SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
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(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant toss.240.14a-11(c) orss.240.14a-12

Steelton Bancorp, 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.

(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (set forth the amount on which the filing
fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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 number, or
the Form or Schedule and the date of its filing.

(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[STEELTON BANCORP, INC. LETTERHEAD]

March 15, 2001

Dear Fellow Stockholder:

On behalf of the Board of Directors and management of Steelton Bancorp,
Inc. (the "Corporation"), we cordially invite you to attend our Annual Meeting
of Stockholders (the "Meeting") to be held at Mechanics Savings Bank, 51 South
Front Street, Steelton, Pennsylvania, on April 18, 2001, at 10:00 a.m. The
attached Notice of Annual Meeting of Stockholders and Proxy Statement describe
the formal business to be transacted at the Meeting.

The Board of Directors of the Corporation has determined that the
matters to be considered at the Meeting, described in the accompanying Notice of
Annual Meeting and Proxy Statement, are in the best interest of the Corporation
and its stockholders. For the reasons set forth in the Proxy Statement, the
Board of Directors unanimously recommends a vote "FOR" each matter to be
considered.

The Corporation has enclosed its 2000 Annual Stockholders Report. As
reflected in the Annual Report, the Corporation had another successful year of
operations as the only financial institution holding company headquartered and
operated in Steelton, Pennsylvania.

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING POSTAGE-PAID RETURN
ENVELOPE AS QUICKLY AS POSSIBLE. This will not prevent you from voting in person
at the Meeting, but will assure that your vote is counted if you are unable to
attend the Meeting. YOUR VOTE IS VERY IMPORTANT.

Sincerely,

/s/Harold E. Stremmel
--------------------------------------
Harold E. Stremmel
President and Chief Executive Officer

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STEELTON BANCORP, INC.
51 SOUTH FRONT STREET
STEELTON, PENNSYLVANIA 17113
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 18, 2001
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Meeting")
of Steelton Bancorp, Inc. (the "Corporation") will be held at Mechanics Savings
Bank, 51 South Front Street, Steelton, Pennsylvania, on Wednesday, April 18,
2001, at 10:00 a.m. The Meeting is for the purpose of considering and acting
upon the following matters:

1. The election of two directors of Steelton Bancorp, Inc.;

2. The ratification of the Steelton Bancorp, Inc. 2000 Stock Option Plan
(the "Option Plan");

3. The ratification of the Mechanics Savings Bank Restricted Stock Plan
(the "RSP"); and

4. The ratification of the appointment of Beard Miller Company LLP as the
Corporation's independent auditor for the fiscal year ending December
31, 2001.

The transaction of such other business as may properly come before the
Meeting or any adjournments thereof may also be acted upon. The Board of
Directors is not aware of any other business to come before the Meeting.

Action may be taken on any one of the foregoing proposals at the
Meeting on the date specified above, or on any date or dates to which, by
original or later adjournment, the Meeting may be adjourned. Pursuant to the
Corporation's Bylaws, the Board of Directors has fixed the close of business on
February 28, 2001, as the record date for determination of the stockholders
entitled to vote at the Meeting and any adjournments thereof.

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN, DATE
AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. YOU MAY
REVOKE YOUR PROXY BY FILING WITH THE SECRETARY OF THE CORPORATION A WRITTEN
REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE. IF YOU ARE PRESENT AT
THE MEETING YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON ON EACH MATTER BROUGHT
BEFORE THE MEETING. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT
REGISTERED IN YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR
RECORD HOLDER TO VOTE IN PERSON AT THE MEETING.

BY ORDER OF THE BOARD OF DIRECTORS

/s/Victoria J. Segina
---------------------
Victor J. Segina
Secretary
Steelton, Pennsylvania
March 15, 2001

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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE CORPORATION THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
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PROXY STATEMENT
OF
STEELTON BANCORP, INC.
51 SOUTH FRONT STREET
STEELTON, PENNSYLVANIA 17113
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ANNUAL MEETING OF STOCKHOLDERS
April 18, 2001

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GENERAL
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This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Steelton Bancorp, Inc. (the
"Corporation") to be used at the Annual Meeting of Stockholders of the
Corporation which will be held at Mechanics Savings Bank, 51 South Front Street,
Steelton, Pennsylvania on April 18, 2001, at 10:00 a.m. (the "Meeting"). The
accompanying Notice of Annual Meeting of Stockholders and this Proxy Statement
are being first mailed to stockholders on or about March 15, 2001. The
Corporation is the parent company of Mechanics Savings Bank (the "Bank"). The
Corporation was formed as a corporation chartered under the laws of the
Commonwealth of Pennsylvania at the direction of the Bank to acquire all of the
outstanding stock of the Bank issued in connection with the completion of the
Bank's mutual-to-stock conversion on July 8, 1999.

At the Meeting, stockholders will consider and vote upon (i) the
election of two directors of the Corporation, (ii) the ratification of the
Steelton Bancorp, Inc. 2000 Stock Option Plan (the "Option Plan"), (iii) the
ratification of the Mechanics Savings Bank Restricted Stock Plan (the "RSP") and
(iv) the ratification of the appointment of Beard Miller Company LLP as the
Corporation's independent auditor for the fiscal year ending December 31, 2001.

The Board of Directors adopted the Option Plan and the RSP and the
stockholders of the Corporation approved these plans at a special meeting held
February 3, 2000. There have been no changes made to these plans. The only
reason the Option Plan and the RSP are being resubmitted to stockholders of the
Corporation for ratification at this time is to comply with OTS interpretive
letters, as discussed below under Proposal II and Proposal III.

The Board of Directors knows of no additional matters that will be
presented for consideration at the Meeting. Execution of a proxy, however,
confers on the designated proxyholder the discretionary authority to vote the
shares represented by such proxy in accordance with their best judgment on such
other business, if any, that may properly come before the Meeting or any
adjournment thereof.

VOTING AND REVOCABILITY OF PROXIES

Stockholders who execute proxies retain the right to revoke them at any
time. Unless so revoked, the shares represented by such proxies will be voted at
the Meeting and all adjournments thereof. Proxies may be revoked by written
notice to the Secretary of the Corporation at the address above or by the filing
of a later dated proxy prior to a vote being taken on a particular proposal at
the Meeting. A proxy will not be voted if a stockholder attends the Meeting and
votes in person. Proxies solicited by the Board of Directors will be voted as
specified thereon. If no specification is made, signed proxies will be voted
"FOR" the nominees for director as set forth herein, "FOR" the ratification of
the Option Plan, "FOR" the ratification of the RSP, and "FOR" the ratification
of Beard Miller Company LLP as the Corporation's independent auditor for the
fiscal year ending December 31, 2001. The proxy confers

-1-

discretionary authority on the persons named thereon to vote with respect to the
election of any person as a director where the nominee is unable to serve, or
for good cause will not serve, and with respect to matters incident to the
conduct of the Meeting.

INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON

Executive officers and directors of the Corporation have an interest in
certain matters to be acted upon at the Meeting. Upon stockholders ratification
of the Option Plan and the RSP, the awards made under these plans will vest upon
any future Change in Control of the Corporation, as defined in the Option Plan
and the RSP. The ratification of the Option Plan and the RSP are being presented
as Proposal II and Proposal III, respectively.

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

Stockholders of record as of the close of business on February 28, 2001
(the "Record Date"), are entitled to one vote for each share of Common Stock
then held. As of the Record Date, the Corporation had 349,259 shares of Common
Stock issued and outstanding.

The articles of incorporation of the Corporation ("Articles of
Incorporation") 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 with respect
to the shares held in excess of the Limit. Beneficial ownership is determined
pursuant to the definition in the Articles of Incorporation and includes shares
beneficially owned by such person or any of his or her affiliates (as such terms
are defined in the Articles of Incorporation), or which such person or any of
his or her affiliates has the right to acquire upon the exercise of conversion
rights or options and shares as to which such person or any of his or her
affiliates or associates have or share investment or voting power, but neither
any employee stock ownership or similar plan of the Corporation or any
subsidiary, 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 purposes of the Articles of Incorporation, to beneficially own any Common
Stock held under any such plan.

The presence in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote (after subtracting any
shares held in excess of the Limit) is necessary to constitute a quorum at the
Meeting. With respect to any matter, any shares for which a broker indicates on
the proxy that it does not have discretionary authority as to such shares to
vote on such matter (the "Broker Non-Votes") will be considered present for
purposes of determining whether a quorum is present. In the event there are not
sufficient votes for a quorum or to ratify any proposals at the time of the
Meeting, the Meeting may be adjourned in order to permit the further
solicitation of proxies.

As to the election of directors, the proxy provided by the Board of
Directors allows a stockholder to vote for the election of the nominees proposed
by the Board of Directors, or to withhold authority to vote for the nominees
being proposed. Under the Corporation's bylaws, directors are elected by a
plurality of votes cast, without regard to either (i) Broker Non-Votes or (ii)
proxies as to which authority to vote for the nominees being proposed is
withheld.

Concerning all other matters that may properly come before the Meeting,
including the ratification of the Option Plan, ratification of the RSP and
ratification of the independent auditors, by checking the appropriate box, a
shareholder may: (i) vote "FOR" the item, (ii) vote "AGAINST" the item, or (iii)
"ABSTAIN" with respect to the item. Unless otherwise required by law, all such
matters shall be determined

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by a majority of votes cast affirmatively or negatively without regard to (i)
Broker Non-Votes or (ii) proxies marked "ABSTAIN" as to that matter.

Security Ownership of Certain Beneficial Owners

Persons and groups owning in excess of 5% of the outstanding shares of
Common Stock are required to file reports regarding such ownership pursuant to
the Securities Exchange Act of 1934, as amended (the "1934 Act"). The following
table sets forth, as of the Record Date, persons or groups who own more than 5%
of the Common Stock and the ownership of all executive officers and Directors of
the Corporation as a group. Such reported amounts and all other amounts in this
Proxy Statement have been adjusted to reflect the 5% stock dividend paid by the
Corporation in February 2001. Other than as noted below, management knows of no
person or group that owns more than 5% of the outstanding shares of Common Stock
at the Record Date.

Percent of Shares of
Amount and Nature of Common Stock
Name and Address of Beneficial Owner Beneficial Ownership Outstanding
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Mechanics Savings Bank Employee Stock
Ownership Plan ("ESOP") 32,340(1) 9.8%
51 South Front Street
Steelton, Pennsylvania

Howard Amster
25812 Fairmount Boulevard 25,315(2) 6.9%
Beachwood, Ohio 44122

James S. Nelson
51 South Front Street 19,196(3) 5.5%
Steelton, Pennsylvania 17113

All directors and executive officers of
the Corporation as a group (8 persons) 72,959(4) 20.5%

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(1) These shares are held in a suspense account and are allocated among
participants annually on the basis of compensation as the ESOP debt is
repaid. As of the Record Date, 3,234 shares have been allocated to ESOP
participants.
(2) Based upon a Schedule 13D filed with the SEC on July 19, 1999 which states
that Mr. Amster has sole voting and dispositive power over 10,500 shares
and shared voting and dispositive power over 14,815 shares in an individual
retirement account.
(3) Includes 1,617 shares that may be acquired pursuant to exercisable options.
(4) Includes shares of Common Stock held directly as well as by spouses or
minor children, in trust and other indirect ownership, over which shares
the individuals effectively exercise sole voting and investment power,
unless otherwise indicated. Includes 6,629 shares that may be acquired
pursuant to exercisable options. Excludes 32,016 unallocated shares held by
the ESOP over which the non-employee directors of the Corporation exercise
sole voting power. The Board of Directors appointed a committee consisting
of Directors Falcone, Farina, Segina, Stone and Wiedeman to serve as the
ESOP Plan Committee (the "ESOP Committee"). The ESOP Committee directs the
vote of unallocated shares and shares for which timely voting directions
are not received. Also excludes 12,936 shares held by the RSP over which
certain directors, as RSP trustees, exercise sole voting power. Such
individuals disclaim beneficial ownership with respect to shares held by
the ESOP and the RSP.

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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Corporation's officers and directors, and persons who own more than
ten percent of the Common Stock, to file reports of ownership and changes in
ownership of the Common Stock with the Securities and Exchange Commission and to
provide copies of those reports to the Corporation. The Corporation is not aware
of any beneficial owner, as defined under Section 16(a), of more than ten
percent of its Common Stock. To the best of the Corporation's knowledge, all
section 16(a) filing requirements applicable to its officers and directors were
complied with during the 2000 fiscal year.

PROPOSAL I - ELECTION OF DIRECTORS

The Articles of Incorporation require that the Board of Directors be
divided into four classes, as nearly equal in number as possible, each class to
serve for a four-year period, with approximately one-fourth of the directors
elected each year. The Board of Directors currently consists of seven members.
Two directors will be elected at the Meeting, each to serve for a four-year term
or until his successor has been elected and qualified.

Marino Falcone and Richard E. Farina have been nominated by the Board
of Directors to serve as directors. Both nominees are currently members of the
Board of Directors. It is intended that proxies solicited by the Board of
Directors will, unless otherwise specified, be voted for the election of the
named nominees. If either of the nominees is unable to serve, the shares
represented by all valid proxies will be voted for the election of such
substitutes as the Board of Directors may recommend or the size of the Board may
be reduced to eliminate the vacancy. At this time, the Board of Directors knows
of no reason why either of the nominees might be unavailable to serve.

The following table sets forth the names, ages, terms of, length of
board service and the number and percentage of shares of Common Stock
beneficially owned by both nominees and for each other director of the
Corporation who will continue to serve as a director after the Meeting.

Age at Year First Current Common Stock Percent
December 31, Elected or Term to Beneficially of
Name 2000 Appointed(1) Expire Owned (2) Class
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Board Nominees for Term to Expire in 2005

Marino Falcone 81 1961 2001 3,715(3) 1.0%
Richard E. Farina 69 1966 2001 1,090(3) *

THE BOARD OF DIRECTORS RECOMMENDS THAT ITS NOMINEES
BE REELECTED AS DIRECTORS

Directors Continuing in Office

Harold E. Stremmel 66 1991 2002 13,894(4) 4.0%
Joseph A. Wiedeman 61 1979 2002 11,065(3) 3.2%
James S. Nelson 52 1994 2003 19,196(5) 5.5%
James F. Stone 72 1970 2004 11,065(3) 3.2%
Victor J. Segina 73 1980 2004 11,065(3) 3.2%

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* Less than 1%.
(1) Refers to the year the individual first became a director of the Bank.
(2) Beneficial ownership as of the Record Date. Includes shares of Common
Stock held directly as well as by spouses or minor children, in trust,
and other indirect ownership, over which shares the individuals
effectively exercise sole or shared voting and investment power, unless
otherwise indicated.
(3) Includes 404 shares subject to exercisable options.
Excludes 32,016 unallocated shares of Common Stock held under the ESOP
over which such individual, an ESOP Trustee, exercises sole voting
power. Also excludes 12,936 shares of Common Stock held by the RSP over
which such individual, as an RSP trustee, exercises sole voting power.
Such individual disclaims beneficial ownership with respect to ESOP and
RSP shares.
(4) Includes 2,021 shares subject to exercisable options.
(5) Includes 1,617 shares subject to exercisable options.

Biographical Information

Directors and Executive Officers of the Corporation. Set forth below is
the business experience for the past five years of each of the directors and
executive officers of the Corporation. All directors of the Bank in February
1999 became directors of the Corporation at that time.

Marino Falcone has been a member of the Board of Directors since 1961
and has been Chairman of the Board since 1987. He has been retired since 1986.
Mr. Falcone was previously the owner of Steelton Coal and Oil Company in
Steelton, Pennsylvania.

Richard E. Farina has been a member of the Board of Directors since
1966. Since 1994, Mr. Farina has been retired. He was previously a branch
manager for the Pennsylvania Insurance Company in Harrisburg, Pennsylvania.

Harold E. Stremmel serves as the President and Chief Executive Officer
and has been a member of the Board of Directors since 1991. Mr. Stremmel has
been Chief Executive Officer of the Bank since 1987. He is the past president
and treasurer of the Harrisburg East Shore Kiwanis Club and was previously the
treasurer of the New Steelton Association.

Joseph A. Wiedeman serves as Treasurer and has been a member of the
Board of Directors since 1979. Since 1974, Mr. Wiedeman has been a majority
stockholder of Wiedeman & Douty, P.C., Certified Public Accountants, an
accounting firm located in Steelton, Pennsylvania.

James S. Nelson serves as the Executive Vice President of the
Corporation and has been a member of the Board of Directors since 1994. Mr.
Nelson is also Executive Vice President and Chief Lending Officer of the Bank
and has been employed by the Bank since 1987.

James F. Stone has been a member of the Board of Directors since 1970.
He has been retired since 1992. Mr. Stone was previously the owner of Stone
Funeral Home in Steelton, Pennsylvania.

Victor J. Segina has been a member of the Board of Directors since 1980
and also serves as Secretary. Mr. Segina retired in 1998. He was previously the
owner of an architectural firm located in Harrisburg, Pennsylvania. Mr. Segina
serves on the Building Commission of the Harrisburg Catholic Diocese.

Shannon Aylesworth serves as Chief Financial Officer of the
Corporation. She has been Chief Financial Officer of the Bank since 1996 and a
Vice President of the Bank since January, 1999. Ms. Aylesworth has been employed
by the Bank since 1990.

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Meetings and Committees of the Board of Directors

The Board of Directors conducts its business through meetings of the
board and through activities of its committees. During the year ended December
31, 2000, the Board of Directors held twelve regular meetings and one special
meeting. No director attended fewer than 75% of the total meetings of the Board
of Directors and the committees on which he served during the year ended
December 31, 2000.

Nominating Committee. The entire Board of Directors serves as a
Nominating Committee to select persons to be nominated to serve as directors of
the Corporation and met once in such capacity during the year ended December 31,
2000. The Nominating Committee is not required to consider nominees recommended
by stockholders of the Corporation.

Compensation Committee. The Corporation has no full time employees and
relies on the employees of the Bank for the limited services required by the
Corporation. All compensation paid to executive officers of the Corporation is
paid by the Bank. For these reasons, the Corporation does not have a
compensation committee. The entire Board of Directors of the Bank serves the
function of a compensation committee and met once in such capacity during the
year ended December 31, 2000.

Audit Committee. The Audit Committee consists of Directors Wiedeman,
Stone and Segina and Ms. Barbara Coates, an officer of the Bank. All members of
the Audit Committee other than Ms. Coates are independent under the rules of the
Nasdaq stock market. As the Corporation's stock is traded on the OTC Electronic
Bulletin Board, the Corporation is not required to and has not adopted a written
charter for the Audit Committee. The Audit Committee meets quarterly and meets
with the Corporation's independent auditor to review the results of the annual
audit and other related matters. The Audit Committee met four times during the
year ended December 31, 2000. The Board of Directors as a whole approved the
inclusion of the audited financial statements in the Corporation's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 2000.

Report of the Audit Committee. The Audit Committee is scheduled to meet
to do all of the following for the fiscal year ended December 31, 2000: (i)
review and discuss the Corporation's audited financial statements with
management, (ii) discuss with the Corporation's independent auditor, Beard
Miller Company LLP, all matters required to be discussed under Statement on
Auditing Standards No. 61., and (iii) receive from Beard disclosures regarding
Beard's independence as required by Independence Standards Board Standard No. 1
and discuss with Beard its independence. Such matters will be completed prior to
the date of the Meeting.

Audit Committee:
Joseph A. Wiedeman, James F. Stone, Victor J. Segina and Barbara G.
Coates

Audit Fees. For the year ended December 31, 2000, the Corporation paid
approximately $31,500 for professional services rendered by Beard in connection
with the audit of the annual financial statements and review of the quarterly
financial statements and approximately $3,000 for tax preparation services
rendered by Beard. In addition, the Corporation paid approximately $19,000 for
professional services rendered by the Corporation's prior independent auditor,
McKonly & Asbury, LLP, in connection with the review of the quarterly financial
statements. On September 20, 2000, the Corporation dismissed McKonly and
appointed Beard as its new independent auditors. See "Proposal IV - Ratification
of Appointment of Auditors." All audit and review services were performed by
employees of either Beard or McKonly.

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Certain Relationships and Related Transactions

The Bank, like many financial institutions, has followed a policy of
offering residential mortgage loans for the financing of personal residences,
share loans, and consumer loans to its officers, directors and employees. Share
loans and consumer loans are made in the ordinary course of business and also
made on substantially the same terms and conditions, including interest rate and
collateral, as those of comparable transactions prevailing at the time with
other persons, and do not include more than the normal risk of collectibility or
present other unfavorable features. The Bank offers mortgage loans to full-time
employees for the purchase or refinance of a permanent residence on special
terms and conditions including waiver of appraisal and credit report fees and a
one percent reduction in service charges and interest rate. If the employee is
terminated, or the residence is no longer owner-occupied, the one percent
reduction is eliminated.

DIRECTOR AND EXECUTIVE OFFICER COMPENSATION

Compensation of Directors

Board Fees. The Corporation does not presently compensate its directors
for membership on the Board of Directors. Each director of the Corporation is
also a director of the Bank. During 2000, each director was paid a fee of
$6,000. The chairman of the board, the secretary, and the treasurer receive an
additional yearly fee of $2,756, $2,756, and $1,985, respectively. Directors do
not receive compensation for attending committee meetings. The total fees paid
to the directors for the year ended December 31, 2000 were approximately
$49,497.

Stock Awards. Each non-employee director has been awarded 2,021 options
to purchase shares of Common Stock at an exercise price of $8.72 per share under
the Option Plan and 808 shares of Common Stock under the RSP, as adjusted for
the 5% stock dividend paid by the Corporation in February 2001. Stockholders of
the Corporation approved these awards at a special meeting of stockholders held
February 3, 2000. These awards vest at the rate of 20% on the one year
anniversary of the date of stockholder approval, and 20% annually thereafter.
Ratification of these plans is being presented in this Proxy Statement as
Proposal II and Proposal III.

Executive Compensation

General. The Corporation has no full time employees and relies on the
employees of the Bank for the limited services required by the Corporation. All
compensation paid to officers of the Corporation is paid by the Bank.

Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to or earned by the Corporation's President and
Chief Executive Officer. No executive officer received a total annual salary and
bonus in excess of $100,000 for the fiscal years ended December 31, 1999 or
2000.

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Annual Compensation Long Term Compensation
-------------------------------------- -------------------------
Restricted Securities
Name and Fiscal Other Annual Stock Underlying All Other
Principal Position Year Salary Bonus Compensation(1) Award(2) Options (3) Compensation
- ------------------- ---- ------ ----- --------------- -------- ----------- ------------

Harold E. Stremmel, 2000 $62,702 $ -- $6,215 $35,382 10,106 $8,236(4)
President and CEO 1999 $60,300 $ -- $6,000 $ -- -- $2,309(5)

- -------------------
(1) Includes directors fees.
(2) Represents the award of 4,042 shares of Common Stock under the RSP, as
adjusted for the 5% stock dividend paid by the Corporation in February
2001, based upon the last reported sales price for the Common Stock as
reported on the OTC Electronic Bulletin Board on February 3, 2000, the date
of the award. This award vests at the rate of 20% per year, beginning on
the first anniversary of the date of the grant. Dividend rights associated
with the restricted stock are accrued and held in arrears to be paid at the
time the shares vest.
(3) Mr. Stremmel was awarded 10,106 options, as adjusted for the 5% stock
dividend paid by the Corporation in February 2001, at the exercise price of
$8.72, equal to the last reported sales price for the Common Stock on
February 3, 2000, the date of the award, as adjusted for the 5% stock
dividend.
(4) Represents the award of 538 shares under the ESOP as of June 30, 2000 based
upon the last reported sales price of the Common Stock on the date of the
award. Also includes the Bank's contribution to Mr. Stremmel's account
under a 401(k) Plan of $2,381 during 2000.
(5) Represents Bank's contribution to Mr. Stremmel's account under a 401(k)
Plan of $2,039 during 1999.

Stock Awards. The following tables set forth information concerning
options granted to Mr. Stremmel during the fiscal year ended December 31, 2000.

Option Grants in Last Fiscal Year
-------------------------------------------------------------------------------------------------------------
Individual Grants
-----------------------------------------------------------------------------------

Percent of Total
Options Granted
Number of to Employees Exercise Price Expiration
Name Options Granted(1) in Fiscal Year ($/Share)(1) Date
- ---- ------------------ -------------- ----------------- ------------

Harold E. Stremmel 10,106 25% $8.72 2/3/10

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

(1) Mr. Stremmel was awarded 10,106 options, as adjusted for the 5% stock
dividend paid by the Corporation in February 2001, at the exercise price of
$8.72, equal to the last reported sales price for the Common Stock as
reported on the OTC Electronic Bulletin Board on February 3, 2000, the date
of the award, as adjusted for the 5% stock dividend.

Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
------------------------------------------------------------------------
Value of
Number of Options In-the-Money Options
Shares Acquired Value at Fiscal Year-End (#) at Fiscal Year-End ($)
Name on Exercise(#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable(1)
- ---- --------------- ------------- ------------------------- ----------------------------

Harold E. Stremmel -- $ -- 0 / 10,106 $0 / $41,990

- ---------------------------
(1) Based upon the difference between the option exercise price of $8.72
and the last reported sales price of the Common Stock of $12.875 per
share as of December 29, 2000, as reported on the OTC Bulletin Board.

-8-

Employment Agreements. The Bank has entered into an employment
agreement with its President and Chief Executive Officer, Harold E. Stremmel.
Mr. Stremmel's current base salary under the employment agreement is $65,074.
The employment agreement has a term of three years. The agreement is terminable
by the Bank for "just cause" as defined in the agreement. If Mr. Stremmel is
terminated without just cause, he will be entitled to a continuation of his
salary from the date of termination through the remaining term of the agreement,
but in no event for a period of less than 1 year. The employment agreement
contains a provision stating that in the event of the termination of employment
in connection with any change in control of the Bank or the Corporation, Mr.
Stremmel will be paid a lump sum amount equal to 2.99 times his five-year
average annual taxable cash compensation. If a payment had been made under the
agreement as of December 31, 2000, the payment would have equaled approximately
$177,872. The aggregate payment that would have been made to Mr. Stremmel would
be an expense to the Bank and would have resulted in reductions to the Bank's
net income and capital. The agreement may be renewed annually by the Bank's
Board of Directors upon a determination of satisfactory performance within the
board's sole discretion. If Mr. Stremmel shall become disabled during the term
of the agreement, he shall continue to receive payment of 100% of his base
salary for a period of 12 months and 65% of his base salary for the remaining
term of the agreement. The payments shall be reduced by any other benefit
payments made under other disability programs in effect for the Bank's
employees.

In addition, two other executive officers of the Bank have entered into
employment agreements with the Bank which are similar to the employment
agreement with Mr. Stremmel. If change in control termination payments had been
made under the employment agreements with the two other executive officers as of
December 31, 2000, the payment in the aggregate would have equaled approximately
$238,447.

PROPOSAL II - RATIFICATION OF THE OPTION PLAN

General

The Corporation's Board of Directors adopted the Option Plan and the
Corporation's stockholders approved the Option Plan at a special meeting of
stockholders on February 3, 2000 (the "Effective Date"). There have been no
changes made to the Option Plan since it was originally adopted by the Board of
Directors and approved by stockholders of the Corporation on February 3, 2000.
The Option Plan is being resubmitted to stockholders of the Corporation for
ratification at this time to comply with OTS interpretive letters, as discussed
below.

Pursuant to the Option Plan, up to 40,425 shares of Common Stock
(representing up to 10% of the total Common Stock previously issued in the
Conversion, as adjusted for the 5% stock dividend paid by the Corporation in
February 2001) are reserved under the Corporation's authorized but unissued
shares for issuance by the Corporation upon exercise of stock options to be
granted to officers, directors, employees, and other persons from time to time.
The purpose of the Option Plan is to attract and retain qualified personnel for
positions of substantial responsibility and to provide additional incentive to
certain officers, directors, employees and other persons to promote the success
of the business of the Corporation and the Bank.

Pursuant to regulations of the Office of the Thrift Supervision (the
"OTS") applicable to stock benefit plans established or implemented within one
year following the completion of a mutual-to-stock conversion of a federally
chartered savings institution such as the Bank, the Option Plan contains certain
restrictions and limitations. The Option Plan provides that options granted to
employees or directors become first exercisable no more rapidly than ratably
over a five-year period (with acceleration upon death or disability or a Change

-9-

in Control, as such term is defined in the Option Plan); provided, however, that
such accelerated vesting is not inconsistent with the regulations of the OTS at
the time of such acceleration. Recent OTS interpretive letters permit awards
under stock benefit plans to accelerate vesting of awards upon a Change in
Control; provided that stockholders ratify such plan provisions by action of
stockholders taken more than one year following the completion of the
mutual-to-stock conversion. The Board of Directors is seeking ratification of
the Option Plan (as previously approved by the stockholders on February 3, 2000)
as a means of complying with the OTS interpretive letters.

Ratification of the Option Plan does not increase the number of shares
reserved for issuance thereunder, alter the classes of individuals eligible to
participate in the Option Plan, or otherwise amend or modify the terms of the
Option Plan. In the event that the Option Plan is not ratified by stockholders
at the Meeting, the Option Plan will nevertheless remain in effect. However, any
employee or director of the Corporation or the Bank that has their service
terminated prior to the vesting of such stock awards may forfeit such unvested
awards to the extent that may be required under applicable OTS regulations and
policies.

The Option Plan is administered by the Board of Directors or a
committee of not less than two non-employee directors appointed by the
Corporation's Board of Directors and serving at the pleasure of the Board (the
"Option Committee"). Members of the Option Committee shall be deemed
"Non-Employee Directors" within the meaning of Rule 16b-3 pursuant to the 1934
Act. The Option Committee may select the officers and employees to whom options
are to be granted and the number of options to be granted based upon several
factors including prior and anticipated future job duties and responsibilities,
job performance, the Bank's financial performance and a comparison of awards
given by other institutions. A majority of the members of the Option Committee
shall constitute a quorum and the action of a majority of the members present at
any meeting at which a quorum is present shall be deemed the action of the
Option Committee.

Officers, directors, key employees and other persons who are designated
by the Option Committee will be eligible to receive, at no cost to them, options
under the Option Plan (the "Optionees"). Each option granted pursuant to the
Option Plan shall be evidenced by an instrument in such form as the Option
Committee shall from time to time approve. Option shares may be paid for in
cash, shares of Common Stock, or a combination of both. The Corporation will
receive no monetary consideration for the granting of stock options under the
Option Plan. Further, the Corporation will receive no consideration other than
the option exercise price per share for Common Stock issued to Optionees upon
the exercise of those options.

Shares of Common Stock issuable under the Option Plan may be from
authorized but unissued shares, treasury shares or shares purchased in the open
market. An option which expires, becomes unexercisable, or is forfeited for any
reason prior to its exercise will again be available for issuance under the
Option Plan. No option or any right or interest therein is assignable or
transferable except by will or the laws of descent and distribution. The Option
Plan shall continue in effect for a term of ten years from the Effective Date.

Stock Options

The Option Committee may grant either Incentive Stock Options (options
that afford favorable tax treatment to recipients upon compliance with certain
restrictions pursuant to Section 422 of the Internal Revenue Code of 1986, as
amended ("Code"), and that do not normally result in tax deductions to the
Corporation) or Non-Incentive Stock Options (options that do not afford
recipients favorable tax treatment under Code Section 422). In general, if an
Optionee ceases to serve as an employee of the Corporation for any reason other
than disability or death, an exercisable Incentive Stock Option may continue to
be exercisable for three months but in no event after the expiration date of the
option, except as may otherwise

-10-

be determined by the Option Committee at the time of the award. In the event of
the disability or death of an Optionee during employment, an exercisable
Incentive Stock Option will continue to be exercisable for one year and two
years, respectively, to the extent exercisable by the Optionee immediately prior
to the Optionee's disability or death but only if, and to the extent that, the
Optionee was entitled to exercise such Incentive Stock Options on the date of
termination of employment. The terms and conditions of Non-Incentive Stock
Options relating to the effect of an Optionee's termination of employment or
service, disability, or death shall be such terms as the Option Committee, in
its sole discretion, shall determine at the time of termination of service,
disability or death, unless specifically determined at the time of grant of such
options.

Currently, the Option Plan requires that options granted to employees
or directors become first exercisable no more rapidly than ratably over a
five-year period (with acceleration upon death or disability or a Change in
Control, as such terms are defined in the Option Plan); provided, however, that
such accelerated vesting is not inconsistent with the regulations of the OTS at
the time of such acceleration. Ratification of the Option Plan at the Meeting
will conform the acceleration of vesting of options upon a Change in Control
with applicable OTS interpretive letters. Such stockholder ratification will be
effective with respect to previously awarded options and any options that may be
granted in the future. Pursuant to the Option Plan, upon a Change in Control,
all options previously granted and outstanding as of the date of a Change in
Control will automatically become exercisable and non-forfeitable.

No shares of Common Stock shall be issued upon the exercise of an
option until full payment has been received by the Corporation, and no Optionee
shall have any of the rights of a stockholder of the Corporation until shares of
Common Stock are issued to such Optionee. Upon the exercise of an option by an
Optionee (or the Optionee's personal representative), the Option Committee, in
its sole and absolute discretion, may make a cash payment to the Optionee, in
whole or in part, in lieu of the delivery of shares of Common Stock. Such cash
payment to be paid in lieu of delivery of Common Stock shall be equal to the
difference between the fair market value of the Common Stock on the date of the
option exercise and the exercise price per share of the option. Any cash payment
shall be in exchange for the cancellation of such option. A cash payment shall
not be made in the event that such transaction would result in liability to the
Optionee and the Corporation under Section 16(b) of the 1934 Act, and
regulations promulgated thereunder.

The Option Plan provides that the Board of Directors of the Corporation
may authorize the Option Committee to direct the execution of an instrument
providing for the modification, extension or renewal of any outstanding option,
provided that no such modification, extension or renewal shall confer on the
Optionee any right or benefit which could not be conferred on the Optionee by
the grant of a new option at such time, and shall not materially decrease the
Optionee's benefits under the option without the Optionee's consent, except as
otherwise provided under the Option Plan.

Awards Under the Option Plan

The Board or the Option Committee shall from time to time determine the
officers, directors, key employees and other persons who shall be granted
options under the Plan, the number of options to be granted to any participant,
and whether options granted to each such Plan participant shall be Incentive
Stock Options and/or Non-Incentive Stock Options. In selecting participants and
in determining the number of shares of Common Stock subject to options to be
granted to each such participant, the Board or the Option Committee may consider
the nature of the services rendered by each such participant, each such
participant's current and potential contribution to the Corporation and such
other factors as may be deemed relevant. Participants who have been granted an
option may, if otherwise eligible, be granted additional options. In no event
shall shares of Common Stock subject to options granted to non-employee
directors in the aggregate under this Option Plan exceed more than 30% of the
total number of shares of Common Stock authorized

-11-

for delivery under this Plan, and no more than 5% of total shares of Common
Stock may be awarded to any individual non-employee director. In no event shall
shares of Common Stock subject to options granted to any employee exceed more
than 25% of the total number of shares of Common Stock authorized for delivery
under the Option Plan.

The table below presents information related to options previously
awarded by the Corporation under the Option Plan. Ratification of the Option
Plan does not impact the number of options previously awarded. Stockholder
ratification of the Option Plan confirms the provisions of the Option Plan
previously approved by stockholders of the Corporation. In accordance with the
Option Plan, all outstanding options shall become immediately exercisable in the
event of a Change in Control of the Corporation or the Bank.

PREVIOUSLY AWARDED BENEFITS
UNDER THE STOCK OPTION PLAN
---------------------------
Number of Options
Name and Position Previously Granted (1)(2)(3)
----------------- ----------------------------

Harold E. Stremmel, President, CEO and Director 10,106
James S. Nelson, Executive Vice President and Director 8,085
Shannon Aylesworth, Vice President and Chief Financial Officer 4,851
Michael S. Leonzo, Vice President 4,042
Barbara G. Coates, Vice President 3,234
Marino Falcone, Director 2,021
James F. Stone, Director 2,021
Joseph A. Wiedeman, Director and Treasurer 2,021
Victor J. Segina, Director and Secretary 2,021
Richard E. Farina, Director 2,021
Executive Group (5 persons) 30,318
Non-Executive Director Group (5 persons) 10,105
Non-Executive Officer Employee Group 0

- --------------------------
(1) The exercise price of the Options was set on the date of stockholder
approval of the Option Plan on February 3, 2000. As adjusted for the 5%
stock dividend paid by the Corporation in February 2001, the exercise price
is $8.72. The exact dollar value of the options will equal the last
reported sales price of the Common Stock on the date the option is
exercised less the exercise price. As of March 8, 2001, the last reported
sale price of the Common Stock was $15.625 per share.
(2) Awards shall be 100% exercisable in the event of death, disability, or upon
a change in control of the Corporation or the Bank (subject to stockholder
ratification of Proposal II). Options awarded to officers and employees are
first exercisable at the rate of 20% on the one year anniversary of the
date of grant and 20% annually thereafter during periods of continued
service as an employee, director or director emeritus. Options awarded to
employees shall continue to be exercisable during continued service as an
employee, director or director emeritus. Options not exercised within three
months of termination of service as an employee shall thereafter be deemed
non-incentive stock options. Options awarded to directors are first
exercisable at a rate of 20% one year after the date of grant and 20%
annually thereafter, during such period of service as a director or
director emeritus, and shall remain exercisable for ten years without
regard to continued service as a director or director emeritus.
(3) All option awards presented herein have been adjusted to reflect the 5%
stock dividend paid by the Corporation in February 2001.

-12-

Effect of Mergers, Change of Control and Other Adjustments

Subject to any required action by the stockholders of the Corporation,
within the sole discretion of the Option Committee, the aggregate number of
shares of Common Stock for which Options may be granted hereunder or the number
of shares of Common Stock represented by each outstanding Option will be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Common Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend or any other increase
or decrease in the number of shares of Common Stock effected without the receipt
or payment of consideration by the Corporation. Subject to any required action
by the stockholders of the Corporation, in the event of any change in control,
recapitalization, merger, consolidation, exchange of shares, spin-off,
reorganization, tender offer, partial or complete liquidation or other
extraordinary corporate action or event, the Option Committee, in its sole
discretion, shall have the power, prior to or subsequent to such action or
events, to (i) appropriately adjust the number of shares of Common Stock subject
to each option, the exercise price per share of such option, and the
consideration to be given or received by the Corporation upon the exercise of
any outstanding options; (ii) cancel any or all previously granted options,
provided that appropriate consideration is paid to the Optionee in connection
therewith; and/or (iii) make such other adjustments in connection with the
Option Plan as the Option Committee, in its sole discretion, deems necessary,
desirable, appropriate or advisable. However, no action may be taken by the
Option Committee which would cause Incentive Stock Options granted pursuant to
the Option Plan to fail to meet the requirements of Section 422 of the Code
without the consent of the Optionee. The Option Plan provision to accelerate the
exercise of options and the immediate exercisability of options in the case of a
Change in Control of the Corporation could have an anti-takeover effect by
making it more costly for a potential acquiror to obtain control of the
Corporation due to the higher number of shares outstanding following such
exercise of options.

The power of the Option Committee to accelerate the exercise of options
and the immediate exercisability of Options in the case of a Change in Control
of the Corporation could have an anti-takeover effect by making it more costly
for a potential acquiror to obtain control of the Corporation due to the higher
number of shares outstanding following such exercise of options. The power of
the Option Committee to make adjustments in connection with the Option Plan,
including adjusting the number of shares subject to options and canceling
options, prior to or after the occurrence of an extraordinary corporate action,
allows the Option Committee to adapt the Option Plan to operate in changed
circumstances, to adjust the Option Plan to fit a smaller or larger company, and
to permit the issuance of options to new management following such extraordinary
corporate action. However, this power of the Option Committee also has an
anti-takeover effect, by allowing the Option Committee to adjust the Option Plan
in a manner to allow the present management of the Corporation to exercise more
options and hold more shares of the Corporation's Common Stock, and to possibly
decrease the number of options available to new management of the Corporation.

Amendment and Termination of the Option Plan

The Board of Directors may alter, suspend or discontinue the Option
Plan, except that no action of the Board shall increase the maximum number of
shares of Common Stock issuable under the Option Plan, materially increase the
benefits accruing to Optionees under the Option Plan or materially modify the
requirements for eligibility for participation in the Option Plan unless such
action of the Board shall be subject to approval or ratification by the
stockholders of the Corporation.

-13-

Possible Dilutive Effects of the Option Plan

The Common Stock to be issued upon the exercise of options awarded
under the Option Plan may either be authorized but unissued shares of Common
Stock or shares purchased in the open market. Because the stockholders of the
Corporation do not have preemptive rights, to the extent that the Corporation
funds the Option Plan, in whole or in part, with authorized but unissued shares,
the interests of current stockholders will be diluted. If upon the exercise of
all of the options, the Corporation delivers newly issued shares of Common Stock
(i.e., 40,425 shares of Common Stock), then the dilutive effect to current
stockholders would be approximately 10.4%. Ratification of the Option Plan does
not increase the maximum number of shares issuable under the Option Plan as
previously approved by stockholders.

Federal Income Tax Consequences

Under present federal tax laws, awards under the Option Plan will have
the following consequences:

1. The grant of an option will not by itself result in the
recognition of taxable income to an Optionee nor entitle the
Corporation to a tax deduction at the time of such grant.

2. The exercise of an option which is an "Incentive Stock Option"
within the meaning of Section 422 of the Code generally will not,
by itself, result in the recognition of taxable income to an
Optionee nor entitle the Corporation to a deduction at the time
of such exercise. However, the difference between the option
exercise price and the fair market value of the Common Stock on
the date of option exercise is an item of tax preference which
may, in certain situations, trigger the alternative minimum tax
for an Optionee. An Optionee will recognize capital gain or loss
upon resale of the shares of Common Stock received pursuant to
the exercise of Incentive Stock Options, provided that such
shares are held for at least one year after transfer of the
shares or two years after the grant of the option, whichever is
later. Generally, if the shares are not held for that period, the
Optionee will recognize ordinary income upon disposition in an
amount equal to the difference between the option exercise price
and the fair market value of the Common Stock on the date of
exercise, or, if less, the sales proceeds of the shares acquired
pursuant to the option.

3. The exercise of a Non-Incentive Stock Option will result in the
recognition of ordinary income by the Optionee on the date of
exercise in an amount equal to the difference between the
exercise price and the fair market value of the Common Stock
acquired pursuant to the option.

4. The Corporation will be allowed a tax deduction for federal tax
purposes equal to the amount of ordinary income recognized by an
Optionee at the time the Optionee recognizes such ordinary
income.

5. In accordance with Section 162(m) of the Code, the Corporation's
tax deductions for compensation paid to the most highly paid
executives named in the Corporation's Proxy Statement may be
limited to no more than $1 million per year, excluding certain
"performance-based" compensation. The Corporation intends for the
award of options under the Option Plan to comply with the
requirement for an exception to Section 162(m) of the Code
applicable to stock option plans so that the Corporation's
deduction for

-14-

compensation related to the exercise of options would not be
subject to the deduction limitation set forth in Section 162(m)
of the Code.

Accounting Treatment

The Corporation expects to use the "intrinsic value based method" as
prescribed by APB Opinion 25. Accordingly, neither the grant nor the exercise of
an option under the Option Plan currently require any charge against earnings
under generally accepted accounting principles. Common Stock issuable pursuant
to outstanding options which are exercisable under the Option Plan will be
considered outstanding for purposes of calculating earnings per share on a
diluted basis.

Stockholder Ratification

Stockholder ratification of the Option Plan is being sought in
accordance with interpretive letters of the OTS. An affirmative vote of a
majority of the votes cast at the Meeting on the matter, in person or by proxy,
is required to constitute stockholder ratification of the Option Plan, submitted
as Proposal II.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
RATIFICATION OF THE OPTION PLAN.

PROPOSAL III - RATIFICATION OF THE RSP

General

The Board of Directors of the Corporation previously adopted the RSP as
a method of providing directors, officers, and key employees of the Bank with a
proprietary interest in the Corporation in a manner designed to encourage such
persons to remain in the employment or service of the Bank. There have been no
changes made to the RSP since it was originally adopted by the Board of
Directors and approved by stockholders of the Corporation on February 3, 2000.
The RSP is being resubmitted to stockholders of the Corporation for ratification
at this time to comply with OTS interpretive letters, as discussed below.

As previously approved by stockholders of the Corporation on February
3, 2000, the Bank contributed sufficient funds to the RSP to purchase Common
Stock representing up to 4% of the total Common Stock previously issued in the
Conversion (i.e., 16,170 shares of Common Stock, as adjusted for the 5% stock
dividend paid by the Corporation in February 2001) in the open market. All of
the Common Stock purchased by the RSP was purchased at the Fair Market Value of
such stock on the date of purchase. Awards under the RSP were made in
recognition of expected future services to the Bank by its directors, officers
and key employees responsible for implementation of the policies adopted by the
Bank's Board of Directors and as a means of providing a further retention
incentive.

Pursuant to regulations of the Office of the Thrift Supervision (the
"OTS") applicable to stock benefit plans established or implemented within one
year following the completion of a mutual-to-stock conversion of a federally
chartered savings institution such as the Bank, the RSP contains certain
restrictions and limitations. The RSP provides that stock awards ("Awards")
granted to employees or directors become vested no more rapidly than ratably
over a five-year period (with acceleration upon death or disability or a Change
in Control, as such term is defined in the RSP); provided, however, that such
accelerated vesting is

-15-

not inconsistent with the regulations of the OTS at the time of such
acceleration. Recent OTS interpretive letters permit awards under stock benefit
plans to accelerate vesting of awards upon a Change in Control; provided that
stockholders ratify such plan provisions by action of stockholders taken more
than one year following the completion of the mutual-to-stock conversion. The
Board of Directors is seeking ratification of the RSP (as previously approved by
the stockholders on February 3, 2000) as a means of complying with the OTS
interpretive letters.

Ratification of the RSP does not increase the number of shares reserved
for issuance thereunder, alter the classes of individuals eligible to
participate in the RSP, or otherwise amend or modify the terms of the RSP. In
the event that the RSP is not ratified by stockholders at the Meeting, the RSP
will nevertheless remain in effect. However, any employee or director of the
Corporation or the Bank that has their service terminated prior to the vesting
of such stock awards may forfeit such unvested awards to the extent that may be
required under applicable OTS regulations and policies.

Awards Under the RSP

Currently, the RSP requires that Awards granted to employees or
directors become first exercisable no more rapidly than ratably over a five-year
period (with accelerated vesting upon death or disability or a Change in
Control, as such terms are defined in the RSP); provided, however, that such
accelerated vesting is not inconsistent with the regulations of the OTS at the
time of such acceleration. Ratification of the RSP at the Meeting will conform
the acceleration of vesting of Awards upon a Change in Control with applicable
OTS interpretive letters. Such stockholder ratification will be effective with
respect to previously granted Awards and any Awards that may be granted in the
future. Pursuant to the RSP, upon a Change in Control, all Awards previously
granted and outstanding as of the date of a Change in Control will automatically
become exercisable and non-forfeitable.

Benefits under the RSP ("Plan Share Awards") may be granted at the sole
discretion of a committee comprised of not less than three directors who are not
employees of the Bank or the Corporation (the "RSP Committee") appointed by the
Bank's Board of Directors. The RSP is managed by trustees (the "RSP Trustees")
who are non-employee directors of the Bank or the Corporation and who have the
responsibility to invest all funds contributed by the Bank to the trust created
for the RSP (the "RSP Trust"). Unless the terms of the RSP or the RSP Committee
specifies otherwise, awards under the RSP will be in the form of restricted
stock payable as the Plan Share Awards shall be earned and non-forfeitable.
Twenty percent (20%) of such awards shall be earned and non-forfeitable on the
one year anniversary of the date of grant of such awards, and 20% annually
thereafter, provided that the recipient of the award remains an employee,
director or director emeritus during such period. A recipient of such restricted
stock will not be entitled to voting rights associated with such shares prior to
the applicable date such shares are earned. Dividends paid on Plan Share Awards
shall be held in arrears and distributed upon the date such applicable Plan
Share Awards are earned. Any shares held by the RSP Trust which are not yet
earned shall be voted by the RSP Trustees, as directed by the RSP Committee. If
a recipient of such restricted stock terminates employment or service for
reasons other than death, disability, or a change in control of the Corporation
or the Bank, the recipient forfeits all rights to the awards under restriction.
If the recipient's termination of employment or service is caused by death,
disability, or a change in control of the Corporation or the Bank (provided that
such accelerated vesting is not inconsistent with applicable regulations of the
OTS at the time of such change in control), all restrictions expire and all
shares allocated shall become unrestricted. Awards of restricted stock to
directors shall be immediately non-forfeitable in the event of the death or
disability of such director, or a change in control of the Corporation or the
Bank and distributed as soon as practicable thereafter. The Board of Directors
can terminate the RSP at any time, and if it does so, any shares not allocated
will revert to the Corporation.

-16-

Plan Share Awards under the RSP will be determined by the RSP
Committee. In no event shall any Employee receive Plan Share Awards in excess of
25% of the aggregate Plan Shares authorized under the Plan. Plan Share Awards
may be granted to newly elected or appointed non-employee directors of the Bank
subsequent to the effective date (as defined in the RSP) provided that the Plan
Share Awards made to non-employee directors shall not exceed 30% of total Plan
Share Reserve in the aggregate under the Plan or 5% of the total Plan Share
Reserve to any individual non-employee director.

The aggregate number of Plan Shares available for issuance pursuant to
the Plan Share Awards and the number of shares to which any Plan Share Award
relates shall be proportionately adjusted for any increase or decrease in the
total number of outstanding shares of Common Stock issued subsequent to the
effective date (as defined in the RSP) of the RSP resulting from any split,
subdivision or consolidation of the Common Stock or other capital adjustment,
change or exchange of Common Stock, or other increase or decrease in the number
or kind of shares effected without receipt or payment of consideration by the
Corporation.

The following table presents information related to the previously
granted awards of Common Stock under the RSP as authorized pursuant to the terms
of the RSP. Ratification of such RSP does not change the number of shares
awarded or other terms. Such ratification of the RSP confirms the provisions of
the RSP previously approved by the stockholders of the Corporation.

PRIOR AWARDS UNDER THE
RESTRICTED STOCK PLAN
---------------------
Number of Shares
Name and Position to be Granted (1)(2)(3)
----------------- -----------------------

Harold E. Stremmel, President, CEO and Director 4,042
James S. Nelson, Executive Vice President and Director 3,234
Shannon Aylesworth, Vice President and Chief Financial Officer 1,940
Michael S. Leonzo, Vice President 1,617
Barbara G. Coates, Vice President 1,294
Marino Falcone, Director 808
James F. Stone, Director 808
Joseph A Wiedeman, Director and Treasurer 808
Victor J. Segina, Director and Secretary 808
Richard E. Farina, Director 808
Executive Group (5 persons) 12,127
Non-Executive Director Group (5 persons) 4,042
Non-Executive Officer Employee Group 0

- ----------------------------
(1) The exact dollar value of the shares of Common Stock granted will equal the
last reported sales price of the Common Stock as reported on the OTC
Electronic Bulletin Board on the date of vesting of such awards.
Accordingly, the exact dollar value is not presently determinable. The last
reported sale price for the Common Stock on February 3, 2001, the date of
the vesting of the first 20% of the award, was $13.50 per share.
(2) All Plan Share Awards presented herein shall be earned at the rate of 20%
one year from date of grant, and 20% annually thereafter. All awards become
immediately 100% vested upon death, disability, or termination of service
following a change in control (as defined in the RSP). Plan Share Awards
shall continue to vest during periods of service as an employee, director,
or director emeritus.
(3) All Plan Share Awards presented herein have been adjusted to reflect the 5%
stock dividend paid by the Corporation in February 2001.

-17-

Amendment and Termination of the RSP

The Board may amend or terminate the RSP at any time. However, no
action of the Board may increase the maximum number of Plan Shares permitted to
be awarded under the RSP, except for adjustments in the Common Stock of the
Corporation, materially increase the benefits accruing to Participants under the
RSP or materially modify the requirements for eligibility for participation in
the RSP unless such action of the Board shall be subject to ratification by the
stockholders of the Corporation.

Possible Dilutive Effect of the RSP

In the event that the RSP is not ratified at the Meeting, the RSP will
nevertheless remain in effect. Because shares for awards under the RSP have
already been purchased in the market, current shareholders will suffer no
ownership dilution. However, in the event the RSP is ratified and a change in
control of the Corporation occurs prior to the time that shares that have been
awarded pursuant to the RSP would otherwise vest, the aggregate purchase price
received by stockholders could be effectively reduced by the value of shares
that vest solely because of the change in control. The Corporation currently has
no plan in place that will result in a change in control.

Federal Income Tax Consequences

Common Stock awarded under the RSP is generally taxable to the
recipient at the time that such awards become earned and non-forfeitable, based
upon the fair market value of such stock at the time of such vesting.
Alternatively, a recipient may make an election pursuant to Section 83(b) of the
Code within 30 days of the date of the transfer of such Plan Share Award to
elect to include in gross income for the current taxable year the fair market
value of such award. Such election must be filed with the Internal Revenue
Service within 30 days of the date of the transfer of the stock award. The
Corporation will be allowed a tax deduction for federal tax purposes as a
compensation expense equal to the amount of ordinary income recognized by a
recipient of Plan Share Awards at the time the recipient recognizes taxable
ordinary income. A recipient of a Plan Share Award may elect to have a portion
of such award withheld by the RSP Trust in order to meet any necessary tax
withholding obligations.

Accounting Treatment

For accounting purposes, the Corporation will recognize compensation
expense in the amount of the fair market value of the Common Stock subject to
Plan Share Awards at the grant date pro rata over the period of years during
which the awards are earned.

Stockholder Ratification

The Corporation is submitting the RSP to stockholders for ratification
in accordance with the interpretive letters of the OTS. An affirmative vote of a
majority of the votes cast at the Meeting on the matter, in person or by proxy,
is required to constitute stockholder ratification of the RSP, submitted as
Proposal III.

-18-

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
RATIFICATION OF THE RSP.

PROPOSAL IV - RATIFICATION OF APPOINTMENT OF AUDITORS

The Board of Directors of the Corporation has appointed Beard Miller
Company LLP as the Corporation's independent auditor for the fiscal year ending
December 31, 2001, subject to ratification by the Corporation's stockholders. A
representative of Beard is expected to be present at the Meeting, will have the
opportunity to make a statement if he or she so desires, and is expected to be
available to respond to appropriate questions.

On September 20, 2000, the Corporation dismissed its independent
auditors, McKonly & Asbury, LLP, and appointed Beard as its new independent
auditors. The decision to change accountants was approved by the Corporation's
Board of Directors. McKonly & Asbury's reports on the Corporation's consolidated
financial statements for the fiscal years ended December 31, 1998 and 1999 did
not contain an adverse opinion or disclaimer of opinion, and were not qualified
or modified as to uncertainty, audit scope or accounting principles. In
connection with audits of the fiscal years ended December 31, 1998 and 1999 and
any subsequent interim period preceding the date hereof, there were no
disagreements or reportable events between the Corporation and McKonly & Asbury
on any matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which, if not resolved to the
satisfaction of McKonly & Asbury, would have caused them to make a reference to
the subject matter of the disagreements or reportable events in connection with
their reports. During the two most recent fiscal years, the Corporation did not
consult with Beard regarding any the application of accounting principals to any
specific accounting, auditing or financial reporting matters.

Ratification of the appointment of the auditors requires the
affirmative vote of a majority of the votes cast, in person or by proxy, by the
stockholders of the Corporation at the Meeting. The Board of Directors
recommends that stockholders vote "FOR" the ratification of the appointment of
Beard Miller Company LLP as the Corporation's auditors for the 2001 fiscal year.

STOCKHOLDER PROPOSALS

In order to be considered for inclusion in the Corporation's proxy
materials for the annual meeting of stockholders for the fiscal year ending
December 31, 2001, all stockholder proposals must be received at the
Corporation's executive office at 51 South Front Street, Steelton, Pennsylvania
17113 no later than November 15, 2001. In addition, stockholder proposals must
meet other applicable criteria as set forth in the Corporation's bylaws in order
to be considered for inclusion in the Corporation's proxy materials.

Under the Corporation's bylaws, stockholder proposals that are not
included in the Corporation's proxy statement for the fiscal year ending
December 31, 2001, will only be considered at the annual meeting to be held in
2002 if the stockholder submits notice of the proposal to the Corporation at the
above address by February 17, 2002. In addition, stockholder proposals must meet
other applicable criteria as set forth in the Corporation's bylaws in order to
be considered at the 2002 annual meeting.

-19-

OTHER MATTERS

The Board of Directors is not aware of any other matters to come before
the Meeting. However, if any other matters should properly come before the
Meeting or any adjournments, it is intended that proxies in the accompanying
form will be voted in respect thereof in accordance with the judgment of the
persons named in the accompanying proxy.

FORM 10-KSB

A copy of the Corporation's annual report on Form 10-KSB for the fiscal
year ended December 31, 2000 will be furnished without charge to stockholders as
of the Record Date upon written request to the Secretary, Steelton Bancorp,
Inc., 51 South Front Street, Steelton, Pennsylvania 17113.

BY ORDER OF THE BOARD OF DIRECTORS

/s/Victor J. Segina
-----------------------
Victor J. Segina
Secretary

Steelton, Pennsylvania
March 15, 2001

-20-

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STEELTON BANCORP, INC.
51 SOUTH FRONT STREET
STEELTON, PENNSYLVANIA 17113
- --------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
April 18, 2001
- --------------------------------------------------------------------------------

The undersigned hereby appoints the Board of Directors of Steelton
Bancorp, Inc. (the "Corporation"), or its designee, with full powers of
substitution, to act as attorneys and proxies for the undersigned, to vote all
shares of Common Stock of the Corporation, which the undersigned is entitled to
vote at the Annual Meeting of Stockholders (the "Meeting"), to be held at
Mechanics Savings Bank, 51 South Front Street, Steelton, Pennsylvania on
Wednesday, April 18, 2001, at 10:00 a.m. and at any and all adjournments
thereof, in the following manner:

FOR WITHHELD
--- --------

1. The election as director of the nominees
listed with terms to expire in 2005
(except as marked to the contrary below): [ ] [ ]

Marino Falcone
Richard E. Farina

INSTRUCTIONS: To withhold your vote for either nominee, write the nominee's name
on the line provided below.

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

FOR AGAINST ABSTAIN
--- ------- -------

2. The ratification of the
Steelton Bancorp, Inc.
2000 Stock Option Plan. [ ] [ ] [ ]

3. The ratification of the
Mechanics Savings Bank
Restricted Stock Plan. [ ] [ ] [ ]

4. The ratification of the appointment
of Beard Miller Company LLP as the
Corporation's independent auditor for the
fiscal year ending December 31, 2001. [ ] [ ] [ ]

The Board of Directors recommends a vote "FOR" all of the above listed
proposals.

- --------------------------------------------------------------------------------
THIS SIGNED PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS SIGNED PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED.
IF ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS SIGNED PROXY WILL BE
VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME,
THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE
MEETING.
- --------------------------------------------------------------------------------

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

Should the undersigned be present and elect to vote at the Meeting, or
at any adjournments thereof, and after notification to the Secretary of the
Corporation at the Meeting of the stockholder's decision to terminate this
Proxy, the power of said attorneys and proxies shall be deemed terminated and of
no further force and effect. The undersigned may also revoke this Proxy by
filing a subsequently dated Proxy or by written notification to the Secretary of
the Corporation of his or her decision to terminate this Proxy.

The undersigned acknowledges receipt from the Corporation prior to the
execution of this proxy of a Notice of Annual Meeting of Stockholders and a
Proxy Statement dated March 15, 2001.

[ ] Check Box if You Plan
Dated: to Attend the Annual Meeting.
---------------------------

- ------------------------- --------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER

- ------------------------- --------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER

Please sign exactly as your name appears on this Proxy. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title. If shares are held jointly, each holder should sign.

- --------------------------------------------------------------------------------
PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
- --------------------------------------------------------------------------------