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


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

For the quarterly period ended SEPTEMBER 30, 2003

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


For the transition period from ________________to__________________


                         Commission file Number 0-21885

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


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

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

                                 (304) 737-3531
              ----------------------------------------------------
              (Registrant's telephone number, including area code)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act  during  the past 12 months  (or such  shorter
period that the registrant was required to file such reports),  and (2) has been
subjected to such filing requirements for the past 90 days.  Yes__x__  No____

State the  number of shares  outstanding  for each of the  issuer's  classes  of
common equity as of the latest practicable date:

       Class:  Common Stock, par value $.0667 per share
        Outstanding at November 12, 2003: 1,398,427


Transitional Small Business Disclosure Format ( check one):
Yes_____  No__x__

<PAGE>

                            Advance Financial Bancorp

                                      Index



                                                                          Page
                                                                          Number
                                                                          ------


Part I - FINANCIAL INFORMATION

        Item 1 - Financial Statements

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

                 Consolidated Statement of Income (Unaudited)
                   For the Three Months ended September 30, 2003
                   and 2002                                                 4

                 Consolidated Statement of Cash Flows (Unaudited)
                   For the Three Months ended September 30, 2003 and
                   2002                                                     5

                 Notes to the Unaudited Consolidated Financial Statements  6-7


        Item 2 - Management's Discussion and Analysis                      8-14


        Item 3 - Control and Procedures                                     15


Part II - OTHER INFORMATION

        Item 1 - Legal Proceedings                                          16

        Item 2 - Changes in Securities                                      16

        Item 3 - Default Upon Senior Securities                             16

        Item 4 - Submissions of Matters to a vote of Security Holders       16

        Item 5 - Other Information                                          16

        Item 6 - Exhibits and Reports on Form 8-K                           16

SIGNATURES                                                                  17

<PAGE>
                             ADVANCE FINANCIAL BANCORP
                       CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                  SEPTEMBER 30,      JUNE 30,
                                                                                     2003             2003
                                                                                 -------------    -------------
<S>                                                                              <C>              <C>
ASSETS
     Cash and cash equivalents:
       Cash and amounts due from banks                                           $   2,317,272    $   2,906,568
       Interest bearing deposits with other institutions                             1,776,449       13,163,753
                                                                                 -------------    -------------
          Total cash and cash equivalents                                            4,093,721       16,070,321
                                                                                 -------------    -------------
     Investment securities:
       Securities held to maturity (fair value of $14,242,672 and $15,298,606)      14,087,631       15,086,475
       Securities available for sale                                                11,288,661       11,394,701
                                                                                 -------------    -------------
          Total investment securities                                               25,376,292       26,481,176
                                                                                 -------------    -------------

     Mortgaged-backed securities:
       Securities held to maturity (fair value of $15,969,777 and $18,751,018)      16,066,720       18,642,532
       Securities available for sale                                                 7,610,094        8,979,898
                                                                                 -------------    -------------
          Total mortgage-backed securities                                          23,676,814       27,622,430
                                                                                 -------------    -------------
     Loans held for sale                                                             2,518,114        5,687,708
     Loans receivable,  (net of allowance for loan losses
          of $1,275,031 and $1,095,822 )                                           253,507,750      229,239,547
     Office properties and equipment, net                                            4,977,291        5,069,073
     Federal Home Loan Bank Stock, at cost                                           2,578,000        1,679,400
     Accrued interest receivable                                                     1,500,282        1,447,525
     Goodwill                                                                        4,700,472        4,700,472
     Other intangibles, net                                                          1,664,820        1,709,413
     Other assets                                                                    2,419,590        2,193,526
                                                                                 -------------    -------------
          TOTAL ASSETS                                                           $ 327,013,146    $ 321,900,591
                                                                                 =============    =============
LIABILITIES:
     Deposits                                                                    $ 265,194,698    $ 272,828,932
     Advances from Federal Home Loan Bank                                           32,500,000       20,000,000
     Other Borrowings                                                                7,200,000        7,200,000
     Advance payments by borrowers for taxes and insurance                             422,535          507,049
     Accrued interest payable and other liabilities                                  1,156,313        1,276,657
                                                                                 -------------    -------------
          TOTAL LIABILITIES                                                        306,473,546      301,812,638
                                                                                 -------------    -------------
STOCKHOLDERS' EQUITY:
     Preferred stock, $.10 par value; 500,000 shares
         authorized, none issued                                                          --               --
     Common stock, $.0667 par value; 3,000,000 shares
          authorized 1,626,675 shares issued                                           108,445          108,445
     Additional paid in capital                                                     10,499,002       10,467,559
     Retained earnings - substantially restricted                                   12,225,547       11,705,306
     Unallocated shares held by Employee Stock Ownership Plan (ESOP)                  (228,944)        (250,634)
     Unallocated shares held by Restricted Stock Plan (RSP)                           (205,732)        (206,756)
     Treasury Stock (228,248 shares at cost)                                        (2,233,265)      (2,233,265)
     Accumulated other comprehensive income                                            374,547          497,298
                                                                                 -------------    -------------
          TOTAL STOCKHOLDERS' EQUITY                                                20,539,600       20,087,953
                                                                                 -------------    -------------
          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                             $ 327,013,146    $ 321,900,591
                                                                                 =============    =============
</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

                                       3
<PAGE>
                      ADVANCE FINANCIAL BANCORP
             CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED
                                                               SEPTEMBER 30,
                                                            2003           2002
                                                        -----------    -----------
<S>                                                     <C>            <C>
INTEREST AND DIVIDEND INCOME
    Loans                                               $ 3,908,300    $ 3,178,795
    Investment securities - taxable                         140,348         79,914
    Investment securities - nontaxable                      111,984         76,987
    Interest-bearing deposits with other institutions         8,971         42,258
    Mortgage-backed securities                              203,306        123,564
    Dividends on Federal Home Loan Bank Stock                10,845          8,668
                                                        -----------    -----------
        Total interest and dividend income                4,383,754      3,510,186
                                                        -----------    -----------
INTEREST EXPENSE
    Deposits                                              1,505,250      1,383,869
    Advances from Federal Home Loan Bank                    310,170        292,738
    Other Borrowings                                         78,493           --
                                                        -----------    -----------
        Total interest expense                            1,893,913      1,676,607
                                                        -----------    -----------
NET INTEREST INCOME                                       2,489,841      1,833,579

Provision for loan losses                                   321,000         49,200
                                                        -----------    -----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES       2,168,841      1,784,379
                                                        -----------    -----------

NONINTEREST INCOME
    Service charges on deposit accounts                     205,924        152,590
    Income from loan servicing activity                      81,102         66,235
    Gain on sale of loans                                   132,817         94,926
    Loss on sale of repossessed assets                      (13,370)       (12,539)
    Other income                                             99,370        102,529
                                                        -----------    -----------
        Total noninterest income                            505,843        403,741
                                                        -----------    -----------
NONINTEREST EXPENSE
    Compensation and employee benefits                      745,887        614,726
    Occupancy and equipment                                 272,439        251,811
    Professional fees                                        41,443         36,016
    Advertising                                              50,706         26,795
    Data processing charges                                 130,238         79,017
    Amortization of intangible asset                         44,593           --
    Other expenses                                          408,562        347,476
                                                        -----------    -----------
        Total noninterest expenses                        1,693,868      1,355,841
                                                        -----------    -----------
Income before income taxes                                  980,816        832,279
Income taxes                                                326,445        306,899
                                                        -----------    -----------
NET INCOME                                              $   654,371    $   525,380
                                                        ===========    ===========


EARNINGS PER SHARE - NET INCOME
        Basic                                           $       .49    $       .39
        Diluted                                         $       .48    $       .39
DECLARED DIVIDEND PER SHARE                             $       .15    $       .12
</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

                                       4
<PAGE>
                          ADVANCE FINANCIAL BANCORP
               CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED
                                                                           SEPTEMBER 30,
                                                                       2003            2002
                                                                   ------------    ------------
<S>                                                                <C>                 <C>
OPERATING ACTIVITIES
     Net Income                                                    $    654,371    $    525,380
     Adjustments to reconcile net income to net cash provided by
        operating activities:
         Depreciation, amortization and accretion, net                  204,050          87,212
         Provision for loan losses                                      321,000          49,200
         Gain on sale of loans                                         (132,817)        (94,926)
         Loss on sale of repossessed assets                              13,370          12,539
         Origination of loans held for sale                         (12,089,588)     (7,654,419)
         Proceeds from the sale of loans                             15,391,999       8,327,992
         Increase in other assets and liabilities                      (243,047)        363,707
                                                                   ------------    ------------
              Net cash provided by operating activities               4,119,338       1,616,685
                                                                   ------------    ------------
INVESTING ACTIVITIES
     Investment securities held to maturity:
         Maturities and repayments                                    1,000,000            --
     Investment securities available for sale:
         Purchases                                                         --        (2,004,133)
         Maturities and repayments                                          480       2,300,550
     Mortgage-backed securities held to maturity:
         Maturities and repayments                                    2,504,769         135,440
     Mortgage-backed securities available for sale:
         Purchases                                                         --        (1,000,050)
         Maturities and repayments                                    1,268,977       1,310,210
     Purchase of Federal Home Loan Bank Stock                          (898,600)           --
     Net increase in loans                                          (24,589,203)     (4,210,749)
     Purchases of premises and equipment                                (29,483)       (906,701)
                                                                   ------------    ------------
              Net cash used in investing activities                 (20,743,060)     (4,375,433)
                                                                   ------------    ------------
FINANCING ACTIVITIES
     Net (decrease) increase in deposits                             (7,634,234)      7,535,903
     Net increase in short term borrowings                           12,500,000            --
     Net change in advances for taxes and insurance                     (84,514)       (156,289)
     Cash dividends paid                                               (134,130)       (106,044)
                                                                   ------------    ------------
              Net cash provided by financing activities               4,647,122       7,273,570
                                                                   ------------    ------------
              (Decrease) increase in cash and cash equivalents      (11,976,600)      4,514,822

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                     16,070,321      11,770,440
                                                                   ------------    ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                         $  4,093,721    $ 16,285,262
                                                                   ============    ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Cash paid during the period for:
         Interest on deposits and borrowings                       $  1,899,841    $  1,688,127
         Income taxes                                              $    485,000    $    285,000
</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

                                       5
<PAGE>


                            ADVANCE FINANCIAL BANCORP
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

The  consolidated   financial  statements  of  Advance  Financial  Bancorp  (the
"Company"),  includes its wholly-owned  subsidiaries,  Advance Financial Savings
Bank (the "Bank") and the Bank's wholly-owned  service  corporation  subsidiary,
Advance  Financial  Service  Corporation  of  West  Virginia.   All  significant
intercompany balances and transactions have been eliminated.

The accompanying  unaudited consolidated financial statements have been prepared
in  accordance  with the  instructions  to Form  10-QSB and,  therefore,  do not
necessarily  include all information that would be included in audited financial
statements.  The information  furnished reflects all adjustments,  which are, in
the  opinion  of  management,  necessary  for a fair  statement  of  results  of
operations.  All such adjustments are of a normal recurring nature.  The results
of  operations  for the interim  periods are not  necessarily  indicative of the
results  to be  expected  for the fiscal  year ended June 30,  2004 or any other
period.

These statements should be read in conjunction with the consolidated  statements
of and for the year ended June 30, 2003 and related  notes which are included on
the Form 10-KSB (file no. 0-21885).


NOTE 2 - EARNINGS PER SHARE

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

Effective for shareholders of record as of November 10, 2003, the Company issued
a three for two  stock  split.  The stock  split was done in the form of a stock
dividend.  The effects on EPS have been included for the comparative  periods in
the accompanying financial statements.
<TABLE>
<CAPTION>
                                                                             Three Months Ended
                                                                                September 30
                                                                                (Unaudited)
                                                                           2003             2002
                                                                       --------------     ----------

<S>                                                                      <C>              <C>
Weighted-average common shares outstanding                               1,626,675        1,626,675
Average treasury stock shares                                             (228,248)        (228,248)
Average unearned ESOP and RSP shares                                       (50,795)         (63,572)
                                                                         ---------        ---------
Weighted -average common shares and
    common stock equivalents used to
    calculate basic earnings per share                                   1,347,632        1,334,855

Additional common stock equivalents
    (stock options) used to calculate
    diluted earnings per share                                              24,675                -
                                                                         ---------        ---------
Weighted-average common shares and
    common stock equivalents used
    to calculate diluted earnings per share                              1,372,307        1,334,855
                                                                         =========        =========
</TABLE>


                                       6
<PAGE>

NOTE 3 - COMPREHENSIVE INCOME

Other accumulated  comprehensive  income consists solely of net unrealized gains
and  losses  on  available  for sale  securities.  For the  three  months  ended
September 30, 2003 and 2002, comprehensive income totaled $531,620 and $664,955,
respectively.

NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS

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

                                       7
<PAGE>

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

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

OVERVIEW
--------

On October 21, 2003, the Company's  Board of Directors  approved a three for two
(50%) stock split in the form of a stock dividend.  The stock split is effective
for  holders of record as of  November  10,  2003.  After the stock  split,  the
outstanding  shares of the company  increased  466,142 shares to 1,398,427.  The
earnings  per  share  calculations  for  September  30,  2003 and 2002 have been
restated to reflect the stock split.

COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2003 AND JUNE 30, 2003
-------------------------------------------------------------------------
The Company's total assets increased by approximately $5,113,000 to $327,013,146
at September 30, 2003,  from  $321,900,591 at June 30, 2003. Net loans increased
by approximately $24,268,000.  The increase in net loans was primarily funded by
a combined  decrease in interest  bearing  deposits,  investment  securities and
mortgage-backed  securities of  $16,438,000.  Also,  net loans were funded by an
increase  in  short-term  advances  from the  Federal  Home Loan Bank  ("FHLB").
Short-term  advances from the FHLB  increased  $12,500,000  during the period to
fund  loan  demand  and to  replace  the  loss of  approximately  $7,600,000  in
deposits.

Interest-bearing   deposits   with  other   financial   institutions   decreased
$11,387,000  to $1,776,449 at September  30, 2003 from  $13,163,753  at June 30,
2003.  The  decrease  in funds  was used to fund the  company's  increased  loan
demand.  Investment  securities decreased $1,105,000 to $25,376,292 at September
30, 2003 from $26,481,176 at June 30, 2003. This decrease was due primarily to a
called FHLB bond.  The proceeds from this called  security were used to fund the
increased  loan  demand.  Mortgage-backed  securities  decreased  $3,946,000  to
$23,676,814  at  September  30,  2003 from  $27,622,430  at June 30,  2003.  The
decrease  was  due  to  accelerated  principle  repayments  on  higher  yielding
securities  due to the low  interest  rate  environment  during the period ended
September 30, 2003.

Loans held for sale  decreased  $3,170,000  to  $2,518,114 at September 30, 2003
from  $5,687,708 at June 30, 2003.  The decrease is indicative to an increase in
interest  rates on fixed rate 1-4 family  mortgages and the related  decrease in
customer demand for these mortgages.

Loans  receivable,  net increased  $24,268,000 to  $253,507,750 at September 30,
2003 from  $229,239,547  at June 30, 2003.  The  increase in net loans  consists
primarily of 1-4 family  mortgages,  net construction  loans,  automobile dealer
floor plan loans,  and indirect  automobile  loans which increased  $11,380,000,
$1,920,000 $1,678,000 and $9,554,000,  respectively.  The increase in 1-4 family
mortgages include  approximately  $6,695,000 in fixed rate loans that were added
to the Bank's  portfolio  during the period and  $4,685,000 in  adjustable  rate
loans as these  products  became  attractive as a result the Bank's  competitive
pricing  and as a result of the  favorable  interest  rate  changes  during  the
period.  Net construction  loan increases were evenly split at $960,000 each for
1-4 family and non-residential  mortgages. The increase in construction loans is
due to the demand  created by the  anticipation  of near  future  interest  rate
increases in mortgage products.  The increase in dealer floor plans and indirect
automobile  loans is primarily the result of new  relationships  the Company has
developed  over the last  six  months  with the  creation  of an  Indirect  Loan
Department  within  the  Business  Division  of the  bank.  The  success  of the
department  is  indicated  by the  substantial  growth  in both  floor  plan and
indirect auto  lending.  Future growth in these areas will depend upon the local
economy,  competition from other institutions and the  manufacturers'  incentive
programs, as well as, the Company's evaluation of the risk level involved.

FHLB  stock  increased  $898,600  to  $2,578,000  at  September  30,  2003  from
$1,679,400,at  June 30,  2003.  The  increase is  primarily  due to the required
purchases  of stock as a result of the  corresponding  increase  in  outstanding
advances.  During the three month period ended  September 30, 2003,  the Company
increased their advance total by $12,500,000.


                                       8
<PAGE>
Deposits  decreased  $7,634,000  to  $265,194,698  at  September  30,  2003 from
$272,828,932  at June 30, 2003. The decrease is primarily in money market demand
deposits  and Jumbo and "special  term" term  certificate  of deposit  products.
Money  market  accounts  with  balances  in excess  of  $10,000  have  decreased
$1,855,000  during the period as customers  continue to search for higher yields
on their investments in equities or other investment vehicles.  The money market
accounts have been utilized by some  customers as a "parking"  mechanism as they
wait for an  increase in the  interest  rate cycle and  stability  in the equity
markets.  Jumbo and "special term" certificates of deposit decreased  $5,429,000
during  the  period  due  to  similar  customer   sentiments.   These  types  of
certificates  are generally  the highest cost of funds of this  Company,  and as
such, the need for this deposit funding is evaluated based upon the availability
of alternative  funding  sources and other factors.  At this time, the Company's
strategy  is to not offer the  higher  yields  on these  certificates,  but will
instead borrow on a short-term  basis from the FHLB at a  significantly  reduced
rate.  This funding  approach could change in future periods  depending upon the
local demand for loans,  the local market or other factors such as  management's
consideration of interest rate risk.

Advances from the FHLB  increased  $12,500,000  to  $32,500,000 at September 30,
2003 from  $20,000,000 at June 30, 2003.  This increase is currently  applied to
the  Bank's  Open Repo  Line of  Credit  with the  FHLB.  For the  period  ended
September  30,  2003,  the  average  rate paid on the line was 1.23%.  It is the
Company's  intent to continue to use the short term advances offered by the FHLB
until such time as local market  conditions,  the interest rate market and other
management factors dictate.

Stockholders'  equity  increased   approximately   $452,000  to  $20,539,600  at
September  30, 2003 from  $20,087,953  at June 30, 2003.  This  increase was the
result of net income of $654,000 for the period and the recognition of shares in
the Employee Stock  Ownership Plan and Restricted  Stock Plan of $55,000.  These
increases were offset by a decrease in the net unrealized  gain on securities of
$123,000 and by the payment of cash dividends of $134,000.


COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
2003 AND 2002
-------------
Net interest income  increased  $656,000 or 35.79%,  to $2,490,000 for the three
months ended September 30, 2003 from $1,834,000 for the comparable  period ended
2002. The increase in net interest income resulted primarily from an increase in
the average  volume of the  underlying  principle  balances in interest  earning
assets and  liabilities.  The net  interest  spread for the three  months  ended
September  30,  2003,  decreased to 3.12% from 3.21% for the  comparable  period
ended 2002.  The 9 basis point  decrease in the net interest rate spread for the
current  three month period was  primarily  due to a 100 basis point  decline in
average yields on assets which was offset by a 91 basis point decline in average
cost of funds.  The increase in investment and  mortgage-backed  securities as a
result  of the  deposit  assumption  of The  Second  National  Bank of  Warren's
Steubenville, Ohio branches in February 2003 has contributed to a decline in the
net interest margin and net interest spread of the Company. See "Average Balance
Sheet" for the three-month periods ended September 30, 2003 and 2002.

The  provision  for loan losses  increased  $272,000  to $321,000  for the three
months ended  September  30, 2003 from $49,000 for the  comparable  period ended
2002.  The  increase in the  provision  for loan losses was  precipitated  by an
increase in loan volume.  In determining  the adequacy of the allowance for loan
losses, management reviews and evaluates on a quarterly basis the potential risk
in the loan portfolio.  This evaluation  process is documented by management and
approved by the  Company's  Board of Directors.  The  evaluation is performed by
senior  members  of  management  with years of  lending  and review  experience.
Management  evaluates  homogenous  consumer-oriented  loans,  such as 1-4 family
mortgage  loans and retail  consumer  loans,  based upon all or a combination of
delinquencies,   loan  concentrations  and  charge-off  experience.   Management
supplements this analysis by reviewing the local economy, trends affecting local
industry  and  business  development  and other known  factors  which may impact
future  credit  losses.  Nonhomogenous  loans,  generally  defined as commercial
business and real estate  loans,  are selected by management to be reviewed on a
quarterly basis upon the combination of delinquencies,  concentrations and other
known  factors  that may  effect the local  economy  and more  specifically  the
individual businesses.

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.

                                       9
<PAGE>
The  allowance  for  loan  losses  is  maintained  at a  level  that  represents
management's best estimates of losses in the loan portfolio at the balance sheet
date. However, there can be no assurance that the allowance for loan losses will
be  adequate  to cover  losses  which,  may be  realized  in the future and that
additional provision for loan losses will not be required. See "Risk Elements".

Noninterest  income  increased  $102,000 or 25.29%,  to  $506,000  for the three
months ended  September 30, 2003 from $404,000 for the  comparable  period ended
2002. For the three month period of 2003, miscellaneous fees and fees on deposit
accounts  increased  by  $50,000  or 19.67% as a result of an  increase  in core
customers and related activity and individual fee item increases.  For the three
month  period of 2003,  gains on sales of fixed rate loans and income  from loan
servicing  activity  increased  $53,000 as a result of the  customer  demand for
fixed 1-4 family  mortgage  loans during the period in  comparison to the period
ended in 2002.

Noninterest  expense  increased  $338,000 or 24.93%, to $1,694,000 for the three
months ended September 30, 2003, from $1,356,000 for the comparable 2002 period.
For the three-month  period ended September 30, 2003,  compensation and employee
benefits increased $131,000.  The increase in compensation and employee benefits
for the  three  month  period  ended  September  30,  2003 is due in part to the
February 2003 branch  acquisitions and de novo branch opening in September 2002,
$92,000 of the $131,000 increase is attributable to the new branches.  Occupancy
and equipment,  professional fees,  marketing and data processing  expenses have
increased by $101,000 for the three-month  period ended September 30, 2003. Such
increases are  primarily  due to the operation of the new branches  acquired and
opened since  September  2002. For the  three-month  period ended  September 30,
2003, other expenses have increased  $106,000.  The increase in other expense is
due to increases in supplies and communications of $13,000, in fees paid for ATM
and consumer  card usage of $10,000 and in fees paid to the Federal  Reserve for
item  processing of $7,000.  Each of these  increases  are primarily  related to
customer  activity due to the increase in the Company's core  customers  created
primarily by the branch  purchases and the de novo branch opening.  Also,  other
expense  increased for the  three-month  period ended  September  2003 due to an
increase  in  amortization  expense  as a result of the  branch  acquisition  in
February 2003 and costs relating to Other Real Estate and Repossessed  Assets of
$52,000 and $21,000, respectively.

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

LIQUIDITY
---------

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

The Company's  liquid assets consist of cash and cash equivalents and investment
and  mortgage-backed  securities  classified as available for sale. The level of
these assets is dependent on the Company's operating,  investing,  and financing
activities  during any given  period.  At  September  30,  2003,  liquid  assets
totalled  $22.3 million or 7.03% of total assets.  Management  believes that the
liquidity  needs of the Company are satisfied by the current balance of cash and
cash equivalents,  readily available access to traditional funding sources, FHLB
advances,  and the portion of the  investment  and loan  portfolios  that mature
within one year.  These  sources of funds will  enable the  Company to meet cash
obligations and off-balance sheet commitments as they come due.

Operating  activities provided net cash of $4.1 million and $1.6 million for the
three-month  periods ended September 30, 2003 and 2002,  respectively,  and were
generated  principally  from net  income  and net sales of fixed rate 1-4 family
mortgages.

Investing  activities  used $20.7  million and $4.4  million in funds during the
three-month periods ended September 30, 2003 and 2002, respectively.  These cash
usages  primarily  consisted  of loan  originations  of $24.6  million  and $4.2
million for 2003 and 2002, respectively.  Offsetting these usages for the period
ended  September  30, 2003 were  proceeds  from  repayments  and  maturities  of
investment and mortgage-backed securities of $4.8 million.

Financing  activities  consist of the  solicitation  and  repayment  of customer
deposits and  borrowings.  During the three months ended September 30, 2003, net
cash  provided by financing  activities  was $4.6  million,  and consisted of an
increase in borrowings of $12.5 million. Offsetting this amount was reduction in
deposits of $7.6 million.  During the same period ended 2002,  net cash provided
by  financing  activities  totaled  $7.3  million,  principally  derived from an
increase in deposits.

                                       10
<PAGE>
Liquidity may be adversely  affected by unexpected  deposit outflows,  excessive
interest rates paid by competitors,  and similar  matters.  Management  monitors
projected  liquidity  needs and determines the level  desirable based in part on
the bank's  commitment to make loans, as well as management's  assessment of the
Company's  ability to  generate  funds.  The  Company  anticipates  it will have
sufficient  liquidity  available  to meet  estimated  short-term  and  long-term
funding needs.

CAPITAL
-------

Management monitors both the Company's equity capital ratio and the Bank's total
risk-based,  Tier I risk-based  and Tier I leveraged  capital ratios in order to
assess  compliance with regulatory  guidelines.  At September 30, 2003, both the
Company  and the Bank  exceeded  the  minimum  capital  requirements,  including
risk-based and leveraged capital ratios.  The Company's equity capital ratio and
the Bank's total  risk-based,  Tier I risk-based and Tier I leverage  ratios are
4.22% and 10.27%, 9.65% and 6.22%, respectively, at September 30, 2003.


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 September 30,
                                                    -----------------------------------------------
                                                         2003            Vs             2002
                                                    -----------------------------------------------
                                                                   Increase (Decrease)
                                                                       Due to
                                                    -----------------------------------------------
                                                        Volume          Rate             Net
                                                    -----------------------------------------------
<S>                                                     <C>             <C>              <C>
Interest Income:
    Loans                                               $1,318,008      $(588,503)       $ 729,505
    Investments                                            254,617       (110,554)         144,063
                                                    -----------------------------------------------
      Total interest-earning assets                      1,572,625       (699,057)         873,568
                                                    -----------------------------------------------

Interest Expense
    Core Deposits                                          182,345       (237,307)        (54,962)
    Certificates of Deposit                                489,672       (313,330)         176,342
    FHLB Borrowings                                        106,177        (88,744)          17,433
    Other Borrowings                                        78,493               -          78,493
                                                    -----------------------------------------------
      Total interest-bearing liabilities                   856,687       (639,381)         217,306
                                                    -----------------------------------------------

Change in net interest income                             $715,938     $ ( 59,676)        $656,262
                                                    ===============================================
</TABLE>


                                       11
<PAGE>

AVERAGE BALANCE SHEET FOR THE THREE-MONTH PERIOD ENDED SEPTEMBER 30

     The  following  table  sets  forth  certain  information  relating  to  the
Company's  average  balance  sheet and reflects the average  yield on assets and
average cost of  liabilities  for the periods  indicated and the average  yields
earned and rates paid.  Such yields and costs are derived by dividing  income or
expense by the average balance of assets or liabilities,  respectively,  for the
periods  presented.  Average  balances  are  derived  from  month-end  balances.
Management does not believe that the use of month-end  balances instead of daily
average  balances  has  caused  any  material  differences  in  the  information
presented.
<TABLE>
<CAPTION>
                                                                       Three-Month Period Ended September 30,
                                                      ----------------------------------------------------------------------
                                                                    2003                                 2002
                                                      -----------------------------------    --------------------------------
                                                       Average                 Average       Average                Average
                                                       Balance     Interest   Yield/Cost     Balance    Interest   Yield/Cost
                                                      ---------    --------   -----------    -------    --------   ----------
<S>                                                    <C>           <C>         <C>        <C>          <C>          <C>
Interest-earning assets:
  Loans receivable (1)                                 $246,043      $3,908      6.35%      $174,754     $3,179       7.28%
  Investment securities (2)                              33,947         272      3.21%        24,791        208       3.35%
  Mortgage-backed securities                             25,796         204      3.15%         8,994        123       5.50%
                                                       --------      ------    ------       --------     ------     ------
     Total interest-earning assets                      305,786       4,384      5.73%       208,539      3,510       6.73%
                                                                     ------    ------                    ------     ------
Non-interest-earning assets                              17,641                                8,942
                                                       --------                             --------
     Total assets                                      $323,427                             $217,481
                                                       ========                             ========

Interest-bearing liabilities:
  Interest-bearing demand deposits                     $ 53,445         143      1.07%      $ 29,340        145       1.98%
  Certificates of deposit                               154,300       1,229      3.19%       105,353      1,053       4.00%
  Savings deposits                                       49,369         133      1.08%        35,727        186       2.08%
  FHLB Borrowings                                        25,417         310      4.88%        20,000        293       5.85%
  Other Borrowings                                        7,200          79      4.36%             -          -          -
                                                       --------      ------    ------       --------     ------     ------
     Total interest-bearing liabilities                 289,731       1,894      2.61%       190,420      1,677       3.52%
                                                                     ------    ------                    ------     ------
Non-interest bearing liabilities                         13,248                                8,555
                                                       --------                             --------
     Total liabilities                                  302,979                              198,975
Stockholders' equity                                     20,448                               18,506
                                                       --------                             --------
     Total liabilities and stockholders'
       equity                                          $323,427                             $217,481
                                                       ========                             ========

Net interest income                                                 $ 2,490                              $1,833
                                                                    =======                              ======
Interest rate spread (3)                                                         3.12%                                3.21%
                                                                               ======                               ======
Net Yield on interest-earning assets (4)                                         3.26%                                3.52%
                                                                               ======                               ======
Ratio of average interest-earning assets  to
  average interest-bearing liabilities                                         105.54%                              109.52%
                                                                               ======                               ======
<FN>
_____________
(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.
</FN>
</TABLE>

                                       12
<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.
<TABLE>
<CAPTION>
                                                           September 30,    June 30,
                                                                2003          2003
                                                           ------------     --------

<S>                                                           <C>           <C>
Loans on a nonaccrual basis                                   $1,061        $1,398
Loans past due 90 days or more and still accruing              1,537         1,681
                                                              ------        ------
         Total nonperforming loans                             2,598         3,079
                                                              ------        ------

Other real estate                                                662           802
Repossessed assets                                                35            28
                                                              ------        ------
         Total nonperforming assets                           $3,295        $3,909
                                                              ------        ------


Nonperforming loans as a percentage of total net loans          1.02%         1.34%
                                                              ======        ======

Nonperforming assets as a percentage of total assets            1.01%         1.21%
                                                              ======        ======

Allowance for loan losses to nonperforming loans               49.08%        35.60%
                                                              ======        ======
</TABLE>


Nonaccrual  loans at September  30, 2003,  consisted of $450,032 in  one-to-four
family  residential  mortgages  and  $611,138  in  non-residential  real  estate
mortgages.

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

As of September 30, 2003,  the total  investment in impaired loans was $646,164,
and such amount was subject to a specific  allowance for loan losses of $66,357.
The average  investment in the impaired loans for the  three-month  period ended
September 30, 2003 was $649,383.  The interest  income  potential based upon the
original  terms of the  contracts  of these  impaired  loans was $14,159 for the
three-month  period  ended  September  30,  2003.  A total of $7,258 of interest
income has been recognized for the three-month period ended September 30, 2003.

                                       13
<PAGE>

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

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

The following is a breakdown of the loan portfolio  composition at September 30,
2003 and June 30, 2003:
<TABLE>
<CAPTION>
                                                      September 30,                June 30,
                                                         2003                       2003
                                                      ------------              -------------
<S>                                                   <C>                       <C>
Mortgage loans:
           1-4 family                                 $137,486,466              $126,106,815
           Multi-family                                  8,702,301                 8,227,328
           Non-residential                              39,307,581                39,099,195
           Construction                                 13,092,582                10,074,633
                                                      ------------              ------------
                                                       198,588,930               183,507,971
                                                      ------------              ------------
Consumer Loans:
           Home Improvement                                880,609                   900,060
           Automobile-Direct                             8,836,870                 8,761,516
           Automobile-Indirect                          31,694,788                22,140,818
           Share loans                                   2,253,947                 1,914,628
           Other                                         2,490,745                 2,687,302
                                                      ------------              ------------
                                                        46,156,959                36,404,324
                                                      ------------              ------------

Commercial Loans                                        18,190,171                17,383,993

Less:
           Loans in process                              8,023,120                 6,844,741
           Net deferred loan fees                          130,159                   116,178
           Allowance for loan losses                     1,275,031                 1,095,822
                                                      ------------              ------------
                                                         9,428,310                 8,056,741
                                                      ------------              ------------
                Total                                 $253,507,750              $229,239,547
                                                      ============              ============
</TABLE>

                                       14
<PAGE>

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

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


                                       15
<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

                NONE


Item 5 - Other Information

                 NONE

Item 6  - Exhibits and reports on Form 8-K

        (a) List of Exhibits:

            3 (i)  Certificate of Incorporation of Advance Financial Bancorp *
            3 (ii)  Amended Bylaws of Advance Financial Bancorp
            4  (i)  Specimen Stock Certificate *
            4  (ii) Shareholders Rights Plan **
            10      Employment Agreement between the Bank and Stephen M.
                      Gagliardi ***
            10.1    1998 Stock Option Plan ****
            10.2    Restricted Stock Plan and Trust Agreement ****
            31      Certification pursuant to Section 302 of the Sarbanes-Okley
                      Act of 2002
            32      Certification pursuant to Section 906 of the Sarbanes-Oxley
                      Act of 2002
        (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 10-KSB filed with the
     SEC on September 28, 1999.


                                       16
<PAGE>
                                   SIGNATURES

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


                                        Advance Financial Bancorp

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

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


                                       17