<PAGE> 1

                                  UNITED STATES
                        SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C. 20549

                                   FORM 10-QSB
(Mark One)

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended December 31, 1998

                                       or

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
         SECURITIES EXCHANGE ACT OF 1934

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

                         Commission File Number 1-14577


                    SECURITY OF PENNSYLVANIA FINANCIAL CORP.
--------------------------------------------------------------------------------
         (Exact name of small business issuer as specified in its charter)

Delaware                                                             23-2980576
--------------------------------------------------------------------------------
(State or other jurisdiction of                                (I.R.S. Employer
incorporation or organization)                                 Identication No.)

31 W. Broad Street, Hazleton, Pennsylvania                                18201
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip Code)


                                 (570) 454-0824
--------------------------------------------------------------------------------
                (Issuer's telephone number, including area code)


                                 Not Applicable
--------------------------------------------------------------------------------
                  (Former name, former address and former fiscal
                     year, if changes since last report)



         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 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
                                                              -----      -----

                                                           Yes        No   X
                                                              -----      -----
                      APPLICABLE ONLY TO CORPORATE ISSUERS:

         State the number of shares  outstanding of each of the issuer's classes
of  common  stock, as  of  the latest practicable date: the Issuer had 1,587,000
shares  of common stock,  par value  $0.01 per share, outstanding as of February
16, 1999.



<PAGE> 2


                    SECURITY OF PENNSYLVANIA FINANCIAL CORP.
                                   FORM 10-QSB

                                      INDEX

                                                                            Page
                                                                            ----
PART I.       FINANCIAL INFORMATION

Item 1.    Financial Statements

           Consolidated Balance Sheet at
           December 31, 1998 (unaudited) and June 30, 1998.....................1

           Consolidated Income Statement and Statement of
           Comprehensive Income for the Three and Six
           Months Ended December 31, 1998 and 1997 (unaudited).................2

           Consolidated Statement of Changes in Equity
           for the Six Months Ended December 31, 1998..........................5

           Consolidated Statement of Cash Flows for the
           Six Months Ended December 31, 1998 and 1997.........................6

           Notes to Consolidated Financial Statements..........................7


Item 2.    Management's Discussion and Analysis or Plan of Operation...........8

PART II:      OTHER INFORMATION

Item 1.    Legal Proceedings..................................................15
Item 2.    Changes in Securities and Use of Proceeds..........................15
Item 3.    Defaults Upon Senior Securities....................................15
Item 4.    Submission of Matters to a Vote of Security Holders................15
Item 5.    Other Information..................................................15
Item 6.    Exhibits and Reports on Form 8-K...................................16

SIGNATURES....................................................................17




<PAGE> 3


                          PART I. FINANCIAL INFORMATION


Item 1.    Financial Statements.
           --------------------
<TABLE>
<CAPTION>
                    SECURITY OF PENNSYLVANIA FINANCIAL CORP.
                           CONSOLIDATED BALANCE SHEET

                 DECEMBER 31, 1998 (UNAUDITED) AND JUNE 30, 1998
             (In thousands, except share and per share information)

                                                                                DECEMBER 31,             JUNE 30,
                                                                                   1998                   1998
                                                                               --------------        --------------
                                                                                (UNAUDITED)
Assets:

    <S>                                                                          <C>                   <C>
    Cash and cash equivalents...........................................         $  28,010             $  11,858
    Held-to-maturity securities
       (fair value of $20,807 in 6/98 and $18,984 in 12/98).............            17,641                20,783
    Available for sale securities.......................................             8,016                 7,900
    Loans (less allowance for loan loss of $427 in 12/98
       and $496 in 6/98)................................................            71,929                69,211
    Property and equipment, net.........................................             1,302                 1,364
    Accrued interest receivable.........................................               521                   619
    Real estate owned, net..............................................               383                   221
    Other assets........................................................             1,423                    34
                                                                                  --------              --------
       Total assets.....................................................          $129,225              $111,990
                                                                                  ========              ========

Liabilities and Equity:
    Deposits............................................................          $104,964              $102,604
    Advances from borrowers for taxes and insurance.....................                17                    34
    Borrowed funds......................................................             1,261                    --
    Accrued interest payable and other liabilities......................               406                   122
                                                                                  --------              --------
       Total liabilities................................................           106,648               102,760

    Common Stock ($.01 par value; 6,000,000 authorized shares,
       1,587,000 shares issued..........................................                16                    --
    Additional paid-in capital..........................................            14,868                    --
    Unearned Employee Stock Ownership Plan (ESOP) shares................            (1,261)                   --
    Retained earnings - substantially restricted........................             9,083                 9,361
    Accumulated other comprehensive income..............................              (129)                 (131)
                                                                                  --------              --------
       Total equity.....................................................            22,577                 9,230
                                                                                  --------              --------

       Total liabilities and equity.....................................          $129,225              $111,990
                                                                                  ========              ========

</TABLE>




                                                   1

<PAGE> 4
<TABLE>
<CAPTION>



                    SECURITY OF PENNSYLVANIA FINANCIAL CORP.
                          CONSOLIDATED INCOME STATEMENT

        FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
                                 (in thousands)


                                                                                     DECEMBER 31,          DECEMBER 31,
                                                                                        1998                  1997
                                                                                   ---------------       ---------------
                                                                                     (UNAUDITED)
<S>                                                                                    <C>                   <C>
Interest income:
    Loans..................................................................            $1,294                $1,356
    Interest and dividends on securities:
       Taxable.............................................................               299                   356
       Non-taxable.........................................................                11                    --
       Dividends...........................................................                10                     9
       Interest-bearing deposits with banks................................               240                   211
                                                                                     --------              --------
           Total interest income...........................................             1,854                 1,932

Interest expense:
    Deposits...............................................................             1,066                 1,065
    FHLB advances and other borrowings.....................................                --                    --
                                                                                    ---------             ---------
       Total interest expense..............................................             1,066                 1,065

    Net interest income....................................................               788                   867
    Provision for loan losses..............................................                50                    65
                                                                                    ---------             ---------
    Net interest income after provision for loan losses....................               738                   802

Noninterest income:
    Other loan fees and service charges....................................                75                    68
    Gain (loss) on sale of:
       Real estate owned...................................................              (113)                   16
       Investments.........................................................                --                     1
       Other...............................................................                10                     7
                                                                                    ---------            ----------
           Total noninterest income........................................               (28)                   92

Noninterest Expense:
    Salaries and net employee benefits.....................................               357                   361
    Occupancy costs........................................................                67                    52
    Federal deposit insurance premiums.....................................                15                    15
    Data processing........................................................                36                    34
    Professional fees......................................................                16                    11
    Foreclosed real estate expenses, net...................................                40                    28
    Charitable contributions...............................................               755                     7
    Other noninterest expense..............................................               122                   124
                                                                                     --------              --------
           Total noninterest expense.......................................             1,408                   632

Income (Loss) before provision for income taxes............................              (698)                  262
Income tax provision (benefit).............................................              (222)                  108
                                                                                     --------              --------
Net income (loss)..........................................................          $   (476)              $   154
                                                                                     ========               =======
</TABLE>


                                                         2

<PAGE> 5
<TABLE>
<CAPTION>

                    SECURITY OF PENNSYLVANIA FINANCIAL CORP.
                          CONSOLIDATED INCOME STATEMENT

        FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
                                (in thousands)


                                                                                   DECEMBER 31,          DECEMBER 31,
                                                                                       1998                  1997
                                                                                  ---------------       ---------------
                                                                                    (UNAUDITED)

<S>                                                                                  <C>                    <C>
Interest income:
Loans..................................................................              $  2,630               $ 2,657
    Interest and dividends on securities:
       Taxable.............................................................               620                   748
       Non-taxable.........................................................                18                    --
       Dividends...........................................................                19                    18
       Interest-bearing deposits with banks................................               485                   406
                                                                                     --------              --------
           Total interest income...........................................             3,772                 3,829

Interest expense:
    Deposits...............................................................             2,151                 2,114
    FHLB advances and other borrowings.....................................                --                    --
                                                                                     --------             ---------
       Total interest expense..............................................             2,151                 2,114

    Net interest income....................................................             1,621                 1,715
    Provision for loan losses..............................................                55                    73
                                                                                     ---------             ---------
    Net interest income after provision for loan losses....................             1,566                 1,642

Noninterest income:
    Other loan fees and service charges....................................               145                   139
    Gain (loss) on sale of:
       Real estate owned...................................................              (111)                   16
       Investments.........................................................                --                     1
       Other...............................................................                21                    21
                                                                                     --------            ----------
           Total noninterest income........................................                55                   177

Noninterest Expense:
    Salaries and net employee benefits.....................................               679                   676
    Occupancy costs........................................................               136                   114
    Federal deposit insurance premiums.....................................                30                    31
    Data processing........................................................                74                    68
    Professional fees......................................................                53                    41
    Foreclosed real estate expenses, net...................................                72                    38
    Charitable contributions...............................................               757                     9
    Other noninterest expense..............................................               228                   234
                                                                                     --------              --------
           Total noninterest expense.......................................             2,029                 1,211

Income (Loss) before provision for income taxes............................              (408)                  608
Income tax provision (benefit).............................................              (130)                  246
                                                                                     --------              --------
Net income (loss)..........................................................          $   (278)              $   362
                                                                                     ========               =======

</TABLE>

                                                         3

<PAGE> 6
<TABLE>
<CAPTION>

                    SECURITY OF PENNSYLVANIA FINANCIAL CORP.
                 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

        FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
                                 (in thousands)


                                                                                     DECEMBER 31,          DECEMBER 31,
                                                                                         1998                  1997
                                                                                   ---------------       ---------------
                                                                                      (UNAUDITED)

<S>                                                                                     <C>                    <C>
Net income (loss)..........................................................             $(476)                 $154
Increase (decrease) in unrealized losses available-for-sale securities.....               (47)                  (12)
                                                                                      -------                ------

Comprehensive income (loss)................................................             $(523)                 $166
                                                                                        =====                  ====

</TABLE>

<TABLE>
<CAPTION>

          FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
                                 (in thousands)


                                                                                   DECEMBER 31,           DECEMBER 31,
                                                                                      1998                   1997
                                                                                 ---------------        ---------------
                                                                                   (UNAUDITED)

<S>                                                                                     <C>                    <C>
Net income (loss)..........................................................             $(278)                 $362
Increase (decrease) in unrealized losses available-for-sale securities.....                 2                    50
                                                                                     --------                ------

Comprehensive income (loss)................................................             $(276)                 $412
                                                                                        =====                  ====

</TABLE>



                                                         4

<PAGE> 7
<TABLE>
<CAPTION>


                    SECURITY OF PENNSYLVANIA FINANCIAL CORP.
                         STATEMENT OF CHANGES IN EQUITY

                   FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
                                 (in thousands)

                                                                                            ACCUMULATED
                                                        ADDITIONAL                             OTHER
                                              COMMON     PAID-IN                RETAINED    COMPREHENSIVE      NET
                                               STOCK     CAPITAL       ESOP     EARNINGS    INCOME (LOSS)     EQUITY
                                              --------   ---------   ---------  ---------   -------------   ----------

<S>                                              <C>     <C>          <C>        <C>            <C>         <C>
Balance at June 30, 1998................         $--     $     --     $    --    $9,361         $(131)      $  9,230
Net Income/(Loss).......................                                           (278)                        (278)
Proceeds from sale of stock.............          16       14,868                                             14,884
(Increase)/Decrease in unrealized
   losses on Available-for-Sale
   Securities...........................                                                            2              2
Unearned ESOP Shares....................                               (1,261)                                (1,261)
                                                 ---      -------     -------    ------         -----        -------
Balance at December 31, 1998............         $16      $14,868     $(1,261)   $9,083         $(129)       $22,577
                                                 ===      =======     =======    ======         =====        =======
</TABLE>


                                                         5

<PAGE> 8
<TABLE>
<CAPTION>

                    SECURITY OF PENNSYLVANIA FINANCIAL CORP.
                      CONSOLIDATED STATEMENT OF CASH FLOWS

             FOR SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997 (UNAUDITED)
                                 (in thousands)


                                                                                     DECEMBER 31,          DECEMBER 31,
                                                                                         1998                  1997
                                                                                   ---------------      ----------------

<S>                                                                                  <C>                    <C>
OPERATING ACTIVITIES:
Net income (loss)..........................................................          $   (279)              $   361
Adjustments to reconcile net income to net cash provided
    by operating activities:
Provision for loan losses and foreclosed real estate.......................                55                    73
Amortization and accretion on investment securities........................                81                    (1)
Depreciation and amortization..............................................                74                    37
Deferred income taxes......................................................                --                    --
(Gain) Loss on sale of:
    Real estate acquired through foreclosure...............................                 4                     8
    Securities.............................................................                --                   (63)
Change in assets and liabilities:
    Accrued interest receivable............................................                98                    (1)
    Other assets...........................................................            (1,388)                  (41)
    Accrued interest payable and other liabilities.........................               284                    34
                                                                                      -------                  ----

Net cash provided by operating activities..................................           $(1,071)              $   407
                                                                                       =======                  ===

INVESTMENT ACTIVITIES:
Purchase of held-to-maturity securities....................................          $     --               $    --
Purchase of available-for-sale securities..................................            (8,120)               (5,150)
Proceeds from maturities of held-to-maturity securities....................                --                    --
Proceeds from the call of held-to-maturity securities......................             6,435                 2,741
Proceeds from maturities and principal paydowns on
    available-for-sale securities..........................................               600                   500
Proceeds from principal paydowns of held-to-maturity securities............               715                   484
Proceeds from sale of available-for-sale securities........................                --                    --
Loans made to customers, net of principal collected........................            (2,773)               (3,147)
Acquisition of office premises and equipment...............................               (12)                 (186)
Proceeds from sale of foreclosed real estate...............................               349                   623
                                                                                       ------                ------

Net cash used in investing activities......................................           $(2,806)              $(4,135)
                                                                                       =======               =======

FINANCING ACTIVITIES:
Net increase (decrease) in deposit accounts................................           $ 2,360               $ 2,391
Net increase (decrease) in advances from borrowers
    for taxes and insurance................................................               (17)                  (99)
Repayments of borrowed funds...............................................                --                    --
Net proceeds from issuance of common stock.................................            16,145                   --
                                                                                       ------               ------

Net cash provided by financing activities..................................            18,488                 2,292
                                                                                       ------                ------
Increase (decrease) by cash and equivalents................................            16,152                (1,900)
Cash and equivalent - beginning of the year................................            11,858                 9,034
                                                                                       ------                ------
Cash and equivalent - end of year..........................................           $28,010               $ 7,134
                                                                                       ======                ======

Supplemental Disclosure of Cash Flow Information:
    Interest paid on deposits..............................................           $ 2,151               $ 2,114
    Income taxes paid......................................................          $   (130)             $    246

Supplemental Disclosure of Non-Cash Information:
    Transfer from loans to real estate owned...............................          $    638              $    270

</TABLE>
                                                        6

<PAGE> 9


                  SECURITY OF PENNSYLVANIA FINANCIAL CORP.
                 Notes to Consolidated Financial Statements


(1)      Organization
         ------------

         Security  of   Pennsylvania   Financial   Corp.   (the   Company")  was
incorporated  under the laws of  Delaware  in  August  1998 for the  purpose  of
serving as the holding company of Security Savings  Association of Hazleton (the
"Association") as part of the Association's  conversion from the mutual to stock
form of  organization  (the  "Conversion").  The  Company is a savings  and loan
holding   company  and  is  subject  to  regulation  by  the  Office  of  Thrift
Supervision,  the Federal Deposit  Insurance  Corporation and the Securities and
Exchange Commission. The Conversion,  completed on December 30, 1998 resulted in
the Company  issuing an aggregate of 1,587,000  shares of its common stock,  par
value $.01 per share,  at a price of $10 per share,  of which  1,511,617  shares
were issued in a subscription offering and 75,383 shares were issued and sold to
Security Savings Charitable Foundation. Prior to the Conversion, the Company had
not engaged in any material operations.

(2)      Accounting Principles
         ---------------------

         The  accompanying   unaudited  financial   statements  of  Security  of
Pennsylvania  Financial  Corp.  Have been prepared in accordance  with generally
accepted  accounting  principles  for  interim  financial  information  and with
instructions  to Form 10-QSB and of Regulation S-B.  Accordingly,  the financial
statements  do not  include all of the  information  and  footnotes  required by
generally accepted accounting principles for complete financial  statements.  In
the opinion of management,  all  adjustments  (consisting of a normal  recurring
nature)  considered  necessary  for a  fair  presentation  have  been  included.
Operating  results for the three and six months ended  December 31, 1998 are not
necessarily  indicative  of the  results  that may be  expected  for the current
fiscal year.

         For further information, refer to the consolidated financial statements
included in the Company's  offering  prospectus  prepared in connection with the
Conversion filed with the Securities and Exchange Commission.









                                      7

<PAGE> 10



Item 2.  Management's Discussion and Analysis or Plan of Operation.
         ---------------------------------------------------------

         The following analysis discusses changes in the financial condition and
results of  operations  at and for the three and six months  ended  December 31,
1998, and should be read in conjunction with the Bank's  Consolidated  Financial
Statements and the notes thereto, appearing in Part I, Item 1 of this document.

FORWARD-LOOKING STATEMENTS

         This report  contains  certain  forward-looking  statements  within the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E of the Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking  statements  to be covered  by the safe  harbor  provisions  for
forward-looking  statements  contained in the Private  Securities  Reform Act of
1995,  and is  including  this  statement  for  purposes  of these  safe  harbor
provisions.  Forward -looking statements, which are based on certain assumptions
and describe  future plans,  strategies  and  expectations  of the Company,  are
generally  identified  by  use  of  the  words  "believe,"  "expect,"  "intend,"
"anticipate,"  "estimate,"  "project,"  or similar  expressions.  The  Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain.  Factors which could have a material adverse effect on the
operations of the Company and the subsidiaries  include, but are not limited to,
changes in: interest rates, general economic conditions,  legislative/regulatory
changes, monetary and fiscal policies of the U.S. Government, including policies
of the U.S.  Treasury and the Federal Reserve Board,  the quality or composition
of the loan or investment portfolios,  demand for loan products,  deposit flows,
competition,  demand for  financial  services in the  Company's  market area and
accounting  principles and guidelines.  These risks and uncertainties  should be
considered in evaluating  forward-looking  statements and undue reliance  should
not be placed on such statements. Further information concerning the Company and
its business,  including  additional  factors that could  materially  affect the
Company's financial results, is included in the Company's filings with the SEC.

         The  Company  does  not  undertake  - and  specifically  disclaims  any
obligation - to publicly  release the result of any revisions  which may be made
to any  forward-looking  statements to reflect events or circumstances after the
date  of  such  statements  or to  reflect  the  occurrence  of  anticipated  or
unanticipated events.

GENERAL

         Security of Pennsylvania Financial Corp. (the "Company") is the holding
company for Security  Savings  Association  of Hazleton (the  "Association"),  a
Pennsylvania  chartered  capital stock savings  association.  The  Association's
results of operations are dependent  primarily on net interest income,  which is
the difference  between the income earned on its loan and investment  portfolios
and its  cost  of  funds,  consisting  of the  interest  paid  on  deposits  and
borrowings.  Results  of  operations  are  also  affected  by the  Association's
provision for loan losses,  loan and security sales activities,  service charges
and other fee income,  and noninterest  expense.  The Association's  noninterest
expense  principally  consists of  compensation  and employee  benefits,  office
occupancy  and equipment  expense,  federal  deposit  insurance  premiums,  data
processing, advertising and business

                                      8

<PAGE> 11



promotion  and other  expenses.  Results of  operations  are also  significantly
affected by general economic and competitive conditions, particularly changes in
interest rates, government policies and actions of regulatory authorities.

MANAGEMENT STRATEGY

         The Association's operating strategy has been that of a community-based
banking  institution,  offering a wide variety of savings products to its retail
customers,  while  concentrating  on residential and consumer  lending and, to a
lesser extent, multi-family and commercial real estate and construction lending.
Additionally,  as of February 1999, the Association has opened a commercial loan
department  and expects to expand its services in that area. It is expected that
these loans will provide a higher spread in our lending  portfolio.  In order to
promote  long-term  financial  strength  and  profitability,  the  Association's
operating  strategy  has focused on: (i)  maintaining  strong  asset  quality by
originating  primarily one- to four-family  mortgage loans and home equity loans
and lines of credit  secured by  residential  real estate  located in its market
area; (ii) managing its interest rate risk within the context of its significant
fixed-rate  one- to  four-family  mortgage  lending  activity;  (iii)  providing
products  and delivery  systems  directed at the needs and  expectations  of its
customer base, including through taking advantage of technological advances when
appropriate; and (iv) maintaining a strong regulatory capital position.

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

         Total assets increased $17.2 million,  or 15.4%, from $112.0 million at
June 30, 1998 to $129.2 at December 31, 1998.  This increase was primarily due a
$16.2 million, or 136%, increase in cash and cash equivalents from $11.9 million
at June 30, 1998 to $28.0  million at December  31,  1998  primarily  due to the
gross proceeds  retained  through the sale of the Company's  common stock in the
Company's initial public offering. The increase in cash and cash equivalents was
also  attributable to a growth in deposits.  Additionally,  loans increased $2.7
million,  or 3.9%,  from  $69.2  million  at June 30,  1998 to $71.2  million at
December  31, 1998.  The  increase  was due to a $2.7  million  increase in real
estate loans offset by a $337,000 decrease in consumer loans.

         Total  deposits  increased $2.4 million from $102.6 million at June 30,
1998 to $105.0 million at December 31, 1998.  Such increase was  attributable to
an increase in the balance of NOW and money market accounts  primarily due to an
account  opened  at the  Association  for the  Company's  portion  of the  gross
proceeds from the stock offering.

         Total equity  increased  $13.3 million,  or 145%,  from $9.2 million at
June 30, 1998 to $22.6 million at December 31, 1998 due to the proceeds received
through the Company's initial public offering.



                                        9

<PAGE> 12



COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND
1997

         GENERAL.  The Company reported a $476,000 net loss for the three months
ended  December 31, 1998 compared to net income of $154,000 for the three months
ended  December  31,  1997.  This loss was due to a  one-time  $753,000  expense
relating  to  the  funding  of  Security  Savings  Charitable   Foundation  (the
"Foundation"),  a  charitable  foundation  established  in  connection  with the
Association's conversion.

         INTEREST INCOME.  Total interest income decreased $78,000, or 4.0%, for
the three month  period ended  December  31, 1998 as compared to the  comparable
period  for the  previous  year.  The  decrease  was  attributable  to a $64,000
decrease in interest  income on loans due to a decrease in the weighted  average
yield  during the period and a $45,000  decrease in interest  and  dividends  on
securities due to a lower rate of return.  However, the decreases were offset by
an $29,000,  or 13.7%,  increase in interest on  interest-bearing  deposits with
banks.  Such increase was  attributable to the increased funds received  through
stock subscriptions in connection with the Company's stock offering.

         INTEREST  EXPENSE.  Interest expense for the quarter ended December 31,
1998 was virtually the same as the previous year's quarter.  This was due to the
Relative stability of the Company's deposit base.

         PROVISION FOR LOAN LOSSES.  The Company  reduced its provision for loan
losses from $65,000 for the three months ended  December 31, 1997 to $50,000 for
the  three  months  ended  December  31,  1998.  The  decrease  was based on the
Company's  periodic review of the loan  portfolio,  the level of charge-offs and
nonperforming loans, real estate owned, loan commitments, unused lines of credit
as well as an  evaluation  of the general  economic  conditions in the Company's
market areas.

         NONINTEREST  INCOME.  Noninterest income decreased from $92,000 for the
three  months  ended  December  31, 1997 to a $28,000  loss for the three months
ended December 31, 1998. This decrease was attributable to $113,000 in losses on
the sale of real estate owned,  offset by a $7,000,  or 10.3%,  increase in loan
fees and service charge income.

         NONINTEREST   EXPENSES.   Total  noninterest  expenses  increased  from
$632,000  to $1.4  million  for the three  months  ended  December  31, 1997 and
December 31, 1998,  respectively,  due primarily to the one-time  costs with the
establishment and funding of the Foundation.  A $12,000,  or 42.9%,  increase in
the expenses associated with foreclosing on real estate and a $15,000, or 28.9%,
increase in occupancy costs  associated with increased  rental costs  associated
with one of the Association's branch offices, also contributed to the increase.

         PROVISION  FOR INCOME  TAXES.  The Company had an income tax benefit of
$222,000 for the three months ended December 31, 1998, compared to an expense of
$108,000  for the three months  ended  December  31,  1997.  The decrease in the
income tax expense was  attributable  to the net operating  loss relating to the
one-time charitable donation to the Foundation.



                                       10

<PAGE> 13



COMPARISON  OF OPERATING RESULTS FOR  THE SIX MONTHS ENDED DECEMBER 31, 1998 AND
1997

         GENERAL.  The Company had a net loss of $278,000 compared to net income
of $362,000  for the six months  ended  December 31, 1998 and December 31, 1997,
respectively.  This loss was due to a one-time  $753,000 expense relating to the
funding of the Foundation and $111,000 in losses on real estate owned.

         INTEREST INCOME.  Total interest income decreased $57,000, or 1.5%, for
the six months  ended  December  31, 1998 as compared to the same period for the
previous year. The decrease was primarily  attributable to $109,000  decrease in
interest  income and  dividends on  securities  due to a lower rate of return on
those  investments.  A $27,000  decrease in interest income on loans for the six
months  ended  December 31, 1998 as compared to the same period for the previous
year due to a lower  weighted  average  yield on loans also  contributed  to the
decrease in interest income. The decrease in total interest income was offset by
a $79,000 increase in interest income earned on interest-bearing  deposits, from
$405,000  for the six months  ended  December  31, 1997 to $485,000  for the six
months ended December 31, 1998.

         INTEREST  EXPENSE.  Interest  expense for the six months ended December
31, 1998 increased $37,000 as compared to the six month period in 1997. The 1.8%
increase  reflected a small  increase  in the  Company's  deposit  base over the
preceding year.

         PROVISION FOR LOAN LOSSES.  The Company  reduced its provision for loan
losses from  $73,000 for the six months  ended  December 31, 1997 to $55,000 for
the six months ended  December 31, 1998. The decrease was based on the Company's
periodic   review  of  the  loan   portfolio,   the  level  of  charge-offs  and
nonperforming  loans,  real estate  owned,  loan  commitments,  unused  lines of
credit,  as well as an  evaluation  of the general  economic  conditions  in the
Company's market areas.

         NONINTEREST INCOME. Noninterest income decreased $122,000 from $177,000
for the six months  ended  December 31, 1997 to $55,000 for the six months ended
December 31, 1998,  primarily  due to a $111,000 loss on the sale of real estate
owned offset by a $6,000, or 4.3%, increase on loan fees and service charges.

         NONINTEREST EXPENSES. Total noninterest expenses increased $818,000, or
67.5%,  from $1.2 million to $2.0 million for the six months ended  December 31,
1997 and December 31, 1998,  respectively,  due primarily to the one-time  costs
with the establishment and funding of Security Savings Charitable Foundation.

         PROVISION  FOR  INCOME  TAX  EXPENSES.  The  Company  had an income tax
benefit of $130,000 for the six months ended  December 31, 1998,  compared to an
expense of $246,000 for the three months ended  December 31, 1997.  The decrease
in the income tax expense was attributable to the net operating loss relating to
the one-time charitable donation to the Foundation.



                                         11

<PAGE> 14



LIQUIDITY AND CAPITAL RESOURCES

         The Association's primary sources of funds are deposits,  principal and
interest  payments on loans,  mortgage-backed  and  investment  securities.  The
Association  uses the funds  generated  to support its  lending  and  investment
activities as well as any other demands for liquidity such as deposit  outflows.
While maturities and scheduled  amortization of loans are predictable sources of
funds, deposit flows, mortgage prepayments and the exercise of call features are
greatly   influenced  by  general  interest  rates,   economic   conditions  and
competition.  The  Association  has continued to maintain the required levels of
liquid assets as defined by OTS regulations.  This requirement of the OTS, which
may be varied at the direction of the OTS depending upon economic conditions and
deposit flows, is based upon a percentage of deposits and short-term borrowings.
The Association's  currently  required  liquidity ratio is 4.0%. At December 31,
1998 and  1997,  the  Association's  liquidity  ratios  were  31.7%  and  22.9%,
respectively.

         At December 31, 1998,  the  Association  exceeded all of its regulatory
capital requirements with a tangible capital level of $15.4 million, or 12.6% of
total adjusted  assets,  which is above the required  level of $3.7 million,  or
3.0%; core capital of $15.4 million, or 12.6% of total adjusted assets, which is
above the required level of $4.8 million,  or 4.0%;  and  risk-based  capital of
$15.8 million,  or 29.4% of  risk-weighted  assets,  which is above the required
level of $4.3 million, or 8.0%.

         The Association has other sources of liquidity if a need for additional
funds arises,  including Federal Home Loan Bank ("FHLB")  advances.  At December
31, 1998, the Association did not have any advances  outstanding  from the FHLB,
and at June 30, 1998 had an overall  borrowing  capacity  from the FHLB of $53.7
million.

         The  Association's  most  liquid  assets  are cash and due from  banks,
interest-bearing  deposits with banks and its  investment  and  mortgage-related
securities  available-for-sale.  The levels of these assets are dependent on the
Association's operating,  financing, lending and investing activities during any
given period.  At December 31, 1998,  cash and due from banks,  interest-bearing
deposits with banks and investment  securities  available for sale totaled $36.0
million, or 27.9% of total assets.

         At December 31, 1998,  the  Association  had  commitments  to originate
loans  and  unused  outstanding  lines of credit  and  undisbursed  proceeds  of
construction  mortgages totaling $4.1 million. The Association  anticipates that
it will have  sufficient  funds  available to meet its current loan  origination
commitments.  Certificate  accounts,  which are scheduled to mature in less than
one year from December 31, 1998, totaled $35.2 million.  The Association expects
that substantially all of the maturing  certificate accounts will be retained by
the Association at maturity.

         The  initial  impact of the  Conversion  on the  liquidity  and capital
resources  of the Company was  significant  as it  substantially  increased  the
liquid assets of the Company and the capital base on which the Company operates.
Further the additional  capital resulting from the stock offering  increased the
capital base of the Association. At December 31, 1998, the Association had total
equity,  determined in accordance with generally accepted accounting principles,
of $16.6 million, or 13.7% of total assets, which approximated the Association's
regulatory tangible capital at that date

                                      12

<PAGE> 15


of 12.6% of assets.  An  institution  with a ratio of tangible  capital to total
assets of greater  than or equal to 5% is  considered  to be  "well-capitalized"
pursuant to OTS regulations.

YEAR 2000 COMPLIANCE

         As the year 2000  approaches,  an important  business issue has emerged
regarding how existing  application  software programs and operating systems can
accommodate this date value.  Many existing  application  software products were
designed to  accommodate  only  two-digits.  For example,  "96" is stored on the
system and represents 1996. The Association  relies  significantly on an outside
service bureau.  The Association has not received any guarantee from the outside
service bureau that the bureau will be Year 2000 compliant. However, the service
bureau has completed its  inventory and  assessment of its Year 2000  compliance
and is scheduled to have  resolved all  identified  problems by the end of 1998.
The Association's service bureau has completed its proxy testing of their system
and the  Association  will  conduct  on-line  testing at each of its  offices on
February 14, 1999. Any problems encountered during this testing can be addressed
and remedied in time for the second round of testing scheduled for May 1999. The
Association  has  completed  its  inventory  and  assessment  and has  completed
upgrading its internal  system to handle the Year 2000 problem.  The Association
currently is testing its upgraded  system.  The cost to the  Association for the
internal system  upgrade,  not including staff time, has been less than $50,000.
There can be no assurances, however, that the performance by the Association and
its service  bureau will be effective to remedy all potential  problems.  To the
extent the Company's systems are not fully Year 2000 compliant,  there can be no
assurance that potential  systems  interruptions or the cost necessary to update
software would not have a materially  adverse effect on the Company's  business,
financial  condition,   results  of  operations  and  business  prospects.   The
Association  has prepared a  contingency  plan in the event there are any system
interruptions.  Any Year 2000 failure on the part of the Association's customers
could result in additional  expense or loss to the Association.  The Association
plans to work with its customers to address any potential Year 2000 problems.

RECENT ACCOUNTING PRONOUNCEMENTS

         ACCOUNTING  FOR  TRANSFERS  AND  SERVICING  OF  FINANCIAL   ASSETS  AND
EXTINGUISHMENTS OF LIABILITIES. In June 1996, the Financial Accounting Standards
Board  ("FASB")  issued  Statement of Financial  Accounting  Standards  No. 125,
"Accounting for Transfers and Servicing of Financial Assets and  Extinguishments
of Liabilities." This Statement provides  accounting and reporting standards for
transfers and servicing of financial assets and  extinguishments  of liabilities
based on consistent application of a financial-components  approach that focuses
on control.  It distinguishes  transfers of financial assets that are sales from
transfers that are secured borrowings. Under the financial-components  approach,
after a transfer of financial  assets,  an entity  recognizes  all financial and
servicing  assets it controls and  liabilities it has incurred and  derecognizes
financial   assets  it  no  longer  controls  and  liabilities  that  have  been
extinguished.  The  financial-components  approach  focuses  on the  assets  and
liabilities  that exist  after the  transfer.  If a  transfer  does not meet the
criteria for a sale, the transfer is accounted for as a secured borrowing with a
pledge of collateral. The Statement became effective for transfers and servicing
of financial assets and extinguishments of liabilities  occurring after December
31, 1996, and is to be applied prospectively. Adoption of this

                                   13

<PAGE> 16



Statement did not have a material impact on the net income, equity, or financial
position of the Association.

         ACCOUNTING  FOR EARNINGS PER SHARE.  In February  1997, the FASB issued
SFAS No. 128,  "Earnings Per Share." This  statement  establishes  standards for
computing and presenting earnings per share ("EPS") and applies to entities with
publicly-held  common stock or potential common stock. This statement simplifies
the standards for computing  earnings per share  previously found in APB Opinion
No. 15,  "Earnings Per Share," and makes them  comparable to  international  EPS
standards.  It replaces the  presentation  of primary EPS with a presentation of
basic EPS. It also  requires dual  presentation  of basic and diluted EPS on the
face of the income  statement for all entities with complex  capital  structures
and requires a reconciliation  of the numerator and denominator of the basic EPS
computation  to the numerator and  denominator  of the diluted EPS  computation.
This statement is effective for financial  statements  issued for periods ending
after December 15, 1997,  including interim periods,  and earlier application is
not permitted.

         DISCLOSURE ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION.  In
September 1997, the FASB issued SFAS No. 131,  "Disclosures About Segments of an
Enterprise and Related  Information"  ("SFAS No. 131"). SFAS No. 131 establishes
standards for the way that public business  enterprises report information about
operating  segments  in annual  financial  statements  and  requires  that those
enterprises  report selected  information  about  operating  segments in interim
financial  reports issued to  shareholders.  It also  establishes  standards for
related  disclosures  about products and services,  geographic  areas, and major
customers.  SFAS No. 131 is  effective  for  financial  statements  for  periods
beginning after December 15, 1997. Management has not yet determined the impact,
if any, of this statement on the Association.

         ACCOUNTING FOR DERIVATIVE  INSTRUMENTS AND HEDGING ACTIVITIES.  In June
1998, the FASB issued SFAS No. 133,  "Accounting for Derivative  Instruments and
Hedging  Activities"  ("SFAS No. 133"). SFAS No. 133 establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments embedded in other contracts and for hedging activities.  It requires
that an entity  recognize all derivatives as either assets or liabilities in the
statement of financial  position and measure those instruments at fair value. In
connection with the implementation of SFAS No. 133, the Association may transfer
debt  securities  classified  as  held-to-maturity  to  the   available-for-sale
category.  Such a  transfer  will  not  call  into  question  the  Association's
intention  to hold  other  debt to  maturity  in the  future.  SFAS  No.  133 is
effective for financial  statements for periods  beginning  after June 15, 1999.
Management has not yet  determined the impact,  if any, of this statement on the
Association.  Management  plans to adopt SFAS No.  133  during  its fiscal  year
ending June 30, 1999 in order to use the special provision allowing the transfer
of debt  securities  classified as  held-to-maturity  to the  available-for-sale
category. Management has not identified which securities might be transferred to
the  available-for-sale  category;  and, as a result,  is not able to  determine
whether such transfer could have a material  impact on its financial  condition.
If the Association had  transferred  all of its  held-to-maturity  securities to
available-for-sale  securities as of December 31, 1998, its shareholders' equity
would have increased by approximately $866,000.




                                       14

<PAGE> 17



                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings.
        -----------------

                  None.

Item 2. Changes in Securities and Use of Proceeds.
        -----------------------------------------

         The following  information is provided in connection with the Company's
sale of its common stock as part of the Bank's conversion:

         a.       The effective date of the  Registration Statement on Form SB-2
                  (File No. 333-63271) was November 12, 1998.

         b.       The  offering  was  consummated  on December 30, 1998 with the
                  sale of all securities registered pursuant to the Registration
                  Statement. Sandler O'Neill & Partners, L.P.
                  acting as marketing agent for the offering.

         c.       The class of securities registered was common stock, par value
                  $.01  per  share.  The  aggregate  amount  of such  securities
                  registered was 1,587,000 shares which represented an aggregate
                  amount of $15,870,000.  That amount included  1,511,617 shares
                  (or  $15,116,170)  sold in the offering and 75,383  shares (or
                  $753,830) issued to Security Savings Charitable Foundation.

         d.       The expenses  incurred in connection  with the  Conversion and
                  offering  of  $985,872,  including  expenses  paid  to or  for
                  underwriters  of  $330,643,  attorney and  accounting  fees of
                  $351,876  and other  expenses of  $303,353.  The net  proceeds
                  resulting  from the  offering  after  deducting  expenses  was
                  $14,130,298.

         e.       The   net   proceeds   are   temporarily    invested   in   an
                  interest-bearing   deposit   account   at   Security   Savings
                  Association of Hazleton. The Company intend to use these funds
                  to invest in various securities.

Item 3. Defaults Upon Senior Securities.
        -------------------------------

                  None.

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

                  None.

Item 5. Other Information.
        -----------------

                  None.


                                   15

<PAGE> 18


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

       (a)     Exhibits

               2.1  Amended  Plan  of  Conversion  (including the Stock Articles
                    of   Incorporation   and  Bylaws  of  the  Security  Savings
                    Association  of  Hazleton)*
               3.1  Certificate of  Incorporation of  Security  of  Pennsylvania
                    Financial  Corp.*
               3.2  Bylaws of Security of Pennsylvania Financial Corp.*
               10.1 Employment Agreement between Richard C. Laubach and Security
                    of Pennsylvania Financial Corp.
               10.2 Employment  Agreement  between  David  P. Marchetti, Sr. and
                    Security of Pennsylvania Financial Corp.
               10.3 Employment Agreement between Richard C. Laubach and Security
                    of Pennsylvania Financial Corp.
               10.4 Employment  Agreement  between  David  P. Marchetti, Sr. and
                    Security of Pennsylvania Financial Corp.
               10.5 Change in  Control  Agreement between Joseph P. Correale and
                    Security Savings Association of Hazleton
               10.6 Change  in  Control  Agreement  between  Nicoline  Evans and
                    Security  Savings  Association  of Hazleton
               10.7 Form  of Security Savings Association Supplemental Executive
                    Retirement Plan*
               10.8 Form  of  Security  Savings Association of Hazleton Employee
                    Severance Compensation Plan*
               11.0 Statement regarding Computation of Per Share Earnings**
               27.0 Financial Data Schedule
                    -----------------------------
*    Incorporated by reference  into this document from the Exhibits to the Form
     SB-2, Registration Statement, and any amendments thereto,  Registration No.
     333-63271

**   Not applicable  as the Company did not  have  earnings in the quarter ended
     December 31, 1998.

     (b)      Reports on Form 8-K
              None.

                                       16

<PAGE> 19



                                   SIGNATURES

         In  accordance  with the  requirements  of the Exchange Act, the issuer
caused this report to be signed on its behalf by the  undersigned  hereunto duly
authorized.


                                    SECURITY OF PENNSYLVANIA FINANCIAL CORP.


Dated:  February 16, 1999     By:   /s/ Richard C. Laubach
                                    ----------------------------------
                                    Richard C. Laubach
                                    President and Chief Executive Officer
                                    (principal executive officer)

Dated:  February 16, 1999     By:   /s/ David P. Marchetti, Sr.
                                    ----------------------------------
                                    David P. Marchetti, Sr.
                                    Chief Financial Officer and Treasurer
                                    (principal financial and accounting officer)