UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20552

                                  FORM 10 - QSB

[X]  QUARTERLY  REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934

                For the quarterly period ended September 30, 2005

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


                 For the transition period from ______ to ______

                         Commission File Number 0-32623
                         ------------------------------

                             Nittany Financial Corp.
             (Exact name of registrant as specified in its charter)

            Pennsylvania                                   23-2925762
(State or other jurisdiction of incorporation  (IRS Employer Identification No.)
 or organization)

            2541 E. College Avenue, State College, Pennsylvania 16801
                    (Address of principal executive offices)

                                (814) 238 - 5724
              (Registrant's telephone number, including area code)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act  during  the past 12 months  (or such  shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes X No

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:

                  Class: Common Stock, par value $.10 per share
                   Outstanding at November 12, 2005: 2,270,442

<PAGE>
                             NITTANY FINANCIAL CORP.

                                      INDEX



                                                                            Page
                                                                          Number
                                                                          ------

PART I  -  FINANCIAL INFORMATION

    Item 1.   Financial Statements

              Consolidated Balance Sheet (Unaudited) as of                    3
                 September 30, 2005 and December 31, 2004

              Consolidated Statement of Income (Unaudited)
                 for the Three and Nine Months ended September 30,
                 2005 and 2004                                                4

              Consolidated Statement of Changes in Stockholders' Equity
                 (Unaudited) for the Nine Months ended September 30, 2005     5

              Consolidated Statement of Cash Flows (Unaudited)
                 for the Nine Months ended September 30, 2005 and 2004        6

              Notes to Unaudited Consolidated Financial Statements            7

    Item 2.   Management's Discussion and Analysis of
                 Financial Condition and Results of Operations                13

    Item 3.   Controls and Procedures                                         21

PART II  -  OTHER INFORMATION

    Item 1.   Legal Proceedings                                               21

    Item 2.   Changes in Securities and Small Business Issuer
                 Purchases of Equity Securities                               21

    Item 3.   Defaults Upon Senior Securities                                 21

    Item 4.   Submission of Matters to a Vote of Security Holders             21

    Item 5.   Other Information                                               22

    Item 6.   Exhibits                                                        22

SIGNATURES                                                                    23

CERTIFICATIONS

                                       2
<PAGE>

                             NITTANY FINANCIAL CORP.
                           CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
                                                                    September 30,     December 31,
                                                                        2005              2004
                                                                    -------------    -------------
                                                                     (unaudited)
<S>                                                                 <C>              <C>
ASSETS
     Cash and due from banks                                        $   1,311,483    $   1,094,763
     Interest-bearing deposits with other banks                        15,494,167       14,487,813
                                                                    -------------    -------------
     Cash and cash equivalents                                         16,805,650       15,582,576
     Investment securities available for sale                           1,717,756        2,084,223
     Investment securities held to maturity (estimated
       market value of $38,569,087 and $37,502,230)                    38,873,162       37,491,341
     Loans receivable (net of allowance for loan losses
       of $2,469,213 and $2,198,235)                                  270,523,560      235,428,568
     Premises and equipment                                             3,922,400        2,609,528
     Federal Home Loan Bank stock                                       4,309,900        2,066,100
     Intangible assets                                                  1,763,231        1,763,231
     Accrued interest and other assets                                  2,905,308        2,210,133
                                                                    -------------    -------------

             TOTAL ASSETS                                           $ 340,820,967    $ 299,235,700
                                                                    =============    =============
LIABILITIES
     Deposits:
         Noninterest-bearing demand                                 $  12,551,749    $  10,668,777
         Interest-bearing demand                                       28,387,104       25,614,681
         Money market                                                  35,439,254       43,191,121
         Savings                                                      122,451,170      157,200,274
         Time                                                          40,251,138       21,596,027
                                                                    -------------    -------------
            Total deposits                                            239,080,415      258,270,880
     Short-term borrowings                                             69,232,473       14,838,231
     Other borrowings                                                   5,003,068        7,180,612
     Accrued interest payable and other liabilities                     1,316,354        1,279,653
                                                                    -------------    -------------

             TOTAL LIABILITIES                                        314,632,310      281,569,376
                                                                    -------------    -------------

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, 2,270,442 and 1,930,794 issued and outstanding         227,044          193,079
     Additional paid-in capital                                        20,378,456       14,339,979
     Retained earnings                                                  5,594,647        3,139,165
     Accumulated other comprehensive loss                                 (11,490)          (5,899)
                                                                    -------------    -------------

             TOTAL STOCKHOLDERS' EQUITY                                26,188,657       17,666,324
                                                                    -------------    -------------

             TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY             $ 340,820,967    $ 299,235,700
                                                                    =============    =============
</TABLE>

     See the accompanying notes to the unaudited financial statements.

                                       3
<PAGE>

                             NITTANY FINANCIAL CORP.
                        CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
                                                        Three months Ended           Nine months Ended
                                                           September 30,               September 30,
                                                         2005          2004          2005          2004
                                                      -----------    ----------   -----------   -----------
                                                           (unaudited)                  (unaudited)
<S>                                                   <C>            <C>          <C>           <C>
INTEREST AND DIVIDEND INCOME
    Loans, including fees                             $ 4,090,536    $3,266,905   $11,411,040   $ 9,034,114
    Interest-bearing deposits with other banks             65,007        24,473       168,113        49,679
    Investment securities                                 414,472       371,767     1,251,574     1,114,783
                                                      -----------    ----------   -----------   -----------
          Total interest and dividend income            4,570,015     3,663,145    12,830,727    10,198,576
                                                      -----------    ----------   -----------   -----------

INTEREST EXPENSE
    Deposits                                            1,278,195     1,185,689     3,789,366     3,492,226
    Short-term borrowings                                 602,991         1,932     1,030,267        65,037
    Other borrowings                                       76,633       176,615       267,356       395,720
                                                      -----------    ----------   -----------   -----------
          Total interest expense                        1,957,819     1,364,236     5,086,989     3,952,983
                                                      -----------    ----------   -----------   -----------

NET INTEREST INCOME                                     2,612,196     2,298,909     7,743,738     6,245,593

Provision for loan losses                                  76,000       138,000       306,000       442,000
                                                      -----------    ----------   -----------   -----------

NET INTEREST INCOME AFTER PROVISION FOR
   LOAN LOSSES                                          2,536,196     2,160,909     7,437,738     5,803,593
                                                      -----------    ----------   -----------   -----------

NONINTEREST INCOME
    Service fees on deposit accounts                      180,384       177,863       521,630       498,231
    Investment security gain                                 --          32,707          --          32,707
    Asset management fees and commissions                 750,322       614,209     2,173,974     1,773,425
    Secondary market fees                                  82,047        17,758       200,965        65,145
    Other                                                  32,176         8,951        89,259        16,230
                                                      -----------    ----------   -----------   -----------
          Total noninterest income                      1,044,929       851,488     2,985,828     2,385,738
                                                      -----------    ----------   -----------   -----------

NONINTEREST EXPENSE
    Compensation and employee benefits                    718,847       730,611     2,174,035     2,168,606
    Occupancy and equipment                               213,561       186,363       589,997       540,492
    Professional fees                                      50,767        49,290       177,531       144,088
    Data processing fees                                  147,513       121,146       420,956       351,317
    Supplies, printing, and postage                        42,487        39,084       126,469       104,015
    Advertising                                            36,967        37,721       151,320       115,849
    ATM processing fees                                    41,425        36,191       114,783       106,044
    Solicitor fees                                        463,173       381,639     1,336,330     1,120,476
    Other                                                 246,603       205,537       737,199       545,706
                                                      -----------    ----------   -----------   -----------
          Total noninterest expense                     1,961,343     1,787,582     5,828,620     5,196,593
                                                      -----------    ----------   -----------   -----------

Income before income taxes                              1,619,782     1,224,815     4,594,946     2,992,738
Income taxes                                              563,000       427,000     1,611,030     1,061,000
                                                      -----------    ----------   -----------   -----------

NET INCOME                                            $ 1,056,782    $  797,815   $ 2,983,916   $ 1,931,738
                                                      ===========    ==========   ===========   ===========
DIVIDENDS PER SHARE                                   $      0.25           N/A   $      0.25           N/A
EARNINGS PER SHARE
    Basic                                             $      0.47          0.41   $      1.41          1.00
    Diluted                                                  0.45          0.38          1.32          0.93
WEIGHTED AVERAGE SHARES OUTSTANDING
    Basic                                               2,193,701     1,924,621     2,101,778     1,924,621
    Diluted                                             2,304,330     2,080,438     2,242,872     2,078,490
</TABLE>

    See the accompanying notes to the unaudited financial statements

                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                   Accumulated
                                                    Additional                       Other          Total
                                      Common         Paid-in        Retained      Comprehensive  Stockholders'   Comprehensive
                                       Stock         Capital        Earnings          Loss          Equity         Income
                                   --------------  -------------  -------------   -------------  -------------  --------------
                                                                            (unaudited)
<S>                                <C>           <C>            <C>            <C>             <C>             <C>
Balance, December 31, 2004         $     193,079   $ 14,339,979   $  3,139,165    $     (5,899)  $ 17,666,324

Net income                                                           2,983,916                      2,983,916   $   2,983,916
Other comprehensive income:
    Unrealized loss on available
    for sale securities
    net of tax benefit of $2,880                                                        (5,591)        (5,591)         (5,591)
                                                                                                                --------------
Comprehensive income                                                                                            $   2,978,325
                                                                                                                ==============
Cash dividend ($0.25 per share)                                       (528,434)                      (528,434)
Stock Offering - 180,000 shares
    at $26 per share
    (net of offering expenses)            18,000      4,516,163                                     4,534,163
Exercise of stock options                 15,965      1,522,314                                     1,538,279
                                   --------------  -------------  -------------   -------------  -------------

Balance, September 30, 2005        $     227,044   $ 20,378,456   $  5,594,647    $    (11,490)  $ 26,188,657
                                   ==============  =============  =============   =============  =============

</TABLE>
     See accompanying notes to unaudited consolidated financial statements.




                                       5
<PAGE>

                             NITTANY FINANCIAL CORP.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                          Nine months ended September 30,
                                                                               2005            2004
                                                                           ------------    ------------
                                                                                   (unaudited)
<S>                                                                        <C>             <C>
OPERATING ACTIVITIES
     Net income                                                            $  2,983,916    $  1,931,738
     Adjustments to reconcile net income to net cash
       provided by  operating activities:
        Provision for loan losses                                               306,000         442,000
        Depreciation, amortization, and accretion, net                          371,017         540,818
        Investment security gain                                                   --           (32,707)
        Increase in accrued interest receivable                                (159,687)       (105,747)
        Decrease in accrued interest payable                                    510,749         (34,839)
        Decrease in taxes payable                                               465,174          51,757
        Other, net                                                           (1,471,832)         75,762
                                                                           ------------    ------------
           Net cash provided by operating activities                          3,005,337       2,868,782
                                                                           ------------    ------------

INVESTING ACTIVITIES
     Investment securities available for sale:
        Purchases                                                                  --           (80,881)
        Proceeds from sale                                                         --            52,707
        Proceeds from principal repayments and maturities                       353,403       3,353,469
     Investment securities held to maturity:
        Purchases                                                           (10,128,113)    (42,268,480)
        Proceeds from principal repayments and maturities                     8,573,725      36,262,161
     Net increase in loans receivable                                       (35,386,939)    (44,150,543)
     Purchase of FHLB stock                                                  (3,844,600)       (912,000)
     Redemption of FHLB stock                                                 1,600,800            --
     Purchase of premises and equipment                                      (1,520,781)       (147,330)
                                                                           ------------    ------------
        Net cash used for investing activities                              (40,352,505)    (47,890,897)
                                                                           ------------    ------------

FINANCING ACTIVITIES
     Net increase (decrease) in deposits                                    (19,190,465)     25,665,981
     Net increase in short-term borrowings                                   54,394,242       4,427,735
     Proceeds from other borrowings                                                --        14,575,000
     Repayment of other borrowings                                           (2,177,544)       (166,881)
     Proceeds from the sale of common stock                                   4,534,163            --
     Proceeds from exercise of stock options                                  1,538,279            --
     Cash dividends paid                                                       (528,434)           --
     Cash paid in lieu of fractional shares                                        --            (3,472)
                                                                           ------------    ------------
        Net cash provided by financing activities                            38,570,241      44,498,363
                                                                           ------------    ------------

        Increase (decrease) in cash and cash equivalents                      1,223,073        (523,752)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                             15,582,576      14,953,286
                                                                           ------------    ------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                 $ 16,805,649    $ 14,429,534
                                                                           ============    ============

SUPPLEMENTAL CASH FLOW DISCLOSURE
     Cash paid during the year for:
        Interest on deposits and borrowings                                $  4,576,240    $  3,987,822
        Income taxes                                                          1,730,000       1,151,500
</TABLE>

        See the accompanying notes to the unaudited financial statements

                                       6
<PAGE>

                             NITTANY FINANCIAL CORP.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - BASIS OF PRESENTATION

The consolidated financial statements of Nittany Financial Corp. (the "Company")
includes its wholly-owned subsidiaries, Nittany Bank (the "Bank"), Nittany Asset
Management,  Inc, and Vantage  Investment  Advisors,  LLC. The Bank includes its
wholly-owned subsidiary, FTF Investments Inc. All significant intercompany items
have been eliminated.

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with the  instructions  to Form  10-QSB and,  therefore,  do not
necessarily  include all information that would be included in audited financial
statements.  The information furnished reflects all adjustments that are, in the
opinion  of  management,  necessary  for a  fair  statement  of the  results  of
operations.  All such adjustments are of a normal recurring nature.  The results
of operations for the nine months ended  September 30, 2005 are not  necessarily
indicative of the results to be expected for the fiscal year ended  December 31,
2005 or any other future interim period.

These statements  should be read in conjunction with the consolidated  financial
statements  and related  notes for the year ended  December 31, 2004,  which are
incorporated herein by reference to the Company's Annual Report on Form 10-KSB.

Stock-Based  Compensation  - The Company  maintains a stock  option plan for key
officers, employees, and nonemployee directors. Had compensation expense for the
stock option plan been recognized in accordance  with the fair value  accounting
provisions of Statement of Financial  Accounting  Standards No. 123,  Accounting
for Stock-Based Compensation,  net income applicable to common stock, basic, and
diluted net income per common share would have been as follows:
<TABLE>
<CAPTION>
                                                  Three Months Ended                      Nine Months Ended
                                                    September 30,                           September 30,
                                               2005                2004                2005               2004
                                         ------------------  -----------------   -----------------  -----------------

<S>                                        <C>                  <C>                 <C>                <C>
Net income, as reported:                   $     1,056,782      $    797,815        $   2,983,916      $   1,931,738

Less proforma expense related
  to stock options                                  13,644             29,747              41,354             89,241
                                           ----------------     --------------      --------------     --------------
Proforma net income                        $     1,043,138      $     768,068       $   2,942,562      $   1,842,497
                                           ================     ==============      ==============     ==============


Basic net income per common share:
     As reported                           $          0.47      $        0.41       $        1.41      $        1.00
     Pro forma                                        0.48               0.40                1.40               0.96
Diluted net income per common share:
     As reported                           $          0.45      $        0.38       $        1.32      $        0.93
     Pro forma                                        0.45               0.37                1.31               0.89
</TABLE>

                                       7
<PAGE>

NOTE 2 - EARNINGS PER SHARE

The Company provides dual  presentation of Basic and Diluted earnings per share.
Basic  earnings per share  utilizes net income as reported as the  numerator and
the actual average shares  outstanding as the denominator.  Diluted earnings per
share  includes  any  dilutive  effects of options,  warrants,  and  convertible
securities.  For the three months ended September 30, 2005 and 2004, the diluted
number of shares  outstanding  from  employee  stock  options  was  110,629  and
155,817,  respectively.  For the nine months ended  September 30, 2005 and 2004,
the diluted number of shares outstanding from employee stock options was 141,094
and 153,869, respectively.

NOTE 3 - COMPREHENSIVE INCOME

The components of comprehensive  income consist  exclusively of unrealized gains
and losses on available for sale securities. For the nine months ended September
30,  2005,  this  activity is shown under the  heading  Comprehensive  Income as
presented in the Consolidated  Statement of Changes in Stockholders' Equity. For
the three months ended September 30, 2005 and 2004, comprehensive income totaled
$1,062,244 and $802,587,  respectively.  For the nine months ended September 30,
2004, comprehensive income totaled $1,935,311.

NOTE 4 - STOCK OFFERING

In November  2004,  the Board of Directors  approved a stock  offering which was
completed  during the first quarter of 2005 to existing  shareholders and to the
public.  As a result,  180,000  additional  shares of the  Company's  stock were
issued,  common  stock was  increased by $18,000,  and surplus was  increased by
$4,516,163,  the net proceeds of the offering. The offering was completed in the
first  quarter but a few of the expenses of the offering were paid in the second
quarter.

NOTE 5 - RECENT ACCOUNTING PRONOUNCEMENTS

In December  2004, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial Accounting Standards No. 123 (revised 2004),  Share-Based
Payment  (FAS No.  123R).  FAS No.  123R  revised FAS No.  123,  Accounting  for
Stock-Based  Compensation,  and  supersedes  APB Opinion No. 25,  Accounting for
Stock Issued to Employees, and its related implementation guidance. FAS No. 123R
will require  compensation costs related to share-based payment  transactions to
be recognized in the financial statement (with limited  exceptions).  The amount
of compensation  cost will be measured based on the grant-date fair value of the
equity or liability  instruments  issued.  Compensation  cost will be recognized
over the period that an employee provides service in exchange for the award.

In April, the Securities and Exchange  Commission adopted a new rule that amends
the compliance dates for FAS No. 123R. The Statement  requires that compensation
cost relating to  share-based  payment  transactions  be recognized in financial
statements  and that this cost be measured based on the fair value of the equity
or liability instruments issued. FAS No. 123R covers a wide range of share-based
compensation  arrangements  including  share  options,  restricted  share plans,
performance-based awards, share appreciation rights, and employee share purchase
plans.  The Company  will adopt FAS No. 123R on January 1, 2006 and is currently
evaluating  the impact the adoption of the standard  will have on the  Company's
results of operations.

                                       8
<PAGE>

In March 2005,  the  Securities  and Exchange  Commission  ("SEC")  issued Staff
Accounting  Bulletin No. 107 ("SAB No.  107"),  Share-Based  Payment,  providing
guidance on option valuation  methods,  the accounting for income tax effects of
share-based  payment  arrangements  upon  adoption  of FAS  No.  123R,  and  the
disclosures in MD&A subsequent to the adoption. The Company will provide SAB No.
107 required disclosures upon adoption of FAS No. 123R on January 1, 2006 and is
currently  evaluating  the impact the adoption of the standard  will have on the
Company's financial condition, results of operations, and cash flows.

In December 2004, FASB issued FAS No. 153,  Exchanges of Nonmonetary Assets - An
Amendment of APB Opinion No. 29. The guidance in APB Opinion No. 29,  Accounting
for  Nonmonetary  Transactions,  is based on the  principle  that  exchanges  of
nonmonetary  assets  should be  measured  based on the fair  value of the assets
exchanged. The guidance in that Opinion, however, included certain exceptions to
that principle. FAS No. 153 amends Opinion No. 29 to eliminate the exception for
nonmonetary  exchanges  of  similar  productive  assets and  replaces  it with a
general  exception  for  exchanges  of  nonmonetary  assets  that  do  not  have
commercial  substance.  A nonmonetary  exchange has commercial  substance if the
future cash flows of the entity are expected to change significantly as a result
of the exchange.  The  provisions  of FAS No. 153 are effective for  nonmonetary
asset exchanges occurring in fiscal periods beginning after June 15, 2005. Early
application  is permitted and companies  must apply the standard  prospectively.
The adoption of this  standard is not expected to have a material  effect on the
Company's results of operations or financial position.

In June  2005,  the FASB  issued  FAS No.  154,  Accounting  Changes  and Errors
Corrections,  a  replacement  of APB Opinion No. 20 and FAS No. 3. The Statement
applies to all  voluntary  changes in  accounting  principle,  and  changes  the
requirements  for  accounting  for  and  reporting  of a  change  in  accounting
principle.  FAS No. 154 requires  retrospective  application  to prior  periods'
financial  statements of a voluntary change in accounting principle unless it is
impractical.  APB Opinion No. 20 previously required that most voluntary changes
in  accounting  principle be recognized by including in net income of the period
of the change the cumulative effect of changing to the new accounting principle.
FAS No.154 improves the financial reporting because its requirements enhance the
consistency of financial  reporting  between periods.  The provisions of FAS No.
154 are  effective  for  accounting  changes and  corrections  of errors made in
fiscal years beginning after December 15, 2005.


NOTE 6 - BUSINESS SEGMENTS

The company operates two reportable  segments:  community banking and investment
advisory and product  services.  The Company's  community banking segment offers
services  traditionally  offered by  full-service  commercial  banks,  including
commercial  mortgage,  residential real estate, and consumer loan financing,  as
well as commercial  demand,  individual demand, and time deposit services to its
customers. The investment advisory and product services segment offers fee based
investment  management  services  and  alternative  investment  products.  Asset
management  fees are primarily  recognized as the services are performed.  Asset
management  fees are  generally  based on a percentage  of the fair value of the
assets under management and performance fees are generally based on a percentage
of the returns on such assets.


                                       9
<PAGE>

Selected segment information is included in the following tables:
<TABLE>
<CAPTION>
                                                                                    Investment
                                                                                   Advisory and
                                                               Community             Product
                                                                Banking              Services          Consolidated
                                                           -------------------  -------------------  ------------------
<S>                                                          <C>                    <C>                <C>
For the quarter ended September 30, 2005:

Interest income                                              $      4,570,015       $           --     $     4,570,015
Interest expense                                                    1,957,819                   --           1,957,819
                                                             ----------------       --------------     ---------------

Net interest income                                                 2,612,196                   --           2,612,196
Provision for loan losses                                              76,000                   --              76,000
                                                             ----------------       --------------     ---------------

Net interest income after provision for loan losses                 2,536,196                   --           2,536,196
Noninterest income                                                    308,547              736,382           1,044,929
Noninterest expense                                                 1,369,336              592,007           1,961,343
                                                             ----------------       --------------     ---------------

Income before income taxes                                          1,475,407              144,375           1,619,782
Income taxes                                                          563,000                   --             563,000
                                                             ----------------       --------------     ---------------

Net income                                                   $        912,407       $      144,375     $     1,056,782
                                                             ================       ==============     ===============

Intersegment revenues (expenses) included above              $        128,273       $     (128,273)    $            --
Goodwill                                                              799,217              964,014           1,763,231
Depreciation and amortization expense                                  70,179                  561              70,740
Total assets                                                      339,963,771              857,197         340,820,967
</TABLE>

                                       10
<PAGE>
<TABLE>
<CAPTION>
                                                                                    Investment
                                                                                   Advisory and
                                                               Community             Product
                                                                Banking              Services          Consolidated
                                                             ----------------       --------------     ---------------
<S>                                                          <C>                    <C>                <C>
For the quarter ended September 30, 2004:

Interest income                                              $      3,663,145       $           --     $     3,663,145
Interest expense                                                    1,364,236                   --           1,364,236
                                                             ----------------       --------------     ---------------

Net interest income                                                 2,298,909                   --           2,298,909
Provision for loan losses                                             138,000                   --             138,000
                                                             ----------------       --------------     ---------------

Net interest income after provision for loan losses                 2,160,909                   --           2,160,909
Noninterest income                                                    254,780              596,708             851,488
Noninterest expense                                                 1,291,381              496,201           1,787,582
                                                             ----------------       --------------     ---------------

Income before income taxes                                          1,124,308              100,507           1,224,815
Income taxes                                                          427,000                   --             427,000
                                                             ----------------       --------------     ---------------

Net income                                                   $        697,308       $      100,507     $       797,815
                                                             ================       ==============     ===============

Intersegment revenues (expenses) included above              $        114,000       $     (114,000)    $             -
Goodwill                                                              799,217              964,014           1,763,231
Depreciation and amortization expense                                  67,785                  562              68,347
Total assets                                                      293,910,064            1,245,192         295,155,256
</TABLE>

                                       11
<PAGE>
<TABLE>
<CAPTION>
                                                                                       Investment
                                                                                      Advisory and
                                                             Community                  Product
                                                              Banking                   Services                Consolidated
                                                          ----------------           ---------------           ---------------
<S>                                                       <C>                        <C>                       <C>

Year to Date - September 30, 2005
Interest income                                           $     12,830,727           $             0           $    12,830,727
Interest expense                                                 5,086,989                         0                 5,086,989
                                                          ----------------           ---------------           ---------------

Net interest income                                              7,743,738                         0                 7,743,738
Provision for loan losses                                          306,000                         0                   306,000
                                                          ----------------           ---------------           ---------------

Net interest income after provision for loan losses              7,437,738                         0                 7,437,738
Noninterest income                                                 859,673                 2,126,155                 2,985,828
Noninterest expense                                              4,110,160                 1,718,460                 5,828,620
                                                          ----------------           ---------------           ---------------

Income before income taxes                                       4,187,251                   407,695                 4,594,946
Income taxes                                                     1,611,000                        30                 1,611,030
                                                          ----------------           ---------------           ----------------

Net income                                                $      2,576,251           $       407,665           $     2,983,916
                                                          ================           ===============           ================

Intersegment revenues (expenses) included above           $        411,138           $      (411,138)          $             0
Goodwill                                                           799,217                   964,014                 1,763,231
Depreciation and amortization expense                              206,242                     1,666                   207,908
Total assets                                                   339,608,211                 1,212,756               340,820,967
</TABLE>


                                       12
<PAGE>
<TABLE>
<CAPTION>
                                                                                       Investment
                                                                                      Advisory and
                                                             Community                  Product
                                                              Banking                   Services                Consolidated
                                                          ----------------           ---------------           ---------------
<S>                                                       <C>                        <C>                       <C>
Year to Date - September 30, 2004

Interest income                                           $     10,198,576           $             0           $    10,198,576
Interest expense                                                 3,952,983                         0                 3,952,983
                                                          ----------------           ---------------           ---------------

Net interest income                                              6,245,593                         0                 6,245,593
Provision for loan losses                                          442,000                         0                   442,000
                                                          ----------------           ---------------           ---------------

Net interest income after provision for loan losses              5,803,593                         0                 5,803,593
Noninterest income                                                 668,571                 1,717,167                 2,385,738
Noninterest expense                                              3,738,445                 1,458,148                 5,196,593
                                                          ----------------           ---------------           ---------------

Income before income taxes                                       2,733,719                   259,019                 2,992,738
Income taxes                                                     1,061,000                         0                 1,061,000
                                                          ----------------           ---------------           ---------------

Net income                                                $      1,672,719           $       259,019           $     1,931,738
                                                          ================           ===============           ===============

Intersegment revenues (expenses) included above                    373,678           $      (373,678)          $             0
Goodwill                                                           799,217                   964,014                 1,763,231
Depreciation and amortization expense                              197,201                     1,673                   198,874
Total assets                                                   293,910,063                 1,245,192               295,155,256
</TABLE>


                       MANAGEMENT DISCUSSION AND ANALYSIS

                                     GENERAL

The Private  Securities  Litigation Act of 1995 contains safe harbor  provisions
regarding forward-looking  statements.  When used in this discussion,  the words
"believes,"  "anticipates,"  "contemplates,"  "expects," and similar expressions
are intended to identify forward-looking statements. Such statements are subject
to certain risks and  uncertainties  which could cause actual  results to differ
materially from those projected.  Those risks and uncertainties include, but are
not limited  to,  changes in interest  rates,  the ability to control  costs and
expenses, and general economic conditions.


                                       13
<PAGE>

Overview

Nittany Financial Corp. ("Nittany" or the "Company") is a unitary thrift holding
company  organized in 1997 for the purpose of  establishing  a de novo community
bank in  State  College,  Pennsylvania.  Nittany  Bank  (the  "Bank")  commenced
operations as a wholly-owned  FDIC-insured  federal  savings bank  subsidiary of
Nittany on October 26, 1998. At September 30, 2005,  the business  operations of
Nittany  included  three  operating  subsidiaries  (collectively  defined as the
"Company", unless the context indicates otherwise), as follows:

     o    Nittany  Bank  commenced  banking  operations  in  October  1998  as a
          federally-insured   federal  savings  bank  with  headquarters   State
          College,  Pennsylvania.  The Bank currently has four offices currently
          operating in State  College plus an office which opened in February of
          this  year in a  historic  property  in  Bellefonte,  Pennsylvania,  a
          neighboring  community.  The Bank formed a Delaware investment company
          called FTF Investments Inc. during 2004 to aid in asset utilization.

     o    Nittany  Asset  Management,  Inc. was formed in May 1999  primarily to
          offer  investment  products  and  services  to retail  customers.  The
          subsidiary  is  headquartered  at  2541  East  College  Avenue,  State
          College, Pennsylvania.

     o    In 2003, Nittany Financial Corp. acquired Vantage Investment Advisors,
          LLC  ("Vantage").  Vantage is a registered  investment  advisor  which
          currently  manages  investment  assets of approximately  $325 million.
          This subsidiary is also  headquartered  at 2541 East College Avenue in
          State College.

Our retail business is conducted  principally through Nittany Bank. Nittany Bank
provides a wide range of banking  services with an emphasis on  residential  and
commercial real estate lending, consumer lending,  commercial lending and retail
deposits.  At September  30, 2005, we had  consolidated  assets of $341 million,
loans receivable (net of allowance for loan losses) of $271 million, deposits of
$239  million,  and  stockholders'  equity of $26  million.  Net  income for the
quarter ended  September 30, 2005 increased  $259,000 to $1,057,100 or $0.45 per
diluted  share from  $798,000 or $0.38 per diluted  share for the same period in
2004.  This  included  an income tax expense of  $563,000  for the 2005  quarter
compared to $427,000 for the 2004 quarter.

On September 6, 2005, the Company and National Penn Bancshares,  Inc. ("National
Penn") of Boyertown,  PA entered into a merger  agreement  pursuant to which the
Company  would be  acquired  by  National  Penn.  Under the terms of the  merger
agreement,  shareholders  of the Company will be entitled to receive in exchange
for each of their  shares of  Company  common  stock,  (i) cash in the amount of
$42.43,  (ii) 1.975 shares of National Penn common stock  (subject to adjustment
based upon the average  closing  price of National  Penn common  stock for a ten
trading day period prior to the Company's  meeting of  shareholders at which the
merger  agreement  will  be  considered),   or  (iii)  a  combination   thereof.
Shareholders  will be  entitled to elect what form of  consideration  to receive
subject to overall limits that provide that no more than 30% of the  outstanding
shares of Company  common stock may be  exchanged  for cash.  Completion  of the
merger is subject to receipt of all required  regulatory  approvals and approval
of the merger agreement by the shareholders of the Company.

                                       14
<PAGE>

COMPARISON OF FINANCIAL CONDITION

Total assets  increased  $41,585,300 to  $340,821,000 at September 30, 2005 from
$299,235,700  at December 31, 2004.  Strong growth in residential and commercial
real estate loans resulted in an increase in net loans receivable of $35,095,000
which were funded mainly through Federal Home Loan Bank borrowings.

Cash and cash equivalents decreased $1,223,100 at September 30, 2005 as compared
to December 31, 2004.  This  decrease  resulted from growth in loan demand which
exceeded  deposits  during the quarter.  Management  believes that the liquidity
needs of the  Company  are  satisfied  by the  current  balance of cash and cash
equivalents, readily available access to traditional funding sources, FHLB short
term  advances,  and the portion of the  investment  and loan  portfolios  whose
scheduled principal payments and maturities occur within one year. These sources
of funds will enable the Company to meet cash obligations and off-balance  sheet
commitments as they come due.

Investment  securities  available for sale  decreased to $1,717,800 at September
30, 2005 from $2,084,200 at December 31, 2004 and investment  securities held to
maturity  increased to  $38,873,000  at September 30, 2005 from  $37,491,300  at
December 31, 2004.  The increase in the investment  securities  held to maturity
portfolio  resulted primarily from the investment of cash held at Nittany Bank's
FTF Investments Inc. subsidiary.

Net loans receivable increased $35,095,000 to $270,523,600 at September 30, 2005
from  $235,428,600  at December 31, 2004.  The increase in net loans  receivable
resulted from the strong real estate market in the  Company's  market area,  and
low market interest rates. At September 30, 2005, one to four family residential
mortgage  balances grew by  $20,702,400 to  $177,425,400  from  $156,723,000  at
December 31, 2004 and commercial  real estate loans grew by  $15,872,200  during
the same time period. Management attributes the increases in lending balances to
continued customer  referrals,  the economic climate within the market area, and
competitive  rates.  As of  September  30,  2005,  the  Company  had  additional
commitments to fund loan demand of $16,352,000 of which approximately $8,544,000
relates to commercial customers.

At September  30, 2005,  the Company's  allowance  for loan losses  increased by
$179,200 to  $2,377,500  from  $2,198,300  at December  31,  2004.  The increase
resulted from an additional loan loss provision of $306,00 needed for the growth
in loans during the quarter which were offset by two chargeoffs totaling $55,000
and a few recoveries of previous charge-offs.

The additions to the allowance for loan losses are based upon a careful analysis
by  management  of loan data.  Because the Company has incurred very little loan
losses in its five-year  history,  management must base its  determination  upon
such factors as the Company's  volume and the type of loans that it  originates,
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 the Company maintains its
allowance for loan losses at a level that it considers to be adequate to provide
for the inherent risk of loss in its loan portfolio at September 30, 2005, there
can be no  assurance  that  additional  losses  will not be  incurred  in future
periods.

                                       15
<PAGE>


The table below outlines the Company's past due loans as of September 30, 2005:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                                                      > 90 Days Past    > 90 Days Past
                                                             Total Loan                 Due - Number      Due - Balance
                                        # of Loans           Balance                    of Loans            of Loans
----------------------------------------------------------------------------------------------------------------------
<S>                                         <C>              <C>                             <C>              <C>
Personal Loans                              382              $8,531,600                      2                $18,400
----------------------------------------------------------------------------------------------------------------------
Credit
Line Loans                                  457               4,813,000                      4                 43,000
----------------------------------------------------------------------------------------------------------------------
Business Loans                              189              11,268,300                      8                143,200
----------------------------------------------------------------------------------------------------------------------
Real
Estate Loans                              1,441             248,288,100                      2                386,800
----------------------------------------------------------------------------------------------------------------------
      Total                               2,469            $272,901,000                     16               $591,400
----------------------------------------------------------------------------------------------------------------------
</TABLE>

Total deposits decreased by $19,190,500 to $239,080,400 at September 30, 2005 as
compared to  $258,270,900  at December 31,  2004.  The Nittany  Savings  deposit
account is a competitively priced deposit account which comprises  approximately
51% of total deposits at September 30, 2005. During the quarter,  a large escrow
account was  distributed  and also  Management  made the  decision to not retain
selected higher  yielding  deposits during the rise in short term rates that did
not complement the overall funding strategy of the Bank. Time deposits increased
by $18,655,100 for the year,  mainly in the variable rate products tied to prime
rate,  which partially  offset the decline of $34,749,100 in the Nittany Savings
account and  $7,751,900 in money market  accounts.  Non-interest  bearing demand
deposits  increased to  $1,882,980  at September  30, 2005 from  $10,668,800  at
December  31, 2004 which helped the net interest  margin.  Short term  borrowing
from the Federal  Home Loan Bank in  Pittsburgh,  with very  competitive  market
rates,  were used to offset  funding gaps caused by the decline in deposits.  It
should be noted that the number of new deposit  accounts  remained steady during
the nine month and three month period.

Stockholder's  equity  increased  to  $26,188,700  at  September  30,  2005 from
$17,666,300 at December 31, 2004 because of net income of $2,983,900,  the stock
offering of 180,000 shares at $26 per share during the first quarter,  and minor
fluctuations in the market value of available for sale securities.

Total assets included $1.8 million of intangible  assets from the acquisition of
Vantage  and the  Bank's  original  core  deposits.  These  intangibles  are not
currently being amortized.

Average Balance Sheet for September 30, 2005 and 2004

The  following  tables set forth certain  information  relating to the Company's
quarterly  average  balance  sheet and reflects the average  yield on assets and
average cost of  liabilities  for the periods  indicated and the average  yields
earned and rates paid.  Such yields 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.

                                       16
<PAGE>

The yield on earning assets and the net interest margin are presented on a fully
taxable-equivalent (FTE) and annualized basis. The FTE basis adjusts for the tax
benefit of income on certain  tax-exempt loans and investments using the federal
statutory tax rate of 34% for each period  presented.  The Company believes this
measure to be the  preferred  industry  measurement  of net interest  income and
provides relevant comparison between taxable and non-taxable amounts.

a.  Nittany   Financial   Quarterly   Average  Balance  Sheet  and  Supplemental
Information:
<TABLE>
<CAPTION>
                                                                              For the three months ended
                                            ----------------------------------------------------------------------------------
                                                              9/30/2005                                         9/30/2004
                                            ---------------------------------------         ----------------------------------
                                                                             (3)                                      (3)
                                                  Average                  Average          Average                 Average
                                                  Balance    Interest    Yield/Cost         Balance     Interest   Yield/Cost
                                                  -------    --------    ----------         -------     --------   ----------
                                                                              (Dollars in thousands)
<S>                                           <C>           <C>           <C>           <C>            <C>         <C>
Interest-earning assets:
  Loans recievable                               $269,320      $4,090        6.07%         $222,148       $3,267      5.88%
  Investments securities                           46,494         414        4.09%           46,768          372      4.27%
  Interest-bearing dep. with other banks           12,137          65        2.14%           10,355           24      0.93%
                                                 --------      ------    ----------        --------       ------   ---------
Total interest-earning assets                     327,951       4,569        5.65%          279,271        3,663      5.43%
                                                               ------                                     ------
Noninterest-earning assets                          8,737                                     6,413
Allowance for loan losses                          (2,424)                                   (2,029)
                                                 --------                                  --------
Total assets                                     $334,264                                  $283,655
                                                 ========                                  ========
Interest-bearing liabilities:
  Interest - bearing demand deposits             $ 25,276          52        0.82%         $ 21,652           47      0.87%
  Money market deposits                            23,061         159        2.76%           37,679          196      2.08%
  Savings deposits                                134,049         715        2.13%          155,610          790      2.03%
  Certificates of deposit                          40,062         352        3.51%           21,051          153      2.91%
  Borrowings                                       68,577         680        3.97%           20,366          179      3.52%
                                                 --------      ------    ----------        --------       ------   ---------
Total interest-bearing liabilities                291,025       1,958        2.69%          256,358        1,365      2.13%
                                                 --------      ------                      --------       ------
Noninterest-bearing liabilities
  Demand deposits                                  12,314                                    10,022
  Other liabilities                                 1,347                                       705
Stockholders' equity                               24,839                                    16,569
                                                 --------                                  --------
Total liabilities and stockholders' equity       $329,526                                  $283,655
                                                 ========                                  ========
Net interest income                                            $2,611                                     $2,298
                                                               ======                                     ======
Interest rate spread (1)                                                     2.96%                                    3.30%
Net yield on interest-earning assets (2)                                     3.26%                                    3.47%
Ratio of avg. interest-earning assets to
  average interest-bearing liabilities                                     112.69%                                  108.94%

</TABLE>


(1)  Interest  rate  spread  is  the   difference   between  the  avg  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.

                                       17
<PAGE>

a.  Nittany  Financial  Year to Date  Average  Balance  Sheet  and  Supplemental
Information:

<TABLE>
<CAPTION>
                                                                              For the period ended
                                            ---------------------------------------------------------------------------------
                                                              9/30/2005                                      9/30/2004
                                            ---------------------------------------         ---------------------------------
                                                                            (3)                                      (3)
                                                  Average                  Average          Average                 Average
                                                  Balance    Interest    Yield/Cost         Balance     Interest   Yield/Cost
                                                  -------    --------    ----------         -------     --------   ----------
                                                                              (Dollars in thousands)
<S>                                           <C>           <C>           <C>           <C>            <C>         <C>
Interest-earning assets:
  Loans recievable                               $253,886     $11,411        5.99%         $205,669      $ 9,034      5.86%
  Investments securities                           45,925       1,252        4.17%           47,818        1,115      3.64%
  Interest-bearing dep. with other banks           11,296         168        1.98%            9,776           50      0.68%
                                                 --------     -------    --------          --------      -------   ---------
Total interest-earning assets                     311,106      12,831        5.58%          263,264       10,199      5.26%
                                                              -------                                    -------
Noninterest-earning assets                          8,082                                     7,193
Allowance for loan losses                          (2,316)                                   (1,886)
                                                 --------                                  --------
Total assets                                     $316,872                                  $268,570
                                                 ========                                  ========
Interest-bearing liabilities:
  Interest - bearing demand deposits             $ 24,186         152        0.84%         $ 20,489          131      0.85%
  Money market deposits                            31,920         537        2.24%           35,910          560      2.08%
  Savings deposits                                143,417       2,205        2.05%          150,639        2,323      2.06%
  Certificates of deposit                          35,561         895        3.36%           21,454          478      2.97%
  Borrowings                                       44,766       1,298        3.87%           14,566          461      4.22%
                                                 --------     -------    ----------        --------      -------   ---------
Total interest-bearing liabilities                279,850       5,087        2.42%          243,059        3,953      2.17%
                                                 --------     -------                      --------      -------
Noninterest-bearing liabilities
  Demand deposits                                  11,169                                     8,939
  Other liabilities                                 1,450                                       719
Stockholders' equity                               22,829                                    15,854
                                                 --------                                  --------
Total liabilities and stockholders' equity       $315,297                                  $268,570
                                                 ========                                  ========
Net interest income                                           $ 7,744                                    $ 6,246
                                                              =======                                    =======
Interest rate spread (1)                                                     3.16%                                    3.09%
Net yield on interest-earning assets (2)                                     3.40%                                    3.26%
Ratio of avg. interest-earning assets to
  average interest-bearing liabilities                                     111.17%                                  108.31%

</TABLE>
(1)  Interest  rate  spread  is the  difference  between  the  average  yield on
     int-earning assets and the average cost of int-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.


RESULTS OF OPERATIONS

Net income was  $1,056,800  for the three months ended  September  30, 2005,  an
increase of $258,970 as compared to the same period ended 2004.  The increase is
primarily  due to  increases in net interest  income and  noninterest  income of
$313,300 and $1,056,800  respectively,  which were partially offset by increases
in noninterest expense and taxes. Basic and diluted earnings per share increased
to $0.48 and $0.45 per share,  respectively  for the quarter ended September 30,
2005 compared to $0.33 and $0.31 per share, respectively,  for the quarter ended
September  30,  2004.  Net  income  was  $2,983,900  for the nine  months  ended
September  30, 2005,  an increase of  $1,052,200  as compared to the same period
ended 2004.  The increase is primarily  due to increases in net interest  income
and  noninterest  income of $1,498,100  and $600,100,  respectively,  which were
offset by increases in noninterest expense and taxes. Basic and diluted earnings
per share  decreased  to $0.94 and $0.87 per  share,  respectively  for the nine
months  period ended  September  30, 2005 compared to $1.00 and $0.93 per share,
respectively, for the nine month period ended September 30, 2004.

                                       18
<PAGE>

Net interest income for the three months ended September 30, 2005 was $2,612,200
as  compared to  $2,298,900  for the same period  ended  2004.  Interest  income
increased  $906,900  for 2005 as  compared  to the  prior  year  period  and was
influenced  mainly  by  increases  in  interest  earned on loans  receivable  of
$823,600.  The  increase  in  interest  income was the result of an  increase of
$48,680,000  in average  balances  of  interest-earning  assets  that  primarily
resulted from a $47,172,000 increase in the average balance of loans receivable.
The yield on interest  earning  assets  increased  to 5.58% for the three months
ended  September  30,  2005 from  5.43% for the same  period  ended  2004 due to
increasing interest rates during the quarter.  There were significant  increases
in residential  real estate lending  although the yield on the loans  receivable
increased 20 basis points in 2005 as compared to 2004.  Net interest  income for
the  nine  months  ended  September  30,  2005 was  $7,743,700  as  compared  to
$6,245,600 for the same period ended 2004. Interest income increased  $2,632,200
for 2005 as  compared  to the prior  year  period and was  influenced  mainly by
increases in interest earned on loans receivable of $2,376,900.

Interest expense  increased by $593,600 for the three months ended September 30,
2005 as compared to the prior year period as  decreases  in the Nittany  Savings
balances  were  essentially  offset by higher  rates and  balances in  overnight
borrowings.  The average  rate of  interest-bearing  liabilities  (i.e.  cost of
funds) increased by 56 basis points as compared to the same period in year 2004.
The average balance of savings deposit,  the Bank's flagship account,  decreased
by $21,561,000 while rates held steady. The Bank used the preferential overnight
borrowing  rates  offered  by the  Federal  Home  Loan  Bank to  offset  funding
differences.  The average  balance in advances  from the Federal  Home Loan Bank
increased  significantly  from  $20,366,000  in the  third  quarter  of  2004 to
$68,577,000 in the current quarter. Interest expense increased by $1,134,000 for
the nine months ended September 30, 2005 as compared to the prior year period as
higher rates and additional  borrowings  were  partially  offset by decreases in
average deposit balances.

As a result of an increase in the average cost of interest bearing  liabilities,
the Bank's  quarterly net interest margin  decreased by 21 basis points to 3.26%
from 3.47% at September 30, 2004, a period of continued  flattening in the yield
curve.

Total noninterest income for the three months ended September 30, 2005 increased
$193,400 as compared to the same period ended 2004. Noninterest income items are
primarily  comprised of service  charges and fees on deposit  account  activity,
secondary  market fees,  overdraft  privilege  fees, and fee income derived from
asset  management  services.  For the three month and nine month  periods  ended
September 30, 2005,  commissions  and  management  fees from Vantage and Nittany
Asset Management increased by $136,100 and $400,500 respectively,  over the same
periods of 2004.

Total  noninterest  expenses  increased  $173,800  for the  three  months  ended
September 30, 2005,  as compared to the same period ended 2004.  The increase in
total  noninterest  expenses for the current period was primarily related to the
larger  organization  that resulted from opening of the new branch in Bellefonte
during the last quarter, the marketing efforts to increase visibility within the
Company's  market  area,  performance  bonuses  given  to  employees,  and  data
processing expenses.  For the nine months ended September 30, 2005,  noninterest
expenses  increased  $632,000 as compared  to the same period  ended 2004.  This
increase also relates primarily to the larger  organization,  marketing efforts,
and data processing expenses. A portion of the increase for the quarter and year
to date also  related to the fact that  Vantage  paid  $463,200  of  independent
investment solicitors' fees for the quarter as compared to $381,600 for the same
period  in 2004  and  $1,336,300  for the  nine  month  period  as  compared  to
$1,120,480  for the

                                       19
<PAGE>


same nine month period in 2004.  These increases are due to the sustained growth
in assets under management by Vantage.

Income tax expense of $563,000 was recognized in the quarter ended September 30,
2005 compared to $427,000 for the same period of 2004 as the Company's effective
tax rate remained steady at approximately 35%. The Bank holds  approximately $15
million in high quality  municipal bonds and has a Delaware  investment  company
subsidiary  which holds  approximately  $43 million in investments and deposits.
These strategies have helped to maintain our effective tax rate.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity  management for Nittany is measured and monitored on both a short- and
long-term basis,  allowing management to better understand and react to emerging
balance  sheet trends.  After  assessing  actual and projected  cash flow needs,
management seeks to obtain funding at the most economical cost to Nittany.  Both
short- and long-term  liquidity  needs are addressed by maturities,  repayments,
and sales of investments securities, and loan repayments and maturities. The use
of these  resources,  in  conjunction  with  access to credit,  provide the core
ingredients for satisfying depositor, borrower, and creditor needs.

Nittany's  liquid assets  consist of cash and cash  equivalents,  and investment
securities  classified  as  available  for sale.  The  level of these  assets is
dependent on Nittany's operating, investing, and financing activities during any
given period.  At September 30, 2005,  cash and cash  equivalents  totaled $16.8
million  or 5%  of  total  assets  while  investment  securities  classified  as
available for sale totaled  $1,717,800.  The Bank's borrowings of $73,360,000 of
FHLB  advances are  substantially  higher than historic  levels which  increases
interest rate risk.  Management,  however,  believes that the liquidity needs of
Nittany  are  satisfied  by the  current  balance of cash and cash  equivalents,
readily available access to traditional funding sources,  and the portion of the
investment and loan portfolios that mature within one year.

Operating  activities  provided net cash of $3,005,300 for the nine month period
ended September 30, 2005,  generated  principally from net income of $2,983,900.
Also  contributing  to operating  activities  was  provision for loan losses and
depreciation,   amortization,   and   accretion   of  $306,000   and   $371,000,
respectively.

Investing  activities  consist primarily of loan originations and repayments and
investment  purchases and maturities.  These cash usages primarily  consisted of
loan  originations  of $35,386,900 for the nine months ended September 30, 2005,
as well as  investment  purchases  of  $10,128,100  for the  same  time  period.
Partially  offsetting  the  usage of  investment  activities  is  $8,918,900  of
proceeds from  investment  security  maturities and repayments for the same time
period.  The Bank also  purchased  a former  Dunkin  Donuts  building  which was
adjacent to the East College Avenue office for approximately $850,000 for future
expansion.

Financing  activities  consist of the  solicitation  and  repayment  of customer
deposits, borrowings and repayments, and proceeds from the sale of common stock.
During the nine month period  ending  September  30, 2005,  net cash provided by
financing  activities totaled  $38,570,200,  principally  derived from the stock
offering  during the quarter  (180,000 shares at $26 per share) and the proceeds
from short term  borrowings  from the Federal  Home Loan Bank of  Pittsburgh  of
$54,394,200.

                                       20
<PAGE>

Nittany's primary source of capital has been common stock offerings and retained
earnings.  Historically,  Nittany has generated  net retained  income to support
normal growth and expansion.  Management has developed a capital planning policy
to not only  ensure  compliance  with  regulations,  but also to ensure  capital
adequacy for future expansion.

Management  monitors both the Company's and the Bank's total risk-based,  Tier I
risk-based  and  tangible  capital  ratios  in order to assess  compliance  with
regulatory  guidelines.  At September  30,  2005,  both the Company and the Bank
exceeded the minimum  risk-based and tangible  capital ratio  requirements.  The
Company's and the Bank's  risk-based,  Tier I risk-based,  and tangible  capital
ratios are 13.5%, 12.2%, 7.0% and 12.7%, 11.4%, 6.5%, respectively, at September
30, 2005.

ITEM 3.  CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.  Based on their evaluation
    ------------------------------------------------
as of September  30, 2005,  the  Registrant's  principal  executive  officer and
principal  financial  officer have  concluded that the  Registrant's  disclosure
controls and procedures (as defined in Rules  13a-15(c) and 15d-15(c)  under the
Securities  Exchange Act of 1934 (the  "Exchange  Act")) are effective to ensure
that  information  required to be  disclosed  by the Company in reports  that it
files or submits under the Exchange Act is recorded,  processed,  summarized and
reported within the time periods specified in Securities and Exchange Commission
rules and forms.

(b)  Changes in  internal  controls.  There were no  significant  changes in the
     ------------------------------
Registrant's  internal  controls or in other  factors  that could  significantly
affect these controls subsequent to the date of their evaluation,  including any
corrective  actions  with  regard  to  significant   deficiencies  and  material
weaknesses.


PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

               None

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

               None

Item 3.    Defaults upon Senior Securities

               None


Item 4.     Submission of matters to a vote of security holders

            None

                                       21
<PAGE>



Item 5.    Other Information

               None

Item 6.    Exhibits
<TABLE>
<CAPTION>

          (a) The following exhibits are included in this Report or incorporated
              herein by reference:

                  <S>       <C>
                  3(i)     Amended Articles of Incorporation of Nittany Financial Corp. *
                  3(ii)    Bylaws of Nittany Financial Corp. *
                  4        Specimen Stock Certificate of Nittany Financial Corp. *
                  10.1     Employment Agreement between the Bank and David Z. Richards *
                  10.2     Nittany Financial Corp. 1998 Stock Option Plan **
                  10.3     Supplemental Executive Retirement Plan ***
                  31.1     Certification Pursuant to Section 302 of the Securities Exchange Act of 1934 - David Z. Richards
                  31.2     Certification Pursuant to Section 302 of the Securities Exchange Act of 1934 - Gary M. Bradley
                  32.1     Certification  Pursuant  to 18 U.S.C.  Section  1350,  as Adopted  Pursuant  to Section 906 of the
                           Sarbanes-Oxley Act 0f 2002.
                  99.1     Independent Accountants' Report
</TABLE>

*    Incorporated  by  reference  to the  identically  numbered  exhibit  to the
     registration statement on Form SB-2 (File No. 333-57277) declared effective
     by the SEC on July 31, 1998.

**   Incorporated  by  reference  to the  identically  numbered  exhibit  to the
     December 31, 1999 Form 10-KSB filed with the SEC on March 28, 2000.

***  Incorporated  by  reference  to the  identically  numbered  exhibit  to the
     December 31, 2003 Form 10-KSB filed with the SEC on March 30, 2004.


                                       22
<PAGE>

                                   SIGNATURES

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


                                       Nittany Financial Corp.


Date:    November 14, 2005             By: /s/ David Z. Richards
                                           -------------------------------------
                                           David Z. Richards
                                           President and Chief Executive Officer



Date:    November 14, 2005             By: /s/ Gary M. Bradley
                                           -------------------------------------
                                           Gary M. Bradley
                                           Vice President and Chief Accounting
                                           Officer


                                       23