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 June 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
                    Outstanding at a August 9, 2001: 803,865


<PAGE>

                             NITTANY FINANCIAL CORP.

                                      INDEX
<TABLE>
<CAPTION>

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

      Item 1.       Financial Statements

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

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

                    Consolidated Statement of Income (Unaudited)                                                     5
                        for the Three Months ended June 31, 2001 and 2000

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

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

                    Notes to Unaudited Consolidated Financial Statements                                           8 - 9

      Item 2.       Management's Discussion and Analysis of
                        Financial Condition and Results of Operations                                             10 - 14

PART II  -  OTHER INFORMATION

      Item 1.       Legal Proceedings                                                                                15

      Item 2.       Changes in Securities                                                                            15

      Item 3.       Default Upon Senior Securities                                                                   15

      Item 4.       Submissions of Matters to a Vote of Security Holders                                             15

      Item 5.       Other Information                                                                                15

      Item 6.       Exhibits and Reports on Form 8 - K                                                               15

SIGNATURES                                                                                                           16

</TABLE>
<PAGE>


                             NITTANY FINANCIAL CORP.
                     CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                        June 30,                December 31,
                                                                                          2001                      2000
                                                                                    ------------------        -----------------
<S>                                                                             <C>                       <C>
ASSETS
Cash and due from banks                                                             $         252,848         $        411,553
Interest-bearing deposits with other banks                                                 13,202,360                3,821,851
Investment securities available for sale                                                   10,598,499               14,849,794
Investment securities held to maturity  (market
      value of $7,820,897 and $4,523,173)                                                   7,798,691                4,536,734
Loans receivable (net of allowance for loan losses
      of $419,135 and $343,673)                                                            51,938,551               43,416,301
Premises and equipment                                                                      1,122,634                  358,854
Federal Home Loan Bank stock                                                                  530,000                  530,000
Intangible assets                                                                             823,157                  846,707
Accrued interest and other assets                                                             517,423                  648,568
                                                                                    ------------------        -----------------
      TOTAL ASSETS                                                                  $      86,784,163         $     69,420,362
                                                                                    ==================        =================
LIABILITIES
Deposits:
      Noninterest-bearing demand                                                    $       3,369,131         $      3,905,448
      Interest-bearing demand                                                               9,698,890                8,941,842
      Money market                                                                         13,998,291               15,021,369
      Savings                                                                              23,205,173                6,351,164
      Time                                                                                 19,346,953               19,655,028
                                                                                    ------------------        -----------------
           Total deposits                                                                  69,618,438               53,874,851
Loans Payable                                                                               1,075,000                        -
Short-term borrowings                                                                       2,919,672                2,000,000
FHLB advances                                                                               5,908,329                6,600,000
Accrued interest payable and other liabilities                                                567,658                  585,939
                                                                                    ------------------        -----------------
      TOTAL LIABILITIES                                                                    80,089,097               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; 803,865 and 780,312 issued and outstanding                                   80,386                   78,031
Additional paid-in capital                                                                  7,823,919                7,652,275
Retained deficit                                                                           (1,170,512)              (1,221,659)
Accumulated other comprehensive loss                                                          (38,727)                (149,075)
                                                                                    ------------------        -----------------
      TOTAL STOCKHOLDERS' EQUITY                                                            6,695,066                6,359,572
                                                                                    ------------------        -----------------
      TOTAL LIABILITIES AND
            STOCKHOLDERS' EQUITY                                                    $      86,784,163         $     69,420,362
                                                                                    ==================        =================

</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

                                        3
<PAGE>

                             NITTANY FINANCIAL CORP.
                  CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                           Six Months Ended June 30,
                                                                                          2001                      2000
                                                                                    ------------------        -----------------
<S>                                                                               <C>                       <C>
INTEREST AND DIVIDEND INCOME
Loans, including fees                                                               $       1,930,343         $      1,270,580
Investment securities                                                                         521,253                  572,397
Interest-bearing deposits with other banks                                                    146,471                   64,877
                                                                                    ------------------        -----------------
      Total interest and dividend income                                                    2,598,067                1,907,854
                                                                                    ------------------        -----------------
INTEREST EXPENSE
Deposits                                                                                    1,362,247                  850,557
Borrowings                                                                                    283,376                  269,105
                                                                                    ------------------        -----------------
      Total interest expense                                                                1,645,623                1,119,662
                                                                                    ------------------        -----------------
NET INTEREST INCOME                                                                           952,444                  788,192

Provision for loan losses                                                                      90,000                   71,000
                                                                                    ------------------        -----------------
NET INTEREST INCOME AFTER
   PROVISION FOR LOAN LOSSES                                                                  862,444                  717,192
                                                                                    ------------------        -----------------
NONINTEREST INCOME
Service fees on deposit accounts                                                              153,915                  105,137
Other income                                                                                   41,485                   21,119
                                                                                    ------------------        -----------------
      Total noninterest income                                                                195,400                  126,256
                                                                                    ------------------        -----------------
NONINTEREST EXPENSE
Compensation and employee benefits                                                            468,420                  345,733
Occupancy and equipment                                                                       166,392                  114,884
Professional fees                                                                              45,341                   34,815
Data processing                                                                               109,327                   83,971
Goodwill amortization                                                                          23,651                   23,745
Stationery, printing, supplies, and postage                                                    47,307                   33,962
Other                                                                                         146,259                  123,895
                                                                                    ------------------        -----------------
      Total noninterest expense                                                             1,006,697                  761,005
                                                                                    ------------------        -----------------
Income before income taxes                                                                     51,147                   82,443
Income taxes                                                                                        -                        -
                                                                                    ------------------        -----------------
NET INCOME                                                                          $          51,147         $         82,443
                                                                                    ==================        =================
EARNINGS PER SHARE:
      Basic                                                                         $           $0.07         $          $0.12
      Diuluted                                                                                  $0.06                    $0.12

WEIGHTED AVERAGE SHARES OUTSTANDING:
      Basic                                                                                   780,442                  696,252
      Diuluted                                                                                787,316                  696,711

</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

                                        4
<PAGE>

                             NITTANY FINANCIAL CORP.
                  CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                           Three Months Ended June 30,
                                                                                          2001                      2000
                                                                                    ------------------        -----------------
<S>                                                                               <C>                       <C>
INTEREST AND DIVIDEND INCOME
Loans, including fees                                                               $       1,007,655         $        688,686
Investment securities                                                                         225,221                  287,973
Interest-bearing deposits with other banks                                                     97,505                   31,837
                                                                                    ------------------        -----------------
      Total interest and dividend income                                                    1,330,381                1,008,496
                                                                                    ------------------        -----------------
INTEREST EXPENSE
Deposits                                                                                      716,845                  453,105
Borrowings                                                                                    141,474                  138,891
                                                                                    ------------------        -----------------
      Total interest expense                                                                  858,319                  591,996
                                                                                    ------------------        -----------------
NET INTEREST INCOME                                                                           472,062                  416,500

Provision for loan losses                                                                      49,500                   38,000
                                                                                    ------------------        -----------------
NET INTEREST INCOME AFTER
   PROVISION FOR LOAN LOSSES                                                                  422,562                  378,500
                                                                                    ------------------        -----------------
NONINTEREST INCOME
Service fees on deposit accounts                                                               84,292                   50,977
Other income                                                                                   22,030                   11,257
                                                                                    ------------------        -----------------
      Total noninterest income                                                                106,322                   62,234
                                                                                    ------------------        -----------------
NONINTEREST EXPENSE
Compensation and employee benefits                                                            246,515                  177,275
Occupancy and equipment                                                                        80,992                   58,270
Professional fees                                                                              23,857                   20,867
Data processing                                                                                56,278                   41,345
Goodwill amortization                                                                          11,941                   11,873
Stationery, printing, supplies, and postage                                                    23,442                   17,481
Other                                                                                          71,999                   68,084
                                                                                    ------------------        -----------------
      Total noninterest expense                                                               515,024                  395,195
                                                                                    ------------------        -----------------

Income before income taxes                                                                     13,860                   45,539
Income taxes                                                                                        -                        -
                                                                                    ------------------        -----------------
NET INCOME                                                                          $          13,860         $         45,539
                                                                                    ==================        =================

EARNINGS PER SHARE:
      Basic                                                                         $           $0.02         $          $0.06
      Diuluted                                                                                  $0.02                    $0.06

WEIGHTED AVERAGE SHARES OUTSTANDING:
      Basic                                                                                   780,571                  709,389
      Diuluted                                                                                787,155                  709,389

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

                                        5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                     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                                                               51,147                              51,147     $   51,147
Other comprehensive income:
  Unrealized gain on available for
    sale securities                                                                       110,348           110,348        110,348
                                                                                                                        -----------
Comprehensive income                                                                                                    $  161,495
                                                                                                                        ===========
Common stock issued, net               2,355           171,644                                              173,999
                                   ----------     -------------    -------------    --------------    --------------
Balance, June 30, 2001             $  80,386      $  7,823,919     $ (1,170,512)    $     (38,727)    $   6,695,066
                                   ==========     =============    =============    ==============    ==============
</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

                                        6
<PAGE>
                             NITTANY FINANCIAL CORP.
                CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                            Six Months Ended June 30,
                                                                                          2001                      2000
                                                                                    ------------------        -----------------
<S>                                                                               <C>                       <C>
OPERATING ACTIVITIES
Net income                                                                          $          51,147         $         82,443
Adjustments to reconcile net income to net cash
   provided by operating activities:
      Provision for loan losses                                                                90,000                   71,000
      Depreciation, amortization, and accretion, net                                           98,421                   53,821
      Decrease (increase) in accrued interest receivable                                       68,885                  (72,617)
      Increase in accrued interest payable                                                    (89,158)                (165,972)
      Other, net                                                                              133,137                    3,167
                                                                                    ------------------        -----------------
      Net cash provided by (used for) operating activities                                    352,432                  (28,158)
                                                                                    ------------------        -----------------
INVESTING ACTIVITIES
Investment securities available for sale:
      Maturities and repayments                                                             4,351,291                  442,237
Investment securities held to maturity:
      Purchases                                                                            (4,563,109)                       -
      Maturities and repayments                                                             1,297,921                   89,906
Net increase in loans receivable                                                           (8,616,466)              (7,883,490)
Purchase of premises and equipment                                                           (820,852)                  (7,575)
                                                                                    ------------------        -----------------
      Net cash used for investing activities                                               (8,351,215)              (7,358,922)
                                                                                    ------------------        -----------------
FINANCING ACTIVITIES
Net increase in deposits                                                                   15,743,587                5,289,866
Increase in short-term borrowings                                                             919,672                        -
Proceeds from loans payable                                                                 1,075,000                        -
Repayments of long-term FHLB advances                                                        (691,671)                       -
Net proceeds from the sale of common stock                                                    173,999                  581,379
                                                                                    ------------------        -----------------
      Net cash provided by financing activities                                            17,220,587                5,871,245
                                                                                    ------------------        -----------------
      Increase (decrease) in cash and cash  equivalents                                     9,221,804               (1,515,835)

CASH AND CASH EQUIVALENTS
   AT BEGINNING OF PERIOD                                                                   4,233,404                3,057,875
                                                                                    ------------------        -----------------
CASH AND CASH EQUIVALENTS
   AT END OF PERIOD                                                                 $      13,455,208         $      1,542,040
                                                                                    ==================        =================
SUPPLEMENTAL CASH FLOW DISCLOSURE Cash paid during the period for:
      Interest on deposits and borrowings                                           $       1,734,781         $      1,285,634
      Income taxes                                                                                650                        -

</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 six  months  ended  June 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 six-months ended June 30, 2001 and 2000, the diluted number
of  shares   outstanding   from  employee  stock  options  was  6,874  and  459,
respectively.  For the  three-months  ended June 30, 2001, the diluted number of
shares outstanding from employee stock options was 6,584. There were no dilutive
shares of common stock for the three-months ended June 30, 2000.

NOTE 3 - COMPREHENSIVE INCOME

The components of comprehensive  income consist  exclusively of unrealized gains
and losses on available for sale  securities.  For the six months ended June 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 June 30, 2001,  comprehensive income totaled $23,119. For the
three and six-months ended June 30, 2000,  comprehensive  income totaled $16,139
and $53,600.

                                       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  stipulate an
annual interest rate of 6.50% which shall accrue and, along with principal,  not
be payable  until the  completion  of the sale of a sufficient  amount of common
stock in the offering, which in no event will be later than December 31, 2001.

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 is
sufficient.  The offering is not  underwritten and is not subject to the sale of
any minimum  number or dollar amount of shares.  The offering will  terminate no
later than December 31, 2001.  On June 29, 2001,  23,553 shares were issued with
net proceeds from the issuance amounting to approximately  $174,000. On July 31,
2001, the Company realized additional net proceeds of $932,783 from the issuance
of 100,893 shares.  The Company has used $174,000 or 14.7 percent,  of the total
proceeds for additional  capitalization  of the Bank, and $920,000 for repayment
of loans payable to certain members of the Board of Directors.

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 June 30,  2001,  the Company had  approximately  $823,000 of
intangible assets from branch acquisitions.

                                       9
<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
and commercial and real estate lending, consumer lending, commercial lending and
retail deposits.  At June 30, 2001, we had consolidated assets of $86.8 million,
loans  receivable,  net  of  $51.9  million,  deposits  of  $69.6  million,  and
stockholders'  equity  of  $6.7  million.  Due to an  increase  in  non-interest
expenses which more than offset the increase in net interest income,  net income
declined  for the three and six months  ended June 30,  2001 as  compared to the
same 2000 periods.  Net income for the three months ended June 30, 2001 declined
$32,000 to $14,000 from $46,000 for the same 2000 period. Net income for the six
months ended June 30, 2001 declined $31,000 to $51,000 from $82,000 for the same
2000 period.  Although  Nittany Bank  experienced  dramatic  growth  during this
period,  net interest  income for the current  three and six 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, as
discussed  below. For the three and six months ended June 30, 2001, net interest
rate spreads  declined to 2.49% and 2.64%,  respectively,  from 3.14% and 3.07%,
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 , which during the current  quarter was heavily  marketed in our primary
market  area.  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 are 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 has 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.  We believe that the
long-term  benefits of  increasing  our  customer  base and core  business  will
enhance Nittany Bank's net income and franchise value in the long term.

         On June 2, 2001,  we commenced an additional  common stock  offering to
sell up to 210,000 shares of our common stock at $9.50 per share.  We have filed
a registration statement covering 250,000 shares. If we find that demand for the
shares is sufficient,  we may sell some or all of the additional  40,000 shares.
The offering is not  underwritten  and is not subject to the sale of any minimum
number or dollar  amount of shares.  The offering  will  terminate no later than
December 31, 2001. On June 29, 2001, we sold and issued 23,553 shares increasing
our

                                       10
<PAGE>

outstanding common shares to 803,865 shares. The aggregate net proceeds from the
offering of approximately $174,000 was contributed as capital to Nittany Bank.

         At July 31,  2001,  we sold and  issued an  additional  100,893  shares
increasing our outstanding  common shares to 124,446  shares.  The aggregate net
proceeds from the offering at July 31, 2001were approximately $934,0000 of which
$920,000 was used to pay off loan  payables due to certain  members of our board
of directors.

         On July 6, 2001, Nittany Bank added a new executive officer to its team
to help  bolster  its  lending  activities.  This  new  officer  has 17 years of
commercial lending experience.

Comparison of Financial Condition

         Asset growth for the period  continued to remain  strong.  Total assets
increased  $17,364,000  to  $86,784,000  at June 30,  2001 from  $69,420,000  at
December 31, 2000. Additionally, the growth in assets for the quarter ended June
30, 2001 represented an increase of $15,349,000 from March 31, 2001.

         Cash and cash equivalents  increased  $9,222,000 to $13,455,000 at June
30, 2001 as compared to $4,233,000 December 31, 2000. For the quarter ended June
30, 2001, cash and cash  equivalents  represented an increase of $7,115,000 from
March  31,  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  held  to  maturity  increased   $3,262,000  to
$7,799,000  at June 30, 2001 from  $4,537,000  at December 31, 2000.  During the
June 30, 2001 quarter,  we purchased  $4,563,000 of  mortgage-backed  securities
which were  partially  funded by $1,298,000 of proceeds  received from principal
repayments and maturities.

         Loans receivable,  net increased  $8,523,000 to $51,939,000 at June 30,
2001 from $43,416,000 at December 31, 2000. For the quarter ended June 30, 2001,
loans receivable, net increased $5,595,000 from March 31, 2001. Of such increase
in loans  receivable,  net for the quarter ended June 30, 2001,  residential and
consumer loans increased approximately $3,043,000 and $1,687,000,  respectively.
The  growth in  commercial  real  estate and  commercial  loans  represented  an
aggregate  increase of $3,236,000  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 June 30, 2001, we had additional commitments to
fund loan demand of  $9,735,000  of which  approximately  $2,156,000  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 June 30, 2001, our allowance for loan losses increased $75,000
to $419,000 from $344,000 at December 31, 2000.  This increase was primarily due
to  the  growth  of  commercial  real  estate  loans  and  the  commercial  loan
portfolios.  The increased allowance resulted from a loan loss provision for the
six months

                                       11
<PAGE>



ended June 30, 2001 of $90,000,  offset by loan  chargeoffs of $15,000.  For the
quarter ended June 30, 2001, we added $50,000 to the allowance, which was offset
by $4,000 of loan chargeoffs.

         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  $15,743,000 to $69,618,000 at June 30, 2001
from  $53,875,000  at December  31, 2000.  For the quarter  ended June 30, 2001,
interest bearing demand increased  $1,748,000 and savings increased  $13,312,000
from March 31, 2001. Additionally, our sweep account program, which offers us an
alternative  funding vehicle to higher fixed term deposit products,  resulted in
an overall  increase  in  short-term  borrowings  of  $920,000  at June 30, 2001
compared to December 31, 2000.

         During the quarter,  we increased  our  borrowings  $1,075,000  through
short term loan payables due to certain members of our board of directors. These
funds were contributed to Nittany Bank to maintain its Tier I capital to average
assets ratio  requirement of 8.0%. With the proceeds of the stock sales in July,
$920,000 of such notes were paid off on July 31, 2001.

         Stockholder's  equity increased $336,000 to $6,695,000 at June 30, 2001
from $6,359,000 at December 31, 2000, as a result of net income of $51,000,  net
proceeds from the stock offering of $174,000 and a decline in accumulative other
comprehensive loss of $111,000.  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 June 30, 2001  decreased  $32,000
to $14,000 from $46,000 for the same 2000 period.  Net income for the six months
ended June 30, 2001 decreased  $31,000 to $51,000 from $82,000 for the same 2000
period. See "Overview"

         Net  interest  income  for the three  months  ended  June 30,  2001 was
$472,000 as compared to $417,000 for the same 2000 period. Interest and dividend
income increased $322,000 to $1,330,000 for the three months ended June 30, 2001
from $1,008,000 for the same 2000 year period.  Increased  interest and dividend
income for the current three months ended June 30, 2001 was influenced primarily
by increases in interest  earned on loans  receivable  of $319,000.  The average
yield on interest earning assets  decreased to 7.05% for the three-months  ended
June 30, 2001 from 7.60% for the same period ended 2000.  Average yield on loans
receivable remained

                                       12
<PAGE>

relatively unchanged for the three months ended June 30, 2001 as compared to the
same 2000 period.

         Net  interest  income for six  months  ended  June 30,  2001  increased
$164,000  to $952,000  from  $788,000  for the same 2000  period.  Interest  and
dividend income  increased  $690,000 to $2,598,000 for the six months ended June
30, 2001 from $1,908,000 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 $660,000.  The average yield
on interest  earning assets  declined to 7.23% for the six months ended June 30,
2001 from 7.43% for the same period ended 2000.  With a significant  increase in
commercial and commercial  real estate  lending,  the yield on loans  receivable
increased 15 basis points in 2001 as compared to 2000.

         Interest  expense for the three  months  ended June 30, 2001  increased
$266,000 to $858,000 from  $592,000 for the same 2000 period and was  influenced
primarily by an increase in interest  expense on deposits of  $264,000.  Average
cost of fund for interest bearing liabilities  remained relatively unchanged for
the three  months  ended  June 30,  2001 as  compared  to the same 2000  period.
However, due to the increase in savings accounts for the current period, average
cost of funds for deposits increased 15 basis points for the current three month
2001 period as compared to the same 2000 period.

         Interest  expense  for the six  months  ended June 30,  2001  increased
$526,000  to  $1,646,000  from  $1,120,000  for the  same  2000  period  and was
influenced  mainly by an increase in interest  expense on deposits of  $512,000.
Average cost of fund for interest  bearing  liabilities  also increased to 4.90%
for the six months  ended June 30,  2001 from  4.77% for the same  period  ended
2000.  Average  cost of funds for  deposits  increased  31 basis  points for the
current six -month period as compared to the same 2000 period.

         Total noninterest  income increased  $44,000 and $69,000,  respectively
for the current  three and six months  ended June 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 six months ended June 30, 2001, service
fees on deposit accounts increased $33,000 and $49,000 , 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 six
months ended June 30, 2001, Nittany Asset Management  contributed  approximately
$19,000 and $33,000, respectively in commission and management fees, an increase
of $8,000 and $12,000, respectively over the same periods in 2000.

         Total  noninterest  expenses  increased  $120,000  and $246,000 for the
three and six months  ended June 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 the Company'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

                                       13
<PAGE>

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.  For the three and six months  ended June 30,  2001,  Nittany  Asset
Management   operations   contributed   approximately   $15,000  and  $32,000  ,
respectively  of other  operating  expense,  an  increase  of $1,000 and $4,000,
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 June 30, 2001, the Company and
Nittany Bank's total  risk-based,  tier I risk-based and tier I leverage  ratios
were 13.6%, 12.7%,6.8% and 15.9%, 15.0 %, 8.1%, respectively.

                                       14

<PAGE>

PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

           None

Item 2.    Changes in securities and use of proceeds
<TABLE>
<CAPTION>
         (b)      Use of Proceeds from Registered Securities
               <S>      <C>
                  (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 has not terminated.  The offering is expected to
                                    terminate on December 31, 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 - 223,754 on June 29, 2001;
                            (v)     Expenses of the offering which were direct or indirect
                                    payments to others;
                                    Expense paid to and for underwriters: None
                                    Other expenses - $49,754;
                                    Total expenses - $49,754;
                           (vi)     Net offering proceeds - $174,000;
                           (vii)    Direct or indirect payments to affiliates:
                                    Purchase outstanding stock of subsidiary bank - $174,000
                           (viii)   Not applicable
</TABLE>

Item 3.    Defaults by the Company on its senior securities

           None

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

           The following represents the results of matters submitted to a vote
           of the stockholders at the annual meeting held on May 18, 2001:

           Election of a Director for term to expire in 2005:
           Donald J. Musso was elected by the following vote:

           For:                   601,039
           Votes Withheld:          3,410


<PAGE>

          Ratified  amendment to the Nittany  Financial  Corp. 1998 Stock Option
          Plan as described in the Proxy Statement for the Annual Meeting by the
          following vote:

               For:                    523,614
               Against                  26,982
               Votes Withheld:           7,100

          S.R. Snodgrass A.C. was selected as the Company's independent auditors
          for the fiscal year 2000 by the following vote:

               For:                    601,589
               Against:                  1,100
               Votes Withheld:           1,760

Item 5.   Other information

          None

Item 6.   Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
        <S>     <C>
          (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 **
                  99.1     Independent Accountants Report
</TABLE>

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

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

     (b)  Reports on Form 8-K.

     None


                                       15

<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: August 13, 2001                By:   /s/David Z. Richards
                                           -------------------------------------
                                           David Z. Richards
                                           President and Chief Executive Officer
                                           (Principal Accounting Officer)


                                       16