The market area of Philadelphia, in particular South Philadelphia and Center City, as well as Delaware County and also Bucks,

Chester and Montgomery Counties which, along with Delaware County, comprise the suburbs of Philadelphia, is referred to as the Delaware Valley region. For 2003, the median household income in Philadelphia and Delaware Counties were $33,243 and $55,150, respectively, compared to $46,158 and $46,615, respectively, for all of Pennsylvania and the entire United States. Household growth in 2003 was (0.3)% and 0.2% for Philadelphia and Delaware Counties, respectively, compared to 0.5% and 1.2%, respectively, for all of Pennsylvania and the United States. The largest employers in the market area include, among others, Wyeth, GlaxoSmith Kline,

Merck, Pfizer, Jefferson Health Systems, Crozer-Keystone Health System, Independence Blue Cross, Cigna and State Farm Insurance.

The Company is primarily engaged in attracting deposits from the general public and using those funds to invest in loans and securities. The Company’s principal sources of funds are deposits, repayments of loans and mortgage-backed securities, maturities of investment securities and interest-bearing deposits, funds provided from operations and funds borrowed from the Federal Home Loan Bank of Pittsburgh. These funds are primarily used for the origination of various loan types including single-family residential mortgage loans, construction and land development loans, non-residential or commercial real estate mortgage loans, home equity loans and lines of credit, commercial business loans and consumer loans. The Company is an active originator of residential home mortgage loans and construction and land development loans in the Company’s market area. Traditionally, Prudential Savings Bank focused on originating or purchasing fixed-rate, long-term single-family residential mortgage loans for portfolio. In recent years, in particular since fiscal 2000, the Company has substantially increased the Company’s involvement in construction and land development lending. Such loans typically have higher yields as compared to single-family residential mortgage loans and have adjustable rates of interest and/or shorter terms to maturity. As a result of such emphasis, the Company’s construction and land development loans have grown from $8.4 million or 4.8% of the total loan portfolio at September 30, 1999 to $30.5 million or 19.0% of the Company’s total loan portfolio at June 30, 2004.

Total assets amounted to $409.6 million at June 30, 2004. During the nine months ended June 30, 2004, total assets increased by $13.8 million or 3.5% compared to total assets at September 30, 2003.

Total loan originations and purchases of $45.8 million during the nine months ended June 30, 2004 offset loan principal repayments of $38.5 million. The Company also experienced a $4.1 million decrease in cash and cash equivalents between September 30, 2003 and June 30, 2004 as the Company used such assets to help fund the growth in its loan and securities portfolios.

Total liabilities amounted to $371.3 million at June 30, 2004, an increase of $12.0 million over total liabilities at September 30, 2003.