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, 2001

---
     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)

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

                                (814) 234 - 7320
              (Registrant's telephone number, including area code)


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

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

                  Class: Common Stock, par value $.10 per share
              Shares Outstanding at a November 11, 2001: 1,030,312


<PAGE>

                             NITTANY FINANCIAL CORP.

                                      INDEX

<TABLE>
<CAPTION>
<S>               <C>
PART I  -  FINANCIAL INFORMATION

      Item 1.       Financial Statements

                        Consolidated Balance Sheet (Unaudited) as of                                                     3
                            September 30, 2001 and December 31, 2000

                        Consolidated Statement of Income (Unaudited)
                            for the Three Months ended September 30, 2001 and 2000                                       4

                        Consolidated Statement of Income (Unaudited)                                                     5
                            for the Nine Months ended September 30, 2001 and 2000

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

                        Consolidated Statement of Cash Flows (Unaudited)
                            for the Nine Months ended September 30, 2001 and 2000                                        7

                        Notes to Unaudited Consolidated Financial Statements                                           8 - 11

      Item 2.       Management's Discussion and Analysis of
                            Financial Condition and Results of Operations                                             12 - 16

PART II  -  OTHER INFORMATION

      Item 1.       Legal Proceedings                                                                                   17

      Item 2.       Changes in Securities                                                                               17

      Item 3.       Default Upon Senior Securities                                                                      17

      Item 4.       Submissions of Matters to a Vote of Security Holders                                                17

      Item 5.       Other Information                                                                                   17

      Item 6.       Exhibits and Reports on Form 8 - K                                                                17 - 18

SIGNATURES                                                                                                              19

</TABLE>


<PAGE>

                             NITTANY FINANCIAL CORP.
                     CONSOLIDATED BALANCE SHEET (UNAUDITED)

<TABLE>
<CAPTION>
                                                               September 30,    December 31,
                                                                     2001             2000
                                                               -------------    -------------
<S>                                                          <C>              <C>
ASSETS
Cash and due from banks                                        $     701,977    $     411,553
Interest-bearing deposits with other banks                        16,431,973        3,821,851
Investment securities available for sale                           5,540,931       14,849,794
Investment securities held to maturity  (market
      value of $20,980,463 and $4,523,173)                        20,903,116        4,536,734
Loans receivable (net of allowance for loan losses
      of $507,565 and $343,673)                                   59,572,757       43,416,301
Premises and equipment                                             1,198,900          358,854
Federal Home Loan Bank stock                                         530,000          530,000
Intangible assets                                                    811,187          846,707
Accrued interest and other assets                                    592,892          648,568
                                                               -------------    -------------

      TOTAL ASSETS                                             $ 106,283,733    $  69,420,362
                                                               =============    =============
LIABILITIES
Deposits:
      Noninterest-bearing demand                               $   3,949,060    $   3,905,448
      Interest-bearing demand                                     11,572,960        8,941,842
      Money market                                                15,029,788       15,021,369
      Savings                                                     39,892,426        6,351,164
      Time                                                        18,168,712       19,655,028
                                                               -------------    -------------
           Total deposits                                         88,612,946       53,874,851
Loans Payable                                                              -                -
Short-term borrowings                                              1,564,726        2,000,000
FHLB advances                                                      5,861,418        6,600,000
Accrued interest payable and other liabilities                     2,081,025          585,939
                                                               -------------    -------------
      TOTAL LIABILITIES                                           98,120,115       63,060,790
                                                               -------------    -------------
STOCKHOLDER'S EQUITY
Serial perferred stock, no par value; 5,000,000 shares                     -                -
      authorized, none issued
Common stock, $.10 par value, 10,000,000 shares
      authorized; 960,249 and 780,312 issued and outstanding          96,025           78,031
Additional paid-in capital                                         9,255,123        7,652,275
Retained deficit                                                  (1,149,011)      (1,221,659)
Accumulated other comprehensive loss                                 (38,519)        (149,075)
                                                               -------------    -------------
      TOTAL STOCKHOLDERS' EQUITY                                   8,163,618        6,359,572
                                                               -------------    -------------
      TOTAL LIABILITIES AND
           STOCKHOLDERS' EQUITY                                $ 106,283,733    $  69,420,362
                                                               =============    =============
</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

                                        3
<PAGE>

                             NITTANY FINANCIAL CORP.
                  CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)


                                          Three Months Ended September 30,
                                                  2001       2000
                                              ----------   ----------
INTEREST AND DIVIDEND INCOME
Loans, including fees                         $1,129,794   $  791,636
Investment securities                            293,030      286,728
Interest-bearing deposits with other banks       115,255        3,447
                                              ----------   ----------
      Total interest and dividend income       1,538,079    1,081,811
                                              ----------   ----------

INTEREST EXPENSE
Deposits                                         886,533      520,236
Borrowings                                       120,757      128,157
                                              ----------   ----------
      Total interest expense                   1,007,290      648,393
                                              ----------   ----------

NET INTEREST INCOME                              530,789      433,418

Provision for loan losses                         88,500       44,000
                                              ----------   ----------
NET INTEREST INCOME AFTER
   PROVISION FOR LOAN LOSSES                     442,289      389,418
                                              ----------   ----------
NONINTEREST INCOME
Service fees on deposit accounts                  96,328       52,976
Investment securities gains                       21,487            -
Other income                                      28,665       12,742
                                              ----------   ----------
      Total noninterest income                   146,480       65,718
                                              ----------   ----------
NONINTEREST EXPENSE
Compensation and employee benefits               266,744      181,254
Occupancy and equipment                           88,322       74,956
Professional fees                                 21,287       17,683
Data processing                                   62,700       52,376
Goodwill amortization                             11,970       11,970
Stationery, printing, supplies, and postage       35,437       24,279
Other                                             80,308       63,108
                                              ----------   ----------
      Total noninterest expense                  566,768      425,626
                                              ----------   ----------

Income before income taxes                        22,001       29,510
Income taxes                                         500         --
                                              ----------   ----------

NET INCOME                                    $   21,501   $   29,510
                                              ==========   ==========

EARNINGS PER SHARE:
      Basic                                   $     0.02   $     0.04
      Diuluted                                $     0.02   $     0.04

WEIGHTED AVERAGE SHARES OUTSTANDING:
      Basic                                      880,410      709,389
      Diuluted                                   886,168      709,389


See accompanying notes to the unaudited consolidated financial statements.

                                        4
<PAGE>

                             NITTANY FINANCIAL CORP.
                  CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)


                                          Nine Months Ended September 30,
                                                 2001         2000
                                              ----------   ----------

INTEREST AND DIVIDEND INCOME
Loans, including fees                         $3,060,137   $2,062,216
Investment securities                            814,283      859,125
Interest-bearing deposits with other banks       261,726       68,324
                                              ----------   ----------
      Total interest and dividend income       4,136,146    2,989,665
                                              ----------   ----------
INTEREST EXPENSE
Deposits                                       2,248,780    1,370,793
Borrowings                                       404,133      397,262
                                              ----------   ----------
      Total interest expense                   2,652,913    1,768,055
                                              ----------   ----------

NET INTEREST INCOME                            1,483,233    1,221,610

Provision for loan losses                        178,500      115,000
                                              ----------   ----------
NET INTEREST INCOME AFTER
   PROVISION FOR LOAN LOSSES                   1,304,733    1,106,610
                                              ----------   ----------
NONINTEREST INCOME
Service fees on deposit accounts                 250,243      158,113
Investment securities gains                       21,487         --
Other income                                      70,150       33,861
                                              ----------   ----------
      Total noninterest income                   341,880      191,974
                                              ----------   ----------
NONINTEREST EXPENSE
Compensation and employee benefits               735,164      526,987
Occupancy and equipment                          254,714      189,840
Professional fees                                 66,628       52,498
Data processing                                  172,027      136,347
Goodwill amortization                             35,621       35,715
Stationery, printing, supplies, and postage       82,744       58,241
Other                                            226,567      187,003
                                              ----------   ----------
      Total noninterest expense                1,573,465    1,186,631
                                              ----------   ----------

Income before income taxes                        73,148      111,953
Income taxes                                         500            -
                                              ----------   ----------

NET INCOME                                    $   72,648   $  111,953
                                              ==========   ==========

EARNINGS PER SHARE:
      Basic                                   $     0.09   $     0.16
      Diuluted                                $     0.09   $     0.16

WEIGHTED AVERAGE SHARES OUTSTANDING:
      Basic                                      814,131      700,663
      Diuluted                                   820,633      700,663

See accompanying notes to the unaudited consolidated financial statements.

                                        5
<PAGE>
<TABLE>
<CAPTION>

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

                                                                                             Accumulated
                                                                                               Other
                                                               Additional                      Compre-       Total         Compre-
                                                  Common       Paid-in        Retained         hensive     Stockholders'   hensive
                                                   Stock        Capital       Deficit            Loss        Equity        Income
                                                 ---------    -----------   ------------      ----------   ------------   ---------
<S>                                            <C>         <C>           <C>               <C>           <C>            <C>
Balance, December 31, 2000                       $ 78,031    $ 7,652,275   $ (1,221,659)     $ (149,075)   $ 6,359,572

Net income                                                                       72,648                         72,648    $ 72,648
Other comprehensive income:
  Unrealized gain on available for
    sale securities                                                                             110,556        110,556     110,556
                                                                                                                          --------
Comprehensive income                                                                                                      $183,204
                                                                                                                          ========
Common stock issued, net                           17,994      1,602,848                                     1,620,842
                                                 --------     ----------    -----------       ---------    -----------
Balance, September 30, 2001                      $ 96,025    $ 9,255,123   $ (1,149,011)      $ (38,519)   $ 8,163,618
                                                 ========     ==========    ===========       =========    ===========

Components of comprehensive income:
Change in net unrealized gain on
    investment securities available for sale                                                                              $132,043
Realized gains included in net income,                                                                                     (21,487)
                                                                                                                          --------
Total                                                                                                                     $110,556
                                                                                                                          ========
</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

                                        6
<PAGE>

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

<TABLE>
<CAPTION>
                                                                    Nine Months Ended September 30,
                                                                          2001            2000
                                                                     ------------    ------------
<S>                                                                <C>             <C>
OPERATING ACTIVITIES
Net income                                                           $     72,648    $    111,953
Adjustments to reconcile net income to net cash
   provided by operating activities:
      Provision for loan losses                                           178,500         115,000
      Depreciation, amortization, and accretion, net                      152,542          90,225
      Investment securities gains                                         (21,487)              -
      Decrease (increase) in accrued interest receivable                    3,272         (46,205)
      Increase (decrease) in accrued interest payable                     (55,535)          9,042
      Other, net                                                        1,603,025             525
                                                                     ------------    ------------
      Net cash provided by operating activities                         1,932,965         280,540
                                                                     ------------    ------------

INVESTING ACTIVITIES
Investment securities available for sale:
      Proceed from sales                                                2,388,750               -
      Maturities and repayments                                         7,050,151         744,778
Investment securities held to maturity:
      Purchases                                                       (18,704,991)              -
      Maturities and repayments                                         2,317,805         122,914
Net increase in loans receivable                                      (16,341,344)    (11,439,615)
Purchase of premises and equipment                                       (927,871)       (228,271)
                                                                     ------------    ------------
      Net cash used for investing activities                          (24,217,500)    (10,800,194)
                                                                     ------------    ------------

FINANCING ACTIVITIES
Net increase in deposits                                               34,738,095      10,233,975
Decrease in short-term borrowings                                        (435,274)              -
Proceeds from loans payable                                                     -               -
Repayments of long-term FHLB advances                                    (738,582)     (3,000,000)
Net proceeds from the sale of common stock                              1,620,842         581,379
                                                                     ------------    ------------
      Net cash provided by financing activities                        35,185,081       7,815,354
                                                                     ------------    ------------

      Increase (decrease) in cash and cash  equivalents                12,900,546      (2,704,300)

CASH AND CASH EQUIVALENTS
   AT BEGINNING OF PERIOD                                               4,233,404       3,057,875
                                                                     ------------    ------------
CASH AND CASH EQUIVALENTS
   AT END OF PERIOD                                                  $ 17,133,950    $    353,575
                                                                     ============    ============

SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid during the period for:
      Interest on deposits and borrowings                            $  2,708,448    $  1,759,013
      Income taxes                                                            500               -

</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

                                        7
<PAGE>
                             NITTANY FINANCIAL CORP
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - BASIS OF PRESENTATION

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

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with the  instructions  to Form  10-QSB and,  therefore,  do not
necessarily  include all information that would be included in audited financial
statements.  The information furnished reflects all adjustments that are, in the
opinion  of  management,  necessary  for a  fair  statement  of the  results  of
operations.  All such adjustments are of a normal recurring nature.  The results
of operations for the nine months ended  September 30, 2001 are not  necessarily
indicative of the results to be expected for the fiscal year ended  December 31,
2001 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, 2000,  which are
incorporated by reference in the Company's Annual Report on Form 10-KSB.

NOTE 2 - EARNINGS PER SHARE

The Company provides dual  presentation of Basic and Diluted earnings per share.
Basic  earnings per share  utilizes net income as reported as the  numerator and
the actual average shares  outstanding as the denominator.  Diluted earnings per
share  includes  any  dilutive  effects of options,  warrants,  and  convertible
securities.  For the nine-months and three- months ended September 30, 2001, the
diluted number of shares  outstanding  from employee stock options was 6,502 and
5,758,  respectively.  For the nine-months and three-months  ended September 30,
2000, there were no dilutive shares of common stock..

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,  2001,  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, 2001, comprehensive income totaled $21,709.
For the three and  nine-months  ended September 30, 2000,  comprehensive  income
totaled $150,039 and $203,639.

                                       8
<PAGE>

NOTE 4 - LOANS PAYABLE

In June 2001, the Company  entered into short-term loan agreements of $1,075,000
with certain  members of the Board of Directors.  The  agreements  stipulated an
annual interest rate of 6.50% which was accrued and, along with  principal,  was
not payable until the completion of the sale of common stock in the offering. As
of September 30, 2001, all short-term loan agreements have been satisfied.

NOTE 5 - COMMON STOCK OFFERING

On June 12, 2001, the Company  commenced an additional  common stock offering to
sell up to 210,000 shares of its common stock at $9.50 per share. A registration
statement was filed covering  250,000  shares,  if the demand for the shares was
sufficient. The offering was not underwritten and was not subject to the sale of
any minimum number or dollar amount of shares. As of September 30, 2001, 179,937
shares  were  issued  with  net  proceeds   from  the   issuance   amounting  to
approximately  $1,621,000.  On October  24,  2001,  the Company  terminated  the
offering and realized  additional  net proceeds of $657,032 from the issuance of
70,063 shares.

NOTE 6 - RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial  Accounting  Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141, Business Combinations,  effective for
all business combinations initiated after June 30, 2001, as well as all business
combinations  accounted for by the purchase method that are completed after June
30, 2001. The new statement  requires that the purchase  method of accounting be
used   for   all   business   combinations   and   prohibits   the  use  of  the
pooling-of-interests  method.  The adoption of Statement No. 141 is not expected
to have a material  affect on the  Company's  financial  position  or results of
operations.

In July 2001, the FASB issued  Statement of Financial  Accounting  Standards No.
142, Goodwill and Other Intangible Assets,  effective for fiscal years beginning
after December 15, 2001.  The new statement  changes the accounting for goodwill
from an amortization method to an impairment-only  approach.  Thus, amortization
of goodwill,  including  goodwill recorded in past business  combinations,  will
cease upon adoption of this  Statement.  Management  in currently  reviewing the
effect this Statement will have on the Company's  financial position and results
of operations.  At September 30, 2001, the Company had approximately $811,000 of
intangible assets from branch acquisitions.

                                       9
<PAGE>

NOTE 7 - INVESTMENT SECURITIES

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

<TABLE>
<CAPTION>
                                               2001
                                         ---------------------------------------------------------------------------
                                                                 Gross               Gross            Estimated
                                            Amortized          Unrealized          Unrealized           Market
Available for sale                             Cost              Gains               Losses             Value
                                         -----------------  -----------------   -----------------  -----------------
<S>                                    <C>                <C>                 <C>                <C>
U.S. Government agency
  securities                             $        499,629   $          5,176    $             -    $        504,805
Corporate securities                              678,213                  -            (51,859)            626,354
Collateralized mortgage
  obligations issued by
  U.S. Government agencies                      3,151,164             17,860            (24,569)          3,144,455
Mortgage-backed securities                      1,230,718             14,380             (1,991)          1,243,107
                                         -----------------  -----------------   -----------------  -----------------
     Total debt securities                      5,559,724             37,416            (78,419)          5,518,721
Mutual funds                                       19,725              2,485                  -              22,210
                                         -----------------  -----------------   -----------------  -----------------

     Total                               $      5,579,449   $         39,901    $       (78,419)   $      5,540,931
                                         =================  =================   =================  =================
</TABLE>

<TABLE>
<CAPTION>
                                               2001
                                         ---------------------------------------------------------------------------
                                                                 Gross               Gross            Estimated
                                            Amortized          Unrealized          Unrealized           Market
Held to maturity                               Cost              Gains               Losses             Value
                                         -----------------  -----------------   -----------------  -----------------
<S>                                    <C>                <C>                 <C>                <C>
U.S. Government agency
  securities                             $      3,351,250   $         15,038    $             -    $      3,366,288
Collateralized mortgage
  obligations issued by
  U.S. Government agencies                      6,478,334             22,841             (8,573)          6,492,602
Mortgage-backed securities                     11,073,532             54,571             (6,530)         11,121,573
                                         -----------------  -----------------   -----------------  -----------------

               Total                     $     20,903,116   $         92,450    $       (15,103)   $     20,980,463
                                         =================  =================   =================  =================
</TABLE>

                                       10
<PAGE>

7.   INVESTMENT SECURITIES (Continued)

<TABLE>
<CAPTION>
                                               2000
                                         ---------------------------------------------------------------------------
                                                                 Gross               Gross            Estimated
                                            Amortized          Unrealized          Unrealized           Market
Available for sale                             Cost              Gains               Losses             Value
                                         -----------------  -----------------   -----------------  -----------------
<S>                                    <C>                <C>                 <C>                <C>
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
                                         =================  =================   =================  =================
</TABLE>

<TABLE>
<CAPTION>
                                               2000
                                         ---------------------------------------------------------------------------
                                                                 Gross               Gross            Estimated
                                            Amortized          Unrealized          Unrealized           Market
                                               Cost              Gains               Losses             Value
                                         -----------------  -----------------   -----------------  -----------------
<S>                                    <C>                <C>                 <C>                <C>
Held to maturity
Mortgage-backed securities               $      4,536,734   $              -    $       (13,561)   $      4,523,173
                                         =================  =================   =================  =================
</TABLE>


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 3 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.

<TABLE>
<CAPTION>
                                                 Available for Sale                   Held to Maturity
                                         ------------------------------------   ------------------------------------
                                                               Estimated                              Estimated
                                            Amortized            Market            Amortized            Market
                                               Cost              Value                Cost              Value
                                         -----------------  -----------------   -----------------  -----------------
<S>                                    <C>                <C>                 <C>                <C>
Due after one year through
  five years                             $        864,346   $        874,816    $      2,837,888   $      2,857,605
Due after five years through
  ten years                                       459,184            464,672           5,955,662          5,969,142
Due after ten years                             4,236,194          4,179,233          12,109,566         12,153,716
                                         -----------------  -----------------   -----------------  -----------------

                 Total                   $      5,559,724   $      5,518,721    $     20,903,116   $     20,980,463
                                         =================  =================   =================  =================
</TABLE>
                                       11
<PAGE>
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATION

Overview

         Our business is conducted  principally  through  Nittany Bank.  Nittany
Bank provides a full range of banking  services with an emphasis on residential,
commercial  real  estate  lending,  consumer  lending  and retail  deposits.  At
September  30,  2001,  we had  consolidated  assets  of  $106.3  million,  loans
receivable,  net of $59.6 million,  deposits of $88.6 million, and stockholders'
equity of $8.2 million.  Due primarily to an increase in  non-interest  expenses
which more than offset the increase in net interest income,  net income declined
for the three and nine months ended  September  30, 2001 as compared to the same
2000 periods.  Net income for the three months ended September 30, 2001 declined
$8,000 to $22,000 from $30,000 for the same 2000 period. Net income for the nine
months ended  September 30, 2001  declined  $39,000 to $73,000 from $112,000 for
the same 2000 period.  Although Nittany Bank experienced  dramatic growth during
this period,  net interest  income for the current  three and nine month periods
rose  moderately  due to a  decrease  in  the  net  interest  rate  spread  (the
difference between the interest rate earned on assets and the interest rate paid
on liabilities) as a result of a business  strategy  implemented by Nittany Bank
which is designed to focus on asset growth,  as discussed  below.  For the three
and nine months ended September 30, 2001, net interest rate spreads  declined to
1.83% and 1.98%, respectively,  from 2.41% and 2.25%, respectively, for the same
2000 periods.

         During the last six months of fiscal 2000,  management and the Board of
Directors  of Nittany  Bank  introduced  a 5% savings  account  and 3%  checking
account.  As a result of a general decrease in market interest rates and several
decreases in interest rates by the Federal Reserve Board during the past several
months, the rates paid by Nittany Bank on its deposits were significantly higher
than the  market  rates  paid by other  financial  institutions  and  investment
companies.  The  introduction  and  marketing of the  high-yielding  savings and
checking  accounts have resulted in a significant  increase in asset size by our
obtaining  new  customers,  core  deposit  accounts  and banking  relationships.
However,  the decrease in the market yields on loans and investments during this
same period,  has resulted in a decrease in our interest margin or yield,  which
is the  difference in the interest  rates  received on the bank's assets and the
net  interest  rates  paid on the  bank's  liabilities.  We  have  intentionally
accepted a decrease in current net income in order to take  advantage of the low
market  interest  rates to expand  Nittany  Bank's asset size and core business.
Nittany Bank has the ability to quickly increase net interest income by lowering
the  interest  rates  on its  savings  and  checking  accounts.  Because  of the
continuation  by the Federal  Reserve Board of decreasing  interest rates during
September  2001,  we  decreased  our savings  account rate to 3.75% and checking
account rate to 2.25%.

         We  completed  our stock  offering on October 24, 2001 and sold 250,000
shares of common  stock.  At September  30,  2001,  we issued a total of 179,937
shares increasing our outstanding common shares to 960,249 shares. Additionally,
at September  30, 2001,  we received  total net proceeds of  approximately  $1.6
million.

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<PAGE>

Comparison of Financial Condition

         Asset growth for the period  continued to remain  strong.  Total assets
increased  $36.9  million to $106.3  million at  September  30,  2001 from $69.4
million at December 31, 2000. Additionally, the growth in assets for the quarter
ended September 30, 2001  represented an increase of $19.5 million from June 30,
2001.

         Cash and cash  equivalents  increased $12.9 million to $17.1 million at
September 30, 2001 from $4.2 million at December 31, 2000. For the quarter ended
September 30, 2001,  cash and cash  equivalents  represented an increase of $3.6
million from June 30, 2001. The increase in cash and cash  equivalents  resulted
from temporary fluctuations with interest-bearing  deposits with other banks due
to the timing of customer activity.

         Investment   securities  available  for  sale  at  September  30,  2001
decreased  $9.3 million to $5.5 million from $14.8 million at December 31, 2000.
The decrease in such  securities  primarily  reflected  proceeds  from sales and
principal  repayments  and  maturities.  These funds were used primarily to fund
loans and invest in mortgage-backed securities held to maturity.

         Investment securities held to maturity increased $16.4 million to $20.9
million at  September  30,  2001 from $4.5  million at  December  31,  2000.  At
September 30, 2001, we purchased  $18.7  million of  mortgage-backed  securities
which were partially funded by $2.3 million of proceeds  received from principal
repayments and maturities.

         Loans  receivable,  net  increased  $16.2  million to $59.6  million at
September  30, 2001 from $43.4  million at December  31,  2000.  For the quarter
ended September 30, 2001, loans receivable, net increased $7.7 million from June
30,  2001.  Of such  increase in loans  receivable,  net for the  quarter  ended
September 30, 2001, residential loans increased  approximately $6.8 million. The
growth in commercial real estate and commercial  loans  represented an aggregate
increase  of $3.8  million  from  December  31,  2000.  The  increase  in  loans
receivable,  net 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.  As of  September  30,  2001,  we  had  additional
commitments  to fund loan demand of $11.6  million of which  approximately  $3.4
million 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 September 30, 2001,  our allowance for loan losses  increased
$164,000 to $508,000  from  $344,000 at December  31,  2000.  This  increase was
primarily  due to the  growth of the loan  portfolio.  The  increased  allowance
resulted from a loan loss provision for the nine months ended September 30, 2001
of  $179,000,  offset by loan  chargeoffs  of  $15,000.  For the  quarter  ended
September  30, 2001, we added $89,000 to the allowance due primarily to the $3.8
million  increase in the commercial real estate and commercial loan  portfolios.
We experienced no chargeoffs for the three months ended September 30, 2001.

         The  additions  to the  allowance  for loan  losses  are  based  upon a
determination by

                                       13
<PAGE>


management  that it  believes  is  appropriate.  Due to our  lack of  historical
experience since we were formed in 1998, management bases its determination upon
such factors as the volume and type of loans that we  originate,  the amount and
trends relating to our delinquent and non-performing loans, regulatory policies,
general economic  conditions and other factors relating to the collectibility of
loans in our portfolio.  Although we maintain our allowance for loan losses at a
level that we consider to be adequate to provide for the  inherent  risk of loss
in our loan portfolio, there can be no assurance that additional losses will not
be required in future periods.

         Premises and equipment increased $840,000 to $1.2 million from $354,000
at December 31, 2001.  The increase is primarily  related to the  renovations of
the new East College  Avenue  branch  which is expected to be opened  during the
first  quarter of 2002. We currently  estimate that we will spend  approximately
$500,000 to complete the renovation of this new branch location.

         Total  deposits  increased  $34.7 million to $88.6 million at September
30,  2001 from  $53.9  million at  December  31,  2000.  For the  quarter  ended
September 30, 2001, deposits increased $19.0 million from June 30, 2001. Of such
increase,  interest bearing demand accounts increased $1.8 million, money market
accounts  increased $1.0 million,  savings accounts increased $16.7 million from
June 30, 2001.  Offsetting deposit increases for the current 2001 quarter period
was a $1.2 million decline in time deposits.

         Stockholder's   equity  increased  $1.8  million  to  $8.2  million  at
September  30, 2001 from $6.4 million at December  31, 2000,  as a result of net
income of $73,000,  net proceeds  from the stock  offering of $1.6 million and a
decline in accumulative other comprehensive loss of $110,000.  Accumulated other
comprehensive  loss decreased as a result of changes in the net unrealized  loss
on  investment  securities  available for sale due to  fluctuations  in interest
rates. Because of interest rate volatility, accumulated other comprehensive loss
could materially fluctuate for each interim period and year-end period depending
on economic and interest rate conditions.

Results of Operations

         Net income for the three  months  ended  September  30, 2001  decreased
$8,000 to $22,000 from $30,000 for the same 2000 period. Net income for the nine
months ended  September 30, 2001 decreased  $39,000 to $73,000 from $112,000 for
the same 2000 period.

         Net  interest  income for the three  months  ended  September  30, 2001
increased  $97,000 to $531,000 from $433,000 for the same 2000 period.  Interest
and  dividend  income  increased  $400,000 to $1.5  million for the three months
ended  September  30,  2001 from  $1.1  million  for the same 2000 year  period.
Increased  interest  and  dividend  income for the current  three  months  ended
September 30, 2001 was influenced  primarily by increases in interest  earned on
loans  receivable  of $338,000 and $112,000 on interest  bearing  deposits  with
other banks.  The average yield on interest earning assets declined to 6.56% for
the  three-months  ended September 30, 2001 from 7.79% for the same period ended
2000. The average yield on loans  receivable net declined to 8.07% for the three
months ended September 30, 2001 from 8.39% for the same 2000 period.

                                       14
<PAGE>

         Net interest  income for nine months ended September 30, 2001 increased
$300,000 to $1.5 million  from $1.2  million for the same 2000 period.  Interest
and dividend  income  increased $1.2 million to $4.1 million for the nine months
ended  September 30, 2001 from $2.9 million for the same 2000 period.  As in the
current  three  month  period,   increased  interest  and  dividend  income  was
influenced  primarily  by increases in interest  earned on loans  receivable  of
$998,000 and $193,000 on interest bearing deposits with other banks. The average
yield on interest  earning  assets  declined to 6.94% for the nine months  ended
September 30, 2001 from 7.54% for the same period ended 2000. For the nine month
period ended September 30, 2001, the average yield on loans receivable,  net was
8.16%, which remained relatively constant compared to the same 2000 period.

         Interest  expense  for  the  three  months  ended  September  30,  2001
increased  $359,000 to $1.0 million  from  $648,000 for the same 2000 period and
was  influenced  primarily  by an increase  in  interest  expense on deposits of
$366,000.  However,  average  cost  of fund  for  interest  bearing  liabilities
decreased to 4.73% for the three months ended  September 30, 2001 from 5.37% for
the same period ended 2000.

         Interest expense for the nine months ended September 30, 2001 increased
$885,000  to $2.7  million  from $1.8  million  for the same 2000 period and was
influenced  mainly by an increase in interest  expense on deposits of  $878,000.
However,  average cost of fund for  interest  bearing  liabilities  decreased to
4.96% for the nine  months  ended  September  30,  2001 from  5.28% for the same
period ended 2000.

         Total noninterest  income increased $81,000 and $150,000,  respectively
for the current  three and nine months ended  September  30,  2001.  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. For the three and nine months ended September 30, 2001,
service fees on deposit accounts  increased  $43,000 and $92,000,  respectively,
and have  progressively  increased during each quarter as the number of accounts
and volume of related transactions have increased.  Additionally,  for the three
and nine months ended September 30, 2001,  Nittany Asset Management  contributed
approximately  $15,000 and $48,000,  respectively  in commission  and management
fees, an increase of $4,000 and $17,000,  respectively  over the same periods in
2000.

         Total  noninterest  expenses  increased  $141,000  and $387,000 for the
three and nine months  ended  September  30, 2001 as compared to the same period
ended 2000.  The increase in total  noninterest  expenses for the current period
was 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 Nittany Bank's market.
On April 24, 2000,  Nittany Bank entered into a lease agreement for a new branch
office  located in State  College,  which  began  operations  on August 7, 2000.
Salary and benefits costs increased in connection with the new branch office, as
three full-time staff were hired. In addition,  occupancy and equipment expenses
increased as well due to the new branch operations.  In March 2001, Nittany Bank
purchased the building and property for the Nittany  Financial  Corp.  Financial
Center,  which is  expected  to open in early  2002.  During the past six months
Nittany Bank has

                                       15
<PAGE>

incurred  additional  amortization  expenses,  compensation  expenses  and other
expenses for the new building. For the three and nine months ended September 30,
2001,  Nittany  Asset  Management  operations  added  approximately  $14,000 and
$46,000,  respectively  of other  operating  expense,  an increase of $5,000 and
$10,000, respectively, over the same periods in 2000.

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.

         Management  monitors  both  the  Company's  and  Nittany  Bank's  total
risk-based,  tier I risk- based and tier I leverage  capital  ratios in order to
assess compliance with regulatory guidelines. At September 30, 2001, the Company
and Nittany  Bank's  total  risk-based,  tier I  risk-based  and tier I leverage
ratios were 14.80%, 13.85%, 7.00% and 14.68%, 13.73%,6.94%, respectively.

                                       16
<PAGE>
PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

               None

Item 2.    Changes in securities and use of proceeds

         (b)      Use of Proceeds from Registered Securities

                  (1)      The effective date of the Form SB-2 was May 31, 2001,
                           and the Commission file number was 333-60252.

                  (2)      The offering commenced on June 12, 2001.

                  (3)      Not applicable.

                  (4)      (i)      The offering terminated on October 24, 2001
                           (ii)     The name of the managing underwriter: None
                           (iii)    Common stock, par value $.10 per share was
                                      registered;
                           (iv)     Amount registered - 250,000 shares
                                      Aggregate price of offering amount
                                      registered - $2,375,000; Amount sold -
                                      $2,375,000 as of October 24, 2001;
                            (v)     Expenses of the offering which were direct
                                      or indirect payments to others;
                                    Expense paid to and for underwriters: None
                                    Other expenses - $97,126
                                    Total expenses - $97,126
                           (vi)     Net offering proceeds - $2,278,000;
                           (vii)    Direct or indirect payments to affiliates:
                                    Purchase outstanding stock of subsidiary
                                      bank - $994,000
                           (viii)   Not applicable

Item 3.    Defaults by the Company on its senior securities

               None

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

               None

Item 5.    Other information

               None

Item 6.    Exhibits and Reports on Form 8-K

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

                                       17
<PAGE>

                  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 **
                  99.1    Independent Accountants Report

*    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.

         (b)  Reports on Form 8-K.

         On October 2, 2001,  an 8-K was filed to disclose  that the  Registrant
         would close the common stock offering on October 24, 2001.

                                       18
<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, 2001                By: /s/David Z. Richards
                                           -------------------------------------
                                           David Z. Richards
                                           President and Chief Executive Officer


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