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

                                    FORM 10-Q
(Mark One)

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

         For the quarterly period ended                June 30, 2006
                                         ---------------------------------------

                                       OR

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

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

                                     Commission file number 0-29709

                   HARLEYSVILLE SAVINGS FINANCIAL CORPORATION
                   ------------------------------------------
             (Exact name of registrant as specified in its charter)

      Pennsylvania                                             23-3028464
-------------------------------                           ---------------------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                            Identification No.)

                271 Main Street, Harleysville, Pennsylvania 19438
--------------------------------------------------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (215) 256-8828
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
Registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark whether the Registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the Exchange  Act.  (Check
one):

Large accelerated filer [_]   Accelerated filer [_]    Non-accelerated filer [X]

Indicate by check mark whether the  Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). [_] Yes [X] No

APPLICABLE ONLY TO CORPORATE ISSUERS:  Indicate the number of shares outstanding
of each of the issuer's  classes of common stock,  as of the latest  practicable
date:

Common Stock, $.01 Par Value, 3,921,177 as of August 11, 2006


<PAGE>
<TABLE>
<CAPTION>

                   HARLEYSVILLE SAVINGS FINANCIAL CORPORATION

                                      Index
                                      -----


                                                                             PAGE(S)
                                                                             -------
<S>                                                                          <C>

Part I  FINANCIAL INFORMATION
         Item 1.  Financial Statements

                  Unaudited Condensed Consolidated Statements of Financial
                  Condition as of June 30, 2006 and September 30, 2005         1

                  Unaudited Condensed Consolidated Statements of Income for
                  the Three and Nine Months Ended June 30, 2006 and 2005       2

                  Unaudited Condensed Consolidated Statements of
                  Comprehensive Income for the Three and Nine Months
                  Ended June 30, 2006 and 2005                                 3

                  Unaudited Condensed Consolidated Statements of
                  Stockholders' Equity for the Nine Months Ended
                  June 30, 2006 and 2005                                       4

                  Unaudited Condensed Consolidated Statements of Cash Flows
                  for the Nine Months Ended June 30, 2006 and 2005             5

                  Notes to Unaudited Condensed Consolidated Financial
                  Statements                                                 6 - 12

         Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                       13 - 16

         Item 3.  Quantitative and Qualitative Disclosures About Market
                  Risk                                                      16 - 17

         Item 4.  Controls and Procedures                                   17 - 18



Part II  OTHER INFORMATION

         Item 1.  Legal Proceedings                                            19

         Item 1A. Risk Factors                                                 19

         Item 2.  Unregistered Sales of Equity Securities and Use
                  of Proceeds                                                  19

         Item 3.  Defaults upon Senior Securities                              19

         Item 4.  Submission of Matters to a Vote of Security Holders          19

         Item 5.  Other information                                            19

         Item 6.  Exhibits                                                     19

         Signatures                                                             -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                    Harleysville Savings Financial Corporation
                        Unaudited Condensed Consolidated Statements of Financial Condition

                                                                                      June 30,       September 30,
                                                                                        2006             2005
                                                                                    -------------    -------------
<S>                                                                                     <C>              <C>
Assets
Cash and amounts due from depository institutions                                   $   1,526,695    $   1,193,285
Interest-bearing deposits in other banks                                                7,769,333        6,741,695
                                                                                    -------------    -------------
     Total cash and cash equivalents                                                    9,296,028        7,934,980
Investment securities held to maturity (fair value -
        June 30, $108,927,000; September 30, $88,404,000)                             110,915,724       87,364,445
Investment securities available-for-sale at fair value                                  4,567,051        2,835,244
Mortgage-backed securities held to maturity (fair value -
        June 30, $219,597,000; September 30, $259,994,000)                            229,622,377      263,963,765
Mortgage-backed securities available-for-sale at fair value                               807,343        1,045,087
Loans receivable (net of allowance for loan losses -
        June 30, $1,955,000; September 30, $1,968,000)                                378,791,591      366,006,917
Accrued interest receivable                                                             3,784,123        3,432,054
Federal Home Loan Bank stock - at cost                                                 15,265,000       16,035,900
Office properties and equipment, net                                                    8,058,890        5,829,694
Deferred income taxes                                                                     363,880          339,587
Prepaid expenses and other assets                                                      13,709,369       12,202,792
                                                                                    -------------    -------------
TOTAL ASSETS                                                                        $ 775,181,376    $ 766,990,465
                                                                                    =============    =============

Liabilities and Stockholders' Equity
Liabilities:
     Deposits                                                                       $ 433,683,617    $ 418,979,655
     Advances from Federal Home Loan Bank                                             286,241,566      297,268,488
     Accrued interest payable                                                           1,336,801        1,358,953
     Advances from borrowers for taxes and insurance                                    5,029,316        1,135,429
     Accounts payable and accrued expenses                                                876,204          672,124
                                                                                    -------------    -------------
Total liabilities                                                                     727,167,504      719,414,649
                                                                                    -------------    -------------

Commitments (Note 9)
Stockholders' equity:
     Preferred Stock:  $.01 par value;
       12,500,000 shares authorized; none issued
     Common stock:  $.01 par value; 25,000,000
       shares authorized; issued June 2006, 3,921,177; Sept. 2005, 3,904,136
       and outstanding, June 2006, 3,840,158; Sept. 2005, 3,900,881                        39,212           39,041
     Paid-in capital in excess of par                                                   7,972,297        7,610,511
     Treasury stock, at cost (June 2006, 81,019 shares; Sept. 2005, 3,255 shares)      (1,428,866)         (60,107)
     Retained earnings - partially restricted                                          41,469,370       39,995,584
     Accumulated other comprehensive loss                                                 (38,141)          (9,213)
                                                                                    -------------    -------------
Total stockholders' equity                                                             48,013,872       47,575,816
                                                                                    -------------    -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                          $ 775,181,376    $ 766,990,465
                                                                                    =============    =============
</TABLE>

See notes to unaudited condensed consolidated financial statements.

                                                     page -1-
<PAGE>
<TABLE>
<CAPTION>

                                 Harleysville Savings Financial Corporation
                           Unaudited Condensed Consolidated Statements of Income

                                                     For the Three Months Ended  For the Nine Months Ended
                                                             June 30,                    June 30,
                                                     -----------------------------------------------------
                                                         2006          2005          2006          2005
                                                         ----          ----          ----          ----
<S>                                                      <C>           <C>         <C>           <C>
INTEREST INCOME:
  Interest and fees on mortgage loans                $ 4,029,498   $ 3,837,297   $11,914,305   $11,390,798
  Interest on mortgage-backed securities               2,650,659     2,976,642     8,253,139     8,760,645
  Interest and fees on consumer and other loans        1,445,980     1,187,392     4,175,349     3,354,950
  Interest and dividends on tax-exempt investments       351,082       343,634     1,043,932     1,030,480
  Interest and dividends on taxable investments        1,445,645       821,684     3,641,547     2,057,250
                                                     -----------   -----------   -----------   -----------
Total interest income                                  9,922,864     9,166,649    29,028,272    26,594,123
                                                     -----------   -----------   -----------   -----------

Interest Expense:
  Interest on deposits                                 3,340,338     2,640,489     9,657,080     7,510,962
  Interest on borrowings                               3,280,298     3,215,587     9,756,035     9,198,880
                                                     -----------   -----------   -----------   -----------
Total interest expense                                 6,620,636     5,856,076    19,413,115    16,709,842
                                                     -----------   -----------   -----------   -----------

Net Interest Income                                    3,302,228     3,310,573     9,615,157     9,884,281
Provision for loan losses                                     --            --            --            --
                                                     -----------   -----------   -----------   -----------
Net Interest Income after Provision
  for Loan Losses                                      3,302,228     3,310,573     9,615,157     9,884,281
                                                     -----------   -----------   -----------   -----------

Non-interest Income:
  Net gain on sales of securities                         18,005        24,260        27,395        88,003
  Net gain on sale of loans                                                           16,672        16,672
  Other Non-interest income                              322,459       338,382       916,954     1,029,404
                                                     -----------   -----------   -----------   -----------
Total non-interest income                                340,464       379,314       944,349     1,134,079
                                                     -----------   -----------   -----------   -----------

Non-interest Expenses:
  Salaries and employee benefits                       1,176,228     1,019,274     3,344,031     3,090,529
  Occupancy and equipment                                384,656       372,118     1,137,674     1,134,525
  Deposit insurance premiums                              13,656        14,416        41,132        43,527
  Other                                                  582,595       611,092     1,638,625     1,720,433
                                                     -----------   -----------   -----------   -----------
Total non-interest expenses                            2,157,135     2,016,900     6,161,462     5,989,014
                                                     -----------   -----------   -----------   -----------

Income before Income Taxes                             1,485,557     1,672,987     4,398,044     5,029,346

Income tax expense                                       386,000       428,500     1,056,177     1,287,400
                                                     -----------   -----------   -----------   -----------

Net Income                                           $ 1,099,557   $ 1,244,487   $ 3,341,867   $ 3,741,946
                                                     ===========   ===========   ===========   ===========


Basic Earnings Per Share                             $      0.29   $      0.32   $      0.86   $      0.97
                                                     ===========   ===========   ===========   ===========
Diluted Earnings Per Share                           $      0.28   $      0.32   $      0.85   $      0.95
                                                     ===========   ===========   ===========   ===========

Dividends Per Share                                  $      0.16   $      0.15   $      0.48   $      0.43
                                                     ===========   ===========   ===========   ===========
</TABLE>

See notes to unaudited condensed consolidated financial statements.

                                                 page -2-
<PAGE>
<TABLE>
<CAPTION>

                                    Harleysville Savings Financial Corporation
                        Unaudited Condensed Consolidated Statement of Comprehensive Income


                                                                                          Three Months Ended
                                                                                        2006             2005
------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>               <C>
Net Income                                                                          $ 1,099,557       $ 1,244,487

Other Comprehensive Income

Unrealized (loss) gain on securities net of tax                                         (29,841)(1)        21,601(1)
                                                                                    -----------       -----------

Total Comprehensive Income                                                          $ 1,069,716       $ 1,266,088
                                                                                    ===========       ===========
<CAPTION>

(1) Disclosure of reclassification amount, net of tax for the three months ended:       2006              2005
                                                                                        ----              ----
<S>                                                                                 <C>               <C>
     Net unrealized (loss) gain arising during the three months ended               $   (17,958)      $    37,613
     Less: Reclassification adjustment for net gains included in net income              11,883            16,012
                                                                                    -----------       -----------

     Net unrealized (loss) gain on securities                                       $   (29,841)      $    21,601
                                                                                    ===========       ===========
<CAPTION>
                                                                                          Nine Months Ended
                                                                                        2006             2005
------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>               <C>
Net Income                                                                          $ 3,341,867       $ 3,741,946

Other Comprehensive Income

Unrealized loss on securities net of tax                                                (28,928)(2)       (48,285)(2)
                                                                                    -----------       -----------

Total Comprehensive Income                                                          $ 3,312,939       $ 3,693,661
                                                                                    ===========       ===========
<CAPTION>

(2) Disclosure of reclassification amount, net of tax for the nine months ended:        2006              2005
                                                                                        ----              ----
<S>                                                                                 <C>               <C>

     Net unrealized (loss) gain arising during the nine months ended                $   (10,847)      $     9,797
     Less: Reclassification adjustment for net gains included in net income              18,081            58,082
                                                                                    -----------       -----------

     Net unrealized loss on securities                                              $   (28,928)      $   (48,285)
                                                                                    ===========       ===========
</TABLE>

See notes to unaudited condensed consolidated financial statements.

                                                     page -3-
<PAGE>
<TABLE>
<CAPTION>

                                             Harleysville Savings Financial Corporation
                                 Unaudited Condensed Consolidated Statement of Stockholders' Equity


                                                                                           Retained    Accumulated
                                          Common               Additional                  Earnings-      Other          Total
                                          Stock      Common     Paid-in      Treasury     Partially   Comprehensive  Stockholders'
                                          Shares      Stock     Capital       Stock       Restricted       Loss          Equity
----------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>        <C>       <C>          <C>           <C>           <C>            <C>
Balance at October 1, 2005               3,904,136  $ 39,041  $ 7,610,511  $    (60,107) $ 39,995,584  $     (9,213)  $ 47,575,816

 Net Income                                                                                 3,341,867                    3,341,867
 Issuance of Common Stock                   17,041       171                                                                   171
 Dividends - $.48 per share                                                                (1,868,081)                  (1,868,081)
 Option Compensation                                               77,225                                                   77,225
 Treasury stock purchased                                                    (1,681,657)                                (1,681,657)
  Stock delivered under
 employee stock plans                                             (19,526)      169,601                                    150,075
  Stock delivered under
   Dividend Reinvestment Plan                                     304,087       143,297                                    447,384
 Unrealized holding loss on available -
    for sale securities, net of tax                                                                         (28,928)       (28,928)
                                         ---------  --------  -----------  ------------  ------------  ------------   ------------

Balance at June 30, 2006                 3,921,177  $ 39,212  $ 7,972,297  $ (1,428,866) $ 41,469,370  $    (38,141)  $ 48,013,872
                                         =========  ========  ===========  ============  ============  ============   ============
<CAPTION>
                                                                                           Retained    Accumulated
                                          Common               Additional                  Earnings-      Other          Total
                                          Stock      Common     Paid-in      Treasury     Partially   Comprehensive  Stockholders'
                                          Shares      Stock     Capital       Stock       Restricted       Loss          Equity
----------------------------------------------------------------------------------------------------------------------------------
<S>                <C>                   <C>        <C>       <C>          <C>           <C>           <C>            <C>
Balance at October 1, 2004               2,316,490  $ 23,165  $ 7,426,853  $   (414,430) $ 37,244,200  $     33,124   $ 44,312,912

 Net Income                                                                                 3,741,946                    3,741,946
 Issuance of Common Stock                   35,282       356      170,045                                                  170,401
 Stock Split                             1,544,327    15,440      (15,440)
 Dividends - $.43 per share                                                                (1,667,922)                  (1,667,922)
 Treasury stock purchased                                                      (204,100)                                  (204,100)
  Stock delivered under
 employee stock plans                                            (235,370)      514,174                                    278,804
  Stock delivered under
   Dividend Reinvestment Plan                                     168,715       104,356                                    273,071
 Unrealized holding gain on available -
    for sale securities, net of tax                                                                         (48,285)       (48,285)
                                         ---------  --------  -----------  ------------  ------------  ------------   ------------

Balance at June 30, 2005                 3,896,099  $ 38,961  $ 7,514,803  $         --  $ 39,318,224  $    (15,161)  $ 46,856,827
                                         =========  ========  ===========  ============  ============  ============   ============
</TABLE>

See notes to unaudited condensed consolidated financial statements.

                                                             page -4-
<PAGE>
<TABLE>
<CAPTION>

                              Harleysville Savings Financial Corporation
                       Unaudited Condensed Consolidated Statements of Cash Flows

                                                                           Nine Months Ended June 30,
                                                                           --------------------------
                                                                             2006             2005
                                                                             ----             ----
<S>                                                                     <C>              <C>
Operating Activities:
Net Income                                                              $   3,341,867    $   3,741,946
Adjustments to reconcile net income to net cash provided by (used in)
    operating activities:
    Depreciation                                                              332,440          159,805
    Increase (decrease) in deferred income taxes                               14,900             (130)
    Compensation charge on stock options                                       77,225
    Amortization of deferred loan fees                                        (35,195)        (182,247)
    Net gain on sale of loans                                                                  (16,672)
    Proceeds from the sale of loans held for sale                                              925,094
    Origination of loans held for sale                                                        (908,422)
    Realized loss on disposal of fixed assets                                   3,124
    Net gain on sale of securities                                            (27,395)         (88,003)
     Increase in cash surrender value                                        (324,000)        (335,000)
     Net amortization of premiums and discounts                               255,198          537,303
      Increase bank owned life insurance                                                    (2,500,000)
    Changes in assets and liabilities which provided (used) cash:
      Increase in accounts payable and accrued
      expenses                                                                204,080        2,027,188
      Increase in prepaid expenses and other assets                        (1,206,870)      (1,936,829)
      Decrease in accrued interest receivable                                (352,069)        (377,068)
      (Decrease) increase in accrued interest payable                         (22,152)         179,690
                                                                        -------------    -------------
Net cash provided by operating activities                                   2,261,153        1,226,655
                                                                        -------------    -------------

Investing Activities:
Purchase of investment securities held to maturity                        (23,749,535)     (30,463,338)
Purchase of investment securities available for sale                       (2,064,820)      (1,902,768)
Purchase of mortgage-backed securities held to maturity                    (2,011,250)     (50,134,368)
Proceeds from maturities of investment securities held to maturity            316,618       16,303,834
Proceeds from sale of investment securities available for sale                327,357        5,014,125
Principal collected on long-term loans & mortgage-backed securities       100,099,282      109,130,994
Proceeds (purchase) of FHLB stock                                             770,900         (819,900)
Long-term loans originated or acquired                                    (76,642,716)     (81,808,936)
Purchases of premises and equipment                                        (2,564,760)        (310,408)
                                                                        -------------    -------------
Net cash used in investing activities                                      (5,518,924)     (34,990,765)
                                                                        -------------    -------------

Financing Activities:
Net decrease in demand deposits, NOW accounts
    and savings accounts                                                   (2,317,137)      (5,656,124)
Net increase in certificates of deposit                                    17,021,099       13,092,794
Cash dividends                                                             (1,868,081)      (1,667,922)
Net (decrease) increase in FHLB advances                                  (11,026,922)      23,354,653
Treasury stock delivered under employee stock plans                           150,075          278,804
Stock delivered under Dividend Reinvestment Plan                              447,384          273,071
Purchase of treasury stock                                                 (1,681,657)        (204,100)
Net proceeds from issuance of stock                                               171          170,401
Net increase in advances from borrowers for taxes & insurance               3,893,887        3,734,993
                                                                        -------------    -------------
Net cash provided by financing activities                                   4,618,819       33,376,570
                                                                        -------------    -------------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                            1,361,048         (387,540)
                                                                        -------------    -------------

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                              7,934,980        4,718,784
                                                                        -------------    -------------

                                                                        -------------    -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                              $   9,296,028    $   4,331,244
                                                                        =============    =============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
    Income taxes                                                        $   1,066,927    $   1,103,112
    Interest expense                                                       19,435,267       16,530,152

</TABLE>

See notes to unaudited condensed consolidated financial statements.

                                               page -5-
<PAGE>

                   Harleysville Savings Financial Corporation
         Notes to Unaudited Condensed Consolidated Financial Statements


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation -The unaudited condensed consolidated financial statements
include  the  accounts  of  Harleysville  Savings  Financial   Corporation  (the
"Company")  and its  subsidiary.  Harleysville  Savings Bank (the "Bank") is the
wholly owned subsidiary of the Company.  All significant  intercompany  balances
and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the  instructions for Form 10-Q and therefore do not
include  information  or  footnotes  necessary  for a complete  presentation  of
financial  condition,  results of operations  and cash flows in conformity  with
accounting  principles  generally  accepted  in the  United  States of  America.
However,  all  adjustments  (consisting  only of normal  recurring  adjustments)
which,  in the opinion of management,  are necessary for a fair  presentation of
the  consolidated  financial  statements  have been  included.  The  results  of
operations for the three and nine months ended June 30, 2006 are not necessarily
indicative  of the  results  which may be  expected  for the entire  fiscal year
ending September 30, 2006 or any other period. The financial  information should
be read in conjunction  with the Annual Report on Form 10-K for the period ended
September 30, 2005.

Use of Estimates  in  Preparation  of  Consolidated  Financial  Statements - The
preparation of consolidated  financial  statements in conformity with accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the  financial  statements  and the  reported  amounts of income and
expenses during the reporting period. The most significant of these estimates is
the allowance for loan losses. Actual results could differ from those estimates.

Accounting  for Stock  Options - In  December  2004,  the  Financial  Accounting
Standards  Board ("FASB")  issued  Statement of Financial  Accounting  Standards
("SFAS") No. 123R (revised 2004),  "Share-Based Payment", which revises SFAS No.
123, "Accounting for Stock-Based  Compensation",  and supersedes APB Opinion No.
25,  "Accounting  for Stock Issued to  Employees".  This  Statement  requires an
entity to recognize  the cost of employee  services  received in exchange for an
award of equity  investment  based on grant-date  fair value of the award.  That
cost will be recognized  over the period during which an employee is required to
provide  service in exchange  for the award.  The Company  adopted the  modified
prospective  method provisions of SFAS No. 123R.  Effective October 1, 2005, the
Company was  required to  recognize  compensation  expense for the fair value of
stock  options that were granted or vest after that date.  Upon adoption of SFAS
No. 123R, the Company was required to recognize through earnings, the fair value
of the remaining  unvested  portion of options granted prior to January 1, 2002.
For fiscal year 2006, the Company expects to recognize approximately $113,000 of
pre-tax expense  relating to the options.  The following  table  illustrates the
effect on net income and  earnings per share if the Company had applied the fair
value  recognition  provisions of SFAS No. 123,  using  Binomial  Option Pricing
Model, to stock-based employee  compensation for the nine months ended June 2005
and the actual impact for the nine months ended June 2006.

                                                    For the Nine Months Ended
                                                   June 30, 2006  June 30, 2005
                                                   -------------  -------------
Net income available to shareholders                $ 3,341,867    $ 3,741,946
Add: Total stock-based employee compensation
expense included in reported net income (net
of tax)                                                  50,969
Deduct:  Total stock-based employee compensation
expensed determined under fair value method ( net
of tax)                                                 (50,969)       (41,693)
                                                    -----------    -----------
Proforma net income                                 $ 3,341,867    $ 3,700,253

Earnings per share:

Basic - as reported                                 $      0.86    $      0.97
Basic - pro forma                                   $      0.86    $      0.96

Diluted - as reported                               $      0.85    $      0.95
Diluted - pro forma                                 $      0.85    $      0.94

Recent  Accounting  Pronouncements - In June 2005, the FASB has issued Statement
No.  154,  "Accounting  Changes and Error  Corrections",  a  replacement  of APB
Opinion No. 20 and FASB Statement  No.3. The Statement  applies to all voluntary
changes in accounting principle, and changes the requirements for accounting for
and  reporting  of a change in  accounting  principle.  Statement  154  requires
retrospective  application to prior periods' financial statements of a voluntary
change in  accounting  principle  unless it is  impracticable.  APB  Opinion  20
previously  required  that most  voluntary  changes in  accounting  principle be
recognized by including in net income of the period of the change the cumulative
effect of changing  to the new  accounting  principle.  Statement  154  improves
financial  reporting  because  its  requirements   enhance  the  consistency  of
financial information between periods. Statement 154 is effective for accounting
changes and  corrections of errors made in fiscal years beginning after December
15,  2005.  The  impact of this new  pronouncement  will  depend on the  Company
changing an accounting principle and will be evaluated at that time.

In November 2005, the FASB issued FASB Staff  Position (FSP)  115-1/124-1,  "The
Meaning  of  Other-Than-Temporary  Impairment  and its  Application  to  Certain
Investments".  This FSP provides  additional guidance on when an investment in a
debt or equity security  should be considered  impaired and when that impairment
should be considered  other-than-temporary and recognized as a loss in earnings.
Specifically,  the  guidance  clarifies  that an investor  should  recognize  an
impairment    loss   no   later   than   when   the    impairment    is   deemed
other-than-temporary, even if a decision to sell has not been made. The FSP also
requires  certain  disclosures  about  unrealized  losses  that  have  not  been
recognized  as  other-than-temporary  impairments.  The Company is applying  the
guidance  in this FSP in fiscal  2006 and there  was no  material  affect to the
results of operations or the statement of financial position.

On December 19, 2005,  the FASB issued FSP 94-6-1,  "Terms of Loan Products That
May Give Rise to a Concentration of Credit Risk". FSP 94-6-1 addresses  whether,
under existing guidance, non-traditional loan products represent a concentration
of credit risk and what  disclosures  are required for entities that  originate,
hold,  guarantee,  service, or invest in loan products whose terms may give rise
to a  concentration  of credit risk.  Non-traditional  loan products  expose the
originator,  holder, investor, guarantor, or servicer to higher credit risk than
traditional loan products. Typical features of non-traditional loan products may
include high loan-to-value  ratios and interest or principal repayments that are
less than the repayments for fully  amortizing  loans of an equivalent term. FSP
94-6-1 was effective upon its issuance and it did not have a material  impact on
the Company's financial position or disclosures.

In February  2006,  the FASB issued SFAS No. 155,  Accounting for Certain Hybrid
Financial Instruments. This statement amends FASB Statements No. 133, Accounting
for Derivative  Instruments and Hedging Activities,  and No. 140, Accounting for
Transfers and Servicing of Financial Assets and  Extinguishments of Liabilities.
This statement resolves issues addressed in Statement 133  Implementation  Issue
No. D1,  Application  of Statement  133 to  Beneficial  Interest in  Securitized
Financial  Assets.  This  Statement is effective for all  financial  instruments
acquired or issued  after the  beginning  of an entity's  first fiscal year that
begins after September 15, 2006. The Company is still continuing to evaluate the
impact of this  pronouncement  and does not expect that the guidance will have a
material effect on the Company's financial position or results of operations.

In March  2006,  the FASB  issued  SFAS No.  156  Accounting  for  Servicing  of
Financial  Assets an amendment of FASB  Statement  No. 140 ("SFAS 140" and "SFAS
156").  SFAS  140  establishes,  among  other  things,  the  accounting  for all
separately  recognized  servicing  assets and  servicing  liabilities.  SFAS 156
amends SFAS 140 to require that all separately  recognized  servicing assets and
servicing liabilities be initially measured at fair value, if practicable.  This
Statement  permits,  but  does  not  require,  the  subsequent   measurement  of
separately  recognized servicing assets and servicing liabilities at fair value.
Under this Statement,  an entity can elect subsequent fair value  measurement to
account  for  its   separately   recognized   servicing   assets  and  servicing
liabilities.  Adoption of this  Statement is required as of the beginning of the
first  fiscal year that begins after  September  15, 2006.  Upon  adoption,  the
Company will apply the requirements  for recognition and initial  measurement of
servicing assets and servicing  liabilities  prospectively to all  transactions.
The Company  will adopt SFAS 156 for the fiscal year  beginning  October 1, 2006
and is evaluating the impact of this pronouncement.

In July 2006,  the FASB issued FIN 48,  "Accounting  for  Uncertainty  in Income
Taxes-an  interpretation  of FASB Statement No.109" ("FIN 48"). FIN 48 clarifies
the  recognition  threshold  and  measurement  of a tax position  taken on a tax
return.  FIN 48 is effective for fiscal years beginning after December 15, 2006.
FIN 48 also requires  expanded  disclosure  with respect to the  uncertainty  in
income taxes.  We are currently  evaluating the  requirements  of FIN 48 and the
impact   this   interpretation   may   have   on   our   financial   statements.

Reclassification  - Certain  items in the 2005  financial  statements  have been
reclassified to conform with the presentation in the 2006 consolidated financial
statements. Such reclassifications did not have a material impact on the overall
presentation of the financial statements.

                                    page -6-
<PAGE>

2. INVESTMENT SECURITIES HELD TO MATURITY

A  comparison  of  amortized  cost and  approximate  fair  value  of  investment
securities  held  to  maturity  with  gross  unrealized  gains  and  losses,  by
maturities, is as follows:

<TABLE>
<CAPTION>
                                                                  June 30, 2006
                                                               Gross         Gross
                                              Amortized     Unrealized     Unrealized      Approximate
                                                 Cost          Gains         Losses        Fair Value
------------------------------------------------------------------------------------------------------
<S>                                       <C>          <C>                <C>           <C>
U.S. Government Agencies
      Due after 1 years through 5 years     $ 12,000,000                  $   (369,000)   $ 11,631,000
      Due after 5 years through 10 years      26,426,513   $      2,213       (825,726)     25,603,000
      Due after 10 years through 20 years     47,622,290                    (1,990,290)     45,632,000
Tax-Exempt Obligations
      Due after 10 years through 15 years     16,879,780        803,220                     17,683,000
      Due after 15 years                       7,987,141        390,859                      8,378,000
                                            ------------   ------------   ------------    ------------

Total Investment Securities                 $110,915,724   $  1,196,292   $ (3,185,016)   $108,927,000
                                            ============   ============   ============    ============

A summary  of  investment  securities  with  unrealized  losses,  aggregated  by
category, at June 30, 2006 is as follows:

<CAPTION>
                               Less than 12 Months             12 Months or Longer             Total           Total
                           Fair Value  Unrealized Losses   Fair Value   Unrealized Losses   Fair Value   Unrealized Losses
                           ----------  -----------------   ----------   -----------------   ----------   -----------------
<S>                      <C>             <C>              <C>             <C>              <C>             <C>
US Government agencies   $  51,761,320   $  (1,651,659)   $  30,441,530   $  (1,533,357)   $  82,202,850   $  (3,185,016)
                         -------------   -------------    -------------   -------------    -------------   -------------
Total                    $  51,761,320   $  (1,651,659)   $  30,441,530   $  (1,533,357)   $  82,202,850   $  (3,185,016)
                         =============   =============    =============   =============    =============   =============
</TABLE>

At June 30, 2006,  investment securities in a gross unrealized loss position for
twelve months or longer consisted of 11 U.S.  Government  Agency Securities that
at such date had an aggregate  depreciation of 4.8% from the Company's amortized
cost basis.  Management believes that the estimated fair value of the securities
disclosed  above is primarily  dependent  upon the  movement in market  interest
rates.  Management  evaluated  the  length  of time and the  extent to which the
market  value has been less than cost;  the  financial  condition  and near term
prospects of the issuers,  including any specific events which may influence the
operations  of the  issuers  such as changes in  technology  that may impair the
earnings  potential  of the  issuers.  The Company has the ability and intent to
hold these  securities  until the  anticipated  recovery  of fair value  occurs.
Management  does not believe any individual  unrealized loss as of June 30, 2006
represents an other-than-temporary impairment.

<TABLE>
<CAPTION>
                                                             September 30, 2005
                                                             Gross        Gross
                                                          Unrealized    Unrealized    Approximate
                                                Cost         Gains        Losses       Fair Value
--------------------------------------------------------------------------------------------------
<S>                                        <C>                <C>        <C>          <C>
U.S. Government Agencies
      Due after 1 years through 5 years     $12,000,000                 $  (197,000)   $11,803,000
      Due after 5 years through 10 years     25,703,340   $    77,445      (207,785)    25,573,000
      Due after 10 years through 15 years    24,862,533         5,200      (497,733)    24,370,000
Tax-Exempt Obligations
      Due after 10 years through 15 years    13,050,956       949,044                   14,000,000
      Due after 15 years                     11,747,616       910,384                   12,658,000
                                            -----------   -----------   -----------    -----------

Total Investment Securities                 $87,364,445   $ 1,942,073   $  (902,518)   $88,404,000
                                            ===========   ===========   ===========    ===========
<CAPTION>

A summary  of  investment  securities  with  unrealized  losses,  aggregated  by
category, at September 30, 2005 is as follows:

                               Less than 12 Months             12 Months or Longer             Total           Total
                           Fair Value  Unrealized Losses   Fair Value   Unrealized Losses   Fair Value   Unrealized Losses
                           ----------  -----------------   ----------   -----------------   ----------   -----------------
<S>                      <C>             <C>              <C>             <C>              <C>             <C>
US Government agencies   $  31,567,124   $    (284,269)   $  21,339,331   $    (618,249)   $  52,906,455   $    (902,518)
                         -------------   -------------    -------------   -------------    -------------   -------------
Total                    $  31,567,124   $    (284,269)   $  21,339,331   $    (618,249)   $  52,906,455   $    (902,518)
                         =============   =============    =============   =============    =============   =============
</TABLE>

At September 30, 2005, investment securities in a gross unrealized loss position
for twelve months or longer consisted of eight US Government  Agency  Securities
that at such  date had an  aggregate  depreciation  of 2.8%  from the  Company's
amortized cost basis.  Management  believes that the estimated fair value of the
securities  disclosed  above is primarily  dependent upon the movement in market
interest rates.  Management evaluated the length of time and the extent to which
the market value has been less than cost; the financial  condition and near term
prospects of the issuers,  including any specific events which may influence the
operations  of the  issuers  such as changes in  technology  that may impair the
earnings  potential  of the  issuers.  The Company has the ability and intent to
hold these  securities  until the  anticipated  recovery  of fair value  occurs.
Management  does not believe any individual  unrealized loss as of September 30,
2005 represented an other-than-temporary impairment.

                                    page -7-
<PAGE>

3.  INVESTMENT SECURITIES AVAILABLE-FOR-SALE

A  comparison  of  amortized  cost and  approximate  fair  value  of  investment
securities  available-for-sale  with  gross  unrealized  gains and  losses is as
follows:

<TABLE>
<CAPTION>
                                                  June 30, 2006
                                              Gross          Gross
                               Amortized    Unrealized    Unrealized
                                  Cost         Gain          Losses      Fair Value
------------------------------------------------------------------------------------
<S>                           <C>           <C>            <C>            <C>
Equity Securities             $ 1,050,664                 $   (79,944)   $   970,720
Mutual Funds                    3,596,331                                  3,596,331
                              -----------   -----------   -----------    -----------

Total Investment Securities   $ 4,646,995                 $   (79,944)   $ 4,567,051
                              ===========   ===========   ===========    ===========

There were no securities in a loss position greater than twelve months.

A summary of investment with unrealized losses,  aggregated by category, at June
30,2005 is as follows:

<CAPTION>
                 Less than 12 Months             12 Months or Longer             Total          Total
             Fair Value  Unrealized Losses   Fair Value   Unrealized Losses   Fair Value  Unrealized Losses
             ----------  -----------------   ----------   -----------------   ----------  -----------------
<S>        <C>             <C>              <C>             <C>              <C>             <C>
Equities   $     970,720   $     (79,944)   $          --   $          --   $     970,720   $     (79,944)
           -------------   -------------    -------------   -------------   -------------   -------------
Total      $     970,720   $     (79,944)   $          --   $          --   $     970,720   $     (79,944)
           =============   =============    =============   =============   =============   =============
</TABLE>

Management evaluates securities for other-than-temporary  impairment at least on
a quarterly  basis, and more frequently when economic or market concerns warrant
such  evaluation.  For  securities in an unrealized  loss  position,  management
evaluated  the length of time and the extent to which the market  value has been
less than cost; the financial  condition and near term prospects of the issuers,
including any specific  events which may influence the operations of the issuers
such as changes in  technology  that may impair the  earnings  potential  of the
issuers or the  discontinuance  of a segment of the business that may effect the
future earnings potential.  The Company has the ability and intent to hold these
securities  until the  anticipated  recovery  of fair value  occurs.  Management
believes that the securities are temporarily impaired.

                                             September 30, 2005
                                             Gross        Gross
                              Amortized    Unrealized   Unrealized
                                 Cost        Gains        Losses      Fair Value
--------------------------------------------------------------------------------


Equity Securities             $  906,113   $    9,830   $  (56,723)   $  859,220
Money Market Mutual Funds      1,976,024                               1,976,024
                              ----------   ----------   ----------    ----------

Total Investment Securities   $2,882,137   $    9,830   $  (56,723)   $2,835,244
                              ==========   ==========   ==========    ==========

There were no  securities  in a loss position  greater than twelve  months.  For
securities in an unrealized  loss position,  management  evaluated the length of
time and the  extent to which the  market  value  has been less than  cost;  the
financial  condition  and near term  prospects  of the  issuers,  including  any
specific  events  which may  influence  the  operations  of the issuers  such as
changes in technology  that may impair the earnings  potential of the issuers or
the  discontinuance  of a segment  of the  business  that may  effect the future
earnings  potential.  The  Company  has the  ability  and  intent to hold  these
securities until the anticipated recovery of fair value occurs.  Management does
not believe any individual  unrealized loss as of September 30, 2005 represented
an other-than-temporary impairment.

                                    page -8-
<PAGE>

4. MORTGAGE-BACKED SECURITIES HELD TO MATURITY
A comparison of amortized  cost and  approximate  fair value of  mortgage-backed
securities  held to  maturity  with  gross  unrealized  gains  and  losses is as
follows:

<TABLE>
<CAPTION>
                                                             June 30,2006
                                                         Gross          Gross
                                        Amortized      Unrealized     Unrealized     Approximate
                                          Cost           Gains          Losses       Fair Value
------------------------------------------------------------------------------------------------
<S>                                   <C>            <C>            <C>             <C>
Collateralized mortgage obligations   $ 15,529,796   $     68,356   $   (538,152)   $ 15,060,000
FHLMC pass-through certificates        103,617,348         39,029     (4,884,377)     98,772,000
FNMA pass-through certificates         105,465,058         49,651     (4,831,709)    100,683,000
GNMA pass-through certificates           5,010,175         71,825                      5,082,000
                                      ------------   ------------   ------------    ------------

Total Mortgage-Backed Securities      $229,622,377   $    228,861   $(10,254,238)   $219,597,000
                                      ============   ============   ============    ============
<CAPTION>

A summary of mortgage-backed  securities with unrealized  losses,  aggregated by
category, at June 30, 2006 is as follows:

                                   Less than 12 Months             12 Months or Longer             Total           Total
                               Fair Value  Unrealized Losses   Fair Value   Unrealized Losses   Fair Value   Unrealized Losses
                               ----------  -----------------   ----------   -----------------   ----------   -----------------
<S>                          <C>             <C>              <C>             <C>              <C>             <C>
Mortgage-backed securities
  held to maturity           $  69,556,220   $  (2,977,393)   $ 135,780,606   $  (7,276,845)   $ 205,336,826   $ (10,254,238)
                             -------------   -------------    -------------   -------------    -------------   -------------
Total                        $  69,556,220   $  (2,977,393)   $ 135,780,606   $  (7,276,845)   $ 205,336,826   $ (10,254,238)
                             =============   =============    =============   =============    =============   =============
</TABLE>

At  June  30,  2006,  mortgage-related  securities  in a gross  unrealized  loss
position for twelve  months or longer  consisted of 61  securities  that at such
date had an aggregate  depreciation  of 5.1% from the Company's  amortized  cost
basis. Management does not believe any individual unrealized loss as of June 30,
2006  represents  an  other-than-temporary  impairment.  The  unrealized  losses
reported for  mortgage-related  securities relate primarily to securities issued
by the Federal  National  Mortgage  Association,  the Federal Home Loan Mortgage
Corporation  and private  institutions.  The majority of the  unrealized  losses
associated  with  mortgage-related  securities  are  primarily  attributable  to
changes  in   interest   rates  and  not  due  to  the   deterioration   of  the
creditworthiness  of the issuer.  The Company has the ability and intent to hold
these securities until the securities mature.

<TABLE>
<CAPTION>
                                September 30,2005
                                                         Gross          Gross
                                        Amortized     Unrealized     Unrealized     Approximate
                                          Cost           Gains         Losses        Fair Value
------------------------------------------------------------------------------------------------
<S>                                   <C>            <C>            <C>             <C>
Collateralized mortgage obligations   $ 17,089,874   $     36,738   $   (278,612)   $ 16,848,000
FHLMC pass-through certificates        118,663,486        128,502     (2,047,988)    116,744,000
FNMA pass-through certificates         121,596,729        161,648     (2,216,377)    119,542,000
GNMA pass-through certificates           6,613,676        246,324                      6,860,000
                                      ------------   ------------   ------------    ------------

Total Mortgage-Backed Securities      $263,963,765   $    573,212   $ (4,542,977)   $259,994,000
                                      ============   ============   ============    ============
<CAPTION>

A summary of mortgage-backed  securities with unrealized  losses,  aggregated by
category, at September 30, 2005 is as follows:

                                   Less than 12 Months             12 Months or Longer             Total           Total
                               Fair Value  Unrealized Losses   Fair Value   Unrealized Losses   Fair Value   Unrealized Losses
                               ----------  -----------------   ----------   -----------------   ----------   -----------------
<S>                          <C>             <C>              <C>             <C>              <C>             <C>
Mortgage-backed securities
  held to maturity           $ 178,406,095   $  (2,751,178)  $  58,493,074   $  (1,791,799)   $ 236,899,169    $  (4,542,977)
                             -------------   -------------   -------------   -------------    -------------    -------------
Total                        $ 178,406,095   $  (2,751,178)  $  58,493,074   $  (1,791,799)   $ 236,899,169    $  (4,542,977)
                             =============   =============   =============   =============    =============    =============
</TABLE>

At September 30, 2005,  mortgage-related  securities in a gross  unrealized loss
position for twelve  months or longer  consisted of 27  securities  that at such
date had an aggregate  depreciation  of 3.0% from the Company's  amortized  cost
basis. For securities in an unrealized loss position,  management  evaluated the
length of time and the extent to which the market value has been less than cost;
the financial  condition and near term  prospects of the issuers,  including any
specific  events  which may  influence  the  operations  of the issuers  such as
changes in technology that may impair the earnings potential of the issuers. The
Company  has  the  ability  and  intent  to  hold  these  securities  until  the
anticipated  recovery  of fair value  occurs.  Management  does not  believe any
individual   unrealized   loss  as  of  September   30,  2005   represented   an
other-than-temporary impairment.

                                    page -9-
<PAGE>

5. MORTGAGE-BACKED SECURITIES AVAILABLE-FOR-SALE
A comparison of amortized  cost and  approximate  fair value of  mortgage-backed
securities  available-for-sale  with  gross  unrealized  gains and  losses is as
follows:

<TABLE>
<CAPTION>
                                                     June 30,2006
                                                   Gross       Gross
                                   Amortized    Unrealized   Unrealized
                                      Cost         Gains       Losses     Fair Value
------------------------------------------------------------------------------------
<S>                                <C>          <C>         <C>             <C>
FNMA pass-through certificates     $  785,187   $   22,156                $  807,343
                                   ----------   ----------   ----------   ----------

Total Mortgage-Backed Securities   $  785,187   $   22,156                $  807,343
                                   ==========   ==========   ==========   ==========


<CAPTION>
                                                  September 30,2005
                                                   Gross       Gross
                                   Amortized    Unrealized   Unrealized
                                      Cost         Gains       Losses     Fair Value
------------------------------------------------------------------------------------
<S>                                <C>          <C>         <C>             <C>
FNMA pass-through certificates     $1,012,154   $   32,933                $1,045,087
                                   ----------   ----------   ----------   ----------

Total Mortgage-Backed Securities   $1,012,154   $   32,933                $1,045,087
                                   ==========   ==========   ==========   ==========

</TABLE>


6.  LOANS RECEIVABLE
Loans receivable consist of the following:
                                            June 30, 2006    September 30, 2005
                                            -------------    ------------------
Residential Mortgages                       $ 278,826,159      $ 270,940,562
Commercial Mortgages                            5,143,610          2,003,219
Construction                                    4,621,175          7,639,300
Savings Account                                   986,247            921,400
Home Equity                                    67,344,574         59,724,004
Automobile and other                              730,005            771,538
Line of Credit                                 26,598,411         31,579,680
                                            -------------      -------------
Total                                         384,250,181        373,579,703
  Undisbursed portion of loans in process      (2,912,593)        (4,933,753)
  Deferred loan fees                             (591,053)          (671,426)
  Allowance for loan losses                    (1,954,944)        (1,967,607)
                                            -------------      -------------
Loans receivable - net                      $ 378,791,591      $ 366,006,917
                                            =============      =============

The  total  amount  of loans  being  serviced  for the  benefit  of  others  was
approximately  $4.1 million and $4.7 million at June 30, 2006 and  September 30,
2005, respectively. Commercial mortgage loans consist of five or more units.

The following schedule summarizes the changes in the allowance for loan losses:

                                   Nine Months Ended          Year Ended
                                     June 30, 2006       September 30, 2005
                                     -------------       ------------------
Balance, beginning of period         $ 1,967,607             $ 1,976,849
  Provision for loan losses                   --                      --
  Amounts charged-off                    (16,377)                (92,949)
  Loan recoveries                          3,714                  83,707
                                     -----------             -----------
Balance, end of period               $ 1,954,944             $ 1,967,607
                                     ===========             ===========

he activity in the  recoveries  and charge off accounts was primarily the result
of  the  Company's  Bounce  Protection  program.  This  program  extends  credit
automatically  to our  depositors.  If the account is not brought current by the
depositor  the loan is charged  off.  If the  customer  subsequently  brings the
account current, a recovery is recognized.

                                   page -10-
<PAGE>

7.  OFFICE PROPERTIES AND EQUIPMENT
Office  properties  and equipment  are  summarized  by major  classification  as
follows:

                                        June 30, 2006       September 30, 2005
                                        -------------       ------------------
Land                                    $   1,159,031          $     184,788
Buildings                                   7,553,703              6,383,356
Furniture, fixtures and equipment           3,596,123              3,433,247
Automobiles                                    24,896                 24,896
                                        -------------          -------------
Total                                      12,333,753             10,026,287
  Less accumulated depreciation            (4,274,863)            (4,196,593)
                                        -------------          -------------
Net                                     $   8,058,890          $   5,829,694
                                        =============          =============

8.  DEPOSITS
Deposits are summarized as follows:

                                        June 30, 2006       September 30, 2005
                                        -------------       ------------------
Non-interest bearing checking           $  10,015,087          $   9,618,764
NOW accounts                               17,127,643             18,282,489
Checking accounts                          20,137,856              9,102,649
Money Market Demand accounts               64,311,230             76,581,019
Passbook and Club accounts                  3,482,567              3,806,599
Certificate accounts                      318,609,234            301,588,135
                                        -------------          -------------
Total deposits                          $ 433,683,617          $ 418,979,655
                                        =============          =============

The  aggregate  amount of  certificate  accounts in  denominations  of more than
$100,000 at June 30, 2006 and September 30, 2005 amounted to approximately $42.1
million and $39.7 million,  respectively.  Amounts in excess of $100,000 may not
be federally insured.

9.  COMMITMENTS
At June 30, 2006, the following commitments were outstanding:

Origination of fixed-rate mortgage loans   $10,865,903
Unused line of credit loans                 41,441,541
Loans in process                             2,912,593
                                           -----------

Total                                      $55,220,037
                                           ===========

10.  DIVIDENDS
On July 19, 2006, the Company's  Board of Directors  declared a cash dividend of
$.16 per share payable on August 23, 2006 to the  stockholders  of record at the
close of business on August 9, 2006.

                                   page -11-
<PAGE>

11.  EARNINGS PER SHARE
The  following  average  shares were used for the  computation  of earnings  per
share:
              For the Three Months Ended          For the Nine Months Ended
                        June 30,                           June 30,
              -------------------------------------------------------------
                  2006           2005               2006          2005
                  ----           ----               ----          ----
 Basic          3,850,573      3,890,153          3,882,257    3,872,400
Diluted         3,884,694      3,936,829          3,914,062    3,936,929

The  difference  between  the  number of shares  used for  computation  of basic
earnings per share and diluted earnings per share represents the dilutive effect
of stock options.

12. ADVANCES FROM FEDERAL HOME LOAN BANK
Advances from the Federal Home Loan Bank consists of the following:

                                   June 30,                  September 30,
                                     2006                        2005
                                          Weighted                      Weighted
                                          Interest                      Interest
 Maturing Period            Amount          Rate        Amount            Rate
------------------------------------------------------------------------------

 1 to  12 months        $ 56,865,731        4.70%    $ 36,043,911         3.73%
13 to  24 months          41,761,302        4.84%      25,446,061         3.66%
25 to  36 months          42,255,788        4.20%      69,114,248         4.83%
37 to  48 months          15,924,422        4.43%      31,484,966         3.89%
49 to  60 months          30,000,000        5.67%       9,302,331         3.97%
61 to  72 months          53,236,213        4.58%      40,208,732         5.35%
73 to  84 months          21,198,109        4.04%      60,668,239         4.47%
85 to 120 months          25,000,000        4.01%      25,000,000         3.80%
                       ---------------------------------------------------------

Total                  $ 286,241,566        4.60%   $ 297,268,488         4.38%
                       =========================================================

The advances are  collateralized  by Federal Home Loan Bank  ("FHLB")  stock and
substantially  all first mortgage  loans.  The Company has a line of credit with
the FHLB of which $33.5  million out of $40.0  million was used at June 30, 2006
and $21.0 million was used as of September 30, 2005. Included in the table above
at June 30, 2006 and September  30, 2005 are  convertible  advances  whereby the
FHLB has the option at a predetermined strike rate to convert the fixed interest
rate to an adjustable rate tied to London Interbank Offered Rate ("LIBOR").  The
Company  then has the option to repay these  advances if the FHLB  converts  the
interest rate.  These advances are included in the periods in which they mature.
The  Company  has a total FHLB  borrowing  capacity  of $559.9  million of which
$286.2 million was used as of June 30, 2006.

13. REGULATORY CAPITAL REQUIREMENTS
Harleysville  Savings Bank (the "Bank") is subject to various regulatory capital
requirements  administered  by the  federal  banking  agencies.  Failure to meet
minimum  capital  requirements  can  initiate  certain  mandatory - and possibly
additional discretionary - actions by regulators that, if undertaken, could have
a direct material effect on the Bank's consolidated financial statements.  Under
capital adequacy  guidelines and the regulatory  framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve quantitative
measures of the Bank's assets,  liabilities and certain  off-balance-sheet items
as calculated under regulatory accounting practices.  The Bank's capital amounts
and classification  are also subject to qualitative  judgments by the regulators
about  components,  risk weightings,  and other factors.  Quantitative  measures
established  by  regulation  to  ensure  capital  adequacy  require  the Bank to
maintain minimum amounts and ratios (set forth in the table below) of total Tier
1 capital (as defined in the  regulations) to risk weighted assets (as defined),
and of Tier 1 capital (as defined) to assets (as defined).  Management believes,
as of June 30, 2006,  that the Bank meets all capital  adequacy  requirements to
which it is subject.

As of June 30,  2006,  the most recent  notification  from the  Federal  Deposit
Insurance  Corporation  categorized  the  Bank as  well  capitalized  under  the
regulatory  framework for prompt  corrective  action.  To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based,
and Tier 1 leverage  ratios as set forth in the  following  table.  There are no
conditions  or events since that  notification  that  management  believes  have
changed the Bank's category.

The Bank's actual capital amounts and ratios are also presented in the following
table.

<TABLE>
<CAPTION>
                                                                                                               To Be Considered Well
                                                                                                                 Capitalized Under
                                                                                          For Capital            Prompt Corrective
                                                                    Actual             Adequacy Purposes         Action Provisions

                                                              Amount       Ratio      Amount        Ratio        Amount      Ratio
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>     <C>              <C>     <C>             <C>
As of June 30, 2006
                   Tier 1 Capital (to assets)              $ 47,824,555     6.23%   $30,720,320      4.00%   $ 38,400,400    5.00%
                   Tier 1 Capital (to risk weighted assets)  47,824,555    13.08%    14,628,960      4.00%     21,943,440    6.00%
                   Total Capital (to risk weighted assets)   49,779,789    13.61%    29,257,920      8.00%     36,572,400   10.00%

As of September 30, 2005
                   Tier 1 Capital (to assets)              $ 47,524,213     6.26%   $30,376,680      4.00%   $ 37,970,850    5.00%
                   Tier 1 Capital (to risk weighted assets)  47,524,213    13.31%    14,283,160      4.00%     21,424,740    6.00%
                   Total Capital (to risk weighted assets)   49,491,820    13.86%    28,566,320      8.00%     35,707,900   10.00%
</TABLE>

                                   page -12-
<PAGE>

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of  Operations
This report contains certain forward-looking statements and information relating
to the  Company  that  are  based  on the  beliefs  of  management  as  well  as
assumptions  made by and  information  currently  available  to  management.  In
addition, in those and other portions of this document,  the words "anticipate,"
"believe,"  "estimate,"  "intend,"  "should"  and  similar  expressions,  or the
negative thereof, as they relate to the Company or the Company's management, are
intended to identify  forward-looking  statements.  Such statements  reflect the
current  views of the  Company  with  respect to  future-looking  events and are
subject to certain risks,  uncertainties and assumptions.  Should one or more of
these risks or uncertainties  materialize or should underlying assumptions prove
incorrect,  actual results may vary materially  from those  described  herein as
anticipated,  believed,  estimated,  expected or intended.  The Company does not
intend to update these forward-looking statements.

The Company's primary business consists of attracting  deposits from the general
public  through a variety  of  deposit  programs  and  investing  such  deposits
principally in first  mortgage  loans secured by  residential  properties in the
Company's primary market area. The Company also originates a variety of consumer
loans,  predominately  home  equity  loans and lines of credit  also  secured by
residential properties in the Company's primary lending area. The Company serves
its customers through its full-service  branch network as well as through remote
ATM locations, the Internet and telephone banking.

Critical Accounting Policies and Judgments
------------------------------------------

The  Company's  consolidated  financial  statements  are  prepared  based on the
application of certain  accounting  policies.  Certain of these policies require
numerous  estimates  and  strategic  or  economic  assumptions  that  may  prove
inaccurate or subject to variations and may  significantly  affect the Company's
reported  results and  financial  position for the period or in future  periods.
Changes in underlying factors,  assumptions,  or estimates in any of these areas
could have a material  impact on the Company's  future  financial  condition and
results of operations.

Analysis and  Determination of the Allowance for Loan Losses - The allowance for
loan losses is a valuation  allowance for probable  losses  inherent in the loan
portfolio. The Company evaluates the need to establish allowances against losses
on loans on a  monthly  basis.  When  additional  allowances  are  necessary,  a
provision for loan losses is charged to earnings.

Our  methodology  for  assessing the  appropriateness  of the allowance for loan
losses  consists of three key  elements:  (1)  specific  allowances  for certain
impaired or  collateral-dependent  loans; (2) a general  valuation  allowance on
certain identified  problem loans; and (3) a general valuation  allowance on the
remainder  of the loan  portfolio.  Although  we  determine  the  amount of each
element of the  allowance  separately,  the entire  allowance for loan losses is
available for the entire portfolio.

Specific Allowance Required for Certain Impaired or Collateral-Dependent  Loans:
We establish an allowance  for certain  impaired  loans for the amounts by which
the  collateral  value or  observable  market  price are lower than the carrying
value of the loan.  Under current  accounting  guidelines,  a loan is defined as
impaired when,  based on current  information and events,  it is probable that a
creditor will be unable to collect all amounts due under the  contractual  terms
of the loan agreement. At June 30, 2006, no loans were considered impaired.

General  Valuation  Allowance  on  Certain  Identified  Problem  Loans - We also
establish  a  general  allowance  for  classified  loans  that  do not  have  an
individual  allowance.  We  segregate  these loans by loan  category  and assign
allowance  percentages to each category based on inherent losses associated with
each type of lending  and  consideration  that these  loans,  in the  aggregate,
represent an  above-average  credit risk and that more of these loans will prove
to be uncollectible compared to loans in the general portfolio.

General  Valuation  Allowance  on the  Remainder  of  the  Loan  Portfolio  - We
establish  another  general  allowance  for  loans  that are not  classified  to
recognize the inherent  losses  associated with lending  activities,  but which,
unlike specific allowances, has not been allocated to particular problem assets.
This general valuation  allowance is determined by segregating the loans by loan
category  and  assigning  allowance  percentages  based on our  historical  loss
experience, delinquency trends and management's evaluation of the collectibility
of the loan  portfolio.  The allowance may be adjusted for  significant  factors
that, in management's judgment, affect the collectibility of the portfolio as of
the evaluation  date. These  significant  factors may include changes in lending
policies and procedures,

                                   page -13-
<PAGE>

changes in existing  general  economic and  business  conditions  affecting  our
primary lending areas, credit quality trends, collateral value, loan volumes and
concentrations,  seasoning  of the loan  portfolio,  recent loss  experience  in
particular segments of the portfolio, duration of the current business cycle and
bank regulatory  examination  results.  The applied loss factors are reevaluated
monthly to ensure their relevance in the current economic environment.

Changes in Financial Position for the Nine-Month Period Ended June 30, 2006
Total assets at June 30, 2006 were $775.2  million,  an increase of $8.2 million
for the nine-month  period then ended.  The increase was primarily the result of
increases in  investment  securities  held to maturity of $23.6  million,  loans
receivable of $12.8 million,  office  property and equipment of $2.2 million and
prepaid expense and other assets of $1.5 million. These increases were partially
offset by a decrease  in  mortgage-backed  securities  held to maturity of $34.3
million and Federal Home Loan Bank stock of $771,000.

As of June 30,  2006,  total  deposits  increased  by $14.7  million  to  $433.7
million.  Advances from borrowers for taxes and insurance also increased by $3.9
million.  There was also a decrease in advances  from  Federal Home Loan Bank of
$11.0 million due to the growth of deposits and normal cash flows.

Comparisons  of Results of Operations  for the Three and Nine Month Period Ended
--------------------------------------------------------------------------------
June 30, 2006 with the Three and Nine Month Period Ended June 30, 2005.
----------------------------------------------------------------------
Net Interest Income
-------------------
Net interest income was $3.30 million for the three-month  period ended June 30,
2006 compared to $3.31 million for the  comparable  period in 2005. The decrease
in the net interest income for the  three-month  period ended June 30, 2006 when
compared to the same period in 2005 is  attributed  to the  decrease in interest
rate spread to 1.58% in 2006 from 1.63% in 2005.  The  decrease in net  interest
income was also a result of an increase in the  average  rate paid on  interest-
bearing  liabilities  to 3.75% in 2006 from 3.37% in 2005 and an increase in the
average balance of interest  bearing  liabilities to $706.4 million in 2006 from
$695.0  million in 2005.  This was partially  offset by an increase in the yield
earned on assets to 5.33% in 2006 from 5.00% in 2005 along with an  increase  in
the average  balance of interest  earning  assets to $744.6 million in 2006 from
$733.2 million in 2005.

Total interest income was $9.9 million for the three-month period ended June 30,
2006 compared to $9.2 million for the  comparable  period in 2005.  For the nine
month  period  ended June 30,  2006,  total  interest  income was $29.0  million
compared to $26.6  million for the  comparable  period in 2005.  The increase is
primarily  the result of the increased  average  yield for the  interest-earning
assets to 5.33% and 5.20% for the three and  nine-month  period  ended  June 30,
2006, respectively, from 5.00% and 4.95% for the comparable periods in 2005. The
increase is also  attributed  to an increase in the average  balance of interest
earning assets to $744.6 million and $743.8 million for the three and nine-month
period ended June 30, 2006, respectively, from $733.2 million and $716.9 million
for the comparable periods in 2005.

Total  interest  expense  increased to $6.6 million for the  three-month  period
ended June 30, 2006 from $5.9 million for the comparable period in 2005. For the
nine-month period ended June 30, 2006, total interest expense increased to $19.4
million from $16.7 million for the comparable  period in 2005.  These  increases
occurred  primarily  as a result  of a  increase  in the  average  rate  paid on
interest-bearing  liabilities  to 3.75% and  3.67% for the three and  nine-month
periods  ended  June 30,  2006,  respectively,  from  3.37%  and  3.27%  for the
comparable  periods ended June 30, 2005.  The increase is also  attributed to an
increase  in the  average  balance of  interest  bearing  liabilities  to $706.4
million and $705.7 million for the three and  nine-month  periods ended June 30,
2006,  respectively,  from $695.0  million and $680.6 million for the comparable
periods in 2005.

Non-interest Income
-------------------
Non-interest  income decreased to $340,000 for the three-month period ended June
30, 2006 from $379,000 for the  comparable  period in 2005.  For the  nine-month
period ended June 30, 2006,  non-interest income decreased to $944,000 from $1.1
million for the comparable  period in 2005. The  three-month  and the nine-month
decrease are due to lower gains from the sale of investments and loans available
for sale.

                                   page -14-
<PAGE>

Non-interest Expenses
---------------------
During the quarter  ended June 30,  2006,  non-interest  expenses  increased  by
$140,000 or 6.9% to $2.2 million when  compared to the same period in 2005.  For
the nine-month period ended June 30, 2006,  non-interest  expenses  increased by
$172,000 or 2.9% compared to the comparable period in 2005.  Management believes
these are normal  increases  in the cost of  operations  after  considering  the
effects of inflation and the impact of the 2.6% growth in average  assets of the
Company  when  compared to the same  periods in 2005.  The  annualized  ratio of
expenses to average  assets for the three and nine month  periods ended June 30,
2006 was 1.12% and 1.07%, respectively.

Income Taxes
------------
The Company  made  provisions  for income taxes of $386,000 and $1.1 million for
the three and nine-month periods ended June 30, 2006, respectively,  compared to
$429,000 and $1.3 million for the comparable  periods in 2005.  These provisions
are based on the levels of taxable income which decreased for the three and nine
months ended June 30, 2006 when compared to the same periods in 2005.

Liquidity and Capital Recourses
-------------------------------
As of June 30, 2006,  the Company had $55.2 million in  commitments to fund loan
originations,  disburse loans in process and meet other obligations.  Management
anticipates  that the majority of these  commitments  will be funded  within the
next six months by means of normal cash flows, FHLB borrowings and new deposits.
The amount of certificate accounts,  which are scheduled to mature during the 12
months  ending June 30,  2007,  is $189.0  million.  Management  expects  that a
substantial  portion of these  maturing  deposits will remain as accounts in the
Company.  The Company  invests  excess  funds in  overnight  deposits  and other
short-term  interest-earning  assets,  which  provide  liquidity to meet lending
requirements.  The Company also has available  borrowings  with the Federal Home
Loan Bank of Pittsburgh up to the Company's  maximum borrowing  capacity,  which
was $559.9 million at June 30, 2006 of which $286.2  million was  outstanding at
June 30, 2006.

The Bank's net income for the nine months  ended June 30,  2006 of $3.3  million
increased  the  Bank's  stockholders'  equity to $48.0  million or 6.2% of total
assets.  This amount is well in excess of the Bank's minimum  regulatory capital
requirement.

Recent Accounting Pronouncements
--------------------------------
In June 2005,  the FASB has issued  Statement No. 154,  "Accounting  Changes and
Error Corrections", a replacement of APB Opinion No. 20 and FASB Statement No.3.
The Statement  applies to all voluntary  changes in  accounting  principle,  and
changes  the  requirements  for  accounting  for and  reporting  of a change  in
accounting principle.  Statement 154 requires retrospective application to prior
periods'  financial  statements of a voluntary  change in  accounting  principle
unless  it is  impracticable.  APB  Opinion  20  previously  required  that most
voluntary  changes in  accounting  principle be  recognized  by including in net
income of the period of the change the cumulative  effect of changing to the new
accounting  principle.  Statement 154 improves  financial  reporting because its
requirements  enhance the consistency of financial  information between periods.
Statement 154 is effective for accounting changes and corrections of errors made
in fiscal  years  beginning  after  December  15,  2005.  The impact of this new
pronouncement  will depend on the Company  changing an accounting  principle and
will be evaluated at that time.

In November 2005, the FASB issued FASB Staff  Position (FSP)  115-1/124-1,  "The
Meaning  of  Other-Than-Temporary  Impairment  and its  Application  to  Certain
Investments".  This FSP provides  additional guidance on when an investment in a
debt or equity security  should be considered  impaired and when that impairment
should be considered  other-than-temporary and recognized as a loss in earnings.
Specifically,  the  guidance  clarifies  that an investor  should  recognize  an
impairment    loss   no   later   than   when   the    impairment    is   deemed
other-than-temporary, even if a decision to sell has not been made. The FSP also
requires  certain  disclosures  about  unrealized  losses  that  have  not  been
recognized  as  other-than-temporary  impairments.  The Company is applying  the
guidance  in this FSP in fiscal  2005 and there  was no  material  affect to the
results of operations or the statement of financial position.

On December 19, 2005,  the FASB issued FSP 94-6-1,  "Terms of Loan Products That
May Give Rise to a Concentration of Credit Risk". FSP 94-6-1 addresses  whether,
under existing guidance, non-traditional loan products represent a concentration
of credit risk and what  disclosures  are required for entities that  originate,
hold,  guarantee,  service, or invest in loan products whose terms may give rise
to a  concentration  of credit risk.  Non-traditional  loan products  expose the
originator,  holder, investor, guarantor, or servicer to higher credit risk than
traditional loan

                                   page -15-
<PAGE>

products.  Typical  features of  non-traditional  loan products may include high
loan-to-value ratios and interest or principal repayments that are less than the
repayments  for fully  amortizing  loans of an equivalent  term.  FSP 94-6-1 was
effective  upon  its  issuance  and it did not  have a  material  impact  on the
Company's financial position or disclosures.

In February  2006,  the FASB issued SFAS No. 155,  Accounting for Certain Hybrid
Financial Instruments. This statement amends FASB Statements No. 133, Accounting
for Derivative  Instruments and Hedging Activities,  and No. 140, Accounting for
Transfers and Servicing of Financial Assets and  Extinguishments of Liabilities.
This statement resolves issues addressed in Statement 133  Implementation  Issue
No. D1,  Application  of Statement  133 to  Beneficial  Interest in  Securitized
Financial  Assets.  This  Statement is effective for all  financial  instruments
acquired or issued  after the  beginning  of an entity's  first fiscal year that
begins after September 15, 2006. The Company is still continuing to evaluate the
impact of this  pronouncement  and does not expect that the guidance will have a
material effect on the Company's financial position or results of operations.

In March  2006,  the FASB  issued  SFAS No.  156  Accounting  for  Servicing  of
Financial  Assets an amendment of FASB  Statement  No. 140 ("SFAS 140" and "SFAS
156").  SFAS  140  establishes,  among  other  things,  the  accounting  for all
separately  recognized  servicing  assets and  servicing  liabilities.  SFAS 156
amends SFAS 140 to require that all separately  recognized  servicing assets and
servicing liabilities be initially measured at fair value, if practicable.  This
Statement  permits,  but  does  not  require,  the  subsequent   measurement  of
separately  recognized servicing assets and servicing liabilities at fair value.
Under this Statement,  an entity can elect subsequent fair value  measurement to
account  for  its   separately   recognized   servicing   assets  and  servicing
liabilities.  Adoption of this  Statement is required as of the beginning of the
first  fiscal year that begins after  September  15, 2006.  Upon  adoption,  the
Company will apply the requirements  for recognition and initial  measurement of
servicing assets and servicing  liabilities  prospectively to all  transactions.
The Company  will adopt SFAS 156 for the fiscal year  beginning  October 1, 2006
and is evaluating the impact of this pronouncement.

In July 2006,  the FASB issued FIN 48,  "Accounting  for  Uncertainty  in Income
Taxes-an  interpretation  of FASB Statement No.109" ("FIN 48"). FIN 48 clarifies
the  recognition  threshold  and  measurement  of a tax position  taken on a tax
return.  FIN 48 is effective for fiscal years beginning after December 15, 2006.
FIN 48 also requires  expanded  disclosure  with respect to the  uncertainty  in
income taxes.  We are currently  evaluating the  requirements  of FIN 48 and the
impact this interpretation may have on our financial statements.

Item 3.Quantitative and Qualitative Disclosures About Market Risk
The Company has instituted  programs designed to decrease the sensitivity of its
earnings to material and prolonged  increases in interest  rates.  The principal
determinant  of the exposure of the Company's  earnings to interest rate risk is
the timing  difference  between  the  repricing  or  maturity  of the  Company's
interest-earning  assets and the  repricing or maturity of its  interest-bearing
liabilities.  If the  maturities of such assets and  liabilities  were perfectly
matched,  and if the  interest  rates borne by its assets and  liabilities  were
equally  flexible  and moved  concurrently,  neither  of which is the case,  the
impact on net interest  income of rapid increases or decreases in interest rates
would be minimized.  The Company's asset and liability  management policies seek
to increase the interest rate sensitivity by shortening the repricing  intervals
and the maturities of the Company's interest-earning assets. Although management
of the Company believes that the steps taken have reduced the Company's  overall
vulnerability to increases in interest rates, the Company remains  vulnerable to
material and prolonged  increases in interest  rates during periods in which its
interest rate sensitive liabilities exceed its interest rate sensitive assets.

The authority and  responsibility  for interest rate management is vested in the
Company's Board of Directors.  The Chief Executive Officer  implements the Board
of Directors'  policies  during the day-to-day  operations of the Company.  Each
month, the Chief Financial  Officer ("CFO") presents the Board of Directors with
a report,  which  outlines the Company's  asset and liability  "gap" position in
various time periods.  The "gap" is the  difference  between  interest-  earning
assets and  interest-bearing  liabilities  which  mature or reprice over a given
time period.

The CFO also meets weekly with the Company's other senior officers to review and
establish  policies and  strategies  designed to regulate the Company's  flow of
funds and  coordinate  the  sources,  uses and pricing of such funds.  The first
priority in structuring  and pricing the Company's  assets and liabilities is to
maintain an  acceptable  interest  rate  spread  while  reducing  the effects of
changes in interest rates and maintaining the quality of the Company's assets.

                                   page -16-
<PAGE>

The  following  table  summarizes  the  amount of  interest-earning  assets  and
interest-bearing liabilities outstanding as of June 30, 2006, which are expected
to mature, prepay or reprice in each of the future time periods shown. Except as
stated below, the amounts of assets or liabilities shown which mature or reprice
during a particular  period were  determined in accordance  with the contractual
terms  of the  asset or  liability.  Adjustable  and  floating-rate  assets  are
included  in the period in which  interest  rates are next  scheduled  to adjust
rather  than in the  period  in which  they are due,  and  fixed-rate  loans and
mortgage-backed  securities  are  included  in the  periods  in  which  they are
anticipated to be repaid.

The passbook accounts, negotiable order of withdrawal ("NOW") accounts, interest
bearing accounts, and money market deposit accounts, are included in the "Over 5
Years"  categories  based on  management's  beliefs  that  these  funds are core
deposits having significantly longer effective maturities based on the Company's
retention of such deposits in changing interest rate environments.

Generally, during a period of rising interest rates, a positive gap would result
in an increase  in net  interest  income  while a negative  gap would  adversely
affect net  interest  income.  Conversely,  during a period of falling  interest
rates, a positive gap would result in a decrease in net interest  income while a
negative gap would positively affect net interest income. However, the following
table  does not  necessarily  indicate  the  impact  of  general  interest  rate
movements on the Company's net interest  income because the repricing of certain
categories  of  assets  and  liabilities  is  discretionary  and is  subject  to
competitive  and other  pressures.  As a result,  certain assets and liabilities
indicated as repricing  within a stated  period may in fact reprice at different
rate levels.

<TABLE>
<CAPTION>
                                                   1 Year      1 to 3       3 to 5        Over 5
                                                  or less       Years        Years         Years        Total
                                                 ---------    ---------    ---------     ---------    ---------
<S>                                                 <C>          <C>          <C>           <C>         <C>
Interest-earning assets
Mortgage loans                                   $  37,564    $  58,471    $  44,299     $ 138,492    $ 278,826
Mortgage-backed securities                          77,984       77,746       38,097        36,603      230,430
Consumer and other loans                            58,350       26,798        9,309        10,967      105,424
Investment securities and other investments         35,935        2,292       24,529        87,581      150,337
                                                              ---------    ---------     ---------    ---------

Total interest-earning assets                      209,833      165,307      116,234       273,643      765,017
                                                 ---------    ---------    ---------     ---------    ---------

Interest-bearing liabilities

   Passbook and Club accounts                           --           --           --         3,483        3,483
   NOW and checking accounts                            --           --           --        37,265       37,265
   Money Market Deposit accounts                    17,182           --           --        37,840       55,022
   Choice Savings                                    2,322                                   6,967        9,289
   Certificate accounts                            188,952      123,691        5,966            --      318,609
   Borrowed money                                   80,725       71,542       45,385        88,590      286,242
                                                 ---------    ---------    ---------     ---------    ---------

Total interest-bearing liabilities                 289,181      195,233       51,351       174,145      709,910
                                                 ---------    ---------    ---------     ---------    ---------

Repricing GAP during the period                  $ (79,348)   $ (29,926)   $  64,883     $  99,498    $  55,107
                                                 =========    =========    =========     =========    =========

Cumulative GAP                                   $ (79,348)   $(109,274)   $ (44,391)    $  55,107
                                                 =========    =========     =========    =========

Ratio of GAP during the period to total assets     -10.24%       -3.86%         8.37%        12.84%
                                                =========    =========     =========    =========

Ratio of cumulative GAP to total assets            -10.24%      -14.10%       -5.73%          7.11%
                                                =========    =========     =========    =========
</TABLE>

Item 4. Controls and Procedures
Our management evaluated,  with the participation of our Chief Executive Officer
and Chief Financial  Officer,  the effectiveness of our disclosure  controls and
procedures  (as defined in Rules  13a-15(e) and 15d-15(e)  under the  Securities
Exchange Act of 1934) as of the end of the period covered by this report.  Based
on such evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded  that our  disclosure  controls and  procedures are designed to ensure
that  information  required to be disclosed by us in the reports that we file or
submit under the

                                   page -17-
<PAGE>

Securities Exchange Act of 1934 is recorded, processed,  summarized and reported
within the time  periods  specified in the SEC's rules and  regulations  and are
operating in an effective manner.

No change in our internal control over financial  reporting (as defined in Rules
13a-15(f) and  15(d)-15(f)  under the Securities  Exchange Act of 1934) occurred
during the most  recent  fiscal  quarter  that has  materially  affected,  or is
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.


                                   page -18-
<PAGE>

Part II  OTHER INFORMATION

         Item 1.     Legal Proceedings

                     Not applicable.

         Item 1A.    Risk Factors

                     Not applicable.

         Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

         The following  table  presents the  repurchasing  activity of the stock
repurchase program during the quarter ended June 30, 2006:

                                        Total
                                      Number of
                                        Shares
                                      Purchased       Maximum
                                      as Part of  Number of Shares
              Total        Average     Publicly   that May Yet Be
            Number of       Price      Announced  Purchased Under
              Shares        Paid       Plans or    the Plans or
  Period    Purchased     per Share    Programs     Programs

April 1 -           --           --           --       73,373
30, 2006
May 1 -         33,586        17.58       33,586       39,787
31, 2006
June 1 -
30, 2006
            ----------   ----------   ----------   ----------
                33,586        17.58       33,586       39,787
            ==========                ==========   ==========
Total


 Notes to this table:
(a)      On June  18,  2003,  the  Company  announced  its  current  program  to
         repurchase up to 5.0% of the outstanding  shares of Common Stock of the
         Company, or 191,667 shares.
(b)      The program does not have an  expiration  date and all shares have been
         purchased in the open market.

         Item 3.     Defaults upon Senior Securities

                     Not applicable.

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

                     Not applicable

         Item 5.     Other information.

                     Not applicable.

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

                           No.

                          31.1    Certification of Chief Executive
                                  Officer


                          31.2    Certification of Chief Financial
                                  Officer

                          32.0    Section 1350 Certification of Chief
                                  Executive Officer and Chief Financial Officer

                                   page -19-
<PAGE>

Signatures

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

HARLEYSVILLE SAVINGS FINANCIAL CORPORATION

Date: August 11, 2006            By:  /s/ Edward J. Molnar
                                      ------------------------------------------
                                      Edward J. Molnar
                                      Chief Executive Officer


Date: August 11, 2006             By: /s/ Brendan J. McGill
                                      ------------------------------------------
                                      Brendan J. McGill
                                      Senior Vice President
                                      Treasurer and Chief Financial Officer