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


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

{ }    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCAHANGE
          ACT


For the transition period from _________,_______to__________________


                         Commission file Number 0-21885
                         ------------------------------

                            Advance Financial Bancorp
                            -------------------------

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


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 $.10 per share
        Outstanding at February 1, 2003:   932,285


<PAGE>

                            Advance Financial Bancorp

                                      Index

<TABLE>
<CAPTION>
                                                                                Page
                                                                               Number
                                                                               ------

<S>                                                                         <C>
Part I - FINANCIAL INFORMATION

        Item 1 - Financial Statements

                   Consolidated Balance Sheet ( Unaudited) as of
                      December 31, 2002 and June 30, 2002                        3

                   Consolidated Statement of Income (Unaudited)
                       For the Three Months ended December 31, 2002 and 2001     4

                   Consolidated Statement of Income (Unaudited)
                       For the Six Months ended December 31, 2002 and 2001       5

                   Consolidated Statement of Cash Flows (Unaudited)
                   For the Six Months ended December 31, 2002 and 2001           6

                   Notes to the Unaudited Consolidated Financial Statements      7-10


          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                            21

SIGNATURES                                                                      22

SECTION 302 CERTIFICATIONS                                                      23-24

</TABLE>

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

<TABLE>
<CAPTION>
                                                                                DECEMBER 31,       JUNE 30,
                                                                                    2002             2002
                                                                               -------------    -------------
<S>                                                                          <C>              <C>
Assets
     Cash and cash equivalents:
       Cash and amounts due from banks                                         $   2,023,295    $   1,775,051
       Interest bearing deposits with other institutions                           5,510,165        9,995,389
                                                                               -------------    -------------
          Total cash and cash equivalents                                          7,533,460       11,770,440
                                                                               -------------    -------------
     Investment securities:
       Securities held to maturity (fair value of $4,598,104 and $ -0-)            4,588,093                -
       Securities available for sale                                              12,304,664       12,999,362
                                                                               -------------    -------------
          Total investment securities                                             16,892,757       12,999,362
                                                                               -------------    -------------
     Mortgaged-backed securities:
       Securities held to maturity (fair value of $1,145,853 and $1,449,641)       1,100,755        1,396,306
       Securities available for sale                                               9,305,268        7,791,566
                                                                               -------------    -------------
          Total mortgage-backed securities                                        10,406,023        9,187,872
                                                                               -------------    -------------

     Loans held for sale                                                             848,325          578,647
     Loans receivable,  (net of allowance for loan losses
          of $977,624 and $969,088 )                                             188,938,966      172,145,867
     Office properties and equipment, net                                          4,722,956        3,901,592
     Federal Home Loan Bank Stock, at cost                                         1,430,300        1,058,100
     Accrued interest receivable                                                   1,094,200        1,160,312
     Other assets                                                                  1,880,020        1,502,749
                                                                               -------------    -------------
          TOTAL ASSETS                                                         $ 233,747,007    $ 214,304,941
                                                                               =============    =============
Liabilities:
     Deposits                                                                  $ 186,442,544    $ 175,058,743
     Advances from Federal Home Loan Bank                                         20,000,000       20,000,000
     Other borrowings                                                              7,200,000                -
     Advance payments by borrowers for taxes and insurance                           439,173          404,220
     Accrued interest payable and other liabilities                                  600,426          618,232
                                                                               -------------    -------------
          TOTAL LIABILITIES                                                      214,682,143      196,081,195
                                                                               -------------    -------------
Stockholders' Equity:
     Preferred stock, $.10 par value; 500,000 shares
         authorized, none issued                                                           -                -
     Common stock, $.10 par value; 2,000,000 shares
          authorized 1,084,450 shares issued                                         108,445          108,445
     Additional paid in capital                                                   10,416,139       10,380,430
     Retained earnings - substantially restricted                                 10,948,877       10,274,004
     Unallocated shares held by Employee Stock Ownership Plan (ESOP)                (294,014)        (337,394)
     Unallocated shares held by Restricted Stock Plan (RSP)                         (208,771)        (215,775)
     Treasury Stock (152,165 shares at cost)                                      (2,233,265)      (2,233,265)
     Accumulated other comprehensive income                                          327,453          247,301
                                                                               -------------    -------------
          TOTAL STOCKHOLDERS' EQUITY                                              19,064,864       18,223,746
                                                                               -------------    -------------
          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                           $ 233,747,007    $ 214,304,941
                                                                               =============    =============
</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

                                      -3-

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

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                                                                  DECEMBER 31,
                                                              2002           2001
                                                          -----------    -----------
<S>                                                     <C>            <C>
INTEREST AND DIVIDEND INCOME
      Loans                                               $ 3,160,482    $ 3,182,927
      Investment securities                                   161,738        152,379
      Interest-bearing deposits with other institutions        39,002         28,291
      Mortgage-backed securities                              117,386        149,386
      Dividends on Federal Home Loan Bank Stock                 9,198         17,247
                                                          -----------    -----------

         Total interest and dividend income                 3,487,806      3,530,230
                                                          -----------    -----------
INTEREST EXPENSE
      Deposits                                              1,379,767      1,581,671
      Advances from Federal Home Loan Bank                    292,738        292,738
                                                          -----------    -----------

         Total interest expense                             1,672,505      1,874,409
                                                          -----------    -----------

NET INTEREST INCOME                                         1,815,301      1,655,821

Provision for loan losses                                     105,000         82,800
                                                          -----------    -----------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES         1,710,301      1,573,021
                                                          -----------    -----------
NONINTEREST INCOME
      Service charges on deposit accounts                     151,989        134,649
      Income from loan servicing activity                       8,553         76,579
      Gain on sale of loans                                    68,976        111,510
      Gain on sale of fixed assets                                  -          3,120
      Loss on sale of repossessed assets                         (950)             -
      Other income                                             72,020         63,771
                                                          -----------    -----------

         Total noninterest income                             300,588        389,629
                                                          -----------    -----------
NONINTEREST EXPENSE
      Compensation and employee benefits                      627,639        596,722
      Occupancy and equipment                                 271,001        214,138
      Professional fees                                        38,404         37,939
      Advertising                                              57,492         39,705
      Data processing charges                                  87,093         83,471
      Other expenses                                          332,962        322,823
                                                          -----------    -----------

         Total noninterest expenses                         1,414,591      1,294,798
                                                          -----------    -----------

Income before income taxes                                    596,298        667,852
Income taxes                                                  234,719        243,903
                                                          -----------    -----------
Net Income                                                $   361,579    $   423,949
                                                          ===========    ===========

EARNINGS PER SHARE - NET INCOME
         Basic                                            $       .42    $       .48
         Diluted                                          $       .42    $       .48
</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

                                       -4-

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

<TABLE>
<CAPTION>
                                                                             SIX MONTHS ENDED
                                                                               DECEMBER 31,
                                                                            2002           2001
                                                                        -----------    -----------
<S>                                                                   <C>            <C>
INTEREST AND DIVIDEND INCOME
    Loans                                                               $ 6,339,277    $ 6,030,917
    Investment securities                                                   318,639        320,718
    Interest-bearing deposits with other institutions                        81,260         78,398
    Mortgage-backed securities                                              240,950        303,650
    Dividends on Federal Home Loan Bank Stock                                17,866         38,401
                                                                        -----------    -----------

        Total interest and dividend income                                6,997,992      6,772,084
                                                                        -----------    -----------
INTEREST EXPENSE
    Deposits                                                              2,763,636      3,114,200
    Advances from Federal Home Loan Bank                                    585,476        587,925
                                                                        -----------    -----------

        Total interest expense                                            3,349,112      3,702,125
                                                                        -----------    -----------

NET INTEREST INCOME                                                       3,648,880      3,069,959

Provision for loan losses                                                   154,200        149,100
                                                                        -----------    -----------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                       3,494,680      2,920,859
                                                                        -----------    -----------
NONINTEREST INCOME
    Service charges on deposit accounts                                     304,579        270,343
    Income from loan servicing activity                                      74,788        102,231
    Gain on sale of loans                                                   163,902        143,889
    Gain on sale of fixed assets                                                  -          3,120
    Loss on sale of repossessed assets                                      (13,489)             -
    Other income                                                            174,549        139,913
                                                                        -----------    -----------

        Total noninterest income                                            704,329        659,496
                                                                        -----------    -----------
NONINTEREST EXPENSE
    Compensation and employee benefits                                    1,242,365      1,121,452
    Occupancy and equipment                                                 522,812        410,813
    Professional fees                                                        74,420         69,641
    Advertising                                                              84,287         60,810
    Data processing charges                                                 166,110        147,776
    Other expenses                                                          680,438        601,323
                                                                        -----------    -----------

        Total noninterest expenses                                        2,770,432      2,411,815
                                                                        -----------    -----------

Income before income taxes                                                1,428,577      1,168,540
Income taxes                                                                541,618        441,755
                                                                        -----------    -----------

Income before extaordinary item                                             886,959        726,785
Extraordinary item- Excess over cost on net assets acquired in merger             -        201,206

                                                                        -----------    -----------
Net Income                                                              $   886,959    $   927,991
                                                                        ===========    ===========

EARNINGS PER SHARE - INCOME BEFORE EXTRAORDINARY ITEM
        Basic                                                           $      1.00    $       .82
        Diluted                                                         $      1.00    $       .82

EARNINGS PER SHARE - NET INCOME
        Basic                                                           $      1.00    $      1.05
        Diluted                                                         $      1.00    $      1.05
</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

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

<TABLE>
<CAPTION>
                                                                         SIX MONTHS ENDED
                                                                            DECEMBER 31,
                                                                        2002            2001
                                                                   ------------    ------------
<S>                                                              <C>             <C>
OPERATING ACTIVITIES
     Net Income                                                    $    886,959    $    927,991
     Adjustments to reconcile net income to net cash provided by
        operating activities:
         Depreciation, amortization and accretion, net                  248,523         287,366
         Provision for loan losses                                      154,200         149,100
         Gain on sale of loans                                         (163,902)       (143,889)
         Gain on sale of fixed assets                                         -          (3,120)
         Loss on sale of repossessed assets                              13,489               -
         Extraordinary gain on net assets acquired in merger                  -        (201,206)
         Origination of loans held for sale                         (12,432,512)    (12,327,844)
         Proceeds from the sale of loans                             12,326,736      12,107,282
         (Increase) decrease in net other assets and liabilities       (523,210)        357,037
                                                                   ------------    ------------

              Net cash provided by operating activities                 510,283       1,152,717
                                                                   ------------    ------------
INVESTING ACTIVITIES
     Investment securities held to maturity:
         Purchases                                                   (4,588,093)              -
         Maturities and repayments                                            -         750,000
     Investment securities available for sale:
         Purchases                                                   (3,507,886)       (260,722)
         Maturities and repayments                                    4,304,400       3,856,504
     Mortgage-backed securities held to maturity:
         Maturities and repayments                                      294,720         238,679
     Mortgage-backed securities available for sale:
         Purchases                                                   (3,723,622)     (1,508,800)
         Maturities and repayments                                    2,226,008       1,634,579
     Purchase of Federal Home Loan Bank Stock                          (372,200)       (115,000)
     Sale of Federal Home Loan Bank Stock                                     -         445,900
     Net increase in loans                                          (16,697,299)     (6,684,447)
     Purchases of premises and equipment                             (1,089,957)       (177,492)
                                                                   ------------    ------------

              Net cash used in investing activities                 (23,153,929)     (1,820,799)
                                                                   ------------    ------------
FINANCING ACTIVITIES
     Net increase in deposits                                        11,383,801       6,191,773
     Increase in long term borrowings                                 7,200,000               -
     Net change in advances for taxes and insurance                      34,953         150,422
     Net cash purchase of stock in merger                                     -      (6,041,007)
     Cash dividends paid                                               (212,088)       (191,044)
                                                                   ------------    ------------
              Net cash provided by financing activities              18,406,666         110,144
                                                                   ------------    ------------

             Decrease in cash and cash equivalents                   (4,236,980)       (557,938)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                     11,770,440       8,553,178
                                                                   ------------    ------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                         $  7,533,460    $  7,995,240
                                                                   ============    ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Cash paid during the period for:
         Interest on deposits and borrowings                       $  3,366,719    $  3,719,295
         Income taxes                                              $    640,000    $    492,000
</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 Advance  Statutory  Trust I (the  "Trust") 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,  2003 or any other
period.

These statements should be read in conjunction with the consolidated  statements
of and for the year ended June 30, 2002 and related  notes which are included on
the Form 10-KSB (file no. 0-21885).


NOTE 2 - EARNINGS PER SHARE

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


                                                          Six Months Ended
                                                             December 31,
                                                             (Unaudited)
                                                      2002                2001
                                                   -----------      ------------

Weighted-average common shares outstanding          1,084,450        1,084,450
Average treasury stock shares                        (152,165)        (152,165)
Average unearned ESOP and RSP shares                  (41,659)         (48,989)
                                                    ---------        ---------

Weighted-average common shares and
    common stock equivalents used to
    calculate basic earnings per share                890,626          883,296

Additional common stock equivalents
    (stock options) used to calculate
    diluted earnings per share                              -                -
                                                    ---------        ---------
Weighted-average common shares and
    common stock equivalents used
    to calculate diluted earnings per share           890,626          883,296
                                                    =========        =========


                                       -7-

<PAGE>

NOTE 2 - EARNINGS PER SHARE (CONTINUED)


                                                        Three Months Ended
                                                            December 31
                                                            (Unaudited)
                                                       2002            2001
                                                  -------------  ---------------

Weighted-average common shares outstanding         1,084,450        1,084,450
Average treasury stock shares                       (152,165)        (152,165)
Average unearned ESOP and RSP shares                 (40,213)         (47,543)
                                                   ---------        ---------

Weighted -average common shares and
    common stock equivalents used to
    calculate basic earnings per share               892,072          884,742

Additional common stock equivalents
    (stock options) used to calculate
    diluted earnings per share                             -                -
                                                   ---------        ---------
Weighted-average common shares and
    common stock equivalents used
    to calculate diluted earnings per share          892,072          884,742
                                                   =========        =========


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,  2002,   comprehensive   income  totaled  $302,156  and  $967,111,
respectively.   For  the  three  and  six  months   ended   December  31,  2001,
comprehensive income totaled $232,687 and $965,858, respectively.

NOTE 4 - EXTRAORDINARY ITEM

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

NOTE 5 - BRANCH DEVELOPMENT

On  October  28,  2002,  the  Company  entered  into a purchase  and  assumption
agreement  to acquire the  deposits  of Second  National  Bank of  Warren's  two
Steubenville,  Ohio branches. The acquisition includes approximately $89 million
in  deposits,  $85,000 in loans and real and personal  property  with a value of
approximately  $450,000.  The  Company is paying a premium of  approximately  $6
million for the  deposits.  The  transaction  was  completed  as of the close of
business February 7, 2003.


                                       -8-
<PAGE>

NOTE 6 - OTHER BORROWINGS

Other borrowings at December 31, 2002 consisted of $7.2 million of floating rate
trust capital  securities.  In December  2002, the Company formed a wholly-owned
subsidiary,  Advance Statutory Trust I (the "Trust").  On December 19, 2002, the
Trust issued and sold $7.2  million of floating  rate  capital  securities  in a
pooled trust  offering.  The interest rate resets every quarter to 3-month LIBOR
plus 3.25% with an initial rate of 4.66%. The capital securities mature in 2032,
and the Company  has the right to redeem the  securities  prior to the  maturity
date but no sooner than five years after the  issuance.  The proceeds  were used
for the acquisition of two branches from Second  National Bank of Warren,  which
was completed as of the close of business February 7, 2003.

NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS

In April 2002, the FASB issued FAS No. 145,  "Recission of FASB Statement  No.4,
44 and 64, Amendment of FASB Statement No. 13, and Technical  Corrections".  FAS
No.  145  rescinds  FAS  No.4,   which   required  all  gains  and  losses  from
extinguishment  of debt to be  aggregated  and, if  material,  classified  as an
extraordinary  item, net of related income tax effect. As a result, the criteria
in  Opinion  30 will  now be used to  classify  those  gains  and  losses.  This
statement   also  amends  FASB  FAS  No.  13  to  require  that  certain   lease
modifications that have economic effects similar to sale-leaseback  transactions
be  accounted  for in the  same  manner  as  sale-leaseback  transactions.  This
statement also makes technical corrections to existing pronouncements, which are
not substantive but in some cases may change accounting practice. FAS No. 145 is
effective for transactions occurring after May 15, 2002. The adoption of FAS No.
145 did not have a  material  effect  on the  Company's  financial  position  or
results of operations.

In July 2002, the FASB issued FAS No. 146,  Accounting for Costs Associated with
Exit or  Disposal  Activities,  which  requires  companies  to  recognize  costs
associated  with exit or disposal  activities when they are incurred rather than
at the date of a commitment to an exit or disposal plan. This statement replaces
EITF Issue No. 94-3,  Liability  Recognition  for Certain  Employee  Termination
Benefits and Other Costs to Exit an Activity  (Including  Certain Costs Incurred
in a  Restructuring).  The new statement  will be effective for exit or disposal
activities  initiated  after  December  31,  2002,  the adoption of which is not
expected to have a material effect on the Company's financial statements


On October 1, 2002, the Financial  Accounting  Standards  Board ("FASB")  issued
Statement  No.  147,  Acquisitions  of  Certain  Financial  Institutions,  which
provides  guidance  on  the  accounting  for  the  acquisition  of  a  financial
institution,  except those between two or more mutual enterprises. The excess of
the fair  value of  liabilities  assumed  over the fair  value of  tangible  and
identifiable  intangible  assets acquired in a business  combination  represents
goodwill that should be accounted for under FASB Statement No. 142, Goodwill and
Other Intangible Assets. Thus, the specialized  accounting guidance in paragraph
5 of FASB Statement No. 72,  Accounting for Certain  Acquisitions  of Banking or
Thrift Institutions, will not apply after September 30, 2002. In accordance with
Statement  147, if previously  acquired  branches that meet the  definition of a
business  combination  as defined in Emerging  Issues Task Force Issue No. 98-3,
the  amount of the  unidentifiable  intangible  asset  will be  reclassified  to
goodwill  upon  adoption  of  that  Statement.  Financial  institutions  meeting
conditions  outlined in  Statement  147 will be  required to restate  previously
issued financial statements. The objective of that restatement requirement is to
present the balance  sheet and income  statement as if the amount  accounted for
under Statement 72 as an  unidentifiable  intangible asset had been reclassified
to goodwill as of the date Statement 142 was initially applied.  (For example, a
financial  institution  that  adopted  Statement  142 on January 1, 2002,  would
retroactively  reclassify the unidentifiable  intangible asset to goodwill as of
that  date and  restate  previously  issued  income  statements  to  remove  the
amortization  expense  recognized  in 2002).  Those  transition  provisions  are
effective on October 1, 2002;  however,  early  application  is  permitted.  The
adoption of this  statement  is not  expected  to have a material  effect on the
Company's financial statements.

                                       -9-
<PAGE>

NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)

On December 31, 2002, the FASB issued FAS No. 148,  Accounting  for  Stock-Based
Compensation - Transition and Disclosure,  which amends FAS No. 123,  Accounting
for Stock-Based Compensation.  FAS No. 148 amends the disclosure requirements of
FAS No. 123 to require more prominent and more frequent disclosures in financial
statements about the effects of stock-based  compensation.  Under the provisions
of FAS No. 123,  companies that adopted the preferable,  fair value based method
were required to apply that method  prospectively  for new stock option  awards.
This  contributed to a "ramp-up" effect on stock-based  compensation  expense in
the first few years following  adoption,  which caused concern for companies and
investors  because of the lack of  consistency in reported  results.  To address
that concern,  FAS No. 148 provides two  additional  methods of transition  that
reflect  an  entity's  full  complement  of  stock-based   compensation  expense
immediately upon adoption,  thereby  eliminating the ramp-up effect. FAS No. 148
also  improves the clarity and  prominence  of  disclosures  about the pro forma
effects of using the fair  value  based  method of  accounting  for  stock-based
compensation  for all  companies--regardless  of the accounting  method used--by
requiring  that  the  data  be  presented  more   prominently   and  in  a  more
user-friendly format in the footnotes to the financial statements.  In addition,
the statement  improves the  timeliness of those  disclosures  by requiring that
this information be included in interim as well as annual financial  statements.
The  transition  guidance and annual  disclosure  provisions  of FAS No. 148 are
effective  for fiscal  years  ending  after  December  15,  2002,  with  earlier
application   permitted  in  certain   circumstances.   The  interim  disclosure
provisions are effective for financial reports containing  financial  statements
for interim periods beginning after December 15, 2002.

In November,  2002, the FASB issued Interpretation No.45, Guarantor's Accounting
and Disclosure  requirements for Guarantees,  Including  Indirect  Guarantees of
Indebtedness of Others. This interpretation  elaborates on the disclosures to be
made by a guarantor  in its interim and annual  financial  statements  about its
obligations  under certain  guarantees that it has issued.  This  interpretation
clarifies  that a  guarantor  is  required  to  disclose  (a) the  nature of the
guarantee,  including the approximate  term of the guarantee,  how the guarantee
arose,  and the events or  circumstances  that would  require the  guarantor  to
perform under the guarantee; (b) the maximum potential amount of future payments
under the guarantee;  (c) the carrying amount of the liability,  if any, for the
guarantor's  obligations  under the guarantee;  and (d) the nature and extent of
any recourse provisions or available  collateral that would enable the guarantor
to recover  the  amounts  paid under the  guarantee.  This  interpretation  also
clarifies  that a guarantor  is required to  recognize,  at the  inception  of a
guarantee,  a liability  for the  obligations  it has  undertaken in issuing the
guarantee,  including its ongoing  obligation to stand ready to perform over the
term of the  guarantee  in the event  that the  specified  triggering  events or
conditions occur. The objective of the initial  measurement of that liability is
the fair value of the guarantee at its inception.  The initial  recognition  and
initial  measurement  provisions  of this  interpretation  are  applicable  on a
prospective  basis to  guarantees  issued or modified  after  December 31, 2002,
irrespective of the guarantor's fiscal year-end. The disclosure  requirements in
this interpretation are effective for financial  statements of interim or annual
periods ending after December 15, 2002.


                                      -10-
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

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

OVERVIEW
--------

On September 18, 2002,  the Bank began  operations in its newly  constructed  de
novo branch  located in the Hollywood  Plaza in  Steubenville,  Ohio.  This full
service branch is staffed by seven full time employees. The cost of the facility
totaled  approximately  $800,000  and  was  paid  for  with  cash  from  current
operations.

On  October  28,  2002,  the  Company  entered  into a purchase  and  assumption
agreement  to acquire the  deposits  of Second  National  Bank of  Warren's  two
Steubenville,  Ohio branches.  The assumption includes approximately $89 million
in  deposits,  $85,000 in loans and real and personal  property  with a value of
approximately  $450,000.  The  Company  is paying a premium on the  deposits  of
approximately $6 million. The deposit and branch acquisition received regulatory
approval in January  2003.  The  transaction  was  completed  as of the close of
business February 7, 2003.

The Company  expects that its  noninterest  expense in fiscal 2003 will increase
due to the costs associated with operating the three additional branches.

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 2002 AND JUNE 30, 2002
------------------------------------------------------------------------

The  Company's   total  assets   increased  by   approximately   $19,400,000  to
$233,747,007  at December  31, 2002,  from  $214,304,941  at June 30, 2002.  Net
loans,   investment   securities  and   mortgage-backed   securities   increased
$16,800,000, $3,900,000 and $1,200,000,  respectively. The net increase in loans
and  securities  has been  funded  primarily  by an increase  of  $9,200,000  in
certificates  of  deposit,  by the  issuance  of  $7,200,000  of  Capital  Trust
Securities  by  Advance  Statutory  Trust I, a wholly  owned  subsidiary  of the
Company,  and by the use of $4,500,000 in  interest-bearing  deposits with other
financial institutions.

Investment  securities  increased $3,900,000 to $16,892,757 at December 31, 2002
from  $12,999,362  at June 30, 2002. The increase is due in part to the purchase
of five municipal  securities  totalling  $3,100,000 with a weighted average tax
equivalent  yield of 6.43% and an average  maturity  of 15 years  with  callable
provisions ranging from 7 to 10 years. The increase is also due in part to a net
increase in callable  agency  securities  of  $1,000,000.  During the six months
ended  December  31,  2002,  the  Company  has had seven  investments  totalling
$4,000,000 called.  These investments were replaced by similar agency securities
in terms of amounts and maturities. The weighted average yield on the securities
called was 4.37%  while the average  yield on the  investments  replacing  these
securities  was 2.90%.  The  decrease in yield is due to current  interest  rate
environment of decreasing yields.

Mortgage-backed  securities  increased $1,200,000 to $10,406,023 at December 31,
2002 from  $9,187,872  at June 30, 2002.  The increase is due to the purchase of
two GNMA  investments  totalling  $3,100,000.  These  securities have an average
yield of 4.20% and average  lives  ranging from 3.5 to 5 years.  The purchase of
these  securities  was  offset by  accelerated  prepayments  of higher  yielding
securities of $1,900,000  for the six months ended  December 31, 2002 due to the
current rate environment for 1-4 family mortgages.

Loans receivable, net increased $16,793,000 to $188,938,966 at December 31, 2002
from $172,145,867 at June 30, 2002. The increase in net loans consists primarily
of 1-4 family  mortgages,  automobile  dealer floor plan loans, land development
loans and  dealer  originated  automobile  loans  which  increased  $11,100,000,
$1,091,000 $1,135,000 and $2,701,000,  respectively.  The increase in 1-4 family
mortgages includes  approximately  $9,900,000 for the three-month period October
to December 2002. The increase over this period is due to a change in management
strategy to increase the Company's  interest-earning  assets in  anticipation of
the  acquisition of the branch  offices from the Second  National Bank of Warren
Ohio. The branch  acquisition was completed as of the close of business February
7, 2003. The majority of these 1-4 family mortgage loans would have been sold in
periods  prior to this change in  strategy.  The  increase in dealer  originated
automobile  loans is the result of new  relationships  the company has developed
with floor plan customers over the six month period ended December 31, 2002.

                                      -11-

<PAGE>

Office  properties  and  equipment,  net  increased  $821,000 to  $4,722,956  at
December 31, 2002 from  $3,901,592  at June 30, 2002.  The increase is primarily
the result of the  construction  and  furnishing  of the  Bank's de novo  branch
facility in the Hollywood Plaza in Steubenville,  Ohio which opened for business
on September 18, 2002.

Deposits  increased  $11,259,000  to  $186,442,544  at  December  31,  2002 from
$175,058,743  at June 30, 2002.  The increase is primarily due to an increase in
certificates of deposit of $9,200,000. This increase is comprised of deposits in
longer-term  products  such as two year and 34 month  specials  and 5 and 7 year
term regular products.  These increases are the result of customer preference to
obtain higher yields in the current  interest rate  environment.  Deposit growth
over the three-month  period ended December 31, 2002 was $3,200,000  compared to
$8,100,000 for the three month period ended  September 30, 2002.  This reduction
in deposit growth is a result of a change in management strategy in anticipation
of the  acquisition of the two branches from the Second National Bank of Warren,
Ohio. The acquisition was completed as of the close of business February 7, 2003
and brought approximately of $89 million in deposits, therefore, the Company has
restrained from aggressive deposit growth over the past three month period.

During the three months ended December 31, 2003, the Company  participated  in a
pooled trust preferred offering. The effective date of the issuance was December
19, 2002.  The rate on the  securities is at 3-month  LIBOR plus 3.25%  adjusted
quarterly, the beginning rate is 4.66% and it is effective until March 26, 2003.
The  securities  are  written  with a 30  year  maturity  and a five  year  call
provision.

Stockholders' equity increased approximately $841,000 to $19,064,864 at December
31, 2002 from  $18,223,746 at June 30, 2002. This increase was the result of net
income of $887,000  for the period,  the  recognition  of shares in the Employee
Stock Ownership Plan and Restricted Stock Plan of $86,000 and an increase in the
net unrealized gain on securities of $80,000. These increases were offset by the
payment of cash dividends of $212,000.


COMPARISON  OF THE  RESULTS OF  OPERATIONS  FOR THE THREE AND SIX  MONTHS  ENDED
--------------------------------------------------------------------------------
DECEMBER 31, 2002 AND 2001
--------------------------

Net interest  income  increased  $159,000 or 9.63%,  to $1,815,000 for the three
months ended December 31, 2002 from  $1,656,000 for the comparable  period ended
2001. The increase in net interest income resulted primarily from an increase in
the average  volume of the  underlying  principle  balances in interest  earning
assets and  liabilities.  The net  interest  spread for the three  months  ended
December 31, 2002 decreased to 3.07% from 3.12% for the comparable  period ended
2001. The 5 basis point decrease in the net interest rate spread for the current
three month  period was  primarily  due to a 105 basis point  decline in average
yields on assets  which was offset by a 100 basis point  decline in average cost
of funds. See "Average Balance Sheet" for the three-month periods ended December
31, 2002 and 2001.

Net  interest  income  increased  $579,000  or  18.86%,  to  $3,649,000  for the
six-months  December 31, 2002 from  $3,070,000 for the  comparable  period ended
2001. The increase in net interest income resulted primarily from an increase in
the average  volume of the  underlying  principle  balances in interest  earning
assets  and  liabilities.  The net  interest  spread  for the six  months  ended
December 31, 2002 increased to 3.14% from 3.03% for the comparable  period ended
2001.  The 11 basis  point  increase  in the net  interest  rate  spread for the
current six month period was  primarily  the result of a 118 basis point decline
in  average  cost of funds  which was  offset by a 107 basis  point  decline  in
average yields on assets.  See "Average Balance Sheet" for the six-month periods
ended December 31, 2002 and 2001.

The provision for loan losses increased $22,000 to $105,000 for the three months
ended December 31, 2002 from $83,000 for the  comparable  period ended 2001. The
provision  increased  $5,000 to $154,000 for the six months  ended  December 31,
2002 from  $149,000 for the  comparable  period ended 2001.  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,  political  trends  effecting 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.

                                      -12-
<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,
fair  value  of the  collateral  or the  present  value  of  future  cash  flows
discounted at the loan's  effective  interest  rate.  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 decreased $89,000 or 22.85%, to $301,000 for the three months
ended  December  31, 2002 from  $390,000 for the  comparable  period ended 2001.
Noninterest  income  increased  $45,000 or 6.80% to $704,000 for the  six-months
ended December 31, 2002 from $659,000 for the comparable  period ended 2001. For
the three and six month periods of 2002,  miscellaneous fees and fees on deposit
accounts  increased  by $26,000  and  $69,000,  respectively,  as a result of an
increase in core  customers  and related  activity.  For the three and six month
periods  of 2002,  gains on sales of fixed  rate  loans  and  income  from  loan
servicing activity decreased $111,000 and $7,000,  respectively,  as a result of
the  change in  management  strategy  toward  retaining  fixed  rate 1-4  family
mortgage loans that would have been sold, as noted above in the loan discussion.
Until such time as the funds acquired in the assumption  have been invested into
interest  earning  assets,  management  expects  to  maintain  its  strategy  of
retaining 1-4 family  mortgages.  Therefore,  future gains and servicing  income
will decline accordingly.

Noninterest  expense  increased  $120,000 or 9.25%,  to $1,415,000 for the three
months ended December 31, 2002,  from $1,295,000 for the comparable 2001 period.
Noninterest  expense  increased  $358,000 or 14.87%,  to $2,770,000  for the six
months ended December 31, 2002 from  $2,412,000 for the comparable  period ended
2001. For the three and six month periods ended December 31, 2002,  compensation
and employee benefits increased $31,000 and $121,000, respectively. The increase
in compensation and employee  benefits for the three and six month periods ended
December 31, 2002 totalled $39,000 and $97,000,  respectively, due to the hiring
of  additional  employees to operate the two branches  acquired in the Company's
acquisition of Ohio State Financial  Services ("OSFS") in September 2001 and the
September 2002 opening of the de novo branch in Steubenville,  Ohio. The effects
of the OSFS merger totals $58,000 and includes two additional months for 2002 in
comparison  to the same  period of 2001.  The  effects of the de novo  branch in
Steubenville totals $39,000 and is primarily reflected in the three month period
October to December 2002. Occupancy and equipment,  professional fees, marketing
and data  processing  expenses  have  increased  by $79,000 and $159,000 for the
three  and six  month  periods  ended  December  31,  2002,  respectively.  Such
increases  are  primarily  due to the operation of the two OSFS branches and the
opening of the de novo branch in  Steubenville,  Ohio in September 2002. For the
three  and six month  period  ended  December  31,  2002,  other  expenses  have
increased  $10,000 and $79,000,  respectively.  The increase in other expense is
due to increases in supplies,  communications and postage of $1,000 and $16,000,
in fees paid for ATM and consumer card usage of $14,000 and $26,000, and in fees
paid to the Federal  Reserve for item  processing of $2,000 and $4,000,  for the
three and six month periods, 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 merger with OSFS in September  2001 and the opening of
the de novo branch in  Steubenville,  Ohio in September 2002.  Regulatory  fees,
capital market  assessments  and state tax franchise fees have increased  $8,000
and $16,000 for the three and six month periods  ended  December 31, 2002 due to
factors  related to asset and  capital  growth.  Expenses  related to Other Real
Estate and Repossessed  assets  decreased  $5,000 for the three month period but
increased  $11,000 for the six month period  ended  December 31, 2002 due to the
activity in these areas.

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

As of  December  31,  2002,  the  Company  had  commitments  to  fund  loans  of
approximately  $5,801,764.  These loan  commitments are expected to be funded by
January 31, 2003.

Management  monitors both the Company's and the Bank's total risk-based,  Tier I
risk-based  and Tier I leveraged  capital  ratios in order to assess  compliance
with regulatory guidelines.  At December 31, 2002, both the Company and the Bank
exceeded the minimum  risk-based and leveraged capital ratio  requirements.  The
Company's and the Bank's total risk-based, Tier I risk-based and Tier I leverage
ratios are 12.54%, 11.91% and 7.91% and 16.20%, 15.57% and 10.33%, respectively,
at December 31, 2002.

                                      -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,
                                                    -----------------------------------------------
                                                         2002            Vs             2001
                                                    -----------------------------------------------
                                                                   Increase (Decrease)
                                                                       Due to
                                                    -----------------------------------------------
                                                        Volume          Rate             Net
                                                    -----------------------------------------------
<S>                                                  <C>            <C>              <C>
Interest Income:
    Loans                                                $ 389,116      $(411,561)       $(22,445)
    Investments                                             97,920       (117,899)        (19,979)
                                                    -----------------------------------------------
      Total interest-earning assets                        487,036       (529,460)        (42,424)
                                                    -----------------------------------------------

Interest Expense
    Core Deposits                                           75,081       (117,188)        (42,107)
    Certificates of Deposit                                164,112       (323,909)       (159,797)
    FHLB Borrowings                                              -              -               -
                                                    -----------------------------------------------
      Total interest-bearing liabilities                   239,193       (441,097)       (201,904)
                                                    -----------------------------------------------

Net change in interest income                             $247,843      $ (88,363)       $159,480
                                                    ===============================================
</TABLE>

<TABLE>
<CAPTION>
                                                            Six Months Ended December 31,
                                                    -----------------------------------------------
                                                         2002            Vs             2001
                                                    -----------------------------------------------
                                                                   Increase (Decrease)
                                                                       Due to
                                                    -----------------------------------------------
                                                        Volume          Rate             Net
                                                    -----------------------------------------------
<S>                                                   <C>             <C>             <C>
Interest Income:
    Loans                                               $1,194,795      $(886,435)       $308,360
    Investments                                            158,868       (241,320)        (82,452)
                                                    -----------------------------------------------
      Total interest-earning assets                      1,353,663     (1,127,755)        225,908
                                                    -----------------------------------------------

Interest Expense
    Core Deposits                                          228,041       (225,092)          2,949
    Certificates of Deposit                                434,261       (787,774)       (353,513)
    FHLB Borrowings                                         (2,449)             -          (2,449)
                                                    -----------------------------------------------
      Total interest-bearing liabilities                   659,853     (1,012,866)       (353,013)
                                                    -----------------------------------------------

Net change in interest income                             $693,810      $(114,889)       $578,921
                                                    ===============================================
</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>
                                                                          Period Ended December 31,
                                                -------------------------------------------------------------------------------
                                                                  2002                                       2001
                                                -------------------------------------- ----------------------------------------
                                                 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)                          $181,527         $3,161         6.96%    $161,077         $3,183         7.90%
  Investment securities (2)                       26,721            210         3.14%      18,168            198         4.36%
  Mortgage-backed securities                       8,699            117         5.40%       9,564            149         6.25%
                                                --------    ------------   ----------- ----------    ------------   -----------
     Total interest-earning assets               216,947          3,488         6.43%     188,809          3,530         7.48%
                                                            ------------   -----------               ------------   -----------
Non-interest-earning assets                        9,522                                    7,944
                                                ---------                              -----------
     Total assets                               $226,469                                 $196,753
                                                =========                              ===========

Interest-bearing liabilities:
  Interest-bearing demand deposits               $29,889            135         1.80%     $24,262            150         2.47%
  Certificates of deposit                        110,704          1,068         3.86%      97,082          1,223         5.04%
  Savings deposits                                37,153            177         1.91%      30,529            208         2.74%
  Borrowings                                      21,200            293         5.52%      20,000            293         5.85%
                                                --------    ------------   ----------- ----------    ------------   -----------
     Total interest-bearing liabilities          198,946          1,673         3.36%     171,873          1,874         4.36%
                                                            ------------   -----------               ------------   -----------
Non-interest bearing liabilities                   8,525                                    7,709
                                                ---------                              -----------
     Total liabilities                           207,471                                  179,582
Stockholders' equity                              18,998                                   17,171
                                                ---------                              -----------
     Total liabilities and stockholders'
       equity                                   $226,469                                 $196,753
                                                =========                              ===========

Net interest income                                             $ 1,815                                  $ 1,656
                                                            ============                             ============
Interest rate spread (3)                                                        3.07%                                    3.12%
                                                                           ===========                              ===========
Net Yield on interest-earning assets (4)                                        3.35%                                    3.51%
                                                                           ===========                              ===========
Ratio of average interest-earning assets  to
  average interest-bearing liabilities                                        109.05%                                  109.85%
                                                                           ===========                              ===========
</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>
                                                                         Period Ended December 31,
                                             --------------------------------------------------------------------------------------
                                                            2002                                           2001
                                             ---------------------------------------     ------------------------------------------
                                               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)                        $178,141         $6,339         7.12%          $148,644         $6,031         8.11%
  Investment securities (2)                     25,756            418         3.24%            18,631            437         4.70%
  Mortgage-backed securities                     8,847            241         5.45%             9,614            304         6.32%
                                              --------    ------------   -----------     ------------    ------------   -----------
     Total interest-earning assets             212,744          6,998         6.58%           176,889          6,772         7.66%
                                                          ------------   -----------                     ------------   -----------
Non-interest-earning assets                      9,231                                          7,547
                                             ----------                                  -------------
     Total assets                             $221,975                                       $184,436
                                             ==========                                  =============

Interest-bearing liabilities:
  Interest-bearing demand deposits             $29,615            280         1.89%           $22,652            291         2.57%
  Certificates of deposit                      108,028          2,121         3.93%            91,843          2,470         5.38%
  Savings deposits                              36,440            363         1.99%            25,607            353         2.76%
  Borrowings                                    20,600            585         5.68%            20,000            588         5.88%
                                              --------    ------------   -----------     ------------    ------------   -----------
     Total interest-bearing liabilities        194,683          3,349         3.44%           160,102          3,702         4.63%
                                                          ------------   -----------                     ------------   -----------
Non-interest bearing liabilities                 8,540                                          7,476
                                             ----------                                  -------------
     Total liabilities                         203,223                                        167,578
Stockholders' equity                            18,752                                         16,858
                                             ----------                                  -------------
     Total liabilities and stockholders'
       equity                                 $221,975                                       $184,436
                                             ==========                                  =============

Net interest income                                           $ 3,649                                        $ 3,070
                                                          ============                                   ============
Interest rate spread (3)                                                      3.14%                                          3.03%
                                                                         ===========                                    ===========
Net Yield on interest-earning assets (4)                                      3.43%                                          3.47%
                                                                         ===========                                    ===========
Ratio of average interest-earning assets to
  average interest-bearing liabilities                                      109.28%                                        110.49%
                                                                         ===========                                    ===========
</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,  renegotiated loans, loans 90 days past due, other real estate
loans and repossessed  assets.  A loan is classified as nonaccrual  when, in the
opinion of management, there are serious doubts about collectibility of interest
and  principal.  At the time the  accrual of interest  is  discontinued,  future
income is recognized  only when cash is received.  Renegotiated  loans are those
loans which terms have been  renegotiated  to provide a reduction or deferral of
principal or interest as a result of the deterioration of the borrower.


                                                       December 31,     June 30,
                                                           2002           2002
                                                         ------         ------

Loans on a nonaccrual basis                              $  831         $  864
Loans past due 90 days or more and still accruing           586          1,148
                                                         ------         ------
         Total nonperforming loans                        1,417          2,012
                                                         ------         ------

Other real estate                                           688            645
Repossessed assets                                           10             18
                                                         ------         ------
         Total nonperforming assets                      $2,115         $2,675
                                                         ------         ------

Nonperforming loans as a percentage of total net loans     0.75%          1.17%
                                                         ======         ======

Nonperforming assets as a percentage of total assets       0.91%          1.25%
                                                         ======         ======

Allowance for loan losses to nonperforming loans          68.99%         48.16%
                                                         ======         ======


Nonaccrual  loans at December  31,  2002,  consisted  of $272,803 in one to four
family residential  mortgages,  $41,575 in multi-family  mortgages,  $177,671 in
non-residential  real  estate  mortgages  and  $339,430 in  commercial  loans at
December 31, 2002.

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, 2002,  the total  investment in impaired  loans was $928,388,
and such amount was subject to a specific allowance for loan losses of $125,884.
The average  investment  in the impaired  loans for the  six-month  period ended
December 31, 2002 was $958,444.  The interest  income  potential  based upon the
original  terms of the  contracts  of these  impaired  loans was $42,228 for the
six-month  period ended December 31, 2002. A total of $24,176 of interest income
has been recognized for the six-month period ended December 31, 2002.

                                      -17-

<PAGE>

During the six-month period ended December 31, 2002, the Company foreclosed upon
a loan with a balance of $102,228  that was  classified  as impaired at June 30,
2002. As a result of the foreclosure  action,  the asset  collaterallizing  this
loan was added to "Other Real Estate" in the amount of $75,000,  which  resulted
in a write  down to the  allowance  for loan  losses  during  the  period  ended
December 31, 2002 of $27,517.

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,
2002 and June 30, 2002:

                                        December 31,    June 30,
                                           2002           2002
                                       ------------   ------------
Mortgage loans:
           1-4 family                  $102,730,054   $ 91,663,131
           Multi-family                   6,542,282      6,864,328
           Non-residential               36,193,991     36,146,830
           Construction                   4,611,482      4,338,936
                                       ------------   ------------
                                        150,077,809    139,013,225
                                       ------------   ------------
Consumer Loans:
           Home Improvement                 913,553        943,384
           Automobile                    20,250,116     17,176,464
           Share loans                    1,838,728      1,589,842
           Other                          2,705,231      2,613,244
                                       ------------   ------------
                                         25,707,628     22,322,934
                                       ------------   ------------

Commercial Loans                         17,050,216     14,824,483
                                       ------------   ------------

Less:
           Loans in process               2,813,058      2,961,044
           Net deferred loan fees           106,005         84,643
           Allowance for loan losses        977,624        969,088
                                       ------------   ------------
                                          3,896,687      4,014,775
                                       ------------   ------------
                Total                  $188,938,966   $172,145,867
                                       ============   ============

                                      -18-

<PAGE>

ITEM 3 - CONTROLS AND PROCEDURES

(1) Evaluation of disclosure controls and procedures - Based on their evaluation
    ------------------------------------------------
as of a date within 90 days of the filing date of this Quarterly  Report on Form
10-QSB,  the Registrant's  principal  executive officer and principal  financial
officer have concluded that the Registrant's  disclosure controls and procedures
(as defined in Rules 13a-14(c) and 15d-14(c)  under the Securities  Exchange Act
of 1934 (the "Exchange Act")) 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  controls - There were no  significant  changes in the
     ------------------------------
Registrant's  internal  controls or in other  factors  that could  significantly
affect these controls subsequent to the date of their evaluation,  including any
corrective  actions  with  regard  to  significant   deficiencies  and  material
weaknesses.


                                      -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,
2002 and the following matters were voted upon:


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

                                              FOR         WITHHELD
                                              ---         --------
     Walker Peterson Holloway, Jr.          802,291         4,045
     John R. Sperlazza                      802,291         4,045
     Dominic J. Teramana, Jr.               802,291         4,045

Directors  continuing  in office are Stephen M.  Gagliardi,  William B. Chesson,
Kelly M. Bethel, William E. Watson, and Frank Gary Young.


PROPOSAL  II -  Ratification  of the  appointment  of S.R.  Snodgrass,  AC.,  as
                independent auditors for the Company, for the fiscal year ending
                June 30, 2003.

                                              FOR         AGAINST      ABSTAIN
                                              ---         -------      -------
                                            794,082        11,054       1,200


Item 5 - Other Information

                 NONE


                                      -20-

<PAGE>

Item 6  - Exhibits and reports on Form 8-K

<TABLE>
<CAPTION>
       <S>     <C>
        (a)      List of Exhibits:

                  3(i)   Certificate of Incorporation of Advance Financial Bancorp *
                  3(ii)  Amended Bylaws of Advance Financial Bancorp *****
                  4(i)   Specimen Stock Certificate *
                  4(ii)  Shareholders Rights Plan **
                 10      Employment Agreement between the Bank and Stephen M. Gagliardi ***
                 10.1    1998 Stock Option Plan ****
                 10.2    Restricted Stock Plan and Trust Agreement ****
                 99      Certifications  pursuant to 18 U.S.C.  Section  1350,  as adopted
                         pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

</TABLE>

(b)    None

--------------------------------------------------------------------------------

*       Incorporated by reference to the Registration Statement on Form S-1
        (File No. 333-13021) declared effective by the SEC on November 12, 1996.

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

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

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

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


                                      -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 13, 2003          By:  /s/Stephen M. Gagliardi
                                       -----------------------------------------
                                       Stephen M. Gagliardi
                                       President and Chief Executive Officer

Date:  February 13, 2003          By:  /s/Stephen M. Magnone
                                       -----------------------------------------
                                       Stephen M. Magnone
                                       Treasurer (Chief Financial Officer)


                                      -22-

<PAGE>

                            SECTION 302 CERTIFICATION


     I, Stephen M. Magnone, certify that:

1.   I have reviewed this quarterly  report on Form 10-QSB of Advance  Financial
     Bancorp;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     (b)  evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     (c)  presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):

     (a)  all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     (b)  any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and


6.   The  registrant's  other  certifying  officer and I have  indicated in this
     quarterly  report  whether  there  were  significant  changes  in  internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.


Date:   February 13, 2003                /s/Stephen M. Magnone
                                         ---------------------------------------
                                         Stephen M. Magnone
                                         Treasurer (Chief Financial Officer)

                                      -23-

<PAGE>

                            SECTION 302 CERTIFICATION


     I, Stephen M. Gagliardi, certify that:

1.   I have reviewed this quarterly  report on Form 10-QSB of Advance  Financial
     Bancorp;

2.   Based on my knowledge,  this  quarterly  report does not contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this quarterly report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in this  quarterly  report,  fairly  present  in all
     material respects the financial  condition,  results of operations and cash
     flows of the  registrant  as of, and for,  the  periods  presented  in this
     quarterly report;

4.   The  registrant's  other  certifying  officers  and I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     (b)  evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     (c)  presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):

     (a)  all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

6.   The  registrant's  other  certifying  officer and I have  indicated in this
     quarterly  report  whether  there  were  significant  changes  in  internal
     controls  or in other  factors  that could  significantly  affect  internal
     controls  subsequent to the date of our most recent  evaluation,  including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.



Date:   February 13, 2003               /s/Stephen M. Gagliardi
                                        ----------------------------------------
                                        Stephen M. Gagliardi
                                        President and Chief Executive Officer


                                      -24-