As filed with the Securities and Exchange Commission on May 4, 2001
Registration No. 333-
-----

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

Nittany Financial Corp.
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(Exact name of Small Business Issuer as specified in charter)

Pennsylvania 6035 23-2925762
- ----------------------------------- ----------------- -------------------
(State or other jurisdiction (Primary SIC No.) (I.R.S. Employer
of incorporation or organization) identification No.)

116 East College Avenue, State College, Pennsylvania 16801
(814) 234-7320
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(Address, including zip code, and telephone number, including area code,
of principal executive offices and principal place of business)

David Z. Richards, Jr., President
Nittany Financial Corp.
116 East College Avenue, State College, Pennsylvania 16801
(814) 234-7320
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(Name, address and telephone number of agent for service)

Please send copies of all communications to:
Felicia C. Battista, Esq.
Malizia Spidi & Fisch, PC
1100 New York Avenue, NW, Suite 340 West, Washington, D.C. 20005
(202) 434-4660
- --------------------------------------------------------------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering.
[ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

Title of Each Shares Proposed Maximum Proposed Maximum Amount of
Class of Securities to be Offering Price Aggregate Offering Registration
To Be Registered Registered(2) Per Unit Price(1) Fee(2)
- -----------------------------------------------------------------------------------------------------

Common Stock,
$.10 Par Value 111,953 $10.00 $1,119,530 $279.88
- -----------------------------------------------------------------------------------------------------

(1) Estimated solely for purposes of calculating the registration fee.
(2) A registration statement on Form SB-2 (333-90793) was filed and
declared effective on December 6, 1999, which registered 230,000 common
shares. Of such shares, 98,047 common shares were unsold. Pursuant to
Rule 429 of Regulation C, this offering also includes the 98,047 unsold
shares which registration fee was previously paid. A total registration
fee of $496.73 was previously paid.

The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

[LOGO]

PROSPECTUS

UP TO 210,000 SHARES OF COMMON STOCK
$____ PER SHARE

Nittany Financial Corp. is offering to sell up to 210,000 shares of its
common stock at $____ per share. Nittany intends to sell the shares through its
directors and officers, who will use their best efforts to sell the shares. The
offering is not underwritten and is not subject to the sale of any minimum
number or dollar amount of shares. Our directors and executive officers plan to
purchase approximately __________ shares in the offering.

The common stock is listed on the Electronic Bulletin Board under the
symbol "NTNY." Since Nittany's common stock began trading on the Electronic
Bulletin Board on October 23, 1998, Nittany issued a 10% stock dividend in
January 2001 and the sales prices, adjusted for the 10% stock dividend, have
generally ranged from approximately $_____ to $_____ per share.

On ____________, 2001, the last reported sales price of the common
stock on the Electronic Bulletin Board was $_________.

INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE __.

THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS ARE NOT SAVINGS
OR DEPOSIT ACCOUNTS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE SAVINGS ASSOCIATION FUND OR ANY OTHER GOVERNMENTAL AGENCY.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Proceeds, Before
Price to Public Expenses, To Nittany
--------------- --------------------

Per Share: $_______ $_______

Total Maximum $_______ $_______

We plan to keep the offering open for approximately 60 days, but we may
terminate it early or extend it. The offering will terminate no later than
December 31, 2001. We will conduct sequential closings on approximately a
monthly basis. We intend to deliver certificates representing shares for
accepted subscriptions within 10 days after each sequential closing.

THE DATE OF THIS PROSPECTUS IS MAY ___, 2001.

[INSIDE FRONT COVER]

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THE HISTORY OF NITTANY FINANCIAL CORP.
AND NITTANY BANK

July 1997 Chairman Samuel J. Malizia and President David Z. Richards meet to form Nittany Bank and Nittany
Financial Corp.
Fall 1997 Original Board of Directors is assembled and organizers create business plan for Nittany Financial Corp.
December 10, 1997 Nittany Financial Corp. is incorporated as a Pennsylvania corporation.
January-March 1998 Regulatory applications, business plans and strategy of Nittany Bank is formed. Organizers meet with
regulators.
March 1998 Nittany Financial Corp. board of directors move forward with the formation and filings to organize
Nittany Bank. Original board of directors include Samuel J. Malizia, Chairman; David Z. Richards,
President and Chief Executive Officer; William A. Jaffe, Secretary; D. Michael Taylor and Donald J.
Musso.
March 24, 1998 Agreement is signed with First Commonwealth Bank to assume the deposits and acquire certain assets
of two Central Bank locations in State College.
April 7, 1998 Regulatory applications filed for federal charter, FDIC Insurance of Accounts and Holding Company.
May 1998 Preliminary stock prospectus is filed with the Securities and Exchange Commission (the "SEC").
July 30, 1998 SEC declares effective final prospectus and initial public stock offering of Nittany Financial Corp.
begins.
August 1998 Richard C. Barrickman and John E. Arrington join the Nittany Bank executive management team.
September 14, 1998 Conditional regulatory approvals are received for approval of the holding company, FDIC insurance and
a federal banking charter.
October 23, 1998 Final closing of stock offering. Nittany Financial Corp. is capitalized with $5.7 million in capital.
October 23, 1998 Organizers close the purchase of both Central Bank offices.
October 26, 1998 Nittany Bank opens its doors as State College's hometown bank. The slogan of "The Right Bank, The
Right Time" is adopted.
November 1998 Nittany Bank issues its first digitally imaged bank statement. Customers can conveniently store all
statements for a year in a Nittany Bank binder.
November 1998 24 Hour Telephone Banking,"The Nittany Line," is introduced.
December 31, 1998 Nittany Bank closes its first nine weeks of operation with assets in excess of $24 million.
January 1999 Remodeling is completed of both offices.
April-May, 1999 New ATM at College Avenue office; addition of drive-up ATM at North Atherton office.
May 1999 Nittany Asset Management, Inc. chartered as subsidiary to offer alternative securities investments.
June 1999 Nittany Bank holds first meeting of Community Advisory Board of Directors to evaluate needs of the
community and solicit comments.
August 1999 Nittany Financial Corp. exceeds $40 million in assets.
November 1999 Nittany Asset Management, Inc. commences business operations.
December 1999 Nittany Financial Corp. approaching $50 million in assets.
December 1999 - Nittany Financial Corp. conducts secondary common stock offering which raised approximately $1.5
March 31, 2000 million in gross proceeds from the from the sale of 131,953 common shares.
August 2000 Third branch office and ATM opened at 129 Rolling Ridge Drive, State College, Pennsylvania. Fourth
ATM opened on Sowers Street, downtown, State College.
December 2000 Nittany Financial Corp. approaching $70 million in assets.
January 2001 Nittany Financial Corp. issued a 10% stock dividend.
March 2001 Nittany Bank purchased the building of the former Zimms Restaurant on East College Avenue (Route
26) in State College. Nittany Bank intends to operate a financial center on site, expected to open in
the second half of 2001.
April 2001 Nittany Bank launches to its customers internet banking services, which offers personal and business
online banking and bill payment services.
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TABLE OF CONTENTS

Page
----

Prospectus Summary..............................................................
Risk Factors....................................................................
Use of Proceeds.................................................................
Capitalization..................................................................
Determination of Offering Price.................................................
Trading History and Dividends...................................................
How to Subscribe................................................................
Management's Discussion and Analysis............................................
Business........................................................................
Regulation......................................................................
Management......................................................................
Description of Capital Stock....................................................
Legal Matters...................................................................
Experts.........................................................................
Available Information...........................................................
Index to Financial Statements...................................................
Financial Statements............................................................
Subscription Agreement..........................................................

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION NOR TO MAKE ANY
REPRESENTATIONS OTHER THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY DISTRIBUTION OF THE COMMON STOCK OF NITTANY FINANCIAL CORP.
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF NITTANY FINANCIAL CORP. SINCE THE DATE AS
OF WHICH INFORMATION IS FURNISHED HEREIN.

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information regarding Nittany Financial Corp. and the common stock being sold in
this offering and our financial statements and the notes to the financial
statements appearing elsewhere in this prospectus. References in this document
to "we", "us", and"our" refer to Nittany Bank. In certain instances where
appropriate, "we", "us", and "our" refer collectively to Nittany Financial
Corp., Nittany Bank, and Nittany Asset Management, Inc. References in this
document to "Nittany" refers to Nittany Financial Corp.

NITTANY FINANCIAL CORP.

Nittany is a holding company organized in 1997 for the purpose of
establishing a de novo community bank in State College, Pennsylvania. Nittany
Bank commenced operations as a wholly-owned FDIC-insured federal savings bank
subsidiary of Nittany on October 26, 1998. At December 31, 2000, the business
operations of Nittany included the following two operating subsidiaries:

o Nittany Bank commenced banking operations in October 1998 as a
federally-insured federal savings bank with two offices at 116
East College Avenue, 1276 North Atherton, State College,
Pennsylvania. On August 7, 2000, a third branch office was opened
at 129 Rolling Ridge Drive in State College. On March 15, 2001,
Nittany Bank purchased the building of the former Zimms
Restaurant on East College Avenue (Route 26) in State College,
Pennsylvania. Nittany Bank intends to operate a full financial
center on the site. The building will have a full service Nittany
branch office, an office of Nittany Asset Management and possibly
other tenants, which may include service related businesses, such
as, legal, insurance, and accounting businesses. The new office
is expected to open in the second half of 2001.

o Nittany Asset Management, Inc. was formed in May 1999 primarily
to offer various types of investment products and services. This
subsidiary is headquartered at 1276 North Atherton, State
College, Pennsylvania and began operations in November 1999.

Our business is conducted principally through Nittany Bank. Nittany
Bank provides a full range of banking services with emphasis on residential real
estate lending, consumer lending, commercial lending, and retail deposits. At
December 31, 2000, we had consolidated assets of $69.4 million, loans receivable
net of $43.4 million, deposits of $53.9 million, and stockholders' equity of
$6.4 million.

Our principal executive office is located at 116 East College Avenue,
State College, Pennsylvania 16801. Our telephone number is (814) 234-7320. We
maintain a website at http://www.nittanybank.com. Any information on our website
is not part of the offering.

THE OFFERING

Shares of common stock offered.......................... 210,000 shares (1)

Offering Price.......................................... $______ per share

Shares of common stock outstanding at
December 31, 2000.................................... 780,312 shares

Shares of common stock to be outstanding
after the offering................................... 990,312 (maximum) shares (1)

Purchase guidelines..................................... Through December 31, 2001, the common stock
will be offered in the following priorities.
Shareholders and customers of Nittany Bank as of
the date of this prospectus have first priority to
purchase shares in the offering. Any remaining
shares will be offered to the general public, with a
preference to persons residing in the State College
area. Our directors and executive officers plan to
purchase approximately ________ shares in the
offering and reserve the right to increase or
decrease the number of shares to be purchased.
See page __.

Use of proceeds......................................... We intend to use the proceeds to capitalize Nittany
Bank, which in turn will use such proceeds to
increase its working capital and total regulatory
capital.

Electronic bulletin board symbol........................ NTNY

Minimum subscription.................................... 250 shares (2)

Maximum subscription.................................... 10,000 shares (2)

Minimum to be sold in the offering...................... No minimum

Plan of Distributions................................... Nittany plans to offer shares of common stock,
through its officers and directors, to shareholders,
customers, persons and businesses in the State
College area and elsewhere in the Commonwealth
of Pennsylvania. Nittany may, in its sole
discretion, accept or reject any subscription, in
whole or in part. Funds received by Nittany from
a subscriber will be available to Nittany upon the
acceptance of the subscription. We intend to
conduct the first closing on or before June 30, 2001
and subsequent sequential closings on
approximately a monthly basis. Between closings,

all funds will be placed in an escrow deposit at
Nittany Bank. If Nittany elects not to accept a
subscription, all funds received from the subscriber
will be returned within 10 business days, without
interest. See pages __________.

- --------------------
(1) These figures do not include 95,154 shares issuable upon exercise of
outstanding stock options to employees, executive officers, and
directors with exercise prices of up to $9.09 per share.
(2) The minimum and maximum subscription may be waived on a case-by-case
basis by the Board of Directors. In addition, the total number of
shares that any person may purchase, when added to his existing
ownership, may not equal or exceed 10% of the shares outstanding at the
completion of this offering.

SELECTED CONSOLIDATED FINANCIAL DATA

You should read the following selected consolidated financial data in
conjunction with our consolidated financial statements and notes to those
financial statements elsewhere in this prospectus.

At and for the Year Ended December 31,
----------------------------------------------------------
2000 1999 1998 1997(1)
------ ------ ------ --------
(Dollars in Thousands)

Income Statement Data:
Total interest and dividend
income......................................... $4,172 $2,449 $ 187 $ --
Total interest expense............................. 2,491 1,455 95 --
------ ------ ------ -------
Net interest income................................ 1,681 994 92 --
------ ------ ------ -------
Provision for loan losses.......................... 157 99 100 --
Net interest income (loss) after provision
for loan losses................................. 1,524 895 (8) --
------ ------ ------- -------
Total non-interest income.......................... 264 171 13 --
Total non-interest expenses........................ 1,638 1,292 505 26
------ ------ ------ ------
Net income (loss) before
income taxes.................................... 150 (227) (500) 26
Income taxes....................................... -- -- -- --
------ ------ ------ -------
Net income (loss).................................. $ 150 $ (227) $ (500) $ (26)
====== ======= ====== =======

- --------------
(1) Financial information for 1997 represents the financial operations and
condition of Nittany prior to the formation of Nittany Bank. Nittany Bank
commenced operations on October 26, 1998.

At and for the Year Ended December 31,
-------------------------------------------------------------
2000 1999 1998 1997(1)
------ ------ ------ --------
(Dollars in Thousands, Except per Share Amounts)

Balance Sheet Data:
Total assets..................................... $ 69,420 $ 50,045 $ 24,791 $ 99
Total deposits.................................. 53,875 35,783 13,992 -
Investment securities (includes available for
sale and held to maturity).................... 19,397 17,072 13,151 -
Loans receivable, net............................ 43,416 27,980 4,424 -
Intangible assets (goodwill)..................... 847 894 942 -
Borrowings....................................... 8,600 8,600 5,000 -
Total stockholders' equity....................... 6,359 5,231 5,154 (26)
Total stockholders' equity before
accumulated other comprehensive loss.......... 6,508 5,777 5,184 (26)
Per Share Data:
Net income (loss) - basic....................... $ .19 $ (.36) $ (3.62) N/A
Net income (loss) - diluted.................... .19 (.36) N/A N/A
Book value (end of period)(2)(3)................ 8.15 7.97 8.93 N/A
Weighted average number of
shares outstanding -- basic.................. 772,998 635,180 138,049 N/A
Weighted average number of
shares outstanding -- diluted................ 776,244 635,180 N/A N/A
Selected Asset Quality Ratios:
Net loans charged-off as a percent of
average loans................................ .02% .06% .06% N/A
Total non-performing loans to net loans......... .09% - - -
Allowance for loan losses to total loans........ .79% .66% 2.18% N/A
Capital Ratios:
Tangible capital ............................... 8.24% 9.83% 18.72% N/A
Core capital.................................... 14.96% 17.17% 31.58% N/A
Total risk-based capital........................ 15.87% 17.80% 32.32% N/A

- --------------------
N/A - Not Applicable
(1) At or for the three month period ended December 31, 1997.
(2) Book value per share, excluding accumulated other comprehensive loss, was
$8.57, $8.57 and $8.98, respectively.
(3) Cash book value per share, excluding accumulated other comprehensive loss
and intangible assets, was $7.26, $7.44, and $7.35, respectively.

RISK FACTORS

Before you invest in our common stock, you should be aware that there
are various risks, including those described below. You should carefully
consider these risk factors, together with all the other information included in
this prospectus, before you decide whether to purchase shares of our common
stock.

Some of the information in this prospectus contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate" and "continue" or similar words. You should
read statements that contain these words carefully because they (1) discuss our
future expectations; (2) contain projections of our future results of operations
or of our financial condition; or (3) state other "forward-looking" information.
We believe it is important to communicate our expectations to our investors.
However, there may be events in the future that we are not able to accurately
predict or over which we have no control. The risk factors listed in this
section, as well as any cautionary language in this prospectus, provide examples
of risks, uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements.
Before you invest in our common stock, you should be aware that the occurrence
of the events described in these risk factors and elsewhere in this prospectus
could have a material adverse effect on our business, results of operations and
financial condition.

RISKS RELATED TO THE OFFERING

The Offering Price Does Not Necessarily Represent Current Market Value.
Since the issuance of the common stock by Nittany on October 23, 1998, Nittany
issued a 10% stock dividend in January 2001 and the sales prices have generally
ranged between $9.00 to $12.00 per share (not adjusted for the 10% stock
dividend issued). The offering price does not necessarily reflect the price at
which the common stock currently trades, nor does the offering price necessarily
reflect the price at which Nittany's common stock will trade following the
offering. No underwriter assisted us in determining the offering price.

We Have Not Engaged an Underwriter And May Not Sell All of The Shares
Offered. The offering is not underwritten, so we can provide no assurance that
we will sell all or any of the shares offered. We may sell any number of shares
in the offering without any minimum. We may terminate the offering after
accepting subscriptions for any number of shares less than the maximum. Once you
submit a subscription, we can hold your subscription funds in an non-interest
bearing account and accept or reject your subscription for any reason or no
reason. Our directors and officers have only limited experience in conducting an
offering of common stock.

RISKS RELATED TO OUR BUSINESS

Our Certificate of Incorporation and Bylaws Contain Certain Provisions
Which May Discourage Non-Negotiated Takeover Attempts and May Limit Your Voting
Power. Certain provisions included in our certificate of incorporation and
bylaws are designed to encourage potential acquirors to negotiate directly with
our board of directors and to discourage takeover attempts. These provisions,
which include restrictions on stockholders' ability to call special meetings,
require an 80% vote for certain business combinations and amendments to our
certificate of incorporation and bylaws and do not permit cumulative voting in
the election of directors, may discourage non-negotiated takeover attempts.
These provisions also tend to perpetuate management. You may determine that
these provisions are not in your best interest in as much as they may
substantially limit your voting power. See pages __ to __.

Future Changes in Interest Rates May Reduce Our Earnings. Our ability
to make a profit largely depends on our net interest income, which could be
negatively affected by changes in interest rates. Net interest income is the
difference between (1) the interest income we earn on interest-earning assets,
such as mortgage loans and investment securities and (2) the interest expense we
pay on our interest- bearing liabilities, such as deposits and amounts we
borrow.

If more interest-earning assets than interest-bearing liabilities
reprice or mature during a time when interest rates are declining, then our net
interest income may be reduced. If more interest-bearing liabilities than
interest-earning assets reprice or mature during a time when interest rates are
rising, then our net interest income may be increased. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Market Risk and Net Portfolio Value."

Fluctuations in interest rates are not predictable or controllable. We
have attempted to structure our asset and liability management strategies to
mitigate the impact of changes in market interest rates on our net interest
income. However, there can be no assurance that we will be able to manage
interest rate risk so as to avoid significant adverse effects in our net
interest income.

Our Lending Business Is Geographically Concentrated Which Could Reduce
Our Earnings and Effect Our Financial Condition. Our loan portfolio consists
almost entirely of loans to persons and businesses located in Pennsylvania and,
in particular, Centre County. The collateral for many of our loans consists of
real and personal property located in the same county. This lack of geographic
diversification in the loan portfolios could have a material adverse effect on
our financial condition and results of operation if a cyclical downturn or
natural disaster affected the local economy.

The Lending Business Has Inherent Risks. Nittany Bank is engaged
primarily in real estate mortgage lending and consumer lending. A significant
amount of the loans are secured by local commercial real estate, which is
considered to have a higher risk than home mortgages. The risk of nonpayment of
loans is inherent in the lending business. The ability of borrowers to repay
their obligations can be adversely affected by factors beyond our control,
including local and general economic and market conditions. A substantial
portion of our loans are secured by real estate. These same factors may
adversely affect the value of real estate collateral. We maintain an allowance
for loan losses and periodically make additional provisions to the allowance to
reflect the level of losses determined by management to be inherent in the loan
portfolio. However, the level of the allowance and the amount of these
provisions are only estimates based on our judgment, and we can provide no
assurance that actual losses incurred will not exceed the amount of the
allowance or require substantial additional provisions to the allowance.

We Have a Short Operating History. At December 31, 2000, Nittany Bank
has been operating for approximately two years. We cannot assure you that we
will continue to increase in asset size at the rate we have grown since
inception on October 26, 1998, or that results of future operations can be
predicted.

We Do Not Currently Pay Cash Dividends. Our ability to pay cash
dividends in the future will depend on our profitability, growth, capital needs
and compliance with regulatory capital requirements. The Board of Directors
currently intends to retain earnings, if any, to support growth and has no
intention of paying cash dividends in the foreseeable future. We cannot assure
you as to when or whether we will pay a cash dividend or the amount of the
dividend.

We Face Strong Competition. Competition may have an adverse effect on
us. In Centre County, Pennsylvania, large regional financial institutions
headquartered outside of the area dominate the banking

industry. These large regional financial institutions have greater resources for
marketing, development of services and products than we have, and they may enjoy
greater economies of scale.

Our Operations Could Be Significantly Curtailed By Our Regulators.
Because Nittany Bank is a de novo bank, we must maintain a ratio of Tier I
capital to average assets of at least 8% for a period of three years, from the
opening of Nittany Bank on October 26, 1998. If we do not maintain such a ratio,
our operations could be significantly curtailed by our regulators. At December
31, 2000, Nittany Bank's Tier I capital to average assets was 8.24%.

We Are Subject to Extensive Regulation Which Could Affect Our
Operations. In November 1999, the President signed into law the
Gramm-Leach-Bliley Financial Services Modernization Act of 1999. This
legislation is intended to modernize the financial services industry by
establishing a comprehensive framework to permit affiliations among commercial
banks, insurance companies, securities firms and other financial service
providers. Since the legislation now permits banks, securities firms and
insurance companies to affiliate, the financial services industry may experience
further consolidation. This could result in a growing number of larger financial
institutions that offer a wider variety of financial services than we currently
offer and that can aggressively compete in the markets we currently serve. This
could adversely impact our profitability.

The Amount of Common Stock Held by Our Executive Officers and Directors
Gives Them Significant Influence over the Election of Our Board of Directors and
Other Matters That Require Stockholder Approval. A total of approximately
__________ shares of our common stock (including vested stock option), or _____%
of the common stock outstanding (assuming 210,000 shares are sold in this
offering resulting in 990,312 shares outstanding), is expected to be
beneficially owned by our directors and executive officers following this
offering. Therefore, if they vote together, our directors and executive officers
have the ability to exert significant influence over the election of our Board
of Directors and other corporate actions requiring stockholder approval,
including the adoption of proposals made by stockholders. See page ____.

Our Stock Price May Fluctuate Significantly. In recent years the stock
market in general and the market for shares of small capitalization stocks in
particular have experienced significant price fluctuations, which have often
been unrelated to the operating performance of affected companies. These
fluctuations could have a material adverse effect on the market price of our
common stock.

An underwriter is permitted to take certain steps to limit the
volatility of a stock's market price after completion of an offering. Without an
underwriter, we will have little or no control over the volatility of the market
price for our common stock after the offering.

USE OF PROCEEDS

If we sell all of the shares offered, gross proceeds will be
$_________. We estimate expenses of the offering at approximately $__________,
leaving maximum net proceeds of $__________. If we sell less than all of the
shares offered, proceeds will be lower. The offering is not subject to the sale
of any minimum number or dollar amount of shares.

Nittany intends to retain all proceeds received in the offering and to
invest all of the capital in Nittany Bank. The funds will be used to increase
Nittany Bank's working capital and total regulatory capital. If we sell all the
shares being offered, Nittany Bank will increase its loan to one-borrower limit
to approximately $1.1 million.

Proceeds retained by Nittany will initially be invested in government
securities or other permitted investments and ultimately used in the discretion
of the Board of Directors. We cannot assure you that we will succeed in selling
all or any portion of the shares being offered.

CAPITALIZATION

The following table sets forth the capitalization and capital ratios of
Nittany at December 31, 2000, and as adjusted to give pro forma effect to the
offering assuming sale of the 210,000 shares offered hereby:

At December 31, 2000
--------------------------------
As Adjusted
Actual for the Offering
------ ----------------
(Dollars in Thousands)

Preferred stock, 5,000,000 shares authorized; none outstanding............... $ - $
Common stock, $.10 par value, 10,000,000 shares authorized;
shares outstanding: 780,312 at December 31, 2000 and
990,312 as adjusted....................................................... 78
Additional paid-in capital................................................... 7,652
Retained deficit ............................................................ (1,222)
-------
Stockholders' equity before accumulated other comprehensive loss............. 6,508
Accumulated other comprehensive (loss) (1)................................... (149)
------
Total stockholders' equity .................................................. $ 6,359 $
=======
(1) Represents unrealized loss on securities available for sale.
Capital Ratios:
Tangible capital ......................................................... 8.24% %
Core capital.............................................................. 14.96% %
Total risk-based control.................................................. 15.87% %

The table above assumes that Nittany will immediately pay estimated
expenses of $______ and invest net proceeds in U.S. Treasury securities with a
0% risk factor for regulatory capital purposes. The table above does not reflect
shares of common stock that would be issued upon exercise of outstanding stock
options. See "Management - Stock Option Plan."

DETERMINATION OF OFFERING PRICE

The Board of Directors of Nittany determined the offering price for the
shares of common stock offered after considering several factors, including
recent trading prices of the common stock, book value per share, earnings per
share, historical results of operations, assessment of our management and
financial condition and market activity of stock for other financial
institutions. The offering price does not necessarily reflect the price at which
the common stock currently trades, nor does the offering price necessarily
reflect the price at which the common stock will trade following the offering.
Because the offering is expected to take place over a period of 60 days and as
long as 210 days, the market price for the common stock could vary during the
offering.

TRADING HISTORY AND DIVIDENDS

Trading History

Nittany's common stock is listed on the Electronic Bulletin Board under
the symbol "NTNY." E.E. Powell & Co., Inc., Ryan Beck & Co., and Tucker Anthony,
Inc. have acted as market makers for the common stock. These market makers have
no obligation to make a market for Nittany's common stock, and they may
discontinue making a market at any time.

The information in the following table indicates the high and low
closing prices for the common stock, based upon information provided by the
market makers. These quotations reflect inter-dealer prices, without retail
mark-up, markdown, or commission, do not reflect actual transactions, and do not
include nominal amounts traded directly by shareholders or through other dealers
who are not market makers.

On January 1, 2001, Nittany issued a 10% stock dividend to stockholders
of record as of December 1, 2000. Market prices for 2000 and 1999, set forth in
the table below, have been adjusted for the stock dividend issued by Nittany on
January 1, 2001.

High Low
---- ---
2001
- ----
April 1, 2001 to _____________.......................
First Quarter........................................

2000
- ----
Fourth Quarter....................................... 9.55 7.84
Third Quarter........................................ 8.86 7.72
Second Quarter....................................... 9.32 8.20
First Quarter........................................ 9.55 8.64

1999
- ----
Fourth Quarter....................................... 10.23 8.64
Third Quarter........................................ 10.68 9.55
Second Quarter....................................... 10.68 9.44
First Quarter........................................ 10.23 9.44

On __________ __, 2001, the last reported sale price of the common
stock on the Electronic Bulletin Board was $______ per share. As of __________
__, 2001, we had approximately 600 shareholders, which included the number of
persons or entities who held stock in nominee or "street" name through various
brokerage firms.

Dividend Policy and History

We currently have no intention of paying cash dividends in the
foreseeable future. Instead, we intend to consider the periodic issuance of
stock dividends. Payment of cash dividends is conditioned on earnings, financial
condition, cash needs, the discretion of the Board of Directors and compliance
with regulatory requirements. Our ability to pay dividends to stockholders is
dependent upon the dividends we receive from Nittany Bank. Nittany Bank may not
declare or pay a cash dividend on any of its stock if the effect of such payment
would cause its regulatory capital to be reduced below the regulatory
requirements imposed by the OTS.

HOW TO SUBSCRIBE

General

To invest, you must purchase at least 250 shares for a minimum
investment of $______ (unless waived on a case-by-case basis by the Board of
Directors). Once you submit a completed subscription to us, you may not withdraw
it. We reserve the right to accept individual subscriptions for fewer than 250
shares in our discretion. The offering is not underwritten and is not
conditioned on the sale of any minimum number of shares. Our directors and
executive officers intend to purchase approximately ________ shares in the
offering. However, they reserve the right to increase or decrease the number of
shares they plan to purchase.

Only the directors and officers of Nittany and its subsidiaries have
the authority to solicit subscriptions for shares. Our directors and officers
intend to solicit by means of personal and telephone contact with prospective
subscribers and by direct mailing of the prospectus. We may reimburse our
directors and officers for their reasonable expenses, if any, incurred in
connection with the selling of shares.

Purchase Guidelines

In connection with this offering, through December 31, 2001, Nittany
has generally established the following guidelines.

1. Stockholders of record and customers of Nittany Bank as of the
date of this prospectus will be given the first opportunity to
purchase stock. In the event of an oversubscription by current
stockholders, the stock will be allocated pro-ratably in
proportion to their current ownership in Nittany. In the event
of an oversubscription by customers, orders will be filled in
the order they are received.

2. Any remaining shares will be offered to the general public,
with a preference given to natural persons residing in the
State College area.

Notwithstanding the above guidelines, Nittany reserves the right to
reject any order in part or in whole.

Restrictions

Only persons who have received a copy of this prospectus may subscribe.
No investor may purchase, directly or indirectly, shares which together with any
shares previously held by the investor

equal or exceed 10% of the Nittany common stock to be outstanding immediately
following completion of the offering. In addition, except with our consent, no
investor may purchase in the offering, directly or indirectly, more than 10,000
shares of our common stock in the offering.

Application for Common Stock

The prospectus includes Appendix A, the Stock Subscription Application,
and is accompanied by a Stock Subscription Application. You may subscribe to
purchase shares by mailing or delivering to us:

o a completed and signed application; and
o a check payable to "Nittany Bank, Escrow Agent for Nittany
Financial Corp." in the amount of the purchase price.

We can accept or reject applications in whole or in part for any
reason. We will notify you in writing whether we have accepted your application
within ten business days after receipt of your application. If we reject your
application in whole or in part, we will return your unaccepted funds.

We will deposit all subscription funds in a non-interest-bearing escrow
account at Nittany Bank. Any funds in the escrow account are insured by the FDIC
up to a maximum of $100,000 per purchaser; however, our common stock is not
insured by the FDIC or any other agency.

The first closing is expected to occur on or before June 30, 2001.
Thereafter, on approximately a monthly basis, we will conduct a closing at our
premises. At each closing, at our request Nittany Bank will release to us funds
in the escrow account attributable to accepted applications. Within 10 business
days after each closing, we will mail to each of you whose application we have
accepted a stock certificate, registered in your name or as directed by you, for
the shares you have purchased.

We plan to keep the offering open for 60 days, but we may terminate it
early or extend it until December 31, 2001. If for any reason we terminate the
offering without accepting any applications, we will send to each of you who has
submitted an application a written notice and a refund of the amount you
submitted on those funds while on deposit in the impound account.

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

General

We are a holding company organized in 1997 for the purpose of
establishing a de novo community bank in State College, Pennsylvania. Nittany
Bank commenced operations as a wholly-owned FDIC- insured federal savings bank
subsidiary of Nittany on October 26, 1998. At December 31, 2000, the business
operations of Nittany included two operating subsidiaries as follows:

On December 9, 2000, Nittany Bank signed an agreement to purchase the
building of the former Zimms Restaurant on East College Avenue (Route 26) in
State College, Pennsylvania, subject to various zoning and regulatory approvals.
Nittany Bank intends to operate a full financial center on the site. The
building will have a full service Nittany branch office, an office of Nittany
Asset Management and possibly other tenants, which may include service related
businesses, such as, legal, insurance, and accounting businesses. The closing
date for the purchase was March 15, 2001 and the new office is expected to open
in the second half of 2001.

Our business is conducted principally through Nittany Bank. Nittany
Bank provides a full range of banking services with an emphasis on residential
and commercial real estate lending, consumer lending, commercial lending, and
retail deposits. At December 31, 2000, we had consolidated assets of $69.4
million, loans receivable net of $43.4 million, deposits of $53.9 million, and
stockholders' equity of $6.4 million.

Market Risk and Net Portfolio Value

Market risk is the risk of loss of income from adverse changes in
prices and rates that are set by the market. We are at risk of changes in
interest rates that affect the income we receives on lending and investment
activities, as well as the costs associated with its deposits and borrowings. A
sudden and substantial change in interest rates may affect our earnings if the
rates of interest that we earn on our loans and investments does not change at
the same speed, to the same extent or on the same basis as the interest rates we
pay on our deposits and borrowings. We make it a high priority to actively
monitor and manage our exposure to interest rate risk.

We seek to manage interest rate sensitivity through our asset and
liability committee which is comprised of members of management and the board of
directors. The committee accomplishes this by first evaluating the interest rate
risk that is inherent in the makeup of our assets and liabilities. Then, the
committee considers our business strategy, current operating environment,
capital and liquidity requirements, as well as its current performance
objectives, and determine an appropriate level of risk. The Board of Directors
has adopted guidelines within which we manage our interest rate risk, trying to
minimize to the extent practical its vulnerability to changes in interest rates.
These strategies include focusing on our investment activities on short and
medium-term securities, emphasizing shorter-term loans and loans with adjustable
rate features and maintaining and increasing the transaction deposit accounts,
as these accounts are considered to be relatively resistant to changes in
interest rates and utilizing deposit marketing programs to adjust the term or
repricing of its liabilities.

We also monitors our interest rate sensitivity through the use of a
model which estimates the change in its net portfolio value ("NPV") in the event
of a range of assumed changes in market interest rates. Net portfolio value is
defined as the current market value of assets, less the current market value of
liabilities, plus or minus the current value of off-balance sheet items. The
change in NPV measures Nittany Bank's vulnerability to changes in interest rates
by estimating the change in the market value of its assets, liabilities and
off-balance-sheet items as a result of an instantaneous change in the general
level of interest rates.

As market interest rates decrease, the average maturities of loans and
investment securities shorten due to quicker prepayments, causing an increase in
their value. Deposit accounts have only relatively minor movements in a
declining interest rate environment, since they are primarily short term in
nature, resulting in the value of deposits decreasing more quickly than the
value of assets increase.

The following table lists the percentage change in our net portfolio
value assuming an immediate change in interest rates of plus or minus up to 300
basis points from the level at December 31, 2000. All loans and investments
presented in this table are classified as held to maturity or available for
sale.

Change in Interest
Rates in Basis Points Net Portfolio Value
(Rate Shock) Amount $ Change % Change
------------ ------ -------- --------
300 6,010 (728) -11
200** 6,378 (360) -5
100 6,639 (98) -1
0 6,739
(100) 6,389 (348) -5
(200) 6,160 (578) -9
(300) 6,117 (621) -9

** Denotes rate shock used to compute the NPV capital ratios.

As market interest rates rise, the average maturities of loans and
securities lengthen as prepayments decrease. Decreases in the value of these
loans and securities occur at a more rapid rate in Nittany Bank's NPV model than
increases in the value of its deposits. The slow increase in the value of
Nittany Bank's deposits in a rising interest rate environment is due to the high
concentration of time deposits in the deposit base which have terms of one year
or less.

The NPV model, shown above, which is prepared by the OTS, has certain
shortcomings. Based on the model, certain assumptions are made that may or may
not actually reflect how actual yields and costs will react to market interest
rates. For example, the NPV model assumes that the makeup of its interest rate
sensitive assets and liabilities will remain constant over the period being
measured. Thus, although using such a model can be instructive in providing an
indication of the bank's exposure to interest rate risk, we cannot precisely
forecast the effects of a change in market interest rates, and the results
indicated by the model are likely to differ from actual results.

Comparison of Financial Condition

Total assets increased $19,376,000, or 38.7%, to $69,420,000 at
December 31, 2000 from $50,045,00 at December 31, 1999. A strong real estate
market and the growing market awareness of Nittany Bank, resulted in a net
increase in loans receivable of $15,600,000 that was primarily supported with
growth in deposit accounts of $18,100,000.

Cash and cash equivalents increased $1,176,000 to $4,234,000 at
December 31, 2000 from $3,058,000 at December 31, 1999. The increase resulted
from temporary fluctuations with interest- bearing deposits with other banks due
to the timing of customer activity. Management believes that our liquidity needs
are satisfied by the current balance of cash and cash equivalents, readily
available access to traditional funding sources, FHLB advances, and the portion
of the investment and loan portfolios that mature within one year. These sources
of funds will enable us to meet cash obligations and off-balance sheet
commitments as they come due.

Investment securities available for sale decreased $547,000 to
$14,850,000 at December 31, 2000 from $15,397,000 at December 31, 1999. The
decrease primarily reflects proceeds from principal repayments and maturities of
$994,000 offset by an increase in market value (before tax) of $447,000.

Investment securities held to maturity increased $2,862,000 to
$4,537,000 at December 31, 2000 from $1,675,000 at December 31, 1999. Such
increase reflects purchases of mortgage-backed securities. As a result, the
overall yield on the mortgage-backed securities portfolio increased from 6.12%
at December 31, 1999 to 6.27% at December 31, 2000.

Net loans receivable increased to $43,416,000 at December 31, 2000 from
$27,980,000 at December 31, 1999. The increase in net loans receivable resulted
from the economic health of our market area and the strategic, service-oriented
marketing approach taken by management to meet the lending needs of the area.
The majority of lending activity continues to be mortgage loans secured by
one-to-four family residential property. Residential real estate, construction,
and home equity loans make up 68.1% of the total loan portfolio. During 2000,
commercial real estate and commercial loans grew to $12,000,000 from $4,000,000,
and currently account for 27.5% of the total loan portfolio. Management
attributes the increases in residential owner occupied and non-owner occupied
and commercial properties to continued customer referrals and our overall
relationship with our customers. As of December 31, 2000, we had additional
commitments to fund loan demand of $4,700,000 of which approximately $2,000,000
relates to commercial and commercial real estate.

The allowance for loans is increased by provisions for loan losses,
which is charged against earnings, and is reduced by charge-offs and increased
by recoveries. At December 31, 2000, the allowance for loan losses increased
$157,000 to $344,000 from $187,000 at December 31, 1999. This increase was
primarily due to the growth of commercial real estate loans and the commercial
loan portfolios. The increased allowance resulted from a loan loss provision of
$157,000, charge-offs of $3,000 and recoveries of $3,000 during the year.

The additions to the allowance for loan losses is based upon a
determination by management that it believes is appropriate. Due to our lack of
historical experience since we are newly formed, management bases its
determination upon such factors as the volume and type of loans that we
originate, the amount and trends relating to its delinquent and non-performing
loans, regulatory policies, general economic conditions and other factors
relating to the collectibility of loans in its portfolio. Although we maintain
the allowance for loan losses at a level that we consider to be adequate to
provide for the inherent risk of loss in our loan portfolio, there can be no
assurance that additional losses will not be required in future periods.

At December 31, 2000, liabilities increased $18,248,000 to $63,061,000
from $44,813,000 at December 31, 1999. Of this increase, at December 31, 1999,
deposits increased $18,092,000 to $53,875,000 from $35,783,000 at December 31,
1999. Such increase was primarily the result of increases in time and savings
deposits of $8,922,000 and $4,619,000, respectively, since we were highly
competitive

with certain deposit products during the year. Additionally, we completed a
successful effort to lengthen the maturities of its deposit base by growing one
to three year certificates of deposit by $7,700,000 for the period while
partially being offset by a slight decline in short-term certificates of
deposit.

Stockholder's equity increased to $6,360,000 at December 31, 2000 from
$5,231,000 at December 31, 1999 as a result of net income of $150,000, the sale
of 52,913 shares of common stock resulting in net proceeds of $581,000, and a
decline in accumulative other comprehensive loss, net of taxes, of $397,000. On
October 26, 2000, the Board of Directors declared a 10% stock dividend on our
outstanding common stock, which was issued on January 1, 2001, to stockholders
of record as of December 1, 2000.

Results of Operations

We recorded net income of $150,000 for the year ended December 31, 2000
as compared to a net loss of $227,000 for the year ended December 31, 1999. This
increase in net income was due to the significant growth in net interest income
of $687,000 and noninterest income of $93,000 while offset by increases in
noninterest expense and the provision for loan losses of $345,000 and $58,000,
respectively. Basic and diluted earnings per share increased to $.19 per share
for the year ended 2000 from a loss per share of $.39 for the year ended 1999.

Net interest income for the year ended December 31, 2000 increased
$687,000 to $1,681,000 from $994,000 for the same period ended 1999. Interest
income increased $1,723,000 for the year ended 2000 as compared to the prior
year and was influenced mainly by increases in interest earned on loans
receivable and investment securities of $1,598,000 and $135,000, respectively.
Although there was an increase in general interest rate levels during these
periods, interest income was primarily driven by increases in average balances
of interest-earning assets. The average balance of loans receivable increased
$18,400,000 to $35,600,000 during 2000, when compared to $17,200,000 for the
year ended 1999. The yield on interest earning assets increased to 7.60% for the
year ended 2000 from 6.67% for the year ended 1999 and was mainly driven by a 44
basis point and 65 basis point increase in loans receivable and investment
securities, respectively. See "Average Balance Sheet and Rate/Volume Analysis."

Interest expense increased $1,036,000 by the year ended December 31,
2000 to $2,491,000 from $1,455,000 for the same period ended 1999. Interest
incurred on deposits and FHLB advances increased $866,000 and $170,000,
respectively, for the year ended 2000 as compared to the same period ended 1999.
This increase was primarily attributable to a $15,300,000 increase in the
average balance of interest-bearing deposits to $39,500,000 for the year ended
2000 from $24,200,000 for the year ended 1999. Specifically, the average
principal balances of certificates of deposit and demand deposit accounts
increased $8,200,000 and $5,500,000, respectively. Furthermore, the rising
interest rate environment resulted in the cost of funds increasing to 5.22% for
the year ended December 31, 2000 from 4.62% for the year ended 1999. See
"Average Balance Sheet and Rate/Volume Analysis."

Average Balance Sheet. The following table sets forth certain
information relating to us for the periods indicated. The average yield and
costs are derived by dividing income or expense by the average balance of assets
or liabilities, respectively for the periods presented. Average balances are
derived from average daily balances.

For the Period Ended December 31,
----------------------------------------------------------------------------
2000 1999
----------------------------------- --------------------------------------
Average Average Average Average
Balance Interest Yield/Cost Balance Interest Yield/Cost(3)
------- -------- ---------- ------- -------- -------------
(Dollars in thousands)

Interest-earning assets:
Loans receivable.............................. $ 35,560 $ 2,935 8.25% $ 17,127 $1,338 7.81%
Investments securities........................ 17,141 1,147 6.69% 16,756 1,012 6.04%
Interest-bearing deposits with other banks.... 2,189 90 4.11% 2,813 99 3.54%
-------- -------- -------- ------
Total interest-earning assets................... 54,890 4,172 7.60% 36,696 2,449 6.67%
-------- ------
Noninterest-earning assets...................... 3,277 1,658
Allowance for loan losses....................... (256) (122)
-------- --------
Total assets.................................... $ 57,911 $ 38,232
======== ========
Interest-bearing liabilities:
Interest-bearing demand deposits.............. $ 5,740 141 2.46% $ 3,480 73 2.11%
Money market deposits......................... 15,109 757 5.01% 11,837 583 4.93%
Savings deposits.............................. 3,135 137 4.37% 1,557 53 3.38%
Certificates of deposit....................... 15,514 924 5.96% 7,331 383 5.23%
Advances from FHLB............................ 8,208 532 6.48% 7,290 363 4.97%
-------- -------- -------- ------
Total interest-bearing liabilities.............. 47,706 2,491 5.22% 31,495 1,455 4.62%
-------- -------- -------- ------
Noninterest-bearing liabilities
Demand deposits............................... 2,523 1,793
Other liabilities............................. 1,817 247
Stockholders' equity............................ 5,865 4,697
-------- --------
Total liabilities and stockholders' equity...... $ 57,911 $ 38,232
======== ========
Net interest income............................. $ 1,681 $ 994
======== ======
Interest rate spread (1)........................ 2.38% 2.05%
Net yield on interest-earning assets(2)......... 3.06% 2.71%
Ratio of average interest-earning assets to
average interest-bearing liabilities........... 115.06% 116.51%

- ----------------
(1) Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(2) Net yield on interest-earning assets represents net interest income as a
percentage of average interest-earning assets.
(3) Average yields are computed using annualized interest income and expense
for the periods.

Rate/Volume Analysis. The following table sets forth certain
information regarding changes in our interest income and interest expense for
the periods indicated. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable to
(i) changes in volume (changes in average volume multiplied by old rate) and
(ii) changes in rate (changes in rate multiplied by old volume). Increases and
decreases due to both rate and volume, which cannot be separated, have been
allocated to the change due to volume.

Year Ended December 31,
------------------------------
2000 vs. 1999
------------------------------
Increase (Decrease)
Due to
------------------------------
Volume Rate Total
------ ---- -----
(In Thousands)
Interest-earning assets:
Loans receivable .............................. $ 1,440 $ 157 $ 1,597
Investment securities ......................... 23 112 135
Interest-bearing deposits with other banks .... (22) 13 (9)
------- ------- -------
Total interest-earning assets ............... $ 1,441 $ 282 $ 1,723
======= ======= =======

Interest-bearing liabilities:
Interest-bearing demand deposits ............. $ 48 $ 20 $ 68
Money market ................................. 161 12 173
Savings deposits ............................. 53 31 84
Certificates of deposit ...................... 428 113 541
Advances from FHLB ........................... 46 124 170
------- ------- -------
Total interest-bearing liabilities ......... $ 736 $ 300 $ 1,036
======= ======= =======

Increase (decrease) in net interest income .... $ 705 $ (18) $ 687
======= ======= =======

Total noninterest income for the year ended December 31, 2000 increased
to $264,000 from $171,000 for the year ended 1999. Noninterest income items are
primarily comprised of service charges and fees on deposit account activity,
along with fee income derived from asset management services and related
commissions. Service fees on deposit accounts increased $48,000 and have
progressively increased during each quarter as the number of accounts and volume
of related transactions have increased. Additionally, for the year ended 2000,
Nittany Asset Management contributed approximately $43,000 in commission and
management fees.

Total noninterest expenses increased to $1,638,000 for the year ended
December 31, 2000 from $1,293,000 for 1999. The increase in total noninterest
expenses for the current year is primarily related to operating a larger
organization that resulted from the opening of an additional branch during the
third quarter of 2000, as well as the related marketing efforts to increase
visibility within our market. Salary and benefits costs increased in connection
with the new branch office, as three full-time employees were hired. In
addition, occupancy and equipment expenses increased as well due to the new
branch operations. Nittany Asset Management operations also contributed
approximately $49,000 of other operating expense.

Liquidity and Capital Resources

Our primary sources of funds are customer deposits, proceeds from
principal and interest payments on loans, proceeds from maturities, sales and
repayments of investment securities and FHLB advances. While maturities and
scheduled amortization of loans are a predictable source of funds, deposit flows
and mortgage prepayments are greatly influenced by general interest rates,
economic conditions and competition. Management monitors liquidity daily, and on
a monthly basis incorporates liquidity management into its asset/liability
management program.

We must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to support loan growth and deposit withdrawals,
to satisfy financial commitments and to take advantage of investment
opportunities. We generally maintain sufficient cash and short-term investments
to meet short- term liquidity needs. At December 31, 2000, cash and
interest-bearing deposits with other Bank's totaled $4,200,000 or 6.1% of total
assets, and investment securities classified as available for sale totaled
$14,800,000 or 21.4% of total assets. We maintain a credit facility with the
FHLB of Pittsburgh, which provides for immediately available advances. Advances
under this credit facility totaled $8,600,000 at December 31, 2000. In addition,
we have access to funds through the discount window at the Federal Reserve Bank.

At December 31, 2000, we had loan and lines of credit commitments
totaling $4,600,000. We anticipate that we will have sufficient funds available
to meet our current loan origination commitments. Time certificates of deposit
that are scheduled to mature in less than one year from December 31, 2000
totaled $11,700,000. We expect that we will retain a majority of maturing
certificates accounts.

Nittany Bank is required to maintain specific amounts of capital
pursuant to OTS requirements. As of December 31, 2000, Nittany Bank was in
compliance with all applicable regulatory capital requirements. See Footnote 12
to the Financial Statements.

Net cash provided by operating activities for the year ended December
31, 2000 increased $217,000 to $341,000 from $124,000 for the same period in
1999. The increase for the year ended December 31, 2000 was primarily due to net
income of $150,000 compared to a net loss of $227,000 for the year ended 1999.

Net cash used for investing activities for the year ended December 31,
2000 decreased $11,367,000 to $17,839,000 from $29,207,000 for the year ended
December 31, 1999. Such decrease in funds reflects a decrease of $8,070,000 in
loan originations and net purchases of investment securities available for sale
of $4,542,000 offset by net purchases of investment securities held to maturity
of $645,000.

Net cash provided by financing activities for the year ended December
31, 2000 decreased $7,538,000 to $18,673,000 from $26,211,000 for the year ended
December 31, 1999. Such decrease in receipt of funds is primarily due to
decreases in deposits of $3,699,000, net funds received from advances and
borrowings of $3,600,000, and $239,000 of net proceeds received from the sale of
common stock.

BUSINESS

Nittany Financial Corp. We were incorporated under the laws of the
Commonwealth of Pennsylvania on December 8, 1997, primarily to own all of the
outstanding shares of capital stock of Nittany Bank. On September 14, 1998, the
Office of Thrift Supervision, referred to as the "OTS", granted

us the necessary approvals to acquire the capital stock of Nittany Bank and to
become a savings and loan holding company of Nittany Bank. Nittany Bank opened
for business on October 26, 1998, and currently has three branches in State
College, Pennsylvania.

We initially issued 29,998 shares of Common Stock at $10.00 per share
in a private offering in order to pay our pre-opening costs and offering
expenses of our initial public offering in August 1998. The initial public
offering was primarily for the purpose of raising the funds necessary to
capitalize Nittany Bank. We sold a total of 537,438 shares of common stock in
the initial public offering and issued 10,000 shares to First Commonwealth Bank
in connection with the branch acquisitions, as described below. Effective as of
October 23, 1998, we purchased with all of the proceeds received in the initial
public offering all of the capital stock of Nittany Bank.

On March 31, 2000, we completed a stock offering and sold 131,953
shares of common stock to existing shareholders of Nittany, customers of Nittany
Bank, and the general public. We raised approximately $1.5 million in gross
proceeds.

We are a unitary savings and loan holding company which, under existing
laws, generally is not restricted in the types of business activities in which
it may engage provided that Nittany Bank retains a specified amount of its
assets in housing-related investments. We currently conduct no significant
business or operations of our own other than owning all of the outstanding
shares of capital stock of Nittany Bank and Nittany Asset Management, Inc.

Nittany Asset Management Company. On May 24, 1999, Asset Management
Company was formed and incorporated as a Pennsylvania corporation. Nittany Asset
Management Company is a wholly- owned subsidiary of Nittany and was formed to
engage in the offering of various types of investment services. Asset Management
Company began operations in November 1999 to provide investment advisory
services to high net worth or emerging affluent clients, with an emphasis on
establishing fee based asset management accounts.

Nittany Bank. On April 7, 1998, the organizers of Nittany filed an
application with the OTS to organize us as a federal stock savings bank. On
September 14, 1998, the OTS conditionally approved the application, and we
obtained all necessary regulatory approvals to commence banking operations.
Effective as of October 23, 1998, we sold our capital stock to Nittany and
commenced banking operations on October 26, 1998. Our deposit accounts are
insured by the Federal Deposit Insurance Corporation and we are a member of the
Federal Home Loan Bank System.

Effective as of October 23, 1998, we also acquired from First
Commonwealth Bank two branch offices, certain assets and the assumption of
certain deposit liabilities primarily related to First Commonwealth's branch
offices, located at 116 East College Avenue and, 1276 North Atherton Street. On
August 7, 2000, a third branch office was opened at 129 Rolling Ridge Drive,
State College, Pennsylvania.

On March 15, 2001, we purchased the building of the former Zimms
Restaurant on East College Avenue (Route 26) in State College, Pennsylvania. We
intend to operate a full financial center on the site. The building will have a
full service Nittany Bank branch office, an office of Nittany Asset Management
and possibly other tenants, which may include service related businesses, such
as, legal, insurance, and accounting businesses. The new office is expected to
open in the second half of 2001.

We are a community-oriented financial institution. Our business is to
attract retail deposits and to invest those deposits, together with funds
generated from operations and borrowings, primarily in one- to four-family
mortgage loans and small business real estate loans. To a lesser extent, we
invest in home equity loans, construction loans, commercial business loans and
consumer loans. Our deposit base is comprised of traditional deposit products
including checking accounts, statement savings accounts, money market accounts,
certificates of deposit and individual retirement accounts.

Market Strategy. Our objective is to create a customer-driven financial
institution focused on providing value to customers by delivering products and
services matched to the customers' needs. We believe that customers are drawn to
a locally owned and managed institution that demonstrates an active interest in
its customers and their business and personal financial needs.

The banking industry in our market area has experienced substantial
consolidation in recent years. Many of the area's locally owned or managed
financial institutions have either been acquired by large regional bank holding
companies or have been consolidated into branches. This consolidation has been
accompanied by increasing fees for bank services, the dissolution of local
boards of directors, management and personnel changes and, in the perception of
management, a decline in the level of customer service. With recent changes in
regulations and the banking industry, this type of consolidation is expected to
continue.

Operating Strategy. We believe that the following attributes make us
attractive to the local business people and residents:

o Direct and easy access to our President, officers and directors,
by members of the community, whether during or after business
hours.

o Local conditions and needs are taken into account by us when
deciding loan applications and making other business decisions
affecting members of the community.

o A personalized relationship banking approach that is supported by
decision making that is local and responsive to customer needs.

o Offering competitive interest rates and fees on passbook and
checking accounts.

o Prompt review and processing of loan applications.

o Depositors' funds are invested back into the community.

o Our positive involvement in the community affairs of State
College.

o Technology based services that enhance the convenience for our
customers to conduct business.

o Availability of a wide array of financial services coordinated by
a team of personal bankers dedicated to meeting customer needs.

Competition. We experience substantial competition both in attracting
and retaining deposits and in making loans. Our most direct competition is in
our market area of Centre County (which includes the borough of State College
and the surrounding townships of College, Ferguson, Halfmoon, Harris and

Patton) which is a highly competitive market for financial services. We face
direct competition from a significant number of financial institutions operating
in its market area, many with a state-wide or regional presence and in some
cases a national presence. Many of these financial institutions have been in
business for many years, have established customer bases, are significantly
larger and have greater financial resources than we have and are able to offer
certain services that we currently are not able to offer. In particular, Centre
County, is served almost entirely by large, regional financial institutions,
almost all of which are headquartered out of the area. These financial
institutions include Mellon Bank, NA (Pittsburgh, PA), Sovereign Bank (Reading,
PA), Northwest Savings Bank (Warren, PA), PNC Bank (Pittsburgh, PA), First
Commonwealth Bank (Indiana, PA), Omega Bank (State College, PA), M & T Bank
(Buffalo, NY), Reliance Bank (Altoona, PA) and U.S. Bank (Johnstown, PA). The
area also includes Corning Employees Credit Union, Penn State Federal Credit
Union, SPE Federal Credit Union and State College Federal Credit Union. Nittany
Bank is the only FDIC-insured financial institution headquartered and operated
solely in State College. We also compete for deposits and loans from non-bank
institutions such as brokerage firms, credit unions, insurance companies, money
market mutual funds and mortgage banking companies.

Lending Activities

Analysis of Loan Portfolio. Set forth below is selected data relating
to the composition of our loan portfolio by type of loan and in percentage of
the respective portfolios at the dates indicated.

At December 31,
------------------------------------
2000 1999
--------------- ----------------
Amount Percent Amount Percent
------ ------- ------ -------
Type of Loans: (Dollars in Thousands)
- --------------
Real Estate Loans:
One- to- four family.................. $25,115 57.39% $15,490 54.98%
Commercial ........................... 9,249 21.13 6,504 23.09
Home equity........................... 3,078 7.03 2,377 8.44
Construction.......................... 1,606 3.67 747 2.65
Commercial.............................. 2,799 6.39 1,638 5.81
Consumer ............................... 1,923 4.39 1,417 5.03
------- ------ ------- ------
Total.............................. 43,770 100.00% 28,173 100.00%
====== ======
Less:
Deferred loan (costs) fees, net......... 10 7
Allowance for possible loan losses...... 344 187
------- -------
Total loans, net................... $43,416 $27,979
======= =======

Loan Maturity Tables

The following table sets forth by scheduled repricing dates or the
contractual maturity dates the of the loan portfolio at December 31, 2000. The
table does not include prepayments or scheduled principal repayments.

Due after
Due within 1 through Due after
1 year 5 years 5 years Total
---------- --------- ------- -----
(In thousands)
Real Estate Loans:
One- to- four family ......... $ 360 $ 5,456 $19,299 $25,115
Commercial ................... 1,552 6,486 1,211 9,249
Construction ................. 1,606 - - 1,606
Home equity .................. 990 524 1,564 3,078
Commercial ..................... 1,624 1,078 97 2,799
Consumer ....................... 871 885 167 1,923
------- ------- ------- -------
Total amount due ............... $ 7,003 $14,429 $22,338 $43,770
======= ======= ======= =======

The following table sets forth the dollar amount of all loans at
December 31, 2000, due after December 31, 2001, which have fixed interest rates
and floating or adjustable interest rates.

Floating or
Fixed Rates Adjustable Rates Total
----------- ---------------- -----
(In thousands)
One- to- four family............. $ 7,031 $17,724 $24,755
Commercial real estate........... - 7,697 7,697
Home equity...................... 2,088 - 2,088
Commercial....................... 1,116 59 1,175
Consumer......................... 1,052 - 1,052
------- ------- -------
Total................... $11,287 $25,480 $36,767
======= ======= =======

One- to- Four Family Lending. One- to- four family residential mortgage
loans are secured by property located in our market area. We generally originate
one- to- four family residential mortgage loans in amounts up to 90% of the
lesser of the appraised value or selling price of the mortgaged property without
requiring mortgage insurance. Additionally, we generally originate and retains
fixed rate and adjustable rate loans for retention in its portfolio. Currently,
our one- to- four family loan portfolio consists of 15-year fixed rate loans and
adjustable rate loans with fixed rate periods of up to 7 years (three years for
non-owner occupied), with primarily, principal and interest calculated using a
maximum 30 year (owner occupied) or 25 year (non-owner occupied) amortization
period.

All of the one- to- four family mortgages include "due on sale"
clauses, which are provisions that give us the right to declare a loan
immediately payable if the borrower sells or otherwise transfers an interest in
the property to a third party.

Property appraisals on real estate securing one- to- four family
residential loans that we originate are made by state certified and licensed
independent appraisers approved by the Board of Directors.

Appraisals are performed in accordance with applicable regulations and policies.
At our discretion, title insurance is either obtained or, more commonly, an
attorney's certificates of title is obtained on all first mortgage real estate
loans originated. In some instances, a fee is charged equaled to a percentage of
the loan amount (commonly referred to as points).

We have historically only originated loans which we hold in our own
portfolio. With the recent decrease in market interest rates, Nittany Bank
entered into an arrangement with a local mortgage broker to offer long-term,
fixed-rate loans at a competitive interest rate, which are sold in the secondary
mortgage market. We receive a fee in connection with the administrative services
rendered in offering and accepting these secondary market mortgage loans from
our customers. We do not service or fund these loans.

Commercial Real Estate and Commercial Business Loans. We originate a
significantly higher percentage of commercial real estate loans than the average
savings bank. Commercial real estate loans are loans secured by commercial real
estate (e.g., shopping centers, medical buildings, retail offices) in our market
area. Commercial real estate loans are generally originated in amounts up to 80%
of the appraised value of the property and are secured by improved property such
as office buildings, retail stores, warehouse, church buildings and other
non-residential buildings, most of which are located in our market area.
Commercial real estate loans are generally made at rates which adjust above the
treasury interest rate or are balloon loans with fixed interest rates which
generally mature in three to five years with principal amortization for a period
of up to 25 years.

Commercial business loans are underwritten on the basis of the
borrower's ability to service such debt from income. Commercial business loans
are generally made to small and mid-sized companies located within our primary
lending area. In most cases, additional collateral of equipment, accounts
receivable, inventory, chattel or other assets is required before we make a
commercial business loan.

Loans secured by commercial real estate and commercial business loans
are generally larger and involve a greater degree of risk than one- to- four
family residential mortgage loans. Of primary concern, is the borrower's
creditworthiness and the feasibility and cash flow potential of the project.
Loans secured by income properties are generally larger and involve greater
risks than residential mortgage loans because payments on loans secured by
income properties are often dependent on successful operation or management of
the properties. As a result, repayment of such loans may be subject to a greater
extent than residential real estate loans to adverse conditions in the real
estate market or the economy.

Construction Loans. We originate loans to finance the construction of
one- to- four family dwellings. Generally, construction loans to individuals are
made only if we also make the mortgage loan on the property. Construction loans
to individuals are underwritten similar to those for residential mortgage loans.
We make construction loans to builders on a limited basis. Construction loans to
builders generally have terms of up to one year and interest rates which are
slightly higher than normal residential mortgage loans. These loans generally
are adjustable rate loans.

Construction financing is generally considered to involve a higher
degree of risk of loss than long- term financing on improved, occupied real
estate. Risk of loss on a construction loan is dependent largely upon the
accuracy of the initial estimate of the property's value at completion of
construction and development and the estimated cost (including interest) of
construction. During the construction phase, a number of factors could result in
delays and cost overruns. If the estimate of construction costs proves to be
inaccurate, we may be required to advance funds beyond the amount originally
committed to permit completion of the development. If the estimate of value
proves to be inaccurate, we may be confronted,

at or prior to the maturity of the loan, with a project having a value which is
insufficient to assure full repayment.

Consumer. Our consumer loan portfolio includes various types of secured
and unsecured consumer loans including home equity lines of credit and
automobile loans (new and used). Consumer loans generally have terms of one year
to ten years, some of which are at fixed rates and some of which have rates that
adjust periodically.

Consumer loans are advantageous to us because such loans generally have
higher rates of interest and shorter terms, but they also involve more credit
risk than residential mortgage loans because of the higher potential of defaults
and the difficulties involved in disposing of any collateral.

Loan Approval Authority and Underwriting. We have established various
lending limits for its officers and also maintain a loan committee. The loan
committee is comprised of the Chairman of the Board, the President, an Executive
Loan Officer and two non-employee members of the Board of Directors. The
President has authority to approve applications for mortgage loans up to
$300,000, secured loans up to $200,000 and unsecured loans up to $125,000. The
Executive Loan Officer has authority to approve mortgage loans up to $250,000,
secured loans up to $150,000 and unsecured loans up to $100,000. Additionally,
the President, together with the Executive Loan Officer have authority to
approve applications for real estate loans up to $400,000, secured loans up to
$300,000 and unsecured loans up to $150,000. Personal banking officers generally
have authority to approve loan applications between $5,000 and $75,000,
depending upon the loan collateral and type of loan. The loan committee
considers all applications in excess of the authorized lending limits of the
employee officers and the entire Board of Directors ratifies all such loans.

Upon receipt of a completed loan application from a prospective
borrower, a credit report is ordered. Income and certain other information is
verified. If necessary, additional financial information may be requested. An
appraisal or other estimate of value of the real estate intended to be used as
security for the proposed loan is obtained. Appraisals are processed by
independent fee appraisers. Borrowers also must obtain fire and casualty
insurance. Flood insurance is also required on loans secured by property that is
located in a flood zone.

Loan Commitments. Commitments to extend credit are arrangements to lend
to the customer as long as there is no violation of any condition established in
the loan agreement. These commitments are comprised primarily of available
personal and commercial lines of credit, undisbursed construction funding, and
various loans approved but not yet funded. At December 31, 2000, loan
commitments totalled $4,623,000.

Nonperforming and Problem Assets

Loan Delinquencies. When a mortgage loan becomes 15 days past due, a
notice of nonpayment is sent to the borrower. If such payment is not received by
month end, an additional notice of nonpayment is sent to the borrower. After 60
days, if the mortgage loan continues to be delinquent, a notice of right to cure
default is sent to the borrower giving 30 additional days to bring the loan
current before foreclosure is commenced. If the mortgage loan continues in a
delinquent status for 90 days past due and no repayment plan is in effect,
foreclosure proceedings will be initiated.

Loans are reviewed and are placed on a non-accrual status when the loan
becomes more than 90 days delinquent or when, in our opinion, the collection of
additional interest is doubtful. Interest accrued

and unpaid at the time a loan is placed on nonaccrual status is charged against
interest income. Subsequent interest payments, if any, are either applied to the
outstanding principal balance or recorded as interest income, depending on the
assessment of the ultimate collectibility of the loan.

Non-Performing Assets. The following table sets forth information with
respect to our non-performing assets for the periods indicated. We have no loans
categorized as troubled debt restructurings within the meaning of the Statement
of Financial Accounting Standards ("SFAS") 15 and no impaired loans within the
meaning of SFAS 114, as amended by SFAS 118. For the year ended December 31,
2000, interest income that would have been recorded on loans accounted for on a
nonaccrual basis was not material.

At December 31,
---------------
2000 1999
---- ----
(In Thousands)

Loans accounted for on a non-accrual basis - Consumer ........... $42 $ --
--- -----
Total non-accrual loans ......................................... $42 $ --
--- -----
Accruing loans which are contractually past due 90 days or more:
One-to-four family ............................................ $-- $ --
Commercial real estate ........................................ -- --
Home equity ................................................... -- --
Construction .................................................. -- --
Commercial .................................................... -- --
Consumer ...................................................... -- --
--- -----
Total ........................................................... $-- $ --
--- -----
Real estate owned ............................................... $-- $ --
--- -----
Total non-performing assets ..................................... $42 $ --
=== =====
Total non-accrual and accrual loans to
net loans .................................................... .09% --%
=== =====
Total non-performing assets to total assets ..................... .06% --%
=== =====

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

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

of the aforementioned categories but possess credit deficiencies or potential
weaknesses are required to be designated "special mention" by management.

The following table sets forth our classified assets in accordance with
our classification system.

At December 31, 2000
--------------------
(Dollars in thousands)
Special Mention.............. $ 42
Substandard.................. --
Doubtful .................... --
Loss ........................ --
------
$ 42
======

Allowances for Loan Losses. Our allowance for loan losses is intended
to be maintained at a level sufficient to absorb all estimable and probable
losses inherent in the loans receivable portfolio. In determining, the
appropriate level of the allowance for loan losses and, accordingly, the level
of the provision for loan losses, management reviews its loans receivable
portfolio on at least a monthly basis, taking into account: (i) known and
inherent risks in the portfolio, (ii) adverse situations that may affect the
borrower's ability to repay, (iii) the estimated value of any underlying
collateral, and (iv) current economic conditions.

While we believe that the allowance for loan losses is adequate,
additions to the allowance for loan losses may be necessary in the event of
future adverse changes in economic and other conditions that we are unable to
predict. In addition, the determination of the amount of the allowance for loan
losses is subject to review by the OTS, as part of its examination process.
After a review of the information available, the OTS might require the
establishment of an additional allowance. Any increase in the loan loss
allowance required by the OTS would have a negative impact on our earnings.

The following table sets forth information with respect to our
allowance for loan losses at the dates indicated.

At December 31,
-----------------------
2000 1999
-------- ----------
(Dollars In Thousands)
Total loans outstanding .............................. $ 43,770 $ 28,173
======== ========
Average loans outstanding ............................ $ 35,560 $ 17,127
======== ========

Allowance balance at beginning of period ............. $ 187 $ 99
Provision:
Real estate loans .................................... 126 89
Commercial ........................................... 11 6
Consumer ............................................. 20 4
-------- --------
157 99
-------- --------
Charge-offs:
Real estate loans .................................... -- --
Commercial ........................................... -- --
Consumer ............................................. (3) (11)
-------- --------
(3) (11)
-------- --------
Recoveries:
Real estate loans .................................... -- --
Commercial ........................................... -- --
Consumer ............................................. 3 --
-------- --------
3 --
-------- --------
Allowance balances at end of period .................. $ 344 $ 187
======== ========
Allowance for loan losses as a percent of total
loans outstanding .................................... .79% .66%
======== ========
Net loans charged off as percent of average loans
outstanding .......................................... .02% .06%
======== ========

The following table illustrates the allocation of the allowance for
loan losses for each category of loan for the dates indicated. The allocation of
the allowance to each category is not necessarily indicative of future loss in
any particular category and does not restrict our use of the allowance to absorb
losses in other loan categories.

At December 31,
--------------------------------------------------
2000 1999
----------------------- ------------------------
Percent of Percent of
Loans in Loans in
Each Each
Category to Category to
Amount Total Loans Amount Total Loans
------ ----------- ------ -----------
(Dollars In Thousands)

Type of Loans:
Real Estate Loans:
One- to- four family ......... $133 57.39% $103 54.98%
Commercial real estate ....... 106 21.13 47 23.09
Home equity .................. 23 7.03 16 8.44
Construction ................. 19 3.67 -- 2.65
Commercial ....................... 28 6.39 12 5.81
Consumer ......................... 34 4.39 9 5.03
---- ------ ---- ------
Total ................. $343 100.00% $187 100.00%
==== ====== ==== ======

Investment Activities

We are required under federal regulations to maintain a minimum amount
of liquid assets which may be invested in specified short-term securities and
certain other investments. The level of liquid assets varies depending upon
several factors, including: (i) the yields on investment alternatives, (ii)
judgment as to the attractiveness of the yields then available in relation to
other opportunities, (iii) expectation of future yield levels, and (iv)
projections as to the short-term demand for funds to be used in loan origination
and other activities. Investment securities, including mortgage-backed
securities, are classified at the time of purchase, based upon management's
intentions and abilities, as securities held to maturity or securities available
for sale. Debt securities acquired with the intent and ability to hold to
maturity are classified as held to maturity and are stated at cost and adjusted
for amortization of premium and accretion of discount, which are computed using
the level yield method and recognized as adjustments of interest income. All
other debt securities are classified as available for sale to serve principally
as a source of liquidity.

Current regulatory and accounting guidelines regarding investment
securities require us to categorize securities as "held to maturity," "available
for sale" or "trading." As of December 31, 2000, we had securities classified as
"held to maturity" and "available for sale" in the amount of $4.5 million and
$15.4 million, respectively, and had no securities classified as "trading."
Securities classified as "available for sale" are reported for financial
reporting purposes at the fair market value with net changes in the market value
from period to period included as a separate component of stockholders' equity,
net of income taxes. At December 31, 2000, our securities available for sale had
net unrealized losses of $149,000. These net unrealized losses reflect normal
market conditions and vary, either positively or negatively, based primarily on
changes in general levels of market interest rates relative to the yields on the
portfolio. Changes in the market value of securities available for sale do not
affect our income. In addition, changes in the market value of securities
available for sale do not affect Nittany Bank's regulatory capital requirements
or its loan-to-one borrower limit.

At December 31, 2000, our investment portfolio policy allowed
investments in instruments such as: (i) U.S. Treasury obligations, (ii) U.S.
federal agency or federally sponsored agency obligations, (iii) local municipal
obligations, (iv) mortgage-backed securities, (v) collateralized mortgage
obligations, (vi) banker's acceptances, (vii) certificates of deposit, and
(viii) investment grade corporate bonds, commercial paper and mortgage
derivative products. The Board of Directors may authorize additional
investments.

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

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

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

Securities Portfolio. The following table sets forth the carrying value of
our securities portfolio at the dates indicated:

At
December 31,
---------------------
2000 1999
-------- ---------
(In Thousands)
Securities available for sale:
U.S. government agency securities ................ $ 5,727 $ 5,541
Corporate securities ............................. 3,554 3,526
Collateralized mortgage obligations .............. 3,967 4,393
Mortgage-backed securities ....................... 1,602 1,937
FHLB stock ....................................... 530 475
------- -------
15,380 15,872
------- -------
Securities held to maturity:
Mortgage-backed securities ....................... 4,537 1,675
------- -------
Total investment securities ........................ $19,917 $17,547
======= =======

The following table sets forth information regarding the scheduled
maturities, carrying values, estimated fair values, and weighted average yields
for our investment securities portfolio at December 31, 2000 by contractual
maturity. The following table does not take into consideration the effects of
scheduled repayments or the effects of possible prepayments.

As of December 31, 2000
------------------------------------------------------------------------------------------------------
Within More than More than More than
One Year One to Five Years Five to Ten Years Ten Years Total Investment Securities
------------------ ----------------- ------------------ ----------------- ---------------------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average Market
Value Yield Value Yield Value Yield Value Yield Value Yield Value
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
(Dollars in thousands)

U.S. government
agency securities...... $ 498 5.23% $3,062 6.09% $2,167 6.42% $ - -% $ 5,727 6.14% $ 5,727
Corporate securities..... 498 5.85 - - - - 3,056 7.13 3,554 6.95 3,554
Collateralized mortgage
obligations........... - - - - - - 3,967 6.81 3,967 6.81 3,967
Mortgage-backed
securities............. - - - - 735 5.86 5,404 6.32 6,139 6.27 6,125
FHLB stock............... 530 6.75 - - - - - - 530 6.75 530
------ ------ ------ ------ ------- -------
Total investment
securities.......... $1,526 5.97% $3,062 6.09% $2,902 6.28% $12,427 6.68% $19,917 6.47% $19,903
===== ==== ====== ==== ====== ==== ======= ==== ======= ==== =======

Sources of Funds

Our major external source of funds for lending and other investment
purposes are deposits. Funds are also derived from the receipt of payments on
loans and prepayment of loans and maturities of investment securities and
mortgage-backed securities and, to a much lesser extent, borrowings and
operations. Scheduled loan principal repayments are a relatively stable source
of funds, while deposit inflows and outflows and loan prepayments are
significantly influenced by general interest rates and market conditions.

Deposits. Consumer and commercial deposits are attracted principally
from within our market area through the offering of a selection of deposit
instruments including checking and savings accounts, money market accounts, and
term certificate accounts. We offered through most of 2000, and currently
continues, to offer a 5% passbook account and a 3% checking account in order to
attract core deposits and new customers. IRA accounts and NOW accounts are also
offered. Deposit account terms vary according to the minimum balance required,
the time period the funds must remain on deposit, and the interest rate.

The interest rates paid by us on deposits are set at the direction of
senior management. Interest rates are determined based on our liquidity
requirements, interest rates paid by our competitors, our growth goals and
applicable regulatory restrictions and requirements. At December 31, 2000, we
had no brokered deposits.

The following table indicates the amount of certificates of deposit of
$100,000 or more by time remaining until maturity as of December 31, 2000.

Certificates
Maturity Period of Deposits
--------------- ------------
(In thousands)
Within three months $1,900
Three through six months 592
Six through twelve months 983
Over twelve months 1,606
------
$5,081
======

Borrowings. We may obtain advances (borrowings) from the FHLB of
Pittsburgh ("FHLB") to supplement its supply of lendable funds. Advances from
the FHLB are secured by investments held in safe keeping at the FHLB. Each FHLB
credit program has its own interest rate, which may be fixed or adjustable, and
range of maturities. If the need arises, we may also access the Federal Reserve
Bank discount window to supplement our supply of lendable funds and to meet
deposit withdrawal requirements.

The following table sets forth information concerning short-term
borrowings during the periods indicated.

At or For the Years Ended
December 31,
--------------------------
2000 1999
---- ----
(Dollars in Thousands)
FHLB advances:

Ending balance ................................... $2,000 $8,600

Average balance during the period................. 6,780 7,290

Maximum month-end balance during the period....... 8,500 9,100

Average interest rate during the period........... 6.54% 4.97%

Weighted average rate at period end............... 6.63% 6.40%

Description of Property

We currently operate from our main office and two branch offices. All
three of these properties are leased. The leases have initial terms of up to 20
years, with renewal options for additional years. Nittany Bank purchased a
building on March 15, 2001, which is in the process of major renovations. The
building will have a full service Nittany branch office, an office of Nittany
Asset Management and possibly other tenants, which may include service related
businesses, such as legal, insurance, and accounting businesses. The new office
is expected to open in the second half of 2001.

Employees

At December 31, 2000, we had 19 full-time equivalent employees. None of
the employees are represented by a collective bargaining group. We believe that
our relationship with our employees is good.

Regulation

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

Regulation of Nittany Financial Corp.

General. We are a unitary savings and loan holding company subject to
regulatory oversight by the OTS. As such, we are required to register and file
reports with the OTS and are subject to regulation and examination by the OTS.
In addition, the OTS has enforcement authority over us and its non-savings
association subsidiaries, should such subsidiaries be formed, which authority
also permits the OTS to restrict or prohibit activities that are determined to
be a serious risk to the subsidiary savings association. This regulation and
oversight is intended primarily for the protection of the depositors of Nittany
Bank and not for the benefit of our stockholders.

As a unitary savings and loan holding company, we generally are not
subject to any restrictions on our business activities. While the
Gramm-Leach-Bliley Act (the "GLB Act"), enacted in November 1999, terminated the
"unitary thrift holding company" exemption from activity restrictions on a
prospective basis, we enjoy grandfathered status under this provision of the GLB
Act because we acquired Nittany Bank prior to May 4, 1999. As a result, our
freedom from activity restrictions as a unitary savings and loan holding company
were not affected by the GLB Act. However, if we were to acquire control of an
additional savings association, our business activities would be subject to
restriction under the Home Owners' Loan Act. Furthermore, if we were in the
future to sell control of Nittany Bank to any other company, such company would
not succeed to our grandfathered status under the GLB Act and would be subject
to the same activity restrictions. The continuation of our exemption from
restrictions on business activities as a unitary savings and loan holding
company is also subject to our continued compliance with the Qualified Thrift
Lender ("QTL") test. See "- Regulation of the Bank - Qualified Thrift Lender
Test."

Regulation of Nittany Bank

General. As a federally chartered, SAIF-insured savings association, we
are subject to extensive regulation by the OTS and the FDIC. Lending activities
and other investments must comply with various federal statutory and regulatory
requirements. We are also subject to certain reserve requirements promulgated by
the Federal Reserve Board.

The OTS, regularly examines us and prepares reports for the
consideration of our Board of Directors regarding any deficiencies that are
found in our operations. Our relationship with our depositors and borrowers is
also regulated to a great extent by federal and state law, especially in such
matters as the ownership of savings accounts and the form and content of our
mortgage documents.

We must file reports with the OTS concerning its activities and
financial condition, in addition to obtaining regulatory approvals prior to
entering into certain transactions such as mergers with or acquisitions of other
savings institutions. This regulation and supervision establishes a
comprehensive framework of activities in which an institution can engage and is
intended primarily for the protection of the SAIF and depositors. 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.

Insurance of Deposit Accounts. The deposit accounts held by us are
insured by the SAIF to a maximum of $100,000 for each insured member (as defined
by law and regulation). Insurance of deposits may be terminated by the FDIC upon
a finding that the institution has engaged in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC or the
institution's primary regulator.

We are required to pay insurance premiums based on a percentage of our
insured deposits to the FDIC for insurance of its deposits by the SAIF. The FDIC
has set the deposit insurance assessment rates for SAIF-member institutions for
the first six months of 2001 at 0% to .027% of insured deposits on an annualized
basis, with the assessment rate for most savings institutions set at 0%. In
addition, all FDIC- insured institutions are required to pay assessments to the
FDIC at an annual rate of approximately .0212% of insured deposits to fund
interest payments on bonds issued by the Financing Corporation ("FICO"), an
agency of the Federal government established to recapitalize the predecessor to
the SAIF. These assessments will continue until the FICO bonds mature in 2017.

Regulatory Capital Requirements. OTS capital regulations require
savings institutions to meet three capital standards: (1) tangible capital equal
to 1.5% of total adjusted assets, (2) core capital equal to at least 3% of total
adjusted assets for savings institutions that receive the highest supervisory
rating for safety and soundness and 4% of total adjusted assets for all other
thrifts, and (3) risk-based capital equal to 8% of total risk-weighted assets.
The Bank's regulatory capital ratios, which are in compliance with all
regulatory requirements, are set forth in Footnote 12 to the consolidated
financial statements. Additionally, in accordance with the FDIC order approving
our application for Federal Deposit Insurance, we must maintain a ratio of Tier
1 capital to average assets of at least 8% for a period of three years, from the
opening of the bank on October 26, 1998.

For purposes of the OTS capital regulations, tangible capital is
defined as core capital less all intangible assets, less certain mortgage
servicing rights and less certain investments. Core, or Tier 1, capital is
defined as common stockholders' equity, noncumulative perpetual preferred stock
and minority interests in the equity accounts of consolidated subsidiaries,
certain nonwithdrawable accounts and pledged deposits of mutual savings
associations and qualifying supervisory goodwill, less nonqualifying intangible
assets, certain mortgage servicing rights and certain investments.

The risk-based capital standard for savings institutions requires the
maintenance of total risk-based capital of 8% of risk-weighted assets.
Risk-based capital equals the sum of core and supplementary capital. The
components of supplementary capital include, among other items, cumulative
perpetual preferred stock, perpetual subordinated debt, mandatory convertible
subordinated debt, intermediate-term preferred stock, the portion of the
allowance for loan losses not designated for specific loan losses, and up to 45%
of unrealized gains on equity securities. The portion of the allowance for loan
and lease losses includable in supplementary capital is limited to a maximum of
1.25% of risk-weighted assets. Overall, supplementary capital is limited to 100%
of core capital. A savings association must calculate its risk-weighted assets
by multiplying each asset and off-balance sheet item by various risk factors as
determined by the OTS, which range from 0% for cash to 100% for delinquent
loans, property acquired through foreclosure, commercial loans, and other
assets.

In addition to the above regulatory capital requirements, the OTS's
prompt corrective action regulation classifies savings associations by capital
levels and provides that the OTS will take various corrective actions, including
imposing significant operational restrictions, against any thrift that fails to
meet the regulation's capital standards. Under this regulation, a "well
capitalized" savings association is one that has a total risk-based capital
ratio of at least 10%, a Tier 1 risk-based capital ratio of at least 6% and a
leverage capital ratio of 5%, and is not subject to any capital order or
directive. A thrift is deemed "adequately capitalized" category if it has a
total risk-based capital ratio of at least 8%, a Tier 1 risk-based capital ratio
of at least 4%, and a leverage capital ratio of at least 4%. Institutions with
lower capital levels are deemed to be "undercapitalized," "significantly
undercapitalized" or "critically undercapitalized," depending on their capital
levels. A thrift that falls within any of the three undercapitalized categories
is subject to severe regulatory sanctions under the prompt corrective action
regulation. At December 31, 2000, we were classified as "well capitalized."

Dividend and Other Capital Distribution Limitations. The OTS imposes
various restrictions or requirements on the ability of savings institutions to
make capital distributions, including cash dividends.

A savings association, such as us, that is a subsidiary of a savings
and loan holding company, must file an application or a notice with the OTS at
least 30 days before making a capital distribution. Savings associations are not
required to file an application for permission to make a capital distribution
and need only file a notice if the following conditions are met: (1) they are
eligible for expedited treatment under

OTS regulations, (2) they would remain adequately capitalized after the
distribution, (3) the annual amount of capital distribution does not exceed net
income for that year to date added to retained net income for the two preceding
years, and (4) the capital distribution would not violate any agreements between
the OTS and the savings association or any OTS regulations. Any other situation
would require an application to the OTS.

The OTS may disapprove an application or notice if the proposed capital
distribution would: (i) make the savings association undercapitalized,
significantly undercapitalized, or critically undercapitalized; (ii) raise
safety or soundness concerns; or (iii) violate a statue, regulation, or
agreement with the OTS (or with the FDIC), or a condition imposed in an
OTS-approved application or notice. Further, a federal savings association, like
us, cannot distribute regulatory capital that is needed for its liquidation
account.

Qualified Thrift Lender Test. Federal savings institutions must meet
one of two Qualified Thrift Lender ("QTL") tests. To qualify as a QTL, a savings
institution must either (i) be deemed a "domestic building and loan association"
under the Internal Revenue Code by maintaining at least 60% of its total assets
in specified types of assets, including cash, certain government securities,
loans secured by and other assets related to residential real property,
educational loans and investments in premises of the institution or (ii) satisfy
the statutory QTL test set forth in the Home Owner's Loan Act by maintaining at
least 65% of its "portfolio assets" in certain"Qualified Thrift Investments"
(defined to include residential mortgages and related equity investments,
certain mortgage-related securities, small business loans, student loans and
credit card loans, and 50% of certain community development loans). For purposes
of the statutory QTL test, portfolio assets are defined as total assets minus
intangible assets, property used by the institution in conducting its business,
and liquid assets equal to 10% of total assets. A savings institution must
maintain its status as a QTL on a monthly basis in at least nine out of every 12
months. A failure to qualify as a QTL would result in a number of sanctions,
including certain operating restrictions. At December 31, 2000, we were in
compliance with its QTL requirement, with 72.1% of its assets invested in
Qualified Thrift Investments.

Federal Home Loan Bank System. We are 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 Directors of the FHLB.

As a member, we are required to purchase and maintain stock in the FHLB
of Pittsburgh in an amount equal to the greater of 1% of its aggregate unpaid
residential mortgage loans, home purchase contracts or similar obligations at
the beginning of each year or 5% of the bank's advances from the FHLB. At
December 31, 2000, we were in compliance with this requirement.

Federal Reserve System. The Federal Reserve Board 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 Board may be
used to satisfy the liquidity requirements that are imposed by the OTS. At
December 31, 2000, we were in compliance with these Federal Reserve Board
requirements.

MANAGEMENT

The following sets forth information with respect to Nittany and
Nittany Bank's directors and executive officers.

Board of Directors

David K. Goodman, Jr., 48, is the President and Chief Executive Officer
of D. C. Goodman & Sons, Inc., a Huntingdon based contracting firm. The firm
specializes in construction for industry, institutions, and commercial customers
in the fields of fire protection sprinkler systems, mechanical, and electrical
contracting. Mr. Goodman is a member of the board of directors of Huntingdon
County United Way, J. C. Blair Memorial Hospital, and Huntingdon County Business
and Industry. He is also a member of the Trustee's Council of Juniata College.
Mr. Goodman received his education at Juniata College and holds numerous
professional memberships in fire protection and contracting organizations.

William A. Jaffe, 62, is the President and owner of The Jaffe Group, a
Human Resource Consultancy, headquartered in State College, Pennsylvania, which
he established in January 1996. Previously, he was Compensation and Human
Resource Practice Leader for the Mid-Atlantic Region of Alexander & Alexander
Consulting Group. Mr. Jaffe received his Bachelor of Arts degree in journalism
from Penn State University and Masters of Science degree in Management from the
University of Illinois. He is past President of The Mount Nittany Conservancy
and currently serves on the Executive Committee for the Nittany Lion Club and
the Penn State College of Communications Alumni Society. Mr. Jaffe is also the
chair of the Penn State Hillel Foundation. Mr. Jaffe previously served as the
chair of the Chamber of Business & Industry of Center County's Human Resource
Committee and is currently a member of its board of directors. Additionally, Mr.
Jaffe served as an adjunct associate professor at The George Washington
University from 1991 to 1995. In 1996, Mr. Jaffe was named a Penn State Alumni
Fellow.

Samuel J. Malizia, 46, is the Chairman of the Board of Nittany and
Nittany Bank. Mr. Malizia is the managing partner of the law firm of Malizia
Spidi & Fisch, PC, a law firm headquartered in Washington, DC with a State
College, Pennsylvania office. For over 20 years, Mr. Malizia has specialized in
transactional, securities and regulatory matters for financial institutions and
related entities. He received a Bachelor of Science Degree with Distinction in
accounting from the Pennsylvania State University and a Juris Doctor Degree from
the George Washington University. He served as Attorney Advisor to Special Trial
Judge Francis Cantrel at the United States Tax Court and attended the Masters of
Law in Taxation program at the Georgetown University where he was associate
editor of the Tax Lawyer. He is a member of the Pennsylvania and District of
Columbia bars, the U.S. Tax Court, U.S. Claims Court, U.S. Court of Appeals for
the District of Columbia and a member of the Federal Bar Association and
American Bar Association. He is an alumnus of several Penn State University's
organizations, including Lions Paw, Skull and Bones Honor Society, Beta Alpha
Psi and Omicron Delta Kappa. He serves on the board of directors of the Lions
Paw Alumni Society and the Mount Nittany Conservancy.

J. Garry McShea, 46, has been owner and founder of the J.G. McShea
Construction Company, Boalsburg, Pennsylvania since 1978. McShea Construction
specializes in custom home construction, remodeling projects,
commercial/residential rental properties and land development. Prior to this,
Mr. McShea was employed by Certain Teed Corporation, Valley Forge, Pennsylvania,
as a Residential Building Material Specialist. Mr. McShea is a past President
and 22 year member of the Builders Association of Central Pennsylvania. He is a
Director of the Tussey Mountain Ski Corporation and serves

on the Harris Township Planning Commission. Mr. McShea received a Bachelor of
Science Degree in Marketing from the Pennsylvania State University College of
Business.

Donald J. Musso, 41, is the founder of FinPro, Inc., a consulting and
investment banking firm which specializes in providing advisory services
nationally to the financial institutions industry. Mr. Musso has a Bachelor of
Science in Finance from Villanova University and an MBA in Finance from
Fairleigh Dickinson University. Mr. Musso's corporation has represented hundreds
of financial institutions nationally in connection with business plans,
appraisals, asset liability management, mergers and acquisitions, branch
acquisitions and de novo financial institutions. Prior to establishing FinPro,
he had direct industry experience, having managed the Corporate Planning and
Mergers and Acquisitions departments for Meritor Financial Group, a $20 billion
dollar institution in Philadelphia. Prior to that, he was responsible for the
banking, thrift and real estate consulting practice in New Jersey for DeLoitte,
Haskins and Sells. He is also an instructor of strategic planning for the
Stonier Graduate School of Banking.

David Z. Richards, Jr., 40, is President and CEO of Nittany and Nittany
Bank. Mr. Richards was President and Chief Executive Officer of Mifflinburg Bank
and Trust Company of Mifflinburg, Pennsylvania from 1991 until 1997. From 1978
until 1990, he served in various capacities, including Vice President and
Financial Officer of The First National Bank of Danville, Pennsylvania. In 1997
he was appointed to the Executive Committee of the Pennsylvania Bankers
Association, for which he has chaired and served on several committees. He
formerly served as President of LUN Data Inc., a multi-owned data processing
consortium. Mr. Richards has a Bachelor of Science in Finance from Susquehanna
University and is a graduate of The Stonier Graduate School of Banking.

D. Michael Taylor, 59, is an architect, real estate developer and
entrepreneur, who has resided in the State College area for 28 years. Mr. Taylor
has a Bachelor of Architecture degree from Kansas State University. Upon
graduation, he spent several years in commercial architecture for Phillips
Petroleum and other firms, specializing in retail construction for national
companies. In addition to his architecture practice, Mr. Taylor is part owner of
Gwald/Taylor, a firm specializing in industrial process equipment sales to the
paper and pulp industry.

Executive Officers Who Are Not Directors

Richard C. Barrickman, 49, was appointed Senior Vice President upon
completion of the formation of Nittany Bank on October 23, 1998. Mr. Barrickman
was employed by PNC Bank, N.A. ("PNC") and its predecessors through mergers.
Prior to merger with PNC and its predecessors in 1982, Mr. Barrickman was the
President of Mt. Nittany Savings and Loan Association. Mr. Barrickman is a
native of State College, Pennsylvania.

John E. Arrington, 36, was appointed Vice President of Retail Banking
upon completion of the formation of Nittany Bank on October 23, 1998. He is also
President of Nittany Asset Management, Inc. Previous to his appointment with
Nittany Bank, Mr. Arrington was employed by PNC and its predecessors, serving in
a variety of capacities, most recently as Vice President. Mr. Arrington is past
President of the Board of the Nittany Valley Symphony.

Community Advisory Board of Directors

Nittany Bank has created a Community Advisory Board of Directors to
help evaluate the needs of the community and to solicit ideas and comments from
the business community and general populous. The members of the Community
Advisory Board are selected on a yearly basis and meet at least every calendar
quarter. The Community Advisory Board serves at the pleasure of the Board of
Directors of Nittany Bank. Set forth below are the names of the members of the
Community Advisory Board along with a brief description of their occupation.

Craig Avedesian is the President and part-owner of Federal Carbide Co.
located in Tyrone, Pennsylvania. Mr. Avedesian is a resident of State College,
Pennsylvania.

D. Patrick Daugherty is the owner of the Tavern Restaurant located in
State College, Pennsylvania.

Dr. Richard Doerfler is in private practice as an orthodontist in State
College, Pennsylvania. Dr. Doerfler is a resident of State College,
Pennsylvania.

Kelly Grimes is the President and owner of the Wendy's franchise stores
located in State College, Pennsylvania. Ms. Grimes is a resident of State
College, Pennsylvania.

James Meister is a Special Assistant to the Athletic Director of the
Pennsylvania State University, State College, Pennsylvania. He is a retired vice
president of ALCOA. Mr. Meister is a resident of State College, Pennsylvania.

Lori Pacchioli is the Director of Marketing for Penn State
broadcasting, State College, Pennsylvania. Ms. Pacchioli is a resident of State
College, Pennsylvania.

Anne Riley is a member of the Pennsylvania State Board of Trustees and
is past president of the Pennsylvania State University Alumni Association, State
College, Pennsylvania. Ms. Riley is also a member of the Renaissance board of
directors and the Mt. Nittany Conservatory board of directors, State College,
Pennsylvania. She is a resident of Boalsburg, Pennsylvania.

Richard Shore is Vice President of Corporate Development and Tax
Affairs for Tele-Media, Corporation of Delaware, Inc., Pleasant Gap,
Pennsylvania. Mr. Shore is a resident of State College, Pennsylvania.

Donn Wagner is President of Alleghenies Analysis, Boalsburg,
Pennsylvania. Mr. Wagner is a resident of Boalsburg, Pennsylvania.

William Updegraff is the owner of Updegraff & Updegraff, an accounting
firm located in State College, Pennsylvania. Mr. Updegraff is a resident of
State College, Pennsylvania.

Director Compensation

Directors and advisory directors have received no compensation for
their services, since the incorporation of Nittany in 1997.

Stock Option Plan

During fiscal 1999 upon shareholders approval on May 24, 1999, (the
"effective date of grant") under the 1998 stock option plan, each director was
granted stock options. The following information is adjusted for the 10% stock
dividend issued on January 1, 2001. Messrs. Malizia and Richards were each
granted options to purchase 22,000 shares of common stock and Mr. Musso was
granted options to purchase 11,000 shares of common stock. Messrs. Jaffe and
Taylor were each granted options to purchase 5,500 shares of common stock and
Messrs. Goodman and McShea were each granted options to purchase 4,400 shares of
common stock. As of October 23, 2000, all options granted under the Option Plan,
except for Mr. Richards were vested. For Mr. Richards, 25% of the options were
exercisable on the effective date of grant and the remaining options are
exercisable at the rate of 25% per year on the board approval date of October
23, 1998. Additionally, on June 15, 2000, the directors were awarded additional
stock options to purchase common shares, as follows: Mr. Malizia - 1,171 shares,
Mr. Goodman - 1,111 shares, Mr. McShea - 638 shares, Mr. Musso - 403 shares, Mr.
Jaffe - 130 shares, and Mr. Taylor - 111 shares. For all directors, except for
Mr. Richards, the options were exercisable at the rate of 33 1/3% per year
beginning on June 15, 2000. Options awarded to Mr. Richards were exercisable at
the rate of 25% per year beginning on June 15, 2000.

Subject to shareholder ratification on May 18, 2001, the stock option
plan will be amended to reserve a total of 100,000 additional shares to be
issued to directors, officers and employees from time to time, upon the
discretion of the Board of Directors or Option Committee. The exercise price of
any awarded options will be equal to the market price on the date of grant.
Currently, no determination has been made as to the granting of any awards under
the stock option plan.

Executive Officer Compensation

Nittany has no full time employees, but relies on the employees of
Nittany Bank for the limited services required by us. All compensation paid to
officers and employees is paid by Nittany Bank.

Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to or earned by the chief executive officer. No
other executive officer of either Nittany Bank or Nittany had a salary and bonus
during the years ended December 31, 1998 that exceeded $100,000 for services
rendered for the years presented. Mr. Richards employment with Nittany Bank
commenced on October 23, 1998.

Long Term
Annual Compensation Compensation Awards
------------------- -------------------
Securities
Name and Fiscal Underlying
Principal Position Year Salary($) Bonus($) Options(#)(1)
------------------ ---- --------- -------- -------------

David Z. Richards, Jr. 2000 105,000 24,675 422
President and CEO 1999 100,000 15,000 22,000
1998 76,666 -- --

- -----------------------
(1) Represents awards (adjusted for the 10% stock dividend issued on January 1,
2001) of 22,000 options as of October 23, 1998 and 422 options on June 15,
2000, see "-- Stock Awards."

Employment Agreement. We entered into an employment agreement with
David Z. Richards, Jr., President and Chief Executive Officer. The agreement has
a term of three years and may be renewed annually by Nittany Bank's Board of
Directors upon a determination of satisfactory performance within the board's
sole discretion. If Mr. Richards should become disabled during the term of the
agreement, he shall continue to receive payment of 80% of the base salary for a
period of 3 months and 50% of such base salary for a period of 12 months, but
not exceeding the remaining term of the agreement. Such payments shall be
reduced by any other benefit payments made under other disability programs in
effect for the Nittany Bank's employees. Under the agreement, Mr. Richards may
be terminated by us for "just cause" as defined in the agreement. If we
terminate Mr. Richards without just cause, Mr. Richards will be entitled to a
continuation of his salary from the date of termination through the remaining
term of the agreement. The agreement contains a provision stating that in the
event of the termination of employment in connection with a change in control of
Nittany, Mr. Richards will be paid a lump sum amount equal to 2.99 times his
five year average annual taxable compensation. If such payments had been made
under the agreement as of December 31, 2000, such payments would have equaled
approximately $306,000.

Stock Awards. The following tables set forth additional information
concerning stock options granted to Mr. Richards during the 2000 fiscal year
pursuant to our option plan and the year end value of such outstanding options.
No stock appreciation rights are authorized under the option plan. The awards
(including the exercise prices and estimated prices) in the tables below were
adjusted for the 10% stock dividend issued on January 1, 2001.

OPTION GRANTS TABLES

Option Grants in Last Fiscal Year
---------------------------------

Individual Grants
- ------------------------------------------------------------------------------------------
# of Securities % of Total Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted(#) Fiscal Year ($/Sh) Date
---- ---------- ----------- ------ ----

David Z. Richards, Jr. 422 34% $8.41 June 15, 2010

Aggregated Option Exercises in Last Fiscal Year, and FY-End Option Values
-------------------------------------------------------------------------
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-The-Money Options
Shares Acquired Value FY-End(#) at FY-End($)
Name on Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable(1)
---- -------------- ----------- ------------------------- ----------------------------

David Z. Richards, Jr. -- -- 16,500/5,500(1) 7,590 / 2,530
-- -- 105/317(2) 120 / 361

- ----------------------
(1) Based upon an exercise price of $9.09 per share and estimated price of
$9.55 at December 31, 2000.
(2) Based upon an exercise price of $8.41 per share and estimated price of
$9.55 at December 31, 2000.

Security Ownership of Certain Beneficial Owners and Management

Based upon the records of Nittany's transfer agent, the following table
sets forth, as of December 31, 2000, persons or groups who own more than 5% of
the common stock, all directors of Nittany, the named executive officer, and the
ownership of all named executive officers and directors of

Nittany as a group. All share amounts in the table below were adjusted for the
10% stock dividend issued on January 1, 2001. Other than as noted below,
management knows of no person or group that owns more than 5% of the outstanding
shares of common stock at that date.

Before Offering After Offering
------------------------------- -------------------------------
Amount and Percent of Amount and Percent of
Nature of Shares of Nature of Shares of
Beneficial Common Stock Beneficial Common Stock
Name of Beneficial Owner Ownership (2) Outstanding (%) Ownership (2) Outstanding (%)
- ------------------------ ------------- --------------- ------------- ---------------

David K. Goodman, Jr. (1) 59,700 7.6
William A. Jaffe 13,816 1.8
Samuel J. Malizia (1) 92,624 11.5
J. Garry McShea (1) 46,170 5.9
Donald J. Musso (1) 46,711 5.9
David Z. Richards, Jr. 22,710 2.8
D. Michael Taylor 18,874 2.4
All directors and executive 299,575 35.2
officers as a group (7 persons)

- -----------------
(1) The address of each beneficial owner that owns more than 5% of Nittany's
common stock is 116 East College Avenue, State College, Pennsylvania 16801.
(2) Includes shares of common stock held directly as well as by spouses or
minor children, in trust and other indirect ownership, over which shares
the individuals effectively exercise sole voting and investment power,
unless otherwise indicated. Also, includes shares of common stock that the
following persons have a right to purchase pursuant to exercisable stock
options within 60 days of December 31, 2000, as follows: David K. Goodman,
Jr.- 4,770 shares, William A. Jaffe -5,543 shares, Samuel J. Malizia -
22,390 shares, J. Garry McShea - 4,612 shares, Donald J. Musso - 11,134
shares, David Z. Richards, Jr.- 16,605 shares, and D. Michael Taylor- 5,537
shares.

Certain Relationships and Related Transactions

Nittany Bank, like many financial institutions, has followed a policy
of granting various types of loans to officers, directors, and employees. The
loans have been made in the ordinary course of business and on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with Nittany Bank's other customers, and do not
involve more than the normal risk of collectibility, or present other
unfavorable features.

DESCRIPTION OF CAPITAL STOCK

Nittany is authorized to issue 10,000,000 shares of the Common Stock,
$0.10 par value, of which 780,312 shares were issued and outstanding as of
December 31, 2000. Along with the common stock, the authorized capital of
Nittany includes 5,000,000 shares of serial preferred stock, of which none were
issued and outstanding as of December 31, 2000. The following is a summary of
certain terms of the Common Stock and is subject to and qualified in its
entirety by reference to our articles of incorporation and bylaws which are
filed as exhibits to the registration statement of which this prospectus forms a
part.

Common Stock

Voting Rights. Each share of the Common Stock will have the same
relative rights and will be identical in all respects with every other share of
the Common Stock. The holders of our Common Stock will possess exclusive voting
rights, except to the extent that shares of serial preferred stock issued in the
future may have voting rights, if any. Each holder of the Common Stock will be
entitled to only one vote for each share held of record on all matters submitted
to a vote of holders of the Common Stock and will not be permitted to cumulate
their votes in the election of our directors.

Dividend Rights. Each share of Nittany's common stock participates
equally in dividends on common stock, which are payable when, as, and if
declared by the Board of Directors out of funds legally available for that
purpose. See page __.

Liquidation. In the unlikely event of the complete liquidation or
dissolution of us, the holders of the Common Stock will be entitled to receive
all our assets available for distribution in cash or in kind, after payment or
provision for payment of (i) all our debts and liabilities (including all
savings accounts and accrued interest thereon); (ii) any accrued dividend
claims; (iii) liquidation preferences of any serial preferred stock which may be
issued in the future; and (iv) any interests in the liquidation account.

Restrictions on Acquisition of the Common Stock. See "Certain
Anti-Takeover Provisions" for a discussion of the limitations on acquisition of
shares of the Common Stock.

Other Characteristics. Holders of the Common Stock will not have
preemptive rights with respect to any additional shares of the Common Stock
which may be issued. Therefore, the Board of Directors may sell shares of our
capital stock without first offering such shares to our existing stockholders.
The Common Stock is not subject to call for redemption, and the outstanding
shares of Common Stock when issued and upon receipt by us of the full purchase
price therefor will be fully paid and non-assessable.

Serial Preferred Stock

Nittany is authorized to issue 10,000,000 shares of preferred stock.
The Board of Directors may create one or more classes or series of preferred
stock and may determine the rights, preferences, privileges and restrictions of
any class or series without any further approval or action by the shareholders.

The effects of issuing preferred stock on the holders of common stock
could include, among other things:

o reducing the amount otherwise available for payments of dividends
on common stock if dividends are payable on the series of
preferred stock;

o restricting dividends on common stock if dividends on the series
of preferred stock are in arrears;

o diluting the voting power of common stock if the series of
preferred stock has voting rights, including a possible "veto"
power if the series of preferred stock has class voting rights;

o diluting the equity interest of holders of common stock if the
series of preferred stock is convertible, and is converted, into
common stock; and

o restricting the rights of holders of common stock to share in
Nittany's assets upon liquidation until satisfaction of any
liquidation preference granted to the holder of the series of
preferred stock.

Certain Anti-Takeover Provisions

The following discussion is a general summary of our material
provisions of the articles of incorporation, bylaws, and certain other
regulatory provisions, which may be deemed to have such an anti- takeover
effect.

Articles of Incorporation and Bylaws of Nittany Financial Corp.

Election of Directors. Certain provisions of our articles of
incorporation and bylaws will impede changes in majority control of the Board of
Directors. Our articles of incorporation provides that the Board of Directors
will be divided into four staggered classes, with directors in each class
elected for four- year terms. Thus, it would take three annual elections to
replace a majority of our board. Our articles of incorporation provide that the
size of the Board of Directors may be increased or decreased only if two- thirds
of the directors then in office concur in such action. The articles of
incorporation also provide that any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of directors, shall be
filled for the remainder of the unexpired term by a majority vote of the
directors then in office. Finally, the articles of incorporation and the bylaws
impose certain notice and information requirements in connection with the
nomination by stockholders of candidates for election to the Board of Directors
or the proposal by stockholders of business to be acted upon at an annual
meeting of stockholders.

The articles of incorporation provide that a director may only be
removed for cause by the affirmative vote of at least a majority of our shares
entitled to vote generally in an election of directors cast at a meeting of
stockholders called for that purpose.

Restrictions on Call of Special Meetings. Our articles of incorporation
provide that a special meeting of stockholders may be called only pursuant to a
resolution adopted by a majority of the Board of Directors.

Absence of Cumulative Voting. Our articles of incorporation provide
that stockholders may not cumulate their votes in the election of directors.

Procedures for Business Combinations. Our articles of incorporation
require the affirmative vote of at least 80% of our outstanding shares for any
merger, consolidation, liquidation, or dissolution or any action that would
result in the sale or other disposition of at least 50% of our tangible assets,
unless the transaction has been approved by two-thirds of the Board of
Directors. Any amendment to this provision requires the affirmative vote of at
least 80% of our outstanding shares.

Amendment to Articles of Incorporation and Bylaws. Amendments to our
articles of incorporation must be approved by our Board of Directors and also by
a majority of the outstanding shares of our voting stock, provided, however,
that approval by at least 80% of the outstanding voting stock is generally
required for certain provisions (i.e., number, classification, election and
removal of directors;

amendment of bylaws; call of special stockholder meetings; director liability;
business combinations; power of indemnification; and amendments to provisions
relating to the foregoing in the articles of incorporation).

Our bylaws may be amended by a majority vote of the Board of Directors
or the affirmative vote of the holders of at least 80% of our outstanding shares
entitled to vote in the election of directors cast at a meeting called for that
purpose.

Acquisition of Control. Federal regulations prohibit a person, other
than a company from acquiring 10% or more of the outstanding equity securities
of a bank holding company without prior notice to and approval of the OTS. No
corporation may acquire 25% or more of the outstanding shares of a bank holding
company without obtaining the prior approval of the OTS.

LEGAL MATTERS

Our counsel Malizia Spidi & Fisch, PC, headquartered in Washington,
D.C. with a State College, Pennsylvania office, will give an opinion that the
shares of common stock covered by this prospectus are valid.

EXPERTS

We have included Nittany Financial Corp.'s audited statements at
December 31, 2000 and 1999 in this prospectus upon reliance on the report by
S.R. Snodgrass, A.C., independent certified public accountants, given on the
authority of that firm as experts in accounting and auditing.

AVAILABLE INFORMATION

We are registered under the Securities Exchange Act of 1934, as
amended, and file periodic reports and other information with the SEC. You may
inspect or copy these materials at the Public Reference Room at the SEC at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices
of the SEC located at 7 World Trade Center, 13th Floor, Suite 1300, New York,
New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500 West Madison
Street, Chicago, Illinois 60661. For a fee, you may also obtain copies of these
materials by writing to the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the public reference rooms by calling the SEC at 1-800-SEC-0330.
Our SEC filings are also available to the public on the SEC's website at
http://www.sec.gov.

We have filed with the SEC a registration statement on Form SB-2
(together with all amendments and exhibits thereto, the "Registration
Statement") with respect to the shares of common stock offered by this
prospectus. This prospectus does not contain all of the information included in
the Registration Statement. For further information about us and the shares of
common stock offered by this prospectus, please refer to the Registration
Statement and its exhibits and to the documents incorporated by reference into
the Registration Statement. The statements contained in this prospectus as to
the contents of any contract or other document filed as an exhibit on Form SB-2
are, of necessity, brief descriptions and are not necessarily complete; each
statement is qualified by reference to such contract or document. You may obtain
a copy of the Registration Statement through the public reference facilities of
the SEC described above. You may also access a copy of the Registration
Statement by means of the SEC's website at http://www.sec.gov.

NITTANY FINANCIAL CORP.

INDEX TO FINANCIAL STATEMENTS

Page
----

Report of Independent Auditors......................................... F-1

Consolidated Balance Sheet............................................. F-2

Consolidated Statement of Income ...................................... F-3

Consolidated Statement of Changes in Stockholders' Equity.............. F-4

Consolidated Statement of Cash Flows................................... F-5

Notes to the Consolidated Financial Statements......................... F-6

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

[LOGO]
SNODGRASS
Certified Public Accountants and Consultants

REPORT OF INDEPENDENT AUDITORS
------------------------------

Board of Directors and Stockholders
Nittany Financial Corp.

We have audited the consolidated balance sheet of Nittany Financial Corp. and
its subsidiaries as of December 31, 2000 and 1999, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management as well as
evaluating the overall financial statement presentation. We believe our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nittany Financial
Corp. and its subsidiaries as of December 31, 2000 and 1999, and the results of
their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.

/s/S.R. Snodgrass, A.C.

Wexford, PA
February 9, 2001

F-1

S.R. Snodgrass, A.C.
1000 Stonewood Drive, Suite 200 Wexford, PA 15090-8399 Phone: 724-934-0344 Facsimile: 724-934-0345

NITTANY FINANCIAL CORP.
CONSOLIDATED BALANCE SHEET

December 31,
2000 1999
------------ ------------

ASSETS
Cash and due from banks $ 411,553 $ 826,181
Interest-bearing deposits with other banks 3,821,851 2,231,694
Investment securities available for sale 14,849,794 15,397,402
Investment securities held to maturity (estimated
market value of $4,523,173 and $1,599,740) 4,536,734 1,674,729
Loans receivable (net of allowance for loan losses
of $343,673 and $186,647) 43,416,301 27,979,708
Premises and equipment 358,854 175,587
Federal Home Loan Bank stock 530,000 475,000
Intangible assets 846,707 894,392
Accrued interest and other assets 648,568 390,031
------------ ------------
TOTAL ASSETS $ 69,420,362 $ 50,044,724
============ ============
LIABILITIES
Deposits:
Noninterest-bearing demand $ 3,905,448 $ 2,626,107
Interest-bearing demand 8,941,842 5,659,727
Money market 15,021,369 15,032,313
Savings 6,351,164 1,732,077
Time 19,655,028 10,733,000
------------ ------------
Total deposits 53,874,851 35,783,224
Federal Home Loan Bank advances 8,600,000 8,600,000
Accrued interest payable and other liabilities 585,939 430,097
------------ ------------
TOTAL LIABILITIES 63,060,790 44,813,321
------------ ------------
STOCKHOLDERS' EQUITY
Serial preferred stock, no par value; 5,000,000 shares
authorized, none issued - -

Common stock, $.10 par value; 10,000,000 shares
authorized, 780,312 and 656,476 issued and outstanding 78,031 65,648

Additional paid-in capital 7,652,275 6,464,476
Retained deficit (1,221,659) (752,781)
Accumulated other comprehensive loss (149,075) (545,940)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 6,359,572 5,231,403
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 69,420,362 $ 50,044,724
============ ============

See accompanying notes to the consolidated financial statements.

F-2

NITTANY FINANCIAL CORP.
CONSOLIDATED STATEMENT OF INCOME

Year Ended December 31,
2000 1999
----------- -----------
INTEREST AND DIVIDEND INCOME
Loans, including fees $ 2,935,025 $ 1,337,470
Interest-bearing deposits with other banks 89,648 99,463
Investment securities 1,147,358 1,011,937
----------- -----------
Total interest and dividend income 4,172,031 2,448,870
----------- -----------
INTEREST EXPENSE
Deposits 1,958,556 1,092,510
FHLB advances 532,468 362,683
----------- -----------
Total interest expense 2,491,024 1,455,193
----------- -----------
NET INTEREST INCOME 1,681,007 993,677

Provision for loan losses 157,000 98,760
----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 1,524,007 894,917
----------- -----------
NONINTEREST INCOME
Service fees on deposit accounts 215,957 167,593
Investment securities gain - 1,342
Other 47,646 1,766
----------- -----------
Total noninterest income 263,603 170,701
----------- -----------
NONINTEREST EXPENSE
Compensation and employee benefits 726,395 551,875
Occupancy and equipment 272,304 200,447
Other 638,849 540,427
----------- -----------
Total noninterest expense 1,637,548 1,292,749
----------- -----------
Income (loss) before income taxes 150,062 (227,131)
Income taxes - -
----------- -----------
NET INCOME (LOSS) $ 150,062 $ (227,131)
=========== ===========
EARNINGS (LOSS) PER SHARE
Basic $ 0.19 $ (0.36)
Diluted 0.19 (0.36)

See accompanying notes to the consolidated financial statements.

F-3

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

Accumulated
Additional Other Total
Common Paid-in Retained Comprehensive Stockholders' Comprehensive
Stock Capital Deficit Loss Equity Income (Loss)
-------- ----------- ------------- ------------- ------------- --------------

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

Net loss (227,131) (227,131) $ (227,131)
Other comprehensive loss:
Unrealized loss on
available for
sale securities,
net of
reclassification
adjustment (515,354) (515,354) (515,354)
--------------
Comprehensive loss $ (742,485)
==============
Sale of 79,040 shares
of common stock, issued
December 31, 1999,
net of offering costs 7,904 812,331 820,235
-------- ----------- ------------- ------------- -------------
Balance, December 31, 1999 65,648 6,464,476 (752,781) (545,940) 5,231,403

Net income 150,062 150,062 $ 150,062
Other comprehensive income:
Unrealized gain on
available for sale
securities 396,865 396,865 396,865
--------------
Comprehensive income $ 546,927
==============
Sale of 52,913 shares
of common stock
net of offering costs 5,291 576,088 581,379
Ten percent stock dividend
(including cash
paid for fractional shares) 7,092 611,711 (618,940) - (137)
-------- ----------- ------------- ------------- -------------
Balance, December 31, 2000 $78,031 $7,652,275 $(1,221,659) $(149,075) $ 6,359,572
======== =========== ============= ============= =============

2000 1999
------------- -------------
Components of other
comprehensive income (loss):
Change in net unrealized
gain (loss) on
investment securities
available for sale $ 396,865 $ (514,012)
Realized gain included
in net loss - (1,342)
------------- -------------
Total $ 396,865 $ (515,354)
============= =============

See accompanying notes to the consolidated financial statements.

F-4

NITTANY FINANCIAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS

Year Ended December 31,
2000 1999
------------ ------------

OPERATING ACTIVITIES
Net income (loss) $ 150,062 $ (227,131)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Provision for loan losses 157,000 98,760
Depreciation, amortization, and accretion, net 136,982 140,190
Investment securities gain - (1,342)
Increase in accrued interest receivable (182,889) (180,613)
Increase in accrued interest payable 156,062 275,826
Other, net (75,868) 18,701
------------ ------------
Net cash provided by operating activities 341,349 124,391
------------ ------------
INVESTING ACTIVITIES
Investment securities available for sale:
Purchases - (7,428,147)
Proceeds from sale - 428,555
Proceeds from principal repayments and maturities 933,961 3,391,795
Investment securities held to maturity:
Purchases (3,025,313) (1,945,065)
Proceeds from principal repayments and maturities 162,968 272,404
Net increase in loans receivable (15,597,485) (23,667,224)
Purchase of FHLB stock (55,000) (167,800)
Purchase of premises and equipment (257,820) (91,352)
------------ ------------
Net cash used for investing activities (17,838,689) (29,206,834)
------------ ------------
FINANCING ACTIVITIES
Net increase in deposits 18,091,627 21,790,840
Proceeds from long-term FHLB advances 6,000,000 600,000
Repayment of FHLB advances - (5,000,000)
Net increase (decrease) in short-term FHLB borrowings (6,000,000) 8,000,000
Net proceeds from sale of common stock 581,379 820,235
Cash paid in lieu of fractional shares (137) -
------------ ------------
Net cash provided by financing activities 18,672,869 26,211,075
------------ ------------
Increase (decrease) in cash and cash equivalents 1,175,529 (2,871,368)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,057,875 5,929,243
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,233,404 $ 3,057,875
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid during the year for:
Interest on deposits and FHLB advances $ 2,334,962 $ 1,179,367

See accompanying notes to the consolidated financial statements.

F-5

NITTANY FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting and reporting policies applied in the
presentation of the accompanying financial statements follows:

Nature of Operations and Basis of Presentation
- ----------------------------------------------

Nittany Financial Corp. (the "Company") was incorporated under the laws of the
State of Pennsylvania for the purpose of becoming a unitary savings and loan
holding company. The Company presently has two operating subsidiaries, Nittany
Bank (the "Bank"), a federal stock savings institution and Nittany Asset
Management, Inc. ("Nittany") that was incorporated in May 1999 to offer various
types of investment products and services. The Bank's principal sources of
revenue are derived from its commercial, commercial mortgage, residential real
estate, and consumer loan financing, investment portfolios and deposit services
offered to its customers. The Company's business is conducted by its
wholly-owned subsidiaries, the Bank and Nittany, both located in State College,
Pennsylvania. The Company and Nittany are subject to regulation and supervision
by the Board of Governors of the Federal Reserve System, while the Bank is
subject to regulation and supervision by the Office of Thrift Supervision
("OTS").

The consolidated financial statements of the Company include the accounts of its
wholly-owned subsidiaries, the Bank and Nittany. All intercompany transactions
have been eliminated in consolidation. The investment in subsidiaries on the
parent company's financial statements is carried at the parent company's equity
in the underlying net assets.

The accounting principles followed by the Company and the methods of applying
these principles conform with generally accepted accounting principles and with
general practice within the banking industry. In preparing the consolidated
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the balance
sheet date and revenues and expenses for the period. Actual results could differ
significantly from those estimates.

Investment Securities
- ---------------------

Investment securities, including mortgage-backed securities, are classified at
the time of purchase, based upon management's intentions and ability, as
securities held to maturity or securities available for sale. Debt securities
acquired with the intent and ability to hold to maturity are classified as held
to maturity and are stated at cost and adjusted for amortization of premium and
accretion of discount, which are computed using the level yield method and
recognized as adjustments of interest income. All other debt securities are
classified as available for sale to serve principally as a source of liquidity.
Unrealized holding gains and losses on available for sale securities are
reported as a separate component of stockholders' equity until realized.
Realized securities gains and losses are computed using the specific
identification method. Interest and dividends on investment securities are
recognized as income when earned.

Loans Receivable
- ----------------

Loans receivable are stated at their unpaid principal amounts, net of the
allowance for loan losses. Interest on loans is recognized as income when earned
on the accrual method. Interest accrued on loans more than 90 days delinquent is
generally offset by a reserve for uncollected interest and is not recognized as
income.

F-6

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loans Receivable (Continued)
- ----------------

The accrual of interest is generally discontinued when management has serious
doubts about further collectibility of principal or interest, even though the
loan may be currently performing. A loan may remain on accrual status if it is
in the process of collection and is either guaranteed or well secured. When a
loan is placed on nonaccrual status, unpaid interest is charged against income.
Interest received on nonaccrual loans is either applied to principal or reported
as interest income, according to management's judgment as to the collectibility
of principal.

Loan origination fees and certain direct loan origination costs are being
deferred and the net amount amortized as adjustments of the related loan's
yield. The Company is amortizing these amounts over the contractual life of the
related loans.

Allowance for Loan Losses
- -------------------------

The allowance for loan losses represents the amount which management estimates
is adequate to provide for potential losses in its loan portfolio. The allowance
method is used in providing for loan losses. Accordingly, all loan losses are
charged to the allowance, and all recoveries are credited to it. The allowance
for loan losses is established through a provision for loan losses which is
charged to operations. The provision is based on management's evaluation of the
adequacy of the allowance for loan losses which encompasses the overall risk
characteristics of the various portfolio segments, past experience with losses,
the impact of economic conditions on borrowers, and other relevant factors. The
estimates used in determining the adequacy of the allowance for loan losses,
including the amounts and timing of future cash flows expected on impaired
loans, are particularly susceptible to significant changes in the near term.

A commercial or commercial real estate loan is considered impaired when it is
probable the borrower will not repay the loan according to the original
contractual terms of the loan agreement. Management has determined that first
mortgage loans on one-to-four family properties and all consumer loans represent
large groups of smaller-balance homogeneous loans that are to be collectively
evaluated. Loans that experience insignificant payment delays, which are defined
as 90 days or less, generally are not classified as impaired. A loan is not
impaired during a period of delay in payment if the Company expects to collect
all amounts due including interest accrued at the contractual interest rate for
the period of delay. All commercial and commercial real estate loans identified
as impaired are evaluated independently by management. The Company estimates
credit losses on impaired loans based on the present value of expected cash
flows or the fair value of the underlying collateral if the loan repayment is
expected to come from the sale or operation of such collateral. Impaired loans,
or portions thereof, are charged off when it is determined that a realized loss
has occurred. Until such time, an allowance for loan losses is maintained for
estimated losses. Cash receipts on impaired loans are applied first to accrued
interest receivable unless otherwise required by the loan terms, except when an
impaired loan is also a nonaccrual loan, in which case the portion of the
receipts related to interest is recognized as income.

Premises and Equipment
- ----------------------

Premises, leasehold improvements, and equipment are stated at cost less
accumulated depreciation and amorti-zation. Depreciation and amortization are
calculated using the straight-line method over the useful lives of the related
assets. Expenditures for maintenance and repairs are charged to operations as
incurred. Costs of major additions and improvements are capitalized.

F-7

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes
- ------------

Income tax expense consists of current and deferred taxes. Current income tax
provisions or benefits approximate taxes to be paid or refunded for the
applicable year. Deferred tax assets or liabilities are computed based on the
difference between the financial statement and income tax basis of assets and
liabilities using the enacted marginal tax rates. Deferred income tax expenses
or benefits are based on the changes in the deferred tax asset or liability from
period to period.

Recognition of deferred tax assets is based on management's belief that it is
more likely than not that the tax benefit associated with these temporary
differences such as the tax operating loss carryforward, will be realized. A
valuation allowance is recorded for those deferred tax assets for which it is
more likely than not that realization will not occur in the near term.

Comprehensive Income
- --------------------

The Company is required to present comprehensive income and its components in a
full set of general purpose financial statements for all periods presented. The
Company's other comprehensive income is comprised exclusively of net unrealized
holding gains (losses) on the available for sale securities portfolio. The
Company has elected to report the effects of other comprehensive loss as part of
the Consolidated Statement of Changes in Stockholders' Equity.

Earnings (Loss) Per Share
- -------------------------

The Company provides dual presentation of basic and diluted earnings (loss) per
share. Basic earnings (loss) per share is calculated utilizing net income (loss)
as reported in the numerator and average shares outstanding in the denominator.
The computation of diluted earnings (loss) per share differs in that the
dilutive effects of any stock options, warrants, and convertible securities are
adjusted in the denominator.

Stock Options
- -------------

The Company maintains a stock option plan for directors, officers, and
employees. When the exercise price of the Company's stock options is greater
than or equal to the market price of the underlying stock on the date of the
grant, no compensation expense is recognized in the Company's financial
statements. Pro forma net income (loss) and earnings (loss) per share are
presented to reflect the impact of the stock option plan assuming compensation
expense had been recognized based on the fair value of the stock options granted
under the plan.

Intangible Assets
- -----------------

Intangible assets are comprised exclusively of goodwill resulting from branch
office acquisitions. Goodwill is amortized using the straight-line method over a
20-year period. Annual assessments of the carrying values and remaining
amortization periods of the goodwill are made to determine possible carrying
value impairment and appropriate adjustments as deemed necessary.

Cash Flow Information
- ---------------------

Management has defined cash equivalents as cash and due from banks and
interest-bearing deposits with other banks with maturities of 90 days or less.

F-8

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Pending Accounting Pronouncements
- ---------------------------------

Financial Accounting Standards Board ("FASB") Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by FASB Statement No.
138, "Accounting for Derivative Instruments and Hedging Activities-Deferral of
the Effective Date of Statement No. 133," is effective in 2001, and requires
measuring and recording the change in fair value of derivative instruments.
Statement No. 133 is not expected to materially affect the Company's financial
position or results of operations.

In September 2000, the FASB issued Statement No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." The
Statement replaces FASB Statement No. 125 and provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings based on a control-oriented "financial-components"
approach. Under this approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and liabilities it has
incurred, derecognizes financial assets when control has been surrendered and
derecognizes liabilities when extinguished. The provisions of Statement No. 140
are effective for transactions occurring after March 31, 2001. This Statement is
effective for recognition and reclassification of collateral and for disclosures
relating to securitization trans-actions and collateral for fiscal years ending
after December 15, 2000. The adoption of the provisions of Statement No. 140 is
not expected to have a material impact on financial position or results of
operations.

Reclassification
- ----------------

Certain items in the prior year financial statements have been reclassified to
conform to the presentation of the current year amounts. Such reclassifications
did not affect stockholders' equity or net income.

2. EARNINGS PER SHARE

There are no convertible securities which would affect the numerator in
calculating basic and diluted earnings per share; therefore, net income as
presented on the Consolidated Statements of Income will be used as the
numerator. The following table sets forth a reconciliation of the denominator of
the basic and diluted earnings per share computation.

2000 1999
------- -------

Weighted-average common shares used
to calculate basic earnings per share 772,998 635,180

Additional common stock equivalents
(stock options) used to calculate
diluted earnings per share 3,246 -
------- -------
Weighted-average common shares and
common stock equivalents used
to calculate diluted earnings per share 776,244 635,180
======= =======

F-9

3. INVESTMENT SECURITIES

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

2000
---------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Available for sale Cost Gains Losses Value
----------------- ----------------- ----------------- -----------------

U.S. Government agency
securities $ 5,792,836 $ - $ (66,068) $ 5,726,768
Corporate securities 3,542,293 15,013 (2,938) 3,554,368
Collateralized mortgage
obligations issued by
U.S. Government agencies 4,041,934 - (74,832) 3,967,102
Mortgage-backed securities 1,621,806 - (20,250) 1,601,556
----------------- ----------------- ----------------- -----------------
Total $ 14,998,869 $ 15,013 $ (164,088) $ 14,849,794
================= ================= ================= =================

2000
---------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------------- ----------------- ----------------- -----------------

Held to maturity
Mortgage-backed securities $ 4,536,734 $ - $ (13,561) $ 4,523,173
================= ================= ================= =================

1999
---------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Available for sale Cost Gains Losses Value
----------------- ----------------- ----------------- -----------------

U.S. Government agency
securities $ 5,792,993 $ - $ (252,151) $ 5,540,842
Corporate securities 3,538,198 5,391 (17,151) 3,526,438
Collateralized mortgage
obligations issued by
U.S. Government agencies 4,612,322 - (219,631) 4,392,691
Mortgage-backed securities 1,999,829 - (62,398) 1,937,431
----------------- ----------------- ----------------- -----------------
Total $ 15,943,342 $ 5,391 $ (551,331) $ 15,397,402
================= ================= ================= =================

1999
---------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------------- ----------------- ----------------- -----------------

Held to maturity
Mortgage-backed securities $ 1,674,729 $ - $ (74,989) $ 1,599,740
================= ================= ================= =================

F-10

3. INVESTMENT SECURITIES (Continued)

The amortized cost and estimated market value of investments in debt securities
available for sale at December 31, 2000, by contractual maturity, are shown
below. The Company's mortgage-backed securities and collateralized mortgage
obligations have contractual maturities ranging from 5 to 28 years. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.

Available for Sale Held to Maturity
------------------------------------ -------------------------------------
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
----------------- ----------------- ----------------- -----------------

Due within one year $ 1,001,064 $ 995,914 $ - $ -
Due after one year through
five years 3,092,978 3,062,388 - -
Due after five years through
ten years 2,947,325 2,901,852 - -
Due after ten years 7,957,502 7,889,640 4,536,734 4,523,173
----------------- ----------------- ----------------- -----------------
Total $ 14,998,869 $ 14,849,794 $ 4,536,734 $ 4,523,173
================= ================= ================= =================

The proceeds from the sale of an investment security available for sale and the
gross gain realized for the year ended December 31, 1999 were $428,555 and
$1,342, respectively. There were no sales in 2000.

Investment securities with amortized cost and estimated market values of
$7,501,431 and $13,787,716 and $7,448,687 and $13,335,390 at December 31, 2000
and 1999, respectively, were pledged to secure FHLB borrowings, public deposits,
and other purposes as required by law.

4. LOANS RECEIVABLE

Loans receivable consists of the following at December 31:

2000 1999
----------------- -----------------

Real estate loans:
Residential $ 26,650,576 $ 16,126,655
Home equity 3,078,086 2,377,059
Commercial 9,319,149 6,614,314
Commercial 2,799,226 1,639,033
Consumer loans 1,922,815 1,416,970
----------------- -----------------
43,769,852 28,174,031
Less:
Deferred loan fees, net 9,878 7,676
Allowance for loan losses 343,673 186,647
----------------- -----------------
Total $ 43,416,301 $ 27,979,708
================= =================

F-11

4. LOANS RECEIVABLE (Continued)

Aggregate loans of $60,000 or more extended to executive officers, directors,
and corporations in which they are beneficially interested as stockholders,
executive officers, or directors were $1,375,258 at December 31, 2000. An
analysis of these related party loans follows:

1999 Additions Repayments 2000
----------------- ----------------- ----------------- -----------------

$ 1,407,671 $ 34,950 $ 67,363 $ 1,375,258

The Company's primary business activity is with customers located within its
local trade area. Mortgage, consumer, and commercial loans are granted. Although
the Company's loan portfolio is diversified at December 31, 2000 and 1999, the
repayment of these loans is dependent upon the local economic conditions in its
immediate trade area.

5. ALLOWANCE FOR LOAN LOSSES

Activity in the allowance for loan losses for the years ended December 31, is as
follows:

2000 1999
----------- -----------

Balance, January 1 $ 186,647 $ 98,988
Add:
Provision charged to operations 157,000 98,760
Recoveries 3,368 254
Less loans charged off 3,342 11,355
----------- -----------
Balance, December 31 $ 343,673 $ 186,647
=========== ===========

6. PREMISES AND EQUIPMENT

Premises and equipment consist of the following:

2000 1999
----------- -----------

Leasehold improvements $ 141,963 $ 61,156
Furniture and equipment 338,316 160,362
----------- -----------
480,279 221,518
Less accumulated depreciation and amortization 121,425 45,931
----------- -----------

Total $ 358,854 $ 175,587
=========== ===========

Depreciation and amortization expense for the years ended December 31, 2000 and
1999 was $74,554 and $41,925, respectively.

On December 9, 2000, the Company entered into a sales agreement to purchase a
commercial building and land for $750,000 to establish a new branch office. The
sale is expected to close during the first quarter of 2001.

F-12

7. FEDERAL HOME LOAN BANK STOCK

The Bank is a member of the FHLB System. As a member, the Bank maintains an
investment in the capital stock of the FHLB of Pittsburgh, at cost, in an amount
not less than the greater of one percent of its outstanding home loans or five
percent of its outstanding notes payable to the FHLB of Pittsburgh as calculated
at December 31 of each year.

8. DEPOSITS

Time deposits include certificates of deposit in denominations of $100,000 or
more. Such deposits aggregated $5,080,923 at December 31, 2000. Deposits in
excess of $100,000 are not federally insured.

The scheduled maturities of time certificates of deposit as of December 31,
2000, are as follows:

Within three months $ 1,899,719
Three through six months 591,961
Six through twelve months 983,342
Over twelve months 1,605,901
-----------------
Total $ 5,080,923
=================

9. FHLB ADVANCES

Outstanding borrowings consisted of draws on the Bank's "RepoPlus" line of
credit and fixed-rate, fixed-term advances through FHLB of Pittsburgh. The
RepoPlus line carries an adjustable rate that is subject to annual renewal and
incurs no service charges. All outstanding borrowings are secured by a blanket
security agreement on qualifying residential mortgage loans, certain pledged
investment securities, and the Bank's investment in FHLB stock. The Bank's
maximum available borrowing limit with the FHLB was approximately $33 million
during 2000.

The following tables set forth information concerning both short and long-term
advances with the FHLB:

2000 1999
------------ ------------

Balance at year-end $ 2,000,000 $ 8,600,000
Maximum amount outstanding at any month-end 8,500,000 9,100,000
Average balance outstanding during the year 6,780,377 7,290,274
Weighted-average interest rate:
As of year-end 6.63% 6.40%
Paid during the year 6.54% 4.97%

F-13

9. FHLB ADVANCES (Continued)

The scheduled maturities of advances outstanding are as follows:

2000
----------------------------------
Year Ending Weighted-
December 31, Amount Average Rate
------------ ----------------- --------------

2001 $ 786,225 5.49%
2002 1,198,125 7.07%
2003 210,784 6.21%
2004 224,254 6.21%
2005 2,738,582 6.19%
2006 and after 1,442,030 6.21%
-----------------
$ 6,600,000
=================

10. COMMITMENTS

In the normal course of business, the Company makes various commitments that are
not reflected in the accompanying consolidated financial statements. These
instruments involve, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the consolidated balance sheet. The
Company's exposure to credit loss in the event of nonperformance by the other
parties to the financial instruments is represented by the contractual amounts
as disclosed. The Company minimizes its exposure to credit loss under these
commitments by subjecting them to credit approval and review procedures and
collateral requirements as deemed necessary. Commitments generally have fixed
expiration dates within one year of their origination.

The off-balance sheet commitments were comprised of the following:

2000 1999
------------- -------------
Commitments to extend credit:
Fixed rate $ 1,242,565 $ 1,096,400
Variable rate 3,380,717 4,634,382
------------- -------------
4,623,282 5,730,782
Letters of credit 61,672 -
------------- -------------
Total $ 4,684,954 $ 5,730,782
============= =============

The range of interest rates on fixed rate loan commitments was 8.375 percent to
9.50 percent at December 31, 2000.

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the loan agreement. These
commitments are comprised primarily of undisbursed residential construction
loans, available commercial and personal lines of credit, and loans approved but
not yet funded. Fees from the issuance of the credit lines are generally
recognized over the period of maturity.

F-14

10. COMMITMENTS (Continued)

The Company is committed under three non-cancelable operating leases for the
Bank's office facilities with remaining terms through 2007. At December 31,
2000, the minimum rental commitments under these leases are as follows:

2001 149,316
2002 149,316
2003 142,236
2004 117,256
2005 92,196
2006 and after 184,392
-----------------
Total $ 834,712
=================

Occupancy and equipment expenses include rental expenditures of $140,241 and
$115,580 for 2000 and 1999, respectively.

11. STOCKHOLDERS' EQUITY

Common Stock Offering
- ---------------------

On September 16, 1999, the Board of Directors approved the offering of the
Company's common stock to existing shareholders and to the public. The offering
began on December 10, 1999, and terminated on March 31, 2000. On December 31,
1999, 79,040 shares were issued with net proceeds from the issuance amounting to
$820,235. During 2000, the Company has realized additional net proceeds of
$467,808 and $113,571 from the issuance of 42,528 and 10,385 shares on February
3, 2000 and March 31, 2000, respectively. The Company has used $1,152,000 or
82.2 percent, of the total proceeds for additional capitalization of the Bank.

Stock Dividend
- --------------

The Board of Directors approved a ten percent stock dividend to stockholders of
record as of December 1, 2000 payable January 1, 2001. As a result of the
dividend, 70,923 additional shares of the Company's common stock were issued,
common stock was increased by $7,092, surplus was increased by $611,711, and
retained earnings decreased by $618,940. Fractional shares paid were paid in
cash. All average shares outstanding and all per share amounts included in the
financial statements are based on the increased number of shares after giving
retroactive effect to the stock dividend.

12. REGULATORY MATTERS

Dividend Restrictions
- ---------------------

The Bank is subject to a dividend restriction that generally limits the amount
of dividends that can be paid by an OTS-chartered bank. OTS regulations require
the Bank to give the OTS 30 days notice of any proposed declara-tion of
dividends to the Company, and the OTS has the authority under its supervisory
powers to prohibit the payment of dividends by the Bank to the Company.

Regulatory Capital Requirements
- -------------------------------

Federal regulations require the Company and the Bank to maintain minimum amounts
of capital. Specifically, each is required to maintain certain minimum dollar
amounts and ratios of Total and Tier I capital to risk-weighted assets and of
Tangible and Core capital (as defined in the regulations) to adjusted assets.

F-15

12. REGULATORY MATTERS (Continued)

Regulatory Capital Requirements (Continued)
- -------------------------------

In addition to the capital requirements, the Federal Deposit Insurance
Corporation Improvement Act ("FDICIA") established five capital categories
ranging from "well capitalized" to "critically undercapitalized." Should any
institution fail to meet the requirements to be considered "adequately
capitalized," it would become subject to a series of increasingly restrictive
regulatory actions.

As of December 31, 2000 and 1999, the FDIC categorized the Company and the Bank
as well capitalized under the regulatory framework for prompt corrective action.
To be classified as a well-capitalized financial institution, Total risk-based,
Tier 1 risk-based, and Core capital ratios must be at least ten percent, six
percent, and five percent, respectively.

The following table reconciles the Company's capital under generally accepted
accounting principles to regulatory capital:

2000 1999
--------------- -------------

Total stockholders' equity $ 6,359,572 $ 5,231,403
Unrealized loss on securities 149,075 545,940
Intangible assets (846,707) (894,392)
--------------- -------------

Tier I, core, and tangible capital 5,661,940 4,882,951
Allowance for loan losses 343,673 186,647
--------------- -------------
Total risk-based capital $ 6,005,613 $ 5,069,598
=============== =============

F-16

12. REGULATORY MATTERS (Continued)

Regulatory Capital Requirements (Continued)
- -------------------------------

The consolidated capital position of the Bank does not materially differ from
the Company's; therefore, the following table sets forth the Company's capital
position and minimum requirements for the years ended December 31:

2000 1999
------------------------------- -------------------------------
Amount Ratio Amount Ratio
-------------- --------------- -------------- --------------

Total Capital (to Risk-weighted Assets)
- ---------------------------------------

Actual $ 6,005,613 15.9 % $ 5,069,598 17.8 %
For Capital Adequacy Purposes 3,028,080 8.0 2,274,800 8.0
To Be Well Capitalized 3,785,100 10.0 2,843,500 10.0

Tier I Capital (to Risk-weighted Assets)
- ----------------------------------------

Actual $ 5,661,940 15.0 % $ 4,882,951 17.2 %
For Capital Adequacy Purposes 1,514,040 4.0 1,137,400 4.0
To Be Well Capitalized 2,271,060 6.0 1,706,100 6.0

Core Capital (to Adjusted Assets)
- ---------------------------------

Actual $ 5,661,940 8.2 % $ 4,882,951 9.8 %
FDIC Denovo Capital Required 5,497,829 8.0 3,975,596 8.0
For Capital Adequacy Purposes 2,061,686 3.0 1,490,848 3.0
To Be Well Capitalized 3,436,143 5.0 2,484,747 5.0

Tangible Capital (to Adjusted Assets)
- -------------------------------------

Actual $ 5,661,940 8.2 % $ 4,882,951 9.8 %
For Capital Adequacy Purposes 1,030,843 1.5 745,424 1.5

13. EMPLOYEE BENEFITS

Profit Sharing Plan
- -------------------

The Company maintains a non-contributory profit sharing plan (the "Plan") for
officers and employees who have met the age and length of service requirements.
The Plan is a defined contribution plan, with contributions based on a
percentage of participants' salaries. In conjunction with the Plan, an
integrated 401(k) salary reduction plan was also implemented.

The Company may make matching contributions equal to a discretionary percentage
determined annually by the Board of Directors. Employee contributions are vested
at all times, and the Company contributions are fully vested after six years.
The Company made no profit sharing or matching contributions for the year ended
December 31, 2000 and 1999.

F-17

13. EMPLOYEE BENEFITS (Continued)

Stock Option Plan
- -----------------

The Board of Directors adopted a stock option plan for directors, officers, and
employees which was approved by the stockholders on May 24, 1999. The number of
shares with respect to which awards may be made available to the plan may not
exceed 95,277 shares. These shares may be issued from authorized but unissued
common stock, treasury stock, or shares purchased in the market. The stock
options have expiration terms of ten years subject to certain extensions and
terminations. The per share exercise price of a stock option is equal to the
fair value of a share of common stock on the date the option is granted. Options
are exercisable in annual installments of 33 1/3 percent for directors and 25
percent for officers and employees, using the plan adoption date as the
anniversary date. At the effective date of grant, one third of the directors'
shares and one fourth of the officers' and employees' shares are immediately
vested and exercisable.

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

2000 1999
---------------------------------- --------------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
---------------- ---------------- ------------- -----------------

Outstanding, beginning of the year 90,475 $ 9.09 - $ -

Granted 4,789 8.41 90,585 9.09
Exercised - - - -
Forfeited (110) 9.09 (110) 9.09
---------------- -------------
Outstanding, end of the year 95,154 $ 9.06 90,475 $ 9.09
================ =============
Exercisable at year-end 82,460 $ 9.08 54,067 $ 9.09
================ =============

The following table summarizes characteristics of stock options outstanding and
exercisable at December 31, 2000:

Outstanding Exercisable
------------------------------------------------ -------------------------------
Average Average
Average Exercise Exercise
Exercise Price Shares Life Price Shares Price
---------------------- --------------- ------------ ------------ --------------- ------------

$ 9.09 90,365 8.4 $ 9.09 80,971 $ 9.09
8.41 4,789 9.5 8.41 1,489 8.41
--------------- ---------------
95,154 82,460
=============== ===============

The Company accounts for its stock option plan under provisions of APB Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations.
Under this Opinion, no compensation expense has been recognized with respect to
the plans because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the grant date. 13.

F-18

EMPLOYEE BENEFITS (Continued)

Stock Option Plan (Continued)
- -----------------

For purposes of computing pro forma results, the Company estimated the fair
values of stock options using the Black-Scholes option pricing model. The model
requires the use of subjective assumptions that can materially effect fair value
estimates. Therefore, the pro forma results are estimates of results of
operations as if compensation expense had been recognized for the stock option
plans. The fair value of each stock option granted was estimated using the
following weighted-average assumptions for grants in 2000 and 1999; (1)
risk-free interest rate of 5.10 and 6.68 percent; (2) expected volatility of
31.60 and 6.22 percent; and (3) expected lives of options ranging from 9 to 10
years.

Had compensation expense for the stock option plan been recognized in accordance
with the fair value accounting provisions of SFAS 123, "Accounting for
Stock-based Compensation," the net loss applicable to common stock and the basic
and diluted net loss per share for the years ended December 31, would be as
follows:

2000 1999
----------- ------------
Net income (loss) applicable to common stock:
As reported $ 150,062 $ (227,131)
Pro forma (7,297) (488,446)
Basic net income (loss) per common share:
As reported $ 0.19 $ (0.36)
Pro forma (0.01) (0.77)
Diluted net income (loss) per common share:
As reported $ 0.19 $ (0.36)
Pro forma (0.01) (0.77)

14. INCOME TAXES

The components of income taxes for the years ended December 31, are summarized
as follows:

2000 1999
------------- --------------

Current payable:
Federal $ - $ -
State - -
------------- --------------
- -
Deferred taxes 57,636 (72,167)
Adjustment to valuation allowance for deferred tax assets (57,636) 72,167
------------- --------------

Total $ - $ -
============ ==============

F-19

14. INCOME TAXES (Continued)

The following temporary differences gave rise to the net deferred tax assets:

2000 1999
-------- ---------

Deferred tax assets:
Net unrealized loss on securities $ 50,686 $ 185,620
Allowance for loan losses 98,728 40,577
Organization costs 39,046 52,923
Loan origination costs 3,359 2,610
Contribution carryover 2,224 -
Net operating loss carryforward 133,497 227,110
-------- ---------
Total gross deferred tax assets 327,540 508,840
Less valuation allowance 303,052 495,622
-------- ---------
Deferred tax assets after allowance 24,488 13,218
-------- ---------
Deferred tax liabilities:
Premises and equipment 13,365 7,400
Core deposit intangible 11,123 5,818
-------- ---------
Total gross deferred tax liabilities 24,488 13,218
-------- ---------
Net deferred tax assets $ - $ -
======== =========

The Company represents an entity that has been operating for less than three
years and has an accumulated net operating deficit since its inception. As such,
management has established a valuation allowance for its deferred tax assets,
primarily the accumulated future tax benefits attributed to the operating loss
carryforward and loan loss provisions since it is more likely than not that
realization of these deferred assets cannot be fully supported at December 31,
2000 and 1999.

The reconciliation of the federal statutory rate and the Company's effective
income tax rate is as follows:

2000 1999
------------------------- -----------------------
% of % of
Pre-tax Pre-tax
Amount Loss Amount Loss
------------ ----------- ----------- ----------

Tax (benefit) at statutory rate $ 51,021 34.0 % $ (77,225) (34.0)%
State income, net of
federal tax 10,231 6.8 (19,195) (8.5)
Adjustment of valuation
allowance for deferred
tax assets (57,636) (38.4) 72,167 31.8
Other, net (3,616) (2.4) 24,253 10.7
------------ ----------- ----------- ----------
Actual tax benefit
and effective rate $ - - % $ - - %
============ =========== =========== ==========

F-20

14. INCOME TAXES (Continued)

At December 31, 2000, the Company has available a net operating loss
carryforward of approximately $250,000 for federal income tax purposes. If
unused, the carryforwards will expire in the years 2018 to 2020. The Bank is
subject to the Pennsylvania Mutual Thrift Institution's tax that is calculated
at 11.5 percent of earnings based on generally accepted accounting principles
with certain adjustments. At December 31, 2000, the Bank has an available net
operating loss carryforward of approximately $496,000 for state tax purposes
that will expire in the years 2001 and 2002. The Company also has available a
net operating loss carryforward of approximately $163,000 for state income tax
purposes which will expire in the years 2008 to 2010.

15. OTHER EXPENSES

The following is an analysis of other expenses:

2000 1999
--------- ---------

Professional fees $ 79,536 $ 94,755
Data processing 114,970 79,698
ATM and debit card processing and supplies 71,118 45,665
Stationery, printing, supplies, and postage 76,632 58,182
Amortization of intangible assets 47,683 43,538
Advertising 73,944 47,167
Other 174,966 171,422
---------- ----------
Total $ 638,849 $ 540,427
========== ==========

16. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the Company's financial instruments at December 31,
are as follows:

2000 1999
------------------------------------ -------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
----------------- ----------------- ----------------- -----------------

Financial assets:
Cash and due from banks and
interest-bearing deposits
with other banks $ 4,233,404 $ 4,233,404 $ 3,057,875 $ 3,057,875
Investment securities and
FHLB stock 19,916,528 19,902,967 17,547,131 17,472,142
Loans receivable 43,416,301 43,796,327 27,979,708 27,694,124
Accrued interest receivable 528,948 528,948 346,059 346,059
----------------- ----------------- ----------------- -----------------
Total $ 68,095,181 $ 68,461,646 $ 48,930,773 $ 48,570,200
================= ================= ================= =================
Financial liabilities:
Deposits $ 53,874,851 $ 54,146,906 $ 35,783,224 $ 35,730,224
FHLB advances 8,600,000 8,631,000 8,600,000 8,591,000
Accrued interest payable 526,233 526,233 370,171 370,171
----------------- ----------------- ----------------- -----------------
Total $ 63,001,084 $ 63,304,139 $ 44,753,395 $ 44,691,395
================= ================= ================= =================

Financial instruments are defined as cash, evidence of an ownership interest in
an entity, or a contract which creates an obligation or right to receive or
deliver cash or another financial instrument from/to a second entity on
potentially favorable or unfavorable terms.

F-21

16. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

Fair value is defined as the amount at which a financial instrument could be
exchanged in a current transaction between willing parties other than in a
forced or liquidation sale. If a quoted market price is available for a
financial instrument, the estimated fair value would be calculated based upon
the market price per trading unit of the instrument.

If no readily available market exists, the fair value estimates for financial
instruments are based upon manage-ment's judgment regarding current economic
conditions, interest rate risk, expected cash flows, future estimated losses,
and other factors as determined through various option pricing formulas. As many
of these assumptions result from judgments made by management based upon
estimates which are inherently uncertain, the resulting estimated fair values
may not be indicative of the amount realizable in the sale of a particular
financial instrument. In addition, changes in the assumptions on which the
estimated fair values are based may have a significant impact on the resulting
estimated fair values.

As certain assets, such as deferred tax assets and premises and equipment, are
not considered financial instruments, the estimated fair value of financial
instruments would not represent the full value of the Company.

The Company employed estimates using discounted cash flows in determining the
estimated fair value of financial instruments for which quoted market prices
were not available based upon the following assumptions:

Cash and Due from Banks, Interest-bearing Deposits with Other Banks, Accrued
- --------------------------------------------------------------------------------
Interest Receivable, and Accrued Interest Payable
- -------------------------------------------------

The fair value is equal to the current carrying value.

Investment Securities and FHLB Stock
- ------------------------------------

The fair value of investment securities is equal to the available quoted market
price. If no quoted market price is available, fair value is estimated using the
quoted market price for similar securities. FHLB stock represents ownership in
an institution that is wholly-owned by other financial institutions. This equity
security's fair value is equal to the current fair value.

Loans Receivable, Deposits, and FHLB Advances
- ---------------------------------------------

The fair value of loans is estimated using discounted contractual cash flows
generated using prepayment estimates. Discount rates are based upon current
market rates generally being offered for new loan originations with similar
credit and payment characteristics. Savings, checking, and money market deposit
accounts are valued at the amount payable on demand as of year-end. Fair values
for time deposits and the FHLB borrowings are estimated using a discounted cash
flow calculation that applies contractual costs currently being offered in the
existing portfolio to current market rates being offered for deposits and
borrowings of similar remaining maturities.

Commitments to Extend Credit
- ----------------------------

These financial instruments are generally not subject to sale, and estimated
fair values are not readily available. The carrying value, represented by the
net deferred fee arising from the unrecognized commitment, and the fair value,
determined by discounting the remaining contractual fee over the term of the
commitment using fees currently charged to enter into similar agreements with
similar credit risk, are not considered material for disclosure. The contractual
amounts of unfunded commitments are presented in Note 10.

F-22

17. PARENT COMPANY

Following are condensed financial statements for Nittany Financial Corp.:

CONDENSED BALANCE SHEET

December 31,
2000 1999
-------------------- --------------------

ASSETS
Cash $ 77,472 $ 31,656
Investment in subsidiaries 6,266,371 5,206,747
Other assets 25,000 -
-------------------- --------------------
TOTAL ASSETS $ 6,368,843 $ 5,238,403
==================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities $ 9,271 $ 7,000
Stockholders' equity 6,359,572 5,231,403
-------------------- --------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,368,843 $ 5,238,403
==================== ====================

CONDENSED STATEMENT OF INCOME

Year Ended December 31,
2000 1999
-------------------- --------------------

INCOME $ - $ -

EXPENSES 60,696 34,908
-------------------- --------------------

Loss before equity in undistributed net income (loss) of subsidiaries (60,696) (34,908)

Equity in undistributed net income (loss) of subsidiaries 210,758 (192,223)
-------------------- --------------------
NET INCOME (LOSS) $ 150,062 $ (227,131)
==================== ====================

F-23

17. PARENT COMPANY (Continued)

CONDENSED STATEMENT OF CASH FLOWS

Year Ended December 31,
2000 1999
-------------------- --------------------

OPERATING ACTIVITIES
Net income (loss) $ 150,062 $ (227,131)
Adjustments to reconcile net income (loss) to
net cash provided by (used for) operating activities:
Equity in undistributed net (income) loss of subsidiaries (210,759) 192,223
Other, net 2,271 47,002
-------------------- --------------------
Net cash provided by (used for) operating activities (58,426) 12,094
-------------------- --------------------
INVESTING ACTIVITIES
Initial capitalization of Nittany - (10,000)
Capital contribution to subsidiary bank (452,000) (800,000)
-------------------- --------------------
Net cash used for investing activities (452,000) (810,000)
-------------------- --------------------
FINANCING ACTIVITIES
Proceeds from issuance of common stock 581,379 820,235
Other, net (25,000) -
Cash paid in lieu of fractional shares (137) -
-------------------- --------------------
Net cash provided by financing activities 556,242 820,235
-------------------- --------------------
Increase in cash 45,816 22,329

CASH AT BEGINNING OF PERIOD 31,656 9,327
-------------------- --------------------
CASH AT END OF PERIOD $ 77,472 $ 31,656
==================== ====================

F-24

APPENDIX A

STOCK SUBSCRIPTION APPLICATION

NITTANY FINANCIAL CORP.

BY EXECUTING THIS STOCK SUBSCRIPTION APPLICATION,
I ACKNOWLEDGE RECEIPT OF A COPY OF THE PROSPECTUS.

I hereby subscribe for and offer to purchase the number of shares of common
stock, $.10 par value, of Nittany Financial Corp. ("Common Stock") shown below,
upon the terms and conditions specified in the Prospectus at a purchase price of
$______ per share. All subscriptions must be for a minimum of 250 shares, unless
waived by Nittany No fractional shares will be issued.

I acknowledge and agree that this Application constitutes an irrevocable offer
and may not be withdrawn without the consent of Nittany Financial Corp. If
Nittany accepts any subscription only in part, I understand that Nittany will
return any portion of funds not required for the partial subscription, with no
interest earned on this portion. If Nittany declines any subscription, I
understand that Nittany will return my subscription funds at that time, with no
interest earned on the funds.

If Nittany Financial Corp. cancels the offering in its entirety or rejects the
Application, this offer to purchase and subscribe shall become void, and Nittany
will return any payments received from in full with no interest earned on the
amount returned. I understand that Nittany will mail my funds within 10 days
upon termination of the offering or rejection of my Application.

Subscriptions may be made by completing and signing this stock subscription
application and delivering to: Nittany Bank, Escrow Agent for Nittany Financial
Corp., 116 East College Avenue (or, to P.O. Box 10283, if mailing this stock
subscription application), State College, Pennsylvania, 5:00 p.m., Eastern
Standard Time, within 60 days of the date of the offering, but in its discretion
Nittany Financial Corp., may terminate or extend the offering period. The
offering period will terminate no later than December 31, 2001. The Stock
Subscription Application must be delivered together with the full amount of the
purchase price for the shares subscribed, in United States dollars, by check,
bank draft, or money order, made payable to "Nittany Bank, Escrow Agent for
Nittany Financial Corp."

Upon each closing, all funds received for subscriptions that are accepted by
Nittany Financial Corp. shall become capital of Nittany Financial Corp. together
with interest thereon. These shares of common stock being offered are not
deposits and are not insured by the FDIC.

A-1

NITTANY FINANCIAL CORP.
STOCK SUBSCRIPTION APPLICATION

Name(s) of Subscribers: ___________________________ Date of Subscription _________________________________

Number of Shares ________ x $______ per share = Amount of Subscription $__________________________________

Are you currently a shareholder of Nittany Financial Corp? Yes o No o
Are you currently a customer of Nittany Bank? Yes o No o
(Note: Shareholders and customers may receive preference in the event of an over
subscription.)

REGISTRATION INFORMATION:

IF SHARES ARE NOT TO BE PURCHASED WITH AN IRA, SEP, KEOGH OR UNDER THE UNIFORM
GIFTS TO MINORS ACT, PLEASE CHECK AS APPROPRIATE AND WRITE OUT THE WAY IN WHICH
SHARES ARE TO BE REGISTERED:

[ ] INDIVIDUAL

[ ] JT TEN -- as joint tenants with right of survivorship and not as _________ tenants in common

[ ] TEN COM -- as tenants in common

[ ] OTHER ____________________

Registration Name ________________________________________________________________________________________

Social Security Number or Tax ID Number

Address of Subscriber

City ________________________________ State _____________ Zip Code _____________________________________

Telephone Number: Day: ___________________ Evening: ______________________________________________________

CHECK AS APPROPRIATE AND, IF CHECKED, COMPLETE AS INDICATED:

[ ] Uniform Gifts to Minors Act
(custodian)
Custodian for ____________ under Uniform Gifts to Minors Act, State of ___________________________________
(minor) (state)

[ ] IRA, SEP or Keogh Account #

Note: If the Subscription Application is on behalf of an IRA, SEP or KEOGH,
the registration name above must read exactly as does the name of the
IRA, SEP or KEOGH account.

Brokerage Firm ______________________________________ Broker _____________________________________________
Broker's Phone No. ________________ Custodian Firm _______________________________________________________
Mailing Address of Broker or Custodian ___________________________________________________________________
__________________________________________________________________________________________________________

I HAVE READ AND RECEIVED A PROSPECTUS DATED ________ ___, 2001 AND HEREBY AGREE
TO THE TERMS OF THIS APPLICATION.

Signature of Subscriber ________________________________________________________

A-2

NITTANY FINANCIAL CORP.

[LOGO]

210,000 Shares
Common Stock

----------
PROSPECTUS
----------

Dated May __, 2001

THESE SECURITIES ARE NOT DEPOSITS OR
ACCOUNTS AND ARE NOT FEDERALLY
INSURED OR GUARANTEED.

PART II - INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24.Indemnification of Officers and Directors.

Sections 1741 through 1747 of the Pennsylvania Business Corporation Act
sets forth circumstances under which directors, officers, employees and agents
may be insured or indemnified against liability which they may incur in their
capacities as such.

Provisions regarding indemnification of directors, officers, employees
or agents of Nittany are contained in Article 10 of Nittany's Articles of
Incorporation.

Under a directors' and officers' liability insurance policy, directors
and officers of Nittany are insured against certain liabilities, including
certain liabilities under the Securities Act, as amended.

Item 25. Other Expenses of Issuance and Distribution

* Legal services................................................$25,000
* Accounting fees.................................................8,000
* Registration fees ..............................................2,000
* Postage and Transfer Agent......................................5,000
* Advertizing and Marketing.......................................3,000
* Printing and engraving..........................................6,000
* Blue Sky expenses...............................................5,000
* EDGAR expenses..................................................6,000
* Miscellaneous..................................................10,000
-------
TOTAL ........................................................$70,000
=======
- ---------------
* Estimated.

Item 26. Recent Sales of Unregistered Securities.

None

Item 27. Exhibits:

The exhibits filed as part of this Registration Statement are as
follows:

3(i) Amended Articles of Incorporation of Nittany Financial Corp.*
3(ii) Bylaws of Nittany Financial Corp.*
4 Specimen Stock Certificate of Nittany Financial Corp.*
5 Opinion of Malizia Spidi & Fisch, PC***
10.1 Employment Agreement between Nittany Financial Corp. and
David Z. Richards*
10.2 Nittany Financial Corp. 1998 Stock Option Plan**
23.1 Consent of Malizia Spidi & Fisch, PC (included in Exhibit 5)***
23.2 Consent of S.R. Snodgrass, A.C.***
99 Form of Subscription Agreement (included as Appendix A to the Prospectus)
99.1 Marketing Materials***

II-1

- --------------
* Incorporated by reference to the identically numbered exhibit to the
registration statement on Form SB-2 (File No. 333-57277) declared
effective by the Securities and Exchange Commission on July 31, 1998.
** Incorporated by reference to the identically number exhibit to the
December 31, 1999 Form 10-KSB filed on March 28, 2000.
*** To be filed by amendment.

Item 28. Undertakings

The undersigned registrant hereby undertakes:

(1) To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:

(i) Include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933 ("Securities Act");

(ii) Reflect in the prospectus any facts or events which
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.

(iii) Include any additional or changed material information
on the plan of distribution.

(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.

(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.

(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act, and is therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the small business issuer of expenses incurred or paid by a director,
officer or controlling person of the small business issuer in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
small business issuer will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

II-2

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in State College,
Pennsylvania as of May 4, 2001.

NITTANY FINANCIAL CORP.

/s/David Z. Richards
-----------------------------------------------
David Z. Richards
President, Chief Executive Officer and Director
(Duly authorized representative)

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David Z. Richards, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments, including post-effective amendments, to this Registration
Statement, and any registration statement relating to the offering covered by
this Registration Statement and filed pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or his
substitute or substitutes may lawfully so or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities indicated as of May 4, 2001.

/s/Samuel J. Malizia /s/David Z. Richards
- --------------------------------------------- -----------------------------------------------
Samuel J. Malizia David Z. Richards
Chairman of the Board and Assistant Secretary President, Chief Executive Officer and Director
(Principal Financial and Accounting Officer)

/s/William A. Jaffe /s/David K. Goodman, Jr.
- --------------------------------------------- -----------------------------------------------
William A. Jaffe David K. Goodman, Jr.
Director and Secretary Director

/s/Donald J. Musso /s/J. Garry McShea
- --------------------------------------------- -----------------------------------------------
Donald J. Musso J. Garry McShea
Director Director

/s/D. Michael Taylor
- ---------------------------------------------
D. Michael Taylor
Director