United States Securities and Exchange Commission
                             Washington, D.C. 20552
                                   FORM 10QSB


{x}  QUARTERLY REPORT UNDER SECTION 13 OF 15 (d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

{ }    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCAHANGE
          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 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
subjected to such filing requirements for the past 90 days. Yes  x    No
                                                               -----     -----

State the  number of shares  outstanding  for 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 February 1, 2002:   932,285

<PAGE>


                            Advance Financial Bancorp

                                      Index



                                                                          Page
                                                                          Number
                                                                          ------


Part I - FINANCIAL INFORMATION

   Item 1 - Financial Statements

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

                   Consolidated Statement of Income (Unaudited)
                       For the Three Months ended December 31, 2001 and 2000  4

                   Consolidated Statement of Income (Unaudited)
                       For the Six Months ended December 31, 2001 and 2000    5

                   Consolidated Statement of Cash Flows (Unaudited)
             For the Six Months ended December 31, 2001 and 2000              6

              Notes to the Unaudited Consolidated Financial Statements      7-10


     Item 2 - Management's Discussion and Analysis                         11-17

Part II - OTHER INFORMATION

      Item 1 - Legal Proceedings                                              18

      Item 2 - Changes in Securities                                          18

      Item 3 - Default Upon Senior Securities                                 18

      Item 4 - Submissions of Matters to a vote of Security Holders           18

      Item 5 - Other Information                                              19

      Item 6 - Exhibits and Reports on Form 8-K                               19

SIGNATURES                                                                    20


<PAGE>
                            ADVANCE FINANCIAL BANCORP
                      CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                DECEMBER 31,       JUNE 30,
                                                                                    2001             2001
                                                                               -------------    -------------
<S>                                                                          <C>              <C>
Assets
     Cash and cash equivalents:
       Cash and amounts due from banks                                         $   1,458,888    $   1,177,728
       Interest bearing deposits with other institutions                           6,536,352        7,375,450
                                                                               -------------    -------------
          Total cash and cash equivalents                                          7,995,240        8,553,178
                                                                               -------------    -------------
     Investment securities:
       Securities held to maturity (fair value of $0 and $742,057)                         -          749,934
       Securities available for sale                                              10,501,243       11,147,919
                                                                               -------------    -------------
          Total investment securities                                             10,501,243       11,897,853
                                                                               -------------    -------------
     Mortgaged-backed securities:
       Securities held to maturity (fair value of $1,734,782 and $1,601,960)       1,683,920        1,595,349
       Securities available for sale                                               8,292,578        8,383,075
                                                                               -------------    -------------
          Total mortgage-backed securities                                         9,976,498        9,978,424
                                                                               -------------    -------------

     Loans held for sale                                                             804,400          439,949
     Loans receivable,  (net of allowance for loan losses
          of $945,422 and $779,170 )                                             162,350,825      129,595,542
     Office properties and equipment, net                                          3,794,319        3,828,367
     Federal Home Loan Bank Stock, at cost                                         1,190,000        1,075,000
     Accrued interest receivable                                                   1,086,295        1,017,024
     Other assets                                                                  1,610,981        1,101,725
                                                                               -------------    -------------
          TOTAL ASSETS                                                         $ 199,309,801    $ 167,487,062
                                                                               =============    =============
Liabilities:
     Deposits                                                                  $ 160,950,456    $ 130,499,131
     Advances from Federal Home Loan Bank                                         20,000,000       20,000,000
     Advance payments by borrowers for taxes and insurance                           402,111          146,095
     Accrued interest payable and other liabilities                                  678,188          499,119
                                                                               -------------    -------------
          TOTAL LIABILITIES                                                      182,030,755      151,144,345
                                                                               -------------    -------------
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                                         108,445          108,445
     Additional paid in capital                                                   10,354,641       10,339,790
     Retained earnings - substantially restricted                                  9,540,563        8,806,639
     Unallocated shares held by Employee Stock Ownership Plan (ESOP)                (380,774)        (424,154)
     Unallocated shares held by Restricted Stock Plan (RSP)                         (210,173)        (316,480)
     Treasury Stock (152,165 shares at cost)                                      (2,233,265)      (2,233,265)
     Accumulated other comprehensive income                                           99,609           61,742
                                                                               -------------    -------------
          TOTAL STOCKHOLDERS' EQUITY                                              17,279,046       16,342,717
                                                                               -------------    -------------
          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                           $ 199,309,801    $ 167,487,062
                                                                               =============    =============
</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
                                                                              DECEMBER 31,
                                                                           2001          2000
                                                                        -----------   -----------
<S>                                                                   <C>           <C>
INTEREST AND DIVIDEND INCOME
    Loans                                                               $ 3,182,927   $ 2,661,463
    Investment securities                                                   152,379       175,623
    Interest-bearing deposits with other institutions                        28,291        95,435
    Mortgage-backed securities                                              149,386        98,096
    Dividends on Federal Home Loan Bank Stock                                17,247        15,511
                                                                        -----------   -----------
         Total interest and dividend income                               3,530,230     3,046,128
                                                                        -----------   -----------
INTEREST EXPENSE
    Deposits                                                              1,581,671     1,506,919
    Advances from Federal Home Loan Bank                                    292,738       241,990
                                                                        -----------   -----------
         Total interest expense                                           1,874,409     1,748,909
                                                                        -----------   -----------
NET INTEREST INCOME                                                       1,655,821     1,297,219

Provision for loan losses                                                    82,800        40,800
                                                                        -----------   -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                       1,573,021     1,256,419
                                                                        -----------   -----------
NONINTEREST INCOME
    Service charges on deposit accounts                                     134,649       129,748
    Gain on sale of loans                                                   111,510         4,295
    Loss on other real estate owned                                               -       (20,000)
    Loss on sale of investments                                                   -        (1,705)
    Gain on sale of fixed assets                                              3,120             -
    Other income                                                            140,350        67,243
                                                                        -----------   -----------
         Total noninterest income                                           389,629       179,581
                                                                        -----------   -----------
NONINTEREST EXPENSE
    Compensation and employee benefits                                      596,722       510,682
    Occupancy and equipment                                                 214,138       192,219
    Professional fees                                                        37,939        27,110
    Advertising                                                              39,705        27,583
    Data processing charges                                                  83,471        57,780
    Other expenses                                                          322,823       242,893
                                                                        -----------   -----------
         Total noninterest expenses                                       1,294,798     1,058,267
                                                                        -----------   -----------
Income before income taxes                                                  667,852       377,733
Income taxes                                                                243,903       153,179
                                                                        -----------   -----------
Income before extaordinary item                                             423,949       224,554
Extraordinary item- Excess over cost on net assets acquired in merger             -             -
                                                                        -----------   -----------
Net Income                                                                  423,949       224,554
                                                                        ===========   ===========

EARNINGS PER SHARE - INCOME BEFORE EXTRAORDINARY ITEM
         Basic                                                          $       .48   $       .25
         Diluted                                                        $       .48   $       .25

EARNINGS PER SHARE - NET INCOME
         Basic                                                          $       .48   $       .25
         Diluted                                                        $       .48   $       .25
</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

                                       -4-
<PAGE>
                            ADVANCE FINANCIAL BANCORP
                   CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                 SIX MONTHS ENDED
                                                                                   DECEMBER 31,
                                                                                 2001          2000
                                                                             -----------   -----------
<S>                                                                        <C>           <C>
INTEREST AND DIVIDEND INCOME
    Loans                                                                    $ 6,030,917   $ 5,204,014
    Investment securities                                                        320,718       345,901
    Interest-bearing deposits with other institutions                             78,398       142,180
    Mortgage-backed securities                                                   303,650       157,491
    Dividends on Federal Home Loan Bank Stock                                     38,401        30,090
                                                                             -----------   -----------
         Total interest and dividend income                                    6,772,084     5,879,676
                                                                             -----------   -----------
INTEREST EXPENSE
    Deposits                                                                   3,114,200     2,943,566
    Advances from Federal Home Loan Bank                                         587,925       407,000
                                                                             -----------   -----------
         Total interest expense                                                3,702,125     3,350,566
                                                                             -----------   -----------
NET INTEREST INCOME                                                            3,069,959     2,529,110

Provision for loan losses                                                        149,100        70,800
                                                                             -----------   -----------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                            2,920,859     2,458,310
                                                                             -----------   -----------
NONINTEREST INCOME
    Service charges on deposit accounts                                          270,343       235,328
    Gain on sale of loans                                                        143,889         9,411
    Loss on other real estate owned                                                    -       (20,000)
    Loss on sale of investments                                                        -        (1,705)
    Gain on sale of fixed assets                                                   3,120             -
    Other income                                                                 242,144       139,657
                                                                             -----------   -----------
         Total noninterest income                                                659,496       362,691
                                                                             -----------   -----------
NONINTEREST EXPENSE
    Compensation and employee benefits                                         1,121,452     1,010,172
    Occupancy and equipment                                                      410,813       371,651
    Professional fees                                                             69,641        56,627
    Advertising                                                                   60,810        53,229
    Data processing charges                                                      147,776       113,334
    Other expenses                                                               601,323       479,886
                                                                             -----------   -----------
         Total noninterest expenses                                            2,411,815     2,084,899
                                                                             -----------   -----------

Income before income taxes                                                     1,168,540       736,102
Income taxes                                                                     441,755       294,876
                                                                             -----------   -----------
Income before extaordinary item                                                  726,785       441,226
Extraordinary item- Excess over cost on net assets acquired in merger            201,206          --
                                                                             -----------   -----------
Net Income                                                                       927,991       441,226
                                                                             ===========   ===========

EARNINGS PER SHARE - INCOME BEFORE EXTRAORDINARY ITEM
         Basic                                                               $       .82   $       .50
         Diluted                                                             $       .82   $       .50

EARNINGS PER SHARE - NET INCOME
         Basic                                                               $      1.05   $       .50
         Diluted                                                             $      1.05   $       .50

</TABLE>

See accompanying notes to the unaudited consolidated financial statements

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

<TABLE>
<CAPTION>
                                                                          SIX MONTHS ENDED
                                                                            DECEMBER 31,
                                                                        2001            2000
                                                                   ------------    ------------
<S>                                                              <C>             <C>
OPERATING ACTIVITIES
     Net Income                                                    $    927,991    $    441,226
     Adjustments to reconcile net income to net cash provided by
        operating activities:
          Depreciation, amortization and accretion, net                 287,366         321,601
          Provision for loan losses                                     149,100          70,800
          Loss on other real estate owned                                     -          20,000
          Loss on sale of investments                                         -           1,705
          Gain on sale of fixed assets                                   (3,120)              -
          Extraordinary gain on net assets acquired in merger          (201,206)              -
          Gain on sale of loans                                        (143,889)         (9,411)
          Origination of loans held for sale                        (12,327,844)     (1,986,945)
          Proceeds from the sale of loans                            12,107,282       1,695,745
          Increase (decrease) in other assets and liabilities           357,037        (291,777)
                                                                   ------------    ------------
               Net cash provided by operating activities              1,152,717         262,944
                                                                   ------------    ------------
INVESTING ACTIVITIES
     Investment securities held to maturity:
          Purchases                                                           -               -
          Maturities and repayments                                     750,000               -
     Investment securities available for sale:
          Purchases                                                    (260,722)     (4,694,575)
          Maturities and repayments                                   3,856,504           9,330
     Mortgage-backed securities held to maturity:
          Maturities and repayments                                     238,679         247,312
     Mortgage-backed securities available for sale:
          Purchases                                                  (1,508,800)     (5,002,344)
          Maturities and repayments                                   1,634,579          82,611
     Purchase of Federal Home Loan Bank Stock                          (115,000)       (275,000)
     Sale of Federal Home Loan Bank Stock                               445,900               -
     Net increase in loans                                           (6,684,447)     (5,429,490)
     Purchases of premises and equipment                               (177,492)       (129,850)
                                                                   ------------    ------------
               Net cash used in investing activities                 (1,820,799)    (15,192,006)
                                                                   ------------    ------------
FINANCING ACTIVITIES
     Net increase in deposits                                         6,191,773       4,876,811
     Net increase in short term advances from FHLB                            -       1,000,000
     Net Proceeds from advances from the FHLB                                 -      10,000,000
     Net change in advances for taxes and insurance                     150,422         (10,778)
     Net cash purchase of OSFS stock                                 (6,041,007)           --
     Cash dividends paid                                               (191,044)       (170,610)
                                                                   ------------    ------------
               Net cash provided by financing activities                110,144      15,695,423
                                                                   ------------    ------------
               (Decrease) Increase in cash and cash equivalents        (557,938)        766,361

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                      8,553,178       5,751,624
                                                                   ------------    ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                         $  7,995,240    $  6,517,985
                                                                   ============    ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Cash paid during the period for:
          Interest on deposits and borrowings                      $  3,719,295    $  3,406,798
          Income taxes                                             $    492,000    $    409,930

</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  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,  2002 or any other
interim period.

These statements should be read in conjunction with the consolidated  statements
of and for the year ended June 30, 2001 and related  notes which are included on
the Form 10-KSB (file no. 0-21885).


NOTE 2 - EARNINGS PER SHARE

There were no  convertible  securities,  which  would  affect the  numerator  in
calculating  basic and  diluted  earnings  per share;  therefore,  net income as
presented on the Consolidated Statement of Income will be used as the numerator.
The following  table sets forth the composition of the  weighted-average  common
shares   (denominator)  used  in  the  basic  and  diluted  earnings  per  share
computation.

                                                Six Months Ended
                                                   December 31

                                                 2001          2000
                                              ----------    ----------

Weighted-average common shares outstanding     1,084,450     1,084,450
Average treasury stock shares                   (152,165)     (152,165)
Average unearned ESOP and RSP shares             (48,989)      (56,301)
                                               ---------     ---------
Weighted-average common shares and
    common stock equivalents used to
    calculate basic earnings per share           883,296       875,984

Additional common stock equivalents
    (stock options) used to calculate
    diluted earnings per share                         -             -
                                               ---------     ---------
Weighted-average common shares and
    common stock equivalents used
    to calculate diluted earnings per share      883,296       875,984
                                               =========     =========

                                       -7-
<PAGE>

NOTE 2 - EARNINGS PER SHARE (CONTINUED)

                                                Three Months Ended
                                                    December 31

                                                 2001          2000
                                              ----------    ----------

Weighted-average common shares outstanding     1,084,450     1,084,450
Average treasury stock shares                   (152,165)     (152,165)
Average unearned ESOP and RSP shares             (47,543)      (54,711)
                                              ----------    ----------
Weighted -average common shares and
    common stock equivalents used to
    calculate basic earnings per share           884,742       877,574

Additional common stock equivalents
    (stock options) used to calculate
    diluted earnings per share                         -             -
                                              ----------    ----------
Weighted-average common shares and
    common stock equivalents used
    to calculate diluted earnings per share      884,742       877,574
                                               =========     =========


NOTE 3 - COMPREHENSIVE INCOME

Other accumulated  comprehensive  income consists solely of net unrealized gains
and losses on available for sale securities.  For the three and six months ended
December  31,  2001,   comprehensive   income  totaled  $232,687  and  $965,858,
respectively.   For  the  three  and  six  months   ended   December  31,  2000,
comprehensive income totaled $69,162 and $232,993, respectively.


NOTE 4 - MERGER

As of the close of business  September 7, 2001, the Company  acquired all of the
outstanding stock of Ohio State Financial Services "OSFS". The total cost of the
acquisition by the Company was  $7,861,147.  The acquisition was a cash purchase
of all outstanding stock of OSFS and was accounted for under the purchase method
of accounting. The Consolidated Statements of Income for the three-and six-month
periods  ended  December  31,  2001,  include  the results of  operation  of the
acquired institution from September 8, 2001.

OSFS was a bank  holding  company for  Bridgeport  Savings  and Loan,  which had
branch offices in Bridgeport and Shadyside, Ohio. The merger was entered into to
enhance the Company's  return on equity by  geographical  diversification,  more
profitable deployment of excess capital and market area expansion.

The  following are proforma  Statements  of Income for the  three-and  six-month
periods ended December 31, 2001 and 2000.  The proforma  statements are intended
to present  the  business  combination's  effect on  earnings  per share for the
comparable periods had both entities been combined at the start of each period.

                                       -8-
<PAGE>

NOTE 4 - MERGER (CONTINUED)


                                                              PROFORMA
                                                           SIX-MONTHS ENDED
                                                              DECEMBER 31
                                                          2001         2000
                                                       ------------------------

Total Interest Income                                  $7,191,566   $7,065,966
Total Interest Expense                                  3,881,609    3,858,414
                                                       ------------------------
Net Interest Income                                     3,309,957    3,207,552
Provision for loan losses                                 180,015       70,800
                                                       ------------------------
Net Interest Income after Provision for Loan Losses     3,129,942    3,136,752
                                                       ------------------------
Noninterest Income                                        665,256      375,562
Noninterest Expense                                     2,612,422    2,585,987
                                                       ------------------------
Income before income taxes                              1,182,776      926,327
Income taxes                                              442,144      362,442
                                                       ------------------------
Net Income                                               $740,632     $563,885
                                                       ========================

Earnings per share:
     Basic                                                  $0.84        $0.64
     Diluted                                                $0.84        $0.64



                                                              PROFORMA
                                                          THREE-MONTHS ENDED
                                                              DECEMBER 31
                                                          2001        2000
                                                       ------------------------

Total Interest Income                                  $3,530,230   $3,634,381
Total Interest Expense                                  1,874,409    1,998,685
                                                       ------------------------
Net Interest Income                                     1,655,821    1,635,696
Provision for loan losses                                  82,800       40,800
                                                       ------------------------
Net Interest Income after Provision for Loan Losses     1,573,021    1,594,896
                                                       ------------------------
Noninterest Income                                        389,629      180,942
Noninterest Expense                                     1,294,798    1,311,860
                                                       ------------------------
Income before income taxes                                667,852      463,978
Income taxes                                              243,903      183,788
                                                       ------------------------
Net Income                                               $423,949     $280,190
                                                       ========================

Earnings per share:
     Basic                                                  $0.48        $0.32
     Diluted                                                $0.48        $0.32


                                       -9-
<PAGE>

NOTE 5 - EXTRAORDINARY ITEM

As a result of the merger  with OSFS,  the fair  market  value of the net assets
acquired  by the Company  from OSFS  exceeded  the amount paid by  approximately
$2,697,000. In accordance with FASB 141, all non-current and non-financial asset
balances  were  reduced  until the excess fair value was  eliminated.  The total
non-current  and  non-financial  assets  created  as a result of the  merger was
$2,496,000,  therefore,  since  this total was less than the total  excess  fair
value,  these asset  balances were reduced to zero in accordance  with FASB 141.
After    eliminating    these    asset    balances,    approximately    $201,000
($2,697,000-$2,496,000) in excess fair value remained that could not be reduced.
In  accordance  with APB Opinion 30, any excess that remains  after  reducing to
zero the amounts that  otherwise  would have been assigned to those assets,  the
remaining excess shall be recognized as an extraordinary gain. The extraordinary
gain shall be  recognized  in the period in which the  business  combination  is
completed.  The remaining portion of the excess,  $201,206, was recognized as an
extraordinary gain for the period ended September 30, 2001.


                                      -10-

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
     The Private  Securities  Litigation Reform Act of 1995 contains safe harbor
provisions regarding forward-looking  statements.  When used in this discussion,
the words  "believes",  "anticipates",  "contemplates",  "expects",  and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, which could cause actual results
to differ materially from those projected. Those risks and uncertainties include
changes in interest  rates,  risks  associated with the ability to control costs
and expenses, and general economic conditions.

     The Company conducts no significant business or operations of its own other
than holding all of the outstanding  stock of the Advance Financial Savings Bank
(the "Bank"). As a result, references to the Company generally refer to the Bank
unless the context indicates otherwise.

OVERVIEW
--------

On September 7, 2001,  the Company's  growth was bolstered by the  completion of
the  acquisition of Ohio State Financial  Services,  Inc ("OSFS") and its wholly
owned subsidiary  Bridgeport  Savings and Loan Association.  The acquisition was
accounted for under the purchase method of accounting in a cash transaction.  As
a result of the completion of the acquisition,  the Company paid $7.8 million to
the  shareholders  of OSFS.  The  transaction  was  funded  with a $3.8  million
short-term  FHLB  advance and $4 million  dollars  from the  Company's  overnite
funds.  The FHLB  advance  was repaid  with  proceeds  from  matured  and called
investment  securities  and redeemed FHLB stock after the date of the merger and
prior to September 30, 2001. With the completion of the acquisition, the Company
added two additional branches located in Bridgeport and Shadyside, Ohio bringing
the total  branch  locations of the Company to five.  The results of  operations
from September 8, 2001 include the operations of OSFS.

For the three and six months  ended  December  31,  2001,  net  income  totalled
$424,000 and $928,000,  respectively,  compared to $225,000 and $441,000 for the
same 2000  periods.  The  increase in net income for the  current  three and six
month periods is primarily the result of the low interest  rate  environment  in
which the  Company  had been  active in the  origination  and sale of fixed rate
residential mortgage loans.  However, the increase in net income for the current
six-month  period  also  reflects  a  $201,000   extraordinary   gain  from  the
acquisition  of OSFS.  This  non-recurring  gain  was due to the  fact  that the
Company  purchased  the net  assets of OSFS at a discount  of their fair  market
value.  See  "Note  5 -  Extraordinary  item"  on  page  10 to the  Consolidated
Financial Statements.


COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2001 AND JUNE 30, 2001
------------------------------------------------------------------------

The  Company's   total  assets   increased  by   approximately   $31,823,000  to
$199,309,801 at December 31, 2001, from  $167,487,062 at June 30, 2001 primarily
as a result of the acquisition of OSFS which increased  assets  $24,935,000.  In
addition,  net loans from operations have increased $6,684,000 for the six-month
period.  This  increase  in loans from  operations  was funded  primarily  by an
increase in core deposits.

Loans receivable, net increased $32,755,000 to $162,350,825 at December 31, 2001
from  $129,595,542  at June  30,  2001.  The  acquisition  of  OSFS  contributed
$26,763,000 to loans receivable,  net consisting primarily of $25,300,000 in 1-4
family and construction  loans and $700,000 in automobile loans. The increase in
net  loans  as a  result  of  operations  of  $6,684,000  consist  primarily  of
non-residential,  commercial and automobile  loans which  increased  $1,943,000,
$2,801,000, and $967,000, respectively, over the six month period ended December
31, 2001.


                                      -11-
<PAGE>

Deposits  increased  $30,451,000  to  $160,950,456  at  December  31,  2001 from
$130,499,131 at June 30, 2001. The acquisition of OSFS contributed approximately
$24,349,000 to deposits, consisting primarily of $12,630,000 in core savings and
NOW accounts and  $11,719,000 in  certificates  of deposit.  Deposits  increased
$6,192,000 as a result of operations. The increase is primarily the result of an
increase in core  savings  and demand  products of  $3,187,000  and  $2,144,000,
respectively.  These  increases  in core  products  is  reflective  of  customer
preferences  toward  short term liquid  insured  deposits due to the current low
interest rate environment and other significant events over the six month period
ended December 31, 2001.

Stockholders' Equity increased approximately $936,000 to $17,279,046 at December
31, 2001 from  $16,342,717 at June 30, 2001. This increase was the result of net
income of $928,000 for the period, of which $201,000 relates to an extraordinary
gain as a result of the merger,  the recognition of shares in the Employee Stock
Ownership Plan and Restricted Stock Plan of $161,000, and an increase in the net
unrealized  gain on  securities  of $38,000  were  offset by the payment of cash
dividends of $191,000.


COMPARISON  OF THE  RESULTS OF  OPERATIONS  FOR THE THREE AND SIX  MONTHS  ENDED
--------------------------------------------------------------------------------
DECEMBER 31, 2001 AND 2000
--------------------------

Net interest income  increased  $359,000 or 27.64%,  to $1,656,000 for the three
months ended December 31, 2001 from  $1,297,000 for the comparable  period ended
2000. The increase in net interest income resulted primarily from an increase in
the average  volume of the  underlying  principle  balances in interest  earning
assets and  liabilities.  The net  interest  spread for the three  months  ended
December 31, 2001 increase to 3.12% from 3.05% for the  comparable  period ended
2000. The 7 basis point increase in the net interest rate spread for the current
three month period was primarily due to a 98 basis point decline in average cost
of funds  which was offset by a 91 basis  point  decline  in  average  yields on
assets.  See "Average Balance Sheet" for the three-month  periods ended December
31, 2001 and 2000.

Net  interest  income  increased  $541,000  or  21.38%,  to  $3,070,000  for the
six-months  December 31, 2001 from  $2,529,000 for the  comparable  period ended
2000. The increase in net interest income resulted primarily from an increase in
the average  volume of the  underlying  principle  balances in interest  earning
assets  and  liabilities.  The net  interest  spread  for the six  months  ended
December 31, 2001 decreased to 3.03% from 3.05% for the comparable  period ended
2000. The 2 basis point decrease in the net interest rate spread for the current
six month period was primarily the result of a 63 basis point decline in average
yields on assets which was offset by a 61 basis point decline in average cost of
funds. See "Average Balance Sheet" for the six-month  periods ended December 31,
2001 and 2000.

The provision for loan losses increased  $42,000 to $82,800 for the three months
ended December 31, 2001 from $40,800 for the  comparable  period ended 2000. The
provision  increased  $78,000 to $149,000 for the six months ended  December 31,
2001 from  $71,000 for the  comparable  period  ended 2000.  The increase in the
provision for loan losses for the current three month period was precipitated by
a  $82,000  write-down  of  impaired  loans  prior  to  foreclosure.  See  "Risk
Elements".

Noninterest  income increased $210,000 or 117%, to $390,000 for the three months
ended  December  31, 2001 from  $180,000 for the  comparable  period ended 2000.
Noninterest  income increased  $297,000 or 81.83% to $659,000 for the six-months
ended December 31, 2001 from $363,000 for the comparable  period ended 2000. For
the three and six month period of 2001,  miscellaneous  fees and fees on deposit
accounts  increased  by $12,000  and  $60,000,  respectively,  as a result of an
increase in core  customers and related  activity.  For the three and six months
ended  December  31,  2001,  gains  on sales of fixed  rate  loans  and  related
servicing  rights  increased  $173,000  and  $213,000,  respectively  due to the
current  fixed rate mortgage loan  environment  in comparison to the  comparable
period  ended  2000.  The gains of the  sales of fixed  rate  loans and  related
servicing  rights for the three and six month periods  ended  December 31, 2001,
are not  necessarily  indicative of anticipated  trends for the remainder of the
fiscal year ended June 30, 2002.

                                      -12-
<PAGE>

Noninterest  expense  increased  $237,000 or 22.35%, to $1,295,000 for the three
months ended December 31, 2001,  from $1,058,000 for the comparable 2000 period.
Noninterest  expense  increased  $327,000 or 15.68%,  to $2,412,000  for the six
months ended December 31, 2001 from  $2,085,000 for the comparable  period ended
2000. For the three and six month periods ended December 31, 2001,  compensation
and employee benefits increased $86,000 and $111,000, respectively. The increase
in compensation and employee  benefits for the three and six month periods ended
December 31, 2001  totalled  $129,000  and  $177,000,  respectively,  due to the
hiring of thirteen (13) new employees to operate the two branches created by the
merger  with OSFS and  additional  cost of living  increase  for other full time
employees.  This  increase was offset by an increase for the three and six-month
period ended December 31, 2001 of $43,000 and $62,000,  respectively in deferred
labor costs as a result of increased loan  production.  Occupancy and equipment,
professional  fees,  marketing and data  processing  expenses have  increased by
$71,000 and $94,000 for the three and six month period ended  December 31, 2001,
respectively.  Such  increases  are due to the  operation  of the  two  branches
created  by the  merger  with  OSFS.  For the three and six month  period  ended
December  31,  2001,  other  expenses  have  increased   $80,000  and  $121,000,
respectively.  The increase in other  expense is due to an increase in supplies,
communications  and  postage of $33,000  and  $45,000,  in fees paid for ATM and
consumer  card  usage of $8,000  and  $21,000,  and in fees paid to the  Federal
Reserve for item  processing of $5,000 and $14,000,  for the three and six month
period,  respectively.  Each of these increases are related to customer activity
due to the increase in the Company's core customers. Board of directors fees and
insurance  expense have  increased a combined  $18,000 and $20,000 for the three
and six month  periods,  respectively  due to the creation of the advisory board
made  up of  nonemployee  directors  of the  former  OSFS  and the  purchase  of
liability  insurance for potential  claims against the former OSFS. In addition,
state  franchise  taxes  have  increased  $5,000 and $8000 for the three and six
month period, respectively due to the increase in the company's capital.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

As of  December  31,  2001,  the  Company  had  commitments  to  fund  loans  of
approximately  $2,385,879.  These loan  commitments are expected to be funded by
January 31, 2001.

Management  monitors both the Company's and the Bank's total risk-based,  Tier I
risk-based  and Tier I leveraged  capital  ratios in order to assess  compliance
with regulatory guidelines.  At December 31, 2001, both the Company and the Bank
exceeded the minimum  risk-based and leveraged capital ratio  requirements.  The
Company's and the Bank's total risk-based, Tier I risk-based and Tier I leverage
ratios are 13.42%, 12.70%, 8.39% and 12.10%, 11.38%, and 7.55%, respectively, at
December 31, 2001.


                                      -13-

<PAGE>

Average Balance Sheet for the Three-Month Period ended December 31

     The  following  table  sets  forth  certain  information  relating  to  the
Company's  average  balance  sheet and reflects the average  yield on assets and
average cost of  liabilities  for the periods  indicated and the average  yields
earned and rates paid.  Such yields and costs are derived by dividing  income or
expense by the average balance of assets or liabilities,  respectively,  for the
periods  presented.  Average  balances  are  derived  from  month-end  balances.
Management does not believe that the use of month-end  balances instead of daily
average  balances  has  caused  any  material  differences  in  the  information
presented.

<TABLE>
<CAPTION>
                                                                     Period Ended December 31,
                                          -------------------------------------------------------------------------------------
                                                        2001                                           2000
                                          --------------------------------------     ------------------------------------------
                                           Average                     Average          Average                       Average
                                           Balance      Interest      Yield/Cost        Balance        Interest      Yield/Cost
                                          ---------   ------------   -----------     -------------   ------------   -----------
<S>                                     <C>              <C>          <C>              <C>              <C>           <C>
Interest-earning assets:
  Loans receivable (1)                    $161,077         $3,183         7.90%          $123,618         $2,661         8.61%
  Investment securities (2)                 18,168            198         4.36%            15,635            287         7.33%
  Mortgage-backed securities                 9,564            149         6.25%             5,939             98         6.61%
                                          ---------   ------------   -----------     -------------   ------------   -----------
     Total interest-earning assets         188,809          3,530         7.48%           145,192          3,046         8.39%
                                                      ------------   -----------                     ------------   -----------
Non-interest-earning assets                  7,944                                          7,011
                                          ---------                                  -------------
     Total assets                         $196,753                                       $152,203
                                          =========                                  =============

Interest-bearing liabilities:
  Interest-bearing demand deposits         $24,262            150         2.47%           $19,290            168         3.48%
  Certificates of deposit                   97,082          1,223         5.04%            79,839          1,219         6.11%
  Savings deposits                          30,529            209         2.74%            16,996            120         2.82%
  FHLB borrowings                           20,000            293         5.85%            14,833            242         6.53%
                                          ---------   ------------   -----------     -------------   ------------   -----------
     Total interest-bearing liabilities    171,873          1,874         4.36%           130,958          1,749         5.34%
                                                      ------------   -----------                     ------------   -----------
Non-interest bearing liabilities             7,709                                          5,714
                                          ---------                                  -------------
     Total liabilities                     179,582                                        136,672
Stockholders' equity                        17,171                                         15,531
                                          ---------                                  -------------
     Total liabilities and stockholders'
       equity                             $196,753                                       $152,203
                                          =========                                  =============

Net interest income                                       $ 1,656                                        $ 1,297
                                                      ============                                   ============
Interest rate spread (3)                                                  3.12%                                          3.05%
                                                                     ===========                                    ===========
Net Yield on interest-earning assets (4)                                  3.51%                                          3.57%
                                                                     ===========                                    ===========
Ratio of average interest-earning assets
  to average interest-bearing liabilities                               109.85%                                        110.87%
                                                                     ===========                                    ===========
</TABLE>

-----------------------------------------------------------------
(1)  Average balances include non-accrual loans.
(2)  Includes interest-bearing deposits in other financial institutions and FHLB
     stock.
(3)  Interest-rate spread represents the difference between the average yield on
     interest   earning   assets  and  the  average  cost  of   interest-bearing
     liabilities.
(4)  Net yield on  interest-earning  assets  represents net interest income as a
     percentage of average interest-earning assets.

                                      -14-
<PAGE>

Average Balance Sheet for the Six-Month Period ended December 31

     The  following  table  sets  forth  certain  information  relating  to  the
Company's  average  balance  sheet and reflects the average  yield on assets and
average cost of  liabilities  for the periods  indicated and the average  yields
earned and rates paid.  Such yields and costs are derived by dividing  income or
expense by the average balance of assets or liabilities,  respectively,  for the
periods  presented.  Average  balances  are  derived  from  month-end  balances.
Management does not believe that the use of month-end  balances instead of daily
average  balances  has  caused  any  material  differences  in  the  information
presented.

<TABLE>
<CAPTION>
                                                                       Period Ended December 31,
                                            --------------------------------------------------------------------------------------
                                                          2001                                           2000
                                            --------------------------------------     -------------------------------------------
                                             Average                     Average            Average                       Average
                                             Balance       Interest     Yield/Cost          Balance        Interest      Yield/Cost
                                            ---------   ------------   -----------     -------------   ------------   ------------
<S>                                       <C>              <C>          <C>              <C>              <C>          <C>
Interest-earning assets:
  Loans receivable (1)                      $148,644         $6,031         8.11%          $122,212         $5,204         8.52%
  Investment securities (2)                   18,631            437         4.70%            14,879            518         6.97%
  Mortgage-backed securities                   9,614            304         6.32%             4,746            158         6.64%
                                            ---------   ------------   -----------     -------------   ------------   -----------
     Total interest-earning assets           176,889          6,772         7.66%           141,837          5,880         8.29%
                                                        ------------   -----------                     ------------   -----------
Non-interest-earning assets                    7,547                                          7,093
                                            ---------                                  -------------
     Total assets                           $184,436                                       $148,930
                                            =========                                  =============

Interest-bearing liabilities:
  Interest-bearing demand deposits           $22,652            291         2.57%           $19,499            341         3.50%
  Certificates of deposit                     91,843          2,470         5.38%            78,201          2,357         6.03%
  Savings deposits                            25,607            353         2.76%            17,313            246         2.84%
  FHLB borrowings                             20,000            588         5.88%            12,750            407         6.38%
                                            ---------   ------------   -----------     -------------   ------------   -----------
     Total interest-bearing liabilities      160,102          3,702         4.63%           127,763          3,351         5.24%
                                                        ------------   -----------                     ------------   -----------
Non-interest bearing liabilities               7,476                                          5,794
                                            ---------                                  -------------
     Total liabilities                       167,578                                        133,557
Stockholders' equity                          16,858                                         15,373
                                            ---------                                  -------------
     Total liabilities and stockholders'
       equity                               $184,436                                       $148,930
                                            =========                                  =============

Net interest income                                         $ 3,070                                        $ 2,529
                                                        ============                                   ============
Interest rate spread (3)                                                    3.03%                                          3.05%
                                                                       ===========
                                                                                                                      ===========
Net Yield on interest-earning assets (4)                                    3.47%                                          3.57%
                                                                       ===========                                    ===========
Ratio of average interest-earning assets
  to average interest-bearing liabilities                                 110.49%                                        111.02%
                                                                       ===========                                    ===========

</TABLE>

------------------------------------------------------------------
(1)  Average balances include non-accrual loans.
(2)  Includes interest-bearing deposits in other financial institutions and FHLB
     stock.
(3)  Interest-rate spread represents the difference between the average yield on
     interest   earning   assets  and  the  average  cost  of   interest-bearing
     liabilities.
(4)  Net yield on  interest-earning  assets  represents net interest income as a
     percentage of average interest-earning assets.

                                       15
<PAGE>



RISK ELEMENTS
-------------
The table below presents information  concerning  nonperforming assets including
nonaccrual loans,  renegotiated loans, loans 90 days 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.

                                                      December 31,    June 30,
                                                          2001         2000
                                                         ------       ------

Loans on a nonaccrual basis                              $  738       $  535
Loans past due 90 days or more and still accruing         1,103          668
                                                         ------       ------
         Total nonperforming loans                        1,841        1,203
                                                         ------       ------

Other real estate                                           813          355
Repossessed assets                                           38           13
                                                         ------       ------
         Total nonperforming assets                      $2,692       $1,571
                                                         ------       ------


Nonperforming loans as a percentage of total net loans     1.13%        0.92%
                                                         ======       ======

Nonperforming assets as a percentage of total assets       1.35%        0.94%
                                                         ======       ======

Allowance for loan losses to nonperforming loans          51.35%       64.77%
                                                         ======       ======

Nonaccrual  loans,  net of the  impaired  mortgage  loans  which  were  $113,000
discussed  below,  consist  of  consist  of  $468,000  in  one  to  four  family
residential  mortgages,  $42,000 in  multi-family  mortgages,  and  $115,000  in
non-residential real estate mortgages at December 31, 2001

The Company considers a loan impaired when it is probable that the borrower will
not repay  the loan  according  to the  original  contractual  terms of the loan
agreement.  Management has  determined  that first mortgage loans on one-to-four
family   properties   and  all  consumer   loans   represent   large  groups  of
smaller-balance,  homogenous  loans  that  are  to  be  collectively  evaluated.
Management  considers an insignificant  delay,  which is defined as less than 90
days by the Company,  will not cause a loan to be classified as impaired. A loan
is not impaired  during the period of delay in payment if the Company expects to
collect all amounts due including  interest accrued at the contractual  interest
rate during the period of delay.  All loans identified as impaired are evaluated
independently  by management.  The Company  estimates  credit losses on impaired
loans  through  the  allowance  for  loan  losses  by  evaluating  the  recorded
investment in the impaired loan to the estimated present value of the underlying
collateral or the present value of expected cash flows.

As of December 31, 2001,  the total  investment in impaired  loans was $380,041,
and such amount was subject to a specific  allowance for loan losses of $25,165.
The average investment in impaired loans for the six-month period ended December
31, 2001 was $658,877.  The interest  income  potential  based upon the original
terms of the  contracts of these  impaired  loans was $42,778 for the  six-month
period ended  December 31, 2001. A total of $18,607 of interest  income has been
recognized for the six month period ended December 31, 2001.

                                      -16-
<PAGE>

During the  quarter  ended  December  2001,  the  company  foreclosed  upon loan
balances of $438,509 that were  classified as impaired at September 30, 2001. As
a result of the foreclosure action, the assets  collateralizing these loans were
added to "Other  Real  Estate" in the amount of  $356,057,  which  resulted in a
write down to the allowance for loan losses during December 2001 of $82,452.

The  allowance  for loan  losses is based  upon  estimates  of  probable  losses
inherent in the loan portfolio.  The amount actually  observed in respect to the
losses  can vary  significantly  from the  estimated  amounts.  Our  methodology
includes  several  features that are intended to reduce the differences  between
estimated and actual losses.  The historical loss experience  model that is used
to established  the loan loss factors for problem graded loans is designed to be
self-correcting by taking into account our recent loss experience. Similarly, by
basing  the  past  graded  loss  factors  on  historical  loss  experience,  the
methodology is further designed to take our recent loss experience into account.
In addition to historical and recent loss trends,  our methodology  incorporates
the current volume and trend in delinquencies,  as well as, a self-assessment of
the status of the local economy.  Our methodology requires the monitoring of the
changing  loan  portfolio  mix and the effect that the  changing  mix has on the
trend in delinquencies, as well as, actually loss factors.

The combination of the historical loss factors, recent loss experience,  current
trend in delinquencies,  the local economic  environment,  and the assessment of
the changing loan portfolio mix are used in  conjunction  with the internal loan
grading system to adjust our allowance on a quarterly  basis.  Furthermore,  our
methodology includes our impaired loan assessment and permits adjustments to any
loss factor used in determining the allowance in the event that, in management's
judgement,  significant  conditions  which  effect  the  collectibility  of  the
portfolio as of the  evaluation  date are not reflected in the loss factors.  By
assessing  the probable  estimated  losses  inherent in the loan  portfolio on a
quarterly  basis,  we are able to adjust  specific and inherent  loss  estimates
based upon recent information, as it becomes available.

The following is a breakdown of the loan  portfolio  composition at December 31,
2001 and June 30, 2001:

                                       December 31,      June 30,
                                           2001           2001
                                       ------------   ------------
Mortgage loans:
           1-4 family                  $ 89,579,350   $ 64,696,315
           Multi-family                   6,335,393      6,002,553
           Non-residential               29,899,436     27,956,885
           Construction                   3,958,117      2,455,751
                                       ------------   ------------
                                        129,772,296    101,111,504
                                       ------------   ------------
Consumer Loans:
           Home Improvement                 987,672      1,208,279
           Automobile                    14,667,858     13,000,468
           Share loans                    1,357,155      1,594,755
           Other                          2,642,007      2,778,630
                                       ------------   ------------
                                         19,654,692     18,582,132
                                       ------------   ------------

                                       ------------   ------------
Commercial Loans                         15,452,524     12,651,451
                                       ------------   ------------

Less:
           Loans in process               1,498,756      1,861,360
           Net deferred loan fees            84,509        109,015
           Allowance for loan losses        945,422        779,170
                                       ------------   ------------
                                          2,528,687      2,749,545
                                       ------------   ------------
                Total                  $162,350,825   $129,595,542
                                       ============   ============


                                      -17-
<PAGE>

PART II - OTHER INFORMATION


Item 1 - Legal Proceedings

                NONE

Item 2 - Changes in securities

                NONE

Item 3 - Defaults upon senior securities

                 NOT APPLICABLE

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

The annual  meeting of the  shareholders  of the Company was held on October 16,
2001 and the following matters were voted upon:

PROPOSAL I - Election of Directors with term to expire in 2003.

                                       FOR          WITHHELD
                                       ---          --------
     Kelly M. Bethel                 738,161         90,825
     William E. Watson               740,161         88,825
     Frank Gary Young                739,991         88,995

Directors  continuing  in office are Stephen M.  Gagliardi,  William B. Chesson,
James R. Murphy, George H. Johnson, and John R. Sperlazza.

PROPOSAL  II - Ratification  of  the  appointment  of S.R.  Snodgrass,  AC.,  as
               independent auditors for the Company, for the fiscal year ending
               June 30, 2002.

                                       FOR          AGAINST       ABSTAIN
                                       ---          -------       -------
                                     827,877         1,109           0


Item 5 - Other information

NONE


                                      -18-
<PAGE>

Item 6  - Exhibits and reports on Form 8-K

          (a)  List of Exhibits:

              3(i)   Certificate of Incorporation of Advance Financial Bancorp *
              3(ii)  Amended 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 ***
             10.1    1998 Stock Option Plan ****
             10.2    Restricted Stock Plan and Trust Agreement ****

(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.

****    Incorporated by reference to the proxy statement for the Special Meeting
        of the Stockholders on January 20, 1998 and filed with the SEC on
        December 12, 1997.

*****   Incorporated  by  reference  to the June 30,  1999  Form  10KSB
          (File  No. 0-21885) filed on . September 28, 1999.



                                      -19-


<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:  February 14, 2002               By: /s/Stephen M. Gagliardi
                                           -------------------------------------
                                           Stephen M. Gagliardi
                                           President and Chief Executive Officer

Date:  February 14, 2002               By: /s/Stephen M. Magnone
                                           -------------------------------------
                                           Stephen M. Magnone
                                           Vice President and CFO

                                       -20-