Securities and Exchange Commission
                             Washington, D.C. 20549

                                    Form 10-K
 Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
            Act of 1934 for the fiscal year ended December 31, 1998

                         Commission File Number: 0-14815

                         PROGRESS FINANCIAL CORPORATION
             (Exact name of registrant as specified in its charter)


          Delaware                                            23-2413363
--------------------------------                       -----------------------
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                         Identification Number)


4 Sentry Parkway - Suite 200
P. O. Box 3036
Blue Bell, Pennsylvania                                       19422-0764
--------------------------------                       -----------------------
(Address of principal executive offices)                      (Zip Code)


Registrant's telephone number,                                  (610) 825-8800
including area code:                                            --------------

Securities registered pursuant to                               Non applicable
Section 12(b) of the Act:                                       --------------

Securities registered pursuant to               Common  Stock, $1.00 par value
Section 12(g) of the Act:                       ------------------------------
                                                       (Title of class)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. 
Yes  |X|    No ____

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.     |X|

The aggregate market value of the voting stock, held by non-affiliates of the
Registrant as a group, was $65,802,717 as of March 5, 1999, based upon the
closing price of $14.6875 per share of the Registrant's common stock on March 5,
1999 as reported by the Nasdaq Stock Market.

As of March 5, 1999, there were 5,270,728 issued and outstanding shares of the
Registrant's Common Stock.

Documents Incorporated By Reference:
-----------------------------------

(1) Portions of the Annual Report to Stockholders for the year ended December
    31, 1998 are incorporated into Part II, Items 5 through 8 of this 
    Form 10-K.

(2) Portions of the definitive proxy statement for the 1999 Annual Meeting of
    Stockholders are incorporated into Part III, Items 10 through 13 of this
    Form 10-K.



                                       1
<PAGE>


                         PROGRESS FINANCIAL CORPORATION
                                Table of Contents


                                     PART I
                                                                            Page
                                                                            ----

Item 1.   Business............................................................3
Item 2.   Properties.........................................................19
Item 3.   Legal Proceedings..................................................19
Item 4.   Submission of Matters to a Vote of Security Holders................19



                                     PART II

Item 5.   Market for the Registrant's Common Equity and Related 
              Stockholder Matters............................................20
Item 6.   Selected Consolidated Financial Data...............................20
Item 7.   Management's Discussion and Analysis of Financial Condition and
              Results of Operations..........................................20
Item 7A.  Quantitative and Qualitative Disclosure about Market Risk..........20
Item 8.   Financial Statements and Supplementary Data........................20
Item 9.   Changes in and Disagreements with Accountants on Accounting and
              Financial Disclosure...........................................20

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.................20
Item 11.  Executive Compensation.............................................20
Item 12.  Security Ownership of Certain Beneficial
              Owners and Management..........................................20
Item 13.  Certain Relationships and Related Transactions.....................20


                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and
          Reports on Form 8-K................................................21

          Signatures.........................................................22



                                       2
<PAGE>

                                     PART I


Item 1.  Business


General

Progress Financial Corporation (the "Company") was incorporated under the laws
of the State of Delaware in February 1986 by authorization of the Board of
Directors of Progress Bank (the "Bank") for the purpose of becoming a unitary
thrift holding company owning all of the outstanding stock of the Bank. On July
18, 1986, pursuant to a plan of reorganization approved by the Bank's
stockholders, all of the outstanding shares of capital stock of the Bank were
converted into shares of capital stock of the Company on a share-for-share basis
so that the stockholders of the Bank became the stockholders of the Company, and
the Company became the sole stockholder of the Bank. The Company is authorized
as a Delaware corporation to engage in any activity permitted by the Delaware
General Corporation Law. The holding company structure permits the Bank, through
the Company, to expand the size and scope of the financial services offered
beyond those that the Bank is permitted to offer.

The Company is a Delaware corporation headquartered in Blue Bell, Pennsylvania.
The Company is a unitary thrift holding company and the sole stockholder of the
Bank, a federally-chartered savings bank, which has been engaged in the thrift
business since 1878. The Bank conducts its business through eight banking
offices located in Montgomery County, one banking office in Delaware County, one
banking office in Chester County and one banking office in the Andorra section
of Philadelphia, in southeastern Pennsylvania.

The Company's current business strategy is to operate as a profitable,
diversified financial institution providing a full range of banking services
with an emphasis on commercial real estate and commercial business loans to
small- and medium-sized businesses, as well as residential construction and
consumer lending, funded primarily by customer deposits. As a complement to this
core business, the Company has expanded its business activities to include:
equipment leasing; insurance and financial planning; commercial mortgage
banking; asset management, managing a fund which provides subordinated debt
financing primarily to technology companies in the Mid-Atlantic region; and
communications and telemarketing, which provide a steady source of fee income.
As a result of increased acquisitions of small- and medium-sized financial
institutions by large bank holding companies in southeastern Pennsylvania, the
Company believes that there is a significant market opportunity for the Bank to
provide a full range of commercial banking services to small- and middle-market
commercial customers seeking personalized service that is generally unavailable
to such customers at larger regional and national institutions.

Historically, the principal business of the Company consisted of attracting
deposits from the general public through the Bank's branch office network and
using such deposits to originate loans secured by first mortgage liens on
existing single-family residential real estate and existing multi-family
residential and commercial real estate as well as to originate construction
loans (which included land acquisition and development loans). Prior to 1995,
such lending activities comprised, in the aggregate, at least 80% of the
Company's total loan originations. Beginning in 1995, the Company started to
change its focus and to modify its operations to become more like a commercial
bank. The Company's emphasis shifted to commercial business, commercial real
estate and construction lending and equipment leasing, with a focus on providing
such banking services to small- and medium-sized businesses, including companies
in the technology sector. The Company's shift in focus to providing a full range
of commercial banking services also coincided with the recent acquisitions of
small- to medium-sized banking institutions by larger bank holding companies and
the consolidation in the banking industry which has limited the number of
lenders available to small commercial borrowers. Since 1995, the Company has not
emphasized residential lending and has only originated a limited amount of
single-family residential mortgage loans.

The Company also invests in mortgage-backed securities, including securities
which are insured or guaranteed by the U.S. Government and agencies thereof, and
other similar investments permitted by applicable laws and regulations. In
addition, the Bank is periodically involved in real estate development and
related activities, through its subsidiaries, primarily to facilitate the
completion and sale of certain property held as real estate owned.

                                       3
<PAGE>


Commercial Business Lending. The Bank's commercial banking division provides
customized loan, deposit and investment products, as well as cash management
services to small- and middle-market businesses. Through the Bank, the Company
originates secured or unsecured loans for commercial, corporate, business and
agricultural purposes, which include the issuance of letters of credit.

As a result of increased acquisitions of small- and medium-sized financial
institutions by large bank holding companies in southern Pennsylvania, the
Company believes that there is a large amount of small- and middle-market
commercial customers seeking the full range of commercial banking services that
the Bank offers combined with personalized service that is generally unavailable
to such customers at larger regional and national institutions. Due to this
consolidation, the Company believes it has an opportunity to expand its
commercial lending relationships and thereby continue to grow the Bank's
interest-earning assets, as well as increase its commercial deposits. In
addition, this consolidation has resulted in the availability of experienced
commercial lenders who do not remain with an institution after it is acquired.
The Company in the past has hired, and will look to hire in the future, high
quality experienced commercial lending officers who become available as a result
of such industry consolidation.

The commercial banking division provides a full range of banking services
targeted to businesses with annual revenues of $1 million to $25 million located
primarily in Bucks, Chester, Montgomery, Philadelphia and Delaware counties of
Pennsylvania. The Company's commercial business loans consist primarily of loans
secured by various equipment, machinery and other corporate assets, including
accounts receivable. Commercial business loans are also made to provide working
capital to businesses in the form of lines of credit which may be secured by
inventory or other assets or are unsecured, as well as for various other
miscellaneous purposes.

The Bank has established a specialized lending division which provides
customized financial services to companies in the technology, healthcare and
insurance industries. The specialized lending division primarily focuses on
lending to technology-based companies in the greater Philadelphia geographic
area from Princeton, New Jersey to Wilmington, Delaware and west to Harrisburg,
Pennsylvania. The division seeks relationships with emerging technology-based
companies which have already received initial venture capital and have annual
revenues of at least $1.0 million. In addition to providing financing, the
Company often obtains a small equity position in the borrower in the form of
warrants to purchase common stock of the borrower. The Bank has originated
approximately $37.5 million of loans through the Specialized Lending Division
during 1998. These included loans to approximately 14 companies engaged in the
software, electronics and healthcare services industries. Generally, such loans
are originated with a balance of between $100,000 and $4.3 million. As of
December 31, 1998, the Bank had 107 loans outstanding originated through the
Specialized Loan Division with an aggregate outstanding balance of $35.3
million. In December 1997, the Bank and the Eastern Technology Council of
Greater Philadelphia, a non-profit technology-oriented trade group, entered into
a three-year agreement providing for the Bank to serve as the Council's 
preferred provider of financial services. Through this "TechBanc" alliance, the 
Bank now has access to over 600 member organizations of the council to provide 
lending and banking services.

Commercial Real Estate Activities. The Company originates commercial real estate
loans through the Bank and conducts commercial mortgage banking activities
through Progress Realty Advisors, Inc. ("PRA"), a subsidiary of the Company
formed in September of 1993. In evaluating whether a lending opportunity is
originated for the Bank's portfolio or placed with third parties through PRA,
the Company considers the following four factors: loan size, recourse
provisions, geographic location and business banking relationships.

Commercial Real Estate Lending. The Bank originates mortgage loans secured by
multi-family residential and commercial real estate. Commercial real estate
loans originated by the Bank are primarily secured by office buildings, retail
stores, warehouses and general purpose industrial space. Commercial real estate
loans also include multi-family residential loans, substantially all of which
are secured by apartment buildings. A significant portion of such loans are
secured by owner-occupied properties and relate to borrowers which have an
existing banking relationship with the Bank.

At December 31, 1998, the Bank's commercial real estate loan portfolio consisted
of approximately 248 loans with an average principal balance of approximately
$542,000 and the Bank's largest commercial real estate loan had an outstanding
balance of $6.0 million. Although terms vary, commercial real estate loans
secured by existing properties generally have maturities of ten years or less
and interest rates which adjust every one, three or five years in accordance
with a designated index.

At December 31, 1998, substantially all of the Bank's commercial real estate
loan portfolio was secured by properties located within its primary market area.
Loan-to-value ratios on the Bank's commercial real estate loans are limited to

                                       4
<PAGE>

80% or lower, except in certain limited circumstances. In addition, as part of
the criteria for underwriting permanent commercial real estate loans, the Bank
generally imposes a debt service coverage ratio (the ratio of net cash from
operations before payment of debt service to debt service) of at least 1.2x. It
is also the Bank's general policy to obtain personal guarantees of its
commercial real estate loans from the principals of the borrower.

Commercial real estate lending is generally considered to involve a higher
degree of risk than single-family residential lending. Such lending typically
involves large loan balances concentrated in a single borrower or groups of
related borrowers. In addition, the payment experience on loans secured by
income-producing properties is typically dependent on the successful operation
of the related real estate project and thus may be subject to a greater extent
to adverse conditions in the real estate market or in the economy generally. The
Bank generally attempts to offset the risks associated with commercial real
estate lending by, among other things, lending primarily in its market area,
periodically inspecting each property, using conservative loan-to-value ratios
in the underwriting process and obtaining financial statements and rent rolls
from all commercial and multi-family borrowers on at least an annual basis.

Commercial Mortgage Banking. The Company conducts commercial mortgage banking
and brokerage services through PRA and its divisions. PRA was formed as a
complement to the Bank's commercial lending activities in order to provide
lending services for borrowers where borrowing needs are not consistent with the
Bank's lending operations due to, among other things, the amount of financing
required, the location of the borrower and recourse provisions. PRA specializes
in originating, underwriting and closing commercial real estate financing for
residential, multi-family and commercial properties for other financial
institutions, insurance and finance companies for a brokerage fee.

Construction Lending. Through the Bank, the Company also offers both residential
construction loans and, to a lesser extent, commercial construction loans. At
December 31, 1998, the Company's construction loan portfolio consisted of
approximately 46 loans with an average principal balance of approximately
$968,000 and the Company's largest construction loan had an outstanding balance
of $3.1 million.

Construction loans generally offer higher yields and afford the Company the
opportunity to increase the interest rate sensitivity of its loan portfolio.
Construction financing is generally considered to involve a higher degree of
risk of loss than long-term financing on improved, owner-occupied real estate.
Risk of loss on a construction loan is dependent in large part upon the accuracy
of the initial estimate of the property's value at completion of construction or
development, the estimated cost (including interest) of construction and the
financial strength of the borrower. During the construction phase, a number of
factors could result in delays and cost overruns. If the estimate of
construction costs proves to be inaccurate, the Company may be required to
advance funds beyond the amount originally committed to permit completion of the
development. If the estimate of value proves to be inaccurate, the Company may
be confronted, at or prior to the maturity of the loan, with a project having a
value which is insufficient to assure full repayment, in which case the Company
would have to rely upon the borrower's financial ability.

The Company generally attempts to address the additional risks associated with
construction lending by, among other things, lending primarily in its market
area, periodically inspecting each property during the construction period,
using conservative loan-to-value ratios in the underwriting process and
generally requiring personal guarantees. At December 31, 1998, all of the
Company's construction loans were secured by properties located within the
Company's primary market area. In addition, residential construction loans are
generally made for 80% or less of the appraised value of the property upon
completion (75% in the case of land loans). Moreover, the Company does not
originate loans for the construction of speculative (or unsold) residential
properties. Prior to making a commitment to fund a construction loan, the
Company requires both an appraisal of the property by independent appraisers
approved by the Board of Directors and a study of the feasibility of the
proposed project.

Construction loans, including land loans, generally have maturities of 12 to 24
months (up to three years in the case of land loans). Interest rates on
construction loans generally adjust in accordance with a designated index.
Advances are generally made to cover actual construction costs, and generally
include a reserve for paying the stated interest due on the loan during the life
of the loan. Loan proceeds are disbursed as inspections of construction progress
warrants and as pre-construction sale and leasing requirements generally imposed
by the Company are met.

Equipment Leasing. As part of the strategy to be a full-service commercial
lender, the Company acquired an equipment leasing company in 1996 in order to
provide diversified equipment leasing services to small- and middle-market
business companies. In January and November, 1998, the Company further expanded
its leasing capacity through the acquisition of two additional leasing
companies.

                                       5
<PAGE>

Equipment lease financing is provided through the Bank's subsidiary, Progress
Leasing Company ("PLC"), formerly The Equipment Leasing Company ("ELC"), also
doing business as Quaker State Leasing Company ("QSL"). PLC has two divisions,
one located in Blue Bell, Pennsylvania and another in Baltimore, Maryland.
Through this network, the Company provides lease financing throughout the
mid-Atlantic region with a current concentration on Pennsylvania, New York, New
Jersey, Maryland and Virginia. The Company provides leasing either directly to
the business customer or through regional vendor sponsored programs.

The Company provides lease financing for a wide variety of business equipment,
including computer systems, telephone systems, furniture, landscaping and
construction equipment, medical equipment, dry cleaning equipment and graphic
systems equipment.

For many of the Company's leases the Company retains the residual value of the
leased property upon expiration of the lease. In the event that the residual
value is less than provided for in the lease, the Company may have a loss
related to the disposition of such property. However, because a majority of the
Company's leases are bought out or extended at the end of their terms, the
Company has not experienced any material losses in this area to date.

Consumer Lending. Subject to restrictions contained in applicable federal laws
and regulations, the Bank is authorized to make loans for a wide variety of
personal or consumer purposes.

The Bank has been emphasizing a variety of consumer loans in recent years in
order to provide a full range of financial services to its customers and because
such loans generally have shorter terms and higher interest rates than
traditional first mortgage loans. The consumer loans offered by the Bank include
home equity loans and lines of credit, deposit account secured loans and loans
that are secured by personal property, including automobiles.

Home equity loans are originated by the Bank for up to 80% of the appraised
value, less the amount of any existing prior liens on the property. The Bank
also offers home equity lines of credit in amounts up to 80% of the appraised
value, less the amount of any existing prior liens. Home equity loans have a
maximum term of 15 years, and the interest rate is dependent upon the term of
the loan. The Bank secures the loan with a mortgage on the property (generally a
second mortgage) and will originate the loan even if another institution holds
the first mortgage.

Consumer loans generally have shorter terms and higher interest rates than
mortgage loans but generally involve more credit risk than mortgage loans
because of the type and nature of the collateral and, in certain cases, the
absence of collateral. In addition, consumer lending collections are dependent
on the borrower's continuing financial stability, and thus are more likely to be
adversely effected by job loss, divorce, illness and personal bankruptcy. In
most cases, any repossessed collateral for a defaulted consumer loan will not
provide an adequate source of repayment of the outstanding loan balance. The
Company believes that the generally higher yields earned on consumer loans
compensate for the increased credit risk associated with such loans and that
consumer loans are important to its efforts to increase rate sensitivity,
shorten the average maturity of its loan portfolio and provide a full range of
services to its customers.

Other Activities. Progress Capital, Inc. ("PCI"), a subsidiary of the Company
was formed in 1996 and is the corporate general partner of the Ben
Franklin/Progress Capital Fund, L.P., a $9.1 million fund managed by Progress
Capital Management, Inc. ("PCM"), also a subsidiary of the Company, which
commenced operations in December 1997 and provides subordinated debt financing
to early-stage Mid-Atlantic based technology companies with proven, innovative
products and an existing revenue stream. In addition, the fund generally
receives warrants to purchase equity of the borrowers in connection with such
lending. The Company earns a fee for managing the fund through its subsidiary
PCM as well as maintaining an equity interest. PCI also invests in middle market
companies that are prospects or customers of the Company and companies who have
demonstrated a superior track record in their area of expertise.

Procall Teleservices, Inc. ("PTI"), a subsidiary of the Company, is an
interactive communications and marketing firm, which provides a full range of
business-to-business teleservices, including customer service, market research
and telesales. PTI, which was formed and began operations in the second quarter
of 1997, provides marketing support to a variety of businesses, from start up
companies to Fortune 500 companies as well as the subsidiaries of the Company.
PTI also manages the call center for the Bank. 

In February 1998, the Company formed Progress Development Corp ("PDC"), to
invest in a joint venture partnership, Progress Development LP, which acquired
an interest in NewSeasons Assisted Living Communities ("NewSeasons"). NewSeasons
owns, acquires, develops and operates assisted living residences for the
elderly. NewSeasons had ten

                                       6
<PAGE>

projects at December 31, 1998 and has plans for a total of 21 projects within
the next three years. In addition to owning an equity interest in NewSeasons,
Progress Development LP will provide fee based development, construction
management and financial services to NewSeasons.

In January 1999, the Company's newest subsidiary Progress Financial Resources,
Inc. ("PFR") commenced operations. PFR, a Delaware corporation, is headquartered
in Philadelphia, Pennsylvania, and sells investment and insurance products,
employee benefits and financial planning services to individuals and businesses.

Recent Development

In February 1999, VerticalNet, an internet company, went public at an initial
offering price of $16 per share of common stock. The Company holds warrants to
purchase 49,962 shares of common stock of VerticalNet, with a weighted average
exercise price of $5.58, issued in connection with a loan from the Specialized
Lending Division. The Company is prohibited from selling or otherwise disposing
of the warrants or any shares of common stock received from the exercise of such
warrants for a period of 180 days from February 11, 1999. The closing price of a
share of VerticalNet common stock between February 11, 1999 and March 25, 1999
ranged between $35 and $108.50. VerticalNet common stock is traded on the Nasdaq
Stock Market under the symbol of "VERT."

Competition

The Company faces strong competition both in attracting deposits and making
loans. As a provider of a wide range of financial services, the Company competes
with national and state banks, savings and loan associations, securities
dealers, brokers, mortgage bankers, finance and insurance companies, and other
financial service companies. The ability of the Company to attract and retain
deposits depends on its ability to generally provide a rate of return, liquidity
and risk comparable to that offered by competing investment opportunities. The
Company competes for loans principally through the interest rates and loan fees
it charges and the efficiency and quality of services it provides borrowers.

                           REGULATION AND SUPERVISION

General

The Company, as a unitary thrift holding company, is subject to comprehensive
examination, supervision and regulation by the Office of Thrift Supervision
("OTS"). As a subsidiary of a unitary thrift holding company, the Bank is
subject to certain restrictions in its dealings with the Company and affiliates
thereof. Four of the Company's non-banking subsidiaries (PRA, PTI, PCM and PDC)
are subject to the laws of the Commonwealth of Pennsylvania. PCI and PFR are
Delaware corporations.

The Bank

Insurance of Deposits

The Bank's deposits are insured by the Savings Association Insurance Fund
("SAIF") to a maximum of $100,000 for each depositor. The Federal Deposit
Insurance Corporation ("FDIC") requires an annual audit by independent
accountants and may also examine the Bank.

Federal law requires that the FDIC maintain the reserve level of each of the
SAIF and the Bank Insurance Fund ("BIF") at 1.25% of insured deposits. The BIF
reached this level during 1995. A one-time assessment on thrift institutions
sufficient to recapitalize the SAIF was enacted in September 1996. On September
30, 1996, the Bank paid a special one-time premium of $1.8 million to capitalize
SAIF. Deposit insurance premiums in 1998, were 6.22 cents per $100 of deposits,
compared to an average 7.89 cents per $100 of deposits in 1997. Deposit
insurance is payable on a quarterly basis.

                                       7
<PAGE>

Qualified Thrift Lender Test

All savings associations are required to meet a qualified thrift lender ("QTL")
test set forth in Section 10(m) of the Home Owners' Loan Act ("HOLA") and
regulations of the OTS thereunder to avoid certain restrictions on their
operations. Currently, the QTL test requires that 65% of an institution's
"portfolio assets" (as defined) consist of certain housing, small business, and
consumer related assets on a monthly average basis in 9 out of every 12 months.

The Bank complied with this test for 1998. At December 31, 1998, approximately
81.39% of the Bank's assets were invested in qualified thrift investments, which
was in excess of the percentage required to qualify under the QTL test.



Federal Home Loan Bank System

The Bank is a member of the Federal Home Loan Bank of Pittsburgh ("FHLB"), which
administers the home financing credit function and serves as a source of
liquidity for member savings associations and commercial banks within its
assigned region. It makes loans to members (i.e., advances) in accordance with
policies and procedures established by its Board of Directors. As of December
31, 1998, the Bank's advances from the FHLB amounted to $88.0 million.

As a member, the Bank is required to purchase and maintain stock in the FHLB in
an amount equal to the greater of 1% of its mortgage related assets or .3% of
total assets. At December 31, 1998, the Bank had $4.9 million in FHLB stock,
which was in compliance with this requirement.

Federal Limitations on Transactions with Affiliates

Transactions between savings associations and any affiliate are governed by
Section 23A and 23B of the Federal Reserve Act. In addition to the restrictions
imposed, no savings association may (i) loan or otherwise extend credit to an
affiliate, except for any affiliate which engages only in activities which are
permissible for bank holding companies, or (ii) purchase or invest in any
stocks, bonds, debentures, notes, or similar obligations of any affiliate,
except for affiliates which are subsidiaries of the savings association.

In addition, Section 12 CRF-215 (Regulation O) of the Code of Federal
Regulations places restrictions on loans by savings associations to executive
officers, directors, and principal stockholders of the Company and the Bank.
At December 31, 1998, the Bank was in compliance with this regulation.


Employees

As of December 31, 1998, the Company, PCI, PCM and PFR had no employees. The
Bank and its leasing companies had 178 full-time and 24 part-time employees,
while PRA had 24 full-time employees. PTI had 8 full-time and 2 part-time
employees. PTI also utilizes personnel obtained through an employment services
agency. PDC had 3 full-time employees.

Statistical Information

Statistical information is furnished pursuant to the requirements of Guide 3
(Statistical Disclosure by Bank Holding Companies) promulgated under the
Securities Act of 1933. The information required herein is incorporated by
reference from pages 9 to 17 and page 35 of the Company's Annual Report to
Stockholders. Additional disclosures required in Guide 3 and not incorporated by
reference are included below.

Tabular information is provided in thousands of dollars except for share and per
share data.

                                       8
<PAGE>


Distribution of Average Assets, Liabilities and Stockholders' Equity

The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest income on average interest-earning
assets and the resultant average yield; (ii) the total dollar amount of interest
expense on average interest-bearing liabilities and the resultant average cost;
(iii) net interest income; (iv) interest rate spread; and (v) net interest
margin. Information is based on average daily balances during the indicated
periods. For the purposes of this table, non-accrual loans have been included in
the appropriate average balance category.

<TABLE>
<CAPTION>
For the years ended December 31,                                        1998                            1997
                                                                        ----                            ----

                                                          Average                 Yield/    Average                 Yield/
                                                          Balance     Interest     Rate    Balance   Interest       Rate
<S>                                                      <C>          <C>          <C>    <C>          <C>           <C>  
 Interest-earning assets:
   Interest-bearing deposits                             $  3,990     $    158     3.96%  $  3,082     $   178       5.78%
   Investment securities(1)                                18,030        1,017     5.64      7,797         447       5.73
   Mortgage-backed securities (1)                         134,528        8,686     6.46     88,937       6,065       6.82
   Single family residential loans (2)                     54,890        4,193     7.64     61,084       4,875       7.98
   Commercial real estate loans (2)                       123,113       10,868     8.83     95,353       8,774       9.20
   Construction loans                                      31,611        3,432    10.86     27,371       3,038      11.10
   Commercial business loans                               77,268        7,487     9.69     49,515       4,833       9.76
   Lease financing                                         60,446        7,298    12.07     47,933       6,198      12.93
   Consumer loans                                          26,217        2,190     8.35     24,796       2,089       8.42
                                                         --------     --------    -----   --------     -------      -----
   Total interest-earning assets                          530,093       45,329     8.55    405,868      36,497       8.99
                                                                                                      
Non-interest-earning assets (5)                            33,015                           29,542              
                                                         --------                         --------    
     Total assets                                        $563,108                         $435,410              
                                                         ========                         ========              

Interest-bearing liabilities:      
   Interest-bearing deposits:      
     NOW and Super NOW                                   $ 51,515        1,384     2.69   $ 31,688         679       2.14
     Money market accounts                                 33,722          999     2.96     37,199       1,181       3.17
     Passbook and statement savings                        31,314          725     2.32     29,698         810       2.73
     Time deposits                                        206,158       11,358     5.51    177,860       9,687       5.45
                                                         --------     --------    -----   --------     -------      -----
   Total interest-bearing deposits                        322,709       14,466     4.48    276,445      12,357       4.47
   Federal Home Loan Bank borrowings                       69,069        3,996     5.79     33,332       2,108       6.32
   Other borrowings                                        67,301        3,988     5.93     47,683       3,429       7.19
                                                         --------     --------    -----   --------     -------      -----
    Total interest-bearing liabilities                    459,079       22,450     4.89    357,460      17,894       5.01
                                                                      --------    -----                -------      -----

Non-interest-bearing liabilities (5)                       52,842                           46,415                       
                                                         --------                         --------
                                                                                                      
     Total liabilities                                    511,921                          403,875    
Capital securities                                         15,000                            8,750               
Stockholders' equity                                       36,187                           22,785               
                                                         --------                         --------    
     Total liabilities, capital securities and                          
     stockholders' equity                                $563,108                         $435,410  
                                                         ========                         ========  
Net interest income                                                   $ 22,879                         $18,603    
                                                                      ========                         =======    
Interest rate spread (3)                                                           3.66%                             3.98%
                                                                                  =====                             ===== 
Net interest margin (4)                                                            4.32%                             4.58%
                                                                                  =====                             ===== 
Average interest-earning assets to average                                       115.47%                           113.54%
interest-bearing liabilities                                                     ======                            ====== 

<FN>
(1)  Includes investment and mortgage-backed securities classified as available
     for sale. Yield information does not give effect to changes in fair values
     that are reflected as a component of stockholders' equity.

(2)  Includes loans held for sale.

(3)  Interest rate spread represents the difference between the weighted average
     yield on interest-earning assets and the weighted average cost of
     interest-bearing liabilities.

(4)  Net interest margin represents net interest income divided by average
     interest-earning assets.

(5)  For the years ended December 31,              1998       1997
     ---------------------------------------------------------------
     Cash                                        $10,093     $ 8,573
     Allowance for possible loan
        and lease losses                          (4,339)     (3,887)
     Other assets                                 27,261      24,856
                                                 -------     -------
     Total non-interest earning assets           $33,015     $29,542
                                                 =======     =======
     Non-interest bearing liabilities:
     Non-interest bearing deposits               $40,928     $35,292
     Other liabilities                            11,914      11,123
                                                 -------     -------
       Total non-interest bearing liabilities    $52,842     $46,415
                                                 =======     =======
</FN>
</TABLE>

                                       9
<PAGE>

Distribution of Average Assets, Liabilities and Stockholders' Equity

The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest income on average interest-earning
assets and the resultant average yield; (ii) the total dollar amount of interest
expense on average interest-bearing liabilities and the resultant average cost;
(iii) net interest income; (iv) interest rate spread; and (v) net interest
margin. Information is based on average daily balances during the indicated
periods. For the purposes of this table, non-accrual loans have been included in
the appropriate average balance category.

<TABLE>
<CAPTION>
For the years ended December 31,                                        1996                            1995
                                                                        ----                            ----

                                                             Average               Yield/    Average              Yield/
                                                             Balance   Interest     Rate     Balance   Interest    Rate
<S>                                                          <C>         <C>         <C>     <C>         <C>         <C>  
Interest-earning assets:
   Interest-bearing deposits                                 $  2,319    $   172     7.42%   $  2,555    $   179     7.01%
   Investment securities (1)                                    6,645        414     6.23      16,809      1,056     6.28
   Mortgage-backed securities (1)                              96,959      6,443     6.65     100,377      6,598     6.57
   Single family residential loans (2)                         77,360      6,035     7.80      95,355      7,022     7.36
   Commercial real estate loans (2)                            84,101      7,991     9.50      75,241      7,515     9.99
   Construction loans                                          18,106      2,050    11.32       8,383        952    11.36
   Commercial business loans                                   22,443      2,213     9.86      13,651      1,426    10.45
   Lease financing                                             21,342      2,838    13.30       3,741        483    12.91
   Consumer loans                                              22,724      1,958     8.62      20,895      1,821     8.72
                                                             --------    -------   ------    --------    -------   ------
   Total interest-earning assets                              351,999     30,114     8.56     337,007     27,052     8.03
                                                                         -------   ------                -------   ------

Non-interest-earning assets (5)                                22,935                          18,350
                                                             --------                        --------
     Total assets                                            $374,934                        $355,357
                                                             ========                        ========

Interest-bearing liabilities:
   Interest-bearing deposits:
     NOW and Super NOW                                       $ 27,977        594     2.12     $26,661        716     2.69
     Money market accounts                                     33,781      1,023     3.03      33,577      1,042     3.10
     Passbook and statement savings                            28,258        806     2.85      27,290        783     2.87
     Time deposits                                            178,677      9,597     5.37     177,972      9,712     5.46
                                                             --------    -------   ------    --------    -------   ------
   Total interest-bearing deposits                            268,693     12,020     4.47     265,500     12,253     4.62
   Federal Home Loan Bank borrowings                           27,901      1,746     6.26      44,177      2,812     6.37
   Other borrowings                                            26,031      2,054     7.89       6,057        535     8.83
                                                             --------    -------   ------    --------    -------   ------
   Total interest-bearing liabilities                         322,625     15,820     4.90     315,734     15,600     4.94
                                                                         -------   ------                -------   ------
Non-interest-bearing liabilities (5)                           32,654                          25,138
                                                             --------                          ------

     Total liabilities                                        355,279                         340,872
Capital securities                                                --                              --
Stockholders' equity                                           19,655                          14,485
                                                             --------                          ------
     Total liabilities, capital securities and               
     stockholders' equity                                    $374,934                        $355,357
                                                             ========                        ========

Net interest income                                                      $14,294                         $11,452
                                                                         =======                         =======

Interest rate spread (3)                                                             3.66%                         3.09%
                                                                                   ======                          ====== 
Net interest margin (4)                                                              4.06%                         3.40%
                                                                                   ======                          ====== 
Average interest-earning assets to average                                         
interest-bearing liabilities                                                       109.10%                         106.74%
                                                                                   ======                          ====== 

<FN>

(1)  Includes investment and mortgage-backed securities classified as available
     for sale. Yield information does not give effect to changes in fair values
     that are reflected as a component of stockholders' equity.

(2)  Includes loans held for sale.

(3)  Interest rate spread represents the difference between the weighted average
     yield on interest-earning assets and the weighted average cost of
     interest-bearing liabilities.

(4)  Net interest margin represents net interest income divided by average
     interest-earning assets.

(5)  For the years ended December 31,                     1996          1995
     -------------------------------------------------------------------------
     Non-interest earning assets:
     Cash                                                $6,064        $4,691
     Allowance for possible loan                                     
        and lease losses                                 (5,287)       (1,667)
     Other assets                                        22,158        15,326
                                                        -------       -------
     Total non-interest earning assets                  $22,935       $18,350
                                                        =======       =======
     Non-interest bearing liabilities:                               
     Non-interest bearing deposits                      $25,521       $20,210
     Other liabilities                                    7,133         4,928
                                                        -------       -------
        Total non-interest bearing liabilities          $32,654       $25,138
                                                        =======       =======
</FN>
</TABLE>

                                       10
<PAGE>


Distribution of Average Assets, Liabilities and Stockholders' Equity

The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest income on average interest-earning
assets and the resultant average yield; (ii) the total dollar amount of interest
expense on average interest-bearing liabilities and the resultant average cost;
(iii) net interest income; (iv) interest rate spread; and (v) net interest
margin. Information is based on average daily balances during the indicated
periods. For the purposes of this table, non-accrual loans have been included in
the appropriate average balance category.

<TABLE>
<CAPTION>
For the year ended December 31,                                    1994
                                                                   ----
                                                     Average                        Yield/
                                                     Balance        Interest         Rate
<S>                                                 <C>            <C>                <C>  
Interest-earning assets:
   Interest-bearing deposits                        $  1,257       $     69           5.49%
   Investment securities(1)                           15,682            960           6.12
   Mortgage-backed securities (1)                    113,819          6,617           5.81
   Single family residential loans (2)                84,508          6,201           7.34
   Commercial real estate loans (2)                   72,277          6,042           8.36
   Construction loans                                  4,554            449           9.86
   Commercial business loans                          10,658          1,036           9.72
   Lease financing                                      --             --             --
   Consumer loans                                     17,055          1,456           8.54
                                                    --------       --------         ------
   Total interest-earning assets                     319,810         22,830           7.14
                                                                   --------         ------

Non-interest-earning assets (5)                       20,304
                                                    --------
     Total assets                                   $340,114
                                                    ========

Interest-bearing liabilities:
   Interest-bearing deposits:
     NOW and Super NOW                              $ 21,932            532           2.43
     Money market accounts                            41,428          1,138           2.75
     Passbook and statement savings                   27,808            820           2.95
     Time deposits                                   168,250          7,678           4.56
                                                    --------       --------         ------
                                                     259,418         10,168
   Total interest-bearing deposits                                                    3.92
   Federal Home Loan Bank borrowings                  44,007          2,202           5.00
   Other borrowings                                    1,508            135           8.95
                                                    --------       --------         ------
   Total interest-bearing liabilities                304,933         12,505           4.10
                                                    --------       --------         ------
Non-interest-bearing liabilities (5)                  21,528
                                                    --------

     Total liabilities                               326,461
Capital securities                                      --
Stockholders' equity                                  13,653
                                                    --------

     Total liabilities, capital securities and
     stockholders' equity                           $340,114
                                                    ========

Net interest income                                                 $10,325
                                                                    =======
Interest rate spread (3)                                                              3.04%
                                                                                    ======

Net interest margin (4)                                                               3.23%
                                                                                    ======

Average interest-earning assets to average
interest-bearing liabilities                                                        104.88%
                                                                                    ======

<FN>

(1)  Includes investment and mortgage-backed securities classified as available
     for sale. Yield information does not give effect to changes in fair values
     that are reflected as a component of stockholders' equity.

(2)  Includes loans held for sale.

(3)  Interest rate spread represents the difference between the weighted average
     yield on interest-earning assets and the weighted average cost of
     interest-bearing liabilities.

(4)  Net interest margin represents net interest income divided by average
     interest-earning assets.

(5)  For the year ended December 31, 1994

     Non-interest earning assets:
     Cash                                            $5,945
     Allowance for possible loan
        and lease losses                             (1,808)
     Other assets                                    16,167
                                                    -------
         Total non-interest earning assets          $20,304
                                                    =======

     Non-interest bearing liabilities:
     Non-interest bearing deposits                  $16,713
     Other liabilities                                4,815
                                                    -------
         Total non-interest bearing liabilities     $21,528
                                                    =======
</FN>
</TABLE>

                                       11
<PAGE>

Investment Securities

Investment securities are comprised of the following at December 31, 1998, 1997,
and 1996:


<TABLE>
<CAPTION>
                                                                        1998
                                                                        ----
                                                      Held to Maturity         Available for Sale
                                                   Amortized   Estimated     Amortized   Estimated
                                                     Cost      Fair Value       Cost     Fair Value
                                                   ---------   ----------    ---------   ----------
<S>                                                 <C>        <C>           <C>         <C>  
FHLB stock                                          $ 4,923      $ 4,923      $  --        $  --
FHLB investment securities                            4,975        5,089         --           --
U.S. agency obligations                               2,503        2,535        2,000        2,001
Municipal bonds                                        --           --          9,599        9,591
Equity investments                                     --           --          6,609        6,317
                                                    -------      -------      -------      -------
         Total investment securities                $12,401      $12,547      $18,208      $17,909
                                                    -------      -------      -------      -------

<CAPTION>
                                                                        1997
                                                                        ----
                                                      Held to Maturity         Available for Sale
                                                   Amortized   Estimated     Amortized   Estimated
                                                     Cost      Fair Value       Cost     Fair Value
                                                   ---------   ----------    ---------   ----------
<S>                                                 <C>        <C>           <C>         <C>  

FHLB stock                                          $ 1,728      $ 1,728      $  --        $  --
FHLB investment securities                            2,323        2,342         --           --
U.S. agency obligations                                 --          --         3,000         3,001
Equity investments                                      --          --         2,924         3,394
                                                    -------      -------      -------      -------

         Total investment securities                $ 4,051      $ 4,070      $ 5,924      $ 6,395
                                                    -------      -------      -------      -------

<CAPTION>
                                                                        1996
                                                                        ----
                                                      Held to Maturity         Available for Sale
                                                   Amortized   Estimated     Amortized   Estimated
                                                     Cost      Fair Value       Cost     Fair Value
                                                   ---------   ----------    ---------   ----------
<S>                                                 <C>        <C>           <C>         <C>  

FHLB stock                                          $ 1,937      $ 1,937      $  --        $  --
U.S. agency obligations                                 --          --          3,468        3,418
Equity investments                                      --          --             30           44
                                                    -------      -------      -------      -------

         Total investment securities                $ 1,937      $ 1,937      $ 3,498      $ 3,462
                                                    -------      -------      -------      -------
</TABLE>





The investment securities which are classified as held to maturity and available
for sale have a weighted average coupon rate of 7.04% and 4.19% respectively, at
December 31, 1998.

                                       12
<PAGE>

Mortgage-Backed Securities

The following table details the Company's mortgage-backed securities by
classification at December 31, 1998, 1997, and 1996.




<TABLE>
<CAPTION>
                                                                    1998
                                                Held to Maturity            Available for Sale
                                            Amortized     Estimated      Amortized      Estimated
                                              Cost        Fair Value        Cost        Fair Value
                                            -------        -------        -------        -------
<S>                                         <C>            <C>            <C>            <C>    
GNMA                                        $  --          $  --         $121,178       $120,893
FNMA                                           --             --           13,330         13,307
FHLMC                                          --             --           10,714         10,564
Non-agency pass through certificate            --             --            1,688          1,695
                                            -------        -------       --------       --------
         Total investment securities        $  --          $  --         $146,910       $146,459
                                            =======        =======       ========       ========


<CAPTION>
                                                                    1997
                                                Held to Maturity            Available for Sale
                                            Amortized     Estimated      Amortized      Estimated
                                              Cost        Fair Value        Cost        Fair Value
                                            -------        -------        -------        -------
<S>                                         <C>            <C>            <C>            <C>    
GNMA                                        $19,509        $19,247        $39,553        $39,772
FNMA                                         15,900         15,872            914            904
FHLMC                                        14,012         13,975          1,336          1,315
Non-agency pass through certificate            --             --            2,443          2,527
                                            -------        -------        -------        -------
         Total investment securities        $49,421        $49,094        $44,246        $44,518
                                            -------        -------        -------        -------

<CAPTION>
                                                                    1996
                                                Held to Maturity            Available for Sale
                                            Amortized     Estimated      Amortized      Estimated
                                              Cost        Fair Value        Cost        Fair Value
                                            -------        -------        -------        -------
<S>                                         <C>            <C>            <C>            <C>    

  GNMA                                      $22,759        $22,217        $21,770        $21,839
  FNMA                                        7,321          7,219          7,335          7,188
  FHLMC                                      17,254         17,099          7,229          7,172
  Collateralized mortgage obligations          --             --            3,000          2,940
  Non-agency pass through certificate          --             --            3,605          3,599
                                            -------        -------        -------        -------
           Total investment securities      $47,334        $46,535        $42,939        $42,738
                                            -------        -------        -------        -------
</TABLE>

                                       13
<PAGE>
Mortgage-Backed Securities (continued)

The following table sets forth the activity in the Company's mortgage-backed
securities portfolio during the periods indicated:

<TABLE>
<CAPTION>
For the years ended December 31,                                        1998          1997          1996
                                                                     --------       --------     ---------
<S>                                                                  <C>           <C>           <C>      
Mortgage-backed securities at beginning of period                    $ 93,939      $  90,072     $  89,675
Purchases (1)                                                         147,537         54,672        52,800
Conversion of existing loans to mortgage-backed securities                 --             --         9,982
Sales of loans converted to securities                                     --             --       (9,982)
Sales from portfolio                                                 (55,882)       (33,428)      (34,924)
Repayments                                                           (37,228)       (17,176)      (17,082)
Premium amortization                                                  (1,146)          (675)         (598)
Other                                                                    (72)             --            --
Change in unrealized loss on securities available for sale              (689)            474           201
                                                                     --------       --------     ---------
Mortgage-backed securities at end of period (2)                      $146,459       $ 93,939     $  90,072
                                                                     --------       --------     ---------
Weighted average coupon at end of period                                 7.40%          7.97%         7.88%
                                                                     ========       ========     =========
<FN>


(1)  Includes applicable premiums and discounts.
(2)  Includes $146.5 million, $44.5 million and $42.7 million of mortgage-backed
     securities classified as available for sale at estimated fair value at
     December 31, 1998, 1997 and 1996, respectively.
</FN>
</TABLE>

Loan and Lease Portfolio

The principal categories in the Company's loan and lease portfolio are
residential real estate loans, which are secured by single-family (one-to-four
units) residences; commercial real estate loans, which are secured by
multi-family (over five units), residential and commercial real estate; loans
for the construction of single-family, multi-family and commercial properties,
including land acquisition and development loans; commercial business loans,
lease financing, consumer loans and credit card receivables. Substantially all
of the Company's mortgage loan portfolio consists of conventional mortgage
loans, which are loans that are neither insured by the Federal Housing
Administration nor partially guaranteed by the Department of Veterans Affairs.

The Company's net loan and lease portfolio, including loans held for sale,
totaled $419.5 million at December 31, 1998 or 64.8% of its total assets, an
increase of $79.2 million or 23.3% from the $340.3 million outstanding at
December 31, 1997. The following table depicts the composition of the Company's
portfolio at December 31 for the years indicated net of unearned income.

<TABLE>
<CAPTION>
                                   1998                1997                 1996                 1995                 1994
                             Amount    Percent   Amount    Percent    Amount    Percent    Amount    Percent    Amount    Percent
                            --------   -------  --------   -------   --------   -------   --------   -------    -------   -------
<S>                         <C>         <C>     <C>         <C>      <C>         <C>      <C>         <C>      <C>         <C>   
Real estate loans:
   Single family
     residential (1)        $ 50,086    11.81%  $ 56,565    16.44%   $ 64,259    23.77%   $ 91,091    37.72%   $ 99,917    48.12%
   Commercial
     real estate(2)          134,380    31.69    109,938    31.94      90,350    33.42      81,535    33.77      71,273    34.33
   Construction               44,546    10.51     26,695     7.76      20,692     7.65      14,230     5.89       5,379     2.59
                            --------   ------   --------   ------    --------   ------    --------   ------     -------   ------
     Total real estate
      loans                  229,012    54.01    193,198    56.14     175,301    64.84     186,856    77.38     176,569    85.04
                            --------   ------   --------   ------    --------   ------    --------   ------     -------   ------
   Commercial business        92,737    21.87     69,312    20.14      30,384    11.24      17,244     7.14      12,005     5.78
                            --------   ------   --------   ------    --------   ------    --------   ------     -------   ------
   Lease financing            73,499    17.34     56,072    16.29      40,867    15.12      14,965     6.20          --       --
                            --------   ------   --------   ------    --------   ------    --------   ------     -------   ------
Consumer loans
   Consumer                   27,807     6.56     24,639     7.16      22,898     8.47      21,666     8.97      19,027     9.17
   Credit card receivables       931      .22        918      .27         885      .33         757      .31          24      .01
                            --------   ------   --------   ------    --------   ------    --------   ------     -------   ------
   Total consumer loans       28,738     6.78     25,557     7.43      23,783     8.80      22,423     9.28      19,051     9.18
                            --------   ------   --------   ------    --------   ------    --------   ------     -------   ------
Total loans and leases       423,986   100.00%   344,139   100.00%    270,335   100.00%    241,488   100.00%    207,625   100.00%
                                       ======              ======               ======               ======               ====== 
Allowance for possible
   loan and lease losses      (4,490)             (3,863)              (3,768)              (2,310)              (1,503)
                            --------            --------             --------             --------             --------         
   Net loans and leases     $419,496            $340,276             $266,567             $239,178             $206,122      
                            ========            ========             ========             ========             ========         
<FN>

(1) Includes $373,000, $599,000, $3.2 million, and $351,000 of loans classified
    as held for sale at December 31, 1997, 1996, 1995 and 1994, respectively.
(2) Includes $25.3 million of loans classified as held for sale at December 31,
    1998.

</FN>
</TABLE>

                                       14
<PAGE>



Loans and Lease Portfolio (continued)

The following table sets forth the scheduled contractual amortization of loans
and leases in the  Company's total loan and lease portfolio (including loans
classified as held for sale) at December 31, 1998. Loans and leases having no
stated schedule of repayments and no stated maturity are reported as due in one
year or less . The following table also sets forth the dollar amount of loans
and leases which are scheduled to mature after one year which have fixed or
adjustable rates.

<TABLE>
<CAPTION>
                                             Real Estate  Real Estate     Lease     Commercial
                                              Mortgage    Construction  Financing    Business     Consumer     Total
                                             -----------  ------------  ---------   ----------    --------    --------
<S>                                           <C>           <C>          <C>          <C>         <C>         <C>     
Amounts due:
   One year or less                           $  4,886      $23,300      $29,776      $55,892     $ 1,915     $115,769
   After one year through five years            26,553       19,263       43,293       27,589       7,304      124,002
   Beyond five years                           153,027        1,983          430        9,256      19,519      184,215
                                              --------      -------      -------      -------     -------     --------
     Total                                    $184,466      $44,546      $73,499      $92,737     $28,738     $423,986
                                              ========      =======      =======      =======     =======     ========
Interest rate terms on amounts due after
one year:
   Fixed                                       $86,681      $ 7,499      $43,723      $22,014     $22,583     $182,500
                                              --------      -------      -------      -------     -------     --------
   Adjustable                                  $92,899      $13,747      $    --      $14,831     $ 4,240     $125,717
                                              --------      -------      -------      -------     -------     --------
</TABLE>

Scheduled contractual principal repayments do not reflect the actual maturities
of loans and leases. The average maturity of loans and leases is less than their
average contractual terms because of prepayments and, in the case of
conventional mortgage loans due and payable in the event, among other things,
that the borrower sells the real property subject to the mortgage and the loan
is not repaid. The average life of mortgage loans tends to increase when current
mortgage loan rates are higher than rates on existing mortgage loans and,
conversely, decrease when rates on existing mortgages are lower than current
mortgage loan rates (due to refinancing of adjustable-rate and fixed rate loans
at lower rates). Under the circumstances, the weighted average yield on loans
decreases as higher yielding loans are paid or refinanced at lower rates.

The following table shows total loans and leases originated, purchased, sold and
repaid during the periods ended December 31 for the years indicated:

<TABLE>
<CAPTION>
                                                                       1998            1997             1996
                                                                     --------        --------         --------
<S>                                                                  <C>             <C>              <C>
Loan originations:
Single family residential                                            $  2,095        $  3,692         $ 17,018
Commercial real estate                                                 52,236          42,155           25,503
Construction                                                           54,516          35,300           25,711
Lease financing                                                        33,568          40,899           19,157
Commercial business                                                   136,699          52,390           33,024
Consumer                                                               15,014           7,168           11,643
                                                                     --------        --------         --------
     Total loans and leases originated                                294,128         181,604          132,056
Leases acquired through purchases (2)                                  13,339              --           20,025
                                                                     --------        --------         --------
     Total loans and leases originated and purchased                  307,467         181,604          152,081
                                                                     --------        --------         --------
Sales and loan/lease principal reductions:
     Loans and leases sold (1)                                         28,021           3,347           30,787
     Loan and lease principal reductions                              199,267          98,731           90,059
                                                                     --------        --------         --------
         Total loans/leases sold and principal reductions             227,288         102,078          120,846
                                                                     --------        --------         --------
Net change due to other items                                            (332)         (5,722)          (2,388)
                                                                     --------        --------         --------
Net increase (decrease) in loan and leases, net of unearned          
  income                                                             $ 79,847        $ 73,804         $ 28,847
                                                                     ========        ========         ========

<FN>

(1)  For the years ended December 31, 1998 and 1997 there were no loans
     converted into mortgage-backed securities and subsequently sold. For the
     years ended December 31, 1996, $10.0 million of loans, were converted into
     mortgage-backed securities and subsequently sold.
(2)  Leases purchased from a third party in 1998 and leases acquired through the
     purchase of Primary Capital, Inc. in 1998 and The Equipment Leasing Company
     in 1996.
</FN>
</TABLE>

                                       15
<PAGE>

Loans and Lease Portfolio (continued)

The accrual of interest on commercial and mortgage loans is generally
discontinued when loans become 90 days past due and when, in management's
judgement, it is determined that a reasonable doubt exists as to collectibility.
The accrual of interest is also discontinued on residential and consumer loans
when such loans become 90 days past due, except for those loans in the process
of collection which are secured by real estate with a loan to value less than
80% where the accrual of interest ceases at 180 days. Consumer loans generally
are charged-off when the loan becomes over 120 days delinquent, unless secured
by real estate and meeting the above mentioned criteria. When a loan is placed
on non-accrual status, interest accruals cease and uncollected accrued interest
is reversed and charged against current income. Additional interest income on
such loans is recognized only when received. A loan remains on non-accrual
status until the factors which indicate doubtful collectibility no longer exist,
or the loan is liquidated, or when the loan is determined to be uncollectible
and is charged-off against the allowance for possible loan losses.

The following table details the Company's underperforming assets at December 31:

<TABLE>
<CAPTION>


                                                            1998         1997         1996         1995         1994
                                                           ------       ------       ------       ------       ------
<S>                                                        <C>          <C>          <C>          <C>          <C>   
Loans and leases accounted for on a non-accrual            $3,683       $2,179       $1,689       $4,075       $4,369
  basis
REO, net of related reserves                                   --          380        2,150          728        4,534
                                                           ------       ------       ------       ------       ------
    Total non-performing assets                             3,683        2,559        3,839        4,803        8,903
Accruing loans 90 or more days past due                     4,030        2,721        4,077           --          182
                                                           ------       ------       ------       ------       ------
Total underperforming assets                               $7,713       $5,280       $7,916       $4,803       $9,085
                                                           ------       ------       ------       ------       ------
Non-performing assets as a percentage of total
   loans and leases and real estate owned                     .88%         .75%        1.43%        2.00%        4.23%
                                                           ------       ------       ------       ------       ------
Non-performing assets as a percentage of total assets         .57%         .50%        0.96%        1.33%        2.56%
                                                           ------       ------       ------       ------       ------
Underperforming assets as a percentage of total
loans and leases and real estate owned                       1.84%        1.55%        2.95%        2.00%        4.31%
                                                           ------       ------       ------       ------       ------
Underperforming assets as a percentage of total assets       1.19%        1.04%        1.99%        1.33%        2.61%
                                                           ======       ======       ======       ======       ======
</TABLE>

Gross interest income that would have been recorded during 1998, 1997, and 1996
if the Company's non-accrual loans and leases at the end of such periods had
been performing in accordance with their terms during such periods was $252,000,
$190,000 and $251,000, respectively. The amount of interest income that was
actually recorded during 1998, 1997, and 1996 with respect to such non-accrual
loans and leases amounted to approximately $112,000, $148,000 and $153,000,
respectively.

The $3.7 million of non-accrual loans and leases at December 31, 1998 consists
of $981,000 of loans secured by single-family residential property, $181,000 of
loans secured by commercial property, $188,000 of commercial business loans,
$209,000 of consumer loans and $2.1 million of lease financing.

Delinquencies

All loans and leases are reviewed on a regular basis and are placed on
non-accrual status when, in the opinion of management, the collection of
additional interest is deemed insufficient to warrant further accrual.

The following table sets forth information concerning the principal balances and
percent of the total loan and lease portfolio represented by delinquent loans
and leases at the dates indicated:

<TABLE>
<CAPTION>

As of December 31,                                              1998                  1997                  1996
                                                                ----                  ----                  ----
                                                          Amount    Percent    Amount     Percent     Amount    Percent
                                                          ------    -------    ------     -------     ------    -------
Delinquencies:
<S>                                                       <C>         <C>      <C>         <C>        <C>         <C>  
     30 to 59 days                                        $ 7,305     1.76%    $ 6,167     1.79%      $3,291      1.22%
     60 to 89 days                                          3,337      .81       1,934      .56          776       .28
     90 or more days                                        4,030      .97       2,721      .79        4,077      1.51
                                                         --------     ----     -------     ----       ------      ----
           Total                                          $14,672     3.54%    $10,822     3.14%      $8,144      3.01%
                                                         --------     ----     -------     ----       ------      ----
</TABLE>

                                       16
<PAGE>


Allowance for Possible Loan and Lease Losses

The following table details the allocation of the allowance for possible loan
and lease losses to the various categories at the dates indicated. The
allocation is not necessarily indicative of the categories in which future
losses will occur, and the entire allowance is available to absorb losses in any
category of loans or leases.

<TABLE>
<CAPTION>

December 31,                        1998                1997                1996                1995               1994
                                   Percent             Percent             Percent             Percent             Percent
                                      of                  of                  of                  of                 of
                                   Loans to            Loans to            Loans to            Loans to            Loans to
                                    Total               Total               Total               Total               Total
                                    Loans               Loans               Loans               Loans               Loans
                                     and                 and                 and                 and                 and
                          Amount    Leases    Amount    Leases    Amount    Leases    Amount    Leases     Amount   Leases
                          ------   --------   ------   --------   ------   --------   ------   --------    ------  --------
<S>                       <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C>       <C>       <C>   
Residential real          $  116     11.81%   $  127     16.44%   $  129     23.77%   $  148     37.72%    $  268    48.12%
estate

Commercial real estate     1,134     31.69     1,120     31.94     1,620     33.42     1,045     33.77        917    34.33

Real estate construction     652     10.51       290      7.76       257      7.65       286      5.89        125     2.59

Commercial business          930     21.87       749     20.14       387     11.24       166      7.14        152     5.78

Lease financing            1,619     17.34     1,446     16.29     1,221     15.12       590      6.20         --       --

Consumer                      39      6.78       131      7.43       154      8.80        75      9.28         41     9.18
                          ------    ------    ------    ------    ------    ------    ------    ------     ------   ------

   Total                  $4,490    100.00%   $3,863    100.00%   $3,768    100.00%   $2,310    100.00%    $1,503   100.00%
                          ------    ------    ------    ------    ------    ------    ------    ------     ------   ------
</TABLE>

                                       17
<PAGE>


The following table details the Company's allowance for possible loan and lease
losses for the periods indicated:

<TABLE>
<CAPTION>

For the years ended December 31,                     1998            1997              1996           1995           1994
                                                    --------       --------          --------       --------       --------
<S>                                                 <C>            <C>               <C>            <C>            <C>     
Average loans and leases outstanding                $373,545       $306,052          $246,076       $217,266       $189,052
                                                    --------       --------          --------       --------       --------
Balance beginning of period                         $  3,863       $  3,768          $  2,310       $  1,503       $  2,113

Charge-offs:
     Residential real estate                              --              3                25             20             --
     Commercial real estate                               --            394                --             --          1,160
     Real estate construction                             --             --                --            100             50
     Commercial business                                   2            291                 7            281             88
     Lease financing                                     681            879               309             74             --
     Consumer                                             72            100                80             26             20
                                                    --------       --------          --------       --------       --------
         Total charge-offs                               755          1,667               421            501          1,318
                                                    --------       --------          --------       --------       --------
Recoveries:
     Residential real estate                               1             --                 2             --             --
     Commercial real estate                                5             --                30             --             --
     Real estate construction                              2             --                --              1            137
     Commercial business                                 128             20                26              3             36
     Lease financing                                     275            214               171             41             --
     Consumer                                             12             19                19             15             14
                                                    --------       --------          --------       --------       --------
         Total recoveries                                423            253               248             60            187
                                                    --------       --------          --------       --------       --------
Net charge-offs                                          332          1,414               173            441          1,131

Provision for possible loan and lease losses             959          1,509               781            641            521

Allowances assumed through acquisitions (1)               --             --               850            607             --
                                                    --------       --------          --------       --------       --------
     Total additions                                     959          1,509             1,631          1,248            521
                                                    --------       --------          --------       --------       --------
Balance at end of period                              $4,490         $3,863            $3,768         $2,310       $  1,503
                                                    ========       ========          ========       ========       ========
Ratio of net chargeoffs during the period to
average loans and leases outstanding during
the period                                              .09%           .46%              .07%           .20%           .60%
                                                    ========       ========          ========       ========       ========
Ratio of allowance for possible loan and lease
losses to non performing loans and leases at
end of period                                        121.91%        177.28%           223.09%         56.69%         34.40%
                                                    ========       ========          ========       ========       ========
Ratio of allowance for possible loan and lease
losses to underperforming loans and leases at
end of period (2)                                     58.21%         78.84%            65.35%         56.69%         33.03%
                                                    ========       ========          ========       ========       ========
<FN>

(1)  Allowance assumed through acquisitions represents, The Equipment Leasing
     Company in 1996, and First Valley Leasing, Inc., a subsidiary of UJB
     Financial, in 1995.

(2)  Includes loans 90 or more days delinquent and still accruing.

An allowance for possible loan and lease losses is maintained at a level that
management considers adequate to provide for potential losses based upon an
evaluation of known and inherent risks in the portfolio. Management's periodic
evaluation of the adequacy of the allowance is based upon examination of the
portfolio, past loss experience, adverse situations that may affect the
borrower's ability to repay, the estimated value of any underlying collateral,
current economic conditions, the results of the most recent regulatory
examinations, and other relevant factors. While management uses the best
information available to make such evaluations, future adjustments to the
allowance may be necessary if economic conditions differ substantially from the
assumptions used in making such evaluations.
</FN>
</TABLE>

                                       18

<PAGE>


Deposits

The following table presents the interest rate and maturity information for time
deposits at December 31, 1998.

<TABLE>
<CAPTION>

                                                                     Maturity Date
                              One year or less      >1-2 Years        >2-3 Years         Over 3 Years         Total
                              ----------------      ----------       -------------       ------------         -----
<S>                              <C>                  <C>               <C>                 <C>                 <C>  
Interest Rate
       2.00 -  3.99%             $   1,262            $    25           $   13              $   12              1,312
       4.00 -  5.99%               139,670             24,509            8,980               5,993            179,152
       6.00 -  7.99%                13,363             10,959              492               1,383             26,197
       8.00 -  9.99%                    27                 --               --                  16                 43
      10.00 - 11.99%                    --                 --               --                  17                 17
                                 ---------            -------           ------              ------           --------
                                 $ 154,322            $35,493           $9,485              $7,421           $206,721
                                 ---------            -------           ------              ------           --------
</TABLE>


Time deposits of $100,000 or more totaled $36.9 million at December
31, 1998 which mature as follows: $20.7 million within three months; $4.3
million between three and six months; $9.1 million between six and twelve
months; and $2.8 million after twelve months.

The ability of the Company to attract and maintain deposits and the Company's
cost of funds on these deposit accounts have been, and will continue to be,
significantly affected by economic and competitive conditions.

Borrowings

The following table presents certain information regarding borrowings:


<TABLE>
<CAPTION>

For the years ended December 31,                                       1998                  1997                  1996
--------------------------------                                       ----                  ----                  ----

<S>                                                                  <C>                   <C>                    <C>    
    Average balance outstanding                                      $136,370              $81,015                $53,932
    Maximum amount outstanding at any month-end during the period    $172,405              $97,983                $80,589
    Weighted average interest rate during the period                     5.85%                6.83%                  7.05%
    Weight average interest rate at end of period                        5.53%                6.73%                  7.18%

</TABLE>

Included in borrowings at December 31, 1998 were securities sold under
agreements to repurchase of $75.2 million, FHLB borrowings of $88.0 million,
subordinated debt of $3.0 million and an Employee Stock Option Plan note payable
of $127,000 Borrowings increased $83.2 million from year-end 1997.

Item 2. Properties

The Company's and the Bank's executive offices are located at 4 Sentry Parkway,
Suite 200, Blue Bell, Pennsylvania. The Bank conducts business from eleven
branch offices in Bridgeport, Plymouth Meeting, East Norriton, Conshohocken,
King of Prussia, Lansdale, Norristown, Jeffersonville, Paoli, and Rosemont,
Pennsylvania and the Andorra community of Philadelphia, one of which is owned
and ten are leased. The Bank also conducts equipment leasing business in leased
facilities in Baltimore, MD, and Blue Bell, PA. The Company, through PRA, has
leased locations in Blue Bell, PA, Richmond, VA, Woodbridge, NJ, Chesapeake, VA,
and Wilmington, DE.

Item 3. Legal Proceedings

The Company is involved in routine legal proceedings occurring in the ordinary
course of business which management, after reviewing the foregoing actions with
legal counsel, is of the opinion that the liability, if any, resulting from such
actions will not have a material effect on the financial condition or results of
operations of the Company.

Item 4. Submissions of Matters to a Vote of Security Holders

Not applicable.

                                       19
<PAGE>

                                    PART III

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

The information required herein is incorporated by reference from page 35 of the
Company's 1998 Annual Report to Stockholders, which is included herein as
Exhibit 13 (the "Company's 1998 Annual Report.")

Item 6. Selected Financial Data.

The information required herein is incorporated by reference from page 9 of the
Company's 1998 Annual Report.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

The information required herein is incorporated by reference from pages 10 to 17
of the Company's 1998 Annual Report.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

The information required herein is incorporated by reference from pages 14 to 16
of the Company's 1998 Annual Report.

Item 8. Financial Statements and Supplementary Data

The information required herein is incorporated by reference from pages 18 to 34
of the Company's 1998 Annual Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

Not applicable.

Item 10. Directors and Executive Officers of the Registrant

The information contained in the section titled "Election of Directors" in the
Company's definitive Proxy Statement for the 1999 Annual Meeting to be held
April 27, 1999 (the "Proxy Statement"), with respect to the Directors of the
Company is incorporated herein by reference.

Item 11. Executive Compensation

The information appearing in the Caption "Executive Compensation and
Transactions" in the Proxy Statement is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information appearing in the captions "Security Ownership of Certain
Beneficial Owners" and "Election of Directors" (with respect to security
ownership by Directors) in the Proxy Statement is incorporated herein by
reference.

Item 13. Certain Relationships and Related Transactions

The information appearing in the caption "Indebtedness of Management" in the
Proxy Statement is incorporated herein by reference.

                                       20
<PAGE>


                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

a. The financial statements listed on the index set forth in Item 8 of this
   Annual Report on Form 10-K are filed as part of this Annual Report.

   Financial Statement schedules are not required under the related
   instructions of the Securities and Exchange Commission or are inapplicable
   and, therefore, have been omitted.

b. The following exhibits are incorporated by reference herein or are filed as
   part of this Annual Report.

    No.                                 Exhibits
    ---                                 --------

    *3.1    Certificate of Incorporation (Exhibit 3.1 to the Company's Annual
            Report on Form 10-K for the year ended December 31, 1987)

    *3.2    By-Laws (Exhibit 3.2 to the Company's Registration Statement No.
            33-3685 on Form S-4, filed with the Securities and Exchange
            Commission (the "SEC") on March 3, 1986)

     3.3    Certificate of Amendment of Certificate of Incorporation dated May
            13, 1998.

    *4.1    Amended and Restated Declaration of Trust relating to Progress
            Capital Trust I, dated as of June 3, 1997, between Progress
            Financial Corporation and the trustees named therein. (Exhibit 4.4
            to the Company's Registration Statement on Form S-4, filed with the
            SEC on October 22, 1997)

    *4.2    Indenture, dated as of June 3, 1997, between Progress Financial
            Corporation and The Bank of New York, as trustee, relating to Junior
            Subordinated Deferrable Interest Debentures due 2027 of Progress
            Financial Corporation. (Exhibit 4.1 to the Company's Registration
            Statement on Form S-4, filed with the SEC on October 22, 1997)

    *4.3    Series B Capital Securities Guarantee Agreement, dated as of
            December 11, 1997, relating to the Capital Securities of Progress
            Capital Trust I. (Exhibit 4.6 to the Company's Registration
            Statement on Form S-4, filed with the SEC on October 22, 1997)

   *10.1    Key Employee Stock Compensation Program (Exhibit 28 to the Company's
            Registration Statement on Form S-8, filed with the SEC on November
            13, 1986)

   *10.2    Amendment dated December 15, 1987 to Key Employee Stock Compensation
            Program (Exhibit 4.2 to the Company's Registration Statement, No.
            33-19570)

    10.3    1993 Stock Incentive Plan as amended in 1997 and 1998.

   *10.4    1993 Directors' Stock Option Plan as amended in 1997 (Appendix B to
            the Company's Definitive Proxy on Form DEF 14A, filed with the SEC
            on April 7, 1997)

   *10.5    Employment Agreement between Progress Financial Corporation,
            Progress Bank and W. Kirk Wycoff dated March 1, 1997. (Exhibit 10.5
            to the Company's Annual Report on Form 10-K for the year ended
            December 31, 1997, filed with the SEC on March 31, 1998)

    10.6    Change in Control and Termination Agreement between Progress
            Financial Corporation, Progress Bank and Michael B. High dated
            October 2, 1998.

    10.7    Change in Control and Termination Agreement between Progress
            Financial Corporation, Progress Bank and H. Wayne Griest dated
            November 17, 1998.

    10.8    Change in Control and Termination Agreement between Progress
            Financial Corporation, Progress Bank and Eric J. Morgan dated
            October 2, 1998.

                                       21

<PAGE>

   *10.9    Restricted Stock Award Plan dated February 17, 1999 (Exhibit 4 on
            the Company's Registration Statement on Form S-8, File Number
            333-72543 filed with the SEC on February 18, 1999)

      11    Computation of Earnings per Share

      13    1998 Annual Report to Stockholders

      21    Subsidiaries of the Registrant

      23    Consent of Independent Accountants

      27    Financial Data Table


No reports on Form 8-K were filed for the quarter ended December 31, 1998.

*  Incorporated by reference.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto being duly authorized.

                                         Progress Financial Corporation


March 23, 1999                       BY: /s/ W. Kirk Wycoff
--------------                           ---------------------------------------
     Date                                W. Kirk Wycoff, Chairman, President and
                                         Chief Executive Officer


Pursuant to the Requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated.


<TABLE>

<S>                                                                             <C> 
/s/ W. Kirk Wycoff                                                              March 23, 1999
-----------------------------------------                                       --------------
W. Kirk Wycoff, Chairman, President                                                 Date
and Chief Executive Officer

/s/ John E. F. Corson                                                           March 23, 1999   
-----------------------------------------                                       --------------
John E.Flynn Corson, Director                                                       Date

/s/ William O. Daggett, Jr.                                                     March 23, 1999    
-----------------------------------------                                       --------------
William O. Daggett, Jr., Director                                                   Date

/s/ H. Wayne Griest                                                             March 23, 1999   
-----------------------------------------                                       --------------
H. Wayne Griest, Director                                                           Date

                                                                                                 
-----------------------------------------                                       --------------
G. Daniel Jones, Director                                                           Date

/s/ Joseph R. Klinger                                                           March 23, 1999   
-----------------------------------------                                       --------------
Joseph R. Klinger, Director                                                         Date

/s/ Paul M. LaNoce                                                              March 23, 1999  
-----------------------------------------                                       --------------
Paul M. LaNoce, Director                                                            Date

                                                                                               
-----------------------------------------                                       --------------
A. John May, III, Director                                                          Date



                                       22
<PAGE>



<S>                                                                             <C>    
/s/ William L. Mueller                                                          March 23, 1999   
-----------------------------------------                                       --------------
William L. Mueller, Director                                                        Date

/s/ Janet E. Paroo                                                              March 23, 1999   
-----------------------------------------                                       --------------
Janet E. Paroo, Director                                                            Date

/s/ Kevin J. Silverang                                                          March 23, 1999   
-----------------------------------------                                       --------------
Kevin J. Silverang, Director                                                        

/s/ Charles J. Tornetta                                                         March 23, 1999   
-----------------------------------------                                       --------------
Charles J. Tornetta, Director                                                       Date

/s/ Michael B. High                                                             March 23, 1999   
-----------------------------------------                                       --------------
Michael B. High, Sr. Vice President                                                 Date
and Chief Financial Officer

</TABLE>
                                       23