<PAGE>

                      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, 1999

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

For the transition period from __________________ to____________________________

Commission File Number:  0-22399

HARRIS FINANCIAL, INC.
----------------------
(Exact name of registrant as specified in its charter)

PENNSYLVANIA                                23-2889833
------------                                ----------
(State or other jurisdiction of            (IRS Employer
incorporation or organization)             Identification No.)

235 North Second Street PO Box 1711, Harrisburg, Pennsylvania         17105
-------------------------------------------------------------         -----
               (Address of principal executive offices)               (Zip Code)

(Registrant's telephone number, including area code)        717-236-4041
                                                            ------------

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

     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 the number of shares outstanding of each of the Bank's classes of
common stock, as of the latest practicable date 33,591,700 shares of stock, par
                                                -------------------------------
value of $.01 per share, outstanding at July 30, 1999.
------------------------------------------------------


                                    Page 1
<PAGE>

Part I.  Financial Information.


Part 1, Item 1    Financial Statements.


              (Balance of this page is left intentionally blank.)


                                    Page 2
<PAGE>

                     HARRIS FINANCIAL, INC. AND SUBSIDIARIES
                 Consolidated Statements of Financial Condition
                                 (in thousands)
                                   (Unaudited)

                                [OBJECT OMITTED]
<TABLE>
<CAPTION>

                                                                       June 30,              December 31,
                                                                         1999                   1998
Assets                                                             ---------------        ---------------
--------------
<S>                                                                 <C>                    <C>
Cash and cash equivalents                                               $ 57,289               $ 56,741
Marketable securities available for sale (Note 2)                      1,263,384              1,274,837
Loans receivable, net                                                  1,263,055              1,051,642
Loans held for sale, net                                                   2,028                 14,418
Loan servicing rights                                                      9,344                 10,996
Real estate investments                                                    6,473                  7,262
Premises and equipment, net of accumulated
   depreciation of $ 18,568 and $ 17,230                                  23,123                 21,614
Accrued interest receivable                                               17,674                 15,523
Income taxes receivable                                                        -                    635
Intangible assets                                                         18,978                 16,909
Deferred tax asset                                                         1,445                      -
Other assets                                                               2,189                 26,892
                                                                  ---------------        ---------------
   Total assets                                                      $ 2,664,982            $ 2,497,469
                                                                  ===============        ===============

Liabilities and Stockholders' Equity
--------------------------------------
Deposits                                                             $ 1,276,734            $ 1,205,379
Escrow                                                                    17,647                  7,906
Accrued interest payable                                                   7,637                  6,965
Postretirement benefit obligation                                          2,868                  2,452
Other borrowings (Note 3)                                              1,138,000              1,069,254
Deferred tax liability                                                         -                  5,472
Income taxes payable                                                       1,329                      -
Other liabilities                                                         34,627                 10,071
                                                                  ---------------        ---------------
   Total Liabilities                                                 $ 2,478,842            $ 2,307,499
                                                                  ---------------        ---------------

Common stock, $ .01 par value, authorized 100,000,000 shares
 34,005,000 shares issued and 33,585,700 outstanding at
June 30, 1999,  33,993,500 shares issued and 33,584,200
shares outstanding at December 31, 1998 (Note 6)                     $       340            $       340
Paid in capital                                                           30,141                 29,960
Retained earnings                                                        167,100                158,386
Other comprehensive income                                                (4,542)                 8,106
Employee stock ownership plan                                               (346)                  (396)
Recognition and retention plans                                             (456)                  (456)
Treasury Stock 419,300 shares (Note 9)                                    (6,097)                (5,970)
                                                                  ---------------        ---------------
    Total stockholders' equity                                           186,140                189,970
                                                                  ---------------        ---------------
    Total liabilities and stockholders' equity                       $ 2,664,982            $ 2,497,469
                                                                  ===============        ===============
</TABLE>

See accompanying notes to consolidated financial statements.

                                    Page 3
<PAGE>

                    HARRIS FINANCIAL, INC. AND SUBSIDIARIES
                        Consolidated Statement of Income
                    (in thousands, except for per share data)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                             Six Months Ended June 30,   Three Months Ended June 30,
                                                     --------------------------------    ----------------------------
Interest Income:                                         1999              1998            1999            1998
                                                     --------------    --------------    ----------    --------------
<S>                                                  <C>                <C>              <C>             <C>
  Loans receivable:
      First mortgage loans                           $      23,726    $       24,385    $   11,756    $       12,045
      Commercial                                             9,447             4,803         5,192             2,604
      Consumer and other loans                              12,057             9,768         6,377             5,061
  Taxable investments                                       15,215            14,579         7,217             7,144
  Taxfree investments                                        3,145             3,062         1,562             1,528
  Dividends                                                  4,273             4,551         2,047             2,306
  Mortgage backed securities                                16,214            19,318         8,235             9,390
  Money market securities                                       59                43            42                24
                                                     --------------    --------------    ----------    --------------
       Total interest income                                84,136            80,509        42,428            40,102
                                                     --------------    --------------    ----------    --------------
Interest Expense:
  Deposits                                                  25,026            25,602        12,555            12,622
  Borrowed funds (Note 3)                                   28,735            26,714        14,644            13,402
  Escrow                                                        53                35            28                18
                                                     --------------    --------------    ----------    --------------
    Total interest expense                                  53,814            52,351        27,227            26,042
                                                     --------------    --------------    ----------    --------------
     Net interest income                                    30,322            28,158        15,201            14,060
Provision for loan losses                                    1,590             1,400           795               570
                                                     --------------    --------------    ----------    --------------
    Net int. inc. after provision for loan losses           28,732            26,758        14,406            13,490
                                                     --------------    --------------    ----------    --------------
Non-interest Income:
  Service charges on deposits                                2,740             1,973         1,507             1,037
  Other svc. charges/commissions/fees                          688               342           364               163
  Net servicing income                                         120               180           120               234
  Gain on sale of securities, net (Note 2)                   1,365             2,970            12               586
  Gain on sale of loans, net                                 1,914             2,068           742               994
  Other                                                        705               447           766                38
                                                     --------------    --------------    ----------    --------------
      Total non-interest income                              7,532             7,980         3,511             3,052
                                                     --------------    --------------    ----------    --------------
Non-interest Expense:
  Salaries and benefits                                     10,921            10,696         5,149             5,361
  Equipment expense                                          2,000             1,493         1,038               814
  Occupancy expense                                          1,559             1,443           757               714
  Advertising and public relations                             868             1,077           385               585
  FDIC insurance                                               346               357           177               178
  Director fees                                                179               155            96                79
  Income from real estate operations                          (347)             (368)         (131)             (207)
  Amortization of intangibles                                1,200             1,233           600               628
  Other                                                      6,199             4,136         3,262             2,247
                                                     --------------    --------------    ----------    --------------
     Total non-interest expense                             22,925            20,222        11,333            10,399
                                                     --------------    --------------    ----------    --------------
  Income before income taxes                                13,339            14,516         6,584             6,143
  Income tax expense                                         3,669             4,292         1,847             1,668
                                                     --------------    --------------    ----------    --------------
      Net Income                                     $       9,670    $       10,224    $    4,737    $        4,475
                                                     ==============    ==============    ==========    ==============
  Basic earnings per share (Note 6)                  $        0.29    $         0.30    $     0.14    $         0.13
                                                     ==============    ==============    ==========    ==============
  Diluted earnings per share (Note 6)                $        0.29    $         0.30    $     0.14    $         0.13
                                                     ==============    ==============    ==========    ==============
</TABLE>
See accompanying notes to consolidated financial statements.

                                    Page 4
<PAGE>
                    HARRIS FINANCIAL, INC. AND SUBSIDIARIES
                Consolidated Statements of Shareholders' Equity
                                (in thousands)
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                 Other     Employee   Recognition
                                                                Compre-      Stock        And                               Compre-
                              Common    Paid in     Retained    hensive    Ownership   Retention    Treasury                hensive
                               Stock    Capital     Earnings    Income       Plan        Plan        Stock       Total      Income
                             -------------------------------------------------------------------------------------------------------
<S>                          <C>        <C>         <C>         <C>      <C>          <C>           <C>        <C>         <C>
Balance at January 1, 1998       $ 338   $ 28,016    $ 141,043  $ 10,732     $ (529)      $ (566)       $ -    $ 179,034
Net income                                              10,224                                                    10,224   $ 10,224
Dividends paid at $.055 per
 share                                                    (898)                                                     (898)
Exercised stock options              2        631                                                                    633
Unrealized losses on
 securities (1)                                                   (1,039)                                         (1,039)    (1,039)
                                                                                                                         -----------
Comprehensive income                                                                                                        $ 9,185
                                                                                                                         ===========
ESOP stock committed for
 release                                                                         83                                   83
Earned portion of RRP plan                                                                    60                      60
Excess of fair value above
 cost of ESOP stock committed
 for release                                  453                                                                    453
Excess of fair value above
 cost of earned portion of
 RRP stock                                    278                                                                    278
                             --------------------------------------------------------------------------------------------
Balance at June 30, 1998         $ 340   $ 29,378    $ 150,369   $ 9,693     $ (446)      $ (506)       $ -    $ 188,828
                             ============================================================================================

Balance at January 1, 1999         340     29,960      158,386     8,106       (396)        (456)    (5,970)     189,970
Net income                                               9,670                                                     9,670    $ 9,670
Dividends paid at $.06 per
 share                                                    (956)                                                     (956)
Exercised stock options                        43                                                                     43
Unrealized losses on
 securities (1)                                                  (12,648)                                        (12,648)   (12,468)
                                                                                                                         -----------
Comprehensive income                                                                                                       $ (2,798)
                                                                                                                         ===========
ESOP stock committed for
 release                                                                         50                                   50
Excess of fair value above
 cost of ESOP stock committed
 for release                                  138                                                                    138
Treasury stock purchased -
 10,000 shares                                                                                         (127)        (127)
                             --------------------------------------------------------------------------------------------
Balance at June 30, 1999         $ 340   $ 30,141    $ 167,100  $ (4,542)    $ (346)      $ (456)  $ (6,097)   $ 186,140
                             ============================================================================================
</TABLE>

(1) Net of reclassification adjustment and net of tax effect of ($8,116) and
    ($716) for 1999 and 1998, respectively.

See accompanying notes to consolidated financial statements.



                                    Page 5
<PAGE>







                    HARRIS FINANCIAL, INC. AND SUBSIDIARIES
                     Consolidated Statements of Cash Flows
                                (in thousands)
                                  (Unaudited)
<TABLE>
<CAPTION>


                                                                            Six Months Ended June 30,
                                                                           1999                  1998
                                                                     ------------           ------------
<S>                                                               <C>                       <C>
Cash flows from operating activities:
  Net Income                                                      $        9,670             $   10,224
  Adjustments to reconcile net income to net cash provided by
  operating activities:
    Provision for loan losses                                              1,590                  1,400
    Net depreciation, amortization, and accretion                          2,767                  3,839
    Decrease (increase) in loans held for sale                            13,656                 (4,008)
    Net gain on sales of interest earning assets                          (3,279)                (5,038)
    Gain on sale of foreclosed real estate                                  (162)                   (49)
    Equity losses/(income) from joint ventures                                57                    (21)
    Increase in accrued interest receivable                               (2,151)                (3,089)
    Increase in accrued interest payable                                     672                  2,322
    Amortization and write-off of intangibles                              1,200                  1,232
    Earned ESOP shares                                                       188                    536
    Earned RRP shares                                                          -                    338
    Provision for deferred income taxes                                      981                   (968)
    Decrease in income taxes receivable                                    1,964                  7,011
    Other, net                                                            26,315                   (107)
                                                                     ------------           ------------
  Net cash provided by operating activities                               53,468                 13,622
                                                                     ------------           ------------

Cash flows from investing activities:
   Proceeds from maturities and principal reductions of marketable
      securities:
           Held to Maturity                                                    -                  1,032
           Available-for-sale                                            162,352                209,567
   Proceeds from sales of marketable securities; available for sale      225,730                376,052
   Purchase of marketable securities; available for sale                (370,263)              (634,943)
   Loans Sold                                                             57,249                 72,759
   Net increase in loan originations less principal payments on
       loans                                                            (272,457)              (108,465)
   Acquisition of loan servicing rights                                      153                 (2,564)
   Investment in real estate held for investment                            (239)                  (210)
   Proceeds from payments on real estate held for investment                 419                     40
   Purchases of premises and equipment, net                               (2,946)                (2,027)
   Cash proceeds received from the sale of foreclosed real
      estate                                                               1,549                    687
  Branch purchase                                                         34,004                      -
                                                                     ------------           ------------
      Net cash used in investing activities                       $     (164,449)            $  (88,072)
                                                                     ------------           ------------
</TABLE>
       See accompanying notes to the consolidated financial statements.

                                  (Continued)


                                    Page 6
<PAGE>

                    HARRIS FINANCIAL, INC. AND SUBSIDIARIES
                     Consolidated Statements of Cash Flows
                                (in thousands)
                                  (Unaudited)
                                  (continued)

<TABLE>
<CAPTION>
                                                                                 Six Months Ended June 30,
                                                                               1999                    1998
                                                                           -------------            ------------
<S>                                                                     <C>                      <C>
Cash flows from financing activities:
    Net increase (decrease) in deposits                                  $       34,082           $     (20,088)
    Net increase in other borrowings                                             68,746                 107,310
    Net increase in escrow                                                        9,741                   6,361
    Payments to acquire treasury stock                                             (127)                      -
    Cash dividends                                                                 (956)                   (898)
    Proceeds from the exercise of stock options                                      43                     633
                                                                           -------------            ------------

   Net cash provided by financing operations                                    111,529                  93,318
                                                                           -------------            ------------

  Net increase in cash and cash equivalents                                         548                  18,868

Cash and cash equivalents at beginning of period                                 56,741                  24,466
                                                                           -------------            ------------

Cash and cash equivalents at end of period                               $       57,289           $      43,334
                                                                           =============            ============

Supplemental disclosures:
Cash paid during the periods for:
    Interest on deposits, advances and other borrowings
        (includes interest credited to deposit accounts)                 $       53,218           $      47,642
   Income taxes                                                                     636                   1,340
Cash received during the periods for:
  Income tax refunds                                                     $            -           $       3,089
Non-cash investing activities:
  Transfer from loans to foreclosed real estate                          $          922           $       1,027

Branch acquisition:
  Fair value of assets acquired                                          $       34,004           $           -
  Deposit premium paid                                                            3,269                       -
  Fair value of liabilities assumed                                              37,273                       -
</TABLE>

See accompanying notes to consolidated financial statements.


                                    Page 7
<PAGE>

                    HARRIS FINANCIAL, INC. AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
         (All dollar amounts presented in the tables are in thousands)
                                  (Unaudited)



(1)      Accounting Policies
         -------------------

         The Consolidated Financial Statements include the accounts of Harris
Financial, Inc. and its wholly-owned subsidiary Harris Savings Bank. In turn,
Harris Savings Bank is comprised of the following subsidiaries: AVSTAR Mortgage
Corporation, Harris Delaware Corporation, H. S. Service Corporation, First
Harrisburg Service Corporation and C.B.L. Service Corporation. All intercompany
balances have been eliminated in consolidation.

         The accompanying interim financial statements have been prepared in
accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the results of interim periods
have been made. Operating results for the six month period ended June 30, 1999
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1999 or any other interim period.

         The accounting policies followed in the presentation of interim
financial results are consistent with those followed on an annual basis. These
policies are presented on pages 46 through 50 of the 1998 Annual Report to
Stockholders.


(2)      Marketable Securities
         ---------------------

         In January 1998, the remaining held-to-maturity portfolio with a book
value of $96.4 million was transferred to the available-for-sale segment of the
portfolio and $63.0 million of the amount transferred was subsequently sold for
a gain of $1.4 million. The market value of these securities at time of transfer
was $97.5 million. This decision resulted from analysis performed in January of
1998 which indicated that the Bank was heavily invested in fixed rate assets,
which increased the risk of earnings compression in a rising rate environment.
The analysis showed that the Registrant could liquidate the majority of its
issues in the held-to-maturity portfolio and reinvest the majority of the
proceeds in a mix of fixed and floating rate assets that would maintain the
Registrant's earnings stream, while increasing the level of variable rate
assets. This course of action was approved by the Registrant's Board of
Directors in January, 1998 and the sale was conducted in the same month. Under
generally accepted accounting principles, the sale of these securities
eliminated the Registrant's ability to use the held-to-maturity classification
of securities for a period of at least two years.

Marketable Securities consist of the following as of the date indicated:

                                                June 30,       December 31,
                                                  1999             1998
                                            ---------------   --------------
Available-for-sale, at amortized cost       $    1,271,007    $   1,261,696
Available-for-sale, net unrealized gain             (7,623)          13,141
                                            ---------------   --------------
Available-for-sale, at fair value                1,263,384        1,274,837
                                            ---------------   --------------
     Total Marketable securities            $    1,263,384    $   1,274,837
                                            ===============   ==============

                                    Page 8
<PAGE>

                    HARRIS FINANCIAL, INC. AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
         (All dollar amounts presented in the tables are in thousands)
                                  (Unaudited)

(3)  Other Borrowings
     ----------------

         The following table presents the composition of the Registrant's other
borrowings as of the dates indicated.



                                                June 30,       December 31,
                                                  1999             1998
                                            ---------------   --------------
FHLB advances                               $      825,000    $     746,581
Repurchase Agreements                              313,000          322,673
                                            ---------------   --------------
  Total other borrowings                    $    1,138,000    $   1,069,254
                                            ===============   ==============

(4)  New Accounting Standards
     ------------------------

         During June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for
Derivative Instruments and Hedging Activities" . The Statement establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded on the balance sheet as either an asset or liability measured at its
fair value. SFAS 133 requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting treatment.

         SFAS 133 is effective for fiscal years beginning after June 15, 2000. A
company may also implement the Statement as of the beginning of any fiscal
quarter after issuance. The Statement cannot be applied retroactively.

         Management has not yet quantified the impact of adopting SFAS 133 on
the financial statements and has not determined the timing of or method of
adoption of the Statement. However, the application of the Statement could
increase volatility in earnings and comprehensive income.

                                    Page 9
<PAGE>

                    HARRIS FINANCIAL, INC. AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                                  (Unaudited)


(5)   Commitments and Contingent Liabilities
      --------------------------------------

         In the ordinary course of business, the Registrant makes commitments to
extend letters of credit to its customers. At June 30, 1999 and December 31,
1998, standby letters of credit issued and outstanding amounted to $11,216,000
and $4,703,000 respectively. These letters of credit are not reflected in the
accompanying financial statements. Management does not anticipate any
significant losses as a result of these transactions.

         At June 30, 1999, the Registrant has $148,933,000 in unused line of
credit commitments extended to its customers, $43,457,000 of undistributed funds
on construction loans and $42,447,000 of loan origination commitments.

(6)  Earnings per share
     ------------------

         The following table shows the allocation of earnings per share to basic
earnings per share and diluted earnings per share.

                                                           Weighted
                                                            Average
                                                             Shares    Per Share
For the six months ended June 30, 1999      Income        Outstanding    Amount
                                           -------------------------------------
Basic earnings per share
  Income available to common shareholders    $ 9,670,000   33,804,463    $ 0.29
                                           -------------------------------------
  Options held by management and directors                     86,863
                                           -------------------------------------
Diluted earnings per share
  Income available to common shareholders
  plus assumed conversions                   $ 9,670,000   33,891,326    $ 0.29
                                           =====================================

For the six months ended June 30, 1998
Basic earnings per share
  Income available to common shareholders   $ 10,224,000   33,917,123    $ 0.30
                                           -------------------------------------
  Options held by management and directors                    303,703
                                           -------------------------------------
Diluted earnings per share
  Income available to common shareholders
  plus assumed conversions                  $ 10,224,000   34,220,826    $ 0.30
                                           =====================================

                                    Page 10
<PAGE>

                    HARRIS FINANCIAL, INC. AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
                                  (unaudited)

(6)  Earnings per share (continued)
     ------------------

                                                           Weighted
                                                            Average
                                                             Shares    Per Share
For the three months ended June 30, 1999    Income        Outstanding    Amount
                                           -------------------------------------
Basic earnings per share
  Income available to common shareholders    $ 4,737,000   33,809,603    $ 0.14
                                           -------------------------------------
  Options held by management and directors                     82,643
                                           -------------------------------------
Diluted earnings per share
  Income available to common shareholders
  plus assumed conversions                   $ 4,737,000   33,892,246    $ 0.14
                                           =====================================

For the three months ended June 30, 1998
Basic earnings per share
  Income available to common shareholders    $ 4,475,000   33,953,331    $ 0.13
                                           -------------------------------------
  Options held by management and directors                    307,121
                                           -------------------------------------
Diluted earnings per share
  Income available to common shareholders
  plus assumed conversions                   $ 4,475,000   34,260,452    $ 0.13
                                           =====================================





(7)  Loan Servicing

         On March 15, 1999, the Registrant sold the rights to service loans
totaling $79.4 million. Concurrent with this sale, the Registrant also sold an
interest rate floor that was purchased in 1998 to hedge against the
deterioration in the carrying value of the servicing rights related to these
loans. The floor was recorded at its fair market value on the balance sheet at
December 31, 1998, with an offsetting entry to the value of the mortgage
servicing rights. In addition, the Registrant paid a premium to enter into the
floor contract. As a result of the sale of the mortgage servicing rights and the
floor, and the write off of unamortized premium, the Registrant recognized a net
loss of $194,000.

                                    Page 11
<PAGE>

                    HARRIS FINANCIAL, INC. AND SUBSIDIARIES
                  Notes to Consolidated Financial Statements
         (All dollar amounts presented in the tables are in thousands)
                                  (unaudited)


(8) Dividend Waivers by the Mutual Holding Company
    ----------------------------------------------

         The Mutual Company has generally waived the receipt of dividends
declared by the Bank, or, subsequent to the Two-Tier Reorganization, dividends
paid by the Registrant. The Mutual Company has not been required to obtain
approval of the Federal Reserve Bank (the "FRB" ) prior to any such waiver, and
through the date hereof has not sought or received FRB approval of any such
waiver. In connection with the FRB and Federal Deposit Insurance Corporation
(the "FDIC") approvals of the Bank's acquisition of First Harrisburg Bancor,
Inc. and its wholly owned subsidiary, First Federal Savings and Loan Association
of Harrisburg ("First Federal"), the Bank and the Mutual Company made several
commitments to the FDIC and the FRB regarding the waiver of dividends by the
Mutual Company. These commitments include the following: (1) Any dividends
waived by the Mutual Company shall be taken into account in any valuation of the
Bank and the Mutual Company, and factored into the calculation used in
establishing a fair and reasonable basis for exchanging Bank shares for holding
company shares in any subsequent conversion of the Mutual Company to stock form;
(2) Dividends waived by the Mutual Company shall not be available for payment to
or the value thereof transferred to Minority Stockholders by any means including
through dividend payments or at liquidation; (3) Beginning five years after
April 19, 1996, the date of consummation of the Bank's acquisition of First
Federal, the Mutual Company will make prior application to and shall receive the
approval of the FRB prior to waiving any dividends declared on the capital stock
of the Bank, and the FRB shall have the authority to approve or deny any
dividend waiver request in its discretion, and after such date such application
may be made on an annual basis with respect to any year in which the Mutual
Company intends to waive dividends paid by the Bank; (4) After April 19, 1996,
the date of consummation of the Bank's acquisition of First Federal, the amount
of waived dividends that are identified as belonging to the Mutual Company shall
not be available for payment to, or the value transferred to, Minority
Stockholders, either through dividend payments, upon the conversion of the
Mutual Company to stock form, upon the redemption of shares of the Bank, upon
the Bank's issuance of additional shares, at liquidation, or by any other means;
(5) The Mutual Company shall notify the FRB of all such transactions and will
make available to the FRB such information as the FRB determines to be
appropriate; (6) The Bank will take into account when setting its dividend rate
the declaration rate in relation to net income and the rate's effect on the
Bank's ability to issue capital; (7) The dividend rate will be reasonable and
sustainable upon a full conversion to stock form of the Mutual Company; (8) In
the event that the FRB adopts regulations regarding dividends waivers by mutual
holding companies, the Mutual Company will comply with the applicable
requirements of such regulations. After the completion of the two-tier
reorganization, the commitments became applicable to dividends paid by the
Registrant that are waived by the Mutual Company. If the Mutual Company decides
that it is in its best interest to waive the right to receive a particular
dividend to be paid by the Registrant, and, if necessary, the FRB approves such
waiver, then the Registrant pays such dividend only to Minority Stockholders,
and the amount of the dividend waived by the Mutual Company is treated in the
manner described above. The Mutual Company's decision as to whether or not to
waive a particular dividend depends on a number of factors, including the Mutual
Company's capital needs, the investment alternatives available to the Mutual
Company as compared to those available to the Registrant, and the receipt of
required regulatory approvals.

         There can be no assurance that (a) the Mutual Company will waive
dividends paid by the Registrant, (b) the FRB will approve any dividend waivers
by the Mutual Company after April 2001, or (c) the terms that may be imposed by
the FRB on any dividend waiver will be favorable to Minority Stockholders. As of
the date hereof, the Mutual Company has waived the right to receive all
dividends paid by the Bank and the Registrant. As of April 19, 1996, the Mutual
Company had waived $9.1 million of dividends declared by the Bank, and through
June 30, 1999, had waived a total of $25.3 million of dividends paid by the Bank
and the Registrant.


                                    Page 12
<PAGE>

                     HARRIS FINANCIAL, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
          (All dollar amounts presented in the tables are in thousands)
                                   (unaudited)


(9) Treasury Stock Repurchase Program
    ---------------------------------

         On February 28, 1998, HFI received authorization from the Pennsylvania
Department of Banking to repurchase 450,000 shares of its outstanding common
stock. The assumed price for the repurchase of the shares was $16 per share for
an aggregate cost of $7,200,000. The proposed repurchase of shares were to be
completed one year from the approval date of February 28, 1998. On June 2, 1999,
the Registrant received approval from the Department of Banking to extend the
period for repurchasing 450,000 shares of its outstanding common stock until
June 1, 2000.

         During the third and fourth quarters of 1998 and the second quarter of
1999, the Registrant purchased 419,300 shares with a market value of $6,097,000.
The shares will be used to facilitate several stock ownership and stock option
plans. These plans will benefit directors, executive officers, non-executive
officers, and newly appointed executives or directors. On April 20, 1999, the
shareholders ratified and approved the 1999 Stock Option Plan (For Employees)
and the 1999 Stock Option Plan for Outside Directors. These option plans
authorize a maximum of 1,125,000 shares in aggregate for awards in the form of
stock options.

(10) Financial Instruments and Risk Management
     -----------------------------------------

         On June 4, 1999, HFI entered into a total return swap. This swap is
intended to hedge market value fluctuations in HFI's retail construction loan
portfolio which are caused by changes in market levels of interest rates. The
swap has a notational amount of $5,000,000, a contract duration of 7 months and
consists of two components:

(a)  HFI exchanges fixed rate interest payments on a 6.5 % FNMA 30 year mortgage
     pool for a floating rate interest payment based on the London Interbank
     Offered Rate (LIBOR) minus 42 basis points. The settlement is made on a
     monthly basis between HFI and the counter party.

(b)  A lump sum payment which reflects the change in market value of a 6.5% FNMA
     mortgage pool from the inception of the swap contract to the end of the
     swap contract. This payment is made at the final date of the contract
     between HFI and the counter party. HFI receives a payment if the market
     value of the underlying FNMA pool declines. Conversely, HFI must pay the
     counter party if the value of the FNMA pool increases.

         The total return swap is designed to hedge against the decline in the
market value of a specifically identified pool of fixed rate construction loans
that are to be sold upon their conversion to long term mortgage loans. HFI has
determined that there is a high degree of correlation between the changes in the
market value of the contract and the fair market value of the hedged loans.
Accordingly, HFI has recorded the change in market value of the contract on the
balance sheet, with an offsetting entry to the carrying value of the hedged
loans. The fair value of the contract at June 30, 1999, is $42,175. The ultimate
gain or loss incurred by HFI as a result of the changes in the market value of
the contract will be recognized upon the sale of the construction loans. HFI has
recorded the impact of the interest rate swap portion of the contract using
synthetic instrument accounting. Under this method, gains or losses related to
the interest rate swap are accrued as they occur.


                                    Page 13
<PAGE>

Item 2 Management's Discussion and Analysis of Financial Condition and Results
       of  Operations

         The following is management's discussion and analysis of the
significant changes in the results of operations, capital resources and
liquidity presented in its accompanying interim consolidated financial
statements for Harris Financial, Inc. and subsidiaries. This discussion should
be read in conjunction with the 1998 Annual Report. Current performance does not
guarantee, and may not be indicative of similar performance in the future.

         In addition to historical information, this Quarterly Report on Form
10-Q contains forward-looking statements, as such term is defined in the
Securities and Exchange Act of 1934 and the regulations thereunder. The
forward-looking statements contained herein are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
projected in the forward-looking statements. Important factors that might cause
such a difference include, but are not limited to, those discussed in the
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations". Readers are cautioned not to place undue reliance on
these forward-looking statements, which reflect management's analysis only as of
the date hereof. The Registrant undertakes no obligation to publicly revise or
update these forward-looking statements to reflect events or circumstances that
arise after the date hereof.

 (a)     Results of Operations

         Net Income or Loss  The net income for the six month period ended June
         30, 1999 was $9,670,000, representing a decrease of $554,000 or 5.4%
         from the $10,224,000 net income figure reported during the comparable
         six month period ending June 30, 1998. For the three month period
         ending June 30, 1999, net income was $4,737,000 which was $262,000 or
         5.9% higher than the net income figure of $4,475,000 for the comparable
         period in 1998.

         Net Interest Income  HFI's principle source of revenue is net interest
         income, which represents the difference between interest income
         generated by earning assets and the interest expense of deposits and
         external sources of funds. Furthermore, net interest income is
         significantly dependent on the volume and composition of earning assets
         and interest earning liabilities as well as the yield/cost of interest
         earning assets/liabilities.

         Net interest income, on a tax equivalent basis, totaled $32,015,000 for
         the six months ended June 30, 1999, which represents an increase of
         $2,208,000, or 7.4%, from the $29,807,000 of net interest income
         recorded in the six months ended June 30, 1998. This increase reflected
         a favorable volume variance of $3,540,000 due to a $229.0 million
         increase in total average earning assets to $2.429 billion during the
         year to date period ended June 30, 1999 as compared to $2.200 billion
         recorded during the same period ending June 30, 1998. At the same time,
         general market interest rate trends created an unfavorable rate
         variance of $1,332,000 for the six months ended June 30, 1999. The
         interaction of positive volume variances and negative rate variances
         generated the net positive change of $2,208,000 mentioned above.

         Net interest income, on a tax equivalent basis, totaled $16,042,000 for
         the three months ended June 30, 1999. This represents an increase of
         $1,158,000 or 7.8% over the $14,884,000 reported for the comparable
         three month period ended June 30, 1998. This increase reflects a
         favorable volume variance of $1,931,000 that was partially offset by a
         unfavorable rate variance of $773,000. The volume variance reflects a
         $265.0 million increase in interest earning assets to $2.467 billion
         during the three months ended June 30, 1999, from $2.202 billion in the
         three months ending June 30, 1998. While market rates displayed
         significant swings, the overall trend for the three month period ended
         June 30, 1999 was still lower than for the comparable three month
         period ended June 30, 1998. Consequently, the Registrant experienced an
         unfavorable rate variance of $773,000.

         For the six months ended June 30, 1999, the yield on interest earning
         assets was 7.07%. This figure is 40 basis points lower than the 7.47%
         yield reported for the six month period ended June 30, 1998.


                                    Page 14
<PAGE>

         At same time, the cost of funds decreased 40 basis points to 4.66% for
         the period ending June 30, 1999, versus 5.06% for the six months ended
         June 30, 1998. As a result, the interest spread (the difference between
         the yield on assets minus the cost of funds) remained unchanged at
         2.41% for the six month period ending June 30, 1999, versus the
         comparable period ending June 30, 1998. Yields on interest earning
         assets fell uniformly from the comparable period ending June 30, 1999
         with the exception of an 8 basis point increase (7.62% versus 7.54%) in
         indirect consumer loans. HFI has increased its marketing efforts in
         this area, and managed to generate modest increase rates, especially in
         the mobile home segment of indirect loans.

         The market rate trends detailed in the preceding paragraph also
         generated the same results in the three month periods ended June 30,
         1999 and June 30, 1998. The yield on interest earning assets declined
         42 basis points from 7.44% for the three month period ended June 30,
         1998, to 7.02% for the three month period ended June 30, 1999. At the
         same time, the cost of funds declined 40 basis points from 5.05% for
         the three month period ended June 30, 1998, to 4.65% for the three
         months ended June 30, 1999. Consequently the net interest spread
         declined two basis points from 2.39% for the three months ended June
         30, 1998, to 2.37% for the comparable period in 1999.

         HFI continues to rely on wholesale funding sources to support an
         investment leveraging strategy and uses external borrowings to
         supplement funding provided by savings and time deposits. During the
         six month period ending June 30, 1999, total deposits (net of escrow
         deposits) increased $71.4 million or 5.9% while other borrowings
         increased by $68.7 million or 6.4%. The strategy relies on wholesale
         funding to support a redeployment of capital generated from ongoing
         operations (leveraging) into an interest earning capacity, via the
         investment portfolio. The objective of this strategy is to increase the
         absolute dollar amount of interest income and boost the Registrant's
         return on equity. However, this strategy compresses the Registrant's
         net interest margins. This is caused by the higher marginal cost of
         funds associated with external borrowings over the cost of core
         deposits. These factors are reflected in the net interest margin
         decline of 7 basis points to the 2.64% yield for the six months ended
         June 30, 1999, versus the yield of 2.71% for the comparable period
         ending June 30, 1998. For the three month period ended June 30, 1999,
         the net interest margin was 2.60% or 10 basis points lower than the
         2.70% net interest margin recorded for the three months ended June 30,
         1998.

         The following table summarizes the impact of the leveraging strategy on
         the return on average assets (ROAA) and net interest margin (NIM) for
         the six month periods ended June 30, 1999, and June 30, 1998, and the
         three month periods ended June 30, 1999 and June 30, 1998,
         respectively.


                                    Page 15
<PAGE>

<TABLE>
<CAPTION>
Comparison of Financial Performance with and without a Capital Leveraging Strategy
----------------------------------------------------------------------------------------
  (All figures in 000's)
--------------------------------
                                                      With             Without           Difference in
Six month period ended June 30, 1999               Leveraging        Leveraging          Basis Points
--------------------------------------------      -------------    ----------------     ----------------
<S>                                               <C>              <C>                  <C>
  Return on Average Assets                               0.77%               0.58%                   19
  Net Interest Margin                                    2.64%               3.45%                  (81)

Six month period ended June 30, 1998
--------------------------------------------
  Return on Average Assets                               0.90%               0.82%                    8
  Net Interest Margin                                    2.71%               3.51%                  (80)

Three month period ended June 30, 1999
--------------------------------------------
  Return on Average Assets                               0.74%               0.59%                   15
  Net Interest Margin                                    2.60%               3.42%                  (82)

Three month period ended June 30, 1998
--------------------------------------------
  Return on Average Assets                               0.79%               0.67%                   12
  Net Interest Margin                                    2.70%               3.50%                  (80)
</TABLE>


Table 1 on the following pages presents the Registrant's average asset and
liability balances, interest rates, interest income, and interest expense for
each of the six month periods ended June 30, 1999 and June 30, 1998, as well as
the quarters ended June 30, 1999 and June 30, 1998, respectively. Table 2
presents a rate-volume analysis of changes in net interest income for the six
month periods ended June 30, 1999 and June 30, 1998, as well as the quarters
ended June 30, 1999 and June 30, 1998, respectively.

For information on qualitative and quantitative disclosures regarding market
risk, refer to Management's Discussion and Analysis included in the 1998 Annual
Report to Stockholders. There have been no significant changes in the
Registrant's market risk profile or the Registrant's risk management procedures,
in the current year.


                                    Page 16
<PAGE>

Average Balance Sheets, Rate, and Interest Income and Expense Summary (All
figures in 000's)

<TABLE>
<CAPTION>
                                                                    For the six months ended,
                                      ---------------------------------------------------------------------------------
                                                      June 30, 1999                             June 30, 1998
                                      ---------------------------------------------------------------------------------
                                         Average       (1) (2)     Average         Average      (1) (2)      Average
                                         Balance      Interest    Yield/Cost       Balance      Interest   Yield/Cost
                                      ----------------------------------------  ---------------------------------------
                                                                 (Dollar amounts in thousands)
<S>                                   <C>             <C>         <C>           <C>            <C>         <C>
Assets:
  Interest Bearing assets:
      Mortgage Loans, net                $   615,765    $ 23,726        7.71%     $   570,014     $ 24,385       8.56%
      Commercial loans                       249,803       9,447        7.56%         107,941        4,803       8.90%
      Direct consumer loans                  159,544       6,080        7.62%         155,365        5,861       7.54%
      Indirect consumer loans                136,044       5,977        8.79%          87,447        3,906       8.93%
      Marketable Securities - Taxable      1,121,005      35,092        6.26%       1,127,214       37,307       6.62%
      Marketable Securities - Taxfree        117,907       4,838        8.21%         113,511        4,711       8.30%
      Other interest earning assets           28,596         669        4.68%          38,365        1,185       6.18%
                                      ---------------------------               ---------------------------
  Total interest-earning assets            2,428,664      85,829        7.07%       2,199,857       82,158       7.47%
                                                     ------------                             -------------
  Noninterest-earning assets                  98,121                                   77,837
                                      ---------------                           --------------
  Total assets                           $ 2,526,785                              $ 2,277,694
                                      ===============                           ==============

Liabilities and stockholders' equity:
  Interest bearing liabilities:
    Savings deposits                     $   144,832    $  1,408        1.94%     $   151,409     $  1,881       2.48%
    Time deposits                            773,084      20,222        5.23%         731,777       20,184       5.52%
    NOW and money market deposits            296,424       3,396        2.29%         245,139        3,537       2.89%
    Escrow                                    13,078          53        0.81%          10,978           35       0.64%
    Borrowed Funds                         1,080,955      28,735        5.32%         930,639       26,714       5.74%
                                      ---------------------------               ---------------------------
  Total interest bearing liabilities     $ 2,308,373      53,814        4.66%     $ 2,069,942       52,351       5.06%
                                                     ------------                             -------------
  Non interest bearing liabilities            27,486                                   25,128
                                      ---------------                           --------------
  Total liabilities                        2,335,859                                2,095,070
  Stockholders' equity                       190,926                                  182,624
                                      ---------------                           --------------
  Total liabilities and stockholder
   equity                                $ 2,526,785                              $ 2,277,694
                                      ===============                           ==============


Net interest income before
  before provision for loan loss                        $ 32,015                                  $ 29,807
                                                     ============                             =============
Interest rate spread (3)                                                2.41%                                    2.41%
                                                                 =============                             ============
Net interest-earning assets              $   120,291                              $   129,915
                                      ===============                           ==============
Net interest margin (4)                                                 2.64%                                    2.71%
                                                                 =============                             ============
Ratio of interest earning assets to
  interest bearing liabilities                  1.05                                     1.06
                                      ---------------                           --------------
</TABLE>

(1)  Includes income recognized on deferred loan fees of $972,000 and
     $1,583,000 for the comparable 1999 and 1998 periods, respectively.
(2)  Interest income and yields are shown on a tax equivalent basis.
(3)  Represents the difference between the average yield on interest-earning
     assets and the average cost on interest-bearing liabilities.
(4)  Represents the annualized net interest income before the provision for loan
     losses divided by average interest-earning assets.


                                    Page 17
<PAGE>

TABLE 1 - Average Balance Sheets, Rate, and Interest Income and Expense Summary
(All figures in 000's)

<TABLE>
<CAPTION>
                                                                         For the quarter ended,
                                           ---------------------------------------------------------------------------------
                                                           June 30, 1999                             June 30, 1998
                                           ---------------------------------------------------------------------------------
                                              Average       (1) (2)     Average         Average      (1) (2)      Average
                                              Balance      Interest    Yield/Cost       Balance      Interest   Yield/Cost
                                           ----------------------------------------  ---------------------------------------
                                                                    (Dollar amounts in thousands)
<S>                                        <C>             <C>         <C>           <C>             <C>        <C>
Assets:
   Interest Bearing assets:
      Mortgage Loans, net                      $  622,250    $ 11,756        7.56%      $  573,031     $ 12,045       8.41%
      Commercial loans                            274,863       5,192        7.56%         117,384        2,604       8.87%
      Direct consumer loans                       160,320       3,140        7.83%         156,197        2,973       7.61%
      Indirect consumer loans                     153,145       3,237        8.45%          85,879        2,091       9.74%
      Marketable Securities - Taxable           1,110,389      17,238        6.21%       1,119,841       18,154       6.48%
      Marketable Securities - Taxfree             118,115       2,403        8.14%         112,905        2,349       8.32%
      Other interest earning assets                28,120         303        4.31%          36,342          710       7.81%
                                           ---------------------------               ---------------------------
  Total interest-earning assets                 2,467,202      43,269        7.02%       2,201,579       40,926       7.44%
                                                          ------------                             -------------
  Noninterest-earning assets                       94,989                                   76,924
                                           ---------------                           --------------
  Total assets                                 $2,562,191                               $2,278,503
                                           ===============                           ==============

Liabilities and stockholders' equity:
  Interest bearing liabilities:
    Savings deposits                           $  145,782    $    721        1.98%      $  154,201     $    923       2.39%
    Time deposits                                 777,289      10,128        5.21%         714,700        9,904       5.54%
    NOW and money market deposits                 300,709       1,706        2.27%         252,323        1,795       2.85%
    Escrow                                         15,401          28        0.73%          11,852           18       0.61%
    Borrowed Funds                              1,101,372      14,644        5.32%         930,174       13,402       5.76%
                                           ---------------------------               ---------------------------
  Total interest bearing liabilities           $2,340,553      27,227        4.65%      $2,063,250       26,042       5.05%
                                                          ------------                             -------------
  Non interest bearing liabilities                 30,179                                   31,039
                                           ---------------                           --------------
  Total liabilities                             2,370,732                                2,094,289
  Stockholders' equity                            191,459                                  184,214
                                           ---------------                           --------------
  Total liabilities and stockholder equity     $2,562,191                               $2,278,503
                                           ===============                           ==============


Net interest income before
  before provision for loan loss                             $ 16,042                                  $ 14,884
                                                          ============                             =============
Interest rate spread (3)                                                     2.37%                                    2.39%
                                                                      =============                             ============
Net interest-earning assets                    $  126,649                                $ 138,329
                                           ===============                           ==============
Net interest margin (4)                                                      2.60%                                    2.70%
                                                                      =============                             ============
Ratio of interest earning assets to
  interest bearing liabilities                       1.05                                     1.07
                                           ===============                           ==============
</TABLE>


(1)  Includes income recognized on deferred loan fees of $528,000 and $634,000
     for the comparable 1999 and 1998 periods, respectively.

(2)  Interest income and yields are shown on a tax equivalent basis.

(3)  Represents the difference between the average yield on interest-earning
     assets and the average cost on interest-bearing liabilities.

(4)  Represents the annualized net interest income before the provision for loan
     losses divided by average interest-earning assets.


                                    Page 18
<PAGE>

<TABLE>
<CAPTION>
TABLE 2 - Rate/Volume Analysis of Changes in Net Interest Income (All figures in 000's)

                                     Six Months Ended June 30, 1999           Quarter Ended June 30, 1999
                                                  Compared to                           Compared to
                                     Six Months Ended June 30, 1998           Quarter Ended June 30, 1998
                                               Increase (Decrease)                   Increase (Decrease)
                                     -------------------------------------    -------------------------------------

                                        Volume       Rate         Net           Volume        Rate         Net
                                     -------------------------------------    -------------------------------------
<S>                                     <C>          <C>          <C>           <C>           <C>          <C>
Interest-earning assets:
  Mortgage loans, net                     $ 1,871    $ (2,530)    $  (659)        $   986     $ (1,275)    $  (289)
  Commercial loans                          5,464        (820)      4,644           3,024         (436)      2,588
  Direct consumer loans                       157          62         219              80           87         167
  Indirect consumer loans                   2,133         (62)      2,071           1,454         (308)      1,146
  Marketable securities - Taxable            (204)     (2,011)     (2,215)           (154)        (762)       (916)
  Marketable securities - Taxfree             179         (52)        127             106          (52)         54
  Other interest earning assets              (264)       (252)       (516)           (137)        (270)       (407)
                                     -------------------------------------    -------------------------------------
Total interest earning assets               9,336      (5,665)      3,671           5,359       (3,016)      2,343
                                     -------------------------------------    -------------------------------------


Interest-bearing liabilities:
  Savings Deposits                            (79)       (394)       (473)            (49)        (153)       (202)
  Time deposits                             1,119      (1,081)         38             835         (611)        224
  NOW and money market deposits               667        (808)       (141)            312         (401)        (89)
  Escrow and stock subscriptions                8          10          18               6            4          10
  Borrowed funds                            4,081      (2,060)      2,021           2,324       (1,082)      1,242
                                     -------------------------------------    -------------------------------------
Total interest-bearing liabilities          5,796      (4,333)      1,463           3,428       (2,243)      1,185
                                     -------------------------------------    -------------------------------------
Net change in net interest income         $ 3,540    $ (1,332)    $ 2,208         $ 1,931     $   (773)    $ 1,158
                                     =====================================    =====================================
</TABLE>


Note: Changes in interest income and interest expense arising from the
combination of rate and volume variances are prorated across rate and volume
variances.

                                    Page 19
<PAGE>

      Provision for Loan Losses The Registrant recognized a provision for loan
      loss of $1,590,000 for the six months ended June 30, 1999. This represents
      an increase of $190,000 from the $1,400,000 provision recorded for the six
      months ended June 30, 1998. For the three months ended June 30, 1999, the
      Registrant recognized a provision expense of $795,000. This is a $225,000
      increase over the $570,000 expensed in the three month period ended June
      30, 1998. Refer to comments in the Asset Quality section which follows.

      Noninterest Income Noninterest income totaled $7,532,000 for the six
      months ended June 30, 1999. This represents a decrease of $448,000, or
      5.6%, from the $7,980,000 recorded in the six months ended June 30, 1998.
      This decrease can be attributed to several factors:

      (1) The net gain on securities decreased $1,605,000 or 54.0% to $1,365,000
          recognized in the six month period ended June 30, 1999, versus
          $2,970,000 for the comparable period ended June 30, 1998.
      (2) These decreases were offset by service charges on deposits generating
          $2,740,000, or a $767,000 increase over the prior six month period
          ended June 30, 1998, figure of $1,973,000. This trend reflects the
          Registrant's increased emphasis on overdraft charges and income
          generated by increased foreign ATM traffic which produced higher
          transaction volumes subject to surcharging.
      (3) Other service charges/commissions/fees increased $346,000 or 101.2% to
          the $688,000 figure recognized in the six month period ended June 30,
          1999, versus income of $342,000 for the comparable period ended June
          30, 1998. $222,000 of this increase is attributable to commissions
          earned by out sourcing corporate checks to a third party in the third
          quarter of 1998.
      (4) Other non-interest income registered $705,000 for the six month period
          ended June 30, 1999. This was a $258,000 or 57.7% increase over the
          $447,000 reported in the six month period ended June 30, 1998. The
          significant factor causing this increase was realization of a $700,000
          fraud recovery in the three month period ending June 30, 1999.
          However, the recognition of a $390,000 gain on the sale of AVSTAR's
          mortgage servicing rights in the three months ended March 31, 1998
          reduced the absolute dollar impact of the fraud recovery on the
          comparison of results for the six months ended June 30, 1999, versus
          the six months ended June 30, 1998.

      Noninterest income equalled $3,511,000 for the three months ended June 30,
      1999. This was a $459,000 or 15.1% increase over the $3,052,000 reported
      for the three months ended June 30, 1998. The reasons for this performance
      are:

      (1) The net gain on securities decreased $574,000 or 98.0% to $12,000
          recognized in the three month period ended June 30, 1999, versus
          $586,000 for the comparable period ended June 30, 1998.
      (2) Service charges on deposits increased $470,000 or 45.3% to the
          $1,507,000 figure recognized in the three month period ended June
          30, 1999, versus income of $1,037,000 for the comparable period
          ended June 30, 1998. The performance of overdraft fees and ATM
          charges described in the preceding paragraph were responsible for
          this increase.
      (3) Other service charges/commissions/fees rose $201,000 or 123.3% to
          the $364,000 figure reported in the three month period ended June
          30, 1999, versus income of $163,000 for the comparable period ended
          June 30, 1998. $100,000 of this increase is attributable to a third
          party check vendor program that was described in the preceding
          paragraph. The remainder of the increase is split between Trust
          Fees and credit life insurance commissions.
      (4) Other non-interest income was $766,000 for the three month period
          ended June 30, 1999. The fraud recovery described in the preceding
          paragraph was the primary reason for the $728,000 increase over the
          $38,000 reported in the three month period ended June 30, 1998.

      Noninterest Expense Noninterest expense was $22,925,000 for the six months
      ended June 30, 1999. This is an increase of $2,703,000, or 13.4%, from the
      $20,222,000 reported for the six month period ended June 30, 1998. The
      increase in noninterest expense was caused, primarily, by a $2,063,000
      increase in other expense. During the six months ended June 30, 1999,
      other expense equalled $6,199,000 versus the $4,136,000 recognized in the
      comparable period ending June 30, 1998. $1,139,000 of the increase
      represents costs associated with the restructuring of unprofitable
      operations
                                    Page 20
<PAGE>

         and ongoing internal conversion projects. The remainder of the increase
         represents ongoing support costs associated with higher business
         volumes and ATM support activity. Another significant contributor to
         the increase in noninterest expense was a $507,000 increase in
         equipment expense to $2,000,000 for the six months ended June 30, 1999,
         versus $1,493,000 for the six months ended June 30, 1998. The increase
         represents higher depreciation expense and software maintenance support
         costs associated with the installation of a proof of deposit settlement
         area in the third quarter of 1998. This project supports the
         infrastructure required by the Registrant's continuing strategic
         transformation into a commercial bank.

         Noninterest expense was $11,333,000 for the three months ended June 30,
         1999. This equates to a $934,000 increase over the $10,399,000 reported
         for the three month period ended June 30, 1998. The principle driver of
         this trend was a $1,015,000 increase in other non-interest expense to
         $3,262,000 for the three month period ended June 30, 1999, versus
         $2,247,000 for the three month period ended June 30, 1998. The two
         largest contributors to the increase were a $328,000 in costs
         associated with the ongoing dissolution of the Registrant's mortgage
         banking subsidiary and another $227,000 in costs related to conversion
         projects undertaken in the three months ended June 30, 1999. In
         addition, equipment expense increased $224,000 to $1,038,000 for the
         three months ended June 30, 1999 versus $814,000 for the three months
         ended June 30, 1998. These costs were incurred because of the proof of
         deposit installation detailed in the preceding paragraph.

         Provision for Income Taxes Corporate income tax expense totaled
         $3,669,000 for the six month period ended June 30, 1999, which resulted
         in an effective tax rate of 27.5% on pretax income of $13,339,000. This
         represents a decrease of $623,000 from the $4,292,000 of corporate tax
         expense, or an effective tax rate of 29.6% on pretax income of
         $14,516,000, recorded during the six month period ended June 30, 1998.
         The decrease in the effective tax rate is the result of the
         Registrant's continued focus on increasing tax exempt sources of
         income.

         Income tax expense was $1,847,000 (an effective tax rate of 28.1%) for
         the three months ended June 30, 1999. This is an $179,000 increase over
         the tax expense of $1,668,000 (effective tax rate of 27.2%) recorded
         for the three months ended June 30, 1998. The increase in the absolute
         dollar amount of tax expense and the change in the effective tax rate
         reflects higher levels of pre-tax income for the three months ended
         June 30, 1999 versus the comparable three month period ended June 30,
         1998.

         Stockholders' Equity Stockholders' equity totaled $186.1 million and
         $190.0 million at June 30, 1999 and December 31, 1998, respectively.
         Stockholders' equity amounted to 7.0% of total assets equalling $2.665
         billion as of June 30, 1999, compared to 7.6% of total assets of $2.497
         billion at December 31, 1998.

         The decrease in Stockholders' equity of $3.9 million or 2.1% for the
         six months ended June 30, 1999 resulted mainly from a $12.5 million
         decline in the market value, net of tax effect, of the available-for-
         sale securities and $1.0 million in dividends paid. The drop in the
         market value of the available-for-sale portfolio reflects the impact of
         recent market rate increases on the market value of fixed rate issues
         that reside in the Registrant's investment portfolio. Offsetting this
         decrease is a $9.7 million increase attributable to income from ongoing
         operations.

                                    Page 21
<PAGE>

         Regulatory Capital Compliance Risk-based capital standards are issued
         by bank regulatory agencies in the United States. These capital
         standards link a banking company's capital to the risk profile of its
         assets and provide the basis by which all banking companies and banks
         are evaluated in terms of capital adequacy. These risk-based capital
         standards require all banks to have Tier 1 capital of at least 4.0 %
         and total capital, including Tier 1 capital, equal to at least 8.0 % of
         risk-adjusted assets. Tier 1 capital consists of common stockholders'
         equity and qualifying perpetual preferred stock along with related
         surpluses and retained earnings. Total capital is comprised of Tier 1
         capital, limited life preferred stock, qualifying debt instruments, and
         the reserves for loan losses. Furthermore, the banking regulators also
         issue leverage ratio requirements. The leverage ratio equals the ratio
         of Tier 1 capital to adjusted average assets. The following table
         provides a comparison of Harris Financial, Inc.'s risk-based capital
         ratios and leverage ratio to the minimum regulatory requirements for
         the period indicated.

<TABLE>
<CAPTION>

                                                                     Minimum                                  Minimum
                                                                   Requirement                               Requirement
                                                                   for Capital                             to be "Well Cap-
HARRIS FINANCIAL, INC.                  Actual                       Adequacy                                 italized"
                                        ------                       --------                                 --------
As of  June 30, 1999              Amount       Ratio              Amount         Ratio                    Amount       Ratio
--------------------              ------       -----              -------        -----                    ------       -----
<S>                              <C>           <C>                <C>            <C>                     <C>            <C>
  Total Capital
    (to Risk Weighted Assets)    $186,041       11.7%             $126,824          8.0%                 $158,530        10.0%
 Tier 1 Capital
   (to Risk Weighted Assets)      171,705       10.8%               63,412          4.0%                   95,118         6.0%
 Tier 1 Capital
   (to Avg. Assets)               171,705        6.9%              100,160          4.0%                  125,201         5.0%



As of December 31, 1998
-----------------------
  Total Capital
    (to Risk Weighted Assets)    $179,157       12.0%             $119,160          8.0%                 $148,949        10.0%
 Tier 1 Capital
   (to Risk Weighted Assets)      164,955       11.1%               59,580          4.0%                   89,370         6.0%
 Tier 1 Capital
   (to Avg. Assets)               164,955        6.8%               97,553          4.0%                  121,941         5.0%

</TABLE>

                                    Page 22
<PAGE>

         The following table provides a comparison of Harris Savings Bank's
risk-based capital ratios and leverage ratio to the minimum regulatory
requirements for the period indicated.

<TABLE>
<CAPTION>

                                                                           Minimum                                 Minimum
                                                                         Requirement                             Requirement
                                                                         for Capital                          to be "Well Cap-
HARRIS SAVINGS BANK                           Actual                       Adequacy                               italized"
                                              ------                       --------                               --------
As of  June 30, 1999                   Amount       Ratio               Amount         Ratio                  Amount       Ratio
--------------------                   ------       -----              -------         -----                  -------      -----
<S>                                   <C>           <C>                <C>              <C>                   <C>           <C>
  Total Capital
    (to Risk Weighted Assets)        $180,602        11.4%             $126,527          8.0%                 $158,159     10.0%
 Tier 1 Capital
   (to Risk Weighted Assets)          166,199        10.5%               63,263          4.0%                   94,895      6.0%
 Tier 1 Capital
   (to Avg. Assets)                   166,199         6.7%               99,694          4.0%                  124,618      5.0%



As of December 31, 1998
-----------------------
  Total Capital
    (to Risk Weighted Assets)        $174,663        11.8%             $118,879          8.0%                 $148,598     10.0%
 Tier 1 Capital
   (to Risk Weighted Assets)          160,317        10.8%               59,439          4.0%                   89,159      6.0%
 Tier 1 Capital
   (to Avg. Assets)                   160,317         6.6%               97,395          4.0%                  121,744      5.0%

</TABLE>

         During the six months ended June 30, 1999, the Registrant adhered to,
on an average asset basis, the 6.5% Tier 1 minimum stipulated by the
Pennsylvania Department of Banking ("Department"). This minimum threshold was a
condition required by the Department for the Treasury Stock Repurchase Program
that was approved on February 27, 1998.

                                    Page 23
<PAGE>

      Marketable Securities In January 1998, the Registrant sold securities from
      the held-to-maturity (HTM) portfolio. The book value of these securities
      totalled $63.0 million and a gain of $1.4 million was realized from the
      transaction. This decision resulted from analysis performed in January of
      1998 which indicated that the Bank was heavily invested in fixed rate
      assets, which increased the risk of earnings compression in a rising rate
      environment. The analysis showed that the Registrant could liquidate the
      majority of its issues in the held-to-maturity portfolio and reinvest the
      majority of the proceeds in a mix of fixed and floating rate assets that
      would maintain the Registrant's earnings stream, while increasing the
      level of variable rate assets. This course of action was approved by the
      Registrant's Board of Directors in January, 1998 and the sale was
      conducted in the same month. Under generally accepted accounting
      principles, the sale of these securities eliminated the Registrant's
      ability to use the held-to-maturity classification on any securities for a
      period of two years. As a result, the remaining securities in the held-to-
      maturity portfolio were transferred to the available-for-sale portfolio.
      This transfer resulted in a $209,565 increase, net of taxes, to the net
      unrealized gains on marketable securities.

      Marketable securities, excluding the Federal Home Loan Bank cash account,
      totaled $1,263.4 million, at June 30, 1999, and $1,274.8 million at
      December 31, 1998. Total marketable securities decreased $11.4 million, or
      .9%, during the six months of 1999.

TABLE 3 - Composition of Marketable Securities Portfolios (All figures in 000's)

The following table sets forth certain information regarding the amortized cost
and fair values of the Registrant's marketable securities portfolio at June 30,
1999 and December 31, 1998.

<TABLE>
<CAPTION>

                                                    June 30, 1999             December 31, 1998
                                       -------------------------------------------------------------
                                         Amortized         Fair        Amortized         Fair
                                            Cost          Value          Cost           Value
                                       -------------------------------------------------------------
<S>                                        <C>            <C>           <C>              <C>
Available-for-sale:
   U.S. Government and agencies             $ 342,772      $ 331,896     $ 298,247        $ 299,196
    Corporate bonds                            74,534         72,021       148,731          142,240
    Municipal obligations                     118,345        120,368       113,557          119,233
    FHLB stock                                 41,250         41,250        37,579           37,579
    Equities (Common and Preferred)            88,409         97,454       112,403          123,765
    Asset Backed Securities                         -              -        15,146           15,661

   Mortgage-backed securities:
        FHLMC PC's                                  -              -         1,421            1,494
        FNMA CMO's                             64,834         65,489       104,276          105,864
        FHLMC CMO's                           121,021        120,468        75,137           75,157
        Private Issue CMO's                   419,842        414,438       355,199          354,648
                                       -------------------------------------------------------------
        Total mortgage-backed securities      605,697        600,395       536,033          537,163
                                       -------------------------------------------------------------
   Total securities available-for-sale    $ 1,271,007    $ 1,263,384   $ 1,261,696      $ 1,274,837
                                       -------------------------------------------------------------

   Other interest-earning securities:
       FHLB daily investment                 $ 33,201       $ 33,201      $ 22,423         $ 22,423
                                       -------------------------------------------------------------
   Total marketable securities and
      interest bearing investments        $ 1,304,208    $ 1,296,585   $ 1,284,119      $ 1,297,260
                                       =============================================================
</TABLE>
                                    Page 24
<PAGE>

      Loans Loans Receivable, excluding the reduction for the Allowance for Loan
      Losses, totaled $1,273.3 million and $1,060.7 million at June 30, 1999,
      and December 31, 1998. The increase of $212.6 million, or 20.0%, for the
      six months ended June 30, 1999, reflects growth in commercial loans of
      $95.0 million, a $75.5 million increase in automobile, consumer and other
      loans, and first mortgage loan increases amounting to $42.1 million

      Loan charge-offs, net of recoveries, totaled $412,000 for the six month
      period ended June 30, 1999, and $1,141,000 for the twelve month period
      ended December 31, 1998. Based on management's continuing review of the
      loan portfolio the Registrant recorded provisions for loan losses of
      $1,590,000 for the six months ending June 30, 1999, and $2,540,000 for the
      twelve month period ending December 31, 1998.

      Prior to the quarter ended March 31, 1999, the Registrant considered all
      loans that were delinquent 90 days or more with respect to principal and
      interest repayments to be in a non accrual status. During the quarter
      ended March 31, 1999, the Registrant adopted a policy that follows the
      Federal Financial Institutions Examination Council ("FFIEC") uniform bank
      examination guidelines. The major provisions of the policy are:

      (1) Loans that are 90 days past due are still considered to be in an
          accrual status.
      (2) Any loan that is 90 days past due will be reviewed on a monthly basis
          to determine its loss potential.
      (3) Once the loan is 120 days past due, the Registrant will charge-off any
          unsecured loan balance.
      (4) Interest income recognized from the filing date of the most recent
          Federal Deposit Insurance Corporation Report of Condition up to and
          including the date of charge-off will be reversed against the current
          accounting periods recognition of interest income. Any remaining
          accrued interest receivable will be reversed and offset against the
          allowance for loan loss.

      Using these new policy guidelines, non accrual loans were $1,512,000 and
      $7,651,000 at June 30, 1999, and December 31, 1998, respectively. In
      addition, loans 90 days past due, but still accruing were $5,331,000 at
      June 30, 1999 and $0 at December 31, 1998, respectively. The combined
      total of non accrual loans and loans 90 days past due, but still accruing
      interest as a percentage of total loans receivable (including Loans held
      for sale, net), before deducting the Allowance for Loan Loss, equalled
      .54% and .71% at June 30, 1999, and December 31, 1998, respectively.

      The Registrant conducts a third party loan review to identify those loans
      which are considered performing and current with respect to payments of
      principal and interest but display an above normal risk of becoming non
      performing or requiring restructuring in the future. This review is
      conducted on a quarterly basis.

      The allowance for loan losses totaled $10,266,000 and $9,088,000 at June
      30, 1999 and December 31, 1998, respectively. Stated as a percentage of
      total loans receivable (including Loans held for sale, net), the allowance
      for loan losses amounted to .81% and .85% at June 30, 1999 and December
      31, 1998, respectively.

      Table 4 on the following page depicts the trend of charge-offs,
      recoveries, and provisions to the allowance for loan losses for the six
      months ended June 30, 1999, and the year ended December 31, 1998,
      respectively. In addition, Table 5 on the following page highlights the
      allowance for loan losses as a percent of non accrual loans, loans 90 days
      past due, but still accruing and specifically designated problem loans for
      the six months ended June 30, 1999, and the year ended December 31, 1998,
      respectively.

                                    Page 25
<PAGE>

<TABLE>
<CAPTION>

Table 4 Analysis of Allowance for Loan Losses (all figures in 000's)
                                                              As of or for the                   As of or for the
Allowance for Loan Loss                                       six months ended                  twelve months ended
  (All Figures in 000's)                                       June 30, 1999                     December 31, 1998
-------------------------------------------             -----------------------------      ------------------------------
<S>                                                        <C>                              <C>
Balance at beginning of the period                                           $ 9,088                             $ 8,192
Provision for loan losses                                                      1,590                               2,540
Provision component related to unfunded
  commitments                                                                      -                                (503)

Charge Offs:
  Commercial                                                                     (50)                               (591)
  One-to-four family                                                            (349)                               (173)
  Other mortgage loans                                                             -                                 (83)
  Consumer loans                                                                (115)                               (344)
                                                        -----------------------------      ------------------------------
   Total Charge Offs                                                            (514)                             (1,191)
                                                        -----------------------------      ------------------------------
Recoveries:
  Commercial                                                                      55                                   -
  One-to-four family                                                               5                                   -
  Other mortgage loans                                                             -                                   2
  Consumer loans                                                                  42                                  48
                                                        -----------------------------      ------------------------------
   Total Recoveries                                                              102                                  50
                                                        -----------------------------      ------------------------------
Net Charge Offs                                                                 (412)                             (1,141)
                                                        -----------------------------      ------------------------------

Balance at end of period                                                    $ 10,266                             $ 9,088
                                                        =============================      ==============================
Net Charge Offs to Average Loans Outstanding (1)                               0.07%                               0.12%
                                                        =============================      ==============================

(1) Year to date ratio is annualized



Table 5-- Allowance for Loan Losses Coverage Ratios (all dollar figures in 000's)
                                                                 As of or for the            As of or for the
                                                                 six months ended          twelve months ended
                                                                   June 30, 1999            December 31, 1998
                                                               ----------------------    -------------------------
Allowance at the end of period                                              $ 10,266                      $ 9,088

Non accrual loans                                                            $ 1,512                      $ 7,651

90 Days past due, but still accruing                                         $ 5,331                          $ -

Problem loans                                                               $ 16,052                      $ 9,800

   Allowance/non accrual loans                                               678.97%                      118.78%
                                                               ----------------------    -------------------------

   Allowance/90 days past due, but still accruing                            192.57%                        0.00%
                                                               ----------------------    -------------------------

   Allowance/non accrual loans and 90 days past due,
     but still accruing                                                      150.02%                      118.78%
                                                               ----------------------    -------------------------

   Allowance/problem loans                                                    63.95%                       92.73%
                                                               ----------------------    -------------------------
</TABLE>
                                    Page 26
<PAGE>

      Asset Quality Virtually all of HFI's credit risk lies with the Bank, which
      holds all of HFI's loan assets. As part of its conversion from a thrift
      institution, the Bank created a Business Banking Group to offer commercial
      financial products and services to businesses in the Bank's primary market
      area. This expansion beyond traditional thrift lending such as residential
      mortgage lending and real estate secured consumer lending has had the
      effect of increasing the Bank's credit risk exposure. To accommodate this
      credit risk exposure, management has hired skilled and experienced
      commercial lending professionals to manage its Business Banking Group. In
      addition, the Bank has adopted commercial bank underwriting, credit
      management and loan loss provisioning techniques under the direction of a
      senior level executive Chief Operating Officer.

      As part of its credit risk management activities, the Bank follows a
      policy of continuous credit loss monitoring, including assessment of the
      adequacy of the allowance for loan losses. The assessment of the adequacy
      of the allowance for loan losses is based on internal and external
      factors. The external factors include the general economic condition of
      the Bank's market area and those factors described in regulatory
      guidelines. The internal factors include the current composition of the
      portfolio, portfolio growth trends, concentrations of credit risk, and the
      current emphasis on commercial lending.

      Quarterly, the commercial loan portfolio is analyzed on an individual loan
      basis and a specific reserve is developed for each known loss, using a
      risk rating system. This review identified $1,343,000 in impaired loans
      for the six month period ending June 30, 1999. The June 30, 1999,
      allowance for loan losses has an allocation equal to 15% of the impaired
      commercial loan balances which are internally designated as substandard
      ($1,245,000) and 100% of the internally designated doubtful balances
      ($98,000). The December 31, 1998, allowance for loan losses has an
      allocation equal to 15% of the $2,538,000 in impaired loan balances which
      were classified as substandard. In addition, the Bank assigns a reserve
      for existing losses on commercial loans that are not specifically
      reviewed. This reserve is determined using factors such as charge-off
      history, portfolio delinquencies and current economic conditions. The
      mortgage and consumer portfolios are also analyzed in pools of similar
      loans with similar risk characteristics. The reserve factor applied to
      each pool is based on actual charge-off history, adjusted for other
      factors such as credit concentrations and delinquency trends.

      In addition to the allowance for loan loss, the Registrant maintains a
      reserve for unfunded commitments. This reserve represents the Bank's
      estimation of loss incurred relative to available funds committed to
      customers, but that have yet to be disbursed. The reserve factor assigned
      to this pool is developed using factors such as credit concentrations and
      economic conditions. The reserve established for unfunded commitments is
      classified as a separate liability from the allowance for loan losses, in
      accordance with generally accepted accounting principles.

      Other Borrowings During the six month period ended June 30, 1999, the
      Registrant maintained wholesale leveraging activities to deploy its excess
      capital. This strategy relies on using external sources of funds to invest
      in interest earning assets at a positive spread between the yield on
      interest earning asset and the cost of the supporting borrowing.

      Other borrowings totaled $1,138.0 million and $1,069.3 million at June 30,
      1999, and December 31, 1998, respectively. Borrowings from non-deposit
      funding sources increased $68.7 million, or 6.4%, during the six months
      ended June 30, 1999. Federal Home Loan Bank advances increased by $78.4
      million or 10.5%, while repurchase agreements decreased by $9.7 million or
      3.0% for the six month period ending June 30, 1999.

      As of June 30, 1999, the Registrant had maximum available FHLB lines of
      credit totalling $977.9

                                    Page 27
<PAGE>

      million versus $943.5 million in available FHLB credit at December 31,
      1998. This increase of 3.6% or $34.4 million is based on increases in the
      amount of securities that qualify as security for FHLB advances. HFI had
      borrowings totaling $825.0 million and $746.6 million outstanding to the
      FHLB as of June 30, 1999, and December 31, 1998, respectively.

      Liquidity The Registrant's primary sources of funds are deposits and
      proceeds from principal and interest payments on loans and mortgage-backed
      securities. While maturities and scheduled amortization of loans and
      mortgage-backed securities are a predictable source of funds, deposit
      flows and mortgage prepayments are greatly influenced by general interest
      rates, economic conditions, and competition. The Registrant anticipates
      that it will have sufficient funds available to meet its current
      commitments.

      The Registrant exceeded all regulatory standards for liquidity at June 30,
      1999 and December 31, 1998.

      Year 2000 Compliance The efficient and reliable operation of the
      Registrant's business is significantly dependent upon its computer
      hardware, software programs, and operating systems (collectively "computer
      systems"). As a financial services company, the Registrant relies on
      computer systems in virtually all significant business operations.
      Management considers Year 2000 readiness to be a major business issue and
      has implemented a Year 2000 Compliance Effort to identify all major
      compliance risks.

      The Registrant's Year 2000 Compliance Effort ("Y2K Project") can be broken
      down into several distinct stages or phases. The first stage ("Awareness
      Phase") dates from October 1996, and marks the beginning of the Y2K
      Project initiative. The senior staff of HFI created a Y2K task force that
      represented all the major functional areas of the Registrant. The task
      force started monthly meetings during October 1997, and in July 1998
      accelerated to the current bi-weekly meeting schedule to intensify the
      Registrant's focus on the issue. This task force has the commitment of the
      Registrant's senior management team and monthly updates are provided to
      the Registrant's board of directors.

      The second stage is termed the ("Inventory Phase") and covers the time
      period from October 1997 to December 1997. During this phase, the
      Registrant reviewed all existing hardware, software and embedded
      technology to determine their Year 2000 Compliance profile. In December
      1997, the Registrant created a pamphlet that identified the existence of
      Year 2000 Compliance issues and provided a high level review of the
      Registrant's efforts to ensure compliance. This pamphlet is available in
      branch locations and the information is provided on our web site. In
      addition, the Registrant developed a data base to track external vendors'
      responses to the Registrant's questionnaire to determine the external
      vendors state of Year 2000 Compliance. The results from the internal
      review and the questionnaire surveys were used as inputs to the "Analysis
      Phase".

      The third phase ("Analysis Phase") focused on the hardware and software
      identified from the Inventory Phase that was crucial for the Registrant to
      conduct its business operations. The systems were ranked "mission
      critical" or "non mission critical". These two classifications were
      further segmented into low, medium, or high risk ratings. Therefore, a
      "mission critical" system with a high risk rating received the most
      testing focus. The following list details the high priority "mission
      critical" systems:

      (1) The AS400 mainframe hardware and operating system is certified Year
          2000 Compliant by the vendor, IBM.
      (2) All Alltel core systems (which include the general ledger, all major
          lending and deposit applications and customer information databases),
          are certified Year 2000 compliant.
      (3) The Registrant purchased software to test the BIOS (Basic Input Output
          Systems) of all personal

                                    Page 28
<PAGE>

          computers (PCs) in the local area network (LAN) and wide area network
          (WAN). This testing targeted non compliant PCs that were later
          replaced by the Registrant during the fourth phase of the Y2K Project.

      The subsequent fourth stage dubbed ("Testing/Renovation") phase of the Y2K
      Project started in March 1998 and was completed by June 30, 1999. During
      this phase, the Registrant's goal was to test all mission critical
      systems, provide the results of those tests to the Registrant's Internal
      Audit Department for review/analysis and correct non compliant mission
      critical systems. At this time, all mission critical systems have been
      renovated.

      In addition, the Registrant has tested other stand alone PC software
      programs. The Registrant has dedicated a separate PC, printer and
      accessory environment to conduct tests in a controlled manner with the
      PC's internal clock set to five specific, internally designated, Year 2000
      dates. The testing procedure was approved by the Registrant's Internal
      Audit Department and the results of the tests were provided to the
      Registrant's Internal Audit Department for review and analysis. At this
      point, the results of internal testing and the identification and ensuing
      risk assessment of external vendors and significant customers have been
      combined into an overall risk assessment for the Registrant's Year 2000
      Compliance profile. The ensuing profile is the basis for a business
      resumption contingency plan to address any unexpected Year 2000 events.
      The contingency planning process includes four major steps: defining the
      planning strategy; performing the business analysis; developing the plan;
      validating the plan. The first two steps were completed by March 31, 1999,
      and the final two steps were completed by June 30, 1999. Estimated costs
      to complete the Year 2000 Compliance Effort are listed in the following
      table.

                                                              Dollar
      Tasks                                                   Amount
      -----                                                   ------
      Loan support PCs                                     $  39,000
      Mortgage origination PCs                                12,000
      Software upgrades                                       20,000
      Operations Ctr. alternative power supply                50,000
      Internal resources
       (Testing and planning)                                 53,000
                                                        ---------------
         Total Costs                                       $ 174,000
                                                        ===============


      Beyond the scope of the Y2K Project, the Registrant installed new
      mainframe hardware, operating systems and application software that was
      described in the preceding paragraphs. This conversion commenced in April
      1997, and replaced a prior system that was not capable of supporting the
      Registrant's strategic transition to a commercial bank and was lacking
      Year 2000 Compliance certification. The costs of that conversion consist
      of capitalized costs of approximately $4,083,000 for hardware and software
      replacements and teller platform upgrades. Furthermore, another $632,000
      in operating expenses were incurred for consulting fees, training, travel,
      communication and other associated conversion costs.

      Mortgage Banking Operations During the six months ended June 30, 1999, HFI
      restructured its mortgage banking operations, resulting in a net charge to
      earnings of approximately $.6 million during this time period. On April
      30, 1999, HFI consummated the sale of certain mortgage banking assets.

                                    Page 29
<PAGE>

PART II. OTHER INFORMATION

          Item 1.       Legal Proceedings.
                        None.

          Item 2.       Changes in Securities and Use of Proceeds.
                        None.

          Item 3.       Defaults Upon Senior Securities.
                        None.

          Item 4.       Submission of  Matters to a Vote of Security Holders.
                        None.

          Item 5.       Other information.
                        None.


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

                        (a) Exhibits

                                 Exhibit 27           Financial Data Schedule

                                    Page 30
<PAGE>

                                   SIGNATURES


         Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

                                    HARRIS FINANCIAL, INC.
                                    (Registrant)


                           By       /s/ Charles C. Pearson, Jr.
                                    ---------------------------
                                    Charles C. Pearson, Jr., President
                                    and Chief Executive Officer


                           By       /s/ James L. Durrell
                                    --------------------
                                    James L. Durrell, Executive Vice President
                                    and Chief Financial Officer


Dated: August 6, 1999

                                    Page 31
<PAGE>

                                  EXHIBIT INDEX


Exhibit Number
--------------


Exhibit 27              Financial Data Schedule