UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20519

SCHEDULE 14A

Proxy Statement Pursuant to Section 14 (a) of the
Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement [ ] Confidential, for use of the commission
only (as permitted by rule 14A-6
[X] Definitive Proxy Statement (E)(2))

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to
Rule 14a-12

FIRST KEYSTONE FINANCIAL, INC.
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(Name of Registrant as Specified in Its Charter)

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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6 (i) (1) and 0-11.

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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a) (2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
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[FIRST KEYSTONE LOGO]

December 30, 2002

Dear Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of
First Keystone Financial, Inc. The meeting will be held at the Towne House
Restaurant located at 117 Veterans Square, Media, Pennsylvania, on Wednesday,
January 22, 2003 at 2:00 P.M., Eastern Time. The matters to be considered by
stockholders at the Annual Meeting are described in the accompanying materials.

It is very important that you be represented at the Annual Meeting
regardless of the number of shares you own or whether you are able to attend the
meeting in person. We urge you to mark, sign and date your proxy card today and
return it in the envelope provided, even if you plan to attend the Annual
Meeting. This will not prevent you from voting in person, but will ensure that
your vote is counted if you are for any reason unable to attend.

Your continued support of and interest in First Keystone Financial, Inc.
are sincerely appreciated.

Sincerely,

/s/ Donald S. Guthrie

Donald S. Guthrie
Chairman and Chief Executive Officer

FIRST KEYSTONE FINANCIAL, INC.
22 WEST STATE STREET
MEDIA, PENNSYLVANIA 19063
(610) 565-6210

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 22, 2003

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of First Keystone Financial, Inc. (the "Company") will be held at the
Towne House Restaurant located at 117 Veterans Square, Media, Pennsylvania, on
Wednesday, January 22, 2003 at 2:00 P.M., Eastern Time, for the following
purposes, all of which are more completely set forth in the accompanying Proxy
Statement:

(1) To elect two (2) directors for four-year terms or until their
successors are elected and qualified;

(2) To ratify the appointment by the Board of Directors of Deloitte &
Touche LLP as the Company's independent auditors for the fiscal year
ending September 30, 2003; and

(3) To transact such other business as properly may come before the
meeting or any adjournment thereof. As of the date hereof,
management is not aware of any other such business.

The Board of Directors has fixed December 6, 2002 as the voting record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting. Only those stockholders of record as of the close of
business on that date will be entitled to vote at the Annual Meeting.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Carol Walsh

Carol Walsh
Corporate Secretary

Media, Pennsylvania
December 30, 2002

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YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT THAT
YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO
BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING
OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF. HOWEVER, IF YOU ARE A
STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU WILL NEED
ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER IN ORDER TO VOTE IN PERSON AT
THE ANNUAL MEETING.

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FIRST KEYSTONE FINANCIAL INC.

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JANUARY 22, 2003

This Proxy Statement is furnished to holders of common stock, $.01 par
value per share (the "Common Stock"), of First Keystone Financial, Inc. (the
"Company"), the holding company of First Keystone Federal Savings Bank (the
"Bank"). Proxies are being solicited on behalf of the Board of Directors of the
Company to be used at the Annual Meeting of Stockholders ("Annual Meeting") to
be held at the Towne House Restaurant located at 117 Veterans Square, Media,
Pennsylvania, on Wednesday, January 22, 2003 at 2:00 P.M., Eastern Time, for the
purposes set forth in the Notice of Annual Meeting of Stockholders. This Proxy
Statement is first being mailed to stockholders on or about December 30, 2002.

The proxy solicited hereby, if properly signed and returned to the Company
and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, then each
proxy received will be voted FOR the nominees for director described herein, FOR
ratification of the appointment of Deloitte & Touche LLP as the Company's
independent auditors for fiscal 2003 and upon the transaction of such other
business as may properly come before the meeting, in accordance with the best
judgment of the persons appointed as proxies. Any stockholder giving a proxy has
the power to revoke it at any time before it is exercised by (i) filing with the
Secretary of the Company written notice thereof (Carol Walsh, Secretary, First
Keystone Financial, Inc., 22 West State Street, Media, Pennsylvania 19063); (ii)
submitting a duly executed proxy bearing a later date; or (iii) appearing at the
Annual Meeting and giving the Secretary notice of his or her intention to vote
in person. Proxies solicited hereby may be exercised only at the Annual Meeting
and any adjournment thereof and will not be used for any other meeting.

VOTING

Only stockholders of record at the close of business on December 6, 2002
(the "Voting Record Date") will be entitled to vote at the Annual Meeting. On
the Voting Record Date, there were 2,006,187 shares of Common Stock outstanding
and the Company had no other class of equity securities outstanding. Each share
of Common Stock is entitled to one vote at the Annual Meeting on all matters
properly presented at the meeting. Directors are elected by a plurality of the
votes cast with a quorum present. The two persons who receive the greatest
number of votes of the holders of Common Stock represented in person or by proxy
at the Annual Meeting will be elected directors of the Company. Abstentions are
considered in determining the presence of a quorum and will not affect the
plurality vote required for the election of directors. The affirmative vote of
the holders of a majority of the total votes present in person or by proxy is
required to ratify the appointment of the independent auditors. Under rules of
the New York Stock Exchange, the proposals to elect directors and ratify the
appointment of auditors are considered "discretionary" items upon which
brokerage firms may vote in their discretion on behalf of their clients if such
clients have not furnished voting instructions and for which there will not be
"broker non-votes."

INFORMATION WITH RESPECT TO NOMINEES FOR DIRECTOR
AND EXECUTIVE OFFICERS

ELECTION OF DIRECTORS

The Restated Articles of Incorporation of the Company provide that the
Board of Directors of the Company shall be divided into four classes that are as
equal in number as possible, and that members of each class of directors are to
be elected for a term of four years. One class is to be elected annually.
Stockholders of the Company are not permitted to cumulate their votes for the
election of directors.

No directors or executive officers of the Company are related to any other
director or executive officer of the Company by blood, marriage or adoption
except for Donald G. Hosier, Jr. and Robert R. Hosier (who serves as a Senior
Vice President of the Bank) who are brothers and Edmund Jones and Donald A.
Purdy who are brothers-in-law. Each nominee for director currently serves as
director of the Company. In addition, Messrs. Silvio F. D'Ignazio and Willard F.
Letts and Mmes. Olive J. Faulkner and Joan G. Taylor serve as directors for the
Bank. In October 2002, Mr. William J. O'Donnell was appointed director of the
Bank and in November 2002 was appointed director of the Company.

Unless otherwise directed, each proxy executed and returned by a
stockholder will be voted for the election of the nominees for director listed
below. If the person or persons named as nominee should be unable or unwilling
to stand for election at the time of the Annual Meeting, then the proxies will
nominate and vote for one or more replacement nominees recommended by the Board
of Directors. At this time, the Board of Directors knows of no reason why the
nominees listed below may not be able to serve as directors if elected.

The following tables present information concerning the nominees for
director of the Company and each director of the Company whose term continues,
including such person's tenure as a director of the Bank.

NOMINEES FOR DIRECTOR FOR FOUR-YEAR TERMS EXPIRING IN 2007

Principal Occupation During Director
Name Age(1) the Past Five Years Since
- -------------------------- ----------- ----------------------------------------- -----------

Donald S. Guthrie 67 Chairman of the Board and Chief Executive 1994
Officer of the Company; served as
President of the Company from 1994 until
2002; President and Chief Executive
Officer of the Bank; previously a member
of the law firm of Jones, Strohm &
Guthrie, P.C., Media, Pennsylvania.

Edmund Jones 84 Director; former Chairman of the Board of 1947
the Bank from 1979 until 1993; member of
the law firm of Jones, Strohm & Guthrie,
P.C., Media, Pennsylvania.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE ABOVE
NOMINEES FOR DIRECTOR.

MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE

DIRECTORS WHOSE TERMS EXPIRE IN 2004

Principal Occupation During Director
Name Age(1) the Past Five Years Since
- -------------------------- ----------- ----------------------------------------- -----------

Donald A. Purdy 79 Director; Chairman of the Board of the 1970
Bank from 1993 to 2002 and the Company
from 1994 to 2002; served as President of
the Bank from 1979 to 1990 and as
President and Chief Executive Officer of
the Bank from 1990 to 1993.

Thomas M. Kelly 46 Director; President of the Company since 1997
2002; has served as Chief Financial
Officer of the Company since 1994; has
served as Chief Financial Officer of the
Bank since 1991 and Executive Vice
President since 1995; served as Senior
Vice President of the Bank from 1991 to
1995; former Senior Manager at Deloitte &
Touche LLP.

DIRECTORS WHOSE TERM EXPIRES IN 2005

Principal Occupation During Director
Name Age(1) the Past Five Years Since
- -------------------------- ----------- ----------------------------------------- -----------

Donald G. Hosier, Jr. 47 Director; President of First Keystone 2001
Insurance Services, LLC, a subsidiary of
the Bank, and a principal with Montgomery
Insurance Services, Inc., Media,
Pennsylvania, an insurance brokerage
firm.

Marshall J. Soss 56 Director; President and Chief Executive 2001
Officer of KarMar Realty Group, Inc.,
Media, Pennsylvania, a commercial and
investment real estate service company.

DIRECTORS WHOSE TERMS EXPIRE IN 2006

Principal Occupation During Director
Name Age(1) the Past Five Years Since
- -------------------------- ----------- ----------------------------------------- -----------

Edward Calderoni 80 Director; Associate-broker of Century 1982
21-Alliance, a real estate firm located
in Aston and Media, Pennsylvania.

William J. O'Donnell, CPA 35 Director; Information Technology Manager 2002
with Wawa, Inc., Wawa, Pennsylvania since
2000; served as Information Technology
Manager with Vlasic Foods International,
Cherry Hill, New Jersey from 1998 to
2000; former Information Technology
Project Leader with ARCO Chemical Co.,
Newtown Square, Pennsylvania.

- -----------
(1) As of September 30, 2002.

STOCKHOLDER NOMINATIONS

Article 6.F of the Company's Restated Articles of Incorporation governs
nominations for election to the Board of Directors and requires all such
nominations, other than those made by the Board, to be made at a meeting of
stockholders called for the election of directors, and only by a stockholder who
has complied with the notice provisions set forth in such section. Stockholder
nominations must be made pursuant to timely notice delivered in writing to the
Secretary of the Company. To be timely, a stockholder's notice must be delivered
to, or mailed and received at, the principal executive offices of the Company
not later than 60 days prior to the anniversary date of the immediately
preceding annual meeting. No such notices were submitted to the Company's
Secretary by November 24, 2002 for consideration at this Annual Meeting.

Each written notice of a stockholder nomination shall set forth (a) as to
each person whom the stockholder proposes to nominate for election or
re-election as a director and as to the person nominated thereby (i) the name,
age, business address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the class and number of shares of
Company stock that are beneficially owned by such person on the date of such
stockholder notice, and (iv) any other information relating to such person that
is required to be disclosed in solicitations of proxies with respect to nominees
for election as directors, pursuant to the proxy rules under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); and (b) as to the
stockholder giving the notice (i) the name and address, as they appear on the
Company's books, of such stockholder and any other stockholders known by such
stockholder to be supporting such nominees and (ii) the class and number of
shares of Company stock that are beneficially owned by such stockholder on the
date of such stockholder notice and, to the extent known, by any other
stockholders known by such stockholder to be supporting such nominees on the
date of such stockholder notice. The presiding officer of the meeting may refuse
to acknowledge the nomination of any person not made in compliance with the
foregoing procedures.

COMMITTEES AND MEETINGS OF THE BOARD OF THE COMPANY AND BANK

The Board of Directors of the Company meets on a quarterly basis and may
have additional special meetings upon the request of the President or a majority
of the directors. During the fiscal year ended September 30, 2002, the Board of
Directors of the Company met eight times. No director attended fewer than 75% of
the total number of Board meetings or committee meetings on which he or she
served that were held during fiscal 2002. The Board of Directors of the Company
has established the following committees, among others:

Internal Review Committee. The Internal Review Committee consists of
Messrs. Calderoni, Purdy and O'Donnell. The Internal Review Committee reviews
the records and affairs of the Company, engages the Company's external auditors,
meets with the Company's outsourced internal auditor, and reviews their reports.
The members of the Internal Review Committee are independent as such term is
currently defined in Rule 4200(a)(15) of the Nasdaq Stock Market's listing
standards. The Internal Review Committee meets on an as needed basis and met
four times in fiscal 2002. On May 24, 2000, the Board of Directors of the
Company adopted an Audit Committee Charter, which was filed as an appendix to
the proxy statement for the annual meeting of stockholders in January 2001.

Nominating Committee. The Nominating Committee consists of Messrs. Soss,
Jones and Donald Hosier, who is Chairman of the Committee. The Nominating
Committee, which is responsible for reviewing and nominating candidates to the
Board, met one time during fiscal 2002 in connection with the nominations for
the annual meeting of stockholders in January 2002.

In addition to the committees of the Company described above, the Bank
also has established other committees which include members of the Board of
Directors of the Bank as well as senior management and which meet as required.
These committees include, among others, the Executive Committee, Compensation
Committee, Internal Review Committee, Asset/Liability Committee, Loan Committee,
Community Investment Committee and Asset Quality Review Committee.

Compensation Committee. The Compensation Committee of the Bank consists of
Messrs. Calderoni, D'Ignazio and Letts. The Compensation Committee reviews
overall compensation and benefits for the Bank's employees and senior officers
and recommends compensation and benefits for the President. The Company does not
pay separate compensation to its employees and officers. The Compensation
Committee of the Bank met one time in fiscal 2002 and its report is included
below under "Executive Compensation."

REPORT OF THE INTERNAL REVIEW COMMITTEE OF THE COMPANY

The Internal Review Committee of the Company is responsible for providing
independent, objective oversight of the Company's accounting function and
internal controls. Management is responsible for the preparation, presentation
and integrity of the Company's financial statements, the Company's accounting
and financial reporting principles and the Company's internal controls and
financial reporting procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The Company's independent
auditors are responsible for performing an independent audit of the Company's
consolidated financial statements in accordance with generally accepted auditing
standards and issuing an opinion as to their conformity with generally accepted
accounting principles.

The Internal Review Committee is composed of directors all of whom are
independent as defined by The Nasdaq Stock Market, Inc. listing standards. The
Internal Review Committee is governed by the Audit Committee Charter which
specifies, among other things, the scope of the Committee's responsibilities and
how those responsibilities are to be performed. The responsibilities of the
Internal Review Committee include being the primary liaison with the external
independent auditors and meeting and reviewing reports prepared by the Company's
outsourced internal auditor.

The Internal Review Committee has reviewed and discussed the audited
financial statements with management. In addition, in compliance with applicable
provisions of the Audit Committee Charter, the Internal Review Committee

has considered whether the provision of any non-audit services by the
independent auditors is compatible with maintaining the auditor's independence
and has discussed with the Company's independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61 "Communication with
Audit Committees," as may be modified or supplemented. The Internal Review
Committee has received the written disclosures and the letter from the
independent accountants required by Independence Standards Board Standard No. 1,
as may be modified or supplemented, and has discussed with the independent
accountant, the independent accountant's independence. Based on the review and
discussions referred to above in this report, the Internal Review Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report to Stockholders, which financial
statements were incorporated into the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 2002 for filing with the Commission. The
Internal Review Committee also has recommended the reappointment of Deloitte &
Touche LLP as the Company's independent auditors for the fiscal year ended
September 30, 2003.

INTERNAL REVIEW COMMITTEE

Edward Calderoni Donald A. Purdy William J. O'Donnell, CPA

EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

Set forth below is information with respect to the principal occupations
during at least the last five years for the six executive officers of the
Company and/or the Bank who do not serve as directors. There are no arrangements
or understandings between a director of the Company and any other person
pursuant to which such person was elected an executive officer of the Company.

A. CHARLES AMENTT, JR. Age 47. Mr. Amentt has served as Senior Vice
President of Commercial Lending since July 2002 and prior thereto was Vice
President of Commercial Lending since 1996.

ROSE MARY DIMARCO. Age 40. Ms. DiMarco has served as Senior Vice President
of Finance since July 2002 and has been employed in various capacities at the
Bank since 1989.

STEPHEN J. HENDERSON. Age 55. Mr. Henderson has served as Senior Vice
President of Residential Lending Officer since May 1991 and has been employed in
various capacities at the Bank since 1971.

ROBERT R. HOSIER. Age 41. Mr. Hosier has served as Senior Vice President
of Information Technology since July 2002 and has been employed in various
capacities at the Bank since 1987.

ELIZABETH M. MULCAHY. Age 65. Ms. Mulcahy has served as Senior Vice
President of Human Resources, Branch Operations and Security since 1991 and has
been employed in various capacities at the Bank since 1964.

CAROL WALSH. Age 54. Ms. Walsh has served as Corporate Secretary since
August 1991 and has been employed in various capacities at the Bank since 1970.

ROBIN G. OTTO. Age 44. Ms. Otto has served as Senior Vice President of
Marketing at the Bank since December 2002; previously marketing consultant with
Palindrome Consulting, Glen Mills, Pennsylvania since August 1996; and prior
thereto, Ms. Otto served as an officer of the Bank.

BENEFICIAL OWNERSHIP OF COMMON STOCK
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership of the Common
Stock as of the Voting Record Date, and certain other information with respect
to (i) the only persons or entities, including any "group" as that term is used
in Section 13(d)(3) of the Exchange Act, who or which were known to the Company
to be the beneficial owner of more than 5% of the issued and outstanding shares
of Common Stock, (ii) each director and executive officer of the Company, and
(iii) all directors and executive officers of the Company as a group.

Amount and Nature
Name of Beneficial of Beneficial
Owner or Number of Ownership as of Percent of
Persons in Group December 6, 2002(1) Common Stock
- ----------------------------------------- ------------------- ------------

First Keystone Financial, Inc. 320,175 16.0%
Employee Stock Ownership Plan Trust(2)
22 West State Street
Media, Pennsylvania 19063

Charles J. Moore 129,100(3) 6.4
The Banc Funds Company L.L.C
208 South LaSalle Street
Chicago, Illinois 60604

Dimensional Fund Advisors Inc. 138,300(4) 6.9
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401

Jeffrey L. Gendell 170,800(5) 8.5
Tontine Financial Partners, L.P.
200 Park Avenue, Suite 3900
New York, New York 10166

Directors:
Edward Calderoni 33,313(6) 1.7(15)
Donald S. Guthrie 105,813(7) 5.2(15)
Donald G. Hosier, Jr. 3,850(8) *(15)
Edmund Jones 37,530(9) 1.9(15)
Thomas M. Kelly 66,321(10) 3.2(15)
William J. O'Donnell -- --
Donald A. Purdy 60,360(11) 3.0(15)
Marshall J. Soss 2,000 *(15)

Other Named Executive Officers:
Stephen J. Henderson 61,881(12) 3.0(15)
Elizabeth M. Mulcahy 79,287(13) 3.9(15)

Directors of the Bank who do not serve as
directors of the Company (4 persons) 141,096 6.9(15)

Directors and executive officers of the
Company and the Bank as a group (19
persons) 652,718(14) 29.2(15)

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*Represents less than 1% of the outstanding shares of Common Stock.

(Footnotes continued on following page)

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(1) Based upon filings made pursuant to the Exchange Act and information
furnished by the respective individuals. Under regulations promulgated
pursuant to the Exchange Act, shares of Common Stock are deemed to be
beneficially owned by a person if he or she directly or indirectly has or
shares (i) voting power, which includes the power to vote or to direct the
voting of the shares, or (ii) investment power, which includes the power
to dispose or to direct the disposition of the shares. Unless otherwise
indicated, the named beneficial owner has sole voting and dispositive
power with respect to the shares.

(2) The First Keystone Financial, Inc. Employee Stock Ownership Plan Trust
(the "Trust") was established pursuant to the First Keystone Financial,
Inc. Employee Stock Ownership Plan (the "ESOP") by an agreement between
the Company and Messrs. Calderoni, Jones and Purdy, who act as trustees of
the plan (the "Trustees"). Under the terms of the ESOP, the Trustees
generally will vote all allocated shares held in the ESOP in accordance
with the instructions of the participating employees. Unallocated shares
will generally be voted by the Trustees in the same ratio on any matter as
to those shares for which instructions are given, subject in each case to
the fiduciary duties of the Trustees and applicable law. Any allocated
shares which either abstain or are not voted on a proposal will be
disregarded in determining the percentage of stock voted for and against
such proposal by the participants. As of the Voting Record Date, 191,841
shares held in the Trust had been allocated to the accounts of
participating employees including 59,991 shares beneficially owned by
eight executive officers.

(3) Information obtained from a Schedule 13G, dated February 14, 2002, filed
with the SEC with respect to shares of Common Stock beneficially owned by
The Banc Funds Company, L.L.C. ("Banc Funds"). The Schedule 13G states
that Banc Fund IV L.P. and Banc Fund V L.P. (the "Funds") have sole voting
power as to 116,800 and 12,300 shares, respectively. The sole stockholder
of the general partner of the Funds is Banc Funds which is controlled by
Charles J. Moore who as such, has voting and dispositive authority over
the shares held thereby.

(4) Information obtained from a Schedule 13G, dated February 12, 2002, filed
with the SEC with respect to shares of Common Stock beneficially owned by
Dimensional Fund Advisors Inc. ("Dimensional"). The Schedule 13G states
that Dimensional has sole voting and dispositive power as to all of these
shares. Dimensional disclaims beneficial ownership of these shares.

(5) Information obtained from Schedule 13D, filed November 21, 2001 with the
SEC with respect to shares of Common Stock beneficially owned by Tontine
Financial Partners, L.P. ("TFP") which reports shared voting and
dispositive power with respect to all the shares. Tontine Management,
L.L.C. is the general partner to TFP. Mr. Gendell serves as the managing
member of Tontine Management.

(6) Includes options covering 8,950 shares granted pursuant to the 1998 Stock
Option Plan ("1998 Option Plan") and the 1995 Stock Option Plan ("1995
Option Plan") (collectively, the "Option Plans") that may be acquired
within 60 days of the Voting Record Date and 22,160 shares held jointly
with spouse.

(7) Includes 14,077 shares held in the Bank's 401(k)/Profit-Sharing Plan
("401(k)Plan"), 13,268 shares allocated to Mr. Guthrie as a participant in
the ESOP and 37,050 shares that may be acquired within 60 days of the
Voting Record Date pursuant to the exercise of options granted under the
Option Plans.

(8) Includes 2,324 shares held by the Montgomery Insurance Services, Inc.
Employee Profit Sharing Plan of which Mr. Hosier is a trustee.

(Footnotes continued on following page)

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(9) Includes 5,000 shares owned by Mr. Jones' spouse and 4,870 shares that may
be acquired within 60 days of the Voting Record Date pursuant to the
exercise of options granted under the Option Plans.

(10) Includes 9,078 shares held in the 401(k) Plan, 12,077 shares allocated to
Mr. Kelly as a participant in the ESOP and 43,770 shares that may be
acquired within 60 days of the Voting Record Date pursuant to the exercise
of options granted under the Option Plans.

(11) Includes 5,530 shares held by Mr. Purdy's spouse over which Mr. Purdy
disclaims beneficial ownership and 15,750 shares that may be acquired
within 60 days of the Voting Record Date pursuant to the exercise of
options granted under the Option Plans.

(12) Includes 8,770 shares allocated to Mr. Henderson as a participant in the
ESOP and 25,050 shares that may be acquired within 60 days of the Voting
Record Date pursuant to the exercise of options granted under the Option
Plans.

(13) Includes 9,192 shares held in the 401(k) Plan, 2,224 shares held by Ms.
Mulcahy's spouse, 8,166 shares allocated to Ms. Mulcahy as a participant
in the ESOP and 43,770 shares that may be acquired within 60 days of the
Voting Record Date pursuant to the exercise of options granted under the
Option Plans.

(14) Includes 60,544 shares allocated to executive officers pursuant to the
ESOP and 228,650 shares that may be acquired within 60 days of the Voting
Record Date pursuant to the exercise of options granted under the Option
Plans.

(15) Each beneficial owner's percentage ownership is determined by assuming
that options held by such person (but not those held by any other person)
and that are exercisable within 60 days of the voting record date have
been exercised.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth a summary of certain information concerning
the compensation paid by the Bank for services rendered in all capacities during
the three years ended September 30, 2002 to the Chief Executive Officer of the
Bank and the other three officers of the Bank whose total annual cash
compensation exceeded $100,000 during fiscal 2002. None of such officers, two of
whom also serve as executive officers of the Company (Messrs. Guthrie and
Kelly), receive any compensation from the Company.

Annual Compensation(1) Long Term Compensation
---------------------- ----------------------
Awards
----------------------
Name and Fiscal Number of All Other
Principal Position Year Salary Bonus Stock Grants Options Compensation
------------------ ------ -------- -------- ------------ --------- ------------

Donald S. Guthrie 2002 $253,000 $28,102 $ $56,234(2)
Chairman of the Board 2001 230,000 27,805 -- -- 55,404(2)
and Chief Executive 2000 207,000 36,123 -- -- 53,856(2)
Officer

Thomas M. Kelly 2002 $186,000 $17,098 $ -- -- $26,069(3)
President and Chief 2001 168,000 21,831 -- -- 18,013(3)
Financial Officer 2000 155,217 26,349 1,213 11,750 29,207(3)

Stephen J. Henderson 2002 $105,000 $6,000 $ -- -- $16,955(4)
Senior Vice 2001 100,000 6,000 -- -- 14,322(4)
President/Lending 2000 98,412 7,000 1,213 11,750 23,504(4)

Elizabeth M. Mulcahy 2002 $ 99,000 $6,423 $ -- -- $22,889(5)
Senior Vice 2001 94,000 6,398 -- -- 23,901(5)
President/Human 2000 91,108 7,304 1,213 11,750 23,707(5)
Resources

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

(1) Does not include amounts attributable to miscellaneous personal benefits
received by the named executive officers. In the opinion of management of
the Company, the costs to the Bank of providing such benefits to such
persons during the fiscal year ended September 30, 2002 did not exceed the
lesser of $50,000 or 10% of the total of annual salary and bonus reported
for each individual.

(2) Reflects contributions made by the Bank on Mr. Guthrie's behalf to the
401(k) Plan in fiscal years 2002, 2001 and 2000; also reflects in fiscal
years 2002, 2001 and 2000 the allocation of shares of Common Stock to Mr.
Guthrie's account in the ESOP with a fair market value as of the date of
allocation of $24,519, $20,336 and $16,726, respectively. In addition,
such amount includes in each fiscal year presented the present value of
the premiums paid as well as the term insurance premiums paid in each such
period for split life insurance purchased by the Bank to supplement the
retirement benefits to be received by Mr. Guthrie pursuant to the Bank's
retirement plans. See "- Benefits - Supplemental Retirement Benefits."

(3) Reflects contributions made by the Bank on Mr. Kelly's behalf to the
401(k) Plan in fiscal years 2002, 2001 and 2000; also reflects in fiscal
years 2002, 2001 and 2000 the allocation of shares of Common Stock to Mr.
Kelly's account in the ESOP with a fair market value as of the date of
allocation of $24,189, $20,041 and $16,571, respectively.

(Footnotes continued on following page)

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

(4) Reflects contributions made by the Bank on Mr. Henderson's behalf to the
401(k) Plan in fiscal years 2002, 2001 and 2000; also reflects in fiscal
years 2002, 2001 and 2000 the allocation of shares of Common Stock to Mr.
Henderson's account in the ESOP with a fair market value as of the date of
allocation of $15,568, $14,902 and $13,409, respectively.

(5) Reflects contributions made by the Bank on Ms. Mulcahy's behalf to the
401(k) Plan in fiscal years 2002, 2001 and 2000; also reflects in fiscal
years 2002, 2001 and 2000 allocation of shares of Common Stock to Ms.
Mulcahy's account in the ESOP with a fair market value as of the date of
allocation of $14,824, $14,194 and $12,696, respectively. In addition,
such amount includes in fiscal years 2002, 2001 and 2000 value of the
premiums paid as well as the term insurance premiums paid in each such
period for split life insurance purchased by the Bank to supplement the
retirement benefits to be received by Ms. Mulcahy pursuant to the Bank's
retirement plans. See "-- Benefits -- Supplemental Retirement Benefits."

STOCK OPTIONS

The following table discloses certain information regarding the options
held at September 30, 2002 by the Chief Executive Officer and the other named
executive officers. No options were granted thereto during the fiscal year ended
September 30, 2002.

Number of Options at Value of Options at
September 30, 2002 September 30, 2002
--------------------------------- ----------------------------------
Shares
Acquired on Value
Name Exercise Realized Exercisable(1) Unexercisable(1) Exercisable(2) Unexercisable(2)
- -------------------- ----------- -------- -------------- ---------------- -------------- ----------------

Donald S. Guthrie 6,720 $43,486 37,050 4,700 $240,000 $15,863
Thomas M. Kelly -- -- 43,770 4,700 317,554 15,863
Stephen J. Henderson 6,561 55,769 25,050 4,700 167,794 15,863
Elizabeth M. Mulcahy -- -- 43,770 4,700 317,554 15,863

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

(1) Number of options has been adjusted to reflect effect of two-for-one stock
split effected in fiscal 1998 with respect to options granted prior to
split.

(2) Based on a per share market price of $15.50 at September 30, 2002. Except
with respect to options to purchase 11,750 shares granted to each of such
officers in fiscal 1999 with an exercise price of $12.125, the exercise
price for all options reflected in the table is $7.50.

DIRECTORS' COMPENSATION

BOARD FEES. Directors of the Company received no compensation during
fiscal 2002, except for Messrs. Hosier and Soss who are paid $1,750 per quarter
as directors of the Company. During fiscal 2002, members of the Board of
Directors of the Bank received $900 per meeting attended. Full-time officers who
serve on the Board do not receive any fees for attending meetings of the Board
or committees thereof. During fiscal 2002, the Chairman of the Board of the Bank
received an annual fee of $5,000. During fiscal 2002, members of the Board
serving on the Bank's Executive Committee, Community Investment Committee,
Compensation Committee, Loan Committee and Internal Review Committee received
$200 per meeting attended, while members of the Board serving on other Company
committees received $200 per meeting attended.

STOCK OPTIONS. Pursuant to the 1995 Option Plan, in July 1995 each
non-employee director of the Company then serving was granted compensatory stock
options to purchase 2,720 shares of Common Stock (except that each non-employee
director who had served as a director of the Bank for more than 30 years was
granted compensatory options

to purchase 5,440 shares of Common Stock). In addition, compensatory options to
purchase 340 shares of Common Stock were granted to each non-employee director
(except that each non-employee director who has served as a director of the Bank
for more than 30 years was granted compensatory options to purchase 680 shares
of Common Stock) on each of the next two succeeding anniversary dates of the
initial grant. Options granted to non-employee directors vest at the rate of 20%
per year from the date of grant. The number of shares subject to such option
grants discussed above do not reflect the effect of the two-for-one stock split
effected in fiscal 1998. During fiscal 1999, each then serving non-employee
director was granted compensatory options to purchase 2,150 shares at $12.125
per share (the fair market value of the Common Stock on the date of grant)
pursuant to the 1998 Option Plan. The options vest over a three year period.
During fiscal 2002, Messrs. Soss and Donald Hosier, appointed as directors in
fiscal 2001, were each granted options to purchase 2,150 shares at $14.84 per
share, which options vest over a three year period.

EMPLOYMENT AND SEVERANCE AGREEMENTS

The Company and the Bank (collectively the "Employers") entered into
employment agreements with each of Messrs. Guthrie, Henderson and Kelly
effective May 26, 1999. The Employers agreed to employ Messrs. Guthrie,
Henderson and Kelly for a term of three years in their current respective
positions. The term of each employment agreement is extended each year on its
anniversary date for a successive additional one-year period unless the
Employers or the officer, not less than 30 days prior to the annual anniversary
date, elect not to extend the employment term. The term of each employment
agreement was extended in 2002 for an additional year.

The employment agreements are terminable with or without cause by the
Employers. The officers have no right to compensation or other benefits pursuant
to the employment agreement for any period after voluntary termination or
termination by the Employers for cause, disability, retirement or death,
provided, however, that (i) in the event that the officer terminates his
employment because of failure of the Employers to comply with any material
provision of the employment agreement or (ii) the employment agreement is
terminated by the Employers other than for cause, disability, retirement or
death or by the officer as a result of certain adverse actions which are taken
with respect to the officer's employment following a Change in Control of the
Company, as defined, Messrs. Guthrie, Henderson and Kelly will be entitled to a
cash severance amount equal to three times their base salary. In addition,
Messrs. Guthrie, Henderson and Kelly will be entitled to a continuation of
benefits similar to those they are receiving at the time of such termination for
the remaining term of the agreement or until the officer obtains full-time
employment with another employer, whichever occurs first.

The Employers also entered into two-year severance agreements with
Mesdames Mulcahy and Walsh effective May 26, 1999. Under the terms of such
severance agreements, the Employers have agreed that in the event that such
officer's employment is terminated as a result of certain adverse actions that
are taken with respect to the officer's employment following a Change in Control
of the Company, as defined, such officer will be entitled to a cash severance
amount equal to two times her base salary. The term of each severance agreement
shall be extended each year for a successive additional one-year period unless
the Employers or the officer, not less than 30 days prior to the anniversary
date, elect not to extend the term of the severance agreement. The term of both
severance agreements was extended in 2002 for an additional year.

Each of the employment and severance agreements with the Employers
provides that if the payments and benefits to be provided thereunder, or
otherwise upon termination of employment, are deemed to constitute a "parachute
payment" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), then the executive officer would be reimbursed
for any excise tax liability pursuant to Sections 280G and 4999 of the Code and
for any additional income taxes imposed as a result of such reimbursement.
Because the amount of the payments and benefits that could constitute a
parachute payment is dependent upon the timing, price and structure of any
change in control that may occur in the future, it is not possible at this time
to quantify the severance benefits payable to the executive officers under the
employment or severance agreements. Although the above-described employment and
severance agreements could increase the cost of any acquisition of control of
the Company, management of the Company does not believe that the terms thereof
would have a significant anti-takeover effect.

A change in control generally is defined in the employment and severance
agreements to include any change in control of the Company or the Bank required
to be reported under the federal securities laws, as well as (i) the acquisition
by any person of 25% or more of the Company's outstanding voting securities and
(ii) a change in a majority of the directors of the Company during any two-year
period without the approval of at least two-thirds of the persons who were
directors of the Company at the beginning of such period.

Messrs. Guthrie's and Kelly's agreements provide that they will be
entitled to the use of an automobile. In addition, in the event of Messrs.
Guthrie's, Kelly's or Henderson's death during the term of their respective
agreements, their estates will receive payments equal to the amount of
compensation due for the remainder of the term of their agreements at their
respective current salary at the time of their deaths. Mr. Guthrie's employment
agreement also provides for medical insurance coverage for him and his spouse
until he reaches age 69 and that in the event of his death, his spouse shall be
covered under the Bank's health insurance plan until age 69. Mr. Kelly's
employment agreement also provides medical insurance coverage under such plan
during the term of his agreement for him and the members of his immediate family
and provides for continued coverage for a period of five years following the
termination of his agreement except if he is terminated for cause.

BENEFITS

Deferred Compensation Arrangements. The Bank provides supplemental
retirement benefits to Messrs. Betts (an advisory director and former director
of the Bank and the Company), Jones and Purdy and Ms. Faulkner (a director of
the Bank) in recognition of their long service as officers of the Bank. Under
the terms of the Bank's amended arrangements with such persons, each person
receives monthly payments, which payments commenced the first month subsequent
to each such person's retirement. Such payments will continue as long as such
persons continue to serve on the Board of the Bank or the Company or in an
advisory capacity. In addition, Mr. Purdy also chose to defer receipt of
approximately one-half of his payments during part of fiscal 1999 and all of
fiscal 2000. In accordance with such arrangements, such persons received an
aggregate of $119,000 during fiscal 2002.

Supplemental Retirement Benefits. In July 1994, the Bank purchased a split
dollar variable life insurance policy for the benefit of Mr. Guthrie and Ms.
Mulcahy in order to supplement the retirement benefits to be received by Mr.
Guthrie and Ms. Mulcahy pursuant to the Bank's SEP and the Profit-sharing Plan
and the ESOP. Under the current arrangements with the Bank, upon Mr. Guthrie's
and Ms. Mulcahy's retirement from the Bank after attaining age 69 and 67,
respectively, Mr. Guthrie and Ms. Mulcahy will each receive an aggregate annual
supplemental retirement benefit until their death, which is estimated to amount
to approximately 70% of Mr. Guthrie's salary and 50% of Ms. Mulcahy's salary.
Although the expected benefits are to be paid from the cash value of the policy,
there is no guarantee that the cash value of the policy will in fact produce
such level of benefits. The insurance policies were issued in each of Mr.
Guthrie's and Ms. Mulcahy's name, but the Bank has agreed to pay all premiums
required. However, as a part of such agreements, Mr. Guthrie and Ms. Mulcahy
have assigned to the Bank their interest in their respective policies to the
extent the cash surrender value and death benefit thereof equal the premiums
paid. Upon Mr. Guthrie's or Ms. Mulcahy's death, any proceeds remaining after
reimbursing the Bank for the total amount of premiums paid will be paid to Mr.
Guthrie's or Ms. Mulcahy's beneficiary, as appropriate, under the policy. During
fiscal 2002, the Bank incurred an expense of $430,800 due to decline in cash
value of the insurance policies. The Bank may enter into agreements during
fiscal 2003 with Mr. Kelly and two other executive officers to provide similar
benefits to those described above.

REPORT OF THE COMPENSATION COMMITTEE

Under rules established by the Securities and Exchange Commission, the
Company is required to provide certain data and information regarding the
compensation and benefits provided to its Chief Executive Officer and certain
other executive officers of the Bank (since such persons do not receive separate
compensation for service as officers of the Company). The disclosure
requirements for the Chief Executive Officer and such other executive officers
include the use of various tables as well as a report explaining the rationale
and considerations that led to fundamental executive compensation decisions
affecting those individuals. In fulfillment of this requirement, the
Compensation Committee of the Board of Directors of the Bank has prepared the
following report for inclusion in this proxy statement.

The Compensation Committee annually reviews the performance of the Chief
Executive Officer and other executive officers and approves changes to base
compensation as well as the level of bonus, if any, to be awarded. With respect
to all positions within the organization with the exception of the Chief
Executive Officer, the Bank uses a formal quantitative system of job evaluation.
In determining whether the base salary of the Chief Executive Officer should be
increased, the Board of Directors takes into account individual performance,
performance of the Bank, the size of the Bank and the complexity of its
operations, and information regarding compensation paid to executives performing
similar duties for financial institutions in the Bank's market area.

While the Compensation Committee does not use strict numerical formulas to
determine changes in compensation for the Chief Executive Officer and while it
weighs a variety of different factors in its deliberations, it has emphasized
and will continue to emphasize earnings, profitability, capital position and
income level, and return on tangible equity as factors in setting the
compensation of the Chief Executive Officer. Other non-quantitative factors
considered by the Compensation Committee in fiscal 2002 included general
management oversight of the Bank, the quality of communication with the Board of
Directors, and the productivity of employees. Finally, the Compensation
Committee considers the Bank's standing with customers and the community, as
evidenced by the level of customer/community complaints and compliments. While
each of the quantitative and non-quantitative factors described above was
considered by the Compensation Committee, such factors were not assigned a
specific weight in evaluating the performance of the Chief Executive Officer.
Rather, all factors were considered, and based upon the effectiveness of such
officer in addressing each of the factors, and the range of compensation paid to
officers of peer institutions, the Board of Directors approved the Compensation
Committee's recommendation to increase the base salary of the Chief Executive
Officer to $268,000 for fiscal 2003.

COMPENSATION COMMITTEE OF THE BANK

Edward Calderoni Silvio F. D'Ignazio Willard F. Letts

PERFORMANCE GRAPH

The following graph compares the cumulative total return on the Common
Stock since September 1997 with (i) the yearly cumulative total return on the
stocks included in the Russell 2000 Index; (ii) the yearly cumulative total
return on the stocks included in the Nasdaq Bank Index; and (iii) the yearly
cumulative total return on the stocks indexed in the S&P Bank Index. All of
these cumulative returns are computed assuming the reinvestment of dividends at
the frequency with which dividends were paid during the applicable years. The
graph represents $100 invested in the Company's Common Stock at $16.13 per share
on September 30, 1997.

[LINE GRAPH]

INDEX 9/30/97 9/30/98 9/30/99 9/30/00 9/30/01 9/30/02
- ------------------------------ ------- ------- ------- ------- ------- -------

First Keystone Financial, Inc.
(FKFS) 100.00 85.78 80.66 68.11 88.63 104.76
Russell 2000 Index (RTY) 100.00 80.12 94.16 114.88 89.21 79.83
Nasdaq Bank Index (BANK) 100.00 91.42 88.85 93.91 108.74 116.11
S&P Bank Index (BIX) 100.00 91.54 94.75 99.52 100.08 95.88

TRANSACTIONS WITH CERTAIN RELATED PERSONS

Until November 1996, the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 required that all loans or extensions of credit to
executive officers and directors be made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with the general public and not involve more than the
normal risk of repayment or present other unfavorable features. In addition,
loans made to a director or executive officer in excess of the greater of
$25,000 or 5% of the Bank's capital and surplus (up to a maximum of $500,000)
must be approved in advance by a majority of the disinterested members of the
Board of Directors.

Except as hereinafter indicated, all loans made by the Bank to its
executive officers and directors are made in the ordinary course of business,
are made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons and do not involve more than the normal risk of collectibility or
present other unfavorable features.

In accordance with applicable regulations, the Bank extends residential
first mortgage loans to its directors and executive officers secured by their
primary residence pursuant to a benefit program that is widely available to
employees

of the Bank and does not give preference to any executive officer or director
over other employees of the Bank. Under the terms of such loans, the interest is
1% below that charged on similar loans to non-employees and certain fees and
charges are waived. Set forth in the following table is certain information
relating to such preferential loans to executive officers and directors whose
loans aggregated in excess of $60,000 which were outstanding at September 30,
2002.

LARGEST AMOUNT OF
INDEBTEDNESS BETWEEN BALANCE AS OF
YEAR LOAN OCTOBER 1, 2001 AND SEPTEMBER 30,
NAME MADE SEPTEMBER 30, 2002 2002 INTEREST RATE
---- ---- ------------------ ---- -------------

Donald S. Guthrie 1997 $ 78,839 $ 69,048 5.500%

Thomas M. Kelly 2001 99,296 94,926 5.750

Donald G. Hosier Jr. 2002 218,000 212,265 5.100

A. Charles Amentt, Jr. 2000 127,192 124,971 variable

Robert R. Hosier 1997 233,316 227,489 5.875

Mr. Edmund Jones, a director of the Company and the Bank, is a member of
the law firm, Jones, Strohm & Guthrie, P.C., which serves as general counsel to
the Bank.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's officers,
directors and persons who beneficially own more than 10% of the Common Stock to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("Commission"). Officers, directors and more than 10%
shareholders are required by regulation to furnish the Company with copies of
all Section 16(a) forms that they file.

Based solely on its review of the copies of such forms received by it, the
Company believes that during the year ended September 30, 2002 and with respect
thereto, all filing requirements applicable to its officers and directors and
more than 10% stockholders have been satisfied.

RATIFICATION OF APPOINTMENT OF AUDITORS

The Board of Directors of the Company has appointed Deloitte & Touche LLP,
independent certified public accountants, to perform the audit of the Company's
financial statements for the fiscal year ending September 30, 2003, and further
directed that the selection of auditors be submitted for ratification by the
stockholders at the Annual Meeting.

The Company has been advised by Deloitte & Touche LLP that neither that
firm nor any of its associates has any relationship with the Company or its
subsidiaries other than the usual relationship that exists between independent
certified public accountants and clients. Deloitte & Touche LLP will have one or
more representatives at the Annual Meeting who will have an opportunity to make
a statement, if they so desire, and who will be available to respond to
appropriate questions.

The Internal Review Committee considered, in determining whether to
appoint Deloitte & Touche LLP as the Company's auditors, whether the provision
of services, other than auditing services, by Deloitte & Touche LLP is
compatible with maintaining the auditor's independence. In addition to
performing auditing services, the Company's auditors performed other audit- and
tax-related services for the Company in fiscal 2002. These other services
included

tax services and tax consulting services. The Internal Review Committee believes
that Deloitte & Touche LLP's performance of these other services is compatible
with maintaining the auditor's independence.

AUDIT FEES

The aggregate amount of the fees billed by Deloitte & Touche LLP for its
audit of the Company's annual financial statements for fiscal 2002 and for its
reviews of unaudited interim financial statements included in reports filed by
the Company under the Exchange Act during such fiscal year was $103,500.

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION

The Company did not engage or pay any fees to Deloitte & Touche LLP with
respect to the provision of financial information systems design and
implementation service during fiscal 2002.

OTHER FEES

The aggregate amount of fees billed by Deloitte & Touche LLP for all other
services (as described above) rendered to the Company during fiscal 2002 was
$16,170.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF
THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING SEPTEMBER 30, 2003.

STOCKHOLDER PROPOSALS

Any proposal that a stockholder wishes to have included in the proxy
materials of the Company relating to the next annual meeting of stockholders of
the Company, which is anticipated to be held in January 2004, must be received
at the principal executive offices of the Company, 22 West State Street, Media,
Pennsylvania 19063, Attention: Carol Walsh, Corporate Secretary, no later than
August 28, 2003. If such proposal complies with all of the requirements of Rule
14a-8 under the Exchange Act, it will be included in the proxy statement and set
forth on the form of proxy issued for such annual meeting of stockholders. It is
urged that any such proposals be sent by certified mail, return receipt
requested.

Stockholder proposals which are not submitted for inclusion in the
Company's proxy materials pursuant to Rule 14a-8 under the Exchange Act may be
brought before an annual meeting pursuant to Article 9.D of the Company's
Articles of Incorporation, which provides that business at an annual meeting of
stockholders must be (a) properly brought before the meeting by or at the
direction of the Board of Directors, or (b) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Company. To be timely, a
stockholder's notice must be delivered to, or mailed and received at, the
principal executive offices of the Company not later than 60 days prior to the
anniversary date of the immediately preceding annual meeting of stockholders of
the Company. Proposals to be presented at this Annual Meeting had to be
submitted to the Company by November 24, 2002. No such proposals were received
by such date. Proposals to be submitted for consideration at the Company's next
annual meeting of stockholders must be received by November 23, 2003. Such
stockholder's notice is required to set forth as to each matter the stockholder
proposes to bring before an annual meeting certain information specified in the
Company's Articles of Incorporation.

ANNUAL REPORTS

A copy of the Company's Annual Report to Stockholders for the fiscal year
ended September 30, 2002 accompanies this Proxy Statement. Such Annual Report is
not part of the proxy solicitation materials.

UPON RECEIPT OF A WRITTEN REQUEST, THE COMPANY WILL FURNISH TO ANY
STOCKHOLDER WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR FISCAL 2002 REQUIRED TO BE FILED UNDER THE EXCHANGE ACT. SUCH WRITTEN
REQUESTS SHOULD BE DIRECTED TO CAROL WALSH, CORPORATE SECRETARY, FIRST KEYSTONE
FINANCIAL, INC., 22 WEST STATE STREET, MEDIA, PENNSYLVANIA 19063. THE FORM 10-K
IS NOT PART OF THE PROXY SOLICITATION MATERIALS.

OTHER MATTERS

Each proxy solicited hereby also confers discretionary authority on the
Board of Directors of the Company to vote the proxy with respect to the approval
of the minutes of the last meeting of stockholders, the election of any person
as a director if the nominee is unable to serve or for good cause will not
serve, matters incident to the conduct of the meeting, and upon such other
matters as may properly come before the Annual Meeting. As of the date hereof,
management is not aware of any business that may properly come before the Annual
Meeting other than the matters described above in this Proxy Statement. However,
if any other matters should properly come before the meeting, it is intended
that the proxies solicited hereby will be voted with respect to those other
matters in accordance with the judgment of the persons voting the proxies.

The cost of the solicitation of proxies will be borne by the Company. The
Company has retained Regan & Associates, Inc., a professional proxy solicitation
firm, to assist in the solicitation of proxies. Such firm will be paid a fee of
$5,500. The Company will reimburse brokerage firms and other custodians,
nominees and fiduciaries for reasonable expenses incurred by them in sending the
proxy materials to the beneficial owners of the Company's Common Stock. In
addition to solicitations by mail, directors, officers and employees of the
Company may solicit proxies personally or by telephone without additional
compensation.

YOUR VOTE IS IMPORTANT! WE URGE YOU TO COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD AND RETURN IT TODAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.

REVOCABLE PROXY
FIRST KEYSTONE FINANCIAL, INC.

[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FIRST KEYSTONE
FINANCIAL, INC. ("COMPANY") FOR USE AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD ON JANUARY 22, 2003 AND AT ANY ADJOURNMENT THEREOF.

The undersigned, being a stockholder of the Company as of December 6, 2002,
hereby authorizes the Board of Directors of the Company or any successors
thereto as proxies with full powers of substitution, to represent the
undersigned at the Annual Meeting of Stockholders of the Company to be held at
the Towne House Restaurant located at 117 Veterans Square, Media, Pennsylvania,
on January 22, 2003 at 2:00 p.m., Eastern Time, and at any adjournment of said
meeting, and thereat to act with respect to all votes that the undersigned would
be entitled to cast, if then personally present, as set forth herein.

With- For All
For hold Except

1. ELECTION OF DIRECTORS [ ] [ ] [ ]
Nominees for four-year term:

DONALD S. GUTHRIE
EDMUND JONES

INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
"FOR ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.

For Against Abstain

2. PROPOSAL to ratify the appointment [ ] [ ] [ ]
of Deloitte & Touche LLP as the
Company's independent auditors for
the fiscal year ending September
30, 2003.

PLEASE CHECK BOX IF YOU PLAN TO ATTEND THE MEETING. [ ]

In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.

SHARES OF THE COMPANY'S COMMON STOCK WILL BE VOTED AS SPECIFIED. IF NOT
OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE BOARD OF
DIRECTORS' NOMINEES TO THE BOARD OF DIRECTORS, FOR PROPOSAL 2 AND OTHERWISE AT
THE DISCRETION OF THE PROXIES. YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO
THE TIME IT IS VOTED AT THE ANNUAL MEETING. THE BOARD OF DIRECTORS RECOMMENDS
YOU VOTE FOR THE BOARD OF DIRECTORS' NOMINEES AND PROPOSAL 2.

The undersigned hereby acknowledges receipt of a Notice of Annual Meeting of
Stockholders of the Company called for January 22, 2003, a Proxy Statement for
the Annual Meeting and the Company's 2002 Annual Report to Stockholders prior to
the signing of this Proxy.

Please be sure to sign and date this Proxy in the box below.

Date
---------------------

- --------------------------------------------------------------------------------
Stockholder sign above Co-holder (if any) sign above

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

- DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED. -

FIRST KEYSTONE FINANCIAL, INC.

PLEASE SIGN THIS PROXY EXACTLY AS YOUR NAME(S) APPEAR(S) ON THIS PROXY. WHEN
SIGNING IN A REPRESENTATIVE CAPACITY, PLEASE GIVE TITLE. WHEN SHARES ARE HELD
JOINTLY, ONLY ONE HOLDER NEED SIGN.

PLEASE ACT PROMPTLY
SIGN, DATE AND MAIL YOUR PROXY CARD TODAY

IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.

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