<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 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, 1999
                         Commission File No.:  1-14154

                               GA FINANCIAL, INC.
             (exact name of registrant as specified in its charter)

            DELAWARE                                     25-1780835
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

            4750 Clairton Boulevard, Pittsburgh, Pennsylvania 15236
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (412) 882-9946
          Securities registered pursuant to Section 12(b) of the Act:

                    Common Stock, par value $0.01 per share
                                (Title of class)

       Securities registered pursuant to Section 12(g) of the Act:  None

                          The American Stock Exchange
                     (Name of exchange on which registered)

     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 the 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, i.e., persons other than the directors and executive officers of
the registrant, was $63,908,190 based upon the last sales price as listed on The
American Stock Exchange for March 7, 2000.

     The number of shares of Common Stock outstanding as of March 7, 2000 is:
6,012,059.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Annual Report to Stockholders for the year ended December
31, 1999, are incorporated by reference into Part II of this Form 10-K.

     Portions of the Proxy Statement for the 2000 Annual Meeting of Stockholders
are incorporated by reference into Part III of this Form 10-K.
<PAGE>

                                     INDEX
<TABLE>
<CAPTION>
                                                                            PAGE
                                     PART I

<S>        <C>                                                              <C>
Item 1.    Business.......................................................   1

Additional Item.  Executive Officers of the Registrant....................  37

Item 2.    Properties.....................................................  37

Item 3.    Legal Proceedings..............................................  38

Item 4.    Submission of Matters to a Vote of Security Holders............  38

                                    PART II

Item 5.    Market for Registrant's Common Equity and Related
           Stockholder Matters............................................  38

Item 6.    Selected Financial Data........................................  38

Item 7.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations............................  38

Item 7A.   Quantitative and Qualitative Disclosures About Market Risk.....  38

Item 8.    Financial Statements and Supplementary Data....................  38

Item 9.    Changes In and Disagreements with Accountants
           on Accounting and Financial Disclosure.........................  38

                                    PART III

Item 10.   Directors and Executive Officers of the Registrant.............  39

Item 11.   Executive Compensation.........................................  39

Item 12.   Security Ownership of Certain Beneficial Owners
           and Management.................................................  39

Item 13.   Certain Relationships and Related Transactions.................  39

                                    PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports
           on Form 8-K....................................................  40

                                   SIGNATURES
</TABLE>
<PAGE>

Item 1.  Business.
-----------------

General

     GA Financial, Inc. (the "Company") was incorporated under Delaware law in
December 1995.  The Company completed its initial public offering of 8,900,000
shares of common stock on March 26, 1996 in connection with the conversion of
Great American Federal Savings and Loan Association (the "Association") from the
mutual to stock form of ownership.  GA Financial, Inc. is the parent company of
the Association and New Eagle Capital, Inc.  The Association is a federally
chartered savings and loan association and is wholly-owned by the Company.  The
Company is a savings and loan holding company and is subject to regulation by
the Office of Thrift Supervision ("OTS"), the Federal Deposit Insurance
Corporation ("FDIC") and the Securities and Exchange Commission ("SEC").
Currently, other than investing in various securities, the Company does not
directly transact any material business other than through the Association.
Accordingly, the discussion herein addresses the operations of the Company as
they are conducted through the Association.  As of December 31, 1999, the
Company had total assets of $883.0 million, total deposits of $495.1 million and
total stockholders' equity of $84.6 million.

     The Association was originally chartered in 1914.  The Association's
principal business is to operate a customer oriented savings and loan
association.  The Association attracts retail deposits from the general public
in its primary market area and invests those funds primarily in fixed-rate one-
to four-family owner-occupied mortgage loans, consumer loans and investment,
mortgage-backed and mortgage-related securities. To a lesser extent, the
Association invests in construction and development loans, multi-family loans
and commercial real estate loans.  The Association's revenues are derived
principally from interest on mortgage loans and interest and dividends on
investment, mortgage-backed and mortgage-related securities and, to a much
lesser extent, short-term investments and other fees and services charges. The
Association's primary source of funds is retail deposits, loan repayments and
borrowed funds from the Federal Home Loan Bank.

     The Company's and Association's executive offices are located at 4750
Clairton Boulevard, Pittsburgh, Pennsylvania 15236.  The telephone number is
(412) 882-9946.  As of December 31, 1999, the Association had 207 full-time
equivalent employees.  The employees are not represented by a collective
bargaining unit and the Association considers its relations with its employees
to be good.

Market Area and Competition

     The Association has been, and continues to be, a community-oriented savings
institution offering a variety of financial services to meet the needs of the
communities which it serves.  Its primary market area is the areas surrounding
its branch offices while its lending activities include areas throughout
Allegheny, Beaver, Butler, Fayette, Washington and Westmoreland Counties,
Pennsylvania.  In addition to its principal office in Whitehall, the Association
operates fourteen other retail offices, all of which are located in the southern
and eastern suburbs of the Pittsburgh greater metropolitan area in Allegheny and
Westmoreland Counties.  The earnings of the Association are affected by the
competitive, economic and regulatory environment in which the savings industry
operates.  The Association competes actively with national and local banks,
brokerage firms, mutual fund companies and other financial service entities.

Lending Activities

     Loan Portfolio Composition.  The Association's loan portfolio primarily
consists of first mortgage loans secured by one- to four-family residences and
consumer loans (consisting of home equity loans and education loans) and, to a
much lesser extent, multi-family loans, residential construction and development
loans, commercial real estate loans and other loans.  As of December 31, 1999,
the Association had total

                                       1
<PAGE>

loans outstanding of $358.8 million, of which $256.2 million were one- to four-
family residential mortgage loans, or 71.4% of the Association's total loans. At
such date, the remainder of the Association's loan portfolio consisted of $72.0
million of consumer loans, or 20.1% of total loans; $4.4 million of multi-family
residential loans, or 1.2% of total loans; $3.7 million of construction and
development loans, or 1.0% of total loans; $17.6 million of commercial real
estate loans, or 4.9% of total loans; and $5.0 million of other loans, or 1.4%
of total loans. At that same date, 4.3% of the Association's mortgage loans had
adjustable interest rates. The Association's one- to four-family mortgage loan
portfolio, as a percentage of total assets has remained relatively stable from
29.1% of total assets as of December 31, 1998 to 29.0% of total assets as of
December 31, 1999. The Association has attempted to offset the decline in demand
for one- to four-family mortgage loans secured by properties located in the
Association's market area by purchasing such loans secured by properties outside
of its primary market area. During the year ended December 31, 1999, the
Association purchased $57.6 million of such loans primarily secured by
properties located in the northeast, midwest and south.

     The types of loans that the Association may originate are subject to
federal and state laws and regulations.  Interest rates charged by the
Association on loans are affected by the demand for such loans and the supply of
money available for lending purposes and the rates offered by competitors.
These factors are, in turn, affected by, among other things, economic
conditions, monetary policies of the federal government, including the Federal
Reserve Board, and legislative tax policies.

                                       2
<PAGE>

     The following table sets forth the composition of the Association's loan
portfolio in dollar amounts and as a percentage of the portfolio as of the dates
indicated.

<TABLE>
<CAPTION>
                                                                      As of December 31,
                              -------------------------------------------------------------------------------------------------
                                      1999               1998                1997              1996               1995
                              ------------------- ------------------- ------------------- ------------------ ------------------
                                        Percent             Percent             Percent            Percent            Percent
                               Amount   of Total   Amount   of Total   Amount   of Total  Amount   of Total  Amount   of Total
                              -------- ---------- -------- ---------- -------- ---------- ------- ---------- ------- ----------
                                                      (Dollar amounts in thousands)
<S>                           <C>       <C>       <C>       <C>      <C>       <C>      <C>       <C>      <C>       <C>
Mortgage loans:
 One- to four-family........  $256,172   71.39%   $239,648   71.62%  $215,024   69.37%   $178,234   75.89%  $122,509   66.79%
 Multi-family...............     4,405    1.23       5,293    1.58      5,778    1.86       6,727    2.87      7,208    3.93
 Commercial.................    17,592    4.90       7,329    2.20      4,360    1.41       5,053    2.15      3,290    1.79
 Construction and
  development...............     3,658    1.02       2,371    0.70      2,966    0.96       3,545    1.51      5,891    3.21
Consumer loans:
 Home equity................    52,819   14.72      54,953   16.43     59,111   19.07      22,153    9.43     20,151   10.99
 Education..................    19,158    5.34      20,040    5.99     18,853    6.08      15,383    6.55     20,766   11.32
Other:
 Unsecured personal
  loans.....................     3,280    0.91       2,930    0.87      1,594    0.51       1,534    0.65      1,250    0.68
 Loans on savings...........     1,725    0.48       2,003    0.59      2,168    0.70       2,062    0.88      2,159    1.18
  accounts..................
 Other loans................        37    0.01          83    0.02        125    0.04         164    0.07        199    0.11
                              --------  ------    --------  ------   --------  ------    --------  ------   --------  ------
Total loans.................   358,846  100.00%    334,650  100.00%   309,979  100.00%    234,855  100.00%   183,423  100.00%
                              --------  ======    --------  ======   --------  ======    --------  ======   --------  ======
Less:
 Undisbursed loan funds.....    (2,905)             (1,350)              (688)               (684)            (1,363)
 Deferred loan fees.........      (701)               (968)            (1,442)             (1,381)              (963)
 Allowance for loan
  losses....................    (1,731)             (1,604)            (1,322)             (1,031)              (822)
                              --------            --------           --------            --------           --------
Total loans, net............  $353,509            $330,728           $306,527            $231,759           $180,275
                              ========            ========           ========            ========           ========
</TABLE>

                                       3
<PAGE>

     Loan Maturity.  The following table shows the remaining contractual
maturity of the Association's loans as of December 31, 1999.  As of December 31,
1999, all of the Association's loans, except for education loans, were
categorized as held for investment.  The table does not include the effect of
future principal prepayments.  Principal prepayments and scheduled principal
amortization on loans totaled $59.7 million, $65.8 million and $52.2 million for
the years ended December 31, 1999, 1998 and 1997, respectively.

<TABLE>
<CAPTION>
                                                                       As of December 31, 1999
                                            ---------------------------------------------------------------------------
                                              One- to                       Construction                      Total
                                               Four-    Multi-                  and                           Loans
                                               Family   Family  Commercial  Development   Consumer  Other   Receivable

                                            ---------- ------- ----------- ------------- --------- ------- -----------
<S>                                          <C>       <C>      <C>         <C>           <C>       <C>     <C>
                                                                          (In thousands)
Amounts due:
 One year or less............................ $     60  $   --     $     3        $3,658   $    98  $2,426    $  6,245
                                              --------  ------     -------  ------------   -------  ------    --------
 After one year:
   More than one year to three years.........      752      --          39            --       578     347       1,716
   More than three years to five years.......    1,942      79         102            --    25,135   1,629      28,887
   More than five years to 10 years..........   15,633      --       9,992            --    22,740     403      48,768
   More than 10 years to 20 years............   42,750   4,326         757            --     4,268     237      52,338
   More than 20 years........................  195,035      --       6,699            --        --      --     201,734
                                              --------  ------     -------  ------------   -------  ------    --------
   Total due after December 31, 2000.........  256,112   4,405      17,589            --    52,721   2,616     333,443
                                              --------  ------     -------  ------------   -------  ------    --------
   Total amount due.......................... $256,172  $4,405     $17,592        $3,658   $52,819  $5,042    $339,688
                                              ========  ======     =======  ============   =======  ======    ========
     Less:
       Undisbursed loan funds...............................................................................    (2,905)
       Deferred loan fees, net..............................................................................      (701)
       Allowance for loan losses............................................................................    (1,731)

   Total loans, net.........................................................................................   $334,351
                                                                                                               ========
</TABLE>

                                       4
<PAGE>

     The following table sets forth as of December 31, 1999 the dollar amount of
loans contractually due after December 31, 2000, and whether such loans have
fixed interest rates or adjustable interest rates.

<TABLE>
<CAPTION>
                                        Due After December 31, 2000
                                   --------------------------------------
                                     Fixed       Adjustable       Total
                                     -----       ----------       -----
<S>                                <C>          <C>             <C>
                                               (In thousands)
Mortgage loans:
   One- to four-family............ $245,160        $10,952       $256,112
   Multi-family...................    4,405             --          4,405
   Construction and development...       --             --             --
   Commercial.....................   17,534             55         17,589

Consumer loans:
   Home equity....................   52,066            655         52,721
   Education......................   19,158             --         19,158

Other Loans:
   Unsecured personal loans.......      219          2,360          2,579
   Loans on savings accounts......       --             --             --
   Other loans....................       37             --             37
                                   --------        -------       --------
Total loans receivable............ $338,579        $14,022       $352,601
                                   ========        =======       ========
</TABLE>


     Origination, Sale, Servicing and Purchase of Loans.  The Association's
mortgage origination lending activities are conducted by loan personnel at its
fifteen full service branch offices.  Although the Association offers both
adjustable-rate and fixed-rate mortgage loans, the substantial majority of the
Association's loan originations have been fixed-rate mortgage loans.  The
Association's ability to originate loans is dependent upon the relative customer
demand for fixed-rate or adjustable-rate mortgage loans, which is affected by
the current and expected future level of interest rates.  The Association has
not emphasized the origination of adjustable-rate mortgage loans due to the
relatively low demand for such loans in the Association's primary market area
and aggressive pricing by competitors offering such loans.  While the
Association generally retains for its portfolio all of the mortgage loans that
it originates, the Association may, in the future, sell mortgage loans that it
originates depending on market conditions and the financial condition of the
Association.  As of December 31, 1999, there were no mortgage loans categorized
as held for sale. Due to the low demand for mortgage loans secured by properties
in its primary market area, the Association has emphasized the purchase of
single-family owner-occupied mortgage loans which are primarily secured by
properties located outside of the Association's primary market area, such as the
northeast, midwest and south. In addition, in response to the low demand for
one- to four-family mortgage loans in its primary market area, the Association
has also emphasized the origination of consumer loans consisting of home equity
loans and education loans.  The Association intends to continue purchasing
single-family owner-occupied loans to supplement reduced loan demand as needed.
Loans purchased by the Association generally must meet the same underwriting
criteria as loans originated by the Association.  Loans purchased by the
Association are generally funded by the Association (not table funded), closed
in the name of the correspondent financial institution and immediately assigned
to the Association, and are generally purchased by the Association on a
servicing released basis.  As of December 31, 1999, the Association had $225.2
million of loans serviced by others.  $39.9 million of purchased mortgage loans
during 1999, or 69.3% of such loans, were purchased from one mortgage lender
affiliated with a residential development company.

                                       5
<PAGE>

     One- to Four-Family Residential Mortgage Lending.  The Association offers
residential mortgage loans primarily secured by owner-occupied one- to four-
family residences.  Loan originations are generally obtained from existing or
past customers, members of the local communities served, or referrals from local
real estate agents, attorneys and builders.  The Association primarily
originates fixed-rate loans, but also offers adjustable-rate mortgage ("ARM")
loans.  As of December 31, 1999, one- to four-family mortgage loans totalled
$256.2 million, or 71.4% of total loans.  Of the Association's mortgage loans
secured by one-to four-family residences, $245.2 million, or 95.7%, were fixed-
rate loans.

     The Association originates mortgage loans for its own portfolio.
Originated mortgage loans are secured by properties located within the
Association's primary market area of Allegheny, Beaver, Butler, Fayette,
Washington and Westmoreland Counties, Pennsylvania.  The Association's one- to
four-family mortgage loan portfolio has increased 6.9% from $239.6 million, or
29.1% of total assets and 71.6% of total loans, as of December 31, 1998 to
$256.2 million, or 29.0% of total assets and 71.4% of total loans, as of
December 31, 1999 as a result of an increase in loan purchases to offset the
decrease in one- to four-family mortgage loan demand in the Association's
primary market area.

     The Association also presently offers one year ARM loans.  One-year ARM
loans have interest rates that adjust annually based on a spread of 275 basis
points above the weekly average yield of the one year CMT Index, subject to a
limitation on interest rate increases and decreases of 2.0% per year, a lifetime
ceiling on interest rate increases of 6.0% above the origination rate, and a
floor on interest rate decreases of 4.0% below the origination rate.  The
Association offers these loans with conversion features whereby the loan may be
converted to a fixed-rate loan one time during the first five years of the loan.
The Association's ARM loans are offered with terms of up to 30 years.

     The volume and types of ARM loans originated by the Association have been
affected by such market factors as the level of interest rates, competition,
consumer preferences and the availability of funds. In recent years, demand for
ARM loans has been weak due to the low interest rate environment and consumer
preference for fixed-rate loans.  In addition, management's strategy has been to
emphasize fixed-rate loans.  Therefore, the Association has not offered
competitive interest rates on its ARM loans.

     The Association has not sold one- to four-family mortgage loans in the
secondary market.  Mortgage loans that are originated by the Association are
underwritten in conformity with FNMA secondary market requirements.  The
Association has been approved by the FNMA to sell mortgage loans in the
secondary market, and may sell loans to FNMA in the future.

     Generally, with the exception of its community loan programs, the
Association's maximum loan-to-value ("LTV") ratio on one- to four-family
mortgage loans is 95%.  However, loans with LTV ratios in excess of 80% require
the borrower to obtain private mortgage insurance ("PMI").  The Association's
one-to four-family residential mortgage loans do not provide for negative
amortization.  Mortgage loans in the Association's portfolio generally include
due-on-sales clauses, which provide the Association with the contractual right
to demand the loan immediately due and payable in the event the borrower
transfers ownership of the property that is subject to the mortgage.  The
maximum one- to four-family loan amount is $450,000 unless otherwise approved by
the Board.

     In an effort to provide financing for low and moderate income home buyers,
the Association participates in various Community Loan Programs.  These programs
offer single-family residential mortgage loans to residents of the CRA
delineated lending areas.  These loans are offered with terms of up to 30 years.
Such loans must be secured by a single-family owner-occupied unit.  These loans
are originated using

                                       6
<PAGE>

modified underwriting guidelines with reduced down payments and loan fees. Such
loans are originated in amounts up to 97% of the lower of the property's
appraised value or the sale price. Because the Association typically charges a
lower rate of interest, lower mortgage origination fees and a discount on
closing costs on its Community Loan Programs, the Association expects to achieve
a lower rate of return on such loans, as compared to other residential mortgage
loans. During 1999 the Association originated 21 community loans totalling $1.1
million.

     The Association offers full-time employees of the Association, other than
executive officers and directors, who satisfy certain criteria and the general
underwriting standards of the Association fixed and adjustable-rate mortgage
loans with interest rates which are currently below the rates offered to the
Association's other customers, the Employee Mortgage Rate ("EMR").  The EMR is
limited for the purchase, construction or refinance of an employee's single-
family owner-occupied primary residence.  When the LTV ratio does not exceed 95%
(80% in the case of refinance loans), the EMR is generally no less than the
Association's overall cost of funds rounded up to the next quarter percentage
point, with a minimum EMR of  6.25%.  Additionally, loan origination fees are
waived for all EMR loans.  The EMR normally ceases upon termination of
employment or if the property no longer is the employee's primary residence.
Upon termination of the employee, the interest rate reverts to the contract rate
in effect at the time that the loan was extended.  All other terms and
conditions contained in the original mortgage and note continue to remain in
effect.  As of December 31, 1999, the Association had $2.8 million of total EMR
loans, or 0.8% of total loans.

     Construction and Development Lending.  The Association originates three
types of construction and development loans for the construction and development
of one- to four-family properties:  (1) acquisition and development loans to
qualified developers; (2) loans and lines of credit to qualified builders; and
(3) construction/permanent financing for other individuals.  As of December 31,
1999, the Association had $3.7 million of construction and development loans
which constituted 1.0% of the Association's total loan portfolio.

     The Association originates loans for the acquisition and development of
one- to four-family properties located in its primary market area.  The
Association's acquisition and development loans primarily have been made to
finance the construction of single-family, owner-occupied residential
properties.  These loans are offered with adjustable-rates and maturities of
four years or less.  Acquisition and development mortgage loans are originated
with maximum LTV ratios of 65% for the acquisition of the raw land and 75% for
the development of the property.  Generally, the maximum loan amount for the
acquisition of the land is $350,000 and the maximum loan amount for construction
and development is $1.0 million.  Proceeds of such loans are dispersed as phases
of the construction are completed.  Generally, if the borrower is a corporation,
partnership or other business entity, personal guarantees by the principal
borrowers are required. However, personal guarantees may not be required on such
loans depending on the creditworthiness of the borrower and amount of the
downpayment.

     The Association also offers loans and lines of credit to qualified builders
for the construction of single-family detached residences located in the
Association's primary market area, except that the lines of credit are limited
to properties located in the counties of Allegheny and Westmoreland,
Pennsylvania.  Such loans and lines of credit are only available to certain
local contractors on the Association's approved list of contractors, and require
that the Association be in a first lien position and limit each loan and line of
credit to the construction of one single-family residence.  Such builder's loans
are originated with a maximum LTV ratio of 80%.  The maximum borrowing limit for
such lines of credit is the lesser of $150,000 or 80% of the proposed selling
price of the property as completed.  Upon the completion and sale of the
property, the outstanding balance of such loan or line of credit is required to
be repaid.  Prior to that time, the borrower

                                       7
<PAGE>

is required to remit monthly payments of interest only. The Association
generally requires personal and/or corporate guarantees on such loans and lines
of credit.

     The Association also originates construction/permanent loans to individual
borrowers for the construction of single-family owner-occupied residential
properties.  The Association's underwriting standards and procedures for
residential construction/permanent financing are similar to those applicable for
one- to four-family residential mortgage lending.  Proceeds of these loans are
dispersed as phases of the construction are completed.  All such loans are
converted to a one- to four-family mortgage loan upon completion of the
construction.

     Construction and development financing is generally considered to involve a
higher degree of credit risk than long-term financing on improved, owner-
occupied real estate.  Risk of loss on a construction loan is dependent largely
upon the accuracy of the initial estimate of the property's value at completion
of construction or development and market demand for similar properties.
Moreover, because of the uncertainties inherent in estimating construction
costs, delays resulting from labor problems, material shortages or weather
conditions and other unpredictable contingencies, it is relatively difficult to
evaluate accurately the total funds required and to establish the related LTV
ratio.  If the estimate of value proves to be inaccurate, the Association may be
confronted with a project, if not completed, having a value which is
insufficient to assure full repayment.

     Multi-Family Lending.  The Association originates multi-family mortgage
loans generally secured by five to one hundred unit apartment buildings located
in the Association's primary market area.  Pursuant to the Association's current
underwriting policies, a multi-family mortgage loan may only be made in an
amount up to 80% of the appraised value of the underlying property.  In
addition, the Association generally requires a debt service coverage of 120%.
Properties securing these loans are appraised by an independent appraiser and
title insurance is required on all such loans.  As of December 31, 1999, multi-
family loans totalled $4.4 million, or 1.2% of the Association's total loan
portfolio.

     The Association also has, from time to time, purchased loan participations
in multi-family real estate loans, most of which are located outside of its
primary market area.  Loan participation interests are subject to the same
underwriting criteria as loans originated by the Association.  As of December
31, 1999, the Association had no multi-family real estate loan participation
interests.

     When determining whether to originate a multi-family loan, the Association
considers many factors including: the net operating income of the mortgaged
premises before debt service and depreciation; the debt service coverage (the
ratio of net operating income to debt service); and the ratio of loan amount to
appraised value.  When evaluating the qualifications of the borrower for a
multi-family loan, the Association considers the financial resources, the
borrower's experience in owning and managing similar property, and the
Association's lending experience with the borrower.  The Association's
underwriting policies require that the borrower be able to demonstrate strong
management skills and the ability to maintain the property from current rental
income.  In addition, the borrower is required to present evidence of the
ability to repay the mortgage and a history of making mortgage payments on a
timely basis.  In making its assessment of the creditworthiness of the borrower,
the Association generally reviews the financial statements, employment and
credit history of the borrower, as well as other related documentation.

     Loans secured by apartment buildings and other multi-family residential
properties are generally larger and involve a greater degree of risk than one-
to four-family residential mortgage loans.  Because payments on loans secured by
multi-family properties are often dependent on successful operation or
management of the properties, repayment of such loans may be subject to a
greater extent to adverse

                                       8
<PAGE>

conditions in the real estate market or the economy. The Association seeks to
minimize these risks through its underwriting policies, which require such loans
to be qualified at origination on the basis of the property's income and debt
coverage ratio.

     Commercial Real Estate Lending.  The Association also offers commercial
real estate loans that are secured by properties generally used for business
purposes such as small office buildings, retail facilities, shopping centers,
motels and hotels and industrial properties located in the Association's primary
market area.  The Association's underwriting standards and procedures are
similar to those applicable to multi-family loans, whereby the Association
considers the net operating income of the property and the borrower's expertise,
credit history and profitability.  Generally, all commercial real estate loans
made to corporations, partnerships and other business entities require personal
guarantees by the principal borrowers.  On an exception basis, the Association
may not require a personal guarantee on such loans depending on the
creditworthiness of the borrowers and the amount of the downpayment.  The
Association's commercial real estate loan portfolio as of December 31, 1999 was
$17.6 million, or 4.9% of total loans.  The Association, from time to time,
purchases loan participations in commercial real estate loans located outside of
its primary market area.  Loan participation interests are subject to the same
underwriting criteria as loans originated by the Association.  As of December
31, 1999, the Association had $1.4 million in commercial real estate loan
participation interests, or 7.8% of commercial real estate loans and 0.4% of
total loans.

     Loans secured by commercial real estate properties, like multi-family
loans, are generally  larger and involve a greater degree of risk than one- to
four-family residential mortgage loans.  Because payments on loans secured by
commercial real estate properties are often dependent on successful operation or
management of the properties, repayment of such loans may be subject to a great
extent of the then prevailing conditions in the real estate market or the
economy.  The Association seeks to minimize these risks through its underwriting
standards.

     Consumer  Lending.  The Association also offers both secured and unsecured
consumer loans. Consumer loans consist of home equity lines of credit and
installment loans and education loans.  As of December 31, 1999, the
Association's consumer loans amounted to $72.0 million, or 20.1% of the
Association's total loan portfolio.  Home equity loans are generally only
available to the residents of Allegheny, Beaver, Butler, Fayette, Washington and
Westmoreland Counties, Pennsylvania.

      The Association's home equity lines of credit are offered as revolving
lines of credit with interest rates that range from .49% to 2.49% above the
prime rate of interest as published by The Wall Street Journal and adjust
monthly but which are capped at 17.99%.  The Association's home equity
installment loans are offered on a fixed-rate basis only with terms of one to
fifteen years.  Both types of home equity loans are offered in minimum amounts
of $5,000.  The home equity lines of credit are offered to a maximum amount of
the lesser of $100,000 or 90% of the appraised value of the property.  Home
equity installment loans are offered to a maximum amount of the lesser of
$150,000 or 90% of the appraised value of the property. Certain "Class B" home
equity installment loans are offered to a maximum amount of 90% of the appraised
value of the property, with an overall maximum of $100,000.   A "Class B" home
equity installment loan is one in which the borrower uses the equity in his or
her existing residence to finance the acquisition of improved land and the
construction of a new primary residence.  As of December 31, 1999, home equity
loans totalled $52.8 million, or 73.4% of consumer loans and 14.7% of the
Association's total loans.

     With respect to education lending, the Association participates in the
United States Department of Education (the "DOE") Title IV loan programs
commonly referred to as the Federal Family Education Loan Programs ("FFELP").
The loans in this program that the Association participates in include the
Federal Subsidized Stafford Loan, the Federal Un-Subsidized Stafford Loan and
the Federal Parent Loan to

                                       9
<PAGE>

Undergraduate Students (PLUS) Loan. All FFELP loans that were disbursed prior to
October 1, 1993 are 100% guaranteed as to principal and interest by the full
faith of the United States Government if serviced properly. Loans disbursed
after October 1, 1993 are guaranteed to at least 98% of principal plus eligible
interest by the full faith of the United States Government if serviced properly.
Under certain circumstances loans guaranteed at the 98% level will be insured to
the 100% level.

     Education loans held by the Association are administrated and guaranteed by
one of two agencies: the Pennsylvania Higher Education Assistance Agency
("PHEAA") or the USA Group.  Federal regulations as established by DOE apply to
both agencies equally.  The Association underwrites, operates and administrates
participation in the FFELP under the policies and procedures outlined in the
common manual of unified student loan policy for loans guaranteed by each
agency.  As of December 31, 1999, education loans totalled $19.2 million, or
26.6% of consumer loans and 5.3% of the Association's total loans.  The
Association has decided to sell educational loans when those loans reach
repayment status.

     Other Lending.  The Association also originates other types of loans
primarily consisting of unsecured personal lines of credit and installment
loans, loans on savings accounts and foreign aid loans. These loans have a
maximum borrowing limitation of $5,000 for unsecured personal loans and 90% of
the account value for loans on savings accounts.  Unsecured personal loans
require a debt ratio (the ratio of debt service to net earnings) of 36%.
Secured personal lines of credit and installment loans are generally secured by
certificates of deposit and passbook savings accounts.  The Association offers
credit card loans to its customers in its own name.  Credit card loans require a
debt ratio of 36% and are offered to a maximum credit limit of $10,000.   As of
December 31, 1999, personal loans totalled $5.0 million, or 1.4% of total loans
of which $1.7 million were secured by savings accounts.

     As of December 31, 1999, the Association also had one outstanding foreign
aid loan in its portfolio to the country of Ecuador which was a performing loan,
guaranteed by the United States government and had an outstanding principal
balance of $37,000.

     Loan Servicing.  The Association generally services mortgage loans in its
own portfolio but relies upon third party loan servicers for the servicing of
purchased loans as such loans are purchased on a servicing released basis.  Loan
servicing includes collecting and remitting loan payments, accounting for
principal and interest, making inspections as required of mortgage premises,
contacting delinquent mortgagors, supervising foreclosures and property
dispositions in the event of unremedied defaults, making certain insurance and
tax payments on behalf of the borrowers and generally administering the loans.
The Association currently does not purchase servicing rights related to mortgage
loans originated by other institutions.  To date, the substantial majority of
loans purchased by the Association has been purchased on a servicing released
basis.  As of December 31, 1999, the Association had $225.2 million of loans
serviced by others and $133.7 million of loans serviced by the Association.

     Delinquencies and Classified Assets.  The Board of Directors performs a
monthly review of all delinquent loans ninety days or more past due with
principal balances of $100,000 or more and reviews a summary of the aggregate
level of non-performing loans 90 days or more past due.  In addition, management
reviews on an ongoing basis all loans 30 or more days delinquent.  The
procedures taken by the Association with respect to delinquencies vary depending
on the nature of the loan and period of delinquency.  In the case of real estate
loans, the Association takes legal action and will commence foreclosure
proceedings against any real property that secures the loan.  If a foreclosure
action is instituted and the loan is not brought current, paid in full, or
refinanced before the foreclosure sale, the real property securing the loan is
generally acquired at foreclosure.

                                       10
<PAGE>

     Federal regulations and the Association's Classification of Assets Policy
require that the Association utilize an internal asset classification system as
a means of reporting problem and potential problem assets. The Association has
incorporated the OTS internal asset classifications as part of its credit
monitoring system.  The Association currently classifies problem and potential
problem assets as "Substandard," "Doubtful" or "Loss" assets.  An asset is
considered "Substandard" if it is inadequately protected by the current net
worth and paying capacity of the obligor or of the collateral pledged, if any.
"Substandard" assets include those characterized by the "distinct possibility"
that the insured institution will sustain "some loss" if the deficiencies are
not corrected.  Assets classified as "Doubtful" have all of the weaknesses
inherent in those classified "Substandard" with the added characteristic that
the weaknesses present make "collection or liquidation in full," on the basis of
currently existing facts, conditions, and values, "highly questionable and
improbable."  Assets classified as "Loss" are those considered "uncollectible"
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted.  Assets which do not
currently expose the insured institution to sufficient risk to warrant
classification in one of the aforementioned categories but possess weaknesses
are required to be designated "Special Mention."

     For regulatory purposes, when an insured institution classifies one or more
assets, or portions thereof, as Substandard or Doubtful, it is required to
establish a general valuation allowance for loan losses in an amount deemed
prudent by management.  The general valuation allowance, which is a regulatory
term, represents a loss allowance which has been established to recognize the
inherent risk associated with lending activities, but which, unlike specific
allowances, has not been allocated to particular problem assets.  When an
insured institution classifies one or more assets, or portions thereof, as
"Loss," it is required either to establish a specific allowance for losses equal
to 100% of the amount of the asset so classified or to charge off such amount.
For financial reporting purposes, the Company follows the guidelines of
Statement of Financial Accounting Standards ("SFAS") No. 114 "Accounting by
Creditors for Impairment of a Loan" and SFAS 118 "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosures," an amendment of SFAS
114.  SFAS 114 addresses the accounting by creditors for impairment of loans by
specifying how reserves for credit losses related to certain loans should be
measured.  SFAS 118 rescinds SFAS 114 rules to permit a creditor to use existing
methods for recognizing interest income on impaired loans and eliminated the
income recognition provisions of SFAS 114.

     A savings institution's determination as to the classification of its
assets and the amount of its valuation allowances is subject to review by the
OTS which can order the establishment of additional general or specific loss
allowances.  The OTS, in conjunction with the other federal banking agencies,
recently adopted an interagency policy statement on the allowance for loan and
lease losses.  The policy statement provides guidance for financial institutions
on both the responsibilities of management for the assessment and establishment
of adequate allowances and guidance for banking agency examiners to use in
determining the adequacy of general valuation guidelines.  Generally, the policy
statement recommends that institutions have effective systems and controls to
identify, monitor and address asset quality problems; that management has
analyzed all significant factors that affect the collectibility of the portfolio
in a reasonable manner; and that management has established acceptable allowance
evaluation processes that meet the objectives set forth in the policy statement.
As a result of the declines in local and regional real estate market value and
the significant losses experienced by many financial institutions, there has
been a greater level of scrutiny by regulatory authorities of the loan
portfolios of financial institutions undertaken as part of the examination of
institutions by the OTS and the FDIC.  While the Association believes that it
has established an appropriate allowance for loan losses, there can be no
assurance that regulators, in reviewing the Association's loan portfolio, will
not request the Association to materially increase its allowance for loan
losses, thereby negatively affecting the Association's financial condition and
earnings at that time.  Although management believes that adequate specific and
general loan loss allowances have been established, actual

                                       11
<PAGE>

losses are dependent upon future events and, as such, further additions to the
level of specific and general loan loss allowances may become necessary.

     The Association's Mortgage Servicing Department reviews the Association's
loans on a monthly basis and provides delinquency reports to the President.  The
Association's Asset Classification Committee meets on a quarterly basis and
classifies assets in accordance with the management guidelines described above.
Real Estate Owned is classified as Substandard.  As of December 31, 1999, the
Association had $1.7 million of assets classified as Substandard, $61,000 of
assets classified as Doubtful and no assets classified as Loss.

     The Association generally requires appraisals on an annual basis on
foreclosed properties and at other times as deemed necessary by management. The
Association also conducts external inspections on commercial real estate
properties, foreclosed properties and other properties as deemed necessary. As
of December 31, 1999, the Association had $345,000 of foreclosed real estate in
its portfolio. The balance consisted of nine properties for which the
Association held first or second liens.

                                       12
<PAGE>

     The following table sets forth delinquencies in the Association's loan
portfolio as of the dates indicated:

<TABLE>
<CAPTION>
                                         As of December 31, 1999                          As of December 31, 1998
                              --------------------------------------------      -------------------------------------------
                                    30-89 Days         90 Days or More                 30-89 Days        90 Days or More
                              --------------------   ---------------------      ---------------------  --------------------
                                Number   Principal   Number    Principal          Number   Principal   Number   Principal
                                  of      Balance      of       Balance             of      Balance      of      Balance
                                 Loans    of Loans    Loans    of Loans            Loans    of Loans    Loans    of Loans
                              --------------------------------------------      -------------------------------------------
                                                                  (Dollars in thousands)
<S>                             <C>      <C>         <C>      <C>                 <C>      <C>         <C>      <C>
Mortgage loans:
 One- to four-family.........        57     $1,695        17      $  856               48     $1,040        20     $  462
 Multi-family................        --         --        --          --               --         --        --         --
 Commercial..................        --         --        --          --               --         --        --         --
Consumer:
 Home equity.................        34        821        20         584               28        705        21        574
 Education...................         7          9         8          13               21         57        34         59
Other loans:
 Unsecured personal loans....        17         32         8          23               21         34         9         21
                                    ---     ------        --      ------          -------  ---------   -------  ---------
Total........................       115     $2,557        53      $1,476              118     $1,836        84     $1,116
                                    ===     ======        ==      ======          =======  =========   =======  =========
Delinquent loans to total
 gross loans.................                 0.71                  0.41                        0.55%                0.34%
</TABLE>


<TABLE>
<CAPTION>
                                         As of December 31, 1997
                              --------------------------------------------
                                    30-89 Days         90 Days or More
                              --------------------   ---------------------
                                Number   Principal   Number    Principal
                                  of      Balance      of       Balance
                                 Loans    of Loans    Loans    of Loans
                              --------------------------------------------
                                         (Dollars in thousands)
<S>                             <C>      <C>         <C>      <C>
Mortgage loans:
 One- to four-family..........       48     $  870        28      $  720
 Multi-family.................       --         --        --          --
 Commercial...................       --         --        --          --
Consumer  loans:
 Home equity..................       48      1,229        28         930
 Education....................       22         49        27          69
Other loans:
 Unsecured personal loans.....       11         26        10          14
                                    ---     ------        --      ------
Total.........................      129     $2,174        93      $1,733
                                    ===     ======        ==      ======
Delinquent loans to total
   gross loans................                0.70%                 0.56%
</TABLE>

                                       13
<PAGE>

     Non-Performing Assets.  General.  The following table sets forth
information regarding non-accrual loans and real estate owned ("REO").  As of
December 31, 1999, the Association held nine REO properties totalling $345,000.
It is the policy of the Association to cease accruing interest on loans 90 days
or more past due and charge off all accrued interest upon foreclosure or deed-
in-lieu of foreclosure.  For the years ended December 31, 1999, 1998, 1997, 1996
and 1995, the amount of additional interest income that would have been
recognized on non-accrual loans if such loans had continued to perform in
accordance with their contractual terms was $138,000, $147,000, $72,000, $37,000
and $59,000, respectively.

<TABLE>
<CAPTION>
                                                          As of December 31,
                                           ---------------------------------------------
                                              1999     1998     1997      1996     1995
                                           ---------------------------------------------
<S>                                          <C>      <C>      <C>      <C>       <C>
                                                       (Dollars in thousands)
Non-accrual loans:
   Mortgage loans:
  One- to four-family......................  $  856   $  462   $  720   $   537   $  727
  Multi-family.............................     ---       --       --        97        8
  Construction and development.............     ---       --       --        --       --
  Commercial...............................     ---       --       --        --       --
Consumer loans:
  Home equity..............................     584      574      930        73      116
  Education................................      13       59       69       163      593
Other loans:
  Unsecured personal loans.................      23       21       14        26       16
                                             ------   ------   ------   -------   ------
    Total non-accrual loans................   1,476    1,116    1,733       896    1,460
Real estate owned, net(3)..................     345      758       --        --       --
                                             ------   ------   ------   -------   ------
  Total non-performing assets..............  $1,821   $1,874   $1,733   $   896   $1,460
                                             ======   ======   ======   =======   ======
Allowance for loan losses as a percent
  of gross loans receivable(1).............    0.48%    0.48%    0.43%     0.44%    0.45%
Allowance for loan losses as a percent of
  total non-performing loans(2)............   95.06%   85.59%   76.28%   115.07%   56.30%
Non-performing assets as a
  percent of gross loans receivable(1)(2)..    0.51%    0.56%    0.56%     0.38%    0.81%
Non-performing assets as a percent of
   total assets(2).........................    0.21%    0.23%    0.22%     0.14%    0.28%
</TABLE>

(1) Gross loans includes loans receivable held for investment and loans
    receivable held for sale, less undisbursed loan funds and deferred loan
    fees.

(2) Non-performing assets consist of non-performing loans and REO.

(3) REO balances are carried at the lower of cost or market value less estimated
    costs to sell.


   Allowance for Loan Losses.  The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the
risks inherent in its loan portfolio and the general economy. The allowance for
loan losses is maintained at an amount management considers appropriate to cover
estimated losses in loans receivable which are deemed probable and estimable
based on information currently known to management. The Board of Directors'
Asset Classification Committee reviews and approves the loan loss reserve on a
quarterly basis.  The allowance is based upon a number of factors, including
current regional and national economic conditions, actual loss experience and
industry trends.  In addition, various regulatory agencies, as an integral part
of their examination process, periodically review the Association's allowance
for loan losses.  Such agencies may require the Association to make additional
provisions for estimated loan losses based upon judgments different from those
of management.  As of

                                       14
<PAGE>

December 31, 1999 and December 31, 1998, the Association's allowance for loan
losses was 0.48% of total loans. The Association had nonperforming assets of
$1.8 million and $1.9 million as of December 31, 1999 and December 31, 1998,
respectively. The Association will continue to monitor and modify its allowances
for loan losses as conditions dictate. While management believes the
Association's allowance for loan losses is sufficient to cover losses inherent
in its loan portfolio at this time, no assurances can be given that the
Association's level of allowance for loan losses will be sufficient to cover
future loan losses incurred by the Association or that future adjustments to the
allowance for loan losses will not be necessary if economic and other conditions
differ substantially from the economic and other conditions used by management
to determine the current level of the allowance for loan losses.

   The following table sets forth activity in the Association's allowance for
loan losses for the periods indicated.

<TABLE>
<CAPTION>
                                  As of or For the Years Ended December 31,
                                 -------------------------------------------
                                    1999     1998     1997     1996     1995
                                 -------------------------------------------
                                             (Dollars in thousands)
<S>                                <C>      <C>      <C>      <C>      <C>
Balance at beginning of period.... $1,604   $1,322   $1,031   $  822   $ 850
Provision for loan losses.........    390      360      300      210      --
Charge-offs:
 Mortgage loans:
   One -to-four-family............     19        5        9       --       8
   Multi-family...................     --       --       --       --      --
   Commercial.....................     --       --       --       --      --
 Consumer loans:
   Home equity....................    164       44       --       --      --
   Education......................     71       37       31        5       5
 Other loans......................     15       30       38       15      22
                                   ------   ------   ------   ------   -----
        Total.....................    269      116       78       20      35
Recoveries........................      6       38       69       19       7
                                   ------   ------   ------   ------   -----
Net (charge-offs) recoveries......   (263)     (78)      (9)      (1)    (28)
                                   ------   ------   ------   ------   -----
Balance at end of period.......... $1,731   $1,604   $1,322   $1,031   $ 822
                                   ======   ======   ======   ======   =====
Ratio of net charge-offs during
  the period to average loans
  outstanding during the period...   0.08%    0.02%    0.00%    0.00%   0.02%
                                   ======   ======   ======   ======   =====
</TABLE>

                                       15
<PAGE>

     The following tables set forth the Association's percent of allowance for
loan losses to total allowance for loan losses and the percent of loans to total
loans in each of the categories listed at the dates indicated.

<TABLE>
<CAPTION>
                                                                      As of December 31,
                               -----------------------------------------------------------------------------------------------
                                            1999                              1998                          1997
                               -------------------------------   -----------------------------  ------------------------------
                                                       Percent                         Percent                         Percent
                                                      of Loans                        of Loans                        of Loans
                                         Percent of    in Each           Percent of    in Each           Percent of    in Each
                                          Allowance   Category            Allowance   Category            Allowance   Category
                                          to Total    to Total            to Total    to Total            to Total    to Total
                                 Amount   Allowance     Loans    Amount   Allowance     Loans    Amount   Allowance     Loans
                               -----------------------------------------------------------------------------------------------
                                                               (Dollars in thousands)
<S>                              <C>     <C>          <C>        <C>     <C>          <C>        <C>     <C>          <C>
Mortgage loans:
 One- to four-family............ $  773       44.66%     71.39%  $  933       58.17%     71.62%  $  624       47.20%     69.37%
 Multi-family...................     87        5.03       1.23      127        7.92       1.58      100        7.56       1.86
 Commercial.....................    349       20.16       4.90       --          --       2.20       14        1.06       1.41
 Construction and development...      7        0.40       1.02       10        0.62       0.70       23        1.74       0.96
Consumer loans:
 Home equity....................    469       27.09      14.72      500       31.20      16.43      530       40.09      19.07
 Education......................     --          --       5.34       --          --       5.99       --          --       6.08
Other loans:
 Unsecured personal loans.......     46        2.66       0.91       34        2.09       0.87       31        2.35       0.51
 Loans on savings accounts......     --          --       0.48       --          --       0.59       --          --       0.70
 Other loans....................     --          --       0.01       --          --       0.02       --          --       0.04
                                 ------      ------     ------   ------      ------     ------   ------      ------     ------
  Total valuation allowance..... $1,731      100.00%    100.00%  $1,604      100.00%    100.00%  $1,322      100.00%    100.00%
                                 ======      ======     ======   ======      ======     ======   ======      ======     ======
</TABLE>



<TABLE>
<CAPTION>
                                                       As of December 31,
                               ---------------------------------------------------------------
                                              1996                           1995
                               -------------------------------  ------------------------------
                                                       Percent                         Percent
                                                      of Loans                        of Loans
                                         Percent of    in Each           Percent of    in Each
                                          Allowance   Category            Allowance   Category
                                          to Total    to Total            to Total    to Total
                                 Amount   Allowance    Loans     Amount   Allowance     Loans
                               ---------------------------------------------------------------
<S>                              <C>     <C>          <C>        <C>     <C>          <C>
                                                    (Dollars in thousands)
Mortgage loans:
 One- to four-family............ $  706       68.48%     75.89%    $429       52.19%     66.79%
 Multi-family...................    117       11.35       2.87      103       12.53       3.93
 Commercial.....................     15        1.45       2.15       16        1.95       1.79
 Construction and development...     27        2.62       1.51       45        5.47       3.21
Consumer loans:
 Home equity....................    145       14.06       9.43      118       14.35      10.99
 Education......................     --          --       6.55       89       10.83      11.32
Other loans:
 Unsecured personal loans.......     21        2.04       0.65       22        2.68       0.68
 Loans on savings accounts......     --          --       0.88       --          --       1.18
 Other loans....................     --          --       0.07       --          --       0.11
                                 ------      ------     ------     ----      ------     ------
  Total valuation allowance..... $1,031      100.00%    100.00%    $822      100.00%    100.00%
                                 ======      ======     ======     ====      ======     ======
</TABLE>

                                       16
<PAGE>

     Real Estate Owned.  As of December 31, 1999, the Association held nine
properties totalling $345,000.  When the Association acquires property through
foreclosure or deed-in-lieu of foreclosure, it is initially recorded at the
lower of the recorded investment in the corresponding loan or the fair value of
the related assets at the date of foreclosure, less estimated costs to sell the
property.  Thereafter, if there is a further deterioration in value, the
Association provides for a specific valuation allowance and charges operations
for the diminution in value.  It is the policy of the Association to have
obtained an appraisal on all real estate subject to foreclosure proceedings
prior to the time of foreclosure.  It is the Association's policy to require
appraisals on foreclosed properties and conduct inspections on foreclosed
properties.

Investment Activities

     The Company can invest in common and preferred stocks, limited partnerships
and all investments the Association is permitted to invest in.  Anything other
than that requires Board of Directors approval. Federally-chartered savings
institutions have the authority to invest in various types of liquid assets,
including United States Treasury obligations, securities of various federal
agencies, certificates of deposit of insured banks and savings institutions,
bankers' acceptances, repurchase agreements and federal funds. Subject to
various restrictions, federally-chartered savings institutions may also invest
their assets in commercial paper, investment-grade corporate debt securities and
mutual funds whose assets conform to the investments that a federally-chartered
savings institution is otherwise authorized to make directly. Additionally, the
Association must maintain minimum levels of investments that qualify as liquid
assets under OTS regulations.  Historically, the Association has maintained
liquid assets above the minimum OTS requirements and at a level considered to be
adequate to meet its normal daily activities.

     The investment policy of the Association, as approved by the Board of
Directors, generally requires management to maintain adequate liquidity,
generate a favorable return on investments without incurring undue interest rate
and credit risk as a complement to the Association's lending activities.  The
Association's current investment policy provides that the Association may invest
in the following types of securities:  U.S. Government and federal government-
sponsored agency debt securities, short-term money market instruments, mutual
funds which primarily invest in mortgage-backed securities and which also
qualify as liquid assets under the OTS regulations, federal funds and U.S.
government sponsored agency issued mortgage-backed and mortgage-related
securities, investment grade corporate debt obligations and other investments as
authorized by the OTS and as may be approved by the Board of Directors.  As of
December 31, 1999, the Association's investment securities generally consisted
of government-sponsored agency debt securities (primarily issued by FHLB, FNMA
and FHLMC), investment grade corporate debt securities, commercial paper,
municipal obligations and mutual fund securities.  As of such date its mortgage-
backed securities portfolio generally consisted of fixed- and adjustable-rate
mortgage-backed securities issued by the FNMA, GNMA and FHLMC and its mortgage-
related securities portfolio consisted of fixed- and adjustable-rate CMOs backed
by FNMA and FHLMC.

     The Board of Directors monitors and ratifies the investment decisions of
the Association's officers which have been authorized to manage the investment
portfolio (the President, Treasurer, Chief Financial Officer and Chief Lending
Officer).  On at least a quarterly basis, the Asset/Liability Management
Committee also reviews the Association's securities portfolio and, in connection
therewith, reviews the market value of each security held.  The Association's
current investment policy generally limits investment securities (consisting of
agency and corporate debt obligations and commercial paper) to 25% of total
assets and limits the weighted average life of such portfolio to twenty years or
less.  The Association's policies also provide that investments in any one CMO,
Real Estate Mortgage Investment Conduit ("REMIC") and other asset-backed
obligation may not, exceed 5% of total assets and limits the weighted average
life of such

                                       17
<PAGE>

investments to less than seven years.  The Association's policies
also limit the aggregate investment in such securities to 20% of total assets.

     As required by SFAS 115, the Association has established an investment
portfolio of securities that may be categorized as held to maturity, available
for sale or held for trading.  As of December 31, 1999, all of the Association's
securities were categorized as available for sale.

     Mortgage-Backed Securities.  As of December 31, 1999, the Association had
$238.0 million in mortgage-backed securities, or 27.0% of total assets, which
generally consisted of mortgage-backed securities guaranteed by GNMA or insured
by either FNMA or FHLMC.  Mortgage-backed securities generally yield less than
the mortgage loans that underlie such securities because of the cost of payment
guaranties or credit enhancement that result in nominal credit risk.  In
addition, mortgage-backed securities are more liquid than individual mortgage
loans and may be used to collateralize obligations of the Association.  In
general, mortgage-backed securities issued or guaranteed by FNMA and FHLMC and
certain AA-rate and AAA-rated mortgage-backed pass through securities are
weighted at no more than 20% for risk-based capital purposes, and mortgage-
backed securities issued or guaranteed by GNMA are weighted at 0% for risk-based
capital purposes, compared to an assigned risk weighting of 50% to 100% for
whole residential mortgage loans. These types of securities allow the
Association to optimize regulatory capital to a greater extent than non-
securitized whole loans.  See "Regulation and Supervision  - Federal Savings
Institution Regulation - Capital Requirements" for a discussion of the OTS risk-
based capital requirement.

     While mortgage-backed securities carry a reduced credit risk as compared to
whole mortgage loans, such securities remain subject to the risk that a
fluctuating interest rate environment, along with other factors such as the
geographic distribution of the underlying mortgage loans, may alter the
prepayment rate of such mortgage loan and so affect both the prepayment speed,
and value, of such securities.  Specifically, investments in mortgage-backed and
CMOs, discussed below, involve risks that in a declining interest rate
environment actual prepayments may exceed prepayments estimated over the life of
the security which, in turn, may result in a loss of any premiums paid for such
instrument thereby reducing the net yield on such securities.  Conversely, if
interest rates increase, the market value of such securities may be adversely
affected.

     Mortgage-Related Securities.  As of December 31, 1999, the Association had
$68.7 million of mortgage-related securities, or 7.8% of total assets,
consisting of CMOs issued by FHLMC and FNMA. CMOs are a type of debt security
issued by a special purpose entity that aggregates pools of underlying fixed-and
adjustable-rate mortgages or mortgage-backed securities and create different
classes of CMO securities with different maturities and, in some cases,
amortization schedules as well as residual interest with each such class
possessing different risk characteristics.  The cash flows from the underlying
collateral is generally divided into "tranches" or "classes" whereby such
tranches have descending priorities with respect to the distribution of
principal repayments from the underlying mortgages or mortgage-backed
securities.  In contrast to mortgage-backed securities in which cash flow is
received (and, accordingly, prepayment risk is shared) pro rata by all
securities holders, the cash flows from the mortgages or mortgage-backed
securities underlying CMOs are segmented and paid in accordance with a
predetermined priority to investors holding various tranches of such securities
or obligations.  Accordingly, CMOs attempt to moderate the reinvestment risk
associated with conventional mortgage-backed securities when prepayments of the
mortgages underlying such securities prepay faster than anticipated.  CMOs are
issued by special purpose entities formed by government-sponsored agencies, such
as FNMA or FHLMC, and private issuers, however, the Association generally only
invests in CMOs issued by government-sponsored agencies which are collateralized
by mortgage-backed securities.

                                       18
<PAGE>

     While CMOs issued by government sponsored agencies involve reduced credit
risk, they involve prepayment risk (i.e., the risk that  actual prepayments of
the mortgage loans or mortgage backed securities underlying the CMOs will be
greater than estimated prepayments over the life of the security upon which the
price of the security CMO is based).  In the event actual prepayments exceed
estimated prepayments, it may require adjustments to the amortization of any
premium or accretion of any discount relating to such instruments thereby
reducing the net yield on such securities.  There is also reinvestment risk
associated with CMOs if the cash flows from such securities are at rate greater
than the estimated cash flow or in the event such securities are redeemed by the
issuer.  In addition, the market value of such securities may be adversely
affected by changes in interest rates.

     Corporate Debt Obligations.  As of December 31, 1999, the Association had
$11.5 million of corporate debt obligations, or 1.3% of total assets. The
Association's investments in corporate debt obligations, as of December 31,
1999, generally consisted of short term debt obligations issued by large and
medium sized U.S. and multinational corporate issuers.  The Association's
policies require all corporate debt obligations purchased by the Association to
be denominated in dollars and be rated in one of the four highest categories by
a nationally recognized rating agency and the average maturity of such
securities may not exceed six years.

     Investments in corporate debt obligations and commercial paper involve
credit risk as they are not insured or guaranteed by the U.S. government or any
agency thereof, generally not secured by collateral and generally rely upon
future income from the operations of the issuer for repayment of principal and
interest.

     GNMA Forward Commitments.  The Company had only limited involvement with
derivative financial instruments.  Periodically, the Company entered into
unconditional forward commitments to purchase mortgage-backed certificates, such
as those issued by the Government National Mortgage Association ("GNMA"), at a
fixed price and coupon rate to be delivered, typically, no longer than six
months in the future. In addition, the Company also entered into 50-50 flexible
commitments to purchase GNMA's whereby the broker delivered at least 50% of the
commitment amount or up to 150% of the total commitment amount on the settlement
date.  In effect, 50% of the commitment represented an unconditional forward
commitment and the remaining portion of the commitment represented standby
commitments (put options) with certain brokers approved by the Board of
Directors.  The Company only entered into these commitments when it had
available  liquidity to meet the full amount of the commitment.  Certain
purchase commitments were "paired off" against sale commitments for the same
type of security bearing the same contact amount, rate and settlement date.

     Risks associated with these commitments arose from the possible inability
of counterparties to meet the terms of their contracts and from movements in
securities values and interest rates.  Under standby commitments, the Company
bore the risk of an unfavorable change in the price of the mortgage-backed
certificates underlying the options.  The Company reviewed the creditworthiness
of the parties to these commitments.

     No such forward commitments were entered into subsequent to June 1999.  The
last purchase commitment settled in September 1999.  Accordingly, the Company
had no forward or standby commitments outstanding as of December 31, 1999.  Such
activity did not result in a material impact to operations for the years ended
December 31, 1999, 1998 and 1997, respectively.

     U.S. Government Securities.  As of December 31, 1999, the Company had $37.1
million of U.S. Government agency securities, or 4.2% of total assets.  All
government securities are issued directly by the

                                       19
<PAGE>

U.S. government, either through the Treasury Department or through one of the
many federal agencies created by Congress. U.S. Treasury Securities are issued
by the Treasury Department and are backed by the full faith and credit of the
U.S. government.

     Marketable Equity Securities.  As of December 31, 1999 the Company had
$42.5 million of marketable equity securities, or 4.8% of total assets.  This
included $26.9 million of mutual funds, backed by adjustable-rate mortgage-
backed securities, corporate debt, corporate bonds, or government bonds, $1.8
million of FHLMC stock, $65,000 of Student Loan Marketing Association stock,
$1.4 million of FNMA stock, $1.6 million of bank equities, $4.7 million of bank
preferred and trust preferred stock, $3.8 million investment in a Real Estate
Limited Partnership, $900,000 in Real Estate Investment Trusts, and a $1.2
million investment in a limited partnership.

     Municipal Obligations.  As of December 31, 1999, the Company had $59.9
million of municipal obligations.  The Company's investment policy requires all
municipal obligations to be rated in one of the four highest categories by a
nationally recognized rating agency.

                                       20
<PAGE>

     The following table sets forth the composition of the Association's
investment, mortgage-backed and mortgage-related securities portfolio in dollar
amounts and in percentages of the respective portfolios as of the dates
indicated.

<TABLE>
<CAPTION>
                                                                    As of December 31,
                                            ----------------------------------------------------------------
                                                      1999                  1998                 1997
                                            ---------------------   -------------------   ------------------
                                                          Percent               Percent              Percent
                                               Amount    of Total    Amount    of Total    Amount   of Total
                                            ----------------------------------------------------------------
<S>                                           <C>        <C>        <C>        <C>        <C>       <C>
                                                                   (Dollars in thousands)
Investment securities available for sale:
 Marketable equity securities(1)............. $ 42,452       9.27%  $ 36,028       8.26%  $ 36,660      8.42%
 U.S. Government Agency debt.................   71,857      15.70     72,350      16.59     77,178     17.72
 Municipal Obligations.......................   60,359      13.19     59,331      13.60     13,278      3.05
 Corporate obligations.......................   11,467       2.51     27,630       6.33     23,910      5.49
                                              --------     ------   --------     ------   --------    ------
  Total investment securities................  186,135      40.67    195,339      44.78    151,026     34.68
                                              --------     ------   --------     ------   --------    ------

Mortgage-backed and mortgage
 related securities available for sale:
 FHLMC.......................................    4,403       0.96      7,462       1.71     17,797      4.09
 FNMA........................................    8,634       1.89     12,907       2.96     20,285      4.66
 GNMA........................................  224,012      48.94    163,504      37.48    172,435     39.60
 CMOs........................................   69,171      15.11     87,845      20.14     71,595     16.44
                                              --------     ------   --------     ------   --------    ------
  Total mortgage-backed and
      mortgage-related securities............  306,220      66.90    271,718      62.29    282,112     64.79
                                              --------     ------   --------     ------   --------    ------
Plus:
 Unamortized premium (discount)..............  (34,671)     (7.57)   (30,825)     (7.07)     2,288      0.53
                                              --------     ------   --------     ------   --------    ------
  Total securities, net...................... $457,684     100.00%  $436,232     100.00%  $435,426    100.00%
                                              ========     ======   ========     ======   ========    ======
</TABLE>
_________________
(1) As of December 31, 1999, marketable equity securities consisted of $26.9
    million of mutual funds backed by adjustable-rate mortgage-backed
    securities, corporate debt, corporate bonds or government bonds, $1.8
    million of FHLMC stock, $65,000 of Student Loan Marketing Association stock,
    $1.4 million of FNMA Stock, $1.7 million of bank equities, $4.7 million of
    bank preferred and trust preferred stock, $3.8 million in a real estate
    limited partnership, $900,000 in real estate investment trusts, and a $1.2
    million investment in a limited partnership.

                                       21
<PAGE>

     The following table sets forth certain information regarding the carrying
and market values of the Association's short-term investments (consisting of
federal funds sold and interest-bearing demand deposits) and investments,
mortgage-backed and mortgage-related securities as of the dates indicated:
<TABLE>
<CAPTION>
                                                                        As of December 31,
                                         -----------------------------------------------------------------------------------
                                                    1999                         1998                         1997
                                         -----------------------      -----------------------      -------------------------
                                          Carrying       Market        Carrying        Market       Carrying         Market
                                           Value          Value         Value           Value         Value           Value
                                          ---------     --------      ---------       -------       --------        --------
<S>                                      <C>            <C>           <C>             <C>           <C>             <C>
Short term investments..............      $12,457        $12,457       $ 8,205        $ 8,205        $ 5,791         $ 5,791
                                          -------        -------       -------        -------        -------         -------
Investment securities:
  Available for sale:
    Corporate obligations...........       11,476         11,476        27,802         27,802         24,208          24,208
    U.S. government and
      agency obligations............       37,148         37,148        59,280         59,280         77,137          77,137
    Municipal obligations...........       59,884         59,884        39,998         39,998         13,260          13,260
    Marketable equity securities(1).       42,452         42,452        36,028         36,028         36,660          36,660
                                         --------       --------      --------       --------       --------        --------
      Total available for sale......      150,960        150,960       163,108        163,108        151,265         151,265
                                          -------        -------       -------        -------        -------         -------
Mortgage-backed and
  mortgage-related securities:
  Available for sale:
  FHLMC.............................       4,473           4,473         7,646          7,646         18,148          18,148
  GNMA..............................     224,654         224,654       164,863        164,863        173,806         173,806
  FNMA..............................       8,864           8,864        13,219         13,219         20,742          20,742
  CMOs..............................      68,733          68,732        87,396         87,396         71,465          71,465
                                        --------        --------      --------       --------       --------        --------
      Total available for sale......     306,724         306,724       273,124        273,124        284,161         284,161
                                        --------        --------      --------       --------       --------        --------
Total short-term investments,
  investment securities, mortgage-
  backed and mortgage-related
  securities........................    $470,141       $470,141       $444,437       $444,437       $444,217        $444,217
                                        ========       ========       ========       ========       ========        ========

</TABLE>

--------------------------
(1)  As of December 31, 1999, marketable equity securities consisted of $26.9
     million of mutual funds backed by adjustable-rate mortgage-backed
     securities, corporate debt, corporate bonds or government bonds, $1.8
     million of FHLMC stock, $65,000 of Student Loan Marketing Association
     stock, $1.4 million of FNMA Stock, $1.7 million of bank equities, $4.7
     million of bank preferred and trust preferred stock, $3.8 million in a real
     estate limited partnership, $900,000 in real estate investment trusts, and
     a $1.2 million investment in a limited partnership.

                                       22
<PAGE>

     The table below sets forth certain information regarding the carrying
value, weighted average yields and contractual maturities of the Association's
short-term investments (consisting of federal funds sold and interest-bearing
demand deposits), investment securities and mortgage-backed and mortgage related
securities as of December 31, 1999.

<TABLE>
<CAPTION>
                                                                    As of December 31, 1999
                           --------------------------------------------------------------------------------------------------------
                                                    More than One        More than Five
                              One Year or Less    Year to Five Years   Years to Ten Years  More than Ten Years        Total
                           --------------------   ------------------   ------------------  -------------------   ------------------
                                       Weighted             Weighted             Weighted             Weighted             Weighted
                             Carrying   Average   Carrying   Average   Carrying   Average   Carrying   Average   Carrying   Average
                              Value      Yield     Value      Yield     Value      Yield     Value      Yield     Value      Yield
                           --------------------------------------------------------------------------------------------------------
                                                           (Dollars in thousands)
<S>                          <C>       <C>        <C>       <C>        <C>       <C>        <C>       <C>        <C>       <C>
Short-term investments......  $12,457      4.06%  $   --         -- %  $    --        -- %  $     --       -- %  $ 12,457      4.06%

Investment securities:
 Available for Sale:
   U.S. Government agency
    securities..............    2,000      5.69     10,436      6.18      5,698      6.40     19,014      7.11     37,148      6.66
   Municipal obligations....    1,455      4.14      4,473      4.28      6,993      4.72     46,963      4.73     59,884      4.68
   Corporate obligations....    2,003      6.16      3,079      6.24      4,739      6.45      1,655      6.50     11,476      6.35
   Marketable equity
    securities..............   26,885      5.84         --        --         --        --         --        --     26,885      5.84
   Common Stock.............    4,586        --         --        --         --        --         --        --      4,586        --
   Preferred and Trust
    Preferred Securities....    5,123      8.87         --        --         --        --         --        --      5,123      8.87
   Other Investment
    Securities (1)..........    5,858      5.60         --        --         --        --         --        --      5,858      5.60
                              -------      ----    -------      ----    -------      ----   --------      ----   --------      ----
   Total investment
     securities.............   47,910      5.53     17,988      5.72     17,430      5.74     67,632      5.44    150,960      5.54
                              -------      ----    -------      ----    -------      ----   --------      ----   --------      ----
Mortgage-backed and
 mortgage-related
   securities:
   Available for Sale:
   GNMA.....................       --        --         --        --         --        --    224,654      6.94    224,654      6.94
   FNMA.....................      505      6.33        732      6.77        973      7.01      6,654      6.65      8,864      6.68
   FHLMC....................       --        --      4,473      6.50         --        --         --        --      4,473      6.50
   CMOs.....................       --        --         --        --     14,697      6.40     54,036      6.42     68,733      6.41
                              -------      ----    -------      ----    -------      ----   --------      ----   --------      ----
   Total mortgage-backed
    and mortgage-
    related securities......      505      6.33      5,205      6.54     15,670      6.44    285,344      6.83    306,724      6.81
                              -------      ----    -------      ----    -------      ----   --------      ----   --------      ----
Total short-term
 investments, investment
 securities, mortgage-
 backed securities
 and mortgage-related
 securities.................  $60,872              $23,193              $33,100             $470,141             $470,141
                              =======              =======              =======             ========             ========
</TABLE>
--------------
(1) Other investment securities consisted of $3.8 million of a real estate
    investment limited partnership, $1.2 million investment in a limited
    partnership and $900,000 of investment in real estate investment trusts.

                                       23
<PAGE>

Sources of Funds

     General. Deposits, loan repayments and prepayments, proceeds from sales of
loans, principal and interest payments on investment and mortgage-backed and
mortgage-related securities, cash flows generated from operations and FHLB
advances are the primary sources of the Association's funds for use in lending,
investing and for other general purposes.

     Deposits.  The Association offers a variety of deposit accounts with a
range of interest rates and terms.  The Association's deposits consist of
savings, NOW accounts, checking accounts, money market accounts and certificate
accounts.  For the year ended December 31, 1999, core deposits represented 54.8%
of total average deposits.  The flow of deposits is influenced significantly by
general and regional economic conditions, changes in money market rates,
prevailing interest rates and competition.  The Association's deposits are
obtained predominantly from the areas in which its branch offices are located.
To attract and retain deposits, the Association relies primarily on pricing its
deposit products at a competitive rate providing customer service and its long-
standing relationships with customers; however, market interest rates and rates
offered by competing financial institutions significantly affect the
Association's ability to attract and retain deposits.  The Association uses
traditional means of advertising its deposit products, including radio and print
media and generally does not solicit deposits from outside its market area.
Certificate accounts in excess of $100,000 are not actively solicited by the
Association and the Association does not currently use brokers to obtain
deposits.  During the year ended December 31, 1999, the Association's balance of
passbook accounts decreased by $11.1 million, or 7.0%, and its balance of
certificates of deposits increased by $2.5 million, or 1.0%.  The increase in
certificates of deposit resulted from the Association's offering CD specials and
increased advertising during 1999 which caused depositors to invest in
certificates of deposit.

     As of December 31, 1999, certificate accounts with maturities of one year
or less totalled $163.8 million, or 33.1% of total deposits.  While the
Association believes that, based on the Association's historical deposit outflow
activity, the substantial majority of such accounts will remain with the
Association, if a material amount of such accounts were not renewed it could
have a material adverse impact on the liquidity and cash flows of the
Association and may result in increased interest expense in the event the
Association paid higher rates to attract and retain deposit accounts or
increased its utilization of higher cost borrowings to fund its liquidity needs.

     The following table presents the deposit activity of the Association for
the periods indicated:

<TABLE>
<CAPTION>
                                                     For the Years Ended
                                                        December 31,
                                               -------------------------------
                                                   1999       1998      1997
                                               -------------------------------
<S>                                              <C>        <C>       <C>
                                                       (In thousands)

Net deposits (withdrawals).....................   $(4,798)   $ 2,221   $(5,316)
Interest credited on deposit accounts..........    17,374     18,173    17,904
                                                  -------    -------   -------
Total increase (decrease) in deposit accounts..   $12,576    $20,394   $12,588
                                                  =======    =======   =======
</TABLE>

                                       24
<PAGE>

     As of December 31, 1999, the Association had $19.7 million in certificate
accounts in amounts of $100,000 or more maturing as follows:


                                         Weighted
Maturity Period              Amount     Average Rate
--------------------------  -------   ---------------
                           (Dollars in
                            thousands)

Three months or less......   $ 5,041          5.88%
Over 3 through 6 months...     3,332          5.04
Over 6 through 12 months..     2,509          4.99
Over 12 months............     8,859          5.88
                             -------
Total.....................   $19,741
                             =======

                                       25
<PAGE>

     The following table sets forth the distribution of the Association's
average deposit accounts for the periods indicated and the weighted average
nominal interest rates on each category of deposits presented.  Averages for the
periods presented utilize daily average balances.

<TABLE>
<CAPTION>

                                                                       For the Years Ended December 31,
                                           ----------------------------------------------------------------------------------------
                                                       1999                            1998                         1997
                                           ------------------------------ ------------------------------ --------------------------
                                                      Percent                        Percent                      Percent
                                                      of Total   Weighted            of Total   Weighted          of Total Weighted
                                             Average  Average     Average Average    Average    Average  Average  Average  Average
                                             Balance  Deposits     Cost   Balance    Deposits     Cost   Balance  Deposits  Cost
                                           ----------------------------------------------------------------------------------------
                                                                       (Dollars in thousands)
<S>                                          <C>       <C>       <C>      <C>        <C>        <C>     <C>       <C>      <C>
Money market savings accounts.........       $ 18,770      3.87%   3.66%  $ 14,342      3.04%    2.29%  $ 16,152    3.54%  2.46%
Passbook accounts.....................        157,920     32.58    2.41    159,374     33.84     2.76    160,155   35.12   3.00
NOW accounts..........................         33,744      6.96    1.82     31,886      6.77     1.78     28,339    6.21   1.95
Non-interest-bearing accounts.........         31,944      6.59      --     25,565      5.43       --     21,784    4.78     --
                                             --------    ------    ----   --------    ------     ----   --------  ------   ----
  Total...............................        242,378     50.00    2.11    231,167     49.08     2.29    226,430   49.65   2.54
                                             --------    ------    ----   --------    ------     ----   --------  ------   ----
Certificate accounts:
 Less than six months.................            605      0.12    3.41        570      0.12     3.56        719    0.16   3.83
 Over six through 12 months...........         65,011     13.41    5.65     68,410     14.53     5.02     76,267   16.72   4.90
 Over 12 through 24 months............         65,051     13.42    5.78     62,294     13.23     5.95     46,772   10.26   5.97
 Over 24 months.......................         62,718     12.94    4.38     60,910     12.93     5.91     60,664   13.30   5.98
 IRA/KEOGH............................         48,999     10.11    5.35     47,635     10.11     5.59     45,198    9.91   5.65
                                             --------    ------    ----   --------    ------     ----   --------  ------   ----
  Total certificate accounts..........        242,384     50.00    5.30    239,819     50.92     5.58    229,620   50.35   5.53
                                             --------    ------    ----   --------    ------     ----   --------  ------   ----
   Total average deposits.............       $484,762    100.00%   3.71%  $470,986    100.00%    3.97%  $456,050  100.00%  4.05%
                                             ========    ======    ====   ========    ======     ====   ========  ======   ====
</TABLE>


                                       26
<PAGE>

     The following table presents, by various rate categories, the amount of
certificate accounts outstanding as of the dates indicated and the periods to
maturity of the certificate accounts outstanding as of December 31, 1999.

<TABLE>
<CAPTION>


                       Period to Maturity from December 31, 1999    As of December 31,
                       -----------------------------------------  ------------------------
                          Less     One to   Two to    Over
                          than       Two     Three    Three       1999      1998      1997
                           One      years    years    years
                           Year
                         --------  -------  -------  -------  --------  --------  --------
<S>                      <C>       <C>      <C>      <C>      <C>       <C>       <C>
                                                  (In thousands)
Certificate accounts:
0  to 2.99%...........   $  1,379  $    --  $    --  $    --   $  1,379  $    684  $     --
3.00 to 3.99%.........        538       --       --       --        538       584     1,360
4.00 to 4.99%.........     71,851    8,000    3,442    5,427     88,720    52,889     8,053
5.00 to 5.99%.........     57,019   16,820    6,958    4,752     85,549   116,924   133,348
6.00 to 6.99%.........     20,918    1,770   17,523   15,747     55,958    54,986    75,378
7.00 to 7.99%.........     12,064      325    1,086      296     13,771    17,450    16,727
8.00 to 8.99%.........         --       --      840      358      1,198     1,138     1,097
Over 9.00%............         --       --       --       --         --        --        --
                         --------  -------  -------  -------  --------  --------  ---------

   Total..............   $163,769  $26,915  $29,849  $26,580   $247,113  $244,655  $235,963
                         ========  =======  =======  =======   ========  ========  ========
</TABLE>

                                       27
<PAGE>

     Borrowings.  The Association utilizes advances from the FHLB as an
alternative to retail deposits to fund its operations and may do so in the
future as part of its operating strategy. These FHLB advances are collateralized
primarily by certain of the Association's mortgage loans and mortgage-backed
securities and secondarily by the Association's investment in capital stock of
the FHLB. FHLB advances are made pursuant to several different credit programs,
each of which has its own interest rate and range of maturities. The maximum
amount that the FHLB will advance to member institutions, including the
Association, fluctuates from time to time in accordance with the policies of the
OTS and the FHLB. As of December 31, 1999, the Association had $115.2 million in
short-term and $182.0 million in long-term outstanding advances from the FHLB.

     The following table sets forth certain information regarding the
Association's borrowed funds as of or for the periods ended on the dates
indicated:

                                              As of or For the Year
                                                Ended December 31,
                                          ------------------------------
                                           1999        1998       1997
                                          --------   --------   --------
                                               (Dollars in thousands)
FHLB advances:
 Average balance outstanding............. $286,034   $222,057   $146,481
                                          ========   ========   ========
 Maximum amount outstanding at
    any month-end during the period...... $307,160   $225,340   $195,398
                                          ========   ========   ========
 Balance outstanding at end of period.... $297,160   $217,545   $193,237
                                          ========   ========   ========
 Weighted average interest rate
    during the period....................     5.39%      5.82%      5.98%
                                          ========   ========   ========
 Weighted average interest rate at end
   of period.............................     5.54%      5.63%      6.04%
                                          ========   ========   ========


Subsidiary Activities

     GA Financial Inc. is the parent company of the Association and New Eagle
Capital, Inc.  Great American Financial Services, Inc. is a wholly-owned
subsidiary of the Association, which currently does not conduct any activities.

                                       28
<PAGE>

                           REGULATION AND SUPERVISION

General

   As a savings and loan holding company, the Company is required by federal law
to file reports with, and otherwise comply with, the rules and regulations of
the Office of Thrift Supervision ("OTS").  The Association is subject to
extensive regulation, examination and supervision by the OTS, as its primary
federal regulator, and the FDIC, as the deposit insurer.  The Association is a
member of the Federal Home Loan Bank System and, with respect to deposit
insurance, of the Savings Association Insurance Fund ("SAIF") managed by the
FDIC.  The Association must file reports with the OTS and the FDIC concerning
its activities and financial condition in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with, or
acquisitions of, other savings institutions.  The OTS and/or the FDIC conduct
periodic examinations to test the Association's safety and soundness and
compliance with various regulatory requirements.  This regulation and
supervision establishes a comprehensive framework of activities in which an
institution can engage and is intended primarily for the protection of the
insurance fund and depositors.  The regulatory structure also gives the
regulatory authorities extensive discretion in connection with their supervisory
and enforcement activities and examination policies, including policies with
respect to the classification of assets and the establishment of adequate loan
loss reserves for regulatory purposes.  Any change in such regulatory
requirements and policies, whether by the OTS, the FDIC or the Congress, could
have a material adverse impact on the Company, the Association and their
operations. Certain of the regulatory requirements applicable to the Association
and to the Company are referred to below or elsewhere herein.  The description
of statutory provisions and regulations applicable to savings institutions and
their holding companies set forth in this Form 10-K does not purport to be a
complete description of such statutes and regulations and their effects on the
Association and the Company.

Holding Company Regulation

   The Company is a nondiversified unitary savings and loan holding company
within the meaning of federal law.  Under prior law, a unitary savings and loan
holding company, such as the Company was not generally restricted as to the
types of business activities in which it may engage, provided that the
Association continued to be a qualified thrift lender.  See "Federal Savings
Institution Regulation - QTL Test."  The Gramm-Leach-Bliley Act of 1999 provides
that no company may acquire control of a savings association after May 4, 1999
unless it engages only in the financial activities permitted for financial
holding companies under the law or for multiple savings and loan holding
companies as described below.  Further, the Gramm-Leach-Bliley Act specifies
that existing savings and loan holding companies may only engage in such
activities.  The Gramm-Leach-Bliley Act, however, grandfathered the unrestricted
authority for activities with respect to unitary savings and loan holding
companies existing prior to May 4, 1999, such as the Company, so long as the
Association continues to comply with the QTL Test.  Upon any non-supervisory
acquisition by the Company of another savings institution or savings bank that
meets the qualified thrift lender test and is deemed to be a savings institution
by the OTS, the Company would become a multiple savings and loan holding company
(if the acquired institution is held as a separate subsidiary) and would
generally be limited to activities permissible for bank holding companies under
Section 4(c)(8) of the Association Holding Company Act, subject to the prior
approval of the OTS, and certain activities authorized by OTS regulation.

   A savings and loan holding company is prohibited from, directly or
indirectly, acquiring more than 5% of the voting stock of another savings
institution or savings and loan holding company, without prior written approval
of the OTS and from acquiring or retaining control of a depository institution
that is not insured

                                       29
<PAGE>

by the FDIC. In evaluating applications by holding companies to acquire savings
institutions, the OTS considers the financial and managerial resources and
future prospects of the company and institution involved, the effect of the
acquisition on the risk to the deposit insurance funds, the convenience and
needs of the community and competitive factors.

   The OTS may not approve any acquisition that would result in a multiple
savings and loan holding company controlling savings institutions in more than
one state, subject to two exceptions:  (i) the approval of interstate
supervisory acquisitions by savings and loan holding companies and (ii) the
acquisition of a savings institution in another state if the laws of the state
of the target savings institution specifically permit such acquisitions.  The
states vary in the extent to which they permit interstate savings and loan
holding company acquisitions.

   Although savings and loan holding companies are not subject to specific
capital requirements or specific restrictions on the payment of dividends or
other capital distributions, federal regulations  do prescribe such restrictions
on subsidiary savings institutions as described below. The Association must
notify the OTS 30 days before declaring any dividend to the Company.  In
addition, the financial impact of a holding company on its subsidiary
institution is a matter that is evaluated by the OTS and the agency has
authority to order cessation of activities or divestiture of subsidiaries deemed
to pose a threat to the safety and soundness of the institution.

Federal Savings Institution Regulation

   Business Activities.  The activities of federal savings institutions are
governed by federal law and regulations.  These laws and regulations delineate
the nature and extent of the activities in which federal associations may
engage.  In particular, many types of lending authority for federal association,
e.g., commercial, non-residential real property loans and consumer loans, are
limited to a specified percentage of the institution's capital or assets.

   Capital Requirements.  The OTS capital regulations require savings
institutions to meet three minimum capital standards:  a 1.5% tangible capital
ratio, a 4% leverage ratio (3% for institutions receiving the highest rating on
the CAMELS rating system) and an 8% risk-based capital ratio.  In addition, the
prompt corrective action standards discussed below also establish, in effect, a
minimum 2% tangible capital standard, a 4% leverage ratio (3% for institutions
receiving the highest rating on the CAMEL financial institution rating system),
and, together with the risk-based capital standard itself, a 4% Tier 1 risk-
based capital standard.  The OTS regulations also require that, in meeting the
tangible, leverage and risk-based capital standards, institutions must generally
deduct investments in and loans to subsidiaries engaged in activities as
principal that are not permissible for a national bank.

   The risk-based capital standard for savings institutions requires the
maintenance of Tier 1 (core) and total capital (which is defined as core capital
and supplementary capital) to risk-weighted assets of at least 4% and 8%,
respectively.  In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet assets, are multiplied by a risk-weight
factor of 0% to 100%, assigned by the OTS capital regulation based on the risks
believed inherent in the type of asset.  Core (Tier 1) capital is defined as
common stockholders' equity (including retained earnings), certain noncumulative
perpetual preferred stock and related surplus, and minority interests in equity
accounts of consolidated subsidiaries less intangibles other than certain
mortgage servicing rights and credit card relationships.  The components of
supplementary capital currently include cumulative preferred stock, long-term
perpetual preferred stock, mandatory convertible securities, subordinated debt
and intermediate preferred stock, the allowance for loan and lease

                                       30
<PAGE>

losses limited to a maximum of 1.25% of risk-weighted assets and up to 45% of
unrealized gains on available-for-sale equity securities with readily
determinable fair market values. Overall, the amount of supplementary capital
included as part of total capital cannot exceed 100% of core capital.

   The capital regulations also incorporate an interest rate risk component.
Savings institutions with "above normal" interest rate risk exposure are subject
to a deduction from total capital for purposes of calculating their risk-based
capital requirements.  For the present time, the OTS has deferred implementation
of the interest rate risk capital charge.  As of December 31, 1999, the
Association met each of its capital requirements.

   The following table presents the Association's capital position as of
December 31, 1999.

<TABLE>
<CAPTION>
                                                        Capital
                                         Excess     -----------------
                   Actual   Required  (Deficiency)  Actual   Required
                   Capital  Capital      Amount     Percent   Percent
                 --------- ---------  ------------  -------  --------
<S>                <C>      <C>       <C>           <C>      <C>
                                (Dollars in thousands)

Tangible          71,164     13,158       58,006       8.11%   1.50%
Core (Leverage)   71,164     26,317       44,847       8.11%   3.00%
Risk-based        73,333     25,374       47,959      23.12%   8.00%
</TABLE>

   Prompt Corrective Regulatory Action.  The OTS is required to take certain
supervisory actions against undercapitalized institutions, the severity of which
depends upon the institution's degree of undercapitalization.  Generally, a
savings institution that has a ratio of total capital to risk weighted assets of
less than 8%, a ratio of Tier 1 (core) capital to risk-weighted assets of less
than 4% or a ratio of core capital to total assets of less than 4% (3% or less
for institutions with the highest examination rating) is considered to be
"undercapitalized."  A savings institution that has a total risk-based capital
ratio less than 6%, a Tier 1 capital ratio of less than 3% or a leverage ratio
that is less than 3% is considered to be "significantly undercapitalized" and a
savings institution that has a tangible capital to assets ratio equal to or less
than 2% is deemed to be "critically undercapitalized."  Subject to a narrow
exception, the OTS is required to appoint a receiver or conservator for an
institution that is "critically undercapitalized."  The regulation also provides
that a capital restoration plan must be filed with the OTS within 45 days of the
date a savings institution receives notice that it is "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized."  Compliance
with the plan must be guaranteed by any parent holding company. In addition,
numerous mandatory supervisory actions become immediately applicable to an
undercapitalized institution, including, but not limited to, increased
monitoring by regulators and restrictions on growth, capital distributions and
expansion.  The OTS could also take any one of a number of discretionary
supervisory actions, including the issuance of a capital directive and the
replacement of senior executive officers and directors.

   Insurance of Deposit Accounts.   The Association is a member of the SAIF.
The FDIC maintains a risk-based assessment system by which institutions are
assigned to one of three categories based on their capitalization and one of
three subcategories based on examination ratings and other supervisory

                                       31
<PAGE>

information.  An institution's assessment rate depends upon the categories to
which it is assigned. Assessment rates for SAIF member institutions are
determined semiannually by the FDIC and currently range from zero basis points
for the healthiest institutions to 27 basis points for the riskiest.

   In addition to the assessment for deposit insurance, institutions are
required to make payments on bonds issued in the late 1980s by the Financing
Corporation ("FICO") to recapitalize the predecessor to the SAIF.  During 1999,
FICO payments for SAIF members approximated 6.1 basis points, while Bank
Insurance Fund ("BIF") members paid 1.2 basis points.  By law, there is equal
sharing of FICO payments between SAIF and BIF members beginning on January 1,
2000.

   The Association's assessment rate for 1999 was 5.9 basis points and the
premium paid as payments towards the FICO bonds for this period was $281,000.
The FDIC has authority to increase insurance assessments.  A significant
increase in SAIF insurance premiums would likely have an adverse effect on the
operating expenses and results of operations of the Association.  Management
cannot predict what insurance assessment rates will be in the future.

   Insurance of deposits may be terminated by the FDIC upon a finding that the
institution has engaged in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations or has violated any applicable law,
regulation, rule, order or condition imposed by the FDIC or the OTS.  The
management of the Association does not know of any practice, condition or
violation that might lead to termination of deposit insurance.

   Loans to One Borrower.  Federal law provides that savings institutions are
generally subject to the limits on loans to one borrower applicable to national
banks.  A savings institution may not make a loan or extend credit to a single
or related group of borrowers in excess of 15% of its unimpaired capital and
surplus. An additional amount may be lent, equal to 10% of unimpaired capital
and surplus, if secured by specified readily-marketable collateral.  As of
December 31, 1999, the Association's limit on loans to one borrower was $10.7
million, and the Association's largest aggregate outstanding balance of loans to
one borrower was $5.7 million.

   QTL Test.  The HOLA requires savings institutions to meet a qualified thrift
lender test.  Under the test, a savings association is required to either
qualify as a "domestic building and loan association" under the Internal Revenue
Code or maintain at least 65% of its "portfolio assets" (total assets less: (i)
specified liquid assets up to 20% of total assets; (ii) intangibles, including
goodwill; and (iii) the value of property used to conduct business) in certain
"qualified thrift investments" (primarily residential mortgages and related
investments, including certain mortgage-backed securities) in at least 9 months
out of each 12 month period.

   A savings institution that fails the qualified thrift lender test is subject
to certain operating restrictions and may be required to convert to a bank
charter.  As of December 31, 1999, the Association maintained 98.3% of its
portfolio assets in qualified thrift investments and, therefore, met the
qualified thrift lender test. Recent legislation has expanded the extent to
which education loans, credit card loans and small business loans may be
considered "qualified thrift investments."

   Limitation on Capital Distributions.  OTS regulations impose limitations upon
all capital distributions by a savings institution, including cash dividends,
payments to repurchase its shares and payments to shareholders of another
institution in a cash-out merger.  The rule effective in the first quarter of
1999

                                       32
<PAGE>

established three tiers of institutions based primarily on an institution's
capital level. An institution that exceeded all capital requirements before and
after a proposed capital distribution ("Tier 1 Bank") and had not been advised
by the OTS that it was in need of more than normal supervision, could, after
prior notice but without obtaining approval of the OTS, make capital
distributions during the calendar year equal to the greater of (i) 100% of its
net earnings to date during the calendar year plus the amount that would reduce
by one-half the excess capital over its capital requirements at the beginning of
the calendar year or (ii) 75% of its net income for the previous four quarters.
Any additional capital distributions would require prior regulatory approval.
Effective April 1, 1999, the OTS's capital distribution regulation changed.
Under the new regulation, an application to and the prior approval of the OTS is
required prior to any capital distribution if the institution does not meet the
criteria for "expedited treatment" of applications under OTS regulations (i.e.,
generally, examination ratings in the two top categories), the total capital
distributions for the calendar year exceed net income for that year plus the
amount of retained net income for the preceding two years, the institution would
be undercapitalized following the distribution or the distribution would
otherwise be contrary to a statute, regulation or agreement with OTS. If an
application is not required, the institution must still provide prior notice to
OTS of the capital distribution if, like the Bank, it is a subsidiary of a
holding company. In the event the Association's capital fell below its
regulatory requirements or the OTS notified it that it was in need of more than
normal supervision, the Association's ability to make capital distributions
could be restricted. In addition, the OTS could prohibit a proposed capital
distribution by any institution, which would otherwise be permitted by the
regulation, if the OTS determines that such distribution would constitute an
unsafe or unsound practice.

   Liquidity.  The Association is required to maintain an average daily balance
of specified liquid assets equal to a monthly average of not less than a
specified percentage of its net withdrawable deposit accounts plus short-term
borrowings.  This liquidity requirement is currently 4%, but may be changed from
time to time by the OTS to any amount within the range of 4% to 10%.  Monetary
penalties may be imposed for failure to meet these liquidity requirements.  The
Association's liquidity ratio for December 31, 1999 was 45.5%, which exceeded
the applicable requirements.  The Association has never been subject to monetary
penalties for failure to meet its liquidity requirements.

   Assessments.  Savings institutions are required to pay assessments to the OTS
to fund the agency's operations.  The general assessments, paid on a semi-annual
basis, are computed upon the savings institution's total assets, including
consolidated subsidiaries, as reported in the Association's latest quarterly
thrift financial report.  The assessments paid by the Association for the year
ended December 31, 1999 totaled $154,000.

   Transactions with Related Parties.  The Association's authority to engage in
transactions with "affiliates" (e.g., any company that controls or is under
common control with an institution, including the Company and its non-savings
institution subsidiaries) is limited by federal law.  The aggregate amount of
covered transactions with any individual affiliate is limited to 10% of the
capital and surplus of the savings institution.  The aggregate amount of covered
transactions with all affiliates is limited to 20% of the savings institution's
capital and surplus.  Certain transactions with affiliates are required to be
secured by collateral in an amount and of a type described in federal law.  The
purchase of low quality assets from affiliates is generally prohibited.  The
transactions with affiliates must be on terms and under circumstances, that are
at least as favorable to the institution as those prevailing at the time for
comparable transactions with non-affiliated companies.  In addition, savings
institutions are prohibited from lending to any affiliate that is engaged in
activities that are not permissible for bank holding companies and no savings
institution may purchase the securities of any affiliate other than a
subsidiary.

                                       33
<PAGE>

   The Association's authority to extend credit to executive officers, directors
and 10% shareholders ("insiders"), as well as entities such persons control, is
also governed by federal law.  Such loans are required to be made on terms
substantially the same as those offered to unaffiliated individuals and not
involve more than the normal risk of repayment.  Recent legislation created an
exception for loans made pursuant to a benefit or compensation program that is
widely available to all employees of the institution and does not give
preference to insiders over other employees.  The law limits both the individual
and aggregate amount of loans the Association may make to insiders based, in
part, on the Association's capital position and requires certain board approval
procedures to be followed.

   Enforcement.  The OTS has primary enforcement responsibility over savings
institutions and has the authority to bring actions against the institution and
all institution-affiliated parties, including stockholders, and any attorneys,
appraisers and accountants who knowingly or recklessly participate in wrongful
action likely to have an adverse effect on an insured institution.  Formal
enforcement action may range from the issuance of a capital directive or cease
and desist order to removal of officers and/or directors to institution of
receivership, conservatorship or termination of deposit insurance.  Civil
penalties cover a wide range of violations and can amount to $25,000 per day, or
even $1 million per day in especially egregious cases.  The FDIC has the
authority to recommend to the Director of the OTS that enforcement action to be
taken with respect to a particular savings institution.  If action is not taken
by the Director, the FDIC has authority to take such action under certain
circumstances.  Federal law also establishes criminal penalties for certain
violations.

   Standards for Safety and Soundness.  The federal banking agencies have
adopted Interagency Guidelines prescribing Standards for Safety and Soundness.
The guidelines set forth the safety and soundness standards that the federal
banking agencies use to identify and address problems at insured depository
institutions before capital becomes impaired.  If the OTS determines that a
savings institution fails to meet any standard prescribed by the guidelines, the
OTS may require the institution to submit an acceptable plan to achieve
compliance with the standard.

Federal Home Loan Bank System

   The Association is a member of the Federal Home Loan Bank System, which
consists of 12 regional Federal Home Loan Banks.  The Federal Home Loan Bank
provides a central credit facility primarily for member institutions.  The
Association, as a member of the Federal Home Loan Bank, is required to acquire
and hold shares of capital stock in that Federal Home Loan Bank in an amount at
least equal to 1.0% of the aggregate principal amount of its unpaid residential
mortgage loans and similar obligations at the beginning of each year, or 1/20 of
its advances (borrowings) from the Federal Home Loan Bank, whichever is greater.
The Association was in compliance with this requirement with an investment in
Federal Home Loan Bank stock as of December 31, 1999 of $15.5 million.

   The Federal Home Loan Banks are required to provide funds for the resolution
of insolvent thrifts in the late 1980s and to contribute funds for affordable
housing programs.  These requirements could reduce the amount of dividends that
the Federal Home Loan Banks pay to their members and could also result in the
Federal Home Loan Banks imposing a higher rate of interest on advances to their
members.  If dividends were reduced, or interest on future Federal Home Loan
Bank advances increased, The Association's net interest income would likely also
be reduced.  Recent legislation has changed the structure of the Federal Home
Loan Banks funding obligations for insolvent thrifts, revised the capital
structure of the Federal Home Loan Banks and implemented entirely voluntary
membership for Federal Home Loan Banks.  Management

                                       34
<PAGE>

cannot predict the effect that these changes may have with respect to its
Federal Home Loan Bank membership.

Federal Reserve System

   The Federal Reserve Board regulations require savings institutions to
maintain non-interest earning reserves against their transaction accounts
(primarily NOW and regular checking accounts).  The regulations generally
provide that reserves be maintained against aggregate transaction accounts as
follows: for accounts aggregating $44.3 million or less (subject to adjustment
by the Federal Reserve Board) the reserve requirement is 3%; and for accounts
aggregating greater than $44.3 million, the reserve requirement is $1.329
million plus 10% (subject to adjustment by the Federal Reserve Board between 8%
and 14%) against that portion of total transaction accounts in excess of $44.3
million.  The first $5.0 million of otherwise reservable balances (subject to
adjustments by the Federal Reserve Board) are exempted from the reserve
requirements.  The Association complies with the foregoing requirements.


                           FEDERAL AND STATE TAXATION

Federal Taxation

   General.  The Company and the Association report their income on a calendar
year, consolidated basis and the accrual method of accounting, and are subject
to federal income taxation in the same manner as other corporations with some
exceptions, including particularly the Association's reserve for bad debts
discussed below.  The following discussion of tax matters is intended only as a
summary and does not purport to be a comprehensive description of the tax rules
applicable to the Association or the Company.  The Association was last audited
by the IRS for 1995.  Tax years 1996 through 1999 are still open for examination
under the statute of limitations.  For its 1999 taxable year, the Association is
subject to a maximum federal income tax rate of 34.0%.

   Bad Debt Reserves.  For fiscal years beginning prior to December 31, 1995,
thrift institutions which qualified under certain definitional tests and other
conditions of the Internal Revenue Code of 1986 (the "Code") were permitted to
use certain favorable provisions to calculate their deductions from taxable
income for annual additions to their bad debt reserve.  A reserve could be
established for bad debts on qualifying real property loans (generally secured
by interests in real property improved or to be improved) under (i) the
Percentage of  Taxable Income Method (the "PTI Method") or (ii)  the Experience
Method.  The reserve for nonqualifying loans was computed using the Experience
Method.

   The Small Business Job Protection Act of 1996 (the "1996 Act"), which was
enacted on August 20, 1996, repeals the reserve method of accounting for bad
debts for tax years beginning after 1995 and requires savings institutions to
recapture (i.e., take into income) certain portions of their accumulated bad
debt reserves.  The thrift institutions eligible to be treated as "small banks"
(assets of $500 million or less)  are allowed to use the Experience Method
applicable to such institutions, while thrift institutions that are treated as
large banks (assets exceeding $500 million) are required to use only the
specific charge-off method.  The PTI Method of accounting for bad debts is no
longer available for any financial institution.

                                       35
<PAGE>

   A thrift institution required to change its method of computing reserves for
bad debts will treat such change as a change in method of accounting, initiated
by the taxpayer, and having been made with the consent of the IRS.  Any Section
481(a) adjustment required to be taken into income with respect to such change
generally will be taken into income ratably over a six-taxable year period,
beginning with the first taxable year beginning after 1995, subject to a 2-year
suspension if the "residential loan requirement" is satisfied.

   Under the residential loan requirement provision, the recapture required by
the 1996 Act will be suspended for each of two successive taxable years,
beginning with the Association's 1996  taxable year, in which the Association
originates a minimum of certain residential loans based upon the average of the
principal amounts of such loans made by the Association during its six taxable
years preceding its current taxable year.

   The Association is required to recapture (i.e., take into income) over a six
year period the excess of the balance of its tax bad debt reserves as of
December 31, 1995 other than its supplemental reserve for losses on loans, if
any over the balance of such reserves as of December 31, 1987 (or a lesser
amount since the Association's loan portfolio decreased since December 31,
1987).  As a result of such recapture, the Association will incur an additional
tax liability of approximately $765,000 which is to be paid beginning in 1998
over a six year period.

   Distributions.  Under the 1996 Act, if the Association makes "non-dividend
distributions" to the Company, such distributions will be considered to have
been made from the Association's unrecaptured tax bad debt reserves (including
the balance of its reserves as of December 31, 1987) to the extent thereof, and
then from the Association's supplemental reserve for losses on loans, to the
extent thereof, and an amount based on the amount distributed (but not in excess
of the amount of such reserves) will be included in the Association's income.
Non-dividend distributions include distributions in excess of the Association's
current and accumulated earnings and profits, as calculated for federal income
tax purposes, distributions in redemption of stock, and distributions in partial
or complete liquidation.  Dividends paid out of the Association's current or
accumulated earnings and profits will not be so included in the Association's
income.

   The amount of additional taxable income triggered by a non-dividend is an
amount that, when reduced by the tax attributable to the income, is equal to the
amount of the distribution.  Thus, if the Association makes a non-dividend
distribution to the Company, approximately one and one-half times the amount of
such distribution (but not in excess of the amount of such reserves) would be
includable in income for federal income tax purposes, assuming a 34% federal
corporate income tax rate.  The Association does not intend to pay dividends
that would result in a recapture of any portion of its bad debt reserves.

                                       36
<PAGE>

Additional Item.  Executive Officers of the Registrant.
------------------------------------------------------

   The  following table sets forth certain information regarding the executive
officers of the Company and the Association who are not also directors.

<TABLE>
<CAPTION>

     Name           Age at 12/31/99             Position
----------------    ---------------  -----------------------------------
<S>                 <C>              <C>
Todd L. Cover              38        Executive Vice President and Chief
                                     Operating Officer of the Association

Andrew R. Getsy            61        Vice President and Treasurer of the
                                     Association

Raymond G. Suchta          51        Chief Financial Officer and Treasurer of
                                     the Company and Vice President and
                                     Chief Financial Officer of the
                                     Association

Lawrence A. Michael        50        Secretary of the Company and Vice
                                     President and Secretary of the
                                     Association

Aaron T. Flaitz, Jr.       49        Vice President and Assistant Secretary
                                     of the Association

Norman A. Litterini        58        Vice President - Lending of the
                                     Association

Wayne A. Callen            50        Vice President - Data Processing of the
                                     Association

Judith A. Stoeckle         59        Vice President - Systems Coordinator of
                                     the Association
</TABLE>


Item 2.  Properties.
-------------------

   The Association presently conducts its business through an administrative and
full service office located in the Borough of Whitehall and fourteen other full
service branch offices, all of which are located in the greater Pittsburgh
metropolitan area.  The Association owns the building and land for eight of its
offices and leases its remaining seven offices.  As of December 31, 1999, Great
American Federal's land, building and equipment had a net book value of $5.7
million.

                                       37
<PAGE>

Item 3.   Legal Proceedings.
---------------------------

     The Association is not involved in any pending legal proceedings other than
routine legal proceedings occurring in the ordinary course of business.  Such
routine legal proceedings, in the aggregate, are believed by management to be
immaterial to the Company's financial condition and results of operations.

Item 4.   Submission of Matters to a Vote of Security Holders.
-------------------------------------------------------------

     None.

                                    PART II

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

     Information relating to the market for the Registrant's common equity and
related stockholder matters appears under "Stock Information" and "Stock Price"
on the inside back cover of the Registrant's 1999 Annual Report to Stockholders
and is incorporated herein by reference.

Item 6.   Selected Financial Data.
---------------------------------

     The above-captioned information appears under "Selected Consolidated
Financial and Other Data" in the Registrant's 1999 Annual Report to Stockholders
on page 5 and is incorporated herein by reference.

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

     The above-captioned information appears under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Registrant's
1999 Annual Report to Stockholders on pages 6 though 14 and is incorporated
herein by reference.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.
--------------------------------------------------------------------

     This information contained in the Section captioned, "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Management of Interest Rate Risk and Market Risk Analysis" on pages 6 through 8
of the 1999 Annual Report to Stockholders is incorporated herein by reference.

Item 8.   Financial Statements and Supplementary Data.
-----------------------------------------------------

     The Consolidated Financial Statements of GA Financial, Inc. and its
subsidiaries, together with the report thereon by KPMG LLP for the 1999
financial statements appears in the Registrant's 1999 Annual Report to
Stockholders on pages 15 through 38 and are incorporated herein by reference. In
addition, the report by PriceWaterhouseCoopers LLP on the consolidated financial
statements of GA Financial, Inc. and its subsidiaries as of December 31, 1998
and each of the years in the two year period then ended is filed herewith as
exhibit 99.2.

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

     On February 24, 1999, the Company engaged KPMG LLP as its principal
accountant to audit the Company's consolidated financial statements for the
fiscal year ended December 31, 1999.  The Company issued a Form 8-K on March 3,
1999.

                                       38
<PAGE>

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.
------------------------------------------------------------

     The information relating to Directors and Executive Officers of the
Registrant is incorporated herein by reference to the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on April 26, 2000,
at pages 4 through 6.

Item 11.  Executive Compensation.
--------------------------------

     The information relating to directors' compensation and executives'
compensation is incorporated herein by reference to the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on April 26, 2000,
at pages 7 through 10 and pages 12 through 17 (excluding the Executive
Compensation Committee Report and Stock Performance Graph).

Item 12.  Security Ownership of Certain Beneficial Owners and Management.
------------------------------------------------------------------------

     The information relating to security ownership of certain beneficial owners
and management is incorporated herein by reference to the Registrant's Proxy
Statement for the Annual Meeting of Stockholders to be held on April 26, 2000,
at page 3.

Item 13.  Certain Relationships and Related Transactions.
--------------------------------------------------------

     The information relating to certain relationships and related transactions
is incorporated herein by reference to the Registrant's Proxy Statement for the
Annual Meeting of Stockholders to be held on April 26, 2000, at page 18.

                                       39
<PAGE>

                                    PART IV

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

(a)  The following documents are filed as a part of this report:

(1)  Consolidated Financial Statements of the Company are incorporated by
     reference to the following indicated pages of the 1999 Annual Report to
     Stockholders.

<TABLE>
<CAPTION>
                                                                        PAGE
                                                                        -----
<S>                                                                     <C>

   Independent Auditors' Report for 1999 Financial Statements..........  15

   Consolidated Statements of Financial Condition as of
     December 31, 1999 and 1998........................................  16

   Consolidated Statements of Income and Comprehensive Income for the
     Years Ended December 31, 1999, 1998 and 1997......................  17

   Consolidated Statements of Cash Flows for the
     Years Ended December 31, 1999, 1998 and 1997......................  18

   Consolidated Statements of Shareholders' Equity
     for the Years Ended December 31, 1999, 1998 and 1997..............  19

   Notes to Consolidated Financial Statements for the
     Years Ended December 31, 1999, 1998 and 1997......................  20-38
</TABLE>
   The remaining information appearing in the 1999 Annual Report to Stockholders
is not deemed to be filed as part of this report, except as expressly provided
herein.

(2)  All schedules are omitted because they are not required or applicable, or
     the required information is shown in the consolidated financial statements
     or the notes thereto.

                                       40
<PAGE>

(3)  Exhibits

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

         3.1  Certificate of Incorporation of GA Financial, Inc.*
         3.2  Amended Bylaws of GA Financial, Inc.**
         4.0  Stock Certificate of GA Financial, Inc.*
         10.1 Amended and Restated GA Financial Inc. 1996 Stock-Based
              Incentive Plan***
         10.2 Form of Great American Federal Savings and Loan Association
              Employee Stock Ownership Plan*
         10.3 Employment Agreement between Great American Federal Savings and
              Loan Association and John M. Kish****
         10.4 Employment Agreement between GA Financial, Inc. and John M.
              Kish****
         10.5 Change in Control Agreement between Great American Federal Savings
              and Loan Association and Todd Cover (filed herewith)
         10.6 Change in Control Agreement between GA Financial, Inc. and Raymond
              G. Suchta*
         13.0 Portions of the 1999 Annual Report to Stockholders (filed
              herewith)
         21.0 Subsidiary information is incorporated herein by reference to
              "Part I - Subsidiaries"
         23.0 Consent of KPMG LLP (filed herewith)
         23.1 Consent of PricewaterhouseCoopers LLP (filed herewith)
         27.0 Financial Data Schedule (field herewith)
         99.1 Proxy Statement, dated March 24, 2000, for the 2000 Annual Meeting
              of Stockholders (filed herewith)
         99.2 PricewaterhouseCoopers LLP Report of Independent Accountants
              (filed herewith)
     (b) Reports on Form 8-K

         None.
         __________________________________
         *    Incorporated by reference into this document from the Exhibits to
              Form S-1, Registration Statement, filed on December 21, 1995, as
              amended, Registration No. 33-80715.
         **   Incorporated by reference into this document from the Company's
              Form 10-Q filed on November 15, 1999.
         ***  Incorporated by reference into this document from the Proxy
              Statement for the 1999 Annual Meeting of Shareholders filed on
              March 26, 1999.
         **** Incorporated by reference into this document from the Company's
              Form 10-Q filed on May 13, 1998.

                                       41
<PAGE>

CONFORMED                         SIGNATURES

     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 duly authorized.

                              GA FINANCIAL, INC.


                              By:   /s/ John M. Kish
                                    --------------------------------------------
                                    John M. Kish
                                    Chairman of the Board and
                                    Chief Executive Officer

                                    Date:  March 30, 2000

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

Name                          Title                               Date
----                          -----                               ----

/s/ John M. Kish         Chairman of the Board and            March 30, 2000
---------------------    Chief Executive Officer
John M. Kish             (principal executive officer)


/s/ Raymond G. Suchta    Chief Financial Officer              March 30, 2000
---------------------    and Treasurer
Raymond G. Suchta        (principal accounting and
                         financial officer)


/s/ Thomas E. Bugel      Director                             March 30, 2000
---------------------
Thomas E. Bugel


/s/ Darrell J. Hess      Director                             March 30, 2000
---------------------
Darrell J. Hess


/s/ Thomas M. Stanton    Director                             March 30, 2000
---------------------
Thomas M. Stanton


/s/ David R. Wasik       Director                             March 30, 2000
---------------------
David R. Wasik


/s/ Robert J. Ventura    Director                             March 30, 2000
---------------------
Robert J. Ventura

                                       42