SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

For the fiscal year ended            December 31, 1998             
                         ----------------------------------------
                                     - 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:

 Title of Each Class                 Name of Each Exchange on which Registered
 -------------------                 -----------------------------------------

 Common Stock, par value             Nasdaq National Market
 $.10 per share

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

     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 (ss.229.405 of this chapter) 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 of this
Form 10-K or any amendment 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 5, 1999, was $12.3 million
(981,607 shares at $12.50 per share).

     As of March 5, 1999 there were issued and outstanding  2,760,000  shares 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, 1998. (Parts I, II and IV)
2.   Portions  of  the  Proxy   Statement   for  the  1999  Annual   Meeting  of
     Stockholders. (Part III)


<PAGE>
<TABLE>
<CAPTION>

                                      INDEX
<S>      <C>                                                                               <C>
PART I                                                                                       Page

Item 1.   Business.............................................................................1

Item 2.   Description of Properties...........................................................25

Item 3.   Legal Proceedings...................................................................25

Item 4.   Submission of Matters to a Vote of Security-Holders.................................25

PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters...............25

Item 6.   Selected Financial Data.............................................................25

Item 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations...............................................................26

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk..........................26

Item 8.   Financial Statements and Supplementary Data.........................................26

Item 9.   Changes In and Disagreements with Accountants on Accounting and Financial
          Disclosure..........................................................................26

PART III

Item 10.  Directors and Executive Officers of the Registrant..................................26

Item 11.  Executive Compensation..............................................................26

Item 12.  Security Ownership of Certain Beneficial Owners and Management......................26

Item 13.  Certain Relationships and Related Transactions......................................26

PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.....................27

</TABLE>


<PAGE>

PART I

     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  rates,  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;  disruptions of the Company's operation due to the "Year 2000
Problem;"  and the success of the Company at managing the risks  resulting  from
these factors.

     The Company cautions that the listed factors are 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.

Item 1.  Business
-----------------

General

     The Bank attracts  deposits from the general  public and uses such deposits
primarily to invest in consumer loans, mortgage-backed and other securities, and
to purchase and originate one- to four-family  mortgage loans.  Because the Bank
faces strong competition in originating  traditional residential mortgage loans,
the Bank has  emphasized  other forms of lending,  including the  origination of
automobile  loans.  The  principal  sources of funds for the Bank's  lending and
investing activities are deposits, the repayment and maturity of loans and sale,
maturity,  and call of securities,  and FHLB advances.  The principal  source of
income is interest on loans,  mortgage-backed and investment  securities and the
principal  expense  is  interest  paid on  deposits,  FHLB  advances  and  other
borrowings.

Mutual Holding Company/Stock Holding Company Reorganization

     On July 9, 1997, the Bank  reorganized  from a Pennsylvania  mutual savings
bank into the mutual holding company structure (the "Reorganization").  Pursuant
to the Reorganization,  the Bank, among other things, exchanged its Pennsylvania
mutual  savings bank charter for a  Pennsylvania  stock savings bank charter and
formed PHS Bancorp, M.H.C., a Pennsylvania-chartered mutual holding company (the

                                       1

<PAGE>

"M.H.C."). Concurrently with the Reorganization,  1,242,000 shares of the Bank's
Common Stock representing 45.0% of the then issued and outstanding shares of the
Bank's  Common Stock were issued in a public  offering to certain  depositors of
the Bank.  Each  share of Common  Stock was issued and sold at a price of $10.00
per share.

     On  November 9, 1998 the Bank  completed  its  reorganization  to the stock
holding company form of  organization.  In connection  with the  reorganization,
stockholders  of the Bank exchanged their shares of common stock in the Bank for
shares of common stock in PHS Bancorp,  Inc., a Pennsylvania  corporation,  on a
one for one basis. Upon completion of the  reorganization,  there were 2,760,000
shares of common stock of PHS Bancorp, Inc. issued and outstanding. PHS Bancorp,
M.H.C. owns 55% of the outstanding stock of PHS Bancorp, Inc., the stock holding
company. The company's stock now trades under the Bank's old symbol "PHSB."

Geographic Lending Area

     The Bank is  authorized  to make real estate  loans  throughout  the United
States.  The Bank's primary market area generally  includes  Beaver and Lawrence
Counties,  Pennsylvania,  which are between  the  Pittsburgh,  Pennsylvania  and
Youngstown, Ohio metropolitan areas. The Bank has identified its primary lending
area as a twenty  mile  radius  from  its  principal  office  in  Beaver  Falls,
Pennsylvania,  which includes Beaver County and portions of Lawrence,  Allegheny
and Butler Counties.  These areas were once largely  dependent on heavy industry
manufacturing,  primarily  steel.  Due to a  nationwide  recession  in the early
1980's and competition from imported steel, these communities  suffered a severe
recession.  Parts of these  communities  have  now  moved to a more  diversified
economic base consisting of food services,  light  industrial,  high technology,
educational and health related industries.

     The Bank  believes  its market  area has  benefitted  from the new  Greater
Pittsburgh  International  Airport,  which  opened in October  1992 in  adjacent
Allegheny  County.  Beaver County's largest  employers are U.S.  Airways,  which
operates its hub out of the Pittsburgh  airport,  Beaver County Medical  Center,
Beaver County Government, LTV Steel and Duquesne Light Co. The unemployment rate
has steadily  declined in the Bank's market area since the early 1980's,  and at
December 31, 1998,  unemployment in the Bank's market area was  approximately at
the national average. However, many of the new jobs are in the service sector of
the economy and tend to be lower  paying than those that  previously  existed in
manufacturing.  Average  wages  in the area are  believed  to be lower  than the
national averages.



                                        2

<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,
                                       -------------------------------------------------------------------------------------------
                                             1998                1997             1996                 1995               1994
                                       -----------------   -----------------  ---------------    ---------------   ---------------
                                         $          %         $        %        $         %         $       %          $       %
                                       --------  -------   --------   ------  -------  ------    -------  ------   -------  ------ 
                                                                          (Dollars in Thousands)
<S>                                    <C>      <C>        <C>       <C>      <C>     <C>        <C>     <C>       <C>     <C>    
Mortgage loans:
  One-to-four family units(1).......   $ 49,084   48.88%   $ 45,108    44.94% $41,279   42.93%   $36,997   42.16%  $37,056   44.65%
  Multi-family units................        554    0.55         217     0.22      353    0.37        865    0.99     1,028    1.24
  Construction......................        326    0.32         304     0.30      150    0.16        259    0.30         -    -
  Commercial........................        941    0.94       1,378     1.37    1,573    1.64      1,934    2.20     2,404    2.90
                                       --------  ------    --------   ------  -------  ------    -------  ------   -------  ------
     Total mortgage loans...........     50,905   50.69      47,007    46.83   43,355   45.10     40,055   45.65    40,488   48.79
Commercial loans....................      3,617    3.60       2,464     2.46    1,967    2.04      1,442    1.64     1,314    1.58
Consumer loans:
  Consumer credit line..............      5,288    5.27       5,468     5.45    5,250    5.46      5,521    6.29     6,027    7.26
  Automobile........................     36,618   36.47      39,569    39.42   39,215   40.79     34,710   39.55    29,351   35.36
  Other(2)..........................      3,990    3.97       5,859     5.84    6,352    6.61      6,005    6.84     5,744    6.92
                                       --------  ------    --------   ------  -------  ------    -------  ------   -------  ------
     Total consumer loans...........     45,896   45.71      50,896    50.71   50,817   52.86     46,236   52.68    41,122   49.54
Lease financing receivables.........          -        -          -         -       4        -        26    0.03        74    0.09
                                       --------  ------    --------   ------  -------  ------    -------  ------   -------  ------
     Total loans....................    100,418  100.00%    100,367   100.00%  96,143  100.00%    87,759  100.00%   82,998  100.00%
                                                 ======               ======           ======             ======            ======
Less:
  Loans in process..................        219                 370               105                263                62
  Deferred loan fees................     (1,002)             (1,088)           (1,169)            (1,108)           (1,026)
  Allowance for losses on loans.....      1,287               1,394             1,434              1,274             1,085
                                        -------             -------           -------             ------            ------      
     Total loans, net...............   $ 99,914             $99,691           $95,773            $87,330           $82,877
                                        =======             =======            ======             ======            ======
</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.

                                        3

<PAGE>



     Loan Maturity  Tables.  The following  table sets forth the maturity of the
Company's  loan  portfolio  at  December  31,  1998.  The table does not include
prepayments  or  scheduled  principal  repayments.   Prepayments  and  scheduled
principal  repayments on loans totalled $48.5 million,  $40.5 million, and $37.1
million  for  the  three  years  ended   December  31,  1998,   1997  and  1996.
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       $      -       $    20       $    293      $     527
                                     -------        -------        ------        -------       --------
Amounts Due:
  Less than 1 year...............        520             13           171          6,588          7,292

After 1 year:
  1 to 3 years ..................      1,614             16           405         12,237         14,272
  3 to 5 years...................      8,733              8           935         20,881         30,557
  5 to 10 years..................     14,794            960           660          5,316         21,730
  Over 10 years..................     23,535            498         1,426            581         26,040
                                     -------        -------        ------        -------       --------
     Total due after one year....     48,676          1,482         3,426         39,015         92,599
                                     -------        -------        ------        -------       --------
     Total amount due............     49,410          1,495         3,617         45,896        100,418
                                     -------        -------        ------        -------       --------

Less:
  Allowance for losses on loans..        255             30            72            930          1,287
  Loans in process...............        219              -             -              -            219
  Deferred loan fees.............        126              -             -         (1,128)        (1,002)
                                     -------        -------        ------        -------       --------
     Loans receivable, net.......    $48,810         $1,465        $3,545        $46,094        $99,914
                                     -------        -------        ------        -------       --------
</TABLE>

-------------------
(1)      Includes   $326,000  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.


         The following table sets forth the dollar amount of all loans due after
December  31,  1999  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............   $46,598          $2,078         $48,676
Other real estate mortgages.........     1,482               -           1,482
Commercial loans and leases.........     2,645             781           3,426
Consumer............................    39,015               -          39,015
                                       -------          ------         -------
     Total..........................   $89,740          $2,859         $92,599




                                        4

<PAGE>



     One-to-four Family Lending.  The Bank originates fixed rate-loans for terms
of  15  to  30  years.  The  Bank  seeks  to  reduce  its  risk  by  originating
adjustable-rate loans. The Bank 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 Bank's experience has been that
the  average  life of  those  loans  has  been  substantially  shorter  than the
contractual  period.  The average life based upon the Bank's experience has been
approximately 10 to 12 years.

     The  majority  of the  Bank'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  Bank'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,  1998,  such loans
totaled $20.9 million, or 20.8% of the Company's total loan portfolio.

     Multi-Family Residential Real Estate. The Bank also originates multi-family
residential real estate loans. The Bank's  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 $435,000 at December 31, 1998. Multi-family residential real estate loans can
be  originated  in amounts  up to 75% of the  appraised  value of the  mortgaged
property. The Bank makes both adjustable and 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 Bank 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 the same  rates as the Bank's  one- to
four-family permanent mortgage loan rates.

     Commercial Real Estate.  The Bank originates  commercial real estate loans.
The Bank's  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
$269,000 on December 31, 1998. Commercial real estate loans can be originated in
amounts up to 75% of the  appraised  value of the mortgaged  property.  The Bank
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 Bank is authorized to

                                        5

<PAGE>



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 Bank's primary market area.
The  Bank'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 Bank also  originates  commercial  business loans with
fixed rates of interest.  The Bank'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.  The  Bank's  consumer  lending   portfolio  has  steadily
increased since its inception in 1982.  Consumer loans are all originated in the
Bank'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  Bank  does  not  participate  in any
secondary market consumer loans and all such loans are originated by the Bank.

     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.

     The largest  category of the  Company's  consumer  loan  portfolio is loans
secured by new and used automobiles.  Automobile loans amounted to $36.6 million
or 79.8% of the Company's  total  consumer loan  portfolio at December 31, 1998.
These  loans  have  terms  of up to  six  years,  depending  on  the  age of the
automobile.  The Bank  requires  that the  vehicles  be insured  and the Bank be
listed as the loss  payee on the  insurance  policy.  These  loans are  obtained
primarily  indirectly  by the Bank through a network of over 20 new and used car
dealers  located  within the Bank's  primary  market area with whom the Bank has
ongoing  relationships.  Dealers are  selected  based upon their  stability  and
location,  among other factors.  The Bank began offering this type of lending in
June 1993 and currently originated  approximately equal amounts of loans secured
by new and used  automobiles.  The lending and support staff and data processing
system  have since  been  enhanced  as the  portfolio  has  grown.  Each loan is
individually  underwritten  and  processed  by the Bank  pursuant  to the Bank's
underwriting  policies  prior  to its  origination  of the  loan.  All  borrower
information is confirmed by the Bank 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 Bank to seek recourse from the
dealer in the event of default.  During fiscal 1998,  1997 and 1996, the Company
charged net credit  losses  against its allowance for loan losses of $383,000 or
1.04%,  $419,000 or 1.06% and  $208,000 or 0.58% of its  average  indirect  auto
loans, respectively.

     The Company's  consumer loans also include credit extended pursuant to VISA
credit  cards  issued  by the Bank,  student  loans and  secured  and  unsecured
personal loans.

                                        6

<PAGE>




     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
Bank'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 Bank 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.  See  "-  Non-performing  Loans  and  Problem  Assets"  for  information
regarding the Bank's loan loss experience and reserve policy.

     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,
1998,  the Bank's  largest  aggregation  of loans to one borrower was  $435,000,
consisting of one loan secured by several  rental  properties in Beaver  County,
which was within the Bank's legal  lending limit to one borrower of $4.2 million
at such date.  At December 31, 1998,  this loan was current and at a market rate
of interest.

     Loan Purchases and Sales. The Company's  activity in the secondary mortgage
market mainly consists of the purchase and sale of  mortgage-backed  securities.
The Bank originates and holds  residential and commercial  loans until maturity.
Prior to 1984, the Bank from time-to-time had purchased  participation interests
in residential  mortgage pools and commercial  real estate loans.  Currently the
Bank does not  purchase  such  loans.  In June 1993,  the Bank  entered  into an
agreement  with the Student Loan  Marketing  Association  to sell all qualifying
student loans held by the Bank.

                                        7

<PAGE>



The  following  table sets forth total  loans  originated,  purchased,  sold and
repaid during the periods indicated.

                                                  Year Ended December 31,
                                           ----------------------------------
                                             1998         1997          1996
                                           --------    --------       -------
                                                      (In Thousands)
BEGINNING LOANS RECEIVABLE..............  $100,367     $ 96,143       $87,759

Loan originations:
  One-to-four family....................    18,596       13,515        12,810
  Multi-family..........................       450            -             -
  Other real estate.....................         -          220           215
  Commercial and leases.................     3,127        1,472         1,405
Consumer Loans:
  Savings account loans.................       446          351           547
  Consumer Credit Line..................     7,052        5,334         1,832
  Automobile............................    18,234       22,075        23,283
  Other.................................     1,926        2,335         6,129
                                          --------     --------       -------
     Total loans originated.............    49,831       45,302        46,221
Sales and loan principal reductions:
  Loan principal reductions.............    48,484       40,531        37,137
  Loans sold(1).........................     1,296          547           700
                                          --------     --------       -------
ENDING LOANS RECEIVABLE.................  $100,418     $100,367       $96,143
                                          --------     --------       -------

---------------------
(1)      Loans sold consist of student loans held for sale.

     Loan Commitments.  The Bank 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.  The total amount of the Bank's  commitments to extend credit
as of December 31, 1998, 1997 and 1996 was $19.9 million,  $14.8 million,  $13.4
million, respectively.

     Loan  Origination  and Other Fees. In addition to interest earned on loans,
the Bank  received loan  origination  and  commitment  fees for  originating  or
purchasing  loans.  In accordance  with GAAP, all loan  origination  fees net of
certain loan origination costs over the related life of the loan are amortized.

     The Bank's loan  origination  fees generally are 1.0% for  multi-family and
commercial  real estate  loans.  The total amount of deferred loan costs and net
discounts  on loans  originated  and  purchased as of December 31, 1998 was $1.0
million.

     The Bank also receives other fees and charges  relating to existing  loans,
which  include  prepayment  penalties,  late  charges,  and  fees  collected  in
connection with a change in borrower or other loan modifications. These fees and
charges have not constituted a material source of income.


                                        8

<PAGE>



Non-performing Loans and Problem Assets.

     Non-performing  Assets.  The following  table sets forth  information  with
respect to the Bank's  non-performing  assets for the periods indicated.  During
the periods indicated the Bank had no restructured loans.
<TABLE>
<CAPTION>
                                                                                   At December 31,
                                                                ----------------------------------------------------
                                                                1998        1997       1996       1995        1994
                                                                -------    -------     -------    ------     -------
                                                                              (Dollars in Thousands)
<S>                                                           <C>         <C>         <C>       <C>         <C>   
Loans accounted for on a non-accrual basis:
Mortgage loans:
  Loans secured by 1-4 family dwelling units................    $   204     $  347      $  769    $   668     $  605
  All other mortgage loans..................................         --         --          --         63         63
Non-mortgage loans:
  Commercial................................................         20         33          17         --         --
  Consumer..................................................        168        377         367        251         72
                                                                 ------      -----      ------     ------      -----
Total.......................................................    $   392     $  757      $1,153    $   982     $  740
                                                                =======     ======      ======    =======     ======
Accruing loans which are contractually
past due 90 days or more:
Mortgage loans:
  Loans secured by 1-4 dwelling units.......................    $    10     $   61      $   65    $    49     $  125
  All other mortgage loans..................................         --         --          --        192         --
Non-mortgage loans:
  Commercial and leases.....................................         --         --          --          5         13
  Consumer..................................................        125         52          65         80         24
                                                                 ------      -----      ------     ------      -----
Total.......................................................    $   135     $  113      $  130    $   326     $  162
                                                                =======     ======      ======    =======     ======
Total non-performing loans .................................    $   527     $  870      $1,283    $ 1,308     $  902
                                                                =======     ======      ======    =======     ======
Real estate owned...........................................    $    --     $   33      $   42    $   275     $  331
                                                                =======     ======      ======    =======     ======
Total non-performing assets.................................    $   527     $  903      $1,325    $ 1,583     $1,233
                                                                =======     ======      ======    =======     ======
Total non-performing loans to total loans...................       0.52%      0.87%       1.33%      1.49%      1.09%
                                                                =======     ======      ======    =======     ======
Total non-accrual and accrual loans to total assets.........       0.22%      0.40%       0.63%      0.66%      0.48%
                                                                =======     ======      ======    =======     ======
Total non-performing assets to total assets.................       0.22%      0.41%       0.66%      0.80%      0.66%
                                                                =======     ======      ======    =======     ======
</TABLE>

     During the years ended  December 31, 1998,  1997,  and 1996,  approximately
$47,000, $85,000, and $59,000, respectively 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 during the same periods  amounted to  approximately  $29,000,
$50,000, and $56,000,  during the years ended December 31, 1998, 1997, and 1996,
respectively.

     Management  of the Bank  regularly  reviews the loan  portfolio in order to
identify potential problem loans, and classifies any potential problem loan as a
special  mention,  substandard,   doubtful,  or  loss  asset  according  to  the
Pennsylvania  Department of Banking (the  "Department")  classification of asset
regulations.  At December 31, 1998, the Bank had no loans classified as troubled
debt restructuring.

     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

                                        9

<PAGE>

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, 1998, the Bank had total classified assets of $710,000,  of
which $596,000,  $66,000 and $48,000 were considered substandard,  doubtful, and
loss,  respectively.  Special  mention assets  totaled  $602,000 at December 31,
1998.

     Allowance  for  Loan  and  Lease  Losses  and REO.  The  Bank's  management
evaluates  the need to  establish  reserves  against  losses  on loans and other
assets each quarter based on estimated  losses on specific loans and on any real
estate  held  for  sale or  investment  when a  finding  is made  that a loss is
estimable and probable. Such evaluation includes a review of all loans for which
full  collectibility  may not be reasonably  assured and considers,  among other
matters,  the  estimated  market value of the  underlying  collateral of problem
loans, prior loss experience, economic conditions and overall portfolio quality.
These  provisions for losses are charged  against  earnings in the year they are
established.

     While the Bank believes it has established its existing  allowance for loan
losses in accordance with GAAP,  there can be no assurance that  regulators,  in
reviewing the Bank's loan portfolio,  will not request the Bank to significantly
increase its allowance for loan losses, or that general economic  conditions,  a
deteriorating  real estate  market,  or other factors will not cause the Bank to
significantly  increase its  allowance for loans  losses,  therefore  negatively
effecting the Bank's financial condition and earnings.

     In making loans, the Bank recognizes that credit losses will be experienced
and that the risk of loss will vary with,  among other things,  the type of loan
being made, the  creditworthiness of the borrower over the term of the loan and,
in the case of a secured loan, the quality of the security for the loan.

     It is the Bank's policy to review its loan  portfolio,  in accordance  with
regulatory classification  procedures, on a quarterly basis.  Additionally,  the
Bank maintains a program of reviewing loan applications prior to making the loan
and immediately after loans are made in an effort to maintain loan quality.



                                       10

<PAGE>

         The following table sets forth certain information regarding the Bank's
allowances for loan losses at the dates indicated.
<TABLE>
<CAPTION>
                                                                                  At December 31,
                                                                ----------------------------------------------------
                                                                  1998      1997        1996       1995        1994
                                                                -------    -------     -------    -------    -------
                                                                                (Dollars in Thousands)
<S>                                                           <C>        <C>         <C>        <C>        <C>     
Total loans outstanding.....................................   $100,418   $100,367     $96,143    $87,759    $82,998
                                                                =======    =======      ======     ======     ====== 
Average loans outstanding...................................    $99,253    $99,594     $92,834    $87,209    $75,111
                                                                =======    =======      ======     ======     ====== 
Allowance balances (at beginning of period).................    $ 1,394    $ 1,434     $ 1,274    $ 1,085   $    902
Add provisions charged to operations........................        365        555         455        370        300
Less Charge-offs:
  Residential...............................................         23        119          12          1         17
  Commercial real estate....................................          -          -          21          -         15
  Commercial business loans.................................          9          -           4          -         15
  Consumer..................................................        495        533         270        208         78
                                                                -------     ------      ------     ------    ------- 
     Sub-total..............................................        527        652         307        209        125
                                                                -------     ------      ------     ------    ------- 
Add: Recoveries
  Residential...............................................         12          8           1          -          6
  Commercial real estate....................................          -          6           -          -          -
  Commercial business loans.................................          -          -           -          -          2
  Consumer..................................................         43         43          11         28          -
                                                                -------     ------      ------     ------    -------  
     Sub-total..............................................         55         57          12         28          8
                                                                -------     ------      ------     ------    ------- 
Net loans charged-off.......................................        472        595         295        181        117
                                                                -------     ------      ------     ------    ------- 
Allowance balance, at end of period.........................   $  1,287   $  1,394    $  1,434   $  1,274   $  1,085
                                                                =======    =======      ======     ======     ====== 
Allowance for loan losses as a
  percent of total loans outstanding........................       1.28%      1.39%       1.49%      1.45%      1.31%
Net loans charged-off as a
  percent of average loans outstanding......................       0.48%      0.60%       0.32%      0.21%      0.16%


</TABLE>

     To  further  monitor  and  assess  the  risk  characteristics  of the  loan
portfolio,  loan  delinquencies  are  reviewed to consider any  developing  loan
problems.  Based upon the  procedures  in place,  considering  the  Bank's  past
charge-offs  and  recoveries  and  assessing  the current  risk  elements in the
portfolio,  management  believes the  allowance  for loan losses at December 31,
1998 is adequate.

     In providing for loans to customers,  banks are subject to the risk of loan
losses as one of the costs of lending.  While management  recognizes and charges
against  the  allowance  for loan losses  accounts  which are  determined  to be
uncollectible,  experience  indicates that at any point in time, possible losses
may  exist  in the  loan  portfolio  which  are not  specifically  identifiable.
Therefore, based upon management's best estimate, each year an amount is charged
to earnings to maintain the allowance  for loan losses at a level  sufficient to
recognize this potential risk.

     The amount  charged to  earnings  is based upon  several  factors  such as,
quarterly review of all significant  loans,  commitments  outstanding,  and real
estate owned, a continuing review of problem or nonperforming  loans and overall
portfolio  quality;  regular  examinations  of the loan and  real  estate  owned
portfolios  quality;  regular  examinations  of the loan and real  estate  owned
portfolios   by   representatives   of  regulatory   agencies  and   independent
accountants; management's judgment with respect to economic conditions and their
impact on the existing loan portfolio.


                                       11

<PAGE>


     The  Bank  currently  does not  purchase  loans  in the  secondary  market.
However,  in 1983 the Bank purchased a 90 percent  participation  in residential
loans  secured  by  shareholders'  stock  in  co-operative  units  located  in a
multi-family housing facility in Arlington, Virginia (the "Co-operative Loans").
The balance of these loans was approximately  $1.3 million at December 31, 1998.
At December 31, 1998,  these loans were  performing  according to their  current
loan terms.  Management  will  continue to monitor  these loans  closely and has
included these loans in the calculation of the general loan loss reserves.


                                       12

<PAGE>




         The  following  table  exhibits a  breakdown  by loan  category  of the
allowance for loan losses.
<TABLE>
<CAPTION>
                                                                          December 31,
                                ---------------------------------------------------------------------------------------------------
                                      1998                1997               1996                  1995                 1994
                                ----------------    -----------------   ------------------   ------------------    ----------------
                                          % of                 % of                % of                 % of                % of  
                                        loans in             loans in             loans in             loans in            loans in
                                          each                each                 each                  each               each 
                                        category             category             category             category            category
                                        to total             to total            to total             to total            to total 
                                Amount   loans       Amount   loans      Amount   loans       Amount    loans      Amount   loans
                                ------ ---------     ------ ---------    ------  ---------    ------   --------    ------ ---------
                                                                       (Dollars in Thousands)
<S>                            <C>      <C>       <C>        <C>       <C>        <C>       <C>        <C>      <C>      <C>    
Real estate mortgage loans....  $  285    50.69%   $  397      46.83%   $  462      45.10%   $  419      45.64%  $  386    48.78%
Commercial business loans and
lease financing receivables...      72     3.60        71       2.46        61       2.04        65       1.67       58     1.67
Consumer loans................     930    45.71       926      50.71       911      52.86       790      52.69      641    49.55
                                 -----   ------     -----     ------     -----     ------     -----     ------   ------   ------
     Total....................  $1,287   100.00%   $1,394     100.00%   $1,434     100.00%   $1,274     100.00%  $1,085   100.00%
                                 =====   ======     =====     ======     =====     ======     =====     ======    =====   ======

</TABLE>

                                       13

<PAGE>


         The following table sets forth certain information regarding the Bank's
allowance for REO losses for the periods indicated.
<TABLE>
<CAPTION>
                                                                  For the Year Ended December 31,
                                                          ----------------------------------------------
                                                          1998         1997         1996          1995         1994
                                                          ----         ----         ----          ----         ----
                                                                           (Dollars in Thousands)
<S>                                                       <C>          <C>           <C>         <C>          <C>    
Total real estate owned, net.........................     $    --       $   33       $    42        $ 275        $ 331
                                                           ======        =====          ====         ====         ====
Allowance balances, beginning of period..............     $    --       $   25       $   396        $ 409        $ 446
Provisions charged to operations.....................          --           11            18            1           29
Charge-offs..........................................          --           36           389           14           66
                                                           ------       ------          ----         ----
Allowance balance, end of period.....................     $    --       $   --       $    25        $ 396        $ 409
                                                           ======        =====          ====         ====         ====
Allowance for losses on real estate owned
  as a percent of net real estate owned..............          --%          --%        59.52%      144.00%      123.56%
                                                           ======        =====          ====         ====         ====
</TABLE>

Investment Activities

     General.  Pennsylvania-chartered savings banks have the authority to invest
in various types of liquid assets, including United States Treasury obligations,
securities of various  Federal  agencies,  certain  certificates  of deposits of
insured banks and savings institutions, certain bankers' acceptances, repurchase
agreements, and loans to other banking institutions on Federal Funds. Subject to
various restrictions,  state chartered institutions may also invest a portion of
their assets in commercial  paper,  corporate debt  securities and  asset-backed
securities.  A significant  portion of the Bank's income during recent years has
been  attributable  to  interest  income and gains  from the sale of  investment
securities.  For example,  $2.6 million of the $16.1  million for the year ended
December 31, 1998, in total interest income for the Company was  attributable to
interest on investment securities.

     The  Investment  Policy of the Bank,  which is  established by the Board of
Directors is designed to provide and maintain liquidity, to generate a favorable
return on investments without incurring undue interest rate and credit risk, and
to compliment the Bank's lending  activities.  The policy currently provides for
investment,  held for sale, and trading  portfolios,  although the Bank does not
currently engage in trading investment securities, and does not anticipate doing
so in the future.

     The Bank maintains a portfolio of securities  available for sale to enhance
total return on investments value. These assets are accounted for at fair market
value. The Bank's Investment Policy designates what securities may be maintained
in this portfolio.

     Mortgage-backed  Securities.  To  deploy  excess  liquidity,  the Bank also
purchases  mortgage-backed  securities guaranteed by participation  certificates
issued by FHLMC, the Government National Mortgage Association ("GNMA") and FNMA.
The  mortgage-backed   securities  are  participation  certificates  issued  and
guaranteed by the FHLMC or FNMA and secured by interest in pools of conventional
mortgages originated by other financial institutions. A majority of the FNMA and
FHLMC  securities are classified as  held-to-maturity,  while most of the Bank's
GNMA securities are fixed-rate and classified as available-for-sale.

     Mortgage-backed  securities  provide for monthly  payments of principal and
interest and generally have contractual  maturities  ranging from five to thirty
years.  However,  due to expected repayment terms being  significantly less than
the underlying mortgage loan pool contractual maturities, the estimated lives

                                       14

<PAGE>

of these securities could be significantly shorter.

     Investment  decisions are made within policy guidelines  established by the
Board of Directors.

     Investment and Mortgage-backed  Securities Portfolios.  The following table
sets forth the  carrying  value of the  Bank's  investment  and  mortgage-backed
securities  portfolios,  short-term  investments  and FHLB  stock  at the  dates
indicated.  At December  31,  1998,  the carrying and market value of the Bank's
investment  and  mortgage-backed  securities  portfolio  was $135.4  million and
$136.6  million,  respectively.  The market value is equal to the carrying value
for interest-bearing deposits and FHLB stock.
<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                        ----------------------------------
                                                                        1998           1997           1996
                                                                        ----           ----           ----
                                                                                  (In Thousands)
<S>                                                                 <C>            <C>            <C>    
Investment and mortgage-backed securities held to maturity:
  U.S. Government Agency securities...............................   $13,927        $ 6,998        $ 3,000
  Corporate obligations...........................................     2,981            999          3,999
  Obligations of States and Political Subdivisions................     1,238          2,017          3,769
  Mortgage-backed securities......................................    42,287         40,234         31,138
                                                                      ------         ------         ------
    Total investment and
       mortgage-backed securities.................................    66,433         50,248         41,906
Interest-bearing deposits.........................................     9,332          3,308          3,004
FHLB stock........................................................     1,545          1,020            972
                                                                      ------         ------         ------
     Total investments............................................   $77,310        $54,576        $45,882
                                                                      ======         ======         ======
</TABLE>

<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                        -------------------------------------
                                                                        1998           1997           1996
                                                                        ----           ----           ----
                                                                                  (In Thousands)
<S>                                                                    <C>            <C>            <C>    
Investment and mortgage-backed securities available for sale:
  U.S. Government Treasury securities.............................      $ 9,132        $ 6,087        $ 6,129
  Corporate obligations...........................................            -             49             92
  Real estate mortgage investment conduits........................          102            518            852
  Obligations of States and Political Subdivisions................       15,963         17,599         19,615
  Mortgage-backed securities......................................       32,878         30,159         25,794
                                                                        -------        -------         ------
     Total investments............................................      $58,075        $54,412        $52,482
                                                                        =======        =======         ======
</TABLE>


                                       15

<PAGE>



     During the years ended  December 31, 1998,  1997 and 1996,  excluding  U.S.
Government  Treasury and Agency  securities,  the Company had no securities of a
single issuer that exceeded 10% of stockholders' equity except as listed below.
<TABLE>
<CAPTION>

                                  December 31, 1998              December 31, 1997              December 31, 1996
                              -------------------------      -------------------------      -------------------------
Issuer                        Aggregate       Aggregate      Aggregate       Aggregate      Aggregate       Aggregate
                                Book           Market          Book           Market          Book           Market
                                Value           Value          Value           Value          Value           Value
                                -----           -----          -----           -----          -----           -----
                                                                 (In Thousands)
<S>                            <C>            <C>             <C>             <C>            <C>             <C>   
General Electric
Capital Corporation             $2,981         $2,981          $    -          $    -         $    -          $    -

</TABLE>


                                       16

<PAGE>



     Investment  Portfolio  Maturities.  The following  table sets forth certain
information   regarding  the  carrying  values,   weighted  average  yields  and
maturities of the Bank's investment and mortgage-backed  securities portfolio at
December 31, 1998.
<TABLE>
<CAPTION>
                                                                                                                    Total Investment
                                                                                                                          and
                                         One Year             One to           Five to        More than              Mortgage-backed
                                          or Less           Five Years        Ten Years       Ten Years                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.   $5,072   6.73%   $4,060   5.53%    $   --     --%  $    --     --%  $ 9,132   6.20%  $ 9,132
Obligations of states and political 
 subdivisions                               --      --    5,663   9.49      1,085   9.21     9,215   8.17    15,963   8.71    15,963
Real estate investment conduits......       --      --       15   6.04         --     --        87   6.10       102   6.09       102
Mortgage-backed securities...........       --      --       29   7.20        633   7.21    32,216   7.24    32,878   7.24    32,878
     Total...........................   $5,072   6.73%   $9,767   7.83%    $1,718   8.47%  $41,518   7.44%  $58,075   7.48%  $58,075

Held to Maturity:
U.S. Government Agency securities....   $1,000   5.65%   $7,597   6.17%    $2,778   5.65%   $2,552   5.40%  $13,927   5.89%  $14,321
Obligations of states and political
 subdivisions                               --      --       --     --        245   7.07       993   8.19     1,238   7.97     1,280
Corporate obligations................    2,981    5.23       --     --         --     --        --     --     2,981   5.23     2,981
Mortgage-backed securities...........       --      --       --     --         --     --    48,287   7.00    48,287   7.00    48,768
     Total...........................   $3,981    5.34%  $7,597   6.17%    $3,023   5.77%  $51,832   6.94%  $66,433   6.71%  $67,350

</TABLE>

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

                                       17

<PAGE>

Deposit Portfolio

         Deposits in the Bank as of  December  31,  1998,  were  represented  by
various types of savings programs described below.
<TABLE>
<CAPTION>
                                                                 Interest Rate         Balance
                                                                     as of             as of         Percentage
                                                                 December 31,       December 31,      of Total
Category                             Term                            1998              1998(1)        Deposits
--------                             ----------                  ----------------   -------------   ------------

<S>                                  <C>                            <C>                 <C>              <C> 
NOW Checking and
  Demand Deposit Accounts             None                           0.00% - 0.05%       $ 25,854          14.26%
Regular Savings                       None                                   2.00%         27,601          15.23
Money Market Accounts                 None                           2.22% - 4.55%         25,131          13.87

Certificates of Deposit:
  Fixed Term, Fixed Rate               1 - 3 months                          3.94%            929           0.51
  Fixed Term, Fixed Rate               4 - 6 months                          3.96%         10,435           5.76
  Fixed Term, Fixed Rate               7 - 12 months                         4.18%         15,699           8.66
  Fixed Term, Fixed Rate              13 - 24 months                 4.43% - 4.91%         12,656           6.98
  Fixed Term, Fixed Rate              25 - 36 months                 4.91% - 5.15%         23,836          13.15
  Fixed Term, Fixed Rate              37 - 48 months                         5.15%          4,391           2.42
  Fixed Term, Fixed Rate              49 - 120 months                5.15% - 5.39%         11,683           6.44
  IRA Fixed Term, Variable Rate       60 months                              4.45%          9,408           5.19
  IRA Fixed Term, Fixed Rate          60 months                              5.39%         10,813           5.96
  Jumbo Certificates                                                 4.30% - 4.60%          2,677           1.48
                                                                                         --------        -------
                                                                                          181,113          99.91
                                      Accrued interest on deposits                            154           0.09
                                      Total                                              $181,267         100.00%
                                                                                         ========        =======
</TABLE>
---------------------
(1) In thousands

     Time Deposits by Rate. The following  table sets forth the time deposits in
the Bank classified by rates as of the dates indicated.

                                                      At December 31,
                                               1998         1997         1996
                                             -------     --------     --------

Weighted Average Rate
  2.01% - 4.00%...........................  $  6,056   $       --    $     235
  4.01% - 6.00%...........................    79,040       81,984       88,947
  6.01% - 8.00%...........................    17,431       19,445       20,797
  8.01% - 10.00%..........................        --          292          634
                                            --------     --------     --------
                                             102,527      101,721      110,613
Accrued interest on certificate accounts..       154          181          250
                                            --------     --------     --------
     Total................................  $102,681     $101,902     $110,863
                                            ========     ========    =========



                                       18

<PAGE>



     Time Deposits Maturity Schedule.  The following table sets forth the amount
and maturities of time deposits at December 31, 1998.
<TABLE>
<CAPTION>
                                                     At December 31,
                          --------------------------------------------------------------------
                          December 31,  December 31,   December 31,   December 31,
                              1999          2000           2001           2002          Total
                           ------       --------       --------        -------      ---------
<S>                       <C>           <C>            <C>            <C>          <C>     
Interest Rate
  2.01% - 4.00%........    $ 6,056       $    --        $    --       $     --      $  6,056
  4.01% - 6.00%........     36,027        12,145         11,952         18,916        79,040
  6.01% - 8.00%........      5,064         7,161            399          4,807        17,431
  8.01% - 10.00%.......         --            --             --             --            --
                           -------       -------        -------        -------      --------
                           $47,147       $19,306        $12,351        $23,723      $102,527
                           =======       =======        =======        =======      ========
Accrued interest
  on certificate
  accounts.............                                                                  154
                                                                                    --------
     Total.............                                                             $102,681
                                                                                    ========

</TABLE>

     Time deposits include  certificates of deposit in denominations of $100,000
or more. Such deposits aggregated $9.2 million, $7.9 million and $8.7 million at
December 31, 1998,  1997 and 1996,  respectively  with maturities as of December
31, 1998 as follows:

Maturity Period                                Certificates of Deposit
---------------                                -----------------------
                                                   (In Thousands)
Within three months.........................          $    818
Beyond three but within six months..........             1,282
Beyond six but within twelve months.........               880
Beyond one year.............................             6,174
                                                      --------
     Total..................................            $9,154
                                                      ========



Savings Deposit Activity.  The following table sets forth the savings activities
of the Company for the periods indicated:

                                                      Year Ended December 31,
                                                      -----------------------
                                                      1998     1997      1996
                                                      ----     ----      ----
Net increase (decrease) before interest credited..  $  818  $(7,692)  $(3,609)
Interest credited.................................   6,009    6,053     5,990
Net increase (decrease) in savings deposits.......  $6,827  $(1,639)   $2,381



     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 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

                                       19

<PAGE>



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).


                                                      Year Ended December 31,
                                                    --------------------------
                                                    1998       1997      1996
                                                    ----       ----      ----
                                                     (Dollars in Thousands)
FHLB advances:
  Average balance outstanding...................  $19,435     $6,131   $ 8,059
  Maximum amount outstanding at any
    month-end during the year...................   30,895     12,117    11,400
  Weighted average interest rate during the year     5.89%      5.69%     5.67%
  Total FHLB advances at end of period..........   30,895     12,117     8,100
  Weighted Year End Rate........................     5.59%      6.11%     6.45%


Subsidiary Activity

     The only  subsidiary  of the Company is the Bank.  The Company owns 100% of
the outstanding capital stock of the Bank.

Personnel

     As of  December  31,  1998,  the Bank  had 77  full-time  employees  and 15
part-time  employees.   The  employees  are  not  represented  by  a  collective
bargaining  unit.  The Bank believes its  relationship  with its employees to be
satisfactory.

Competition

     The Bank faces strong  competition in its  attraction of savings  deposits,
which are its primary  source of funds for lending,  and in the  origination  of
real estate and consumer loans. The Bank's  competition for savings deposits and
loans historically has come from other savings institutions and commercial banks
located in the Bank's market area. The Bank also competes with mortgage  banking
companies for real estate loans,  and commercial  banks and  automobile  finance
companies for automobile  loans;  and faces  competition for investor funds from
short-term money market securities and corporate and government securities.  The
Bank's   market  area   primarily   includes   Beaver  and  Lawrence   Counties,
Pennsylvania,  which are between the  Pittsburgh,  Pennsylvania  and Youngstown,
Ohio Metropolitan areas.

     The Bank competes for loans by charging competitive interest rates and loan
fees,  remaining  efficient  and  providing  a wide  range  of  services  to its
customers.  The Bank  offers all  consumer  banking  services  such as  checking
accounts,  certificates of deposit,  retirement accounts,  consumer and mortgage
loans and ancillary services such as safe deposit boxes,  convenient offices and
drive-up facilities,  automated teller machines and overdraft protection.  These
services help the Bank compete for deposits.  The Bank offers  competitive rates
on deposits.

                                       20

<PAGE>


Legal Proceedings

     The Bank, from time to time, is a party to routine litigation, which arises
in the normal course of business, such as claims to enforce liens,  condemnation
proceedings  on properties in which the Bank holds  security  interests,  claims
involving  the making and  servicing of real  property  loans,  and other issues
incident to the business of the Bank. There were no lawsuits pending or known to
be contemplated  against the Company or the Bank at December 31, 1998 that would
have a material effect on the operations or income of the Company.

                           REGULATION AND SUPERVISION

     Set forth below is a brief  description of certain laws which relate to the
regulation and supervision of the Bank and the Company. The description does not
purport  to be  complete  and is  qualified  in its  entirety  by  reference  to
applicable laws and regulations.

Regulation of the Bank

     General. As a Pennsylvania  chartered,  SAIF-insured savings bank, the Bank
is subject to  extensive  regulation  and  examination  by the  Department,  the
Federal Deposit Insurance  Corporation (the "FDIC"),  which insures its deposits
to the maximum  extent  permitted by law,  and to a much less or 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.

     One of the  purposes of the Banking Code is to provide  savings  banks with
the opportunity to be fully competitive with each other and with other financial
institutions  existing under other state, federal and foreign laws. To this end,
the Banking Code provides  state-chartered  savings banks with all of the powers
enjoyed by federal savings and loan  associations,  subject to regulation by the
Department.  The Federal Deposit  Insurance  Corporation Act ("FDIA"),  however,
prohibits state chartered  institutions  from making new investments,  loans, or
becoming  involved in activities as principal and equity  investments  which are
not permitted for national banks unless (1) the FDIC  determines the activity or
investment  does  not  pose a  significant  risk of loss to the SAIF and (2) the
savings bank meets the fully phased-in capital  requirements.  Accordingly,  the
ability of the Banking  Code to provide  additional  operating  authority to the
Bank is limited by the FDIA.


                                       21

<PAGE>



     The  Department  generally  examines each savings bank not less  frequently
than once every two years. The Banking Code permits the Department to accept the
examinations  and reports of the FDIC in lieu of the  Department's  examination.
The present practice is for the Department to conduct  individual  examinations.
The Department may order any savings bank to discontinue any violation of law or
unsafe or  unsound  business  practice  and may  direct  any  trustee,  officer,
attorney or employee of a savings  bank  engaged in an  objectionable  activity,
after the Department has ordered the activity to be terminated, to show cause at
a hearing before the Department why such person should not be removed.

     Assessments. The FDIC is authorized to establish separate annual assessment
rates for deposit  insurance  for members of the BIF and the SAIF.  The FDIC may
increase  assessment  rates for either fund if  necessary  to restore the fund's
ratio of reserves to insured  deposits to its target  level  within a reasonable
time and may decrease such  assessment  rates if such target level has been met.
The FDIC has  established a risk-based  assessment  system for both SAIF and BIF
members.  Under this system,  assessments  are set within a range,  based on the
risk the  institution  poses to its deposit  insurance  fund. This risk level is
determined  based on the  institution's  capital  level and the FDIC's  level of
supervisory  concern about the  institution.  During the year ended December 31,
1998, the Bank paid $105,000 in assessments,  including  approximately $.064 per
$100 in deposits to the Financing Corp. (Fico Bonds).


     Regulatory Capital Requirements.  The FDIC has promulgated  regulations and
adopted a statement of policy prescribing the capital adequacy  requirements for
state-chartered  banks,  some of which,  like the Bank,  are not  members of the
Federal Reserve.  At December 31, 1998, the Bank exceeded all regulatory capital
requirements and is classified as "well capitalized."

     The  FDIC's  capital  regulations  establish  a minimum  3% Tier I leverage
capital requirement for the most highly-rated state-chartered, non-member banks,
with an  additional  cushion  of at least 100 to 200 basis  points for all other
state-chartered,  non-member banks,  which effectively will increase the minimum
Tier I leverage ratio for such other banks to 4% to 5% or more. Under the FDIC's
regulation,  the highest-rated  banks are those that the FDIC determines are not
anticipating or experiencing  significant growth and have well diversified risk,
including no undue interest rate risk exposure,  excellent  asset quality,  high
liquidity,  good earnings and, in general, which are considered a strong banking
organization,  rated composite 1 under the Uniform Financial Institutions Rating
System.  Leverage or core capital is defined as the sum of common  stockholders'
equity (including  retained earnings),  noncumulative  perpetual preferred stock
and related surplus, and minority interests in consolidated subsidiaries,  minus
all intangible assets other than certain qualifying  supervisory  goodwill,  and
certain   purchased   mortgage   servicing   rights  and  purchased  credit  and
relationships.

     The FDIC  also  requires  that  savings  banks  meet a  risk-based  capital
standard.  The  risk-based  capital  standard  for savings  banks  requires  the
maintenance   of  total  capital  (which  is  defined  as  Tier  I  capital  and
supplementary  (Tier 2) capital) to risk weighted  assets of 8%. In  determining
the amount of risk-weighted  assets, all assets,  plus certain off balance sheet
assets,  are multiplied by a risk-weight  of 0% to 100%,  based on the risks the
FDIC believes are inherent in the type of asset or item.

     The  components of Tier I capital are equivalent to those  discussed  above
under the 3% leverage standard. The components of supplementary (Tier 2) capital
include  certain  perpetual  preferred  stock,  certain  mandatory   convertible
securities,  certain  subordinated  debt and  intermediate  preferred  stock and
general  allowances  for loan and  lease  losses.  Allowance  for loan and lease
losses  includable in supplementary  capital is limited to a maximum of 1.25% of
risk-weighted   assets.   Overall,   the  amount  of  capital   counted   toward
supplementary capital cannot exceed 100% of core capital.


                                       22

<PAGE>


     A bank which has less than the  minimum  leverage  capital  requirement  is
subject to various  capital plan and activities  restriction  requirements.  The
FDIC's regulation also provides that any insured  depository  institution with a
ratio of Tier I capital to total  assets  that is less than 2.0% is deemed to be
operating in an unsafe or unsound condition pursuant to Section 8(a) of the FDIA
and could be subject to potential termination of deposit insurance.

     The Bank is also  subject to  Department  regulations.  The  components  of
leverage and risk-based  capital are  substantially the same as those defined by
the FDIC.

     The Bank was in  compliance  in both  the  FDIC  and  Pennsylvania  capital
requirements at December 31, 1998.

     Community  Reinvestment.  Under the Community  Reinvestment Act ("CRA"), as
implemented  by FDIC  regulations,  a savings  association  has a continuing and
affirmative obligation consistent with its safe and sound operation to help meet
the credit needs of its entire  community,  including  low and  moderate  income
neighborhoods.  The CRA does not  establish  specific  lending  requirements  or
programs  for  financial   institutions  nor  does  it  limit  an  institution's
discretion  to develop the types of products and  services  that it believes are
best  suited  to its  particular  community,  consistent  with the CRA.  The CRA
requires the FDIC,  in  connection  with its  examination  of a savings bank, to
assess the institution's record of meeting the credit needs of its community and
to take such record into account in its  evaluation of certain  applications  by
such  institution,  and to provide a written  evaluation of an institution's CRA
performance  utilizing a four tiered descriptive rating system in lieu. The Bank
received a "satisfactory" rating in its last CRA examination in May, 1996.

     Transactions With Affiliates.  Generally, restrictions on transactions with
affiliates  require  that  transactions  between  a savings  association  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 the Bank's capital. Affiliates of the Bank include
the Holding Company and any company which would be under common control with the
Bank.

     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 associations. 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, 1998,  the Bank had $1.5 million in
FHLB stock,  which was in compliance with this  requirement.  For the year ended
December 31, 1998, dividends paid by the FHLB of Pittsburgh to the Bank totalled
approximately $78,000.

     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, 1998, the Bank met its reserve requirements.


                                       23

<PAGE>

Regulation of the Company

     General.  The Company,  as a bank holding company, is subject to regulation
and  supervision  by the Board of  Governors  of 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.  The Bank Holding  Company Act of
1956,  as amended  ("BHCA"),  prohibits a bank holding  company  from  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,  without prior
approval of the Federal  Reserve.  In  determining  whether to  authorize a bank
holding  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. The BHCA also generally
prohibits a bank holding  company from acquiring any bank located outside of the
state in which the  operations  of the existing  bank  subsidiaries  of the bank
holding  company are principally  conducted  unless  specifically  authorized by
applicable  state law. No approval  under the BHCA is required,  however,  for a
bank holding  company  already owning or  controlling  50% or more of the voting
shares of a bank to acquire additional shares of such bank.

     The BHCA also prohibits a bank holding  company,  with certain  exceptions,
from  acquiring  more than 5% of the voting  shares of any company that is not a
bank and from  engaging  in any  business  other  than  banking or  managing  or
controlling  banks. Under the BHCA, the Federal Reserve is authorized to approve
the ownership of shares by a bank holding company in any company, the activities
of which the Federal  Reserve has determined to be so closely related to banking
or to managing  or  controlling  banks as to be a proper  incident  thereto.  In
making such  determinations,  the Federal  Reserve is required to weigh expected
benefits to the public, such as greater  convenience,  increased  competition or
gains  in  efficiency,  against  the  possible  adverse  effects,  such as undue
concentration  of  resources,  decreased  or unfair  competition,  conflicts  of
interest or unsound banking practices.

     The Federal Reserve has by regulation  determined  that certain  activities
are closely related to banking within the meaning of the BHCA.  These activities
include those of operating a mortgage company,  a finance company, a credit card
company,  a  factoring  company,  a  trust  company  or a  savings  association;
performing  certain data processing  operations;  providing  limited  securities
brokerage  services;  acting as an  investment  or  financial  advisor;  leasing
personal  property  on a  full-payout  (and,  to a  limited  extent,  less  than
full-payout),  non-operating  basis;  providing  tax  planning  and  preparation
services; operating a collection agency; and providing certain courier services.
The Federal Reserve also has determined that certain other activities, including
real estate brokerage and syndication, land development, property management and
underwriting  of life  insurance  not  related to credit  transactions,  are not
closely related to banking and a proper incident thereto.

     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."


                                       24

<PAGE>


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 $7.7
million with a net book value of $4.5  million at December  31,  1998.  The Bank
currently  operates automated teller machines at most of its branch offices (six
machines).

     The Bank utilizes Jack Henry's  Silverlake  Software on an inhouse computer
system. The Bank has been advised by Jack Henry that the Silverlake  Software is
year 2000 compliant.

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

     At a special  meeting of  Stockholders  of the Bank on August 20, 1998 (and
subsequently   reconvened  on  October  22,  1998),  the  following  items  were
presented:

          Approval of the 1998 Stock Option Plan.  The plan  received  2,194,957
          votes in favor, 75,078 votes against and 16,818 votes abstained.

          Approval  of  the  1998  Restricted  Stock  Plan.  The  Plan  received
          2,156,824  votes in favor,  120,406  votes  against  and  9,258  votes
          abstained.

          Adoption of an Agreement and Plan of  Reorganization  to form a middle
          tier stock holding company.  The proposal received  2,144,002 votes in
          favor, 38,538 votes against and 9,488 votes abstained.


                                     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,  1998  ("Annual  Report")  on pages 4 and 5, 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 on pages 2 through 3, and is  incorporated  herein by
reference.

                                       25

<PAGE>


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
on pages 5 through 15, and is incorporated herein by reference.

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

     The above captioned information appears under "Market Risk Analysis" in the
Annual Report on pages 11 and 12 is incorporated herein by reference.

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

     The Consolidated  Financial Statements of the Company and its subsidiaries,
together  with the report  thereon by SR Snodgrass,  A.C.  appears in the Annual
Report on pages 16 through 44, and 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 section captioned "Proposal I-Election
of Directors" at pages 3 to 7 of the Registrant's definitive proxy statement for
the  Registrant's  Annual Meeting of  Stockholders  to be held on April 22, 1999
(the  "Proxy  Statement"),  which was filed  with the SEC on March 18,  1999 and
incorporated herein by reference.

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

     The information  relating to executive  compensation is incorporated herein
by reference to the Registrant's Proxy Statement at pages 8 through 12.

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

     The information relating to security ownership of certain beneficial owners
and management is  incorporated  herein by reference to the  Registrant's  Proxy
Statement at pages 2 and 3.

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

     The information relating to certain  relationships and related transactions
is incorporated  herein by reference to the Registrant's Proxy Statement on page
13.


                                       26

<PAGE>
                                     PART IV




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

(a)  The following documents are filed as a part of this report:

(1)  Financial  Statements of the Company are  incorporated  by reference to the
     following indicated pages of the Annual Report.

                                                                         PAGE
                                                                         ----

Independent Auditors' Report..............................................16
Consolidated Balance Sheets as of December 31, 1998 and 1997..............17
Consolidated Statements of Income For the Years Ended December 31,
   1998, 1997 and 1996....................................................18
Consolidated Statements of Stockholders' Equity
  for the Years Ended December 31, 1998, 1997 and 1996....................19
Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1998, 1997 and 1996........................................20
Notes to Consolidated Financial Statements................................21

     The remaining  information  appearing in the Annual Report is not deemed to
be filed as part of this report, except as expressly provided herein.

(2)  All schedules are omitted  because they are not required or applicable,  or
     the required information is shown in the consolidated  financial statements
     or the notes thereto.

(3)  Exhibits

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

          2.0  Agreement and Plan of Reorganization*
          3.1  Articles of Incorporation of Peoples Home Savings Bank*
          3.2  Bylaws of Peoples Home Savings Bank*
          4.0  Form of 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*
          11.0 Statement regarding computation of earnings per share (see Note 1
               to the Notes to Consolidated  Financial  Statements in the Annual
               Report)
          13.0 Annual Report to Stockholders  for the fiscal year ended December
               31, 1998
          21.0 Subsidiary of the  Registrant  (see "Item 1 Business - Subsidiary
               Activity" herein)
          23.0 Consent of Accountants
          27.0 Financial Data Schedule (in electronic 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.

                                       27

<PAGE>




         (b)      Reports on Form 8-K.

     On November 10, 1998,  the Company filed a Current  Report on Form 8-K with
the  Commission   announcing  the  completion  of  its  stock  holding   company
reorganization.


                                       28

<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 18, 1999              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 18, 1999.

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 Executive Officer) (Principal Financial Officer)


By:   /s/Douglas K. Brooks                       By:/s/Emlyn Charles 
----------------------------------------         -------------------------------
      Douglas K. Brooks                          Emlyn Charles
      Director                                   Director


By:   /s/John C. Kelly                           By:/s/Earl F. Klear        
----------------------------------------         -------------------------------
      John C. Kelly                              Earl F. Klear
      Director                                   Director


By:   /s/Howard B. Lenox                         By:/s/John M. Rowse   
----------------------------------------         -------------------------------
      Howard B. Lenox                            John M. Rowse
      Director                                   Director