SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K
(Mark One)
[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

For the fiscal year ended         December 31, 1999
                          ------------------------------------

                                     - or -

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

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

SEC File Number 000-23230

                                PHS Bancorp, Inc.
                  ------------------------------------------
             (Exact name of Registrant as specified in its Charter)

              Pennsylvania                                  23-2744266
------------------------------------------------   -----------------------------
(State or other jurisdiction of incorporation            (I.R.S. Employer
or organization)                                         Identification No.)

744 Shenango Road, Beaver Falls, Pennsylvania                15010
----------------------------------------------       -----------------
(Address of principal executive offices)    Zip Code

Registrant's telephone number, including area code:   (724) 846-7300
                                                     -----------------

Securities registered pursuant to Section 12(b) of the Act:      None
                                                             ------------

Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.10 per share
                  --------------------------------------------
                                (Title of class)

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

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements incorporated by reference in Part III to this Form 10-K. [X]

         The aggregate  market value of the voting stock held by  non-affiliates
of the Registrant,  based on the closing price of the Registrant's  Common Stock
as quoted on the Nasdaq  National  Market,  Inc.,  on March 10,  2000,  was $6.4
million.

         As of March 10, 2000 there were  2,626,000  shares  outstanding  of the
Registrant's Common Stock.

     DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions  of the Annual  Report to  Stockholders  for the Fiscal Year Ended
     December 31, 1999. (Parts I, II and IV)
2.   Portions  of  the  Proxy   Statement   for  the  2000  Annual   Meeting  of
     Stockholders. (Part III)

<PAGE>

Forward-Looking Statements

         PHS Bancorp, Inc. (the "Company") may from time to time make written or
oral  "forward-looking  statements",   including  statements  contained  in  the
Company's  filings with the Securities and Exchange  Commission  (including this
annual  report  on Form  10-K  and the  exhibits  thereto),  in its  reports  to
stockholders and in other communications by the Company,  which are made in good
faith by the Company  pursuant to the "safe  harbor"  provisions  of the Private
Securities Litigation Reform Act of 1995.

         These forward-looking statements involve risks and uncertainties,  such
as statements of the Company's plans,  objectives,  expectations,  estimates and
intentions,  that are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's  financial  performance to differ  materially from the
plans,  objectives,  expectations,  estimates and  intentions  expressed in such
forward-looking statements: the strength of the United States economy in general
and  the  strength  of  the  local  economies  in  which  the  Company  conducts
operations;  the effects of, and changes in, trade, monetary and fiscal policies
and laws,  including  interest  rate  policies of the Board of  Governors of the
Federal  Reserve  System,   inflation,   interest  rate,   market  and  monetary
fluctuations;  the timely  development  of and  acceptance  of new  products and
services of the Company and the perceived  overall  value of these  products and
services by users,  including  the  features,  pricing  and quality  compared to
competitors'  products and  services;  the  willingness  of users to  substitute
competitors' products and services for the Company's products and services;  the
success of the  Company in  gaining  regulatory  approval  of its  products  and
services,  when required;  the impact of changes in financial services' laws and
regulations   (including  laws  concerning   taxes,   banking,   securities  and
insurance);  technological changes,  acquisitions;  changes in consumer spending
and saving habits; and the success of the Company at managing these risks.

         The  Company  cautions  that  this  list of  important  factors  is not
exclusive.  The  Company  does  not  undertake  to  update  any  forward-looking
statement,  whether written or oral, that may be made from time to time by or on
behalf of the Company.

                                     PART I

Item 1.  Description of Business
--------------------------------

General

         PHS Bancorp,  Inc. is a bank holding  company formed in connection with
the holding company  reorganization of Peoples Home Savings Bank (the "Bank") in
November 1998. The Company is a subsidiary of PHS Bancorp, MHC, which was formed
in connection with the mutual holding company  reorganization  in July 1997. PHS
Bancorp,  MHC is owned and controlled by the depositors of the Bank and conducts
no  significant  operations  of its own,  other than  holding a majority  of the
Company's stock.  References to the Company  throughout this document  generally
refers to the consolidated entity which includes the main operating company, the
Bank, unless the context indicates otherwise.

Competition

         The Company is one of the many  financial  institutions  servicing  its
market area which  consists of the counties of Beaver,  Lawrence,  Allegheny and
Butler,  Pennsylvania.  The  competition  for deposit  products comes from other
insured financial  institutions such as commercial banks,  thrift  institutions,
credit unions,  and  multi-state  regional  banks in the Company's  market area.
Deposit  competition also includes a number of insurance  products sold by local
agents and investment products such as mutual funds and other securities sold by
local and  regional  brokers.  Loan  competition  varies  depending  upon market
conditions  and  comes  from  other  insured  financial   institutions  such  as
commercial  banks,  thrift  institutions,  credit unions,  multi-state  regional
banks, and mortgage bankers.


<PAGE>

Lending Activities

         Analysis of Loan Portfolio.  The following table sets forth information
concerning the composition of the Company's loan portfolio in dollar amounts and
in percentages of the total loan portfolio as of the dates indicated.
<TABLE>
<CAPTION>
                                                                       At December 31,
                                ------------------------------------------------------------------------------------------
                                        1999               1998              1997             1996             1995
                                -----------------  -----------------  -----------------  --------------  -----------------
                                     $      %           $       %         $        %         $      %        $        %
                                --------- -------  --------  -------  --------  -------  -------- -----  --------  -------
                                                                    (Dollars in Thousands)
<S>                              <C>     <C>       <C>       <C>     <C>       <C>      <C>     <C>      <C>      <C>
Mortgage loans:
  One-to-four family units(1)....  53,184  44.62     49,084    48.88   45,108    44.94    41,279  42.93    36,997   42.16
  Multi-family units.............     388   0.33        554     0.55      217     0.22       353   0.37       865    0.99
  Construction...................   1,614   1.36        326     0.32      304     0.30       150   0.16       259    0.30
  Commercial.....................     541   0.45        941     0.94    1,378     1.37     1,573   1.64     1,934    2.20
                                  ------- ------     ------   ------   ------   ------    ------ ------    ------  ------
Total Mortgage loans.............  55,727  46.76     50,905    50.69   47,007    46.83    43,355  45.10    40,055   45.65
Commercial loans.................   4,728   3.97      3,617     3.60    2,464     2.46     1,967   2.04     1,442    1.64
Consumer loans:
  Consumer credit line...........   5,547   4.65      5,288     5.27    5,468     5.45     5,250   5.46     5,521    6.29
  Automobile.....................  48,026  40.29     36,618    36.47   39,569    39.42    39,215  40.79    34,710   39.55
  Other(2).......................   5,161   4.33      3,990     3.97    5,859     5.84     6,352   6.61     6,005    6.84
                                  ------- ------     ------   ------   ------   ------    ------ ------    ------  ------
Total consumer loans.............  58,734  49.27     45,896    45.71   50,896    50.71    50,817  52.86    46,236   52.68

Lease financing receivables......      --     --         --       --       --       --         4     --        26    0.03
                                  ------- ------     ------   ------   ------   ------    ------ ------    ------  ------
  Total loans.................... 119,189 100.00    100,418   100.00  100,367   100.00    96,143 100.00    87,759  100.00
                                          ======              ======            ======            =====            ======
Less:
  Loans in process...............     707               219               370                105              263
  Deferred loan fees.............  (1,623)           (1,002)           (1,088)            (1,169)          (1,108)
  Allowance for losses on loans..   1,360             1,287             1,394              1,434            1,274
                                    -----             -----             -----              -----            -----
    Total loans, net............. 118,745            99,914            99,691             95,773           87,330
                                  =======            ======            ======             ======           ======

</TABLE>
--------
(1)  Includes home equity and junior lien mortgage loans.
(2)  Consists primarily of student loans held for sale and secured and unsecured
     personal loans.

                                       2
<PAGE>
         Loan Maturity  Tables.  The following  table sets forth the maturity of
the Company's  loan  portfolio at December 31, 1999.  The table does not include
prepayments  or  scheduled  principal  repayments.   Prepayments  and  scheduled
principal repayments on loans totalled $48.5 million for the year ended December
31,  1999.  Adjustable-rate  mortgage  loans  are  shown  as  maturing  based on
contractual maturities.

<TABLE>
<CAPTION>
                          1-4 Family     Other        Commercial
                          Real Estate    Real Estate  Loans and
                           Mortgages     Mortgages    Leases      Consumer       Total
                           ---------     ----------   -------     --------       -----
                                                   (Dollars in Thousands)
<S>                        <C>            <C>         <C>         <C>          <C>
Nonperforming ..........   $     214      $    --     $    --     $     283    $     497
                           =========      =========   =========   =========    =========

Amounts Due:
  Less than 1 year .....       1,763(1)           6         267       6,720        8,756

After 1 year:
 1 to 3 years ..........       2,952              4         737      12,071       15,764
 3 to 5 years ..........       7,669             10         830      27,724       36,233
 5 to 10 years .........      13,443            764         991      10,659       25,857
 Over 10 years .........      28,757            145       1,903       1,277       32,082
                           ---------      ---------   ---------   ---------    ---------
Total due after one year      52,821            923       4,461      51,731      109,936
                           ---------      ---------   ---------   ---------    ---------
Total amount due .......      54,798            929       4,728      58,734      119,189
                           ---------      ---------   ---------   ---------    ---------
Less:
Allowance for losses
   on loans ............         236             30         122         972        1,360
 Loans in process ......         707           --          --          --            707
 Deferred loan fees ....          94           --          --        (1,717)      (1,623)
                           ---------      ---------   ---------   ---------    ---------
  Loans receivable, net.   $  53,761      $     899   $   4,606   $  59,479    $ 118,745
                           =========      =========   =========   =========    =========

</TABLE>

-----------------------
(1)      Includes   $1,614,000  in  construction  loans  on  one-to-four  family
         residences.  Construction  loans are written as permanent  loans at the
         loan's  conception,  with  a  specified  period  of  time  to  complete
         construction.


                                       3
<PAGE>

         The following table sets forth the dollar amount of all loans due after
December  31,  2000,  which have  pre-determined  interest  rates and which have
floating or adjustable interest rates.

                                                 Floating or
                                 Fixed Rates  Adjustable Rates      Total
                                 -----------  ----------------      -----
                                               (In Thousands)
One-to-four family units ....      $ 51,069        $  1,752        $ 52,821
Other real estate mortgages..           923              --             923
Commercial loans and leases..         2,425           2,036           4,461
Consumer ....................        48,968           2,763          51,731
                                   --------        --------        --------
    Total ...................      $103,385        $  6,551        $109,936
                                   ========        ========        ========

         One-to-four Family Lending. The Company originates fixed rate-loans for
terms of 15 to 30 years and also offers a one-year  adjustable rate loan with an
interest  rate indexed to the  one-year  Treasury,  with a cap on interest  rate
increases  of 2% per  year  and 6% over  the  life  of the  loan.  The  original
contractual  loan  repayment  period on  residential  mortgage  loans  generally
average 20 years.  However, the average life based upon the Company's experience
has been approximately 10 to 12 years.

         Pursuant to underwriting  guidelines  adopted by the Board of Directors
the Company's  maximum loan to value ratio is 95% of the lower of sales price or
appraised value.  Private mortgage insurance must be obtained on all residential
loans for which loan-to-value ratios exceed 80%. Property appraisals on the real
estate and improvements securing  single-family  residential loans are made by a
qualified independent appraisers approved by the Board of Directors.  Appraisals
are performed in  accordance  with  applicable  regulations  and  policies.  The
Company obtains title insurance policies on all first mortgage real estate loans
originated.

         The majority of the Company's one- to four-family residential loans are
underwritten  in  accordance  with the Federal  Home Loan  Mortgage  Corporation
("FHLMC")  or Federal  National  Mortgage  Association  ("FNMA")  guidelines  to
facilitate their sale in the secondary market (although the Bank usually retains
residential  mortgages  for  portfolio).  Substantially  all  of  the  Company's
residential mortgages include "due on sale" clauses, which are provisions giving
the Bank the right to declare a loan  immediately  payable if the borrower sells
or otherwise transfers an interest in the property to a third party.

         Included in the Company's one- to  four-family  loan portfolio are home
equity loans and second  mortgage  loans.  Second  mortgages are generally fixed
rate with interest  rates based on market  rates.  In most  instances,  the Bank
holds the first lien on a second  mortgage.  At December  31,  1999,  such loans
totaled $22.5 million, or 18.9% of the Company's total loan portfolio.

         Multi-Family  Residential  Real Estate.  Multi-family  residential real
estate loans are permanent loans primarily secured by apartment  buildings.  The
largest multi-family  residential real estate loan was secured by several rental
properties located in Beaver County,  Pennsylvania,  with an outstanding balance
of $374,000 at December 31, 1999. Multi-family residential real estate loans can
be  originated  in amounts  up to 75% of the  appraised  value of the  mortgaged
property.  The  Company  makes  both  adjustable  and

                                       4
<PAGE>

fixed-rate multi-family residential real estate loans. The adjustable rate loans
have terms of up to 15 years,  the rate of  interest  is tied to the Wall Street
Journal prime rate.

         Construction.  The Company will occasionally originate loans to finance
the  construction  of  one-  to  four-family  residences.   Constructions  loans
typically are originated directly to the owners of pre-sold single-family houses
that are being built, and generally  convert to a permanent loan upon completion
of construction.  Construction loans require payment of interest only during the
construction  period and are offered at rates at a premium to the Company's one-
to four-family permanent mortgage loan rates.

         Commercial  Real Estate.  Commercial  real estate  loans are  permanent
loans secured by improved property such as office buildings,  retail stores, and
other  non-residential  buildings.  Essentially  all originated  commercial real
estate loans are within the Bank's  market  area.  The largest  commercial  real
estate  loan  was  secured  by a  medical  office  building  in  Beaver  County,
Pennsylvania,  with a balance of $243,000 on December 31, 1999.  Commercial real
estate loans can be originated  in amounts up to 75% of the  appraised  value of
the  mortgaged  property.  The  Company  makes both  adjustable  and  fixed-rate
commercial  real  estate  loans.  Commercial  real  estate  loans are  primarily
adjustable  rate loans  with terms of up to 15 years,  with the rate tied to the
Wall Street Journal prime rate.

         Commercial  Loans.  Subject  to  the  restrictions   contained  in  the
Pennsylvania Banking Code of 1965, as amended,  federal laws and the regulations
promulgated  thereunder,  the Company is authorized to make secured or unsecured
commercial  business loans for corporate and  agricultural  purposes,  including
issuing letters of credit.

         Commercial business loans generally are deemed to entail  significantly
greater risk than that which is involved with real estate lending. The repayment
of commercial business loans typically is dependent on the successful operations
and income stream of the borrower.  Such risks can be significantly  affected by
economic  conditions.   In  addition,   commercial  lending  generally  requires
substantially  greater  oversight  efforts  compared to residential  real estate
lending.

         Commercial  business  loans are generally  provided to various types of
closely-held  businesses  located  principally  in the Company's  primary market
area. The Company's commercial business loans may be structured as term loans or
as revolving  lines of credit.  Commercial  business term loans  generally  have
terms of seven years or less and interest  rates which float in accordance  with
the prime rate,  although the Company also originates  commercial business loans
with fixed rates of interest.  The Company's commercial term loans generally are
secured by equipment, machinery or other corporate assets. In addition, the Bank
generally  obtains personal  guarantees from the principals of the borrower with
respect to all commercial business loans.

         Consumer  Loans.  Consumer loans are originated in the Company's  local
market area and generally have maturities of one to seven years.  Consumer loans
are  generally  collateralized  by  personal  property  (primarily  new and used
automobiles)  or secondary  liens on real estate.  Unsecured  consumer loans are
only made up to  $20,000.  The  Company's  consumer  loans also  include  credit
extended pursuant to VISA credit cards issued by the Company,  student loans and
secured and unsecured personal loans.

         Consumer loans are shorter term and generally  contain higher  interest
rates than residential loans.  Management  believes the consumer loan market has
been helpful in  improving  its spread  between  average loan yield and costs of
funds and at the same time  improved the matching of its rate  sensitive  assets
and liabilities.

                                       5
<PAGE>

         The largest category of the Company's  consumer loan portfolio is loans
secured by new and used automobiles.  Automobile loans amounted to $48.0 million
or 81.8% of the Company's  total  consumer loan  portfolio at December 31, 1999.
These  loans  have  terms  of up to  six  years,  depending  on  the  age of the
automobile. The Company requires that the vehicles be insured and the Company be
listed as the loss  payee on the  insurance  policy.  These  loans are  obtained
primarily  indirectly  by the Company  through a network of over 30 new and used
car dealers located within the Company's  primary market area with whom the Bank
has ongoing  relationships.  Dealers are selected based upon their stability and
location,  among  other  factors.  Each loan is  individually  underwritten  and
processed by the Company pursuant to the Company's  underwriting  policies prior
to its  origination  of the loan.  All borrower  information is confirmed by the
Company before an automobile loan is approved.  The dealer  generally  retains a
reserve on each loan  originated.  Indirect loans are generally made under terms
which do not allow the Company to seek  recourse from the dealer in the event of
default.

         The officer charged with overseeing the automobile  lending program has
authority  to  approve  loans up to  $50,000.  Any loans  over  $50,000  must be
approved by the President or the Board of Directors.

         Consumer loans entail greater risks than one-to four-family residential
mortgage  loans,  particularly  consumer  loans  secured by rapidly  depreciable
assets such as  automobiles  or loans that are  unsecured.  In such  cases,  any
repossessed  collateral for a defaulted loan may not provide an adequate  source
of  repayment  of  the  outstanding  loan  balance,  since  there  is a  greater
likelihood  of  damage,  loss  or  depreciation  of the  underlying  collateral.
Further,  consumer loan  collections are dependent on the borrower's  continuing
financial  stability,  and therefore are more likely to be adversely affected by
job loss, divorce,  illness or personal bankruptcy.  Finally, the application of
various  Federal and state laws,  including  Federal  and state  bankruptcy  and
insolvency  laws,  may limit the amount  which can be recovered on such loans in
the event of a default.  Management  seeks to minimize the risks associated with
automobile  lending  by,  among other  things,  maintaining  seasoned  employees
knowledgeable  with this type of  lending,  underwriting  loans  pursuant to the
Company's  underwriting  standards,  establishing  relationships with automobile
lenders who submit loan  applications,  and  limiting  business  with any single
dealer to no more than 25% of the outstanding automobile loan portfolio.

         The underwriting  standards  employed by the Company for consumer loans
include a determination  of the applicant's  credit history and an assessment of
the  applicant's  ability  to meet  existing  obligations  and  payments  on the
proposed loan. The stability of the applicant's monthly income may be determined
by   verification  of  gross  monthly  income  from  primary   employment,   and
additionally  from any  verifiable  secondary  income.  Creditworthiness  of the
applicant is of primary  consideration;  however,  the underwriting process also
includes a comparison of the value of the collateral in relation to the proposed
loan amount.

         Loans to One  Borrower.  Under  Pennsylvania  and federal law,  savings
banks have, subject to certain exemptions,  lending limits to one borrower in an
amount equal to 15% of the  institution's  capital  accounts.  An  institution's
capital  account  includes  the  aggregate of all  capital,  surplus,  undivided
profits, capital securities and general reserves for loan losses. As of December
31,  1999,  the  Company's  largest  aggregation  of loans to one  borrower  was
$677,000, consisting of secured loans to a commercial borrower in Beaver County,
which was within the Bank's legal  lending limit to one borrower of $3.8 million
at such date.  At December  31,  1999,  these loans were current and at a market
rates of interest.

         Loan  Solicitation  and  Processing.  The Company's  primary  source of
mortgage loan  applications  is referrals from existing or past  customers.  The
Company also solicits loan applications  from real estate

                                       6
<PAGE>

brokers,  contractors,  and call-ins  and  walk-ins to its offices.  The Company
advertises in local newspapers for first mortgage and home equity loans.

         Upon receipt of any loan  application  from a prospective  borrower,  a
credit  report and  verifications  are ordered to confirm  specific  information
relating to the loan  applicant's  employment,  income and credit  standing.  An
appraisal of the real estate  intended to secure the proposed loan is undertaken
by an independent fee appraiser.  In connection with the loan approval  process,
the  Bank's  loan  officers  analyze  the  loan  applications  and the  property
involved.  All  residential,   home  equity,   multi-family,   construction  and
commercial  real estate loans are processed at the Company's  main office by the
Company's loan servicing department.  The Board of Directors approves all loans,
with the exception of home equity (less than $50,000) and consumer loans.

         Loan applicants are promptly notified of the decision of the Company by
a letter  setting forth the terms and  conditions of the decision.  If approved,
these terms and conditions include the amount of the loan,  interest rate basis,
amortization  term,  a brief  description  of real estate to be mortgaged to the
Company,  tax escrow and the notice of requirement  of insurance  coverage to be
maintained to protect the Company's interest.  The Bank requires title insurance
on first  mortgage  loans  and fire and  casualty  insurance  on all  properties
securing loans, which insurance must be maintained during the entire term of the
loan.

         Loan  Commitments.  The Company,  generally grants  commitments to fund
fixed-rate  single-family  mortgage  loans  for  periods  of up to 90  days at a
specified  term and  interest  rate.  At  December  31,  1999,  total  aggregate
commitments to extend credit were $18.7 million.


                                       7
<PAGE>

Non-performing Loans and Problem Assets.

         Non-performing  Assets. The following table sets forth information with
respect to the Company's non-performing assets for the periods indicated. During
the periods indicated the Company had no restructured loans.
<TABLE>
<CAPTION>
                                                                               At December 31,
                                                               ----------------------------------------------
                                                                 1999     1998      1997      1996      1995
                                                                -----   ------    ------    ------    ------
                                                                            (Dollars in Thousands)
<S>                                                            <C>     <C>       <C>       <C>       <C>
Loans accounted for on a non-accrual basis:
Mortgage loans:
  Loans secured by 1-4 dwelling units .......................   $ 214   $  204    $  347    $  769    $  668
  All other mortgage loans ..................................      --       --        --        --        63
Non-mortgage loans:
  Commercial ................................................      --       20        33        17        --
  Consumer ..................................................     210      168       377       367       251
                                                                -----   ------    ------    ------    ------
Total .......................................................   $ 424   $  392    $  757    $1,153    $  982
                                                                =====   ======    ======    ======    ======
Accruing loans which are contractually
 past due 90 days or more:
Mortgage loans:
  Loans secured by 1-4 dwelling units .......................   $  --   $   10    $   61    $   65    $   49
  All other mortgage loans ..................................      --       --        --        --       192
Non-mortgage loans:
  Commercial and leases .....................................      --       --        --        --         5
  Consumer ..................................................      73      125        52        65        80
                                                                -----   ------    ------    ------    ------
Total .......................................................   $  73   $  135    $  113    $  130    $  326
                                                                =====   ======    ======    ======    ======
Total non-performing loans ..................................   $ 497   $  527    $  870    $1,283    $1,308
                                                                =====   ======    ======    ======    ======

Real estate owned ...........................................   $  --   $   --    $   33    $   42    $  275
                                                                =====   ======    ======    ======    ======
Total non-performing assets .................................   $ 497   $  527    $  903    $1,325    $1,583
                                                                =====   ======    ======    ======    ======
Total non-performing loans to
  total loans ...............................................    0.42%    0.52%     0.87%     1.33%     1.49%
                                                                 ====     ====      ====      ====      ====
Total non-accrual and accrual loans to
  total assets ..............................................    0.19%    0.22%     0.40%     0.63%     0.66%
                                                                 ====     ====      ====      ====      ====
Total non-performing assets to total assets .................    0.19%    0.22%     0.41%     0.66%     0.80%
                                                                 ====     ====      ====      ====      ====
</TABLE>
                                        8
<PAGE>

         During the year  ended  December  31,  1999,  approximately  $54,000 of
interest would have been recorded on loans accounted for on a non-accrual  basis
if such loans had been current according to the original loan agreements for the
entire period. These amounts were not included in the Bank's interest income for
the respective periods.  The amount of interest income on loans accounted for on
a non-accrual  basis that was included in income for the year ended December 31,
1999 amounted to approximately $30,000.

         Loans are reviewed on a regular  basis and are placed on a  non-accrual
status when, in the opinion of management, the collection of additional interest
is  doubtful.  Interest  accrued  and  unpaid  at the time a loan is  placed  on
non-accrual status is charged against interest income.  Subsequent  payments are
either  applied to the  outstanding  principal  balance or  recorded as interest
income,  depending on the assessment of the ultimate collectibility of the loan.
At December 31, 1999, the Company had  approximately  $1.0 million of loans that
were 30-89 days delinquent.

         Classified   Assets.   Management,   in  compliance   with   regulatory
guidelines,  has instituted an internal loan review  program,  whereby loans are
classified as special  mention,  substandard,  doubtful or loss.  When a loan is
classified  as  substandard  or doubtful  management  is required to establish a
general  valuation  reserve for loan losses in an amount that is deemed prudent.
General  allowances  represent loss  allowances  which have been  established to
recognize inherent risk associated with lending  activities,  but which,  unlike
specific allowances,  have not been allocated to particular problem assets. When
management  classifies  a loan as a loss asset,  a reserve  equal to 100% of the
loan balance is required to be established or the loan is to be charged-off.

         An asset is considered "substandard" if it is inadequately protected by
the paying capacity and net worth of the obligor or the collateral  pledged,  if
any.   "Substandard"   assets  include  those  characterized  by  the  "distinct
possibility"  that the  insured  institution  will  sustain  "some  loss" if the
deficiencies are not corrected.  Assets classified as "doubtful" have all of the
weaknesses   inherent  in  those  classified   "substandard,"   with  the  added
characteristic  that the weaknesses  present make  "collection or liquidation in
full," "highly  questionable and improbable," on the basis of currently existing
facts, conditions,  and values. Assets classified as "loss" are those considered
"uncollectible"  and of such  little  value  that  their  continuance  as assets
without the  establishment  of a specific loss reserve is not warranted.  Assets
which do not currently expose the insured  institution to a sufficient degree of
risk to  warrant  classification  in one of the  aforementioned  categories  but
possess  credit  deficiencies  or  potential   weaknesses  are  required  to  be
designated "special mention" by management.

         Management's  evaluation  of  the  classification  of  assets  and  the
adequacy  of the  reserve  for loan losses is reviewed by the Board on a regular
basis and by the regulatory agencies as part of their examination process.

         At  December  31,  1999,  the Company  had total  classified  assets of
$788,000,  of which $742,000,  $35,000 and $11,000 were considered  substandard,
doubtful,  and loss,  respectively.  Special mention assets totaled  $422,000 at
December 31, 1999.

         Allowance  for Loan Losses.  It is  management's  policy to provide for
losses on unidentified loans in its loan portfolio.  A provision for loan losses
is charged to  operations  based on  management's  evaluation  of the  potential
losses that may be incurred in the Company's loan  portfolio.  Such  evaluation,
which  includes a review of all loans of which full  collectibility  of interest
and principal may not be reasonably  assured,  considers the Company's past loan
loss experience,  known and inherent risks in the

                                       9
<PAGE>

portfolio,  adverse  situations that may affect the borrower's ability to repay,
estimated value of any underlying collateral, and current economic conditions.

         Management  will continue to review the loan portfolio to determine the
extent,  if any,  to which  further  additional  loss  provisions  may be deemed
necessary.  There can be no  assurance  that the  allowance  for losses  will be
adequate  to cover  losses  which may in fact be realized in the future and that
additional provisions for losses will not be required.

         The  following  table  sets forth  certain  information  regarding  the
Company's allowances for loan losses at the dates indicated.

<TABLE>
<CAPTION>
                                                       For the Year Ended December 31,
                                         --------------------------------------------------------
                                           1999        1998        1997        1996         1995
                                         --------    --------    --------    --------    --------
                                                            (Dollars in Thousands)
<S>                                     <C>         <C>         <C>         <C>         <C>
Total loans outstanding ..............   $119,189    $100,418    $100,367    $ 96,143    $ 87,759
                                         ========    ========    ========    ========    ========
Average loans outstanding ............   $111,050    $ 99,253    $ 99,594    $ 92,834    $ 87,209
                                         ========    ========    ========    ========    ========

Allowance balances (at beginning of
  period) ............................   $  1,287    $  1,394    $  1,434    $  1,274    $  1,085
Add provisions charged to operations .        410         365         555         455         370
Less Charge-offs:
  Residential ........................         15          23         119          12           1

  Commercial real estate .............         --          --          --          21          --
  Commercial business loans ..........         --           9          --           4          --
  Consumer ...........................        373         495         533         270         208
                                         --------    --------    --------    --------    --------
     Sub-total .......................        388         527         652         307         209
                                         --------    --------    --------    --------    --------
Add: Recoveries
   Residential .......................          1          12           8           1          --
   Commercial real estate ............         --          --           6          --          --
   Commercial business loans .........         --          --          --          --          --
   Consumer ..........................         50          43          43          11          28
                                         --------    --------    --------    --------    --------
     Sub-total .......................         51          55          57          12          28
                                         --------    --------    --------    --------    --------
Net loans charged-off ................        337         472         595         295         181
                                         --------    --------    --------    --------    --------
Allowance balance, at end of period ..   $  1,360    $  1,287    $  1,394    $  1,434    $  1,274
                                         ========    ========    ========    ========    ========
Allowance for loan losses as a percent
  of total loans outstanding .........       1.14%       1.28%       1.39%       1.49%       1.45%
                                         ========    ========    ========    ========    ========
Net loans charged-off as a percent of
  average loans outstanding ..........       0.30%       0.48%       0.60%       0.32%       0.21%
                                         ========    ========    ========    ========    ========
</TABLE>

                                       10
<PAGE>



Analysis of the Allowance for Loan Losses

         The following  table sets forth the breakdown of the allowance for loan
losses by loan category and the percent of loans in each category to total loans
receivable  for the periods  indicated.  The allocation of the allowance to each
category is not  necessarily  indicative  of future losses and does not restrict
the use of the allowances to absorb losses in any category.


<TABLE>
<CAPTION>
                                                                December 31,
               ---------------------------------------------------------------------------------------------------------------------
                      1999                 1998                     1997                    1996                      1995
               ---------------------  ---------------------  ----------------------  ----------------------    ---------------------
                      % of loans in          % of loans in           % of loans in            % of loans in           % of loans in
                      each category          each category           each category            each category           each category
               Amount to total loans  Amount to total loans  Amount  to total loans  Amount   to total loans   Amount to total loans
               ------ --------------  ------ --------------  ------  --------------  ------   --------------   ------ --------------
                                                             (Dollars in Thousands)
<S>           <C>        <C>         <C>          <C>       <C>         <C>          <C>           <C>       <C>           <C>
Real
 estate
 mortgage
 loans........ $  266     46.76%      $  285       50.69%    $  397      46.83%       $ 462         45.09%    $  419        45.64%

Commercial
 business
 loans and
 lease
 financing
 receivables..    122      3.97           72        3.60         71       2.46           61          2.05         65         1.67

Consumer loans    972     49.27          930       45.71        926      50.71          911         52.86        790        52.69
                -----    ------        -----      ------      -----     ------        -----        ------      -----       ------

               $1,360    100.00%      $1,287      100.00%    $1,394     100.00%      $1,434        100.00%    $1,274       100.00%
                =====    ======        =====      ======      =====     ======        =====        ======     ======       ======
</TABLE>



                                       11
<PAGE>
Investment Activities

         The Company is required under federal regulations to maintain a minimum
amount of liquid assets which may be invested in specified short-term securities
and certain other investments.  The level of liquid assets varies depending upon
several  factors,  including:  (i) the yields on investment  alternatives,  (ii)
management's  judgment as to the  attractiveness of the yields then available in
relation to other  opportunities,  (iii) expectation of future yield levels, and
(iv)  management's  projections as to the short-term demand for funds to be used
in loan  origination  and other  activities.  Investment  securities,  including
mortgage-backed  securities,  are classified at the time of purchase, based upon
management's  intentions  and  abilities,  as  securities  held to  maturity  or
securities  available  for sale.  Debt  securities  acquired with the intent and
ability to hold to maturity are classified as held to maturity and are stated at
cost and adjusted for  amortization of premium and accretion of discount,  which
are  computed  using the level yield method and  recognized  as  adjustments  of
interest income.  All other debt securities are classified as available for sale
to serve principally as a source of liquidity. At December 31, 1999, the Company
had no securities  of a single  issuer,  excluding  U.S.  government  and agency
securities, that exceeded 10% of stockholder's equity.

         Current  regulatory  and  accounting  guidelines  regarding  investment
securities  (including  mortgage  backed  securities)  require  the  Company  to
categorize  securities as "held to maturity," "available for sale" or "trading."
As of December 31, 1999, Company had securities classified as "held to maturity"
and  "available  for sale" in the  amount of $73.7  million  and $65.0  million,
respectively  and  had  no  securities   classified  as  "trading."   Securities
classified as "available for sale" are reported for financial reporting purposes
at the fair  market  value with net  changes in the market  value from period to
period included as a separate  component of stockholders'  equity, net of income
taxes. At December 31, 1999, the Registrant's  securities available for sale had
an  amortized  cost of $66.4  million  and market  value of $65.0  million.  The
changes in market value in the Company's  available for sale  portfolio  reflect
normal  market  conditions  and vary,  either  positively or  negatively,  based
primarily on changes in general levels of market  interest rates relative to the
yields of the portfolio. Additionally, changes in the market value of securities
available  for sale do not  affect the  Company's  income nor does it affect the
Bank's regulatory capital requirements or its loan-to-one borrower limit.

         At December 31, 1999, the Company's investment portfolio policy allowed
investments in instruments  such as: (i) U.S.  Treasury  obligations,  (ii) U.S.
federal agency or federally sponsored agency obligations,  (iii) local municipal
obligations,  (iv) mortgage-backed  securities,  (v) banker's acceptances,  (vi)
certificates  of  deposit,  and (vii)  investment  grade  corporate  bonds,  and
commercial paper. The board of directors may authorize additional investments.

         As a  source  of  liquidity  and  to  supplement  Registrant's  lending
activities,   the  Registrant   has  invested  in  residential   mortgage-backed
securities.  Mortgage-backed  securities  can serve as collateral for borrowings
and, through repayments,  as a source of liquidity.  Mortgage-backed  securities
represent a participation  interest in a pool of  single-family or other type of
mortgages.  Principal  and  interest  payments  are  passed  from  the  mortgage
originators, through intermediaries (generally quasi-governmental agencies) that
pool and repackage the  participation  interests in the form of  securities,  to
investors,  like us. The  quasi-governmental  agencies  guarantee the payment of
principal  and interest to investors  and include the Federal Home Loan Mortgage
Corporation  ("FHLMC"),  Government National Mortgage Association ("GNMA"),  and
Federal National Mortgage Association ("FNMA").

         Mortgage-backed  securities  typically are issued with stated principal
amounts.  The  securities  are backed by pools of mortgages that have loans with
interest  rates that are  within a set range and have

                                       12
<PAGE>

varying  maturities.  The underlying pool of mortgages can be composed of either
fixed rate or adjustable  rate mortgage  loans.  Mortgage-backed  securities are
generally  referred to as mortgage  participation  certificates  or pass-through
certificates.  The interest rate risk  characteristics of the underlying pool of
mortgages  (i.e.,  fixed rate or adjustable  rate) and the prepayment  risk, are
passed on to the certificate holder. The life of a mortgage-backed  pass-through
security is equal to the life of the underlying  mortgages.  Expected maturities
will differ from contractual  maturities due to scheduled repayments and because
borrowers  may have the  right to call or  prepay  obligations  with or  without
prepayment penalties. Mortgage-backed securities issued by FHLMC, GNMA, and FNMA
make up a majority of the pass-through certificates market.

         The Company  also  invests in  mortgage-related  securities,  primarily
collateralized mortgage obligations ("CMOs"), issued or sponsored by GNMA, FNMA,
FHLMC,  as well as  private  issuers.  CMOs  are a type  of debt  security  that
aggregates  pools  of  mortgages  and  mortgage-backed  securities  and  creates
different  classes of CMO securities  with varying  maturities and  amortization
schedules as well as a residual  interest with each class having  different risk
characteristics.  The cash  flows from the  underlying  collateral  are  usually
divided into "tranches" or classes whereby  tranches have descending  priorities
with  respect to the  distribution  of principal  and interest  repayment of the
underlying  mortgages and mortgage backed  securities as opposed to pass through
mortgage  backed  securities  where cash flows are  distributed  pro rata to all
security  holders.  Unlike  mortgage  backed-securities  from which cash flow is
received and prepayment risk is shared pro rata by all securities holders,  cash
flows from the mortgages and mortgage backed securities underlying CMOs are paid
in  accordance  with a  predetermined  priority  to  investors  holding  various
tranches of such  securities or obligations.  A particular  tranche or class may
carry  prepayment  risk  which  may be  different  from  that of the  underlying
collateral  and other  tranches.  CMOs  attempt to  moderate  reinvestment  risk
associated  with   conventional   mortgage-backed   securities   resulting  from
unexpected prepayment activity.


                                       13
<PAGE>

         The  following  table sets forth the  carrying  value of the  Company's
investment  securities  held to maturity,  securities  available for sale,  FHLB
stock,  and interest  bearing  deposits and overnight  investments  at the dates
indicated.

                                                December 31,
                                       -----------------------------
                                          1999     1998       1997
                                          ----     ----       ----
                                              (In Thousands)
Investment and mortgage-backed
securities held to maturity:
  U.S. Government Agency securities ... $12,554   $13,927   $ 6,998
  Corporate obligations ...............      --     2,981       999

  Obligations of States and Political
     Subdivisions .....................   2,986     1,238     2,017
  Mortgage-backed securities ..........  44,141    48,287    40,234
                                        -------   -------   -------
     Total investment and
       mortgage-backed securities .....  59,681    66,433    50,248
  Interest-bearing deposits ...........  11,417     9,332     3,308
  FHLB stock ..........................   2,615     1,545     1,020
                                        -------   -------   -------
     Total investments ................ $73,713   $77,310   $54,576
                                        =======   =======   =======


                                                December 31,
                                       -----------------------------
                                          1999     1998       1997
                                          ----     ----       ----
                                              (In Thousands)
Investment and mortgage-backed
securities available for sale:
  U.S. Government Treasury securities.. $ 4,959   $ 9,132   $ 6,087
  U.S. Government Agency securities....   6,000        --        --
  Corporate obligations ...............      --        --        49

  Real estate mortgage investment
    conduits ..........................      59       102       518
  Obligations of States and Political
    Subdivisions ......................  16,577    15,963    17,599
  Mortgage-backed securities ..........  37,426    32,878    30,159
                                        -------   -------   -------
     Total ............................ $65,021   $58,075   $54,412
                                        =======   =======   =======

                                       14

<PAGE>
         Investment Portfolio Maturities. The following table sets forth certain
information   regarding  the  carrying  values,   weighted  average  yields  and
maturities of the Company's investment and mortgage-backed  securities portfolio
at December 31, 1999. The table does not include  interest  bearing  deposits or
FHLB stock.

<TABLE>
<CAPTION>
                                                                                                        Total Investment and
                        One Year or Less    One to Five Years Five to Ten Years More than Ten Years   Mortgage-backed Securities
                        -----------------  ----------------- -----------------  ------------------- --------------------------------
                        Carrying  Average  Carrying Average  Carrying Average   Carrying Average      Carrying Average     Market
                         Value    Yield(1)   Value  Yield(1)  Value   Yield(1)   Value   Yield(1)     Value    Yield(1)    Value
                         -----    --------   -----  --------  -----   --------   -----   --------     -----    --------    -----
                                                            (Dollars in Thousands)
<S>                     <C>       <C>     <C>       <C>     <C>         <C>    <C>        <C>       <C>        <C>      <C>
Available for Sale:
U.S. Government
  Treasury
  Obligations.........   $2,999     5.51%  $1,960    5.30%   $    --       --%     $ --      --%     $ 4,959    5.43%    $ 4,959

U. S. Government
  Agency securities...       --       --       --      --      6,000     7.20       --       --        6,000    7.20       6,000
Obligations of
  states and
  political               2,712     9.58    2,773    8.65      1,932     8.48     9,160    7.92       16,577    8.38      16,577
  subdivisions........
Real estate
  investment
  conduits............       --       --       --      --         --       --        59    6.31           59    6.31          59
Mortgage-backed
  securities..........       --       --       23    7.85      2,459     7.72    34,944    7.01       37,426    7.06      37,426
                          -----     ----     ----    ----     ------     ----    ------    ----       ------    ----      ------
  Total...............   $5,711     7.44%  $4,756    7.27%   $10,391     7.56%  $44,163    7.20%     $65,021    7.28%    $65,021
                          =====     ====    =====    ====     ======     ====    ======    ====       ======    ====      ======

Held to Maturity:
Held to Maturity:
U. S. Government
  Agency securities...       --       --%  $8,600    6.06%   $ 1,385     5.95%  $ 2,569    5.95%     $12,554    6.03%    $12,447
Obligations of states
  and political              --       --       --      --        245     7.07     2,741    7.67        2,986    7.62       2,822
  subdivisions........
Mortgage-backed
  securities..........       --       --      --         --       --        --   44,141    6.81       44,141    6.81      42,264
                           ----    -----    ----     ------     ----    ------   ------    ----       ------    ----      ------

  Total...............   $   --       --%  $8,600    6.06%   $ 1,630     6.12%  $49,451    6.81%     $59,681    6.69%    $57,533
                         ======    =====   ======    ====    =======     ====   =======    ====      =======    ====     =======
</TABLE>

---------------------
(1)  Interest  income is shown on a fully tax  equivalent  basis  assuming a 34%
     federal income tax rate.


                                       15

<PAGE>



Sources of Funds

         General.  Deposits  are the  major  source of the  Company's  funds for
lending and other  investment  purposes.  In addition to  deposits,  the Company
derives funds from loan and mortgage-backed securities principal repayments, and
proceeds from the sale of mortgage-backed  securities and investment securities.
Loan and  mortgage-backed  securities payments are a relatively stable source of
funds,  while deposit inflows are  significantly  influenced by general interest
rates and money market conditions.  Borrowings may be used on a short-term basis
to compensate  for reductions in the  availability  of funds from other sources.
They also may be used on a longer-term basis for general business purposes.

         Deposits.  The  Company  offers a wide  variety  of  deposit  accounts,
although a majority of such deposits are in fixed-term,  market-rate certificate
accounts.  Deposit  account  terms vary,  primarily as to the  required  minimum
balance amount, the amount of time that the funds must remain on deposit and the
applicable interest rate.

         The Company's current deposit products include regular savings,  demand
deposit, NOW, money market and certificates of deposit accounts ranging in terms
from ninety days to eight years.  Included in these are  certificates of deposit
with  negotiable  interest  rates  and  balances  in excess  of  $50,000  (jumbo
certificates), and Individual Retirement Accounts (IRA's).

         Deposits are obtained  primarily  from residents in Beaver and Lawrence
Counties, Pennsylvania. The Company attracts deposit accounts by offering a wide
variety of products,  competitive  interest rates, and convenient  locations and
service hours.  The Company uses  traditional  methods of advertising to attract
new customers and deposits,  including radio, cable television,  and print media
advertising.  The  Company  does not  advertise  outside of its  market  area or
utilize  the  services  of  deposit  brokers  and  management  believes  that an
insignificant   number  of  deposit   accounts  are  held  by  non-residents  of
Pennsylvania.

         The Company pays interest on its deposits which are  competitive in its
market,  but does not  attempt  to pay the  highest  rates in its  market  area.
Interest rates on deposits are set weekly by the Board of Directors,  based upon
a number of factors,  including:  (1) the previous  weeks  deposit  flow;  (2) a
current survey of a selected group of competitors'  rates for similar  products;
(3)  external  data  which  may  influence   interest   rates;   (4)  investment
opportunities and loan demand; (5) scheduled maturities.

         Certificates  of Deposit in Excess of  $100,000.  The  following  table
indicates the amount of the Registrant's  certificates of deposit of $100,000 or
more by time remaining until maturity as of December 31, 1999.


Maturity Period                               Certificates of Deposit
---------------                               -----------------------
                                                 (In Thousands)
Within three months ..................               $1,206
Beyond three but within six months....                1,070
Beyond six but within twelve months...                1,828
Beyond one year ......................                5,694
                                                     ------
  Total ..............................               $9,798
                                                     ======

         Borrowings.  Savings  deposits  are the primary  source of funds of the
Bank's lending and investment  activities and for its general business purposes.
The Bank, if the need arises, may rely upon advances from the FHLB of Pittsburgh
and the  Federal  Reserve  Bank  discount  window to  supplement  its

                                       16
<PAGE>

supply of lendable funds and to meet deposit withdrawal  requirements.  Advances
from the FHLB of  Pittsburgh  are  typically  secured by the Bank's stock in the
FHLB and a portion of the Bank's  residential  mortgage  loans and other  assets
(principally  securities  which are  obligations  of or  guaranteed  by the U.S.
Government).  It is the  Bank's  policy  to  fund  loan  demand  and  investment
opportunities  out of current loan and  mortgage-backed  securities  repayments,
investment  maturities  and new  deposits.  However,  the Bank has utilized FHLB
advances to supplement  these  sources.  This policy may change in the future as
investment opportunities are presented or loan demand increases.

         The following  table sets forth  information  concerning  FHLB advances
during the periods indicated (includes both short- and long-term advances).

                                                    At or For the Years
                                                     Ended December 31,
                                              -------------------------------
                                                1999         1998       1997
                                                ----         ----       ----
                                                 (Dollars in Thousands)
FHLB advances:
  Average balance outstanding                 $ 39,829    $ 19,435    $ 6,131
  Maximum amount outstanding at any
    month-end during the year                   50,295      30,895     12,117
  Weighted average interest rate during
    the year                                     5.62%       5.89%      5.69%
  Total FHLB advances at end of period          50,295      30,895     12,117
  Weighted Year End Rate                         5.62%       5.59%      6.11%

Personnel

         As of December 31, 1999, the Company had 73 full-time  employees and 17
part-time  employees.   The  employees  are  not  represented  by  a  collective
bargaining unit. The Company believes its relationship  with its employees to be
satisfactory.

Regulation

Financial Modernization Legislation

         On  November  12,  1999,   President   Clinton   signed  into  law  the
Gramm-Leach-Bliley  Act (the "GLB Act") which, effective March 11, 2000, permits
qualifying  bank holding  companies to become  financial  holding  companies and
thereby  affiliate with securities  firms and insurance  companies and engage in
other  activities  that are  financial  in nature or  incidental  to a financial
activity. The GLB Act and the implementing  regulation of the Board of Governors
of the Federal  Reserve  System (the  "Federal  Reserve")  define  "financial in
nature"  to  include  securities   underwriting,   dealing  and  market  making;
sponsoring  and  managing  mutual  funds  and  investment  companies;  insurance
underwriting and agency;  merchant  banking  activities;  management  consulting
services;  operation of a travel agency; and activities that the Federal Reserve
has  determined  to be closely  related to banking.  A bank holding  company may
elect to be  treated  as a  financial  holding  company  only if all  depository
institution  subsidiaries  of  the  holding  company  are


                                       17
<PAGE>


and  continue  to be  well-capitalized  and  well-managed  and  have at  least a
satisfactory rating under the Community Reinvestment Act.

         The  GLB  Act  also  authorizes  national  banks  to  engage,   through
"financial  subsidiaries,"  in any activity that is permissible  for a financial
holding company and any activity that is determined to be financial in nature or
incidental to a financial activity,  except insurance underwriting,  real estate
development,  real estate  investment  (except as  otherwise  permitted by law),
insurance company  portfolio  investments and merchant banking  activities.  The
authority of a national bank to invest in a financial subsidiary is subject to a
number of conditions,  including, among other things, requirements that the bank
must be  well-managed  and  well-capitalized  (after  deducting from capital the
bank's outstanding investments in financial  subsidiaries).  The GLB Act further
provides  that a state bank may invest in financial  subsidiaries,  assuming the
requisite  investment  authority under state law, subject to the same conditions
that apply to national bank investments in financial subsidiaries.

         In  addition,  the GLB Act  enacts a number  of  consumer  protections,
including  provisions  intended to protect privacy of bank customers'  financial
information and provisions  requiring disclosure of ATM fees imposed by banks on
customers of other banks.

Regulation of the Bank

         General. As a Pennsylvania  chartered,  SAIF-insured  savings bank, the
Bank  is  subject  to  extensive  regulation  and  regular  examination  by  the
Department, the FDIC, which insures its deposits to the maximum extent permitted
by law, and to a much lesser  extent,  by the Federal  Reserve.  The federal and
state laws and regulations  which are applicable to banks regulate,  among other
things, the scope of their business, their investments, the reserves required to
be kept against deposits,  the timing of the availability of deposited funds and
the  nature  and  amount  of and  collateral  for  certain  loans.  The laws and
regulations  governing  the Bank  generally  have been  promulgated  to  protect
depositors  and not for the purpose of protecting  stockholders.  The regulatory
structure  also  gives  the  regulatory   authorities  extensive  discretion  in
connection with their  supervisory  and  enforcement  activities and examination
policies,  including  policies with respect to the  classification of assets and
the  establishment of adequate loan loss reserves for regulatory  purposes.  Any
change in such  regulation,  whether by the  Department,  the FDIC or the United
States  Congress could have a material  adverse impact on the Company,  the Bank
and their operations.

         Pennsylvania  Savings Bank Law. The Pennsylvania Banking Code ("Banking
Code") contains  detailed  provisions  governing the  organization,  location of
offices,  rights and responsibilities of trustees,  officers, and employees,  as
well as corporate powers, savings and investment operations and other aspects of
the Bank and its affairs. The Banking Code delegates extensive rule-making power
and  administrative  discretion to the  Department so that the  supervision  and
regulation  of  state  chartered  savings  banks  may be  flexible  and  readily
responsive  to  changes  in  economic  conditions  and in  savings  and  lending
practices.

         Interstate  Acquisitions.  The Commonwealth of Pennsylvania has enacted
legislation   regarding  the  acquisition  of  commercial  banks,  bank  holding
companies,   savings  banks  and  savings  and  loan  associations   located  in
Pennsylvania  by  institutions  located  outside of  Pennsylvania.  The  statute
dealing with savings  institutions  authorizes  (i) a savings bank,  savings and
loan association or holding company thereof located in another state (a "foreign
institution")  to acquire the voting stock of,  merge or  consolidate  with,  or
purchase assets and assume liabilities of, a Pennsylvania-chartered savings bank
and (ii) the establishment of branches in Pennsylvania by foreign  institutions,
in each case subject to certain conditions including (A) reciprocal  legislation
in the state in which the foreign institution seeking entry into Pennsylvania is
located permitting comparable entry by Pennsylvania savings institutions and (B)
approval  by the  Department.  Pennsylvania

                                       18
<PAGE>

law also provides for  nationwide  branching by  Pennsylvania-chartered  savings
banks and savings and loan  associations,  subject to the Department's  approval
and  certain  other  conditions.  Out-of-state  banks  can  similarly  branch in
Pennsylvania.

         Federal Deposit  Insurance.  The Bank's deposit accounts are insured by
the BIF to a maximum of $100,000 for each insured account (as defined by statute
and  regulation).  The Bank is required  to pay  insurance  premiums  based on a
percentage of its insured  deposits to the FDIC for insurance of its deposits by
the BIF. The FDIC also maintains another insurance fund, the Savings Institution
Insurance Fund ("SAIF"),  which insures savings association  deposits.  The FDIC
has set the deposit insurance  assessment rates for BIF-member  institutions for
the first six months of 2000 at 0% to .027% of insured deposits on an annualized
basis, with the assessment rate for most banks set at 0%.

         In  addition,  all  FDIC-insured   institutions  are  required  to  pay
assessments  through 2017 to the FDIC at an annual rate of approximately  .0212%
of insured  deposits to fund interest  payments on bonds issued by the Financing
Corporation, an agency of the Federal government established to recapitalize the
predecessor to the SAIF.

         Regulatory  Capital  Requirements.  The  FDIC has  promulgated  capital
adequacy  requirements  for state banks that,  like the Bank, are not members of
the Federal Reserve System,  and the FRB has established  substantially  similar
capital adequacy guidelines applicable to bank holding companies.  These capital
regulations impose two sets of capital  requirements:  risk-based capital rules,
which  require  the  maintenance  of  specified  minimum  ratios of  capital  to
"risk-weighted" assets, and minimum leverage rules, which require banks and bank
holding  companies  to  maintain a specified  minimum  ratio of capital to total
assets.  At December 31, 1999,  the Company and the Bank exceeded all applicable
regulatory capital requirements.

         The required  minimum  ratio of total capital to  risk-weighted  assets
(including  off-balance sheet activities,  such as standby letters of credit) is
8%.  At least  half of the  total  capital  is  required  to be Tier 1  capital,
consisting principally of common shareholders' equity,  noncumulative  perpetual
preferred  stock, a limited amount of cumulative  perpetual  preferred stock and
minority  interests in the equity  accounts of consolidated  subsidiaries,  less
goodwill.  The  remainder  (Tier 2 capital)  may consist of a limited  amount of
subordinated debt and intermediate-term  preferred stock, certain hybrid capital
instruments and other debt securities,  perpetual  preferred stock and a limited
amount of the general loan loss allowance.

         The   leverage   capital   rules  of  the  FDIC  and  the  FRB  require
state-chartered  banks and bank holding companies,  respectively,  to maintain a
minimum  leverage  ratio of Tier 1 capital to total assets of 3% for those banks
and bank holding companies that have the highest regulatory  examination ratings
and are not contemplating or experiencing  significant growth or expansion.  All
other banks and bank holding companies are required to maintain a leverage ratio
of at least 1% to 2% above the 3% stated minimum.

         In addition to the federal  regulatory capital  requirements,  the FDIC
has issued a regulation  that  classifies  insured  banks by capital  levels and
provides that the FDIC will take various prompt  corrective  actions,  including
the imposition of significant operational restrictions, against any bank subject
to its regulation that fails to meet the regulation's  capital standards.  Under
this prompt corrective action regulation,  a "well capitalized" bank is one that
has a total  risk-based  capital  ratio of at  least  10%,  a Tier 1  risk-based
capital ratio of at least 6%, a leverage capital ratio of 5%, and is not subject
to any order or  directive  requiring  the  institution  to improve  its capital
level.  A bank falls within the  "adequately  capitalized"  category if it has a
total risk-based capital ratio of at least 8%, a Tier 1 risk-based capital ratio
of at least 4%, and a leverage capital ratio of at least 4%.  Institutions  with
lower  capital  levels  are  deemed  to  be  "undercapitalized,"  "significantly
undercapitalized"  or "critically  undercapitalized,"  depending on their actual

                                       19
<PAGE>

capital  levels.  A bank that  falls  within  any of the three  undercapitalized
categories  is subjected to severe  regulatory  sanctions  under the FDIC prompt
corrective action  regulation.  At December 31, 1999, the Bank was classified as
"well capitalized."

         The Bank is also subject to minimum capital requirements imposed by the
Department  on   Pennsylvania-chartered   depository   institution.   Under  the
Department's  regulations,  a Pennsylvania  bank or savings bank must maintain a
minimum  leverage  ratio of Tier 1 capital (as defined under the FDIC's  capital
adequacy regulation) to total assets of 4%. In addition,  the Department has the
supervisory  discretion to require a higher  leverage ratio for any  institution
based  on the  institution's  substandard  performance  in any  of a  number  of
specified areas.

         The Bank was in compliance with both the FDIC and Pennsylvania  capital
requirements  at December 31, 1999.  See Note 15 to the  Consolidated  Financial
Statements.

         Transactions   With   Affiliates.    Generally,    federal   regulatory
restrictions on transactions with affiliates require that transactions between a
bank or its subsidiaries and its affiliates be on terms as favorable to the bank
as transactions with non-affiliates.  In addition, certain of these transactions
are  restricted  to a percentage  of a bank's  capital.  Affiliates  of the Bank
include the Holding Company and any nonbank subsidiaries of the Holding Company.

         Federal  Home  Loan  Bank  System.  The Bank is a member of the FHLB of
Pittsburgh,  which  is  one of 12  regional  FHLBs  that  administers  the  home
financing credit function of savings institutions. Each FHLB serves as a reserve
or  central  bank for its  members  within  its  assigned  region.  It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB  System.  It makes loans to members  (i.e.,  advances) in  accordance  with
policies and procedures established by the Board of Trustees of the FHLB.

         As a member, the Bank is required to purchase and maintain stock in the
FHLB of  Pittsburgh  in an amount equal to at least 1% of its  aggregate  unpaid
residential  mortgage loans, home purchase  contracts or similar  obligations at
the beginning of each year.  At December 31, 1999,  the Bank had $2.6 million in
FHLB stock, which was in compliance with this requirement.

         Federal  Reserve System.  The Federal  Reserve  requires all depository
institutions  to maintain  non-interest  bearing  reserves at  specified  levels
against  their  transaction  accounts  (primarily  checking,  NOW and  Super NOW
checking  accounts) and non-personal time deposits.  The balances  maintained to
meet the  reserve  requirements  imposed by the  Federal  Reserve may be used to
satisfy  the  liquidity  requirements  that are  imposed by the  Department.  At
December 31, 1999, the Bank met its reserve requirements.

Regulation of the Company

         General.  The  Company,  as a  bank  holding  company,  is  subject  to
regulation and supervision by the Federal  Reserve and by the  Department.  This
regulation  is  generally  intended  to  ensure  that  the  Company  limits  its
activities  to those  allowed  by law and that it  operates  in a safe and sound
manner without  endangering the financial  health of its subsidiary  banks.  The
Company is required to file  annually a report of its  operations  with,  and is
subject to examination by, the Federal Reserve and the Department.

         BHCA Activities and Other  Limitations.  Under the Bank Holding Company
Act of 1956, as amended  ("BHCA"),  a bank holding company must obtain the prior
approval  of the  Federal  Reserve  Board  before  acquiring  direct or indirect
ownership  or  control  of more than 5% of the  voting  shares  of any bank,  or
increasing  such  ownership or control of any bank.  In  determining  whether to
authorize a bank  holding

                                       20
<PAGE>

company  (or a company  that will  become a bank  holding  company)  to  acquire
control of a bank, the Federal  Reserve takes into  consideration  the financial
and managerial  resources of the bank holding  company,  as well as those of the
bank to be acquired,  and considers  whether the  acquisition  is likely to have
anti-competitive effects or other adverse effects.

         As a bank holding  company,  the Company is prohibited  under the BHCA,
with certain exceptions,  from acquiring direct or indirect ownership or control
of more than 5% of the voting  shares of a company  that is not a bank or a bank
holding  company,  or from engaging  directly or indirectly in activities  other
than those of banking,  managing or controlling banks, or providing services for
its subsidiaries. The principal exceptions to these prohibitions involve certain
non-bank  activities  that, by statute or by FRB regulation or order,  have been
identified as activities  closely related to the business of banking or managing
or controlling banks.

         The GLB  Act  greatly  expands  the  scope  of  non-banking  activities
permissible  for bank holding  companies by enacting  authority  for  "financial
holding  companies."  Effective  March  11,  2000,  the GLBA Act  permits a bank
holding company, upon classification as a financial holding company and assuming
such holding company's subsidiary banks meet certain requirements,  to engage in
activities  that are defined by statute as "financial in nature" or are approved
by the FRB as financial in nature or incidental to a financial activity. See "--
Financial Modernization Legislation."

         Regulatory  Capital  Requirements.  The  Federal  Reserve  has  adopted
capital  adequacy  guidelines  pursuant  to which it  assesses  the  adequacy of
capital in examining  and  supervising  a bank holding  company and in analyzing
applications  to it  under  the  BHCA.  The  Federal  Reserve  capital  adequacy
guidelines are similar to those imposed on the Bank by the FDIC. See "Regulation
of the Bank - Regulatory Capital Requirements."

         Commitments  to  Affiliated  Depository  Institutions.   Under  Federal
Reserve  policy,  the Company  will be expected to act as a source of  financial
strength  to  the  Bank  and  to  commit   resources  to  support  the  Bank  in
circumstances when it might not do so absent such policy. The enforceability and
precise scope of this policy is unclear,  however,  in light of recent  judicial
precedent.  However,  should the Bank require the support of additional  capital
resources, it should be anticipated that the Company will be required to respond
with any such resources available to it.

         Restrictions  Applicable  to   Pennsylvania-Chartered   Mutual  Holding
Companies.  Under  authority of Section 115.1 of the Banking Code,  and a policy
statement issued by the Department,  the Department is authorized to approve the
reorganization  of a state chartered  savings bank to a mutual holding  company,
provided the savings bank has a CAMELS  composite rating of one or two under the
Uniform Financial  Institutions Rating System.  While regulations  governing the
formation of  Pennsylvania-chartered  mutual holding companies have not yet been
adopted,  the policy statement and form of application  issued by the Department
provide the means by which such applications will be processed and approved.

         Pursuant to Pennsylvania  law, a mutual holding company may engage only
in the following activities: (i) investing in the stock of one or more financial
institution  subsidiaries;  (ii)  acquiring  one or  more  additional  financial
institution subsidiaries into a subsidiary of the holding company; (iii) merging
with or  acquiring  another  holding  company,  one of whose  subsidiaries  is a
financial  institution  subsidiary;  (iv) investing in a corporation the capital
stock of which is available  for purchase by a savings bank under federal law or
under the Banking Code;  (v) engaging in such  activities as are  permitted,  by
statute or regulation,  to a holding  company of a federally  chartered  insured
mutual institution under federal law; and (vi) engaging in such other activities
as may be permitted by the Department.  If a mutual holding company  acquires or
merges with

                                       21
<PAGE>

another holding  company,  the holding  company  acquired or the holding company
resulting from such merger or  acquisition  may only invest in assets and engage
in activities listed in (i) through (vi) above, and has a period of two years to
cease any non-conforming activities and divest any non-conforming investment.

Item  2.  Description of Properties
-----------------------------------

Properties

         The Company is headquartered in Beaver Falls, Pennsylvania and operates
through  its wholly  owned  subsidiary,  Peoples  Home  Savings  Bank.  The Bank
operates through it*s  administrative  office,  its main office and eight branch
offices.  The Bank's total  investment in office  property and equipment is $8.1
million with a net book value of $4.3  million at December  31,  1999.  The Bank
currently  operates  automated  teller  machines  at most of its branch  offices
(seven  machines) and utilizes Jack Henry's  Silverlake  Software on an in-house
computer system.

Item 3.  Legal Proceedings
--------------------------

         Neither the Bank nor its subsidiaries are involved in any pending legal
proceedings,  other than routine legal matters  occurring in the ordinary course
of  business,  which in the  aggregate  involve  amounts  which are  believed by
management to be immaterial to the consolidated  financial  condition or results
of operations of the Bank.

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

         None.


         PART II


Item 5.  Market for Common Equity and Related Stockholder Matters
-----------------------------------------------------------------

         Information  relating to the market for Registrant's  common equity and
related  stockholder  matters  appears under " Stock Market  Information" in the
Registrant's  Annual Report to  Stockholders  for the fiscal year ended December
31, 1999 ("Annual Report") and is incorporated herein by reference.

Item 6.  Selected Financial Data
--------------------------------

         The  above-captioned  information appears under "Selected Financial and
Other Data" in the Annual Report and is incorporated herein by reference.

Item 7. Management's Discussion and Analysis of Financial Conditions and Results
--------------------------------------------------------------------------------
        of Operations
        -------------

         The above-captioned  information appears under Management's  Discussion
and  Analysis of Financial  Condition  and Results of  Operations  in the Annual
Report and is incorporated herein by reference.

                                       22
<PAGE>

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
-------------------------------------------------------------------

         The information  contained in the section "Market Risk Analysis" in the
Annual Report and is incorporated herein by reference.

Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------

         The Company's  financial  statements listed in Item 14 are incorporated
herein by reference.

Item 9.  Changes  In  and  Disagreements  with  Accountants  on  Accounting  and
--------------------------------------------------------------------------------
         Financial Disclosure
         --------------------

         None.


         PART III

Item 10.  Directors and Executive Officers of the Registrant
------------------------------------------------------------

         The information  contained under the sections  captioned "Section 16(a)
Beneficial  Ownership  Reporting  Compliance"  and  "Proposal  I--  Election  of
Directors" and "--  Biographical  Information"  in the 2000 Proxy  Statement are
incorporated herein by reference.

Item 11.  Executive Compensation
--------------------------------

         The information contained under the section captioned  "Compensation of
Directors" and "Executive  Compensation"  in the Proxy Statement is incorporated
herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

         (a)      Security Ownership of Certain Beneficial Owners

                  Information  required by this item is  incorporated  herein by
                  reference to the Section captioned  "Principal Holders" of the
                  Proxy Statement.

         (b)      Security Ownership of Management

                  Information  required by this item is  incorporated  herein by
                  reference to the sections  captioned  "Principal  Holders" and
                  "Proposal I -- Election of Directors" of the Proxy Statement.

         (c)      Management of the Company knows of no arrangements,  including
                  any pledge by any person of  securities  of the  Company,  the
                  operation of which may at a subsequent date result in a change
                  in control of the registrant.

Item 13.  Certain Relationships and Related Transactions
--------------------------------------------------------

         The  information  required  by this  item  is  incorporated  herein  by
reference to the section  captioned  "Proposal I -- Election of  Directors"  and
"Principal Holders" of the Proxy Statement.

                                       23
<PAGE>

         PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K
-------------------------------------------------------------------------

     (a)  Listed below are all financial  statements  and exhibits filed as part
          of this report, and are incorporated by reference.

     1.   The  consolidated  statements of financial  conditions of PHS Bancorp,
          Inc. and  subsidiary as of December 31, 1999 and 1998, and the related
          consolidated statements of income, changes in stockholders' equity and
          cash  flows for each of the  three  years  ended  December  31,  1999,
          together  with the  related  notes  and the  independent  accountants'
          report of S.R. Snodgrass, A.C., independent accountants.

     2.   Schedules omitted as they are not applicable.

          (3)     Exhibits

          (a)     The following exhibits are filed as part of this report.

           2.1    Agreement and Plan of Reorganization*
           3.1    Articles of incorporation of PHS Bancorp, Inc.*
           3.2    Bylaws of PHS Bancorp, Inc.*
           4.0    Stock Certificate of PHS Bancorp, Inc.*
          10.1    Amended Employment Agreement between Peoples Home Savings
                  Bank and James P. Wetzel, Jr.*
          10.2    1998 Restricted Stock Plan*
          10.3    1998 Stock Option Plan*
          13.0    Portions of Annual Report to Stockholders  for the fiscal
                  year ended December 31, 1999
          20.1    Dividend Reinvestment Plan**
          21.0    Subsidiary  of the  Registrant  (see  "Item 1 Business -
                  Subsidiary  Activity" herein)
          23.0    Consent of Accountants
          27.0    Financial Data Schedule (electric filing only)

*    Incorporated by reference to Registrant's Quarterly report on form 10-Q for
     the Quarter  Ended  September  30, 1998 and filed with the  Securities  and
     Exchange Commission on November 13, 1998.

**   Incorporated by reference to Registrant's Quarterly report on form 10-Q for
     the Quarter Ended June 30, 1999 and filed with the  Securities and Exchange
     Commission on July 23, 1999.

          (b)     Reports on Form 8-K.

                   None



<PAGE>
                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                               PHS BANCORP, INC.

Dated:  March 24, 2000                     By: /s/James P. Wetzel, Jr.
                                              -------------------------
                                                James P. Wetzel, Jr.
                                                President, Chief Executive
                                                Officer and Director
                                                (Duly Authorized Representative)

         Pursuant to the  requirement  of the  Securities  Exchange Act of 1934,
this  Report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on March 24, 2000.


By:      /s/James P. Wetzel, Jr.              By: /s/Richard E. Canonge
          ---------------------------------       ------------------------------
         James P. Wetzel, Jr.                     Richard E. Canonge
         President, Chief Executive Officer       Vice President and Treasurer
           and Director                           (Principal Financial Officer)
         (Principal Executive Officer)


By:      /s/Joseph D. Belas                   By: /s/Emlyn Charles
         -----------------------------------      ------------------------------
         Joseph D. Belas                          Emlyn Charles
         Director                                 Director


By:      /s/Douglas K. Brooks                 By: /s/Earl F. Klear
         -----------------------------------      ------------------------------
         Douglas K. Brooks                        Earl F. Klear
         Director                                 Director


By:      /s/John C. Kelly                     By: /s/John M. Rowse
         -----------------------------------      ------------------------------
         John C. Kelly                            John M. Rowse
         Director                                 Director


By:      /s/Howard B. Lenox
         -----------------------------------
         Howard B. Lenox
         Director