EXHIBIT 13

<PAGE>

                         CARNEGIE FINANCIAL CORPORATION

Corporate Profile

     Carnegie Financial Corporation ("Carnegie"), a Pennsylvania corporation, is
the savings  and loan  holding  company for  Carnegie  Savings  Bank  ("Carnegie
Savings").  Carnegie  conducts no business of its own other than  holding all of
the outstanding stock of Carnegie Savings.

     Carnegie Savings is a federally  chartered stock savings bank headquartered
in Carnegie,  Pennsylvania and conducts business through its full service branch
located in the community of Carnegie,  Pennsylvania.  Carnegie  Savings offers a
broad range of deposits and loan products to  individuals,  families,  and small
businesses.  Carnegie  Savings is subject to  examination  and regulation by the
Office of Thrift  Supervision and its deposits are insured by the Bank Insurance
Fund of the FDIC to applicable limits.

Stock Market Information

     Carnegie's  common  stock has been  traded on the OTC  Electronic  Bulletin
Board under the trading symbol of "CAFN".  The following table reflects high and
low bid quotations.  The quotations reflect inter-dealer prices,  without retail
mark-up, mark-down, or commission, and may not represent actual transactions.

                                                                    Dividends
                Date                         High ($)     Low ($)   Declared ($)
                ----                         --------     -------   ------------
July 10, 1998 to August 31, 1998              11.88       9.31         --
September 1, 1998 to December 31, 1998        10.00       8.31         --
January 1, 1999 to March 31, 1999              8.50       7.50         --
April 1, 1999 to June 30, 1999                10.25       9.00         --
July 1, 1999 to September 30, 1999             9.25       7.50         --
October 1, 1999 to December 31, 1999           9.00       7.50        .10

     The number of  shareholders of record of common stock as of the record date
of March 1, 1999,  was  approximately  169.  This does not reflect the number of
persons or entities who held stock in nominee or "street"  name through  various
brokerage  firms.  At March 1, 2000,  there  were  224,776  shares  outstanding.
Carnegie's  ability to pay  dividends  to  stockholders  is  dependent  upon the
dividends it receives from Carnegie Savings. Carnegie Savings may not declare or
pay a cash dividend on any of its stock if the effect would cause its regulatory
capital to be reduced below (1) the amount required for its liquidation  account
established in connection  with its stock  conversion or the regulatory  capital
requirements imposed by the Office of Thrift Supervision.

                                       2

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

The Private  Securities  Litigation Act of 1995 contains safe harbor  provisions
regarding forward-looking  statements.  When used in this discussion,  the words
"believes,"  "anticipates,"  "contemplates,"  "expects," and similar expressions
are intended to identify forward-looking statements. Such statements are subject
to certain  risks and  uncertainties  that could cause actual  results to differ
materially from those projected.  Those risks and uncertainties  include changes
in interest rates,  the ability to control costs and expenses,  year 2000 issues
and  general  economic  conditions.  The Company  undertakes  no  obligation  to
publicly  release  the  results  of  any  revisions  to  those  forward  looking
statements which may be made to reflect events or  circumstances  after the date
hereof or to reflect the occurrence of unanticipated events.

Carnegie   Financial   Corporation  is  a  savings  and  loan  holding   company
headquartered  in  Carnegie,  Pennsylvania,  which  provides  a broad  range  of
deposits and loan products through its wholly owned subsidiary, Carnegie Savings
Bank (collectively, the "Company").

Asset/Liability Management

The Company's net interest  income is sensitive to changes in interest rates, as
the rates paid on interest-bearing  liabilities generally change faster than the
rates earned on  interest-earning  assets. As a result, net interest income will
frequently  decline in periods of rising  interest rates and increase in periods
of decreasing interest rates.

The board of directors  manages the  interest  rate  sensitivity  of the Company
through its asset and liability  committee which is comprised of the board of of
directors.  The board of  directors  meets  quarterly  to monitor  the impact of
interest rate risk and develops strategies to manage its liquidity,  shorten the
effective  maturities  of  certain  interest  earning  assets and  increase  the
effective maturities of certain liabilities,  to reduce the exposure to interest
rate fluctuations.  These strategies include focusing its investment  activities
on short and medium-term securities,  maintaining and increasing the transaction
deposit accounts, as these accounts are considered to be relatively resistant to
changes in interest rates and utilizing deposit marketing programs to adjust the
term or repricing of its liabilities.

Net Portfolio Value

The Company  computes  amounts by which the net present  value of cash flow from
assets, liabilities and off balance sheet items ("net portfolio value" or "NPV")
would  change  in the event of a range of  assumed  changes  in market  interest
rates.  The Interest Rate  Sensitivity  of Net Portfolio  Value Report shows the
degree to which balance sheet line items and net portfolio value are potentially
affected by a 100 to 300 basis point (1/100th of a percentage  point) upward and
downward parallel shift (shock) in the Treasury yield curve.


                                       4
<PAGE>

     The following table  represents the Company's NPV at December 31, 1999. The
NPV was calculated by the OTS, based upon  information that the Company provided
to the OTS.

              Changes in Rates         NPV Ratio%(1)         Change(2)
              ----------------         -------------         ---------
                 +300 bp                   .68               -867 bp
                 +200 bp                  2.34               -564 bp
                 +100 bp                  5.29               -269 bp
               Unchanged                  7.99                 --
                 -100 bp                 10.06                207 bp
                 -200 bp                 11.16                318 bp
                 -300 bp                 11.37                338 bp

-----------------------
(1)  Calculated as the estimated NPV divided by present value of total assets.
(2)  Calculated  as the  excess  (deficiency)  of the  NPV  ratio  assuming  the
     indicated change in interest rates over the estimated NPV ratio assuming no
     change in interest rates.

The  calculations  in the above table  indicate that the Company's net portfolio
value could be adversely  affected by  increases in interest  rates but could be
favorably  affected by decreases in interest rates.  Computations of prospective
effects of hypothetical interest rate changes are based on numerous assumptions,
including  relative  levels of market  interest  rates,  prepayments and deposit
run-offs and should not be relied upon as indicative of actual results.  Certain
shortcomings  are inherent in such  computations.  Although  certain  assets and
liabilities may have similar  maturity or periods of repricing they may react at
different  times and in  different  degrees to  changes  in the market  interest
rates.  The  interest  rates on  certain  types of assets  and  liabilities  may
fluctuate in advance of changes in market interest  rates,  while rates on other
types of assets and liabilities may lag behind changes in market interest rates.
Certain assets, such as adjustable rate mortgages, generally have features which
restrict  changes in  interest  rates on a short term basis and over the life of
the asset.  In the event of a change in interest  rates,  prepayments  and early
withdrawal  levels  could  deviate  significantly  from those  assumed in making
calculations set forth above. Additionally,  an increased credit risk may result
as the ability of many borrowers to service their debt may decrease in the event
of an interest rate increase.

Financial Condition

Total assets increased approximately  $9,400,000 ,or 46.8% , to $29.5 million at
December  31, 1999 from $20.1  million at December  31,  1998.  The asset growth
primarily  resulted  from  increases in net loans of $8,000,000  and  securities
available  for sale of  $2,100,000.  Federal  Home  Loan Bank  advances  of $8.3
million were used to fund the Company's asset growth during 1999.

Total  investment   securities   available  for  sale  increased  $2,100,000  to
$3,300,000  at December 31, 1999 from  $1,200,000  at December  31,  1998.  Such
increase  in  securities  primarily  reflects  investments  in  U.S.  Government
Agencies  securities.  These  investments have an overall average yield of 6.71%
and  maturities  that  range  from 15 to 30 years.  Additionally,  during  1999,
management transferred approximately

                                       5
<PAGE>

$500,000 of held to maturity  securities to the  available  for sale  portfolio.
Such transfer was in compliance with generally accepted accounting principles.

Due to the declining interest rate yields, proceeds received from the maturities
and  prepayments of  mortgage-backed  securities  were not reinvested  into such
securities.  At December 31, 1999, total  mortgage-backed  securities (available
for sale and held to maturity) decreased $681,000 to $835,000 from $1,516,000 at
December 31, 1998.

Net loans  receivable  increased  $8,006,000 at December 31, 1999 to $22,518,000
from $14,512,000 at December 31, 1998. Due to the growing demand for residential
real estate  within the  Company's  market  area,  the net real estate  mortgage
portfolio increased $7,152,000 during 1999 and was primarily driven by utilizing
the services of a mortgage  broker,  which resulted in a $5,061,000  increase in
the  one-to-four  family loan portfolio.  At December 31, 1999,  mortgage broker
services  were no longer used and there is no assurance  that in future  periods
the  Company  will  retain  such  services  to  increase  its  residential  loan
portfolio.

Deposits  increased   $1,179,000  at  December  31,  1999  to  $16,552,000  from
$15,372,000  at December  31,  1998.  This  increase  resulted  from the overall
increase in the deposit  portfolio.  Such increase in deposits was the result of
management's ability to meet the competitive pricing of its market area.

Stockholder's equity decreased $344,000 to $2,693,000 at December 31, 1999, from
$3,037,000  at December  31, 1998.  The decrease was the combined  result of the
Company acquiring treasury stock of $129,000, the implementation of a Restricted
Stock Plan ("RSP") for the benefit of key  employees  and  directors of $65,000,
amortization  of the employee stock  ownership  plan("ESOP")  of $19,000 and the
decrease in accumulated other comprehensive income of $245,000. Such decrease in
stockholders equity for the year ended December 31, 1999 was partially offset by
an increase in net income of $146,000 from the comparable 1998 fiscal year.

The  decrease  in  accumulated  other  comprehensive  income  resulted  from the
fluctuation  in market value of the  Company's  investment in available for sale
securities. Because of interest rate volatility, accumulated other comprehensive
income and  shareholders'  equity could  materially  fluctuate  for each interim
period and  year-end  period.  The  decrease in market  value of the  investment
securities  available  for sale is  considered  temporary in nature and will not
affect net income  unless the  securities  are sold.  The Company  plans to hold
these  securities  until maturity or until the market values of these securities
increase.  Accordingly,  the  Company  does  not  expect,  though  there  is  no
assurance,  that its  investment in these  securities  will affect net income in
future periods. See Notes 3 and 4 to the consolidated financial statements.

Results of Operations

The Company's results of operations are primarily  dependent on its net interest
income,  which is the difference  between the interest  income earned on assets,
primarily  loans and  investments,  and the  interest  expense  on  liabilities,
primarily  deposits  and  borrowings.   Net  interest  income  may  be  affected
significantly  by general  economic and  competitive  conditions and policies of
regulatory  agencies,  particularly those with respect to market interest rates.
The  results of  operations  are also  influenced  by the level of  non-interest
expenses,  such as employee  salaries  and benefits  and other  income,  such as
loan-related fees and fees on deposit-related services.

                                       6
<PAGE>

Net income increased  $146,000 to $108,000 for the years ended December 31, 1999
from a net loss of  $38,000  for the  same  period  ended  1998.  Pretax  income
increased $203,000 to $151,000 for fiscal 1999 from a loss of $52,000 for fiscal
1998.  The  increase in net income was  primarily  due to the increase in in net
interest income of $206,000.

Net interest income before the provision for loan losses  increased  $246,000 to
$855,000 for the year ended  December 31, 1999 from $648,000 for the  comparable
1998 fiscal  year.  The increase  was  primarily  due to the increase in average
loans of 7,359,000 million and average investment securities of $848,000 million
coupled  with a 13 basis point  decrease  in average  cost of funds to 4.63% for
1999 from 4.76% for 1998. The increases in average loans and average  investment
securities  were primarily  funded by the increase in average  interest  bearing
liabilities of $6,859,000.  Offsetting the increase in net interest income was a
38 basis point decline in the yield on average  interest earning assets to 7.39%
for 1999 from  7.77% for 1998.  The  yield on  average  interest-earning  assets
declined for 1999 primarily due to an 83 basis point decrease in yields on loans
receivable to 7.69% for 1999 from 8.52% for 1998,  which was the result of loans
refinancing at lower rates.

The  following  table sets forth certain  information  relating to the Company's
average  balance sheet and reflects the average yield on assets and average cost
of liabilities for the periods indicated and the average yields earned and rates
paid.  Such yields and costs are  derived by  dividing  income or expense by the
average  balance  of  assets  or  liabilities,  respectively,  for  the  periods
presented. Average balances are derived from daily balances.

                                       7
<PAGE>
<TABLE>
<CAPTION>
                                                                  Year ended December 31,
                                               --------------------------------------------------------------------
                                                          1999                             1998
                                               --------------------------------- ----------------------------------
                                                                     (Dollars in thousands)
                                               Average                  Average     Average                Average
                                               Balance   Interest     Yield/Cost    Balance  Interest    Yield/Cost
                                               -------   --------     ----------   --------  --------    ----------
<S>                                          <C>        <C>           <C>        <C>       <C>          <C>
Interest-earning assets:
 Loans receivable(1) ......................   $19,068    $ 1,467         7.69%     $11,709   $   998        8.52%
 Mortgage-backed securities ...............     1,789        105         5.87%       2,467       162        6.57%
 Investment securities ....................     3,139        254         8.09%       2,291       140        6.11%
 Other interest-earning assets(2) .........     1,246         39         3.13%         829        44        5.31%
                                              -------    -------                    ------     -----
  Total interest-earning assets ...........    25,242      1,865         7.39%      17,296     1,344        7.77%
                                                         -------                               -----
Non-interest-earning assets ...............       719                                1,075
                                              -------                               ------
  Total assets ............................   $25,961                              $18,371
                                              =======                              =======
Interest-bearing liabilities:
 NOW accounts .............................   $ 1,491         29         1.95%     $ 1,111        23        2.07%
 Savings accounts .........................     3,694         90         2.44%       3,532        89        2.52%
 Certificates of deposit ..................     9,573        519         5.42%       9,777       575        5.88%
 Other liabilities ........................     7,071        372         5.26%         212         9        4.26%
                                              -------    -------                    ------     -----
  Total interest-bearing liabilities ......    21,829      1,010         4.63%      14,632       696        4.76%
                                              -------    -------                    ------     -----
Non-interest bearing liabilities:
 Other liabilities ........................     1,909                                1,811
                                              -------                               ------
 Total liabilities ........................    23,738                               16,443
                                              -------                               ------
Stockholders' equity ......................     2,223                                1,928
                                              -------                               ------
 Total liabilities and stockholders' equity   $25,961                              $18,371
                                              =======                              =======
Net interest income .......................              $   855                             $   648
                                                         =======                             =======
Interest rate spread(3) ...................                              2.76%                              3.01%
                                                                       ======                             ======
Net yield on interest-earning assets(4) ...                              3.39%                              3.75%
                                                                       ======                             ======
Ratio of average interest-earning assets to
  average interest-bearing liabilities ....                            115.64%                            118.20%
                                                                       ======                             ======
</TABLE>

-------------------------------
(1)  Average balances include non-accrual loans.
(2)  Includes investment-bearing deposits in other financial institutions.
(3)  Interest-rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.
(4)  Net yield on  interest-earning  assets  represents net interest income as a
     percentage of average interest-earning assets.

The following  table sets forth  certain  information  regarding  changes in our
interest  income  and  interest  expense  for the  periods  indicated.  For each
category   of   interest-earning   assets  and   interest-bearing   liabilities,
information  is  provided  on  changes  attributable  to  (i) changes  in volume
(changes  in  average  volume  multiplied  by old rate);  (ii) changes  in rates
(changes in rate multiplied by old average volume).  Increases and decreases due
to both rate and volume have been allocated  proportionally to the change due to
volume and the change due to rate.

                                       8

<PAGE>


                                       Year Ended December 31,
                                       -----------------------
                                           1999 vs. 1998
                                       -----------------------
                                         Increase (Decrease)
                                               Due to
                                       -----------------------
                                       Volume    Rate    Total
                                       ------    ----    -----
                                            (In Thousands)
Interest income:
Loans receivable ...................   $ 627    $(158)   $ 469
Mortgage-backed securities .........     (45)     (12)     (57)
Investment securities ..............      52       62      114
Other interest-earning assets ......      22      (27)      (5)
                                       -----    -----    -----
  Total interest-earning assets ....   $ 656    $(135)   $ 521
                                       -----    -----    -----

Interest expense:
 NOW accounts ......................   $   8    $  (2)   $   6
 Savings deposits ..................       4       (3)       1
 Certificates of deposit ...........     (12)     (44)     (56)
 Other interest-bearing liabilities      292       71      363
                                       -----    -----    -----
  Total interest-bearing liabilities   $ 292    $  22    $ 314
                                       =====    =====    =====
Change in net interest income ......   $ 364    $(157)   $ 207
                                       =====    =====    =====

The provision for loan losses increased  $22,000 for the year ended December 31,
1999 to $66,000 from  $44,000 for the  comparable  1998 fiscal year.  Management
continually  evaluates  the adequacy of the  allowance  for loan  losses,  which
encompasses the overall risk  characteristics of the various portfolio segments,
past experience with losses, the impact of economic  conditions on borrowers and
other relevant  factors which may come to the attention of management.  Although
the Company maintains its allowance for loan losses at a level that it considers
to be adequate to provide for the inherent  risk of loss in its loan  portfolio,
there can be no assurance that future losses will not exceed  estimated  amounts
or that  additional  provisions  for loan  losses will not be required in future
periods.

Total  noninterest  income,  which is  comprised  of service  charges on deposit
accounts,  investment securities gains (losses),  net and other income increased
$45,000 to $114,000  for 1999  compared to $69,000 for 1998.  Of this  increase,
service charges on deposit accounts  increased $52,000 due to an increased level
of  transaction  account  activity  and the  addition  of two  automatic  teller
machines  ("ATMs").  Increases in fees  associated  with loan  underwriting  and
processing  accounted for the majority of the $18,000 increases to other income.
Partially  offsetting  these  increases  was a  $22,000  loss  on  the  sale  of
investment securities.

Total  noninterest  expense,  increased  $27,000 to $752,000  for the year ended
December 31, 1999 from $725,000 for the  comparable  1998 fiscal year.  The most
significant items affecting  noninterest  expense was a decline in costs of real
estate operations of $61,000 and increases in occupancy and equipment

                                       9
<PAGE>

expense of $28,000 and  professional  fees of  $47,000.  During 1998 the Company
incurred costs  associated  with real estate  acquired  through  foreclosure and
recognized  no such costs in 1999.  The  increase  in  occupancy  and  equipment
expense is primarily  related to a full year of fees paid to an outside  service
that  maintained  two ATMs that were placed in service during the fourth quarter
of 1998. Such fees may increase during fiscal 2000, since the Company placed two
additional  ATMs in service in the first  quarter of fiscal 2000.  Additionally,
the increase in professional fees was the result of additional services provided
by legal and accounting  professionals  in relation to filing  requirements of a
public company.

Income tax expense  increased  $56,000 for the year ended  December  31, 1999 to
$43,000  from a benefit of $14,000 for the  comparable  1998 fiscal  year.  Such
increase was the result of an increase in pre-tax income of $203,000.

Year 2000

The Company relies on computers to conduct its business and information  systems
processing.  Industry  experts  were  concerned  that on January  1, 2000,  some
computers might not be able to interpret the new year properly, causing computer
malfunctions.  Some banking experts remain concerned that some computers may not
be able to interpret additional dates in the year 2000 properly. The Company has
operated and evaluated its computer  operating systems following January 1, 2000
and  has  not  identified  any  errors  or  experienced   any  computer   system
malfunctions.  Nevertheless,  the Company  continues to monitor its  information
systems to assess whether its systems are at risk of misinterpreting  any future
dates and will develop, if needed,  appropriate contingency plans to prevent any
potential system malfunction or correct any system failures. The Company has not
been informed of any such problems experienced by its vendors or its customers.

It is too soon to conclude that there will not be any problems  arising from the
Year 2000 problem.  The Company will continue to monitor its significant vendors
of goods and services and customers  with respect to any Year 2000 problems they
may encounter, as those issues may effect its ability to continue operations, or
might adversely affect the company's financial  position,  results of operations
and cash flows.  At this time, the Company does not believe that these potential
problems will materially impact the ability to continue operations. However, any
delays,  mistakes,  or failures could have a significant impact on the Company's
financial condition and profitability.

Liquidity And Capital Resources

The  Company's  primary  source  of  funds  includes  savings,   deposits,  loan
repayments  and  prepayments,  cash flow from  operations and borrowing from the
Federal Home Loan Bank.  The Company uses its capital  resources  principally to
fund  loan  origination  and  purchases,  repay  maturing  borrowings,  purchase
investments,  and for short-term liquidity needs. The Company expects to be able
to  fund  or  refinance,  on a  timely  basis,  its  commitments  and  long-term
liabilities.

The Company's liquid assets consist of cash and cash equivalents,  which include
investments in short-term  investments.  The level of these assets are dependent
on the Company's operating financing and investment  activities during any given
period. At December 31, 1999, cash and cash equivalents total $791,000.

Net cash provided by operating activities (the cash effects of transactions that
enter into the determination of net income -- e.g., non-cash items, amortization
and  depreciation,  investment  securities,  loss (gain )


                                       10
<PAGE>

on sale of securities  available for sale and provision for loan losses) for the
year ended  December 31, 1999 was $266,000,  a decrease of $24,000 from December
31, 1998.

Net cash used for investing  activities  (i.e.,  cash  receipts,  primarily from
investment securities and mortgage-backed securities portfolios, certificates of
deposits in other banks, and the loan portfolio) for the year ended December 31,
1999 totaled $9,843,000,  an increase of $6,332,000 from December 31, 1998. This
increase was primarily  attributable  to net cash used of $2,360,000 to fund net
investments securities and $3,102,000 to fund the growth in the loan portfolio.

Net cash provided by financing  activities (i.e.,  cash receipts  primarily from
net  increases  in  deposits)  for the year  ended  December  31,  1999  totaled
$9,403,000,  an increase of $6,067,000  from December 31, 1998.  For 1999,  cash
provided  by  financing   activities   reflected  an  increase  in  deposits  of
$1,179,000,  net  borrowings  of  $8,338,000,offset  by cash  used  to  purchase
$130,000 of treasury shares and common stock acquired by the RSP of $81,000. For
1998,  cash  provided by  financing  activities  reflected  $1,905,0000  of cash
proceeds from the initial public offering and $1,2000,000 of borrowings.

Liquidity may be adversely  affected by unexpected  deposit outflows,  excessive
interest rates paid by competitors,  and similar  matters.  Management  monitors
projected  liquidity needs and determines the level desirable,  based in part on
the  Company's  commitment  to make  loans and  management's  assessment  of the
Company's  ability to generate  funds.  The  Company is also  subject to federal
regulations that impose certain minimum capital requirements.

                                       11
<PAGE>
[LOGO]
SNODGRASS
Certified Public Accountants and Consultants


                         REPORT OF INDEPENDENT AUDITORS
                         ------------------------------



Board of Directors and Stockholders
Carnegie Financial Corporation

We  have  audited  the  accompanying  consolidated  balance  sheet  of  Carnegie
Financial Corporation and subsidiary,  as of December 31, 1999 and 1998, and the
related consolidated  statements of income, changes in stockholders' equity, and
cash  flows  for the  years  then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management as well as evaluating the overall financial  statement  presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Carnegie Financial
Corporation  and subsidiary as of December 31, 1999 and 1998, and the results of
their  operations  and their cash  flows for the years then ended in  conformity
with generally accepted accounting principles.




/s/ S.R. Snodgrass, A.C.
--------------------------------
Wexford, PA
February 29, 2000

<TABLE>
<CAPTION>
<S>                                                     <C>
S.R. Snodgrass, A.C.
1000 Stonewood Drive, Suite 200 Wexford, PA  15090-8399  Phone: 724-934-0344  Facsimile: 724-934-0345
</TABLE>


                                       12
<PAGE>
                         CARNEGIE FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                           1999             1998
                                                                       ------------    ------------
<S>                                                                   <C>             <C>
ASSETS
     Cash and due from banks                                           $    504,005    $    316,515
     Interest-bearing deposits in other banks                               286,780         648,973
                                                                       ------------    ------------
     Cash and cash equivalents                                              790,785         965,488

     Certificates of deposit in other banks                                 100,000         199,000
     Investment securities available for sale                             3,323,894       1,259,532
     Investment securities held to maturity (market
       value of $144,870 and $503,083)                                      145,000         489,287
     Mortgage-backed securities available for sale                          690,164       1,026,442
     Mortgage-backed securities held to maturity (market
       value of $750,369 and $1,082,927)                                    743,385       1,066,910
     Loans receivable (net of allowance for loan losses
       of $203,648 and $138,860)                                         22,518,456      14,512,121
     Accrued interest receivable                                            180,797         114,675
     Premises and equipment                                                 225,827         248,228
     Federal Home Loan Bank stock                                           564,900         102,900
     Other assets                                                           205,393         100,061
                                                                       ------------    ------------
             TOTAL ASSETS                                              $ 29,488,601    $ 20,084,644
                                                                       ============    ============

LIABILITIES
     Deposits                                                          $ 16,551,544    $ 15,372,170
     Borrowed funds                                                       9,537,500       1,200,000
     Advances by borrowers for taxes and insurance                          275,758         179,563
     Accrued interest payable and other liabilities                         431,191         295,492
                                                                       ------------    ------------
             TOTAL LIABILITIES                                           26,795,993      17,047,225
                                                                       ------------    ------------
Commitments and contingencies

STOCKHOLDERS' EQUITY
     Preferred stock, no par value; 2,000,000 shares
       authorized; none issued                                                 --              --
     Common stock, $.10 par value; 4,000,000 shares                          23,805          23,805
       authorized, 238,050 issued
     Additional paid-in capital                                           2,062,493       2,072,044
     Retained earnings - substantially restricted                         1,203,806       1,118,054
     Unallocated shares held by Employee Stock Ownership Plan (ESOP)       (161,874)       (180,918)
     Unallocated shares held by Restricted Stock Plan (RSP)                 (64,750)           --
     Accumulated other comprehensive income (loss)                         (241,366)          4,434
     Treasury stock, at cost (13,274 shares)                               (129,506)           --
                                                                       ------------    ------------
             TOTAL STOCKHOLDERS' EQUITY                                   2,692,608       3,037,419
                                                                       ------------    ------------
             TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                $ 29,488,601    $ 20,084,644
                                                                       ============    ============
</TABLE>

See accompanying notes to the consolidated financial statements.

                                       13
<PAGE>
                         CARNEGIE FINANCIAL CORPORATION
                        CONSOLIDATED STATEMENT OF INCOME

<TABLE>
<CAPTION>
                                                              Year Ended December 31,
                                                                1999           1998
                                                            -----------   ------------
<S>                                                        <C>            <C>
INTEREST AND DIVIDEND INCOME
     Loans receivable                                       $ 1,466,934    $   997,850
     Interest-bearing deposits in other banks                    39,475         44,351
     Investment securities
         Taxable                                                241,616        112,545
         Exempt from federal income tax                          12,072         27,371
     Mortgage-backed securities                                 104,609        161,926
                                                            -----------    -----------
             Total interest and dividend income               1,864,706      1,344,043
                                                            -----------    -----------
INTEREST EXPENSE
     Deposits                                                   638,423        686,825
     Borrowed funds                                             371,543          8,941
                                                            -----------    -----------
             Total interest expense                           1,009,966        695,766
                                                            -----------    -----------
NET INTEREST INCOME                                             854,740        648,277
Provision for loan losses                                        65,831         43,938
                                                            -----------    -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES             788,909        604,339
                                                            -----------    -----------
NONINTEREST INCOME
     Service fees                                                86,897         35,281
     Investment securities gains (losses), net                  (21,578)         2,606
     Other income                                                48,741         31,070
                                                            -----------    -----------
             Total noninterest income                           114,060         68,957
                                                            -----------    -----------
NONINTEREST EXPENSE
     Compensation and employee benefits                         378,036        352,756
     Occupancy and equipment                                     71,296         43,114
     Real estate operations, net                                   --           60,867
     Data processing                                            109,035        117,611
     Professional fees                                           69,501         22,203
     Other                                                      124,037        128,698
                                                            -----------    -----------
             Total noninterest expense                          751,905        725,249
                                                            -----------    -----------
Income (loss) before income tax expense (benefit)               151,064        (51,953)
Income tax expense (benefit)                                     42,834        (13,620)
                                                            -----------    -----------
NET INCOME (LOSS)                                           $   108,230    $   (38,333)
                                                            ===========    ===========
EARNINGS (LOSS) PER SHARE (Since inception July 10, 1998)
     Basic                                                  $      0.47    $     (0.13)
     Diluted                                                       0.46          (0.13)
</TABLE>
See accompanying notes to the consolidated financial statements.


                                       14
<PAGE>
                         CARNEGIE FINANCIAL CORPORATION
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                                         Unallo-    Unallo-     Other
                                             Retained    cated      cated       Compre-                  Total
                               Additional    Earnings    Shares     Shares      hensive                  Stock-     Compre-
                       Common    Paid-in   Substantially Held by    Held by     Income      Treasury    holders'    hensive
                       Stock     Capital    Restricted     ESOP      RSP        (Loss)       Stock       Equity       Loss
                      -------  -----------  ------------ --------  ----------   --------    --------   -----------  ---------
<S>                  <C>      <C>          <C>          <C>         <C>        <C>         <C>        <C>         <C>
Balance,
  December 31, 1997   $    --  $       --   $1,156,387   $    --     $     --   $  13,658   $     --   $1,170,045


Net loss                                       (38,333)                                                   (38,333) $ (38,333)
Other
comprehensive loss:
  Unrealized loss
    on available
    for sale
    securities,
    net of tax
    benefit of
    $4,752                                                                         (9,224)                 (9,224)    (9,224)
                                                                                                                   ---------
Comprehensive loss                                                                                                 $ (47,557)
                                                                                                                   =========
Issuance of
  238,050 shares
  of common stock
  on July 10, 1998,
  net of conversion
  costs                23,805   2,072,044                 (190,440)                                     1,905,409
Release of earned
  ESOP shares                                                9,522                                          9,522
                      -------- -----------  -----------  ----------  ---------   --------  ---------   ----------
Balance,
  December 31, 1998    23,805   2,072,044    1,118,054    (180,918)        --       4,434         --    3,037,419

Net income                                     108,230                                                    108,230  $ 108,230
Other
comprehensive loss:
  Unrealized loss
    on available for
    sale securities,
    net of tax
    benefit of
    $126,624                                                                     (245,800)               (245,800)  (245,800)
                                                                                                                   ---------
Comprehensive loss                                                                                                 $(137,570)
                                                                                                                   =========
Release of earned
  ESOP shares                      (2,409)                  19,044                                         16,635
Treasury stock
  purchased, at cost                                                                        (129,506)    (129,506)
Common stock acquired
  by RSP                           (7,142)                            (80,937)                            (88,079)
Release of earned
  RSP shares                                                           16,187                              16,187
Cash dividends paid
  ($.10 per share)                             (22,478)                                                   (22,478)
                      -------- -----------  -----------  ----------  ---------  ---------  ---------   ----------
Balance,
  December 31, 1999    $23,805  $2,062,493   $1,203,806   $(161,874)  $(64,750) $(241,366) $(129,506)  $2,692,608
                      ======== ===========  ===========  ==========  =========  =========  =========   ==========
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
                                                                  1999             1998
                                                             ---------------  -----------
<S>                                                           <C>          <C>
Components of other comprehensive loss:
    Change in net unrealized loss on investment
      securities available for sale                            $ (231,559) $     (7,504)
     Realized (gains) losses included in net income,
     net of tax benefit of $7,337 and tax expense of $886          14,241        (1,720)
                                                               ----------  ------------
Total                                                          $ (245,800) $     (9,224)
                                                               ==========  ============
</TABLE>
See accompanying notes to the consolidated financial statements.

                                       15
<PAGE>
                         CARNEGIE FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                            Year Ended December 31,
                                                                            1999               1998
                                                                      -----------------  -----------------
<S>                                                               <C>                  <C>
OPERATING ACTIVITIES
     Net income (loss)                                             $           108,230  $         (38,333)
     Adjustments to reconcile net loss to
       net cash provided by operating activities:
         Provision for loan losses                                              65,831             43,938
         Depreciation, amortization, and accretion, net                        (22,536)            10,973
         Net losses (gains) on sale of real estate owned                             -             58,479
         Investment securities losses (gains), net                              21,578             (2,606)
         Deferred income taxes                                                  42,119            (20,124)
         Increase in accrued interest receivable                               (66,122)            (7,314)
         Increase (decrease) in accrued interest payable                       137,722             (9,320)
         Amortization of ESOP unearned compensation                             19,044                  -
         Amortization of RSP unearned compensation                              16,187                  -
         Other, net                                                            (55,969)           254,195
                                                                      -----------------  -----------------
         Net cash provided by operating activities                             266,084            289,888
                                                                      -----------------  -----------------

INVESTING ACTIVITIES
     Decrease in certificates of deposit in other banks                         99,000                  -
     Investment securities available for sale:
         Purchases                                                          (2,993,369)        (1,616,699)
         Proceeds from sales                                                   601,130            417,248
         Maturities and repayments                                             300,000          1,467,029
     Maturities and repayments of investments held to maturity                  45,000            425,000
     Mortgage-backed securities available for sale:
         Purchases                                                                   -           (508,321)
         Proceeds from sales                                                         -            143,493
         Maturities and repayments                                             320,183            240,915
     Maturities and repayments of mortgage-backed securities
       held to maturity                                                        323,229            656,853
     Net increase in loans receivable                                       (8,072,166)        (4,970,699)
     Proceeds from sale of real estate owned                                         -            421,847
     Purchase of Federal Home Loan Bank stock                                 (462,000)          (102,900)
     Purchase of premises and equipment, net                                    (4,420)           (85,153)
                                                                      -----------------  -----------------
         Net cash used for investing activities                             (9,843,413)        (3,511,387)
                                                                      -----------------  -----------------

FINANCING ACTIVITIES
     Net increase in deposits                                                1,179,374            194,253
     Net increase in advances by borrowers
       for taxes and insurance                                                  96,195             36,434
     Proceeds from borrowed funds                                            8,537,500          1,200,000
     Repayment of borrowed funds                                              (200,000)                 -
     Purchase of treasury stock, at cost                                      (129,506)                 -
     Common stock acquired by RSP                                              (80,937)                 -
     Net proceeds from the issuance of common stock                                  -          1,905,409
                                                                      -----------------  -----------------
         Net cash provided by financing activities                           9,402,626          3,336,096
                                                                      -----------------  -----------------

         Increase (decrease) in cash and cash equivalents                     (174,703)           114,597

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                 965,488            850,891
                                                                      -----------------  -----------------

CASH AND CASH EQUIVALENTS AT END OF YEAR                           $           790,785  $         965,488
                                                                      =================  =================

SUPPLEMENTAL CASH FLOW DISCLOSURE
     Cash paid during the year for:
         Interest on deposits and borrowings                       $           872,244 $          705,086
         Income taxes                                                           41,250             26,378
</TABLE>

See accompanying notes to the consolidated financial statements.


                                       16
<PAGE>
                         CARNEGIE FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary  of  significant  accounting  and  reporting  policies  applied in the
presentation of the accompanying financial statements follows:

Nature of Operations and Basis of Presentation
----------------------------------------------

On July 10, 1998,  Carnegie Financial  Corporation (the "Company") was formed as
part  of  a  corporate   reorganization   completed  in   connection   with  the
mutual-to-stock  conversion  of the  Carnegie  Savings Bank (the  "Bank").  As a
result of this  transaction,  the Bank became a  wholly-owned  subsidiary of the
Company.  The  Company's  principal  sources of revenue  emanate  from  interest
earnings  on its  investment,  mortgage-backed  securities,  and  mortgage  loan
portfolios.  The Bank is a  federally-chartered  stock  savings  bank located in
Carnegie,  Pennsylvania.  The Company and the Bank are subject to regulation and
supervision by the Office of Thrift Supervision.

The consolidated financial statements of the Company include the accounts of its
wholly-owned  subsidiary,  the Bank.  All  intercompany  transactions  have been
eliminated  in  consolidation.  The  investment  in  subsidiary  on  the  parent
company's financial  statements is carried at the parent compan's equity in the
underlying net assets of the Bank.

The  accounting  principles  followed by the Company and the methods of applying
these principles conform with generally accepted accounting  principles and with
general  practice  within the  banking  industry.  In  preparing  the  financial
statements, management is required to make estimates and assumptions that affect
the reported  amounts of assets and liabilities as of the balance sheet date and
revenues and expenses for the period.  Actual results could differ significantly
from those estimates.

Investment and Mortgage-backed Securities
-----------------------------------------

Investment securities,  including mortgage-backed  securities, are classified at
the time of  purchase,  based  upon  management's  intentions  and  ability,  as
securities  held to maturity or securities  available for sale.  Debt securities
acquired with the intent and ability to hold to maturity are  classified as held
to maturity and are stated at cost and adjusted for  amortization of premium and
accretion  of  discount,  which are  computed  using a level  yield  method  and
recognized as adjustments of interest income. Certain other debt securities have
been  classified  as  available  for sale to serve  principally  as a source  of
liquidity.  Unrealized holding gains and losses on available for sale securities
are reported as a separate  component of stockholder'  equity, net of tax, until
realized.  Realized  securities gains and losses are computed using the specific
identification  method.  Interest and  dividends on  investment  securities  are
recognized as income when earned.

Common stock of the Federal Home Loan Bank (the "FHLB") represents  ownership in
an institution  which is  wholly-owned  by other  financial  institutions.  This
equity  security  is  accounted  for at  cost  and  reported  separately  on the
accompanying consolidated balance sheet.

Loans Receivable
----------------

Loans  receivable  are  stated at their  unpaid  principal  amounts,  net of the
allowance for loan losses. Interest on loans is recognized as income when earned
on the accrual method. Interest accrued on loans more than 90 days delinquent is
generally offset by a reserve for uncollected  interest and is not recognized as
income.

                                       17
<PAGE>

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loans Receivable (Continued)
----------------

The accrual of interest is generally  discontinued  when  management has serious
doubts about further  collectibility  of principal or interest,  even though the
loan is currently  performing.  A loan may remain on accrual  status if it is in
the process of collection and is either guaranteed or well secured.  When a loan
is placed on  nonaccrual  status,  unpaid  interest is charged  against  income.
Interest received on nonaccrual loans is either applied to principal or reported
as interest income,  according to managemen's judgment as to the collectibility
of principal.

Allowance for Loan Losses
-------------------------

The allowance for loan losses  represents the amount which management  estimates
is adequate to provide for potential losses in its loan portfolio. The allowance
method is used in providing  for loan losses.  Accordingly,  all loan losses are
charged to the  allowance,  and all recoveries are credited to it. The allowance
for loan  losses is  established  through a provision  for loan losses  which is
charged to operations.  The provision is based on management's evaluation of the
adequacy of the  allowance  for loan losses which  encompasses  the overall risk
characteristics of the various portfolio segments,  past experience with losses,
the impact of economic conditions on borrowers,  and other relevant factors. The
estimates  used in  determining  the adequacy of the  allowance for loan losses,
including  the  amounts  and timing of future  cash flows  expected  on impaired
loans, are particularly susceptible to significant changes in the near term.

A loan is  considered  impaired  when it is probable the borrower will not repay
the loan  according to the  original  contractual  terms of the loan  agreement.
Management  has  determined  that first  mortgage  loans on  one-to-four  family
properties  and all consumer  loans  represent  large groups of  smaller-balance
homogeneous loans that are to be collectively  evaluated.  Loans that experience
insignificant  payment delays,  which are defined as 90 days or less,  generally
are not classified as impaired.  A loan is not impaired during a period of delay
in payment if the Company expects to collect all amounts due including  interest
accrued at the  contractual  interest  rate for the  period of delay.  All loans
identified as impaired are evaluated  independently  by management.  The Company
estimates credit losses on impaired loans based on the present value of expected
cash flows, or the fair value of the underlying collateral if the loan repayment
is  expected to come from the sale or  operation  of such  collateral.  Impaired
loans,  or  portions  thereof,  are  charged  off when it is  determined  that a
realized  loss has  occurred.  Until such time,  an allowance for loan losses is
maintained  for estimated  losses.  Cash receipts on impaired  loans are applied
first to accrued  interest  receivable,  unless  otherwise  required by the loan
terms,  except when an impaired loan is also a nonaccrual loan in which case the
portion of the receipts related to interest is recognized as income.

Premises and Equipment
----------------------

Premises  and  equipment  are  stated  at cost  less  accumulated  depreciation.
Depreciation is calculated using the straight-line  method over the useful lives
of the related assets.  Expenditures  for maintenance and repairs are charged to
operations  as  incurred.   Costs  of  major  additions  and   improvements  are
capitalized.

Federal Income Taxes
--------------------

Deferred tax assets or liabilities are computed based on the difference  between
the financial statement and income tax basis of assets and liabilities using the
enacted  marginal tax rates.  Deferred income tax expenses or benefits are based
on the changes in the deferred tax asset or liability from period to period.

                                       18
<PAGE>

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock Options
-------------

The Company  maintains  a stock  option plan for the  directors,  officers,  and
employees.  When the exercise  price of the  Company's  stock options is greater
than or equal to the  market  price of the  underlying  stock on the date of the
grant,  no  compensation  expense  is  recognized  in  the  Company's  financial
statements. Pro forma net income and earnings per share are presented to reflect
the impact of the stock  option  plan  assuming  compensation  expense  had been
recognized based on the fair value of the stock options granted under this plan.

Comprehensive Loss
------------------

The Company is required to present  comprehensive  loss in a full set of general
purpose  financial  statements for all periods  presented.  Other  comprehensive
income (loss) is comprised  exclusively of unrealized  holding gains (losses) on
the available for sale securities  portfolio.  The Company has elected to report
the effects of other  comprehensive  income  (loss) as part of the  Consolidated
Statement of Changes in Stockholders' Equity.

Earnings Per Share
------------------

The Company provides dual  presentation of basic and diluted earnings per share.
Basic earnings per share is calculated  utilizing net income or loss as reported
as  the  numerator  and  average  shares  outstanding  as the  denominator.  The
computation of diluted  earnings per share differs in that the dilutive  effects
of any options,  warrants,  and  convertible  securities are adjusted for in the
denominator.

Reclassification of Comparative Amounts
---------------------------------------

Certain  comparative  account balances for the prior year have been reclassified
to conform to the current period classifications. Such reclassifications did not
affect net income or stockholders' equity.


                                       19
<PAGE>

2.  EARNINGS PER SHARE

There  are no  convertible  securities  which  would  affect  the  numerator  in
calculating basic and diluted earnings per share; therefore,  net income or loss
as presented on the  Consolidated  Statement of Income is used as the numerator.
The following  table sets forth the composition of the  weighted-average  common
shares   (denominator)  used  in  the  basic  and  diluted  earnings  per  share
computation.

                                                        1999       1998
                                                     ---------   ---------

Weighted-average common shares
  outstanding                                         266,083     238,196

Average treasury shares                                (9,015)         --

Average unearned ESOP and RSP shares                  (25,552)    (18,767)
                                                     --------    --------

Weighted-average common shares and
  common stock equivalents used to
  calculate basic earnings per share                  231,516     219,429

Additional common stock equivalents
  (RSP shares) used to calculate
  diluted earnings per share
                                                        5,693          --

Additional common stock equivalents
  (stock options) used to calculate
  diluted earnings per share
                                                          504          --
                                                     --------    --------

Weighted-average common shares and
  common stock equivalents used
  to calculate diluted earnings per share             237,713     219,429
                                                     ========    ========

3.    INVESTMENT SECURITIES

On  April 1,  1999,  the  Company  adopted  Statement  of  Financial  Accounting
Standards  No.  133,   "Accounting   for  Derivative   Instruments  and  Hedging
Activities." In adopting Statement No. 133, the Company has reclassified certain
investment securities from the held to maturity  classification to the available
for sale classification.  These securities had an amortized cost of $489,000 and
an estimated market value of $502,000 at the date of reclassi-fication.

The  amortized  cost  and  estimated  market  values  of  investment  securities
available for sale and held to maturity are summarized as follows:
<TABLE>
<CAPTION>
                                                                            1999
                                         ---------------------------------------------------------------------------
                                                                 Gross               Gross            Estimated
                                            Amortized          Unrealized          Unrealized           Market
                                               Cost              Gains               Losses             Value
                                         -----------------  -----------------   -----------------  -----------------
<S>                                  <C>                 <C>                <C>                 <C>
Available for Sale
U.S. Government agency
  securities                          $         3,686,389 $               -- $         (362,495) $        3,323,894
                                         =================  =================   =================  =================

Held to Maturity
Obligations of state and
  political subdivisions              $           145,000 $               90 $             (220) $          144,870
                                         =================  =================   =================  =================
</TABLE>

                                       20

<PAGE>

3.    INVESTMENT SECURITIES (Continued)
<TABLE>
<CAPTION>
                                                                          1998
                                      ------------------------------------------------------------------------------
                                                                 Gross               Gross            Estimated
                                            Amortized          Unrealized          Unrealized           Market
                                               Cost              Gains               Losses             Value
                                         -----------------  -----------------   -----------------  -----------------
<S>                                  <C>                 <C>                <C>                 <C>
Available for Sale
U.S. Government agency
  securities                          $         1,258,263 $               -- $           (9,025) $        1,249,238
Mutual funds                                        9,203              1,091                 --              10,294
                                         -----------------  -----------------   -----------------  -----------------
               Total                  $         1,267,466 $            1,091 $           (9,025) $        1,259,532
                                         =================  =================   =================  =================
Held to Maturity
Obligations of state and
  political subdivisions              $           489,287 $           13,796 $                -- $          503,083
                                         =================  =================   =================  =================
</TABLE>
The amortized cost and estimated  market value of investments in debt securities
at December 31, 1999, by contractual maturity, are shown below.
<TABLE>
<CAPTION>

                                                 Available for Sale                      Held to Maturity
                                         ------------------------------------   ------------------------------------

                                                               Estimated                              Estimated
                                            Amortized            Market            Amortized            Market
                                               Cost              Value                Cost              Value
                                         -----------------  -----------------   -----------------  -----------------
<S>                                  <C>                 <C>                <C>                 <C>
     Due within one year              $                -- $               -- $            45,000 $           45,090
     Due after one year through
       five years                                 350,000            340,850             100,000             99,780
     Due after five years through
       ten years                                  100,000             93,688                  --                 --
     Due after ten years                        3,236,389          2,889,356                  --                 --
                                         -----------------  -----------------   -----------------  -----------------
                    Total             $         3,686,389 $        3,323,894 $           145,000 $          144,870
                                         =================  =================   =================  =================
</TABLE>


Proceeds from sales of investment  securities available for sale and gross gains
and losses  realized  on those sales for the years  ended  December  31, were as
follows:

                                               1999               1998
                                         -----------------  ----------------
     Proceeds from sales              $           601,130 $          417,248
     Gross gains                                   14,468              2,795
     Gross losses                                  36,046                616



                                       21
<PAGE>

4.    MORTGAGE-BACKED SECURITIES

The amortized  cost and estimated  market values of  mortgage-backed  securities
available for sale and held to maturity are summarized as follows:
<TABLE>
<CAPTION>
                                                                            1999
                                         ---------------------------------------------------------------------------
                                                                 Gross               Gross            Estimated
                                            Amortized          Unrealized          Unrealized           Market
                                               Cost              Gains               Losses             Value
                                         -----------------  -----------------   -----------------  -----------------
<S>                                   <C>                 <C>                <C>                 <C>
Available for Sale
     Government National
       Mortgage Association           $            67,652 $              229 $             (989) $           66,892
     Federal Home Loan
       Mortgage Corporation                       133,200                321             (1,007)            132,514
     Federal National Mortgage
       Association                                307,302                715             (5,990)            302,027
     Collateralized mortgage
       obligations                                185,222              3,509                 --             188,731
                                         -----------------  -----------------   -----------------  -----------------
                    Total             $           693,376 $            4,774 $           (7,986) $          690,164
                                         =================  =================   =================  =================

Held to Maturity
     Government National
       Mortgage Association           $           723,307 $            7,239 $             (264) $          730,282
     Federal Home Loan
       Mortgage Corporation                         9,383                 16                 (7)              9,392
     Federal National Mortgage
       Association                                 10,695                 --                 --              10,695
                                         -----------------  -----------------   -----------------  -----------------
                    Total             $           743,385 $            7,255 $             (271) $          750,369
                                         =================  =================   =================  =================
</TABLE>
                                       22
<PAGE>

4.    MORTGAGE-BACKED SECURITIES (Continued)
<TABLE>
<CAPTION>

                                                                            1998
                                         ---------------------------------------------------------------------------
                                                                 Gross               Gross            Estimated
                                            Amortized          Unrealized          Unrealized           Market
                                               Cost              Gains               Losses             Value
                                         -----------------  -----------------   -----------------  -----------------
<S>                                  <C>                 <C>                <C>                 <C>
Available for Sale
     Government National
        Mortgage Association          $           104,860 $              559 $               --  $          105,419
     Federal Home Loan
        Mortgage Corporation                      170,074              1,593               (141)            171,526
     Federal National Mortgage
        Association                               394,215              3,371               (424)            397,162
     Collateralized mortgage
        obligations                               342,641              9,694                 --             352,335
                                         -----------------  -----------------   -----------------  -----------------
                    Total             $         1,011,790 $           15,217 $             (565) $        1,026,442
                                         =================  =================   =================  =================

Held to Maturity
     Government National
        Mortgage Association          $         1,031,893 $           16,039 $               --  $        1,047,932
     Federal Home Loan
        Mortgage Corporation                       22,378                211                 --              22,589
     Federal National Mortgage
        Association                                12,639                 --               (233)             12,406
                                         -----------------  -----------------   -----------------  -----------------
                    Total             $         1,066,910 $           16,250 $             (233) $        1,082,927
                                         =================  =================   =================  =================
</TABLE>


The amortized cost and estimated market value of  mortgage-backed  securities at
December 31, 1999, by  contractual  maturity,  are shown below.  Mortgage-backed
securities  provide for periodic  payments of  principal  and  interest.  Due to
expected repayment terms being  significantly less than the underlying  mortgage
loan pool contractual maturities,  the estimated lives of these securities could
be significantly shorter.
<TABLE>
<CAPTION>
                                                 Available for Sale                      Held to Maturity
                                         ------------------------------------   ------------------------------------
                                                               Estimated                              Estimated
                                            Amortized            Market            Amortized            Market
                                               Cost              Value                Cost              Value
                                         -----------------  -----------------   -----------------  -----------------
<S>                                           <C>                <C>                  <C>               <C>
     Due after one year through
       five years                              $   28,271         $   28,562           $      --         $       --
     Due after five years through
       ten years                                   60,444             61,829               9,383              9,399
     Due after ten years                          604,661            599,773             734,002            740,970
                                         -----------------  -----------------   -----------------  -----------------
                    Total                      $  693,376         $  690,164           $ 743,385         $  750,369
                                         =================  =================   =================  =================
</TABLE>


Proceeds  from  sales  of  mortgage-backed  securities  available  for  sale was
$143,493  and gross gains of $427 was realized on those sales for the year ended
December 31, 1998. There were no sales in 1999.

                                       23

<PAGE>

5.    LOANS RECEIVABLE

Loans receivable consists of the following:

                                                   1999               1998
                                             -----------------  ----------------
Mortgage loans:
     One-to-four family                   $      17,811,141 $     10,988,748
     Home equity                                    775,417          766,497
     Construction                                 1,573,450        1,251,904
     Commercial                                   1,069,936          490,626
                                             ---------------  ---------------
                                                 21,229,944       13,497,775
                                             ---------------  ---------------
Consumer loans:
     Share loans                                    144,126          111,061
     Automobile loans                               513,457          450,524
     Other                                          270,104          287,887
                                             ---------------  ---------------
                                                    927,687          849,472
                                             ---------------  ---------------
Commercial:
     Commercial lines of credit                     564,473          303,734
                                             ---------------  ---------------

                    Subtotal                     22,722,104       14,650,981
Less:
     Allowance for loan losses                      203,648          138,860
                                             ---------------  ---------------

                    Total                 $      22,518,456 $     14,512,121
                                             ===============  ===============

The Company's  primary  business  activity is with customers  located within its
local trade area.  Residential,  consumer,  and  commercial  loans are  granted.
Although the Company has a diversified  loan  portfolio at December 31, 1999 and
1998,  the  repayment  of these  loans is  dependent  upon  the  local  economic
conditions in its immediate trade area.

Activity in the allowance for loan losses for the years ended December 31, is as
follows:

                                                     1999         1998
                                               ------------  -----------

     Balance, January 1                     $      138,860 $    114,832
     Add:
       Provisions charged to operations             65,831       43,938
       Loan recoveries                                 430           --

     Less loans charged off                          1,473       19,910
                                               ------------  -----------
     Balance, December 31                   $      203,648 $    138,860
                                               ============  ===========

The Company had nonaccrual loans of $38,720 and $57,000 at December 31, 1999 and
1998, respectively, which in management's opinion did not meet the definition of
impaired. Interest income on loans would have been increased by $997 and $1,919,
respectively,  if these loans had  performed in accordance  with their  original
terms.

                                       24
<PAGE>

5.    LOANS RECEIVABLE (Continued)

In the normal  course of business,  loans are extended to  directors,  executive
officers, and their associates.  A summary of loan activity for those directors,
executive officers,  and their associates with aggregate loan balances in excess
of $60,000 for the year ended December 31, 1999, is as follows:

          1998            Additions           Repayments            1999
    -----------------  -----------------   -----------------  -----------------

    $    292,809           $   --             $  5,664           $  287,145


6.    ACCRUED INTEREST RECEIVABLE

Accrued interest receivable consists of the following:

                                              1999               1998
                                        -----------------  -----------------

     Investment securities                     $  56,730          $  21,191
     Mortgage-backed securities                   14,160             17,772
     Interest-bearing deposits                       888              2,336
     Loans receivable                            109,019             73,376
                                        -----------------  -----------------
                  Total                        $ 180,797          $ 114,675
                                        =================  =================

7.    PREMISES AND EQUIPMENT

Premises and equipment consist of the following:

                                                   1999               1998
                                        -----------------  -----------------

     Land and improvements                     $   7,900          $   7,900
     Buildings and improvements                  254,384            254,384
     Furniture and equipment                     177,976            173,630
                                        -----------------  -----------------
                                                 440,260            435,914
     Less accumulated depreciation               214,433            187,686
                                        -----------------  -----------------

                    Total                      $ 225,827          $ 248,228
                                        =================  =================

Depreciation  expense for the years ended December 31, 1999 and 1998 was $26,747
and $21,803, respectively.

8.    FEDERAL HOME LOAN BANK STOCK

The Bank is a member of the FHLB  System.  As a member,  the Bank  maintains  an
investment in the capital stock of the FHLB of Pittsburgh, at cost, in an amount
not less than the greater of one percent of its  outstanding  home loans or five
percent of its outstanding notes payable to the FHLB of Pittsburgh as calculated
at December 31 of each year.


                                       25

<PAGE>

9.    DEPOSITS

Comparative details of deposits are as follows:
<TABLE>
<CAPTION>
                                                      1999                                     1998
                                      -------------------------------------     ------------------------------------
                                           Amount                %                   Amount               %
                                      -----------------  ------------------     -----------------  -----------------
<S>                                <C>                             <C>      <C>                             <C>
Noninterest-bearing                 $          914,839                5.53 % $           582,489               3.79 %
                                      -----------------  ------------------     -----------------  -----------------
Interest-bearing
     Savings                                 3,739,191               22.59             3,647,869              23.73
     NOW checking                            1,479,222                8.94             1,247,990               8.12
                                      -----------------  ------------------     -----------------  -----------------
                                             5,218,413               31.53             4,895,859              31.85
                                      -----------------  ------------------     -----------------  -----------------

Time certificates of deposit
     2.00 - 3.99%                              710,393                4.29               513,490               3.34
     4.00 - 5.99%                            5,566,611               33.63             4,398,613              28.61
     6.00 - 7.99%                            3,954,869               23.89             4,719,873              30.70
     8.00 - 9.99%                              186,419                1.13               261,846               1.71
                                      -----------------  ------------------     -----------------  -----------------
                                            10,418,292               62.94             9,893,822              64.36
                                      -----------------  ------------------     -----------------  -----------------
               Total                $       16,551,544              100.00 % $        15,372,170             100.00 %
                                      =================  ==================     =================  =================
</TABLE>


The aggregate  amount of certificates of deposit with a minimum  denomination of
$100,000  was   $1,255,737  and  $1,253,000  at  December  31,  1999  and  1998,
respectively. Deposits in excess of $100,000 are not federally insured.

The scheduled maturities of time certificates of deposit as of December 31, 1999
are as follows:

     Within one year                             $        4,803,812
     Beyond one year but within two years                 2,498,095
     Beyond two years but within three years              1,704,994
     Beyond three years but within five years             1,101,286
     Beyond five years                                      310,105
                                                   -----------------
          Total                                  $       10,418,292
                                                   =================

Interest  expense by deposit  category  for the years ended  December  31, is as
follows:

                                               1999         1998
                                            ----------  -----------

     Savings                             $     90,408 $     89,104
     NOW                                       29,217       22,841
     Time certificates of deposit             518,798      574,880
                                            ----------  -----------
           Total                         $    638,423 $    686,825
                                            ==========  ===========

                                       26
<PAGE>

10.  BORROWED FUNDS

Borrowed  funds consist of fixed and  adjustable  rate advances from the FHLB of
Pittsburgh as follows:

                            Interest
        Maturity             Rate         1999          1998
     ------------------     --------    ----------    ---------

     January 4, 1999         5.00%    $        --    $  200,000
     January 24, 2000        6.44%      2,000,000            --
     December 30, 2000       4.06%      2,537,500            --
     October 16, 2003        6.28%      1,000,000     1,000,000
     December 17, 2004       5.60%      2,000,000            --
     January 22, 2009        4.99%      2,000,000            --
                                        ---------     ----------
                                      $ 9,537,500    $1,200,000
                                        =========    ===========

The  Bank  has the  capability  to  borrow  additional  funds  through  a credit
arrangement with the FHLB. This credit  arrangement is subject to annual renewal
and incurs no service  charges.  Borrowings  are  secured by a blanket  security
agreement  on certain  investment  and  mortgage-backed  securities,  qualifying
residential  mortgages,  and the Bank's investment in FHLB stock. As of December
31, 1999, the Bank's maximum borrowing capacity with the FHLB was $17.1 million.

11.   INCOME TAXES

The components of income tax expense  (benefit) for the years ended December 31,
are summarized as follows:

                                             1999               1998
                                       -----------------  -----------------

Current payable (receivable):
     Federal                        $            84,953 $          (6,755)
     State                                           --            13,259
                                       -----------------  -----------------
                                                 84,953             6,504
Deferred taxes                                  (35,938)          (30,758)
Change in valuation allowance                    (6,181)           10,634
                                       -----------------  -----------------
                         Total      $            42,834 $         (13,620)
                                       =================  =================

                                       27
<PAGE>

11.   INCOME TAXES (Continued)

The following temporary differences gave rise to the net deferred tax assets:
<TABLE>
<CAPTION>
                                                              1999          1998
                                                            --------    -----------
<S>                                                     <C>         <C>
Deferred tax assets:
     Allowance for loan losses                           $    69,240     $   47,212
     Net unrealized loss on securities                       124,340             --
     Accrual to cash adjustment                               64,683         58,504
     Deferred loan fees                                        6,443             --
     Management recognition plan                               5,504             --
     State net operating loss carryforward                     4,453         10,634
                                                            ---------    -----------
                    Total gross deferred tax assets          274,663        116,350
                    Less valuation allowance                 (4,453)       (10,634)
                                                            ---------  -------------
                          Total deferred tax assets          270,210        105,716
                                                            ---------  -------------

Deferred tax liabilities:
     Net unrealized gain on securities                            --          5,099
     Premises and equipment                                   17,591         19,556
                                                            ---------  -------------
                    Total gross deferred tax liabilities      17,591         24,655
                                                            ---------  -------------
                          Net deferred tax assets        $   252,619 $       81,061
                                                            =========  =============
</TABLE>

The  reconciliation  of the federal  statutory rate and the Company's  effective
income tax rate is as follows:

                                             1999                  1998
                                      --------------------  -------------------
                                                     % of                % of
                                                   Pre-tax             Pre-tax
                                       Amount       Income   Amount     Loss
                                      ---------   --------- --------  ---------

Provision (benefit) at
  statutory rat                     $   58,582      34.0 %  $(17,664)    (34.0)%
State tax expense,
  net of federal tax                        --        --       8,751      16.8
Tax-exempt income                       (4,104)     (2.4)     (9,200)    (17.7)
Other                                  (11,644)     (6.6)      4,493       8.7
                                      ---------    ------   ---------- --------

     Actual tax expense (benefit)
        and effective rate          $   42,834      25.0 %  $(13,620)    (26.2)%
                                      =========    =======  ========== =========

The Bank is subject to the Pennsylvania Mutual Thrift Institution's tax which is
calculated at 11.5 percent of earnings  based on generally  accepted  accounting
principles with certain adjustments.

12.   EMPLOYEE BENEFITS

Simplified Employee Pension Plan ("SEP")
----------------------------------------

The Company  maintains a SEP plan which provides for an annual  contribution  at
the  discretion  of the Board of  Directors  up to 15  percent  of the  eligible
employee's compensation.  Employees are eligible when they attain the age of 21,
have worked for the Company at least one and a half of the immediately preceding
five plan years, and have received annual compensation of at least three hundred
dollars.  Contributions  made for the year ended December 31, 1998 were $22,067.
No contributions were made in 1999.

                                       28
<PAGE>

12.   EMPLOYEE BENEFITS (Continued)

Directors Consultation and Supplemental Executive Retirement Plans
------------------------------------------------------------------

The Company maintains a nonqualified  Directors Consultation and Retirement Plan
(the "Directors Plan") to provide post-retirement  benefits over a period of ten
years to members of the Board of Directors who have completed at least ten years
of service and have  attained  the age of 60.  Pursuant to the  Directors  Plan,
benefits  become fully vested and payable upon  disability,  death, or change of
control of the Company. No expense was incurred for the years ended December 31,
1999 and 1998, respectively.

The Company also maintains a nonqualified Supplemental Executive Retirement Plan
(the "Plan") to provide an executive officer with post-retirement benefits for a
period of ten years,  provided  an  officer  has at least 25 years of service at
retirement  at age 65.  Pursuant to the Plan,  benefits  become fully vested and
payable  upon  disability,  death,  or change of control of the  Company.  Total
expenses  incurred for the years ended  December  31, 1999 and 1998  amounted to
$42,063 and $35,580, respectively.

The  assumptions of 6.50 percent and 5.00 percent for the discount rate and rate
of compensation  increase,  respectively,  were used in determining net periodic
post-retirement  costs for the Directors  Consultation  and Retirement  Plan and
Supplemental Retirement Plan for the executive officers in 1999 and 1998.

Stock Option Plan
-----------------

On January 11, 1999, the Board of Directors approved, and stockholders ratified,
the  formation  of a stock  option  plan.  The plan will  provide  for  granting
incentive stock options and  nonstatutory  stock options for executive  officers
and  non-employee  directors  of the  Company.  A  total  of  23,805  shares  of
authorized  but unissued  common stock are reserved for issuance under the plan,
which expires ten years from the date of shareholder ratification. The per share
exercise  price of an option  granted  will not be less than the fair value of a
share of common stock on the date the option is granted.

On January 11, 1999, non-statutory stock options for non-employee directors were
granted  for the  purchase  of 4,760  shares and  incentive  stock  options  for
officers  and  employees  were granted for the  purchase of 11,663  shares.  The
recipients of these stock options vest over a five-year period of time.

The following table presents share data related to the outstanding options:

                                                         Weighted-
                                                          average
                                                         Exercise
                                          1999             Price
                                    -----------------  -----------------

     Outstanding, beginning                       --            $    --
       Granted                                16,423               8.50
       Exercised                                  --                 --
       Forfeited                                  --                 --
                                    -----------------
     Outstanding, ending                      16,423            $  8.50
                                    =================
     Exercisable at year-end                      --
                                    =================


                                       29
<PAGE>

12.   EMPLOYEE BENEFITS (Continued)

Stock Option Plan (Continued)
-----------------

The following table summarizes the  characteristics of stock options at December
31, 1999:

                              Outstanding                      Exercisable
                    ------------------------------------  --------------------
                                                Average                Average
                                Average        Exercise               Exercise
     Exercise Price  Shares      Life            Price      Shares      Price
     -------------- --------   ---------       ---------  --------   ---------

        $ 8.50       16,423      9.00          $ 8.50         --        $ --

Employee Stock Ownership Plan ("ESOP")
--------------------------------------

The Company has an ESOP for the benefit of  employees  who meet the  eligibility
requirements which include having completed one year of service with the Company
and having  attained age 21. The ESOP Trust  purchased  19,044  shares of common
stock in the initial public offering with proceeds from a loan from the Company.
The Bank makes cash  contributions  to the ESOP on an annual basis sufficient to
enable the ESOP to make the  required  loan  payments to the  Company.  The loan
bears  interest at 8.50 percent with  interest  payable  quarterly and principal
payable in equal annual  installments over ten years. The loan is secured by the
shares of the stock purchased.

As debt is  repaid,  shares  are  released  from  collateral  and  allocated  to
qualified  employees  based on the  proportion of debt service paid in the year.
The shares pledged as collateral are reported as unallocated  ESOP shares in the
consolidated balance sheet. As shares are released from collateral,  the Company
reports  compensation  expense equal to the current  market price of the shares,
and the shares become outstanding for earnings per share computations. Dividends
on  allocated  ESOP shares are  recorded as a  reduction  of retained  earnings;
dividends on unallocated ESOP shares are recorded as a reduction of debt.

Compensation  expense  for the ESOP was  $35,780 and $21,123 for the years ended
December 31, 1999 and 1998, respectively.

                                                1999        1998
                                              ---------  ---------

     Allocated shares                             952          --

     Shares released for allocation               952         952

     Unreleased shares                          17,140      18,092
                                             ---------  ----------

     Total ESOP shares                          19,044      19,044
                                             =========  ==========

     Fair value of unreleased shares      $   145,690   $ 156,044
                                             =========  ==========

Restricted Stock Plan ("RSP")
-----------------------------

In 1999,  the Board of  Directors  adopted a RSP for  directors,  officers,  and
employees  which was approved by  stockholders  at a meeting held on January 11,
1999. The objective of this plan is to enable the Company and the Bank to retain
its corporate officers, key employees, and directors who have the experience and
ability  necessary  to  manage  these  entities.  Directors,  officers,  and key
employees  who are  selected  by  members  of a  Board-appointed  committee  are
eligible to receive  benefits under the RSP. The  non-employee  directors of the
Company and the Bank serve as trustees for the RSP, and have the  responsibility
to invest all funds contributed by the Bank to the Trust created for the RSP.

                                       30
<PAGE>

12.   EMPLOYEE BENEFITS (Continued)

Restricted Stock Plan ("RSP") (Continued)
-----------------------------

In 1999, the Trust purchased,  with funds  contributed by the Bank, 9,522 shares
of the  common  stock of the  Company,  of which  1,904  shares  were  issued to
directors,  and 4,948 shares were issued to officers in 1999. As of December 31,
1999 2,670 shares remained unissued. Directors,  officers, and key employees who
terminate  their  association  with the Company  shall  forfeit the right to any
shares which were awarded but not earned.

The Company granted a total of 6,852 shares of common stock on January 11, 1999,
of which,  under the plan,  shares vest over a five-year  period for  directors,
officers,  and employees beginning January 11, 2000. No shares were vested as of
December 31, 1999.  The RSP shares  purchased  initially  will be excluded  from
stockholders' equity. The Company recognizes  compensation expense in the amount
of fair value of the common  stock at the grant date,  pro rata,  over the years
during  which  the  shares  are  payable  and  recorded  as an  addition  to the
stockholders' equity.

Net  compensation  expense  attributable to the RSPs amounted to $16,187 for the
year ended December 31, 1999.

13.   COMMITMENTS AND CONTINGENT LIABILITIES

Commitments
-----------

In the normal course of business,  the Company makes various  commitments  which
are not reflected in the accompanying  consolidated financial statements.  These
instruments  involve,  to varying degrees,  elements of credit and interest rate
risk in excess of the amount  recognized in the consolidated  balance sheet. The
Company's  exposure to credit loss in the event of  nonperformance  by the other
parties to the financial  instruments is represented by the contractual  amounts
as  disclosed.  The Company  minimizes  its  exposure to credit loss under these
commitments  by subjecting  them to credit  approval and review  procedures  and
collateral  requirements as deemed necessary.  Commitments  generally have fixed
expiration dates within one year of their origination.

The off-balance sheet commitments were comprised of the following:

                                                1999               1998
                                          -----------------  -----------------
     Commitments to extend credit:
        Fixed rate commitments         $         1,581,250 $        2,112,904
        Variable rate commitments                  444,588            467,491
                                          -----------------  -----------------
               Total                   $         2,025,838 $        2,580,395
                                          =================  =================

The range of fixed interest rate residential  mortgage loan commitments was 6.75
percent to 7.50 percent at December 31, 1999.

Contingent Liabilities
----------------------

In the normal  course of  business,  the Company is  involved  in various  legal
proceedings  primarily  involving the collection of outstanding  loans.  None of
these  proceedings  are  expected  to have a  material  effect on the  financial
position or operations of the Company.

                                       31
<PAGE>

14.   CAPITAL REQUIREMENTS

Federal regulations require the Company and the Bank to maintain minimum amounts
of capital.  Specifically,  each is required to maintain  certain minimum dollar
amounts  and ratios of Total and Tier I capital to  risk-weighted  assets and of
Tier I capital to average total assets.

In  addition  to  the  capital  requirements,   the  Federal  Deposit  Insurance
Corporation  Improvement  Act  ("FDICIA")  established  five capital  categories
ranging from "well  capitalized"  to "critically  undercapitalized."  Should any
institution  fail  to  meet  the  requirements  to  be  considered   "adequately
capitalized,"  it would become subject to a series of  increasingly  restrictive
regulatory actions.

As of December 31, 1999 and 1998, the Office of Thrift  Supervision  categorized
the  Bank  as  well  capitalized  under  the  regulatory  framework  for  prompt
corrective action. To be classified as a well capitalized financial institution,
Total risk-based,  Tier 1 risk-based,  and Tier 1 Leverage capital, and Tangible
equity capital ratios must be at least 10.0 percent,  6.0 percent,  5.0 percent,
and 1.5 percent, respectively.

The following table  reconciles the Company's  capital under generally  accepted
accounting principles to regulatory capital.

                                                       1999           1998
                                                  ------------ -----------------

 Total capital                                     $ 2,692,608   $   3,037,419
 Accumulated other comprehensive (income) loss         241,366          (4,434)
                                                   ------------  --------------

 Tier I, core, and tangible capital                  2,933,974       3,032,985

 Allowance for loan losses                             187,263         128,537
 Unrealized gain on equity securities                       --             491
                                                   ------------  --------------
 Risk-based capital                                $ 3,121,237   $   3,162,013
                                                   ============  ==============


                                       32
<PAGE>

14.   CAPITAL REQUIREMENTS (Continued)

The consolidated capital position of the Company does not materially differ from
the Bank's;  therefore,  the following  table sets forth the  Company's  capital
position and minimum requirements for the years ended December 31:

                                       1999                      1998
                                 --------------------   ------------------------
                                  Amount      Ratio       Amount       Ratio
                                 ---------   --------   ------------------------

Total Capital
  (to Risk-weighted Assets)
  -------------------------

Actual                          $3,121,237     20.5 %   $3,162,013     30.8 %
For Capital Adequacy Purposes    1,216,249      8.0        821,814      8.0
To Be Well Capitalized           1,520,311     10.0      1,027,268     10.0

Tier I Capital
  (to Risk-weighted Assets)
  -------------------------

Actual                          $2,933,974     19.3 %   $3,032,985     29.5 %
For Capital Adequacy Purposes      608,124      4.0        410,907      4.0
To Be Well Capitalized             912,187      6.0        616,361      6.0

Core Capital
  (to Adjusted Assets)
  --------------------

Actual                          $2,933,974      9.8 %   $3,032,985     16.6 %
For Capital Adequacy Purposes      900,466      3.0        548,558      3.0
To Be Well Capitalized           1,500,777      5.0        914,263      5.0

Tangible Capital
  (to Adjusted Assets)
  --------------------

Actual                          $2,933,974      9.8 %   $3,032,985     16.6 %
For Capital Adequacy Purposes      450,233      1.5        274,279      1.5
To Be Well Capitalized                 N/A      N/A            N/A      N/A


                                       33
<PAGE>

15.   FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the Company's financial instruments at December 31,
are as follows:
<TABLE>
<CAPTION>
                                                        1999                                   1998
                                         ------------------------------------   ------------------------------------
                                             Carrying             Fair              Carrying             Fair
                                              Value              Value               Value              Value
                                         -----------------  -----------------   -----------------  -----------------
<S>                                  <C>                 <C>                <C>                 <C>
Financial assets:
     Cash and due from banks,
        interest-bearing deposits
        in other banks                $           790,785 $          790,785 $           965,488 $          965,488
     Certificates of deposit in
        other banks                               100,000            100,000             199,000            199,000
     Investment securities:
           Available for sale                   3,323,894          3,323,894           1,259,532          1,259,532
           Held to maturity                       145,000            144,870             489,287            503,083
     Mortgage-backed securities:
           Available for sale                     690,164            690,164           1,026,442          1,026,442
           Held to maturity                       743,385            750,369           1,066,910          1,082,927
     Loans receivable                          22,518,456         21,624,939          14,512,121         14,680,910
     Accrued interest receivable                  180,797            180,797             114,675            114,675
     FHLB stock                                   564,900            564,900             102,900            102,900
                                         -----------------  -----------------   -----------------  -----------------
        Total                         $        29,057,381 $       28,170,718 $        19,736,355 $       19,934,957
                                         =================  =================   =================  =================

Financial liabilities:
     Deposits                         $        16,551,544 $       16,369,247 $        15,372,170 $       15,839,354
     Borrowed funds                             9,537,500          9,354,042           1,200,000          1,188,357
     Advances by borrowers
        for taxes and insurance                   275,758            275,758             179,563            179,563
     Accrued interest payable                     150,202            150,202
                                                                                          12,480             12,480
                                         -----------------  -----------------   -----------------  -----------------
        Total                         $        26,515,004 $       26,149,249 $        16,764,213 $       17,219,754
                                         =================  =================   =================  =================
</TABLE>

Financial  instruments are defined as cash, evidence of an ownership interest in
an entity,  or a contract  which  creates an  obligation  or right to receive or
deliver  cash or  another  financial  instrument  from/to  a  second  entity  on
potentially favorable or unfavorable terms.

Fair value is defined as the  amount at which a  financial  instrument  could be
exchanged  in a current  transaction  between  willing  parties  other than in a
forced  or  liquidation  sale.  If a  quoted  market  price is  available  for a
financial  instrument,  the estimated fair value would be calculated  based upon
the market price per trading unit of the instrument.

If no readily  available  market exists,  the fair value estimates for financial
instruments are based upon  management's  judgment  regarding  current  economic
conditions,  interest rate risk,  expected cash flows,  future estimated losses,
and other factors as  determined  through  various  option  pricing  formulas or
simulation modeling.  As many of these assumptions result from judgments made by
management  based upon estimates which are inherently  uncertain,  the resulting
estimated fair values may not be indicative of the amount realizable in the sale
of a particular financial instrument. In addition, changes in the assumptions on
which the estimated  fair values are based may have a significant  impact on the
resulting estimated fair values.

As certain assets,  such as deferred tax assets and premises and equipment,  are
not  considered  financial  instruments,  the estimated  fair value of financial
instruments would not represent the full value of the Company.

                                       34
<PAGE>

15.   FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

The Company employed simulation modeling in determining the estimated fair value
of financial instruments for which quoted market prices were not available based
upon the following assumptions:

Cash and Due from Banks,  Interest-bearing Deposits in Other Banks, Certificates
--------------------------------------------------------------------------------
of Deposit in Other Banks, Accrued Interest Receivable,  FHLB Stock, Advances by
--------------------------------------------------------------------------------
Borrowers for Taxes and Insurance, and Accrued Interest Payable
---------------------------------------------------------------

The fair value is equal to the current carrying value.

Investment and Mortgage-backed Securities
-----------------------------------------

The fair  value of these  securities  is equal to the  available  quoted  market
price. If no quoted market price is available, fair value is estimated using the
quoted market price for similar securities.

Loans Receivable, Deposits, and Borrowed Funds
----------------------------------------------

The fair value of loans is estimated by discounting  the future cash flows using
a simulation  model which estimates  future cash flows based upon current market
rates adjusted for prepayment risk and credit quality.  Savings,  checking,  and
money market  deposit  accounts are valued at the amount payable on demand as of
year-end. Fair values for time deposits and borrowed funds are estimated using a
discounted cash flow calculation that applies  contractual costs currently being
offered in the  existing  portfolio to current  market  rates being  offered for
deposits and borrowings of similar remaining maturities.

Commitments to Extend Credit
----------------------------

These  financial  instruments  are generally not subject to sale,  and estimated
fair values are not readily  available.  The carrying value,  represented by the
net deferred fee arising from the unrecognized  commitment,  and the fair value,
determined by  discounting  the remaining  contractual  fee over the term of the
commitment  using fees currently  charged to enter into similar  agreements with
similar credit risk, are not considered material for disclosure. The contractual
amounts of unfunded commitments are presented in Note 13.

16.  CONVERSION TO A STOCK FORM OF OWNERSHIP AND FORMATION OF HOLDING COMPANY

On December 15, 1997, the Board of Trustees,  subject to regulatory approval and
approval  by the  members  of  the  Bank,  adopted  a Plan  of  Conversion  (the
"Conversion")  to  convert  from a  state-chartered  mutual  savings  bank  to a
federally-chartered stock savings bank and the concurrent formation of a holding
company.

As part of the  conversion,  Carnegie  Financial  Corporation  was  organized in
December  1997 at the  direction  of the Board of  Trustees  of the Bank for the
purpose of  acquiring  all of the capital  stock to be issued by the Bank in the
conversion.  The  Company  became a holding  company  with its only  significant
assets  being  all of the  outstanding  capital  stock of the  Bank,  which  was
acquired  on July 10,  1998 by  exchanging  approximately  $1.0  million  of the
proceeds  received  in the public  offering  for all of the common  stock of the
Bank. From the proceeds of the Conversion,  approximately  $24,000 was allocated
to common stock and $2.1 million,  which is net of $285,000 in conversion costs,
was allocated to additional paid-in capital.

                                       35
<PAGE>

16.  CONVERSION TO A STOCK FORM OF OWNERSHIP  AND  FORMATION OF HOLDING  COMPANY
(Continued)

In accordance  with  regulations,  at the time the Bank  converted from a mutual
savings  bank to a stock  savings  bank,  a portion  of  retained  earnings  was
restricted by establishing a liquidation  account.  The liquidation account will
be  maintained  for the benefit of  eligible  account  holders  who  continue to
maintain  their  accounts  at the Bank  after the  Conversion.  The  liquidation
account will be reduced  annually to the extent that  eligible  account  holders
have reduced their qualifying deposits. Subsequent increases will not restore an
eligible account holder's interest in the liquidation account. In the event of a
complete  liquidation  of the Bank,  each  account  holder  will be  entitled to
receive a distribution from the liquidation  account in an amount  proportionate
to the current adjusted qualifying balances for accounts then held.

17. CONDENSED  FINANCIAL  INFORMATION OF CARNEGIE FINANCIAL  CORPORATION (PARENT
COMPANY ONLY)

                             CONDENSED BALANCE SHEET

                                                           December 31,
                                                       1999            1998
                                                   ------------  --------------
ASSETS
     Cash and due from banks                    $      145,546         622,933
     Investment securities available for sale          233,146         248,413
     Investment in subsidiary bank                   2,234,680       1,980,429
     Loan receivable from ESOP                         161,874         180,918
     Other assets                                       78,597          33,044
                                                   ------------  --------------
TOTAL ASSETS                                    $    2,853,843 $     3,065,737
                                                   ============  ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
     Dividends payable                          $       22,478 $            --
     RSP payable                                        64,750              --
     Other liabilities                                  74,007          28,318
     Stockholders' equity                            2,692,608       3,037,419
                                                   ------------  --------------
TOTAL LIABILITIES AND
     STOCKHOLDERS' EQUITY                       $    2,853,843 $     3,065,737
                                                   ============  ==============


                                       36
<PAGE>

17. CONDENSED  FINANCIAL  INFORMATION OF CARNEGIE FINANCIAL  CORPORATION (PARENT
COMPANY ONLY) (Continued)

                          CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
                                                                                                 For the Period of
                                                                                                   July 10, 1998
                                                                            Year Ended                  to
                                                                         December 31, 1999       December 31, 1998
                                                                       ----------------------  ----------------------
<S>                                                                <C>                        <C>
INCOME
     Interest income                                                $                 30,304 $                11,898

EXPENSES                                                                              43,330                   1,785
                                                                       ----------------------  ----------------------
Income (loss) before equity in undistributed
  earnings of subsidiary                                                             (13,026)                 10,113

Equity in undistributed earnings of subsidiary                                       121,256                 (37,629)
                                                                       ----------------------  ----------------------

NET INCOME (LOSS)                                                   $                108,230 $               (27,516)
                                                                       ======================  ======================


                        CONDENSED STATEMENT OF CASH FLOWS

                                                                                                 For the Period of
                                                                                                   July 10, 1998
                                                                            Year Ended                  to
                                                                         December 31, 1999       December 31, 1998
                                                                       ----------------------  ----------------------
OPERATING ACTIVITIES
     Net income (loss)                                              $                108,230   $            (27,516)
     Adjustments to reconcile net income (loss) to
        net cash provided by operating activities:
            Equity in undistributed earnings of subsidiary                          (121,256)                37,629
            Other, net                                                                77,038                 (4,186)
                                                                       ----------------------  ----------------------
                Net cash provided by operating activities                             64,012                  5,927
                                                                       ----------------------  ----------------------
INVESTING ACTIVITIES
     Additional investment at subsidiary bank                                       (350,000)                    --
     Purchase of investment securities available for sale                                 --               (250,000)
     Payments from ESOP                                                               19,044                  9,522
     Purchase of savings bank stock                                                       --             (1,047,925)
                                                                       ----------------------  ----------------------
                Net cash used for investing activities                              (330,956)            (1,288,403)
                                                                       ----------------------  ----------------------
FINANCING ACTIVITIES
     Common stock acquired by RSP                                                    (80,937)                     --
     Purchase of treasury stock, at cost                                            (129,506)                     --
     Net proceeds from issuance of common stock                                           --               1,905,409
                                                                       ----------------------  ----------------------
                Net cash provided by (used for) financing activities                (210,443)              1,905,409
                                                                       ----------------------  ----------------------

                Increase (decrease) in cash                                         (477,387)                622,933

CASH AT BEGINNING OF PERIOD                                                          622,933                      --
                                                                       ----------------------  ----------------------
CASH AT END OF PERIOD                                               $                145,546   $             622,933
                                                                       ======================  ======================
</TABLE>


                                       37