United States Securities and Exchange Commission
                             Washington, D.C. 20549
                                   FORM 10QSB


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

For the quarterly period ended December 31, 2003
                               -----------------

{ }  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)


       Delaware                                           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 $.0667 per share
                   Outstanding at February 10, 2004: 1,398,373


Transitional Small Business Disclosure Format ( check one):
Yes        No  x
    ---       ---

<PAGE>


                            Advance Financial Bancorp

                                      Index

                                                                           Page
                                                                          Number
                                                                          ------


Part I - FINANCIAL INFORMATION

        Item 1 - Financial Statements

                  Consolidated Balance Sheet (Unaudited) as of
                    December 31, 2003 and June 30, 2003                        3

                  Consolidated Statement of Income (Unaudited)
                    For the Three Months ended December 31, 2003 and 2002      4

                  Consolidated Statement of Income (Unaudited)
                    For the Six Months ended December 31, 2003 and 2002        5

                  Consolidated Statement of Cash Flows (Unaudited)
                    For the Six Months ended December 31, 2003 and 2002        6

                  Notes to the Unaudited Consolidated Financial Statements   7-9


          Item 2 - Management's Discussion and Analysis                    10-18


          Item 3 - Controls and Procedures                                    19


Part II - OTHER INFORMATION

           Item 1 - Legal Proceedings                                         20

           Item 2 - Changes in Securities and Use of Proceeds                 20

           Item 3 - Default Upon Senior Securities                            20

           Item 4 - Submissions of Matters to a Vote of Security Holders      20

           Item 5 - Other Information                                         20

           Item 6 - Exhibits and Reports on Form 8-K                       20-21

SIGNATURES                                                                    22

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

<TABLE>
<CAPTION>
                                                                                  DECEMBER 31,        JUNE 30,
                                                                                       2003            2003
                                                                                 -------------    -------------
<S>                                                                            <C>              <C>
Assets
     Cash and cash equivalents:
       Cash and amounts due from banks                                           $   2,474,602    $   2,906,568
       Interest bearing deposits with other institutions                             3,089,777       13,163,753
                                                                                 -------------    -------------
          Total cash and cash equivalents                                            5,564,379       16,070,321
                                                                                 -------------    -------------

     Investment securities:
       Securities held to maturity (fair value of $14,218,014 and $15,298,606)      14,090,244       15,086,475
       Securities available for sale                                                    13,722       11,394,701
                                                                                 -------------    -------------
          Total investment securities                                               14,103,966       26,481,176
                                                                                 -------------    -------------

     Mortgaged-backed securities:
       Securities held to maturity (fair value of $14,729,811 and $18,751,018)      14,877,727       18,642,532
       Securities available for sale                                                 6,779,983        8,979,898
                                                                                 -------------    -------------
          Total mortgage-backed securities                                          21,657,710       27,622,430
                                                                                 -------------    -------------

     Loans held for sale                                                               309,000        5,687,708
     Loans receivable,  (net of allowance for loan losses
          of $1,495,738 and $1,095,822 )                                           263,333,201      229,239,547
     Office properties and equipment, net                                            4,938,041        5,069,073
     Federal Home Loan Bank Stock, at cost                                           2,345,200        1,679,400
     Accrued interest receivable                                                     1,351,111        1,447,525
     Goodwill                                                                        4,700,472        4,700,472
     Other intangibles, net                                                          1,620,226        1,709,413
     Other assets                                                                    2,915,485        2,193,526
                                                                                 -------------    -------------
          TOTAL ASSETS                                                           $ 322,838,791    $ 321,900,591
                                                                                 =============    =============

Liabilities:
     Deposits                                                                    $ 266,386,970    $ 272,828,932
     Advances from Federal Home Loan Bank                                           26,800,000       20,000,000
     Other Borrowings                                                                7,200,000        7,200,000
     Advance payments by borrowers for taxes and insurance                             626,170          507,049
     Accrued interest payable and other liabilities                                    872,307        1,276,657
                                                                                 -------------    -------------
          TOTAL LIABILITIES                                                        301,885,447      301,812,638
                                                                                 -------------    -------------

Stockholders' Equity:
     Preferred stock, $.10 par value; 500,000 shares
         authorized, none issued                                                             -                -
     Common stock, $.0667 par value; 3,000,000 shares
          authorized 1,626,621 shares issued                                           108,445          108,445
     Additional paid in capital                                                     10,535,754       10,467,559
     Retained earnings - substantially restricted                                   12,924,894       11,705,306
     Unallocated shares held by Employee Stock Ownership Plan (ESOP)                  (207,247)        (250,634)
     Unallocated shares held by Restricted Stock Plan (RSP)                           (205,719)        (206,756)
     Treasury Stock (228,248 shares at cost)                                        (2,233,265)      (2,233,265)
     Accumulated other comprehensive income                                             30,482          497,298
                                                                                 -------------    -------------
          TOTAL STOCKHOLDERS' EQUITY                                                20,953,344       20,087,953
                                                                                 -------------    -------------

          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                             $ 322,838,791    $ 321,900,591
                                                                                 =============    =============
</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

                                      -3-
<PAGE>

                      ADVANCE FINANCIAL BANCORP
            CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

                                                         THREE MONTHS ENDED
                                                              DECEMBER 31,
                                                          2003         2002
                                                       ----------   ----------
INTEREST AND DIVIDEND INCOME
   Loans                                               $4,043,135   $3,160,482
   Investment securities - taxable                        102,119       84,592
   Investment securities - nontaxable                      80,092       77,146
   Interest-bearing deposits with other institutions        3,094       39,002
   Mortgage-backed securities                             211,917      117,386
   Dividends on Federal Home Loan Bank Stock                6,412        9,198
                                                       ----------   ----------
        Total interest and dividend income              4,446,769    3,487,806
                                                       ----------   ----------
INTEREST EXPENSE
   Deposits                                             1,490,193    1,379,767
   Advances from Federal Home Loan Bank                   327,990      292,738
   Other Borrowings                                        80,811            -
                                                       ----------   ----------
        Total interest expense                          1,898,994    1,672,505
                                                       ----------   ----------

NET INTEREST INCOME                                     2,547,775    1,815,301

Provision for loan losses                                 350,850      105,000
                                                       ----------   ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES     2,196,925    1,710,301
                                                       ----------   ----------


NONINTEREST INCOME
   Service charges on deposit accounts                    226,654      151,989
   Income from loan servicing activity                     66,038        8,553
   Gain on sale of loans                                   57,925       68,976
   Gain on sale of Investments                            446,377            -
   Other income                                            93,494       72,020
                                                       ----------   ----------
        Total noninterest income                          890,488      301,538
                                                       ----------   ----------

NONINTEREST EXPENSE
   Compensation and employee benefits                     819,520      627,639
   Occupancy and equipment                                268,395      271,001
   Professional fees                                       45,336       38,404
   Advertising                                             48,255       57,492
   Data processing charges                                135,814       87,093
   Amortization of intangible asset                        44,594            -
   Other expenses                                         442,286      333,912
                                                       ----------   ----------
        Total noninterest expenses                      1,804,200    1,415,541
                                                       ----------   ----------
Income before income taxes                              1,283,213      596,298
Income taxes                                              449,941      234,719
                                                       ----------   ----------

Net Income                                             $  833,272   $  361,579
                                                       ==========   ==========




EARNINGS PER SHARE - NET INCOME
        Basic                                          $      .61   $      .27
        Diluted                                        $      .60   $      .27
DECLARED DIVIDEND PER SHARE                            $      .10   $      .08

See accompanying notes to the unaudited consolidated financial statements.

                                       -4-

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

                                                            SIX MONTHS ENDED
                                                               DECEMBER 31,
                                                            2003         2002
                                                        ----------   ----------
INTEREST AND DIVIDEND INCOME
    Loans                                               $7,951,435   $6,339,277
    Investment securities - taxable                        242,467      164,506
    Investment securities - nontaxable                     192,076      154,133
    Interest-bearing deposits with other institutions       12,065       81,260
    Mortgage-backed securities                             415,223      240,950
    Dividends on Federal Home Loan Bank Stock               17,257       17,866
                                                        ----------   ----------
        Total interest and dividend income               8,830,523    6,997,992
                                                        ----------   ----------

INTEREST EXPENSE
    Deposits                                             2,995,443    2,763,636
    Advances from Federal Home Loan Bank                   638,160      585,476
    Other Borrowings                                       159,304            -
                                                        ----------   ----------
        Total interest expense                           3,792,907    3,349,112
                                                        ----------   ----------

NET INTEREST INCOME                                      5,037,616    3,648,880

Provision for loan losses                                  671,850      154,200
                                                        ----------   ----------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES      4,365,766    3,494,680
                                                        ----------   ----------


NONINTEREST INCOME
    Service charges on deposit accounts                    432,578      304,579
    Income from loan servicing activity                    147,140       74,788
    Gain on sale of loans                                  190,742      163,902
    Gain on sale of Investments                            446,377            -
    Other income                                           192,864      174,549
                                                        ----------   ----------
        Total noninterest income                         1,409,701      717,818
                                                        ----------   ----------

NONINTEREST EXPENSE
    Compensation and employee benefits                   1,565,407    1,242,365
    Occupancy and equipment                                540,834      522,812
    Professional fees                                       86,779       74,420
    Advertising                                             98,961       84,287
    Data processing charges                                266,052      166,110
    Amortization of intangible asset                        89,187            -
    Other expenses                                         864,218      693,927
                                                        ----------   ----------
        Total noninterest expenses                       3,511,438    2,783,921
                                                        ----------   ----------

Income before income taxes                               2,264,029    1,428,577
Income taxes                                               776,386      541,618
                                                        ----------   ----------
Net Income                                              $1,487,643   $  886,959
                                                        ==========   ==========

EARNINGS PER SHARE - NET INCOME
        Basic                                           $     1.10   $      .66
        Diluted                                         $     1.08   $      .66
DECLARED DIVIDEND PER SHARE                             $      .20   $      .16


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,
                                                                     2003            2002
                                                                  ------------    ------------
<S>                                                             <C>             <C>
OPERATING ACTIVITIES
    Net Income                                                    $  1,487,643    $    886,959
    Adjustments to reconcile net income to net cash provided by
       operating activities:
         Depreciation, amortization and accretion, net                 372,121         248,523
         Provision for loan losses                                     671,850         154,200
         Gain on sale of loans                                        (190,742)       (163,902)
         Gain on sale of investments                                  (446,377)              -
         Origination of loans held for sale                        (12,472,405)    (12,432,512)
         Proceeds from the sale of loans                            18,041,855      12,326,736
         Increase in other assets and liabilities,net                 (585,951)       (509,721)
                                                                  ------------    ------------
              Net cash provided by operating activities              6,877,994         510,283
                                                                  ------------    ------------

INVESTING ACTIVITIES
    Investment securities held to maturity:
         Purchases                                                           -      (4,588,093)
         Maturities and repayments                                   1,000,000               -
    Investment securities available for sale:
         Purchases                                                           -      (3,507,886)
         Maturities and repayments                                       1,000       4,304,400
         Sales                                                      11,211,377               -
    Mortgage-backed securities held to maturity:
         Maturities and repayments                                   3,661,895         294,720
    Mortgage-backed securities available for sale:
         Purchases                                                           -      (3,723,622)
         Maturities and repayments                                   2,077,633       2,226,008
    Purchase of Federal Home Loan Bank Stock,net                      (665,800)       (372,200)
    Net increase in loans                                          (34,765,504)    (16,697,299)
    Purchases of premises and equipment                               (113,436)     (1,089,957)
                                                                  ------------    ------------
              Net cash used in investing activities                (17,592,835)    (23,153,929)
                                                                  ------------    ------------

FINANCING ACTIVITIES
    Net (decrease) increase in deposits                             (6,441,962)     11,383,801
    Net increase in short term borrowings                            6,800,000               -
    Net increase in long term borrowings                                     -       7,200,000
    Net change in advances for taxes and insurance                     119,121          34,953
    Cash dividends paid                                               (268,260)       (212,088)
                                                                  ------------    ------------
              Net cash provided by financing activities                208,899      18,406,666
                                                                  ------------    ------------

              Decrease in cash and cash equivalents                (10,505,942)     (4,236,980)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                    16,070,321      11,770,440
                                                                  ------------    ------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                        $  5,564,379    $  7,533,460
                                                                  ============    ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
    Cash paid during the period for:
         Interest on deposits and borrowings                      $  3,797,500    $  3,366,719
         Income taxes                                             $  1,110,000    $    640,000
</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  subsidiaries,  Advance Financial Savings
Bank (the "Bank") and the Bank's wholly-owned  service  corporation  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,  2004 or any other
period.

These statements should be read in conjunction with the consolidated  statements
of and for the year ended June 30, 2003 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  that  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. For the periods ended 2002, stock options had no dilutive effect on
the denominator due to the fact they were not in the "money".

Effective for shareholders of record as of November 10, 2003, the Company issued
a three for two  stock  split.  The stock  split was done in the form of a stock
dividend.  The effects on EPS have been included for the comparative  periods in
the accompanying financial statements.


                                                Three Months Ended
                                                    December 31
                                                    (Unaudited)
                                                 2003          2002
                                              ----------    ----------

Weighted-average common shares outstanding     1,626,621     1,626,621
Average treasury stock shares                   (228,248)     (228,248)
Average unearned ESOP and RSP shares             (47,542)      (60,319)
                                               ---------     ---------
Weighted -average common shares and
    common stock equivalents used to
    calculate basic earnings per share         1,350,831     1,338,054

Additional common stock equivalents
    (stock options) used to calculate
    diluted earnings per share                    29,857             -
                                               ---------     ---------
Weighted-average common shares and
    common stock equivalents used
    to calculate diluted earnings per share    1,380,688     1,338,054
                                               =========     =========


                                       -7-
<PAGE>

NOTE 2 - EARNINGS PER SHARE (Continued)


                                                 Six-Months Ended
                                                   December 31
                                                    (Unaudited)
                                                 2003          2002
                                              ----------    ----------

Weighted-average common shares outstanding     1,626,621     1,626,621
Average treasury stock shares                   (228,248)     (228,248)
Average unearned ESOP and RSP shares             (49,711)      (62,488)
                                              ----------    ----------
Weighted -average common shares and
    common stock equivalents used to
    calculate basic earnings per share         1,348,662     1,335,885

Additional common stock equivalents
    (stock options) used to calculate
    diluted earnings per share                    26,376             -
                                              ----------    ----------
Weighted-average common shares and
    common stock equivalents used
    to calculate diluted earnings per share    1,375,038     1,335,885
                                               =========     =========



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, 2003, comprehensive income totaled $489,207 and $1,020,827. For the
three and six months  ended  December  31, 2002,  comprehensive  income  totaled
$302,156 and $967,111, respectively. For the three and six months ended December
31, 2003, net income  included a  reclassification  of net  unrealized  gains of
$344,065 and  $466,816,  respectively  as a result of the sale of available  for
sale securities in November 2003.


NOTE 5 - RECENT ACCOUNTING PRONOUNCEMENTS

In December  2003, the Financial  Accounting  Standards  Board ("FASB")  revised
Statement  of  Financial   Accounting  Standards  ("FAS")  No.  132,  Employers'
Disclosures  about  Pension and Other  Postretirement  Benefit.  This  statement
retains  the  disclosures  required  by FAS  No.  132,  which  standardized  the
disclosure  requirements for pensions and other  postretirement  benefits to the
extent practicable and requires additional information on changes in the benefit
obligations  and  fair  value of plan  assets.  Additional  disclosures  include
information   describing  the  types  of  plan  assets,   investment   strategy,
measurement  date(s),  plan  obligations,  cash  flows,  and  components  of net
periodic benefit cost recognized during interim periods.  This statement retains
reduced disclosure  requirements for nonpublic entities from FAS No. 132, and it
includes reduced disclosure for certain of the new requirements.  This statement
is effective for financial  statements  with fiscal years ending after  December
15, 2003. The interim  disclosures  required by this statement are effective for
interim  periods  beginning  after  December  15,  2003.  The  adoption  of this
statement  did  not  have  a  material   effect  on  the  Company's   disclosure
requirements.

                                       -8-
<PAGE>

NOTE 5 - RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)


In April,  2003,  the FASB issued FAS No. 149,  Amendment  of  Statement  133 on
Derivative  Instruments  and  Hedging  Activities.  This  statement  amends  and
clarifies  accounting for derivative  instruments,  including certain derivative
instruments  embedded in other contracts,  and for hedging  activities under FAS
No. 133. The amendments set forth in FAS No. 149 improve financial  reporting by
requiring  that  contracts  with  comparable  characteristics  be accounted  for
similarly.  In particular,  this statement  clarifies under what circumstances a
contract with an initial net investment meets the characteristic of a derivative
as  discussed  in FAS No. 133.  In  addition,  it  clarifies  when a  derivative
contains a financing  component that warrants special reporting in the statement
of cash flows.  FAS No.149 amends certain other existing  pronouncements.  Those
changes  will  result  in  more  consistent  reporting  of  contracts  that  are
derivatives in their entirety or that contain embedded  derivatives that warrant
separate  accounting.  This statement is effective for contracts entered into or
modified  after  September  30,  2003,  except as stated  below and for  hedging
relationships  designated  after  September  30, 2003.  The  guidance  should be
applied  prospectively.  The provisions of this statement that relate to FAS No.
133  Implementation  Issues that have been  effective  for fiscal  quarters that
began prior to September 15, 2003,  should  continue to be applied in accordance
with their respective effective dates. In addition,  certain provisions relating
to forward purchases or sales of when-issued securities or other securities that
do not yet  exist,  should  be  applied  to  existing  contracts  as well as new
contracts  entered into after September 30, 2003. The adoption of this statement
did not have a material effect on the Company's financial position or results of
operations.


In May 2003,  the FASB issued FAS No.  150,  Accounting  for  Certain  Financial
Instruments with  Characteristics of both Liabilities and Equity. This statement
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial  instruments with  characteristics  of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some  circumstances).  Such  instruments may have
been previously  classified as equity. This statement is effective for financial
instruments  entered  into or modified  after May 31,  2003,  and  otherwise  is
effective at the beginning of the first interim period beginning after September
15, 2003. The adoption of this  statement did not have a material  effect on the
Company's reported equity.


In  January,  2003,  the FASB issued  Interpretation  No. 46,  Consolidation  of
Variable Interest Entities,  in an effort to expand upon and strengthen existing
accounting  guidance  that  addresses  when  a  company  should  include  in its
financial  statements the assets,  liabilities and activities of another entity.
The  objective  of this  interpretation  is not to restrict  the use of variable
interest entities but to improve financial  reporting by companies involved with
variable  interest  entities.  Until now,  one company  generally  has  included
another entity in its  consolidated  financial  statements only if it controlled
the  entity  through  voting  interests.  This  interpretation  changes  that by
requiring a variable  interest  entity to be  consolidated  by a company if that
company is subject to a majority of the risk of loss from the variable  interest
entity's  activities or entitled to receive a majority of the entity's  residual
returns or both. The  consolidation  requirements of this  interpretation  apply
immediately to variable  interest  entities  created after January 31, 2003. The
consolidation  requirements  apply to older entities in the first fiscal year or
interim  period  beginning  after  June  15,  2003.  Certain  of the  disclosure
requirements  apply in all financial  statements  issued after January 31, 2003,
regardless of when the variable interest entity was established. The adoption of
this interpretation has not and is not expected to have a material effect on the
Company's  financial  position or results of operations.  In October,  2003, the
FASB  decided  to  defer  to the  fourth  quarter  from the  third  quarter  the
implementation  date for  Interpretation  No. 46. This  deferral only applies to
variable interest entities that existed prior to February 1, 2003.

                                       -9-

<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 October 21, 2003, the Company's  Board of Directors  approved a three for two
(50%) stock split in the form of a stock dividend.  The stock split is effective
for  holders of record as of  November  10,  2003.  After the stock  split,  the
outstanding  shares of the company  increased  466,088 shares to 1,398,373.  The
earnings per share  calculations  for  December  31, 2002 have been  restated to
reflect the stock split.

During the three  month  period  ended  December  31,  2003,  the  Company  sold
approximately  $11,765,000  in available  for sale  investment  securities.  The
amounts  consisted of $2 million in commercial  bonds, $5.8 million in long term
municipal  bonds and $3 million in FHLB callable bonds.  The Company  realized a
gain on the sales of approximately $446,000 that is included in the Statement of
Income for the three and six month periods ended December 31, 2003.

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2003 AND JUNE 30, 2003
------------------------------------------------------------------------
The Company's total assets increased by  approximately  $938,000 to $322,838,791
at December 31, 2003, from $321,900,591 at June 30, 2003. Net loans increased by
approximately $34,094,000. The increase in net loans was funded by a decrease in
interest  bearing  deposits with other  financial  institutions  of $10,074,000,
sales and repayments of investment securities and mortgage-backed  securities of
$18,342,000 and a decrease in loans available for sale of $5,379,000. Short-term
advances from the Federal Home Loan Bank "FHLB" increased  $6,800,000 during the
period to replace the loss of approximately $6,442,000 in deposits.

Interest-bearing   deposits   with  other   financial   institutions   decreased
$10,074,000  to  $3,089,777  at December 31, 2003 from  $13,163,753  at June 30,
2003.  The  decrease  in funds  was used to fund the  Company's  increased  loan
demand.  Investment  securities decreased $12,377,000 to $14,103,966 at December
31, 2003 from  $26,481,176 at June 30, 2003.  This decrease was due primarily to
the sale of Available for Sale Securities of $11,765,000. The company realized a
net gain on the sales of approximately  $446,000. The proceeds of the sales were
used to fund the Company's  loan demand.  Mortgage-backed  securities  decreased
$5,965,000  to  $21,657,710  at December 31, 2003 from  $27,622,430  at June 30,
2003.  The  decrease  was due to  accelerated  principal  repayments  on  higher
yielding  securities due to the low interest rate environment  during the period
ended December 31, 2003.

Loans held for sale  decreased  $5,379,000 to $309,000 at December 31, 2003 from
$5,687,708  at June 30,  2003.  The  decrease  is  indicative  to an increase in
interest  rates on fixed rate 1-4 family  mortgages and the related  decrease in
customer demand for these mortgages.

Loans receivable, net increased $34,094,000 to $263,333,201 at December 31, 2003
from $229,239,547 at June 30, 2003. The increase in net loans is spread over the
Company's  entire  portfolio.  One-four family mortgages  increased  $12,881,000
which includes  approximately  $5,239,000 in fixed rate loans that were added to
the Bank's  portfolio  during the period and $7,642,000 in adjustable rate loans
as these products became attractive as a result the Bank's competitive  pricing,
and as a result of the  favorable  interest  rate  changes  during  the  period.
Nonresidential  mortgages  increased  approximately  $1,525,000  primarily  as a
result of a municipal land loan  originated  during the period.  The increase in
construction  loans for the  period  was  $3,997,000.  This  increase  was split
$2,758,000  and  $1,240,000  for  1-4  family  and   nonresidential   mortgages,
respectively. The increase in construction loans is due to the demand created by
the  anticipation of near future  interest rate increases in mortgage  products.
Dealer Floor Plan loans have increased  $4,193,000 and indirect automobile loans
have  increased  $11,318,000  during  the  period  primarily  as a result of new
relationships  the  Company  has  developed  over the last nine  months with the
creation of an Indirect  Loan  Department  within the  Business  Division of the
Bank.  The success of the department is indicated by the  substantial  growth in
both floor plan and indirect  auto  lending.  Future  growth in these areas will
depend  upon the local  economy,  competition  from other  institutions  and the
manufacturers'  incentive programs,  as well as, the Company's evaluation of the
risk level involved.
                                      -10-
<PAGE>
FHLB  stock  increased   $665,800  to  $2,345,200  at  December  31,  2003  from
$1,679,400,at  June 30,  2003.  The  increase is  primarily  due to the required
purchases  of stock as a result of the  corresponding  increase  in  outstanding
advances.  During the six month  period ended  December  31,  2003,  the Company
increased its advance total by $6,800,000.

Deposits  decreased  $6,442,000  to  $266,386,970  at  December  31,  2003  from
$272,828,932  at June 30, 2003. The decrease is primarily in money market demand
deposits  and Jumbo and "special  term" term  certificate  of deposit  products.
Money  market  accounts  with  balances  in excess  of  $10,000  have  decreased
$2,421,000  during the period as customers  continue to search for higher yields
on their investments in equities or other investment vehicles.  The money market
accounts had been  utilized by some  customers as a "parking"  mechanism as they
wait for an  increase in the  interest  rate cycle and  stability  in the equity
markets.  Jumbo and "special term" certificates of deposit decreased  $5,368,000
during  the  period  due  to  similar  customer   sentiments.   These  types  of
certificates  are  generally  the highest cost of funds of the  Company,  and as
such, the need for this deposit funding is evaluated based upon the availability
of alternative  funding  sources and other factors.  At this time, the Company's
strategy is to not offer the higher yields on these certificates, but instead to
borrow on a short-term basis from the FHLB at a significantly reduced rate. This
funding approach could change in future periods  depending upon the local demand
for  loans,  the local  deposit  market or other  factors  such as  management's
consideration of interest rate risk.

Advances from the FHLB increased  $6,800,000 to $26,800,000 at December 31, 2003
from  $20,000,000  at June 30, 2003.  This increase is currently  applied to the
Bank's Open Repo Line of Credit with the FHLB. For the period ended December 31,
2003, the average rate paid on the line was 1.28%. It is the Company's intent to
continue to use the short term  advances  offered by the FHLB until such time as
local market  conditions,  the interest rate market and other management factors
dictate.

Stockholders' equity increased approximately $865,000 to $20,953,344 at December
31, 2003 from  $20,087,953 at June 30, 2003. This increase was the result of net
income  of  $1,488,000  for the  period  and the  recognition  of  shares in the
Employee  Stock  Ownership  Plan and  Restricted  Stock Plan of $112,000.  These
increases were offset by a decrease in the net unrealized  gain on securities of
$467,000 and by the payment of cash dividends of $268,000.

COMPARISON  OF THE  RESULTS OF  OPERATIONS  FOR THE THREE AND SIX  MONTHS  ENDED
--------------------------------------------------------------------------------
DECEMBER 31, 2003 AND 2002
--------------------------

Net interest income  increased  $733,000 or 40.35%,  to $2,548,000 for the three
months ended December 31, 2003 from  $1,815,000 for the comparable  period ended
2002. The increase in net interest income resulted primarily from an increase in
the average  volume of the  underlying  principal  balances in interest  earning
assets and  liabilities.  The net  interest  spread for the three  months  ended
December 31, 2003 increased to 3.17% from 3.07% for the comparable  period ended
2002.  The 10 basis  point  increase  in the net  interest  rate  spread for the
current  three month  period was  primarily  due to a 76 basis point  decline in
average  cost of funds which was offset by a 66 basis  point  decline in average
yields on assets. See "Average Balance Sheet" for the three-month  periods ended
December 31, 2003 and 2002.

Net interest  income  increased  $1,389,000  or 38.06%,  to  $5,038,000  for the
six-months  December 31, 2003 from  $3,649,000 for the  comparable  period ended
2002. The increase in net interest income resulted primarily from an increase in
the average  volume of the  underlying  principal  balances in interest  earning
assets  and  liabilities.  The net  interest  spread  for the six  months  ended
December 31, 2003 increased to 3.15% from 3.14% for the comparable  period ended
2002.  The basis point  increase in the net interest rate spread for the current
six month period was primarily the result of a 83 basis point decline in cost of
funds which was offset by a 82 basis point decline in average  yields on assets.
See "Average  Balance  Sheet" for the six-month  periods ended December 31, 2003
and 2002.

The  provision  for loan losses  increased  $246,000  to $350,850  for the three
months ended  December 31, 2003 from  $105,000 for the  comparable  period ended
2002.  The  provision  increased  $518,000 to $671,850  for the six months ended
December  31, 2003 from  $154,200  for the  comparable  period  ended 2002.  The
increase in the  provision  for loan losses was  precipitated  by an increase in
loan  volume.  In  determining  the adequacy of the  allowance  for loan losses,
management  reviews and evaluates on a quarterly basis the potential risk in the
loan portfolio. This evaluation process is documented by management and approved
by the  Company's  Board of  Directors.  The  evaluation  is performed by senior
members of management  with years of lending and review  experience.  Management
evaluates homogenous  consumer-oriented loans, such as 1-4 family mortgage loans
and retail  consumer  loans,  based upon all or a combination of  delinquencies,
loan  concentrations  and charge-off  experience.  Management  supplements  this
analysis by reviewing the local  economy,  trends  affecting  local industry and
business  development  and other known  factors  which may impact  future credit
losses.  Nonhomogenous loans,  generally defined as commercial business and real
estate loans,  are selected by  management  to be reviewed on a quarterly  basis
upon the combination of  delinquencies,  concentrations  and other known factors
that  may  effect  the  local  economy  and  more  specifically  the  individual
businesses.

                                      -11-

<PAGE>

-During this evaluation,  the individual loans are evaluated quarterly by senior
members  of  management  for  impairment  as  prescribed  under  SFAS  No.  114,
"Accounting  by  Creditors  for  Impairment  of a Loan".  Impairment  losses are
assumed when,  based upon current  information,  it is probable that the Company
will be unable to collect all amounts due according to the contractual  terms of
the loan agreement.  Impairment is measured by a loan's observable market value,
the  present  value of future  cash flows  discounted  at the  loan's  effective
interest rate, or the fair value of the  collateral.  This data on impairment is
combined  with the  other  data  used for  homogenous  loans  and is used by the
classified asset committee in determining the adequacy of the allowance for loan
losses.

The  allowance  for  loan  losses  is  maintained  at a  level  that  represents
management's best estimates of losses in the loan portfolio at the balance sheet
date. However, there can be no assurance that the allowance for loan losses will
be  adequate  to cover  losses  which,  may be  realized  in the future and that
additional provision for loan losses will not be required. See "Risk Elements".

Noninterest  income  increased  $586,000 or 195.09%,  to $887,000  for the three
months ended  December 31, 2003 from  $301,000 for the  comparable  period ended
2002.  Noninterest  income  increased  $689,000 or 97.76% to $1,393,000  for the
six-months ended December 31, 2003 from $704,000 for the comparable period ended
2002.  The three and six month periods  include gains on the sales of investment
securities of approximately  $446,000 that was previously  discussed.  Also, for
the three and six month periods of 2003,  miscellaneous fees and fees on deposit
accounts  increased  by $75,000 and  $128,000,  respectively,  as a result of an
increase in core  customers  and related  activity.  For the three and six month
periods  of 2003,  gains on sales of fixed  rate  loans  and  income  from  loan
servicing activity increased by $46,000 and $99,000,  respectively,  as a result
of the  customer  demand  for fixed rate 1-4 family  mortgage  loans  during the
period.

Noninterest  expense  increased  $386,000 or 27.30%, to $1,801,000 for the three
months ended December 31, 2003,  from $1,415,000 for the comparable 2002 period.
Noninterest  expense  increased  $724,000 or 26.14%,  to $3,495,000  for the six
months ended December 31, 2003 from  $2,770,000 for the comparable  period ended
2002. For the three and six month periods ended December 31, 2003,  compensation
and  employee  benefits  increased  $192,000  and  $323,000,  respectively.  The
increase  in  compensation  and  employee  benefits  for the three and six month
period  ended  December 31, 2003 is due in part to the  acquisition  in February
2003 of a branch and the de novo  branch  opening  in  September  2003.  The new
branches  account for $42,000 and $134,000 of the increase for the three and six
month  periods,  respectively.   Occupancy  and  equipment,  professional  fees,
marketing and data  processing  expenses have  increased by $44,000 and $145,000
for the three and six-month  period ended December 31, 2003.  Such increases are
primarily  due to the  operation of the new  branches  acquired and opened since
September  2002.  For the three and six month  period  ended  December 31, 2003,
other expenses have increased $106,000 and $167,000,  respectively. The increase
in other expense is due to increases in supplies and  communications  of $11,000
and $24,000, in fees paid for ATM and consumer card usage of $13,000 and $22,000
and in fees paid to the  Federal  Reserve  for item  processing  of  $6,000  and
$13,000, respectively. Each of these increases are primarily related to customer
activity due to the increase in the Company's core customers  created  primarily
by the branch  purchases  and the de novo branch  opening.  Also,  other expense
increased  for the three and six-month  period ended  December 31 2003 due to an
increase in state  franchise tax expense as a result of the branch  acquisitions
in Ohio during February 2003 of $18,000 and $35,000 respectively. Costs relating
to other  real  estate  and  repossessed  assets  increased  for the  three  and
six-month period ended December 31, 2003 by $7,000 and $18,000, respectively.

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

LIQUIDITY
---------

Liquidity  management  for the Company is measured and monitored on both a short
and long-term basis,  thereby allowing management to better understand and react
to emerging balance sheet trends. After assessing actual and projected cash flow
needs,  management  seeks to obtain funding at the most  economical  cost to the
Company.  Both short and long-term  liquidity  needs are addressed by maturities
and  sales  of  investment  securities,   loan  payments  and  maturities,   and
liquidating  overnight  deposit  accounts.  The  use  of  these  resources,   in
conjunction  with  access  to  credit,  provide  the  core  ingredients  to meet
depositor, borrower, and creditor needs.

The Company's  liquid assets consist of cash and cash equivalents and investment
and  mortgage-backed  securities  classified as available for sale. The level of
these assets is dependent on the Company's operating,  investing,  and financing
activities during any given period. At December 31, 2003, liquid assets totalled
$12.4  million or 3.8% of total assets.  Management  believes that the liquidity
needs of the  Company  are  satisfied  by the  current  balance of cash and cash
equivalents,  readily  available  access to traditional  funding  sources,  FHLB
advances,  and the portion of the  investment  and loan  portfolios  that mature
within one year.  These  sources of funds will  enable the  Company to meet cash
obligations and off-balance sheet commitments as they come due.

                                      -12-

<PAGE>

Operating activities provided net cash of $6.9 million and $500,000 thousand for
the six-month periods ended December 31, 2003 and 2002,  respectively,  and were
generated  principally  from net  income  and net sales of fixed rate 1-4 family
mortgages.

Investing  activities  used $17.6  million and $23.2 million in funds during the
six-month  periods ended  December 31, 2003 and 2002,  respectively.  These cash
usages  primarily  consisted  of loan  originations  of $34.8  million and $16.7
million for 2003 and 2002, respectively.  Offsetting these usages for the period
ended  December 31, 2003 were proceeds from sales,  repayments and maturities of
investment and mortgage-backed securities of $18.0 million.

Financing  activities  consist of the  solicitation  and  repayment  of customer
deposits and borrowings. During the six months ended December 31, 2003 and 2002,
net cash  provided by  financing  activities  was  $200,000  and $18.4  million,
respectively.  For the period ended 2003,  short term borrowings  increased in a
similar amount to the decrease in deposits.  For 2003,  deposits increased $11.4
million  and the  Company  received  $7.2  million as part of a Trust  Preferred
Offering.

Liquidity may be adversely  affected by unexpected  deposit outflows,  excessive
interest rates paid by competitors,  and similar  matters.  Management  monitors
projected  liquidity  needs and determines the level  desirable based in part on
the bank's  commitment to make loans, as well as management's  assessment of the
Company's  ability to generate funds.  The Company  currently has  approximately
$145 million in unused borrowing capacity at the FHLB of Pittsburgh. As a result
of this  unused  borrowing  capacity,  the  Company  anticipates  it  will  have
sufficient  liquidity  available  to meet  estimated  short-term  and  long-term
funding needs.

CAPITAL
-------

Management monitors both the Company's equity capital ratio 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, 2003, both the
Company  and the Bank  exceeded  the  minimum  capital  requirements,  including
risk-based and leveraged capital ratios.  The Company's equity capital ratio and
the Bank's total  risk-based,  Tier I risk-based and Tier I leverage  ratios are
4.64% and 10.61%, 9.90% and 6.60%, respectively, at December 31, 2003.

                                      -13-

<PAGE>

RATE/VOLUME ANALYSIS
--------------------

The table below sets forth  certain  information  regarding  changes in interest
income and interest expense of the Company for the periods  indicated.  For each
category  of  interest   earning   assets  and   interest-bearing   liabilities,
information  is  provided on changes  attributable  to (i) changes in volume and
(ii) changes in rate.  Changes not solely  attributable  to rate or volume,  are
allocated to changes in rate due to rate sensitivity of interest-earning  assets
and interest-bearing liabilities.

<TABLE>
<CAPTION>
                                                                      Three Months Ended December 31,
                                                               -----------------------------------------------
                                                                    2003            Vs             2002
                                                               -----------------------------------------------
                                                                              Increase (Decrease)
                                                                                  Due to
                                                               -----------------------------------------------
                                                                   Volume          Rate             Net
                                                               -----------------------------------------------
<S>                                                              <C>             <C>               <C>
Interest Income:
    Loans                                                          $1,406,070      $(523,417)        $882,653
    Investments                                                        98,450       ( 22,140)          76,310
                                                               -----------------------------------------------
      Total interest-earning assets                                 1,504,520       (545,557)         958,963
                                                               -----------------------------------------------
Interest Expense
    Core Deposits                                                     154,352       (193,316)         (38,964)
    Certificates of Deposit                                           399,985       (250,595)         149,390
    FHLB Borrowings                                                   153,731       (118,479)          35,252
    Other Borrowings                                                   80,811              -           80,811
                                                               -----------------------------------------------
      Total interest-bearing liabilities                              788,879       (562,390)         226,489
                                                               ===============================================
Change in net interest income                                        $715,641       $ 16,833         $732,474
                                                               ===============================================
</TABLE>

<TABLE>
<CAPTION>

                                                                       Six Months Ended December 31,
                                                               -----------------------------------------------
                                                                    2003            Vs             2002
                                                               -----------------------------------------------
                                                                              Increase (Decrease)
                                                                                  Due to
                                                               -----------------------------------------------
                                                                   Volume          Rate             Net
                                                               -----------------------------------------------
<S>                                                              <C>           <C>               <C>
Interest Income:
    Loans                                                          $2,724,078    $(1,111,920)      $1,612,158
    Investments                                                       353,067       (132,694)         220,373
                                                               -----------------------------------------------
      Total interest-earning assets                                 3,077,145     (1,244,614)       1,832,531
                                                               -----------------------------------------------
Interest Expense
    Core Deposits                                                     336,697       (430,621)         (93,924)
    Certificates of Deposit                                           889,657       (563,924)         325,733
    FHLB Borrowings                                                   259,908       (207,224)          52,684
    Other Borrowings                                                  159,304              -          159,304
                                                               -----------------------------------------------
      Total interest-bearing liabilities                            1,645,566     (1,201,769)         443,797
                                                               ===============================================
Change in net interest income                                      $1,431,579       $(42,845)      $1,388,734
                                                               ===============================================
</TABLE>

                                      -14-

<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>
                                                                 Three-Month Period Ended Decemberr 31,
                                        -----------------------------------------------------------------------------------------
                                                          2003                                           2002
                                        ------------------------------------------     ------------------------------------------
                                            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)                      $261,807         $4,043         6.18%          $181,527         $3,161         6.96%
  Investment securities (2)                   23,995            192         3.20%            26,721            210         3.14%
  Mortgage-backed securities                  22,561            212         3.76%             8,699            117         5.40%
                                        -------------   ------------   -----------     -------------   ------------   -----------
     Total interest-earning assets           308,363          4,447         5.77%           216,947          3,488         6.43%
                                                        ------------   -----------                     ------------   -----------
Non-interest-earning assets                   17,690                                          9,522
                                        -------------                                  -------------
     Total assets                           $326,053                                       $226,469
                                        =============                                  =============

Interest-bearing liabilities:
  Interest-bearing demand deposits          $ 52,421            141         1.08%          $ 29,889            135         1.80%
  Certificates of deposit                    152,234          1,218         3.20%           110,704          1,068         3.86%
  Savings deposits                            49,681            132         1.06%            37,153            177         1.91%
  FHLB Borrowings                             30,883            327         4.25%            21,200            293         5.52%
  Other Borrowings                             7,200             81         4.50%                 -              -            -
                                        -------------   ------------   -----------     -------------   ------------   -----------
     Total interest-bearing liabilities      292,419          1,899         2.60%           198,946          1,673         3.36%
                                                        ------------   -----------                     ------------   -----------
Non-interest bearing liabilities              12,798                                          8,525
                                        -------------                                  -------------
     Total liabilities                       305,217                                        207,471
Stockholders' equity                          20,836                                         18,998
                                        -------------                                  -------------
     Total liabilities and stockholders'
       equity                               $326,053                                       $226,469
                                        =============                                  =============

Net interest income                                         $ 2,548                                        $ 1,815
                                                        ============                                   ============
Interest rate spread (3)                                                    3.17%                                          3.07%
                                                                       ===========                                    ===========
Net Yield on interest-earning assets (4)                                    3.30%                                          3.35%
                                                                       ===========                                    ===========
Ratio of average interest-earning assets to
  average interest-bearing liabilities                                    105.45%                                        109.05%
                                                                       ===========                                    ===========
</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>

  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>
                                                                 Six-Month Period Ended Decemberr 31,
                                       -----------------------------------------------------------------------------------------
                                                         2003                                           2002
                                       ------------------------------------------     ------------------------------------------
                                            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)                     $253,925         $7,951         6.26%          $178,141         $6,339         7.12%
  Investment securities (2)                  28,971            464         3.20%            25,756            418         3.24%
  Mortgage-backed securities                 24,179            415         3.43%             8,847            241         5.45%
                                       -------------   ------------   -----------     -------------   ------------   -----------
     Total interest-earning assets          307,075          8,830         5.75%           212,744          6,998         6.58%
                                                       ------------   -----------                     ------------   -----------
Non-interest-earning assets                  17,665                                          9,231
                                       -------------                                  -------------
     Total assets                          $324,740                                       $221,975
                                       =============                                  =============

Interest-bearing liabilities:
  Interest-bearing demand deposits         $ 52,933            284         1.07%          $ 29,615            280         1.89%
  Certificates of deposit                   153,267          2,446         3.19%           108,028          2,121         3.93%
  Savings deposits                           49,525            265         1.07%            36,440            363         1.99%
  FHLB Borrowings                            28,150            638         4.53%            20,600            585         5.68%
  Other Borrowings                            7,200            159         4.42%                 -              -             -
                                       -------------   ------------   -----------     -------------   ------------   -----------
     Total interest-bearing liabilities     291,075          3,792         2.60%           194,683          3,349         3.44%
                                                       ------------   -----------                     ------------   -----------
Non-interest bearing liabilities             13,023                                          8,540
                                       -------------                                  -------------
     Total liabilities                      304,098                                        203,223
Stockholders' equity                         20,642                                         18,752
                                       -------------                                  -------------
     Total liabilities and stockholders'
       equity                              $324,740                                       $221,975
                                       =============                                  =============

Net interest income                                        $ 5,038                                        $ 3,649
                                                       ============                                   ============
Interest rate spread (3)                                                   3.15%                                          3.14%
                                                                      ===========                                    ===========
Net Yield on interest-earning assets (4)                                   3.28%                                          3.43%
                                                                      ===========                                    ===========
Ratio of average interest-earning assets to
  average interest-bearing liabilities                                   105.50%                                        109.28%
                                                                      ===========                                    ===========
</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.

                                      -16-

<PAGE>

RISK ELEMENTS
The table below presents information  concerning  nonperforming assets including
nonaccrual  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,
                                                           2003           2003
                                                         ------         ------

Loans on a nonaccrual basis                              $  583         $1,398
Loans past due 90 days or more and still accruing         1,040          1,681
                                                         ------         ------
         Total nonperforming loans                        1,623          3,079
                                                         ------         ------

Other real estate                                           752            802
Repossessed assets                                           39             28
                                                         ------         ------
         Total nonperforming assets                      $2,414         $3,909
                                                         ------         ------


Nonperforming loans as a percentage of total net loans      .62%          1.34%
                                                         ======         ======

Nonperforming assets as a percentage of total assets        .75%          1.21%
                                                         ======         ======

Allowance for loan losses to nonperforming loans          92.13%         35.60%
                                                         ======         ======


Nonaccrual  loans at December  31, 2003,  consisted  of $316,484 in  one-to-four
family  residential  mortgages  and  $266,498  in  non-residential  real  estate
mortgages.

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, 2003, the total  investment in impaired loans was $481,410,
and such amount was subject to a specific  allowance for loan losses of $37,174.
The average  investment  in the impaired  loans for the  six-month  period ended
December 31, 2003 was $510,317.  The interest  income  potential  based upon the
original  terms of the  contracts  of these  impaired  loans was $20,720 for the
six-month  period ended December 31, 2003. A total of $20,720 of interest income
has been recognized for the six-month period ended December 31, 2003.


                                      -17-

<PAGE>

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,
2003 and June 30, 2003:

                                        December 31,     June 30,
                                            2003           2003
                                       ------------   ------------
Mortgage loans:
           1-4 family                  $138,988,014   $126,106,815
           Multi-family                   8,754,271      8,227,328
           Non-residential               40,624,484     39,099,195
           Construction                  14,072,023     10,074,633
                                       ------------   ------------
                                        202,438,792    183,507,971
                                       ------------   ------------
Consumer Loans:
           Home Improvement                 822,016        900,060
           Automobile-Direct              9,118,024      8,761,516
           Automobile-Indirect           33,458,492     22,140,818
           Share loans                    2,185,769      1,914,628
           Other                          2,374,976      2,687,302
                                       ------------   ------------
                                         47,959,277     36,404,324
                                       ------------   ------------

Commercial Loans                         20,224,507     17,383,993

Less:
           Loans in process               5,823,679      6,844,741
           Net deferred loan fees           120,375        116,178
           Allowance for loan losses      1,495,738      1,095,822
                                       ------------   ------------
                                          7,439,792      8,056,741
                                       ------------   ------------
                Total                  $263,182,784   $229,239,547
                                       ============   ============

                                      -18-
<PAGE>

ITEM 3 - CONTROLS AND PROCEDURES
(1) Evaluation of disclosure  controls and procedures  Based on their evaluation
    -------------------------------------------------
of the  Company's  disclosure  controls  and  procedures  (as  defined  in  Rule
13a-15(e) under the Securities  Exchange Act of 1934 (the "Exchange Act")),  the
Company's  principal  executive  officer and  principal  financial  officer have
concluded that as of the end of the period  covered by this Quarterly  Report on
Form 10-QSB such disclosure controls and procedures are effective to ensure that
information  required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded,  processed,  summarized and reported
within the time periods  specified in Securities and Exchange  Commission  rules
and forms.

(2) Changes in internal  control  over  financial  reporting  During the quarter
    --------------------------------------------------------
under  report,  there was no  change  in the  Company's  internal  control  over
financial  reporting that has materially  affected,  or is reasonably  likely to
materially affect, the Company's internal control over financial reporting.


                                      -19-

<PAGE>

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

                NONE

Item 2 - Changes in Securities and Use of Proceeds

                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 21,
2003 and the following matters were voted upon:


PROPOSAL I - Election of Directors with term to expire in 2006.

                                 FOR            WITHHELD
                                 ---            --------
     William B. Chesson        813,117            4,170
     Stephen M. Gagliardi      815,617            1,670

Directors  continuing  in office are Kelly M. Bethel,  William E. Watson,  Frank
Gary Young, John R Sperlazza, Walker Peterson Holloway, and Dominic J. Teramana,
Jr..

PROPOSAL II -  Ratification  of the  appointment  of  S.R.  Snodgrass,  AC.,  as
               independent  auditors for the Company, for the fiscal year ending
               June 30, 2004.

                                 FOR            AGAINST        ABSTAIN
                                 ---            -------        -------
                                 815,717          470           1,100
Item 5 - Other Information

                 NONE

Item 6  - Exhibits and reports on Form 8-K

(a) List of Exhibits:
<TABLE>
<CAPTION>
 <S>            <C>
          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 *****
         31      Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
         32      Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
</TABLE>

                                      -20-
<PAGE>

(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 March 31, 2003 10-Q.
       (File No. 0-021885) filed May 13, 2003.
***    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.

                                      -21-


<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 12, 2004              By:  /s/Stephen M. Gagliardi
                                           -------------------------------------
                                           Stephen M. Gagliardi
                                           President and Chief Executive Officer

Date:  February 12, 2004              By:  /s/Stephen M. Magnone
                                           -------------------------------------
                                           Stephen M. Magnone
                                           Treasurer (Chief Financial Officer)

                                      -22-