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

                                    FORM 10-Q
(Mark One)

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

          For the quarterly period ended March 31, 1999

                                       OR

     [X]  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: 0-25191

                           Willow Grove Bancorp, Inc.
             (Exact name of registrant as specified in its charter)

               United States                                23-2986192
       (State or other jurisdiction                      (I.R.S. Employer
     of incorporation or organization)                  Identification No.)

           Welsh and Norristown Roads, Maple Glen, Pennsylvania 19002
                    (Address of principal executive offices)

                                 (215) 646-5405
              (Registrant's telephone number, including area code)


     Indicate by check mark whether the  registrant (1) has filed all reports 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 [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date.

     The Registrant had 5,143,487  shares of Common Stock issued and outstanding
as of May 11, 1999.


                                       1
<PAGE>


                           WILLOW GROVE BANCORP, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                              Page No.
                                                                                              --------
<S>                                                                                              <C>
PART I   FINANCIAL INFORMATION

     Item 1.   Financial Statements (unaudited)

               Consolidated Statements of Financial Condition at March 31,
               1999 and June 30, 1998                                                             3

               Consolidated Statements of Operations -  For the Three
               and Nine-Month Periods Ended March 31, 1999 and 1998                               4

               Consolidated Statements of Cash Flows - For the Nine-Months
               Ended March 31, 1999 and 1998                                                      5

               Notes to Financial Statements                                                      6

     Item 2.   Management's Discussion and Analysis                                              11

     Item 3.   Quantitative and Qualitative Disclosures About
               Market Risk                                                                       19

PART II  OTHER INFORMATION

     Item 1:   Legal Proceedings                                                                 20

     Item 2:   Changes in Securities and Use of Proceeds                                         20

     Item 3:   Defaults upon Senior Securities                                                   20

     Item 4:   Submission of Matters to a Vote of Security Holders                               20

     Item 5:   Other Information                                                                 20

     Item 6:   Exhibits and Reports on Form 8-K                                                  21
</TABLE>


                                       2
<PAGE>


                           Willow Grove Bancorp, Inc.
                 Consolidated Statements of Financial Condition
                                   (Unaudited)
                                 (In Thousands)


<TABLE>
<CAPTION>
Assets                                                          March 31, 1999       June 30, 1998
--------------------------------------------------------------------------------------------------
<S>                                                                  <C>                 <C>      
Cash and cash equivalents:
   Cash on hand and non-interest bearing
      deposits                                                       $   4,036           $   2,932
   Interest-bearing deposits                                             9,359              15,359
                                                                     ---------           ---------

   Total cash and cash equivalents                                      13,395              18,291
Assets available for sale:
   Securities (amortized cost of $83,212 and $47,984,
   respectively)                                                        82,702              48,111
   Loans                                                                    --              12,152
Loans (net of allowance for loan losses of
   $2,990 and $2,665, respectively)                                    345,131             315,705
Accrued income receivable                                                2,408               2,109
Property and equipment, net                                              5,004               4,772
Intangible assets                                                        2,052               2,360
Other assets                                                             2,237               1,874
--------------------------------------------------------------------------------------------------
   Total Assets                                                      $ 452,929           $ 405,374
--------------------------------------------------------------------------------------------------

Liabilities and Stockholders' Equity
--------------------------------------------------------------------------------------------------
Deposits                                                             $ 375,448           $ 340,793
Federal Home Loan Bank advances                                         12,000              21,000
Advance payments from borrowers for taxes and insurance                  3,690               4,481
Accrued interest payable                                                   520                 389
Other liabilities                                                        2,719               2,766
   Total Liabilities                                                 $ 394,377           $ 369,429

Commitments and contingencies

Stockholders' equity:
   Common stock, $0.01 par value; (25,000,000
   authorized; 5,143,487 issued and
   outstanding as of March 31, 1999)                                        51                  --
   Additional paid-in capital                                           22,295                  --
   Retained earnings                                                    38,270              35,865
   Unallocated common stock held by
      employee stock ownership plan (ESOP)                              (1,748)                 --
   Accumulated other comprehensive income (loss)                          (316)                 80
--------------------------------------------------------------------------------------------------
   Total Stockholders' Equity                                        $  58,552           $  35,945
       Total Liabilities and Stockholders' Equity                    $ 452,929           $ 405,374
--------------------------------------------------------------------------------------------------
</TABLE>



See accompanying notes to the consolidated financial statements


                                       3
<PAGE>


                           Willow Grove Bancorp, Inc.
                      Consolidated Statements of Operations
                                   (Unaudited)
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                     For the Three Months Ended        For the Nine Months Ended
                                                              March 31,                         March 31,
                                                     -----------------------------------------------------------
                                                        1999             1998             1999             1998
----------------------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>             <C>              <C>    
Interest and dividend income:
  Loans receivable                                     $6,776           $6,411          $20,221          $18,744
  Securities, primarily taxable                         1,294              836            3,208            2,424
----------------------------------------------------------------------------------------------------------------
    Total interest income                               8,070            7,247           23,429           21,169
----------------------------------------------------------------------------------------------------------------
Interest expense:
  Deposits                                              3,777            3,613           11,472           10,846
  Borrowings                                              177              135              572              313
  Advanced payment from borrowers for taxes                 7                9               19               23
----------------------------------------------------------------------------------------------------------------
Total interest expense                                  3,961            3,757           12,063           11,183
----------------------------------------------------------------------------------------------------------------
Net interest income                                     4,109            3,490           11,366            9,986
Provision for loan losses                                 121               90              351              270
----------------------------------------------------------------------------------------------------------------
Net interest income after provision
  for loan losses                                       3,988            3,400           11,015            9,716
----------------------------------------------------------------------------------------------------------------

Non-interest income:
  Service charges and fees                                206              154              633              448
  Loss on sale of securities available
  for sale                                                 --               --               --              (55)
  Gain on sale of loans available
  for sale                                                 --               19               11               24
  Loan servicing income, net                                8               28              150              142
----------------------------------------------------------------------------------------------------------------
    Total non-interest income                             214              200              794              558
----------------------------------------------------------------------------------------------------------------

Non-interest expense:
  Compensation and employee benefits                    1,384            1,112            3,948            3,334
  Occupancy                                               143              134              424              398
  Furniture and equipment                                  84               67              226              195
  Federal insurance premium                                52               49              151              145
  Amortization of intangible assets                       103              103              308              308
  Data Processing                                         113               93              313              259
  Advertising                                             109               83              299              255
  Foundation expense                                       --               --              896               --
  Community enrichment                                     38              109              138              291
  Other expense                                           465              287            1,185              869
----------------------------------------------------------------------------------------------------------------
    Total non-interest expense                          2,491            2,037            7,888            6,053
----------------------------------------------------------------------------------------------------------------
Income before income taxes                              1,711            1,563            3,921            4,221
Income taxes                                              578              543            1,416            1,499
Net income                                              1,133           $1,020           $2,505           $2,722
----------------------------------------------------------------------------------------------------------------
Earnings per share:
  Basic                                                   .23               NM               NM               NM
  Diluted                                              $  .23               NM               NM               NM
----------------------------------------------------------------------------------------------------------------
</TABLE>

NM:  Earnings per share  presentation  for periods  prior to quarter ended March
     31, 1999 is not meaningful.

     See accompanying notes to the consolidated financial statements


                                       4
<PAGE>

                           Willow Grove Bancorp, Inc.
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                              For the Nine Months Ended March 31,
                                                                              -----------------------------------
                                                                                     1999              1998
-----------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>               <C>   
Net cash flows from operating activities:
   Net income                                                                            $2,505            $2,722
   Adjustments to reconcile net income to net cash provided by
     operating activities:
     Depreciation                                                                           294               270
     Amortization of premium and accretion of discount, net                                 147               125
     Amortization of intangible assets                                                      308               308
     Foundation  expense                                                                    896                --
     Provision for loan losses                                                              351               270
     Gain on sale of loans available for sale                                               (11)              (55)
     Decrease in deferred loan fees                                                        (240)             (136)
     Decrease in (increase) in accrued income receivable                                   (299)               32
     Decrease in other assets                                                               120                45
     Increase in accrued interest payable                                                   131               299
     Deferred income tax expense (benefit)                                                 (304)               --
     Increase (decrease) in other liabilities                                              (147)               62
     Expense of allocated ESOP shares                                                        46                --
     Originations and purchases of loans available for sale                              (2,865)          (15,319)
     Proceeds from sale of loans available for sale                                      15,028            16,350
-----------------------------------------------------------------------------------------------------------------
     Net cash provided by operating activities                                          $15,960            $4,973
-----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
     Net increase in loans                                                             ($29,475)         ($27,675)
     Purchase of securities available for sale                                          (76,618)          (46,749)
     Proceeds from maturities and calls of securities held to maturity                       --             3,999
     Proceeds from sales and calls of securities available for sale                      31,100            38,970
     Principal repayments of securities available for sale                               10,143             3,179
     Purchase of property and equipment, net                                               (526)             (980)
-----------------------------------------------------------------------------------------------------------------
   Net cash used in investing activities                                               ($65,376)         ($29,256)
-----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
     Net increase in deposits                                                           $34,655           $21,367
     Net increase (decrease) in FHLB advances with
         original maturity less than 90 days                                             (5,000)            2,000
     Repayment of FHLB advances with original maturity greater than 90 days              (4,000)            5,000
     Net decrease in advance payments from borrowers for taxes and insurance               (791)             (465)
     Repayment of notes payable                                                              --              (500)
     Proceeds from stock issuance, net                                                   19,656                --
-----------------------------------------------------------------------------------------------------------------
   Net cash provided by financing activities                                             44,520           $27,402
-----------------------------------------------------------------------------------------------------------------
    Net increase (decrease) in cash and cash equivalents                                ($4,896)           $3,119
Cash and cash equivalents:
     Beginning of period                                                                $18,291            $4,204
-----------------------------------------------------------------------------------------------------------------
   End of period                                                                        $13,395            $7,323
-----------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash and cash flow information:
     Interest paid                                                                      $11,932           $10,844
     Income taxes paid                                                                   $1,755            $1,574
-----------------------------------------------------------------------------------------------------------------
Noncash items:
     Change in unrealized gain (loss) on securities available for sale
          (net of taxes of ($241) and $117 in 1999 and 1998, respectively)                ($637)             $306
</TABLE>


See accompanying notes to the consolidated financial statements


                                       5
<PAGE>


                           WILLOW GROVE BANCORP, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Basis of Financial Statement Presentation

     The  accompanying   consolidated  financial  statements  were  prepared  in
accordance  with  instructions  to Form  10-Q,  and  therefore,  do not  include
information  or footnotes  necessary  for a complete  presentation  of financial
position,  results of  operations  and cash flows in conformity  with  generally
accepted  accounting  principles.  However,  all normal,  recurring  adjustments
which,  in the opinion of management,  are necessary for a fair  presentation of
these  financial  statements,  have been included.  These  financial  statements
should be read in  conjunction  with the audited  financial  statements  and the
notes  thereto for the period ended June 30, 1998  contained in the Willow Grove
Bancorp,  Inc's (the  "Company's")  Prospectus  dated  November 12, 1998 and the
Company's  Form 10-Q for the period ended December 31, 1998. The results for the
interim periods presented are not necessarily indicative of the results that may
be  expected  for the year ended  June 30,  1999.  During the second  quarter of
fiscal  year  1999 the  Company  recorded  a  pre-tax  expense  of  $896,000  in
conjunction   with  the   formation   of  the  Willow  Grove   Foundation   (the
"Foundation").

2.   Summary of Significant Accounting Policies

     On December 23, 1998, the Company  completed the  reorganization  of Willow
Grove Bank, a federally  chartered  mutual  savings bank ("Willow  Grove" or the
"Bank"), into the federal mutual holding company form of ownership,  whereby the
Bank converted into a federally  chartered  stock savings bank as a wholly owned
subsidiary of the Company, and the Company became a majority-owned subsidiary of
Willow  Grove Mutual  Holding  Company,  a federally  chartered  mutual  holding
company   (the   "MHC")  (the   "Reorganization").   In   connection   with  the
Reorganization,  the Company sold 2,240,878  shares of Company common stock, par
value  $0.01 per share  ("Company  Common  Stock") at $10.00 per share to total,
which net of  issuance  costs  generated  proceeds of $21.4  million,  including
shares issued to the employee stock  ownership  plan ("ESOP").  The Company also
issued  2,812,974 shares of Company Common Stock to the MHC. As an integral part
of the  Reorganization  and in furtherance  of Willow Grove's  commitment to the
communities  that it serves,  Willow  Grove and the Company have  established  a
charitable foundation known as the Foundation and have contributed 89,635 shares
to the Foundation.  The Foundation  will provide  funding to support  charitable
causes and community development activities which will complement Willow Grove's
existing community activities.  In addition, the Company established an ESOP for
the  employees  of the  Company  and the Bank which  became  effective  with the
completion of the Reorganization.

     Additional  information  regarding  the  Reorganization  is included in the
Company's  Registration  Statement on Form S-1 filed on September  18, 1998,  as
amended.


                                       6
<PAGE>


3.   Earnings Per Share

     Earnings per share, basic and diluted,  were $0.23 and $0.23,  respectively
for the three months ended March 31, 1999.  Due to the Bank's recent  conversion
and  formation of the Company,  earnings per share figures for prior periods are
not applicable.

     The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share calculations.


<TABLE>
<CAPTION>
                                                          For the Three Months Ended March 31, 1999
                                                          -----------------------------------------
                                                        (Dollars in thousands, except per share data)
                                                                                               Per share
                                                       Net income            Shares              Amount
--------------------------------------------------------------------------------------------------------
<S>                                                      <C>                <C>                   <C>  
    Weighted average common stock outstanding            $1,113             4,964,217             $0.23
    Allocated ESOP shares                                    --                 2,241                --
--------------------------------------------------------------------------------------------------------
    Basic earnings per share                             $1,113             4,966,458             $0.23


<CAPTION>
                                                                                               Per share
                                                       Net income             Shares             Amount
--------------------------------------------------------------------------------------------------------
<S>                                                      <C>                <C>                   <C>  
    Weighted average common stock outstanding            $1,113             4,964,217             $0.23
    Allocated ESOP shares                                    --                 2,241                --
--------------------------------------------------------------------------------------------------------
    Diluted earnings per share                           $1,113             4,966,458             $0.23
</TABLE>

4.   Loan Portfolio

     The  Bank's  Loan  Portfolio  consisted  of  the  following  at  the  dates
indicated:

<TABLE>
<CAPTION>
                                                                March 31, 1999                   June 30, 1998
                                                          ---------------------------------------------------------
                                                                         Percent of                      Percent of
                                                            Amount            Total          Amount           Total
     --------------------------------------------------------------------------------------------------------------
                                                                              (Dollars in Thousands)
     <S>                                                  <C>                <C>          <C>               <C>  
     Mortgage Loans:
     Single-family residential                            $221,182           61.3%        $230,979          70.3%
     Multi-family residential                                8,499            2.4%           7,500           2.3%
     Commercial real estate                                 47,117           13.0%          24,478           7.4%
     Construction                                           20,136            5.6%          13,627           4.2%
     Home equity                                            46,753           12.9%          41,366          12.6%
     ------------------------------------------------------------------------------------------------------------
     Total mortgage loans                                 $343,687           95.2%        $317,950          96.8%
     ------------------------------------------------------------------------------------------------------------
     Non-mortgage consumer loans                          $  6,406            1.8%        $  4,930           1.5%
     ------------------------------------------------------------------------------------------------------------
     Commercial business loans                            $ 10,916            3.0%        $  5,437           1.7%
     ------------------------------------------------------------------------------------------------------------
     Total loans receivable                               $361,009          100.0%        $328,317         100.0%
     Less:
         Undisbursed portion of loan proceeds              (12.036)                         (8,855)
         Allowance for loan losses                          (2,990)                         (2,665)
         Deferred loan origination fees                       (852)                         (1,092)
     ------------------------------------------------------------------------------------------------------------
     Loans receivable, net                                $345,131                        $315,705
     ------------------------------------------------------------------------------------------------------------
</TABLE>


                                       7
<PAGE>


5.   Securities

     The amortized cost of  available-for-sale  securities  and their  estimated
fair values at March 31, 1999 and June 30, 1998 are as follows:


<TABLE>
<CAPTION>
                                                                    At March 31, 1999
-------------------------------------------------------------------------------------------------------------
                                                                                                    Estimated
                                             Amortized         Unrealized         Unrealized           Fair
                                               Cost              Gains              Losses            Value
-------------------------------------------------------------------------------------------------------------
                                                                (Dollars in Thousands)
<S>                                           <C>                  <C>               <C>              <C>    
Equity Securities:
   Mutual fund                                 $8,010                                 ($39)            $7,971
   Federal Home Loan
     Mortgage Corporation
     common stock                                  89               $29                                   118

   Federal National
     Mortgage Association
     stock                                          8                20                                    28
   Federal Home Loan Bank
     of Pittsburgh stock                        2,732                --                 --              2,732
U.S. Government and
   government agency
   securities                                  34,996                 5               (386)            34,615
Mortgage-Backed securities:
   Federal Home Loan
     Mortgage Corporation                           2                --                 --                  2
   Federal National Mortgage
     Association                               22,772                55               (195)            22,632
   Government National
     Mortgage Association                       7,389                83                (59)             7,413
Municipal securities                            1,214                --                (23)             1,191
Federal Home Loan Bank
   Certificates of Deposit                      6,000                --                 --              6,000
-------------------------------------------------------------------------------------------------------------
   Total                                      $83,212              $192              ($702)           $82,702
-------------------------------------------------------------------------------------------------------------



<CAPTION>
                                                                    At June 30, 1998
-------------------------------------------------------------------------------------------------------------
                                                                                                    Estimated
                                             Amortized         Unrealized         Unrealized           Fair
                                               Cost              Gains              Losses            Value
-------------------------------------------------------------------------------------------------------------
                                                                (Dollars in Thousands)
<S>                                           <C>                  <C>               <C>              <C>    
Equity Securities:
   Mutual fund                                 $7,010                                 ($25)            $6,985
   Federal Home Mortgage
     Loan Corporation
     preferred stock                              100                $1                 --                101
   Federal Home Loan
     Mortgage Corporation
       common stock                                89                 5                 --                 94
   Federal National
     Mortgage Association
       stock                                        8                16                 --                 24
   Federal Home Loan Bank
       of Pittsburgh
       stock                                    2,733                --                 --              2,733
U.S. Government and
   government agency
   securities                                  20,004                30                (35)            19,999
Mortgage-Backed Securities:
   Federal Home Loan                                3                --                 --                  3
     Mortgage Corporation
   Federal National Mortgage
     Association                               13,532               112               (100)            13,544
   Government National
     Mortgage Association                       4,405               127                 --              4,532
Municipal security                                100                                   (4)                96
-------------------------------------------------------------------------------------------------------------
   Total                                      $47,984              $291              ($164)           $48,111
-------------------------------------------------------------------------------------------------------------
</TABLE>


                                        8
<PAGE>


6.   Recent Accounting Pronouncements

     In June 1998, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 133  "Accounting for
Derivative  Instruments and Hedging Activities." This Statement standardizes the
accounting for derivative instruments,  including certain derivative instruments
imbedded in other contracts, and those used for hedging activities, by requiring
that an entity  recognize  those items as assets or liabilities in the statement
of financial position and measure them at fair value. The Statement  categorized
derivatives  used for hedging  purposes as either fair value  hedges,  cash flow
hedges,  foreign currency fair value hedges,  foreign currency cash flow hedges,
or hedges  of  certain  foreign  currency  exposures.  The  Statement  generally
provides for matching of gain or loss recognition on the hedging instrument with
the  recognition  of the  changes  in the  fair  value  of the  hedged  asset or
liability  that are  attributable  to the hedged  risk,  so long as the hedge is
effective.  Prospective  application  of SFAS No. 133 is required for all fiscal
years beginning after June 15, 1999,  however earlier  application is permitted.
Currently,  the  Company  does not use any  derivative  instruments  nor does it
engage in any hedging activities. The Company has not yet determined the impact,
if  any,  of  this  Statement,   including  its  provisions  for  the  potential
reclassification of investment securities,  on results of operations,  financial
condition or equity.

     In  October   1998,   the  FASB  issued  SFAS  No.  134   "Accounting   for
Mortgage-Backed  Securities  Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking  Enterprise."  This Statement  requires that
after the  securitization of a mortgage loan held for sale, an entity engaged in
mortgage banking  activities  classify any retained  mortgage-backed  securities
based on the ability and intent to sell or hold those investments, except that a
mortgage   banking   enterprise   must   classify   as  trading   any   retained
mortgage-backed  securities  that  it  commits  to sell  before  or  during  the
securitization process. This Statement is effective for the first fiscal quarter
beginning  after  December  15,  1998  with  earlier  adoption  permitted.  This
Statement provides a one-time opportunity for an enterprise to reclassify, based
on  the  ability  and  intent  on  the  date  of  adoption  of  this  Statement,
mortgage-backed   securities  and  other  beneficial  interests  retained  after
securitization of mortgage loans held for sale from the trading category, except
for those with  commitments in place.  The Company does not expect any impact on
earnings,  financial  condition or equity from this Statement  since it does not
currently engage in the securitization of mortgage loans held for sale.


                                       9
<PAGE>


7.   Comprehensive Income

     On July 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income." The  following  table  displays net income and the  components of other
comprehensive  income to arrive at total comprehensive  income. For the Company,
the only component of other comprehensive  income is the change in the estimated
fair value of investment securities available-for-sale.

<TABLE>
<CAPTION>
                                          Three Months Ended     Nine Months Ended
                                              March 31,              March 31,
----------------------------------------------------------------------------------
                                            1999       1998       1999       1998
----------------------------------------------------------------------------------
Comprehensive income:                              (Dollars in Thousands)
Comprehensive income:
<S>                                        <C>        <C>        <C>        <C>   
Net income                                 $1,133     $1,020     $2,505     $2,722
Other Comprehensive Income net of tax:
   Net change in unrealized gain (loss)      (457)      (153)      (396)       189
   Less: Reclassification adjustments          --         --         --        136
Other Comprehensive Income (loss)            (457)      (153)      (396)        53
----------------------------------------------------------------------------------
Comprehensive Income:                      $  676     $  867     $2,109     $2.775
                                           ======     ======     ======     ======
</TABLE>


                                       10
<PAGE>


Item 2. Management's Discussion and Analysis

     This Form 10-Q  contains  certain  forward-looking  statements  within  the
meaning of the  Private  Securities  Litigation  Reform Act of 1995,  and may be
identified  by the use of  such  words  as  "believe,"  "expect,"  "anticipate,"
"should," "planned,"  "estimated" and "potential."  Examples for forward-looking
statements  include,  but are not  limited  to,  estimates  with  respect to the
financial condition,  results of operations and business of the Company that are
subject to various factors which could cause actual results to differ materially
from these  estimates.  These factors  include,  but are not limited to, general
economic conditions, changes in interest rates, deposit flows, loan demand, real
estate values, and competition;  changes in accounting principles,  policies, or
guidelines;   changes  in  legislation  or  regulation;   and  other   economic,
competitive,  governmental,  regulatory, and technological factors affecting the
Company's operations, pricing, products and services.

Changes in Financial Condition

     General. Total assets of the Company increased by $47.5 million or 11.7% to
$452.9  million at March 31, 1999  compared to $405.4  million at June 30, 1998.
This  increase  is  reflected  primarily  as an  increase  of $34.6  million  in
securities and an increase of $29.4 million in portfolio loans. The increases in
assets were funded by increases of $34.6  million in deposits and $19.7  million
of net  stock  subscription  cash  proceeds  (net  of  Reorganization  costs  of
$960,000).

     Cash and cash  equivalents.  Cash and cash  equivalents  amounted  to $13.4
million and $18.3 million at March 31, 1999 and June 30, 1998, respectively.

     Assets  Available  for  Sale.  At March  31,  1999,  the  Company's  assets
available for sale  consisted of $82.7  million in securities  compared to $48.1
million in  securities  and $12.2  million in loans,  respectively,  at June 30,
1998.  This increase in assets  available for sale of $22.4 million or 37.1% was
related to the purchase of additional mortgage-backed securities, government and
agency  securities  and  bank  qualified  municipal  securities,  as a means  of
deploying a significant portion of the recently raised equity capital.

     At March 31, 1999 the  Company had an  unrealized  loss,  net of taxes,  on
securities  available  for sale of  $316,000,  which is a decrease  of  $396,000
compared to June 30, 1998.

     Loans. The net loan portfolio of the Company  increased from $315.7 million
at June 30, 1998 to $345.1 million at March 31, 1999. The increase in the Bank's
net loan  portfolio was due, in large part, to the Bank's  efforts to expand its
lending  activities,  other than to  single-family  residential  first  mortgage
loans.

     During the nine months ended March 31, 1999,  the  Company's  single-family
residential mortgage loans in portfolio declined by $9.8 million or 4.2%. During
the same period,  the Company's  commercial real estate mortgage loans increased
by $22.6  million  or 92.5% and its  multi-family  residential  mortgage  loans,
construction  loans,  home  equity  loans and  non-mortgage  consumer  loans all
increased.  Such  changes in the Bank's loan  portfolio  reflect  the  Company's
continuing  efforts to diversify its loan portfolio and increase its holdings in
loans which  generally  have higher yields and shorter terms to maturity  and/or
repricing than single-family  residential  mortgage loans.  However,  commercial
real estate loans,  multi-family residential mortgage loans, construction loans,
home equity loans and consumer loans all

                                       11
<PAGE>


generally are deemed to have  increased  risk  characteristics  in comparison to
single-family residential mortgage loans.

     The following table sets forth  information with respect to  non-performing
assets identified by the Bank, including non-accrual loans and other real estate
owned.

                                               March 31, 1999      June 30, 1998
                                               ---------------------------------
                                                     (Dollars in Thousands)
Accruing loans 90 days or more past due:
    Mortgage loans                                 $    5             $  142
                                                   ------             ------
       Total                                       $    5             $  142
 Non-accrual loans:
 Mortgage loans:
    Single-family residential                       1,230              1,249
    Multi-family residential                           --                 --
    Commercial real estate                             --                 --
    Construction                                       64                 --
    Home equity                                         1                 --
    Non-mortgage consumer loans                        48                  2
    Commercial business loans                          --                 96
                                                   ------             ------
       Total                                       $1,343             $1,347
                                                   ------             ------
 Total non-performing loans                        $1,348             $1,489
                                                   ------             ------
 Other real estate owned, net                          --                 --
 Total non-performing assets                       $1,348             $1,489
                                                   ======             ======
 Non-performing loans to total loans                 0.39%              0.47%
 Non-performing assets to total assets               0.30%              0.37%


     Intangible Assets. The Company's intangible assets amounted to $2.1 million
and $2.4 million at March 31, 1999 and June 30, 1998, respectively.  Such assets
are  comprised  of goodwill  and a core deposit  intangible  resulting  from the
Bank's purchase of three branch offices from another  institution in March 1994.
The goodwill is being amortized on a straight-line basis over 15 years while the
core  deposit  intangible  is being  amortized on an  accelerated  basis over 10
years.

     Other Assets.  The Company's  other assets  increased  $363,000 or 19.4% to
$2.2 million at March 31, 1999  compared to $1.9  million at June 30, 1998.  The
primary  reason  for this  increase  was due to the  increase  in the  Company's
deferred tax asset.

     Liabilities. The Company's total liabilities increased by $25.0 million, or
6.8%, to $394.4 million at March 31, 1999 compared to $369.4 million at June 30,
1998.  The primary  reason for such  increase  was a $34.6  million  increase in
deposits,  which was partially offset by a $9.0 million decrease in Federal Home
Loan Bank ("FHLB")  advances.  The Company  attributes the growth in deposits to
its  increase  in  certificates  of  deposit  and to its  continued  efforts  in
soliciting non-interest checking and business accounts.

     Equity.  Total equity of the Company  amounted to $58.6 million or 12.9% of
assets at March 31, 1999  compared to $35.9  million or 8.9% of total  assets at
June 30, 1998. The primary reason for the significant increase to equity was the
$19.7 million net proceeds  raised from the Company's  initial public  offering.
Total  equity of the Company  included  an  unrealized  loss of $316,000  and an
unrealized  gain of $80,000,  net of taxes on  securities  available for sale at
March  31,  1999 and June 30,  1998,  respectively.  The  increase  in  retained
earnings from June 30, 1998


                                       12
<PAGE>


to March 31, 1999 reflects the income for the nine month period of $2.4 million,
net of capitalization of the MHC.

     Results of Operations

     General - Net income for the three month and nine month periods ended March
31, 1999 was $1.1 and $2.5 million, respectively. This compares to net income of
$1.0 and $2.7  million for the same  respective  periods of the prior year.  Net
income  grew as a  result  of a larger  asset  base in part  resulting  from the
Company's initial public offering in December 1998. This increased income helped
offset the  $896,000  initial  expense  to the  Foundation  incurred  during the
current period as compared to the corresponding prior period.

     Net  Interest  Income - Net  interest  income  increased  $619,000 and $1.4
million  during the three and nine  months  ended  March 31, 1999 from the prior
respective periods. Increases in the average balances of interest-earning assets
during each of the periods  more than offset  declines in net  interest  spreads
during such periods.  Average  interest  earning assets grew faster than average
interest bearing  liabilities mostly as a result of the Company's initial public
offering in December 1998. Typically,  this type of effect enhances net interest
income.


                                       13
<PAGE>


     The  following  tables set forth,  for the periods  indicated,  information
regarding  (i) the total  dollar  amount of interest  income of the Company from
interest-earning  assets and the resultant average yields; (ii) the total dollar
amount of interest  expense on  interest-bearing  liabilities  and the resultant
average rate; (iii) net interest income;  (iv) interest rate spread; and (v) net
interest  margin.  Information  is based on average  daily  balances  during the
indicated periods. Given that the Company had only nominal amounts of tax-exempt
investments, the data below is shown without tax effects.


<TABLE>
<CAPTION>
                                                                   Nine Months Ended March 31,
                                               ---------------------------------------------------------------------
                                                            1999                                 1998
                                               ---------------------------------------------------------------------
                                                                        Average                              Average
                                               Average                   Yield/      Average                  Yield/
                                               Balance     Interest       Cost       Balance    Interest      Cost
--------------------------------------------------------------------------------------------------------------------
                                                                  (Dollars in Thousands)
<S>                                           <C>          <C>           <C>        <C>         <C>           <C>  
Interest-earning assets:
  Loans receivable: (1)
   Mortgage loans                             $320,097     $19,247        8.02%     $299,835    $18,345        8.16%
   Non-mortgage consumer loans                   5,674         281        6.60         3,806        181        6.34
   Commercial business loans                     7,717         693       11.96         2,758        219       10.58
                                              --------     -------                  --------    -------
     Total loans                              $333,488     $20,221        8.08      $306,399    $18,744        8.15
  Securities                                    50,317       2,267        6.00        44,277      2,189        6.59
  Other interest-earning assets                 26,906         941        4.66         6,663        235        4.70
                                              --------     -------                  --------    -------
     Total interest-earning assets            $410,711     $23,429        7.60       357,339    $21,168        7.89
Non-interest-earning assets                     11,002     -------                    10,440    -------
                                              --------                              --------
     Total assets                             $421,713                              $367,779
                                              ========                              ========
Interest-bearing liabilities:
  Deposits:
     NOW and money market accounts            $ 44,283     $   797        2.40      $ 41,835    $   667        2.12
     Savings accounts                           41,793         657        2.09        36,329     392584        2.14
     Certificates of deposit                   239,612      10,018        5.57       225,219      9,596        5.68
                                              --------     -------                  --------    -------
       Total deposits                         $355,473      11,472        4.69       319,450    $10,846        4.76
  Total borrowings                              13,874         572        5.49         7,529        313        5.54
  Total escrows                                  3,266          19        0.77         3,035         23        1.01
                                              --------     -------                  --------    -------
  Total interest-bearing liabilities           372,613     $12,063        4.69      $330,014    $11,182        4.75
Non-interest-bearing liabilities                33,665     -------                    18,384    -------
                                              --------                              --------
       Total liabilities                       376,493                              $332,331
Total equity                                    44,220                                35,448
                                              --------                              --------
       Total liabilities and equity           $421,713                              $367,779
                                              ========                              ========
Net interest-earning assets                   $ 38,098                              $ 27,325
                                              ========                              ========
Net interest income/interest rate spread                   $11,366       2.91%                  $ 9,986        3.15%
                                                           =======       ====                   =======        ====
Net interest margin                                                      3.69%                                 3.72%
                                                                         ====                                  ====
Ratio of average interest-earning assets
  to average interest-bearing liabilities                              119.80%                               113.82%
                                                                       ======                                ======
</TABLE>


----------------
(1)  The average balance of loans receivable  includes loans  available-for-sale
     and nonperforming loans, interest on which is recognized on a cash basis.


                                       14
<PAGE>


<TABLE>
<CAPTION>
                                                                   Three Months Ended March 31,

                                             ---------------------------------------------------------------------
                                                             1999                               1998
                                             ---------------------------------------------------------------------
                                                                        Average                            Average
                                               Average                   Yield/    Average                 Yield/
                                               Balance      Interest      Cost      Balance    Interest     Cost
-------------------------------------------------------------------------------------------------------------------
                                                                (Dollars in Thousands)
<S>                                           <C>          <C>          <C>     <C>           <C>         <C>  
Interest-earning assets:
  Loans receivable: (1)
   Mortgage loans                             $325,682     $6,444        7.91%  $306,019      $6,226      8.14%
   Non-mortgage consumer loans                   5,984        104        7.05      4,494          71       6.41
   Commercial business loans                     8,853        228       10.44      3,793         114      12.19
                                              --------     ------               --------      ------
     Total loans                              $340,519     $6,776        8.07   $314,306      $6,411       8.27
  Securities                                   $68,181     $1,044        6.21     46,235        $757       6.64
  Other interest-earning assets                 23,805        250        4.26      7,209          79       4.44
                                              --------     ------               --------
     Total interest-earning assets            $432,505     $8,070        7.57   $367,750      $7,247       7.99
                                                           ------                             ------
Non-interest-earning assets                     11,241                             9,884
                                              --------                          -------- 
     Total assets                             $443,746                          $377,634
                                              ========                          ========
Interest-bearing liabilities:
  Deposits:
     NOW and money market accounts            $ 41,100     $  270        2.66   $ 43,008      $  223       2.10
     Savings accounts                           42,936        217        2.05     37,034         192       2.10
     Certificates of deposit                   243,058      3,290        5.49    228,871       3,198       5.67
                                              --------     ------               --------      ------
       Total deposits                         $364,583     $3,777        4.68   $326,437      $3,613       4.74
  Total borrowings                              13,239        177        5.42      9,889         135       5.54
  Total escrows                                  3,712          7        0.76      3,632           9       1.00
                                              --------     ------               --------      ------
  Total interest-bearing liabilities          $381,534     $3,961        4.67   $339,958      $3,757       4.73
                                                           ------                             ------
Non-interest- bearing liabilities               41,525                            19,601
                                              --------                          --------
       Total liabilities                      $385,570                          $342,035
Total equity                                    58,176                            35,599
                                              --------                          --------
       Total liabilities and equity           $443,746                          $377,634
                                              ========                          ========
Net interest-earning assets                   $ 50,971                          $ 27,792
                                              ========                          ========
Net interest income/interest rate spread                   $4,109        2.90%                $3,490       3.27%
                                                           ======        ====                 ======       ====
Net interest margin                                                      3.85%                             3.85%
                                                                         ====                              ====
Ratio of average interest-earning assets
to average interest-bearing liabilities                                125.71%                           114.05%
                                                                       ======                            ======
</TABLE>


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

(1)  The average balance of loans receivable  includes loans  available-for-sale
     and nonperforming loans, interest on which is recognized on a cash basis.

     Interest Income - Interest income  increased  $823,000 and $2.2 million for
the three and nine months  ended  March 31,  1999 as compared to the  respective
prior year periods.  These  increases  resulted  primarily from increases in the
average balances of loans and investments; a significant portion of which is due
to the deployment of proceeds from the Company's December 1998 stock offering.

     Interest  Expense - Interest  expense on deposits  increased  $164,000  and
$626,000,  respectively,  for the three and nine month  periods  ended March 31,
1999.  Management  has continued to be  competitive  with interest rates paid on
deposits. Also, savings balances increased during the three month and nine month
periods ended March 31, 1999 due to the Bank's continuing promotional efforts to
attract new customers during the period.


                                       15
<PAGE>


     Provision  for Loan Losses - The  Company's  provision  for loan losses was
$121,000 and $351,000 for the three month and nine month periods ended March 31,
1999,  respectively.  This  compares to provision for loan losses of $90,000 and
$270,000 for the same respective periods of the prior year.


                                                       For the Nine Months Ended
                                                       -------------------------
                                                           1999          1998
     ---------------------------------------------------------------------------
                                                         (Dollars in Thousands)
     Allowance at beginning of period                     $2,665        $1,678
                                                          ------        ------
     Provisions                                              351           270
        Charge-offs:
          Mortgage loans                                      --            --
          Non-mortgage consumer loans                         23             2
          Commercial business loans                            3            --
                                                          ------        ------
            Total charge-offs                                 26             2
        Recoveries                                            --            --
                                                          ------        ------
     Allowance at end of period                           $2,990        $1,946
                                                          ======        ======

     Allowance for loan losses to total nonperforming                 
        loans at end of period                            221.79%       130.69%
                                                          ======        ======

     Allowance for loan losses to total loans at end of               
        period                                              0.86%         0.62%
                                                          ======        ======

     Ratio of charge-offs to average loans                 0.008%        0.001%
                                                          ======        ======


     Non-interest  Income - Non-interest  income increased $14,000 and $236,000,
respectively,  for the three and nine months ended March 31, 1999 as compared to
the same  respective  periods in the prior year. The three month period increase
was due to an  increase  in service  charges  and fees.  The nine  month  period
increase  was due to  increased  net  loan  servicing  income  and a net loss of
$55,000 on sale of securities available-for-sale in the prior nine month period.

     Non-interest  Expense - Non-interest  expense  increased  $454,000 and $1.8
million,  respectively,  for the  three and nine  months  ended  March 31,  1999
compared  to the same  periods  in the prior  year.  The  Company  had a pre-tax
expense of $896,000 as a result of the initial  contribution  to the Foundation.
Compensation and employee benefits expense increased due to general increases in
salary levels and benefits and in the number of employees at the Bank. Furniture
and fixture expense increases were the result of management's continuing efforts
to update  equipment and facilities  and the opening of the eighth  full-service
banking office.  Data processing costs increased due to general increased levels
of numbers of accounts and testing and preparation for Year 2000  contingencies.
Advertising  expense  increased  due to  management's  efforts to utilize a more
targeted approach to marketing.

     Income Tax Expense - The  provision for income taxes for the three and nine
month periods ended March 31, 1999 was comparable to the  respective  periods in
the prior year.

Liquidity and Commitments

     The Company's  liquidity,  represented by cash and cash  equivalents,  is a
product of its operating,  investing,  and financing  activities.  The Company's
primary sources of funds are deposits, amortizations, prepayments and maturities
of outstanding loans and  mortgage-backed  securities,  maturities of investment
securities and other short-term  investments and funds 


                                       16
<PAGE>

provided from operations. The Company also utilizes borrowings, generally in the
form of FHLB advances,  as a source of funds.  While scheduled payments from the
amortization of loans and mortgage  related  securities and maturing  investment
securities and short-term  investments  are  relatively  predictable  sources of
funds,  deposit  flows and loan  prepayments  are greatly  influenced by general
interest rates,  economic conditions and competition.  In addition,  the Company
invests  excess  funds in  short-term  interest  earning  assets  which  provide
liquidity to meet lending requirements.

     Liquidity  management  is both a daily and long term  function  of business
management.  Excess  liquidity is generally  invested in short-term  investments
such as U.S.  Treasury  Securities.  The  Company  uses  its  sources  of  funds
primarily  to meet its ongoing  commitments,  to pay  maturing  certificates  of
deposit and savings withdrawals,  fund loan commitments and maintain a portfolio
of mortgage backed and mortgage related securities and investment securities. At
March 31, 1999, the total approved  investment and loan origination  commitments
outstanding  amounted to $23.3  million.  Certificates  of deposit  scheduled to
mature in one year or less at March 31, 1999 totaled $147.2 million.  Investment
securities  scheduled  to mature in one year or less at March 31,  1999  totaled
$7.0  million.  Based  on  historical  experience,  management  believes  that a
significant  portion of maturing  deposits  will remain  with the  Company.  The
Company  anticipates  that it will continue to have sufficient  funds,  together
with borrowings, to meet its current commitments.

Capital

     At March 31, 1999 and June 30, 1998, the Bank had regulatory  capital which
was well in excess of regulatory limits set by the Office of Thrift Supervision.
The current  requirements  and the Bank's  actual  capital  levels are  detailed
below:

<TABLE>
<CAPTION>
                                                                                                      To be Well
                                                                             For Capital           Capitalized Under
                                                                              Adequacy             Prompt Corrective
                                                  Actual Capital              Purposes             Action Provisions
                                              -----------------------------------------------------------------------
                                               Amount        Ratio      Amount          Ratio      Amount       Ratio
       --------------------------------------------------------------------------------------------------------------
                                                                       (Dollars in Thousands)
<S>                                           <C>            <C>         <C>             <C>      <C>            <C>
       As of March 31, 1999:
       Tangible capital
       (to tangible assets)                   $44,940        10.0%       6,792           1.5%         N/A         N/A
       Core Capital
       (to adjusted tangible assets)           44,940        10.0       13,531           3.0       22,552         5.0
       Tier 1 capital
       (to risk-weighted assets)               44,940        17.7        9,783           4.0       15,199         6.0
       Risk-based capital
       (to risk-weighted assets)               47,939        18.9       20,265           8.0       25,331        10.0
       As of June 30, 1998:
       Tangible capital
       (to tangible assets)                   $33,505         8.3       $6,038           1.5          N/A         N/A
       Core capital
       (to adjusted tangible assets)           33,505         8.3       12,075           3.0      $20,126         5.0
       Tier 1 capital
       (to risk-weighted assets)               33,505        13.8        9,719           4.0       14,578         6.0
       Risk-based capital
       (to risk-weighted assets)               36,170        14.9       19,438           8.0       24,297        10.0
</TABLE>

Year 2000 Considerations

     In order to be ready for the year 2000 (the "Year 2000 Issue"), the Company
has developed a Year 2000 Action and  Assessment  Plan (the "Action Plan") which
was presented to the Board of Directors  during  February  1998. The Action Plan
was  developed   using  the  guidelines   outlined  in  the  Federal   Financial
Institutions  Examination's  Council's "The Effect of 


                                       17
<PAGE>

2000  on  Computer   Systems".   The  Company's  Board  of  Directors   assigned
responsibility  for the Action Plan to the Company's Year 2000  Committee  which
reports  to the  Board of  Directors  on a  quarterly  basis.  The  Action  Plan
recognizes that the Company's  operating,  processing and accounting  operations
are computer reliant and could be affected by the Year 2000 Issue. The Company's
Action Plan  addressed the  potential  impact of the Year 2000 Issue on both its
information  technology  ("IT")  systems  and non-IT  systems  (such as security
systems,  elevators,  electrical,  heating  and  air  conditioning,   telephone,
check-signing  equipment,  etc.).  Pursuant to its Action Plan,  the Company has
reviewed  its IT  systems  and  non-IT  systems  for the Year 2000 Issue and has
tested all of its IT and non-IT  systems and equipment  for Year 2000  readiness
and believes that it has identified all equipment  which needs to be upgraded or
replaced.  Commencing in early 1998, the Company began a program of upgrading or
replacing all such equipment in order to ensure that the Company's  equipment is
Year 2000  compliant on or before  September 30, 1999.  The Company is primarily
reliant on third party vendors for its computer output and  processing,  as well
as other significant non-IT functions and services (i.e., securities safekeeping
services,  securities  pricing  information,  etc.).  The Year 2000 Committee is
currently  working  with these  third  party  vendors to assess  their year 2000
readiness.  Such vendors  generally  are  reluctant to guarantee or provide firm
assurance that their  products will be Year 2000 compliant in a timely  fashion.
In addition, the Company believes that it would be difficult to prevail on legal
claims  against such vendors  with  respect to Year 2000  issues.  Instead,  the
Company's approach has been that it is primarily responsible for identifying and
correcting  Year  2000  compliance  issues.  A  major  factor  in the  Company's
operations  is the data  processing  software  which  is used on a  Company-wide
basis. Such software is maintained by a third party vendor. The Company has been
working  closely  with  such  vendor,  whose  clients  include  many  depository
institutions,  in an effort to ensure the Company's Year 2000  preparedness.  In
this respect,  the Company has, on three  occasions  during  non-banking  hours,
tested  its  operation  systems,  both IT and  non-IT  systems,  for  Year  2000
readiness.  Such tests revealed only minor problems,  which are being corrected,
with the  Company's  systems with respect to Year 2000.  By the end of the third
test, all issues were corrected.  Based upon the initial assessment,  management
presently  believes  that with planned  modifications  to existing  software and
hardware and planned  conversions  to new software and  hardware,  the Company's
third party vendors are taking the appropriate  steps to ensure critical systems
will function  properly.  The Company's Action Plan contemplates that all of its
software  vendors will be Year 2000  compliant by September  30, 1999. If any of
its vendors cannot assure the Company of their Year 2000 readiness by such date,
the Company intends to evaluate and use  alternative  vendors and products where
possible.  As of the date hereof,  the Bank has completed  the awareness  (i.e.,
education),  assessment (i.e., assessing the potential Year 2000 problems in its
IT and non-IT  systems and  software),  renovation  (i.e.,  developing  plans to
remedy Year 2000 issues) and validation (i.e.,  testing all critical application
units and systems) phases of its Year 2000 Action Plan. The Company currently is
completing  the   implementation   phase  (i.e.,   replacing  certain  equipment
identified as not being Year 2000 compliant).  The Company is approximately  30%
complete on the implementation  phase. To date, the Company's assessment is that
two of its ATM's software and its remote flood plain certification  software are
not  Year  2000  compliant.  The  Company  does  not  believe  that  any of such
non-compliant systems will have a critical effect on the Company's operations if
they are not Year 2000 compliant by the turn of the century.  While no assurance
can be given as to actual systems operations upon the turn of the century, 


                                       18
<PAGE>

based on information currently known to it and upon consideration of its testing
efforts  to date,  management  believes  that in the worst  case  scenario,  the
Company will suffer only a slight interruption of business practices as a result
of minor  application  failures of its IT and non-IT systems and software as the
result  of  the  Year  2000.  However,  if  the  appropriate  modifications  and
conversions are not made, or are not completed on a timely basis,  the Year 2000
Issue could have a material impact on the operations of the Company.

     The  results  from  the  Year  2000  mailing  to the  Company's  commercial
customers indicated that the commercial customers that use software have updated
or will  update  their  software  packages  by December  31,  1999.  Many of the
customers use outsource  services such as payroll companies who are assuring the
customers that they are Year 2000 compliant. It has been determined that no Bank
customers are facing a high risk of business disruption because of technological
defaults.

     The Company has completed its own company-wide  Year 2000 contingency plan.
Individual  contingency  plans concerning  specific software and hardware issues
have been  formulated for the specific  departments  of the Company.  Such plans
include the  identification  of Company  operations that can be done on a manual
basis or with stand  alone  personal  computers  and  printers.  The Company has
identified  phone lines  within the Company  which should not be affected by any
Year  2000  problems  and it also  has  identified  alternative  electric  power
sources.

     The costs of  modifications  to the existing  software are being  primarily
absorbed by the third party  vendors;  however the Company  recognized  that the
need exists to purchase new hardware and software. Based upon current estimates,
the Bank has identified $300,000 in total costs,  including hardware,  software,
and  other  issues,  for  completing  its Year  2000  project.  Of that  amount,
approximately  $141,000 was expensed for the Year 2000 project through March 31,
1999. It is  anticipated  that the remaining  $159,000 will be expensed over the
next nine months.

Item 3.  Quantitative and Qualitative Disclosure About Market Risk

     For a discussion of the Company's asset and liability  management  policies
as well as the  potential  impact of interest rate changes upon the market value
of the Company's portfolio equity, see "Management's  Discussion and Analysis of
Financial  Condition  and  Results of  Operation"  in the  Company's  prospectus
included in the registration statement on Form S-1 filed with the Securities and
Exchange  Commission (the  "Commission")  on September 18, 1998, as subsequently
amended and as declared  effective by the Commission by order dated November 12,
1998. Management, as part of its regular practices, performs periodic reviews of
the impact of  interest  rate  changes  upon the market  value of the  Company's
portfolio  equity.  Based on,  among other  factors,  such  reviews,  management
believes  that there are no material  change in the market risk of the Company's
asset and liability position since June 30, 1998.


                                       19
<PAGE>

Part II. OTHER INFORMATION

Item 1.  Legal Proceedings

         Not applicable

Item 2.  Use of Proceeds From Registered Securities

         The Company's initial  registration  statement (No.  333-63737) on Form
S-1 was  declared  effective on November 12,  1998.  The  subscription  offering
commenced on November 12, 1998 and terminated on December 15, 1998. Charles Webb
& Co., a division of Keefe,  Bruyette & Woods, Inc.,  assisted the Company, on a
best efforts  basis,  in the offering.  The sale in the offering of 2,240,878 of
the Company's common stock, par value $.01 per share ("Common Stock"), closed on
December 23, 1998 for gross proceeds of  $22,408,780.  Net of offering costs and
expenses of $960,000,  the offering generated net proceeds of $21.4 million.  Of
such proceeds, $1.8 million was loaned to the Company's ESOP for the purchase by
the ESOP of 179,270 shares of Common Stock, $9.8 million was paid to the Bank in
exchange  for the common stock of the Bank issued in its  reorganization  from a
federally-chartered  mutual savings bank to a federally-chartered  stock savings
bank,  and the remaining $9.8 million is held and due from the Bank. As of March
31,  1999,  the $21.4  million was  invested in $8.0  million of loans and $13.4
million of investment securities.

Item 3.  Defaults Upon Senior Securities

         Not applicable

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

         Not applicable

Item 5.  Other Information

         Not applicable


                                       20
<PAGE>

Item 6.  Exhibits and Reports on Form 8-K

     (a)  List of Exhibits (filed herewith unless otherwise noted)
2.1  Plan of Reorganization* 2.2 Plan of Stock Issuance*
3.1  Federal Stock Charter of Willow Grove Bancorp, Inc.*
3.2  Bylaws of Willow Grove Bancorp, Inc.*
4.0  Form of Stock Certificate of Willow Grove Bancorp, Inc.*
10.1 Form of  Employment  Agreement  entered into between  Willow Grove Bank and
     Frederick A. Marcell, Jr.*
10.2 Form of  Employment  Agreement  entered into between  Willow Grove Bank and
     each of Thomas M. Fewer, John J. Foff, Jr. and John T. Powers*
10.3 Supplemental Executive Retirement Agreement*
10.4 Non-Employee Director's Retirement Plan*
27.0 Financial Data Schedule

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

*    Incorporated by Reference from the Company's Registration Statement on Form
     S-1 filed on September  18,  1998,  as amended,  and declared  effective on
     November 12, 1998.

     (b)  Not applicable


                                       21
<PAGE>

                                   SIGNATURES


In accordance with the requirements of the Securities  Exchange Act of 1934, the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.


                                  WILLOW GROVE BANCORP, INC.


Date:  May 11, 1999               By:  /S/Frederick A. Marcell, Jr.
                                       -----------------------------------------
                                       Frederick A. Marcell, Jr.
                                       President and Chief Executive Officer


Date:  May 11, 1999               By:  /S/John J. Foff, Jr.                     
                                       -----------------------------------------
                                       John J. Foff, Jr., Senior Vice President,
                                       Chief Financial Officer and Treasurer



                                       22