<PAGE>
                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, 1998

[  ]  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 Identification No.)
incorporation or organization)

               637 Kennard Road, State College, Pennsylvania 16801
               ---------------------------------------------------
                    (Address of principal executive offices)

                                (814) 466 - 6336
                                ----------------
              (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       No  X
                                                              ---      ---

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 August 31, 1998:  30,000 shares



<PAGE>




                             NITTANY FINANCIAL CORP.

                                      INDEX
                                                                           Page
                                                                          Number
                                                                          ------

PART I - FINANCIAL INFORMATION

   Item 1. Financial Statements

            Balance Sheet (Unaudited) as of
              June 30, 1998 and December 31, 1997                            3

            Statement of Operations (Unaudited) for the
              Three Months and Six Months ended June 30,1998
           and for the period from October 9, 1997 (Inception)
              to June 30, 1998                                               4

            Statement of Cash Flows (Unaudited)  
              for the Six Months  ended June 30,1998 
              and for the period from October 9, 1997 (Inception)
              to June 30, 1998                                               5

            Notes to Unaudited Financial Statements                          6

   Item 2. Management's Discussion and Analysis of
             Recent Developments                                          7 - 9

PART II  -  OTHER INFORMATION

   Item 1. Legal Proceedings                                                10

   Item 2. Changes in Securities                                            10

   Item 3. Defaults Upon Senior Securities                                  10
 
   Item 4. Submission of Matters to a Vote of Security Holders              10

   Item 5. Other Information                                                10

   Item 6. Exhibits and Reports on Form 8-K                              10 & 11

SIGNATURES                                                                  12





<PAGE>




                             NITTANY FINANCIAL CORP.
                                  BALANCE SHEET

<TABLE>
<CAPTION>
                                                                June 30,    December 31,
                                                                  1998          1997
                                                               ----------    ---------
                                                              (Unaudited)
<S>                                                             <C>          <C>      
ASSETS
Cash and interest-bearing deposits in banks                     $ 157,687    $  29,449
Furniture and equipment                                             2,649         --
Deferred organization costs                                        70,000       70,000
                                                               ----------    ---------

TOTAL ASSETS                                                    $ 230,336    $  99,449
                                                                =========    =========

LIABILITIES
Accounts payable and accrued expenses                           $  70,190    $  75,226
Advances from organizers                                              --        50,000
                                                                ---------    ---------

     TOTAL LIABILITIES                                             70,190      125,226
                                                                ---------    ---------

STOCKHOLDERS' EQUITY
Preferred stock, no par value; 15,000,000 shares
      authorized; none outstanding                                    --          --
Common Stock, par value $.10; 10,000,000
     shares authorized; 25,000 and 0 issued
      and outstanding                                               2,500         --
Common stock subscribed (5,000 and 0 shares)                          500         --
Additional paid-in capital                                        297,000         --
Retained deficit                                                  (89,854)     (25,777)
                                                                ---------    ---------
                                                                  210,146      (25,777)
Common stock subscriptions receivable                             (50,000)        --
                                                                ---------    ---------
      TOTAL STOCKHOLDERS' EQUITY                                  160,146      (25,777)
                                                                ---------    ---------
      TOTAL LIABILITIES AND
           STOCKHOLDERS' EQUITY                                 $ 230,336    $  99,449
                                                                =========     ========
</TABLE>

See accompanying notes to the financial statements.



                                        3

<PAGE>



                             NITTANY FINANCIAL CORP.
                             STATEMENT OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                   Period from
                                                          Three Months        Six Months          October 9, 1997
                                                              Ended             Ended              (Inception)
                                                          June 30, 1998      June 30, 1998       to June 30, 1998
                                                          -------------      -------------       ----------------

<S>                                                  <C>                     <C>                  <C>         
INTEREST INCOME                                      $              744      $       1,208        $      1,503

EXPENSES
Officer salary and benefits                                      20,886             41,713              61,462
Occupancy and equipment                                               -                439                 439
Professional services                                             1,484              3,722               9,630
Other                                                            18,398             19,411              19,826
                                                     ------------------       --------------      ------------
Total expenses                                                   40,768             65,285              91,357
                                                     ------------------       --------------      ------------

Loss before income taxes                                        (40,024)           (64,077)            (89,854) 
Income taxes                                                          -                  -                   -
                                                     ------------------       --------------      ------------

NET LOSS                                             $          (40,024)     $     (64,077)       $    (89,854)
                                                     ===================      ==============      ==============

LOSS PER SHARE                                       $            (1.97)     $       (3.74)       $      (5.25) 

AVERAGE SHARES OUTSTANDING                                       20,269             17,130              17,130

</TABLE>
See accompanying notes to the financial statements.


                                        4

<PAGE>



                             NITTANY FINANCIAL CORP
                             STATEMENT OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                       Period from
                                                       Six Months    October 9, 1997
                                                          Ended       (Inception)
                                                      June 30, 1998  to June 30, 1998
                                                      -------------  ----------------
<S>                                                      <C>          <C>       
OPERATING ACTIVITIES
Net loss                                                 $ (64,077)   $ (89,854)
Adjustments to reconcile net loss to net cash
     provided by operating activities:
     Increase in accrued expenses                             --          5,226
                                                         ---------    ---------
             Net cash used for operating activities        (64,077)     (84,628)
                                                         ---------    ---------
 
INVESTING ACTIVITIES
Purchase of one year bank certificate of deposit           (10,548)     (10,548)
Cash paid for organizational costs                          (5,036)      (5,036)
Purchase of equipment                                       (2,649)      (2,649)
                                                         ---------    ---------
             Net cash used for investing activities        (18,233)     (18,233)
                                                         ---------    ---------

FINANCING ACTIVITIES
Advances from organizers                                      --         50,000
Proceeds from sale of common stock                         200,000      200,000
                                                         ---------    ---------
             Net cash provided by financing activities     200,000      250,000
                                                         ---------    ---------

             Increase in cash and cash equivalents         117,690      147,139   

CASH AND CASH EQUIVALENTS
   AT BEGINNING OF PERIOD                                   29,449            -
                                                         ---------    ---------
CASH AND CASH EQUIVALENTS
   AT END OF PERIOD                                      $ 147,139    $ 147,139
                                                         =========    =========

SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION

Noncash financing activities:
      Conversion of advances from organizers
             to common stock                             $  50,000    $  50,000
      Stock subscriptions receivable                     $  50,000    $  50,000
</TABLE>

See accompanying notes to the financial statements.

                                        5

<PAGE>





                             NITTANY FINANCIAL CORP.
                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited 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.  As of the date of these
financial  statements,  Nittany Financial Corp.'s (Company) operations have been
limited to in-formation  procedures;  raising capital,  recruiting  officers and
staff, obtaining a banking facility and working towards obtainment of regulatory
approval.  Since  the  Company's  planned  principal  operations  have  not  yet
commenced;  no significant  revenue has been derived  therefrom.  The results of
operations for the interim periods are not indicative of the results that may be
expected  for a full year and could be  materially  different if the Company was
not an "in-formation" entity and operation.

NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting  Standards No. 133, "Accounting for Derivative  Instruments
and  Hedging  Activities."  The  statement  provides  accounting  and  reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other  contracts,  by requiring  the  recognition  of those items as
assets or liabilities in the balance  sheet,  recorded at fair value.  Statement
No. 133, precludes a held-to-maturity security from being designated as a hedged
item, however,  at the date of initial application of this statement,  an entity
is   permitted   to   transfer   any   held-to-maturity    security   into   the
available-for-sale or trading categories. The unrealized holding gain or loss on
such transferred  securities shall be reported  consistent with the requirements
of Statement No. 115,  "Accounting  for Certain  Investments  in Debt and Equity
Securities."  Such transfers do not raise an issue  regarding an entity's intent
to hold other debt securities to maturity in the future.  This statement applies
prospectively  for all fiscal  quarters  of all years  beginning  after June 15,
1999. Earlier adoption is permitted for any fiscal quarter that begins after the
issue date of this statement.







                                        6

<PAGE>




CAUTIONARY STATEMENT - FORWARD-LOOKING STATEMENTS

Certain  statements  contained in this filing are  "forward-looking  statements"
within the meaning of the Private Securities Litigation Reform Act of 1995, such
statements   relating  to  financial  results  and  plans  for  future  business
development   activities,   and  are  thus  prospective.   Such  forward-looking
statements are subject to risks,  uncertainties  and other factors,  which could
cause  actual  results to differ  materially  from future  results  expressed or
implied by such  forward-looking  statements.  Potential risks and uncertainties
include,  but are not limited to;  economic  conditions,  competition  and other
uncertainties  detailed  from  time  to  time in the  Company's  Securities  and
Exchange Commission filings.

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

The Company was incorporated  under the laws of the Commonwealth of Pennsylvania
on  December  8,1997,  for the  purpose of  becoming a unitary  savings and loan
holding company,  which will own all of the outstanding  shares of capital stock
of a proposed  federal stock savings bank,  Nittany Bank  ("Bank").  The Company
must  receive  regulatory  approval  to open the Bank from the  Federal  Deposit
Insurance  Corporation  and from the Office of Thrift  Supervision  . Regulatory
approval  will be  subject to the  Company  raising  sufficient  capital to meet
regulatory capital requirements,  and to satisfy any additional anticipated cash
requirements  of the  Company and Bank for their  respective  first full year of
operations. The Company is offering for sale in an Offering a minimum of 500,000
shares and a maximum of 600,000  shares of its common stock at a purchase  price
of $10.00  per share.  Should  subscriptions  for the  minimum  offering  not be
obtained, amounts paid by subscribers with their subscriptions will be returned,
and the formation of the Bank will be delayed or not materialize. In addition to
the shares issued pursuant to this Offering,  30,000 shares at a price of $10.00
per share, have been issued to Organizers  pursuant to a Private Placement,  and
an  estimated  10,000  shares of common  stock will be issued to a bank  holding
company as partial payment of a premium on deposits to be assumed by the Bank.

The Company,  through its organizers,  entered into a Branch Purchase  Agreement
("Agreement")  on March 24, 1998 with First  Commonwealth  Bank, a  Pennsylvania
state chartered  commercial  bank.  Pursuant to the Agreement,  the Company will
assume the  deposit  liabilities  and  purchase  certain  assets of two  offices
located in State  College,  Pennsylvania.  The  Company  has agreed to pay First
Commonwealth a premium in the form of cash equal to nine percent and in the form
of stock equal to one percent times the deposit  liabilities.  The total deposit
premium is  estimated to be $ 935,000 in cash and  $104,000  (10,400  shares) in
common stock of the Company.  The Company will purchase furniture,  fixtures and
equipment in an amount  approximating  $34,000. The Company will also assume the
branch facilities leases.  Minor renovations to the facilities will be necessary
prior to opening the offices.  In general,  the building  structures are in good
physical condition.  The Agreement is subject to several  conditions,  including
the required approval of government regulatory  authorities,  the consent of the
landlords regarding the Company's assumption of the leases and the completion of
the stock  offering The Agreement  may be  terminated  by mutual  consent of the
parties,  inability  to obtain  regulatory  approval,  or  failure  to close the
transaction by the earlier of September  30,1998 or within 30 days after receipt
of the required regulatory approvals.

                                        7

<PAGE>



MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS (Continued)

The  proposed  business  of the Bank will  consist  of  offering a full range of
banking  services to  individuals,  professional  and business  customers in its
primary  service  area.  These  services  will  include  providing  personal and
business demand,  savings and time certificates of deposit,  and the origination
of residential  and commercial  mortgages,  home equity loans,  consumer  loans,
small business and other loans. Customer deposits with the Bank will be at rates
competitive  with those offered in the Bank's primary  service area, and will be
insured to the maximum  extent  provided by law through the FDIC.  The Bank does
not  anticipate  offering  brokered  deposits.  The loans  the Bank  anticipates
originating will consist of both adjustable and fixed rate instruments. The Bank
or Company may also offer through affiliations with other companies, alternative
non-deposit investments,  such as mutual funds and securities.  The Bank intends
to also  offer  night  depository,  telephone  banking,  bank-by-mail,  and safe
depository  services.  The Bank does not anticipate offering trust and fiduciary
services,  but may rely on trust and fiduciary services offered by correspondent
banks, if customers request such services.

Effective July 1, 1998, the Company  entered into a data processing and services
agreement with LUN Data Inc. and the Kirchman  Corporation.  The Bank will incur
monthly data processing fees of approximately  $3,000 to $5,000, once operations
begin.  A one-time  software  liscensing  and  conversion  fee of  approximately
$14,000 was paid in July 1998.

Initially,  the Bank anticipates  deriving its income  principally from interest
charged on loans and interest  earned on its investment  portfolio.  Income will
also be derived,  to a lesser  extent;  from fees  received in  connection  with
deposit services offered and loan  originations.  The Bank's principal  expenses
will  be  interest  expense  incurred  on  customer  deposits,  and  noninterest
operating  expenses  such as salaries and  employee  benefits,  data  processing
charges and occupancy costs.

For additional  information  regarding the Company, the Bank, and their proposed
operations,  please refer to the Registration  Statement filed on Form SB-2 with
the Securities and Exchange Commission, dated July 31, 1998.


                                        8

<PAGE>




YEAR 2000

A great deal of information has been disseminated about the global computer year
2000. Many computer  programs that can only  distinguish the final two digits of
the year entered (a common  programming  practice in earlier years) are expected
to read entries for the year 2000 as the year 1900 and compute payment, interest
or  delinquency  based on the wrong date or are expected to be unable to compute
payment,  interest  or  delinquency.  Rapid  and  accurate  data  processing  is
essential to our Bank's  operation.  Data  processing is also  essential to most
other financial  institutions  and many other  companies.  A third party service
bureau will be  providing  all of the  material  data  processing  that could be
affected by this problem.  Our prospective service bureau has advised us that it
is  substantially  compliant  and it expects to resolve this  potential  problem
before the year 2000. In this vein, the core application  software vendor, whose
products are used by our  prospective  service  bureau,  has  recently  obtained
ITAA*2000  certification,  which  indicates  that  the  software  has  the  core
capabilities  needed to handle the Year 2000 challenge.  However, if our service
bureau is unable to resolve  all facets of this  potential  problem in time,  we
could  likely  experience  significant  data  processing  delays,   mistakes  or
failures.  These delays,  mistakes or failures could have a significant  adverse
impact on our  financial  condition  and our results of  operation.  In order to
determine the service bureau is year 2000  compliant,  management must develop a
test  plan,  which it  intends  to  implement  during  the  first  half of 1999.
Management expects to incur additional  operating expenses during 1999, relating
to designing and performing tests of the Bank's computer systems. Management has
determined  the total costs that will be incurred to become year 2000  compliant
are not material to the Company and its proposed banking subsidiary.


                                        9

<PAGE>




PART II - OTHER INFORMATION

Item 1 - Legal proceedings

             NONE

Item 2 - Changes in securities

             NONE

Item 3 - Defaults upon senior securities

             N/A

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. The following exhibits are filed with this report:
<TABLE>
<CAPTION>
                  The exhibits filed as part of this Registration Statement are as follows:
                 <S>      <C>
                   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 with David Z. Richards*
                  10.1     Branch Purchase and Deposit Assumption Agreement (including Amendment No.
                           1 to Agreement)* (Form of Amendment No.2 to Agreement)*
                  27       Financial Data Schedule** As of June 30,1998, neither the Company 
                           nor the Bank had commenced their respective  operations  as a  bank 
                           holding  company  or  as a federal  savings  bank,  and neither  will do 
                           so unless  final regulatory   approvals   are   obtained   and   the
                           required capitalization of the Bank by the Company is obtained from the
                           proceeds of the Company's stock  offering,  which is presently still pending.
</TABLE>
                  -----------------                                  
                  *   Incorporated by reference to the registration statement
                      on Form SB-2 (333-57277).
                  **  Electronic filing only

(b) Reports on Form 8-K

     No  reports on Form 8-K have been  filed  during the second  quarter of the
     year ending December 31, 1998.



                                       10


<PAGE>



SIGNATURES

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


                                       Nittany Financial Corp.


Date:  September 11, 1998             By:\s\ David Z. Richards, Jr.
                                          --------------------------------------
                                          David Z. Richards, Jr.
                                          President ,Chief Executive Officer
                                            And Chief Financial Officer



                                       11