EMPLOYMENT AGREEMENT
                             As Amended and Restated

         THIS AGREEMENT  entered into this 17th day of March,  2004  ("Effective
Date"),  by and between Advance Financial Savings Bank, (the "Savings Bank") and
Stephen M. Gagliardi (the "Employee").

         WHEREAS,  the Employee has heretofore been employed by the Savings Bank
as President and Chief Executive Officer and is experienced in certain phases of
the business of the Savings Bank; and

         WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Savings Bank and the Employee.

         NOW, THEREFORE, it is AGREED as follows:

         1.  Employment.  The  Employee is employed in the capacity as President
             ----------
and Chief Executive  Officer of the Savings Bank. The Employee shall render such
administrative and management services to the Savings Bank and Advance Financial
Bancorp ("Parent") as are currently rendered and as are customarily performed by
persons situated in a similar executive capacity. The Employee shall promote the
business of the Savings Bank and Parent.  The  Employee's  other duties shall be
such as the  President  and the Board of  Directors  for the  Savings  Bank (the
"Board  of  Directors"  or  "Board")  may from time to time  reasonably  direct,
including normal duties as an officer of the Savings Bank.

         2. Base  Compensation.  The  Savings  Bank  agrees to pay the  Employee
            ------------------
during the Term of this Agreement (as hereinafter defined at Section 5) a salary
at the rate of at least $135,509 per annum,  payable in cash not less frequently
than  monthly;  provided,  that the rate of such salary shall be reviewed by the
Board of Directors not less often than annually,  and Employee shall be entitled
to receive  annually an increase at such  percentage or in such an amount as the
Board of Directors in its sole discretion may decide at such time.

         3. Discretionary  Bonus. The  Employee shall be entitled to participate
            --------------------
in an equitable manner with all other senior management employees of the Savings
Bank in  discretionary  bonuses that may be authorized and declared by the Board
of  Directors to its senior  management  employees  from time to time.  No other
compensation provided for in this Agreement shall be deemed a substitute for the
Employee's  right  to  participate  in such  discretionary  bonuses  when and as
declared by the Board of Directors.

         4. (a)  Participation  in Retirement  and Medical  Plans.  The Employee
            -----------------------------------------------------
shall be entitled to  participate  in any plan of the Savings  Bank  relating to
pension,  profit-sharing,  or other retirement  benefits and medical coverage or
reimbursement  plans  that the  Savings  Bank may adopt for the  benefit  of its
employees.  Additionally,  Employee's  dependent  family  shall be  eligible  to
participate in medical and dental  insurance plans

<PAGE>

sponsored by the Savings Bank or Parent with the cost of such  premiums  paid by
the Savings Bank.

         (b) Employee  Benefits;  Expenses.  The  Employee  shall be eligible to
             -----------------------------
participate in any fringe benefits which may be or may become  applicable to the
Savings Bank's senior management employees,  including by example, participation
in any stock  option or  incentive  plans  adopted by the Board of  Directors of
Savings Bank or Parent, reimbursement for club memberships, a reasonable expense
account,  receipt of an appropriate automobile  reimbursement  allowance and any
other benefits which are commensurate with the responsibilities and functions to
be  performed  by the  Employee  under this  Agreement.  The Savings  Bank shall
reimburse  Employee for all  reasonable  out-of-pocket  expenses  which Employee
shall incur in connection with his service for the Savings Bank.

         5. Term. The term of employment of Employee under this Agreement  shall
            ----
be for the period  commencing  on the  Effective  Date and ending  April 1, 2007
thereafter ("Term").  Additionally,  on, or before, each annual anniversary date
from the Effective  Date, the Term of employment  under this Agreement  shall be
extended  for up to an  additional  one year  period  beyond the then  effective
expiration  date upon a  determination  and resolution of the Board of Directors
that the performance of the Employee has met the  requirements  and standards of
the Board, and that the Term of such Agreement shall be extended.

         6. Loyalty; Noncompetition.
            -----------------------

         (a) The  Employee  shall  devote  his full  time and  attention  to the
performance  of  his  employment  under  this  Agreement.  During  the  term  of
Employee's employment under this agreement, the Employee shall not engage in any
business  or activity  contrary  to the  business  affairs or  interests  of the
Savings Bank or Parent.

         (b) Nothing  contained  in this Section 6 shall be deemed to prevent or
limit the right of Employee to invest in the capital  stock or other  securities
of any business  dissimilar from that of the Savings Bank or Parent,  or, solely
as a passive or minority investor, in any business.

         7.  Standards.  The  Employee  shall  perform  his  duties  under  this
             ---------
Agreement in accordance  with such  reasonable  standards  expected of employees
with comparable positions in comparable  organizations and as may be established
from time to time by the Board of Directors.

         8. Vacation and Sick Leave.  At such  reasonable  times as the Board of
            -----------------------
Directors  shall in its  discretion  permit,  the  Employee  shall be  entitled,
without loss of pay, to absent himself  voluntarily  from the performance of his
employment  under this Agreement,  with all such voluntary  absences to count as
vacation time; provided that:

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<PAGE>

         (a) The  Employee  shall  be  entitled  to  annual  vacation  leave  in
accordance  with the policies as are  periodically  established  by the Board of
Directors for senior management employees of the Savings Bank.

         (b)  The  Employee   shall  be  entitled  to  receive  any   additional
compensation  from the Savings  Bank on account of his failure to take  vacation
leave and Employee shall not be entitled to accumulate  unused vacation from one
fiscal year to the next,  except in either case to the extent  authorized by the
Board of Directors for senior management employees of the Savings Bank.

         (c) In addition to the aforesaid paid vacations,  the Employee shall be
entitled without loss of pay, to absent himself voluntarily from the performance
of his employment with the Savings Bank for such additional  periods of time and
for  such  valid  and  legitimate  reasons  as the  Board  of  Directors  in its
discretion may determine.  Further,  the Board of Directors shall be entitled to
grant to the  Employee a leave or leaves of absence  with or without pay at such
time or times and upon such terms and  conditions  as the Board of  Directors in
its discretion may determine.

         (d) In addition, the Employee shall be entitled to an annual sick leave
benefit as established by the Board of Directors for senior management employees
of the Savings  Bank.  In the event that any sick leave  benefit  shall not have
been used during any year,  such leave shall accrue to  subsequent  years to the
extent authorized by the Board of Directors for employees of the Savings Bank.

         9. Termination and Termination Pay.
            -------------------------------

         The Employee's employment under this Agreement shall be terminated upon
any of the following occurrences:

         (a) The death of the  Employee  during the term of this  Agreement,  in
which event the Employee's  estate shall be entitled to receive the compensation
due the  Employee  through  the last day of the  third  calendar  month in which
Employee's death shall have occurred.

         (b) The Board of Directors may terminate the  Employee's  employment at
any time, but any termination by the Board of Directors  other than  termination
for Just Cause,  shall not prejudice the  Employee's  right to  compensation  or
other benefits under the Agreement.  The Employee shall have no right to receive
compensation or other benefits for any period after  termination for Just Cause.
Termination for "Just Cause" shall include termination because of the Employee's
personal dishonesty,  incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation  of any law,  rule or  regulation  (other than traffic  violations  or
similar  offenses) or final  cease-and-desist  order,  or material breach of any
provision of the Agreement.

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<PAGE>

         (c) Except as  provided  pursuant  to  Section 12 herein,  in the event
Employee's  employment  under  this  Agreement  is  terminated  by the  Board of
Directors  without Just Cause, the Bank shall be obligated of this Agreement and
the cost of Employee obtaining all health, life, disability,  and other benefits
which the Employee  would be eligible to  participate in through such date based
upon the benefit levels  substantially equal to those being provided Employee at
the date of  termination  of employment.  Notwithstanding  the foregoing,  in no
event  shall the  Employee  receive  payment  of his salary in  accordance  with
Section 2 herein and the cost of  applicable  benefits for a period of less than
twelve months from the Date of termination of employment without Just Cause.

         (d) If the  Employee  is removed  and/or  permanently  prohibited  from
participating  in the conduct of the Savings  Bank's  affairs by an order issued
under  Sections  8(e)  (4) or 8 (g) (1) of the  Federal  Deposit  Insurance  Act
("FDIA") (12 U.S.C.  1818(e) (4) and (g) (1)),  all  obligations  of the Savings
Bank under this  Agreement  shall  terminate,  as of the  effective  date of the
order, but the vested rights of the parties shall not be affected.

         (e) If the Savings  Bank is in default (as defined in Section 3 (x) (1)
of FDIA) all obligations  under this Agreement shall terminate as of the date of
default,  but  this  paragraph  shall  not  affect  any  vested  rights  of  the
contracting parties.

         (f) All obligations under this Agreement shall be terminated, except to
the extent  determined that  continuation of this Agreement is necessary for the
continued  operation of the Savings  Bank:  (i) by the Director of the Office of
Thrift  Supervision  ("Director of OTS"), or his designee,  at the time that the
Federal  Deposit  Insurance  Corporation  ("FDIC")  enters into an  agreement to
provide  assistance  to or on behalf of the  Savings  Bank  under the  authority
contained in Section 13 (c) of FDIA;  or (ii) By the Director of the OTS, or his
designee,  at the time that the Director of the OTS, or his designee  approves a
supervisory  merger to resolve problems related to operation of the Savings Bank
or when the Savings  Bank is  determined  by the Director of the OTS to be in an
unsafe or unsound condition. Any rights of the parties that have already vested,
however, shall not be affected by such action.

         (g) The voluntary  termination by the Employee  during the term of this
Agreement  with the delivery of no less than 60 days written notice to the Board
of Directors,  other than pursuant to Section 12(b),  in which case the Employee
shall be entitled  to receive  only the  compensation,  vested  rights,  and all
employee benefits up to the date of such termination.

         (h) Notwithstanding  anything herein to the contrary, any payments made
to the Employee pursuant to the Agreement, or otherwise, shall be subject to and
conditioned upon compliance with 12 USC sub section 1828 (k) and any regulations
promulgated thereunder.

         10.  Suspension  of  Employment.  If the Employee is  suspended  and/or
              --------------------------
temporarily  prohibited from  participating in the conduct of the Savings Bank's
affairs by a notice  served  under  Section 8 (e) (3) or

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<PAGE>

(g) (1) of the FDIA (12  U.S.C.  1818(e)  (3) and (g) (1),  the  Savings  Bank's
obligations  under the  Agreement  shall be suspended as of the date of service,
unless  stayed by  appropriate  proceedings.  If the  charges  in the notice are
dismissed,  the Savings Bank may in its  discretion  (i) pay the Employee all or
part of the compensation  withheld while its contract obligations were suspended
and (ii) reinstate any of its obligations which were suspended.

         11. Disability.  If the Employee shall become disabled or incapacitated
             ----------
to the extent  that he is unable to perform his duties  hereunder,  by reason of
medically determinable physical or mental impairment,  as determined by a doctor
engaged by the Board of  Directors,  Employee  shall  nevertheless  continue  to
receive the compensation and benefits provided under the terms of this Agreement
in accordance with the Savings Bank's disability policy as in effect on the date
he becomes disabled. Such benefits noted herein shall be reduced by any benefits
otherwise  provided to the Employee  during such period under the  provisions of
disability insurance coverage in effect for Savings Bank employees.  Thereafter,
Employee  shall be eligible  to receive  benefits  provided by the Savings  Bank
under the provisions of disability insurance coverage in effect for Savings Bank
employees.  Upon returning to active full-time  employment,  the Employee's full
compensation  as set forth in this Agreement  shall be reinstated as of the date
of commencement of such  activities.  In the event that the Employee  returns to
active employment on other than a full-time basis, then his compensation (as set
forth in Section 2 of this Agreement) shall be reduced in proportion to the time
spent in said employment, or as shall otherwise be agreed to by the parties.

         12. Change in Control.
             -----------------

         (a) Notwithstanding any provision herein to the contrary,  in the event
of the involuntary  termination of Employee's employment during the Term of this
Agreement following any change in control of the Savings Bank or Parent,  absent
Just Cause,  Employee shall be paid an amount equal to the product of 2.99 times
the Employee's  "base amount" as defined in Section  280G(b) (3) of the Internal
Revenue  Code of 1986,  as amended  (the  "Code")  and  regulations  promulgated
thereunder. Said sum shall be paid to the Employee in one (1) lump sum not later
than the date of such  termination  of employment  and such payments shall be in
lieu of any other future payments which the Employee would be otherwise entitled
to receive under Section 9 of this Agreement. Additionally, the Employee and his
or her dependents shall remain eligible to participate in the medical and dental
insurance  programs  offered  by the Bank (or its  successor)  to its  employees
through the remaining Term of the Agreement.  Notwithstanding the forgoing,  all
sums  payable  hereunder  shall be reduced in such  manner and to such extent so
that no such payments made hereunder when  aggregated with all other payments to
be made to the  Employee  by the Savings  Bank or the Parent  shall be deemed an
"excess  parachute  payment" in accordance  with Section 280G of the Code and be
subject to the  excise tax  provided  at Section  4999(a) of the Code.  The term
"control"  shall refer to the ownership,  holding or power to vote more than 25%
of the Parent's or Savings Bank's voting stock, the control of the election of a
majority  of the  Parent's or Savings  Bank's  directors,  or the  exercise of a
controlling  influence  over the management or policies of the Parent or Savings
Bank by any person or by persons acting as a group within the meaning of Section
13(d) of the  Securities  Exchange  Act of  1934.  The  term  "person"  means an

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<PAGE>

individual  other  than the  Employee,  or a  corporation,  partnership,  trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein.

         (b)  Notwithstanding  any  other  provision  of this  Agreement  to the
contrary,  Employee may voluntarily  terminate his employment during the Term of
this Agreement  following a change in control of the Savings Bank or Parent, and
Employee shall thereupon be entitled to receive the payment described in Section
12(a) of this  Agreement,  upon the  occurrence,  or  within  ninety  (90)  days
thereafter,  of any of the following events, which have not been consented to in
advance by the  Employee in writing:  (i) if Employee  would be required to move
his personal  residence or perform his principal  executive  functions more than
thirty-five  (35) miles from the Employee's  primary office as of the signing of
this Agreement;  (ii) if in the organizational  structure of the Savings Bank or
Parent,  Employee  would be required to report to a person or persons other than
the  President  and Board of the Savings  Bank or Parent's  (iii) if the Savings
Bank or Parent should fail to maintain Employee's base compensation in effect as
of the date of the Change in Control and the existing  employee  benefits plans,
including material fringe benefit,  stock option and retirement plans, except to
the  extent  that such  reduction  in  benefit  programs  is part of an  overall
adjustment  in benefits for all employees of the Savings Bank or Parent and does
not disproportionately  adversely impact the Employee; (iv) if Employee would be
assigned duties and  responsibilities  other than those normally associated with
his  position  as  referenced  at  Section  1,  herein;  or  (v)  if  Employee's
responsibilities or authority have in any way been diminished or reduced.

         13. Successors and Assigns.
             ----------------------

         (a) This  Agreement  shall inure to the benefit of and be binding  upon
any  corporate  or other  successor  of the Savings  Bank or Parent  which shall
acquire,  directly  or  indirectly,  by  merger,   consolidation,   purchase  or
otherwise,  all or substantially  all of the assets or stock of the Savings Bank
or Parent.

         (b) Since the Savings Bank is  contracting  for the unique and personal
skills of the  Employee,  the  Employee  shall be  precluded  from  assigning or
delegating his rights or duties  hereunder  without first  obtaining the written
consent of the Savings Bank.

         14.  Amendments.  No amendments or additions to this Agreement shall be
              ----------
binding  upon the  parties  hereto  unless  made in  writing  and signed by both
parties, except as herein otherwise specifically provided.

         15.  Applicable  Law. This agreement  shall be governed by all respects
              ---------------
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the State of West Virginia,  except to the extent that Federal law shall
be deemed to apply.

         16.  Severability.  The  provisions of this  Agreement  shall be deemed
              ------------
severable and the  invalidity  or  unenforceability  of any provision  shall not
affect the validity or enforceability of the other provisions hereof.

                                       6
<PAGE>

         17. Arbitration. Any controversy or claim arising out of or relating to
             -----------
this  Agreement,  or the breach  thereof,  shall be settled  by  arbitration  in
accordance  with the rules then in effect of the district office of the American
Arbitration  Association ("AAA") nearest to the home office of the Savings Bank,
and  judgment  upon the  award  rendered  may be  entered  in any  court  having
jurisdiction thereof,  except to the extend that the parties may otherwise reach
a mutual settlement of such issue. The Savings Bank shall reimburse Employee for
all reasonable costs and expenses, including reasonable attorneys' fees, arising
from such  dispute,  proceedings  or  actions,  following  the  delivery  of the
decision  of the  arbitrator  finding  in favor of the  Employee.  Further,  the
settlement of the dispute to be approved by the Board of the Savings Bank or the
Parent may  include a provision  for the  reimbursement  by the Savings  Bank or
Parent  to the  Employee  for  all  reasonable  costs  and  expenses,  including
reasonable  attorneys' fees, arising from such dispute,  proceedings or actions,
or the Board of the Savings Bank or the Parent may authorize such  reimbursement
of such  reasonable  costs and expenses by separate action upon a written action
and determination of the Board following settlement of the dispute.

         18. Entire Agreement. This Agreement together with any understanding or
             ----------------
modifications  thereof as agreed to in writing by the parties,  shall constitute
the entire agreement between the parties hereto.

         IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and first hereinabove written.



ATTEST:                                     Advance Financial Savings Bank

/s/Kelly M. Bethel                      By: Stephen M. Gagliardi
---------------------------------           ------------------------------------
Secretary                                   Director

                                            /s/John R. Sperlazza
                                            ------------------------------------
                                            Director

WITNESS:

/s/Steve D. Martino                         /s/Stephen M. Gagliardi
---------------------------------           ------------------------------------
                                            Stephen M. Gagliardi
                                            Employee