in Concert" means (i) knowing
participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not pursuant to an express agreement; (ii) a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise; or
(iii) a person or company which acts in concert with another person or company
("other party") shall also be deemed to be acting in concert with any person or
company who is also acting in concert with that other party, except

<PAGE> 4

that any Tax-Qualified Employee Stock Benefit Plan will not be deemed to be
acting in concert with its trustee or a person who serves in a similar capacity
solely for the purpose of determining whether stock held by the trustee and
stock held by the plan will be aggregated.

Actual Purchase Price - The term Actual Purchase Price means the per share
price at which the Conversion Stock is ultimately sold in accordance with the
terms hereof.

Associate - The term Associate when used to indicate a relationship with
any person, means (i) any corporation or organization (other than the
ASSOCIATION or a majority-owned subsidiary of the ASSOCIATION) of which such
person is an officer or partner or is, directly or indirectly, the beneficial
owner of 10 percent or more of any class of equity securities, (ii) any trust or
other estate in which such person has a substantial beneficial interest or as to
which such person serves as trustee or in a similar fiduciary capacity except
that for the purposes of Sections 9 and 14 hereof, the term "Associate" does not
include any Non-Tax-Qualified Employee Stock Benefit Plan or any Tax-Qualified
Employee Stock Benefit Plan in which a person has a substantial beneficial
interest or serves as a trustee or in a similar fiduciary capacity, and except
that, for purposes of aggregating total shares that may be held by Officers and
Directors the term "Associate" does not include any Tax-Qualified Employee Stock
Benefit Plan, and (iii) any relative or spouse of such person, or any relative
of such spouse, who has the same home as such person or who is a Director or
Officer of the ASSOCIATION or the Holding Company, if utilized, or any of its
parents or subsidiaries.

ASSOCIATION - The term ASSOCIATION means Security Savings Association of
Hazleton, Hazleton, Pennsylvania.

<PAGE> 5

Community Offering - The term Community Offering means the offering for
sale to certain members of the general public directly by the ASSOCIATION or the
Holding Company, if utilized, of any shares of Conversion Stock not subscribed
for in the Subscription Offering.

Conversion - The term Conversion shall mean (a) the amendment of the
ASSOCIATION's Articles of Incorporation to authorize the issuance of capital
stock in accordance with the Rules and Regulations of the OTS and the
Pennsylvania Savings Association Code of 1967 and to otherwise conform to the
requirements of a Pennsylvania stock savings association and (b) the issuance of
the capital stock of the ASSOCIATION in accordance with this Plan, and the other
transactions effected as part of this Plan including, if utilized, the offer,
sale and issuance by the Holding Company of the Conversion Stock.

Conversion Stock - The term Conversion Stock means the common stock
offered and issued by the Holding Company or the $1.00 par value Common Stock
offered and issued by the ASSOCIATION, if the Holding Company form of
organization is not utilized, upon conversion.

Department - The term Department means the Pennsylvania Department of
Banking.

Director - The term Director means a member of the Board of Directors of
the ASSOCIATION and, where applicable, a member of the Board of Directors of the
Holding Company.

Eligible Account Holder - The term Eligible Account Holder means any
person holding a Qualifying Deposit on the Eligibility Record Date.

Eligibility Record Date - The term Eligibility Record Date means the date
for determining Eligible Account Holders in the ASSOCIATION and is March 31,
1997.

<PAGE> 6

Employees - The term Employees means all Persons who are employed by the
ASSOCIATION but does not include an Officer or Director.

Employee Plans - The term Employee Plans means the Tax-Qualified Employee
Stock Benefit Plans approved by the Board of Directors of the ASSOCIATION.

Estimated Price Range - The term Estimated Price Range means the range of
minimum and maximum aggregate values determined by the Board of Directors of the
ASSOCIATION within which the aggregate amount of Common Stock sold in the
Conversion will fall. The Estimated Price Range will be within the estimated pro
forma market value of the Conversion Stock as determined by the Independent
Appraiser prior to the Subscription Offering and as it may be amended from time
to time thereafter.

FDIC - The term FDIC means the Federal Deposit Insurance Corporation.

Holding Company - The term Holding Company means the corporation formed
for the purpose of acquiring all of the shares of capital stock of the
ASSOCIATION to be issued upon its conversion to stock form unless the Holding
Company form of organization is not utilized. Shares of common stock of the
Holding Company will be issued in the conversion to Participants and others in a
Subscription, Community, Syndicated Community, or underwritten firm commitment
public offering, or through a combination thereof.

Independent Appraiser - The term Independent Appraiser means an appraiser
retained by the ASSOCIATION to prepare an appraisal of the pro forma market
value of the Conversion Stock.

Local Community - The term Local Community means all counties in which the
ASSOCIATION has its home office or a branch office.

<PAGE> 7

Member - The term Member means any Person or entity who qualifies as a
member of the ASSOCIATION pursuant to its charter and bylaws.

OTS - The term OTS means Office of Thrift Supervision of the Department of
the Treasury and its successors.

Officer - The term Officer means an executive officer of the ASSOCIATION
which includes the Chief Executive Officer, President, Executive Vice President,
Senior Vice Presidents, Vice Presidents in charge of principal business
functions, Secretary, Treasurer and Controller and any person performing
functions similar to those performed by the foregoing persons.

Order Form - The term Order Form means any form together with attached
cover letter, sent by the ASSOCIATION to any Participant or Person containing
among other things a description of the alternatives available to such Person
under the Plan and by which any such Person may make elections regarding
subscriptions for Conversion Stock in the Subscription and Community Offerings.

Other Member - The term Other Member means any person who is a Member of
the ASSOCIATION (other than an Eligible Account Holder or Supplemental Eligible
Account Holder) at the close of business on the Voting Record Date.

Participants - The term Participants means the Eligible Account Holders,
Employee Plans, Supplemental Eligible Account Holders and Other Members.

Person - The term Person means an individual, a corporation, a
partnership, an association, a joint-stock company, a trust (including
Individual Retirement Accounts and KEOGH Accounts), any unincorporated
organization, a government or political subdivision thereof or any other entity.

<PAGE> 8

Plan - The term Plan means this Plan of Conversion of the ASSOCIATION as
it exists on the date hereof and as it may hereafter be amended in accordance
with its terms.

Preferred Subscribers - The term Preferred Subscribers means those members
of the general public which are natural persons residing in the ASSOCIATION's
Local Community.

Qualifying Deposit - The term Qualifying Deposit means the balance of each
Savings Account of $50 or more in the ASSOCIATION at the close of business on
the Eligibility Record Date or the Supplemental Eligibility Record Date,
whichever may be the case. Savings Accounts with total deposit balances of less
than $50 shall not constitute a Qualifying Deposit.

SEC - The term SEC refers to the United States Securities and Exchange
Commission.

Savings Account - The term Savings Account has the same meaning as in
Section 561.42 of the Rules and Regulations of the OTS and includes certificates
of deposit.

Special Meeting of Members - The term Special Meeting of Members means the
special meeting and any adjournments thereof held to consider and vote upon this
Plan.

Subscription Offering - The term Subscription Offering means the offering
of Conversion Stock for purchase through Order Forms to Participants.

Subscription Price - The term Subscription Price means the amount per
share of Conversion Stock to be paid initially by Participants in the
Subscription Offering and persons in the Community Offering.

Supplemental Eligibility Record Date - The term Supplemental Eligibility
Record Date means the supplemental record date for determining Supplemental
Eligible Account Holders of the ASSOCIATION. The Supplemental Eligibility Record
Date shall be the last day of the calendar quarter preceding the OTS' approval
of the application for Conversion.

<PAGE> 9

Supplemental Eligible Account Holder - The term Supplemental Eligible
Account Holder means any person (other than an Eligible Account Holder) holding
a Qualifying Deposit, except officers, directors and their associates, as of the
Supplemental Eligibility Record Date.

Syndicated Community Offering - The term Syndicated Community Offering
means the offering of Conversion Stock following the Subscription and Community
Offerings through a syndicate of broker-dealers.

Tax-Qualified Employee Stock Benefit Plan - The term Tax-Qualified
Employee Stock Benefit Plan means any defined benefit plan or defined
contribution plan, such as an employee stock ownership plan, stock bonus plan,
profit-sharing plan or other plan, which, with its related trust, meets the
requirements to be "qualified" under Section 401 of the Internal Revenue Code. A
"Non-Tax-Qualified Employee Stock Benefit Plan" is any defined benefit plan or
defined contribution plan which is not so qualified.

Voting Members - The term Voting Members means those persons qualifying as
voting members of the ASSOCIATION pursuant to its charter and bylaws.

Voting Record Date - The term Voting Record Date means the date fixed by
the Directors in accordance with OTS regulations and the Pennsylvania Savings
Association Code of 1967 for determining eligibility to vote at the Special
Meeting of Members.

3. PROCEDURE FOR CONVERSION

After approval of the Plan by a vote of not less than two-thirds (2/3) of
the Board of Directors of the ASSOCIATION, the Plan shall be submitted together
with all other requisite material to the OTS and the Department for approval.
Notice of the adoption of the Plan by the Board of Directors of the ASSOCIATION
and the submission of the Plan to the OTS and the

<PAGE> 10

Department for approval will be published in a newspaper having general
circulation in each community in which an office of the ASSOCIATION is located
and in a legal newspaper published in the county in which the ASSOCIATION is
located. If there is no legal newspaper published in such county, the notice
shall be published in an additional newspaper of general circulation in the
county. In addition, copies of the Plan will be made available at each office of
the ASSOCIATION for inspection by the Members. Upon receipt of notice from the
OTS to do so, the ASSOCIATION also will cause to be published a notice of the
filing with the OTS of an application to convert in accordance with the
provisions of the Plan. Following approval by the OTS and the Department, to the
extent required, the Plan will be submitted to a vote of the Voting Members at
the Special Meeting of Members called for that purpose. Upon approval of the
Plan by a majority of the total outstanding votes of the Voting Members, the
ASSOCIATION will take all other necessary steps pursuant to applicable laws and
regulations to convert the ASSOCIATION to stock form. The Conversion must be
completed within 24 months of the approval of the Plan by the Voting Members,
unless a longer time period is permitted by governing laws and regulations.

The Board of Directors of the ASSOCIATION intends to take all necessary
steps to form the Holding Company, including the filing of an Application on
Form H-(e)1, or H-(e)1-S, if available to the Holding Company, with the OTS. In
the event that the Holding Company is utilized, upon Conversion the ASSOCIATION
will issue capital stock to the Holding Company and the Holding Company will
issue and sell the Conversion Stock in accordance with this Plan.

The Board of Directors of the ASSOCIATION may determine for any reason at
any time prior to the issuance of the Conversion Stock not to utilize a holding
company form of

<PAGE> 11

organization in the Conversion, in which case, the Holding Company's
Registration Statement under the Securities Act of 1933 filed with the SEC will
be withdrawn, the ASSOCIATION will take all steps necessary to complete the
Conversion from the mutual to the stock form of organization, including filing
any necessary documents with the OTS and the Department, and will issue and sell
the Conversion Stock in accordance with this Plan. In such event, any
subscriptions or orders received for Conversion Stock of the Holding Company
shall be deemed to be subscriptions or orders for Conversion Stock of the
ASSOCIATION without any further action by the ASSOCIATION or the subscribers for
the Conversion Stock, unless any such further action is required by the SEC, the
OTS or the Department, in which case the ASSOCIATION shall take such necessary
action to complete the Conversion. Any references to the Holding Company in this
Plan shall mean the ASSOCIATION in the event the Holding Company is eliminated
in the Conversion.

The Board of Directors of the ASSOCIATION also intend to take all
necessary steps to establish the Foundation, and to fund such Foundation in the
manner set forth in Section 7A hereof, subject to the approval of the Voting
Members.

The Conversion Stock will not be insured by the FDIC. The ASSOCIATION will
not knowingly lend funds or otherwise extend credit to any Person to purchase
shares of the Conversion Stock.

4. HOLDING COMPANY APPLICATIONS AND APPROVALS

The Holding Company shall make timely applications for any requisite
regulatory approvals, including an Application on Form H-(e)1 or an H-(e)1-S, if
available to the Holding Company, to be filed with the OTS and to the extent
applicable, the Department, and a

<PAGE> 12

Registration Statement to be filed with the SEC. The ASSOCIATION shall be a
wholly-owned subsidiary of the Holding Company unless the Holding Company is
eliminated in the Conversion.

5. SALE OF CONVERSION STOCK

The Conversion Stock will be offered simultaneously in the Subscription
Offering to the Eligible Account Holders, Employee Plans, Supplemental Eligible
Account Holders and Other Members in the respective priorities set forth in
Sections 8 through 11 of this Plan. The Subscription Offering may be commenced
as early as the mailing of the Proxy Statement for the Special Meeting of
Members and must be commenced in time to complete the Conversion within the time
period specified in Section 3.

Any shares of Conversion Stock not subscribed for in the Subscription
Offering will be offered for sale in the Community Offering as provided in
Section 12 of this Plan. The Subscription Offering may be commenced prior to the
Special Meeting of Members and, in that event, the Community Offering may also
be commenced prior to the Special Meeting of Members. The offer and sale of
Conversion Stock prior to the Special Meeting of Members shall, however, be
conditioned upon approval of the Plan by the Voting Members.

If feasible, any shares of Conversion Stock remaining after the
Subscription and Community Offerings may be sold in a Syndicated Community
Offering, as provided in Section 13 of this Plan in a manner that will achieve
the widest distribution of the Conversion Stock as determined by the
ASSOCIATION. The sale of all Conversion Stock subscribed for in the Subscription
and Community Offerings will be consummated simultaneously on the date the sale
of Conversion Stock in the Syndicated Community Offering is consummated and only
if all unsubscribed for Conversion Stock is sold.

<PAGE> 13

The ASSOCIATION may elect to offer to pay fees on a per share basis to
brokers who assist Persons in determining to purchase shares in the Subscription
and Community Offerings.

6. NUMBER OF SHARES AND PURCHASE PRICE OF CONVERSION STOCK

The total number of shares (or a range thereof) of Conversion Stock to be
issued and offered for sale will be determined jointly by the Board of Directors
of the ASSOCIATION and the Board of Directors of the Holding Company, if the
holding company form of organization is utilized, immediately prior to the
commencement of the Subscription and Community Offerings, subject to adjustment
thereafter if necessitated by market or financial conditions, with the approval
of the OTS and the Department, if necessary. In particular, the total number of
shares may be increased by up to 15% of the number of shares offered in the
Subscription and Community Offering if the Estimated Price Range is increased
subsequent to the commencement of the Subscription and Community Offering to
reflect changes in market and financial conditions.

All shares sold in the Conversion will be sold at a uniform price per
share referred to in this Plan as the Actual Purchase Price. The aggregate
purchase price for all shares of Conversion Stock will not be inconsistent with
the estimated consolidated pro forma market value of the ASSOCIATION or the
Holding Company, if utilized. The estimated consolidated pro forma market value
of the ASSOCIATION or the Holding Company, if utilized, will be determined for
such purpose by the Independent Appraiser. Prior to the commencement of the
Subscription and Community Offerings, an Estimated Price Range will be
established, which range will vary within 15% above to 15% below the midpoint of
such range. The number of shares of Conversion Stock to be issued and the
purchase price per share may be increased or decreased by the ASSOCIATION or the
Holding Company, if utilized. In the event that the aggregate purchase

<PAGE> 14

price of the Conversion Stock is below the minimum of the Estimated Price Range,
or materially above the maximum of the Estimated Price Range, resolicitation of
purchasers may be required, provided that up to a 15% increase above the maximum
of the Estimated Price Range will not be deemed material so as to require a
resolicitation. Up to a 15% increase in the number of shares to be issued which
is supported by an appropriate change in the estimated pro forma market value of
the ASSOCIATION or the Holding Company, if utilized, will not be deemed to be
material so as to require a resolicitation of subscriptions. In the event that
the aggregate purchase price of the Conversion Stock is below the minimum of the
Estimated Price Range or in excess of 15% above the maximum of the Estimated
Price Range, and a resolicitation is required, such resolicitation shall be
effected in such manner and within such time as the ASSOCIATION shall establish,
with the approval of the OTS and the Department, if required.

Based upon the independent valuation as updated prior to the commencement
of the Subscription and Community Offerings, the Board of Directors of the
Holding Company, (if a holding company form of organization is utilized) and the
Board of Directors of the ASSOCIATION will fix the Subscription Price and the
range of the number of shares to be offered. If upon completion of the
Subscription and Community Offerings all of the Conversion Stock is subscribed
for, or if because of a limited number of unsubscribed shares or otherwise a
Syndicated Community Offering cannot be effected, the total number of shares of
Conversion Stock to be issued and sold will be jointly determined by the
ASSOCIATION and Holding Company (if a holding company form of organization is
utilized) as follows: (a) the estimated aggregate pro forma market value of the
ASSOCIATION or the Holding Company, as the case may be, immediately after
Conversion as determined by the Independent Appraiser, expressed in

<PAGE> 15

terms of a specific aggregate dollar amount rather than as a range, upon
completion of the Subscription and Community Offerings or other sale of all of
the Conversion Stock shall be divided by (b) the Actual Purchase Price.

If there is a Syndicated Community Offering of shares of Conversion Stock
not subscribed for in the Subscription and Community Offerings, the price per
share at which the Conversion Stock is sold in such Syndicated Community
Offering shall be the Subscription Price.

Notwithstanding the foregoing, no sale of Conversion Stock may be
consummated unless, prior to such consummation, the Independent Appraiser
confirms to the ASSOCIATION and Holding Company, if utilized, and to the OTS
that, to the best knowledge of the Independent Appraiser, nothing of a material
nature has occurred which, taking into account all relevant factors, would cause
the Independent Appraiser to conclude that the aggregate value of the Conversion
Stock at the Actual Purchase Price is incompatible with its estimate of the
aggregate consolidated pro forma market value of the Holding Company or the
ASSOCIATION if no Holding Company is utilized. If such confirmation is not
received, the ASSOCIATION may cancel the Subscription and Community Offerings
and/or the Syndicated Community Offering, extend the Conversion, establish a new
Subscription Price Range and/or Estimated Price Range, extend, reopen or hold
new Subscription and Community Offerings and/or Syndicated Community Offering or
take such other action as the OTS and the Department may permit.

The Conversion Stock to be issued in the Conversion shall be fully paid
and nonassessable.

<PAGE> 16

7. PURCHASE BY THE HOLDING COMPANY OF THE STOCK OF THE
ASSOCIATION

Upon the consummation of the sale of all of the Conversion Stock, and in
the event that a holding company form of organization is utilized, the Holding
Company will purchase from the ASSOCIATION all of the capital stock of the
ASSOCIATION to be issued by the ASSOCIATION in the Conversion in exchange for
the Conversion proceeds that are not permitted to be retained by the Holding
Company.

The Holding Company will apply to the OTS to retain up to 50% of the
proceeds of the Conversion. Assuming the Holding Company is not eliminated, a
lesser percentage may be acceptable. The ASSOCIATION believes that the
Conversion proceeds will provide economic strength to the Holding Company and
the ASSOCIATION for the future in a highly competitive and regulated environment
and would facilitate expansion through acquisitions, diversification into other
related businesses and for other business and investment purposes, including the
payment of dividends and future repurchases of Conversion Stock, as permitted by
the OTS and the Department, to the extent required. If during the Conversion
process the Board of Directors of the ASSOCIATION determines not to complete the
Conversion utilizing a holding company form of organization, capital stock of
the ASSOCIATION will be issued and sold in accordance with the Plan. The above
activities may also be engaged in by the ASSOCIATION if the Holding Company is
eliminated.

7A. ESTABLISHMENT AND FUNDING OF FOUNDATION

As part of the Conversion, the Holding Company and the ASSOCIATION intend
to establish a Foundation that will qualify as an exempt organization under
Section 501(c)(3) of the

<PAGE> 17

Internal Revenue Code and to donate to the Foundation up to 8% of the number of
shares of Common Stock sold in the Conversion. The Foundation is being formed in
connection with the Conversion in order to complement the ASSOCIATION's existing
community reinvestment activities and to share with the communities in which the
ASSOCIATION operates a part of the ASSOCIATION's financial success as a
community-minded, financial services institution. The funding of the Foundation
with Common Stock of the Holding Company accomplishes this goal as it enables
such communities to share in the potential growth and profitability of the
Holding Company and the ASSOCIATION over the long-term.

The Foundation will be dedicated to the promotion of charitable purposes
within the communities in which the ASSOCIATION operates, including, but not
limited to, grants or donations to support housing assistance, scholarships,
local education, not-for-profit medical facilities, not-for-profit community
groups and other types of organizations or civic minded projects. The board of
directors of the Foundation will be responsible for establishing the polices of
the Foundation with respect to grants or donations, consistent with the stated
purposes of the Foundation. The Foundation will annually distribute total grants
to assist charitable organizations or to fund projects within its local
community of not less than 5% of the average fair value of Foundation assets
each year. In order to serve the purposes for which it was formed and maintain
its 501(c)(3) qualification, the Foundation may sell, on an annual basis, a
limited portion of the Common Stock contributed to it by the Holding Company.

The establishment and funding of the Foundation as part of the Conversion
is subject to the approval of the Voting Members by an affirmative vote of a
majority of the votes eligible to be cast by Voting Members in person or by
proxy at the Special Meeting. In the event that the

<PAGE> 18

ASSOCIATION's Voting Members approve this Plan, but not the Foundation, the
ASSOCIATION may determine to complete the Conversion without the establishment
of the Foundation and may do so without amending this Plan or obtaining any
further vote of the ASSOCIATION's Voting Members. Failure of the Voting Members
to approve the Foundation may materially affect the pro forma market value of
the ASSOCIATION. In such an event, the ASSOCIATION may establish a new Estimated
Price Range and commence a resolicitation of subscribers. For comparison
purposes, Voting Members will be provided with a projection of the pro forma
market value of the Conversion Stock, an Estimated Price Range and certain
selected pro forma financial data that would result if the Conversion were
consummated without establishment of the Foundation.

8. SUBSCRIPTION RIGHTS OF ELIGIBLE ACCOUNT HOLDERS
(FIRST PRIORITY)

A. Each Eligible Account Holder shall receive, as first priority and
without payment, nontransferable subscription rights to subscribe for shares of
Conversion Stock equal to an amount up to the greater of: the amount permitted
to be subscribed for in the Community Offering which amount, pursuant to Section
12, currently is $150,000 of the Conversion Stock offered, but which may be
increased to 5% or decreased to less than $150,0000 without the further approval
of members or resolicitation of subscribers; one-tenth of one percent (.10%) of
the total offering of shares of Conversion Stock; or fifteen times the product
(rounded down to the next whole number) obtained by multiplying the total number
of shares of Conversion Stock to be issued by a fraction of which the numerator
is the amount of the Qualifying Deposit of the Eligible Account Holder and the
denominator is the total amount of Qualifying Deposits of all Eligible Account
Holders,

<PAGE> 19

in each case on the Eligibility Record Date, subject to the maximum purchase
limitation specified in Section 14A and the minimum purchase limitation
specified in Section 14C and exclusive of an increase in the total number of
shares issued due to an increase in the Estimated Price Range of up to 15%.

B. In the event that Eligible Account Holders exercise subscription rights
for a number of shares of Conversion Stock in excess of the total number of
shares eligible for subscription, the shares of Conversion Stock shall be
allocated among the subscribing Eligible Account Holders so as to permit each
subscribing Eligible Account Holder, to the extent possible, to purchase a
number of shares sufficient to make his or her total allocation of Conversion
Stock equal to the lesser of 100 shares or the number of shares subscribed for
by the Eligible Account Holders. Any shares remaining after that allocation will
be allocated among the subscribing Eligible Account Holders whose subscriptions
remain unsatisfied in the proportion that the amount of the Qualifying Deposit
of each Eligible Account Holder whose subscription remains unsatisfied bears to
the total amount of the Qualifying Deposits of all Eligible Account Holders
whose subscriptions remain unsatisfied. If the amount so allocated exceeds the
amount subscribed for by any one or more Eligible Account Holders, the excess
shall be reallocated (one or more times as necessary) among those Eligible
Account Holders whose subscriptions are still not fully satisfied on the same
principle until all available shares have been allocated or all subscriptions
satisfied.

C. Subscription rights as Eligible Account Holders received by Directors
and Officers and their Associates which are based on deposits made by such
persons during the twelve (12) months preceding the Eligibility Record Date
shall be subordinated to the Subscription Rights of all other Eligible Account
Holders.

<PAGE> 20

9. SUBSCRIPTION RIGHTS OF THE EMPLOYEE PLANS (SECOND PRIORITY)

The Employee Plans shall receive, without payment, as a second priority
after the filling of subscriptions of Eligible Account Holders, nontransferable
subscription rights to purchase in the Subscription Offering the number of
shares of Conversion Stock requested by such Employee Plans. If, after the
filling of subscriptions of Eligible Account Holders, a sufficient number of
shares are not available to fill the subscriptions by such Employee Plans, the
subscription by such Employee Plans shall be filled to the maximum extent
possible; provided, however, that in the event of an increase in the total
number of shares issued due to an increase in the Estimated Price Range of up to
15%, the additional shares may be sold to the Employee Plans subject to the
provisions of Section 14.

The Employee Plans shall not be deemed to be an associate or affiliate of
or Person Acting in Concert with any Director or Officer of the Holding Company
or the ASSOCIATION.

10. SUBSCRIPTION RIGHTS OF SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS
(THIRD PRIORITY)

A. Each Supplemental Eligible Account Holder shall receive, as third
priority and without payment, nontransferable subscription rights to subscribe
for shares of Conversion Stock equal to an amount up to the greater of: the
amount permitted to be subscribed for in the Community Offering which amount,
pursuant to Section 12, currently is $150,000 of the Conversion Stock offered,
but which may be increased to 5% or decreased to less than $150,000 without the
further approval of members or resolicitation of subscribers; one-tenth of one
percent (.10%) of the total offering of Conversion Stock; or fifteen times the
product (rounded down to the next whole number) obtained by multiplying the
total number of shares of Conversion Stock

<PAGE> 21

to be issued by a fraction of which the numerator is the amount of the
Qualifying Deposit of the Supplemental Eligible Account Holder and the
denominator is the total amount of the Qualifying Deposits of all Supplemental
Eligible Account Holders in the ASSOCIATION on the Supplemental Eligibility
Record Date, subject to the maximum purchase limitation specified in Section 14A
and the minimum purchase limitation specified in Section 14C and exclusive of an
increase in the total number of shares issued due to an increase in the
Estimated Price Range of up to 15%.

B. In the event that Supplemental Eligible Account Holders exercise
subscription rights for a number of shares of Conversion Stock in excess of the
total number of shares eligible for subscription, the remaining shares of
Conversion Stock shall be allocated among the subscribing Supplemental Eligible
Account Holders so as to permit each subscribing Supplemental Eligible Account
Holder, to the extent possible, to purchase a number of shares sufficient to
make his or her total allocation of Conversion Stock equal to the lesser of 100
shares or the number of shares subscribed for by the Supplemental Eligible
Account Holder. Any shares remaining after that allocation will be allocated
among the subscribing Supplemental Eligible Account Holders whose subscriptions
remain unsatisfied in the proportion that the amount of the Qualifying Deposit
of each Supplemental Eligible Account Holder whose subscription remains
unsatisfied bears to the total amount of the Qualifying Deposits of all
Supplemental Eligible Account Holders whose subscriptions remain unsatisfied. If
the amount so allocated exceeds the amount subscribed for by any one or more
Supplemental Eligible Account Holders, the excess shall be reallocated (one or
more times as necessary) among those Supplemental Eligible Account Holders whose
subscriptions are still not fully satisfied on the same principle until all
available shares have been allocated or all subscriptions satisfied.

<PAGE> 22

C. Subscription rights received by an Eligible Account Holder pursuant to
Section 8 shall be applied in partial satisfaction of the subscription rights to
be received as a Supplemental Eligible Account Holder pursuant to this Section
10.

11. SUBSCRIPTION RIGHTS OF OTHER MEMBERS (FOURTH PRIORITY)

A. Each Other Member shall receive, without payment, as a fourth priority
after the filling of subscriptions of the Eligible Account Holders, the Employee
Plans, and the Supplemental Eligible Account Holders, nontransferable
subscription rights to subscribe for shares of Conversion Stock equal to an
amount up to the greater of: the amount permitted to be subscribed for in the
Community Offering which amount, pursuant to Section 12, currently is $150,000
of the Conversion Stock offered, but which may be increased to 5% or decreased
to less than $150,000 without the further approval of members or resolicitation
of subscribers; or one-tenth of one percent (.10%) of the total offering of
shares of Conversion Stock, subject to the maximum purchase limitation specified
in Section 14A and the minimum purchase limitation specified in Section 14C and
exclusive of an increase in the total number of shares issued due to an increase
in the Estimated Price Range of up to 15%.

B. In the event that Other Members exercise subscription rights for a
number of shares of Conversion Stock in excess of the total number of shares
eligible for subscription, the remaining shares of Conversion Stock shall be
allocated among the subscribing Other Members so as to permit each subscribing
Other Member, to the extent possible, to purchase a number of shares sufficient
to make his or her total allocation of Conversion Stock equal to the lesser of
100 shares or the number of shares subscribed for by the Other Member. Any
shares remaining after that allocation will be allocated among the subscribing
Other Members whose subscriptions remain

<PAGE> 23

unsatisfied pro rata in the same proportion that the number of votes of a
subscribing Other Member on the Voting Record Date bears to the total votes on
the Voting Record Date of all subscribing Other Members. If the amount so
allocated exceeds the amount subscribed for by any one or more remaining Other
Members, the excess shall be reallocated (one or more times as necessary) among
those remaining Other Members whose subscriptions are still not fully satisfied
on the same principle until all available shares have been allocated or all
subscriptions satisfied.

12. COMMUNITY OFFERING (FIFTH PRIORITY)

If less than the total number of shares of Conversion Stock to be
subscribed for in the Conversion are sold in the Subscription Offering, it is
expected that shares remaining unsubscribed for will be made available for
purchase in the Community Offering to certain members of the general public,
which may subscribe together with any Associate or group of persons Acting in
Concert for up to $150,000 of the shares of Conversion Stock offered subject to
the Maximum Overall Purchase Limitation as specified in Section 14A and the
minimum purchase limitation specified in Section 14C and exclusive of an
increase in the total number of shares issued due to an increase in the
Estimated Price Range of up to 15%; provided, however, that the amount permitted
to be purchased in the Community Offering may be increased to 5% of the
Conversion Stock; or decreased to less than $150,000 without the further
approval of members or resolicitation of subscribers. The shares may be made
available in the Community Offering through a direct community marketing program
which may provide for utilization of a broker, dealer, consultant or investment
banking firm, experienced and expert in the sale of savings institution
securities. Such entities may be compensated on a fixed fee basis or on a
commission basis, or a combination thereof. Shares may be made available in the
Community Offering with

<PAGE> 24

preference given to Preferred Subscribers. The ASSOCIATION shall make
distribution of the Conversion Stock to be sold in the Community Offering in
such a manner as to promote the widest distribution of Conversion Stock. The
ASSOCIATION reserves the right to reject any or all orders, in whole or in part,
which are received in the Community Offering.

If the subscribers in the Community Offering, whose orders would otherwise
be accepted, subscribe for more shares than are available for purchase, the
shares available to them will be allocated among the subscribers in the manner
which permits each such person to the extent possible, to purchase the number of
shares necessary to make his total allocation of Conversion Stock equal to the
lesser of 100 shares or the number of shares subscribed for by such persons.
Thereafter, unallocated shares will be allocated among the subscribers whose
subscriptions remain unsatisfied on a 100 shares per order basis until all such
orders have been filled or the remaining shares have been allocated. The
ASSOCIATION may establish all other terms and conditions of such offer. The
Community Offering may commence concurrently during or subsequent to the
Subscription Offering. The Community Offering must be completed within 45 days
after the completion of the Subscription Offering unless otherwise extended by
the OTS.

13. SYNDICATED COMMUNITY OFFERING

If feasible, all shares of Conversion Stock not subscribed for in the
Subscription and Community Offerings may be sold in a Syndicated Community
Offering, subject to such terms, conditions and procedures as may be determined
by the ASSOCIATION, in a manner that will achieve the widest distribution of the
Conversion Stock subject to the right of the ASSOCIATION to accept or reject in
whole or in part all subscriptions in the Syndicated Community Offering. In the
Syndicated Community Offering, any person together with any Associate or group
of

<PAGE> 25

persons Acting in Concert may purchase up to $150,000 of the shares of
Conversion Stock offered subject to the maximum purchase limitation specified in
Section 14A and the minimum purchase limitation specified in Section 14C and
exclusive of an increase in the total number of shares issued due to an increase
in the Estimated Price Range of up to 15%; provided, however, that this amount
may be increased to 5% or decreased to less than $150,000 without the further
approval of members or resolicitation of subscribers. The shares purchased by
any Person together with any Associate or group of persons Acting in Concert
pursuant to Section 12 shall be counted toward meeting the maximum percentage of
shares permitted to be purchased pursuant to this Section. Provided that the
Subscription Offering has commenced, the ASSOCIATION may commence the Syndicated
Community Offering at any time after the mailing to the Members of the Proxy
Statement to be used in connection with the Special Meeting of Members, provided
that the completion of the offer and sale of the Conversion Stock shall be
conditioned upon the approval of this Plan by the Voting Members. If the
Syndicated Community Offering is not sooner commenced pursuant to the provisions
of the preceding sentence, the Syndicated Community Offering will be commenced
as soon as practicable following the date upon which the Subscription and
Community Offerings terminate.

Alternatively, if a Syndicated Community Offering is not held, the
ASSOCIATION shall have the right to sell any shares of Conversion Stock
remaining following the Subscription and Community Offerings in an underwritten
firm commitment public offering. The provisions of Section 14 hereof shall not
be applicable to sales to underwriters for purposes of such an offering but
shall be applicable to the sales by the underwriters to the public. The price to
be paid by the underwriters in such an offering shall be equal to the Actual
Purchase Price less an underwriting

<PAGE> 26

discount to be negotiated among such underwriters and the ASSOCIATION, which
will in no event exceed an amount deemed to be acceptable by the OTS.

If for any reason a Syndicated Community Offering or an underwritten firm
commitment public offering of shares of Conversion Stock not sold in the
Subscription and Community Offerings can not be effected, or in the event that
any insignificant residue of shares of Conversion Stock is not sold in the
Subscription and Community Offerings or in the Syndicated Community Offering or
an underwritten firm commitment public offering, other purchase arrangements
will be made for the sale of unsubscribed shares by the ASSOCIATION, if
possible. Such other purchase arrangements will be subject to the approval of
the OTS.

14. LIMITATION ON PURCHASES

In addition to the maximum amount of Conversion Stock that may be
subscribed for as set forth in Sections 8, 10, 11, 12 and 13, the following
limitations shall apply to all purchases of shares of Conversion Stock:

A. The maximum number of shares of Conversion Stock which may be
subscribed for or purchased in all categories in the conversion by any Person or
Participant together with any Associate or group or persons Acting in Concert
shall not exceed the greater of (i) $150,000 or (ii) 1.0% of the Conversion
Stock offered (the "Maximum Overall Purchase Limitation"), except for the
Employee Plans which may subscribe for up to 10% of the Conversion Stock issued
and except for certain Eligible Account Holders and Supplemental Eligible
Account Holders which may subscribe for or purchase shares in accordance with
Sections 8 and 10 herein, respectively; provided, however, in the event that the
Maximum Overall Purchase Limitation is increased to more than 2.0% of the shares
of Conversion Stock offered, orders for Conversion Stock in the

<PAGE> 27

Community Offering and in the Syndicated Community Offering (or, alternatively
an underwritten firm commitment public offering), if any, shall, as determined
by the ASSOCIATION, first be filled to a maximum of 2.0% of the total number of
shares of Conversion Stock offered and thereafter remaining shares shall be
allocated on an equal number of shares basis per order until all orders have
been filled.

B. The maximum number of shares of Conversion Stock which may be purchased
in all categories in the Conversion by Officers and Directors of the ASSOCIATION
and their Associates in the aggregate shall not exceed 33% of the total number
of shares of Conversion Stock issued.

C. A minimum of 25 shares of Conversion Stock must be purchased by each
Person purchasing shares in the Conversion to the extent those shares are
available; provided, however, that in the event the minimum number of shares of
Conversion Stock purchased times the price per share exceeds $500, then such
minimum purchase requirement shall be reduced to such number of shares of
Conversion Stock which when multiplied by the price per share shall not exceed
$500, as determined by the Board.

If the number of shares of Conversion Stock otherwise allocable pursuant
to Sections 8, 10, 11, 12 and 13, to any Person or that Person's Associates
would be in excess of the maximum number of shares permitted as set forth above,
the number of shares of Conversion Stock allocated to each such person shall be
reduced to the lowest limitation applicable to that Person, and then the number
of shares allocated to each group consisting of a Person and that Person's
Associates shall be reduced so that the aggregate allocation to that Person and
his or her Associates complies with the above maximums, and such maximum number
of shares shall be reallocated among that

<PAGE> 28

Person and his or her Associates as they may agree, or in the absence of an
agreement, in proportion to the shares subscribed by each (after first applying
the maximums applicable to each Person, separately).

Depending upon market or financial conditions, the Board of Directors of
the ASSOCIATION and the Holding Company, without further approval of the
Members, may decrease or increase the purchase limitations in this Plan,
provided that the maximum purchase limitations may not be increased to a
percentage in excess of 5%. Notwithstanding the foregoing, the Maximum Overall
Purchase Limitation may be increased up to 9.99% provided that orders for
Conversion Stock exceeding 5% of the shares being offered shall not exceed, in
the aggregate, 10% of the total offering. If the ASSOCIATION or the Holding
Company, as the case may be, increases the maximum purchase limitations, the
ASSOCIATION or the Holding Company, as the case may be, is only required to
resolicit Persons who subscribed for the maximum purchase amount and may, in the
sole discretion of the ASSOCIATION or the Holding Company, as the case may be,
resolicit certain other large subscribers.

In the event shares of Conversion stock are sold in excess of the maximum
of the Estimated Price Range, (the "Adjusted Maximum") such shares will be
allocated in the following order of priority: (i) to fill the Employee Plans'
subscription to the Adjusted Maximum; (ii) in the event that there is an over
subscription at the Eligible Account Holder level, to fill unfulfilled
subscriptions of Eligible Account Holders exclusive of the Adjusted Maximum in
accordance with Section 8; (iii) in the event there is an over subscription at
the Supplemental Eligible Account Holder level, to fill unfulfilled
subscriptions of Supplemental Eligible Account Holders exclusive of the Adjusted
Maximum in accordance with Section 10; (iv) in the event that there is an over

<PAGE> 29

subscription at the Other Member level, to fill unfulfilled subscriptions of
Other Members exclusive of the Adjusted Maximum in accordance with Section 11;
and (v) to fill unfulfilled Subscriptions in the Community Offering exclusive of
the Adjusted Maximum in accordance with Section 12.

For purposes of this Section 14, the Directors and Officers of the
ASSOCIATION and the Holding Company shall not be deemed to be Associates or a
group affiliated with each other or otherwise Acting in Concert solely as a
result of their being Directors or Officers of the ASSOCIATION or the Holding
Company.

Each Person purchasing Conversion Stock in the Conversion shall be deemed
to confirm that such purchase does not conflict with the above purchase
limitations contained in this Plan.

For a period of three years following the Conversion, no Officer, Director
or their Associates shall purchase, without the prior written approval of the
OTS, any outstanding shares of common stock of the ASSOCIATION or the Holding
Company, as the case may be, except from a broker-dealer registered with the
SEC. This provision shall not apply to negotiated transactions involving more
than one percent of the outstanding shares of common stock of the ASSOCIATION or
the Holding Company, as the case may be, the exercise of any options pursuant to
a stock option plan or purchases of common stock of the ASSOCIATION or the
Holding Company, as the case may be, made by or held by any Tax-Qualified
Employee Stock Benefit Plan or Non-Tax-Qualified Employee Stock Benefit Plan of
the ASSOCIATION or the Holding Company (including the Employee Plans) which may
be attributable to any Officer or Director. As used herein, the term "negotiated
transaction" means a transaction in which the securities are offered and the
terms and arrangements relating to any sale are arrived at through

<PAGE> 30

direct communications between the seller or any person acting on its behalf and
the purchaser or his investment representative. The term "investment
representative" shall mean a professional investment advisor acting as agent for
the purchaser and independent of the seller and not acting on behalf of the
seller in connection with the transaction.

15. PAYMENT FOR CONVERSION STOCK

All payments for Conversion Stock subscribed for in the Subscription,
Community and Syndicated Community Offerings must be delivered in full to the
ASSOCIATION, together with a properly completed and executed Order Form, or
purchase order in the case of the Syndicated Community Offering, on or prior to
the expiration date specified on the Order Form or purchase order, as the case
may be, unless such date is extended by the ASSOCIATION; provided, however, that
if the Employee Plans subscribe for shares during the Subscription Offering,
such plans will not be required to pay for the shares at the time they subscribe
but rather may pay for such shares of Conversion Stock subscribed for by such
plans at the Actual Purchase Price upon consummation of the Conversion, provided
that, in the case of the employee stock ownership plan ("ESOP") there is in
force from the time of its subscription until the consummation of the
Conversion, a loan commitment from the Holding Company or an unrelated financial
institution to lend to the ESOP, at such time, the aggregate Subscription Price
of the shares for which it subscribed. The ASSOCIATION may make scheduled
discretionary contributions to an Employee Plan provided such contributions do
not cause the ASSOCIATION to fail to meet its regulatory capital requirement.

Notwithstanding the foregoing, the ASSOCIATION and the Holding Company, if
utilized, shall have the right, in their sole discretion, to permit
institutional investors to submit contractually

<PAGE> 31

irrevocable orders in the Community Offering and to thereafter submit payment
for the Conversion Stock for which they are subscribing in the Community
Offering at any time prior to 48 hours before the completion of the Conversion,
unless such 48 hour period is waived by the ASSOCIATION and the Holding Company,
in their sole discretion.

Payment for Conversion Stock subscribed for shall be made either in cash
(if delivered in person), check or money order. Alternatively, subscribers in
the Subscription and Community Offerings may pay for the shares subscribed for
by authorizing the ASSOCIATION on the Order Form to make a withdrawal from the
subscriber's Savings Account at the ASSOCIATION in an amount equal to the
purchase price of such shares. Such authorized withdrawal, whether from a
savings passbook or certificate account, shall be without penalty as to
premature withdrawal. If the authorized withdrawal is from a certificate
account, and the remaining balance does not meet the applicable minimum balance
requirement, the certificate shall be cancelled at the time of withdrawal,
without penalty, and the remaining balance will earn interest at the passbook
rate. Funds for which a withdrawal is authorized will remain in the subscriber's
Savings Account but may not be used by the subscriber until the Conversion Stock
has been sold or the 45-day period (or such longer period as may be approved by
the OTS) following the Subscription and Community Offering has expired,
whichever occurs first. Thereafter, the withdrawal will be given effect only to
the extent necessary to satisfy the subscription (to the extent it can be
filled) at the purchase price per share. Interest will continue to be earned on
any amounts authorized for withdrawal until such withdrawal is given effect.
Interest will be paid by the ASSOCIATION at not less than the passbook annual
rate on payments for Conversion Stock received in cash or by check or money
order. Such interest will be paid from the date payment is received by the

<PAGE> 32

ASSOCIATION until consummation or termination of the Conversion. If for any
reason the Conversion is not consummated, all payments made by subscribers in
the Subscription, Community and Syndicated Community Offerings will be refunded
to them with interest. In case of amounts authorized for withdrawal from Savings
Accounts, refunds will be made by cancelling the authorization for withdrawal.
The ASSOCIATION is prohibited by regulation from knowingly making any loans or
granting any lines of credit for the purchase of stock in the Conversion, and
therefore, will not do so.

16. MANNER OF EXERCISING SUBSCRIPTION RIGHTS THROUGH ORDER
FORMS

As soon as practicable after the Prospectus prepared by the Holding
Company and ASSOCIATION has been declared effective by the OTS, the Department
to the extent required, and the SEC if the holding company form of organization
is utilized, Order Forms will be distributed to all Eligible Account Holders,
the Employee Plans, the Supplemental Eligible Account Holders and Other Members
at their last known addresses appearing on the records of the ASSOCIATION for
the purpose of subscribing to shares of Conversion Stock in the Subscription
Offering and will be made available for use by those Persons entitled to
purchase in the Community Offering. Notwithstanding the foregoing, the
ASSOCIATION may elect to send Order Forms only to those Persons who request them
after such notice as is approved by the OTS and the Department to the extent
required and is adequate to apprize all Eligible Account Holders, the Employee
Plans, Supplemental Eligible Account Holders and Other Members of the pendency
of the Subscription Offering has been given. Such notice may be included with
the proxy statement for the Special Meeting of Members and may also be included
in a notice of the

<PAGE> 33

pendency of the Conversion and the Special Meeting of Members sent to all
Eligible Account Holders and Supplemental Eligible Account Holders in accordance
with regulations of the OTS.

Each Order Form will be preceded or accompanied by the Prospectus (if a
holding company form of organization is utilized) or the Offering Circular (if
the holding company form of organization is not utilized) describing the Holding
Company, if utilized, the ASSOCIATION, the Conversion Stock and the Subscription
and Community Offerings. Each Order Form will contain, among other things, the
following:

A. A specified date by which all Order Forms must be received by the
ASSOCIATION, which date shall be not less than twenty (20), nor more than
forty-five (45) days, following the date on which the Order Forms are mailed by
the ASSOCIATION, and which date will constitute the termination of the
Subscription Offering;

B. The Subscription Price per share for shares of Conversion Stock to be
sold in the Subscription and Community Offerings;

C. A description of the minimum and maximum number of shares of Conversion
Stock which may be subscribed for pursuant to the exercise of subscription
rights or otherwise purchased in the Community Offering;

D. Instructions as to how the recipient of the Order Form is to indicate
thereon the number of shares of Conversion Stock for which such person elects to
subscribe and the available alternative methods of payment therefor;

E. An acknowledgment that the recipient of the Order Form has received a
final copy of the Prospectus or Offering Circular, as the case may be, prior to
execution of the Order Form;

<PAGE> 34

F. A statement to the effect that all subscription rights are
nontransferable, will be void at the end of the Subscription Offering, and can
only be exercised by delivering within the subscription period such properly
completed and executed Order Form, together with cash (if delivered in person),
check or money order in the full amount of the purchase price as specified in
the Order Form for the shares of Conversion Stock for which the recipient elects
to subscribe in the Subscription Offering (or by authorizing on the Order Form
that the ASSOCIATION withdraw said amount from the subscriber's Savings Account
at the ASSOCIATION) to the ASSOCIATION; and

G. A statement to the effect that the executed Order Form, once received
by the ASSOCIATION, may not be modified or amended by the subscriber without the
consent of the ASSOCIATION.

Notwithstanding the above, the ASSOCIATION and the Holding Company will
not accept orders received on photocopied or facsimilied order forms.

17. UNDELIVERED, DEFECTIVE OR LATE ORDER FORMS: INSUFFICIENT
PAYMENT

In the event Order Forms (a) are not delivered and are returned to the
ASSOCIATION by the United States Postal Service or the ASSOCIATION is unable to
locate the addressee, (b) are not received back by the ASSOCIATION or are
received by the ASSOCIATION after the expiration date specified thereon, (c) are
defectively filled out or executed, (d) are not accompanied by the full required
payment, except in the case of institutional investors in the Community
Offering, by delivering irrevocable orders together with a legally binding
commitment to pay in cash, check, money order or wire transfer the full amount
of the purchase price prior to

<PAGE> 35

48 hours before the completion of the Conversion for the shares of Conversion
Stock subscribed for (including cases in which savings accounts from which
withdrawals are authorized are insufficient to cover the amount of the required
payment), or (e) are not mailed pursuant to a "no mail" order placed in effect
by the account holder, the subscription rights of the person to whom such rights
have been granted will lapse as though such person failed to return the
contemplated Order Form within the time period specified thereon; provided,
however, that the ASSOCIATION may, but will not be required to, waive any
immaterial irregularity on any Order Form or require the submission of corrected
Order Forms or the remittance of full payment for subscribed shares by such date
as the ASSOCIATION may specify. The interpretation of the ASSOCIATION of terms
and conditions of the Plan and of the Order Forms will be final, subject to the
authority of the OTS.

18. RESTRICTIONS ON RESALE OR SUBSEQUENT DISPOSITION

A. All shares of Conversion Stock purchased by Directors or Officers of
the ASSOCIATION or the Holding Company in the Conversion shall be subject to the
restriction that, except as provided in Section 18B, below, or as may be
approved by the OTS, no interest in such shares may be sold or otherwise
disposed of for value for a period of one (l) year following the date of
purchase.

B. The restriction on disposition of shares of Conversion Stock set forth
in Section 18A above shall not apply to the following:

(i) Any exchange of such shares in connection with a merger or
acquisition involving the ASSOCIATION or the Holding Company, as the case may
be, which has been approved by the OTS and the Department; and

<PAGE> 36

(ii) Any disposition of such shares following the death of the person
to whom such shares were initially sold under the terms of the Plan.

C. With respect to all shares of Conversion Stock subject to restrictions
on resale or subsequent disposition, each of the following provisions shall
apply:

(i) Each certificate representing shares restricted within the meaning
of Section 18A, above, shall bear a legend prominently stamped on its face
giving notice of the restriction;

(ii) Instructions shall be issued to the stock transfer agent for the
ASSOCIATION or the Holding Company, as the case may be, not to recognize or
effect any transfer of any certificate or record of ownership of any such shares
in violation of the restriction on transfer; and

(iii) Any shares of capital stock of the ASSOCIATION or the Holding
Company, as the case may be, issued with respect to a stock dividend, stock
split, or otherwise with respect to ownership of outstanding shares of
Conversion Stock subject to the restriction on transfer hereunder shall be
subject to the same restriction as is applicable to such Conversion Stock.

19. VOTING RIGHTS OF STOCKHOLDERS

Upon conversion, the holders of the capital stock of the ASSOCIATION shall
have the exclusive voting rights with respect to the ASSOCIATION as specified in
its charter. The holders of the common stock of the Holding Company (if a
holding company form of organization is utilized) shall have the exclusive
voting rights with respect to the Holding Company.

20. ESTABLISHMENT OF LIQUIDATION ACCOUNT

The ASSOCIATION shall establish at the time of Conversion a liquidation
account in an amount equal to its net worth as of the latest practicable date
prior to Conversion ("Liquidation

<PAGE> 37

Account"). The Liquidation Account will be maintained by the ASSOCIATION for the
benefit of the Eligible Account Holders and Supplemental Eligible Account
Holders who continue to maintain their Savings Accounts at the ASSOCIATION. Each
Eligible Account Holder and Supplemental Eligible Account Holder shall, with
respect to his Savings Account, hold a related inchoate interest in a portion of
the Liquidation Account balance, in relation to his Savings Account balance at
the Eligibility Record Date and/or Supplemental Eligibility Record Date or to
such balance as it may be subsequently reduced, as hereinafter provided.

In the unlikely event of a complete liquidation of the ASSOCIATION (and
only in such event), following all liquidation payments to creditors (including
those to Account Holders to the extent of their Savings Accounts) each Eligible
Account Holder and Supplemental Eligible Account Holder shall be entitled to
receive a liquidating distribution from the Liquidation Account, in the amount
of the then adjusted subaccount balance for his Savings Account then held,
before any liquidation distribution may be made to any holders of the
ASSOCIATION's capital stock. No merger, consolidation, bulk purchase of assets
with assumption of Savings Accounts and other liabilities, or similar
transactions with an FDIC-insured institution, in which the ASSOCIATION is not
the surviving institution, shall be deemed to be a complete liquidation for this
purpose. In such transactions, the Liquidation Account shall be assumed by the
surviving institution.

The initial subaccount balance for a Savings Account held by an Eligible
Account Holder and Supplemental Eligible Account Holder shall be determined by
multiplying the opening balance in the Liquidation Account by a fraction, the
numerator of which is the amount of such Eligible Account Holder's and/or
Supplemental Eligible Account Holder's Qualifying Deposit and the

<PAGE> 38

denominator of which is the total amount of all Qualifying Deposits of all
Eligible Account Holders and Supplemental Eligible Account Holders in the
ASSOCIATION. Such initial subaccount balance shall not be increased, but shall
be subject to downward adjustment as described below. For Savings Accounts in
existence at both dates, separate subaccounts shall be determined on the basis
of the Qualifying Deposits in such Savings Account on such record dates. Such
initial subaccount balances shall not be increased but shall be subject to
downward adjustment as described below.

If, at the close of business on any annual closing date, commencing on or
after the effective date of Conversion, the deposit balance in the Savings
Account of an Eligible Account Holder or Supplemental Eligible Account Holder is
less than the lesser of (i) the balance in the Savings Account at the close of
business on any other annual closing date subsequent to the Eligibility Record
Date or Supplemental Eligibility Record Date, or (ii) the amount of the
Qualifying Deposit in such Savings Account, the subaccount balance for such
Savings Account shall be adjusted by reducing such subaccount balance in an
amount proportionate to the reduction in such deposit balance. In the event of
such downward adjustment, the subaccount balance shall not be subsequently
increased, notwithstanding any subsequent increase in the deposit balance of the
related Savings Account. If any such Savings Account is closed, the related
subaccount shall be reduced to zero.

The creation and maintenance of the Liquidation Account shall not operate
to restrict the use or application of any of the net worth accounts of the
ASSOCIATION.

<PAGE> 39

21. TRANSFER OF SAVINGS ACCOUNTS AND CONTINUITY OF THE
ASSOCIATION

Upon Conversion, each Savings Account Holder having a Savings Account at
the ASSOCIATION prior to the Conversion will continue to have a Savings Account,
without payment therefor, in the same amount and subject to the same terms and
conditions (except for voting and liquidation rights) as in effect prior to the
Conversion.

After the Conversion, the ASSOCIATION will succeed to all the rights,
interests, duties and obligations of the ASSOCIATION before the Conversion,
including but not limited to all rights and interests of the ASSOCIATION in and
to its assets and properties, whether real, personal or mixed. The ASSOCIATION
will continue to be a member of the Federal Home Loan Bank System and all its
insured savings deposits will continue to be insured by the FDIC to the extent
provided by applicable law.

22. RESTRICTIONS ON ACQUISITION OF THE ASSOCIATION AND HOLDING
COMPANY

A. In accordance with OTS regulations, for a period of three years from
the date of consummation of the Conversion, no Person, other than the Holding
Company (if a holding company form of organization is utilized), shall directly
or indirectly offer to acquire or acquire the beneficial ownership of more than
10% of any class of an equity security of the ASSOCIATION without the prior
written consent of the OTS.

B. The Certificate of Incorporation of the Holding Company, if a holding
company form of organization is utilized, will contain a provision stipulating
that in no event shall any record owner of any outstanding shares of the Holding
Company's common stock which are

<PAGE> 40

beneficially owned, directly or indirectly, by a person who, as of any record
date for the determination of stockholders entitled to vote on any matter,
beneficially owns in excess of 10% of such outstanding shares, be entitled, or
permitted to any vote in respect to any shares to the extent the vote of such
shares would constitute the vote of shares of the beneficial owner in excess of
10%. In addition, the Certificate of Incorporation and Bylaws of the Holding
Company provide for staggered terms of the directors, noncumulative voting for
directors, limitations on the calling of special meetings, a fair price
provision for certain business combinations and certain notice requirements.

C. In addition, other regulatory approvals under federal law (see part 574
of the Rules and Regulations of the OTS) and state law may be required to
acquire shares of the ASSOCIATION or the Holding Company. For example, Section
212(b) of the Pennsylvania Savings Association Code of 1967 requires the
approval of the Department before any person acquires, or proposes to acquire,
shares of the ASSOCIATION or the Holding Company if the aggregate number of
shares held after such acquisition, whether or not any prior acquisition had
been approved by the Department, would total more than: (1) 10% of any class of
the outstanding shares of the ASSOCIATION; or (2) 5% of any such class, if the
ASSOCIATION or Holding Company had net operating loss carry forwards (as defined
in the Internal Revenue Code of 1986) in excess of 20% of its total
stockholders' equity, as reported in its most recent publicly available annual
financial statements.

D. For the purposes of this Section 22:

(i) The term "person" includes an individual, a group acting in
concert, a corporation, a partnership, an association, a joint stock company, a
trust, an unincorporated

<PAGE> 41

organization or similar company, a syndicate or any other group formed for the
purpose of acquiring, holding or disposing of securities of an insured
institution;

(ii) The term "offer" includes every offer to buy or acquire,
solicitation of an offer to sell, tender offer for, or request or invitation for
tenders of, a security or interest in a security for value;

(iii) The term "acquire" includes every type of acquisition, whether
effected by purchase, exchange, operation of law or otherwise; and

(iv) The term "security" includes non-transferable subscription rights
issued pursuant to a plan of conversion as well as a "security" as defined in 15
U.S.C. Section78c(a)(10).

23. PAYMENT OF DIVIDENDS AND REPURCHASE OF STOCK

The ASSOCIATION shall not declare or pay a cash dividend on, or repurchase
any of, its capital stock if the effect thereof would cause its regulatory
capital to be reduced below (i) the amount required for the Liquidation Account
or (ii) the federal regulatory capital requirement in Section 567.2 of the Rules
and Regulations of the OTS or applicable rules or regulations of the Department.
Otherwise, the ASSOCIATION may declare dividends, make capital distributions or
repurchase its capital stock in accordance with applicable law and regulations.

24. AMENDMENT OF PLAN

If deemed necessary or desirable, the Plan may be substantively amended at
any time prior to the solicitation of proxies from Members to vote on the Plan
by a two-thirds vote of the ASSOCIATION's Board of Directors, and at any time
thereafter by such vote of such Board of Directors with the concurrence of the
OTS and, if applicable, the Department. Any amendment to the Plan made after
approval by the Members with the approval of the OTS and, if applicable,

<PAGE> 42

the Department, shall not necessitate further approval by the Members unless
otherwise required by the OTS and, if applicable, the Department. The Plan may
be terminated by majority vote of the ASSOCIATION's Board of Directors at any
time prior to the Special Meeting of Members to vote on the Plan, and at any
time thereafter with the concurrence of the OTS and, if applicable, the
Department.

By adoption of the Plan, the Members of the ASSOCIATION authorize the
Board of Directors to amend or terminate the Plan under the circumstances set
forth in this Section.

25. CHARTER AND BYLAWS

By voting to adopt the Plan, members of the ASSOCIATION will be voting to
adopt a Pennsylvania Stock Savings Articles of Incorporation and Bylaws for the
ASSOCIATION as a stock association attached as Exhibits I and II to this Plan.
The effective date of the ASSOCIATION's stock Articles of Incorporation and
Bylaws shall be the date of issuance and sale of the Conversion Stock as
specified by the OTS and the Department.

26. CONSUMMATION OF CONVERSION

The Conversion of the ASSOCIATION shall be deemed to take place and be
effective upon the filing of the Articles of Conversion in the Pennsylvania
Department of State and sale of all Conversion Stock.

27. REGISTRATION AND MARKETING

Within the time period required by applicable laws and regulations, the
ASSOCIATION or the Holding Company, as the case may be, will register the
securities issued in connection with the Conversion pursuant to the Securities
Exchange Act of 1934 and will not deregister such securities for a period of at
least three years thereafter, except that the maintenance of registration

<PAGE> 43

for three years requirement may be fulfilled by any successor to the ASSOCIATION
or any holding company of the ASSOCIATION. In addition, the ASSOCIATION or
Holding Company, as the case may be, will use its best efforts to encourage and
assist a market-maker to establish and maintain a market for the Conversion
Stock and to list those securities on a national or regional securities exchange
or the NASDAQ system.

28. RESIDENTS OF FOREIGN COUNTRIES AND CERTAIN STATES

The ASSOCIATION will make reasonable efforts to comply with the securities
laws of all States in the United States in which Persons entitled to subscribe
for shares of Conversion Stock pursuant to the Plan reside. However, no such
Person will be issued subscription rights or be permitted to purchase shares of
Conversion Stock in the Subscription Offering if such Person resides in a
foreign country or in a state of the United States with respect to which both of
the following apply: A. a small number of Persons otherwise eligible to
subscribe for shares under the Plan reside in such state and; B. the issuance of
subscription rights or the offer or sale of shares of Conversion Stock to such
Persons would require the ASSOCIATION or the Holding Company, as the case may
be, under the securities laws of such state, to register as a broker, dealer,
salesman or agent or to register or otherwise qualify its securities for sale in
such state and such registration or qualification would be impracticable for
reasons of cost or otherwise.

29. EXPENSES OF CONVERSION

The ASSOCIATION shall use its best efforts to assure that expenses
incurred by it in connection with the Conversion shall be reasonable.

<PAGE> 44

30. CONDITIONS TO CONVERSION

The Conversion of the ASSOCIATION pursuant to this Plan is expressly
conditioned upon the following:

(a) Prior receipt by the ASSOCIATION of rulings of the United States
Internal Revenue Service and any applicable state taxing authority, or opinions
of counsel or other appropriate tax advisor, substantially to the effect that
the Conversion will not result in any adverse federal or state tax consequences
to Eligible Account Holders or to the ASSOCIATION and the Holding Company before
or after the Conversion;

(b) The sale of all of the Conversion Stock offered in the Conversion; and

31. INTERPRETATION

All interpretations of this Plan and application of its provisions to
particular circumstances by a majority of the Board of Directors of the
ASSOCIATION shall be final, subject to the authority of the OTS and the
Department.

32. RIGHTS OF DISSENTING MEMBERS

A Member who dissents from this Plan shall have the right to have his
savings paid to him in full together with any and all additions thereto which
have been credited to his account by way of earnings prior to the effective date
of the Conversion within thirty days of the receipt of notice by the Association
of his or her dissent.

<PAGE> 45
EXHIBIT I

STOCK ARTICLES OF INCORPORATION
FOR
SECURITY SAVINGS ASSOCIATION OF HAZLETON

Section 1. Corporate Title.

The full corporate title of the savings association is Security Savings
Association of Hazleton (the "Association").

Section 2. Office.

The home office shall be located in the City of Hazleton, in the County of
Luzerne, Commonwealth of Pennsylvania.

Section 3. Duration.

The duration of the Association is perpetual.

Section 4. Purpose and Powers.

The purpose of the Association is to pursue any or all of the lawful
objectives of a Pennsylvania savings association chartered under the
Pennsylvania Savings Association Code of 1967 and to exercise all the express,
implied, and incidental powers conferred thereby and by all acts amendatory
thereof and supplemental thereto, subject to the Constitution and laws of the
United States as they are now in effect, or as they may hereafter be amended,
and subject to all lawful and applicable rules, regulations, and orders of the
Pennsylvania Department of Banking (the "Department").

Section 5. Capital Stock.

The total number of shares of all classes of the capital stock which the
Association has the authority to issue is six million (6,000,000), of which
five million (5,000,000) shall be common stock, par value $1.00 per share and of
which one million (1,000,000) shall be preferred stock, par value $1.00 per
share. The shares may be issued from time to time as authorized by the board of
directors without further approval of shareholders except to the extent that
such approval is required by governing law, rule, or regulation. The
consideration for the issuance of the shares shall be paid in full before their
issuance and shall not be less than the par value. Neither promissory notes nor
future services shall constitute payment or part payment for the issuance of
shares of the Association. The consideration for the shares shall be cash,
tangible or intangible property (to the extent direct investment in such
property would be permitted), labor or services

<PAGE> 46

actually performed for the Association, or any combination of the foregoing. In
the absence of actual fraud in the transaction, the value of such property,
labor, or services, as determined by the board of directors of the Association,
shall be conclusive. In the case of a stock dividend, that part of the retained
earnings of the Association that is transferred to common stock or paid-in
capital accounts upon the issuance of shares as a stock dividend shall be deemed
to be the consideration for their issuance.

Nothing contained in this section 5 shall entitle the holders of any class
or series of capital stock to vote as a separate class or series or to more than
one vote per share: Provided, That this restriction on voting separately by
class or series shall not apply:

(i) To any provision which would authorize the holders of preferred
stock, voting as a class or series, to elect some members of the
board of directors, less than a majority thereof, in the event of
default in the payment of dividends on any class or series of
preferred stock;

(ii) To any provision that would require the holders of preferred stock,
voting as a class or series, to approve the merger or consolidation
of the Association with another corporation or the sale, lease, or
conveyance (other than by mortgage or pledge) of properties or
business in exchange for securities of a corporation other than the
Association if the preferred stock is exchanged for securities of
such other corporation: Provided, That no provision may require such
approval for transactions undertaken with the assistance or pursuant
to the direction of the Department or the Federal Deposit Insurance
Corporation;

(iii) To any amendment which would adversely change the specific terms of
any class or series of capital stock as set forth in this section 5
(or in any supplementary sections hereto), including any amendment
which would create or enlarge any class or series ranking prior
thereto in rights and preferences. An amendment which increases the
number of authorized shares of any class or series of capital stock,
or substitutes the surviving Association in a merger or
consolidation for the Association, shall not be considered to be
such an adverse change.

A description of the different classes and series (if any) of the
Association's capital stock and a statement of the designations, and the
relative rights, preferences, and limitations of the shares of each class of and
series (if any) of capital stock are as follows:

A. Common Stock. Except as provided in this section 5 the holders of
the common stock shall exclusively possess all voting power. Each
holder of shares of common stock shall be entitled to one vote for
each share held by each holder.

Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of
stock having preference over the common stock as to the payment of
dividends, the full amount of dividends and of

<PAGE> 47

sinking fund, or retirement fund, or other retirement payments, if
any, to which such holders are respectively entitled in preference
to the common stock, then dividends may be paid on the common stock
and on any class or series of stock entitled to participate
therewith as to dividends out of any assets legally available for
the payment of dividends.

In the event of any liquidation, dissolution, or winding up of the
Association, the holders of the common stock (and the holders of any
class or series of stock entitled to participate with the common
stock in the distribution of assets) shall be entitled to receive,
in cash or in kind, the assets of the Association available for
distribution remaining after: (i) payment or provision for payment
of the Association's debts and liabilities; (ii) distributions or
provision for distributions in settlement of its liquidation
account; and (iii) distributions or provision for distributions to
holders of any class or series of stock having preference over the
common stock in the liquidation, dissolution, or winding up of the
Association. Each share of common stock shall have the same relative
rights as and be identical in all respects with all the other shares
of common stock.

B. Preferred Stock. The Association may provide for one or more classes
of preferred stock, which shall be separately identified. The shares
of any class may be divided into and issued in series, with each
series separately designated and the terms set forth so as to
distinguish the shares thereof from the shares of all other series
and classes. All shares of the same class shall be identical except
as to the following relative rights and preferences, as to which
there may be variations between different series:

(a) The distinctive serial designation and the number of shares
constituting such series;

(b) The dividend rate or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative
and, if so, from which date(s), the payment date(s) for
dividends, and the participating or other special rights, if
any, with respect to dividends;

(d) Whether the shares of such series shall be redeemable and, if
so, the price(s) at which, and the terms and conditions on
which, such shares may be redeemed;

(e) The amount(s) payable upon the shares of such series in the
event of voluntary or involuntary liquidation, dissolution, or
winding up of the Association;

<PAGE> 48

(f) Whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the
purchase or redemption of such shares, and if so entitled, the
amount of such fund and the manner of its application,
including the price(s) at which such shares may be redeemed or
purchased through the application of such fund;

(g) Whether the shares of such series shall be convertible into,
or exchangeable for, shares of any other class or classes of
stock of the Association and, if so, the conversion price(s)
or the rate(s) of exchange, and the adjustments thereof, if
any, at which such conversion or exchange may be made, and any
other terms and conditions of such conversion or exchange;

(h) The price or other consideration for which the shares of such
series shall be issued; and

(i) Whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued
shares of serial preferred stock and whether such shares may
be reissued as shares of the same or any other series of
serial preferred stock.

Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.

The board of directors shall have authority to divide any authorized class
of preferred stock into series, and, within the limitations set forth in this
section and the remainder of these Articles of Incorporation, fix and determine
the relative rights and preferences of the shares of any series so established.

Prior to the issuance of any preferred shares of a series established by
resolution adopted by the board of directors, the Association shall file a
statement with respect to the shares executed by the Association with the
Department of State. Such statement shall include, among other things, the
resolution. Upon the filing of the statement with the Department of State or
upon an effective date otherwise specified in the statement, whichever is later,
the resolution shall become effective and shall operate as an amendment of the
Articles of Incorporation.

Section 6. Preemptive Rights.

Holders of the capital stock of the Association shall not be entitled to
preemptive rights with respect to any shares of the Association which may be
issued.

<PAGE> 49

Section 7. Liquidation Account.

Pursuant to the requirements of the regulations of the Office of Thrift
Supervision (the "Office") (12 C.F.R. 563b.3), the Association shall establish
and maintain a liquidation account for the benefit of its savings account
holders as of March 31, 1997 and [_________________] ("eligible savers"). In the
event of a complete liquidation of the Association, it shall comply with such
regulations with respect to the amount and the priorities on liquidation of each
of the Association's eligible saver's inchoate interest in the liquidation
account, to the extent it is still in existence: provided, that an eligible
saver's inchoate interest in the liquidation account shall not entitle such
eligible saver to any voting rights at meetings of the Association's
shareholders.

Section 8. Directors.

The Association shall be under the direction of a Board of Directors. The
authorized number of directors shall be not be less than five (5). The number of
directors shall consist of that number specified by resolution(s) adopted by the
Board of Directors from time to time and shall be divided into three classes as
nearly equal in number as possible.

Section 9. Cumulative Voting Limitation.

Shareholders shall not be permitted to cumulate their votes for the
election of directors.

Section 10. Call for Special Meetings.

Special meetings of shareholders relating to changes in control of the
Association or amendments to its Articles of Incorporation shall be called only
at the direction of the board of directors or as otherwise provided under
Pennsylvania law.

Section 11. Indemnification

(a) Scope of Indemnification. Except to the extent prohibited by
Pennsylvania Law, the Association shall indemnify each person made, or
threatened to be made, a party to any action or proceeding, whether criminal or
civil, by reason of the fact that such person or such person's testator or
intestate is or was a director or officer of the Association, or is or was
serving, in any capacity, at the request of the Association, any other
corporation, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, against judgments, fines, penalties, amounts paid in
settlement and reasonable expenses, including attorneys' fees and expenses,
reasonably incurred in enforcing such person's right to indemnification,
incurred in connection with such action or proceeding, or any appeal therein,
provided that no such indemnification shall be made if a judgment or other final
adjudication adverse to such persons establishes that such person's acts were
committed in bad faith or were the result of active and deliberate dishonesty
and were material to the cause of action so adjudicated, or that such person
personally gained in fact a financial profit or other advantage to which such
person was not legally entitled, and provided that no such indemnification

<PAGE> 50

shall be required with respect to any settlement or other nonadjudicated
disposition of any threatened or pending action or proceeding unless the
Association has given its prior consent to such settlement or other disposition.

(b) Reimbursement of Expenses. The Association shall advance or promptly
reimburse upon request any person entitled to indemnification hereunder for all
reasonable expenses, including attorneys' fees and expenses, reasonably incurred
in defending any action or proceeding in advance of the final disposition
thereof upon receipt of an undertaking by or on behalf of such person to repay
such amount if such person is ultimately found not to be entitled to
indemnification or, where indemnification is granted, to the extent the expenses
so advanced or reimbursed exceed the amount to which such person is entitled;
provided, however, that such person shall cooperate in good faith with any
request by the Association that common counsel be used by the parties to any
action or proceeding who are similarly situated unless to do so would be
inappropriate due to actual or potential differing interest between or among
parties.

(c) Additional Rights. Nothing herein shall limit or affect any right of
any director, officer, or other corporate personnel otherwise than hereunder to
indemnification or expenses, including attorneys' fees and expenses, under any
statute, rule, regulation, certificate of incorporation, bylaws, insurance
policy, contract, or otherwise; without affecting or limiting the rights of any
director, officer or other corporate personnel pursuant to this Section 11, the
Association is authorized to enter into agreements with any of its directors,
officers or other corporate personnel extending rights to indemnification and
advancement of expenses to the fullest extent permitted by applicable law.

(d) Notice of Amendments or Elimination. Anything in this Articles of
Incorporation to the contrary notwithstanding, no elimination or amendment of
this Section 11 adversely affecting the right of any person to indemnification
or advancement of expenses hereunder shall be effective until the 60th day
following notice to such person of such action, and no elimination of or
amendment to this Section 11 shall deprive any such person's rights hereunder
arising out of alleged or actual occurrences, act or failures to act prior to
such 60th day. Any amendments or eliminations made pursuant to this Section 11
are only effective with regard to acts occurring after such date.

(e) Amendment or Elimination. The Association shall not, except by
elimination or amendment of this Section 11 in a manner consistent with the
preceding subsection (d), take any corporate action or enter into any agreement
which prohibits, or otherwise limits the rights of any person to,
indemnification in accordance with the provisions of this Section 11. The
indemnification of any person provided by this Section 11 shall continue after
such person has ceased to be a director or officer of the Association and shall
inure to the benefit of such person's heirs, executors, administrators and legal
representatives.

(f) Severability of Provisions. In case any provision in this Section 11
shall be determined at any time to be unenforceable in any respect, the other
provisions of this Section 11 shall not in any way be affected or impaired
thereby, and the affected provision shall be given the fullest possible
enforcement in the circumstances, it being the intention of the Association to
afford

<PAGE> 51

indemnification and advancement of expenses to its directors or officers, acting
in such capacities or in the other capacities mentioned herein, to the fullest
extent permitted by law.

(g) Limitation. Notwithstanding the foregoing, no indenmification shall be
paid to the extent such indemnification is impermissible as a matter of state or
federal law.

SECURITY SAVINGS ASSOCIATION OF
HAZLETON

Attest: By:
---------------------------- ---------------------------
Richard C. Laubach
----------------- President and Chief Executive
Secretary Officer

PENNSYLVANIA DEPARTMENT OF
BANKING

Attest: By:
---------------------------- ---------------------------
Secretary to the Department Director

Declared effective on
the _____ day of __________, 199_

<PAGE> 52

EXHIBIT II

STOCK BYLAWS
FOR
SECURITY SAVINGS ASSOCIATION OF HAZLETON

ARTICLE I - HOME OFFICE

The home office of Security Savings Association of Hazleton (the
"Association") shall be at 31 W. Broad Street, Hazleton in the County of
Luzerne, in the Commonwealth of Pennsylvania.

ARTICLE II - SHAREHOLDERS

Section 1. Place of Meetings. All annual and special meetings of
shareholders shall be held at the home office of the Association or at such
other convenient place as the board of directors may determine.

Section 2. Annual Meeting. A meeting of the shareholders of the
Association for the election of directors and for the transaction of any other
business of the Association shall be held annually on the _________________ of
each year at 4:00 p.m., if not a legal holiday, and if a legal holiday, then on
the next day following which is not a legal holiday, or at such other date and
time as the board of directors may determine within 150 days after the end of
the Association's fiscal year. If required by Pennsylvania law, the time and
place of the annual meeting of shareholders shall be stated in a prominent place
on the cover or inside cover of each passbook or other evidence of membership.

Section 3. Special Meetings. Special meetings of the shareholders for any
purpose or purposes may be called at any time by the chairman of the board, the
president, or a majority of the board of directors, and shall be called by the
chairman of the board, the president, or the secretary upon the written request
of the holders of not less than one-fifth of all of the outstanding capital
stock of the Association entitled to vote at the meeting. Such written request
shall state the purpose or purposes of the meeting and shall be delivered to the
home office of the Association addressed to the chairman of the board, the
president, or the secretary. Upon the written request of a person or persons who
are entitled to call a special meeting, the secretary shall fix a date of such
meeting to be held not more than 60 days after the receipt of the request and
shall give due notice thereof. In the event of the secretary's failure within 30
days after the receipt of the request to fix the date or give the notice, the
person or persons making the request shall have the power to call upon the
Pennsylvania Department of Banking (the "Department") to issue an order to
compel the calling and holding of such meeting.

Section 4. Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with any requirements prescribed by regulations of the
Department or these bylaws or adopted by the board of directors. The board of
directors shall designate, when present, either the chairman of the board or
president to preside at such meetings.

<PAGE> 53

Section 5. Notice of Meetings. Written notice stating the place, day, and
hour of the meeting and the purpose(s) for which the meeting is called shall be
delivered not fewer than 10 nor more than 50 days before the date of the
meeting, either personally or by mail, by or at the direction of the chairman of
the board, the president, or the secretary, or the directors calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the mail,
addressed to the shareholder at the address as it appears on the stock transfer
books or records of the Association as of the record date prescribed in section
6 of this article II with postage prepaid. When any shareholders' meeting,
either annual or special, is adjourned for 30 days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting. It shall
not be necessary to give any notice of the time and place of any meeting
adjourned for less than 30 days or of the business to be transacted at the
meeting, other than an announcement at the meeting at which such adjournment is
taken.

Section 6. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other proper purpose,
the board of directors shall fix in advance a date as the record date for any
such determination of shareholders. Such date in any case shall be not more than
60 days and, in case of a meeting of shareholders, not fewer than 10 days prior
to the date on which the particular action, requiring such determination of
shareholders, is to be taken. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment.

Section 7. Voting Lists. At least 10 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer books for
shares of the Association shall make a complete list of the shareholders of
record entitled to vote at such meeting, or any adjournment thereof, arranged in
alphabetical order, with the address and the number of shares held by each. This
list of shareholders shall be kept on file at the home office of the Association
and shall be subject to inspection by any shareholder of record or the
shareholder's agent at any time during usual business hours for a period of 10
days prior to such meeting. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to inspection by any
shareholder of record or any shareholder's agent during the entire time of the
meeting. The original stock transfer book shall constitute prima facie evidence
of the shareholders entitled to examine such list or transfer books or to vote
at any meeting of shareholders.

Section 8. Quorum. A majority of the outstanding shares of the Association
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
is represented at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time without further notice. At such adjourned meeting
at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to constitute less than a quorum. If a quorum is present, the

2
<PAGE> 54

affirmative vote of the majority of the shares represented at the meeting and
entitled to vote on the subject matter shall be the act of the shareholders,
unless the vote of a greater number of shareholders voting together or voting by
classes is required by law or the charter. Directors, however, are elected by a
plurality of the votes cast at an election of directors.

Section 9. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his or her duly
authorized attorney in fact and filed with the secretary of the Association. A
proxy shall be filed with the secretary of the Association prior to the meeting
to the extent required by Pennsylvania law. Proxies solicited on behalf of the
board of directors shall be voted as directed by the shareholder or, in the
absence of such direction, as determined by a person or persons acting as proxy
pursuant to the direction of the board of directors. A proxy, unless coupled
with an interest, shall be revocable at will notwithstanding any agreement to
the contrary, but the revocation of a proxy shall not be effective until written
notice thereof has been given to the Association. A proxy shall not be revoked
by the death or incompetency of the maker unless, before the vote is counted or
the authority exercised, written notice of such death or of an adjudication of
such incompetence is received by the secretary. No proxy shall be valid more
than eleven months from the date of its execution except for a proxy coupled
with an interest.

Section 10. Voting of Shares in the Name of Two or More Persons. When
ownership stands in the name of two or more persons, in the absence of written
directions to the Association to the contrary, at any meeting of the
shareholders of the Association any one or more of such shareholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose names shares of stock stand, the vote or votes to
which those persons are entitled shall be cast as directed by a majority of
those holding such and present in person or by proxy at such meeting, but no
votes shall be cast for such stock if a majority cannot agree.

Section 11. Voting of Shares by Certain Holders. Shares standing in the
name of another corporation may be voted by any officer, agent, or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian, or conservator may be voted by him or her,
either in person or by proxy, without a transfer of such shares into his or her
name. Shares outstanding in the name of a trustee may be voted by him or her,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him or her without a transfer of such shares into his or her name.
Shares held in trust in an IRA or Keogh Account, however, may by voted by the
Association if no other instructions are received. Shares outstanding in the
name of a receiver may be voted by such receiver, and shares held by or under
control of a receiver may be voted by such receiver without the transfer into
his or her name if authority to do so is consigned in an appropriate order of
the court or other public authority by which such receiver was appointed.

A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.

3
<PAGE> 55

Neither treasury shares of its own stock held by the Association nor
shares held by another Corporation, if a majority of the shares entitled to vote
for the election of directors of such other corporation are held by the
Association, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.

Section 12. Inspectors of Election. In advance of any meeting of
shareholders, the board of directors may appoint any person other than nominees
for office as inspectors of election to act at such meeting or any adjournment.
The number of inspectors shall be either one or three. Any such appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed the chairman of the board or the president may, or on the request of
not fewer than 10% of the votes represented at the meeting shall, make such
appointment at the meeting. If appointed at the meeting, the majority of the
votes present shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment by the board of
directors in advance of the meeting or at the meeting by the chairman of the
board or the president.

Unless otherwise prescribed by regulations of the Department, the duties
of such inspectors shall include: determining the number of shares and the
voting power of each share, the shares represented at the meeting, the existence
of a quorum, and the authenticity, validity and effect of proxies; receiving
votes, ballots, or consents; hearing and determining all challenges and
questions in any way arising in connection with the rights to vote; counting and
tabulating all votes or consents; determining the result; and such acts as may
be proper for conduct the election or vote with fairness to all shareholders.

Section 13. Nominating Committee. The board of directors shall act as a
nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the death
or other incapacity of a management nominee, the nominating committee shall
deliver written nominations to the secretary at least 10 days prior to the date
of the annual meeting. No nominations for directors except those made by the
nominating committee shall be voted upon at the annual meeting unless other
nominations by shareholders are made in writing and delivered to the secretary
of the Association at least 30 days prior to the date of the annual meeting.
Ballots bearing the names of all persons nominated by the nominating committee
and by shareholders shall be provided for use at the annual meeting. However, if
the nominating committee shall fail or refuse to act at least 10 days prior to
the annual meeting, nominations for directors may be made at the annual meeting
by any shareholder entitled to vote and shall be voted upon.

Section 14. New Business. Any new business to be taken up at the annual
meeting other than at the direction of the board of directors shall be stated in
writing and filed with the secretary of the Association at least 30 days before
the date of the annual meeting, and all business so stated, proposed, and filed
shall be considered at the annual meeting; but no other proposal other than at
the direction of the board of directors shall be acted upon at the annual
meeting. This provision shall not prevent the consideration and approval or
disapproval at the annual meeting of reports of officers, directors, and
committees.

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<PAGE> 56

Section 15. Informal Action by Shareholders. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of shareholders, may be taken without a meeting if consent in
writing, setting forth the action so taken, shall be given by all of the
shareholders entitled to vote with respect to the subject matter.

Section 16. Adjournment. Any meeting may be adjourned for any period
except that a meeting at which directors are to be elected may be adjourned from
day to day until such directors have been elected.

ARTICLE III - BOARD OF DIRECTORS

Section 1. General Powers. The business and affairs of the Association
shall be under the direction of its board of directors. The board of directors
shall annually elect a chairman of the board and a president from among its
members and shall designate, when present, either the chairman of the board or
the president to preside at its meetings.

Section 2 . Number and Term. The board of directors shall consist of that
number of directors specified by resolution adopted by the board of directors
and shall be divided into three classes as nearly equal in number as possible.
The members of each class shall be elected for a term of three years and until
their successors are elected and qualified. One class shall be elected by ballot
annually.

Section 3. Regular Meetings. A regular meeting of the board of directors
shall be held without other notice than this bylaw following the annual meeting
of shareholders. The board of directors shall meet regularly without notice at
least once per month to the extent required by the Department at a time and
place fixed by resolution of the board of directors. Directors may participate
in a meeting by means of a conference telephone or similar communications device
through which all persons participating can hear each other at the same time.
Participation by such means shall constitute presence in person for all
purposes.

Section 4. Qualification. Each director shall at all times be the
beneficial owner of not less than 100 shares of capital stock of the Association
unless the Association is a wholly owned subsidiary of a holding company. Each
director shall be a citizen of the United States.

Section 5. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the chairman of the board, the president,
or one-third of the directors. The persons authorized to call special meetings
of the board of directors may fix any place, within the Association's normal
lending territory, as the place for holding any special meeting of the board of
directors called by such persons.

Members of the board of directors may participate in special meetings by
making use of conference telephone or similar communications equipment by which
all persons participating in the meeting can hear each other. Such participation
shall constitute presence in person for all purposes.

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<PAGE> 57

Section 6. Notice. Written notice of any special meeting shall be given to
each director at least 24 hours prior thereto when delivered personally or by
telegram or at least five days prior thereto when delivered by mail at the
address at which the director is most likely to be reached. Such notice shall be
deemed to be delivered when deposited in the mail so addressed, with postage
prepaid if mailed, when delivered to the telegraph company if sent by telegram,
or when the Association receives notice of delivery if electronically
transmitted. Any director may waive notice of any meeting by a writing filed
with the secretary. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any meeting of the board of directors need be
specified in the notice of waiver of notice of such meeting.

Section 7. Quorum. A majority of the number of directors fixed by section
2 of this article III shall constitute a quorum for the transaction of business
at any meeting of the board of directors; but if less than such majority is
present at a meeting, a majority of the directors present may adjourn the
meeting from time to time. Notice of any adjourned meeting shall be given in the
same manner as prescribed by section 5 of this article III.

Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless a greater number is prescribed by regulation of the Office
or by these bylaws.

Section 9. Action Without a Meeting. Any action required or permitted to
be taken by the board of directors at a meeting may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the directors.

Section 10. Resignation. Any director may resign at any time by sending a
written notice of such resignation to the home office of the Association
addressed to the chairman of the board or the president. Unless otherwise
specified, such resignation shall take effect upon receipt by the chairman of
the board or the president. More than three consecutive absences from regular
meetings of the board of directors, unless excused by resolution of the board of
directors, shall automatically constitute a resignation, effective when such
resignation is accepted by the board of directors.

Section 11. Vacancies. Any vacancy occurring on the board of directors may
be filled by the affirmative vote of a majority of the remaining directors
although less than a quorum of the board of directors. A director elected to
fill a vacancy shall be elected to serve only until the next election of
directors by the shareholders. Any directorship to be filled by reason of an
increase in the number of directors may be filled by election by the board of
directors for a term of office continuing only until the next election of
directors by the shareholders.

Section 12. Compensation. Directors, as such, may receive a stated fee for
their services. By resolution of the board of directors, a reasonable fixed sum,
and reasonable expenses of attendance, if any, may be allowed for attendance at
each regular or special meeting of the board of directors.

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<PAGE> 58

Members of either standing or special committees may be allowed such
compensation for attendance at committee meetings as the board of directors may
determine.

Section 13. Presumption of Assent. A director of the Association who is
present at a meeting of the board of directors at which action on any
association matter is taken shall be presumed to have assented to the action
taken unless his or her dissent or abstention shall be entered in the minutes of
the meeting or unless he or she shall file a written dissent to such action with
the person acting as the secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the secretary of the
Association within five days after the date a copy of the minutes of the meeting
is received. Such right to dissent shall not apply to a director who voted in
favor of such action.

Section 14. Removal of Directors. At a meeting of shareholders called
expressly for that purpose, any director may be removed only for cause by a vote
of the holders of a majority of the shares then entitled to vote at an election
of directors. Whenever the holders of the shares of any class are entitled to
elect one or more directors by the provisions of the charter or supplemental
sections thereto, the provisions of this section shall apply, in respect to the
removal of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class and not to the vote of the outstanding shares
as a whole.

Section 15. Age Limitation. No person of an age seventy-five (75) years of
age or older will be eligible for election, reelection, appointment, or
reappointment to the board of directors of the Association and no director shall
serve as such beyond the annual meeting of the Association immediately following
the attainment of seventy-five (75) years of age; provided that the age
limitations set forth in this section 15 of article III shall not apply to any
director of the Association who was a director of the Association as of December
31, 1988. Upon the attainment of seventy-five (75) years of age, such director
may be appointed as a director emeritus. The directors emeritus shall be
compensated for each meeting attended, at the same rate of compensation as the
directors, but may not vote at a meeting of the board of directors or advisory
committees or executive committee or be counted in determining a quorum. The
directors emeritus shall not have any responsibility or be subject to any
liability.

ARTICLE IV - EXECUTIVE AND OTHER COMMITTEES

Section 1. Appointment. The board of directors, by resolution adopted by a
majority of the full board, may designate the chief executive officer and two or
more of the other directors to constitute an executive committee. The
designation of any committee pursuant to this article IV and the delegation of
authority shall not operate to relieve the board of directors, or any director,
of any responsibility imposed by law or regulation.

Section 2. Authority. The executive committee, when the board of directors
is not in session, shall have and may exercise all of the authority of the board
of directors except to the extent, if any, that such authority shall be limited
by the resolution appointing the executive committee; and except

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<PAGE> 59

also that the executive committee shall not have the authority of the board of
directors with reference to: the declaration of dividends; the amendment of the
articles of incorporation or bylaws of the Association, or recommending to the
shareholders a plan of merger, consolidation, or conversion; the sale, lease,
or other disposition of all or substantially all of the property and assets of
the Association otherwise than in the usual and regular course of its business;
a voluntary dissolution of the Association; a revocation of any of the
foregoing; or the approval of a transaction in which any member of the
executive committee, directly or indirectly, has any material beneficial
interest.

Section 3. Tenure. Subject to the provisions of section 8 of this article
IV, each member of the executive committee shall hold office until the next
regular annual meeting of the board of directors following his or her
designation and until a successor is designated as a member of the executive
committee.

Section 4. Meetings. Regular meetings of the executive committee may be
held without notice at such times and places as the executive committee may fix
from time to time by resolution. Special meetings of the executive committee may
be called by any member thereof upon not less than one day's notice stating the
place, date, and hour of the meeting, which notice may be written or oral. Any
member of the executive committee may waive notice of any meeting and no notice
of any meeting need be given to any member thereof who attends in person. The
notice of a meeting of the executive committee need not state the business
proposed to be transacted at the meeting.

Section 5. Quorum. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.

Section 6. Action Without a Meeting. Any action required or permitted to
be taken by the executive committee at a meeting may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the members of the executive committee.

Section 7. Vacancies. Any vacancy in the executive committee may be filled
by a resolution adopted by a majority of the full board of directors.

Section 8. Resignations and Removal. Any member of the executive committee
may be removed at any time with or without cause by resolution adopted by a
majority of the full board of directors. Any member of the executive committee
may resign from the executive committee at any time by giving written notice to
the president or secretary of the Association. Unless otherwise specified, such
resignation shall take effect upon its receipt; the acceptance of such
resignation shall not be necessary to make it effective.

Section 9 Procedure. The executive committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these bylaws.

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<PAGE> 60

It shall keep regular minutes of its proceedings and report the same to the
board of directors for its information at the meeting held next after the
proceedings shall have occurred.

Section 10. Other Committees. The board of directors may by resolution
establish an audit, loan, or other committee composed of directors as they may
determine to be necessary or appropriate for the conduct of the business of the
Association and may prescribe the duties, constitution, and procedures thereof.

ARTICLE V - OFFICERS

Section l . Positions. The officers of the Association shall be a
president, one or more vice presidents, a secretary, and a treasurer or
comptroller, each of whom shall be elected by the board of directors. The board
of directors may also designate the chairman of the board as an officer. The
offices of the secretary and treasurer or comptroller may be held by the same
person and a vice president may also be either the secretary or the treasurer or
comptroller. The president shall not hold any other office. The president shall
be a member of the board of directors. The board of directors may designate one
or more vice presidents as executive vice president or senior vice president.
The board of directors may also elect or authorize the appointment of such other
officers as the business of the Association may require. The officers shall have
such authority and perform such duties as the board of directors may from time
to time authorize or determine. In the absence of action by the board of
directors, the officers shall have such powers and duties as generally pertain
to their respective offices.

Section 2. Election and Term of Office. The officers of the Association
shall be elected annually at the first meeting of the board of directors held
after each annual meeting of the shareholders. If the election of officers is
not held at such meeting, such election shall be held as soon thereafter as
possible. Each officer shall hold office until a successor has been duly elected
and qualified or until the officer's death, resignation or removal in the manner
hereinafter provided. Election or appointment of an officer, employee, or agent
shall not of itself create contractual rights. The board of directors may
authorize the Association to enter into an employment contract with any officer
in accordance with regulations of the Department; but no such contract shall
impair the right of the board of directors to remove any officer at any time in
accordance with section 3 of this Article V.

Section 3. Removal. Any officer may be removed by the board of directors
whenever in its judgment the best interests of the Association will be served
thereby, but such removal, other than for cause, shall be without prejudice to
the contractual rights, if any, of the person so removed.

Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise may be filled by the board
of directors for the unexpired portion of the term.

Section 5. Remuneration. The remuneration of the officers shall be fixed
from time to time by the board of directors.

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ARTICLE VI - CONTRACTS, LOANS, CHECKS, AND DEPOSITS

Section 1. Contracts. To the extent permitted by regulations of the
Department, and except as otherwise prescribed by these bylaws with respect to
certificates for shares, the board of directors may authorize any officer,
employee, or agent of the Association to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Association. Such
authority may be general or confined to specific instances.

Section 2. Loans. No loans shall be contracted on behalf of the
Association and no evidence of indebtedness shall be issued in its name unless
authorized by the board of directors. Such authority may be general or confined
to specific instances.

Section 3. Checks; Drafts. etc. All checks, drafts, or other orders for
the payment of money, notes, or other evidences of indebtedness issued in the
name of the Association shall be signed by one or more officers, employees or
agents of the Association in such manner as shall from time to time be
determined by the board of directors.

Section 4. Deposits. All funds of the Association not otherwise employed
shall be deposited from time to time to the credit of the Association in any
duly authorized depositories as the board of directors may select.

ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER

Section 1. Certificates for Shares. Certificates representing shares of
capital stock of the Association shall be in such form as shall be determined by
the board of directors and approved by the Department. Such certificates shall
be signed by the chief executive officer or by any other officer of the
Association authorized by the board of directors, attested by the secretary or
an assistant secretary, and sealed with the corporate seal or a facsimile
thereof. The signatures of such officers upon a certificate may be facsimiles
if the certificate is manually signed on behalf of a transfer agent or a
registrar other than the Association itself or one of its employees. Each
certificate for shares of capital stock shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares are
issued, with the owner of shares and date of issue, shall be entered on the
stock transfer books of the Association. All certificates surrendered to the
Association for transfer shall be cancelled and no new certificate shall be
issued until the former certificate for a like number of shares has been
surrendered and cancelled, except that in the case of a lost or destroyed
certificate, a new certificate may be issued upon such terms and indemnity to
the Association as the board of directors may prescribe.

Section 2. Transfer of Shares. Transfer of shares of capital stock of the
Association shall be made only on its stock transfer books. Authority for such
transfer shall be given only by the holder of record or by his or her legal
representative, who shall furnish proper evidence of such authority,

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<PAGE> 62

or by his or her attorney authorized by a duly executed power of attorney and
filed with the Association. Such transfer shall be made only on surrender for
cancellation of the certificate for such shares. The person in whose name shares
of capital stock stand on the books of the Association shall be deemed by the
Association to be the owner for all purposes.

ARTICLE VIII - FISCAL YEAR

The fiscal year of the Association shall end on the thirtieth day of
June of each year. The appointment of accountants shall be subject to annual
ratification by the shareholders.

ARTICLE IX - DIVIDENDS

Subject to the terms of the Association's articles of incorporation and
the regulations and orders of the Department, the board of directors may, from
time to time, declare, and the Association may pay, dividends on its
outstanding shares of capital stock.

ARTICLE X - CORPORATE SEAL

The board of directors shall provide the Association seal which shall be
two concentric circles between which shall be the name of the Association. The
year of incorporation or an emblem may appear in the center.

ARTICLE XI - PENNSYLVANIA LAW

Any provision required by Pennsylvania law to be included in these bylaws
shall be deemed to be included herein and to the extent any other provision of
these bylaws is inconsistent with any such required provisions, the required
provisions shall govern.

ARTICLE XII - AMENDMENTS

These bylaws may be amended in a manner consistent with regulations of the
Department and shall be effective after: (i) approval of the amendment by a
two-thirds vote of the authorized board of directors, or by a majority vote of
the votes cast by the shareholders of the Association at any legal meeting, and
(ii) receipt of any applicable regulatory approval. When the Association fails
to meet its quorum requirements, solely due to vacancies on the board, then the
affirmative vote of a majority of the sitting board will be required to amend
the bylaws.

<PAGE> 1
EXHIBIT 3.1

CERTIFICATE OF INCORPORATION
OF
SECURITY OF PENNSYLVANIA FINANCIAL CORP.

FIRST: The name of the Corporation is Security of Pennsylvania Financial
Corp. (hereinafter sometimes referred to as the "Corporation").

SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the registered agent at that
address is The Corporation Trust Company.

THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.

FOURTH:

A. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is six million (6,000,000)
consisting of:

1. One million (1,000,000) shares of Preferred Stock, par
value one cent ($.01) per share (the "Preferred Stock");
and

2. Five million (5,000,000) shares of Common Stock, par
value one cent ($.01) per share (the "Common Stock").

B. The Board of Directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of the shares of Preferred
Stock in series, and by filing a certificate pursuant to the applicable
law of the State of Delaware (such certificate being hereinafter referred
to as a "Preferred Stock Designation"), to establish from time to time the
number of shares to be included in each such series, and to fix the
designation, powers, preferences, and rights of the shares of each such
series and any qualifications, limitations or restrictions thereof. The
number of authorized shares of Preferred Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by
the affirmative vote of the holders of a majority of the Common Stock,
without a vote of the holders of the Preferred Stock, or of any series
thereof, unless a vote of any such holders is required pursuant to the
terms of any Preferred Stock Designation.

C. 1. Notwithstanding any other provision of this
Certificate of Incorporation, in no event shall any
record owner of any outstanding Common Stock which is
beneficially owned, directly or indirectly, by a person
who, as of any record date for the determination of
stockholders entitled to vote on any matter,
beneficially owns in excess of 10% of the
then-outstanding shares of Common Stock (the

<PAGE> 2

"Limit"), be entitled, or permitted to any vote in
respect of the shares held in excess of the Limit. The
number of votes which may be cast by any record owner by
virtue of the provisions hereof in respect of Common
Stock beneficially owned by such person beneficially
owning shares in excess of the Limit shall be a number
equal to the total number of votes which a single record
owner of all Common Stock beneficially owned by such
person would be entitled to cast, (subject to the
provisions of this Article FOURTH) multiplied by a
fraction, the numerator of which is the number of shares
of such class or series which are both beneficially
owned by such person and owned of record by such record
owner and the denominator of which is the total number
of shares of Common Stock beneficially owned by such
person owning shares in excess of the Limit.

2. The following definitions shall apply to this Section C
of this Article FOURTH:

a. "Affiliate" shall have the meaning ascribed to it
in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as
amended, as in effect on the date of filing of
this Certificate of Incorporation.

b. "Beneficial ownership" shall be determined
pursuant to Rule 13d-3 of the General Rules and
Regulations under the Securities Exchange Act of
1934, as amended, (or any successor rule or
statutory provision), or, if said Rule 13d-3 shall
be rescinded and there shall be no successor rule
or provision thereto, pursuant to said Rule 13d-3
as in effect on the date of filing of this
Certificate of Incorporation; provided, however,
that a person shall, in any event, also be deemed
the "beneficial owner" of any Common Stock:

(1) which such person or any of its affiliates
beneficially owns, directly or indirectly;
or

(2) which such person or any of its affiliates
has: (i) the right to acquire (whether such
right is exercisable immediately or only
after the passage of time), pursuant to any
agreement, arrangement or understanding (but
shall not be deemed to be the beneficial
owner of any voting shares solely by reason
of an agreement, contract, or other
arrangement with this Corporation to effect
any transaction which is

<PAGE> 3

described in any one or more of clauses 1
through 5 of Section A of Article EIGHTH of
this Certificate of Incorporation ("Article
EIGHTH")), or upon the exercise of
conversion rights, exchange rights,
warrants, or options or otherwise, or (ii)
sole or shared voting or investment power
with respect thereto pursuant to any
agreement, arrangement, understanding,
relationship or otherwise (but shall not be
deemed to be the beneficial owner of any
voting shares solely by reason of a
revocable proxy granted for a particular
meeting of stockholders, pursuant to a
public solicitation of proxies for such
meeting, with respect to shares of which
neither such person nor any such Affiliate
is otherwise deemed the beneficial owner);
or

(3) which are beneficially owned, directly or
indirectly, by any other person with which
such first mentioned person or any of its
Affiliates acts as a partnership, limited
partnership, syndicate or other group
pursuant to any agreement, arrangement or
understanding for the purpose of acquiring,
holding, voting or disposing of any shares
of capital stock of this Corporation; and
provided further, however, that: (1) no
Director or Officer of this Corporation (or
any Affiliate of any such Director or
Officer) shall, solely by reason of any or
all of such Directors or Officers acting in
their capacities as such, be deemed, for any
purposes hereof, to beneficially own any
Common Stock beneficially owned by any other
such Director or Officer (or any Affiliate
thereof); and (2) neither any employee stock
ownership or similar plan of this
Corporation or any subsidiary of this
Corporation, nor any trustee with respect
thereto or any Affiliate of such trustee
(solely by reason of such capacity of such
trustee), shall be deemed, for any purposes
hereof, to beneficially own any Common Stock
held under any such plan. For purposes only
of computing the percentage of beneficial
ownership of Common Stock of a person, the
outstanding Common Stock shall include
shares deemed owned by such person through
application of this subsection but shall not
include any other Common Stock which may be
issuable by this

<PAGE> 4

Corporation pursuant to any agreement, or
upon exercise of conversion rights, warrants
or options, or otherwise. For all other
purposes, the outstanding Common Stock shall
include only Common Stock then outstanding
and shall not include any Common Stock which
may be issuable by this Corporation pursuant
to any agreement, or upon the exercise of
conversion rights, warrants or options, or
otherwise.

c. The "Limit" shall mean 10% of the then-outstanding
shares of Common Stock.

d. A "person" shall include an individual, a firm, a
group acting in concert, a corporation, a
partnership, an association, a joint venture, a
pool, a joint stock company, a trust, an
unincorporated organization or similar company, a
syndicate or any other group formed for the
purpose of acquiring, holding or disposing of
securities or any other entity.

3. The Board of Directors shall have the power to construe
and apply the provisions of this section and to make all
determinations necessary or desirable to implement such
provisions, including but not limited to matters with
respect to: (i) the number of shares of Common Stock
beneficially owned by any person; (ii) whether a person
is an affiliate of another; (iii) whether a person has
an agreement, arrangement, or understanding with another
as to the matters referred to in the definition of
beneficial ownership; (iv) the application of any other
definition or operative provision of the section to the
given facts; or (v) any other matter relating to the
applicability or effect of this section.

4. The Board of Directors shall have the right to demand
that any person who is reasonably believed to
beneficially own Common Stock in excess of the Limit (or
holds of record Common Stock beneficially owned by any
person in excess of the Limit) supply the Corporation
with complete information as to: (i) the record owner(s)
of all shares beneficially owned by such person who is
reasonably believed to own shares in excess of the
Limit; and (ii) any other factual matter relating to the
applicability or effect of this section as may
reasonably be requested of such person.

5. Except as otherwise provided by law or expressly
provided in this Section C, the presence, in person or
by proxy, of the holders of

<PAGE> 5

record of shares of capital stock of the Corporation
entitling the holders thereof to cast a majority of the
votes (after giving effect, if required, to the
provisions of this Section C) entitled to be cast by the
holders of shares of capital stock of the Corporation
entitled to vote shall constitute a quorum at all
meetings of the stockholders, and every reference in
this Certificate of Incorporation to a majority or other
proportion of capital stock (or the holders thereof) for
purposes of determining any quorum requirement or any
requirement for stockholder consent or approval shall be
deemed to refer to such majority or other proportion of
the votes (or the holders thereof) then entitled to be
cast in respect of such capital stock.

6. Any constructions, applications, or determinations made
by the Board of Directors pursuant to this section in
good faith and on the basis of such information and
assistance as was then reasonably available for such
purpose shall be conclusive and binding upon the
Corporation and its stockholders.

7. In the event any provision (or portion thereof) of this
Section C shall be found to be invalid, prohibited or
unenforceable for any reason, the remaining provisions
(or portions thereof) of this Section shall remain in
full force and effect, and shall be construed as if such
invalid, prohibited or unenforceable provision had been
stricken herefrom or otherwise rendered inapplicable, it
being the intent of this Corporation and its
stockholders that each such remaining provision (or
portion thereof) of this Section C remain, to the
fullest extent permitted by law, applicable and
enforceable as to all stockholders, including
stockholders owning an amount of stock over the Limit,
notwithstanding any such finding.

FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its Directors and stockholders:

A. The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors. In addition to the
powers and authority expressly conferred upon them by statute or by this
Certificate of Incorporation or the Bylaws of the Corporation, the
Directors are hereby empowered to exercise all such powers and do all such
acts and things as may be exercised or done by the Corporation.

B. The Directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.

<PAGE> 6

C. Any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special
meeting of stockholders of the Corporation and may not be effected by any
consent in writing by such stockholders.

D. Special meetings of stockholders of the Corporation may be called
only by the Board of Directors pursuant to a resolution adopted by a
majority of the Whole Board or as otherwise provided in the Bylaws. The
term "Whole Board" shall mean the total number of authorized directorships
(whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board
for adoption).

SIXTH:

A. The number of Directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by
a majority of the Whole Board. The Directors shall be divided into three
classes, as nearly equal in number as reasonably possible, with the term
of office of the first class to expire at the first annual meeting of
stockholders, the term of office of the second class to expire at the
annual meeting of stockholders one year thereafter and the term of office
of the third class to expire at the annual meeting of stockholders two
years thereafter with each Director to hold office until his or her
successor shall have been duly elected and qualified. At each annual
meeting of stockholders following such initial classification and
election, Directors elected to succeed those Directors whose terms expire
shall be elected for a term of office to expire at the third succeeding
annual meeting of stockholders after their election with each Director to
hold office until his or her successor shall have been duly elected and
qualified.

B. Subject to the rights of holders of any series of Preferred Stock
outstanding, the newly created directorships resulting from any increase
in the authorized number of Directors or any vacancies in the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause may be filled only by a majority vote
of the Directors then in office, though less than a quorum, and Directors
so chosen shall hold office for a term expiring at the annual meeting of
stockholders at which the term of office of the class to which they have
been chosen expires. No decrease in the number of Directors constituting
the Board of Directors shall shorten the term of any incumbent Director.

C. Advance notice of stockholder nominations for the election of
Directors and of business to be brought by stockholders before any meeting
of the stockholders of the Corporation shall be given in the manner
provided in the Bylaws of the Corporation.

D. Subject to the rights of holders of any series of Preferred Stock
then outstanding, any Director, or the entire Board of Directors, may be
removed from office at any time, but only for cause and only by the
affirmative vote of the holders of at least 80

<PAGE> 7

percent of the voting power of all of the then-outstanding shares of
capital stock of the Corporation entitled to vote generally in the
election of Directors (after giving effect to the provisions of Article
FOURTH of this Certificate of Incorporation ("Article FOURTH")), voting
together as a single class.

SEVENTH: The Board of Directors is expressly empowered to adopt, amend or
repeal Bylaws of the Corporation. Any adoption, amendment or repeal of the
Bylaws of the Corporation by the Board of Directors shall require the approval
of a majority of the Whole Board. The stockholders shall also have power to
adopt, amend or repeal the Bylaws of the Corporation; provided, however, that,
in addition to any vote of the holders of any class or series of stock of this
Corporation required by law or by this Certificate of Incorporation, the
affirmative vote of the holders of at least 80 percent of the voting power of
all of the then-outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of Directors (after giving effect to
the provisions of Article FOURTH), voting together as a single class, shall be
required to adopt, amend or repeal any provisions of the Bylaws of the
Corporation.

EIGHTH:

A. In addition to any affirmative vote required by law or this
Certificate of Incorporation, and except as otherwise expressly provided
in this Article EIGHTH:

1. any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with: (i) any
Interested Stockholder (as hereinafter defined); or (ii)
any other corporation (whether or not itself an
Interested Stockholder) which is, or after such merger
or consolidation would be, an Affiliate (as hereinafter
defined) of an Interested Stockholder; or

2. any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of
transactions) to or with any Interested Stockholder, or
any Affiliate of any Interested Stockholder, of any
assets of the Corporation or any Subsidiary having an
aggregate Fair Market Value (as hereinafter defined)
equaling or exceeding 25% or more of the combined assets
of the Corporation and its Subsidiaries; or

3. the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of
transactions) of any securities of the Corporation or
any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for
cash, securities or other property (or a combination
thereof) having an aggregate Fair Market Value (as
hereinafter defined) equaling or exceeding 25% of the
combined Fair Market Value of the outstanding

<PAGE> 8

common stock of the Corporation and its Subsidiaries,
except for any issuance or transfer pursuant to an
employee benefit plan of the Corporation or any
Subsidiary thereof; or

4. the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation proposed by or on
behalf of an Interested Stockholder or any Affiliate of
any Interested Stockholder; or

5. any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the
effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any
class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or
indirectly owned by any Interested Stockholder or any
Affiliate of any Interested Stockholder;

shall require the affirmative vote of the holders of at least 80% of the
voting power of the then-outstanding shares of stock of the Corporation
entitled to vote in the election of Directors (the "Voting Stock") (after
giving effect to the provisions of Article FOURTH), voting together as a
single class. Such affirmative vote shall be required notwithstanding the
fact that no vote may be required, or that a lesser percentage may be
specified, by law or by any other provisions of this Certificate of
Incorporation or any Preferred Stock Designation in any agreement with any
national securities exchange or otherwise.

The term "Business Combination" as used in this Article EIGHTH shall
mean any transaction which is referred to in any one or more of paragraphs
1 through 5 of Section A of this Article EIGHTH.

B. The provisions of Section A of this Article EIGHTH shall not be
applicable to any particular Business Combination, and such Business
Combination shall require only the affirmative vote of the majority of the
outstanding shares of capital stock entitled to vote after giving effect
to the provisions of Article FOURTH, or such vote (if any), as is required
by law or by this Certificate of Incorporation, if, in the case of any
Business Combination that does not involve any cash or other consideration
being received by the stockholders of the Corporation solely in their
capacity as stockholders of the Corporation, the condition specified in
the following paragraph 1 is met or, in the case of any other Business
Combination, all of the conditions specified in either of the following
paragraphs 1 or 2 are met:

1. The Business Combination shall have been approved by a
majority of the Disinterested Directors (as hereinafter
defined).

<PAGE> 9

2. All of the following conditions shall have been met:

a. The aggregate amount of the cash and the Fair
Market Value as of the date of the consummation of
the Business Combination of consideration other
than cash to be received per share by the holders
of Common Stock in such Business Combination shall
at least be equal to the higher of the following:

(1) (if applicable) the Highest Per Share Price
(as hereinafter defined), including any
brokerage commissions, transfer taxes and
soliciting dealers' fees, paid by the
Interested Stockholder or any of its
Affiliates for any shares of Common Stock
acquired by it: (i) within the two-year
period immediately prior to the first public
announcement of the proposal of the Business
Combination (the "Announcement Date"); or
(ii) in the transaction in which it became
an Interested Stockholder, whichever is
higher; or

(2) the Fair Market Value per share of Common
Stock on the Announcement Date or on the
date on which the Interested Stockholder
became an Interested Stockholder (such
latter date is referred to in this Article
EIGHTH as the "Determination Date"),
whichever is higher.

b. The aggregate amount of the cash and the Fair
Market Value as of the date of the consummation of
the Business Combination of consideration other
than cash to be received per share by holders of
shares of any class of outstanding Voting Stock
other than Common Stock shall be at least equal to
the highest of the following (it being intended
that the requirements of this subparagraph (b)
shall be required to be met with respect to every
such class of outstanding Voting Stock, whether or
not the Interested Stockholder has previously
acquired any shares of a particular class of
Voting Stock):

<PAGE> 10

of such class of Voting Stock acquired by
it: (i) within the two-year period
immediately prior to the Announcement Date;
or (ii) in the transaction in which it
became an Interested Stockholder, whichever
is higher; or

(2) (if applicable) the highest preferential
amount per share to which the holders of
shares of such class of Voting Stock are
entitled in the event of any voluntary or
involuntary liquidation, dissolution or
winding up of the Corporation; or

(3) the Fair Market Value per share of such
class of Voting Stock on the Announcement
Date or on the Determination Date, whichever
is higher.

c. The consideration to be received by holders of a
particular class of outstanding Voting Stock
(including Common Stock) shall be in cash or in
the same form as the Interested Stockholder has
previously paid for shares of such class of Voting
Stock. If the Interested Stockholder has paid for
shares of any class of Voting Stock with varying
forms of consideration, the form of consideration
to be received per share by holders of shares of
such class of Voting Stock shall be either cash or
the form used to acquire the largest number of
shares of such class of Voting Stock previously
acquired by the Interested Stockholder. The price
determined in accordance with subparagraph B.2 of
this Article EIGHTH shall be subject to
appropriate adjustment in the event of any stock
dividend, stock split, combination of shares or
similar event.

d. After such Interested Stockholder has become an
Interested Stockholder and prior to the
consummation of such Business Combination: (1)
except as approved by a majority of the
Disinterested Directors (as hereinafter defined),
there shall have been no failure to declare and
pay at the regular date therefor any full
quarterly dividends (whether or not cumulative) on
any outstanding stock having preference over the
Common Stock as to dividends or liquidation; (2)
there shall have been: (i) no reduction in the
annual rate of dividends paid on the Common Stock
(except as necessary to reflect any subdivision of
the Common Stock), except as

<PAGE> 11

approved by a majority of the Disinterested
Directors; and (ii) an increase in such annual
rate of dividends as necessary to reflect any
reclassification (including any reverse stock
split), recapitalization, reorganization or any
similar transaction which has the effect of
reducing the number of outstanding shares of the
Common Stock, unless the failure to so increase
such annual rate is approved by a majority of the
Disinterested Directors, and (3) neither such
Interested Stockholder or any of its Affiliates
shall have become the beneficial owner of any
additional shares of Voting Stock except as part
of the transaction which results in such
Interested Stockholder becoming an Interested
Stockholder.

e. After such Interested Stockholder has become an
Interested Stockholder, such Interested
Stockholder shall not have received the benefit,
directly or indirectly (except proportionately as
a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance
or any tax credits or other tax advantages
provided, directly or indirectly, by the
Corporation, whether in anticipation of or in
connection with such Business Combination or
otherwise.

f. A proxy or information statement describing the
proposed Business Combination and complying with
the requirements of the Securities Exchange Act of
1934, as amended, and the rules and regulations
thereunder (or any subsequent provisions replacing
such Act, and the rules or regulations thereunder)
shall be mailed to stockholders of the Corporation
at least 30 days prior to the consummation of such
Business Combination (whether or not such proxy or
information statement is required to be mailed
pursuant to such Act or subsequent provisions).

C. For the purposes of this Article EIGHTH:

1. A "Person" shall include an individual, a firm, a group
acting in concert, a corporation, a partnership, an
association, a joint venture, a pool, a joint stock
company, a trust, an unincorporated organization or
similar company, a syndicate or any other group formed
for the purpose of acquiring, holding or disposing of
securities or any other entity.

<PAGE> 12

2. "Interested Stockholder" shall mean any person (other
than the Corporation or any Holding Company or
Subsidiary thereof) who or which:

a. is the beneficial owner, directly or indirectly,
of more than 10% of the voting power of the
outstanding Voting Stock; or

b. is an Affiliate of the Corporation and at any time
within the two-year period immediately prior to
the date in question was the beneficial owner,
directly or indirectly, of 10% or more of the
voting power of the then outstanding Voting Stock;
or

c. is an assignee of or has otherwise succeeded to
any shares of Voting Stock which were at any time
within the two-year period immediately prior to
the date in question beneficially owned by any
Interested Stockholder, if such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not
involving a public offering within the meaning of
the Securities Act of 1933, as amended.

3. For purposes of this Article EIGHTH, "beneficial
ownership" shall be determined in the manner provided in
Section C of Article FOURTH hereof.

4. "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Securities
Exchange Act of 1934, as in effect on the date of filing
of this Certificate of Incorporation.

5. "Subsidiary" means any corporation of which a majority
of any class of equity security is owned, directly or
indirectly, by the Corporation; provided, however, that
for the purposes of the definition of Interested
Stockholder set forth in Paragraph 2 of this Section C,
the term "Subsidiary" shall mean only a corporation of
which a majority of each class of equity security is
owned, directly or indirectly, by the Corporation.

6. "Disinterested Director" means any member of the Board
of Directors who is unaffiliated with the Interested
Stockholder and was a member of the Board of Directors
prior to the time that the Interested Stockholder became
an Interested Stockholder, and any Director who is
thereafter chosen to fill any vacancy of the Board of
Directors or who is elected and who, in either event, is
unaffiliated with the

<PAGE> 13

Interested Stockholder and in connection with his or her
initial assumption of office is recommended for
appointment or election by a majority of Disinterested
Directors then on the Board of Directors.

7. "Fair Market Value" means:

a. in the case of stock, the highest closing sales
price of the stock during the 30-day period
immediately preceding the date in question of a
share of such stock on the National Association of
Securities Dealers Automated Quotation System or
any system then in use, or, if such stock is
admitted to trading on a principal United States
securities exchange registered under the
Securities Exchange Act of 1934, as amended, Fair
Market Value shall be the highest sale price
reported during the 30-day period preceding the
date in question, or, if no such quotations are
available, the Fair Market Value on the date in
question of a share of such stock as determined by
the Board of Directors in good faith, in each case
with respect to any class of stock, appropriately
adjusted for any dividend or distribution in
shares of such stock or any stock split or
reclassification of outstanding shares of such
stock into a greater number of shares of such
stock or any combination or reclassification of
outstanding shares of such stock into a smaller
number of shares of such stock; and

b. in the case of property other than cash or stock,
the Fair Market Value of such property on the date
in question as determined by the Board of
Directors in good faith.

8. Reference to "Highest Per Share Price" shall in each
case with respect to any class of stock reflect an
appropriate adjustment for any dividend or distribution
in shares of such stock or any stock split or
reclassification of outstanding shares of such stock
into a greater number of shares of such stock or any
combination or reclassification of outstanding shares of
such stock into a smaller number of shares of such
stock.

9. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other
than cash to be received" as used in Subparagraphs (a)
and (b) of Paragraph 2 of Section B of this Article
EIGHTH shall include the shares of Common Stock and/or
the shares of any other class of outstanding Voting
Stock retained by the holders of such shares.

<PAGE> 14

D. A majority of the Disinterested Directors of the Corporation
shall have the power and duty to determine for the purposes of this
Article EIGHTH, on the basis of information known to them after reasonable
inquiry: (a) whether a person is an Interested Stockholder; (b) the number
of shares of Voting Stock beneficially owned by any person; (c) whether a
person is an Affiliate or Associate of another; and (d) whether the assets
which are the subject of any Business Combination have, or the
consideration to be received for the issuance or transfer of securities by
the Corporation or any Subsidiary in any Business Combination has an
aggregate Fair Market Value equaling or exceeding 25% of the combined Fair
Market Value of the Common Stock of the Corporation and its Subsidiaries.
A majority of the Disinterested Directors shall have the further power to
interpret all of the terms and provisions of this Article EIGHTH.

E. Nothing contained in this Article EIGHTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed
by law.

F. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a
lesser vote or no vote, but in addition to any affirmative vote of the
holders of any particular class or series of the Voting Stock required by
law, this Certificate of Incorporation or any Preferred Stock Designation,
the affirmative vote of the holders of at least 80 percent of the voting
power of all of the then-outstanding shares of the Voting Stock (after
giving effect to the provisions of Article FOURTH), voting together as a
single class, shall be required to alter, amend or repeal this Article
EIGHTH.

NINTH: The Board of Directors of the Corporation, when evaluating any
offer of another Person (as defined in Article EIGHTH hereof) to: (A) make a
tender or exchange offer for any equity security of the Corporation; (B) merge
or consolidate the Corporation with another corporation or entity; or (C)
purchase or otherwise acquire all or substantially all of the properties and
assets of the Corporation, may, in connection with the exercise of its judgment
in determining what is in the best interest of the Corporation and its
stockholders, give due consideration to all relevant factors, including, without
limitation, those factors that Directors of any subsidiary of the Corporation
may consider in evaluating any action that may result in a change or potential
change in the control of the subsidiary, and the social and economic effect of
acceptance of such offer: on the Corporation's present and future customers and
employees and those of its Subsidiaries (as defined in Article EIGHTH hereof);
on the communities in which the Corporation and its Subsidiaries operate or are
located; on the ability of the Corporation to fulfill its corporate objective as
a savings and loan holding company under applicable laws and regulations; and on
the ability of its subsidiary savings and loan association to fulfill the
objectives of a stock form savings and loan association under applicable
statutes and regulations.

<PAGE> 15

TENTH:

A. Each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or
was a Director or an Officer of the Corporation or is or was serving at
the request of the Corporation as a Director, Officer, employee or agent
of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is an
alleged action in an official capacity as a Director, Officer, employee or
agent or in any other capacity while serving as a Director, Officer,
employee or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than
such law permitted the Corporation to provide prior to such amendment),
against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in
connection therewith; provided, however, that, except as provided in
Section C hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation.

B. The right to indemnification conferred in Section A of this
Article TENTH shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided, however,
that, if the Delaware General Corporation Law requires, an advancement of
expenses incurred by an indemnitee in his or her capacity as a Director or
Officer (and not in any other capacity in which service was or is rendered
by such indemnitee, including, without limitation, services to an employee
benefit plan) shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right
to appeal (hereinafter a "final adjudication") that such indemnitee is not
entitled to be indemnified for such expenses under this Section or
otherwise. The rights to indemnification and to the advancement of
expenses conferred in Sections A and B of this Article TENTH shall be
contract rights and such rights shall continue as to an indemnitee who has
ceased to be a Director, Officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.

<PAGE> 16

period shall be twenty days, the indemnitee may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the
claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant
to the terms of an undertaking, the indemnitee shall be entitled to be
paid also the expenses of prosecuting or defending such suit. In (i) any
suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right
to an advancement of expenses) it shall be a defense that, and (ii) in any
suit by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking the Corporation shall be entitled to recover
such expenses upon a final adjudication that, the indemnitee has not met
any applicable standard for indemnification set forth in the Delaware
General Corporation Law. Neither the failure of the Corporation (including
its Board of Directors, independent legal counsel, or its stockholders) to
have made a determination prior to the commencement of such suit that
indemnification of the indemnitee is proper in the circumstances because
the indemnitee has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel,
or its stockholders) that the indemnitee has not met such applicable
standard of conduct, shall create a presumption that the indemnitee has
not met the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee, be a defense to such suit. In any suit brought
by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the
burden of proving that the indemnitee is not entitled to be indemnified,
or to such advancement of expenses, under this Article TENTH or otherwise
shall be on the Corporation.

D. The rights to indemnification and to the advancement of expenses
conferred in this Article TENTH shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, the
Corporation's Certificate of Incorporation, Bylaws, agreement, vote of
stockholders or Disinterested Directors or otherwise.

E. The Corporation may maintain insurance, at its expense, to
protect itself and any Director, Officer, employee or agent of the
Corporation or subsidiary or Affiliate or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.

F. The Corporation may, to the extent authorized from time to time
by the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article TENTH with respect to the
indemnification and advancement of expenses of Directors and Officers of
the Corporation.

<PAGE> 17

ELEVENTH: A Director of this Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability: (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) under Section 174 of the Delaware General Corporation
Law; or (iv) for any transaction from which the Director derived an improper
personal benefit. If the Delaware General Corporation Law is amended to
authorize corporate action further eliminating or limiting the personal
liability of Directors, then the liability of a Director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.

Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
Director of the Corporation existing at the time of such repeal or modification.

TWELFTH: The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation in the manner
prescribed by the laws of the State of Delaware and all rights conferred upon
stockholders are granted subject to this reservation; provided, however, that,
notwithstanding any other provision of this Certificate of Incorporation or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any vote of the holders of any class or series of the stock of this
Corporation required by law or by this Certificate of Incorporation, the
affirmative vote of the holders of at least 80 percent of the voting power of
all of the then-outstanding shares of the capital stock of the Corporation
entitled to vote generally in the election of Directors (after giving effect to
the provisions of Article FOURTH), voting together as a single class, shall be
required to amend or repeal this Article TWELFTH, Section C of Article FOURTH,
Sections C or D of Article FIFTH, Article SIXTH, Article SEVENTH, Article EIGHTH
or Article TENTH.

THIRTEENTH: The name and mailing address of the sole incorporator are as
follows:

<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
Siobain Perkins Morris, Nichols, Arsht & Tunnell
1201 North Market Street
P.O. Box 1347
Wilmington, Delaware 19899-1347
</TABLE>

<PAGE> 18

I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a
corporation under the laws of the State of Delaware, do make, file and record
this Certificate of Incorporation and do certify that the facts herein stated
are true, and accordingly, have hereto set my hand this 20th day of August,
1998.

\s\ Siobain Perkins
-------------------
Siobain Perkins
Incorporator

<PAGE> 1
EXHIBIT 3.2

SECURITY OF PENNSYLVANIA FINANCIAL CORP.

BYLAWS

ARTICLE I - STOCKHOLDERS

Section 1. Annual Meeting.

An annual meeting of the stockholders, for the election of Directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall each year fix, which date
shall be within thirteen (13) months subsequent to the later of the date of
incorporation or the last annual meeting of stockholders.

Section 2. Special Meetings.

Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, special meetings of stockholders of the Corporation
may be called only by the Board of Directors pursuant to a resolution adopted by
a majority of the total number of Directors which the Corporation would have if
there were no vacancies on the Board of Directors (hereinafter the "Whole
Board").

Section 3. Notice of Meetings.

Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time by
the Delaware General Corporation Law or the Certificate of Incorporation of the
Corporation).

When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date, and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.

Section 4. Quorum.

At any meeting of the stockholders, the holders of a majority of all of
the shares of the stock entitled to vote at the meeting, present in person or by
proxy (after giving effect to the provisions of Article FOURTH of the
Corporation's Certificate of Incorporation), shall constitute a quorum for

<PAGE> 2

all purposes, unless or except to the extent that the presence of a larger
number may be required by law. Where a separate vote by a class or classes is
required, a majority of the shares of such class or classes present in person or
represented by proxy (after giving effect to the provisions of Article FOURTH of
the Corporation's Certificate of Incorporation) shall constitute a quorum
entitled to take action with respect to that vote on that matter.

If a quorum shall fail to attend any meeting, the chairman of the meeting
or the holders of a majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date,
or time.

If a notice of any adjourned special meeting of stockholders is sent to
all stockholders entitled to vote thereat, stating that it will be held with
those present in person or by proxy constituting a quorum, then except as
otherwise required by law, those present in person or by proxy at such adjourned
meeting shall constitute a quorum, and all matters shall be determined by a
majority of the votes cast at such meeting.

Section 5. Organization.

Such person as the Board of Directors may have designated or, in the
absence of such a person, the Chairman of the Board of the Corporation or, in
his or her absence, such person as may be chosen by the holders of a majority of
the shares entitled to vote who are present, in person or by proxy, shall call
to order any meeting of the stockholders and act as chairman of the meeting. In
the absence of the Secretary of the Corporation, the secretary of the meeting
shall be such person as the chairman appoints.

Section 6. Conduct of Business.

(a) The chairman of any meeting of stockholders shall determine the
order of business and the procedures at the meeting, including such regulation
of the manner of voting and the conduct of discussion as seem to him or her in
order. The date and time of the opening and closing of the polls for each matter
upon which the stockholders will vote at the meeting shall be announced at the
meeting.

(b) At any annual meeting of the stockholders, only such business
shall be conducted as shall have been brought before the meeting: (i) by or at
the direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is entitled to vote with respect thereto and who complies with
the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the business must
relate to a proper subject matter for stockholder action and the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered or mailed to
and received at the principal executive offices of the Corporation not less than
ninety (90) days prior to the date of the annual meeting; provided, however,
that in the event that less than one hundred (100) days' notice or prior public
disclosure of the date of the meeting is given or made to

<PAGE> 3

stockholders, notice by the stockholder to be timely must be received not later
than the close of business on the 10th day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. A stockholder's notice to the Secretary shall set forth as to each
matter such stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting; (ii) the name
and address, as they appear on the Corporation's books, of the stockholder
proposing such business; (iii) the class and number of shares of the
Corporation's capital stock that are beneficially owned by such stockholder; and
(iv) any material interest of such stockholder in such business. Notwithstanding
anything in these Bylaws to the contrary, no business shall be brought before or
conducted at an annual meeting except in accordance with the provisions of this
Section 6(b). The Officer of the Corporation or other person presiding over the
annual meeting shall, if the facts so warrant, determine and declare to the
meeting that business was not properly brought before the meeting in accordance
with the provisions of this Section 6(b) and, if he should so determine, he
shall so declare to the meeting and any such business so determined to be not
properly brought before the meeting shall not be transacted.

At any special meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors.

(c) Only persons who are nominated in accordance with the procedures
set forth in these Bylaws shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at a meeting of stockholders at which directors are to be elected
only: (i) by or at the direction of the Board of Directors; or (ii) by any
stockholder of the Corporation entitled to vote for the election of Directors at
the meeting who complies with the notice procedures set forth in this Section
6(c). Such nominations, other than those made by or at the direction of the
Board of Directors, shall be made by timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered or
mailed to and received at the principal executive offices of the Corporation not
less than ninety (90) days prior to the date of the meeting; provided, however,
that in the event that less than one hundred (100) days' notice or prior
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such stockholder's
notice shall set forth: (i) as to each person whom such stockholder proposes to
nominate for election or re-election as a Director, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
such person's written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); and (ii) as to the stockholder giving
the notice (x) the name and address, as they appear on the Corporation's books,
of such stockholder and (y) the class and number of shares of the Corporation's
capital stock that are beneficially owned by such stockholder. At the request of
the Board of Directors, any person nominated by the Board of Directors for
election as a Director shall furnish to the Secretary of the Corporation that
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee. No person shall be eligible

<PAGE> 4

for election as a Director of the Corporation unless nominated in accordance
with the provisions of this Section 6(c). The Officer of the Corporation or
other person presiding at the meeting shall, if the facts so warrant, determine
that a nomination was not made in accordance with such provisions and, if he or
she shall so determine, he or she shall so declare to the meeting and the
defective nomination shall be disregarded.

Section 7. Proxies and Voting.

At any meeting of the stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing filed in
accordance with the procedure established for the meeting. Any facsimile
telecommunication or other reliable reproduction of the writing or transmission
created pursuant to this paragraph may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.

All voting, including on the election of Directors but excepting where
otherwise required by law or by the governing documents of the Corporation, may
be made by a voice vote; provided, however, that upon demand therefor by a
stockholder entitled to vote or his or her proxy, a stock vote shall be taken.
Every stock vote shall be taken by ballot, each of which shall state the name of
the stockholder or proxy voting and such other information as may be required
under the procedures established for the meeting. The Corporation shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The Corporation may designate one
or more persons as alternate inspectors to replace any inspector who fails to
act. If no inspector or alternate is able to act at a meeting of stockholders,
the person presiding at the meeting shall appoint one or more inspectors to act
at the meeting. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his ability.

All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or the Certificate of Incorporation, all
other matters shall be determined by a majority of the votes cast.

Section 8. Stock List.

A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten (10) days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held.

<PAGE> 5

The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.

Section 9. Consent of Stockholders in Lieu of Meeting.

Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, any action required or permitted to be taken by the
stockholders of the Corporation must be effected at an annual or special meeting
of stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.

ARTICLE II - BOARD OF DIRECTORS

Section 1. General Powers, Number, Term of Office and Limitations.

The business and affairs of the Corporation shall be under the direction
of its Board of Directors. The number of Directors who shall constitute the
Whole Board shall be such number as the Board of Directors shall from time to
time have designated, except that in the absence of such designation shall be
eight. The Board of Directors shall annually elect a Chairman of the Board from
among its members who shall, when present, preside at its meetings.

The Directors, other than those who may be elected by the holders of any
class or series of Preferred Stock, shall be divided, with respect to the time
for which they severally hold office, into three classes, with the term of
office of the first class to expire at the first annual meeting of stockholders,
the term of office of the second class to expire at the annual meeting of
stockholders one year thereafter and the term of office of the third class to
expire at the annual meeting of stockholders two years thereafter, with each
Director to hold office until his or her successor shall have been duly elected
and qualified. At each annual meeting of stockholders, Directors elected to
succeed those Directors whose terms then expire shall be elected for a term of
office to expire at the third succeeding annual meeting of stockholders after
their election, with each Director to hold office until his or her successor
shall have been duly elected and qualified.

Section 2. Vacancies and Newly Created Directorships.

Subject to the rights of the holders of any class or series of Preferred
Stock, and unless the Board of Directors otherwise determines, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
only by a majority vote of the Directors then in office, though less than a
quorum, and Directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which
they have been elected expires and until such Director's successor shall have

<PAGE> 6

been duly elected and qualified. No decrease in the number of authorized
directors constituting the Board shall shorten the term of any incumbent
Director.

Section 3. Regular Meetings.

Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all Directors. A
notice of each regular meeting shall not be required.

Section 4. Special Meetings.

Special meetings of the Board of Directors may be called by one-third
(1/3) of the Directors then in office (rounded up to the nearest whole number),
by the Chairman of the Board or the President or, in the event that the Chairman
of the Board or President are incapacitated or otherwise unable to call such
meeting, by the Secretary, and shall be held at such place, on such date, and at
such time as they, or he or she, shall fix. Notice of the place, date, and time
of each such special meeting shall be given each Director by whom it is not
waived by mailing written notice not less than five (5) days before the meeting
or by telegraphing or telexing or by facsimile transmission of the same not less
than twenty-four (24) hours before the meeting. Unless otherwise indicated in
the notice thereof, any and all business may be transacted at a special meeting.

Section 5. Quorum.

At any meeting of the Board of Directors, a majority of the Whole Board
shall constitute a quorum for all purposes. If a quorum shall fail to attend any
meeting, a majority of those present may adjourn the meeting to another place,
date, or time, without further notice or waiver thereof.

Section 6. Participation in Meetings By Conference Telephone.

Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.

Section 7. Conduct of Business.

At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the Directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of the
proceedings of the Board of Directors.

<PAGE> 7

Section 8. Powers.

The Board of Directors may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, including, without limiting the generality of the foregoing,
the unqualified power:

(1) To declare dividends from time to time in accordance with law;

(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;

(3) To authorize the creation, making and issuance, in such form as
it may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;

(4) To remove any Officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any Officer upon
any other person for the time being;

(5) To confer upon any Officer of the Corporation the power to
appoint, remove and suspend subordinate Officers, employees and agents;

(6) To adopt from time to time such stock, option, stock purchase,
bonus or other compensation plans for Directors, Officers, employees and
agents of the Corporation and its subsidiaries as it may determine;

(7) To adopt from time to time such insurance, retirement, and other
benefit plans for Directors, Officers, employees and agents of the
Corporation and its subsidiaries as it may determine;

(8) To adopt from time to time regulations, not inconsistent with
these Bylaws, for the management of the Corporation's business and
affairs; and

(9) To fix the Compensation of officers and employees of the
Corporation and its subsidiaries as it may determine.

Section 9. Compensation of Directors.

Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as Directors,
including, without limitation, their services as members of committees of the
Board of Directors.

<PAGE> 8

ARTICLE III - COMMITTEES

Section 1. Committees of the Board of Directors.

The Board of Directors, by a vote of a majority of the Board of Directors,
may from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board and shall, for these committees and any others provided for herein,
elect a Director or Directors to serve as the member or members, designating, if
it desires, other Directors as alternate members who may replace any absent or
disqualified member at any meeting of the committee. Any committee so designated
may exercise the power and authority of the Board of Directors to declare a
dividend, to authorize the issuance of stock or to adopt a certificate of
ownership and merger pursuant to Section 253 of the Delaware General Corporation
Law if the resolution which designates the committee or a supplemental
resolution of the Board of Directors shall so provide. In the absence or
disqualification of any member of any committee and any alternate member in his
or her place, the member or members of the committee present at the meeting and
not disqualified from voting, whether or not he or she or they constitute a
quorum, may by unanimous vote appoint another member of the Board of Directors
to act at the meeting in the place of the absent or disqualified member.

Section 2. Conduct of Business.

Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings. The quorum requirements for each such
committee shall be a majority of the members of such committee unless otherwise
determined by the Board of Directors by a majority vote of the Board of
Directors which such quorum determined by a majority of the Board may be
one-third of such members and all matters considered by such committees shall be
determined by a majority vote of the members present. Action may be taken by any
committee without a meeting if all members thereof consent thereto in writing,
and the writing or writings are filed with the minutes of the proceedings of
such committee.

Section 3. Nominating Committee.

The Board of Directors shall appoint a Nominating Committee of the Board,
consisting of not less than three (3) members. The Nominating Committee shall
have authority: (a) to review any nominations for election to the Board of
Directors made by a stockholder of the Corporation pursuant to Section 6(c)(ii)
of Article I of these Bylaws in order to determine compliance with such Bylaw;
and (b) to recommend to the Whole Board nominees for election to the Board of
Directors to replace those Directors whose terms expire at the annual meeting of
stockholders next ensuing.

<PAGE> 9

ARTICLE IV - OFFICERS

Section 1. Generally.

(a) The Board of Directors as soon as may be practicable after the
annual meeting of stockholders shall choose a Chairman of the Board, Chief
Executive Officer, a President, one or more Vice Presidents, a Secretary and a
Treasurer and from time to time may choose such other officers as it may deem
proper. The Chairman of the Board shall be chosen from among the Directors. Any
number of offices may be held by the same person.

(b) The term of office of all Officers shall be until the next
annual election of Officers and until their respective successors are chosen but
any Officer may be removed from office at any time by the affirmative vote of a
majority of the authorized number of Directors then constituting the Board of
Directors.

(c) All Officers chosen by the Board of Directors shall have such
powers and duties as generally pertain to their respective Offices, subject to
the specific provisions of this ARTICLE IV. Such officers shall also have such
powers and duties as from time to time may be conferred by the Board of
Directors or by any committee thereof.

Section 2. Chairman of the Board of Directors.

The Chairman of the Board, subject to the provisions of these Bylaws and
to the direction of the Board of Directors, when present shall preside at all
meetings of the stockholders of the Corporation. The Chairman of the Board shall
perform such duties designated to him by the Board of Directors and which are
delegated to him or her by the Board of Directors by resolution of the Board of
Directors.

Section 3. President and Chief Executive Officer.

The President and Chief Executive Officer shall have general
responsibility for the management and control of the business and affairs of the
Corporation and shall perform all duties and have all powers which are commonly
incident to the office of President and Chief Executive Officer or which are
delegated to him or her by the Board of Directors. Subject to the direction of
the Board of Directors, the President and Chief Executive Officer shall have
power to sign all stock certificates, contracts and other instruments of the
Corporation which are authorized and shall have general supervision of all of
the other Officers (other than the Chairman of the Board), employees and agents
of the Corporation.

Section 4. Vice President.

The Vice President or Vice Presidents shall perform the duties of the
President in his absence or during his inability to act. In addition, the Vice
Presidents shall perform the duties and exercise

<PAGE> 10

the powers usually incident to their respective offices and/or such other duties
and powers as may be properly assigned to them by the Board of Directors, the
Chairman of the Board or the President. A Vice President or Vice Presidents may
be designated as Executive Vice President or Senior Vice President.

Section 5. Secretary.

The Secretary or Assistant Secretary shall issue notices of meetings,
shall keep their minutes, shall have charge of the seal and the corporate books,
shall perform such other duties and exercise such other powers as are usually
incident to such office and/or such other duties and powers as are properly
assigned thereto by the Board of Directors, the Chairman of the Board or the
President. Subject to the direction of the Board of Directors, the Secretary
shall have the power to sign all stock certificates.

Section 6. Treasurer.

The Treasurer shall be the Comptroller of the Corporation and shall have
the responsibility for maintaining the financial records of the Corporation. He
or she shall make such disbursements of the funds of the Corporation as are
authorized and shall render from time to time an account of all such
transactions and of the financial condition of the Corporation. The Treasurer
shall also perform such other duties as the Board of Directors may from time to
time prescribe. Subject to the direction of the Board of Directors, the
Treasurer shall have the power to sign all stock certificates.

Section 7. Assistant Secretaries and Other Officers.

The Board of Directors may appoint one or more Assistant Secretaries and
such other Officers who shall have such powers and shall perform such duties as
are provided in these Bylaws or as may be assigned to them by the Board of
Directors, the Chairman of the Board or the President.

Section 8. Action with Respect to Securities of Other Corporations.

Unless otherwise directed by the Board of Directors, the President or any
Officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.

<PAGE> 11

ARTICLE V - STOCK

Section 1. Certificates of Stock.

Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the Chairman of the Board or the President, and by
the Secretary or an Assistant Secretary, or any Treasurer or Assistant
Treasurer, certifying the number of shares owned by him or her. Any or all of
the signatures on the certificate may be by facsimile.

Section 2. Transfers of Stock.

Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these Bylaws,
an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.

Section 3. Record Date.

In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the next day preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment or rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.

<PAGE> 12

Section 4. Lost, Stolen or Destroyed Certificates.

In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.

Section 5. Regulations.

The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.

ARTICLE VI - NOTICES

Section 1. Notices.

Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, Director, Officer, employee or
agent shall be in writing and may in every instance be effectively given by hand
delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, or by sending such notice by prepaid telegram or mailgram or other
courier. Any such notice shall be addressed to such stockholder, Director,
Officer, employee or agent at his or her last known address as the same appears
on the books of the Corporation. The time when such notice is received, if hand
delivered, or dispatched, if delivered through the mails or by telegram or
mailgram or other courier, shall be the time of the giving of the notice.

Section 2. Waivers.

A written waiver of any notice, signed by a stockholder, Director,
Officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such stockholder, Director, Officer, employee or agent. Neither
the business nor the purpose of any meeting need be specified in such a waiver.

<PAGE> 13

ARTICLE VII - MISCELLANEOUS

Section 1. Facsimile Signatures.

In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these Bylaws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.

Section 2. Corporate Seal.

The Board of Directors may provide a suitable seal, containing the name of
the Corporation, which seal shall be in the charge of the Secretary. If and when
so directed by the Board of Directors or a committee thereof, duplicates of the
seal may be kept and used by the Treasurer or by an Assistant Secretary or an
assistant to the Treasurer.

Section 3. Reliance Upon Books, Reports and Records.

Each Director, each member of any committee designated by the Board of
Directors, and each Officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its Officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such Director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.

Section 4. Fiscal Year.

The fiscal year of the Corporation shall be as fixed by the Board of
Directors.

Section 5. Time Periods.

In applying any provision of these Bylaws which requires that an act be
done or not be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.

<PAGE> 14

ARTICLE VIII - AMENDMENTS

The Board of Directors may amend, alter or repeal these Bylaws at any
meeting of the Board, provided notice of the proposed change was given not less
than two (2) days prior to the meeting. The stockholders shall also have power
to amend, alter or repeal these Bylaws at any meeting of stockholders provided
notice of the proposed change was given in the notice of the meeting; provided,
however, that, notwithstanding any other provisions of the Bylaws or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the voting stock required by law, the Certificate of Incorporation,
any Preferred Stock Designation or these Bylaws, the affirmative votes of the
holders of at least 80% of the voting power of all the then-outstanding shares
of the Voting Stock, voting together as a single class, shall be required to
alter, amend or repeal any provisions of these Bylaws.

The above Bylaws are effective as of August 20, 1998, the date of incorporation
of Security of Pennsylvania Financial Corp.

<PAGE> 1
EXHIBIT 4.0

COMMON STOCK COMMON STOCK
PAR VALUE $.01 SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP

SECURITY OF PENNSYLVANIA FINANCIAL CORP.

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

THIS CERTIFIES THAT

S P E C I M E N
is the owner of:

FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK $.01 PAR VALUE PER
SHARE OF SECURITY OF PENNSYLVANIA FINANCIAL CORP.

The shares represented by this certificate are transferable only on the stock
transfer books of the Corporation by the holder of record hereof, or by his duly
authorized attorney or legal representative, upon the surrender of this
certificate properly endorsed. This certificate and the shares represented
hereby are issued and shall be held subject to all the provisions of the
Certificate of Incorporation of the Corporation and any amendments thereto
(copies of which are on file with the Transfer Agent), to all of which
provisions the holder by acceptance hereof, assents.

This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar. The shares represented by this Certificate are not
insured by the Federal Deposit Insurance Corporation or any other government
agency.

IN WITNESS THEREOF, Security of Pennsylvania Financial Corp. has
caused this certificate to be executed by the facsimile signatures of its duly
authorized officers and has caused a facsimile of its corporate seal to be
hereunto affixed.

Dated: [SEAL]
President Secretary

<PAGE> 2

SECURITY OF PENNSYLVANIA FINANCIAL CORP.

The shares represented by this certificate are subject to a limitation
contained in the Certificate of Incorporation to the effect that in no event
shall any record owner of any outstanding common stock which is beneficially
owned, directly or indirectly, by a person who beneficially owns in excess of
10% of the outstanding shares of common stock (the "Limit") be entitled or
permitted to any vote in respect of shares held in excess of the Limit.

The Board of Directors of the Corporation is authorized by resolution(s),
from time to time adopted, to provide for the issuance of serial preferred stock
in series and to fix and state the voting powers, designations, preferences and
relative, participating, optional, or other special rights of the shares of each
such series and the qualifications, limitations and restrictions thereof. The
Corporation will furnish to any shareholder upon request and without charge a
full description of each class of stock and any series thereof.

The shares represented by this certificate may not be cumulatively voted
on any matter. The affirmative vote of the holders of at least 80% of the voting
stock of the Corporation, voting together as a single class, shall be required
to approve certain business combinations and other transactions, pursuant to the
Certificate of Incorporation or to amend certain provisions of the Certificate
of Incorporation.

The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFTS MIN ACT - __________ custodian __________
(Cust) (Minor)

TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act

--------------------
(State)

JT TEN - as joint tenants with right
of survivorship and not as
tenants in common
</TABLE>

Additional abbreviations may also be used though not in the above list.

For value received, __________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFICATION NUMBER OF ASSIGNEE

- --------------------------------------------------------------------------------
Please print or typewrite name and address including postal zip code of assignee

_______________________________________________ shares of the common stock
represented by the within Certificate, and do hereby irrevocably constitute and
appoint________________________________________________________________________
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.

<TABLE>
<S> <C>
DATED
------------------------ ----------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER.
</TABLE>

SIGNATURE GUARANTEED:
----------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15

<PAGE> 1

EXHIBIT 5.0

___________, 1998

Board of Directors
Security of Pennsylvania Financial Corp.
31 W. Broad Street
Hazleton, Pennsylvania 18201

Re: The issuance of up to a 1,944,075 shares of
Security of Pennsylvania Financial Corp. Common Stock

Gentlemen:

You have requested our opinion concerning certain matters of Delaware
law in connection with the conversion of Security Savings Association of
Hazleton (the "Association"), a Pennsylvania-chartered savings association,
from the mutual to the stock form of ownership (the "Conversion"), and the
related subscription offering, community offering and syndicated community
offering (the "Offerings") by Security of Pennsylvania Financial Corp., (the
"Company"), a Delaware corporation and the proposed holding company for the
Association, of up to 1,610,000 shares of its common stock, par value $.01 per
share ("Common Stock") (1,851,500 shares if the estimated valuation range is
increased up to 15% to reflect changes in market and financial conditions
following commencement of the Offerings) and the issuance of 80,500 shares to
Security Savings Charitable Foundation, (the "Foundation") a privately-owned
charitable foundation formed by the Company, (92,575 shares if the estimated
valuation range is increased up to 15% to reflect changes in market and
financial conditions following commencement of the Offerings).

We understand that the Company will loan to the trust for the
Association's Employee Stock Ownership Plan (the "ESOP") the funds the ESOP
trust will use to purchase shares of Common Stock for which the ESOP trust
subscribes pursuant to the Offerings and for purposes of rendering the opinion
set forth in paragraph 2 below, we assume that: (a) the Board of Directors of
the Company (the "Board") has duly authorized the loan to the ESOP trust (the
"Loan"); (b) the ESOP serves a valid corporate purpose for the Company; (c) the
Loan will be made at an interest rate and on other terms that are fair to the
Company; (d) the terms of the Loan will be set forth in customary and
appropriate documents including, without limitation, a
<PAGE> 2
Board of Directors
Security of Pennsylvania Financial Corp.
___________, 1998
Page 2

promissory note representing the indebtedness of the ESOP trust to the Company
as a result of the Loan; and (e) the closing for the Loan and for the sale of
Common Stock to the ESOP trust will be held after the closing for the sale of
the other shares of Common Stock sold in the Offerings and the receipt by the
Company of the proceeds thereof and the receipt by the Company of the proceeds
thereof.

In connection with your request for our opinion, you have provided to
us and we have reviewed the Company's certificate of incorporation filed with
the Delaware Secretary of State on August 20, 1998 (the "Certificate of
Incorporation"); the Company's Bylaws; the Company's Registration Statement on
Form SB-2, as initially filed with the Securities and Exchange Commission on
September __, 1998 and as amended on October __, 1998 (the "Registration
Statement"); a consent of the sole incorporator of the Company; the plan of
Conversion; the form of gift instrument (the "Gift Instrument") whereby, and in
accordance with the terms of which, shares will be granted to the Foundation;
the ESOP trust agreement and the ESOP Loan agreement; resolutions of the Board
concerning the organization of the Company, the Offerings and designation of a
pricing committee of the Board (the "Pricing Committee"), and the form of stock
certificate approved by the Board to represent shares of Common Stock. We have
also been furnished a certificate of the Delaware Secretary of State certifying
the Company's good standing as a Delaware corporation. Capitalized terms used
but not defined herein shall have the meaning given them in the Certificate of
Incorporation.

In rendering this opinion, we have relied upon the opinion of Morris,
Nichols, Arsht & Tunnell as to matters of Delaware law upon which opinion we
believe we are justified in relying. We have examined the opinion of Morris,
Nichols, Arsht & Tunnell which opinion is in form satisfactory to us.

Based upon and subject to the foregoing, and limited in all respects to
matters of Delaware law, it is our opinion that:

1. The Company has been duly organized and is validly existing in
good standing as a corporation under the laws of the State of Delaware.

2. Upon the due adoption by the Pricing Committee of a resolution
fixing the number of shares of Common Stock to be sold in the Offerings, the
Common Stock to be issued in the Offerings (including the shares to be issued to
the ESOP trust) will be duly authorized and, when such shares are sold and paid
for in accordance with the terms set forth in the prospectus which is included
in the Registration Statement and such resolution of the Pricing Committee, and
certificates representing such shares in the form provided to us are duly and
properly issued, will be validly issued, fully paid and nonassessable.

<PAGE> 3
Board of Directors
Security of Pennsylvania Financial Corp.
___________, 1998
Page 3

3. The Foundation Shares have been duly and validly authorized for
issuance and sale, and when issued and delivered by the Company as provided in
the Gift Instrument against payment therefor, and a certificate representing
such shares in a form provided to us is duly and properly issued, such shares
will be duly issued, fully paid and nonassessable.

The following provisions of the Certificate of Incorporation
may not be given effect by a court applying Delaware law, but in our opinion
the failure to give effect to such provisions will not affect the duly
authorized, validly issued, fully paid and nonassessable status of the Common
Stock:

1. (a) Subsections C.3 and C.6 of Article FOURTH and Section
D of Article EIGHTH, which grant the Board the
authority to construe and apply the provisions of
those Articles, subsection C.4 of Article FOURTH, to
the extent that subsection obligates any person to
provide to the Board the information such subsection
authorizes the Board to demand, and the provision of
Subsection C.7 of Article EIGHTH empowering the Board
to determine the Fair Market Value of property offered
or paid for the Company's stock by an Interested
Stockholder, in each case to the extent, if any, that
a court applying Delaware law were to impose equitable
limitations upon such authority; and

(b) Article NINTH, which authorizes the Board to consider
the effect of any offer to acquire the Company on
constituencies other than stockholders in evaluating
any such offer.

We assume no obligation to advise you of any events that occur
subsequent to the date of this opinion. This opinion is being furnished to you
solely in response to the requirements contained in the Form SB-2 and the Form
AC to be filed with the Securities and Exchange Commission and the Office of
Thrift Supervision, respectively, for your benefit and may not be relied upon
by any other person or for any other purpose and it should not be quoted in
whole or in part or otherwise referred to or furnished to any other person or
entity without the prior written consent of this firm.

Very truly yours,

MULDOON, MURPHY & FAUCETTE

<PAGE> 1
EXHIBIT 5.1

[Morris, Nichols, Arsht & Tunnell Letterhead]

[Date]

Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N.W.
Washington, DC 20016

Ladies and Gentlemen:

You have requested our opinion concerning certain matters of
Delaware law in connection with (i) the conversion of Security Savings
Association of Hazelton, a state chartered savings association (the
"Association"), from the mutual form of ownership to stock form of ownership
(the "Conversion"), (ii) the subscription and community offering (the
"Offering"), in connection with the Conversion, by Security of Pennsylvania
Financial Corp., a Delaware corporation (the "Company"), of up to 1,851,500
shares of its common stock, par value $.01 per share (the "Common Stock"), and
(iii) the sale of up to 92,575 shares of Common Stock (the "Foundation Shares")
to Security Savings Charitable Foundation, a Delaware non-stock corporation (the
"Foundation"), pursuant to the Charitable Gift to Security Savings Charitable
Foundation dated as of ________________, ___, 1998 by the Company (the "Gift
Instrument").

In connection with your request for our opinion, you have provided
to us, and we have reviewed, the Company's certificate of incorporation (the
"Certificate of Incorporation"), its bylaws, the Registration Statement filed
with the Securities and Exchange Commission in connection with the Offering (the
"Registration Statement"), including the prospectus constituting a part thereof
(the "Prospectus"), a consent of the sole incorporator of the Company,
resolutions of

<PAGE> 2
Muldoon, Murphy & Faucette
[Date]
Page 2

the Board of Directors of the Company (the "Board") concerning, inter alia, the
organization of the Company, the Offering and the designation of a Pricing
Committee of the Board (the "Pricing Committee"), the form of stock certificate
approved by the Board to represent shares of Common Stock, the Foundation's
certificate of incorporation (the "Foundation Certificate of Incorporation"),
its bylaws, a consent of the sole incorporator of the Foundation, and the Gift
Instrument. We have also obtained a certificate of the Delaware Secretary of
State as to the Company's and the Foundation's good standing as Delaware
corporations. Capitalized terms used but not defined herein shall have the
meanings given them in the Certificate of Incorporation.

We understand that the Company will loan to the Association's
Employee Stock Ownership Plan (the "ESOP") the funds the ESOP will use to
purchase the shares of Common Stock for which the ESOP has subscribed as part of
the Offering. In this regard, we have assumed, for purposes of rendering the
opinion set forth in paragraph 2 below, that: (a) the Board has duly authorized
the loan to the ESOP (the "Loan"); (b) the Loan serves a valid corporate
purpose; (c) the Loan will be made at an interest rate and on other terms that
are fair to the Company; (d) the terms of the Loan will be set forth in
customary and appropriate documents including, without limitation, a promissory
note representing the indebtedness of the ESOP to the Company as a result of the
Loan; and (e) the closing for the Loan and for the sale of Common Stock to the
ESOP will be held after the closing for the sale of the other shares of Common
Stock sold in the Offering and the receipt by the Company of the proceeds
thereof.

We call your attention to the fact that the opinions expressed
herein are limited in all respects to matters of Delaware corporate law. We
express no opinion concerning the requirements of any other law, rule or
regulation, state or federal, applicable to the Association, the Company, the
Offering, the Conversion, or the Foundation, including, without limitation,
those

<PAGE> 3
Muldoon, Murphy & Faucette
[Date]
Page 3

applicable to state chartered, federally insured savings associations or their
holding companies.

Based upon and subject to the foregoing, it is our opinion that:

1. The Company has been duly organized and is validly existing in
good standing as a corporation under the laws of the State of Delaware, with the
corporate power and authority to own its property and conduct its business as
now conducted as described in the Prospectus.

2. Upon the due adoption by the Pricing Committee of a resolution
fixing the number of shares of Common Stock to be sold in the Offering, the
Common Stock to be issued in the Offering (including the shares to be issued to
the ESOP) will be duly authorized and, when such shares are sold and paid for in
accordance with the terms set forth in the Prospectus and such resolution of the
Pricing Committee, and certificates representing such shares in the form
provided to us are duly and properly issued, will be validly issued, fully paid
and non-assessable, with no personal liability for the payment of the Company's
debts arising solely by virtue of the ownership thereof; such issuance and sale
will not be in violation of or subject to any preemptive rights provided for by
Delaware law or by the Certificate of Incorporation.

3. The Foundation has been duly organized and is validly existing as
a non-stock corporation in good standing under the laws of the State of Delaware
with corporate power and authority to own, lease, and operate its properties and
to conduct its business as described in the Prospectus.

4. No approvals of any Delaware governmental agency, bureau,
commission, department or other organization is required to establish the
Foundation and to issue and sell the Foundation Shares to the Foundation as
described in the Prospectus pursuant to the Gift Instrument; provided, however,
that we express no opinion with respect to the Delaware Securities Act (6 Del.
C. Section 7301 et seq.).

<PAGE> 4
Muldoon, Murphy & Faucette
[Date]
Page 4

5. The Foundation Shares have been duly and validly authorized for
issuance and sale, and when issued and delivered by the Company as provided in
the Gift Instrument against payment therefor, and a certificate representing
such shares in the form provided to us is duly and properly issued, such shares
will be duly and validly issued, fully paid and non-assessable, with no personal
liability for the payment of the Company's debts arising solely by virtue of the
ownership thereof; such issuance and sale will not be in violation of or subject
to any preemptive rights provided for by Delaware law or the Certificate of
Incorporation.

The following provisions of the Certificate of Incorporation may not
be given effect by a court applying Delaware law, but in our opinion the failure
to give effect to such provisions will not affect the duly authorized, validly
issued, fully paid and non-assessable status of the Common Stock:

(a) Subsections C.3 and C.6 of Article FOURTH and Section D of
Article EIGHTH, which grant the Board the authority to construe and apply the
provisions of those Articles, subsection C.4 of Article FOURTH, to the extent
that provision obligates any person to provide to the Board the information such
subsection authorizes the Board to demand, and the provision of Section C.7 of
Article EIGHTH empowering the Board to determine the Fair Market Value of
property offered or paid for the Company's stock by an Interested Stockholder,
to the extent, if any, that a court applying Delaware law were to impose
equitable limitations upon the authority of the Board under such provisions.

(b) Article NINTH of the Certificate of Incorporation, which
purports to permit the Board to consider the effect of any offer to acquire the
Company on constituencies other than stockholders in evaluating any such offer.

Very truly yours,

<PAGE> 1
EXHIBIT 8.0

________________, 1998 DRAFT

Board of Directors
Security Savings Association of Hazleton
31 W. Broad Street
Hazleton, Pennsylvania 18201-0770

Board of Directors
Security of Pennsylvania Financial Corp.
31 W. Broad Street
Hazleton, Pennsylvania 18201-0770

Re: Certain Federal Tax Consequences of the Conversion of
Security Savings Association of Hazleton from a
Pennsylvania-chartered Mutual Savings and Loan
Association to a Pennsylvania-chartered Capital Stock
Savings Association and the Offer and Sale of Common
Stock of Security of Pennsylvania Financial Corp.
(the "Conversion")

Ladies and Gentlemen:

You have requested an opinion on certain federal income tax
consequences of the proposed conversion of Security Savings Association of
Hazleton (the "Association") from a Pennsylvania-chartered mutual savings and
loan association to a Pennsylvania-chartered capital stock savings association
and the acquisition of the Association's capital stock by Security of
Pennsylvania Financial Corp., a Delaware corporation (the "Holding Company"),
pursuant to the plan of conversion adopted by the Board of Directors on June
26, 1998, and as amended on September 8, 1998, (the "Plan of Conversion").

The proposed transaction is described in the Prospectus and the Plan of
Conversion, and the tax consequences of the proposed transaction will be as set
forth in the section of this letter entitled "FEDERAL TAX OPINION."

<PAGE> 2
Board of Directors
____________, 1998 DRAFT
Page 2

We have made such inquiries and have examined such documents and
records as we have deemed appropriate for the purpose of this opinion. In
rendering this opinion, we have received certain standard representations of
the Holding Company and the Association concerning the Holding Company and the
Association as well as the transaction ("Representations"). These
Representations are required to be furnished prior to the execution of this
letter and again prior to the closing of the Conversion. We will rely upon the
accuracy of the Representations of the Holding Company and the Association and
the statements of facts contained in the examined documents, particularly the
Plan of Conversion. We have also assumed the authenticity of all signatures,
the legal capacity of all natural persons and the conformity to the originals
of all documents submitted to us as copies. Each capitalized term used herein,
unless otherwise defined, has the meaning set forth in the Plan of Conversion.
We have assumed that the Conversion will be consummated strictly in accordance
with the terms of the Plan of Conversion.

The Plan of Conversion and the Prospectus contain a detailed
description of the Conversion. These documents as well as the Representations
to be provided by the Holding Company and the Association are incorporated in
this letter as part of the statement of the facts.

Security Savings Association of Hazleton, with its headquarters office
in Hazleton, Pennsylvania, is a Pennsylvania-chartered mutual savings and loan
association. As a mutual savings and loan association, the Association has
never been authorized to issue stock. Instead, the proprietary interest in
the reserves and undivided profits of the Association belong to the deposit
account holders of the Association, hereinafter sometimes referred to as
"depositors." A depositor of the Association has a right to share, pro rata,
with respect to the withdrawal value of his respective deposit account in any
liquidation proceeds distributed in the event the Association is ever
liquidated. In addition, a depositor of the Association is entitled to
interest on his account balance as fixed and paid by the Association.

In order to provide organizational and economic strength to the
Association, the Board of Directors has adopted the Plan of Conversion whereby
the Association will convert itself into a Pennsylvania-chartered capital stock
savings association (the "Converted Association"), the stock of which will be
held entirely by the Holding Company. Assuming that the Holding Company form
of organization is utilized, the Holding Company will acquire the stock of the
Association by purchase, in exchange for the Conversion proceeds that are not
permitted to be retained by the Holding Company. The Holding Company will
apply to the Office of Thrift Supervision ("OTS") to retain up to 50% of the
proceeds received from the Conversion. The aggregate sales price of the Common
Stock issued in the Conversion will be based on an independent appraiser's
valuation of the estimated pro forma market value of the Common Stock of the
Converted Association. The Conversion and sale of the Common Stock will be
subject to approval by the OTS, the Pennsylvania Department of Banking and the
approval of the Voting Members.

<PAGE> 3
Board of Directors
____________, 1998 DRAFT
Page 3

ESTABLISHMENT OF LIQUIDATION ACCOUNT. The Association shall establish
at the time of Conversion a liquidation account in an amount equal to its net
worth as of the latest practicable date prior to Conversion. The liquidation
account will be maintained by the Association for the benefit of the Eligible
Account Holders and Supplemental Eligible Account Holders who continue to
maintain their Savings Accounts at the Association. Each Eligible Account
Holder and Supplemental Eligible Account Holder shall, with respect to his
Savings Account, hold a related inchoate interest in a portion of the
liquidation account balance, in relation to his Savings Account balance on the
Eligibility Record Date and/or Supplemental Eligibility Record Date or to such
balance as it may be subsequently reduced, as provided in the Plan of
Conversion.

In the unlikely event of a complete liquidation of the Association (and
only in such event), following all liquidation payments to creditors (including
those to Account Holders to the extent of their Savings Accounts) each Eligible
Account Holder and Supplemental Eligible Account Holder shall be entitled to
receive a liquidating distribution from the liquidation account, in the amount
of the then adjusted subaccount balance for his Savings Account then held,
before any liquidation distribution may be made to any holders of the
Association's capital stock. No merger, consolidation, purchase of bulk assets
with assumption of Savings Accounts and other liabilities, or similar
transaction with an FDIC institution, in which the Association is not the
surviving institution, shall be deemed to be a complete liquidation for this
purpose. In such transactions, the liquidation account shall be assumed by the
surviving institution.

ESTABLISHMENT OF FOUNDATION. As part of the Conversion, the Company
and the Association intend to establish a charitable foundation (the
"Foundation") that will qualify as an exempt organization under Section
501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code") and to
donate to the Foundation up to 8.0% of the number of shares of Common Stock
sold in the Conversion. The establishment and funding of the Foundation as
part of the Conversion is subject to the approval of the Voting Members of the
Association at the Special Meeting of Members. In the event that the
Foundation does not receive the prerequisite approval, the Association may
determine to complete the Conversion without the Foundation.

The Plan of Conversion provides that the Foundation is being formed to
further the Converted Association's long term commitment to its community. The
Plan of Conversion states that the Foundation is intended to complement the
Association's existing community reinvestment activities so as to allow the
local community to share in the growth and profitability of the Holding Company
and the Converted Association over the long term.

The Foundation will be dedicated to the promotion of charitable and
educational purposes within the Association's Local Community, including, but
not limited to, grants or donations to support housing assistance,
scholarships, local education, not-for-profit medical facilities, not-

<PAGE> 4
Board of Directors
____________, 1998 DRAFT
Page 4

for-profit community groups and other types of organizations or civic minded
projects. The Foundation will annually distribute total grants and donations
to assist charitable organizations or to fund projects within its local
community of not less than 5% of the average fair value of the Foundation
assets each year.

* * *

You have provided the following Representations concerning this
transaction:

(a) The fair market value of the withdrawable deposit accounts
plus interests in the liquidation account of the Converted
Association to be constructively received under the Plan of
Conversion will, in each instance, be equal to the fair market
value of the withdrawable deposit accounts (plus the related
interest in the residual equity of the Association) deemed to
be surrendered in exchange therefor.

(b) If an individual's total deposits in the Association equal or
exceed $50 as of the Eligibility Record Date or the
Supplemental Eligibility Record Date, then no amount of that
individual's total deposits will be excluded from
participating in the liquidation account. The fair market
value of the deposit accounts of the Association which have a
balance of less than $50 on the Eligibility Record Date or the
Supplemental Eligibility Record Date will be less than 1% of
the total fair market value of all deposit accounts of the
Association.

(c) Immediately following the Conversion, the Eligible Account
Holders and the Supplemental Eligible Account Holders of the
Association will own all of the outstanding interests in the
liquidation account and will own such interest solely by
reason of their ownership of deposits in the Association
immediately before the Conversion.

<PAGE> 5
Board of Directors
____________, 1998 DRAFT
Page 5

(d) After the Conversion, the Converted Association will continue
the business of the Association in the same manner as prior to
the Conversion. The Converted Association has no plan or
intention and the Holding Company has no plan or intention to
cause the Converted Association to sell its assets other than
in the ordinary course of business.

(e) The Holding Company has no plan or intention to sell,
liquidate or otherwise dispose of the stock of the Converted
Association other than in the ordinary course of business.

(f) The Holding Company and the Converted Association have no
current plan or intention to redeem or otherwise acquire any
of the Common Stock issued in the Conversion transaction.

(g) Immediately after the Conversion, the assets and liabilities
of the Converted Association will be identical to the assets
and liabilities of the Association immediately prior to the
Conversion, plus the net proceeds from the sale of the
Converted Association's common stock to the Holding Company
and any liability associated with indebtedness incurred by the
Employee Plans in the acquisition of Common Stock by the
Employee Plans.

(h) The Association, the Converted Association and the Holding
Company are corporations within the meaning of section
7701(a)(3) of the Internal Revenue Code of 1986, as amended.

(i) None of the shares of the Common Stock to be purchased by the
depositor-employees of the Association in the Conversion will
be issued or acquired at a discount. However, shares may be
given to certain Directors and employees as compensation by
means of the Employee Plans. Compensation to be paid to such
Directors and depositor-employees will be commensurate with
amounts paid to third parties bargaining at arm's length for
similar services.

(j) The fair market value of the assets of the Association, which
will be transferred to the Converted Association in the
Conversion, will equal or exceed the sum of the liabilities of
the Association which will be assumed by the Converted
Association and any liabilities to which the transferred
assets are subject.

<PAGE> 6
Board of Directors
____________, 1998 DRAFT
Page 6

(k) The Association is not under the jurisdiction of a bankruptcy
or similar court in any Title 11 or similar case within the
meaning of section 368(a)(3)(A) of the Code.

(l) Upon the completion of the Conversion, the Holding Company
will own and hold 100% of the issued and outstanding capital
stock of the Converted Association and no other shares of
capital stock of the Converted Association will be issued
and/or outstanding. At the time of the Conversion, the
Converted Association does not have any plan or intention to
issue additional shares of its stock following the
transaction. Further, no shares of preferred stock of the
Converted Association will be issued and/or outstanding.

(m) Upon the completion of the Conversion, there will be no
rights, warrants, contracts, agreements, commitments or
understandings with respect to the capital stock of the
Converted Association, nor will there be any securities
outstanding which are convertible into the capital stock of
the Converted Association.

(n) No cash or property will be given to Eligible Account Holders,
Supplemental Eligible Account Holders, or others in lieu of
(a) nontransferable subscription rights, or (b) an interest in
the liquidation account of the Converted Association.

(o) The Association has utilized a reserve for bad debts in
accordance with section 593 and, following the Conversion, to
the extent allowed under the Code, the Converted Association
shall maintain a reserve for bad debts in accordance with the
applicable provisions of the Code.

(p) The Association currently satisfies the 60% "qualified assets"
test of section 7701(a)(19) of the Code. Management expects
the Converted Association to be able to continue to satisfy
the test in the future. The Converted Association will also
satisfy the "qualified thrift lender" tests set out in
sections 301 and 303 of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989.

(q) Depositors will pay the expenses of the Conversion solely
applicable to them, if any. The Holding Company and the
Association will each pay expenses of the transaction
attributable to them and will not pay any expenses solely
attributable to the depositors or to the Holding Company
shareholders.

(r) The exercise price of the subscription rights received by the
Association's Eligible Account Holders, Supplemental Eligible
Account Holders, and other holders of

<PAGE> 7
Board of Directors
____________, 1998 DRAFT
Page 7

subscription rights to purchase Holding Company Common Stock
will be equal to the fair market value of the stock of the
Holding Company at the time of the completion of the
Conversion as determined by an independent appraisal.

(s) The proprietary interests of the Eligible Account Holders and
the Supplemental Eligible Account Holders in the Association
arise solely by virtue of the fact that they are account
holders in the Association.

(t) There is no plan or intention for the Converted Association to
be liquidated or merged with another corporation following
this proposed transaction.

(u) The liabilities of the Association assumed by the Converted
Association plus the liabilities, if any, to which the
transferred assets are subject were incurred by the
Association in the ordinary course of its business and are
associated with the assets transferred.

(v) The Association currently has no net operating losses for
federal tax purposes, and has no such losses available for
carryover to future tax years. The Association has neither
generated nor carried forward a net operating loss for federal
tax purposes in the past ten tax years.

LIMITATIONS ON OPINION

Our opinions expressed herein are based solely upon current provisions
of the Internal Revenue Code of 1986, as amended, including applicable
regulations thereunder and current judicial and administrative authority. Any
future amendments to the Code or applicable regulations, or new judicial
decisions or administrative interpretations, any of which could be retroactive
in effect, could cause us to modify our opinion. No opinion is expressed
herein with regard to the federal, state, or city tax consequences of the
Conversion under any section of the Code except if and to the extent
specifically addressed.

FEDERAL TAX OPINION

Based solely upon the foregoing Representations and information and
assuming the transaction occurs in accordance with the Plan of Conversion, and
taking into consideration the limitations noted throughout this opinion, it is
our opinion that under current federal income tax law:

<PAGE> 8
Board of Directors
____________, 1998 DRAFT
Page 8

(1) Pursuant to the Conversion, the changes at the corporate level
other than changes in the form of organization will be
insubstantial. Based upon that fact and the fact that the
equity interest of a depositor in a mutual savings and loan
association is more nominal than real, unlike that of a
shareholder of a corporation, the Conversion of the
Association from a mutual savings and loan association to a
stock savings Association is a tax-free reorganization since
it is a mere change in identity, form or place of organization
within the meaning of section 368(a)(1)(F) of the Code (see
Rev. Rul. 80-105, 1980-1 C.B. 78). Neither the Association
nor the Converted Association shall recognize gain or loss as
a result of the Conversion. The Association and the Converted
Association shall each be "a party to a reorganization" within
the meaning of section 368(b) of the Code.

(2) No gain or loss shall be recognized by the Converted
Association or the Holding Company on the receipt by the
Converted Association of money from the Holding Company in
exchange for shares of the Converted Association's capital
stock or by the Holding Company upon the receipt of money from
the sale of its Common Stock (Section 1032(a) of the Code).

(3) The basis of the assets of the Association in the hands of the
Converted Association shall be the same as the basis of such
assets in the hands of the Association immediately prior to
the Conversion (Section 362(b) of the Code).

(4) The holding period of the assets of the Association in the
hands of the Converted Association shall include the period
during which the Association held the assets (Section 1223(2)
of the Code).

(5) No gain or loss shall be recognized by the Eligible Account
Holders and the Supplemental Eligible Account Holders of the
Association on the issuance to them of withdrawable deposit
accounts in the Converted Association plus interests in the
liquidation account of the Converted Association in exchange
for their deposit accounts in the Association or to the other
depositors on the issuance to them of withdrawable deposit
accounts (Section 354(a) of the Code).

(6) Provided that the amount to be paid for such stock pursuant to
the subscription rights is equal to the fair market value of
the stock, no gain or loss will be recognized by Eligible
Account Holders and Supplemental Eligible Account Holders upon
the distribution to them of the nontransferable subscription
rights to purchase shares of stock in the Holding Company
(Section 356(a)). Gain realized, if any, by the Eligible
Account Holders and Supplemental Eligible Account

<PAGE> 9
Board of Directors
____________, 1998 DRAFT
Page 9

Holders on the distribution to them of nontransferable
subscription rights to purchase shares of Common Stock will be
recognized but only in an amount not in excess of the fair
market value of such subscription rights (Section 356(a)).
Eligible Account Holders and Supplemental Eligible Account
Holders will not realize any taxable income as a result of the
exercise by them of the nontransferable subscription rights
(Rev. Rul. 56-572, 1956-2 C.B. 182).

(7) The basis of the deposit accounts in the Converted Association
to be received by the Eligible Account Holders, Supplemental
Eligible Account Holders and other depositors of the
Association will be the same as the basis of their deposit
accounts in the Association surrendered in exchange therefor
(Section 358(a)(1) of the Code). The basis of the interests
in the liquidation account of the Converted Association to be
received by the Eligible Account Holders of the Association
shall be zero (Rev. Rul. 71-233, 1971-1 C.B. 113). The basis
of the Holding Company Common Stock to its stockholders will
be the purchase price thereof plus the basis, if any, of
nontransferable subscription rights (Section 1012 of the
Code). Accordingly, assuming the nontransferable subscription
rights have no value, the basis of the Common Stock to the
Eligible Account Holders and Supplemental Eligible Account
Holders will be the amount paid therefor. The holding period
of the Common Stock purchased pursuant to the exercise of
subscription rights shall commence on the date on which the
right to acquire such stock was exercised (Section 1223(6) of
the Code).

Our opinion under paragraph (6) above is predicated on the
Representation that no person shall receive any payment, whether in money or
property, in lieu of the issuance of subscription rights. Our opinion under
paragraphs (6) and (7) above assumes that the subscription rights to purchase
shares of Common Stock received by Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members have a fair market value of zero. We
understand that you have received a letter from Keller & Company, Inc. that the
subscription rights do not have any value. We express no view regarding the
valuation of the subscription rights.

If the subscription rights are subsequently found to have a fair market
value, income may be recognized by various recipients of the subscription
rights (in certain cases, whether or not the rights are exercised) and Holding
Company and/or the Converted Association may be taxable on the distribution of
the subscription rights.

<PAGE> 10
Board of Directors
____________, 1998 DRAFT
Page 10

* * *

Since this letter is rendered in advance of the closing of this
transaction, we have assumed that the transaction will be consummated in
accordance with the Plan of Conversion as well as all the information and
Representations referred to herein. Any change in the transaction could cause
us to modify our opinion.

We consent to the inclusion of this opinion as an exhibit to the Form
AC and Form SB-2 Registration Statement of Security of Pennsylvania Financial
Corp. and the references to and summary of this opinion in such Form AC and
Form SB-2 Registration Statement.

Sincerely,

MULDOON, MURPHY & FAUCETTE

<PAGE> 1

Exhibit 8.1

DRAFT

September 11, 1998

Board of Directors
Security Savings Association of Hazleton
31 West Broad Street
Hazleton, Pennsylvania 18201

Board of Directors
Security of Pennsylvania Financial Corp.
31 West Broad Street
Hazleton, Pennsylvania 18201

Ladies and Gentlemen:

You have requested the opinion of Parente, Randolph, Orlando, Carey &
Associates ("PROC") as to certain state income tax ramifications to Security
Savings Association of Hazleton (the "Association"), Security of Pennsylvania
Financial Corp. (the "Holding Company"), and Eligible Account Holders or
Supplemental Eligible Account Holders of the Association, resulting from the
proposed reorganization and conversion of the Association from a state-chartered
mutual savings and loan association to a state-chartered capital stock savings
institution, in which the Association will issue all of its stock to Security of
Pennsylvania Financial Corp., a newly formed savings and loan holding company,
which will own all of the Association's capital stock (the "Conversion").

Our opinion relies on certain facts and representations which appear in
the Draft Prospectus for the Holding Company provided by Muldoon, Murphy &
Faucette, Attorneys at Law, the PLAN OF CONVERSION dated June 29, 1998, and the
facts and representations which are listed below under the titles "STATEMENT OF
FACTS" and "REPRESENTATIONS." If any fact or representation contained below is
not complete or accurate, it is important that we be notified immediately in
writing as this may cause us to change our opinion.
<PAGE> 2
Board of Directors
Security Savings Association of Hazleton
and
Security of Pennsylvania Financial Corp.
September 11, 1998
Page 2

STATEMENT OF FACTS

Security Savings Association of Hazleton, a state-chartered mutual
savings association organized and operated in the Commonwealth of Pennsylvania,
desires to convert to a state-chartered capital stock savings institution (the
"Converted Association") which, similarly, will be organized and operated under
the laws of the Commonwealth of Pennsylvania. The conversion will be
accomplished by the use of a holding company to purchase and hold the stock of
the Association. The Holding Company, a Delaware corporation, will offer for
sale, through a subscription offering and a syndicated community offering,
shares of its common stock. The Association, upon the amendment of its charter
to authorize and issue stock, will simultaneously sell its capital stock to the
Holding Company pursuant to a plan of conversion. The Holding Company will
authorize 5 million shares of common stock, with a par value of $.01 per share.
In addition, the Holding Company will authorize 1 million shares of preferred
stock, with a par value of $.01 per share (the "Preferred Stock"). Based upon
preliminary estimates provided by the Association, the Holding Company will
initially issue between 1,249,500 and 1,690,500 or up to an adjusted maximum of
1,944,075 of their authorized shares of common stock. The issued shares listed
above include the 5% of shares that will be contributed to the charitable
foundation.

The plan of conversion provides that nontransferable rights to
subscribe for the common stock of the Holding Company will be granted, in order
of priority: (1) holders of deposit accounts with a balance of $50 or more as of
March 31, 1997 ("Eligible Account Holders"); (2) the ESOP; (3) holders of
deposit accounts with a balance of $50 or more as of , 1998
("Supplemental Eligible Account Holders"); and (4) to certain other members of
the Association as of the close of business on the voting record date. The
Holding Company will offer its shares of common stock not subscribed for in the
above subscription offering for sale in a community offering or, if necessary,
in a syndicated community offering, to certain members of the general public.

Keller and Company, Inc. has issued an opinion stating that, pursuant
to its valuation, Keller is of the opinion that the subscription rights do not
have any value based on the fact that such rights are acquired by the recipients
without cost, are nontransferable and of short duration, and afford the
recipients the right only to purchase the common stock at a price equal to its
estimated fair market value, which will be the same price as the actual purchase
price for the shares of common stock sold in the community offering.
<PAGE> 3
Board of Directors
Security Savings Association of Hazleton
and
Security of Pennsylvania Financial Corp.
September 11, 1998
Page 3

In the unlikely event of a complete liquidation of the Association in
its present mutual form, each depositor would receive his pro rata share of any
assets of the Association remaining after payment of claims of all creditors
(including the claims of all depositors to the withdrawal value of their
accounts). Each depositor's pro rata share of such remaining assets would be in
the same proportion as the value of his deposit account was to the total value
of all deposit accounts in the Association at the time of liquidation. After the
Conversion, each depositor, in the event of a complete liquidation, would have a
claim as a creditor of the same general priority as the claims of all other
general creditors of the Association. However, except as described below, his
claim would be solely in the amount of the balance in his deposit account plus
accrued interest. He would not have an interest in the value or assets of the
Association above that amount.

The Plan provides for the establishment, upon the completion of the
Conversion, of a special "liquidation account" for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in an amount equal to
the surplus and reserves of the Association as of the date of its latest balance
sheet contained in the final Prospectus used in connection with the Conversion.
Each Eligible Account Holder and Supplemental Eligible Account Holder, if he
were to continue to maintain his deposit account at the Association, would be
entitled, on a complete liquidation of the Association after the Conversion, to
an interest in the liquidation account prior to any payment to the stockholders
of the Association. Each Eligible Account Holder and Supplemental Eligible
Account Holder would have an initial interest in such liquidation account for
each deposit account, including regular accounts, transaction accounts such as
NOW accounts, money market deposit accounts, and certificates of deposit, with a
balance of $50 or more held in the Association on March 31, 1997 and ,
1998, respectively. Each Eligible Account Holder and Supplemental Eligible
Account Holder will have a pro rata interest in the total liquidation account
based on the proportion that the balance of his Qualifying Deposits on the
Eligibility Record Date or Supplemental Eligibility Record Date, respectively,
bore to the total amount of all Qualifying Deposits of all Eligible Account
Holders and Supplemental Eligible Account Holders in the Association. For
deposit accounts in existence at both dates, separate subaccounts shall be
determined on the basis of the Qualifying Deposits in such deposit accounts on
such respective record dates.
<PAGE> 4
Board of Directors
Security Savings Association of Hazleton
and
Security of Pennsylvania Financial Corp.
September 11, 1998
Page 4

REPRESENTATIONS

PROC is relying on the following representations in rendering the
opinions contained herein. It is understood that PROC has not independently
verified the accuracy of any of these representations:

(1) The fair market value of the withdrawable deposit accounts plus
interests in the liquidation account of the converted Association
to be constructively received under the PLAN OF CONVERSION will,
in each instance, be equal to the fair market value of the
withdrawable deposit accounts (plus the related interest in the
residual equity of the Association) deemed to be surrendered in
exchange therefor.

(2) If an individual's total deposits in the Association equal or
exceed $50 as of the Eligibility Record Date or Supplemental
Eligibility Record Date, then no amount of that individual's
total deposits will be excluded from participating in the
liquidation account. The fair market value of the deposit
accounts of the Association which have a balance of less than $50
on the Eligibility Record Date or the Supplemental Eligibility
Record Date will be less than 1% of the total fair market value
of all deposit accounts of the Association.
<PAGE> 5
Board of Directors
Security Savings Association of Hazleton
and
Security of Pennsylvania Financial Corp.
September 11, 1998
Page 5

(3) Immediately following the Conversion, the Eligible Account
Holders and the Supplemental Eligible Account Holders of the
Association will own all of the outstanding interests in the
liquidation account and will own such interest solely by reason
of their ownership of deposits in the Association immediately
before the Conversion.

(4) After the Conversion, the converted Association will continue the
business of the Association in the same manner as prior to the
Conversion. The converted Association has no plan or intention
and the Holding Company has no plan or intention to cause the
converted Association to sell its assets other than in the
ordinary course of business.

(5) The Holding Company has no plan or intention to sell, liquidate
or otherwise dispose of the stock of the converted Association
other than in the ordinary course of business.

(6) The Holding Company and the converted Association have no current
plan or intention to redeem or otherwise acquire any of the
common stock issued in the Conversion transaction.

(7) Immediately after the Conversion, the assets and liabilities of
the converted Association will be identical to the assets and
liabilities of the Association immediately prior to the
Conversion, plus the net proceeds from the sale of the converted
Association's common stock to the Holding Company and any
liability associated with indebtedness incurred by the Employee
Plans in the acquisition of the Holding Company common stock by
the Employee Plans.

(8) The Converted Association and the Holding Company are
corporations within the meaning of Section 7701(a)(3) of the
Internal Revenue Code.

(9) None of the shares of the Holding Company common stock to be
purchased by the depositor-employees of the Association in the
Conversion will be issued or acquired at a discount. However,
shares may be given to certain directors and employees as
compensation by means of the Employee Plans. Compensation to be
paid to such directors and depositor-employees will be
commensurate with amounts paid to third parties bargaining at
arm's length for similar services.
<PAGE> 6
Board of Directors
Security Savings Association of Hazleton
and
Security of Pennsylvania Financial Corp.
September 11, 1998
Page 6

(10) The fair market value of the assets of the Association, which
will be transferred to the converted Association in the
Conversion, will equal or exceed the sum of the liabilities of
the Association which will be assumed by the converted
Association and any liabilities to which the transferred assets
are subject.

(11) The Association is not under the jurisdiction of a bankruptcy or
similar court in any Title 11 or similar case within the meaning
of Section 368(a)(3)(A) of the Code.

(12) Upon the completion of the Conversion, the Holding Company will
own and hold 100% of the issued and outstanding capital stock of
the converted Association and no other shares of capital stock of
the converted Association will be issued and/or outstanding. None
of the shares of the Company's authorized Preferred Stock will be
issued in the Conversion. Such stock may be issued with such
preferences and designations as the Board of Directors may from
time to time determine.

(13) Upon the completion of the Conversion, there will be no rights,
warrants, contracts, agreements, commitments or understandings
with respect to the capital stock of the converted Association,
nor will there be any securities outstanding which are
convertible into the capital stock of the converted Association.

(14) No cash or property will be given to Eligible Account Holders,
Supplemental Eligible Account Holders, or others in lieu of (a)
nontransferable subscription rights, or (b) an interest in the
liquidation account of the converted Association.

(15) The Association currently maintains a reserve for bad debts in
accordance with Section 585 of the Internal Revenue Code (the
"Code") and, following the Conversion, to the extent allowed
under the Code, the converted Association shall maintain a
reserve for bad debts in accordance with the applicable
provisions of the Code.
<PAGE> 7
Board of Directors
Security Savings Association of Hazleton
and
Security of Pennsylvania Financial Corp.
September 11, 1998
Page 7

(16) Depositors will pay the expense of the Conversion solely
applicable to them, if any. The Holding Company and the
Association will each pay expenses of the transaction
attributable to them and will not pay any expenses solely
attributable to the depositors or to the Holding Company
shareholders.

(17) The exercise price of the subscription rights received by the
Association's Eligible Account Holders, Supplemental Eligible
Account Holders, and other holders of subscription rights to
purchase Holding Company common stock will be equal to the fair
market value of the stock of the Holding Company at the time of
the completion of the Conversion as determined by an independent
appraisal.

(18) The proprietary interests of the Eligible Account Holders and the
Supplemental Eligible Account Holders in the Association arise
solely by virtue of the fact that they are account holders in the
Association.

(19) There is no plan or intention for the converted Association to be
liquidated or merged with another corporation following this
proposed transaction.

(20) The liabilities of the Association assumed by the converted
Association plus the liabilities, if any, to which the
transferred assets are subject were incurred by the Association
in the ordinary course of its business and are associated with
the assets transferred.

(21) External legal counsel (Muldoon, Murphy & Faucette) has opined
that for federal income tax purposes, no gain or loss will be
recognized as a result of the proposed Conversion by either the
Association or the Holding Company, and that the proposed
conversion of the Association from a mutual savings association
to a stock savings association qualifies as a tax-free
reorganization for federal income tax purposes pursuant to
Section 368(a)(1)(F) of the Internal Revenue Code.
<PAGE> 8
Board of Directors
Security Savings Association of Hazleton
and
Security of Pennsylvania Financial Corp.
September 11, 1998
Page 8

(22) External legal counsel has opined that for federal income tax
purposes, no gain or loss will be recognized by Eligible Account
Holders and Supplemental Eligible Account Holders of the
Association on the issuance to them of withdrawable deposit
accounts in the converted Association plus interests in the
liquidation account of the converted Association in exchange for
deposit accounts in the Association and their related interest in
the residual equity of the Association or to the other depositors
on the issuance to them of withdrawable deposit accounts.

(23) External legal counsel has opined that for federal income tax
purposes, no gain or loss will be recognized by Eligible Account
Holders and Supplemental Eligible Account Holders of the
Association upon the distribution to them of the nontransferable
subscription rights to purchase shares of stock in the Holding
Company, provided that the amount paid for the Holding Company
common stock is equal to the fair market value of such stock.
Gain realized, if any, by the Eligible Account Holders and
Supplemental Eligible Account Holders of the Association on the
distribution to them of nontransferable subscription rights to
purchase the Holding Company stock will be recognized, but only
in an amount not in excess of the fair market value of such
subscription rights. Eligible Account Holders and Supplemental
Eligible Account Holders of the Association will not realize any
taxable income for federal income tax purposes as a result of the
exercise by them of the nontransferable subscription rights.

(24) Based on the opinion of Keller and Company, Inc., the
nontransferable subscription rights do not have any value.

(25) No gain or loss will be recognized by the Association under
Generally Accepted Accounting Principles (GAAP) as a result of
the Conversion, and the purchase accounting method will not be
used by the Association to account for the transaction in
accordance with GAAP.

(26) The Association is a state-chartered savings institution. The
Association is neither incorporated nor currently conducting
business in the State of Delaware.
<PAGE> 9
Board of Directors
Security Savings Association of Hazleton
and
Security of Pennsylvania Financial Corp.
September 11, 1998
Page 9

(27) The Holding Company is a domestic Delaware corporation, organized
at the direction of the Association to become a savings and loan
holding company and own all of the Association's capital stock to
be issued upon its conversion from mutual form to stock form. The
Holding Company does not maintain any physical presence in nor
conduct any business in the State of Delaware. The Holding
Company conducts its business activities in the State of
Pennsylvania.

INCOME TAX OPINION -
STATE OF PENNSYLVANIA

Pennsylvania Corporate Net Income Tax

Statement of Facts, Representations and Discussions:

Pennsylvania corporate net income tax ("CNI") is imposed on domestic
and foreign corporations, and business trusts for the privilege of doing
business, carrying on activities, having capital or property employed or used,
or owning property in Pennsylvania (72 P.S. Section 7402, Act of March 4, 1971,
P.L. 6). Certain entities are specifically excluded from the tax including
building and loan associations, banks, bank and trust companies, national banks,
savings institutions, trust companies, insurance and surety companies, and
Pennsylvania S corporations (72 P.S. Section 7401(1)). The Holding Company is
not exempt from CNI taxation under any of the above listed exceptions.
Accordingly, the Holding Company is subject to CNI taxation.

Pennsylvania taxable income begins with federal taxable income before
net operating loss deduction and special deductions, reported on federal Form
1120 (72 P.S. Section 7401(3)1(a) & 61 Pa. Code Section 153.11(a)). Certain
adjustments are made to federal taxable income to arrive at Pennsylvania taxable
income.

Adjustments that would increase Pennsylvania taxable income include:

- certain tax preference items under the federal alternative
minimum taxation system that are not deductible for
Pennsylvania CNI purposes (72 P.S. Section 7401(3)1(d));
<PAGE> 10
Board of Directors
Security Savings Association of Hazleton
and
Security of Pennsylvania Financial Corp.
September 11, 1998
Page 10

- foreign and state income taxes (72 P.S. Section 7401(3)1(o));

- employment incentive payments (Section 491(a), Act of June 13,
1967, P.L. 31); and

- expenses related to interest on federal obligations (72
P.S. Section 7401(3)1(b.1)).

Adjustments that would decrease Pennsylvania taxable income include:

- the dividends received deduction (72 P.S. Section
7401(3)1(b));

- interest on federal obligations (72 P.S. Section
7401(3)1(b.1));

- wages related to federal tax credits (72
P.S. Section 7401(3)1(c) & 61 Pa. Code Section 153.12);

- foreign dividend gross up (72 P.S. Section 7401(3)1(b));

- additional capital loss or contribution deductions for
corporations participating in a federal consolidated return
filing (72 P.S. Section 7404);

- depreciation adjustments (72 P.S. Section 7401(3)1(h) & 61 Pa.
Code Section 153.14(3)&(4)); and

- Pennsylvania net operating loss deductions (72
P.S. Section 7401(3)4(a)).

External legal counsel (Muldoon, Murphy & Faucette) has opined that for
federal income tax purposes, no gain or loss will be recognized in the proposed
Conversion by the Holding Company. Also, the transaction does not give rise to
any adjustments (positive or negative) required to be made for Pennsylvania CNI
purposes.

Opinion:

Based solely on the Statement of Facts, Representations, and
Discussions set forth in this opinion letter, it is our opinion that no
Pennsylvania corporate net income tax will arise to the Holding Company as a
result of the Conversion.
<PAGE> 11
Board of Directors
Security Savings Association of Hazleton
and
Security of Pennsylvania Financial Corp.
September 11, 1998
Page 11

Pennsylvania Mutual Thrift Institutions Tax ("MTIT")

Statement of Facts, Representations and Discussions:

Section 1501 of the Pennsylvania Mutual Thrift Institutions Tax Act (72
P.S. Section 8501) (the "Act") defines a mutual thrift institution as every:

(1) savings bank without capital stock;

(2) building and loan association;

(3) savings and loan association; and

(4) savings institutions having capital stock.

The Association has represented that it qualifies as a savings
institution with capital stock and is therefore subject to the MTIT.

The Act provides for a mutual thrift institution to compute its tax
based on separate company net income computed in accordance with Generally
Accepted Accounting Principles (GAAP), subject to certain defined exceptions (72
P.S. Section 8502(c)).

One of the exceptions, as provided in the Act (72 P.S. Section
8502(c)(3)) provides that:

In the case of a business combination entered into after December 31,
1986, which is treated as a reorganization for purposes of Section 368
of the Internal Revenue Code of 1986, or a similar successor provision,
and accounted for under the purchase accounting method, net income or
net loss shall be determined as though the acquisition has been
accounted for under the pooling of interest method.
<PAGE> 12
Board of Directors
Security Savings Association of Hazleton
and
Security of Pennsylvania Financial Corp.
September 11, 1998
Page 12

It has been represented to PROC that upon the Conversion, no gain or
loss will be recognized by the Association under Generally Accepted Accounting
Principles (GAAP) as a result of the Conversion, and the purchase accounting
method will not be used by the Association to account for the transaction in
accordance with GAAP.

Opinion:

Based solely on the Statement of Facts, Representations and Discussions
set forth in this letter, it is our opinion that the following Pennsylvania
mutual thrift institutions tax consequences will occur as a result of the above
Conversion:

(1) The Association will not recognize any gain or loss as a
result of the proposed Conversion.

(2) The Association will continue to file a Pennsylvania Mutual
Thrift Institution Tax Return, with the basis of the
Association's taxable income to be determined under GAAP. The
purchase accounting method will not be used to account for the
transaction.

Pennsylvania Personal Income Tax

Statement of Facts, Representations and Discussions:

External legal counsel (Muldoon, Murphy & Faucette) has opined that for
federal income tax purposes, no gain or loss will be recognized by Eligible
Account Holders and Supplemental Eligible Account Holders of the Association on
the issuance to them of withdrawable deposit accounts in the Association plus
interests in the liquidation account of the Converted Association in exchange
for their deposit accounts in the Association and their related interest in the
residual equity of the Association or to other depositors on the issuance to
them of withdrawable deposit accounts.
<PAGE> 13
Board of Directors
Security Savings Association of Hazleton
and
Security of Pennsylvania Financial Corp.
September 11, 1998
Page 13

External legal counsel has opined that for federal income tax purposes,
no gain or loss will be recognized by Eligible Account Holders and Supplemental
Eligible Account Holders of the Association upon the distribution to them of the
nontransferable subscription rights to purchase shares of stock in the Holding
Company, provided that the amount paid for the Holding Company common stock is
equal to the fair market value of such stock. Gain realized, if any, by the
Eligible Account Holders and Supplemental Eligible Account Holders of the
Association on the distribution to them of nontransferable subscription rights
to purchase the Holding Company stock will be recognized but only in an amount
not in excess of the fair market value of such subscription rights. Eligible
Account Holders and Supplemental Eligible Account Holders of the Association
will not realize any taxable income for federal income tax purposes as a result
of the exercise by them of the nontransferable subscription rights.

In addition, Keller and Company, Inc. has issued an opinion stating
that, pursuant to its valuation, the subscription rights have no value based on
the fact that such rights are acquired by the recipients without cost, are
nontransferable and of short duration, and afford the recipients the right only
to purchase the Holding Company stock at a price equal to its estimated fair
market value, which will be the same price as the actual purchase price for any
unsubscribed shares of Holding Company stock.

Pennsylvania personal income tax is imposed on eight specified
categories of income received by individuals. Income is taxable if it emanates
from one of the following classes (72 P.S. Section 7303(a)):

(1) Compensation;

(2) Net profits;

(3) Net gains or income from disposition of property;

(4) Net gains or income derived from or in the form of rents,
royalties, patents and copyrights;

(5) Dividends;
<PAGE> 14
Board of Directors
Security Savings Association of Hazleton
and
Security of Pennsylvania Financial Corp.
September 11, 1998
Page 14

(6) Interest;

(7) Gambling and lottery winnings other than prizes of the
Pennsylvania State Lottery; and

(8) Net gains or interest obtained through estates and trusts.

Eligible Account Holders and Supplemental Eligible Account Holders of
the Association will be receiving withdrawable deposit accounts in the
Association plus interests in the liquidation account of the converted
Association in exchange for their deposit accounts and their related interest in
the residual equity of the Association, along with nontransferable subscription
rights to purchase shares of stock in the Holding Company.

Consistent with federal treatment, Pennsylvania affords similar
tax-free treatment with respect to tax-free reorganizations pursuant to Section
368(a)(1)(F) of the Internal Revenue Code (72 P.S. Section 7303(a)(3)).
Accordingly, the Conversion would not give rise to any income that would emanate
from any one of the above eight classes.

Opinion:

Based solely on the Statement of Facts, Representations and Discussions
set forth in this opinion letter, it is the opinion of PROC that for
Pennsylvania personal income tax purposes:

(1) No gain or loss will be recognized by Eligible Account Holders
and Supplemental Eligible Account Holders of the Association
on the issuance to them of withdrawable deposit accounts in
the Association plus interests in the liquidation account of
the converted Association in exchange for their deposit
accounts and their related interest in the residual equity of
the Association, or to the other depositors on the issuance to
them of withdrawable deposit accounts.
<PAGE> 15
Board of Directors
Security Savings Association of Hazleton
and
Security of Pennsylvania Financial Corp.
September 11, 1998
Page 15

(2) No gain or loss will be recognized by Eligible Account Holders
and Supplemental Eligible Account Holders of the Association
upon the distribution to them of the nontransferable
subscription rights to purchase shares of stock in the Holding
Company, provided that the amount paid for the Holding Company
common stock is equal to the fair market value of such stock.
Gain realized, if any, by the Eligible Account Holders and
Supplemental Eligible Account Holders of the Association on
the distribution to them of nontransferable subscription
rights to purchase the Holding Company stock will be
recognized but only in an amount not in excess of the fair
market value of such subscription rights. Eligible Account
Holders and Supplemental Eligible Account Holders of the
Association will not realize any taxable income for state
income tax purposes as a result of the exercise by them of the
nontransferable subscription rights.

Delaware Corporate Income Tax

Statement of Facts, Representations and Discussions:

The Association is neither incorporated nor currently conducting
business in the State of Delaware. Accordingly, no Delaware corporate income tax
will arise to the Association as a result of the Conversion.

The Holding Company is a domestic Delaware corporation, organized at
the direction of the Association to become a savings and loan holding company
and own all of the Association's capital stock to be issued upon its conversion
from mutual form to stock form. The Holding Company does not maintain any
physical presence in nor conduct any business in the State of Delaware.

Delaware tax law Section 1902(b)(6) exempts an entity from Delaware
corporation income tax if the corporation maintains a statutory corporate office
in Delaware but is not doing business in Delaware. Thus, if a company has no
physical presence in Delaware and derives no income from Delaware activities, it
should be exempt from Delaware corporate income taxation.
<PAGE> 16
Board of Directors
Security Savings Association of Hazleton
and
Security of Pennsylvania Financial Corp.
September 11, 1998
Page 16

Opinion:

Based solely on the Statement of Facts, Representations and Discussions
set forth in this opinion letter, it is the opinion of PROC that the following
Delaware corporate income tax consequences will occur as a result of the above
Conversion:

(1) The Association will not be subject to Delaware taxation as it
is not organized under Delaware law, and it does not have any
physical presence or conduct any business in Delaware.

(2) Although the Holding Company will be organized in Delaware, it
should not be subject to Delaware corporation income tax if it
does not maintain any physical presence in Delaware nor
conduct any business within Delaware.

* * * * * * * * * *

The opinions rendered above are issued in regard to the specific
matters discussed herein, and PROC expresses no opinion with respect to any
other federal or state income tax, including Pennsylvania corporate net income
tax and Pennsylvania capital stock tax that would occur subsequent to the time
of conversion, or other state and local taxes, or legal aspect of the merger.
Our opinions are based on the completeness and accuracy of the above-stated
facts and representations. If any of the foregoing are not entirely complete or
accurate, PROC must be notified immediately in writing, as the inaccuracy or
incompleteness could have a material effect on our conclusions. We are relying
upon the relevant provisions of Article III, Article IV, and Article XV of the
Pennsylvania Tax Reform Code of 1971, Act of March 4, 1971, P.L. 6; Title 30 of
Delaware State Tax Law; the Internal Revenue Code of 1986, as amended, the
regulations thereunder, and judicial and administrative interpretations thereof,
which are subject to change or modification by subsequent legislative,
regulatory, administrative, or judicial decisions. Any such modification or
change could also have an effect on the validity of our opinions. The opinions
contained herein are not binding upon the Internal Revenue Service, any other
tax authority or any court, and no assurance can be given that a position
contrary to that expressed herein will not be asserted by a tax authority and
ultimately sustained by a
<PAGE> 17
Board of Directors
Security Savings Association of Hazleton
and
Security of Pennsylvania Financial Corp.
September 11, 1998
Page 17

court. Unless specifically requested by you, these opinions will not be updated
for subsequent changes or modifications to the law and regulations, or to the
judicial and administrative interpretations thereof.

Very truly yours,

PARENTE, RANDOLPH, ORLANDO,
CAREY & ASSOCIATES

<PAGE> 1
EXHIBIT 10.1

FORM OF
TRUST AGREEMENT

BETWEEN

SECURITY SAVINGS ASSOCIATION OF HAZLETON

AND

----------------------------------
FOR THE

SECURITY SAVINGS ASSOCIATION OF HAZLETON
EMPLOYEE STOCK OWNERSHIP TRUST

<PAGE> 2

<TABLE>
<CAPTION>
CONTENTS

Page No.

<S> <C> <C>
Section 1 Creation of Trust 1

Section 2 Investment of Trust Fund and
Administrative Powers of the
Trustee 2

Section 3 Compensation and Indemnification
of Trustee and Payment of Expenses
and Taxes 7

Section 4 Records and Valuation 9

Section 5 Instructions from Committee 10

Section 6 Change of Trustees 11

Section 7 Miscellaneous 11
</TABLE>

<PAGE> 3

This TRUST AGREEMENT dated __________, 1998, BETWEEN Security Savings
Association of Hazleton, a Pennsylvania-chartered savings association with its
principal office at 31 W. Broad Street, Hazleton, Pennsylvania 18201,
(hereinafter called the "Company"), AND _______________, with offices at
__________________________ (hereinafter called the "Trustee"),

W I T N E S S E T H T H A T:

WHEREAS, the Company has approved and adopted an employee stock ownership
plan for the benefit of its employees, the Security Savings Association of
Hazleton Employee Stock Ownership Plan, (hereinafter called the "Plan"); and

WHEREAS, the Company has authorized the execution of this Trust Agreement
and has appointed ________________ as Trustee of the Trust Fund created pursuant
to the Plan; and

WHEREAS, _______________ has agreed to act as trustee and to hold and
administer the assets of the Plan in accordance with the terms of this Trust
Agreement.

NOW, THEREFORE, the Company and the Trustee agree as follows:

Section 1. Creation of Trust.

1.1 Trustee. __________________ shall be trustee of the Trust Fund created
in accordance with and in furtherance of the Plan, and shall serve as Trustee
until its removal or resignation in accordance with Section 6.

1.2 Trust Fund. The Trustee hereby agrees to accept contributions from the
Employer as defined in the Plan and amounts transferred from other qualified
retirement plans from time to time in accordance with the terms of the Plan. All
such property and contributions, together with income thereon and increments
thereto, shall constitute the "Trust Fund" to be held in accordance with the
terms of the Trust Agreement.

1.3 Incorporation of Plan. An instrument entitled "Security Savings
Association of Hazleton Employee Stock Ownership Plan" is incorporated herein by
reference, and this Trust Agreement shall be interpreted consistently with that
Plan. All words and phrases defined in that Plan shall have the same meaning
when used in this Trust Agreement.

1.4 Name. The name of this trust shall be "Security Savings Association of
Hazleton Employee Stock Ownership Trust."

1.5 Nondiversion of Assets. In no event shall any part of the corpus or
income of the Trust Fund be used for, or diverted to, purposes other than for
the exclusive benefit of the Participants and their Beneficiaries prior to the
satisfaction of all liabilities under the Plan, except

<PAGE> 4

to the extent that assets may be returned to the Employer in accordance with the
Plan where the Plan fails to qualify initially under Section 401(a) of the
Internal Revenue Code (the "Code"), or where they are attributable to
contributions made by mistake of fact or in excess of the deductibility allowed
under the Code.

Section 2. Investment of Trust Fund and Administrative Powers of the
Trustee.

2.1 Stock and Other Investments. The basic investment policy of the Plan
shall be to invest primarily in Stock of the Employer for the exclusive benefit
of the Participants and their Beneficiaries. The Committee shall have full and
complete investment authority and responsibility with respect to the purchase,
retention, sale, exchange, and pledge of Stock and the payment of Stock
Obligations, and the Trustee shall not deal in any way with Stock except in
accordance with their obligations pursuant to this trust document and the
written instructions of the Committee. The Trustee shall invest, or keep
invested, all or a portion of the Trust Fund in Stock, and shall pay Stock
Obligations out of assets of the Trust Fund, as instructed from time to time by
the Committee. The Trustee shall invest any balance of the Trust Fund (the
"Investment Fund") in such other property as the Committee, in its sole
discretion, shall deem advisable, subject to any delegation of such investment
responsibility pursuant to Section 2.2. Nothing contained herein shall provide
investment discretion authority or any like kind responsibility in regard to the
assets of the Trust Fund.

In connection with instructions to acquire Stock, the Trustee may purchase
newly issued or outstanding Stock from the Employer or any other holders of
Stock, including Participants, Beneficiaries, and Plan fiduciaries. All
purchases and sales of Stock shall be made by the Trustee at fair market value
as determined by the Committee in good faith and in accordance with any
applicable requirements under the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). Such purchases may be made with assets of the Trust
Fund, with funds borrowed for this purpose (with or without guarantees of
repayment to the lender by the Employer), or by any combination of the
foregoing.

Notwithstanding any other provision of this Trust Agreement or the Plan,
neither the Committee nor Trustee shall make any purchase, sale, exchange,
investment, pledge, valuation, or loan, or take any other action involving those
assets for which it is responsible which (i) is inconsistent with the policy of
the Plan and Trust, (ii) is inconsistent with the prudence and diversification
requirements set forth in Sections 404(a)(1)(B) and (C) of ERISA (to the extent
such requirements apply to an employee stock ownership plan and trust), (iii) is
prohibited by Section 406 or 407 of ERISA, or (iv) would impair the
qualification of the Plan or the exemption of the Trust under Sections 401 and
501, respectively, of the Code.

2.2 Delegation of Investment Responsibility. The Committee may, by written
notice and in accordance with the Plan, direct the Trustee to segregate any
portion or all of the Investment Fund into one or more separate accounts for
each of which full investment responsibility will be delegated to an investment
manager appointed in such notice pursuant to Section 402(c)(3) of

<PAGE> 5

ERISA (hereinafter a "Manager"). For any separate account where the Trustee is
to maintain custody of the assets, the Trustee and the Manager shall agree upon
procedures for the transmittal of investment instructions from the Manager to
the Trustee, and the Trustee may provide the Manager with such documents as may
be necessary to authorize the Manager to effect transactions directly on behalf
of the segregated account.

Further, the Committee may, by written notice and in accordance with the
Plan, direct the Trustee to segregate any portion or all of the Investment Fund
into one or more separate accounts for each of which full investment
responsibility will be delegated to an insurance company through one or more
group annuity contracts, deposit administration contracts, or similar contracts,
which may provide for investments in any commingled separate accounts
established under such contracts. An insurance company shall be a Manager with
respect to any amounts held under such a contract except to the extent the
insurer's assets are not deemed assets of the Plan and Trust Fund pursuant to
Section 401(b)(2) of ERISA. The allocation of amounts held under such a contract
among the insurer's general account and one or more individual or commingled
separate accounts shall be determined by the Committee except as otherwise
agreed by the Committee and the insurer.

Any Manager shall have all of the powers given to the Trustee pursuant to
Section 2.3 with respect to the portion of the Trust Fund committed to its
investment discretion and control. The Trustee shall be responsible for the
safekeeping of any assets which remain in its custody, but in no event shall the
Trustee be under any duty to question or make any inquiry or suggestion
regarding the action or inaction of a Manager or an insurer or the advisability
of acquiring, retaining, or disposing of any asset of a segregated account. The
Employer shall indemnify and hold the Trustee harmless from any and all costs,
damages, expenses, and liabilities which the Trustee may incur by reason of any
action taken or omitted to be taken by the Trustee upon directions from the
Committee, a Manager, or an insurer pursuant to this Section 2.2.

2.3 Trustee Powers. In addition to and not by way of limitation upon the
fiduciary powers granted to it by law, the Trustee shall have the following
specific powers, subject to the limitations set forth in Section 2.1:

2.3-1 to receive, hold, manage, invest and reinvest the money or other
property which constitutes the Trust Fund, without distinction between principal
and income;

2.3-2 to hold funds uninvested temporarily, provided it is a period of
time that is not unreasonable, without liability for interest thereon, and to
deposit funds in one or more savings or similar accounts with any banks and
savings and loan associations which are insured by an instrumentality of the
federal government, including the Trustee if it is such an institution.

2.3-3 at the direction of the Committee, to invest or reinvest the whole
or any portion of the money or other property which constitutes the Trust Fund
in such common or preferred stocks, investment trust shares, mutual funds,
commingled trust funds, partnership interests,

<PAGE> 6

bonds, notes, or other evidences of indebtedness, and real and personal property
as the Trustee in its absolute judgment and discretion may deem to be for the
best interests of the Trust Fund, regardless of nondiversification to the extent
that such nondiversification is clearly prudent, and regardless of whether any
such investment or property is authorized by law regarding the investment of
trust funds, of a wasting asset nature, temporarily nonincome producing, or
within or without the United States;

2.3-4 to invest in common and preferred stocks, bonds, notes, or other
obligations of any corporation or business enterprise in which an Employer or
its owners may own an interest;

2.3-5 at the direction of the Committee, to exchange any investment or
property, real or personal, for other investments or properties at such time and
upon such terms as the Trustee shall deem proper;

2.3-6 at the direction of the Committee, to sell, transfer, convey or
otherwise dispose of any investment or property, real or personal, for cash or
on credit, in such manner and upon such terms and conditions as the Trustee
shall deem advisable, and no person dealing with the Trustee shall be under any
duty to inquire as to the validity, expediency, or propriety of any such sale or
as to the application of the purchase money paid to the Trustee;

2.3-7 to hold any investment or property in the name of the Trustee, with
or without the designation of any fiduciary capacity, or in name of a nominee,
or unregistered, or in such other form that title may pass by delivery;
provided, however, that the Trustee's records always show that such investment
or property belongs to the Trust Fund and the Trustee shall not be relieved
hereby of its responsibility to maintain safe custody of such investment or
property;

2.3-8 to organize one or more corporations to hold, manage, or liquidate
any property, including real estate, owned or acquired by the Trust Fund if in
the sole discretion of the Trustee the organization of such corporation or
corporations is for the best interest of the Trust and the Plan participants and
beneficiaries;

2.3-9 to extend the time for payment of, to modify, to renew, or to
release security from any mortgage, note or other evidence of indebtedness, or
to take advantage of or waive any default; to foreclose mortgages and bid on
property under foreclosure or to take title to property by conveyance in lieu of
foreclosure, either with or without the payment of additional consideration;

2.3-10 to vote in person or by proxy all stocks and other securities
having voting privileges; to exercise or refrain from exercising any option or
privilege with respect to stocks and other securities, including any right or
privilege to subscribe for or otherwise to acquire stocks and other securities;
or to sell any such right or privilege; to assent to and join in any plan of
refinance, merger, consolidation, reorganization or liquidation of any
corporation or other enterprise in which this Trust may have an interest, to
deposit stocks and other securities with

<PAGE> 7

any committee formed to effectuate the same, to pay any expense incidental
thereto, to exchange stocks and other securities for those which may be issued
pursuant to any such plan, and to retain as an investment the stocks and other
securities received by the Trustee; and to deposit any investment in a voting
trust; notwithstanding the preceding, participants and beneficiaries shall be
entitled to direct the manner in which stock allocated to their respective
accounts are to be voted on all matters. All stock which has been allocated to
participant's accounts for which the Trustee has received no written direction
and all unallocated Employer securities will be voted by the Trustee in direct
proportion to any participant directions received and solely in the interest of
the participants and beneficiaries. Whenever such voting rights are to be
exercised, the Employer, the Committee and the Trustee shall see that all
participants and beneficiaries are provided with adequate opportunity to deliver
their instructions to the Trustee regarding voting of stock allocated to their
accounts. The instructions of the participants with respect to the voting of
allocated shares hereunder shall be confidential;

2.3-11 to abandon any property, real or personal, which the Trustee shall
consider to be worthless or not of sufficient value to warrant its keeping or
protecting; to abstain from the payment of taxes, water rents, assessments,
repairs, maintenance, and upkeep of any such property; to permit any such
property to be lost by tax sale or other proceedings, and to convey any such
property for a nominal consideration or without consideration;

2.3-12 to borrow money from the Employer or from others (including the
Trustee), and to enter into installment contracts, for the purchase of Stock
upon such terms and conditions and at such reasonable rates of interest as the
Committee may deem to be advisable, to issue its promissory notes as Trustee to
evidence such debt, to secure the payment of such notes by pledging any property
of the Trust Fund, and to authorize the holders of any such notes to pledge them
to secure obligations of the holders and in connection therewith to repledge any
assets of the Trust as security therefor; provided that, with respect to any
extension of credit to the Trust involving, as a lender or guarantor, the
Employer or other "disqualified person" within the meaning of Section 4975(e)(2)
of the Code --

(a) each loan or installment contract is primarily for the benefit of
Participants and Beneficiaries of the Plan;

(b) any interest on a loan or installment contract does not exceed a
reasonable rate;

(c) the proceeds of any loan shall be used only to acquire Stock, to
repay the loan, or to repay a previous loan meeting these
conditions, and the subject of any installment contract shall be
only the Trust's purchase of Stock;

(d) any collateral pledged to a creditor by the Trustee shall consist
only of qualifying employer securities as that term is defined under
Section 4975(e)(8) of the Code and the creditor shall have no
recourse against the Trust Fund except with respect to the
collateral (although the creditor may have recourse against an
Employer as guarantor);

(e) payments with respect to a loan or installment contract shall be
made only from those amounts contributed by the Employer to the
Trust Fund, from amounts

<PAGE> 8

earned on such contributions, and from cash dividends received on
unallocated Stock held by the Trust as collateral for such an
obligation; and

(f) upon the payment of any portion of balance due on a loan or upon any
installment payment, a proportionate part of any qualified employer
securities originally pledged as collateral for such indebtedness
shall be released from encumbrance in accordance with Section 4.2 of
the Plan and the Committee shall at least annually advise the
Trustee of the number of shares of Stock so released and the proper
allocation of such shares under the terms of the Plan;

2.3-13 to manage and operate any real property which shall at any time
constitute an asset of the Trust Fund; to make repairs, alterations, and
improvements thereto; to insure such property against loss by fire or other
casualty; to lease or grant options for the sale of such property, which lease
or option may be for a period of time which may extend beyond the life of this
Trust; and to take any other action or enter into any other contract respecting
such property which is consistent with the best interests of the Trust;

2.3-14 to pay any and all reasonable and normal expenses incurred in
connection with the exercise of any power, right, authority or discretion
granted herein, and, upon prior notice to the Company, to employ and compensate
agents, investment counsel, custodians, actuaries, attorneys, and accountants in
such connection;

2.3-15 to employ and consult with any legal counsel, who also may be
counsel to an Employer or the Administrator, with respect to the meaning or
construction of this Trust Agreement, the extent of the Trustee's obligations
and duties hereunder, and whether the Trustee should take or decline to take a
particular action hereunder, and the Trustee shall be fully protected with
respect to any action taken or omitted by such Trustee in good faith pursuant to
such advice;

2.3-16 to defend any action or proceeding instituted against the Trust
Fund, to institute any action on behalf of the Trust Fund, and to compromise or
submit to arbitration any dispute concerning the Trust Fund;

2.3-17 to make, execute, acknowledge and deliver any and all documents of
transfer and conveyance and any and all other instruments that may be necessary
or appropriate to carry out the powers herein granted;

2.3-18 to commingle the Trust Fund created pursuant hereto, in whole or in
part, in a single trust with all or any portion of any other trust fund,
assigning an undivided interest to each such commingled trust fund, provided
that such commingled trust is itself exempt from taxation pursuant to Section
501(a) of the Code, or its successor Section; and provided further that the
trust agreement governing such commingled trust shall be deemed incorporated by
reference in the Plan;

<PAGE> 9

2.3-19 where two or more trusts governed by this Trust Agreement have an
undivided interest in any property, to credit the income from such property to
such trusts in proportion to their undivided interests, and when non pro rata
distributions of property or money are made from such trusts, to make
appropriate adjustments to the undivided fractional interests of such trusts;

2.3-20 to invest all or any portion of the Trust Fund in one or more group
annuity contracts, deposit administration contracts, and other such contracts
with insurance companies, including any commingled separate accounts established
under such contracts;

2.3-21 generally, with respect to all cash, stocks and other securities,
and property, both real and personal, received or held in the Trust Fund by the
Trustee, to exercise all the same rights and powers as are or may be lawfully
exercised by persons owning cash, or stocks and other securities, or such
property in their own right; and to do all other acts, whether or not expressly
authorized, which it may deem necessary or proper for the protection of the
Trust Fund; and

2.3-22 whenever more than two persons shall qualify to act as co-trustees,
to exercise and perform every power (including discretionary powers), authority
or duty by the concurrence of a majority of them the same effect as if all had
joined therein, except that the unanimous vote of such persons shall be
necessary to determine the number (one or more) and identity of persons who may
sign checks, make withdrawals from financial institutions, have access to safe
deposit boxes, or direct the sale of trust assets and the disposition of the
proceeds.

2.4 Brokerage. If permitted in writing by the Committee the Trustee shall
have the power and authority, to be exercised in its sole discretion at any time
and from time to time, to issue and place orders for the purchase or sale of
securities with qualified brokers and dealers. Such orders may be placed with
such qualified brokers and/or dealers who also provide investment information or
other research or statistical services to the Trustee in its capacity as a
fiduciary or investment manager for other clients.

Section 3. Compensation and Indemnification of Trustee and Payment of
Expenses and Taxes.

3.1 Fees and Expenses from Fund. Compensation of Trustee. In consideration
for rendering services pursuant to this Trust Agreement the Trustee shall be
paid fees in accordance with the Trustee's fee schedule as in effect from time
to time. Fee changes resulting in fee increases shall be effective upon not less
than 30 days' notice to the Company. In addition, the Trustee shall be
reimbursed for any reasonable expenses, including reasonable attorneys' fees,
incurred in the administration of the Trust created hereby. Fees and expenses
shall be allocated to Participant Accounts, if any, unless paid directly by the
Employer. All compensation and expenses of the Trustee shall be paid out of the
Trust Fund or by the Employer as specified in the Plan. If and to the extent the
Trust Fund shall not be sufficient, such compensation and expenses

<PAGE> 10

shall be paid by the Employer upon demand. If payment is due but not paid by the
Employer, such amount shall be paid from the assets of the Trust Fund. The
Trustee is hereby empowered to withdraw all such compensation and expenses which
are 60 days past due from the Trust Fund, and, in furtherance thereof, liquidate
any assets of the Trust Fund, without further authorization or direction from or
by any person.

3.2 Indemnification. Notwithstanding any other provision of this Trust
Agreement, any individual designated as a trustee hereunder shall be indemnified
and held harmless by the Employer to the fullest extent permitted by law against
any and all costs, damages, expenses and liabilities including, but not limited
to attorneys' fees and disbursements reasonably incurred by or imposed upon such
individual in connection with any claim made against him or in which he may be
involved by reason of his being, or having been, a trustee hereunder, to the
extent such amounts are not satisfied by insurance maintained by the Employer,
except liability which is adjudicated to have resulted from the gross negligence
or willful misconduct of the Trustee by reason of any action so taken. Further,
any corporate trustee and its officers, directors and agents may be indemnified
and held harmless by the Employer to the fullest extent permitted by law against
any and all costs, damages, expenses and liabilities including, but not limited
to attorneys' fees and disbursements reasonably incurred by or imposed upon such
persons and/or corporation in connection with any claim made against it or them
or in which such persons and/or corporation may be involved by reason of its
being, or having been, a trustee hereunder as may be agreed between the Employer
and such trustee, except liability which is adjudicated to have resulted from
the gross negligence or willful misconduct of the Trustee by reason of any
action so taken.

3.3 Expenses. All expenses of administering this Trust and the Plan,
whether incurred by the Trustee or the Committee, shall be paid by the Trustee
from the Trust Fund to the extent such expenses shall not have been assumed by
the Employer.

3.4 Taxes. All taxes that may be levied or assessed upon or in respect of
the Trust Fund shall be paid from the Trust Fund. The Trustee shall notify the
Committee of any proposed or final assessments of taxes and may assume that any
such taxes are lawfully levied or assessed unless the Committee advises it in
writing to the contrary within fifteen days after receiving the above notice
from the Trustee. In such case, the Trustee, if requested by the Committee in
writing, shall contest the validity of such taxes in any manner deemed
appropriate by the Committee; the Employer may itself contest the validity of
any such taxes, in which case the Committee shall so notify the Trustee and the
Trustee shall have no responsibility or liability respecting such contest. If
either party to this Agreement contests any such proposed levy or assessments,
the other party shall provide such information and cooperation as the party
conducting the contest shall reasonably request.

<PAGE> 11

Section 4. Records and Valuation.

4.1 Records. The Trustee, and any investment manager appointed pursuant to
Section 2.2, shall maintain accurate and detailed records and accounts of all
investments, receipts, disbursements and other transactions made by it with
respect to the Trust Fund, and all accounts, books and records relating thereto
shall be open at all reasonable time to inspection and audit by the Committee
and the Employer.

4.2 Valuation. From time to time upon the request of the Committee, but at
least annually as of the last day of each Plan Year, the Trustee shall prepare a
balance sheet of the Investment Fund in accordance with Section 8.2 of the Plan
and shall deliver copies of the balance sheet to the Committee and the Employer.

4.3 Discharge of Trustee. Ninety days after the filing of any balance
sheet under Section 4.2 or any accounting under Section 6, the Trustee shall be
forever released and discharged from any liability or accountability other than
for gross negligence or wilful misconduct on the part of the Trustee to anyone
with respect to the transactions shown or reflected in such balance sheet or
accounting, except with respect to any acts or transactions as to which the
Committee, within such ninety-day period, files written objections with the
Trustee. The written approval of the Committee of any balance sheet or
accounting so filed by the Trustee, or the Committee's failure to file written
objections within ninety days, shall be a settlement of such balance sheet or
accounting as against all persons, and shall forever release and discharge the
Trustee from any liability of accountability to anyone with respect to the
transactions shown or reflected in such balance sheet or accounting other than
liability arising out of the Trustee's gross negligence or wilful misconduct. If
a statement of objections is filed by the Committee and the Committee is
satisfied that its objections should be withdrawn or if the balance sheet or
accounting is adjusted to its satisfaction, the Committee shall indicate its
approval of the balance sheet or accounting in a written statement filed with
the Trustee and the Trustee shall be forever released and discharged from any
liability of accountability to anyone in accordance with the immediately
preceding sentence. If an objection is not settled by the Committee and the
Trustee, the Trustee may start a proceeding for a judicial settlement of the
balance sheet or accounting in any court of competent jurisdictions; the only
parties that need be joined in such a proceeding are the Trustee, the Committee,
the Employer and any other parties whose participation is required by law.

4.4 Right to Judicial Settlement. Nothing in this Agreement shall prevent
the Trustee from having its account settled by a court of competent jurisdiction
at any time. The only parties that need be joined in any such proceeding are the
Employer, the Committee, the Trustee and any other parties whose participation
is required by law.

<PAGE> 12

Section 5. Instructions from Committee.

5.1 Certification of Members of the Committee. From time to time the
Company shall certify to the Trustee in writing the names of the individuals
comprising the Committee and shall furnish to the Trustee specimens of their
signatures and the signatures of their agents, if any. The Trustee shall be
entitled to presume that the identities of such individuals and their agents are
unchanged until it receives a certification from the Company notifying it of any
changes.

5.2 Instructions to Trustee.

(a) The Trustee shall pay benefits and administrative expenses under the
Plan only when it receives (and in accordance with) written instructions of the
Committee indicating the amount of the payment and the name and address of the
recipient in accordance with the terms of the Plan. The Trustee need not inquire
into whether any payment the Committee instructs the Trustee to make is
consistent with the terms of the Plan or applicable law or otherwise proper. Any
payment made by the Trustee in accordance with such instructions shall be a
complete discharge and acquittance to the Trustee. If the Committee advises the
Trustee that benefits have become payable with respect to a Participant's
interest in the Trust Fund but does not instruct the Trustee as to the manner of
payment, the Trustee shall hold the Participant's interest in the Trust until
the Trustee receives written instructions from the Committee as to the manner of
payment. The Trustee shall not pay benefits from the Trust Fund without such
instructions, even though it may be informed from other sources, including,
without limitation, a Participant or Beneficiary, that benefits are payable
under the Plan. The Trustee shall have no responsibility to determine when, to
whom or in what amount benefits and expenses are payable under the Plan.
Further, the Trustee shall have no power, authority or duty to interpret the
Plan or inquire into the decisions or determinations of the Committee, or to
question the instructions given to it by the Committee. If the Committee so
directs, the Trustee shall segregate amounts payable with respect to the
interest in the Plan of any Participant and administer them separately from the
rest of the Trust Fund in accordance with the Committee's instructions.

(b) The Trustee may require the Committee to certify in writing that any
payment of benefits or expenses it instructs the Trustee to make pursuant to
Section 5.2(a) above is: (i) in accordance with the terms of the Plan and/or
(ii) one which the Committee is authorized by the Plan and any other applicable
instruments to direct and/or (iii) made for the exclusive purpose of providing
benefits to Participants and Beneficiaries, or defraying reasonable expenses of
Plan administration and/or (iv) not made to a party in interest (within the
meaning of ERISA Section 3(14)), and/or (v) not a prohibited transaction (within
the meaning of Code Section 4975 and ERISA Section 406). If the Trustee
requests, instructions to pay benefits shall be made by the Committee on forms
prepared by the Trustee to include any or all of the above representations. The
Trustee shall be fully protected in relying on the truth of any such
representation by the Committee and shall have no duty to investigate whether
such representations are correct or to see to the application of any amounts
paid to and received by the recipient.

<PAGE> 13

5.3 Plan Change. In the event of an amendment, merger, division, or
termination of the Plan, the Trustee shall continue to disburse funds and to
take other proper actions in accordance with the instructions of the Committee.

Section 6. Change of Trustees.

The Company may at any time remove any person or entity serving as Trustee
hereunder by giving to such person or entity written notice of removal and, if
applicable, the name and address of the successor trustee. Any person or entity
serving as Trustee hereunder may resign at any time by giving written notice to
the Company. Any such removal or resignation shall take effect within 30 days
after notice has been given by the Trustee or by the Company, as the case may
be. Within those 30 days, the removed or resigned Trustee shall transfer, pay
over and deliver any portion of the Trust Fund in its possession or control
(less an appropriate reserve for any unpaid fees, expenses, and liabilities) and
all pertinent records to the successor or remaining trustee; provided, however,
that any assets which are invested in a collective fund or in some other manner
which prevents their immediate transfer shall be transferred and delivered to
the successor trustee as soon as may be practicable. Thereafter, the removed or
resigned Trustee shall have no liability for the Trust Fund or for its
administration by the successor or remaining trustee, but shall render an
accounting to the Committee of its administration of the Trust Fund through the
date on which its trusteeship shall have been terminated. The Company may also,
upon 30 days' notice to each person currently serving as a Trustee, appoint one
or more persons to serve as co-trustees hereunder.

Section 7. Miscellaneous.

7.1 Right to Amend. This Trust Agreement may be amended from time to time
by an instrument executed by the Company; provided, however, that any amendment
affecting the powers, duties or liabilities of the Trustee must be approved by
the Trustee, and provided, further, that no amendment may divert any portion of
the Trust Fund to purposes other than the exclusive benefit of the Participants
and their Beneficiaries prior to the satisfaction of all liabilities for
benefits. Any amendment shall apply to the Trust Fund as constituted at the time
of the amendment as well as to that portion of the Trust Fund which is
subsequently acquired.

7.2 Compliance with ERISA. In the exercise of its powers and the
performance of its duties, the Trustee shall act in good faith and in accordance
with the applicable requirements under ERISA. Except as may be otherwise
required by ERISA, the Trustee shall not be required to furnish any bond in any
jurisdiction for the performance of its duties and, if a bond is required
despite this provision, no surety shall be required on it.

7.3 Nonresponsibility for Funding. The Trustee shall be under no duty to
enforce the payment of any contributions and shall not be responsible for the
adequacy of the Trust Fund to satisfy any obligations for benefits, expenses,
and liabilities under the Plan.

<PAGE> 14

7.4 Reports. The Trustee shall file any report which it is required by law
to file with any governmental authority with respect to this Trust, and the
Committee shall furnish to the Trustee whatever information is necessary to
prepare the report.

7.5 Dealings with Trustee. Persons dealing with the Trustee, including but
not limited to banks, brokers, dealers, and insurers, shall be under no
obligation to inquire concerning the validity of anything which the Trustee
purports to do, nor need any person see to the proper application of any money
paid or any property transferred upon the order of the Trustee or to inquire
into the Trustee's authority as to any transaction.

7.6 Limitation Upon Responsibilities. The Trustee shall have no
responsibilities with respect to the Plan or Trust other than those specifically
enumerated or explicitly allocated to it under this Trust Agreement or the
provisions of ERISA. All other responsibilities are retained and shall be
performed by one or more of the Employer, the Committee, and such advisors or
agents as they choose to engage.

The Trustee may execute any of the trusts or powers hereof and perform any
of its duties by or through attorneys, agents, receivers or employees and shall
not be answerable for the conduct of the same if chosen with reasonable care and
shall be entitled to advice of counsel concerning all matters of trust hereof
and the duties hereunder, and may in all cases pay such reasonable compensation
to all such attorneys, agents, receivers and employees as may reasonably be
employed in connection with the trusts hereof. The Trustee may act upon the
opinion or advice of any attorney (who may be the attorney for the trustee or
attorney for the Committee), approved by the Trustee in the exercise of
reasonable care. The Trustee shall not be responsible for any loss or damage
resulting from any action or non-action in good faith in reliance upon such
opinion or advice.

The Trustee shall be protected in acting upon any notice, request,
consent, certificate, order, affidavit, letter, telegram or other paper or
document believed to be genuine and correct and to have been signed or sent by
the proper person or persons, and the Trustee shall be under no duty to make any
investigation or inquiry as to any statement contained in any such writing but
may accept the same as conclusive evidence of the truth and accuracy of the
statements therein contained.

The Trustee shall not be liable for other than its gross negligence or
willful misconduct. Except in the case of gross negligence or wilful misconduct
on the part of the Trustee, the Trustee in its corporate capacity shall not be
liable for claims of any persons in any manner regarding the Plan; such claims
shall be limited to the Trust Fund. Unless the Trustee participates knowingly
in, or knowingly undertakes to conceal, an act or omission of the Committee or
any other fiduciary, knowing such act or omission to be a breach of fiduciary
responsibility, the Trustee shall be under no liability for any loss of any kind
which may result by reason of such act or omission.

<PAGE> 15

Before taking any action hereunder at the request or direction of the
Committee, the Trustee may require that indemnity in form and amount
satisfactory to the Trustee be furnished for the reimbursement of any and all
costs and expenses to which it may be put including, without limitation,
reasonable attorneys' fees and to protect it against all liability, except
liability which is adjudicated to have resulted from the gross negligence or
willful misconduct of the Trustee by reason of any action so taken.

No provision of this Agreement shall require the Trustee to expend or risk
its own funds or otherwise incur any financial liability in the performance of
any of its duties hereunder, or in the exercise of any of its rights or powers,
if it shall have reasonable grounds for believing that repayment of such funds
or adequate indemnity against such risk or liability is not reasonably assured
to it.

7.7 Qualification of Plan and Trust. The Trustee shall be fully protected
in assuming that the Plan and Trust meet the requirements of Code Section 401
and 501, respectively, and all the applicable provisions of ERISA unless it is
advised to the contrary in writing by the Committee or a governmental agency.

7.8 Party in Interest Information. The Employer shall provide the Trustee
with such information concerning the relationship between any person or
organization and the Plan as the Trustee reasonably requests in order to
determine whether such person or organization is a party in interest with
respect to the Plan within the meaning of ERISA Section 3(14).

7.9 Disputes. If a dispute arises as to the payment of any funds or
delivery of any assets by the Trustee, the Trustee may withhold such payment or
delivery until the dispute is determined by a court of competent jurisdiction or
finally settled in writing by the parties concerned.

7.10 Successor Trustees. This Trust Agreement shall apply to any person
who shall be appointed to succeed the person currently appointed as the Trustee;
and any reference herein to the Trustee shall be deemed to include any one or
more individuals or corporations or any combination thereof who or which have at
any time acted as a co-trustee or as the sole trustee.

7.11 Governing State Law. This Trust Agreement shall be interpreted in
accordance with the laws of the State of Pennsylvania to the extent those laws
may be applicable under the provisions of ERISA.

<PAGE> 16

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.

ATTEST: SECURITY SAVINGS
ASSOCIATION OF HAZLETON

By
- ------------------- ------------------
Corporate Secretary Chief Executive Officer

ATTEST:
--------------------
as TRUSTEE

By:
- ------------------- -----------------

<PAGE> 1
EXHIBIT 10.2

[HOLDING COMPANY LETTERHEAD]

______________, 1998

Security Savings Association of Hazleton
31 W. Broad Street
Hazleton, Pennsylvania 18201

Dear _____________:

This letter confirms _______________________'s commitment to fund a
leveraged ESOP in an amount up to $________. The commitment is subject to the
following terms and conditions:

1. Lender: _______________________ (the "Company").

2. Borrower: Security Savings Association Employee Stock
Ownership Plan.

3. Trustee: ______________________________.

4. Security: Unallocated shares of stock of the Company held in the
Security Savings Association Employee Stock Ownership Plan.

5. Maturity: Up to 10 years from takedown.

6. Amortization: Equal annual principal and interest payments

7. Pricing:

a. [____%] or [the Prime Rate as published in the Wall Street
Journal on the date of the loan transaction].

8. Interest Payments:

a. Annual on a 360 day basis.

<PAGE> 2

9. Funding: In full by _______________, unless such date is waived by
the Company.

10. Prepayment: Voluntary prepayments are permitted at any time.

11. Conditions Precedent to Closing: Receipt by the Company of all
supporting loan documents in a form and with terms and conditions
satisfactory to the Company and its counsel. Consummation of the
transaction will also be contingent upon no material adverse change
occurring in the condition of Security Savings Association
or the Company.

12. Closing Date: Not later than _____________, unless such date is
waived by the Company.

If the terms and conditions are agreeable to you, please indicate your
acceptance by signing the enclosed copy and returning it to my attention.

Sincerely,

Lending Officer

Accepted on Behalf of
Security Savings Association of Hazleton

By: Date:
--------------------------------------- --------------------

President and Chief Executive Officer

<PAGE> 3
FORM OF
SECURITY SAVINGS ASSOCIATION OF HAZLETON
EMPLOYEE STOCK OWNERSHIP PLAN TRUST
LOAN AND SECURITY AGREEMENT

_____________, 1998
Security Savings Association of Hazleton
31 W. Broad Street
Hazleton, Pennsylvania 18201

Gentlemen:

The undersigned Trustee,____________________ ("Borrower"), not
individually but solely as Trustee under the Security Savings Association of
Hazleton Employee Stock Ownership Plan Trust (the "Trust")
effective____________________, 1998 applies to you, Security of Pennsylvania
Financial Corp. (hereinafter referred to as the "Lender"), for your commitment,
subject to all of the terms and conditions hereof and on the basis of the
representations hereinafter set forth, to make a loan available to the Borrower
as hereinafter set forth. The term "Association" as used herein refers to
Security Savings Association of Hazleton, the sponsoring employer of the
Security Savings Association Employee Stock Ownership Plan (the "ESOP").

SECTION ONE. THE TERM LOAN.

1.1 AMOUNT AND TERMS. Subject to and upon the terms and conditions herein
set forth, the Lender agrees to lend amounts to the Borrower, (the "Loan"), from
time to time during the period of this agreement up to but not including the
maturity date of December 31, 200_ in an aggregate principal amount ("Loan
Amount") sufficient to permit the Borrower to acquire a number of shares
("Shares") of common stock, par value $0.01 ("Common Stock") of Security of
Pennsylvania Financial Corp., a Delaware corporation, and the Holding Company of
the Association, equal to 8% of the Shares issued in connection with the
conversion of the Association from the mutual to stock form, including the
shares issued to the Security Savings Charitable Foundation, a charitable
foundation being established in connection with the conversion (the
"Conversion").

The Loan is intended to be an "exempt loan" as described in Section
4975(d)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), as
defined in Section 54.4975-7(b) of the Treasury Regulations (the "Regulations"),
as described in Section 408(b)(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") and as described in Department of Labor
Regulations Section 2550.408b-3 (collectively, the "Exempt Loan Rules").

<PAGE> 4

1.2 THE NOTE. The disbursement of the Loan pursuant to Section 1.1 hereof
shall be made against and evidenced by a promissory note of the Borrower in the
form annexed hereto as Exhibit A (the "Note"), such Note is to bear interest as
hereinafter provided, and to mature in ____ (__) equal annual installments
consisting of both principal and interest amortized over a ____ (__) year period
in an amount sufficient to repay all borrowed amounts plus interest, commencing
on December 31, 199__ and on the last day of each and every December each year
thereafter, except that the final installment in the amount of all principal and
interest not sooner paid shall be due on December 31, 200_, the final maturity
thereof.

Without regard to the principal amount of the Note stated on its face, the
actual principal amount at any time outstanding and owed by the Borrower on
account of the Note shall be the amount of the disbursement of the Loan made by
the Lender under Section 1.1 hereof less all payments of principal actually
received by the Lender. The amount of such disbursement made by the Lender and
any repayments of principal thereof shall be recorded by the Lender on its books
or records or, at its option, endorsed on the reverse side of the Note by the
Lender and the unpaid principal balance at any time so recorded or endorsed by
the Lender shall be prima facie evidence in any court or other proceedings
brought to enforce the Note of the principal amount remaining unpaid thereon.

1.3 EXEMPT LOAN RULES. Notwithstanding anything to the contrary contained
in this Loan and Security Agreement (the "Agreement") or in the Note, the
Borrower shall be obligated to make repayments of the Loan only to the extent
that such repayments when added to the repayments theretofore made during the
applicable plan year would not exceed an amount which would cause the
limitations of Section 415 of the Code to be exceeded for any ESOP participant.

Except as set forth in the next succeeding sentence and to the extent
permitted by applicable law, including, without limitation, the Exempt Loan
Rules, the principal amount of the Loan and any interest thereon shall be
payable solely from contributions (other than contributions of employer
securities) made to the Trust in accordance with the ESOP, and cash dividends
received on the Shares, to enable the Borrower to pay its obligations under the
Loan and from earnings attributable to the Shares and the investment of such
contributions and dividends.

The Lender acknowledges and agrees that it shall have no other recourse
against the Borrower for repayment of the Loan and that it shall have no
recourse against assets of the ESOP included in the Trust other than pursuant to
Sections 3 and 8 hereof.

SECTION TWO. INTEREST AND FEES.

2.1 INTEREST RATE. The Loan shall bear interest (which the Borrower hereby
promises to pay) prior to maturity (whether by lapse of time, acceleration or
otherwise) at a rate per annum equal at all times to the "Interest Rate" defined
for purposes of this Agreement to mean the lowest prime rate reported in the
Wall Street Journal on the date of the Conversion.

<PAGE> 5

2.2 BASIS AND PAYMENT DATES. All interest accruing on the Note prior to
maturity shall be due and payable on a annual basis on the last day of each year
(commencing December 31, 1998) and at maturity (unless prepaid in whole prior to
such date, then on the date of such prepayment in whole) and interest accruing
after maturity shall be due and payable upon demand. All interest on the Note
shall be computed on the basis of a year of 360 days.

SECTION THREE. COLLATERAL.

3.1 GRANT OF SECURITY INTEREST-PLEDGED SHARES. The Borrower hereby grants,
pledges and assigns to the Lender all Shares of the issued and outstanding
common stock, par value $.01 per share all of which were either (i) purchased by
the Borrower from the proceeds of the disbursement of the Loan; (ii) acquired by
the Borrower with the proceeds of a prior exempt loan within the meaning of
Section 54.4975-7(b) of the Regulations, and pledged as collateral for such
prior exempt loan, where the balance of such prior exempt loan has been repaid
with the proceeds of the disbursement of the Loan (the "Pledged Shares" being
hereinafter referred to as the "Collateral"). The Pledged Shares shall be
evidenced by a stock certificate. The assignment and pledge herein granted and
provided for is made and given to secure and shall secure the prompt payment of
principal of and interest on the Note as and when the same becomes due and
payable and the payment, observance and performance of any and all obligations
and liabilities arising under or provided for in this Agreement or the Note or
any of them in each instance as the same may be amended or modified and whether
now existing or hereafter arising.

3.2 FURTHER ASSURANCES. The Borrower covenants and agrees that it will at
any time and from time to time as requested by the Lender execute and deliver
such further instruments and perform such other acts as the Lender may
reasonably deem necessary or desirable to provide for or perfect the lien of the
Lender in the Collateral hereunder.

3.3 VOTING. Upon the occurrence of a Default, as defined in Section Nine
hereunder, the Lender shall have the right to transfer the Collateral or any
part thereof into its name or into the name of its nominee. The Lender shall not
be entitled to vote the Pledged Shares unless and until a Default has occurred
and so long as the same shall not have been waived by the Lender.

3.4 PARTIAL RELEASES. The Lender agrees, provided always that no Default
shall have occurred and be continuing, as promptly as is practicable after
December 31 in each year (the period commencing the date hereof and ending
December 31 and each subsequent 12-month period ending on December 31 being
hereinafter referred to as a "Plan Year"), to release that number of Pledged
Shares then being held to secure the Loan which is equal to the number of such
Pledged Shares held as of the last day of the Plan Year multiplied by a
fraction, the numerator of which is the aggregate amount of all principal and
interest payments made on the Note during the Plan Year and the denominator of
which is the sum of the numerator plus the unpaid principal and interest of the
Note as of the last day of such Plan Year.

<PAGE> 6

SECTION FOUR. PAYMENTS.

4.1 PLACE AND APPLICATION. All payments of principal, interest, fees and
all other amounts payable hereunder shall be made to the Lender at 31 W. Broad
Street, Hazleton, Pennsylvania 18201 for the account of the Lender (or at such
other place for the account of the Lender as the Lender may from time to time in
writing specify to the Borrower) in immediately available and freely
transferable funds. All payments shall be paid in full without setoff or
counterclaim and without reduction for and free from any and all taxes, levies,
duties, fees, charges, deductions, withholdings, restrictions or conditions of
any nature imposed by any government or any political subdivision or taxing
authority thereof.

4.2 PREPAYMENTS. The Borrower shall have the privilege of prepaying in
whole or in part the Note at any time upon giving three (3) Business Days' prior
notice to the Lender, each such prepayment to be made by the payment of the
principal amount to be prepaid and accrued interest thereon to the date fixed
for prepayment. The term "Business Day" shall mean any day on which savings
institutions are generally open for business in Pennsylvania, other than
Saturday and Sunday. All such prepayments shall be made without premium or
penalty. Prepayments shall first be applied to the several installments of the
Note in the inverse order of their respective maturities.

SECTION FIVE. REPRESENTATIONS AND WARRANTIES.

The Borrower represents and warrants to the Lender as follows:

5.1 The Trust is a duly organized, validly existing employee stock
ownership trust.

5.2 The proceeds of the disbursement of the Loan shall be applied in their
entirety to the payment of the purchase price for the Pledged Shares.

5.3 The Borrower has full right, power and authority to enter into this
Agreement, to make the borrowings hereunder provided for, to issue the Note in
evidence thereof and to perform each and all of the matters and things herein
and therein provided for and this Agreement does not, and the Note when issued
will not, nor will the performance or observance by the Borrower of any of the
matters or things herein or therein provided, contravene any provision of law or
the Trust or any other covenant or agreement affecting the Trust or any of its
assets. As of the date of the disbursement of the Loan, the Pledged Shares will
be fully paid and non-assessable and the Pledged Shares will be owned by the
Borrower free and clear of all liens, charges and encumbrances whatsoever,
except for any lien of Lender provided for herein.

5.4 Except as disclosed to the Lender in writing, there is no litigation
or governmental proceeding pending, nor to the knowledge of the Borrower
threatened, against the ESOP and Trust.

<PAGE> 7

5.5 The ESOP and Trust have no material liabilities, whether absolute or
contingent, except for those heretofore disclosed to the Lender.

SECTION SIX. REPRESENTATIONS AND WARRANTIES OF THE LENDER

The Lender represents and warrants that:

6.1 The Lender is a corporation duly organized under the laws of the State
of Delaware, and is validly existing and in good standing under the laws of the
State of Delaware. The Lender has full power and authority and legal right to
make and perform this Agreement.

6.2 The execution, delivery and performance by the Lender of this
Agreement have been duly authorized by all necessary action by the Lender and is
not and will not violate any provisions of law applicable to the Lender, any
rules, regulations or orders applicable to the Lender or any judgments or
decrees binding upon the Lender. This Agreement is a valid and legally binding
obligation of the Lender enforceable against the Lender in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting credits' rights generally
and the general principles of equity (regardless of whether considered in a
proceeding at law or in equity).

6.3 No authorizations, approvals or consents of, and no filings or
registrations with, any governmental regulatory authority or agency are required
for the execution, delivery or performance by the Lender of this Agreement, or
any transaction contemplated hereby, or for the validity or enforceability
against the Lender hereof except as have already been received or accomplished.

6.4 The execution, delivery and performance of the Agreement and the
consummation of the transactions contemplated hereby will not violate, conflict
with or constitute a default under (i) any of the provisions of the Lender's
Certificate of Incorporation or Bylaws, (ii) any provision of any agreement,
instrument, order, arbitration award, judgment or decree to which the Lender is
a party or by which it is or its assets are bound (iii) any statute, rule or
regulation of any federal, state or local government or agency applicable to the
Lender, except in any such case (i), (ii), (iii) above, for any such conflicts,
violations, defaults which either individually or in the aggregate do not have a
material adverse effect on the business properties of the Lender and its
subsidiaries, taken as a whole.

6.5 The Association has taken such actions as are required by applicable
law to be taken by it to establish the ESOP and the Trust.

6.6 There is no action, suit, investigation or proceeding pending, or to
the best knowledge of the Association, threatened against or affecting the ESOP
before any court or governmental department, agency or instrumentality.

<PAGE> 8

6.7 The Loan will be an "exempt loan" as that term is defined under
Section 54.4975-7(b)(1)(iii) of the Regulations, provided the ESOP Committee
determines that the interest rate is not more than reasonable; and the
transactions contemplated by this Agreement are "prohibited transactions" within
the meaning of Section 4975 of the Code or Section 406(a) of ERISA are subject
to exemption pursuant to Section 4975(d)(3) of the Code and Section 408 of
ERISA.

6.8 Except as otherwise provided in this Agreement, the Shares are not
subject to any restriction on transfer under applicable Federal securities law
and may be freely traded over-the-counter.

6.9 DETERMINATION LETTER. The Association shall apply for a determination
letter from the Internal Revenue Service that the Plan and the Trust, taken
together, qualify as an employee stock ownership plan for purposes of Section
4975(e)(7) of the Code and the rules and regulations thereunder.

SECTION SEVEN. CONDITIONS PRECEDENT.

The obligation of the Lender to make the Loan shall be subject to
satisfaction of the following conditions precedent:

7.1 The Lender shall have received executed originals of this Agreement
and the Note duly signed and properly completed.

7.2 The Lender shall have received either (i) the certificate evidencing
all the Pledged Shares together with duly executed blank stock power therefore
or (ii) if such Pledged Shares are not yet available, a duly executed agreement
to pledge such stock in the form attached hereto as Exhibit B (in which event
such certificate and stock power will be delivered within 6 days of the date of
the Lender makes the Loan).

7.3 The Lender shall have received copies (executed or certified, as may
be appropriate) of all legal documents or proceedings taken in connection with
the execution and delivery of this Agreement and the Note.

SECTION EIGHT. COVENANTS.

Borrower covenants and agrees that so long as any amount remains unpaid on
the Note or the Commitment is outstanding, except to the extent compliance in
any case or cases is waived in writing by the Lender:

8.1 COMPLIANCE. The Borrower will comply with all requirements of the
Code, ERISA and any other law, rule or regulation applicable to it as such laws,
rules or regulations affect the ESOP or the Trust.

<PAGE> 9

8.2 REPORTS.

(a) The Borrower will maintain a system of accounting for the ESOP
and the Trust in accordance with sound accounting practice and will, from
time to time, furnish to the Lender and its duly authorized
representatives, such information and data with respect to the financial
condition of the ESOP and the Trust as the Lender may reasonably request.

(b) Without any request the Borrower will furnish to the Lender
promptly after knowledge thereof shall have come to the attention of the
Borrower, written notice of the occurrence of any Default hereunder or of
any threatened or pending litigation or governmental proceeding against
the Plan or the Trust.

SECTION NINE. DEFAULT AND REMEDIES.

9.1 DEFAULT. Any one or more of the following events shall constitute a
Default hereunder:

(a) As of the date when due, the Borrower fails to make payment of
principal and/or interest with respect to the Note or any other amounts
payable under this Agreement when due;

(b) As of the date proven false, the Borrower makes any
representation, warranty or statement herein or in connection with the
making of the Loan which proves to be incorrect in any material respect;

(c) As of the date the Borrower fails to perform or observe any
term, covenant or agreement (other than those referred to in subparts (a)
and (b), inclusive, of this Section 9.1) contained in this Agreement and
such failure continues unremedied for a period of 30 days after notice to
the Borrower by the Lender or any other holder of the Note;

(d) As of the date of termination of the ESOP if such termination is
prior to the expiration of the term of this Agreement.

9.2 LIMITATIONS ON USE OF TRUST ASSETS. When any Default described in
subsections (a) to (c), of Section 9.1 has occurred and is continuing, the
Lender or the holder of the Note shall have no rights to assets of the Trust
other than (i) contributions (other than contributions of employer securities)
that are made by the Lender to enable the Borrower to meet its obligations
pursuant to the Loan, cash dividends received by the Borrower on the Shares and
earnings attributable to the investment of such contributions and dividends and
(ii) the Pledged Shares; provided further, however, that the value of Trust
assets transferred to the Lender as a result of a Default shall not exceed the
amount of the repayment then in default, and, provided further, that so long as
the Lender is a "party in interest" within the meaning of ERISA Section 3(14) or
a

<PAGE> 10

"disqualified person" within the meaning of Section 4975(e)(2) of the Code, a
transfer of Trust assets upon Default shall be made only if, and to the extent
of, the Borrower's failure to meet the loan's payment schedule.

9.3 RIGHTS UPON DEFAULT. When any Default has occurred and is continuing
the Lender may, in addition to such other rights or remedies as it may have,
then or at any time or times thereafter exercise with respect to the Collateral
any and all of the rights, options and remedies of a secured party under the
Uniform Commercial Code of Pennsylvania (the "UCC") including without limitation
the sale of all or any part of the Collateral at any brokers' board or any
public or private sale, provided, however that the Lender shall only be able to
exercise such rights and remedies to the extent of all interest and principal
payments which are due and payable as of the date of the Default and provided
further that prior to such exercise the Lender shall release from the Collateral
so much thereof as it would have been required to release under Section 3.4
hereof if the period from the previous December 31 to the date of such release
constituted a Plan Year and no Default had occurred. The net proceeds of any
such sale, after deducting all costs and expenses incurred in the collection,
protection, sale and delivery of the Collateral (which expenses Borrower
promises to pay) shall be applied first to the payment of any costs and expenses
incurred by the Lender in selling or otherwise disposing of the Collateral,
second, to the payment of the principal of and the interest on the Note, and,
third, ratably as among any other items of the indebtedness hereby secured. Any
surplus remaining after the full payment and satisfaction of the foregoing shall
be returned to the Borrower or to whomsoever a court of competent jurisdiction
shall determine to be entitled thereto. Any requirement of said UCC as to
reasonable notice shall be met by the Lender personally delivering or mailing
notice (by certified mail - return receipt requested) to the Borrower at its
address as provided in Section 10.6 hereof at least ten (10) days prior to the
event giving rise to the requirement of such notice. In connection with any
offer, solicitation or sale of the Collateral, the Lender may restrict bidders
and otherwise proceed in whatever manner it reasonably believes appropriate in
order to comply or assure compliance with applicable legal requirements
pertaining to the offer and sale of securities of the same type as the
Collateral.

9.4 ERISA RESTRICTIONS. The number of Pledged Shares as to which the
Lender may exercise the rights set forth in this Section 9 may not exceed that
number of shares (then remaining subject to pledge hereunder) which is then
equal in current value to the amount in default under the Note. The remedies set
forth in this Section 9 may only be exercised to the extent consistent with the
restrictions on remedies set forth in Section 408(b)(3) of ERISA and the
regulations thereunder and Section 4975(d)(3) of the Code and the regulations
thereunder.

<PAGE> 11

SECTION TEN. MISCELLANEOUS.

10.1 HOLIDAYS. If any principal of the Note shall fall due on Saturday,
Sunday or on another day which is a legal holiday for savings institutions in
the State of Pennsylvania interest at the rate the Note bears for the period
prior to maturity shall continue to accrue on such principal from the stated due
date thereof to and including the next succeeding Business Day on which the same
is payable.

10.2 NO WAIVER, CUMULATIVE REMEDIES. No delay or failure on the part of
the Lender or the part of the holder of the Note in the exercise of any power or
right shall preclude any other or further exercise thereof, or the exercise of
any other power or right, and the rights and remedies hereunder of the Lender
and of any holder of the Note are cumulative to, and not exclusive of, any
rights or remedies which any of them would otherwise have.

10.3 AMENDMENTS, ETC. No amendment, modification, termination or waiver of
any provision of this Agreement or of the Note nor consent to any departure by
the Borrower therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Lender, and then such consent, modification or
waiver shall be effective only in the specific instance and for the specific
purpose for which given. No notice to or demand on the Borrower in any case
shall entitle the Borrower to any other further notice or demand in similar or
other circumstances.

10.4. SURVIVAL OF REPRESENTATIONS. All representations and warranties made
herein or in certificates given in connection with the Loan shall survive the
execution and delivery of this Agreement and of the Note, and shall continue in
full force and effect with respect to the date as of which they were made as
long as any credit is in use or available hereunder.

10.5 PAYMENTS. So long as the Lender is the holder of the Note, the
Borrower will promptly and punctually pay the principal of and interest on the
Note without presentment of the Note.

10.6 ADDRESSES FOR NOTICES. All communications provided for herein shall
be in writing and shall be deemed to have been given or made when served
personally or when deposited in the United States mail addressed, if to the
Borrower at _____________________, Attention: ____________, Trust Officer; if to
the Lender at __________________, 31 W. Broad Street, Hazleton, Pennsylvania
18201, with a copy to Thomas J. Haggerty, Muldoon, Murphy & Faucette, 5101
Wisconsin Avenue, N.W., Washington, D.C. 20016, or at such other address as
shall be designated by any party hereto in a written notice to each other party
pursuant to this Section 10.6.

10.7 HEADINGS. Article and Section headings used in this Agreement are for
convenience or reference only and are not a part of this Agreement for any other
purpose.

<PAGE> 12

10.8 SEVERABILITY OF PROVISIONS. Any provision of this Agreement which is
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such unenforceability without impairing the enforceability of
the remaining provisions hereof affecting the enforceability of such provision
in any other jurisdiction.

10.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and by different parties hereto on separate counterparts, and all
such counterparts taken together shall be deemed to constitute one and the same
instrument.

10.10 BINDING NATURE, GOVERNING LAW, ETC. This Agreement shall be binding
upon the Borrower and its successors and assigns and shall inure to the benefit
of the Lender and the benefit of its successors and assigns, including any
subsequent holder of the Note. To the extent not preempted by Federal law, this
Agreement and the rights and duties of the parties hereto shall be construed and
determined in accordance with the laws of the Commonwealth of Pennsylvania
without regard to principles of conflicts of laws. This Agreement constitutes
the entire understanding of the parties with respect to the subject matter
hereof and any prior agreements, whether written or oral, with respect thereto
are superseded hereby.

10.11 CONCERNING THE BORROWER. The term "Borrower" as used herein shall
mean and include the undersigned as Trustee of the Trust and its successors in
trust not individually but solely as Trustee under that certain Security
Savings Association Employee Stock Ownership Plan Trust effective
_____________, 1998, by and between the undersigned and Security Savings
Association of Hazleton and this Agreement shall be binding upon the
undersigned and its successors and assigns and upon the trust estate. The
undersigned assumes no personal or individual liability or responsibility for
payment of the indebtedness evidenced by the Note or for observance or
performance of the covenants and agreements herein contained or for the
truthfulness of the representations and warranties herein contained, the
undersigned having executed this Agreement and the Note solely in its capacity
as Trustee as aforesaid to bind the undersigned, its successors in trust and
the trust estates.

10.12 LIMITED LIABILITY. Anything contained herein or in the Note to the
contrary notwithstanding, the sole and only recourse of the Lender and any other
holder of the Note for payment of the obligations hereunder and under the Note,
as against the Borrower for the payment of the obligations hereunder and under
the Note shall be to (i) the Collateral, (ii) contributions, other than employer
securities not constituting Collateral hereunder, made to the ESOP and the Trust
by sponsoring employers to enable the Borrower to meet its obligations hereunder
and under the Note, and (iii) earnings attributable to the Pledged Shares and to
the investment of such employer contributions, but only to the extent of the
failure of the Borrower to meet the payment schedule of the Loan provided for
herein. The Trust assets may be transferred to Lender upon the occurrence of a
Default hereunder only upon and to the extent of the failure of the Plan to meet
the payment schedule of the Loan. In no event may the value of the Trust assets
so transferred exceed the amount of the default.

<PAGE> 13

10.13 LENDER'S DUTY OF CARE. It is agreed and understood that the Lender's
duty with respect to the Collateral shall be solely to use reasonable care in
the custody and preservation of the Collateral in the Lender's possession, which
shall not include any steps necessary to preserve rights against prior parties.

All provisions in this Agreement shall be construed so as to maintain (i)
the ESOP as a qualified leveraged employee stock ownership plan under Sections
401(a) and 4975(e)(7) of the Code, (ii) the Trust as exempt from taxation under
Section 501(a) of the Code, and (iii) the Loan as an "exempt loan" under the
Exempt Loan Rules.

[Remainder of this page intentionally left blank]

<PAGE> 14

Upon your acceptance hereof in the manner hereinafter set forth, this
Agreement shall constitute a contract between us for the uses and purposes
hereinabove set forth.

Dated as of this ___ day of ___________, 1998

________________, and its successors in trust, as
Trustee under that certain Security Savings
Association of Hazleton Employee Stock Ownership
Plan Trust effective __________, 1998 by and
between the undersigned and Security Savings
Association of Hazleton.

By
-----------------------------------

Accepted and agreed to at Hazleton, Pennsylvania as of the date last above
written.

[HOLDING COMPANY]

By
-----------------------------------

<PAGE> 15

EXHIBIT A

PROMISSORY NOTE

Amount sufficient to satisfy the Loan Amount ___________, 1998
Hazleton, Pennsylvania

For VALUE RECEIVED, the undersigned, ______________, not individually but
solely as Trustee under that certain Security Savings Association of Hazleton
Employee Stock Ownership Plan Trust effective ___________, 1998 by and between
the undersigned ("Borrower") and Security Savings Association of Hazleton
promises to pay to the order of ________________ (the "Lender") at its office
at 31 W. Broad Street, Hazleton, Pennsylvania 18201, the aggregate unpaid
principal amount of all loan amounts or advances under the loan made to the
Borrower under Section 1.1 of the Loan and Security Agreement hereinafter
referred to in ____ (__) consecutive annual equal installments, consisting of
both principal and interest, amortized over a ____ (__) year period in an
amount sufficient to repay all borrowed amounts plus interest, payable annually
on the last business day of December, 1998 and continuing on the last business
day of each and every December thereafter, except that the final installment in
the amount of all principal and interest not sooner paid shall be due on
December 31, 200_, the final maturity hereof.

The Borrower promises to pay interest (computed on the basis of a year of
360 days) on the balance of principal from time to time remaining outstanding
and unpaid hereon at the rate per annum equal at all times to the Interest Rate
as defined in Section 2.1 of the Loan and Security Agreement (as defined below)
on the last business day of each and every December, commencing December 31,
1998, and in each year thereafter and on the final maturity date of this Note.
On demand, the Borrower promises to pay interest on any overdue principal hereof
(whether by lapse of time, acceleration, or otherwise) until paid at the stated
rate.

This Note is issued under the terms and provisions of that certain
Security Savings Association of Hazleton Employee Stock Ownership Plan Trust
Loan and Security Agreement bearing even date herewith by and between the
Borrower and the Lender (the "Loan and Security Agreement") and this Note and
the holder hereof are entitled to all the benefits and security provided for by
or referred to in such Loan and Security Agreement.

This Note may be declared due prior to its express maturity and voluntary
prepayments may be made hereon, all in the events, on the terms and in the
manner as provided in such Loan and Security Agreement.

Recourse for the payment of this Note has been limited by the provisions
of the Loan and Security Agreement and this Note is expressly made subject to
such provisions. This Note shall be governed by and construed in accordance with
the laws of Pennsylvania without regard to

<PAGE> 16

principles of conflicts of laws. The Borrower hereby waives presentment for
payment and demand.

Upon the occurrence of a Default as such term is defined in the Loan and
Security Agreement at the option of the Lender, all amounts payable by the
Borrower to the Lender under the terms of this Note may immediately become due
and payable by the Borrower to the Lender pursuant to the provisions of Section
9.3 of the Loan and Security Agreement, and the Lender shall have all of the
rights, powers, and remedies available under the terms of this Note, any of the
other documents evidencing and securing this Loan and all applicable laws. The
Borrower and all endorsers, guarantors, and other parties who may now or in the
future be primarily or secondarily liable for the payment of the indebtedness
evidenced by this Note hereby severally waive presentment, protest and demand,
notice of protest, notice of demand and of dishonor and non-payment of this Note
and expressly agree that this Note any payment hereunder may be extended from
time to time without in any way affecting the liability of the Borrower,
guarantors and endorsers.

_______________ and its successors in
trust, as Trustee under that certain
Security Savings Association of
Hazleton Employee Stock Ownership
Trust effective ____________, 1998 by
and between the undersigned and
Security Savings Association of
Hazleton

By:
---------------------------

<PAGE> 17

EXHIBIT B
SECURITY AGREEMENT
INSTRUMENTS OR NEGOTIABLE DOCUMENTS TO BE DEPOSITED

For new value contemporaneously given by ___________________ ("Lender") to
the undersigned ("Borrower"), the receipt whereof is hereby acknowledged, the
Borrower does hereby grant a security interest to said Lender in the instruments
or negotiable documents hereafter described ("Collateral"), in all of which
Collateral the Borrower warrants that the Borrower has good, valid and effective
rights to the ownership and possession thereof and to the grant of the security
interest hereby made:

All Shares of the common stock, par value $.01 per share, of
________________, a Delaware corporation, acquired with the proceeds of the
Loan Amount.

Borrower agrees to deliver said collateral to said Lender as soon as
practicable after the Borrower's receipt of one or more Certificates
theretofore.

Said security interest secures the payment of all indebtedness and
liabilities as undertaken in the Loan and Security Agreement to which this is a
part, now existing or hereafter arising, and the Lender has all the rights with
respect to said Collateral and said security interest as more fully set forth in
the form of secured note or notes executed and delivered by the undersigned to
said Lender prior hereto or contemporaneously herewith.

This agreement, including matters of interpretation and construction, and
the rights of the Lender and the duties and obligations of the debt hereunder
are to be determined in accordance with the laws of the State of Pennsylvania,
particularly the Uniform Commercial Code, except where preempted by federal law.

Dated at Hazleton, Pennsylvania the ____ day of __________, 1998.

_______________, and its successors in
trust, as Trustee under that certain
Security Savings Association of Hazleton
Employee Stock Ownership Plan Trust
effective ___________, 1998 by and
between the undersigned and Security
Savings Association of Hazleton.

By:
---------------------------------

<PAGE> 1
EXHIBIT 10.3

FORM OF
SECURITY SAVINGS ASSOCIATION OF HAZLETON
EMPLOYMENT AGREEMENT

This AGREEMENT is made effective as of_____________, 199__, by and among
Security Savings Association of Hazleton (the "Association"), a
Pennsylvania-chartered financial institution, with its principal administrative
office at 31 W. Broad Street, Hazleton, PA 18201, Security of Pennsylvania
Financial Corp., a corporation organized under the laws of the State of
Delaware, the holding company for the Association (the "Holding Company"),
and_______________ ("Executive").

WHEREAS, the Association wishes to assure itself of the services of
Executive for the period provided in this Agreement; and

WHEREAS, Executive is willing to serve in the employ of the Association
for said period.

NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

1. POSITION AND RESPONSIBILITIES.

During the period of his employment hereunder, Executive agrees to serve
as _________ and _________________ of the Association. Executive shall render
administrative and management services to the Association such as are
customarily performed by persons situated in a similar executive capacity.
During said period, Executive also agrees to serve, if elected, as an officer
and director of the Holding Company or any subsidiary of the Association.

2. TERMS AND DUTIES.

(a) The period of Executive's employment under this Agreement shall be
deemed to have commenced as of the date first above written and shall continue
for a period of _________ (__) full calendar months thereafter. Commencing on
the first anniversary date of this Agreement, and continuing on each anniversary
thereafter, the disinterested members of the board of directors of the
Association ("Board") may extend the Agreement an additional year such that the
remaining term of the Agreement shall be _____ (__) years unless the Executive
elects not to extend the term of this Agreement by giving written notice in
accordance with Section 8 of this Agreement. The Board will review the Agreement
and Executive's performance annually for purposes of determining whether to
extend the Agreement and the rationale and results thereof shall be included in
the minutes of the Board's meeting. The Board shall give notice to the Executive
as soon as possible after such review as to whether the Agreement is to be
extended.

(b) During the period of Executive's employment hereunder, except for
periods of absence occasioned by illness, reasonable vacation periods, and
reasonable leaves of absence, Executive shall devote substantially all his
business time, attention, skill, and efforts to the faithful performance of his
duties hereunder including activities and services related to the organization,

<PAGE> 2

operation and management of the Association and participation in community and
civic organizations; provided, however, that, with the approval of the Board, as
evidenced by a resolution of such Board, from time to time, Executive may serve,
or continue to serve, on the boards of directors of, and hold any other offices
or positions in, companies or organizations, which, in such Board's judgment,
will not present any conflict of interest with the Association, or materially
affect the performance of Executive's duties pursuant to this Agreement.

(c) Notwithstanding anything herein to the contrary, Executive's
employment with the Association may be terminated by the Association or the
Executive during the term of this Agreement, subject to the terms and conditions
of this Agreement.

3. COMPENSATION AND REIMBURSEMENT.

(a) The Association shall pay Executive as compensation a salary of
$_______ per year ("Base Salary"). Base Salary shall include any amounts of
compensation deferred by Executive under any qualified or non-qualified plan
maintained by the Association. Such Base Salary shall be payable bi-weekly.
During the period of this Agreement, Executive's Base Salary shall be reviewed
at least annually; the first such review will be made no later than one year
from the date of this Agreement. Such review shall be conducted by the Board or
by a Committee of the Board, delegated such responsibility by the Board. The
Committee or the Board may increase Executive's Base Salary. Any increase in
Base Salary shall become the "Base Salary" for purposes of this Agreement. In
addition to the Base Salary provided in this Section 3(a), the Association shall
also provide Executive, at no premium cost to Executive, with all such other
benefits as are provided uniformly to permanent full-time employees of the
Association.

(b) The Executive shall be entitled to participate in any employee benefit
plans, arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Association will not,
without Executive's prior written consent, make any changes in such plans,
arrangements or perquisites which would materially adversely affect Executive's
rights or benefits thereunder; except to the extent such changes are made
applicable to all Association employees on a non-discriminatory basis. Without
limiting the generality of the foregoing provisions of this Subsection (b),
Executive shall be entitled to participate in or receive benefits under any
employee benefit plans including but not limited to, retirement plans,
supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident plans, medical coverage or any other employee benefit plan
or arrangement made available by the Association in the future to its senior
executives and key management employees, subject to and on a basis consistent
with the terms, conditions and overall administration of such plans and
arrangements. Executive shall be entitled to incentive compensation and bonuses
as provided in any plan of the Association in which Executive is eligible to
participate. Nothing paid to the Executive under any such plan or arrangement
will be deemed to be in lieu of other compensation to which the Executive is
entitled under this Agreement.

(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3 and other compensation provided for by paragraph (b) of this Section
3, the Association shall pay or reimburse Executive for all reasonable travel
and other reasonable expenses incurred in the

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<PAGE> 3

performance of Executive's obligations under this Agreement and may provide such
additional compensation in such form and such amounts as the Board may from time
to time determine.

4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

(a) Upon the occurrence of an Event of Termination (as herein defined)
during the Executive's term of employment under this Agreement, the provisions
of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Association of Executive's full-time employment hereunder for
any reason other than a termination governed by Section 5(a) hereof, or
Termination for Cause, as defined in Section 7 hereof; (ii) Executive's
resignation from the Association's employ upon any (A) failure to elect or
reelect or to appoint or reappoint Executive as __________ and _______________,
unless consented to by the Executive, (B) a material change in Executive's
function, duties, or responsibilities, which change would cause Executive's
position to become one of lesser responsibility, importance, or scope from the
position and attributes thereof described in Section 1, above, unless consented
to by Executive, (C) a relocation of Executive's principal place of employment
by more than ___ miles from its location at the effective date of this
Agreement, unless consented to by the Executive, (D) a material reduction in the
benefits and perquisites to the Executive from those being provided as of the
effective date of this Agreement, unless consented to by the Executive, or (E) a
liquidation or dissolution of the Association or Holding Company, or (F) breach
of this Agreement by the Association. Upon the occurrence of any event described
in clauses (A), (B), (C), (D), (E) or (F), above, Executive shall have the right
to elect to terminate his employment under this Agreement by resignation upon
not less than sixty (60) days prior written notice given within six full months
after the event giving rise to said right to elect.

(b) Upon the occurrence of an Event of Termination, on the Date of
Termination, as defined in Section 8, the Association shall be obligated to pay
Executive, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be an amount equal to the sum of:
(i) the amount of the remaining payments that the Executive would have earned if
he had continued his employment with the Association during the remaining term
of this Agreement at the Executive's Base Salary at the Date of Termination; and
(ii) the amount equal to the annual contributions that would have been made on
Executive's behalf to any employee benefit plans of the Association or the
Holding Company during the remaining term of this Agreement based on
contributions made (on an annualized basis) at the Date of Termination;
provided, however, that any payments pursuant to this subsection and subsection
4(c) below, shall not, in the aggregate, exceed three (3) times Executive's
average annual compensation for the five most recent taxable years that
Executive has been employed by the Association or such lesser number of years in
the event that Executive shall have been employed by the Association for less
than five years. In the event the Association is not in compliance with its
minimum capital requirements or if such payments pursuant to this subsection (b)
would cause the Association's capital to be reduced below its minimum regulatory
capital requirements, such payments shall be deferred until such time as the
Association or successor thereto is in capital compliance. At the election of
the Executive, which election is to be made prior to an Event of Termination,
such payments shall be made in a lump sum as of the Executive's Date of
Termination. In the event that no election is made, payment to Executive will be
made on a monthly basis in approximately equal installments during the remaining

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<PAGE> 4

term of the Agreement. Such payments shall not be reduced in the event the
Executive obtains other employment following termination of employment.

(c) Upon the occurrence of an Event of Termination, the Association will
cause to be continued life, medical, dental and disability coverage
substantially identical to the coverage maintained by the Association or the
Holding Company for Executive prior to his termination at no premium cost to the
Executive, except to the extent such coverage may be changed in its application
to all Association or Holding Company employees. Such coverage shall cease upon
the expiration of the remaining term of this Agreement.

5. CHANGE IN CONTROL.

(a) For purposes of this Agreement, a "Change in Control" of the
Association or Holding Company shall mean an event of a nature that: (i) would
be required to be reported in response to Item 1 of the current report on Form
8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); or (ii)
results in a Change in Control of the Association or the Holding Company within
the meaning of the Home Owners' Loan Act of 1933, as amended, the Federal
Deposit Insurance Act or the Rules and Regulations promulgated by the Office of
Thrift Supervision ("OTS") (or its predecessor agency), as in effect on the date
hereof (provided, that in applying the definition of change in control as set
forth under the rules and regulations of the OTS, the Board shall substitute its
judgment for that of the OTS); or (iii) without limitation such a Change in
Control shall be deemed to have occurred at such time as (A) any "person" (as
the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of voting securities of the Association or the Holding
Company representing 25% or more of the Association's or the Holding Company's
outstanding voting securities or right to acquire such securities except for any
voting securities of the Association purchased by the Holding Company and any
voting securities purchased by any employee benefit plan of the Association or
the Holding Company, or (B) individuals who constitute the Board on the date
hereof (the "Incumbent Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to the
date hereof whose election was approved by a vote of at least three-quarters of
the directors comprising the Incumbent Board, or whose nomination for election
by the Holding Company's stockholders was approved by the same Nominating
Committee serving under an Incumbent Board, shall be, for purposes of this
clause (B), considered as though he were a member of the Incumbent Board, or (C)
a plan of reorganization, merger, consolidation, sale of all or substantially
all the assets of the Association or the Holding Company or similar transaction
occurs in which the Association or Holding Company is not the resulting entity;
provided, however, that such an event listed above will be deemed to have
occurred or to have been effectuated upon the receipt of all required regulatory
approvals not including the lapse of any statutory waiting periods.

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<PAGE> 5

responsibility, material reduction in annual compensation or benefits or
relocation of his principal place of employment by more than ___ miles from its
location immediately prior to the Change in Control, unless such termination is
because of his death or Termination for Cause (as defined herein).

(c) Upon Executive's entitlement to benefits pursuant to Section 5(b), the
Association shall pay Executive, or in the event of his subsequent death, his
beneficiary or beneficiaries, or his estate, as the case may be, a sum equal to
the greater of: (1) the payments due for the remaining term of the Agreement; or
2) _______ (___) times Executive's average annual compensation for the five (5)
most recent taxable years that Executive has been employed by the Association or
such lesser number of years in the event that Executive shall have been employed
by the Association for less than five (5) years. Such average annual
compensation shall include Base Salary, commissions, bonuses, contributions on
Executive's behalf to any pension and/or profit sharing plan, severance
payments, retirement payments, directors or committee fees, fringe benefits paid
or to be paid to the Executive in any such year, and payment of expense items
without accountability or business purpose or that do not meet the IRS
requirements for deductibility by the Institution; provided however, that any
payment under this provision and subsection 5(d) below shall not exceed three
(3) times the Executive's average annual compensation. In the event the
Association is not in compliance with its minimum capital requirements or if
such payments would cause the Association's capital to be reduced below its
minimum regulatory capital requirements, such payments shall be deferred until
such time as the Association or successor thereto is in capital compliance. At
the election of the Executive, which election is to be made prior to a Change in
Control, such payment shall be made in a lump sum as of the Executive's Date of
Termination. In the event that no election is made, payment to the Executive
will be made in approximately equal installments on a monthly basis over a
period of _________ (__) months following the Executive's termination. Such
payments shall not be reduced in the event Executive obtains other employment
following termination of employment.

(d) Upon the Executive's entitlement to benefits pursuant to Section 5(b),
the Association will cause to be continued life, medical, dental and disability
coverage substantially identical to the coverage maintained by the Association
for Executive prior to his severance at no premium cost to the Executive, except
to the extent that such coverage may be changed in its application for all
Association employees on a non-discriminatory basis. Such coverage and payments
shall cease upon the expiration of _________ (__) months following the Date of
Termination.

6. CHANGE OF CONTROL RELATED PROVISIONS

Notwithstanding the provisions of Section 5, in no event shall the
aggregate payments or benefits to be made or afforded to Executive under said
paragraphs (the "Termination Benefits") constitute an "excess parachute payment"
under Section 280G of the Code or any successor thereto, and in order to avoid
such a result, Termination Benefits will be reduced, if necessary, to an amount
(the "Non-Triggering Amount"), the value of which is one dollar ($1.00) less
than an amount equal to three (3) times Executive's "base amount", as determined
in accordance with said Section 280G. The allocation of the reduction required
hereby among the Termination Benefits provided by Section 5 shall be determined
by Executive.

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<PAGE> 6

7. TERMINATION FOR CAUSE.

The term "Termination for Cause" shall mean termination because of
Executive's personal dishonesty, incompetence, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order or material
breach of any provision of this Agreement. Notwithstanding the foregoing,
Executive shall not be deemed to have been Terminated for Cause unless and until
there shall have been delivered to him a Notice of Termination which shall
include a copy of a resolution duly adopted by the affirmative vote of not less
than a majority of the members of the Board at a meeting of the Board called and
held for that purpose (after reasonable notice to Executive and an opportunity
for him, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the Board, Executive's conduct justified a finding of
Termination for Cause and specifying the particulars thereof in detail.
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause. During the period beginning on the date
of the Notice of Termination for Cause pursuant to Section 8 hereof through the
Date of Termination for Cause, stock options and related limited rights granted
to Executive under any stock option plan shall not be exercisable, nor shall any
unvested awards granted to Executive under any stock benefit plan of the
Association, the Holding Company or any subsidiary or affiliate thereof, vest.
At the Date of Termination for Cause, such stock options and related limited
rights and such unvested awards shall become null and void and shall not be
exercisable by or delivered to Executive at any time subsequent to such
Termination for Cause.

8. NOTICE.

(a) Any purported termination by the Association or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.

(b) "Date of Termination" shall mean the date specified in the Notice of
Termination (which, in the case of a Termination for Cause, shall not be less
than thirty days from the date such Notice of Termination is given.).

(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (the time for
appeal therefrom having expired and no appeal having been perfected) and
provided further that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, in the event the Executive is
terminated for reasons other than Termination for Cause the Association will
continue to pay Executive his Base Salary in effect when the notice

- 6 -

<PAGE> 7

giving rise to the dispute was given until the earlier of: 1) the resolution of
the dispute in accordance with this Agreement or 2) the expiration of the
remaining term of this Agreement as determined as of the Date of Termination.
Amounts paid under this Section are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other amounts due
under this Agreement.

9. POST-TERMINATION OBLIGATIONS.

All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with this Section 9 for one (1) full year
after the earlier of the expiration of this Agreement or termination of
Executive's employment with the Association. Executive shall, upon reasonable
notice, furnish such information and assistance to the Association as may
reasonably be required by the Association in connection with any litigation in
which it or any of its subsidiaries or affiliates is, or may become, a party.

10. NON-COMPETITION AND NON-DISCLOSURE.

(a) Upon any termination of Executive's employment hereunder pursuant to
Section 4 hereof, Executive agrees not to compete with the Association for a
period of one (1) year following such termination in any city, town or county in
which the Executive's normal business office is located and the Association has
an office or has filed an application for regulatory approval to establish an
office and any county adjacent to such city, town or county, determined as of
the effective date of such termination, except as agreed to pursuant to a
resolution duly adopted by the Board. Executive agrees that during such period
and within said cities, towns and counties, Executive shall not work for or
advise, consult or otherwise serve with, directly or indirectly, any entity
whose business materially competes with the depository, lending or other
business activities of the Association. The parties hereto, recognizing that
irreparable injury will result to the Association, its business and property in
the event of Executive's breach of this Subsection 10(a) agree that in the event
of any such breach by Executive, the Association will be entitled, in addition
to any other remedies and damages available, to an injunction to restrain the
violation hereof by Executive, Executive's partners, agents, servants, employees
and all persons acting for or under the direction of Executive. Nothing herein
will be construed as prohibiting the Association from pursuing any other
remedies available to the Association for such breach or threatened breach,
including the recovery of damages from Executive.

(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Association and
affiliates thereof, as it may exist from time to time, is a valuable, special
and unique asset of the business of the Association. Executive will not, during
or after the term of his employment, disclose any knowledge of the past,
present, planned or considered business activities of the Association or
affiliates thereof to any person, firm, corporation, or other entity for any
reason or purpose whatsoever. Notwithstanding the foregoing, Executive may
disclose any knowledge of banking, financial and/or economic principles,
concepts or ideas which are not solely and exclusively derived from the business
plans and activities of the Association. Further, Executive may disclose
information regarding the business activities of the Association to the OTS and
the Federal Deposit Insurance Corporation ("FDIC") pursuant to a formal
regulatory request. In the event of a breach or threatened breach by Executive
of the provisions of this Section,

- 7 -

<PAGE> 8

the Association will be entitled to an injunction restraining Executive from
disclosing, in whole or in part, the knowledge of the past, present, planned or
considered business activities of the Association or affiliates thereof, or from
rendering any services to any person, firm, corporation, other entity to whom
such knowledge, in whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein will be construed as prohibiting the Association from
pursuing any other remedies available to the Association for such breach or
threatened breach, including the recovery of damages from Executive.

11. SOURCE OF PAYMENTS.

(a) All payments provided in this Agreement shall be timely paid in cash
or check from the general funds of the Association. The Holding Company,
however, unconditionally guarantees payment and provision of all amounts and
benefits due hereunder to Executive and, if such amounts and benefits due from
the Association are not timely paid or provided by the Association, such amounts
and benefits shall be paid or provided by the Holding Company.

(b) Notwithstanding any provision herein to the contrary, to the extent
that payments and benefits, as provided by this Agreement, are paid to or
received by Executive under the Employment Agreement dated ___________, 199___,
between Executive and the Holding Company, such compensation payments and
benefits paid by the Holding Company will be subtracted from any amounts due
simultaneously to Executive under similar provisions of this Agreement. Payments
pursuant to this Agreement and the Holding Company Agreement shall be allocated
in proportion to the services rendered and time expended on such activities by
Executive as determined by the Holding Company and the Association on a
quarterly basis.

12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Association or
any predecessor of the Association and Executive, except that this Agreement
shall not affect or operate to reduce any benefit or compensation inuring to
Executive of a kind elsewhere provided. No provision of this Agreement shall be
interpreted to mean that Executive is subject to receiving fewer benefits than
those available to him without reference to this Agreement.

13. NO ATTACHMENT.

(a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.

(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive and the Association and their respective successors, heirs, and
assigns.

- 8 -

<PAGE> 9

14. MODIFICATION AND WAIVER.

(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.

(b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.

15. REQUIRED PROVISIONS.

(a) The Association may terminate Executive's employment at any time, but
any termination by the Association, other than Termination for Cause, shall not
prejudice Executive's right to compensation or other benefits under this
Agreement. Executive shall not have the right to receive compensation or other
benefits for any period after Termination for Cause as defined in Section 7
hereinabove.

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

(c) If Executive is removed and/or permanently prohibited from
participating in the conduct of the Association's affairs by an order issued
under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
Section 1818(e)(4) or (g)(1), all obligations of the Association under this
contract shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.

(d) If the Association is in default as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act, 12 U.S.C. Section 1813(x)(1) all obligations of
the Association under this contract shall terminate as of the date of default,
but this paragraph shall not affect any vested rights of the contracting
parties.

(e) All obligations of the Association under this contract shall be
terminated, except to the extent determined that continuation of the contract is
necessary for the continued operation of the institution: (i) by the Director of
the OTS (or her designee), the FDIC or the Resolution Trust Corporation, at the
time the FDIC enters into an agreement to provide assistance to or on behalf of
the Association under the authority contained in Section 13(c) of the Federal
Deposit Insurance Act, 12 U.S.C. Section 1823(c); or (ii) by the Director of the
OTS (or her designee) at the time the Director (or

- 9 -

<PAGE> 10

her designee) approves a supervisory merger to resolve problems related to the
operations of the Association or when the Association is determined by the
Director to be in an unsafe or unsound condition. Any rights of the parties that
have already vested, however, shall not be affected by such action.

(f) Any payments made to Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
ss.1828(k) and 12 C.F.R. Section 545.121 and any rules and regulations
promulgated thereunder.

16. REINSTATEMENT OF BENEFITS UNDER SECTION 15(b).

In the event Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Association's affairs by a notice described
in Section 15(b) hereof (the "Notice") during the term of this Agreement and a
Change in Control, as defined herein, occurs, the Association will assume its
obligation to pay and Executive will be entitled to receive all of the
termination benefits provided for under Section 5 of this Agreement upon the
Association's receipt of a dismissal of charges in the Notice.

17. SEVERABILITY.

If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.

18. HEADINGS FOR REFERENCE ONLY.

The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.

Wherever any words are used herein in the masculine, feminine or neutor
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply.

19. GOVERNING LAW.

The validity, interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of Pennsylvania, but only
to the extent not superseded by federal
law.

20. ARBITRATION.

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<PAGE> 11

Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement, other than in the case of a
Termination for Cause.

In the event any dispute or controversy arising under or in connection
with Executive's termination is resolved in favor of Executive, whether by
judgment, arbitration or settlement, Executive shall be entitled to the payment
of all back-pay, including salary, bonuses and any other cash compensation,
fringe benefits and any compensation and benefits due Executive under this
Agreement.

21. PAYMENT OF COSTS AND LEGAL FEES.

All reasonable costs and legal fees paid or incurred by Executive pursuant
to any dispute or question of interpretation relating to this Agreement shall be
paid or reimbursed by the Association if Executive is successful on the merits
pursuant to a legal judgment, arbitration or settlement.

22. INDEMNIFICATION.

(a) Subject to the provisions of Section 15 hereof, the Association shall
provide Executive (including his heirs, executors and administrators) with
coverage under a standard directors' and officers' liability insurance policy at
its expense, and shall indemnify Executive (and his heirs, executors and
administrators) to the fullest extent permitted under Pennsylvania law against
all expenses and liabilities reasonably incurred by him in connection with or
arising out of any action, suit or proceeding in which he may be involved by
reason of him having been a director or officer of the Association (whether or
not he continues to be a director or officer at the time of incurring such
expenses or liabilities), such expenses and liabilities to include, but not be
limited to, judgments, court costs and attorneys' fees and the cost of
reasonable settlements.

23. SUCCESSOR TO THE ASSOCIATION.

The Association shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Association or the Holding
Company, expressly and unconditionally to assume and agree to perform the
Association's obligations under this Agreement, in the same manner and to the
same extent that the Association would be required to perform if no such
succession or assignment had taken place.

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<PAGE> 12

SIGNATURES

IN WITNESS WHEREOF, Security Savings Association of Hazleton and
______________ have caused this Agreement to be executed and their seals to be
affixed hereunto by their duly authorized officers and directors, and Executive
has signed this Agreement, on the ___ day of ________, 199__.

ATTEST: SECURITY SAVINGS ASSOCIATION OF
HAZLETON

By:
- -------------------------- --------------------------------------
For the Entire Board of Directors

[SEAL]

ATTEST: SECURITY OF PENNSYLVANIA FINANCIAL
CORP.

(Guarantor)

By:
- -------------------------- --------------------------------------
For the Entire Board of Directors

[SEAL]

WITNESS:

- -------------------------- --------------------------------------
Executive

- 12 -

<PAGE> 1
EXHIBIT 10.4

FORM OF
SECURITY OF PENNSYLVANIA FINANCIAL CORP.
EMPLOYMENT AGREEMENT

This AGREEMENT ("Agreement") is made effective as of _______________,
199___, by and between Security of Pennsylvania Financial Corp. (the "Holding
Company"), a corporation organized under the laws of Delaware, with its
principal administrative office at 31 W. Broad Street, Hazleton, PA 18201
and______________ (the "Executive"). Any reference to "Institution" herein shall
mean Security Savings Association of Hazleton or any successor thereto.

WHEREAS, the Holding Company wishes to assure itself of the services of
Executive for the period provided in this Agreement; and

WHEREAS, the Executive is willing to serve in the employ of the Holding
Company for said period.

NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

1. POSITION AND RESPONSIBILITIES.

During the period of Executive's employment hereunder, Executive agrees to
serve as __________ and ________________ of the Holding Company. The Executive
shall render administrative and management services to the Holding Company such
as are customarily performed by persons in a similar executive capacity. During
said period, Executive also agrees to serve, if elected, as an officer and
director of any subsidiary of the Holding Company.

2. TERMS.

(a) The period of Executive's employment under this Agreement shall be
deemed to have commenced as of the date first above written and shall continue
for a period of ___________ (__) full calendar months thereafter. Commencing on
the date of the execution of this Agreement, the term of this Agreement shall be
extended for one day each day until such time as the board of directors of the
Holding Company (the "Board") or Executive elects not to extend the term of the
Agreement by giving written notice to the other party in accordance with Section
8 of this Agreement, in which case the term of this Agreement shall be fixed and
shall end on the third anniversary of the date of such written notice.

<PAGE> 2

operation and management of the Holding Company and its direct or indirect
subsidiaries ("Subsidiaries") and participation in community and civic
organizations; provided, however, that, with the approval of the Board, as
evidenced by a resolution of such Board, from time to time, Executive may serve,
or continue to serve, on the boards of directors of, and hold any other offices
or positions in, companies or organizations, which, in such Board's judgment,
will not present any conflict of interest with the Holding Company or its
Subsidiaries, or materially affect the performance of Executive's duties
pursuant to this Agreement.

(c) Notwithstanding anything herein contained to the contrary, Executive's
employment with the Holding Company may be terminated by the Holding Company or
Executive during the term of this Agreement, subject to the terms and conditions
of this Agreement. Moreover, in the event the Executive is terminated or
suspended from his position with the Institution, Executive shall not perform,
in any respect, directly or indirectly, during the pendency of his temporary or
permanent suspension or termination from the Institution, duties and
responsibilities formerly performed at the Institution as part of his duties and
responsibilities as ___________ and ________________ of the Holding Company.

3. COMPENSATION AND REIMBURSEMENT.

(a) The Executive shall be entitled to a salary from the Holding Company
or its Subsidiaries of $________ per year ("Base Salary"). Base Salary shall
include any amounts of compensation deferred by Executive under any qualified or
non-qualified plan maintained by the Holding Company and its Subsidiaries. Such
Base Salary shall be payable bi-weekly. During the period of this Agreement,
Executive's Base Salary shall be reviewed at least annually; the first such
review will be made no later than one year from the date of this Agreement. Such
review shall be conducted by the Board or by a Committee of the Board delegated
such responsibility by the Board. The Committee or the Board may increase
Executive's Base Salary. Any increase in Base Salary shall become the "Base
Salary" for purposes of this Agreement. In addition to the Base Salary provided
in this Section 3(a), the Holding Company shall also provide Executive, at no
premium cost to Executive, with all such other benefits as provided uniformly to
permanent full-time employees of the Holding Company and its Subsidiaries.

(b) The Executive shall be entitled to participate in any employee benefit
plans, arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Holding Company and its
Subsidiaries will not, without Executive's prior written consent, make any
changes in such plans, arrangements or perquisites which would materially
adversely affect Executive's rights or benefits thereunder, except to the extent
that such changes are made applicable to all Holding Company and Institution
employees eligible to participate in such plans, arrangements and perquisites on
a non-discriminatory basis. Without limiting the generality of the foregoing
provisions of this Subsection (b), Executive shall be entitled to participate in
or receive benefits under any employee benefit plans including, but not limited
to, retirement plans, supplemental retirement plans, pension plans,
profit-sharing plans, health-and-accident plans, medical coverage or any other
employee benefit plan or arrangement made available by the Holding

<PAGE> 3

Company and its Subsidiaries in the future to its senior executives and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans and arrangements. Executive
shall be entitled to incentive compensation and bonuses as provided in any plan
of the Holding Company and its Subsidiaries in which Executive is eligible to
participate. Nothing paid to the Executive under any such plan or arrangement
will be deemed to be in lieu of other compensation to which the Executive is
entitled under this Agreement.

(c) In addition to the Base Salary provided for by paragraph (a) of this
Section 3 and other compensation provided for by paragraph (b) of this Section
3, the Holding Company shall pay or reimburse Executive for all reasonable
travel, including reasonable expenses for spouses travel, and other reasonable
expenses incurred in the performance of Executive's obligations under this
Agreement and may provide such additional compensation in such form and such
amounts as the Board may from time to time determine.

4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

(a) Upon the occurrence of an Event of Termination (as herein defined)
during the Executive's term of employment under this Agreement, the provisions
of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Holding Company of Executive's full-time employment hereunder
for any reason other than termination governed by Section 5(a) hereof, or for
Cause, as defined in Section 7 hereof; (ii) Executive's resignation from the
Holding Company's employ, upon, any (A) failure to elect or reelect or to
appoint or reappoint Executive as ___________ and __________, unless consented
to by the Executive, (B) a material change in Executive's function, duties, or
responsibilities with the Holding Company or its Subsidiaries, which change
would cause Executive's position to become one of lesser responsibility,
importance, or scope from the position and attributes thereof described in
Section 1, above, unless consented to by the Executive, (C) a relocation of
Executive's principal place of employment by more than ___ miles from its
location at the effective date of this Agreement, unless consented to by the
Executive, (D) a material reduction in the benefits and perquisites to the
Executive from those being provided as of the effective date of this Agreement,
unless consented to by the Executive, (E) a liquidation or dissolution of the
Holding Company or the Institution, or (F) breach of this Agreement by the
Holding Company. Upon the occurrence of any event described in clauses (A), (B),
(C), (D) (E) or (F), above, Executive shall have the right to elect to terminate
his employment under this Agreement by resignation upon not less than sixty (60)
days prior written notice given within six full calendar months after the event
giving rise to said right to elect.

(b) Upon the occurrence of an Event of Termination, on the Date of
Termination, as defined in Section 8, the Holding Company shall be obligated to
pay Executive, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, a sum equal to the sum of: (i)
the amount of the remaining payments that the Executive would have earned if he
had continued his employment with the Institution during the remaining term of
this Agreement at the Executive's Base Salary at the Date of Termination; and
(ii) the amount equal to the annual contributions that would have been made on
Executive's behalf to any employee benefit plans of the

<PAGE> 4

Institution or the Holding Company during the remaining term of this Agreement
based on contributions made (on an annualized basis) at the Date of Termination.
At the election of the Executive, which election is to be made prior to an Event
of Termination, such payments shall be made in a lump sum. In the event that no
election is made, payment to the Executive will be made on a monthly basis in
approximately equal installments during the remaining term of the Agreement.
Such payments shall not be reduced in the event the Executive obtains other
employment following termination of employment.

(c) Upon the occurrence of an Event of Termination, the Holding Company
will cause to be continued life, medical, dental and disability coverage
substantially equivalent to the coverage maintained by the Holding Company or
its Subsidiaries for Executive prior to his termination at no premium cost to
the Executive. Such coverage shall cease upon the expiration of the remaining
term of this Agreement.

5. CHANGE IN CONTROL.

(a) For purposes of this Agreement, a "Change in Control" of the Holding
Company or the Institution shall mean an event of a nature that; (i) would be
required to be reported in response to Item 1(a) of the current report on Form
8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); or (ii) results in a
Change in Control of the Institution or the Holding Company within the meaning
of the Home Owners' Loan Act of 1933, as amended, the Federal Deposit Insurance
Act, or the Rules and Regulations promulgated by the Office of Thrift
Supervision (or its predecessor agency), as in effect on the date hereof
(provided, that in applying the definition of change in control as set forth
under the rules and regulations of the OTS, the Board shall substitute its
judgment for that of the OTS); or (iii) without limitation such a Change in
Control shall be deemed to have occurred at such time as (A) any "person" (as
the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of voting securities of the Institution or the Holding
Company representing 20% or more of the Institution's or the Holding Company's
outstanding voting securities or right to acquire such securities except for any
voting securities of the Institution purchased by the Holding Company and any
voting securities purchased by any employee benefit plan of the Holding Company
or its Subsidiaries; or (B) individuals who constitute the Board on the date
hereof (the "Incumbent Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to the
date hereof whose election was approved by a vote of at least three-quarters of
the directors comprising the Incumbent Board, or whose nomination for election
by the Company's stockholders was approved by a Nominating Committee solely
composed of members which are Incumbent Board members, shall be, for purposes of
this clause (B), considered as though he were a member of the Incumbent Board;
or (C) a plan of reorganization, merger, consolidation, sale of all or
substantially all the assets of the Institution or the Holding Company or
similar transaction occurs or is effectuated in which the Institution or Holding
Company is not the resulting entity; provided, however, that such an event
listed above will be deemed to have occurred or to have been effectuated upon
the receipt of all required federal regulatory approvals not including the lapse
of any statutory waiting periods; or (D) a proxy statement has been distributed
soliciting

<PAGE> 5

proxies from stockholders of the Holding Company, by someone other than the
current management of the Holding Company, seeking stockholder approval of a
plan of reorganization, merger or consolidation of the Holding Company or
Institution with one or more corporations as a result of which the outstanding
shares of the class of securities then subject to such plan or transaction are
exchanged for or converted into cash or property or securities not issued by the
Institution or the Holding Company shall be distributed; or (E) a tender offer
is made for 20% or more of the voting securities of the Institution or Holding
Company then outstanding.

(b) If a Change in Control has occurred pursuant to Section 5(a) or the
Board has determined that a Change in Control has occurred, Executive shall be
entitled to the benefits provided in paragraphs (c) and, (d), of this Section 5
upon his subsequent termination of employment at any time during the term of
this Agreement due to (i) Executive's dismissal, or (ii) Executive's voluntary
resignation following any demotion, loss of title, office or significant
authority or responsibility, reduction in the annual compensation or material
reduction in benefits or relocation of his principal place of employment by more
than ___ miles from its location immediately prior to the change in control,
unless such termination is because of his death or Termination for Cause (as
defined herein).

(c) Upon the Executive's entitlement to benefits pursuant to Section 5(b),
the Holding Company shall pay Executive, or in the event of his subsequent
death, his beneficiary or beneficiaries, or his estate, as the case may be, as
severance pay or liquidated damages, or both, a sum equal to the greater of: (i)
the payments due for the remaining term of the Agreement; or (ii) three (3)
times Executive's average annual compensation for the five (5) preceding taxable
years. Such annual compensation shall include Base Salary, commissions, bonuses,
contributions on behalf of Executive to any pension and profit sharing plan,
severance payments, directors or committee fees and fringe benefits paid or to
be paid to the Executive during such years. At the election of the Executive,
which election is to be made prior to a Change in Control, such payment shall be
made in a lump sum. In the event that no election is made, payment to the
Executive will be made on a monthly basis in approximately equal installments
during the remaining term of the Agreement. Such payments shall not be reduced
in the event Executive obtains other employment following termination of
employment.

(d) Upon the Executive's entitlement to benefits pursuant to Section 5(b),
the Company will cause to be continued life, medical, dental and disability
coverage substantially equivalent to the coverage maintained by the Institution
for Executive at no premium cost to Executive prior to his severance. Such
coverage and payments shall cease upon the expiration of _________ (__) months
following the Change in Control.

6. CHANGE OF CONTROL RELATED PROVISIONS.

(a) Notwithstanding the provisions of Section 5, in the event that:

(i) the aggregate payments or benefits to be made or afforded to
Executive, which are deemed to be parachute payments as
defined in Section 280G of

<PAGE> 6

the Internal Revenue Code of 1986, as amended (the "Code") or
any successor thereof, (the "Termination Benefits") would be
deemed to include an "excess parachute payment" under Section
280G of the Code; and

(ii) if such Termination Benefits were reduced to an amount (the
"Non-Triggering Amount"), the value of which is one dollar
($1.00) less than an amount equal to three (3) times
Executive's "base amount," as determined in accordance with
said Section 280G and the Non-Triggering Amount less the
product of the marginal rate of any applicable state and
federal income tax and the Non Triggering Amount would be
greater than the aggregate value of the Termination Benefits
(without such reduction) minus (i) the amount of tax required
to be paid by the Executive thereon by Section 4999 of the
Code and further minus (ii) the product of the Termination
Benefits and the marginal rate of any applicable state and
federal income tax,

then the Termination Benefits shall be reduced to the Non-Triggering Amount. The
allocation of the reduction required hereby among the Termination Benefits shall
be determined by the Executive.

7. TERMINATION FOR CAUSE.

The term "Termination for Cause" shall mean termination because of a
material loss to the Holding Company or one of its Subsidiaries caused by the
Executive's intentional failure to perform stated duties, personal dishonesty,
willful violation of any law, rule, regulation (other than traffic violations or
similar offenses), final cease and desist order or material breach of any
provision of this Agreement. For purposes of this Section, no act, or the
failure to act, on Executive's part shall be "willful" unless done, or omitted
to be done, not in good faith and without reasonable belief that the action or
omission was in the best interest of the Holding Company or its Subsidiaries.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
Notice of Termination which shall include a copy of a resolution duly adopted by
the affirmative vote of not less than three-fourths of the members of the Board
at a meeting of the Board called and held for that purpose (after reasonable
notice to Executive and an opportunity for him, together with counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of conduct justifying Termination for Cause and specifying
the particulars thereof in detail. The Executive shall not have the right to
receive compensation or other benefits for any period after Termination for
Cause. During the period beginning on the date of the Notice of Termination for
Cause pursuant to Section 8 hereof through the Date of Termination, stock
options and related limited rights granted to Executive under any stock option
plan shall not be exercisable nor shall any unvested awards granted to Executive
under any stock benefit plan of the Holding Company or its Subsidiaries vest. At
the Date of Termination, such stock options and related limited rights and such
unvested awards shall become null and void and shall not be exercisable by or
delivered to Executive at any time subsequent to such Date of Termination for
Cause.

<PAGE> 7

8. NOTICE.

(a) Any purported termination by the Holding Company or by Executive shall
be communicated by Notice of Termination to the other party hereto. For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.

(b) "Date of Termination" shall mean the date specified in the Notice of
Termination (which, in the case of a Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given).

(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by the Executive in which case the
Date of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Holding Company will
continue to pay Executive his full compensation in effect when the notice giving
rise to the dispute was given (including, but not limited to, Base Salary) and
continue him as a participant in all compensation, benefit and insurance plans
in which he was participating when the notice of dispute was given, until the
dispute is finally resolved in accordance with this Agreement. Amounts paid
under this Section are in addition to all other amounts due under this Agreement
and shall not be offset against or reduce any other amounts due under this
Agreement.

9. POST-TERMINATION OBLIGATIONS.

All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with this Section 9 for one (1) full year
after the earlier of the expiration of this Agreement or termination of
Executive's employment with the Holding Company. Executive shall, upon
reasonable notice, furnish such information and assistance to the Holding
Company as may reasonably be required by the Holding Company in connection with
any litigation in which it or any of its subsidiaries or affiliates is, or may
become, a party.

10. NON-COMPETITION AND NON-DISCLOSURE.

(a) Upon any termination of Executive's employment hereunder pursuant to
Section 4 hereof, Executive agrees not to compete with the Holding Company or
its Subsidiaries for a period of one (1) year following such termination in any
city, town or county in which the Executive's

<PAGE> 8

normal business office is located and the Holding Company or any of its
Subsidiaries has an office or has filed an application for regulatory approval
to establish an office and any county adjacent to such city, town or county,
determined as of the effective date of such termination, except as agreed to
pursuant to a resolution duly adopted by the Board. Executive agrees that during
such period and within said cities, towns and counties, Executive shall not work
for or advise, consult or otherwise serve with, directly or indirectly, any
entity whose business materially competes with the depository, lending or other
business activities of the Holding Company or its Subsidiaries. The parties
hereto, recognizing that irreparable injury will result to the Holding Company
or its Subsidiaries, its business and property in the event of Executive's
breach of this Subsection 10(a) agree that in the event of any such breach by
Executive, the Holding Company or its Subsidiaries will be entitled, in addition
to any other remedies and damages available, to an injunction to restrain the
violation hereof by Executive, Executive's partners, agents, servants, employees
and all persons acting for or under the direction of Executive. Executive
represents and admits that in the event of the termination of his employment
pursuant to Section 7 hereof, Executive's experience and capabilities are such
that Executive can obtain employment in a business engaged in other lines and/or
of a different nature than the Holding Company or its Subsidiaries, and that the
enforcement of a remedy by way of injunction will not prevent Executive from
earning a livelihood. Nothing herein will be construed as prohibiting the
Holding Company or its Subsidiaries from pursuing any other remedies available
to the Holding Company or its Subsidiaries for such breach or threatened breach,
including the recovery of damages from Executive.

(b) Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Holding Company and
its Subsidiaries as it may exist from time to time, is a valuable, special and
unique asset of the business of the Holding Company and its Subsidiaries.
Executive will not, during or after the term of his employment, disclose any
knowledge of the past, present, planned or considered business activities of the
Holding Company and its Subsidiaries thereof to any person, firm, corporation,
or other entity for any reason or purpose whatsoever unless expressly authorized
by the Board of Directors or required by law. Notwithstanding the foregoing,
Executive may disclose any knowledge of banking, financial and/or economic
principles, concepts or ideas which are not solely and exclusively derived from
the business plans and activities of the Holding Company. In the event of a
breach or threatened breach by the Executive of the provisions of this Section,
the Holding Company will be entitled to an injunction restraining Executive from
disclosing, in whole or in part, the knowledge of the past, present, planned or
considered business activities of the Holding Company or its Subsidiaries or
from rendering any services to any person, firm, corporation, other entity to
whom such knowledge, in whole or in part, has been disclosed or is threatened to
be disclosed. Nothing herein will be construed as prohibiting the Holding
Company from pursuing any other remedies available to the Holding Company for
such breach or threatened breach, including the recovery of damages from
Executive.

11. SOURCE OF PAYMENTS.

(a) All payments provided in this Agreement shall be timely paid in cash
or check from the general funds of the Holding Company subject to Section 11(b).

<PAGE> 9

(b) Notwithstanding any provision herein to the contrary, to the extent
that payments and benefits, as provided by this Agreement, are paid to or
received by Executive under the Employment Agreement dated ___________, 199__,
between Executive and the Institution, such compensation payments and benefits
paid by the Institution will be subtracted from any amount due simultaneously to
Executive under similar provisions of this Agreement. Payments pursuant to this
Agreement and the Institution Agreement shall be allocated in proportion to the
level of activity and the time expended on such activities by the Executive as
determined by the Holding Company and the Institution on a quarterly basis.

12. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Holding Company
or any predecessor of the Holding Company and Executive, except that this
Agreement shall not affect or operate to reduce any benefit or compensation
inuring to the Executive of a kind elsewhere provided. No provision of this
Agreement shall be interpreted to mean that Executive is subject to receiving
fewer benefits than those available to him without reference to this Agreement.

13. NO ATTACHMENT.

(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive and the Holding Company and their respective successors, heirs and
assigns.

14. MODIFICATION AND WAIVER.

(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.

<PAGE> 10

15. SEVERABILITY.

16. HEADINGS FOR REFERENCE ONLY.

The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.

Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply.

17. GOVERNING LAW.

This Agreement shall be governed by the laws of the State of Delaware
without regard to the principles of conflicts of law of this State, unless
otherwise specified herein.

18. ARBITRATION.

Notwithstanding any right to enforcement under Section 10(a), any dispute
or controversy arising under or in connection with this Agreement shall be
settled exclusively by arbitration, conducted before a panel of three
arbitrators sitting in a location selected by the Executive within fifty (50)
miles from the location of the Institution, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.

In the event any dispute or controversy arising under or in connection
with Executive's termination is resolved in favor of the Executive, whether by
judgment, arbitration or settlement, Executive shall be entitled to the payment
of all back-pay, including salary, bonuses and any other cash compensation,
fringe benefits and any compensation and benefits due Executive under this
Agreement.

19. PAYMENT OF LEGAL FEES.

All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the Holding Company, if Executive is successful pursuant to a
legal judgment, arbitration or settlement.

<PAGE> 11

20. INDEMNIFICATION.

(a) The Holding Company shall provide Executive (including his heirs,
executors and administrators) with coverage under a standard directors' and
officers' liability insurance policy at its expense, and shall indemnify
Executive (and his heirs, executors and administrators) to the fullest extent
permitted under Delaware law against all expenses and liabilities reasonably
incurred by him in connection with or arising out of any action, suit or
proceeding in which he may be involved by reason of him having been a director
or officer of the Holding Company (whether or not he continues to be a director
or officer at the time of incurring such expenses or liabilities), such expenses
and liabilities to include, but not be limited to, judgments, court costs and
attorneys' fees and the cost of reasonable settlements.

(b) Any payments made to Executive pursuant to this Section are subject to
and conditioned upon compliance with 12 U.S.C. Section 1828(k) and 12 C.F.R.
Part 359 and any rules or regulations promulgated thereunder.

21. SUCCESSOR TO THE HOLDING COMPANY.

The Holding Company shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Institution or the Holding
Company, expressly and unconditionally to assume and agree to perform the
Holding Company's obligations under this Agreement, in the same manner and to
the same extent that the Holding Company would be required to perform if no such
succession or assignment had taken place.

<PAGE> 12

SIGNATURES

IN WITNESS WHEREOF, ___________________ has caused this Agreement to be
executed and its seal to be affixed hereunto by its duly authorized officer and
its directors, and Executive has signed this Agreement, on the _____ day of
_________, 199__.

ATTEST: SECURITY OF PENNSYLVANIA
FINANCIAL CORP.

By:
- ---------------------------- ----------------------------

[SEAL]

WITNESS:

By:
- ---------------------------- ----------------------------

<PAGE> 1
EXHIBIT 10.5

FORM OF
SECURITY SAVINGS ASSOCIATION OF HAZLETON
________-YEAR CHANGE IN CONTROL AGREEMENT

This AGREEMENT is made effective as of___________, 199___, by and between
Security Savings Association (the "Association"), a Pennsylvania-chartered
savings institution, with its principal administrative office at 31 W. Broad
Street, Hazleton, PA 18201, ________________________ ("Executive"), and Security
of Pennsylvania Financial Corp. (the "Holding Company"), a corporation organized
under the laws of the State of Delaware which is the holding company of the
Association.

WHEREAS, the Association recognizes the substantial contribution Executive
has made to the Association and wishes to protect Executive's position therewith
for the period provided in this Agreement; and

WHEREAS, Executive has agreed to serve in the employ of the Association.

NOW, THEREFORE, in consideration of the contribution and responsibilities
of Executive, and upon the other terms and conditions hereinafter provided, the
parties hereto agree as follows:

1. TERM OF AGREEMENT.

The term of this Security Savings Association of Hazleton Change in
Control Agreement (the "Agreement") shall be deemed to have commenced as of the
date first above written and shall continue for a period of___________ (__) full
calendar months thereafter. Commencing on the first anniversary date of this
Agreement and continuing at each anniversary date thereafter, the Board of
Directors of the Association ("Board") may extend the Agreement for an
additional year. The Board will review the Agreement and Executive's performance
annually for purposes of determining whether to extend the Agreement, and the
results thereof shall be included in the minutes of the Board's meeting.

2. CHANGE IN CONTROL.

(a) If a Change in Control (as defined herein) has occurred or the Board
has determined that a Change in Control has occurred, Executive shall be
entitled to the benefits provided in Section 3 upon his subsequent termination
of employment at any time during the term of this Agreement due to (i)
Executive's dismissal, or (ii) Executive's voluntary resignation following any
demotion, loss of title, office or significant authority or responsibility,
reduction in the annual compensation or material reduction in benefits or
relocation of his principal place of employment by more than ___ miles from its
location immediately prior to the Change in Control, unless such termination is
because of his death or Termination for Cause (as defined herein).

<PAGE> 2

(b) For purposes of this Plan, a "Change in Control" of the Association or
Holding Company shall mean an event of a nature that: (i) would be required to
be reported in response to Item 1 of the Current Report on Form 8-K, as in
effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"); or (ii) results in a Change in
Control of the Association or the Holding Company within the meaning of the Home
Owners' Loan Act of 1933, as amended, the Federal Deposit Insurance Act, or the
Rules and Regulations promulgated by the Office of Thrift Supervision ("OTS")
(or its predecessor agency), as in effect on the date hereof (provided, that in
applying the definition of change in control as set forth under the Rules and
Regulations of the OTS, the Board shall substitute its judgment for that of the
OTS); or (iii) without limitation such a Change in Control shall be deemed to
have occurred at such time as (A) any "person" (as the term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Association or the Holding Company representing 25% or more of
the Association's or the Holding Company's outstanding voting securities or
right to acquire such securities except for any voting securities of the
Association purchased by the Holding Company in connection with the conversion
of the Association to the stock form and any voting securities purchased by any
employee benefit plan of the Association or the Holding Company, or (B)
individuals who constitute the Board on the date hereof (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors comprising the
Incumbent Board, or whose nomination for election by the Holding Company's
stockholders was approved by the same Nominating Committee serving under an
Incumbent Board, shall be, for purposes of this clause (B), considered as though
he were a member of the Incumbent Board, or (C) a plan of reorganization,
merger, consolidation, sale of all or substantially all the assets of the
Association or the Holding Company or similar transaction occurs in which the
Association or Holding Company is not the resulting entity; provided, however,
that such an event listed above will be deemed to have occurred or to have been
effectuated upon the receipt of all required regulatory approvals not including
the lapse of any statutory periods.

(c) Executive shall not have the right to receive termination benefits
pursuant to Section 3 hereof upon Termination for Cause. The term "Termination
for Cause" shall mean termination because of Executive's personal dishonesty,
incompetence, willful misconduct, any breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful violation
of any law, rule, or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order, or material breach of any provision
of this Agreement. Notwithstanding the foregoing, Executive shall not be deemed
to have been Terminated for Cause unless and until there shall have been
delivered to him a Notice of Termination which shall include a copy of a
resolution duly adopted by the affirmative vote of not less than a majority of
the Board of Directors of the Association at a meeting of the Board called and
held for that purpose (after reasonable notice to Executive and an opportunity
for him, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the Board, Executive's conduct justified a finding of
Termination for Cause and specifying the particulars thereof in detail.
Executive shall not have the right to receive compensation or other benefits for

<PAGE> 3

any period after the Date of Termination for Cause. During the period beginning
on the date of the Notice of Termination for Cause pursuant to Section 4 hereof
through the Date of Termination for Cause, stock options and related limited
rights granted to Executive under any stock option plan shall not be exercisable
nor shall any unvested awards granted to Executive under any stock benefit plan
of the Association, the Company or any subsidiary or affiliate thereof, vest. At
the Date of Termination for Cause, such stock options and related limited rights
and any such unvested awards shall become null and void and shall not be
exercisable by or delivered to Executive at any time subsequent to such
Termination for Cause.

3. TERMINATION BENEFITS.

(a) Upon the occurrence of a Change in Control, followed at any time
during the term of this Agreement by termination of the Executive's employment
due to: (1) Executive's dismissal or (2) Executive's voluntary termination
pursuant to Section 2(a), unless such termination is due to Termination for
Cause, the Association and the Holding Company shall pay Executive, or in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate,
as the case may be, a sum equal to ________ (_____) times Executive's average
annual compensation for the five most recent taxable years that Executive has
been employed by the Association or such lesser number of years in the event
that Executive shall have been employed by the Association for less than five
years. Such average annual compensation shall include Base Salary, commissions,
bonuses, contributions on Executive's behalf to any pension and/or profit
sharing plan, severance payments, retirement payments, directors or committee
fees, fringe benefits paid or to be paid to the Executive in any such year and
payment of any expense items without accountability or business purpose or that
do not meet the Internal Revenue Service requirements for deductibility by the
Association; provided however, that any payment under this provision and
subsection 3(b) below shall not exceed three (3) times the Executive's average
annual compensation. At the election of Executive, which election is to be made
prior to a Change in Control, such payment shall be made in a lump sum. In the
event that no election is made, payment to Executive will be made on a monthly
basis in approximately equal installments during the remaining term of this
Agreement.

(b) Upon the occurrence of a Change in Control of the Association or the
Holding Company followed at any time during the term of this Agreement by
Executive's voluntary or involuntary termination of employment, other than for
Termination for Cause, the Association shall cause to be continued life, medical
and disability coverage substantially identical to the coverage maintained by
the Association or Holding Company for Executive prior to his severance, except
to the extent such coverage may be changed in its application to all Association
or Holding Company employees on a nondiscriminatory basis. Such coverage and
payments shall cease upon the expiration of __________ (__) full calendar months
from the Date of Termination.

(c) Notwithstanding the preceding paragraphs of this Section 3, in no
event shall the aggregate payments or benefits to be made or afforded to
Executive under said paragraphs (the "Termination Benefits") constitute an
"excess parachute payment" under Section 280G of the

<PAGE> 4

Code or any successor thereto, and in order to avoid such a result Termination
Benefits will be reduced, if necessary, to an amount (the "Non-Triggering
Amount"), the value of which is one dollar ($1.00) less than an amount equal to
three (3) times Executive's "base amount," as determined in accordance with said
Section 280G. The allocation of the reduction required hereby among the
Termination Benefits provided by the preceding paragraphs of this Section 3
shall be determined by Executive.

4. NOTICE OF TERMINATION.

(a) Any purported termination by the Association or by Executive in
connection with a Change in Control shall be communicated by Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated.

(b) "Date of Termination" shall mean the date specified in the Notice of
Termination (which, in the instance of Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given).

(c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (the time for
appeal therefrom having expired and no appeal having been perfected) and
provided further that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute in connection with a Change in
Control, in the event the Executive is terminated for reasons other than
Termination for Cause, the Association will continue to pay Executive his full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to his annual salary) and continue him as a
participant in all compensation, benefit and insurance plans in which he was
participating when the notice of dispute was given, until the earlier of: (1)
the resolution of the dispute in accordance with this Agreement or (2) the
expiration of the remaining term of this Agreement as determined as of the Date
of Termination.

5. SOURCE OF PAYMENTS.

It is intended by the parties hereto that all payments provided in this
Agreement shall be paid in cash or check from the general funds of the
Association. Further, the Holding Company guarantees such payment and provision
of all amounts and benefits due hereunder to Executive and, if such amounts and
benefits due from the Association are not timely paid or provided by the
Association, such amounts and benefits shall be paid or provided by the Holding
Company.

<PAGE> 5

6. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS.

This Agreement contains the entire understanding between the parties
hereto and supersedes any prior agreement between the Association and Executive,
except that this Agreement shall not affect or operate to reduce any benefit or
compensation inuring to Executive of a kind elsewhere provided. No provision of
this Agreement shall be interpreted to mean that Executive is subject to
receiving fewer benefits than those available to him without reference to this
Agreement.

Nothing in this Agreement shall confer upon Executive the right to
continue in the employ of Association or shall impose on the Association any
obligation to employ or retain Executive in its employ for any period.

7. NO ATTACHMENT.

(b) This Agreement shall be binding upon, and inure to the benefit of,
Executive, the Association and their respective successors, heirs and assigns.

8. MODIFICATION AND WAIVER.

(a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.

9. REQUIRED REGULATORY PROVISIONS.

(a) The board of directors may terminate Executive's employment at any
time, but any termination by the board of directors, other than Termination for
Cause, shall not prejudice Executive's right to compensation or other benefits
under this Agreement. Executive shall not have the right to receive compensation
or other benefits for any period after Termination for Cause as defined in
Section 2(c) hereinabove.

<PAGE> 6

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

(c) If Executive is removed and/or permanently prohibited from
participating in the conduct of the Association's affairs by an order issued
under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
Section 1818(c)(4) or (g)(1)), all obligations of the Association under this
contract shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.

(d) If the Association is in default as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act, all obligations of the Association under this
contract shall terminate as of the date of default, but this paragraph shall not
affect any vested rights of the contracting parties.

(e) All obligations under this contract shall be terminated, except to the
extent determined that continuation of the contract is necessary for the
continued operation of the institution: (i) by the Director of the Office of
Thrift Supervision (or her designee) at the time the Federal Deposit Insurance
Corporation enters into an agreement to provide assistance to or on behalf of
the Association under the authority contained in Section 13(c) of the Federal
Deposit Insurance Act; or (ii) by the Director of the Office of Thrift
Supervision (or her designee) at the time the Director (or her designee)
approves a supervisory merger to resolve problems related to operation of the
Association or when the Association is determined by the Director to be in an
unsafe or unsound condition. Any rights of the parties that have already vested,
however, shall not be affected by such action.

(f) Any payments made to Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
Section 1828(k) and any rules and regulations promulgated thereunder.

10. REINSTATEMENT OF BENEFITS UNDER SECTION 9(b).

In the event Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Association's affairs by a notice described
in Section 9(b) hereof (the "Notice") during the term of this Agreement and a
Change in Control, as defined herein, occurs, the Association will assume its
obligation to pay and Executive will be entitled to receive all of the
termination benefits provided for under Section 3 of this Agreement upon the
Association's receipt of a dismissal of charges in the Notice.

<PAGE> 7

11. SEVERABILITY.

12. HEADINGS FOR REFERENCE ONLY.

The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement. In addition, references to the
masculine shall apply equally to the feminine.

13. GOVERNING LAW.

The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Pennsylvania but only to
the extent not preempted by Federal law.

14. ARBITRATION.

Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by Executive within fifty
(50) miles from the location of the Association's main office, in accordance
with the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having jurisdiction;
provided, however, that Executive shall be entitled to seek specific performance
of his right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement, other
than in the case of a Termination for Cause.

15. PAYMENT OF COSTS AND LEGAL FEES.

All reasonable costs and legal fees paid or incurred by Executive pursuant
to any dispute or question of interpretation relating to this Agreement shall be
paid or reimbursed by the Association (which payments are guaranteed by the
Holding Company pursuant to Section 5 hereof) if Executive is successful on the
merits pursuant to a legal judgment, arbitration or settlement.

16. INDEMNIFICATION.

(a) The Association shall provide Executive (including his heirs,
executors and administrators) with coverage under a standard directors' and
officers' liability insurance policy at its expense, and shall indemnify
Executive (and his heirs, executors and administrators) to the fullest extent
permitted under Pennsylvania law against all expenses and liabilities

<PAGE> 8

reasonably incurred by him in connection with or arising out of any action, suit
or proceeding in which he may be involved by reason of his having been a
director or officer of the Association (whether or not he continues to be a
director or officer at the time of incurring such expenses or liabilities), such
expenses and liabilities to include, but not be limited to, judgments, court
costs and attorneys' fees and the cost of reasonable settlements.

17. SUCCESSOR TO THE ASSOCIATION

The Association shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Association, expressly and
unconditionally to assume and agree to perform the Association's obligations
under this Agreement, in the same manner and to the same extent that the
Association would be required to perform if no such succession or assignment had
taken place.

<PAGE> 9

SIGNATURES

IN WITNESS WHEREOF, Security Savings Association of Hazleton and
____________________ have caused this Agreement to be executed by their duly
authorized officers, and Executive has signed this Agreement, on the _____ day
of __________, 199___.

ATTEST: SECURITY SAVINGS ASSOCIATION OF
HAZLETON

By:
- ------------------------------ ------------------------------------
Secretary President and Chief Executive Officer
For the Entire Board of Directors

SEAL

ATTEST: SECURITY OF PENNSYLVANIA FINANCIAL
CORP.
(Guarantor)

By:
- ------------------------------ ------------------------------------
Secretary President and Chief Executive Officer
For the Entire Board of Directors

SEAL

WITNESS:

- ------------------------------ ------------------------------------
Executive

<PAGE> 1
EXHIBIT 10.6

FORM OF
SECURITY SAVINGS ASSOCIATION OF HAZLETON
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE> 2
FORM OF
SECURITY SAVINGS ASSOCIATION OF HAZLETON
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

TABLE OF CONTENTS

Article I - Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . .

Article II - Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . .

Article III - Eligibility and Participation . . . . . . . . . . . . . . . . . .

Article IV - Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Article V - Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Article VI - Supplemental Benefit Payments . . . . . . . . . . . . . . . . . .

Article VII - Claims Procedures . . . . . . . . . . . . . . . . . . . . . . . .

Article VIII - Amendment and Termination . . . . . . . . . . . . . . . . . . .

Article IX - General Provisions . . . . . . . . . . . . . . . . . . . . . . . .

Article X - Required Regulatory Provisions . . . . . . . . . . . . . . . . . .

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<PAGE> 3
ARTICLE I
INTRODUCTION

SECTION 1.01 PURPOSE, DESIGN AND INTENT.

(a) The purpose of the Security Savings Association of Hazleton
Supplemental Executive Retirement Plan (the "Plan") is to assist
Security Savings Association of Hazleton (the "Association") and its
affiliates in retaining the services of key employees until their
retirement, to induce such employees to use their best efforts to
enhance the business of the Association and its affiliates, and to
provide certain supplemental retirement benefits to such employees.

(b) The Plan, in relevant part, is intended to constitute an unfunded
"excess benefit plan" as defined in Section 3(36) of the Employee
Retirement Income Security Act of 1974, as amended. The Plan is
specifically designed to provide certain key employees with retirement
benefits that would have been payable under the various tax-qualified
retirement plans sponsored by the Association but for the limitations
placed on the benefits and contribution under such plans by various
provisions of the Internal Revenue Code of 1986, as amended.

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<PAGE> 4
ARTICLE II
DEFINITIONS

SECTION 2.01 DEFINITIONS. In this Plan, whenever the context so
indicates, the singular or the plural number and the masculine or feminine
gender shall be deemed to include the other, the terms "he," "his," and "him,"
shall refer to a Participant or Beneficiary, as the case may be, and, except as
otherwise provided, or unless the context otherwise requires, the capitalized
terms shall have the following meanings:

(a) "AFFILIATE" means any "parent corporation" or any "subsidiary corporation"
of the Association, as such terms are defined in Sections 424(e) and 424(f),
respectively, of the Code.

(b) "APPLICABLE LIMITATIONS" means one of the following:

(i) the maximum limitation on annual benefits payable by a
qualified defined benefit plan under Section 415(b) of the
Code;

(ii) the maximum limitations on annual additions to a qualified
defined contribution plan under Section 415(c) of the Code;

(iii) the maximum limitation on the aggregate projected annual
benefits payable by qualified defined benefit plans and the
annual additions to qualified defined contribution plans under
Section 415(e) of the Code; and

(iv) the maximum limitation on the annual amount of compensation
that may, under Section 401(a)(17) of the Code, be taken into
account in determining contributions to and benefits under
qualified plans.

(d) "BOARD OF DIRECTORS" means the Board of Directors of the Association.

(e) "CHANGE IN CONTROL" means with respect to the Association or the Company,
an event of a nature that: (i) would be required to be reported in response to
Item 1 of the current report on Form 8-K, as in effect on the date hereof,
pursuant to Section 13 or 15(d) of the Exchange Act; or (ii) results in a
"change in control" of the Association or the Company within the meaning of the
Home Owners' Loan Act of 1933, as amended, the Federal Deposit Insurance Act or
the Rules and Regulations promulgated by the Office of Thrift Supervision
("OTS") (or its predecessor agency), as in effect on the date hereof (provided,
that in applying the definition of "change in control" as set forth under the
rules and regulations of the OTS, the Committee shall substitute its judgment
for that of the OTS); or (iii) without limitation such a Change in Control
shall be deemed to have occurred at such time as (A) any "person" (as the term
is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or

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<PAGE> 5
indirectly, of securities of the Association or the Company representing 20% or
more of the Association's or the Company's outstanding securities except for
any securities of the Association purchased by the Company in connection with
the conversion of the Association to the stock form and any securities
purchased by any tax-qualified employee benefit plan of the Association; or (B)
individuals who constitute the Board of Directors of either the Association or
the Company on the date hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was approved by a vote of
at least three-quarters of the directors comprising the Incumbent Board, or
whose nomination, in the case of the Company, for election by the Company's
stockholders was approved by the same Nominating Committee serving under an
Incumbent Board, shall be, for purposes of this clause (B), considered as
though he were a member of the Incumbent Board; or (C) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Association or the Company or similar transaction occurs in which
the Association or Company is not the resulting entity; provided, however, that
such an event listed above will be deemed to have occurred or to have been
effectuated upon the receipt of all required regulatory approvals not including
the lapse of any statutory waiting periods.

(f) "CODE" means the Internal Revenue Code of 1986, as amended.

(g) "COMMITTEE" means the person(s) designated by the Board of Directors,
pursuant to Section 9.02 of the Plan, to administer the Plan.

(h) "COMMON STOCK" means the common stock of the Company.

(i) "COMPANY" means Security of Pennsylvania Financial Corp., and its
successors.

(j) "ELIGIBLE INDIVIDUAL" means any Employee of the Association or an Affiliate
who participates in the ESOP or the Pension Plan, as the case may be, and whom
the Board of Directors determines is one of a "select group of management or
highly compensated employees," as such phrase is used for purposes of Sections
101, 201, and 301 of ERISA.

(k) "EMPLOYEE" means any person employed by the Association or an Affiliate.

(l) "EMPLOYER" means the Association or Affiliate that employs the Employee.

(m) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

(n) "ESOP" means the Security Savings Association of Hazleton Employee Stock
Ownership Plan, as amended from time to time.

(o) "ESOP ACQUISITION LOAN" means a loan or other extension of credit incurred
by the trustee of the ESOP in connection with the purchase of Common Stock on
behalf of the ESOP.

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<PAGE> 6
(p) "ESOP VALUATION DATE" means any day as of which the investment experience
of the trust fund of the ESOP is determined and individuals' accounts under the
ESOP are adjusted accordingly.

(q) "EFFECTIVE DATE" means [JANUARY 1, 1998].

(r) "PARTICIPANT" means an Eligible Employee who is entitled to benefits under
the Plan.

(s) "PENSION PLAN" means the Financial Institutions Retirement Fund, as adopted
by Security Savings Association of Hazleton, as amended from time to time.

(t) "PLAN" means this Security Savings Association of Hazleton Supplemental
Executive Retirement Plan.

(u) "RETIREMENT" means termination of employment at any time following the
satisfaction of the requirements for early or normal retirement under either the
ESOP or the Pension Plan, as appropriate.

(v) "SUPPLEMENTAL ESOP ACCOUNT" means an account established by an Employer,
pursuant to Section 5.01 of the Plan, with respect to a Participant's
Supplemental ESOP Benefit.

(w) "SUPPLEMENTAL ESOP BENEFIT" means the benefit credited to a Participant
pursuant to Section 4.01 of the Plan.

(x) "SUPPLEMENTAL PENSION ACCOUNT" means an account established by an Employer,
pursuant to Section 5.03 of the Plan, with respect to a Participant's
Supplemental Pension Benefit.

(y) "SUPPLEMENTAL PENSION BENEFIT" means the benefit earned by a Participant
pursuant to Section 4.03 of the Plan.

(z) "SUPPLEMENTAL STOCK OWNERSHIP ACCOUNT" means an account established by an
Employer, pursuant to Section 5.02 of the Plan, with respect to a Participant's
Supplemental Stock Ownership Benefit.

(aa) "SUPPLEMENTAL STOCK OWNERSHIP BENEFIT" means the benefit credited to a
Participant pursuant to Section 4.02 of the Plan.

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<PAGE> 7
ARTICLE III
ELIGIBILITY AND PARTICIPATION

SECTION 3.01 ELIGIBILITY AND PARTICIPATION.

(a) Each Eligible Employee may participate in the Plan. An Eligible
Employee shall become a Participant in the Plan upon designation as
such by the Board of Directors. An Eligible Employee whom the Board
of Directors designates as a Participant in the Plan shall commence
participation as of the date established by the Board of Directors.
The Board of Directors shall establish an Eligible Employee's date of
participation at the same time it designates the Eligible Employee as
a Participant in the Plan.

(b) The Board of Directors may, at any time, designate an Eligible
Employee as a Participant for any or all supplemental benefits
provided for under Article IV of the Plan.

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<PAGE> 8
ARTICLE IV
BENEFITS

SECTION 4.01 SUPPLEMENTAL ESOP BENEFIT.

As of the last day of each plan year of the ESOP, the Employer shall credit the
Participant's Supplemental ESOP Account with a Supplemental ESOP Benefit equal
to the excess of (a) over (b), where:

(a) Equals the annual contributions made by the Employer and/or the number
of shares of Common Stock released for allocation in connection with
the repayment of an ESOP Acquisition Loan that would otherwise be
allocated to the accounts of the Participant under the ESOP for the
applicable plan year if the provisions of the ESOP were administered
without regard to and of the Applicable Limitations; and

(b) Equals the annual contributions made by the Employer and for the
number of shares of common stock released for allocation in connection
with the repayment of an ESOP Acquisition Loan that are actually
allocated to the accounts of the Participant under the provisions of
the ESOP for that particular plan year after giving effect to any
reduction of such allocation required by the limitations imposed by
any of the Applicable Limitations.

SECTION 4.02 SUPPLEMENTAL STOCK OWNERSHIP BENEFIT.

(a) Upon a Participant's Retirement from the Employer, the Employer shall
credit to the Participant's Supplemental Stock Ownership Account a
Supplemental Stock Ownership Benefit equal to (i) less (ii), the
result of which is multiplied by (iii), where:

(i) Equals the total number of shares of Common Stock acquired
with the proceeds of all ESOP Acquisition Loans (together with
any dividends, cash proceeds, or other medium related to such
ESOP Acquisition Loans) that would have been allocated or
credited for the benefit of the Participant under the ESOP
and/or this Plan, as the case may be, had the Participant
continued in the employ of the Employer through the first ESOP
Valuation Date following the last scheduled payment of
principal and interest on all ESOP Acquisition Loans
outstanding at the time of the Participant's Retirement; and

(ii) Equals the total number of shares of Common Stock acquired
with the proceeds of all ESOP Acquisition Loans (together with
any dividends, cash proceeds, or other medium related to such
ESOP acquisition Loans) and allocated for the benefit of the
Participant under the ESOP as of the first ESOP Valuation Date
following the Participant's Retirement; and

(iii) Equals the higher of the closing price of the Common Stock as
of:

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<PAGE> 9
(A) The first ESOP Valuation Date following the
Participant's Retirement, or

(B) The last day of the Participant's employment with the
Employer.

(b) For purposes of clause

(i) of subsection (a) of this Section 4.02, the total number of
shares of Common Stock shall be determined by multiplying the
sum of (i) and (ii) by (iii), where: (i) equals the average of
the total shares of Common Stock acquired with the proceeds of
an ESOP Acquisition Loan and allocated for the benefit of the
Participant under the ESOP as of three most recent ESOP
Valuation Dates preceding the Participant's Retirement (or
lesser number if the Participant has not participated in the
ESOP for three full years),

(ii) equals the average number of shares of Common Stock credited
to the Participant's Supplemental ESOP Account for the three
most recent plan years of the ESOP (such that the three recent
plan years coincide with the three most recent ESOP Valuation
Dates referred to in (i) above); and

(iii) equals the total number of scheduled annual payments remaining
on the ESOP Acquisition Loans as of the Participant's
Retirement.

(i) A Participant's Retirement shall be deemed to have occurred as
of the effective date of the Change in Control, as determined
by the Board of Directors, regardless of whether the
Participant continues in the employ of the Employer following
the Change in Control; and

(ii) The determination of fair market value of the Common Stock
shall be made as the effective date of the Change in Control.

SECTION 4.03 SUPPLEMENTAL PENSION BENEFIT.

A Participant or, in the event of his death, his beneficiary, whose retirement
or survivor benefits under the Pension Plan are limited by one or more of the
Applicable Limitations shall be entitled to a supplemental retirement benefit
or survivor benefit (Supplemental Pension Benefit) under this Plan in an amount
equal to the excess of:

(i) the benefit to which he would be entitled under the Pension
Plan in the absence of the Applicable Limitations, computed as
of the day the Participant separates from service with the
Employer on the basis of the benefit form elected under the
Pension Plan; over

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<PAGE> 10
(ii) the actual benefit to which he is entitled under the Pension
Plan, computed as of the day the Participant separates from
service with the Employer on the basis of the benefit form
elected under the Pension Plan;

provided, however, that, if the Plan is terminated with respect to a
Participant prior to his separation from service with the Employer, such
Supplemental Pension Benefit shall not exceed the Supplemental Pension Benefit
that would have been payable under this Section 4.03, on the basis of the
benefit form elected under the Pension Plan, if his separation from service had
occurred as of the date of the termination of the Plan.

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<PAGE> 11
ARTICLE V
ACCOUNTS

SECTION 5.01 SUPPLEMENTAL ESOP BENEFIT ACCOUNT.

For each Participant who is credited with a benefit pursuant to Section 4.01 of
the Plan, the Employer shall establish, as a memorandum account on its books, a
Supplemental ESOP Account. Each year, the Committee shall credit to the
Participant's Supplemental ESOP Account the amount of benefits determined under
Section 4.01 of the Plan for that year. The Committee shall credit the account
with an amount equal to the appropriate number of shares of Common Stock or
other medium of contribution that would have otherwise been made to the
Participant's accounts under the ESOP but for the limitations imposed by the
Code. Shares of Common Stock shall be valued under this Plan in the same
manner as under the ESOP. Cash contributions credited to a Participant's
Supplemental ESOP Account shall be credited annually with interest at a rate
equal to the combined weighted return provided to the Participant's non-stock
accounts under the ESOP.

SECTION 5.02 SUPPLEMENTAL STOCK OWNERSHIP ACCOUNT.

The Employer shall establish, as a memorandum account on its books, a
Supplemental Stock Ownership Account. Upon a Participant's Retirement or in
the event of a Change in Control, the Committee shall credit to the
Participant's Supplemental Stock Ownership Account the amount of benefits
determined under Section 4.02 of the Plan. The Committee shall credit the
account with an amount equal to the appropriate number of shares of Common
Stock or other medium of contribution that would have otherwise been made to
the Participant's accounts under the ESOP but for the Participant's Retirement.
Shares of Common Stock shall be valued under this Plan in the same manner as
under the ESOP. Cash contributions credited to a Participant's Supplemental
ESOP Account shall be credited annually with interest at a rate equal to the
combined weighted return provided to the Participant's non-stock accounts under
the ESOP.

SECTION 5.03 SUPPLEMENTAL PENSION ACCOUNT.

RESERVED

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<PAGE> 12
ARTICLE VI
SUPPLEMENTAL BENEFIT PAYMENTS

SECTION 6.01 PAYMENT OF SUPPLEMENTAL ESOP BENEFIT.

(a) A Participant's Supplemental ESOP Benefit shall be paid to the
Participant or in the event of the Participant's death, to his
beneficiary in the same form, time and medium (i.e., cash and/or
shares of Common Stock) as his benefits are paid under the ESOP.

(b) A Participant shall have a non-forfeitable right to the Supplemental
ESOP Benefit credited to him under this Plan in the same percentage as
he has to benefits allocated to him under the ESOP at the time the
benefits become distributable to him under the ESOP.

SECTION 6.02 PAYMENT OF SUPPLEMENTAL STOCK OWNERSHIP BENEFIT.

(a) A Participant's Supplemental Stock Ownership Benefit shall be paid to
the Participant or in the event of the Participant's death, to his
beneficiary in the same form, time and medium (i.e., cash and/or
shares of Common Stock) as his benefits are paid under the ESOP.

(b) A Participant shall always have a fully non-forfeitable right to the
Supplemental Stock Ownership Benefit credited to him under this Plan.

SECTION 6.03 PAYMENT OF SUPPLEMENTAL PENSION BENEFIT.

(a) A Participant's Supplemental Pension Benefit shall be paid to the
Participant or in the event of the Participant's death, to his
beneficiary in the same form, and at the same time as his benefits are
paid under the Pension Plan.

(b) A Participant shall have a non-forfeitable right to his Supplemental
Pension Benefit under this Plan in the same percentage as he has to
his accrued benefits under the Pension Plan at the time the benefits
become distributable to him under the Pension Plan.

SECTION 6.04 ALTERNATIVE PAYMENT OF BENEFITS

Notwithstanding the other provisions of this Article VI, a Participant may,
with prior written consent of the Committee and upon such terms and conditions
as the Committee may impose, request that the Supplemental ESOP Benefit and/or
the Supplemental Stock Ownership Benefit and/or the Supplemental Pension
Benefit to which he is entitled, and the survivor benefit to which his
beneficiary under the Pension Plan may be entitled under Section 4.03 be paid
commencing at a different time, over a different period, in a different form,
or to different persons, than the benefit to which he or his beneficiary may be
entitled under the ESOP or the Pension Plan; provided, however, that in the
event of any difference with respect to his Supplemental Pension Benefit, the
benefit actually paid under this Section 6.04 shall be the actuarial equivalent
(as determined based

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<PAGE> 13
on applicable tables, factors, and assumption set forth in the Pension Plan) of
the benefit that would be paid in accordance with the provisions of Section
6.03 of the Plan.

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<PAGE> 14
ARTICLE VII
CLAIMS PROCEDURES

SECTION 7.01 CLAIMS REVIEWER.

For purposes of handling claims with respect to this Plan, the "Claims
Reviewer" shall be the Committee, unless the Committee designates another
person or group of persons as Claims Reviewer.

SECTION 7.02 CLAIMS PROCEDURE.

(a) An initial claim for benefits under the Plan must be made by the
Participant or his or her beneficiary or beneficiaries in accordance
with the terms of this Section 7.02.

(b) Not later than ninety (90) days after receipt of such a claim, the
Claims Reviewer will render a written decision on the claim to the
claimant, unless special circumstances require the extension of such
90-day period. If such extension is necessary, the Claims Reviewer
shall provide the Participant or the Participant's beneficiary or
beneficiaries with written notification of such extension before the
expiration of the initial 90-day period. Such notice shall specify
the reason or reasons for the extension and the date by which a final
decision can be expected. In no event shall such extension exceed a
period of ninety (90) days from the end of the initial 90-day period.

(c) In the event the Claims Reviewer denies the claim of a Participant or
any beneficiary in whole or in part, the Claims Reviewer's written
notification shall specify, in a manner calculated to be understood by
the claimant, the reason for the denial; a reference to the Plan or
other document or form that is the basis for the denial; a description
of any additional material or information necessary for the claimant
to perfect the claim; an explanation as to why such information or
material is necessary; and an explanation of the applicable claims
procedure.

(d) Should the claim be denied in whole or in part and should the claimant
be dissatisfied with the Claims Reviewer's disposition of the
claimant's claim, the claimant may have a full and fair review of the
claim by the Committee upon written request submitted by the claimant
or the claimant's duly authorized representative and received by the
Committee within sixty (60) days after the claimant receives written
notification that the claimant's claim has been denied. In connection
with such review, the claimant or the claimant's duly authorized
representative shall be entitled to review pertinent documents and
submit the claimant's views as to the issues, in writing. The
Committee shall act to deny or accept the claim within sixty (60) days
after receipt of the claimant's written request for review unless
special circumstances require the extension of such 60-day period. If
such extension is necessary, the Committee shall provide the claimant
with written notification of such extension before the expiration of
such initial 60-day period. In all events, the Committee shall act to
deny or accept the claim within 120 days of the receipt of the
claimant's written request for review. The action of the

xii
<PAGE> 15
Committee shall be in the form of a written notice to the claimant
and its contents shall include all of the requirements for action on
the original claim.

(e) In no event may a claimant commence legal action for benefits the
claimant believes are due the claimant until the claimant has
exhausted all of the remedies and procedures afforded the claimant by
this Article VII.

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<PAGE> 16
ARTICLE VIII
AMENDMENT AND TERMINATION

SECTION 8.01 AMENDMENT OF THE PLAN.

The Association may from time to time and at any time amend the Plan; provided,
however, that such amendment may not adversely affect the rights of any
Participant or beneficiary with respect to any benefit under the Plan to which
the Participant or beneficiary may have previously become entitled prior to the
effective date of such amendment without the consent of the Participant or
beneficiary. The Committee shall be authorized to make minor or administrative
changes to the Plan, as well as amendments required by applicable federal or
state law (or authorized or made desirable by such statutes); provided,
however, that such amendments must subsequently be ratified by the Board of
Directors.

SECTION 8.02 TERMINATION OF THE PLAN.

The Association may at any time terminate the Plan; provided, however, that such
termination may not adversely affect the rights of any Participant or
beneficiary with respect to any benefit under the Plan to which the Participant
or beneficiary may have previously become entitled prior to the effective date
of such termination without the consent of the Participant or beneficiary. Any
amounts credited to the supplemental accounts of any Participant shall remain
subject to the provisions of the Plan and no distribution of benefits shall be
accelerated because of termination of the Plan.

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<PAGE> 17
ARTICLE IX
GENERAL PROVISIONS

SECTION 9.01 UNFUNDED, UNSECURED PROMISE TO MAKE PAYMENTS IN THE FUTURE.

The right of a Participant or any beneficiary to receive a distribution under
this Plan shall be an unsecured claim against the general assets of the
Association or its Affiliates and neither a Participant nor his designated
beneficiary or beneficiaries shall have any rights in or against any amount
credited to any account under this Plan or any other assets of the Association
or an Affiliate. The Plan at all times shall be considered entirely unfunded
both for tax purposes and for purposes of Title I of ERISA. Any funds invested
hereunder shall continue for all purposes to be part of the general assets of
the Association or an Affiliate and available to its general creditors in the
event of bankruptcy or insolvency. Accounts under this Plan and any benefits
which may be payable pursuant to this Plan are not subject in any manner to
anticipation, sale, alienation, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors of a Participant or a Participant's
beneficiary. The Plan constitutes a mere promise by the Association or
Affiliate to make benefit payments in the future. No interest or right to
receive a benefit may be taken, either voluntarily or involuntarily, for the
satisfaction of the debts of, or other obligations or claims against, such
Participant or beneficiary, including claims for alimony, support, separate
maintenance and claims in bankruptcy proceedings.

SECTION 9.02 COMMITTEE AS PLAN ADMINISTRATOR.

(a) The Plan shall be administered by the Committee designated by the
Board of Directors.

(b) The Committee shall have the authority, duty and power to interpret
and construe the provisions of the Plan as it deems appropriate. The
Committee shall have the duty and responsibility of maintaining
records, making the requisite calculations and disbursing the payments
hereunder. In addition, the Committee shall have the authority and
power to delegate any of its administrative duties to employees of the
Association or Affiliate, as they may deem appropriate. The Committee
shall be entitled to rely on all tables, valuations, certificates,
opinions, data and reports furnished by any actuary, accountant,
controller, counsel or other person employed or retained by the
Association with respect to the Plan. The interpretations,
determination, regulations and calculations of the Committee shall be
final and binding on all persons and parties concerned.

SECTION 9.03 EXPENSES.

Expenses of administration of the Plan shall be paid by the Association or an
Affiliate.

SECTION 9.04 STATEMENTS.

The Committee shall furnish individual annual statements of accrued benefits to
each Participant, or current beneficiary, in such form as determined by the
Committee or as required by law.

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<PAGE> 18
SECTION 9.05 RIGHTS OF PARTICIPANTS AND BENEFICIARIES.

(a) The sole rights of a Participant or beneficiary under this Plan shall
be to have this Plan administered according to its provisions, to
receive whatever benefits he or she may be entitled to hereunder.

(b) Nothing in the Plan shall be interpreted as a guaranty that any funds
in any trust which may be established in connection with the Plan or
assets of the Association or an Affiliate will be sufficient to pay any
benefit hereunder.

(c) The adoption and maintenance of this Plan shall not be construed as
creating any contract of employment or service between the Association
or an Affiliate and any Participant or other individual. The Plan
shall not affect the right of the Association or an Affiliate to deal
with any Participants in employment or service respects, including
their hiring, discharge, compensation, and conditions of employment or
other service.

SECTION 9.06 INCOMPETENT INDIVIDUALS.

The Committee may from time to time establish rules and procedures which it
determines to be necessary for the proper administration of the Plan and the
benefits payable to a Participant or beneficiary in the event that such
Participant or beneficiary is declared incompetent and a conservator or other
person legally charged with that Participant's or beneficiary's care is
appointed. Except as otherwise provided herein, when the Committee determines
that such Participant or beneficiary is unable to manage his or her financial
affairs, the Committee may pay such Participant's or beneficiary's benefits to
such conservator, person legally charged with such Participant's or
beneficiary's care, or institution then contributing toward or providing for
the care and maintenance of such Participant or beneficiary. Any such payment
shall constitute a complete discharge of any liability of the Association or an
Affiliate and the Plan for such Participant or beneficiary.

SECTION 9.07 SALE, MERGER, OR CONSOLIDATION OF THE ASSOCIATION.

The Plan may be continued after a sale of assets of the Association, or a
merger or consolidation of the Association into or with another corporation or
entity only if and to the extent that the transferee, purchaser or successor
entity agrees to continue the Plan. Additionally, upon a merger, consolidation
or other change in control any amounts credited to Participant's deferral
accounts shall be placed in a grantor trust to the extent not already in such a
trust. In the event that the Plan is not continued by the transferee,
purchaser or successor entity, then the Plan shall be terminated subject to the
provisions of Section 7.2 of the Plan. Any legal fees incurred by a
Participant in determining benefits to which such Participant is entitled under
the Plan following a sale, merger, or consolidation of the Association or an
Affiliate of which the Participant is an Employee or, if applicable, a member
of the Board of Directors, shall be paid by the resulting or succeeding entity.

xvi
<PAGE> 19
SECTION 9.08 LOCATION OF PARTICIPANTS.

Each Participant shall keep the Association informed of his or her current
address and the current address of his or her designated beneficiary or
beneficiaries. The Bank shall not be obligated to search for any person.
If such person is not located within three (3) years after the date on which
payment of the Participant's benefits payable under this Plan may first be
made, payment may be made as though the Participant or his or her beneficiary
had died at the end of such three-year period.

SECTION 9.09 LIABILITY OF THE BANK AND ITS AFFILIATES.

Notwithstanding any provision herein to the contrary, neither the Association
nor any individual acting as an employee or agent of the Association shall be
liable to any Participant, former Participant, beneficiary, or any other person
for any claim, loss, liability or expense incurred in connection with the Plan,
unless attributable to fraud or willful misconduct on the part of the
Association or any such employee or agent of the Association.

SECTION 9.10 GOVERNING LAW.

All questions pertaining to the construction, validity and effect of the Plan
shall be determined in accordance with the laws of the United States and to the
extent not preempted by such laws, by the laws of Pennsylvania.

xvii
<PAGE> 20
ARTICLE X
REQUIRED REGULATORY PROVISIONS

SECTION 10.01 REQUIRED REGULATORY PROVISIONS.

(a) The Employer may terminate an Employee's employment at any
time, but any termination by the Employer, other than termination for cause,
shall not prejudice the Employee's right to compensation or other benefits
under this Plan. An Employee shall not have the right to receive compensation
or other benefits for any period after a termination for cause as otherwise
provided hereunder.

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

(c) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Association's affairs by an order issued
under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12
U.S.C. Section 1818(e)(4) or (g)(1), all obligations of the Association under
this Plan shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.

(d) If the Association is in default as defined in Section 3(x)(1)
of the Federal Deposit Insurance Act, 12 U.S.C. Section 1813(x)(1) all
obligations of the Association under this Plan shall terminate as of the date
of default, but this paragraph shall not affect any vested rights of the
Participants.

(e) All obligations of the Association under this Plan shall be
terminated, except to the extent determined that continuation of the contract
is necessary for the continued operation of the institution: (i) by the
Director of the OTS (or his designee), the FDIC or the Resolution Trust
Corporation, at the time the FDIC enters into an agreement to provide
assistance to or on behalf of the Association under the authority contained in
Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C. Section 1823(c);
or (ii) by the Director of the OTS (or his designee) at the time the Director
(or his designee) approves a supervisory merger to resolve problems related to
the operations of the Association or when the Association is determined by the
Director to be in an unsafe or unsound condition. Any rights of the parties
that have already vested, however, shall not be affected by such action.

(f) Any payments made to Participants pursuant to this Plan, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
Section 1828(k), 12 C.F.R. Part 359 and 12 C.F.R. Section 545.121 and any rules
and regulations promulgated thereunder.

xviii
<PAGE> 21
This Plan has been duly adopted this _______ day of ___________, 199____.

xix

<PAGE> 1
EXHIBIT 10.7

FORM OF
SECURITY SAVINGS ASSOCIATION OF HAZLETON
EMPLOYEE SEVERANCE COMPENSATION PLAN

PLAN PURPOSE

The purpose of the Security Savings Association of Hazleton Employee
Severance Compensation Plan (the "Plan") is to assure for Security Savings
Association of Hazleton (the "Association") the services of Employees of the
Association in the event of a Change in Control (capitalized terms are defined
in Section 2.1) of Security of Pennsylvania Financial Corp. (the "Holding
Company") or the Association. The benefits contemplated by the Plan recognize
the value to the Association of the services and contributions of the Employees
of the Association and the effect upon the Association resulting from the
uncertainties of continued employment, reduced employee benefits, management
changes and relocations that may arise in the event of a Change in Control of
the Association or the Holding Company. The Association's and the Holding
Company's Boards of Directors believe that it is in the best interests of the
Association and the Holding Company to provide Employees of the Association who
have been with the Association for a minimum of __________ (years/months) with
such benefits in order to defray the costs and changes in employment status that
could follow a Change in Control. The Boards of Directors believe that the Plan
will also aid the Association in attracting and retaining highly qualified
individuals who are essential to its success and the Plan's assurance of fair
treatment of the Association's Employees will reduce the distractions and other
adverse effects on Employees' performance in the event of a Change in Control.

ARTICLE I
ESTABLISHMENT OF PLAN

1.1 Establishment of Plan

As of the Effective Date, the Association hereby establishes an employee
severance compensation plan to be known as the "Security Savings Association
of Hazelton Employee Severance Compensation Plan."

1.2 Applicability of Plan

The benefits provided by this Plan shall be available to all Employees of
the Association, who, at or after the Effective Date, meet the eligibility
requirements of Article III, except for those executive officers who have
entered into, or who enter into in the future, and continue to be subject to an
employment or change in control agreement with the Employer.

1.3 Contractual Right to Benefits

This Plan establishes and vests in each Participant a contractual right to
the benefits to which each Participant is entitled hereunder, enforceable by the
Participant against the Employer.

<PAGE> 2

ARTICLE II
DEFINITIONS AND CONSTRUCTION

2.1 Definitions

Whenever used in the Plan, the following terms shall have the meanings set
forth below:

(a) "Annual Compensation" of a Participant means and includes all wages,
salary, bonus, and other cash compensation, if any, paid or accrued by an
Employer as consideration for the Participant's service during the 12 months
ended the date as of which Annual Compensation is to be determined, which is or
would be includable in the gross income of the Participant receiving the same
for federal income tax purposes.

(b) "Association" means Security Savings Association of Hazleton or any
successor of the Association as provided for in Article VII hereof.

(c) "Change in Control" shall mean an event of a nature that: (i) would be
required to be reported in response to Item 1(a) of the current report on Form
8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"); or (ii) results in a
Change in Control of the Association or the Holding Company within the meaning
of the Home Owners' Loan Act of 1933, as amended, the Federal Deposit Insurance
Act or the Rules and Regulations promulgated by the Office of Thrift Supervision
("OTS") (or its predecessor agency) as in effect on the date hereof (provided
that in applying the definition of change in control as set forth under the
rules and regulations of the OTS, the Board shall substitute its judgment for
that of the OTS); or (iii) without limitation such a Change in Control shall be
deemed to have occurred at such time as (A) any "person" (as the term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Association or the Holding Company representing
20% or more of the Association's or the Holding Company's outstanding securities
except for any securities of the Association purchased by the Holding Company in
connection with the conversion of the Association to the stock form and any
securities purchased by any tax qualified employee benefit plan of the
Association; or (B) individuals who constitute the Board of Directors on the
date hereof (the "Incumbent Board") cease for any reason to constitute at least
a majority thereof, provided that any person becoming a director subsequent to
the date hereof whose election was approved by a vote of at least three-quarters
of the directors comprising the Incumbent Board, or whose nomination for
election by the Holding Company's stockholders was approved by the same
Nominating Committee serving under an Incumbent Board, shall be, for purposes of
this clause (B), considered as though he were a member of the Incumbent Board;
or (C) a plan of reorganization, merger, consolidation, sale of all or
substantially all the assets of the Association or the Holding Company or
similar transaction occurs in which the Association or Holding Company is not
the resulting entity.

(d) "Disability" means the permanent and total inability by reason of
mental or physical infirmity, or both, of an employee to perform the work
customarily assigned to him.

<PAGE> 3

Additionally, a medical doctor selected or approved by the Board of Directors
must advise the Board that it is either not possible to determine if or when
such Disability will terminate or that it appears probable that such Disability
will be permanent during the remainder of said employees lifetime.

(e) "Effective Date" means the date the Plan is approved by the Board of
Directors of the Association, or such other date as the Board of Directors of
the Association shall designate in its resolution approving the Plan.

(f) "Employee" means any employee of the Association or any subsidiary of
the Association or any parent of the Association who has completed at least
_________ (months/years) of service with the Association; provided, however,
that any employee who is covered or hereinafter becomes covered by an employment
contract or change in control agreement with the Employer shall not be
considered to be an "Employee" for purposes of this Plan.

(g) "Expiration Date" means the date ten (10) years from the Effective
Date, unless the Plan is earlier terminated pursuant to Section 8.2 of the Plan
or unless the Plan is extended pursuant to Section 8.1 of the Plan.

(h) "Employer" means the Association or a subsidiary of the Association or
a parent of the Association which has adopted the Plan pursuant to Article VI
hereof.

(i) "Termination for Cause" shall include termination because of a
Participant's personal dishonesty, incompetence, willful misconduct, any breach
of fiduciary duty involving personal profit, intentional failure to perform
stated duties, willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or violation of any final cease-and
desist order. In determining incompetence, the acts or omissions shall be
measured against standards generally prevailing in the savings institutions
industry.

(j) "Leave of Absence" and "LOA" mean the taking of an authorized or
approved leave of absence under the provisions of (i) the federal Family and
Medical Leave Act ("FMLA"), (ii) any state law providing qualitatively similar
benefits as the FMLA, or (iii) a leave of absence authorized under the policies
of the Association. "Leave of Absence" and "LOA" are defined in this paragraph
for the exclusive purposes of this Plan.

(k) "Payment" means the payment of severance compensation as provided for
in Article IV hereof.

(l) "Participant" means an Employee who meets the eligibility requirements
of Article III.

(m) "Plan" means this Security Savings Association of Hazleton Employee
Severance Compensation Plan.

<PAGE> 4

(n) "_________ of Service" means a consecutive ________ period, beginning
with an Employee's date of hire in which an Employee is credited with at least
one hour of service in each of the _____ calendar (months/years) in such period.
The taking of a LOA shall not eliminate a period of time from the calculation of
__________ of Service if such period of time otherwise qualifies as such.
Further if a particular _________ period of time would not otherwise qualify
under the Plan as __________ of Service because one hour of service is not
credited during each (month/year) of such period due to the taking of a LOA,
then such period of time shall be deemed to be __________ of Service for all
other purposes of this Plan.

2.2 Applicable Law

The laws of the State of Pennsylvania shall be the controlling law in all
matters relating to the Plan to the extent not preempted by Federal law.

2.3 Severability

If a provision of this Plan shall be held illegal or invalid, the
illegality or invalidity shall not affect the remaining parts of the Plan and
the Plan shall be construed and enforced as if the illegal or invalid provision
had not been included.

ARTICLE III
ELIGIBILITY

3.1 Participation

The term Participant shall include all Employees of the Employer who have
completed __________ of Service with the Employer at the time of any termination
pursuant to Section 4.2 of the Plan. Notwithstanding the foregoing, persons who
have entered into and continue to be covered by an employment contract or change
in control agreement with the Employer shall not be entitled to participate in
this Plan.

3.2 Duration of Participation

A Participant shall cease to be a Participant in the Plan when the
Participant ceases to be an Employee of an Employer, unless such Participant is
entitled to a Payment as provided in the Plan. A Participant entitled to receipt
of a Payment shall remain a Participant in this Plan until the full amount of
such Payment has been paid to the Participant.

<PAGE> 5

ARTICLE IV
PAYMENTS

4.1 Right to Payment

A Participant shall be entitled to receive from his respective Employer a
Payment in the amount provided in Section 4.3 of the Plan if there has been a
Change in Control of the Association or the Holding Company and if, within one
(1) year thereafter, the Participant's employment with an Employer shall
terminate for any reason specified in Section 4.2 of the Plan, whether the
termination is voluntary or involuntary. A Participant shall not be entitled to
a Payment if termination of employment occurs by reason of death, voluntary
retirement, voluntary termination other than for reasons specified in Section
4.2 of the Plan, Disability, or as a result of Termination for Cause.

4.2 Reasons for Termination

Following a Change in Control, a Participant shall be entitled to a
Payment if employment by an Employer is terminated, voluntarily or
involuntarily, for any one or more of the following reasons:

(a) The Employer reduces the Participant's base salary or rate of
compensation as in effect immediately prior to the Change in Control.

(b) The Employer materially changes the Participant's function,
duties or responsibilities which would cause the Participant's position to be
one of lesser responsibility, importance or scope with the Employer than
immediately prior to the Change in Control.

(c) The Employer requires the Participant to change the location of
the Participant's job or office, so that such Participant will be based at a
location more than thirty (30) miles from the location of the Participant's job
or office immediately prior to the Change in Control, provided that such new
location is not closer to the Participant's home.

(d) The Employer materially reduces the benefits and perquisites
available to the Participant immediately prior to the Change in Control;
provided, however, that a material reduction in benefits and perquisites
generally provided to all Employees of the Employer on a nondiscriminatory basis
would not trigger a payment pursuant to this Plan.

(e) A successor to the Employer fails or refuses to assume the
Employer's obligations under this Plan, as required by Article VII.

(f) The Employer or any successor to the Employer breaches any other
provisions of this Plan.

(g) The Employer terminates the employment of a Participant at or
after a Change in Control other than for Termination for Cause.

<PAGE> 6

4.3 Amount of Payment

(a) Each Participant entitled to a Payment under this Plan shall
receive from the Association, a lump sum cash payment equal to __________ of his
Annual Compensation for each year of service up to a maximum of ___% of such
Annual Compensation.

(b) Notwithstanding the provisions of paragraph (a) above, if a
Payment to a Participant who is a "Disqualified Individual" shall be in an
amount which includes an "Excess Parachute Payment," the Payment hereunder to
that Participant shall be reduced to the maximum amount which does not include
an Excess Parachute Payment. The terms "Disqualified Individual" and "Excess
Parachute Payment" shall have the same meanings as under Section 280G of the
Internal Revenue Code of 1986, as amended, or any successor provision thereto.

The Participant shall not be required to mitigate damages on the amount of
a Payment by seeking other employment or otherwise, nor shall the amount of such
Payment be reduced by any compensation earned by the Participant as a result of
employment after termination of employment hereunder.

4.4 Time of Payment

The Payment to which a Participant is entitled shall be paid to the
Participant by the Employer or the successor to the Employer, in cash and in
full, not later than twenty (20) business days after the termination of the
Participant's employment. If any Participant should die after termination of the
employment but before all amounts have been paid, such unpaid amounts shall be
paid to the Participant's named beneficiary, if living, otherwise to the
personal representative on behalf of or for the benefit of the Participant's
estate.

ARTICLE V
OTHER RIGHTS AND BENEFITS NOT AFFECTED

5.1 Other Benefits

Neither the provisions of this Plan nor the Payment provided for hereunder
shall reduce any amounts otherwise payable, or in any way diminish the
Participant's rights as an Employee of an Employer, whether existing now or
hereafter, under any benefit, incentive, retirement, stock option, stock bonus,
stock ownership or any employment agreement or other plan or arrangement.

5.2 Employment Status

This Plan does not constitute a contract of employment or impose on the
Participant or the Participant's Employer any obligation to retain the
Participant as an Employee, to change the status of the Participant's
employment, or to change the Employer's policies regarding termination of
employment.

<PAGE> 7

ARTICLE VI
PARTICIPATING EMPLOYERS

6.1 Upon approval by the Board of Directors of the Association, this Plan
may be adopted by any "Subsidiary" or "Parent" of the Association. Upon such
adoption, the Subsidiary or Parent shall become an Employer hereunder and the
provisions of the Plan shall be fully applicable to the Employees of that
Subsidiary or Parent. The term "Subsidiary" means any corporation in which the
Association, directly or indirectly, holds a majority of the voting power of its
outstanding shares of capital stock. The term "Parent" means any corporation
which holds a majority of the voting power of the Association's outstanding
shares of capital stock.

ARTICLE VII
SUCCESSOR TO THE ASSOCIATION

7.1 The Employer shall require any successor or assignee, whether direct
or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Employer, expressly and
unconditionally to assume and agree to perform the Employer's obligations under
this Plan, in the same manner and to the same extent that the Employer would be
required to perform if no such succession or assignment had taken place.

ARTICLE VIII
DURATION, AMENDMENT AND TERMINATION

8.1 Duration

If a Change in Control has not occurred, this Plan shall expire as of the
Expiration Date, unless sooner terminated as provided in Section 8.2 of the
Plan, or unless extended for an additional period or periods by resolution
adopted by the Board of Directors of the Association.

Notwithstanding the foregoing, if a Change in Control occurs this Plan
shall continue in full force and effect, and shall not terminate or expire until
such date as all Participants who become entitled to a Payment hereunder shall
have received such Payments in full.

8.2 Amendment and Termination

The Plan may be terminated or amended in any respect by resolution adopted
by a majority of the Board of Directors of the Association, unless a Change in
Control has previously occurred. If a Change in Control occurs, the Plan no
longer shall be subject to amendment, change, substitution, deletion, revocation
or termination in any respect whatsoever.

<PAGE> 8

8.3 Form of Amendment

The form of any proper amendment or termination of the Plan shall be a
written instrument signed by a duly authorized officer or officers of the
Association, certifying that the amendment or termination has been approved by
the Board of Directors. A proper amendment of the Plan automatically shall
effect a corresponding amendment to each Participant's rights hereunder. A
proper termination of the Plan automatically shall effect a termination of all
Participants' rights and benefits hereunder.

8.4 No Attachment

(a) Except as required by law, no right to receive a Payment under
this Plan shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect such action shall be null, void,
and of no effect.

(b) This Plan shall be binding upon, and inure to the benefit of,
Employees and the Association and their respective successors and assigns.

ARTICLE IX
LEGAL FEES AND EXPENSES

9.1 All reasonable legal fees and other expenses paid or incurred by a
party hereto pursuant to any dispute or question of interpretation relating to
this Plan shall be paid or reimbursed by the prevailing party in any legal
judgment, arbitration or settlement.

ARTICLE X
REQUIRED PROVISIONS

10.1 The Employer may terminate an Employee's employment at any time, but
any termination by the Employer, other than Termination for Cause, shall not
prejudice the Employee's right to compensation or other benefits under this
Plan, except as otherwise provided for hereunder. Employee shall not have the
right to receive compensation or other benefits for any period after termination
which constitutes a Termination for Cause.

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

<PAGE> 9

10.3 If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Association's affairs by an order issued
under Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
Section 1818(e)(4) or (g)(1), all obligations of the Association under this
contract shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.

10.4 If the Association is in default as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act, 12 U.S.C. Section 1813(x)(1), all obligations of
the Association under this contract shall terminate as of the date of default,
but this paragraph shall not affect any vested rights of the contracting
parties.

10.5 All obligations of the Association under this Plan shall be
terminated, except to the extent determined that continuation of the plan is
necessary for the continued operation of the institution: (i) by the Director of
the OTS (or her designee), the FDIC or the Resolution Trust Corporation, at the
time the FDIC enters into an agreement to provide assistance to or on behalf of
the Association under the authority contained in Section 13(c) of the Federal
Deposit Insurance Act, 12 U.S.C. Section 1823(c); or (ii) by the Director of
the OTS (or her designee) at the time the Director (or her designee) approves a
supervisory merger to resolve problems related to the operations of the
Association or when the Association is determined by the Director to be in an
unsafe or unsound condition. Any rights of the Participants that have already
vested, however, shall not be affected by such action.

10.6 Any payments made to Participants pursuant to this Plan, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C. Section
1828(k), 12 C.F.R. Part 359 and 12 C.F.R. Section 545.121 and any rules and
regulations promulgated thereunder.

ARTICLE XI
ADMINISTRATIVE PROVISIONS

11.1 Plan Administrator. The administrator of the Plan shall be under the
supervision of the Board of Directors of the Association or a Committee
appointed by the Board of Directors of the Association (the "Board"). It shall
be a principal duty of the Board to see that the Plan is carried out in
accordance with its terms, for the exclusive benefit of persons entitled to
participate in the Plan without discrimination among them. The Board will have
full power to administer the Plan in all of its details subject, however, to the
requirements of ERISA if the Plan is subject to such requirements. For this
purpose, the Board's powers will include, but will not be limited to, the
following authority, in addition to all other powers provided by this Plan: (a)
to make and enforce such rules and regulations as it deems necessary or proper
for the efficient administration of the Plan; (b) to interpret the Plan, its
interpretation thereof in good faith to be final and conclusive on all persons
claiming benefits under the Plan; (c) to decide all questions concerning the
Plan and the eligibility of any person to participate in the Plan; (d) to
compute the amount of a Payment that will be payable to any Participant or other
person in accordance with the provisions of the Plan, and to determine the
person or persons to whom such benefits will be paid; (e) to authorize Payments;
(f) to appoint such agents, counsel, accountants, consultants and actuaries as
may be required to assist in administering the Plan; and (g) to

<PAGE> 10

allocate and delegate its responsibilities under the Plan and to designate other
persons to carry out any of its responsibilities under the Plan, any such
allocation, delegation or designation to be by written instrument and in
accordance with Section 405 of ERISA if applicable.

11.2 Named fiduciary. The Board will be a "named fiduciary" for purposes
of Section 402(a)(1) of ERISA with authority to control and manage the operation
and administration of the Plan, and will be responsible for complying with all,
if any, of the reporting and disclosure requirements of Part 1 of Subtitle B of
Title I of ERISA.

11.3 Claims and review procedures.

(a) Claims procedure. If any person believes he is being denied any rights
or benefits under the Plan, such person may file a claim in writing with the
Board. If any such claim is wholly or partially denied, the Board will notify
such person of its decision in writing. Such notification will be written in a
manner calculated to be understood by such person and will contain (i) specific
reasons for the denial, (ii) specific reference to pertinent Plan provisions,
(iii) a description of any additional material or information necessary for such
person to perfect such claim and an explanation of why such material or
information is necessary, and (iv) information as to the steps to be taken if
the person wishes to submit a request for review. Such notification will be
given within 90 days after the claim is received by the Board (or within 180
days, if special circumstances require an extension of time for processing the
claim, and if written notice of such extension and circumstances is given to
such person within the initial 90 day period). If such notification is not given
within such period, the claim will be considered denied as of the last day of
such period and such person may request a review of his claim.

(b) Review procedure. Within 60 days after the date on which a person
receives a written notice of a denied claim (or, if applicable, within 60 days
after the date on which such denial is considered to have occurred) such person
(or his duly authorized representative) may (i) file a written request with the
Board for a review of his denied claim and of pertinent documents and (ii)
submit written issues and comments to the Board. The Board will notify such
person of its decision in writing. Such notification will be written in a manner
calculated to be understood by such person and will contain specific reasons for
the decision as well as specific references to pertinent Plan provisions. The
decision on review will be made within 60 days after the request for review is
received by the Board (or within 120 days, if special circumstances require an
extension of time for processing the requests such as an election by the Board
to hold a hearing, and if written notice of such extension and circumstances is
given to such person within the initial 60 day period). If the decision on
review is not made within such period, the claim will be considered denied.

11.4 Nondiscriminatory exercise of authority. Whenever, in the
administration of the Plan, any discretionary action by the Board is required,
the Board shall exercise its authority in a nondiscriminatory manner so that all
persons similarly situated will receive substantially the same treatment.

<PAGE> 11

11.5 Indemnification of Board. The Association will indemnify and defend
to the fullest extent permitted by law any person serving on the Board or as a
member of a committee designated as Board (including any person who formerly
served as a Board member or as a member of such committee) against all
liabilities, damages, costs and expenses (including attorneys fees and amounts
paid in settlement of any claims approved by the Association) occasioned by any
act or omission to act in connection with the Plan, if such act or omission is
in good faith.

11.6 "Plan Year" means the period beginning on the Effective Date and
ending on December 31 and the 12 consecutive-month period ending each year
thereafter.

11.7 Benefits solely from general assets. The benefits provided hereunder
will be paid solely from the general assets of the Employer. Nothing herein will
be construed to require the Employer or the Board to maintain any fund or
segregate any amount for the benefit of any Participant, and no Participant or
other person shall have any claim against, right to, or security or other
interest in, any fund, account or asset of the Employer from which any payment
under the Plan may be made.

Having been adopted by its Board of Directors on _____________, 1998, and
ratified on __________, 199_, this Plan is executed by its duly authorized
officers this ___th day of ________, 199_.

Attest SECURITY SAVINGS ASSOCIATION OF
HAZLETON

By:
- ------------------------------ -------------------------------

- ----------------- -----------------
Secretary President and Chief Executive Officer

<PAGE> 1
EXHIBIT 23.1

[PARENTE - RANDOLPH - ORLANDO - CAREY & ASSOCIATES LOGO]

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
Security Savings Association of Hazleton:

We consent to the use of our report included herein and to the reference
to our firm under the headings "EXPERTS", "LEGAL AND TAX OPINIONS", "TAX
ASPECTS", "STATEMENTS OF INCOME", and "EFFECTS OF CONVERSION", in the
Prospectus, which is a part of the Registration Statement on Form SB-2 for
Security of Pennsylvania Financial Corp. and Form AC for Security Savings
Association of Hazleton.

/s/ PARENTE RANDOLPH ORLANDO CAREY & ASSOCIATES
-----------------------------------------------

Wilkes-Barre, Pennsylvania
September 10, 1998

<PAGE> 1
EXHIBIT 23.2

CONSENT

We hereby consent to the references to this firm and our opinions in: the
Registration Statement on Form SB-2 filed by Security of Pennsylvania Financial
Corp., Hazleton, Pennsylvania, and all amendments thereto; in the Form H-(e)1
for Security of Pennsylvania Financial Corp., and all amendments thereto; and in
the Application for Conversion on Form AC filed by Security Savings Association
of Hazleton (the "Association"), and all amendments thereto, relating to the
conversion of the Association from a Pennsylvania-chartered mutual savings
association to a Pennsylvania-chartered stock savings association, the
concurrent issuance of the Association's outstanding capital stock to Security
of Pennsylvania Financial Corp., a holding company formed for such purpose, and
the offering of Security of Pennsylvania Financial Corp.'s common stock.

MULDOON, MURPHY & FAUCETTE

/s/ MULDOON, MURPHY & FAUCETTE

Dated this 11th day of
September, 1998

<PAGE> 1
EXHIBIT 23.3

[MORRIS, NICHOLS, ARSHT & TUNNELL LETTERHEAD]

September 11, 1998

Muldoon, Murphy & Faucette
5101 Wisconsin Avenue, N.W.
Washington, DC 20016

Ladies and Gentlemen:

We hereby consent to the filing of our opinion to you concerning
certain matters of Delaware law in connection with the subscription and
community offering (the "Offering") by Security of Pennsylvania Financial Corp.,
a Delaware corporation (the "Company"), of shares of its common stock, par value
$.01 per share, in draft or final form, as an exhibit to (i) the Registration
Statement filed with the Securities and Exchange Commission by the Company in
connection with the Offering, and all amendments thereto, and (ii) the
Application for Conversion filed with the Office of Thrift Supervision in
connection with the conversion of Security Savings Association of Hazelton, a
Pennsylvania chartered savings association, from the mutual form of ownership to
stock form of ownership, and all amendments thereto, and to the reference to
this firm in the "Legal Matters" section of the Prospectus relating to the
Offering.

Very truly yours,

/s/ MORRIS, NICHOLS, ARSHT & TUNNELL

<PAGE> 1
Exhibit 23.4

KELLER & COMPANY, INC.
555 METRO PLACE NORTH
SUITE 524
DUBLIN, OHIO 43017
(614) 766-1426
(614) 766-1459 FAX

September 10, 1998

Re: Valuation Appraisal of Security of Pennsylvania Financial Corp.
Security Savings Association of Hazleton
Hazleton, Pennsylvania

We hereby consent to the use of our firm's name, Keller & Company, Inc.
("Keller"), and the reference to our firm as experts in the Application for
Conversion on Form AC to be filed by Security Savings Association of Hazleton,
Hazleton, Pennsylvania and any amendments thereto and references to our opinion
regarding subscription rights filed as an exhibit to the applications referred
to hereafter. We also consent to the use of our firm's name in the Form SB-2 to
be filed by Security of Pennsylvania Financial Corp. with the Securities and
Exchange Commission and any amendments thereto, and to the statements with
respect to us and the references to our Valuation Appraisal Report and in the
said Form AC and any amendments thereto and in the notice and Application for
Conversion filed by Security Savings Association of Hazleton.

Very truly yours,

KELLER & COMPANY, INC.

by: /s/ John A. Shaffer
--------------------------------
John A. Shaffer
Vice President
<PAGE> 2

KELLER & COMPANY, INC.
555 METRO PLACE NORTH
SUITE 524
DUBLIN, OHIO 43017
(614)766-1426
(614)766-1459 FAX

September 10, 1998

The Board of Directors
Security Savings Association of Hazleton
31 W. Broad Street
Hazleton, Pennsylvania 18201-0770

Re: Subscription Rights - Conversion of Security Savings Association of
Hazleton

Gentlemen:

The purpose of this letter is to provide an opinion of the value of the
subscription rights of the "to be issued" common stock of Security of
Pennsylvania Financial Corp. (the "Corporation"), Hazleton, Pennsylvania, in
regard to the conversion of Security Savings Association of Hazleton ("Security
Savings" or the "Association") from a state-chartered mutual savings and loan
association to a state-chartered stock savings and loan association.

Because the Subscription Rights to purchase shares of Common Stock in the
Corporation, which are to be issued to the depositors of Security Savings, and
the other members of the Association and will be acquired by such recipients
without cost, will be nontransferable and of short duration and will afford the
recipients the right only to purchase shares of Common Stock at the same price
as will be paid by members of the general public in a Direct Community
Offering, we are of the opinion that:

(1) The Subscription Rights will have no ascertainable fair market value,
and;

(2) The price at which the Subscription Rights are exercisable will not be
more or less than the fair market value of the shares on the date of
the exercise.

Further, it is our opinion that the Subscription Rights will have no economic
value on the date of distribution or at the time of exercise, whether or not a
community offering takes place.

Sincerely,

KELLER & COMPANY, INC.

/S/ John A. Shaffer
- ----------------------

John A. Shaffer
Vice President

<PAGE> 1
EXHIBIT 24.1

CONFORMED

POWERS OF ATTORNEY

KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Richard C. Laubach and David P. Marchetti, Sr.,
and each of them, as the true and lawful attorneys-in-fact and agents with full
power of substitution and resubstitution, for them and in their name, place and
stead, in any and all capacities to sign any or all amendments to the
Application for Conversion on Form AC and the Registration Statement on Form
SB-2, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Office of Thrift Supervision of the Department of
the Treasury ("OTS") or the U.S. Securities and Exchange Commission,
respectively, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done as fully to all intents and purposes as they might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.

Pursuant to the requirements of Part 563b of the OTS Rules and Regulations
and the Securities Act of 1933, as amended, and any rules and regulations
promulgated thereunder, the foregoing Powers of Attorney prepared in conjunction
with the Application for Conversion on Form AC and the Registration Statement on
Form SB-2 have been duly signed by the following persons in the capacities and
on the dates indicated.

NAME DATE

/s/ Richard C. Laubach September 11, 1998
- --------------------------------------
Richard C. Laubach
President, Chief Executive Officer
and Director
(principal executive officer)
Security of Pennsylvania Financial Corp.

President, Chief Executive Officer
and Director
(principal executive officer)
Security Savings Association of Hazleton

/s/ David P. Marchetti, Sr. September 11, 1998
- --------------------------------------
David P. Marchetti, Sr.
Vice President and Chief Financial Officer
(principal financial and accounting officer)
Security of Pennsylvania Financial Corp.

Chief Financial Officer and Treasurer
(principal accounting and financial officer)
Security Savings Association of Hazleton

<PAGE> 2

/s/ Vincent L. Marusak September 11, 1998
- --------------------------------------
Vincent L. Marusak
Director
Security of Pennsylvania Financial Corp.

Chairman of the Board
Security Savings Association of Hazleton

/s/ Frederick L. Barletta September 11, 1998
- --------------------------------------
Frederick L. Barletta
Director
Security of Pennsylvania Financial Corp.