UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                        Washington, D.C.   20552

                              FORM 10 - QSB

[X]    QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934

For the quarterly period ended June 30, 1999

[ ]    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT


For the transition period from                 to
                               ---------------    ---------------

                     Commission File Number 0-23765
                     ------------------------------

                     Carnegie Financial Corporation
          (Exact name of registrant as specified in its charter)

Pennsylvania                                                     23 -1806857
(State or other jurisdiction of incorporation
or organization)                               (IRS Employer Identification No.)


                17 West Mall Plaza, Carnegie, Pennsylvania, 15106
                    (Address of principal executive offices)

                                (412) 276 - 1266
              (Registrant's telephone number, including area code)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act  during  the past 12 months  (or 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  [ ]

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:

              Class:  Common Stock, par value $.10 per share
                Outstanding at August 5, 1999: 226,148


<PAGE>
                      CARNEGIE FINANCIAL CORP

                               INDEX



                                                           Page
                                                          Number
                                                        ---------

PART I  - FINANCIAL INFORMATION

   Item 1. Financial Statements

           Consolidated Balance Sheet
            (Unaudited) as of June 30,
             1999 and December 31, 1998                    3

             Consolidated Statement of Income
            (Unaudited) for the Six Months
             ended June 30, 1999 and 1998                  4

           Consolidated Statement of Income
            (Unaudited) for the Three Months
             ended June 30, 1999 and 1998                  5

           Consolidated Statement of
             Changes in Stockholders' Equity
             (Unaudited) as of June 30, 1999               6

            Consolidated Statement of Cash
              Flows (Unaudited) for the Six
              Months ended June 30, 1999 and 1998          7

            Notes to Unaudited Consolidated
              Financial Statements                         8

   Item 2.  Management's Discussion and Analysis of
              Financial Condition and Results
              of Operations                              9 - 14

PART II  -  OTHER INFORMATION

   Item 1.  Legal Proceedings                              15

   Item 2.  Changes in Securities                          15

   Item 3.  Default Upon Senior Securities                 15

   Item 4.  Submissions of Matters to a
              Vote of Security Holders                     15

   Item 5.  Other Information                              15

   Item 6.  Exhibits and Reports on Form 8 - K             15

SIGNATURES                                                 16




<PAGE>
                 CARNEGIE FINANCIAL CORPORATION
             CONSOLIDATED BALANCE SHEET (UNAUDITED)

                                                June 30,        December 31,
                                                  1999             1998
                                              ------------     ------------
             ASSETS
Cash and due from banks                       $    213,848    $    316,515
Interest - bearing overnight
   deposits with other institutions                484,128         648,973
                                              ------------    ------------
Cash and cash equivalents                          697,976         965,488

Certificates of deposit                            100,000         199,000
Investment securities available
   for sale                                      3,616,145       1,259,532
Investment securities held to
   maturity (fair value of $503,083)                     -         489,287
Mortgage - backed securities
   available for sale                              884,367       1,026,442
Mortgage - backed securities
   held to maturity (fair value
   of $874,400 and $1,082,927)                     871,601       1,066,910
Loans receivable, (net of
   allowance for loan losses
   of $175,836 and $138,860)                    18,832,488      14,512,121
Premises and equipment                             239,182         248,228
Federal Home Loan Bank Stock                       408,600         102,900
Accrued interest receivable                        178,045         114,675
Other assets                                       169,767         100,061
                                              ------------    ------------
          TOTAL ASSETS                        $ 25,998,171    $ 20,084,644
                                              ============    ============

     LIABILITIES AND STOCKHOLDERS EQUITY
Deposits                                      $ 15,509,414    $ 15,372,170
Borrowed funds                                   6,950,000       1,200,000
Advances from borrowers for taxes
   and insurance                                   278,204         179,563
Accrued interest payable and
   other liabilities                               472,002         295,492
                                              ------------    ------------
          TOTAL LIABILITIES                     23,209,620      17,047,225

STOCKHOLDERS' EQUITY
Preferred stock, no par value;
    2,000,000 shares authorized;
    none issued                                          -               -
Common stock, $.10 par value;
    4,000,000 shares authorized
and 238,050 outstanding                             23,805          23,805
Additional paid - in capital                     2,064,903       2,072,044
Retained earnings - substantially
    restricted                                   1,146,775       1,118,054
Unearned Employee Stock Ownership
    Plan shares (ESOP)                            (171,396)      (180,918)
Unearned Restricted Stock Plan shares (RSP)        (72,843)              -
Accumulated other comprehensive income (loss)      (84,163)          4,434
Treasury stock (11,902 shares, at cost)           (118,530)              -
                                              ------------    ------------
          Total stockholders' equity             2,788,551       3,037,419
                                              ------------    ------------
          Total liabilities and
             stockholder's equity             $ 25,998,171    $ 20,084,644
                                              ============    ============

See accompanying notes to the unaudited consolidated financial statements.

3
<PAGE>
                     CARNEGIE FINANCIAL CORPORATION
              CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

                                                     Six Months Ended
                                                          June 30,
                                               -----------       -----------
                                                    1999             1998
                                               -----------       -----------
INTEREST AND DIVIDEND INCOME
   Loans receivable                            $   653,464       $   468,542
   Investment securities
       Taxable                                      90,311            44,385
       Exempt from federal
         income tax                                  8,752            14,817
   Interest - bearing deposits
     in other banks                                 32,360            19,575
   Mortgage - backed securities                     61,360            84,770
   Dividends on Federal Home
     Loan Bank Stock                                 9,246               421
                                               -----------       -----------
        Total interest and
          dividend income                          855,493           632,510
                                               -----------       -----------
INTEREST EXPENSE
   Deposits                                        327,356           344,548
   Borrowings                                      129,147                 -
                                               -----------       -----------
           Total interest expense                  456,503           344,548
                                               -----------       -----------
NET INTEREST INCOME                                398,990           287,962

Provision for loan losses                           38,448                 -
                                               -----------       -----------
NET INTEREST INCOME AFTER
   PROVISION FOR LOAN LOSSES                       360,542           287,962
                                               -----------       -----------
NONINTEREST INCOME
   Service fees                                     41,680            13,837
   Investment securities gains (losses), net       (27,739)            2,147
   Other income                                     36,636            10,586
                                               -----------       -----------
           Total noninterest income                 50,577            26,570
                                               -----------       -----------
NONINTEREST EXPENSE
   Compensation and employee benefits              170,483           155,786
   Occupancy and equipment                          21,456            19,632
   Data processing charges                          38,352            35,200
   Loss on real estate owned                             -            61,058
   Other expense                                   139,525            62,088
                                               -----------       -----------
           Total noninterest expense               369,816           333,764

                                               -----------       -----------
Income (loss) before income taxes                   41,303           (19,232)

Income taxes                                        12,582            (6,800)
                                               -----------       -----------
NET INCOME (LOSS)                              $    28,721       $   (12,432)
                                               ===========       ===========

Basic per share earnings                       $      0.13       $     N/A

                                               ===========       ===========

Dilutive earnings per share                    $      0.13       $     N/A
                                               ===========       ===========
See accompanying notes to the unaudited consolidated financial statements.

4



<PAGE>
                     CARNEGIE FINANCIAL CORPORATION
              CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

                                                     Three Months Ended
                                                          June 30,
                                               -----------       -----------
                                                    1999             1998
                                               -----------       -----------
INTEREST AND DIVIDEND INCOME
   Loans receivable                            $   351,673       $   252,663
   Investment securities
       Taxable                                      54,568            19,292
       Exempt from federal
         income tax                                  2,853             7,408
   Interest - bearing deposits
     in other banks                                  8,801            12,188
   Mortgage - backed securities                     28,087            40,544
   Dividends on Federal Home
     Loan Bank Stock                                 5,780               421
                                               -----------       -----------
        Total interest and
          dividend income                          451,762           332,516
                                               -----------       -----------
INTEREST EXPENSE
   Deposits                                        159,486           174,234
   Borrowings                                       80,397                 -
                                               -----------       -----------
           Total interest expense                  239,883           174,234
                                               -----------       -----------
NET INTEREST INCOME                                211,879           158,282

Provision for loan losses                           14,427                 -
                                               -----------       -----------
NET INTEREST INCOME AFTER
   PROVISION FOR LOAN LOSSES                       197,452           158,282
                                               -----------       -----------
NONINTEREST INCOME
   Service fees                                     22,301             7,482
   Investment securities gains (losses), net       (28,906)                -
   Other income                                     22,535             5,526
                                               -----------       -----------
           Total noninterest income                 15,930            13,008
                                               -----------       -----------
NONINTEREST EXPENSE
   Compensation and employee benefits               84,686            75,456
   Occupancy and equipment                          10,751             9,581
   Data processing charges                          20,066            17,459
   Loss on real estate owned                             -            57,867
   Other expense                                    69,533            29,554
                                               -----------       -----------
           Total noninterest expense               185,036           189,917

                                               -----------       -----------
Income (loss) before income taxes                   28,346           (18,627)

Income taxes                                        11,916            (6,800)
                                               -----------       -----------
NET INCOME (LOSS)                              $    16,430       $   (11,827)
                                               ===========       ===========

Basic per share earnings                       $      0.08       $     N/A

                                               ===========       ===========

Dilutive earnings per share                    $      0.08       $     N/A
                                               ===========       ===========
See accompanying notes to the unaudited consolidated financial statements.

5



<PAGE>
<TABLE>
<CAPTION>
                         CARNEGIE FINANCIAL CORPORATION
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY


                                                      Unearned     Unearned   Accumulated
                             Additional               Shares       Shares      Other                     Total
                     Common   Paid-in    Retained     Held by      Held by   Comprehensive Treasury  Stockholders' Comprehensive
                     Stock    Capital    Earnings      ESOP          RSP     Income (Loss)   Stock       Equity        Income
                   -------- ----------  ----------  ----------   ----------   ----------   ---------  ----------     ---------
<S>                <C>      <C>         <C>         <C>          <C>         <C>           <C>       <C>            <C>
Balance,
  December 31, 1998 $23,805 $2,072,044  $1,118,054  $ (180,918)  $       -   $    4,434           -   $3,037,419
Net income                                  28,721                                                        28,721     $  28,721
Other comprehensive
income:  Unrealized
loss on available
 for sale
 securities,
 net of
 reclassification
 adjustment                                                                     (88,597)                 (88,597)      (88,597)
                                                                                                                      --------
Comprehensive
income                                                                                                               $ (59,876)
                                                                                                                      ========
Stock purchased RSP             (7,141)                            (80,937)                              (88,078)
Shares earned RSP                                                    8,094                                 8,094
Shares earned ESOP                                       9,522                                             9,522
Treasury stock
  purchased                                                                                (118,530)    (118,530)
                     ------ ----------  ----------  ----------   ---------    ---------    --------     --------

Balance,
  June 30, 1999     $23,805 $2,064,903  $1,146,775 $  (171,396) $  (72,843)   $ (84,163)  $(118,530)  $2,788,551
                     ====== ==========  ==========  ==========   =========    =========    ========    =========




Components of
  comprehensive
  income:
  Change in net
  unrealized
  loss on
  investment
  securities
  held for sale                                                                           $(106,905)
Realized loss
  included in
  net income,
  net of tax                                                                                 18,308
                                                                                           --------
Total                                                                                     $ (88,597)
                                                                                           ========
</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

6

<PAGE>
                      CARNEGIE FINANCIAL CORP.
            CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
                                                            Six Months Ended
                                                                 June 30,
                                                            1999           1998
                                                           --------    ---------
OPERATING ACTIVITIES
Net income (loss)                                            28,721     (12,432)
Adjustments to reconcile net income (loss) to net
   cash provided by operating activities:
    Depreciation, amortization and
       accretion, net                                        48,505      11,686
    Provision for loan losses                                38,448           -
    Investment securities (gains) losses, net                27,739      (2,147)
    Increase in accrued interest receivable                 (63,370)     (9,168)
    Increase in accrued interest payable                    189,678     139,648
    Other, net                                              (37,233)    (17,984)
                                                           --------    --------
    Net cash provided by operating activities               232,488     109,603
                                                           --------    --------
INVESTING ACTIVITIES

Investment securities available for sale:
    Purchases                                            (2,746,119) (1,361,364)
    Proceeds from sales                                     707,194     317,585
    Maturities and repayments                                     -     995,819
Mortgage-backed securities available for sale:
    Purchases                                              (111,463)   (428,186)
    Proceeds from sales                                           -     143,836
    Maturities and repayments                               245,491     211,041
Mortgage-backed securities held to maturity:
    Maturities and repayments                               195,299     372,882
Net increase in loans                                    (4,358,816) (1,539,860)
Purchases of Federal Home Loan Bank stock                  (305,700)          -
Purchases of office properties and equipment                 (4,163)    (32,007)
                                                         ----------   ----------
Net cash used for investing activities                   (6,378,277) (1,320,254)
                                                         ----------   ----------
FINANCING ACTIVITIES
Net increase in deposits                                    137,244   3,271,888
Proceeds from short-term borrowings                       2,000,000           -
Proceeds from long-term borrowings                        3,750,000           -
Purchase of treasury stock                                 (118,530)          -
Purchase stock for RSP                                      (88,079)          -
Net change in advances for taxes and insurance               98,641      63,029
                                                         ----------   ---------
Net cash provided by financing activities                 5,779,276   3,334,917
                                                         ----------   ---------
Increase (decrease) in cash and cash equivalents           (366,513)  2,124,266

CASH AND CASH EQUIVALENTS
   AT BEGINNING OF YEAR                                   1,164,488     950,891
                                                         ----------   ---------
CASH AND CASH EQUIVALENTS
   AT END OF YEAR                                           797,975   3,075,157
                                                         ----------  ----------
                                                         ----------  ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the period for:
  Interest on deposits and borrowings                   $   266,824  $  204,899
  Income taxes                                                4,425      18,526

See accompanying notes to the unaudited consolidated financial statements.

7



<PAGE>
CARNEGIE FINANCIAL CORP.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - BASIS OF PRESENTATION

The consolidated  financial  statements of Carnegie  Financial  Corporation (the
"Company")  includes its wholly-  owned  subsidiary  Carnegie  Savings Bank (the
"Bank"). All significant intercompany items have been eliminated.

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with the  instructions  to Form  10-QSB and,  therefore,  do not
necessarily  include all information that would be included in audited financial
statements. The information furnished reflects all adjustments which are, in the
opinion  of  management,  necessary  for a  fair  statement  of the  results  of
operations.  All such adjustments are of a normal recurring nature.  The results
of  operations  for the interim  periods are not  necessarily  indicative of the
results  to be  expected  for the fiscal  year  December  31,  1999 or any other
interim period.

Note 2 - EARNINGS PER SHARE

Earnings per share computations are based upon the weighted number of shares
outstanding  for the six and three  months  ended June 30,  1999.  The  weighted
number of shares outstanding was 214,497 and 210,027,  respectively.  Net income
used  in  the   earnings  per  share   calculation   was  $28,721  and  $16,430,
respectively.  Earnings per share computations are not applicable for the period
ending June 30,  1998 as the Company  converted  from a  state-chartered  mutual
savings bank to a federally-chartered stock savings bank on July 10, 1998.

The Company provides dual  presentation of Basic and Diluted earnings per share.
Basic  earnings per share  utilizes net income as reported as the  numerator and
the actual average shares  outstanding as the denominator.  Diluted earnings per
share includes any dilutive effects of options, warrants, and convertible
securities. For the six and three months ended June 30, 1999, the diluted number
of shares  outstanding  from  employee  stock  options was 214,963 and  211,300,
respectively.


Note 3 INVESTMENT SECURITIES

In  accordance  with the  Financial  Accounting  Standards  Board (FASB)  issued
Statement of Financial  Accounting Standards No. 133, "Accounting for Derivative
Instruments  and  Hedging  Activities,"  effective  April 1, 1999,  the  Company
reclassified  investment securities from the held to maturity  classification to
available  for sale  classification  with an  amortized  cost of $489,000 and an
estimated market value of $502,000.

8



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

COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1999 AND DECEMBER 31,1998

Total assets  increased by  approximately  $5,913,000 or 29.4% to $25,998,000 at
June 30, 1999 from  $20,085,000  at December  31,  1998.  This growth was funded
primarily through additional  borrowings from the Federal Home Loan Bank of $5.7
million.

Total  investment  and  mortgage-backed  securities  held to maturity  increased
$1,530,000  or 39.8% from  $3,842,000 at December 31, 1998 to $5,372,000 at June
30, 1999. Of the $2,858,000 of investments  purchased,  $2,746,000 or 96.1% were
U.S. Government Agencies.  These investments,  which have slightly lower yields,
primarily  mature between 15 and 30 years.  This overall  increase was partially
offset by repayments of  mortgage-backed  securities of $441,000 and the sale of
$707,000  of  U.S.  Government  Agency  securities.  Additionally,  the  Company
obtained  financing  from the FHLB,  and reduced its balances  with  deposits in
other institutions to fund the growth of the investment  portfolio.  As of April
1,  1999,  in  accordance  with  FASB  Statement  133,  management   transferred
approximately $500,000 of held to maturity securities to available for sale.

At June 30,  1999,  the  Company's  investment  securities  and  mortgage-backed
available for sale portfolios  totaled $4.5 million,  or 17.3%, of the Company's
total consolidated assets.  Pursuant to generally accepted accounting standards,
such securities are recorded at current market value and net unrealized gains or
losses on such  securities are excluded from earnings and reported net of income
taxes as part of  comprehensive  income,  a separate  component of stockholders'
equity,  until  realized.  At June 30, 1999,  due to increases in market  rates,
unrealized losses for such securities were approximately  $84,000 as compared to
net gains at December 31, 1998 of $4,400.  Because of interest rate  volatility,
the Company's  accumulated  comprehensive  income and stockholders' equity could
materially  fluctuate for each interim period and year-end period.  The majority
of the unrealized  loss at June 30, 1999 resulted from the Company's  investment
in U.S. Government Agency securities.

Net loans receivable  increased $4,320,000 or 29.8% from $14,512,000 at December
31, 1998 to $18,832,000 at June 30, 1999 primarily due to the growing demand for
residential real estate within the Company's market area.
The residential  portfolio  increased  $4,040,000  during 1999 and was primarily
driven by  engaging  the  services  of a  mortgage  broker,  which  resulted  in
$5,061,000  in new  residential  loans.  Although  such  loans  have an  average
origination of $230,000, they are subject to the same underwriting guidelines as
is typical within the Company's residential loan portfolio.

Advances from the Federal Home loan Bank of Pittsburgh increased $5,750,000
to  $6,950,000  at June 30, 1999 from  $1,200,000 at December 31, 1998. As noted
previously,  management entered into these advances to fund loan growth, as well
as to implement part of the Company's leverage  strategy.  These borrowings have
staggering  maturites from overnight lines of credit to five years advances.  At
June 30, 1999,  the Bank's  maximum  borrowing  capacity with the FHLB was $15.4
million.

Stockholder's  equity  decreased  $249,000 to $2,789,000 at June 30, 1999,  from
$3,037,000 at December 31, 1998 as a result of the Company acquiring
treasury stock of $119,000,  the  implementation  of a Restricted Stock Plan for
the benefit of key  employees  and  directors  for $81,000,  and the decrease in
accumulated other comprehensive income of $89,000 due to a decline in the market
values of the Company's available for sale investment portfolio.

9






<PAGE>
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE
30, 1999 AND 1998

Net income  increased  $41,000 to $29,000 for the six months ended June 30, 1999
from a loss of  $12,000  for the same  period  ended  1998.  This  increase  was
primarily due to an increase in net interest income of $111,000 while
being  partially  offset by an  increase  in the  provision  for loan losses and
noninterest expense of $38,000 and $36,000, respectively.

Total interest and dividend income increased $223,000 or 35.3% from $632,000 for
the six months  ended June 30, 1998 to $855,000  for the same period ended 1999.
Increases in the average principal  balances of loans and investment  securities
of $5.1 and $1.4 million  primarily  fueled the  increases  in related  interest
income of $185,000  and $46,000,  respectively.  As noted  previously,  the loan
portfolio  was  heavily  influenced  by the  increase in  residential  mortgages
originated  through a mortgage broker while  securities  available for sale were
being purchased from the repayment of mortgage-backed securities and from excess
deposits  in other  financial  institutions.  The  impact  of this  increase  in
interest  income is offset by the decline in the average  principal  balances of
mortgage-backed  securities  of  $530,000,  as  well  as  a  slight  decline  in
interest-earning  assets from 7.31% as of June 30, 1998  compared to 7.24% as of
June 30, 1999.

Interest expense on deposits,  which remained relatively stagnant,  was $327,000
for the six months ended June 30, 1999  compared to $345,000 for the same period
ended in 1998. There were slight increases in the average principal  balances of
interest-bearing   demand  and  savings   deposits  of  $302,000  and  $146,000,
respectively,  while  being  offset by market  declines in the cost of funds for
certificates  of deposit and savings  deposits  of 36 and 19 basis  points.  The
overall  increase in interest  expense  resulted from a $5.7 million increase in
borrowings with the FHLB.

Based upon management's  continuing  evaluation of the adequacy of the allowance
for loan losses  which  encompasses  the  overall  risk  characteristics  of the
various portfolio segments,  past experience with losses, the impact of economic
conditions  on borrowers,  and other  relevant  factors,  the provision for loan
losses  increased by $38,000 for the six months ended June 30, 1999  compared to
the same period ended 1998.  This increase is primarily due to the growth of the
loan portfolio as discussed above.  See "Risk Elements".

Noninterest income, which is comprised of service charges on deposit
accounts,  investment securities gains (losses), net, and other income increased
$24,000 or 90.4% to $51,000  for 1999  compared  to  $27,000  for 1998.  Service
charges on deposit  accounts  increased  $28,000  due to an  increased  level of
transaction  account  activity and the  addition of two ATMs.  Increases in fees
associated with loan  underwriting and processing  accounted for the majority of
the $26,000 increases to other income. Partially offsetting these increase was a
$30,000 loss on the sale of investment securities.

Noninterest  expense,  which increased  $36,000 or 10.8% to $370,000 for the six
months ended June 30, 1999 from $334,000 for the same period ended 1998,
was substantially effected by increases of $77,000 in other expenses and $15,000
in compensation and employee benefits.  Increases to other expenses consisted of
the following:  costs associated with the supplemental  director retirement plan
of $20,000, professional fees and stock expenses of $37,000 resulting from costs
associated with conducting  business as a public entity for the six months ended
June 30, 1999 which were not present  for the same  period  ended 1998,  and ATM
costs of $14,000 as the Company placed two new ATMs in service during the fourth
quarter  of  1998.   Increases  to  compensation   and  employee   benefits  are
attributable  to  implementing  the ESOP and RSP in July of 1998 and  January of
1999, respectively. Offsetting these increases was a decline in the loss on real
estate operations of $61,000 which was recognized in 1998.

Income tax expense increased $19,000 from a benefit of $7,000 for the six months
ended June 30,  1998 to an expense of $12,000  for the same  period  ended 1999.
This increase in due to an increase in 1999 over 1998 of  pre-taxable  income of
$61,000.

10


<PAGE>



COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE
30, 1999 AND 1998

Net income increased $28,000 to $16,000 for the three months ended June 30, 1999
from a loss of $12,000 for the same period ended 1998. This increase was
primarily due to an increase in net interest  income of $54,000 while  partially
being  offset by an  increase  in the  provision  for loan losses and income tax
expense of $14,000 and $19,000, respectively.

Total interest and dividend income increased $119,000 or 35.9% from $333,000 for
the three months ended June 30, 1998 to $452,000 for the same period ended 1999.
Interest  income  on loans  and  investment  securities  increased  $99,000  and
$35,000,  respectively,  due to increases in the average  principal  balances of
$4,863,000  and  $2,168,000,  respectively,  for those same  reasons  enumerated
above.  In  addition,  there was an  increase  in the yield of  interest-earning
assets from 7.01% for the three months ended June 30, 1998 to 7.27% for the same
period  ended 1999.  The increase in yield is due to an increase in the yield on
loans of 14 basis points while offset by declining yields of both investment and
mortgage-backed securities during this same time period.

Total interest expense  increased $66,000 to $240,000 for the three months ended
June 30, 1999 from  $174,000 for the same period ended 1998.  This  increase was
derived from an increase in the average  principal  balances of borrowings  from
the FHLB of  approximately  $6.2 million  which  corresponded  to an increase of
$80,000 in interest expense. Offsetting this increase was market declines in the
cost of funds for  certificates  of deposit  and  savings  deposits of 54 and 38
basis points.

Based upon management's  continuing  evaluation of the adequacy of the allowance
for loan losses  which  encompasses  the  overall  risk  characteristics  of the
various portfolio segments,  past experience with losses, the impact of economic
conditions  on borrowers,  and other  relevant  factors,  the provision for loan
losses increased by $14,000 for the three months ended June 30, 1999 compared to
the same period ended 1998.  This increase is primarily due to the growth of the
loan portfolio as discussed above.  See "Risk Elements".

Noninterest  income  increased  from $13,000 for the three months ended June 30,
1998 to $16,000  for the same period  ended June 30,  1999.  Service  charges on
deposit accounts and other income increased  $15,000 and $17,000,  respectively.
As noted previously,  such increases were due primarily to an increased level of
transaction account activity,  the addition of two ATMs, and an increase in fees
associated with loan  underwriting  and processing.  Partially  offsetting these
increases was a $29,000 loss on the sale of investment securities.

Noninterest  expense decreased from $190,000 for the three months ended June 30,
1998 to $185,000  for the same period ended 1999. A decrease in the loss on real
estate  operations of $58,000 was  substantially  offset by increases of $40,000
and  $9,000  for  other  expenses  and  compensation   and  employee   benefits,
respectively.  As noted above,  these  increases to other expenses  consisted of
increased  costs  associated with the  supplemental  director  retirement  plan,
professional fees and stock expenses,  ATM costs, and the  implementation of the
ESOP and RSP.

Income tax expense increased from a benefit of $7,000 for the three months ended
June 30,  1998 to an expense of $12,000 for the same  period  ended  1999.  This
increase  in due to an  increase  in 1999  over  1998 of  pre-taxable  income of
$47,000.

11


<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

Our   primary   sources  of  funds  are   deposits,   repayment   of  loans  and
mortgage-backed securities, maturities of investments, interest-bearing deposits
with other banks and funds provided from operations.  While scheduled repayments
of loans and mortgage-backed  securities and maturities of investment securities
are predictable sources of funds, deposit flows and loan prepayments are greatly
influenced  by the general level of interest  rates,  economic  conditions,  and
competition.  We use our liquid resources  principally to fund loan commitments,
maturing  certificates of deposit and demand deposit  withdrawals,  to invest in
other interest-earning assets, and to meet operating expenses.

Liquidity may be adversely  affected by unexpected  deposit outflows,  excessive
interest rates paid by competitors,  adverse  publicity  relating to the savings
and loan industry and similar matters.  Management  monitors projected liquidity
needs and determines the level desirable based in part on the Bank's commitments
to make loans and  management's  assessment  of the Bank's  ability to  generate
funds.

Management  monitors both the Company's and the Savings Bank's total risk-based,
Tier I  risk-based  and Tier I  leverage  capital  ratios  in  order  to  assess
compliance  with regulatory  guidelines.  At June 30, 1999, both the Company and
the  Bank  exceeded  the  minimum   risk-based   and  leverage   capital  ratios
requirements.  The Company's and Bank's total risk-based,  Tier I risk-based and
Tier I leverage  ratios  are 22.9%,  21.6%,  10.8% and 17.9%,  16.6%,  and 8.3%,
respectively at June 30, 1999.

12




<PAGE>
RISK ELEMENT

The table below presents information  concerning  nonperforming assets including
nonaccrual loans, renegotiated loans, loans 90 days or more past due, other real
estate loans,  and repossessed  assets. A loan is classified as nonaccrual when,
in the opinion of management,  there are serious doubts about  collectibility of
interest  and  principal.  At the time the accrual of interest is  discontinued,
future income is recognized only when cash is received.  Renegotiated  loans are
those  loans  which  terms  have been  renegotiated  to provide a  reduction  or
deferral  of  principal  or  interest  as a result of the  deterioration  of the
borrower.


                                         June 30,      December 31,
                                           1999            1998
                                       ------------     -----------
                                          (Dollars in thousands)

Loans on nonaccrual basis              $      40         $      57
Loans past due 90 days or
more and still accruing                        -                 -
                                       ---------         ---------

Total nonperforming loans                     40                57
                                       ---------         ---------
Real estate owned                              -                 -
                                       ---------         ---------
Total nonperforming assets                    40                57
                                       ---------         ---------

Nonperforming loans as a
percent of total loans                      0.21%             0.39%
                                       =========         =========

Nonperforming assets as a
 percent of total assets                    0.21%             0.39%
                                       =========         =========

Allowance for loan losses to
 nonperforming loans                      440.00%           243.61%
                                       =========         =========

Management  monitors  impaired loans on a continual  basis. As of June 30, 1999,
impaired  loans had no material  effect on the Company's  financial  position or
results of operations.

During the six month  period ended June 30, 1999,  loans  increased  $4,357,000,
nonperforming  loans  decreased  $17,000,  and the  allowance  for  loan  losses
increased  $37,000 for the same period.  The  percentage  of allowance  for loan
losses to loans outstanding declined slightly to .93% at June 30, 1999 from .95%
at December 31, 1998.  Nonperforming  loans are primarily made up of one to four
family residential mortgages and consumer loans. The collateral  requirements on
such  loans  reduce  the risk of  potential  losses  to an  acceptable  level in
management's opinion.

Management  believes the level of the allowance for loan losses at June 30, 1999
is sufficient; however, there can be no assurance that the current allowance for
loan losses will be adequate to absorb all future loan losses.  The relationship
between the allowance for loan losses and outstanding loans is a function of the
credit  quality and known risk  attributed to the loan  portfolio.  The on-going
loan  review  program  and  credit  approval  process is used to  determine  the
adequacy of the allowance for loan losses.


13


<PAGE>
YEAR 2000

Rapid and accurate data processing is essential to the Bank's  operations.  Many
computer  programs can only distinguish the final two digits of the year entered
(a common programming  practice in prior years) are expected to read entries for
the year 2000 as the year 1900 or as zero and  incorrectly  attempt  to  compute
payment, interest, delinquency and other data. The Bank has been evaluating both
information  technology  (computer  systems)  and  non-  information  technology
systems (e.q. vault timers,  electronic door lock and elevator controls).  Based
upon such  evaluations,  management has  determined  that the Bank has year 2000
risk in three  areas:  (1) Bank's own computer and  software,  (2)  computers of
others used by the Bank's borrowers, and (3) computers of others who provide the
Bank with processing of certain services.

Bank's own computers and software. The Bank has completed its year 2000
testing and has found no material problems.  The Bank has corrected all problems
that  were  found  during  testing.  The  Bank  believes  that  as a  result  of
modifications to existing software and hardware and conversions to new software,
the year 2000 problem has been mitigated.  The majority of the costs  associated
with the Bank's own computers and software were incurred  during 1998.  The Bank
does not expect to have any material costs for such areas in 1999.

Computers of others used by our borrowers.  The Bank has evaluated most of their
borrowers  and does not believe the year 2000  problem  should,  on an aggregate
basis, impact their ability to make payments to the Bank. The Bank believes that
most of their  residential  borrowers are not dependent on their home  computers
for income and that none of their commercial  borrowers are so large that a year
2000 problem  would render them unable to collect  revenue or rent and, in turn,
continue  to make loan  payments  to the  Bank.  The Bank  does not  expect  any
material  costs to  address  this  risk  area and  believes  they are year  2000
compliant in this risk area.

Computers of others who provide us with  processing  of certain  services.  This
risk is  primarily  focused on one third  party  service  bureau  that  provides
virtually all of the Bank's data processing. The service bureau has communicated
that it is substantially  year 2000 compliant and subsequent  results of testing
by the Bank have been positive.

Contingency  Plan.  The Bank will continue  monitoring  their service  bureau to
evaluate whether its data processing system will fail and is being provided with
periodic updates on the status of testing and upgrades being made by the service
bureau.  If the Bank service  bureau  fails,  the Bank will attempt to locate an
alternative  service  bureau  that  is  year  2000  compliant.  If the  Bank  is
unsuccessful,  the Bank  will  enter  deposit  balances  and  interest  with its
existing  computer  system.  If this  labor  intensive  approach  is  necessary,
management  and employees  will become much less  efficient.  However,  the Bank
believes  that they would be able to operate in this  manner in the  short-term,
until their existing  service  bureau,  or their  replacement,  is able to again
provide data processing  services.  If very few financial  institution  services
bureaus were operating in the year 2000, the Bank's replacement costs,  assuming
the Bank could  negotiate an agreement,  could be material.  The above items are
documented in the Bank's written contingency plan which has been approved by the
Board of Directors.

14


<PAGE>
CARNEGIE FINANCIAL CORPORATION
PART II   OTHER INFORMATION

ITEM 1.  Legal Proceedings

         None

ITEM 2.  Changes in Securities

         None

ITEM 3.  Defaults upon Senior Securities

         None

ITEM 4.  Submission of Matters to a Vote of Security Holders

             The following represents the results of matters submitted to a vote
             of the sharesholders at the annual meeting held on April 20, 1999:


             Election of Directors:
             The following directors were elected with terms of four years:

                                          For          Votes Withheld
                                        -------        ----------------

             Charles Rupprecht          235,256            16,000
             Lois A. Wholey             235,256            17,000

             S.R. Snodgrass A.C.was selected as the Company's independent
             auditors for the fiscal year 1999 by the following vote:

             For:                       235,125
             Against:                     1,731
             Abstain:                         0


ITEM 5.  Other Information

         None

ITEM 6.  Exhibits and Reports on Form 8-K

         (a) The following exhibits are incorporated as part of this report

               3.1 Articles of Incorporation of Carnegie Financial Corporation
               3.2 Bylaws of Carnegie Financial Corporation *
               4.0 Specimen Stock Certificate *
              10.1 Employment agreement between Carnegie Savings Bank and
                       Shirley Chiesa
              10.2 Restricted Stock Plan **
              10.3 1999 Stock Option Plan **
              27.0 Financial Data Schedule (electronic filing only)

          (b) Reports on Form 8-K

         There were no reports filed under Form 8-K for the period under report.

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

*   Incorporated by reference to the identically numbered exhibit to the
    registration statement on Form SB-2 (File no. 333-24579) declared
    effective by the SEC on May 14, 1998.

**  Incorporated  by reference to the proxy statement for the special meeting of
    stockholders  on January  11,  1999 and filed with the SEC on  December  10,
    1998.



15




<PAGE>
SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  the  report  to be  signed  on its  behalf  by the
undersigned, thereunto duly authorized.


                                   Carnegie Financial Corporation


Date: August 11, 1999      By:     /s/Shirley Chiesa
                                   --------------------------------------
                                   Shirley Chiesa
                                   President and Chief Executive Officer


Date: August 11, 1999       By:    /s/Joseph Pigoni
                                   --------------------------------------
                                   Joseph Pigoni
                                   Vice President and CFO





16