<PAGE>
             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, 1998

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

For the transition period from            to
                              ------------  ------------

                         Commission File Number 0-21885
                        --------------------------------

                            Advance Financial Bancorp
                      --------------------------------------
              (Exact name of registrant as specified in its charter)

West Virginia                                                       55-0753533
-------------                                                       ----------
(State or other jurisdiction of              (IRS Employer Identification No.)
incorporation or organization)

                   1015 Commerce Street, Wellsburg, WV  26070
                   ------------------------------------------
                    (Address of principal executive offices)

                                (304) 737 - 3531
                   ------------------------------------------
              (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 October 31, 1998:  1,030,648 shares

<PAGE>
                          ADVANCE FINANCIAL BANCORP

                                   INDEX



                                                                      Page
                                                                     Number
                                                                     ------

PART I - FINANCIAL INFORMATION

   Item 1. Financial Statements

            Consolidated Balance Sheet (Unaudited) as of
              September 30, 1998 and June 30, 1998                      3

            Consolidated Statement of Income (Unaudited)
              for the Three Months ended September 30, 1998 and 1997    4

            Consolidated Statement of Stockholders' Equity (Unaudited)  
              as of September 30, 1998                                  5

            Consolidated Statement of Cash Flows (Unaudited)
              for the Three Months ended September 30, 1998 and 1997    6

            Notes to Unaudited Consolidated Financial Statements        7
  
   Item 2. Management's Discussion and Analysis of
             Recent Developments                                       8-12

PART II  -  OTHER INFORMATION

   Item 1. Legal Proceedings                                           13

   Item 2. Changes in Securities                                       13

   Item 3. Default Upon Senior Securities                              13

   Item 4. Submissions of Matters to a Vote of Security Holders        13

   Item 5. Other Information                                           13

   Item 6. Exhibits and Reports on Form 8-K                            13

SIGNATURES                                                             14

<PAGE>
                            ADVANCE FINANCIAL BANCORP
                     CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>

                                                       September 30,      June 30,
                                                           1998            1998
                                                      -------------   -------------

                                                                     
                                                                
<S>                                                   <C>             <C>
ASSETS
Cash and Cash Equivalents:
Cash and amounts due from banks                       $  1,404,643    $   1,334,831
Interest-bearing deposits with other institutions        8,448,613        7,749,362
                                                      -------------   -------------
      Total cash and cash equivalents                    9,853,256        9,084,193

Investment Securities:
Securities held to maturity (fair value 
of $1,255,929 and $1,753,325)                            1,249,168        1,745,667
Securities available for sale                              223,755          264,020 
                                                      -------------   -------------
      Total investment securities                        1,472,923        2,009,687

Mortgage-backed securities held to maturity 
   (fair value of $360,422 and $364,031)                   335,454          339,362
Loans held for sale                                        555,350        1,454,700
Loans receivable, (net of allowance for loan losses
   of $512,162 and $477,654)                            98,891,582       95,590,197
Office properties and equipment, net                     4,104,296        4,082,857
Federal Home Loan Bank Stock, at cost                      622,200          662,200
Accrued interest receivable                                602,735          617,980
Other assets                                               489,880          384,237
                                                      -------------   -------------

      TOTAL ASSETS                                    $116,927,676     $114,185,413
                                                      =============   =============

LIABILITIES 

Deposits                                               $92,272,932      $88,551,543
Advances from Federal Home Loan Bank                     9,000,000       10,000,000
Advances from borrowers for taxes and insurance            129,984          193,346
Accrued interest payable and other liabilities             458,300          512,402
                                                      -------------   -------------
      TOTAL LIABILITIES                                101,861,216       99,257,291
                                                      -------------   -------------


STOCKHOLDERS' EQUITY
Preferred stock, $.10 par value; 500,000 shares 
 authorized, none issued                                        -                 -
Common Stock, $.10 par value; 2,000,000 shares authorized
   1,084,450 shares issued and outstanding                 108,445          108,445
Additional paid - in capital                            10,301,514       10,288,928
Retained Earnings - substantially restricted             7,184,325        7,130,056
Net unrealized loss on securities                          (37,697)         (13,650)
Unearned Employee Stock Ownership Plan shares (ESOP)      (674,962)        (715,158)
Unearned Restricted Stock Plan (RSP)                      (814,302)        (869,636) 
Treasury stock (53,802 shares, at cost)                 (1,000,863)      (1,000,863)
                                                      -------------   -------------
      TOTAL STOCKHOLDERS' EQUITY                        15,066,460       14,928,122
                                                      -------------   -------------

      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $116,927,676    $ 114,185,413
                                                      =============   =============
</TABLE>
See accompanying notes to the unaudited consolidated financial statements.

                                     3

<PAGE>
                           ADVANCE FINANCIAL BANCORP
                  CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>


                                                    Three Months Ended September 30,
                                                         1998           1997
                                                     ------------   ------------
                                                              
<S>                                                  <C>             <C>
INTEREST AND DIVIDEND INCOME
Loans                                                $ 2,044,794    $  1,813,763
Investment securities                                     27,305         131,431    
Interest-bearing deposits with other institutions        120,083          61,609   
Mortgage-backed securities                                 7,717           8,463
Dividends on Federal Home Loan Bank Stock                 10,194           9,267
                                                     ------------   ------------
   Total interest and dividend income                  2,210,093       2,024,533
                                                     ------------   ------------

INTEREST EXPENSE
Deposits                                               1,078,636         934,824
Advances from Federal Home Loan Bank                     124,734         110,627
                                                     ------------   ------------
Total interest expense                                 1,203,370       1,045,451
                                                     ------------   ------------

NET INTEREST INCOME                                    1,006,723         979,082
  
Provision for loan losses                                 37,500          15,671
                                                     ------------   ------------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES      969,223         963,411
                                                     ------------   ------------

NONINTEREST INCOME
   Service charges on deposit accounts                    86,431          57,743
   Gain on sale of loans                                  33,225          20,257
   Other income                                           64,300          17,330
                                                     ------------   ------------
      Total noninterest income                           183,956          95,330
                                                     ------------   ------------

NONINTEREST EXPENSE
   Compensation and employee benefits                    393,219         306,144
   Occupancy and equipment                               139,000          85,339
   Professional fees                                      37,621          62,640
   Advertising                                            33,730          34,884
   Data processing charges                                85,518          74,004
   Other expenses                                        234,385         148,929
                                                     ------------   ------------
      Total noninterest expense                          923,473         711,940
                                                     ------------   ------------

Income before income taxes                               229,706         346,801
  
Income taxes                                              94,877         142,239
                                                     ------------   ------------

NET INCOME                                           $   134,829   $     204,562  
                                                     ============   ============
  
EARNINGS PER SHARE:                                   
  Basic                                              $       .15   $         .20
  Diluted                                            $       .15   $         N/A 

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

                                       4
<PAGE>
<TABLE>
<CAPTION>
                                        ADVANCE FINANCIAL BANCORP
                  CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

                                                                            Un-        Un-
                                                                  Net    allocated  allocated
                                     Additional               Unrealized  Shares     Shares                    Total       Comp-
                           Common      Paid-In     Retained    Loss On    Held by    Held by    Treasury   Stockholders 'rehensive
                            Stock      Capital     Earnings   Securities   ESOP        RSP        Stock       Equity       Income
                          ---------  -----------  ----------  ---------  ---------  ---------  -----------  -----------  ---------
<S>                       <C>        <C>          <C>         <C>        <C>        <C>          <C>        <C>          <C>
Balance, June 30, 1998    $ 108,445  $10,288,928  $7,130,056  $ (13,650) $(715,158) $(869,636) $(1,000,863) $14,928,122  $

Net Income                                           134,829                                                    134,829    134,829
Other comprehensive income:
 Unrealized gain on available
  for sale securities                                           (24,047)                                        (24,047)   (24,047)
Comprehensive income

Accrued compensation
 expense for RSP                                                                       55,334                    55,334
Release of earned ESOP shares             12,586                            40,196                               52,782
Cash dividends declared                              (80,560)                                                   (80,560)
                          ---------  -----------  ----------  ---------  ---------  ---------  -----------  -----------  ---------

Balance, Sept. 30, 1998   $ 108,445  $10,301,514  $7,184,325  $ (37,697) $(674,962) $(814,302) $(1,000,863) $15,066,460  $ 110,782
                          =========  ===========  ==========  =========  =========  =========  ===========  ===========  =========

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

                                       5
<PAGE>
                          ADVANCE FINANCIAL BANCORP
                CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>

                                                      Three Months Ended September 30,
                                                           1998           1997
                                                       ------------   ------------

                                                                  
                                                                
<S>                                                    <C>            <C>
OPERATING ACTIVITIES
   Net income                                          $   134,829    $    204,562
   Adjustments to reconcile net income to net cash 
     provided by operating activities:
   Depreciation, amortization and accretion, net            72,690          32,596
   Provision for loan losses                                37,500          15,671  
   Amortization of unearned ESOP and RSP                   108,116          31,410  
   Gain on sale of loans                                   (33,225)        (20,257)
   Origination of loans held for sale                   (1,839,749)     (1,298,335) 
   Proceeds from sale of loans                           2,772,324       2,773,292  
   Decrease in other assets and liabilities               (136,761)        157,364 
                                                       ------------   ------------

    Net cash provided by operating activities            1,115,724       1,896,303  
                                                       ------------   ------------

INVESTING ACTIVITIES
   Proceeds from maturities of held to maturity           
      securities                                         1,000,000       2,550,000
   Purchases of held to maturity securities                500,000      (1,000,000)        
   Principal collected on available for sale securities      3,610           2,975
   Principal collected on mortgage - backed securities       3,911           1,960
   Net increase in loans                                (3,338,885)     (6,643,133)  
   Purchases of office properties and equipment            (97,413)       (108,827)
                                                       ------------   ------------

   Net cash used for investing activities               (2,928,777)     (5,197,025)  
                                                       ------------   ------------

FINANCING ACTIVITIES
   Net increase (decrease)in deposits                    3,721,389         778,424 
   Proceeds from advances                                           
      from Federal Home Loan Bank                       (1,000,000)         (8,803)
   Dividends paid                                          (75,910)        (79,815)
   Net change in advances for taxes and insurance          (63,362)        (67,809)
                                                       ------------   ------------

   Net cash provided by financing activities             2,582,117         621,997
                                                       ------------   ------------

   Increase (decrease) in cash and cash equivalents        769,064      (2,678,725)

CASH AND CASH EQUIVALENTS
   AT BEGINNING OF YEAR                                  9,084,193       6,792,420     
                                                       ------------   ------------

CASH AND CASH EQUIVALENTS
   AT END OF YEAR                                      $ 9,853,257   $   4,113,695
                                                       ============   ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
   Cash paid during the period for:
      Interest on deposits and borrowings              $  1,186,998   $  1,034,636    
      Income taxes                                          155,000        136,000 
</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

                                      6


<PAGE>
                       ADVANCE FINANCIAL BANCORP
          NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

The consolidated financial statements of Advance Financial Bancorp (the
"Company"), includes its wholly-owned subsidiary, Advance Financial Savings Bank
(the "Bank"), and its wholly-owned subsidiary, Advance Financial Service
Corporation of West Virginia.  All significant intercompany balances and
transactions 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 which 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 interim periods are not necessarily indicative of the
results to be expected for the fiscal year ended June 30, 1999 or any other
interim period.

These statements should be read in conjunction with the consolidated statements
as of and for the year ended June 30, 1998 and related notes which are included
on the Form 10-KSB (file no. 0-21885). 

NOTE 2 - EARNINGS PER SHARE

In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings Per Share."  Statement No. 128 replaced
the previously reported primary and fully diluted earnings per share with basic
and diluted earnings per share. Unlike primary earnings per share, basic 
earnings per share excludes any dilutive effects of options, warrants, and 
convertible securities.  Diluted earnings per share is very similar to the 
previously reported fully diluted earnings per share.  All earnings per 
share amounts for all periods have been presented, and where necessary, 
restated to conform to the Statement 128 requirements. 

There were no convertible securities which would effect the numerator in
calculating basic and diluted earnings per share; therefore, net income as
presented on the Consolidated Statement of Income (Unaudited) for September 30,
1998 and 1997 will be used as the numerator.  The following table sets forth a
reconciliation of the denominator of the basic and diluted earnings per share
computation.
      
                                                  1998          1997
                                                 -------       -------

Denominator:  
    Denominator for basic earnings per
    share weighted-average shares                894,054       999,477

Effect of dilutive securities:
    Employee stock options                             -           N/A
                                                 -------       -------

Dilutive potential common shares                 894,054       999,477        

Denominator for diluted 
    earnings per share-adjusted 
    weighted-average shares                      894,054       999,477
                                                 -------       -------


NOTE 3 - COMPREHENSIVE INCOME

Effective July 1, 1998, the Bank adopted the Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income."  In adopting Statement
No. 130, the Bank is required to present comprehensive income and its
components in a full set of general purpose financial statements.  The Bank
has elected to report the effects of Statement No. 130 as part of the
Statement of Changes in Stockholders' Equity.


                                     7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RECENT DEVELOPMENTS
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1998 AND JUNE 30, 1998
-------------------------------------------------------------------------

Total assets increased by approximately $2,742,000 to $116,928,000 at September
30, 1998 from $114,185,000 at June 30, 1998.  Deposits, which increased by
$3,721,000, were used to supplement the bank's growing loan demand of 
$2,402,000, as well as repay $1,000,000 of Advances from the Federal Home 
Loan Bank.

Interest-bearing deposits with other institutions increased from $7,749,000 at
June 30, 1998 to $8,449,000 at March 31, 1998.  This increase of $700,000 or
9.0% represents called investment securities which have been allocated to meet
outstanding loan commitments.

Investment and mortgage-backed securities decreased $541,000 or 23.0% from
$2,349,000 at June 30, 1998 to $1,808,000 at September 30, 1998.  This decrease
resulted primarily from limited activity within the U.S. Government securities
held to maturity portfolio as only $500,000 of the $1.0 million in called
securities were replaced with similar instruments.  Due to the current interest
rate environment, management is seeking higher returns by aggressively
marketing its commercial and mortgage loan products.

Net loan receivables increased $2,402,000 or 2.5% from $97,045,000 at June 30,
1998 to $99,447,000 at September 30, 1998.  Loan demand was bolstered by
the new Wintersville, Ohio branch, which resulted in an increase in
non-residential mortgages of $1,100,000 and commercial loans of $589,000.

Deposits increased $3,721,000 or 4.2% to $92,273,000 at September 30, 1998 from
$88,552,000 at June 30, 1998. This increase primarily represents $2,712,000 in
deposits accumulated via fifteen to twenty-five month certificate of deposit
products yielding between 5.3% and 5.5% and $681,000 from a premium yielding
money market deposit product.  The competitiveness of the deposit products
coupled with the opening of the new Wintersville, Ohio branch has led to an
increase in the bank's customer base. 

Equity capital increased by $131,000 or .88% from $14,928,000 at June 30, 1998
to $15,066,000 at September 30, 1998.  Net income of $135,000 and the 
recognition of shares in the Employee Stock Ownership Plan and Restricted 
Stock Plan of $108,000 were offset by the payment of cash dividends of 
$81,000 and a decline in the net unrealized loss on securities of $24,000.  
Future dividend policies will be determined by the Board of Directors in 
light of the earnings and financial condition of the Company, including 
applicable governmental regulations and policies.

                                     8
<PAGE>

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED 
------------------------------------------------------------------
SEPTEMBER 30, 1998 AND 1997

Net income decreased $70,000 or 34.1% to $135,000 for the three months ended
September 30, 1998 from $205,000 for the same period ended 1997 as noninterest
expense increased by $212,000 while noninterest income rose by only $89,000. 

Net interest income increased $28,000 or 2.8%, to $1,007,000 for the three 
months ended September 30, 1998 compared to $979,000 for the same period 
ended 1997.  This increase is almost entirely due to fluctuations in the 
average volume of the underlying principal balances as the interest rate 
spread remained stable at 3.2% for both three month periods ended 
September 30, 1998 and 1997.  Interest income increased $186,000 or 9.2% 
primarily resulting from an increase in earnings on loans of $231,000 as the
average principal balance increased $10,410,000 or 11.7% from $89,313,000
for the period ended 1997 to $99,723,000 for the period ended 1998.  
Offsetting this increase was a net decrease of $46,000 in earnings on 
investment securities and interest-bearing deposits with other institutions 
as average principal balances declined $913,000 or 8.2% from $11,143,000 
for the period ended 1997 compared to $10,230,000 for the period ended 1998.  

Interest expense increased $158,000 or 15.1% for the three months ended 
September 30, 1998 compared to the same period ended 1997.  This increase 
was primarily due to an increase in interest on deposits of $144,000 
resulting from increases in average principal balances of certificates of 
deposit and interest-bearing demand deposits of $8,282,000 and $4,248,000, 
respectively, while being offset somewhat by a decline in the average 
principal balance of savings deposits of $592,000.  As stated previously
these increases stem from the new Wintersville branch.

Based upon management's continuing evaluation of the adequacy of the allowance
for loan losses which encompasses the overall risk characteristics of the 
various portfolio segments, past experience with losses, the impact of economic
conditions on borrowers, and other relevant factors, the provision for loan
losses increased by $22,000 for the three months ended September 30, 1998
compared to the same period ended 1997.  See "Risk Elements".

Noninterest income increased $89,000 or 93.0% from $95,000 for the three months
ended September 30, 1997 to $184,000 for September 30, 1998.  Service charges on
deposit accounts increased $29,000 from 1997 to 1998 due to an increase in 
volume from the new Wintersville, Ohio branch. The Bank sold fixed rate 
mortgage loans in the secondary market during the three month period  which 
resulted in an increase on gains on the sale of loans of $13,000. Other 
income increased $47,000 or primarily due to the recognition of $32,000 of 
servicing rights income from loans sold while volume increases occurred in 
all other income type accounts. 

Noninterest expense  increased $212,000 or 29.7% from $712,000 for the three
months ended September 30, 1997 to $923,000 for the same period ended September
30, 1998.  Compensation and employee benefits increased $87,000 or 28.4% due to
the hiring of new employees and related benefits for the new branch office, as
well as an additional increase of $18,000 attributable to the Employee Stock
Ownership Plan. Professional fees decreased by $25,000 or 40.0% due to an
decrease in services for compliance with regulatory requirements and employee
benefit plans. Occupancy and equipment increased $54,000 or 62.9% due primarily
to an increase in depreciation expense for equipment.  Other expense increased
$86,000 or 63.0% mainly due to recognition of $55,000 of amortization expense
for the Restricted Stock Plan as well as nominal increases in all other expense
type accounts.  Data processing expenses increased $12,000 or 15.6% due to both 
volume of transactions and an increase in third party costs.

Income tax expense decreased $47,000 or 33.3% from $142,000 for the three months
ended September 30, 1997 compared to $95,000 for the same period ended 1998 due
to a decline in the level of pre-tax income by 33.8%.
 
                                     9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

The Bank's primary sources of funds are deposits, amortization and prepayment of
loans, maturities of investment securities, and funds provided from operations. 
While scheduled loan repayments are a relatively predictable source of funds,
deposit flows and loan prepayments are greatly influenced by general interest
rates, economic conditions, and competition.  In addition, the Savings Bank
invests excess funds in overnight deposits which provide liquidity to meet
lending requirements. 

The Bank has other sources of liquidity if a need for additional funds arises.
An additional source of funds includes a RepoPlus line of credit with the 
Federal Home Loan Bank ("FHLB") of Pittsburgh amounting to $10 million.  
In addition, as of September 30, 1998, the Bank had outstanding advances 
from the FHLB of $9,000,000. 

As of September 30, 1998 the Company has commitments to fund loans of
approximately $13.4 million   as a direct result of the economic health of the
Bank's market area and the competitive pricing of the Bank's loan products.

Management monitors both the Company's and the 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, 1998, both the Company and the Bank
exceeded the minimum risk-based and leverage  capital ratios requirements.  The
Company's and Bank's total risk-based, Tier I risk-based and Tier I leverage
ratios are 18.2%, 18.9%, 12.8%, and 15.7%, 16.3%, and 11.0% respectively at
September 30, 1998. 


                                  10
<PAGE>
RISK ELEMENT
------------

The table below presents information concerning nonperforming assets including
nonaccrual loans, renegotiated loans, loans 90 days or more past due, other real
estate loans, and repossessed assets.  A loan is classified as nonaccrual when,
in the opinion of management, there are serious doubts about collectibility of
interest and principal.  At the time the accrual of interest is discontinued,
future income is recognized only when cash is received.  Renegotiated loans are
those loans which terms have been renegotiated to provide a reduction or 
deferral of principal or interest as a result of the deterioration of the 
borrower.

                                                     September 30,   June 30,
                                                         1998         1998
                                                      ---------    ---------
                                                      (dollars in thousands)

Loans on nonaccrual basis                             $    334    $    283  
Loans past due 90 days or more and still accruing          183         169
                                                      ---------    ---------

Total nonperforming loans                                  517         452
                                                      ---------    ---------

Other real estate                                           57          76 
Repossessed assets                                           6          13
                                                       --------    --------    
 

Total nonperforming assets                             $   580     $   541
                                                       ========    ========    
 

Nonperforming loans as a percent of total loans            .52%       0.46%
                                                         ======      ======

Nonperforming assets as a percent of total assets          .49%       0.47%
                                                         ======      ======

Allowance for loan losses to nonperforming loans         99.03%      88.19%
                                                         ======      ======

Management monitors impaired loans on a continual basis.  As of September 30,
1998, impaired loans had no material effect on the company's financial position
or results of operations.

During the three month period ended September 30, 1998, loans increased
$2,368,000 and nonperforming loans increased $65,000 while the allowance for 
loan losses increased $35,000 for the same period.  The percentage of 
allowance for loan losses to loans outstanding increased from .4% at June 30,
1998 to .5% at September 30, 1998 in response to the overall growth in the 
loan portfolio.  Specifically, the Bank's market area has generated 
significant growth in the commercial real estate and commercial loan 
segments.  The level of funding for the provision is a reflection of the 
overall loan demand and is not an indication of any decline in the quality of
the loan portfolio.  Nonperforming loans are primarily made up of one to four
family residential mortgages.  The collateral requirements on such loans 
reduce the risk of potential losses to an acceptable level in management's 
opinion.

Management believes the level of the allowance for loan losses at September 30,
1998 is sufficient; however, there can be no assurance that the current 
allowance for loan losses will be adequate to absorb all future loan losses.
The relationship between the allowance for loan losses and outstanding loans
is a function of the credit quality and known risk attributed to the loan 
portfolio.  The on-going loan review program and credit approval process is
used to determine the adequacy of the allowance for loan losses.


                                     11
<PAGE>
YEAR 2000 EVALUATION
--------------------

Rapid and accurate data processing is essential to the Bank's operations. 
Many computer programs can only distinguish the final two digits of the year
entered (a common programming practice in prior years) are expected to read
entries for the year 2000 as the year 1900 or as zero and incorrectly attempt
to compute payment, interest, delinquency, and other data.  The Bank has been
evaluating both information technology (computer systems) and non-information
technology systems (e.g., vault timers, electronic door lock and elevator
controls).  Based upon such evaluations; management has determined that the
Bank has year 2000 risk in three areas:  (1) Bank's own computers, (2)
Computers of others used by the Bank's borrowers, and (3) Computers of others
who provide the Bank with data processing.

BANK'S OWN COMPUTERS.  The Bank expects to spend approximately $50,000 through
June 30, 1999 to upgrade its computer system.  This upgrade is expected to
eliminate the year 2000 risk.  The Bank does not expect to have material costs
to address this risk after September 30, 1999.  At June 30, 1998, none of the
estimated $50,000 had been expensed.  The Bank expects, though there is no
assurance, to be year 2000 compliant in this risk area by December 31, 1998.

COMPUTERS OF OTHERS USED BY OUR BORROWERS.  The Bank has evaluated most of
their borrowers and does not believe the year 2000 problem should, on an
aggregate basis, impact their ability to make payments to the Bank.  The Bank
believes that most of their residential borrowers are not dependent on their
home computers for income and that none of their commercial borrowers are so
large that the year 2000 problem would render them unable to collect revenue
or rent and, in turn, continue to make loan payments to the Bank.  The Bank
does not expect any material costs to address this risk area and believes they
are year 2000 compliant in the risk area.

COMPUTERS OF OTHERS WHO PROVIDE US WITH DATA PROCESSING.  This risk is
primarily focused on one third party service bureau that provides virtually
all of the Bank's data processing.  This service bureau is not year 2000
compliant but had advised the Bank that it expects to be compliant before the
year 2000.  If this problem is not solved before the year 2000, the bank would
likely experience significant delays, mistakes or failures.  These delays,
mistakes or failures could have a significant impact on our financial
condition and results of operations.

CONTINGENCY PLAN.  The Bank is monitoring their service bureau to evaluate
whether its data processing system will fail and is being provided with
periodic updates on the status of testing and upgrades being made by the
service bureau.  If the Bank service bureau fails, the Bank will attempt to
locate an alternative service bureau that is year 2000 compliant.  If the Bank
is unsuccessful, the Bank will enter deposit balances and interest with its
existing computer system.  If this labor intensive approach is necessary,
management and employees will become much less efficient.  However, the Bank
believes that they would be able to operate in this manner indefinitely, until
their existing service bureau, or their replacement, is able to again provide
data processing services.  If very few financial institution service bureaus
were operating in the year 2000, the bank's replacement costs, assuming the
Bank could negotiate an agreement, could be material.

                                     12


<PAGE>
PART II - OTHER INFORMATION

Item 1 - Legal proceedings

         NONE

Item 2 - Changes in securities

         NONE

Item 3 - Defaults upon senior securities

         N/A

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)    List of Exhibits:

        3(i)   Certificate of Incorporation of Advance Financial Bancorp*
        3(ii)  Bylaws of Advance Financial Bancorp*
        4(i)   Specimen Stock Certificate*
        4(ii)  Shareholders Rights Plan**
        10     Employment Agreement between the Bank and Stephen M. 
               Gagliardi***
        27     Financial Data Schedule (electronic filing only)

        (b)    None
----------------------
*     Incorporated by reference to the Registration Statement on Form S-1
      (File No. 333-13021) declared effective by the SEC on 
      November 12, 1996

**    Incorporated by reference to the Form 8-K (File No. 0-21885) filed
      July 17, 1997

***   Incorporated by reference to the June 30, 1997 Form 10K-SB (File No.
      0-21885) filed September 23, 1997.

                                     13
<PAGE>
SIGNATURES

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


                                   Advance Financial Bancorp


Date: November , 1998         By:\s\ Stephen M. Gagliardi
                                   --------------------------------------
                                   Stephen M. Gagliardi
                                   President and Chief Executive Officer


Date: November , 1998         By:\s\ Stephen M. Magnone
                                   --------------------------------------
                                   Stephen M. Magnone
                                   Vice President and CFO









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