UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20552

                                  FORM 10 - QSB


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

     For the quarterly period ended June 30, 1999


[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

     For the transition period from __ to __

                        Commission File Number 333-57277
                        --------------------------------

                             Nittany Financial Corp.
                             -----------------------
             (Exact name of registrant as specified in its charter)

          Pennsylvania                                            23-2925762
-------------------------------                              -------------------
(State or other jurisdiction of                                 (IRS Employer
 incorporation or organization)                              Identification No.)

            116 E. College Avenue, State College, Pennsylvania 16801
            --------------------------------------------------------
                    (Address of principal executive offices)

                                (814) 234-7320
                                --------------
              (Registrant's telephone number, including area code)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act  during  the past 12 months  (or 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
                                                             ---   ---

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:

                  Class: Common Stock, par value $.10 per share
                      Outstanding at July 10, 1999: 577,436


<PAGE>

                             NITTANY FINANCIAL CORP.

                                      INDEX



                                                                           Page
                                                                          Number
                                                                          ------


PART I  -  FINANCIAL INFORMATION

   Item 1.   Financial Statements

             Consolidated Balance Sheet (Unaudited) as of
               June 30, 1999 and December 31, 1998                             3

             Consolidated Statement of Income (Unaudited)
               for the Three and Six Months ended June 30, 1999 and 1998       4

             Consolidated Statement of Changes in
               Stockholders' Equity (Unaudited) at June 30, 1999               5

             Consolidated Statement of Cash Flows (Unaudited)
               for the Six Months ended June 30, 1999 and 1998                 6

             Notes to Unaudited Consolidated Financial Statements              7

   Item 2.   Management's Discussion and Analysis of
                     Financial Condition and Results of Operations          8-12

PART II  -  OTHER INFORMATION

   Item 1.   Legal Proceedings                                                13

   Item 2.   Changes in Securities                                            13

   Item 3.   Default Upon Senior Securities                                   13

   Item 4.   Submissions of Matters to a Vote of Security Holders             13

   Item 5.   Other Information                                                13

   Item 6.   Exhibits and Reports on Form 8-K                                 13

SIGNATURES                                                                    14

<PAGE>


                             NITTANY FINANCIAL CORP.
                     CONSOLIDATED BALANCE SHEET (UNAUDITED)

<TABLE>
<CAPTION>

                                                               June 30,       December 31,
                                                                 1999            1998
                                                             -------------    ------------
<S>                                                       <C>              <C>
ASSETS
Cash and due from banks                                     $      258,892   $     307,443
Interest-bearing deposits with other banks                       1,442,617       5,621,800
Investment securities available for sale                        16,536,254      13,150,768
Investment securities held to maturity  (market
      value of $1,764,004)                                       1,815,406            -
Loans receivable (net of allowance for loan losses
      of $98,834 and $98,988 )                                  17,799,384       4,424,132
Premises and equipment                                             185,703         126,160
Intangible assets                                                  912,372         941,886
Accrued interest and other assets                                  371,614         218,394
                                                              -------------    ------------
      TOTAL ASSETS                                          $   39,322,242   $  24,790,583
                                                              =============    ============
LIABILITIES
Deposits:
      Noninterest-bearing demand                            $    1,555,948   $     777,400
      Interest-bearing demand                                    3,099,254       2,146,171
      Money market                                              12,408,691       5,409,434
      Savings                                                    1,212,955       1,269,834
      Time                                                       7,170,037       4,389,545
                                                              -------------    ------------
           Total deposits                                       25,446,885      13,992,384
FHLB advances                                                    9,100,000       5,000,000
Accrued interest payable and other liabilities                     109,501         144,546
Commitment to purchase investment security                            -            500,000
                                                              -------------    ------------
      TOTAL LIABILITIES                                         34,656,386      19,636,930
                                                              -------------    ------------

STOCKHOLDER'S EQUITY
Serial perferred stock, no par value; 5,000,000 shares                -               -
      authorized, none issued
Common stock, $.10 par value, 10,000,000 shares
      authorized; 577,436 issued and outstanding                    57,744          57,744
Additional paid-in capital                                       5,652,145       5,652,145
Retained deficit                                                  (678,676)       (525,650)
Accumulated other comprehensive loss                              (365,357)        (30,586)
                                                              -------------    ------------
      TOTAL STOCKHOLDERS' EQUITY                                 4,665,856       5,153,653
                                                              -------------    ------------
      TOTAL LIABILITIES AND
          STOCKHOLDERS' EQUITY                              $   39,322,242   $  24,790,583
                                                              =============    ============
</TABLE>


See accompanying notes to the unaudited consolidated financial statements.

                                       3
<PAGE>


                             NITTANY FINANCIAL CORP.
                  CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

<TABLE>
<CAPTION>
                                                        Three Months Ended June 30,      Six Months Ended June 30,

                                                            1999            1998            1999            1998
                                                       -------------    ------------   --------------    -----------
<S>                                                <C>              <C>               <C>             <C>
INTEREST AND DIVIDEND INCOME
Loans, including fees                                $      254,869   $           -     $    405,214    $         -
Interest-bearing deposits with other banks                   17,985             744           60,392          1,208
Investment securities                                       246,272               -          451,004              -
                                                       -------------    ------------     ------------    -----------
      Total interest and dividend income                    519,126             744          916,610          1,208
                                                       -------------    ------------     ------------    -----------
INTEREST EXPENSE
Deposits                                                    234,480               -          414,325              -
FHLB advances                                                75,017               -          125,074              -
                                                       -------------    ------------     ------------    -----------
      Total interest expense                                309,497               -          539,399
                                                       -------------    ------------     ------------    -----------
NET INTEREST INCOME                                         209,629             744          377,211          1,208

Provision for loan losses                                         -               -                -              -
                                                       -------------    ------------     ------------    -----------
NET INTEREST INCOME AFTER
   PROVISION FOR LOAN LOSSES                                209,629             744          377,211          1,208
                                                       -------------    ------------     ------------    -----------
NONINTEREST INCOME
Service fees on deposit accounts                             28,252               -           55,503              -
Other income                                                  8,772               -           12,244              -
Realized Gain on Sale of Securities                           1,342               -            1,342              -
                                                       -------------    ------------     ------------    -----------
      Total noninterest income                               38,366               -           69,089              -
                                                       -------------    ------------     ------------    -----------

NONINTEREST EXPENSE
Compensation and employee benefits                          126,316          13,662          236,240         32,811
Occupancy and equipment                                      45,886               -           95,066            439
Data processing                                              17,852               -           33,630              -
Goodwill amortization                                        11,868               -           25,558              -
Professional fees                                            38,117           1,459           62,874          3,697
Printing and supplies                                         9,154               -           26,062            118
Other                                                        68,328          17,761          119,896         20,515
                                                       -------------    ------------     ------------    -----------
      Total noninterest expense                             317,521          32,882          599,326         57,580
                                                       -------------    ------------     ------------    -----------
Loss before income taxes                                    (69,526)        (32,138)        (153,026)       (56,372)
Income taxes                                                      -               -                -              -
                                                       -------------    ------------     ------------    -----------

NET LOSS                                             $      (69,526)  $     (32,138)    $   (153,026)   $   (56,372)
                                                       =============    ============     ============    ===========

BASIC LOSS PER SHARE                                 $       ($0.12)  $      ($1.59)          ($0.27)   $    ($3.29)(1)

DILUTED LOSS PER SHARE (2)                                    (0.12)              -           ($0.27)             -

WEIGHTED AVERAGE SHARES OUTSTANDING                         577,436          20,269          577,436         17,150

</TABLE>

(1)  - Loss  per  share is  calculated  using  the  weighted  average  number of
       shares outstanding  from February 18, 1998, the first date that stock was
       issued.

(2)    The Company provides dual  presentation of Basic and Diluted earnings per
       share.  Basic  earnings per share  utilizes net income as reported as the
       numerator and the actual average shares  outstanding as the  denominator.
       Diluted  earnings per share  includes  any  dilutive  effects of options,
       warrants,  and  convertible  securities.  At  June 30, 1998 there were no
       dilutive common shares of stock outstanding.

See accompanying notes to the unaudited consolidated financial statements.

                                       4
<PAGE>

                             NITTANY FINANCIAL CORP.
      CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                       Accumulated
                                                                                          Other
                                                      Additional                         Compre-          Total           Compre-
                                       Common          Paid-in          Retained         hensive       Stockholders'      hensive
                                       Stock           Capital          Earnings         (Loss)           Equity          (Loss)
                                     -----------    ---------------   -------------    ------------   --------------    -----------

<S>                               <C>             <C>               <C>              <C>            <C>               <C>
Balance, December 31, 1998           $   57,744      $   5,652,145     $  (525,650)     $  (30,586)    $  5,153,653     $

Net loss                                                                  (153,026)                        (153,026)      (153,026)
Other comprehensive income:
  Unrealized loss on available for
    sale securities                                                                       (334,771)        (334,771)      (334,771)
                                                                                                                         ----------
Comprehensive loss                                                                                                      $ (487,797)
                                      ----------     --------------     -----------      ----------     ------------     ==========
Balance, June 30, 1999               $   57,744     $    5,652,145     $  (678,676)     $ (365,357)    $  4,665,856
                                      ==========     ==============     ===========      ==========     ============

</TABLE>


See accompanying notes to the unaudited consolidated financial statements.

                                       5

<PAGE>

                             NITTANY FINANCIAL CORP.
                CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                Six Months Ended June 30,
                                                                  1999            1998
                                                              -------------    ------------
<S>                                                          <C>              <C>
OPERATING ACTIVITIES
Net loss                                                      $   (153,026)    $   (56,372)
Adjustments to reconcile net loss to
   net cash used for operating activities:
      Provision for loan losses                                         -               -
      Depreciation, amortization, and accretion, net                81,931              -
      Increase in accrued interest receivable                     (101,882)             -
      Increase in accrued interest payable                           4,760              -
      Other, net                                                   (91,143)          5,623
                                                               ------------     -----------
      Net cash used for operating activities                      (259,360)        (50,749)
                                                               ------------     -----------
INVESTING ACTIVITIES
Purchase of certificate of deposit                                      -          (10,548)
Decrease in commitment to purchase AFS investment security        (500,000)             -
Investment securities available for sale:
      Purchases                                                 (6,351,792)             -
      Maturities and repayments                                  2,596,201              -
Investment securities held to maturity:
      Purchases                                                 (1,945,065)             -
      Maturities and repayments                                    128,444
Net increase in loans receivable                               (13,372,124)             -
Purchase of premises and equipment                                 (78,541)         (2,649)
                                                               ------------     -----------
      Net cash used for investing activities                   (19,522,877)        (13,197)
                                                               ------------     -----------
FINANCING ACTIVITIES
Net increase in deposits                                        11,454,503              -
Proceeds from FHLB advances                                      4,100,000              -
Net proceeds from the sale of common stock                              -          200,002
                                                               ------------     -----------
      Net cash provided by financing activities                 15,554,503         200,002
                                                               ------------     -----------

      Increase (decrease) in cash and cash equivalents          (4,227,734)        136,056

CASH AND CASH EQUIVALENTS
   AT BEGINNING OF PERIOD                                        5,929,243          29,449
                                                               ------------     -----------
CASH AND CASH EQUIVALENTS
   AT END OF PERIOD                                           $  1,701,509     $   165,505
                                                               ============     ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid during the period for:
   Interest on deposits and
     borrowings                                               $    544,159     $        0

</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

                                       6


<PAGE>

                             NITTANY FINANCIAL CORP.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - BASIS OF PRESENTATION


       The  consolidated  financial  statements of Nittany  Financial Corp. (the
       "Company")  includes  its  wholly-owned  subsidiaries,  Nittany Bank (the
       "Bank") and Nittany Asset Management,  Inc. All significant  intercompany
       items have been eliminated.

       On  May  24,  1999,  Nittany  Asset  Management,   Inc.  was  formed  and
       incorporated  as a Pennsylvania  corporation.  Nittany Asset  Management,
       Inc. is a wholly-owned subsidiary of the Company and was formed to engage
       in the offering of various types of investment services. At June 30, 1999
       the Company was not funded.

       The accompanying  unaudited  consolidated  financial statements have been
       prepared  in  accordance  with  the  instructions  to  Form  10-QSB  and,
       therefore,  do not  necessarily  include  all  information  that would be
       included  in audited  financial  statements.  The  information  furnished
       reflects  all  adjustments  which  are,  in the  opinion  of  management,
       necessary  for a fair  statement of the results of  operations.  All such
       adjustments are of a normal recurring  nature.  The results of operations
       for the three and six  months  ended  June 30,  1999 are not  necessarily
       indicative  of the  results  to be  expected  for the  fiscal  year ended
       December 31, 1999 or any other interim period.

       These  statements  should be read in  conjunction  with the  consolidated
       financial  statements  and related notes for the year ended  December 31,
       1998 which are  incorporated by reference in the Company's  Annual Report
       on Form 10-KSB.




                                       7

<PAGE>

MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

PLAN OF OPERATIONS

The  Company's  wholly owned  subsidiary,  Nittany  Bank (the "Bank")  commenced
operations as of October 26, 1998, and its activities  have primarily  consisted
of offering  deposits,  originating  loans and  servicing the deposits and loans
acquired from First  Commonwealth  Bank. Prior to October 26, 1998 the Company's
primary activities centered on the formation of the Bank.

On May 24, 1999, Nittany Asset Management, Inc. was formed and incorporated as a
Pennsylvania  corporation.  Nittany  Asset  Management,  Inc. is a wholly  owned
subsidiary  of the Company  and was formed to engage in the  offering of various
types of investment services. At June 30, 1999, the company was not funded.

COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 1999
AND DECEMBER 31, 1998

Total assets at June 30, 1999 increased $14,531,000 or 58.6% from $24,791,000 at
December 31, 1998 to  $39,322,000  at June 30, 1999 due to strong growth in both
loans and deposits within the Company's  market area.  Loans grew by $13,375,000
during  the  period  and  were  funded   primarily  by  growth  in  deposits  of
$11,455,000.

Interest-bearing  deposits with other banks  decreased  $4,179,000 or 74.3% from
$5,622,000 at December 31, 1998 to $1,443,000 at June 30, 1999. Management began
to utilize excess overnight deposits to fund loan demand during the period.

Total  investment  securities  available for sale increased  $3,385,000 or 25.7%
from  $13,151,000  at December 31, 1998 to  $16,536,000  at June 30,  1999.  The
increase  was  primarily  in both  fixed  and  adjustable  rate  mortgage-backed
securities,  which comprised 48.9% of the investment  portfolio at June 30, 1999
as compared to 29.3% of the portfolio at December 31, 1998. Management continued
to emphasize  increasing its  mortgage-backed  securities  portfolio in order to
maintain  yield,  while  providing  the cash  flows  needed to assist in funding
future loan demand.

Rising interest rates caused the net unrealized  losses on securities  available
for sale to rise to $365,000 at June 30,  1999.  Management  has  monitored  the
portfolio  and  determined  that the  quality  of the  portfolio  is  excellent.
Although  the  increase  in  general  rate  levels  and  spreads  has caused the
unrealized  losses,  management  has no intention of  liquidating  the portfolio
until maturity and does not expect the  unrealized  losses to have any effect on
operations.

At June 30,  1999,  $1,815,000  in  securities  were placed as held to maturity.
These  securities are comprised of  mortgage-backed  securities with a projected
weighted average life of under six (6) years.

Net loans receivable increased $13,375,000 or 302.3% from $4,424,000 at December
31,  1998 to  $17,799,000  at June 30,  1999.  The net  increase  was  primarily
attributable  to increases in  one-to-four  family  mortgages of $7,471,000  and
nonresidential  mortgages of $3,676,000.  Such increases primarily reflected the
economic health of the Bank's market area, the competitive pricing of the Bank's
loan products, and the strategic, service-oriented,  marketing approach taken by
management  to meet the  lending  needs of the area.  As of June 30,  1999,  the
Company has outstanding commitments of approximately $2.4 million.

                                       8

<PAGE>


Deposits  increased  $11,455,000  or 81.9% to  $25,447,000 at June 30, 1999 from
$13,992,000  at December 31, 1998 due  primarily to an increase in the volume of
money market  deposit  accounts and  certificates  of deposit of $6,999,000  and
$2,780,492,  respectively. The growth in certificates of deposit was spread over
various  maturity terms at competitive  rates in the market.  During the period,
the Company  offered  promotional  certificates  of deposit for 6, 12, 25 and 36
month terms, at or above competitive bank offerings.

Total FHLB  borrowings at June 30, 1999 increased  $4,100,000 to $9,100,000 from
$5,000,000 at December 31, 1998.  The majority of the increase was  attributable
to a $3,000,000  LIBOR based floating rate borrowing  advanced during the second
quarter.  During the period,  the Company  elected to retire a  $5,000,000  FHLB
convertible borrowing at par and replaced such borrowing with a $5,000,000 LIBOR
based floating rate borrowing with a term of 12 months.  Management has used the
FHLB  borrowings to provide a lower cost of funding,  manage  interest rate risk
and provide capital for investments and loans.

Net  interest  income  for the  three and six  months  ended  June 30,  1999 was
$210,000  and  $377,000  respectively.  Despite a slight  increase  in  regional
interest  rates during the first six months of 1999,  both  interest  income and
expense were driven by increases in average  balances of interest earning assets
and liabilities.  Interest earning assets, which rose $14.4 million during 1999,
were  primarily  comprised  of an  increase  in  net  loans  of  $13.4  million.
Interest-bearing liabilities increased $15.5 million during the six months ended
June 30,  1999,  as increases in money  market  accounts of $7.0  million,  time
deposits of $2.8 million and FHLB advances of $4.1 million occurred.

Noninterest  expense,  for the  three and six  months  ended  June 30,  1999 was
$318,000 and $599,000, respectively.  Compensation and employee benefits expense
of $236,240  represents the necessary  compensation and benefits associated with
the  employment  of the  equivalent  of 14 full time  employees.  Occupancy  and
equipment  expense of $95,066  consists  primarily  of rental  payments for both
branch  offices and the related  maintenance,  utilities,  and  depreciation  of
leasehold improvements.  Data processing expense of $33,630 is primarily related
to fees  associated  with the  Company's  third party service  bureau.  Goodwill
amortization  of  $25,558  is related to the  amortization  of  goodwill  over a
20-year period from the branch office acquisitions with First Commonwealth Bank.
Professional fees of $62,874 stem from outside  assistance in complying with the
increased  levels  of  regulatory  compliance  of a  public  reporting  company.
Stationary,  printing,  supplies,  and postage of $26,062  and other  expense of
$119,896  consist of various smaller dollar items that are continually  incurred
in performing the daily operations of the Company.

                                       9

<PAGE>

YEAR 2000

The year 2000 problem is associated with the inability of some computer programs
to  distinguish  between  the year 1900 and the year 2000  because  of  software
programs  that were written with a two digit year field  instead of a four digit
field.  If not correctly  programmed or  rewritten,  some computer  applications
could fail to operate or may create  erroneous  results when the year changes to
2000 or other key dates in the first quarter of the year 2000.  This could cause
entire system  failures,  miscalculations  and  disruptions  of normal  business
operations.  As the banking industry is heavily  dependent on computer  systems,
the  effect  of  this  problem  could  be the  temporary  inability  to  process
transactions,  generate  statements  and billings or engage in normal day to day
business  activities.  The extent of the potential impact of this problem is not
known and if not corrected in a timely manner, could affect the global economy.

Management and the Board of Directors  views the year 2000  initiative as a high
priority  of  the  Company.   The  Company  continues  to  aggressively   pursue
appropriate   solutions  and  assurances   with  regard  to  compliance  of  all
potentially  affected  applications  by  the  year  2000.  The  five  phases  of
awareness, assessment,  renovation, validation and implementation either are, or
will be, completed by September 30, 1999.

During the awareness  phase,  the Company  provided the Board of Directors  with
monthly  updates and received  input from its members.  The process of gathering
and sharing  information  included  customers,  employees  and  management.  The
process was directed by an internal  employee  assigned the  responsibility  for
coordination in conjunction  with a year 2000 team comprised of employees at all
levels of the bank.  Brochures,  mailings and  statements  stuffers were used to
keep customers abreast of the issues related to the year 2000.

The  process of  assessment  was  completed  in the  fourth  quarter of 1998 and
included the inventorying of all hardware and software and the identification of
all  systems,  vendors  and other  services  which could be affected by the date
change.  The Company's  year 2000  committee  then  determined  which items were
"mission  critical"  and ranked  them with our  highest  priority.  All  outside
vendors  and  commercial   loan   customers   were  asked  to  provide   written
documentation  of their  compliance and complete a survey  prepared by the bank.
Additionally,  testing of internal equipment and services, such as fax machines,
computers and security equipment was completed.

The core  processing  system of the Bank was  determined to be the most critical
item that could affect the Company.  A third party service  bureau (the "service
bureau")  provides the Bank with all of the material data  processing that could
be affected by this problem. The third party service bureau has advised the Bank
that  it  has  completed  the  renovation   phase  and  adequately   tested  all
applications.  The service  bureau has provided  the bank with  written  testing
results and concluded they are  substantially in compliance.  Additionally,  the
service bureau has provided the Company with a detailed contingency plan for the
Bank,  in case  problems  arise after the first day of January,  2000.  The core
application  software vendor, whose products are used by the service bureau, has
obtained ITAA*2000 certification, which indicates that the software has the core
capabilities needed to handle the Year 2000 challenge.

                                       10

<PAGE>

YEAR 2000 (CONTINUED)

As a new operation  opened during the awareness of the year 2000 issue, the Bank
was cognizant of the issues as new equipment  and vendors were  implemented.  As
such, the estimated  costs  associated  with addressing the year 2000 issue were
estimated not to exceed $10,000. To date, less than $5,000 has been expended.

The validation phase includes  extensive  testing of all hardware,  software and
systems  provided  by third  party  vendors.  As of June 30,  1999,  nearly  all
"mission  critical"  core  applications  have been  sufficiently  tested and are
expected to be completed by Mid-August and  implementation  will be completed by
September 30, 1999.

All commercial  borrowers of the bank with aggregate balances exceeding $100,000
have completed a risk assessment  questionnaire  and the bank has determined the
risk associated with such borrowers to be low.

A Contingency and Business  Resumption Plan has been in process and communicated
with  management,  employees and the Board of Directors for several months.  The
final plan is  expected  to be adopted by the Board of  Directors  by August 31,
1999. This plan addresses  perceived risks associated with the year 2000 problem
which includes  remediation  contingency planning intended to mitigate any risks
associated with unforeseen system glitches, system failure, increased demand for
cash or processes outside the Bank's control. The remainder of 1999 will be used
to further validate this plan.

Customer  awareness  continues  to be a  priority  and the  Company  expects  to
communicate  regularly  with its customer  base leading up to the year 2000 date
change.

Despite the best efforts of management to address this issue, the vast number of
external entities that have direct and indirect business  relationships with the
Bank, such as customers,  vendors,  payment system providers and other financial
institutions, makes it impossible to assure that a failure to achieve compliance
by one or more of  these  entities  would  not  have a  material  impact  on the
financial statements of the Company.

LIQUIDITY AND CAPITAL RESOURCES

Our   primary   sources  of  funds  are   deposits,   repayment   of  loans  and
mortgage-backed securities, maturities of investments, and interest-bearing time
deposits with other banks and funds provided from  borrowings.  While  scheduled
repayments of loans and mortgage-backed  securities and maturities of investment
securities are predictable sources of funds,  deposit flows and loan prepayments
are  greatly  influenced  by the  general  level  of  interest  rates,  economic
conditions,  and competition.  We use our liquid  resources  principally to fund
loan   commitments,   maturing   certificates  of  deposit  and  demand  deposit
withdrawals,  to invest in other interest-earning  assets, and to meet operating
expenses.

Liquidity may be adversely  affected by unexpected  deposit outflows,  excessive
interest rates paid by competitors,  adverse publicity relating to the financial
services industry and similar matters.  Management  monitors projected liquidity
needs and determines the level desirable based in part on the Bank's commitments
to make loans and  management's  assessment  of the Bank's  ability to  generate
funds. The Company maintains securities pledged at the Federal Home Loan Bank of
Pittsburgh to be used as collateral for any borrowings  that may be necessary to
fund short and long term loan needs.  The company views such borrowing as either
temporary or as an interest rate match on certain loans and other investments.

                                       11

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

Management  monitors both the Company's and the Bank's Total risk-based,  Tier I
risk-based and Tier I leverage capital ratios in order to assess compliance with
regulatory guidelines.  At June 30, 1999, both the Company and the Bank exceeded
the minimum  risk-based and leverage capital ratio  requirements.  The Company's
and Bank's Total  risk-based,  Tier I risk-based and Tier I leverage  ratios are
15.1%, 14.8%, 10.6% and 15.1%, 14.7%, 10.6%, respectively at June 30, 1999.

RISK ELEMENT

As of June 30, 1999, the Company had $1,000 of non-performing  assets, which are
classified  as  impaired  loans.  Management  monitors  its loan  portfolio  for
impaired loans on a continual basis.

Although  there  was  significant  growth  in  the  loan  portfolio  during  the
three-month  period ended June 30,  1999,  non-performing  loans  continue to be
immaterial.  Approximately 89% of the total loan portfolio to date are comprised
of 1-4 family and  commercial  real estate  loans with  adequate  down  payment.
Residential  real estate  mortgage loans comprise the majority of the portfolio.
These  loan  types  have   historically,   by   industry   standards,   incurred
significantly fewer losses in relationship to actual principal disbursed.

Management  believes the level of the allowance for loan losses at June 30, 1999
is sufficient; however, there can be no assurance that the current allowance for
loan losses will be adequate to absorb all future loan losses.  The relationship
between the allowance for loan losses and outstanding loans is a function of the
credit  quality and known risk  attributed to the loan  portfolio.  The on-going
loan  review  program  and  credit  approval  process is used to  determine  the
adequacy of the allowance for loan losses.  Our internal allowance for loan loss
analysis utilizing various risk factors and weightings shows our allowance to be
adequate as of June 30, 1999.


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<PAGE>


PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

           None

Item 2.    Changes in rights of the Company's security holders

           None

Item 3.    Defaults by the Company on its senior securities

           None

Item 4.    Submission of matters to a vote of security holders


           The annual meeting of the  shareholders  was held on May 24, 1999 and
           The following matters were voted upon:

           Proposal 1 - Election of directors with terms to expire in 2003

                                     FOR       WITHHELD
                                     ---       --------
           J. Garry McShea          469,506      1,700
           D. Michael Taylor        469,506      1,700

           Proposal 2 - The  approval  of  Nittany  Financial  Corp.  1998 Stock
           Option Plan

           For:  404,106          Against: 21,000      Abstain: 46,100

           Proposal 3 - The  ratification of the appointment of S. R. Snodgrass,
           A.C.,  as  independent  auditors  of the  Company for the fiscal year
           ending December 31, 1999

           For:  470,106          Against: 100         Abstain: 1,000


Item 5.    Other information

           None

Item 6.    Exhibits and Reports on Form 8-K

           (a)  The following exhibits are incorporated herein by reference:
                3(I)  Amended Articles of Incorporation of Nittany
                      Financial Corp.**
                3(ii) Bylaws of Nittany Financial Corp.**
                4     Specimen Stock Certificate of Nittany Financial
                      Corp.**
                10    Employment Agreement between the Bank and David Z.
                      Richards**
                27    Financial Data Schedule, filed herewith


**         Incorporated by reference to the identically  numbered exhibit to the
           registration  statement  Form  SB-2  (File  No.  333-57277)  declared
           effective by the SEC on July 31, 1998.

          (b)  Reports on Form 8-K
               None


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<PAGE>

                                   SIGNATURES

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


                                    Nittany Financial Corp.
                                    (Registrant)


Date:                               By: /s/ David Z. Richards
                                        ----------------------------------------
August 16, 1999                         David Z. Richards
                                        President and Chief Executive Officer







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