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 September 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 November 08, 1999: 577,436

<PAGE>


                             NITTANY FINANCIAL CORP.

                                      INDEX

                                                                           Page
                                                                          Number
                                                                          ------
PART I  -  FINANCIAL INFORMATION

  Item 1.  Financial Statements

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

           Consolidated Statement of Income (Unaudited)
               for the Nine Months ended September 30, 1999 and 1998           4

           Consolidated Statement of Income (Unaudited)
               for the Three Months ended September 30, 1999 and 1998          5

           Consolidated Statement of Changes in Stockholders'
               Equity (Unaudited)                                              6

           Consolidated Statement of Cash Flows (Unaudited)
               for the Nine Months ended September 30, 1999 and 1998           7

           Notes to Unaudited Consolidated Financial Statements                8

  Item 2.  Management's Discussion and Analysis of
               Financial Condition and Results of Operations                9-17

PART II  -  OTHER INFORMATION

  Item 1.   Legal Proceedings                                                 18

  Item 2.   Changes in Securities                                             18

  Item 3.   Default Upon Senior Securities                                    18

  Item 4.   Submissions of Matters to a Vote of Security Holders              18

  Item 5.   Other Information                                                 18

  Item 6.   Exhibits and Reports on Form 8 - K                                18

SIGNATURES                                                                    19

<PAGE>

                             NITTANY FINANCIAL CORP.
                     CONSOLIDATED BALANCE SHEET (UNAUDITED)

<TABLE>
<CAPTION>
                                                             September 30,           December 31,
                                                                 1999                    1998
                                                           ------------------       ---------------
<S>                                                    <C>                       <C>
ASSETS
Cash and due from banks                                  $           339,986       $       307,443
Interest-bearing deposits with other banks                         3,279,267             5,621,800
Investment securities available for sale                          16,144,042            13,150,768
Investment securities held to maturity  (market
      value of $1,652,336)                                         1,710,672                    -
Loans receivable (net of allowance for loan losses
      of $157,764 and $98,988 )                                   23,748,711             4,424,132
Premises and equipment                                               182,693               126,160
Intangible assets                                                    900,504               941,886
Accrued interest and other assets                                    296,606               218,394
                                                           ------------------        --------------

      TOTAL ASSETS                                       $        46,602,481       $    24,790,583
                                                           ==================        ==============
LIABILITIES
Deposits:
      Noninterest-bearing demand                         $         2,567,289       $       777,400
      Interest-bearing demand                                      4,818,718             2,146,171
      Money market                                                14,035,933             5,409,434
      Savings                                                      1,451,485             1,269,834
      Time                                                        10,387,375             4,389,545
                                                           ------------------        --------------
           Total deposits                                         33,260,800            13,992,384
FHLB advances                                                      8,600,000             5,000,000
Accrued interest payable and other liabilities                       266,551               144,546
Commitment to purchase investment security                                 -               500,000
                                                           ------------------        --------------
      TOTAL LIABILITIES                                           42,127,351            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                                                    (768,729)             (525,650)
Accumulated other comprehensive loss                                (466,030)              (30,586)
                                                           ------------------        --------------
      TOTAL STOCKHOLDERS' EQUITY                                   4,475,130             5,153,653
                                                           ------------------        --------------
      TOTAL LIABILITIES AND
           STOCKHOLDERS' EQUITY                          $        46,602,481       $    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>

                                                            Nine Months Ended September 30,
                                                              1999                    1998
                                                        ------------------        --------------
<S>                                                 <C>                       <C>
INTEREST AND DIVIDEND INCOME
Loans, including fees                                 $           815,577       $             -
Investment securities                                             728,894                     -
Interest-bearing deposits with other banks                         81,010                 1,996
                                                        ------------------        --------------
      Total interest and dividend income                        1,625,481                 1,996
                                                        ------------------        --------------
INTEREST EXPENSE
Deposits                                                          724,560                     -
FHLB advances                                                     240,548                     -
                                                        ------------------        --------------
      Total interest expense                                      965,108                     -
                                                        ------------------        --------------
NET INTEREST INCOME                                               660,373                 1,996
Provision for loan losses                                          60,000                     -
                                                        ------------------        --------------
NET INTEREST INCOME AFTER
   PROVISION FOR LOAN LOSSES                                      600,373                 1,996
                                                        ------------------        --------------
NONINTEREST INCOME
Service fees on deposit accounts                                   88,319                     -
Investment securities gains, net                                    1,342                     -
Other income                                                       25,606                     -
                                                        ------------------        --------------
      Total noninterest income                                    115,267                     -
                                                        ------------------        --------------
NONINTEREST EXPENSE
Compensation and employee benefits                                394,428                79,730
Occupancy and equipment                                           144,625                   439
Data processing                                                    94,452                     -
Goodwill amortization                                              37,427                     -
Professional fees                                                  77,664               104,175
Printing and supplies                                              43,828                   118
Other                                                             166,295                51,066
                                                        ------------------        --------------
      Total noninterest expense                                   958,719               235,528
                                                        ------------------        --------------
Loss before income taxes                                         (243,079)             (233,532)
Income taxes                                                            -                     -
                                                        ------------------        --------------
NET LOSS                                              $          (243,079)      $      (233,532)
                                                        ==================        ==============
LOSS PER SHARE:
      Basic                                           $            ($0.42)      $       ($10.99)(1)
      Diuluted                                                     ($0.42)                  N/A

WEIGHTED AVERAGE SHARES OUTSTANDING:
      Basic                                                       577,436                21,259
      Diuluted                                                    577,436                   N/A

</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.


See accompanying notes to the unaudited consolidated financial statements.

                                        4
<PAGE>

                             NITTANY FINANCIAL CORP.
                  CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

<TABLE>
<CAPTION>
                                                        Three Months Ended September 30,
                                                           1999                    1998
                                                     ------------------        --------------
<S>                                              <C>                       <C>
INTEREST AND DIVIDEND INCOME
Loans, including fees                              $           410,363       $            -
Investment securities                                          277,890                    -
Interest-bearing deposits with other banks                      20,618                  788
                                                     ------------------        --------------
      Total interest and dividend income                       708,871                  788
                                                     ------------------        --------------
INTEREST EXPENSE
Deposits                                                       310,235                    -
FHLB advances                                                  115,474                    -
                                                     ------------------        --------------
      Total interest expense                                   425,709                    -
                                                     ------------------        --------------
NET INTEREST INCOME                                            283,162                  788

Provision for loan losses                                       60,000                    -
                                                     ------------------        --------------
NET INTEREST INCOME AFTER
   PROVISION FOR LOAN LOSSES                                   223,162                  788
                                                     ------------------        --------------
NONINTEREST INCOME
Service fees on deposit accounts                                32,816                    -
Investment securities gains, net                                     -                    -
Other income                                                    13,362                    -
                                                     ------------------        --------------
      Total noninterest income                                  46,178                    -
                                                     ------------------        --------------
NONINTEREST EXPENSE
Compensation and employee benefits                             158,188               38,017
Occupancy and equipment                                         49,559                    -
Data processing                                                 40,809                    -
Goodwill amortization                                           11,869                    -
Professional fees                                               14,790              100,453
Printing and supplies                                           17,766                    -
Other                                                           66,412               31,773
                                                     ------------------        --------------
      Total noninterest expense                                359,393              170,243
                                                     ------------------        --------------
Loss before income taxes                                       (90,053)            (169,455)
Income taxes                                                         -                    -
                                                     ------------------        --------------
NET LOSS                                           $           (90,053)      $     (169,455)
                                                     ==================        ==============
LOSS PER SHARE
      Basic                                        $            ($0.16)             ($ 6.22)
      Diuluted                                                  ($0.16)                 N/A

WEIGHTED AVERAGE SHARES OUTSTANDING
      Basic                                                    577,436               27,228
      Diuluted                                                 577,436                  N/A

</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

                                        5
<PAGE>


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

<TABLE>
<CAPTION>

                                                                                     Accumulated
                                                           Additional                   Other             Total           Compre-
                                             Common          Paid-in     Retained   Comprehensive     Stockholders'       hensive
                                              Stock          Capital     Deficit        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                                                                 (243,079)                         (243,079)   $   (243,079)
Other comprehensive loss:
  Unrealized loss on available for
    sale securities
Comprehensive loss                                                                      (435,444)          (435,444)       (435,444)
                                          --------------  ------------  ----------  -------------    ---------------   ------------

Balance, September 30, 1999               $      57,744   $ 5,652,145   $(768,729)  $   (466,030)    $    4,475,130    $   (678,523)
                                          ==============  ============  ==========  =============    ===============   =============





Components of comprehensive loss:                                                         1999
Change in net unrealized loss on                                                          ----
   investment securities available
   for sale                                                                         $   (434,558)
Realized gains included in net
   income, net of tax                                                                       (886)
                                                                                    ------------
Total                                                                               $   (435,444)
                                                                                    ============
</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

                                        6

<PAGE>

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

<TABLE>
<CAPTION>
                                                                     Nine Months Ended September 30,
                                                                       1999                    1998
                                                                 ------------------        --------------
<S>                                                          <C>                       <C>
OPERATING ACTIVITIES
Net loss                                                       $          (243,079)      $      (233,532)
Adjustments to reconcile net loss to
   net cash used for operating activities:
      Provision for loan losses                                             60,000                     -
      Depreciation, amortization, and accretion,net                        115,049                     -
      Investment securities gains, net                                      (1,342)                    -
      Increase in accrued interest receivable                             (102,554)                    -
      Increase in accrued interest payable                                 132,237                     -
      Other, net                                                            14,110                63,936
                                                                 ------------------        --------------
      Net cash used for operating activities                               (25,579)             (169,596)
                                                                 ------------------        --------------
INVESTING ACTIVITIES
Purchase of one year certificate of deposit                                      -               (10,548)
Investment securities available for sale:
      Purchases                                                         (6,851,792)                    -
      Proceeds from sales                                                  428,554                     -
      Principal repayments                                               2,462,572                     -
Investment securities held to maturity:
      Purchases                                                         (1,945,065)                    -
      Principal repayments                                                 234,768                     -
Net increase in loans receivable                                       (19,395,256)                    -
Purchase of premises and equipment                                         (86,608)               (2,649)
                                                                 ------------------        --------------
      Net cash used for investing activities                           (25,152,827)              (13,197)
                                                                 ------------------        --------------
FINANCING ACTIVITIES
Net increase in deposits                                                19,268,416                     -
Proceeds from long-term FHLB advances                                    3,600,000                     -
Net proceeds from the sale of common stock                                       -               250,000
                                                                 ------------------        --------------
      Net cash provided by financing activities                         22,868,416               250,000
                                                                 ------------------        --------------
      Increase (decrease) in cash and cash  equivalents                 (2,309,990)               67,207

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                         5,929,243                29,449
                                                                 ------------------        --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                     $         3,619,253       $        96,656
                                                                 ==================        ==============
SUPPLEMENTAL CASH FLOW DISCLOSURE
   Cash paid during the year for:
      Interest on deposits and borrowings                      $           832,871       $             -

</TABLE>


See accompanying notes to the unaudited consolidated financial statements.

                                        7
<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.

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 that 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 nine months ended  September  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 to the Company's Annual Report on Form 10-KSB.

Note 2 - EARNINGS PER SHARE

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 September 30, 1999 there was no dilutive effect on common shares
of stock outstanding.

Note 3 - STOCK OPTION PLAN

On October 23, 1998, the Board of Directors  adopted a stock option plan for the
directors, officers, and employees which was approved by the stockholders on May
24, 1999. An aggregate of 86,615 shares of authorized but unissued  common stock
of the Company were  reserved  for future  issuance  under this plan.  The stock
options have  expiration  terms of ten years subject to certain  extensions  and
terminations.  The per share  exercise  price of a stock  option  shall be, at a
minimum,  equal to the fair  value  of a share of  common  stock on the date the
option is granted.  Non-qualified  and qualified  stock options were granted for
the purchase of $82,500  shares,  exercisable at the market price of $10.00.  Of
this  amount,  48,000 and  34,500  stock  options  were  granted to  nonemployee
directors and officers and employees, respectively. Options awarded to employees
and  officers  become  first  exercisable  at a  rate  of  25  percent  and  for
non-employee  directors at a rate of 33 1/3 percent annually,  commencing on the
date of grant.


                                        8

<PAGE>


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

                                                          Weighted-
                                                           average
                                         Stock            Exercise
                                         Options            Price
                                     -------------       ----------

Outstanding, January 1, 1999         $           -      $         -
Granted                                     82,500            10.00
Exercised                                        -                -
Forfeited                                        -                -
                                     -------------      -----------

Outstanding, September 30, 1999      $      82,500      $     10.00
                                     =============      ===========


As  permitted  under  Statement  of  Financial   Accounting  Standards  No.  123
"Accounting for Stock- based  Compensation," the Company has elected to continue
following  Accounting  Principles  Board Opinion No. 25,  "Accounting  for Stock
Issued to Employees" ("APB 25"), and related Interpretations,  in accounting for
stock-based awards to employees. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of the grant, no compensation expense is recognized in the Company's
financial statements.  Had compensation expense included stock option plan costs
determined  based on the fair value at the grant dates for options granted under
these plans consistent with Statement No. 123, pro forma net income and earnings
per share would not have been  materially  different  than that presented on the
consolidated statements of income.

Note 4 - INVESTMENT SECURITIES

The amortized  cost and estimated  market  values of investment  securities  are
summarized as follows:

<TABLE>
<CAPTION>
                                                            At September 30, 1999
                                        -------------------------------------------------------------
                                                            Gross         Gross          Estimated
                                            Amortized    Unrealized     Unrealized         Market
                                             Cost           Gains         Losses           Value
                                        -------------   ------------  --------------  ---------------
<S>                                   <C>             <C>            <C>              <C>
Available for Sale:
U.S. Government agency
  securities                           $    5,794,706  $        -     $    (200,911)   $   5,593,795

Corporate securities                        3,537,025         2,178         (14,725)       3,524,478
Mortgage-backed securities                  6,823,341           -          (252,572)       6,570,769
                                        -------------   ------------   -------------   -------------
  Total debt securities                    16,155,072         2,178        (468,208)      15,689,042
Equity securities                             455,000           -              -             455,000
                                        -------------   ------------   -------------   -------------
  Total                                 $  16,610,072   $     2,178   $    (468,208)   $ 16,144,042
                                        =============   ============   =============   =============
</TABLE>

<TABLE>
<CAPTION>
                                                           At September 30, 1999
                                        -------------------------------------------------------------
                                                            Gross          Gross          Estimated
                                          Amortized      Unrealized      Unrealized         Market
                                            Cost            Gains          Losses           Value
                                        -------------   -------------   -------------   -------------
<S>                                   <C>             <C>             <C>             <C>
Held to Maturity:
Mortgage-backed securities             $    1,710,672  $        -      $     (58,336)  $    1,652,336
                                        -------------   -------------   -------------   -------------

  Total                                $    1,710,672  $        -      $     (58,336)  $    1,652,336
                                        =============   =============   =============   =============
</TABLE>

                                        9

<PAGE>

<TABLE>
<CAPTION>

                                                                 At December 31,1998
                                        -----------------------------------------------------------------------
                                                                Gross               Gross             Estimated
                                            Amortized         Unrealized          Unrealized            Market
                                              Cost              Gains              Losses               Value
                                        -----------------   -------------     --------------      -------------
<S>                                  <C>                 <C>                <C>                  <C>
Available for Sale:
U.S. Government agency
  securities                           $    5,716,790      $      4,048      $      (1,654)       $   5,719,184

Corporate securities                        3,533,210             1,322            (13,295)           3,521,237
Mortgage-backed securities                  3,624,154               -              (21,007)           3,603,147
                                        -------------       -----------       -------------       -------------
  Total debt securities                    12,874,154             5,370            (35,956)          12,843,568
Equity securities                             307,200               -                 -                 307,200
                                        -------------       -----------       -------------       -------------
  Total                                $   13,181,354      $      5,370      $     (35,956)       $  13,150,768
                                        =============       ===========       =============       =============
</TABLE>

Note 5 - LOANS

Loans receivable consists of the following:

                                           September 30,       December 31,
                                               1999                1998
                                          ---------------     --------------
Real estate loans:
     Residential                        $   12,826,546     $    1,653,004
     Home equity                             2,275,782            997,740
     Construction                            1,136,733               -
     Commercial                              5,333,254            858,000
Commercial                                     633,309            163,122
Consumer loans                               1,698,449            860,406
                                         --------------     -------------
                                            23,904,073          4,532,272
Less:
     Deferred loan costs (fees), net             2,402             (9,152)
     Allowance for loan losses                (157,764)           (98,988)
                                         -------------      -------------

                    Total               $    23,748,711  $      4,424,132
                                         ==============   ===============


                                       10

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATION

General

         References in this discussion to "we", "us",  and"our" refer to Nittany
Bank.  In certain  instances  where  appropriate,  "we",  "us",  and "our" refer
collectively  to Nittany  Financial  Corp. and Nittany Bank.  References in this
discussion to "Nittany" refers to Nittany Financial Corp.

         Nittany 's wholly owned subsidiary,  Nittany 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 (the "Branch Acquisitions").  Prior to October 26, 1998,
our primary activities centered on the formation of Nittany Bank.

On May 24, 1999, Nittany Asset Management, Inc. (the "Asset Management Company")
was formed and  incorporated  as a  Pennsylvania  corporation.  Asset  Managment
Company is a wholly owned  subsidiary  of Nittany and was formed for the purpose
of offering alternative  investment products and investment  management services
to  prospective  customers.  On August 3, 1999,  $10,000  in capital  was raised
through the issuance of common  stock to Nittany,  its sole  shareholder.  Asset
Management  Company intends to begin service operations in the fourth quarter of
1999.

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

Asset/Liability Management

         Our earnings are primarily  dependent on our net interest  income.  Net
interest  income is  affected by (1) the amount of  interest-earning  assets and
interest-bearing  liabilities,  (2) rates of interest earned on interest-earning
assets and rates paid on  interest-bearing  liabilities,  and (3) the difference
("interest rate spread")  between rates of interest  earned on  interest-earning
assets  and  rates  paid  on  interest-bearing   liabilities.   To  measure  the
relationship of  interest-earning  assets and  interest-bearing  liabilities and
their  impact  on our  net  interest  income,  we  maintain  an  asset/liability
management program.

         One of  the  principal  functions  of  our  asset/liability  management
program  is to  monitor  the  level to which the  balance  sheet is  subject  to
interest  rate risk.  The goal of this  program  is to manage  the  relationship
between interest-earning assets and interest-bearing liabilities to minimize the
fluctuations  in the net interest  spread and achieve  consistent  growth in net
interest income during periods of changing  interest rates. We evaluate  various
interest rate analysis scenarios based upon various assumptions.

         Interest rate  sensitivity  is the  relationship  of differences in the
amounts and  repricing  dates of  interest-earning  assets and  interest-bearing
liabilities.  These  differences,  or interest rate repricing  "gap," provide an
indication  to the extent to which net  interest  income  could be  affected  by
changes in interest rates.  During a period of rising interest rates, a positive
gap (when interest-earning assets are greater than interest-bearing liabilities)
is desirable.  A falling  interest rate  environment  would favor a negative gap
position   (when   interest-earning   assets  are  less  than   interest-bearing
liabilities).  However,  not all assets and liabilities with similar  maturities
and repricing opportunities will reprice at the same time or to the same degree.
As a result, our gap position is an indicator of our interest rate risk position
but does not  necessarily  predict the impact on our net interest income given a
change in interest rate levels.


                                       11

<PAGE>



         The following table sets forth our gap position for September 30, 1999,
based upon contractual repricing opportunities or maturities, with variable rate
products  measured to the date of the next  repricing  opportunity as opposed to
contractual maturities.

<TABLE>
<CAPTION>
                                              Less than
                                                1 year     1-5 years   Over 5 Years   Total
                                                ------     ---------   ------------   -----
Interest-earning assets:                                      (Dollars In Thousands)
<S>                                           <C>         <C>         <C>           <C>
  Loans receivable                             $  3,374    $  1,365    $ 19,166      $ 23,905
  Investment securities                           6,979       2,051       8,825        17,855
  Interest bearing deposits with other banks      3,279        --          --           3,279
                                               --------    --------    --------      --------
  Total interest-earning assets                $ 13,632    $  3,416    $ 27,991      $ 45,039
                                               --------    --------    --------      --------

Interest-bearing liabilities
  NOW accounts                                 $  4,819    $   --      $   --        $  4,819
  Money market accounts                          14,036        --          --          14,036
  Savings accounts                                1,451        --          --           1,451
  Certificates of deposit                         5,953       3,869         565        10,387
  FHLB advances                                   8,000         600        --           8,600
                                               --------    --------    --------      --------
  Total interest-bearing liabilities           $ 34,259    $  4,469    $    565      $ 39,293
                                               --------    --------    --------      --------

Excess interest-earning
  assets (liabilities)                         $(20,627)   $ (1,053)   $ 27,426
                                               ========    ========    ========
Cumulative interest-earning assets             $ 13,632    $ 17,048    $ 45,039
Cumulative interest-bearing liabilities          34,259      38,728      39,293
                                               --------    --------   --------
Cumulative gap                                 $(20,627)   $(21,680)   $  5,746
                                               ========    ========   ========
Cumulative interest rate
  sensitivity ratio (1)                            (.40)       (.44)      1.15
                                               ========    ========   ========
</TABLE>

--------
(1)  Cumulative  interest-earning assets divided by cumulative  interest-bearing
     liabilities.



                                       12

<PAGE>



         Average  balances are derived from daily  averages  calculated  for the
nine months ended  September  30, 1999.

<TABLE>
<CAPTION>
                                                For the Nine Months Ended September 30,
                                                ---------------------------------------
                                                            1999
                                                ---------------------------------------
                                                 Average                 Average
                                                 Balance  Interest(1)   Yield/Cost(4)
                                                 -------  -----------   -------------
                                                         (Dollars in thousands)
<S>                                             <C>        <C>            <C>
Interest-earning assets:
  Loans receivable.............................. $14,068    $   816          7.73%
  Investments securities........................  16,436        729          5.91%
  Interest-bearing deposits with other banks....   2,760         80          3.91%
                                                  ------     ------
Total interest-earning assets...................  33,264      1,625          6.52%
                                                              -----
Noninterest-earning assets......................   1,859
Allowance for loan losses.......................   (107)
                                                  -----
Total assets.................................... $35,016
                                                 =======
Interest-bearing liabilities:
  Interest-bearing demand deposits.............. $ 2,975         44          1.96%
  Money market deposits.........................  10,738        393          4.88%
  Savings deposits..............................   1,297         32          3.31%
  Certificates of deposit.......................   6,560        255          5.19%
  Advances from FHLB............................   6,835        241          4.69%
                                                  ------    -------
Total interest-bearing liabilities.............. $28,404        965          4.53%
                                                 -------    -------
Noninterest-bearing liabilities
  Demand deposits............................... $ 1,577
  Other liabilities.............................     219
Stockholders' equity............................   4,815
                                                  ------
Total liabilities and stockholders' liability... $35,016
                                                 =======
Net interest income.............................            $   660
                                                             ======
Interest rate spread (2)........................                             1.99%
Net yield on interest-earning assets(3).........                             2.65%
Ratio of average interest-earning assets to
 average interest-bearing liabilities...........                           117.11%
</TABLE>
---------------
(1)  Interest income and expense are for the period that banking operations were
     in effect.
(2)  Interest rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.
(3)  Net yield on  interest-earning  assets  represents net interest income as a
     percentage of average interest-earning assets.
(4)  Average yields are computed using  annualized  interest  income and expense
     for the periods.


                                       13

<PAGE>



Comparison of Financial Condition

         We continued to experience  strong growth during the nine-month  period
ended September 30, 1999 with total assets  increasing 88.0% to $46,602,000 from
$24,791,000  at December 31, 1998.  This growth was  stimulated  primarily by an
increase in loans,  net of allowance for loan losses,  of  $19,325,000,  and was
funded through  growth in various  deposit  products  totaling  $19,268,000  and
additional Advances from the Federal Home Loan Bank of $3,600,000.

         At the period ended September 30, 1999, total cash and cash equivalents
totaled  $3,619,000 as compared to  $5,929,000 at December 31, 1998.  Management
maintains a level of cash equivalents  which is desirable for meeting the normal
cash flow  requirements  of its customers for the funding of loans and repayment
of deposits.

         Investment  securities  increased $4,704,000 or 35.8% to $17,855,000 at
September 30, 1999 from  $13,151,000 at December 31, 1998. The growth within the
investment portfolio was primarily structured toward mortgage-backed  securities
with varying  maturities between six and twenty-four years. Of the $4,678,000 in
mortgage-backed  securities growth, management has classified $1,711,000 as held
to maturity securities.

         Net loan receivables  increased from $4,424,000 at December 31, 1998 to
$23,749,000  at September 30, 1999.  Of this  increase,  approximately  93.2% or
$18,064,000 was comprised of loans secured by various forms of real estate.  The
real estate lending growth included  $11,174,000 in one-to-four family mortgages
and  $4,475,000 in commercial  real estate.  Additionally,  $2,415,000 was added
during the period in home  equity and  construction  mortgages.  Such  increases
primarily  reflected the economic  health of our market area and the  strategic,
service-oriented  marketing  approach  taken by  management  to meet the lending
needs of the area.  As of September 30, 1999,  we had  outstanding  loan funding
commitments of approximately $2.9 million.

         At  September  30,  1999,  our  allowance  for  loan  losses  increased
approximately $59,000, to $158,000 from $99,000 at December 31, 1998, due to the
overall  increase in the loan portfolio.  Management  continually  evaluates the
adequacy of the allowance for loan losses,  which  encompasses  the overall risk
characteristics of the various portfolio  segments,  past experience with losses
of other  financial  institutions  in our market  area,  the impact of  economic
conditions  on  borrowers  and  other  relevant  factors  that  may  come to the
attention of management. Although we maintain our allowance for loan losses at a
level that we consider to be adequate to provide for the  inherent  risk of loss
in our loan portfolio,  there can be no assurance that future losses will not be
required in future periods.

         Deposits  increased  $19,269,000  or 137.7% to $33,261,000 at September
30, 1999  compared to  $13,992,000  at December 31, 1998.  The growth was spread
among three primary sources: money market accounts of $8,626,000,  time deposits
of $5,998,000 and demand deposits  $4,462,000.  Such growth  resulted  primarily
from the marketing  efforts of promoting the opening of a new community  bank in
the State College Area.

         Advances  from the  Federal  Home Loan  Bank  increased  $3,600,000  to
$8,600,000  at September  30, 1999  compared to $5,000,000 at December 31, 1998.
Management applied  approximately  $3,000,000 of this increase in borrowed funds
to purchase investment securities.  The positive spreads between the earnings on
investments  purchased and the related expenses  incurred on borrowed funds will
provide an additional  source of income.  Of the $8,600,000 of advances from the
Federal Home Loan Bank,

                                       14

<PAGE>



approximately  $8,000,000  is due to mature or reprice  within the next year and
are  comprised of LIBOR- based  floating  rate credit  arrangements.  During the
third  quarter  of 1999,  $517,000  of the  deposit  growth was used to pay down
borrowed funds comprised almost  exclusively of Federal Home Loan Bank advances.

         At September 30, 1999,  accumulated other  comprehensive loss increased
$435,000, to a loss of $466,000 from a loss of $31,000 at December 31, 1998. The
increase in loss resulted from the fluctuation in market value of our investment
in  available  for sale  securities.  See Note 3 to the  consolidated  financial
statements. Because of interest rate volatility, accumulated other comprehensive
loss and stockholders' equity could materially fluctuate for each interim period
and year-end period.  The decrease in market value of the investment  securities
available for sale is considered temporary in nature and will not affect our net
income until the  securities  are sold. We plan to hold these  securities  until
maturity or until the market values of these securities  increase.  Accordingly,
we do not expect,  though there is no  assurance,  that our  investment in these
securities will affect net income in future periods.

Results of Operations

         Net interest  income for the three and nine months ended  September 30,
1999 was $283,000 and $660,000,  respectively.  The interest rate spread for the
three and nine  month  periods  ended  September  30,  1999 was 2.07% and 1.99%,
respectively.  Despite a slight increase in general  interest rate levels during
the period, both interest income and expense were driven by increases in average
balances of interest-earning  assets and  interest-bearing  liabilities.  Of the
$22,966,000  and  $23,545,000  increase in average  interest-earning  assets and
interest-bearing liabilities,  respectively, during the three month period ended
September 30, 1999,  $19,357,000 and  $15,745,000,  were primarily the result of
loan and deposit growth,  respectively.  In comparison,  loan and deposit growth
during the nine  month  period  ended  September  30,  1999 of  $12,392,000  and
$9,826,000,   respectively,   were  the  primary  factors   accounting  for  the
$14,446,000 and  $15,829,000  increase in average  interest-earnings  assets and
interest-bearing liabilities,  respectively. As noted previously, this growth is
a response to the overall economic health of our market area, and the strategic,
service-oriented  marketing  approach  taken by  management to meet the both the
lending and deposit needs of the area.

         Non-interest  income the three and nine month periods ending  September
30, 1999 was $46,000 and $115,000,  respectively.  Non-interest income items are
primarily  comprised of normal service charges and fees on deposits,  along with
fee  income  derived  from  ATM  surcharges.  Such  amounts  have  progressively
increased  during  each  quarter of 1999 as the number of deposit  accounts  and
volume of related transactions have increased.

         Non-interest  expense  for the  three  and nine  month  periods  ending
September  30,  1999  was  $359,000  and  $959,000,  respectively.  Non-interest
expenses  are  comprised  primarily  of  employee   compensation  and  benefits,
occupancy and equipment, data processing, and other non-interest expenses. These
costs are the result of operating a larger organization, including the necessary
investments  in  skilled  employees,  facilities  and  technology;  as  well  as
contracting  the  services  of a third  party  processor  for check and  deposit
activity and transaction  processing costs related to the two ATM's. Included in
other  non-interest  expense for the three and nine months ended  September  30,
1999, is a  non-recurring  charge of $41,000.  This charge relates to additional
expenses incurred in connection with our Branch Acquisitions.




                                       15

<PAGE>



Liquidity and Capital Resources

         Management monitors both Nittany's and Nittany Bank's Total risk-based,
Tier I  risk-based  and Tier I  leverage  capital  ratios  in  order  to  assess
compliance  with regulatory  guidelines.  At September 30, 1999, we exceeded our
minimum risk-based and leverage capital ratio requirements.  Nittany and Nittany
Bank's  Total  risk-based,  Tier I  risk-based  and Tier I leverage  ratios were
12.9%, 12.4%, 8.7% at September 30, 1999.

Year 2000 Readiness

         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  has  viewed  the  year  2000
initiative  as a high priority of the Company and  considers  itself  adequately
prepared for the date change.  We continue 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  have been completed by September 30,
1999.

         Late in 1998,  we  organized a Y2K  Readiness  Committee  comprised  of
senior managers of the bank along with various key personnel in all departments.
Working  through the various stages of Y2K  compliance did not adversely  affect
our business plan for 1999 or delay any planned technology projects.
It has not been necessary for us to hire any external consultants.

         During the  awareness  phase,  we provided the Board of Directors  with
monthly  updates  and  received  input from our board  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 Nittany Bank. Brochures, mailings and statements stuffers were used to
keep customers abreast of the issues related to the year 2000. During the fourth
quarter,  we will continue to work with  customers to prepare and inform them of
the various risk issues associated with the date change.

         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. Our 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.


                                       16

<PAGE>



         The core  processing  system of Nittany Bank was  determined  to be the
most  critical  item that could  affect us. A third  party  service  bureau (the
"service bureau") provides Nittany Bank with all of the material data processing
that could be  affected by this  problem.  The third  party  service  bureau has
provided Nittany Bank with information and testing opportunities that management
deems  to be  adequate  in  supporting  their  claim  of  year  2000  readiness.
Additionally,  the service  bureau has  provided us with a detailed  contingency
plan for Nittany  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.

         As a new operation  opened during the awareness of the year 2000 issue,
Nittany  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  included  extensive  testing  of all  hardware,
software and systems provided by third party vendors.  As of September 30, 1999,
all "mission critical" core applications have been sufficiently  upgraded and/or
replaced.

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

         A Contingency and Business  Resumption Plan was adopted by the Board of
Directors in August 1999.  The most  realistic  risk posed to us is the possible
liquidity risk  associated  with large year-end  customer  withdrawals.  We have
addressed the  contingency  plan for such risk and are prepared to meet expected
cash demands that may occur.  Various agreements and sources of liquidity are in
place,  if needed.  However,  year 2000 issues  could  affect our  liquidity  if
customer withdrawals in anticipation of the year 2000 are greater than expected.
Customer  awareness  continues  to  be a  priority  and  we  expect  to  provide
additional  communication  to our  customers  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  us,  such  as  customers,   vendors,  payment  system  providers,  utility
companies, 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 our financial statements.

Recent Accounting Pronouncements

         In June 1998,  the Financial  Accounting  Standards  Board (the "FASB")
issued  Statement of Financial  Accounting  Standards No. 133,  "Accounting  for
Derivative  Instruments and Hedging  Activities."  ("Statement  No. 133").  This
statement   establishes   accounting  and  reporting  standards  for  derivative
instruments  and for  hedging  activities.  Statement  No.  133  supersedes  the
disclosure  requirements  in  Statements  No.  80,  105 and  119.  Statement  of
Financial Accounting Standards No. 137 deferred the

                                       17

<PAGE>



effective date of this statement to fiscal years  beginning after June 15, 2000.
The adoption of Statement  No. 133 is not expected to have a material  impact on
the financial position or results of Nittany.

         In October  1998,  the FASB issued  Statement of  Financial  Accounting
Standards No. 134 "Accounting for Mortgage-Backed  Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise"
("Statement No. 134").  This statement  amends FASB Statement No. 65 "Accounting
for  Certain   Mortgage   Banking   Activities,"   to  require  that  after  the
securitization  of mortgage  loans held for sale, an entity  engaged in mortgage
banking activities  classify the resulting  mortgage-backed  securities or other
retained  interests  based  on its  ability  and  intent  to sell or hold  those
investments.  Statement  No. 134 is effective  January 1, 1999.  The adoption of
this  statement  is not  expected  to have a  material  impact on the  financial
position or results of operations of Nittany.


                                       18


<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

                  None

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**
                  10.1   Stock Option Plan
                  27     Financial Data Schedule (electronic data filing only)

                  -------------------
                  ** 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


                                       19

<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 hereunto duly authorized.


                                     NITTANY FINANCIAL CORP.


Date: November 10, 1999              By:   /s/David Z. Richards
                                           -------------------------------------
                                           David Z. Richards
                                           President and Chief Executive Officer
                                           (Chief Accounting Officer)