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, 2002

[  ] 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) 272 - 2265
              (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, 2002: 1,133,293


<PAGE>


                             NITTANY FINANCIAL CORP.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                      Page
                                                                                                     Number
                                                                                                   -----------

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

      Item 1.       Financial Statements

                        Consolidated Balance Sheet (Unaudited) as of                                   3
                            September 30, 2002 and December 31, 2001

                        Consolidated Statement of Income (Unaudited)
                            for the Three and Nine Months ended September 30, 2002 and 2001            4

                        Consolidated Statement of Changes in Stockholders' Equity (Unaudited)          5

                        Consolidated Statement of Cash Flows (Unaudited)
                            for the Nine Months ended September 30, 2002 and 2001                      6

                        Notes to Unaudited Consolidated Financial Statements                           7

      Item 2.       Management's Discussion and Analysis of
                            Financial Condition and Results of Operations                              11

      Item 3.       Controls and Procedures                                                            17

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,
                                                                       2002           2001
                                                                   -------------- --------------

ASSETS
<S>                                                             <C>             <C>
    Cash and due from banks                                        $     779,473  $     359,187
    Interest-bearing deposits with other banks                        19,202,465      5,753,971
    Investment securities available for sale                           7,064,869     13,188,065
    Investment securities held to maturity (estimated
      market value of $36,231,115 and $27,789,824)                    35,903,630     27,796,205
    Loans receivable (net of allowance for loan losses
      of $1,053,750 and $649,565)                                    110,868,055     73,787,410
    Premises and equipment                                             1,893,129      1,344,262
    Federal Home Loan Bank stock                                         715,100        710,700
    Intangible assets                                                    799,217        799,217
    Accrued interest and other assets                                  1,155,078      1,043,117
                                                                   -------------  -------------

           TOTAL ASSETS                                            $ 178,381,016  $ 124,782,134
                                                                   =============  =============

LIABILITIES
    Deposits:
       Noninterest-bearing demand                                  $   7,194,682  $   4,094,714
       Interest-bearing demand                                        21,466,911     14,802,415
       Money market                                                   23,021,449     13,827,084
       Savings                                                        78,081,447     46,864,234
       Time                                                           17,919,355     18,932,789
                                                                   -------------  -------------
          Total deposits                                             147,683,844     98,521,236
    Short-term borrowings                                              9,616,230      8,714,554
    Other borrowings                                                  10,666,338      7,813,775
    Accrued interest payable and other liabilities                       827,026        770,753
                                                                   -------------  -------------

           TOTAL LIABILITIES                                         168,793,438    115,820,318
                                                                   -------------  -------------

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, 1,133,293 issued and outstanding                       113,346        113,329
    Additional paid-in capital                                        11,071,157     11,069,804
    Retained deficit                                                  (1,569,645)    (2,155,207)
    Accumulated other comprehensive loss                                 (27,280)       (66,110)
                                                                   -------------  -------------

           TOTAL STOCKHOLDERS' EQUITY                                  9,587,578      8,961,816
                                                                   -------------  -------------

           TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY              $ 178,381,016  $ 124,782,134
                                                                   =============  =============

</TABLE>


See accompanying notes to the consolidated financial statements.

                                       3

<PAGE>
                             NITTANY FINANCIAL CORP.
                  CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

<TABLE>
<CAPTION>

                                                          Three months ended September 30,        Nine months ended September 30,
                                                             2002                2001                2002                2001
                                                       -----------------   -----------------   -----------------   -----------------

<S>                                                  <C>                 <C>                 <C>                 <C>
INTEREST AND DIVIDEND INCOME
     Loans, including fees                             $       1,860,797   $       1,129,794   $       4,949,651   $       3,060,137
     Interest-bearing deposits with other banks                   43,673             115,255             108,236             261,726
     Investment securities                                       400,910             293,030           1,303,893             814,283
                                                       -----------------   -----------------   -----------------   -----------------
             Total interest and dividend income                2,305,380           1,538,079           6,361,780           4,136,146
                                                       -----------------   -----------------   -----------------   -----------------

INTEREST EXPENSE
     Deposits                                                  1,008,544             886,533           2,789,419           2,248,780
     Short-term borrowings                                        53,040              17,998             153,333              53,801
     Other borrowings                                            110,817             102,759             340,876             350,332
                                                       -----------------   -----------------   -----------------   -----------------
             Total interest expense                            1,172,401           1,007,290           3,283,628           2,652,913
                                                       -----------------   -----------------   -----------------   -----------------

NET INTEREST INCOME                                            1,132,979             530,789           3,078,152           1,483,233

Provision for loan losses                                        142,000              88,500             410,000             178,500
                                                       -----------------   -----------------   -----------------   -----------------

NET INTEREST INCOME AFTER PROVISION FOR
   LOAN LOSSES                                                   990,979             442,289           2,668,152           1,304,733
                                                       -----------------   -----------------   -----------------   -----------------

NONINTEREST INCOME
     Service fees on deposit accounts                            119,717              96,328             333,036             250,243
     Investment security gain                                          -              21,487               7,630              21,487
     Other                                                        41,652              28,665              98,730              70,150
                                                       -----------------   -----------------   -----------------   -----------------
             Total noninterest income                            161,369             146,480             439,396             341,880
                                                       -----------------   -----------------   -----------------   -----------------

NONINTEREST EXPENSE
     Compensation and employee benefits                          423,796             266,744           1,154,024             735,164
     Occupancy and equipment                                     124,102              88,322             373,090             254,714
     Other                                                       237,650             211,702             762,123             583,587
                                                       -----------------   -----------------   -----------------   -----------------
             Total noninterest expense                           785,548             566,768           2,289,237           1,573,465
                                                       -----------------   -----------------   -----------------   -----------------

Income before income taxes                                       366,800              22,001             818,311              73,148
Income taxes                                                     130,749                 500             232,749                 500
                                                       -----------------   -----------------   -----------------   -----------------

NET INCOME                                             $         236,051   $          21,501   $         585,562   $          72,648
                                                       =================   =================   =================   =================

EARNINGS PER SHARE
     Basic                                                       $  0.21              $ 0.02             $  0.52             $  0.09
     Diluted                                                        0.19                0.02                0.49                0.09

WEIGHTED AVERAGE SHARES OUTSTANDING:
     Basic                                                     1,133,311             880,410           1,133,299             814,131
     Diluted                                                   1,218,284             886,168           1,200,692             820,633

</TABLE>

See accompanying notes to the consolidated financial statements.


                                       4


<PAGE>

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

<TABLE>
<CAPTION>
                                                                                  Accumulated
                                                     Additional                      Other            Total
                                         Common       Paid-in       Retained     Comprehensive   Stockholders'    Comprehensive
                                         Stock        Capital        Deficit         Loss             Equity           Income
                                     -----------  --------------  ------------   --------------   --------------   -----------

<S>                                 <C>         <C>            <C>              <C>              <C>              <C>
Balance, December 31, 2001            $  113,329   $  11,069,804  $ (2,155,207)    $  (66,110)      $  8,961,816

Net income                                                             585,562                           585,562   $  585,562
Other comprehensive income:
    Unrealized gain on available for
    sale securities, net of taxes
    of $20,003                                                                         38,830             38,830       38,830
                                                                                                                   ----------
Comprehensive income                                                                                               $  624,392
                                                                                                                   ==========
Exercise of stock options                     17           1,353                                           1,370

                                      ----------   -------------  ------------     ----------       ------------
Balance, September 30, 2002           $  113,346   $  11,071,157  $ (1,569,645)    $  (27,280)      $  9,587,578
                                      ==========   =============  ============     ==========       ============


                                                                                     2002
                                                                                   ----------
Components of other comprehensive loss:
    Change in net unrealized loss on investment securities available for sale      $   43,866
    Realized gains included in net income, net of taxes of $2,787                      (5,036)
                                                                                   ----------

Total                                                                              $   38,830
                                                                                   ==========

</TABLE>

See accompanying notes to the consolidated financial statements.

                                       5

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

<TABLE>
<CAPTION>


                                                                          Nine Months Ended September 30,
                                                                            2002                 2001
                                                                       --------------      ----------------
<S>                                                                  <C>                   <C>
OPERATING ACTIVITIES
     Net income                                                        $     585,562         $      72,648
     Adjustments to reconcile net income to net cash
       provided by operating activities:
         Provision for loan losses                                           410,000               178,500
         Depreciation, amortization, and accretion, net                      292,445               152,542
         Investment security gains                                            (7,630)              (21,487)
         Decrease (increase) in accrued interest receivable                 (264,417)                3,272
         Decrease in accrued interest payable                                (55,478)              (55,535)
         Other, net                                                          244,204             1,603,025
                                                                       -------------         -------------
         Net cash provided by operating activities                         1,204,686         $   1,932,965
                                                                       -------------         -------------

INVESTING ACTIVITIES
     Investment securities available for sale:
         Proceeds from sale                                                   37,630             2,388,750
         Proceeds from principal repayments and maturities                 6,090,451             7,050,151
     Investment securities held to maturity:
         Purchases                                                       (26,458,521)          (18,704,991)
         Proceeds from principal repayments and maturities                18,270,784             2,317,805
     Net increase in loans receivable                                    (37,481,590)          (16,341,344)
     Purchase of FHLB stock                                                   (4,400)                    -
     Purchase of premises and equipment                                     (708,477)             (927,871)
                                                                       --------------        -------------
         Net cash used for investing activities                          (40,254,123)          (24,217,500)
                                                                       --------------        -------------

FINANCING ACTIVITIES
     Net increase in deposits                                             49,162,608            34,738,095
     Net increase (decrease) in short-term borrowings                        901,676              (435,274)
     Proceeds from other borrowings                                        4,000,000                     -
     Repayment of other borrowings                                        (1,147,437)             (738,582)
     Exercise of stock options                                                 1,370                     -
     Net proceeds from sale of common stock                                        -             1,620,842
                                                                       -------------         -------------
         Net cash provided by financing activities                        52,918,217            35,185,081
                                                                       -------------         -------------

         Increase in cash and cash equivalents                            13,868,780            12,900,546

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                           6,113,158             4,233,404
                                                                       -------------         -------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                             $  19,981,938         $  17,133,950
                                                                       =============         =============

SUPPLEMENTAL CASH FLOW DISCLOSURE Cash paid during the year for:
         Interest on deposits and borrowings                           $   4,180,914         $   2,708,448
         Income taxes                                                        119,000                   500

</TABLE>

See accompanying notes to the consolidated 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") 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 three and nine months ended  September  30, 2002 are not
necessarily  indicative  of the results to be expected for the fiscal year ended
December 31, 2002 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, 2001,  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  ended September 30, 2002 and 2001, the diluted
number of shares  outstanding  from employee stock options was 67,393 and 6,502,
respectively.  For the three  months  ended  September  30,  2002 and 2001,  the
diluted number of shares  outstanding from employee stock options was 84,973 and
5,758, 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,  2002,  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,  2002,  comprehensive  income  totaled
$279,946. For the three and nine-

                                       7
<PAGE>

months  ended  September  30, 2001,  comprehensive  income  totaled  $21,709 and
$183,204.

NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS

In July, 2001, the Financial  Accounting Standards Board (FASB) issued Statement
of  Financial  Accounting  Standards  (FAS)  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.  FAS No. 141 also specifies criteria which
must be met  for  intangible  assets  acquired  in a  purchase  method  business
combination to be recognized  and reported apart from goodwill.  The adoption of
FAS No. 141 did not have a material effect on the Company's  financial  position
or results of operations.

On January  1,  2002,  the  Company  adopted  FAS No.  142,  Goodwill  and Other
Intangible Assets, effective for fiscal years beginning after December 15, 2001.
This 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. However, this new statement did not amend FAS No. 72, Accounting
for  Certain  Acquisitions  of Banking or Thrift  Institutions,  which  requires
recognition and amortization of unidentified  intangible  assets relating to the
acquisition  of  financial  institutions  or  branches  thereof.  The  FASB  has
undertaken a limited scope project to reconsider the provisions of FAS No. 72 in
2002 and has issued an exposure draft of a proposed  statement,  Acquisitions of
Certain  Financial  Institutions,  that would remove  acquisitions  of financial
institutions  from the  scope  of FAS No.  72.  The  adoption  of this  proposed
statement would require all goodwill originating from acquisitions that meet the
definition of a business  combination  as defined in Emerging  Issues Task Force
Issue ("EITF") No. 98-3 to be discontinued.  The adoption of FAS No. 142 did not
have a  material  effect on the  Company's  financial  position  or  results  of
operations.  However,  the Company  continues to amortize  intangible  assets of
$775.4 million that meet the requirements of FAS No. 72.

In August 2001,  the FASB issued FAS No. 143,  Accounting  for Asset  Retirement
Obligations,  which  requires  that the fair value of a liability be  recognized
when  incurred for the  retirement  of a  long-lived  asset and the value of the
asset  be  increased  by that  amount.  The  statement  also  requires  that the
liability be maintained at its present value in subsequent  periods and outlines
certain  disclosures  for such  obligations.  The new statement takes effect for
fiscal  years  beginning  after June 15, 2002.  The adoption of this  statement,
which is effective January 1, 2003, is not expected to have a material effect on
the Company's financial statements.

On January  1,  2002,  the  Company  adopted  FAS No.  144,  Accounting  for the
Impairment  or Disposal of Long-Lived  Assets.  FAS 144  supercedes  FAS 121 and
applies  to  all  long-lived  assets  (including  discontinued  operations)  and
consequently    amends   APB    Opinion   No.   30,    Reporting    Results   of
Operations-Reporting the Effects of Disposal of a Segment

                                       8
<PAGE>

of a Business.  FAS 144 requires that long-lived  assets that are to be disposed
of by sale be  measured  at the lower of book  value or fair value less costs to
sell.  The  adoption  of FAS No.  144  did not  have a  material  effect  on the
Company's financial statements.

In April 2002, the FASB issued FAS No. 145,  "Recission of FASB Statement No. 4,
44 and 64, Amendment of FASB Statement No. 13, and Technical  Corrections".  FAS
No.  145  rescinds  FAS  No.  4,  which  required  all  gains  and  losses  from
extinguishment  of debt to be  aggregated  and, if  material,  classified  as an
extraordinary  item, net of related income tax effect. As a result, the criteria
in  Opinion  30 will  now be used to  classify  those  gains  and  losses.  This
statement   also  amends  FASB  FAS  No.  13  to  require  that  certain   lease
modifications that have economic effects similar to sale-leaseback  transactions
be  accounted  for in the  same  manner  as  sale-leaseback  transactions.  This
statement also makes technical corrections to existing pronouncements, which are
not substantive but in some cases may change accounting practice. FAS No. 145 is
effective for transactions occurring after May 15, 2002. The adoption of FAS No.
145 did not have a  material  effect  on the  Company's  financial  position  or
results of operations.

In July 2002, the FASB issued FAS No. 146,  Accounting for Costs Associated with
Exit or  Disposal  Activities,  which  requires  companies  to  recognize  costs
associated  with exit or disposal  activities when they are incurred rather than
at the date of a commitment to an exit or disposal plan. This statement replaces
EITF Issue No. 94-3,  Liability  Recognition  for Certain  Employee  Termination
Benefits and Other Costs to Exit an Activity  (Including  Certain Costs Incurred
in a  Restructuring).  The new statement  will be effective for exit or disposal
activities  initiated  after  December  31,  2002,  the adoption of which is not
expected to have a material effect on the Company's financial statements.

On  October 1,  2002,  the FASB  issued  FAS No.  147,  Acquisitions  of Certain
Financial Institutions,  effective for all business combinations initiated after
October 1, 2002. This Statement addresses the financial accounting and reporting
for the  acquisition  of all or part of a  financial  institution,  except for a
transaction  between  two or more mutual  enterprises.  This  Statement  removes
acquisitions of financial  institutions,  other than transactions between two or
more mutual  enterprises,  from the scope of FAS No. 72,  Accounting for Certain
Acquisitions of Banking or Thrift  Institutions,  and FASB Interpretation No. 9,
Applying  APB Opinions  No. 16 and 17 When a Savings and Loan  Association  or a
Similar Institution Is Acquired in a Business  Combination  Accounted for by the
Purchase Method. The acquisition of all or part of a financial  institution that
meets the  definition  of a business  combination  shall be accounted for by the
purchase method in accordance with FAS No. 141, Business  Combinations,  and FAS
No. 142,  Goodwill and Other  Intangible  Assets.  This  Statement also provides
guidance on the accounting for the impairment or disposal of acquired  long-term
customer-relationship    intangible    assets    (such   as    depositor-    and
borrower-relationship   intangible  assets  and  credit  cardholder   intangible
assets),  including  those acquired in  transactions  between two or more mutual
enterprises.  Upon adoption of this statement,  the Company retroactively ceased
the  amortization of $799,000 in goodwill  associated with branch  acquisitions.
The Company will  continue to review the  remaining  goodwill on an annual basis
for impairment.  Had the new accounting  standard been effective in 2001 for the
three and nine months

                                       9
<PAGE>

periods,  net  income  would have been  $30,000,  or $03 per  diluted  share and
$97,000, or $.12 per diluted share, respectively.

NOTE 5 - RESTATEMENT OF FINANCIAL STATEMENTS

On October 1, 2002, the FASB issued FAS No. 147 which changes the accounting for
goodwill from an amortization approach to an impairment-only  approach as of the
effective  date that FAS No. 142 was  adopted,  which in the  Company's  case is
January 1, 2002.  As a result of  complying  with FAS No.  147,  the  Company is
required to restate  earnings for the first and second fiscal  quarters of 2002.
The following  table details the changes on net income and earnings per share as
a result of this restatement:

<TABLE>
<CAPTION>
                                  Three Months Ended            Three Months Ended            Six Months Ended
                                    March 31, 2002                June 30, 2002                June 30, 2002

                               Previously        As         Previously         As         Previously        As
                                Reported      Restated       Reported       Restated       Reported      Restated
                              -------------  ------------   ------------   ------------  -------------  ------------


<S>                        <C>           <C>            <C>            <C>            <C>         <C>
     Net income              $ 175,530     $ 183,430      $ 173,981      $ 181,795      $ 349,511     $ 365,226

     Earnings Per Share:
       Basic                 $    0.15     $    0.16      $    0.15      $    0.16      $    0.31     $    0.32
       Diluted                    0.15          0.16           0.14           0.14           0.29          0.30


</TABLE>

                                       10
<PAGE>
                      MANAGEMENT'S 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
changes in  interest  rates,  the  ability to control  costs and  expenses,  and
general economic conditions.


Overview

         Our business is conducted  principally  through  Nittany Bank.  Nittany
Bank provides a full range of banking  services with an emphasis on  residential
and commercial real estate lending,  consumer  lending,  commercial  lending and
retail  deposits.  At September  30, 2002,  we had  consolidated  assets of $178
million,  loans  receivable  (net of reserve) of $111 million,  deposits of $148
million,  and  stockholders'  equity of $9.6  million.  Net income for the three
months ended  September  30, 2002  increased  $214,000 to $236,000,  or $.19 per
diluted  share,  from  $22,000,  or $.02 per  diluted  share,  for the same 2001
period.  Net income for the nine  months  ended  September  30,  2002  increased
$513,000 to  $586,000,  or $.49 per diluted  share,  from  $73,000,  or $.09 per
diluted share, for the same 2001 period.

         The three and nine month 2002  results  reflect  the  adoption of a new
accounting  standard  eliminating the amortization of goodwill expense beginning
January 1, 2002.  Had the new  accounting  standard  been  effective in the 2001
third quarter and nine months period, net income would have been $12,000 or $.01
per diluted share and $36,000 or $.03 per diluted share, respectively.  Refer to
note 16 of the consolidated financial statements.

Comparison of Financial Condition

         Asset growth for the period  continued to remain  strong.  Total assets
increased $53,599,000 to $178,381,000 at September 30, 2002 from $124,782,000 at
December  31,  2001.  Additionally,  the growth in assets for the quarter  ended
September 30, 2002 represented an increase of $23,473,000 from June 30, 2002.


                                       11
<PAGE>

         Cash and cash  equivalents  increased  $13,869,000  to  $19,982,000  at
September 30, 2002 as compared to $6,113,000  December 31, 2001. For the quarter
ended September 30, 2002, cash and cash equivalents increased by $9,642,000 from
June 30, 2002. The changes in cash and cash equivalents  resulted from temporary
fluctuations with  interest-bearing  deposits with other banks due to the timing
of customer activity and investments purchased.

         Investment  securities  available  for  sale  decreased  $6,123,000  to
$7,065,000  at  September  30, 2002 as compared to  $13,188,000  at December 31,
2001. Additionally,  investment securities held to maturity increased $8,108,000
to  $35,904,000  at September  30, 2002 from  $27,796,000  at December 31, 2001.
During the current year, we purchased $26,459,000 of held to maturity securities
which were partially  funded by $18,271,000 of proceeds  received from principal
repayments and maturities of held to maturity and available for sale securities.
For the quarter ended September 30, 2002,  investment  securities  available for
sale decreased $3,718,000 as compared to June 30, 2002. Additionally, investment
securities  held to  maturity at  September  30, 2002  increased  $2,662,000  as
compared  to June 30,  2002.  During  year 2002,  government  agency  securities
increased as a percentage of the total portfolio from  approximately  19% to 27%
while mortgage backed  securities have decreased from  approximately  77% of the
total portfolio to 67%.

         Loans  receivable,   net  of  allowance  for  loan  losses,   increased
$37,081,000 to $110,868,000  at September 30, 2002 from  $73,787,000 at December
31, 2001.  For the quarter  ended  September  30, 2002,  loans  receivable,  net
increased  $14,864,000 from June 30, 2002. Of such increase in loans receivable,
net for the quarter  ended  September  30,  2002,  real estate  loans  increased
approximately  $13,948,000.  At September 30, 2002, commercial real estate loans
increased $1,318,000 and 1 to 4 family residential loans increased  $12,872,000.
The increase in loans receivable resulted from the economic health of our market
area and the strategic,  service-oriented marketing approach taken by management
to meet  the  lending  needs of the  area.  As of  September  30,  2002,  we had
additional commitments to fund loan demand of $15,777,000 of which approximately
$4,339,000 relates to commercial and commercial real estate.

         The  allowance  for loans is increased by  provisions  for loan losses,
which is charged against  earnings,  and is reduced by charge-offs and increased
by recoveries.  At September 30, 2002,  our allowance for loan losses  increased
$404,000 to  $1,054,000  from  $650,000 at December 31, 2001.  This increase was
primarily due to the growth of residential and commercial real estate loans. The
increased  allowance  resulted  from a loan loss  provision  for the nine months
ended September 30, 2002 of $410,000,  offset by loan


                                       12
<PAGE>

charge offs of $6,000.  For the  quarter  ended  September  30,  2002,  we added
$142,000 to the allowance.

         The  additions  to the  allowance  for loan  losses  are  based  upon a
determination by management that it believes is appropriate.  Due to our lack of
historical   experience  since  we  are  newly  formed,   management  bases  its
determination  upon  such  factors  as the  volume  and  type of  loans  that we
originate,  the amount and trends relating to 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.

         Total deposits  increased  $49,163,000 to $147,684,000 at September 30,
2002 from  $98,521,000  at December 31, 2001. At September 30, 2002, the nittany
savings deposit account added to our deposit base approximately $77,525,000. For
the quarter ended September 30, 2002, interest bearing demand deposits increased
$4,277,000 and nittany savings deposits increased $7,877,000 from June 30, 2002.
The nittany  savings  deposit  product is a competitive  deposit  account with a
tiered  annual  interest  rate of 3.00% for balances over $2,500 for the current
period.  Due to the continued  decreases of short term  interest  rates over the
past year, the nittany savings deposit has helped to increase our deposit base.

         Total borrowings  increased  $3,753,000 to $20,282,000 at September 30,
2002 from  $16,529,000  at December 31, 2001.  Of such increase  $2,000,000  was
related to lines of credit from two local banks. Such funds were used to provide
additional  capital  to  Nittany  Bank.  The  remaining  funds of  approximately
$1,700,000 were from the Federal Home Loan Bank of Pittsburgh  ("FHLB") and were
relatively  short term (3-5  years) in nature.  The FHLB funds were used to fund
loan growth and to lock in a supply of low cost funds.

         Stockholder's  equity increased $626,000 to $9,588,000 at September 30,
2002 from $8,962,000 at December 31, 2001, as a result of net income of $586,000
and a decline in accumulative other  comprehensive loss of $39,000.  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  from period to period  depending  on economic  and
interest rate conditions.

                                       13
<PAGE>

Results of Operations

         Net income for the three  months  ended  September  30, 2002  increased
$214,000 to $236,000  from $22,000 for the same 2001 period.  Net income for the
nine months ended September 30, 2002 increased $513,000 to $586,000 from $73,000
for the same 2001 period.  During both time  periods,  increases in net interest
income were offset by  increases in  noninterest  expense.  Interest  income and
interest expense increased substantially during the year because of the dramatic
growth in real estate loans and the nittany savings deposit  product.  Basic and
diluted  earnings per share increased to $.52 and $.49 per share,  respectively,
for the nine months  ended  September  30, 2002 as compared to $.09 and $.09 for
the same period of year 2001.

         Net  interest  income for the three  months  ended  September  30, 2002
increased  $602,000 to  $1,133,000  as  compared  to $531,000  for the same 2001
period.  Interest and dividend income  increased  $767,000 to $2,305,000 for the
three months ended  September  30, 2002 from  $1,538,000  for the same 2001 year
period.  Increased  interest  and dividend  income for the current  three months
ended  September  30, 2002 was  influenced  primarily  by  increases in interest
earned on loans  receivable of $731,000.  The average yield on interest  earning
assets  decreased to 5.85% for the  three-months  ended  September 30, 2002 from
6.54% for the same period  ended 2001.  The  average  yield on loans  receivable
decreased  for the three months ended  September  30, 2002 by 81 basis points as
compared to the same 2001 period.

         Net interest  income for nine months ended September 30, 2002 increased
$1,595,000 to $3,078,000 from $1,483,000 for the same 2001 period.  Interest and
dividend  income  increased  $2,226,000 to $6,362,000  for the nine months ended
September  30, 2002 from  $4,136,000  for the same 2001  period.  The  increased
interest  and  dividend  income was  primarily a result of increases in interest
earned on loans receivable of $1,890,000.  The average yield on interest earning
assets declined to 5.97% for the nine months ended September 30, 2002 from 6.94%
for the same period ended 2001. The  significant  increase in  residential  real
estate  lending  was  partially  offset  but the  reduction  in  yield  on loans
receivable of 93 basis points in 2002 as compared to 2001.

         Interest  expense  for  the  three  months  ended  September  30,  2002
increased  $165,000 to $1,172,000  from  $1,007,000 for the same 2001 period and
was influenced  primarily by an increase in average balance of interest  bearing
deposits of $51 million.  However,  average  cost of fund for  interest  bearing
liabilities  decreased 153 basis points to 3.24% from 4.77% for the three months
ended  September  30, 2002 as compared  to the same 2001  period.  Additionally,
average  cost of funds for deposits  decreased  149 basis points for the current
three month period as compared to the same 2001 period.


                                       14
<PAGE>

         Interest expense for the nine months ended September 30, 2002 increased
$631,000  to  $3,284,000  from  $2,653,000  for the  same  2001  period  and was
influenced  mainly by an increase in interest  expense on deposits of  $540,000.
However,  average cost of fund for interest  bearing  liabilities  decreased 163
basis  points to 3.36% for the nine months ended  September  30, 2002 from 4.99%
for the same period ended 2001. Additionally, average cost of funds for deposits
decreased 159 basis points for the current nine -month period as compared to the
same 2001 period.

         Total noninterest  income increased  $15,000 and $97,000,  respectively
for the current  three and nine months ended  September  30,  2002.  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, 2002,
service fees on deposit accounts  increased  $24,000 and $83,000 , 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, 2002,  Nittany Asset Management  contributed
approximately  $33,000 and $83,000,  respectively  in commission  and management
fees, an increase of $18,000 and $35,000,  respectively over the same periods in
2001.

         Total  noninterest  expenses  increased  $219,000  and $716,000 for the
three and nine months ended  September  30, 2002 as compared to the same periods
ended 2001.  The  increase in total  noninterest  expenses  for both periods was
primarily  related to operating a larger  organization  that  resulted  from the
opening of an additional office during the first quarter of 2002, as well as the
related  marketing  efforts to increase  visibility within the Company's market.
Salary and benefits costs increased in connection  with the new office,  as five
full-time  staff were hired.  In  addition,  occupancy  and  equipment  expenses
increased  as well due to the new  branch  operations.  For the  three  and nine
months ended September 30, 2002, Nittany Asset Management operations contributed
approximately  $18,000 and $46,000 , respectively of other operating expense, an
increase  of $4,000 and  $1,000,  respectively,  over the same  periods in 2001.
Noninterest  expense  was also  lower due to the  adoption  of a new  accounting
standard which eliminates the amortization of goodwill expense beginning January
1, 2002.


                                       15
<PAGE>

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.

         Liquidity  may be adversely  affected by unexpected  deposit  outflows,
excessive interest rates paid by competitors,  adverse publicity relating to the
savings and loan industry and similar  matters.  Management  monitors  projected
liquidity  needs and determines the level  desirable based in part on the Bank's
commitments to make loans and  management's  assessment of the Bank's ability to
generate funds.

         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, 2002, the Company
and Nittany  Bank's  total  risk-based,  tier I  risk-based  and tier I leverage
ratios were 11.20%, 10.00%, 5.00% and 13.10%, 11.92%, 5.93%, respectively.


                                       16
<PAGE>

Controls and Procedures

         (a) Evaluation of disclosure  controls and  procedures.  Based on their
             ---------------------------------------------------
evaluation  as of a date  within 90 days of the  filing  date of this  Quarterly
Report  on  Form  10-QSB,  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-14(c) and 15d-14(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.
<TABLE>
<CAPTION>

<S>     <C>

PART II - OTHER INFORMATION

Item 1.   Legal Proceedings

          None

Item 2.   Changes in securities and use of proceeds

          None

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:
                  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 **

</TABLE>

                                       17
<PAGE>

               99.0 Independent Accountants Report
               99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                    Pursuant to Section 906 of the Sarbanes-Oxley Act 0f 2002.

*    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.

          None



                                       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 13, 2002       By: /s/David Z. Richards
                                     -------------------------------------------
                                     David Z. Richards
                                     President and Chief Executive Officer



Date:    November 13, 2002       By: /s/Gary M. Bradley
                                     -------------------------------------------
                                     Gary M. Bradley
                                     Vice President and Chief Accounting Officer







                                       19
<PAGE>

                                  CERTIFICATION
        Pursuant to Section 302 of the Securities Exchange Act of 1934


I, David Z. Richards, certify that:

1. I have reviewed  this  quarterly  report on Form 10-QSB of Nittany  Financial
Corp. ("the Registrant").

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  Registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

(a) designed  such  disclosure  controls and  procedures to ensure that material
information relating to the Registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

(b) evaluated the  effectiveness  of the  Registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report ("the Evaluation Date"); and

(c) presented in this quarterly report our conclusions  about the  effectiveness
of the  disclosure  controls and  procedures  based on our  evaluation as of the
Evaluation Date;

5. The Registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the Registrant's auditors and the audit committee of
Registrant's board of directors (or persons fulfilling the equivalent function):

(a) all significant deficiencies in the design or operation of internal controls
which  could  adversely  affect the  Registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  Registrant's
auditors any material weaknesses in internal controls; and

(b) any fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the issuer's internal controls; and

6. The  Registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.




Date:  November 13, 2002                    /s/ David Z. Richards
                                            ---------------------
                                            David Z. Richards
                                            President

<PAGE>


                                  CERTIFICATION
         Pursuant to Section 302 of the Securities Exchange Act of 1934


I, Gary M. Bradley, certify that:

1. I have reviewed  this  quarterly  report on Form 10-QSB of Nittany  Financial
Corp. ("the Registrant").

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;

4.  The  Registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

(a) designed  such  disclosure  controls and  procedures to ensure that material
information relating to the Registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

(b) evaluated the  effectiveness  of the  Registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report ("the Evaluation Date"); and

(c) presented in this quarterly report our conclusions  about the  effectiveness
of the  disclosure  controls and  procedures  based on our  evaluation as of the
Evaluation Date;

5. The Registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the Registrant's auditors and the audit committee of
Registrant's board of directors (or persons fulfilling the equivalent function):

(a) all significant deficiencies in the design or operation of internal controls
which  could  adversely  affect the  Registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  Registrant's
auditors any material weaknesses in internal controls; and

(b) any fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the issuer's internal controls; and

6. The  Registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.



Date:  November 13, 2002          /s/ Gary M. Bradley
                                  -------------------
                                  Gary M. Bradley
                                  Vice President and Chief Accounting Officer