EXHIBIT 13




















                         PEOPLES COMMUNITY BANCORP, INC.



                               2002 ANNUAL REPORT


                                 TO STOCKHOLDERS



<PAGE>



                                TABLE OF CONTENTS

===============================================================================


                                                                         Page

President's Letter to Stockholders..........................................1

Business of Peoples Community Bancorp, Inc..................................2

Market Price of Peoples Community Common Shares and
  Related Stockholder Matters...............................................3

Financial Highlights........................................................4

Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................................6

Consolidated Financial Statements:
       Report of Independent Certified Public Accountants..................21
       Consolidated Statements of Financial Condition......................22
       Consolidated Statements of Earnings.................................23
       Consolidated Statements of Comprehensive Income.....................24
       Consolidated Statements of Stockholders' Equity.....................25
       Consolidated Statements of Cash Flows...............................26
       Notes to Consolidated Financial Statements..........................28

Directors and Executive Officers...........................................53

Banking Locations..........................................................54

Stockholder Information....................................................54



<PAGE>


Dear Stockholders:

         It is a pleasure to present to you our successful financial results for
our second full year as a publicly traded stock company. I would also like to
take this opportunity to offer you my thoughts on our progress in achieving our
goal of becoming a premier, independent community bank.

         We continued to expand our operations in fiscal 2002, resulting in a
39.8% increase in total assets to $581.6 million at September 30, 2002. This
growth in assets was primarily driven by a significant increase in loans due to
both our acquisition of Kenwood Bancorp, Inc. and our increased loan production
through our expanded branch network. During fiscal 2002, we were also able to
continue to diversify our loan portfolio by focusing on the origination of
multi-family residential loans, commercial real estate loans, construction loans
and unsecured commercial business loans. These loan types complement our
single-family lending, which still comprises over 50% of our loan portfolio.
This diversification of the loan portfolio resulted in a rather strong interest
rate spread of 3.74% and an increase in interest income of $10.7 million, or
48.4%, over fiscal 2001. However, these types of loan categories typically
involve a higher degree of risk than one-to four-family lending. As a result of
this increased risk and a significant increase in our nonperforming assets to
total assets from .19% at September 30, 2001 to 1.30% at September 30, 2002, we
provided $5.3 million to our allowance for loan losses. I believe that this
provision is prudent in light of our loan growth and the increase in our
nonperforming loans. We look forward to continuing our role as a true community
banking institution and servicing the varied lending needs of our customers.

         In fiscal 2002, we opened two new branch locations, on the north side
of Lebanon and Rivers Bend in Maineville. In addition, as previously reported,
we also consummated our acquisition of Kenwood Bancorp, Inc. These transactions
added four branch locations and, by expanding our geographic presence, increased
our visibility and allowed us to better serve our existing customers. With
respect to the future, we intend to pursue growth internally which will include
de novo offices to further expand our branch network. We will also continue to
consider other opportunities for growth such as branch and whole bank
acquisitions.

         In summary, I believe fiscal 2002 was a successful year since we
produced solid financial results and took great strides towards our goal of
becoming the premier community bank in the greater Cincinnati area. As always,
we truly appreciate your support and expect that we will continue to reward your
loyalty in the future. On behalf of all of the directors, officers and employees
of Peoples Community Bancorp, Inc., we look forward to exceeding all of the
challenges that lay ahead for Peoples Community Bancorp, Inc.



                                   Sincerely,



                                   Jerry D. Williams
                                   President and Chief Executive Officer




















                                       1
<PAGE>


                         Peoples Community Bancorp, Inc.


                           BUSINESS OF PEOPLES BANCORP

===============================================================================


Peoples Community Bancorp, Inc., a Maryland corporation ("Peoples Bancorp" or
the "Company"), is a unitary savings and loan holding company which owns all of
the outstanding common shares of Peoples Community Bank ("Peoples Bank" or the
"Bank"), a federally chartered savings bank.

Peoples Bank was organized in 1889 as an Ohio-chartered mutual savings and loan
association under the name "People's Building, Loan and Savings Co." On
September 30, 1999, Peoples Bank and The Oakley Improved Building and Loan
Company ("Oakley"), jointly executed an Agreement and Plan of Merger, which
provided for the merger of Oakley with and into Peoples Bank (the "Merger"). The
Merger was accounted for under the pooling-of-interests method of accounting.
Consequently, the financial statements have previously been restated for prior
years to include the accounts of Oakley. In addition, Peoples Bank adopted a
Plan of Conversion (the "Conversion"), which provided for the conversion of
Peoples Bank to a federally chartered stock savings bank, the formation of
Peoples Bancorp and the sale of Peoples Bancorp's common stock.

Immediately following the Merger and the Conversion, Peoples Bancorp acquired
Harvest Home Financial Corporation ("Harvest Home"). The acquisition was
accounted for using the purchase method of accounting. At the time of the Merger
and the Conversion, Peoples Bank changed its name to Peoples Community Bank.

The activities of Peoples Bancorp have been limited primarily to holding the
stock of Peoples Bank. Peoples Bank conducts a general banking business in
southwestern Ohio which consists of attracting deposits from the general public
and primarily applying those funds to the origination of loans for residential,
consumer, commercial and nonresidential purposes. Peoples Banks' business is
conducted through an aggressive marketing and selling effort of its lending
products and services to the communities in its market area and through the
continued development of innovative lending programs that give Peoples Bank a
competitive advantage.

Peoples Bank also invests in U.S. government guaranteed mortgage-backed
securities and investment securities issued by the U.S. government and agencies
thereof. Funds for lending and investment are obtained primarily from savings
deposits, loan principal and interest repayments and borrowings from the Federal
Home Loan Bank (the "FHLB") of Cincinnati, of which Peoples Bank is a member.

Peoples Bancorp is subject to regulation, supervision and examination by the
Office of Thrift Supervision of the U.S. Department of Treasury (the "OTS").
Peoples Bank is subject to regulation, supervision and examination by the OTS as
its primary federal regulator and the Federal Deposit Insurance Corporation (the
"FDIC"), which administers the Savings Association Insurance Fund. The FDIC
insures deposits in Peoples Bank up to applicable limits.

















                                       2
<PAGE>


                         Peoples Community Bancorp, Inc.

                  MARKET PRICE OF PEOPLES BANCORP COMMON SHARES
                         AND RELATED STOCKHOLDER MATTERS

===============================================================================


Peoples Bancorp's common shares have been listed on the Nasdaq National Market
("Nasdaq") since March 29, 2000, under the symbol "PCBI." Presented below are
the high and low trading prices for Peoples Bancorp's common shares for the
period from March 29, 2000 to September 30, 2002. Such prices do not include
retail financial markups, markdowns or commissions. Information relating to
prices has been obtained from Nasdaq.

Fiscal 2002                                      High                  Low

Quarter ended:
  September 30, 2002                           $23.73               $19.90
  June 30, 2002                                 22.73                20.05
  March 31, 2002                                20.80                18.75
  December 31, 2001                             20.70                15.50

Fiscal 2001                                      High                  Low

Quarter ended:
  September 30, 2001                           $18.12               $13.90
  June 30, 2001                                 16.44                13.50
  March 31, 2001                                16.25                14.25
  December 31, 2000                             16.00                11.94

Fiscal 2000                                      High                  Low

Quarter ended:
  September 30, 2000                           $12.69               $10.37
  June 30, 2000                                 12.94                 9.25

As of December 15, 2002, Peoples Bancorp had 2,512,615 common shares outstanding
held of record by approximately 1,036 stockholders. The number of stockholders
does not reflect the number of persons or entities who may hold stock in nominee
or "street" name through brokerage firms or others. Peoples Bancorp did not
declare or pay any dividends during the fiscal years ended September 30, 2002,
2001 and 2000.




























                                       3
<PAGE>


                         Peoples Community Bancorp, Inc.


                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

===============================================================================


The following selected consolidated financial and other data does not purport to
be complete and is qualified in its entirety by reference to the more detailed
financial information, including the Consolidated Financial Statements and
related notes, appearing elsewhere herein.

<TABLE>
<CAPTION>
                                                                                  At September 30,
Selected Consolidated Financial
  Condition Data: (1)                                         2002          2001         2000         1999         1998
                                                                                   (In thousands)
<S>                                                          <C>            <C>         <C>           <C>         <C>
Total assets                                              $581,632      $415,970     $320,620     $107,313     $107,024
Cash and cash equivalents                                   26,637        14,595        4,627        5,183        7,748
Investment securities available for sale                     1,231         1,364        8,211        3,650        4,645
Mortgage-backed securities available for sale               18,763            -        94,050        1,185        1,529
Loans receivable, net                                      504,012       377,727      196,485       94,551       90,448
Deposits                                                   369,080       233,063      151,353       91,018       87,324
Advances from the Federal Home Loan Bank
  and other borrowed money                                 165,450       140,000      134,500           -         4,000
Stockholders' equity (2)                                    42,990        38,778       31,664       14,677       13,940
</TABLE>



<TABLE>
<CAPTION>
                                                                              Year Ended September 30,
Selected Consolidated Operating
  Data: (1)                                                   2002          2001         2000         1999         1998
                                                                        (In thousands, except per share data)
<S>                                                           <C>          <C>           <C>          <C>          <C>
Interest income                                            $33,712       $25,897      $15,429       $7,872       $7,973
Interest expense                                            15,598        15,543       10,091        4,581        4,891
                                                            ------        ------       ------        -----        -----
Net interest income                                         18,114        10,354        5,338        3,291        3,082

Provision for losses on loans                                5,265         2,449          156          175           48
                                                            ------        ------       ------        -----        -----
Net interest income after provision for
  losses on loans                                           12,849         7,905        5,182        3,116        3,034
Other income                                                 2,509         4,847          101           20          116
General, administrative and other expense                    9,817         8,124        4,273        2,030        1,738
                                                            ------        ------       ------        -----        -----

Earnings before income taxes                                 5,541         4,628        1,010        1,106        1,412
Federal income taxes                                         2,392         2,304          462          371          475
                                                            ------        ------       ------        -----        -----
Net earnings                                               $ 3,149       $ 2,324      $   548       $  735       $  937
                                                            ======        ======       ======        =====        =====

Earnings per share
     Basic                                                   $1.29        $1.08           N/A          N/A          N/A
                                                              ====         ====
     Diluted                                                 $1.27        $1.08           N/A          N/A          N/A
                                                              ====         ====
</TABLE>


----------------------------
(See footnotes on next page)





                                       4
<PAGE>


                         Peoples Community Bancorp, Inc.


           SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA (CONTINUED)

===============================================================================


<TABLE>
<CAPTION>
                                                                       At or for the year ended September 30,
Key Operating Ratios:  (1)                                    2002          2001         2000         1999         1998
<S>                                                            <C>          <C>           <C>          <C>          <C>
Performance Ratios:  (3)
  Return on average assets                                     .67%         .65%         .26%          .70%         .88%
  Return on average equity                                    8.09         6.46         2.41          5.14         7.04
  Average interest-earning assets to
    average interest-bearing liabilities                    107.27       110.13       110.39        115.48       114.45
  Interest rate spread (4)                                    3.74         2.57         2.12          2.48         2.28
  Net interest margin (4)                                     3.99         3.03         2.63          3.17         2.95
  General, administrative and other
    expense to average assets                                 2.07         2.26         2.04          1.92         1.64

Asset Quality Ratios:
  Nonperforming assets to total
    assets at end of period (5)                               1.30%         .19%         .43%         1.01%         .66%
  Allowance for loan losses to
    nonperforming loans at end of period                    102.19       467.69        60.67         38.46        34.10
  Allowance for loan losses to total
    loans at end of period                                    1.37          .87          .36           .42          .26

Capital and Other Ratios: (2)
  Average stockholders' equity to average assets              8.22%       10.00%       10.84%        13.54%       12.52%
  Tangible stockholders' equity to tangible assets            8.75         8.60         8.10         12.80        12.08
  Total capital to risk-weighted assets                      13.69        14.01        18.05         24.60        23.92
</TABLE>



(1)  The information as of and for the fiscal years ended September 30, 1998 and
     1999,  has  previously  been  restated to reflect the effects of the merger
     with The Oakley Improved Building and Loan Company in March 2000.
(2)  Consists solely of retained earnings at September 30, 1999 and 1998.
(3)  All ratios  are based on average  monthly  balances  during the  respective
     periods.
(4)  Interest rate spread represents the difference between the weighted-average
     yield  on  interest-earning   assets  and  the  weighted-average   cost  of
     interest-bearing  liabilities;  net interest margin represents net interest
     income as a percentage of average interest-earning assets.
(5)  Nonperforming  assets consist of non-accrual  loans, loans past due 90 days
     or more and  still  accruing  interest  and real  estate  acquired  through
     foreclosure or by deed-in-lieu thereof.











                                       5
<PAGE>


                         Peoples Community Bancorp, Inc.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

===============================================================================


General

Peoples Bancorp's profitability depends primarily on net interest income, which
is the difference between interest and dividend income on interest-earning
assets, principally loans, mortgage-backed securities, investment securities and
interest-earning deposits in other financial institutions, and interest expense,
principally on interest-bearing deposits and borrowings from the Federal Home
Loan Bank of Cincinnati. Net interest income is dependent upon the level of
interest rates and the extent to which such rates are changing. Peoples
Bancorp's profitability also depends, to a lesser extent, on the level of other
income, the provision for losses on loans, general, administrative and other
expenses and federal income taxes.

Peoples Bancorp's operations and profitability are subject to changes in
interest rates, applicable statutes and regulations and general economic
conditions, as well as other factors beyond management's control.

On March 29, 2000 the following transactions were completed:

o    The Oakley  Improved  Building  and Loan was merged  with and into  Peoples
     Bank;
o    Peoples Bank  converted  to a federally  chartered  stock  savings bank and
     Peoples Bancorp sold 1,190,000 shares of its common stock; and
o    Peoples Bancorp acquired Harvest Home Financial  Corporation and its wholly
     owned subsidiary, Harvest Home Savings Bank.

Peoples Bancorp's consolidated financial statements give effect to the
conversion, the merger between Peoples Bank and Oakley using the pooling of
interests method of accounting and the merger between Peoples Bancorp and
Harvest Home Financial using the purchase method of accounting. In the
conversion, Peoples Bancorp issued 1,190,000 shares of common stock, which
resulted in net proceeds of approximately $10.3 million. In addition, Peoples
Bancorp issued 787,733 common shares in connection with the acquisition of
Harvest Home.

On March 30, 2001, Peoples Bancorp acquired the Market Financial Corporation for
consideration of $7.8 million in cash and 527,930 shares of common stock. Under
the terms of the agreement, each share of Market's common stock was exchanged
for a combination of cash and shares of Peoples Bancorp totaling $13.00 per
share. The acquisition was accounted for using the purchase method of accounting
and consequently, prior period amounts were not restated. As of March 30, 2001,
Market Financial Corporation had approximately $56.7 million in assets, $50.7
million in liabilities and $6.0 million in stockholders' equity.

On January 18, 2002, the Bank sold $11.0 million in total loans and $9.9 million
in total deposits to another financial institution pursuant to a Purchase and
Assumption Agreement. These assets and liabilities had been assigned to the
Bank's branch office located in Blanchester, Ohio.

On April 26, 2002, the Company completed its acquisition of Kenwood Bancorp,
Inc. ("Kenwood") for consideration of $25.22 per outstanding share, totaling
$7.9 million in cash. Kenwood was merged with and into the Company and Kenwood's
wholly-owned banking subsidiary, Kenwood Savings Bank, became a wholly-owned
subsidiary of Peoples Bank. Future references to "Peoples Bank" or the "Bank"
include both Peoples Bank and Kenwood Savings Bank. The Company acquired $56.6
million in total assets and initially recorded approximately $3.4 million in
goodwill as part of the transaction.









                                       6
<PAGE>


                         Peoples Community Bancorp, Inc.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

===============================================================================


Forward-Looking Statements Are Subject to Change

Certain statements are made in this document as to what management expects may
happen in the future. These statements usually contain the words "believe,"
"estimate," "project," "expect," "anticipate," "intend" or similar expressions.
Because these statements look to the future, they are based on management's
current expectations and beliefs. Actual results or events may differ materially
from those reflected in the forward-looking statements. Management's current
expectations and beliefs as to future events are subject to change at any time,
and no assurances can be provided that the future events will actually occur.







































                                       7
<PAGE>


                         Peoples Community Bancorp, Inc.


     Average Balances, Net Interest Income and Yields Earned and Rates Paid

===============================================================================

The following table presents for the periods indicated the total dollar amount
of interest income from average interest-earning assets and the resultant
yields, as well as interest expense on average interest-bearing liabilities,
expressed both in dollars and rates, and the net interest margin. All average
balances are based on monthly balances. Management does not believe that the
monthly averages differ significantly from the daily average balances.

<TABLE>
<CAPTION>
                                                                  Year ended September 30,

                                            2002                             2001                             2000
                                Average   Interest               Average   Interest               Average   Interest
                              outstanding  earned/  Yield/     outstanding  earned/  Yield/     outstanding  earned/  Yield/
                                balance     paid     rate        balance     paid     rate        balance     paid     rate
                                                                   (Dollars in thousands)
<S>                              <C>         <C>      <C>        <C>         <C>       <C>        <C>         <C>        <C>
Interest-earning assets:
  Loans receivable (1)         $425,318   $32,790     7.71%    $282,425    $22,098     7.82%    $138,907   $10,857      7.82%
  Mortgage-backed
    securities                   12,239       361     2.95       42,195      2,867     6.79       49,878     3,810      7.64
  Investment securities (2)       9,688       446     4.60       12,952        769     5.94        9,199       530      5.76
  Interest-earning deposits       6,224       115     1.85        4,594        163     3.54        4,629       232      5.01
                                -------    ------               -------     ------               -------    ------

   Total interest-earning
     assets                     453,469    33,712     7.43      342,166     25,897     7.57      202,613    15,429      7.62

Non-interest-earning assets      19,949                          17,724                            7,296
                                -------                         -------                          -------

Total assets                   $473,418                        $359,890                         $209,909
                                =======                         =======                          =======

Interest-bearing liabilities:
  Savings and checking
    accounts                   $ 53,741     1,610     3.00     $ 25,344        879     3.47     $ 13,199       365      2.77
  Money market deposit
    accounts                     28,252       776     2.75       22,638        818     3.61       21,392       816      3.81
  Certificates of deposit       177,229     8,078     4.56      132,774      7,279     5.48       87,626     4,729      5.40
  FHLB advances and other
    borrowings                  153,108     4,384     2.86      129,923      6,567     5.05       61,321     4,181      6.82
  Subordinated debentures        10,417       750     7.20          -          -         -           -         -          -
                                -------    ------               -------     ------               -------    ------


   Total interest-bearing
     liabilities                422,747    15,598     3.69      310,679     15,543     5.00      183,538    10,091      5.50
                                           ------     ----                  ------     ----                 ------      ----

Non-interest-bearing
  liabilities                    11,735                          13,228                            3,608
                                 ------                         -------                          -------

   Total liabilities            434,482                         323,907                          187,146

Stockholders' equity             38,936                          35,983                           22,763
                                -------                         -------                          -------

   Total liabilities and
     stockholders' equity      $473,418                        $359,890                         $209,909
                                =======                         =======                          =======

Net interest income                       $18,114                          $10,354                          $5,338
                                           ======                           ======                           =====

Interest rate spread                                  3.74%                            2.57%                            2.12%
                                                      ====                             ====                             ====

Net interest margin (3)                               3.99%                            3.03%                            2.63%
                                                      ====                             ====                             ====

Average interest-earning
  assets to average interest-
  bearing liabilities                               107.27%                          110.13%                          110.39%
                                                    ======                           ======                           ======
</TABLE>



(1)  Includes non-accruing loans.
(2)  Includes  Federal Home Loan Bank and Federal Home Loan Mortgage Corp. stock
     and other equity securities.
(3)  Equals net interest income divided by average interest-earning assets.


                                       8
<PAGE>


                         Peoples Community Bancorp, Inc.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

===============================================================================


Rate/Volume Analysis

The following table shows the extent to which changes in interest rates and
changes in volume of interest-related assets and liabilities affected Peoples
Bancorp's interest income and expense during 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 (change
in volume multiplied by prior year rate), and (ii) changes in rate (change in
rate multiplied by prior year volume). The combined effect of changes in both
rate and volume has been allocated proportionately to the change due to rate and
the change due to volume.

<TABLE>
<CAPTION>
                                                                            Year ended September 30,
                                                             2002 vs. 2001                          2001 vs. 2000
                                                          Increase                             Increase
                                                         (decrease)                           (decrease)
                                                           due to                               due to
                                                       Rate     Volume       Total           Rate     Volume      Total
                                                                                 (In thousands)
<S>                                                    <C>        <C>        <C>             <C>       <C>         <C>
Interest-earning assets:
  Loans receivable                                   $ (316)   $11,008     $10,692         $   -     $11,241    $11,241
  Mortgage-backed securities                         (1,112)    (1,394)     (2,506)          (386)      (557)      (943)
  Investment securities (1)                            (152)      (171)       (323)            17        222        239
  Interest-earning deposits                             (58)        10         (48)           (67)        (2)       (69)
                                                      -----     ------      ------          -----     ------     ------
     Total interest-earning assets                   (1,638)     9,453       7,815           (436)    10,904     10,468

Interest-bearing liabilities:
  Savings and checking accounts                        (137)       868         731            157        357        514
  Money market deposit accounts                        (218)       176         (42)           (45)        47          2
  Certificates of deposit                            (1,331)     2,130         799             70      2,480      2,550
  FHLB advances and other borrowings                 (3,206)     1,023      (2,183)        (1,327)     3,713      2,386
  Subordinated debentures                                -         750         750             -          -          -
                                                      -----     ------      ------          -----     ------     ------
     Total interest-bearing liabilities              (4,892)     4,947          55         (1,145)     6,597      5,452
                                                      -----     ------      ------          -----     ------     ------

Increase in net interest income                      $3,254    $ 4,506     $ 7,760         $  709    $ 4,307    $ 5,016
                                                      =====     ======      ======          =====     ======     ======
</TABLE>

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

(1)  Includes  Federal Home Loan Bank stock and certificates of deposit at other
     institutions.















                                       9
<PAGE>


                         Peoples Community Bancorp, Inc.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

===============================================================================


Discussion of Financial  Condition  Changes from September 30, 2001 to September
30, 2002

At September 30, 2002, Peoples Bancorp's total assets amounted to $581.6
million, an increase of $165.7 million, or 39.8%, compared to the $416.0 million
total at September 30, 2001. The increase in assets was comprised primarily of a
$126.3 million increase in loans, due in part to the acquisition of Kenwood, an
$18.8 million increase in mortgage-backed securities and a $12.0 million
increase in cash and cash equivalents. The increase in assets was funded by
growth in deposits of $136.0 million and an increase in advances from the
Federal Home Loan Bank of $12.5 million.

Liquid assets (i.e. cash and interest-bearing deposits) totaled $26.6 million at
September 30, 2002, an increase of $12.0 million, or 82.5%, compared to
September 30, 2001. Investment securities totaled $1.2 million at September 30,
2002, a decrease of $133,000, or 9.8%, from September 30, 2001 levels.

At September 30, 2002, Peoples Bancorp had $18.8 million in mortgage-backed
securities. No mortgage-backed securities were held at September 30, 2001. The
Company purchased $20.3 million in mortgage-backed securities during fiscal 2002
utilizing excess liquidity and obtained $3.7 million in mortgage-backed
securities in the acquisition of Kenwood. During fiscal 2002, principal
repayments on mortgage-backed securities totaled $1.7 million and sales amounted
to $3.5 million. The proceeds from the sale and repayment of mortgage-backed
securities were generally used to fund loan originations during the period.

Loans receivable totaled $504.0 million at September 30, 2002, an increase of
$126.3 million, or 33.4%, over September 30, 2001 levels. The Company obtained
$40.3 million in loans through the acquisition of Kenwood, which consisted
primarily of loans secured by one- to four-family residential real estate. Loan
disbursements amounted to $261.6 million during fiscal 2002, which were
partially offset by principal repayments of $153.2 million. The overall growth
in the loan portfolio was comprised primarily of $53.8 million in loans secured
by one-to four-family residential real estate, $20.5 million in loans secured by
multi-family residential real estate, $29.3 million in nonresidential
construction loans, $22.2 million in loans secured by commercial real estate and
land, and $11.5 million in commercial lines of credit. Over the past two fiscal
years, the Bank has placed an increasing emphasis on multi-family residential
loans, commercial real estate and land loans, construction loans and unsecured
commercial loans. As a result, as a percentage of the total loan portfolio,
single-family residential loans have decreased from 72.7% at September 30, 2000
to 53.1% at September 30, 2002, while multi-family residential loans, commercial
real estate and land loans, construction loans and commercial loans have
increased during the same time period from 4.3% to 10.2%, 9.7% to 15.8%, 12.8%
to 16.9% and 0.0% to 4.1%, respectively. Commercial real estate lending and
unsecured commercial lending are generally considered to involve a higher degree
of risk than residential real estate lending due to the relatively larger loan
amounts and the effect of general economic conditions on the successful
operation of the related business and/or income-producing properties. Peoples
Bank has endeavored to reduce such risk by evaluating the credit history and
past performance of the borrower, the location of the real estate, the quality
of the borrowers' management, the debt service ratio, the quality and
characteristics of the income stream generated by the business or the property
and appraisals supporting the property's valuation, as applicable.

The allowance for loan losses totaled $7.7 million at September 30, 2002, an
increase of $4.0 million compared to September 30, 2001. Loans charged-off
amounted to $1.5 million during fiscal 2002, while the acquisition of Kenwood
contributed $276,000 to the level of the allowance and $5.3 million was added
through the provision for losses on loans, due primarily to the overall growth
in the loan portfolio from September 30, 2001, as well as the changes in the
composition of the loan portfolio and an increase in the level of nonperforming
loans. The Bank has continued to change its loan portfolio mix during fiscal
2002, primarily as a result of an increased emphasis on loans






                                       10
<PAGE>


                         Peoples Community Bancorp, Inc.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

===============================================================================


Discussion of Financial Condition Changes from September 30, 2001 to September
30, 2002 (continued)

secured by multi-family and commercial real estate, as well as unsecured loans.
The allowance represented 1.37% and .87% of total loans at September 30, 2002
and 2001, respectively. The allowance for loan losses represented 102.2% and
467.7% of nonperforming loans as of September 30, 2002 and 2001, respectively.
Nonperforming loans totaled $7.5 million and $783,000 at September 30, 2002 and
2001, respectively. The $6.7 million increase in nonperforming loans resulted
primarily from a $3.5 million loan concentration consisting mostly of a series
of construction loans to a financially troubled builder. Additionally, the
increase in nonperforming loans resulted from a $3.2 million multi-family real
estate loan. Management has considered these loan concentrations as a part of
its overall evaluation of the adequacy of the Company's allowance for loan
losses. Although management believes that its allowance for loan losses at
September 30, 2002 was appropriate based upon the available facts and
circumstances, there can be no assurance that additions to such allowance will
not be necessary in future periods, which would adversely affect the Company's
results of operations.

Deposits totaled $369.1 million at September 30, 2002, an increase of $136.0
million, or 58.4%, over the total at September 30, 2001. Total demand,
transaction and savings deposits increased to $139.8 million at September 30,
2002, from $67.2 million at September 30, 2001, while total certificates of
deposit increased from $165.8 million to $229.3 million, respectively. The
increase in deposits was primarily attributable to the addition of $48.4 million
in deposits in connection with the acquisition of Kenwood, as well as
management's efforts to maintain deposit growth through marketing strategies.
Proceeds from deposit growth were generally used to fund new loan originations.

Advances from the Federal Home Loan Bank and other borrowings totaled $165.5
million at September 30, 2002, an increase of $25.5 million, or 18.2%, compared
to September 30, 2001 totals. Borrowings totaling $69.3 million were repaid from
the deposit growth during the period, while new borrowings of $91.8 million were
obtained, generally to fund new loan originations.

Stockholders' equity totaled $43.0 million at September 30, 2002, an increase of
$4.2 million, or 10.9%, over the September 30, 2001 level. The increase resulted
primarily from net earnings of $3.1 million, amortization effects of the stock
benefit plans totaling $839,000 and an $81,000 increase in net unrealized gains
on available for sale securities.

Comparison  of Results of  Operations  for the Fiscal Years Ended  September 30,
2002 and 2001

General

The inclusion of the accounts of Kenwood, which the Company acquired in April
2002, in a transaction accounted for using the purchase method of accounting,
significantly contributed to the increases in the level of income and expense
during the fiscal year ended September 30, 2002, compared to fiscal 2001. In
accordance with the purchase method of accounting, the statement of earnings for
the fiscal year ended September 30, 2001, was not restated for the acquisition.

Peoples Bancorp recorded net earnings of $3.1 million for the fiscal year ended
September 30, 2002, an increase of $825,000, or 35.5%, compared to fiscal 2001.
The increase in earnings resulted primarily from a $7.8 million increase in net
interest income, which was partially offset by a $2.8 million increase in the
provision for losses on loans, a $2.3 million decrease in other income and a
$1.7 million increase in general, administrative and other expense.






                                       11
<PAGE>


                         Peoples Community Bancorp, Inc.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

===============================================================================


Comparison  of Results of  Operations  for the Fiscal Years Ended  September 30,
2002 and 2001 (continued)

Net Interest Income

Total interest income amounted to $33.7 million for the fiscal year ended
September 30, 2002, a $7.8 million, or 30.2%, increase over fiscal 2001. The
increase was due to a $111.3 million, or 32.5%, increase in average
interest-earning assets, partially offset by a 14 basis point decline in the
average yield year to year.

Interest income on loans totaled $32.8 million for the fiscal year ended
September 30, 2002, an increase of $10.7 million, or 48.4%, over fiscal 2001.
This increase was due primarily to a $142.9 million, or 50.6%, increase in the
average portfolio balance outstanding year to year, partially offset by an 11
basis point decline in weighted-average yield, to 7.71% for fiscal 2002. The
impact of the Bank's yield on its loan portfolio from the decrease in market
interest rates, such as the repricing of its adjustable-rate loans and
refinancing at lower rates, was substantially offset by the Bank's increased
emphasis on higher yielding multi-family, commercial real estate and unsecured
commercial loans. Interest income on investment and mortgage-backed securities
and interest-bearing deposits and other totaled $922,000, a decrease of $2.9
million, or 75.7%, due primarily to a $31.6 million, or 52.9%, decrease in the
average balance of the related assets, a 308 basis point decrease in the
weighted-average yield year to year and a $264,000 write down of premiums on
mortgage-backed securities based upon management's estimate of prepayment
speeds. The decrease in the average yield was primarily due to the decrease in
market interest rates. The decrease in the average outstanding balance of these
assets was due to repayments and sales, which proceeds were used to fund loan
originations.

Interest expense on deposits totaled $10.5 million for the fiscal year ended
September 30, 2002, an increase of $1.5 million, or 16.6%, over the $9.0 million
recorded in fiscal 2001. The increase was due primarily to a $78.5 million, or
43.4%, increase in the average balance of deposits outstanding year to year,
which included the addition of $48.4 million in deposits from the acquisition of
Kenwood, partially offset by a decrease in the weighted-average cost of deposits
of 93 basis points, to 4.04% for fiscal 2002. The decrease in the average rate
was primarily due to the decrease in market interest rates.

Interest expense on borrowings totaled $5.1 million for fiscal 2002, a decrease
of $1.4 million, or 21.8%, compared to fiscal 2001, due primarily to a 191 basis
point decrease in the average cost of borrowings, to 3.14% for fiscal 2002,
partially offset by a $33.6 million, or 25.9%, increase in the average balance
of borrowings outstanding for fiscal 2002. The decrease in the average cost of
borrowings was primarily due to a decrease in market interest rates.

As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $7.8 million, or 74.9%, during the fiscal year
ended September 30, 2002, compared to fiscal 2001. The interest rate spread
amounted to 3.74% for fiscal 2002 compared to 2.57% for fiscal 2001. The net
interest margin totaled 3.99% and 3.03% for the fiscal years ended September 30,
2002 and 2001, respectively.

Provision for Losses on Loans

A provision for losses on loans is charged to earnings to bring the total
allowance for loan losses to a level considered appropriate by management based
on historical loss experience, the volume and type of lending conducted by the
Bank, the status of past due principal and interest payments, general economic
conditions, particularly as such conditions relate to the Bank's market area,
and other factors related to the collectibility of the Bank's loan portfolio.
After considering the above factors, management recorded a provision for losses
on loans totaling $5.3 million and $2.4 million for the fiscal years ended
September 30, 2002 and 2001, respectively. The provision recorded during the









                                       12
<PAGE>


                         Peoples Community Bancorp, Inc.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

===============================================================================


Comparison  of Results of  Operations  for the Fiscal Years Ended  September 30,
2002 and 2001 (continued)

Provision for Losses on Loans (continued)

fiscal 2002 period was predicated primarily upon the $137.3 million, or 32.7%,
of growth in the gross loan portfolio, taking into account the increase in loans
secured by multi-family, nonresidential real estate, the origination of
approximately $26.7 million in unsecured commercial lines of credit during
fiscal 2002 and the increase in the level of nonperforming loans year to year.
Such types of lending are generally considered to involve a higher degree of
risk than one- to four-family residential lending. There can be no assurance
that the loan loss allowance will be sufficient to cover losses on nonperforming
assets in the future.

Other Income

Other income totaled $2.5 million for the fiscal year ended September 30, 2002,
a decrease of $2.3 million, or 48.2%, compared to fiscal 2001. The decrease was
due primarily to the effects of a $4.7 million gain on securities transactions
recorded during fiscal 2001, which was partially offset by a $2.1 million gain
on the sale of branch offices during fiscal 2002 and a $238,000, or 177.6%,
increase in other operating income. During fiscal 2002, in connection with it's
building, branch renovation and branch relocation projects, the Corporation sold
three of its former branch buildings, as well as $11.0 million in loans and $9.9
million in deposits from it's former Blanchester office, all of which resulted
in the $2.1 million gain on sale. The increase in other operating income
resulted primarily from the inclusion of Kenwood Savings' operations and
increases in fees related to loans and deposits transactions year to year.

General, Administrative and Other Expense

General, administrative and other expense totaled $9.8 million for the fiscal
year ended September 30, 2002, an increase of $1.7 million, or 20.8%, compared
to fiscal 2001. This increase resulted primarily from a $409,000, or 12.1%,
increase in employee compensation and benefits, a $1.0 million, or 168.0%,
increase in occupancy and equipment expense, and a $1.1 million, or 94.1%,
increase in other operating expense, which were partially offset by a $402,000
decrease in goodwill amortization. Amortization of goodwill will be eliminated
in future periods upon adoption of a recently issued accounting pronouncement.
Management adopted SFAS No. 142 effective October 1, 2002, which will result in
annual expense reduction totaling approximately $460,000 beginning in fiscal
2003.

Generally, as previously noted, the level of general, administrative and other
expenses increased year to year due to the effects of the Kenwood acquisition.
The increase in employee compensation and benefits was due primarily to an
increase in staffing levels, normal merit increases and $143,000 expensed for
stock option awards vesting during the fiscal year. The increase in occupancy
and equipment expense primarily reflects increased depreciation and maintenance
costs associated with the Company's new main office and additions and
improvements made at several branch office locations. During fiscal 2002, the
Corporation committed to begin construction of four new branch office facilities
located in southwestern Ohio. Two of the new offices will replace existing
branch buildings and two represent expansion into new markets. The new offices
are scheduled to be opened over the period through the second quarter of fiscal
2004. The cost of these projects is expected to total approximately $6.8
million. These improvements reflect the effects of the Company's previously
announced ongoing commitment to expand its branch office network through the
acquisition and construction of new branch facilities. Additionally, during
fiscal 2002 management reduced its estimate of depreciable lives for certain
furniture and equipment assets. As a result of this







                                       13
<PAGE>


                         Peoples Community Bancorp, Inc.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

===============================================================================


Comparison  of Results of  Operations  for the Fiscal Years Ended  September 30,
2002 and 2001 (continued)

General, Administrative and Other Expense (continued)

downward change in estimate, the Corporation recognized additional depreciation
expense during fiscal 2002 of approximately $215,000, or $.06 per share on an
after-tax basis. The increase in other operating expense relates primarily to
expenses related to the trust preferred offering totaling $385,000, an increase
in legal expenses, including those related to nonperforming loans, an increase
in advertising costs, office supplies and pro-rata increases in costs associated
with the Company's overall growth year to year.

Federal Income Taxes

Peoples Bancorp recorded a tax provision totaling $2.4 million for the fiscal
year ended September 30, 2002, compared to a provision of $2.3 million for
fiscal 2001. The increase was due primarily to the increase in pre-tax earnings
of $913,000, or 19.7%. The effective tax rates were 43.2% and 49.8% for the
fiscal years ended September 30, 2002 and 2001, respectively. The relatively
high effective tax rates were primarily due to nondeductible amortization and
other charges related to goodwill. The effective tax rate for fiscal 2001 was
also affected by nondeductible merger-related expenses.


Comparison  of Results of  Operations  for the Fiscal Years Ended  September 30,
2001 and 2000

General

The inclusion of the accounts of Market, which the Company acquired in March
2001, in a transaction accounted for using the purchase method of accounting,
significantly contributed to the increases in the level of income and expense
during the fiscal year ended September 30, 2001, compared to fiscal 2000. In
accordance with the purchase method of accounting, the statement of earnings for
the fiscal year ended September 30, 2000, was not restated for the acquisition.

Peoples Bancorp recorded net earnings of $2.3 million for the fiscal year ended
September 30, 2001, an increase of $1.8 million, or 324.1%, compared to fiscal
2000. The increase in earnings resulted primarily from a $5.0 million increase
in net interest income and a $4.7 million increase in other income, which were
partially offset by a $3.9 million increase in general, administrative and other
expense, a $2.3 million increase in the provision for losses on loans and a $1.8
million increase in the provision for federal income taxes.

Net Interest Income

Total interest income amounted to $25.9 million for the fiscal year ended
September 30, 2001, a $10.5 million, or 67.8%, increase over fiscal 2000. The
increase was due to a $139.6 million, or 68.9%, increase in average
interest-earning assets, partially offset by a 5 basis point decline in the
average yield year to year.

Interest income on loans totaled $22.1 million for the fiscal year ended
September 30, 2001, an increase of $11.2 million, or 103.5%, over fiscal 2000.
This increase was due primarily to a $143.5 million, or 103.3%, increase in the
average portfolio balance outstanding year to year, while the weighted-average
yield remained constant at 7.82%. The impact of the Bank's yield on its loan
portfolio from the decrease in market interest rates, such as the repricing of
its adjustable-rate loans and refinancing at lower rates, was substantially
offset by the Bank's increased emphasis on higher yielding multi-family,







                                       14
<PAGE>


                         Peoples Community Bancorp, Inc.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

===============================================================================


Comparison  of Results of  Operations  for the Fiscal Years Ended  September 30,
2001 and 2000 (continued)

Net Interest Income (continued)

commercial real estate and business loans. Interest income on investment and
mortgage-backed securities and interest-bearing deposits and other totaled $3.8
million, a decrease of $773,000, or 16.9%, due primarily to a $4.0 million, or
6.2%, decrease in the average balance of the related assets, coupled with an
82 basis point decrease in the weighted-average yield year to year. The decrease
in the average yield was primarily due to the decrease in market interest rates.

Interest expense on deposits totaled $9.0 million for the fiscal year ended
September 30, 2001, an increase of $3.1 million, or 51.9%, over the $5.9 million
recorded in fiscal 2000. The increase was due primarily to a $58.5 million, or
47.9% increase in the weighted-average balance of deposits outstanding year to
year, which included the addition of $41.7 million in deposits from the
acquisition of Market, coupled with an increase in the weighted-average cost of
deposits of 13 basis points, to 4.97% for fiscal 2001. The impact of lower
market interest rates during fiscal 2001 compared to fiscal 2000 was
substantially offset by the increase in higher rate certificates of deposit.
Interest expense on borrowings totaled $6.6 million for fiscal 2001, an increase
of $2.4 million, or 57.1%, over fiscal 2000, due primarily to a $68.6 million,
or 111.9%, increase in the average balance of borrowings outstanding, which was
partially offset by a 177 basis point decrease in the average cost of
borrowings, to 5.05% for fiscal 2001. The decrease in the average cost of
borrowings was primarily due to a decrease in market interest rates.

As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $5.0 million, or 94.0%, during the fiscal year
ended September 30, 2001, compared to fiscal 2000. The interest rate spread
amounted to 2.57% for fiscal 2001 compared to 2.12% for fiscal 2000. The net
interest margin totaled 3.03% and 2.63% for the fiscal years ended September 30,
2001 and 2000, respectively.

Provision for Losses on Loans

A provision for losses on loans is charged to earnings to bring the total
allowance for loan losses to a level considered appropriate by management based
on historical loss experience, the volume and type of lending conducted by the
Bank, the status of past due principal and interest payments, general economic
conditions, particularly as such conditions relate to the Bank's market area,
and other factors related to the collectibility of the Bank's loan portfolio.
After considering the above factors, management recorded a provision for losses
on loans totaling $2.4 million and $156,000 for the fiscal years ended September
30, 2001 and 2000, respectively. The provision recorded during the fiscal 2001
period was predicated primarily upon the $208.1 million, or 98.4%, of growth in
the gross loan portfolio, taking into account the increase in loans secured by
multi-family, nonresidential and commercial real estate and the origination of
approximately $9.8 million in unsecured commercial lines of credit during fiscal
2001.

Other Income

Other income totaled $4.8 million for the fiscal year ended September 30, 2001,
an increase of $4.7 million over fiscal 2000. The increase was due primarily to
a $4.7 million gain on the sale of investment and mortgage-backed securities,
coupled with a $52,000, or 63.4%, increase in other operating income, due
primarily to increased service fees on ATM and other account transactions during
the period.








                                       15
<PAGE>


                         Peoples Community Bancorp, Inc.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

===============================================================================


Comparison  of Results of  Operations  for the Fiscal Years Ended  September 30,
2001 and 2000 (continued)

General, Administrative and Other Expense

General, administrative and other expense totaled $8.1 million for the fiscal
year ended September 30, 2001, an increase of $3.9 million, or 90.1%, compared
to fiscal 2000. This increase resulted primarily from a $1.5 million, or 76.0%,
increase in employee compensation and benefits, a $387,000, or 185.2%, increase
in occupancy and equipment expense, a $237,000, or 108.2%, increase in franchise
taxes, a $213,000, or 127.5%, increase in data processing expense, and a
$640,000, or 126.5%, increase in other operating expense, which were partially
offset by a $693,000 decrease in merger-related expenses. Additionally, the
Company recognized a $1.6 million increase in amortization of goodwill, which
had initially been recorded in connection with the acquisition of Harvest Home.
The goodwill expense in fiscal 2001 consisted of regular amortization of
$492,000 and a $1.2 million charge recorded following the sale of significant
amounts of interest-earning assets and the corresponding retirement of
liabilities acquired in the Harvest Home combination. Amortization of goodwill
will be eliminated in future periods upon adoption of a recently issued
accounting pronouncement, SFAS No. 142. Management intends to adopt SFAS No. 142
effective October 1, 2002, which will result in annual expense reduction
totaling approximately $460,000 beginning in fiscal 2003.

Generally, as previously noted, the level of general, administrative and other
expenses increased year to year due to the effects of the Market acquisition.
The increase in employee compensation and benefits was due primarily to an
increase in staffing levels, a $428,000 increase in expense related to stock
benefit plans and an additional $465,000 expense recorded for vested obligations
under the directors' retirement plan. The increase in occupancy and equipment
expense reflects increased depreciation and maintenance costs associated with
the Company's new main office and additions and improvements made at several
branch office locations. These improvements reflect the initial phase of the
Company's previously announced commitment to expand its branch office network
through the acquisition and construction of new branch facilities. The increase
in franchise taxes was due to the Company's increase in total equity following
the conversion to stock form. The increase in data processing expense primarily
reflects an increase in transaction costs, coupled with the effects of the
Company's overall growth year to year. The increase in other operating expense
relates primarily to additional costs recognized as part of operating and
reporting as a public stock company, as well as increased advertising costs and
increased supervisory examination fees.

Federal Income Taxes

Peoples Bancorp recorded a tax provision totaling $2.3 million for the fiscal
year ended September 30, 2001, compared to a provision of $462,000 for the same
period in 2000. The increase was due primarily to the increase in earnings
before tax of $3.6 million, as well as the effects of nondeductible goodwill
amortization. The effective tax rates were 49.8% and 45.7% for the fiscal years
ended September 30, 2001 and 2000, respectively.
















                                       16
<PAGE>


                         Peoples Community Bancorp, Inc.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

===============================================================================

Exposure to Changes in Interest Rates

Peoples Bancorp's ability to maintain net interest income depends upon its
ability to earn a higher yield on interest-earning assets than the rates paid on
deposits and borrowings. Peoples Bank's ability to maintain a positive spread
between the interest earned on assets and the interest paid on deposits and
borrowings can be adversely affected when market rates of interest rise.
Historically long-term, fixed-rate mortgage loans made up the dominant portion
of Peoples Bank's interest-earning assets, therefore Peoples Bank may be
particularly susceptible to the risk of changing interest rates. During fiscal
2000, Peoples Bank began to emphasize the origination of adjustable-rate
mortgage ("ARM") loans and shorter-term loans secured by non-residential real
estate, in an effort to improve its interest rate risk position.


Quantitative Analysis

The OTS provides a quarterly report on the potential impact of interest rate
changes upon the market value of portfolio equity. Management reviews the
quarterly reports from the OTS that show the impact of changing interest rates
on net portfolio value. Net portfolio value is the difference between incoming
and outgoing discounted cash flows from assets, liabilities, and off-balance
sheet contracts. The application of the methodology attempts to quantify
interest rate risk and the change in NPV which would result from a theoretical
100, 200 and 300 basis point change in market interest rates.

The following tables present Peoples Bank's net portfolio value as of September
30, 2002 and 2001, as calculated by the OTS, based on information provided to
the OTS by Peoples Bank. The information presented is based on the feature in
Peoples Bank's mortgage loans which permits the loans to be called any time
after three years from the date of origination and the assumed repricing of
called loans at a higher rate in a rising rate environment.

<TABLE>
<CAPTION>
                                                      September 30, 2002
                                                                                                              Change in
   Change in                                                                        Net Portfolio           Net Portfolio
Interest Rates                                                                     Value as a % of         Value as a % of
In Basis Points                          Net Portfolio Value                       Portfolio Value         Portfolio Value
 (Rate Shock)                 Amount         $ Change          % Change               of Assets               of Assets
                             (Dollars in Thousands)
<S>                             <C>             <C>                <C>                     <C>                     <C>
      300bp                  $53,285          $(4,472)              (8)%                   9.34%                  (27)bp
      200                     56,980             (777)              (1)                    9.79                    18
      100                     59,105            1,348                2                     9.97                    36
        0                     57,757               -                 -                     9.61                     -
     (100)                    53,081           (4,676)              (8)                    8.73                   (88)
</TABLE>











                                       17
<PAGE>


                         Peoples Community Bancorp, Inc.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

===============================================================================


Quantitative Analysis (continued)
<TABLE>
<CAPTION>

                                                      September 30, 2001
                                                                                                              Change in
   Change in                                                                        Net Portfolio           Net Portfolio
Interest Rates                                                                     Value as a % of         Value as a % of
In Basis Points                          Net Portfolio Value                       Portfolio Value         Portfolio Value
 (Rate Shock)                 Amount         $ Change          % Change               of Assets               of Assets
                             (Dollars in Thousands)
<S>                            <C>              <C>                <C>                     <C>                    <C>
      300bp                  $16,399         $(25,144)             (61)%                   4.07%                 (565)bp
      200                     24,910          (16,633)             (40)                    6.06                  (366)
      100                     33,449           (8,094)             (19)                    7.97                  (175)
        0                     41,543               -                -                      9.72                    -
     (100)                    48,285            6,742               16                    11.14                   142
     (200)                    54,845           13,302               32                    12.48                   276
</TABLE>

As shown by the 2002 table above, a 100 basis point increase in interest rates
would result in an increase in Peoples Bank's net portfolio value based on OTS
calculations as of September 30, 2002, primarily due to Peoples Bank's efforts
to originate adjustable-rate loans and shorter-term fixed-rate loans in recent
periods.

Peoples Bank's fixed-rate loans help its profitability if interest rates are
stable or declining, since these loans have yields that exceed its cost of
funds. However, if interest rates increase, Peoples Bank would have to pay more
on its deposits and new borrowings, which would adversely affect its interest
rate spread. In order to counter the potential effects of dramatic increases in
market rates of interest, Peoples Bank has focused primarily on developing a
strong core deposit base. Historically, Peoples Bank has been able to maintain
relatively stable levels of net interest income despite the interest rate risk
inherent in its operations. Peoples Bank attempts to mitigate potential exposure
to interest rate risk by:

(1)  Originating one-year and three-year adjustable rate mortgage loans;

(2)  Increasing originations of nonresidential real estate mortgage loans, which
     generally   have  higher   yields  and  shorter   terms  to  maturity  than
     single-family residential mortgage loans;

(3)  Originating  home equity  lines of credit with  interest  rates that adjust
     monthly based on an index;  (4) Originating  unsecured lines of credit with
     interest rates that adjust monthly based on an index;

(5)  Purchasing adjustable rate mortgage-backed securities; and

(6)  Utilizing fixed-rate  longer-term advances offered by the Federal Home Loan
     Bank.











                                       18

<PAGE>


                         Peoples Community Bancorp, Inc.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

===============================================================================


Liquidity and Capital Resources

Peoples Bank maintains cash and liquid investments in U.S. Government and
federal agency obligations and other securities to meet loan commitments and
other funding needs.

At September 30, 2002, Peoples Bank had outstanding commitments to originate
loans totaling $6.4 million, commitments for unused lines of credit under home
equity lines totaling $18.1 million, commitments for unused commercial lines of
credit totaling $4.3 million and commitments for letters of credit under
commercial loans of $476,000. In addition, as of September 30, 2002, the amount
of certificates of deposit which were scheduled to mature in the following 12
months totaled $123.3 million. Peoples Bank believes that it has adequate
resources to fund all of its commitments and that it can adjust the rate on
certificates of deposit to retain deposits in changed interest rate
environments. If Peoples Bank requires funds beyond its internal funding
capabilities, advances from the Federal Home Loan Bank of Cincinnati are
available as an additional source of funds.

Peoples Bank and Kenwood Savings are required to maintain regulatory capital
sufficient to meet tangible, core and risk-based capital ratios of at least
1.5%, 4.0% and 8.0%, respectively. At September 30, 2002, Peoples Bank and
Kenwood Savings exceeded each of their capital requirements. Peoples Bank's
tangible, core and risk-based capital ratios were 8.8%, 8.8% and 13.7%,
respectively, while Kenwood Savings' respective capital ratios were 7.7%, 7.7%
and 16.2%.

Impact of Inflation and Changing Prices

The consolidated financial statements and related financial data presented
herein regarding Peoples Bancorp have been prepared in accordance with
accounting principles generally accepted in the United States of America, which
generally require the measurement of financial position and operating results in
terms of historical dollars, without considering changes in relative purchasing
power over time due to inflation. Unlike most industrial companies, virtually
all of Peoples Bancorp's assets and liabilities are monetary in nature. As a
result, interest rates generally have a more significant impact on Peoples
Bancorp's performance than does the effect of inflation. Interest rates do not
necessarily move in the same direction or in the same magnitude as the prices of
goods and services, since such prices are affected by inflation to a larger
extent than interest rates.

Effect of Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 142 "Goodwill and
Intangible Assets," which prescribes accounting for all purchased goodwill and
intangible assets. Pursuant to SFAS No. 142, acquired goodwill is not amortized,
but is tested for impairment at the reporting unit level annually and whenever
an impairment indicator arises.

An acquired intangible asset, other than goodwill, should be amortized over its
useful economic life. The useful life of an intangible asset is indefinite if it
extends beyond the foreseeable horizon. If an asset's life is indefinite, the
asset should not be amortized until the life is determined to be finite.
Intangible assets being amortized should be tested for impairment in accordance
with SFAS No. 121. Intangible assets not being amortized should be tested for
impairment annually and whenever there are indicators of impairment, by
comparing the asset's fair value to its carrying amount.

SFAS No. 142 is effective for fiscal years  beginning  after December 15, 2001.
Management  adopted SFAS No. 142 effective  October 1, 2002, as required.
Adoption of SFAS No. 142 will result in the elimination of annual goodwill
amortization  expense of  approximately $460,000.



                                       19
<PAGE>


                         Peoples Community Bancorp, Inc.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

===============================================================================


Effect of Recent Accounting Pronouncements (continued)

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 carries over the recognition and
measurement provisions in SFAS No. 121. Accordingly, an entity must recognize an
impairment loss if the carrying value of a long-lived asset or asset group (a)
is not recoverable and (b) exceeds its fair value. Similar to SFAS No. 121, SFAS
No. 144 requires an entity to test an asset or asset group for impairment
whenever events or changes in circumstances indicate that its carrying amount
may not be recoverable. SFAS No. 144 differs from SFAS No. 121 in that it
provides guidance on estimating future cash flows to test recoverability. An
entity may use either a probability-weighted approach or best-estimate approach
in developing estimates of cash flows to test recoverability. SFAS No. 144 is
effective for financial statements issued for fiscal years beginning after
December 15, 2001 and interim periods within those fiscal years. Management
adopted SFAS No. 144 effective October 1, 2002, without material effect on the
Company's financial condition or results of operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 provides financial accounting
and reporting guidance for costs associated with exit or disposal activities,
including one-time termination benefits, contract termination costs other than
for a capital lease, and costs to consolidate facilities or relocate employees.
SFAS No. 146 is effective for exit or disposal activities initiated after
December 31, 2002. SFAS No. 146 is not expected to have a material effect on the
Company's financial condition or results of operations.

In October 2002, the FASB issued SFAS No. 147, "Accounting for Certain Financial
Institutions:  An Amendment of FASB Statements No. 72 and 144 and FASB
Interpretation No. 9," which removes acquisitions of financial institutions from
the scope of SFAS No. 72, "Accounting for Certain Acquisitions of Banking and
Thrift Institutions," except for transactions between mutual enterprises.
Accordingly, the excess of the fair value of liabilities assumed over the fair
value of tangible and intangible assets acquired in a business combination
should be recognized and accounted for as goodwill in accordance with SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets."

SFAS No. 147 also requires that the acquisition of a less-than-whole financial
institution, such as a branch, be accounted for as a business combination if the
transferred assets and activities constitute a business. Otherwise, the
acquisition should be accounted for as the acquisition of net assets.

SFAS No. 147 also amends the scope of SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," to include long-term customer
relationship assets of financial institutions (including mutual enterprises)
such as depositor- and borrower-relationship intangible assets and credit
cardholder intangible assets.

The provisions of SFAS No. 147 related to unidentifiable intangible assets and
the acquisition of a less-than-whole financial institution are effective for
acquisitions for which the date of acquisition is on or after October 1, 2002.
The provisions related to impairment of long-term customer relationship assets
are effective October 1, 2002. Transition provisions for previously recognized
unidentifiable intangible assets are effective on October 1, 2002, with earlier
application permitted.

Management adopted SFAS No. 147 on October 1, 2002, without material effect on
the Company's financial condition or results of operations.




                                       20
<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
Peoples Community Bancorp, Inc.

We have audited the consolidated statements of financial condition of Peoples
Community Bancorp, Inc. as of September 30, 2002 and 2001, and the related
consolidated statements of earnings, comprehensive income, stockholders' equity
and cash flows for each of the years in the three year period ended September
30, 2002. These consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Peoples Community
Bancorp, Inc. as of September 30, 2002 and 2001, and the consolidated results of
its operations and its cash flows for each of the years in the three year period
ended September 30, 2002, in conformity with accounting principles generally
accepted in the United States of America.


/s/GRANT THORNTON LLP

Cincinnati, Ohio
November 8, 2002
























                                       21
<PAGE>




                          PEOPLES COMMUNITY BANCORP, INC.

<TABLE>
<CAPTION>
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

===============================================================================


                                                                                       Year ended September 30,
         ASSETS                                                                            2002           2001
                                                                                  (In thousands, except share data)
<S>                                                                                       <C>             <C>
Cash and due from banks                                                                $  4,460       $  9,839
Interest-bearing deposits in other financial institutions                                22,177          4,756
                                                                                        -------        -------
         Cash and cash equivalents                                                       26,637         14,595

Investment securities designated as available for sale - at market                        1,231          1,364
Mortgage-backed securities designated as available for sale - at market                  18,763             -
Loans receivable - net                                                                  504,012        377,727
Office premises and equipment - at depreciated cost                                      10,973          8,662
Real estate acquired through foreclosure                                                     97             -
Federal Home Loan Bank stock - at cost                                                    9,907          7,880
Accrued interest receivable on loans                                                      2,264          1,883
Accrued interest receivable on mortgage-backed securities                                    77             -
Prepaid expenses and other assets                                                           621            396
Goodwill, net of accumulated amortization                                                 4,875          2,957
Deferred federal income taxes                                                             2,175            506
                                                                                        -------        -------

         Total assets                                                                  $581,632       $415,970
                                                                                        =======        =======

         LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                                               $369,080       $233,063
Advances from the Federal Home Loan Bank                                                152,500        140,000
Other borrowed money                                                                        450             -
Guaranteed preferred beneficial interests in junior subordinated debentures              12,500             -
Advances by borrowers for taxes and insurance                                               189            312
Accrued interest payable                                                                    843             78
Other liabilities                                                                         2,929          2,959
Accrued federal income taxes                                                                151            780
                                                                                        -------        -------
         Total liabilities                                                              538,642        377,192

Stockholders' equity
  Common stock - 15,000,000 shares of $.01 par value authorized; 2,512,615
    and 2,505,663 shares issued at September 30, 2002 and 2001, respectively                 25             25
  Additional paid-in capital                                                             23,931         23,139
  Retained earnings - restricted                                                         19,447         16,298
  Shares acquired by stock benefit plan                                                    (476)          (666)
  Accumulated comprehensive income (loss), unrealized gains (losses) on
    securities designated as available for sale,  net of related tax effects                 63            (18)
                                                                                        -------        -------
         Total stockholders' equity                                                      42,990         38,778
                                                                                        -------        -------

         Total liabilities and stockholders' equity                                    $581,632       $415,970
                                                                                        =======        =======
</TABLE>


The accompanying notes are an integral part of these statements.

                                       22

<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.

<TABLE>
<CAPTION>
                       CONSOLIDATED STATEMENTS OF EARNINGS

===============================================================================


                                                                                   Year ended September 30,
                                                                              2002           2001         2000
                                                                               (In thousands, except share data)
<S>                                                                          <C>             <C>          <C>
Interest income
  Loans                                                                    $32,790        $22,098      $10,857
  Mortgage-backed securities                                                   361          2,867        3,810
  Investment securities                                                        446            769          530
  Interest-bearing deposits and other                                          115            163          232
                                                                            ------         ------       ------
         Total interest income                                              33,712         25,897       15,429

Interest expense
  Deposits                                                                  10,464          8,976        5,910
  Borrowings                                                                 5,134          6,567        4,181
                                                                            ------         ------       ------
         Total interest expense                                             15,598         15,543       10,091
                                                                            ------         ------       ------

         Net interest income                                                18,114         10,354        5,338

Provision for losses on loans                                                5,265          2,449          156
                                                                            ------         ------       ------

         Net interest income after provision
           for losses on loans                                              12,849          7,905        5,182

Other income
  Gain (loss) on sale of investment and mortgage-backed securities              (3)         4,713           19
  Gain on sale of branch offices                                             2,140             -            -
  Other operating                                                              372            134           82
                                                                            ------         ------       ------
         Total other income                                                  2,509          4,847          101

General, administrative and other expense
  Employee compensation and benefits                                         3,780          3,371        1,915
  Occupancy and equipment                                                    1,597            596          209
  Franchise taxes                                                              395            456          219
  Data processing                                                              365            380          167
  Other operating                                                            2,224          1,146          506
  Merger-related expenses                                                       -             317        1,010
  Goodwill amortization                                                      1,456          1,858          247
                                                                            ------         ------       ------
         Total general, administrative and other expense                     9,817          8,124        4,273
                                                                            ------         ------       ------

         Earnings before income taxes                                        5,541          4,628        1,010

Federal income taxes
  Current                                                                    4,761          3,348         (386)
  Deferred                                                                  (2,369)        (1,044)         848
                                                                            ------         ------       ------
         Total federal income taxes                                          2,392          2,304          462
                                                                            ------         ------       ------

         NET EARNINGS                                                      $ 3,149        $ 2,324      $   548
                                                                            ======         ======       ======

         EARNINGS PER SHARE
           Basic                                                            $1.29           $1.08          N/A
                                                                             ====            ====          ===

           Diluted                                                          $1.27           $1.08          N/A
                                                                             ====            ====          ===
</TABLE>


The accompanying notes are an integral part of these statements.

                                       23
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.

<TABLE>
<CAPTION>

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

===============================================================================


                                                                                   Year ended September 30,
                                                                                2002         2001         2000
                                                                                        (In thousands)
<S>                                                                             <C>          <C>           <C>
Net earnings                                                                  $3,149       $2,324       $  548

Other comprehensive income, net of tax:
  Unrealized holding gains on securities during
    the period, net of tax effects of $41, $879 and $77
    in 2002, 2001 and 2000, respectively                                          79        1,706          149

  Reclassification adjustment for realized (gains) losses included
    in earnings, net of taxes (benefits) of $(1), $1,602 and $6 in
    2002, 2001 and 2000, respectively                                              2       (3,111)         (13)
                                                                               -----        -----        -----

Comprehensive income                                                          $3,230       $  919       $  684
                                                                               =====        =====        =====

Accumulated comprehensive income (loss)                                       $   63       $  (18)      $1,387
                                                                               =====        =====        =====
</TABLE>










































The accompanying notes are an integral part of these statements.

                                       24
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.

<TABLE>
<CAPTION>
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

===============================================================================

                                                                                                        Unrealized
                                                                                         Shares      gains (losses)
                                                                                       acquired       on securities
                                                      Additional                       by stock          designated
                                           Common        paid-in       Retained         benefit        as available
                                            stock        capital       earnings            plan            for sale         Total
                                                                             (In thousands)
<S>                                           <C>           <C>          <C>               <C>               <C>            <C>
Balance at October 1, 1999                   $ -         $    -         $13,426          $  -               $1,251        $14,677

Net proceeds from issuance of
  common stock                                 12         11,240             -            (952)                 -          10,300
Issuance of shares in connection with
  acquisition of Harvest Home                   8          5,900             -              -                   -           5,908
Amortization expense of stock benefit
  plan                                         -              -              -              95                  -              95
Net earnings for the year ended
  September 30, 2000                           -              -             548             -                   -             548
Unrealized gains on securities designated
  as available for sale, net of related
  tax effects                                  -              -              -              -                  136            136
                                              ---         ------         ------           ----               -----         ------

Balance at September 30, 2000                  20         17,140         13,974           (857)              1,387         31,664

Issuance of shares in connection with
  acquisition of Market Financial              5          5,999             -              -                   -           6,004
Amortization expense of stock benefit plan     -              -              -             191                  -             191
Net earnings for the year ended
  September 30, 2001                           -              -           2,324             -                   -           2,324
Unrealized gains on securities designated
  as available for sale, net of related
   tax effects                                 -              -              -              -               (1,405)        (1,405)
                                              ---         ------         ------           ----               -----         ------

Balance at September 30, 2001                  25         23,139         16,298           (666)                (18)        38,778

Amortization expense of stock benefit plan     -             649             -             190                  -             839
Compensation expense relating to vested
  stock options                                -             143             -              -                   -             143
Net earnings for the year ended
  September 30, 2002                           -              -           3,149             -                   -           3,149
Unrealized gains on securities designated
   as available for sale, net of related
   tax effects                                 -              -              -              -                   81             81
                                              ---         ------         ------           ----               -----         ------

Balance at September 30, 2002                $ 25        $23,931        $19,447          $(476)             $   63        $42,990
                                              ===         ======         ======           ====               =====         ======
</TABLE>






The accompanying notes are an integral part of these statements.

                                       25
<PAGE>

                         PEOPLES COMMUNITY BANCORP, INC.
<TABLE>
<CAPTION>
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

===============================================================================


                                                                                 Year ended September 30,
                                                                            2002           2001           2000
                                                                                      (In thousands)
<S>                                                                          <C>           <C>             <C>
Cash flows provided by (used in) operating activities:
  Net earnings for the year                                             $  3,149       $  2,324        $   548
  Adjustments to reconcile net earnings to net cash
  provided by (used in) operating activities:
    Amortization of premiums and discounts on investment and
      mortgage-backed securities, net                                        264           (436)          (230)
    Amortization of purchase price adjustments                                -              -            (322)
    Amortization of deferred loan origination fees                          (716)          (311)          (132)
    Amortization expense of stock benefit plan                               839            191             95
    Compensation expense related to vested stock options                     143             -              -
    Amortization and other charges related to goodwill                     1,456          1,858            247
    Depreciation and amortization                                            967            353            113
    Provision for losses on loans                                          5,265          2,449            156
    Federal Home Loan Bank stock dividends                                  (430)          (528)          (254)
    (Gain) loss on sale of securities                                          3         (4,713)           (19)
    Gain on sale of branch offices                                        (2,140)            -              -
    Increase (decrease) in cash, net of acquisition of Harvest Home
      Financial Corporation, Market Financial Corporation and
      Kenwood Bancorp, Inc., due to changes in:
        Accrued interest receivable on loans                                (179)          (366)          (299)
        Accrued interest receivable on investments and mortgage-backed
          securities                                                         (58)           195            (98)
        Prepaid expenses and other assets                                 (3,916)            87             56
        Accrued interest payable                                             652           (597)           313
        Other liabilities                                                   (132)           976           (136)
        Federal income taxes
          Current                                                          3,583          2,072           (526)
          Deferred                                                        (2,369)        (1,044)           848
                                                                         -------        -------         ------
         Net cash provided by operating activities                         6,381          2,510            360

Cash flows provided by (used in) investing activities:
  Decrease in certificates of deposit in other financial institutions         -              -             400
  Proceeds from maturity of investment securities                             -          10,500          1,096
  Proceeds from sale of investment securities designated as
    available for sale                                                        -           4,167             -
  Purchase of mortgage-backed securities                                 (20,264)            -         (62,992)
  Principal repayments on mortgage-backed securities                       1,730         26,612         12,809
  Proceeds from sale of mortgage-backed securities designated as
    available for sale                                                     3,520         71,727          2,122
  Proceeds from sale of loan participations                                6,738          2,747             -
  Principal repayments on loans                                          153,207         92,571         33,989
  Loan disbursements                                                    (261,576)      (241,112)       (73,723)
  Purchase of office premises and equipment                               (2,002)        (4,358)        (1,035)
  Proceeds from sale of branch offices                                     3,572             -              -
  Purchase of Federal Home Loan Bank stock                                  (970)            -          (3,345)
  Acquisition of Kenwood Bancorp, Inc. common stock - net                  2,042             -              -
  Acquisition of Market Financial Corporation common stock - net              -          (1,010)            -
  Acquisition of Harvest Home Financial Corporation common
    stock - net                                                               -              -          (8,190)
                                                                         -------        -------         ------
         Net cash used in investing activities                          (114,003)       (38,156)       (98,869)
                                                                         -------         ------         ------

         Net cash used in operating and investing activities
           (balance carried forward)                                    (107,622)       (35,646)       (98,509)
                                                                         -------         ------         ------
</TABLE>




                                       26
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.
<TABLE>
<CAPTION>
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

===============================================================================


                                                                                 Year ended September 30,
                                                                            2002           2001           2000
                                                                                      (In thousands)
<S>                                                                        <C>            <C>            <C>
         Net cash used in operating and investing activities
           (balance brought forward)                                   $(107,622)      $(35,646)      $(98,509)

Cash flows provided by (used in) financing activities:
  Net increase (decrease) in deposit accounts                             97,551         40,007         (2,923)
  Proceeds from Federal Home Loan Bank advances and
    other borrowings                                                      79,250         85,500         98,803
  Repayment of Federal Home Loan Bank advances                           (69,289)       (80,000)        (8,253)
  Proceeds from issuance of junior subordinated debentures                12,500             -              -
  Net increase (decrease) in advances for taxes and insurance               (348)           107             26
  Proceeds from stock issuance - net                                          -              -          10,300
                                                                        --------        -------        -------
         Net cash provided by financing activities                       119,664         45,614         97,953
                                                                        --------        -------        -------

Net increase (decrease) in cash and cash equivalents                      12,042          9,968           (556)

Cash and cash equivalents at beginning of year                            14,595          4,627          5,183
                                                                        --------        -------        -------

Cash and cash equivalents at end of year                               $  26,637       $ 14,595       $  4,627
                                                                        ========        =======        =======


Supplemental disclosure of cash flow information:
  Cash paid during the year for:
    Federal income taxes                                               $   2,600       $  1,000       $    139
                                                                        ========        =======        =======

    Interest on deposits and borrowings                                $  14,833       $ 16,023       $  9,535
                                                                        ========        =======        =======


Supplemental disclosure of noncash investing activities:
  Unrealized gains (losses) on securities designated as available
    for sale, net of related tax effects                               $      81       $ (1,405)      $    136
                                                                        ========        =======        =======

  Transfers from loans to real estate acquired through
    foreclosure                                                        $     620       $    197       $    110
                                                                        ========        =======        =======

  Loans disbursed to facilitate sale of real estate acquired
    through foreclosure                                                $     191       $    412       $     -
                                                                        ========        =======        =======

  Fair value of assets received in acquisition of:
    Harvest Home Financial Corporation                                 $      -        $     -        $118,026
                                                                        ========        =======        =======

    Market Financial Corporation                                       $      -        $ 56,672       $     -
                                                                        ========        =======        =======

    Kenwood Bancorp, Inc.                                              $  56,550       $     -        $     -
                                                                        ========        =======        =======
</TABLE>








The accompanying notes are an integral part of these statements.

                                       27

<PAGE>

                         PEOPLES COMMUNITY BANCORP, INC.


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

===============================================================================


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    On March 29, 2000, The People's Building, Loan and Savings Company
    ("People's") and The Oakley Improved Building and Loan Company ("Oakley"),
    (collectively "the Companies"), jointly executed an Agreement and Plan of
    Merger (the "Merger") wherein Oakley merged with and into People's.
    Coincident with the Merger, People's changed its name to Peoples Community
    Bank (hereinafter "Peoples" or the "Bank"). The Merger was accounted for
    under the pooling-of-interests method of accounting, whereby the financial
    statements were restated for prior years to include the accounts of Oakley.
    In connection therewith, the Companies adopted an overall Plan of Conversion
    (the "Conversion") whereby a new holding company, Peoples Community Bancorp,
    Inc. (the "Corporation") was formed, simultaneously converting People's from
    mutual to stock form.

    Pursuant to the Plan of Conversion, the Corporation issued 1,190,000 common
    shares to its depositors and members of the community. The costs of issuing
    the common stock were deducted from the sale proceeds of the offering.

    Immediately following the Merger and Conversion, the Corporation acquired
    the Harvest Home Financial Corporation ("Harvest Home") for consideration of
    $7.9 million in cash and 787,733 shares of common stock. Under the terms of
    the agreement, each share of Harvest Home's common stock was exchanged for a
    combination of $9.00 per share in cash plus 0.9 of a share of the
    Corporation's common stock. The acquisition was accounted for using the
    purchase method of accounting, consequently prior period amounts were not
    restated.

    On March 30, 2001, the Corporation acquired Market Financial Corporation
    ("Market") for consideration of $7.8 million in cash and 527,930 shares of
    the Corporation's common stock. Under the terms of the agreement, each share
    of Market's common stock was exchanged for cash and/or shares of the
    Corporation totaling $13.00 per share. The acquisition was accounted for
    using the purchase method of accounting, consequently prior period amounts
    were not restated.

    On January 18, 2002, the Bank sold $11.0 million in total loans and $9.9
    million in total deposits to another financial institution pursuant to a
    Purchase and Assumption Agreement. These assets and liabilities had been
    assigned to the Bank's branch office located in Blanchester, Ohio.

    On April 26, 2002, the Corporation completed its acquisition of Kenwood
    Bancorp, Inc. ("Kenwood") for consideration of $25.22 per outstanding share,
    totaling $7.9 million in cash. Kenwood was merged with and into the
    Corporation and Kenwood's wholly-owned banking subsidiary, Kenwood Savings
    Bank, became a wholly-owned subsidiary of Peoples. Future references to
    "Peoples" or the "Bank" include both Peoples and Kenwood Savings Bank. The
    Corporation acquired $56.6 million in total assets and recorded
    approximately $3.4 million in goodwill as a result of the transaction.

    The Corporation is a savings and loan holding company whose activities are
    primarily limited to holding the stock of the Bank. Peoples conducts a
    general banking business in southwestern Ohio which consists of attracting
    deposits from the general public and primarily applying those funds to the
    origination of loans for residential, consumer and nonresidential purposes.
    Peoples' profitability is significantly dependent on net interest income,
    which is the difference between interest income generated from
    interest-earning assets (i.e. loans and investments) and the interest
    expense paid on interest-bearing liabilities (i.e. customer deposits and
    borrowed funds). Net interest income is affected by the relative





                                       28
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    amount of interest-earning assets and interest-bearing liabilities and the
    interest received or paid on these balances. The level of interest rates
    paid or received by Peoples can be significantly influenced by a number of
    environmental factors, such as governmental monetary policy, that are
    outside of management's control.

    The consolidated financial information presented herein has been prepared in
    accordance with accounting principles generally accepted in the United
    States of America ("U.S. GAAP") and general accounting practices within the
    financial services industry. In preparing consolidated financial statements
    in accordance with U.S. GAAP, management is required to make estimates and
    assumptions that affect the reported amounts of assets and liabilities and
    the disclosure of contingent assets and liabilities at the date of the
    financial statements and revenues and expenses during the reporting period.
    Actual results could differ from such estimates.

    The following is a summary of the Corporation's significant accounting
    policies which have been consistently applied in the preparation of the
    accompanying consolidated financial statements.

    1.  Principles of Consolidation

    The accompanying consolidated financial statements include the accounts of
    the Corporation and its wholly-owned subsidiaries, Peoples and Peoples
    Bancorp Capital Trust I, and Peoples' wholly-owned subsidiary, Kenwood
    Savings Bank. All significant intercompany balances and transactions have
    been eliminated.

    2.  Investment Securities and Mortgage-Backed Securities

    The Corporation accounts for investment and mortgage-backed securities in
    accordance with Statement of Financial Accounting Standards ("SFAS") No. 115
    "Accounting for Certain Investments in Debt and Equity Securities." SFAS No.
    115 requires that investments in debt and equity securities be categorized
    as held-to-maturity, trading, or available for sale. Securities classified
    as held-to-maturity are carried at cost only if the Corporation has the
    positive intent and ability to hold these securities to maturity. Trading
    securities and securities designated as available for sale are carried at
    fair value with resulting unrealized gains or losses recorded to operations
    or stockholders' equity, respectively.

    Realized gains and losses on sales of securities are recognized using the
    specific identification method.

    3.  Loans Receivable

    Loans receivable are stated at the principal amount outstanding, adjusted
    for deferred loan origination fees and the allowance for loan losses.
    Interest is accrued as earned unless the collectibility of the loan is in
    doubt. Interest on loans that are contractually past due is charged off, or
    an allowance is established based on management's periodic evaluation. The
    allowance is established by a charge to interest income equal to all
    interest previously accrued, and income is subsequently recognized only to
    the extent that cash payments are received until, in management's






                                       29
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    3.  Loans Receivable (continued)

    judgment, the borrower's ability to make periodic interest and principal
    payments has returned to normal, in which case the loan is returned to
    accrual status. If the ultimate collectibility of the loan is in doubt, in
    whole or in part, all payments received on nonaccrual loans are applied to
    reduce principal until such doubt is eliminated.

    4.  Loan Origination Fees

    Peoples accounts for loan origination fees in accordance with SFAS No. 91
    "Accounting for Nonrefundable Fees and Costs Associated with Originating or
    Acquiring Loans and Initial Direct Cost of Leases." Pursuant to the
    provisions of SFAS No. 91, origination fees received from loans, net of
    direct origination costs, are deferred and amortized to interest income
    using the level-yield method, giving effect to actual loan prepayments.
    Additionally, SFAS No. 91 generally limits the definition of loan
    origination costs to the direct costs of originating a loan, i.e.,
    principally actual personnel costs. Fees received for loan commitments that
    are expected to be drawn upon, based on Peoples' experience with similar
    commitments, are deferred and amortized over the life of the loan using the
    level-yield method. Fees for other loan commitments are deferred and
    amortized over the loan commitment period on a straight-line basis.

    5.  Allowance for Loan Losses

    It is Peoples' policy to provide valuation allowances for estimated losses
    on loans based on past loss experience, trends in the level of delinquent
    and problem loans, adverse situations that may affect the borrower's ability
    to repay, the estimated value of any underlying collateral and current and
    anticipated economic conditions in the primary lending area. When the
    collection of a loan becomes doubtful, or otherwise troubled, Peoples
    records a loan charge-off equal to the difference between the fair value of
    the property securing the loan and the loan's carrying value. Major loans
    (including development projects) and major lending areas are reviewed
    periodically to determine potential problems at an early date. The allowance
    for loan losses is increased by charges to earnings and decreased by
    charge-offs (net of recoveries).

    Peoples accounts for impaired loans in accordance with SFAS No. 114,
    "Accounting by Creditors for Impairment of a Loan," which requires that
    impaired loans be measured based upon the present value of expected future
    cash flows discounted at the loan's effective interest rate or, as an
    alternative, at the loan's observable market price or fair value of the
    collateral. Peoples' current procedures for evaluating impaired loans result
    in carrying such loans at the lower of cost or fair value.

    A loan is defined under SFAS No. 114 as impaired when, based on current
    information and events, it is probable that a creditor will be unable to
    collect all amounts due according to the contractual terms of the loan
    agreement. In applying the provisions of SFAS No. 114, the Bank considers
    its investment in one- to four-family residential loans and consumer loans
    to be homogeneous and therefore excluded from separate identification for







                                       30
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    5.  Allowance for Loan Losses (continued)

    evaluation of impairment. With respect to Peoples' investment in
    multi-family, nonresidential real estate and land loans, and its evaluation
    of impairment thereof, such loans are collateral dependent, and as a result,
    are carried as a practical expedient at the lower of cost or fair value.
    With respect to the Bank's investment in unsecured commercial lines of
    credit, any impairment would be measured based upon the present value of
    expected future cash flows.

    It is Peoples' policy to charge off unsecured credits that are more than
    ninety days delinquent. Similarly, collateral dependent loans which are more
    than ninety days delinquent are considered to constitute more than a minimum
    delay in repayment and are evaluated for impairment under SFAS No. 114 at
    that time.

    Information with respect to the Bank's impaired loans at and for the year
    ended September 30, 2002 is as follows:
<TABLE>
<CAPTION>
                                                                                         (In thousands)
<S>                                                                                           <C>
    Impaired loans with related allowance                                                    $6,312
    Impaired loans with no related allowance                                                     -
                                                                                              -----

         Total impaired loans                                                                $6,312
                                                                                              =====

    Allowance for losses on impaired loans
      Beginning balance                                                                      $   -
      Provision for losses on loans                                                             679
                                                                                              -----

      Ending balance                                                                         $  679
                                                                                              =====

    Average recorded investment in impaired loans during fiscal 2002                         $2,352
                                                                                              =====

    Interest income recognized on impaired loans during fiscal 2002                          $  211
                                                                                              =====
</TABLE>

    The allowance for impaired loans is included in the Bank's overall allowance
    for loan losses.

    At September 30, 2001, Peoples had no loans defined as impaired under
    SFAS No. 114.

    6.  Office Premises and Equipment

    Office premises and equipment are carried at cost and include expenditures
    which extend the useful lives of existing assets. Maintenance, repairs and
    minor renewals are expensed as incurred. For financial reporting,
    depreciation and amortization are provided on the straight-line and
    accelerated methods over the useful lives of the assets, estimated to be
    forty to fifty years for buildings, ten to fifty years for building
    improvements, and three to ten years for furniture and equipment. An
    accelerated method is used for tax reporting purposes. During fiscal 2002,
    management reduced its estimate of depreciable lives for certain furniture
    and equipment assets. As a result of this downward change in estimate, the
    Corporation recognized additional depreciation expense during fiscal 2002 of
    approximately $215,000, or $.06 per share on an after-tax basis.







                                       31
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    7.  Real Estate Acquired Through Foreclosure

    Real estate acquired through foreclosure is carried at the lower of the
    loan's unpaid principal balance (cost) or fair value less estimated selling
    expenses at the date of acquisition. Real estate loss provisions are
    recorded if the properties' fair value subsequently declines below the
    amount determined at the recording date. In determining the lower of cost or
    fair value at acquisition, costs relating to development and improvement of
    property are capitalized. Costs relating to holding real estate acquired
    through foreclosure, net of rental income, are charged against earnings as
    incurred.

    8.  Goodwill

    Prior to adoption of SFAS No. 142, goodwill was amortized over a ten year
    period using the straight-line method. Management had periodically evaluated
    the carrying value of intangible assets in relation to the continuing
    earnings capacity of the acquired assets and assumed liabilities. During
    fiscal 2001, the Corporation recorded a charge to goodwill totaling $1.2
    million following the sale of a significant amount of interest-earning
    assets acquired in the Harvest Home combination. During fiscal 2002, the
    Corporation recorded a charge to goodwill totaling $1.0 million following a
    review of diminished net interest income arising from loans and savings
    acquired in the purchase of Harvest Home.

    In June 2001, the Financial Accounting Standards Board issued SFAS No. 142
    "Goodwill and Intangible Assets," which prescribes accounting for all
    purchased goodwill and intangible assets. Pursuant to SFAS No. 142, acquired
    goodwill is not amortized, but is tested for impairment at the reporting
    unit level annually and whenever an impairment indicator arises. All
    goodwill should be assigned to reporting units that are expected to benefit
    from the goodwill. Goodwill impairment should be tested with a two-step
    approach. First, the fair value of the reporting unit should be compared to
    its carrying value, including goodwill. If the reporting unit's carrying
    value exceeds its fair value, then any goodwill impairment should be
    measured as the excess of the goodwill's carrying value over its implied
    fair value. The implied fair value of goodwill should be calculated in the
    same manner as goodwill is calculated for a business combination, using the
    reporting unit's fair value as the "purchase price." Therefore, the
    goodwill's implied fair value will be the excess of the "purchase price"
    over the amounts allocated to assets, including unrecognized intangible
    assets, and liabilities of the reporting unit. Goodwill impairment losses
    should be reported in the income statement as a separate line item within
    operations, except for such losses included in the calculation of a gain or
    loss from discontinued operations.

    An acquired intangible asset, other than goodwill, should be amortized over
    its useful economic life. The useful life of an intangible asset is
    indefinite if it extends beyond the foreseeable horizon. If an asset's life
    is indefinite, the asset should not be amortized until the life is
    determined to be finite. Intangible assets being amortized should be tested
    for impairment in accordance with SFAS No. 144. Intangible assets not being
    amortized should be tested for impairment annually and whenever there are
    indicators of impairment, by comparing the asset's fair value to its
    carrying amount.

    SFAS No. 142 is effective for fiscal years beginning after December 15,
    2001, or October 1, 2002 as to the Corporation.  Management adopted
    SFAS No. 142 effective October 1, 2002, as required.  Application of SFAS
    No. 142 will result in the elimination of annual goodwill amortization
    totaling approximately $460,000 beginning in fiscal 2003.






                                       32
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    9.  Federal Income Taxes

    The Corporation accounts for federal income taxes in accordance with the
    provisions of SFAS No. 109, "Accounting for Income Taxes." Pursuant to the
    provisions of SFAS No. 109, a deferred tax liability or deferred tax asset
    is computed by applying the current statutory tax rates to net taxable or
    deductible differences between the tax basis of an asset or liability and
    its reported amount in the consolidated financial statements that will
    result in taxable or deductible amounts in future periods. Deferred tax
    assets are recorded only to the extent that the amount of net deductible
    temporary differences or carryforward attributes may be utilized against
    current period earnings, carried back against prior years' earnings, offset
    against taxable temporary differences reversing in future periods, or
    utilized to the extent of management's estimate of future taxable income. A
    valuation allowance is provided for deferred tax assets to the extent that
    the value of net deductible temporary differences and carryforward
    attributes exceeds management's estimates of taxes payable on future taxable
    income. Deferred tax liabilities are provided on the total amount of net
    temporary differences taxable in the future.

    The Corporation's principal temporary differences between pretax financial
    income and taxable income result from different methods of accounting for
    deferred loan origination fees and costs, Federal Home Loan Bank stock
    dividends, deferred compensation and stock benefit plans, the general loan
    loss allowance, percentage of earnings bad debt deductions and purchase
    price adjustments resulting from acquisitions. Additional temporary
    differences result from depreciation computed using accelerated methods for
    tax purposes.

    10.  Benefit Plans

    Peoples has a noncontributory unfunded retirement plan that covers all
    members of its Board of Directors. Peoples' policy is to maintain an accrued
    liability equal to the present value of benefits computed using a
    predetermined annual benefit amount at retirement. The plan provided that
    each director was vested at 65% upon adoption with an additional vesting of
    15% after three years and 5% per year thereafter until 100% vesting is
    reached. During fiscal 2001, the plan was amended to provide for total
    vesting for all participants. The provision for directors retirement expense
    totaled $84,000, $547,000 and $71,000 for the fiscal years ended September
    30, 2002, 2001 and 2000, respectively.

    In conjunction with the Conversion, the Corporation implemented an Employee
    Stock Ownership Plan ("ESOP") which provides retirement benefits for
    substantially all full-time employees who have completed one year of
    service. The Corporation accounts for the ESOP in accordance with Statement
    of Position ("SOP") 93-6, "Employers' Accounting for Employee Stock
    Ownership Plans." SOP 93-6 requires that compensation expense recorded by
    employers equal the fair value of ESOP shares allocated to participants
    during a given fiscal year. Expense recognized related to the ESOP totaled
    $307,000, $292,000 and $114,000 for the fiscal years ended September 30,
    2002, 2001 and 2000, respectively.








                                       33
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    10.  Benefit Plans (continued)

    The Corporation also has a Management Recognition Plan ("MRP") which
    provides for awards of up to 79,109 shares of the Corporation's common stock
    to members of the Board of Directors, management and employees. During
    fiscal 2002, the MRP awarded 11,076 shares to members of management and
    employees. During fiscal 2001, the MRP awarded 23,204 shares to members of
    the Board of Directors and 11,602 shares to members of management and
    employees. Common shares awarded to outside members of the Board of
    Directors were expensed in fiscal 2001, while shares awarded to members of
    management and employees will vest over a five year period beginning with
    the date of the award. Shares awarded under the MRP will be distributed from
    previously authorized but unissued shares. Expense recognized under the MRP
    totaled approximately $54,000, $346,000 and $96,000 for the fiscal years
    ended September 30, 2002, 2001 and 2000, respectively.

    11.  Earnings Per Share

    Basic earnings per share for the fiscal years ended September 30, 2002 and
    2001 is based upon the weighted-average shares outstanding during the year,
    less 47,600 and 85,680 unallocated ESOP shares, respectively. Diluted
    earnings per share is computed taking into consideration common shares
    outstanding and dilutive potential common shares to be issued under the
    Corporation's stock option plan. The computations were as follows:
<TABLE>
<CAPTION>

                                                                        2002                  2001
<S>                                                                     <C>                  <C>
    Weighted-average common shares
      outstanding (basic)                                            2,447,984             2,147,132
    Dilutive effect of  assumed exercise
      of stock options                                                  29,796                 9,486
                                                                     ---------             ---------
    Weighted-average common shares
      outstanding (diluted)                                          2,477,780             2,156,618
                                                                     =========             =========
</TABLE>


    The provisions of SFAS No. 128, "Earnings Per Share," are not applicable to
    the fiscal year ended September 30, 2000, as the Conversion was completed in
    March 2000.

    12.  Fair Value of Financial Instruments

    SFAS No. 107, "Disclosures About Fair Value of Financial Instruments,"
    requires disclosure of the fair value of financial instruments, both assets
    and liabilities whether or not recognized in the consolidated statement of
    financial condition, for which it is practicable to estimate that value. For
    financial instruments where quoted market prices are not available, fair
    values are based on estimates using present value and other valuation
    methods.

    The methods used are greatly affected by the assumptions applied, including
    the discount rate and estimates of future cash flows. Therefore, the fair
    values presented may not represent amounts that could be realized in an
    exchange for certain financial instruments.






                                       34
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    12.  Fair Value of Financial Instruments (continued)

    The following methods and assumptions were used by the Corporation in
    estimating its fair value disclosures for financial instruments at September
    30, 2002 and 2001:

                  Cash and cash equivalents: The carrying amounts presented in
                  the consolidated statements of financial condition for cash
                  and cash equivalents are deemed to approximate fair value.

                  Investment and mortgage-backed securities: For investment and
                  mortgage-backed securities, fair value is deemed to equal the
                  quoted market price.

                  Loans receivable: The loan portfolio has been segregated into
                  categories with similar characteristics, such as one- to
                  four-family residential, multi-family residential,
                  nonresidential real estate and unsecured commercial loans.
                  These loan categories were further delineated into fixed-rate
                  and adjustable-rate loans. The fair values for the resultant
                  loan categories were computed via discounted cash flow
                  analysis, using current interest rates offered for loans with
                  similar terms to borrowers of similar credit quality. For
                  consumer and other loans, fair values were deemed to equal the
                  historic carrying values. The historical carrying amount of
                  accrued interest on loans is deemed to approximate fair value.

                  Federal Home Loan Bank stock: The carrying amount presented in
                  the consolidated statements of financial condition is deemed
                  to approximate fair value.

                  Deposits: The fair value of checking accounts, savings
                  accounts, money market demand and escrow deposits is deemed to
                  approximate the amount payable on demand. Fair values for
                  fixed-rate certificates of deposit have been estimated using a
                  discounted cash flow calculation using the interest rates
                  currently offered for deposits of similar remaining
                  maturities.

                  Advances from the Federal Home Loan Bank: The fair value of
                  these advances is estimated using the rates currently offered
                  for similar advances of similar remaining maturities.

                  Other borrowed money: The fair value of other borrowed money
                  is estimated using the rates currently offered for similar
                  borrowings of similar remaining maturities.

                  Subordinated debentures: The fair value of the Corporation's
                  subordinated debentures has been estimated using discounted
                  cash flow analysis, based on the interest rates currently
                  offered for instruments of similar remaining maturities.

                  Commitments to extend credit: For fixed-rate and
                  adjustable-rate loan commitments, the fair value estimate
                  considers the difference between current levels of interest
                  rates and committed rates. At September 30, 2002 and 2001, the
                  difference between the fair value and notional amount of loan
                  commitments was not material.



                                       35
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    12.  Fair Value of Financial Instruments (continued)

    Based on the foregoing methods and assumptions, the carrying value and fair
    value of the Corporation's financial instruments at September 30 are as
    follows:
<TABLE>
<CAPTION>
                                                                    2002                            2001
                                                        Carrying            Fair       Carrying           Fair
                                                           value           value          value          value
                                                                              (In thousands)
<S>                                                        <C>              <C>           <C>            <C>
    Financial assets
      Cash and cash equivalents                         $ 26,637        $ 26,637       $ 14,595       $ 14,595
      Investment securities                                1,231           1,231          1,364          1,364
      Mortgage-backed securities                          18,763          18,763             -              -
      Loans receivable                                   504,012         527,766        377,727        379,842
      Federal Home Loan Bank stock                         9,907           9,907          7,880          7,880
                                                         -------         -------        -------        -------

                                                        $560,550        $584,304       $401,566       $403,681
                                                         =======         =======        =======        =======
    Financial liabilities
      Deposits                                          $369,080        $376,680       $233,063       $236,976
      Advances from the Federal Home Loan Bank           152,500         153,266        140,000        140,000
      Other borrowed money                                   450             450             -              -
      Subordinated debentures                             12,500          12,508             -              -
                                                         -------         -------        -------        -------

                                                        $534,530        $542,904       $373,063       $376,976
                                                         =======         =======        =======        =======
</TABLE>

    13.  Capitalization

    The Corporation's authorized capital stock includes 1,000,000 shares of $.01
    per share par value voting preferred stock. No preferred shares have been
    issued at September 30, 2002 and 2001.

    14.  Advertising

    Advertising costs are expensed when incurred. The Corporation's advertising
    expense totaled $174,000, $139,000 and $67,000 for the fiscal years ended
    September 30, 2002, 2001 and 2000, respectively.

    15.  Cash and Cash Equivalents

    For purposes of reporting cash flows, cash and cash equivalents include cash
    and due from banks and interest-bearing deposits in other financial
    institutions with original maturities of less than ninety days.

    16.  Reclassifications

    Certain prior year amounts have been reclassified to conform to the 2002
consolidated financial statement presentation.






                                       36
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES

    The amortized cost, gross unrealized gains, gross unrealized losses and
    estimated fair values of investment securities at September 30, 2002 and
    2001, are summarized as follows:
<TABLE>
<CAPTION>
                                                                                2002
                                                                      Gross             Gross        Estimated
                                                 Amortized       unrealized        unrealized             fair
                                                      cost            gains            losses            value
                                                                            (In thousands)
<S>                                                   <C>               <C>              <C>              <C>
    Available for sale:

      FHLMC stock                                   $1,391             $ -               $192           $1,199
      Other equity securities                           29                3                -                32
                                                     -----              ---               ---            -----

                                                    $1,420             $  3              $192           $1,231
                                                     =====              ===               ===            =====

                                                                                2001
                                                                      Gross             Gross        Estimated
                                                 Amortized       unrealized        unrealized             fair
                                                      cost            gains            losses            value
    Available for sale:                                                    (In thousands)

      FHLMC stock                                   $1,391             $ -               $ 27           $1,364
                                                     =====              ===               ===            =====
</TABLE>

    Proceeds from sales of investment securities amounted to $4.2 million for
    the fiscal year ended September 30, 2001, resulting in gross realized gains
    totaling $2.5 million.

    The amortized cost, gross unrealized gains, gross unrealized losses and
    estimated fair values of mortgage-backed securities at September 30, 2002,
    are summarized as follows:
<TABLE>
<CAPTION>

                                                                                  2002
                                                                           Gross          Gross      Estimated
                                                       Amortized      unrealized     unrealized           fair
                                                            cost           gains         losses          value
                                                                            (In thousands)
<S>                                                       <C>               <C>             <C>           <C>
    Available for sale:
      Government National Mortgage Association
        participation certificates                       $18,479            $284           $ -         $18,763
                                                          ======             ===            ===         ======
</TABLE>

    Proceeds from sales of mortgage-backed securities acquired in the Kenwood
    acquisition amounted to $3.5 million during the fiscal year ended September
    30, 2002, resulting in gross realized gains of $17,000 and gross realized
    losses of $20,000. Proceeds from sales of mortgage-backed securities
    amounted to $71.7 million during the fiscal year ended September 30, 2001,
    resulting in gross realized gains totaling $2.3 million and gross realized
    losses totaling $69,000. Proceeds from sales of mortgage-backed securities
    amounted to $2.1 million during fiscal 2000, resulting in gross realized
    gains of $19,000.

    At September 30, 2002, People's had $11.0 million of mortgage-backed
    securities pledged to secure public deposits.




                                       37
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================

NOTE C - LOANS RECEIVABLE

    The composition of the loan portfolio at September 30 is summarized as
follows:

<TABLE>
<CAPTION>
                                                                                           2002           2001
                                                                                             (In thousands)
<S>                                                                                      <C>             <C>
    Residential real estate
      One-to-four family                                                               $296,294       $242,540
      Multifamily                                                                        56,980         36,487
      Construction                                                                       51,544         53,824
    Nonresidential real estate and land                                                  88,029         65,842
    Nonresidential real estate construction                                              38,458          9,158
    Commercial                                                                           21,280          9,800
    Consumer and other                                                                    4,265          1,883
                                                                                        -------        -------
         Total loans receivable                                                         556,850        419,534

    Less:
      Undisbursed portion of loans in process                                            43,144         36,782
      Deferred loan origination fees                                                      2,038          1,363
      Allowance for loan losses                                                           7,656          3,662
                                                                                        -------        -------

         Loans receivable - net                                                        $504,012       $377,727
                                                                                        =======        =======
</TABLE>

    As depicted above, Peoples' lending efforts have historically focused on
    one-to-four family residential, multifamily residential real estate and
    residential construction loans, which comprised approximately $382.4
    million, or 76%, of the net loan portfolio at September 30, 2002, and $301.1
    million, or 80%, of the net loan portfolio at September 30, 2001. During
    fiscal 2002, Peoples has continued to change the composition of the loan
    portfolio through the addition of loans secured by nonresidential real
    estate. This type of lending comprised approximately $105.8 million, or 21%,
    of the net loan portfolio at September 30, 2002 and $70.0 million, or 19%,
    of the net loan portfolio at September 30, 2001. Generally, such loans have
    been underwritten on the basis of no more than an 80% loan-to-value ratio,
    which has historically provided Peoples with adequate collateral coverage in
    the event of default. Nevertheless, Peoples, as with any lending
    institution, is subject to the risk that real estate values could
    deteriorate in its primary lending area of southwestern Ohio, thereby
    impairing collateral values. However, management believes that real estate
    values in Peoples' primary lending area are presently stable.

    In the ordinary course of business, Peoples has granted loans to some of its
    directors, officers and their related business interests. All loans to
    related parties have been made on substantially the same terms as those
    prevailing at the time for unrelated third parties. The aggregate dollar
    amount of loans to executive officers and directors was approximately $1.2
    million and $1.1 million at September 30, 2002 and 2001, respectively.
    During the fiscal year ended September 30, 2002, loans originated to
    officers and directors totaled $258,000 and principal repayments of $97,000
    were received from officers and directors.










                                       38
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE D - ALLOWANCE FOR LOAN LOSSES

    The activity in the allowance for loan losses is summarized as follows for
the years ended September 30:

<TABLE>
<CAPTION>
                                                                                2002         2001         2000
                                                                                       (In thousands)
<S>                                                                             <C>           <C>          <C>
    Balance at beginning of year                                              $3,662       $  762         $415
    Provision for losses on loans                                              5,265        2,449          156
    Charge-off of loans                                                       (1,547)          -            (4)
    Allowance resulting from acquisition of Harvest Home                          -            -           195
    Allowance resulting from acquisition of Market - net                          -           451           -
    Allowance resulting from acquisition of Kenwood - net                        276           -            -
                                                                               -----        -----          ---

    Balance at end of year                                                    $7,656       $3,662         $762
                                                                               =====        =====          ===
</TABLE>

    At September 30, 2002, the Bank's allowance for loan losses was solely
    general in nature and is includible as a component of regulatory risk-based
    capital, subject to certain percentage limitations.

    At September 30, 2002, 2001 and 2000, the Bank's nonperforming loans,
    including impaired loans, totaled $7.5 million, $783,000 and $1.3 million,
    respectively. Interest income which would have been recognized if such loans
    had performed pursuant to contractual terms totaled approximately $343,000,
    $27,000 and $47,000 for the fiscal years ended September 30, 2002, 2001 and
    2000, respectively.


NOTE E - OFFICE PREMISES AND EQUIPMENT

    Office premises and equipment are comprised of the following at
    September 30:

<TABLE>
<CAPTION>
                                                                        2002           2001
                                                                          (In thousands)
<S>                                                                     <C>            <C>
    Land and improvements                                            $ 2,563        $ 1,369
    Office buildings and improvements                                  8,010          6,621
    Furniture, fixtures and equipment                                  3,397          2,485
                                                                      ------         ------
                                                                      13,970         10,475
      Less accumulated depreciation                                    2,997          1,813
                                                                      ------         ------

                                                                     $10,973        $ 8,662
                                                                      ======         ======
</TABLE>

    During fiscal 2001, the Corporation began construction of two new branch
    office facilities located in southwestern Ohio, as well as the remodeling of
    an existing branch office. The two new offices were completed and opened in
    the second quarter of fiscal 2002. The cost of these projects amounted to
    approximately $2.8 million.

    During fiscal 2002, the Corporation committed to begin construction of four
    new branch office facilities located in southwestern Ohio. Two of the new
    offices will replace existing branch buildings and two represent expansion
    into new markets. The new offices are scheduled to be opened over the period
    through the second quarter of fiscal 2004. The cost of these projects is
    expected to total approximately $6.8 million.





                                       39
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

================================================================================


NOTE F - DEPOSITS

    Deposits consist of the following major classifications at September 30:
<TABLE>
<CAPTION>

    Deposit type and weighted-average                                  2002                        2001
    interest rate                                                Amount      %               Amount       %
                                                                           (Dollars in thousands)
<S>                                                               <C>        <C>              <C>          <C>
    Non-interest bearing checking accounts                     $  6,075       1.6%         $  7,552        3.3%
    Checking accounts -
      1.51% in 2002 and 2.06% in 2001                            17,220       4.7             7,692        3.3
    Savings accounts - 2.98% in 2002
      and 2.54% in 2001                                          87,193      23.7            24,390       10.5
    Money market demand deposit -
      2.51% in 2002 and 3.49% in 2001                            29,265       7.9            27,591       11.8
                                                                -------     -----           -------      -----
         Total demand, transaction and
           passbook deposits                                    139,753      37.9            67,225       28.9

    Certificates of deposit:
      Original maturities of:
        Less than 12 months
          2.92% in 2002 and 5.02% in 2001                        53,674      14.5            65,584       28.1
        12 months to 36 months
          3.87% in 2002 and 5.84% in 2001                       114,171      30.9            72,267       31.0
        More than 36 months
          5.44% in 2002 and 6.18% in 2001                        36,493       9.9            10,239        4.4
      Individual retirement accounts
        4.99% in 2002 and 5.91% in 2001                          24,989       6.8            17,748        7.6
                                                                -------     -----           -------      -----

         Total certificates of deposit                          229,327      62.1           165,838       71.1
                                                                -------     -----           -------      -----

         Total deposits                                        $369,080     100.0%         $233,063      100.0%
                                                                =======     =====           =======      =====
</TABLE>

    At September 30, 2002 and 2001, Peoples had certificate of deposit accounts
    with balances greater than $100,000 totaling $55.2 million and $38.7
    million, respectively.

    Interest expense on deposit accounts is summarized as follows for the years
ended September 30:

<TABLE>
<CAPTION>
                                                                                2002         2001         2000
                                                                                       (In thousands)
<S>                                                                             <C>          <C>           <C>
    Money market demand deposit accounts                                     $   776       $  818       $  816
    Savings and escrow accounts                                                1,392          768          313
    Checking accounts                                                            218          111           52
    Certificates of deposit                                                    8,078        7,279        4,729
                                                                              ------        -----        -----

                                                                             $10,464       $8,976       $5,910
                                                                              ======        =====        =====
</TABLE>





                                       40
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE F - DEPOSITS (continued)

    Maturities of outstanding certificates of deposit are summarized as follows
at September 30:

<TABLE>
<CAPTION>
                                                                        2002             2001
                                                                          (In thousands)
<S>                                                                     <C>             <C>
    Less than one year                                              $123,283         $128,679
    One to three years                                                67,151           27,509
    Over three years                                                  38,893            9,650
                                                                     -------          -------

                                                                    $229,327         $165,838
                                                                     =======          =======
</TABLE>


NOTE G - ADVANCES FROM THE FEDERAL HOME LOAN BANK

    Advances from the Federal Home Loan Bank, collateralized at September 30,
    2002 by pledges of certain residential mortgage loans totaling $190.9
    million and Peoples' investment in Federal Home Loan Bank stock, are
    summarized as follows:
<TABLE>
<CAPTION>

    Interest Rate                                  Maturing fiscal                           September 30,
                                                   year ending in                        2002             2001
                                                                                        (Dollars in thousands)
<S>                                                     <C>                            <C>               <C>
    3.31%                                                2002                        $     -          $140,000
    5.22%                                                2008                           1,500               -
    3.97% - 4.13%                                        2011                          51,000               -
    3.58% - 4.24%                                        2012                         100,000               -
                                                                                      -------          -------

                                                                                     $152,500         $140,000
                                                                                      =======          =======

               Weighted-average interest rate                                           3.93%             3.31%
                                                                                        ====              ====
</TABLE>


NOTE H - OTHER BORROWED MONEY

    The Corporation has a $10.0 million line of credit with another financial
    institution, with interest payable at LIBOR plus 150 basis points. At
    September 30, 2002, the Corporation had $450,000 outstanding at an interest
    rate of 3.31%. This line of credit expires in the second quarter of fiscal
    2003. The loan is secured by the outstanding shares of the Bank.














                                       41
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE I - GUARANTEED PREFERED BENEFICIAL INTERESTS IN JUNIOR
SUBORDINATED DEBENTURES

     In November 2001, a Delaware trust owned by the Corporation (the "Trust"),
     issued $12.5 million of mandatorily redeemable debt securities. The debt
     securities issued by the Trust are included in the Corporation's regulatory
     capital, specifically as a component of Tier I capital. The subordinated
     debentures are the sole assets of the Trust, and the Corporation owns all
     of the common securities of the Trust. Interest payments on the debt
     securities are made semi-annually at an annual variable interest rate equal
     to the six-month LIBOR rate plus 375 basis points, or equal to 5.78% at
     September 30, 2002, and are reported as a component of interest expense on
     borrowings. The net proceeds received by the Corporation from the sale of
     the debt securities were used for general corporate purposes, including to
     facilitate the growth of the Bank.


NOTE J - COMMITMENTS

    Peoples is a party to financial instruments with off-balance-sheet risk in
    the normal course of business to meet the financing needs of its customers,
    including commitments to extend credit. Such commitments involve, to varying
    degrees, elements of credit and interest-rate risk in excess of the amount
    recognized in the consolidated statement of financial condition. The
    contract or notional amounts of the commitments reflect the extent of
    Peoples' involvement in such financial instruments.

    Peoples' exposure to credit loss in the event of nonperformance by the other
    party to the financial instrument for commitments to extend credit is
    represented by the contractual notional amount of those instruments. Peoples
    uses the same credit policies in making commitments and conditional
    obligations as those utilized for on-balance-sheet instruments.

    At September 30, 2002, Peoples had commitments to originate real estate
    loans totaling $6.4 million, commitments for unused lines of credit under
    home equity loans totaling $18.1 million, commitments for unused commercial
    lines of credit totaling $4.3 million and commitments for letters of credit
    under commercial loans totaling $476,000. Management believes that such loan
    commitments are able to be funded through normal cash flow from operations
    and existing excess liquidity. Fees received in connection with these
    commitments have not been recognized in earnings.

    Commitments to extend credit are agreements to lend to a customer as long as
    there is no violation of any condition established in the contract.
    Commitments generally have fixed expiration dates or other termination
    clauses and may require payment of a fee. Since many of the commitments may
    expire without being drawn upon, the total commitment amounts do not
    necessarily represent future cash requirements. Peoples evaluates each
    customer's creditworthiness on a case-by-case basis. The amount of
    collateral obtained, if it is deemed necessary by Peoples upon extension of
    credit, is based on management's credit evaluation of the counterparty.
    Collateral on loans may vary but the preponderance of loans granted
    generally include a mortgage interest in real estate as security.











                                       42
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE K - FEDERAL INCOME TAXES

    Federal income taxes differ from the amounts computed at the statutory
    corporate tax rate for the years ended September 30 as follows:
<TABLE>
<CAPTION>
                                                                            2002           2001           2000
                                                                                  (Dollars in thousands)
<S>                                                                          <C>          <C>             <C>
    Federal income taxes at statutory rate                                $1,884         $1,574           $343
    Increase in taxes resulting from:
      Amortization and other charges related to goodwill                     495            590             84
      Nondeductible merger-related expenses                                   -             108             35
      Other                                                                   13             32             -
                                                                           -----          -----            ---
    Federal income taxes per consolidated
      financial statements                                                $2,392         $2,304           $462
                                                                           =====          =====            ===

    Effective tax rate                                                     43.2%           49.8%          45.7%
                                                                           ====            ====           ====
</TABLE>

    The composition of the Corporation's net deferred tax asset at September 30
    is as follows:

<TABLE>
<CAPTION>
                                                                                           2002           2001
                                                                                               (In thousands)
     Taxes (payable) refundable on temporary differences at estimated corporate
     tax rate:
<S>                                                                                        <C>           <C>
       Deferred tax assets:
         General loan loss allowance                                                     $2,603         $1,245
         Deferred compensation                                                              488            482
         Stock benefit plans                                                                103            195
         Deferred loan origination fees                                                     693            442
         Unrealized losses on securities designated as
           as available for sale                                                             -               9
         Other                                                                               14             23
                                                                                          -----          -----
           Total deferred tax assets                                                      3,901          2,396

       Deferred tax liabilities:
         Percentage of earnings bad debt deduction                                         (119)          (155)
         Cash versus accrual basis of accounting                                           (156)          (242)
         Federal Home Loan Bank stock dividends                                            (989)          (800)
         Book/tax depreciation differences                                                  (26)          (227)
         Unrealized gains on securities designated as
           available for sale                                                               (32)            -
         Purchase price adjustments                                                        (404)          (466)
                                                                                          -----          -----
           Total deferred tax liabilities                                                (1,726)        (1,890)
                                                                                          -----          -----

           Net deferred tax asset                                                        $2,175         $  506
                                                                                          =====          =====
</TABLE>






                                       43
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE K - FEDERAL INCOME TAXES (continued)

    Prior to fiscal 1997, Peoples was allowed a special bad debt deduction based
    on a percentage of earnings, generally limited to 8% of otherwise taxable
    income and subject to certain limitations based on aggregate loans and
    savings account balances at the end of the year. This deduction totaled
    approximately $5.2 million as of September 30, 2002. If the amounts that
    qualified as deductions for federal income tax purposes are later used for
    purposes other than for bad debt losses, including distributions in
    liquidation, such distributions will be subject to federal income taxes at
    the then current corporate income tax rate. The approximate amount of the
    unrecognized deferred tax liability relating to the cumulative bad debt
    deduction is $1.6 million.

    As a result of fiscal 1997 legislative changes, Peoples is required to
    recapture as taxable income approximately $1.2 million of its tax bad debt
    reserve, which represents the post-1987 additions to the reserve, and is
    unable to utilize the percentage of earnings method to compute its bad debt
    deduction in the future. Peoples has provided deferred taxes for this amount
    and began to amortize the recapture of the bad debt reserve into taxable
    income over a six year period in fiscal 1999.


NOTE L - REGULATORY CAPITAL

    Peoples and Kenwood Savings are subject to minimum regulatory capital
    standards promulgated by the Office of Thrift Supervision (the "OTS").
    Failure to meet minimum capital requirements can initiate certain mandatory
    -- and possibly additional discretionary -- actions by regulators that, if
    undertaken, could have a direct material effect on the consolidated
    financial statements. Under capital adequacy guidelines and the regulatory
    framework for prompt corrective action, the Banks must meet specific capital
    guidelines that involve quantitative measures of their assets, liabilities,
    and certain off-balance-sheet items as calculated under regulatory
    accounting practices. The Banks' capital amounts and classification are also
    subject to qualitative judgments by the regulators about components, risk
    weightings, and other factors.

    The minimum capital standards of the OTS generally require the maintenance
    of regulatory capital sufficient to meet each of three tests, hereinafter
    described as the tangible capital requirement, the core capital requirement
    and the risk-based capital requirement. The tangible capital requirement
    provides for minimum tangible capital (defined as stockholders' equity less
    all intangible assets) equal to 1.5% of adjusted total assets. The core
    capital requirement provides for minimum core capital (tangible capital plus
    certain forms of supervisory goodwill and other qualifying intangible
    assets) generally equal to 4.0% of adjusted total assets, except for those
    associations with the highest regulatory examination rating and acceptable
    levels of risk. The risk-based capital requirement provides for the
    maintenance of core capital plus general loss allowances equal to 8.0% of
    risk-weighted assets. In computing risk-weighted assets, Peoples multiplies
    the value of each asset on its statement of financial condition by a defined
    risk-weighting factor, e.g., one- to four-family residential loans carry a
    risk-weighted factor of 50%.

    During fiscal 2002, the Bank was notified by the OTS that it was categorized
    as "well-capitalized" under the regulatory framework for prompt corrective
    action. To be categorized as "well-capitalized" the Bank must maintain
    minimum capital ratios as set forth in the following tables.






                                       44
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE L - REGULATORY CAPITAL (continued)

    As of September 30, 2002, Peoples and Kenwood Savings exceeded all capital
    adequacy requirements to which they were subject. As of September 30, 2001,
    Peoples exceeded all capital adequacy requirements to which it was subject.
<TABLE>
<CAPTION>

    Peoples Community Bank                                      As of September 30, 2002
                                                                                                 To be "well-
                                                                                              capitalized" under
                                                                     For capital               prompt corrective
                                             Actual                adequacy purposes          action provisions
                                         Amount    Ratio           Amount     Ratio            Amount      Ratio
                                                               (Dollars in thousands)
<S>                                       <C>        <C>             <C>       <C>              <C>          <C>
    Tangible capital                    $50,793      8.8%       =>$ 8,704    =>1.5%         =>$29,013     => 5.0%

    Core capital                        $50,793      8.8%       =>$23,210    =>4.0%         =>$34,815     => 6.0%

    Risk-based capital                  $55,689     13.7%       =>$32,549    =>8.0%         =>$40,686     =>10.0%

                                                                As of September 30, 2001
                                                                                                 To be "well-
                                                                                              capitalized" under
                                                                     For capital               prompt corrective
                                             Actual                adequacy purposes          action provisions
                                         Amount    Ratio           Amount     Ratio            Amount      Ratio
                                                               (Dollars in thousands)

    Tangible capital                    $35,839      8.6%       =>$ 6,244    =>1.5%         =>$20,812     => 5.0%

    Core capital                        $35,839      8.6%       =>$16,650    =>4.0%         =>$24,975     => 6.0%

    Risk-based capital                  $38,678     14.0%       =>$22,083    =>8.0%         =>$27,604     =>10.0%


    Kenwood Savings Bank                                        As of September 30, 2002
                                                                                                 To be "well-
                                                                                              capitalized" under
                                                                     For capital               prompt corrective
                                             Actual                adequacy purposes          action provisions
                                         Amount    Ratio           Amount     Ratio            Amount      Ratio
                                                               (Dollars in thousands)

    Tangible capital                     $4,355      7.7%        =>$  849    =>1.5%          =>$2,830     => 5.0%

    Core capital                         $4,355      7.7%        =>$2,264    =>4.0%          =>$3,396     => 6.0%

    Risk-based capital                   $4,456     16.2%        =>$2,205    =>8.0%          =>$2,756     =>10.0%
</TABLE>







                                       45
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE L - REGULATORY CAPITAL (continued)

    Management believes that, under the current regulatory capital regulations,
    the Banks will continue to meet their minimum capital requirements in the
    foreseeable future. However, events beyond the control of the Banks, such as
    increased interest rates or a downturn in the economy in the Banks' market
    area, could adversely affect future earnings and, consequently, the ability
    to meet future minimum regulatory capital requirements.


NOTE M - STOCK OPTION PLAN

    During fiscal 2001 the Board of Directors adopted the Peoples Community
    Bancorp, Inc. Stock Option and Incentive Plan (the "Plan") that provides for
    the issuance of 197,773 shares of authorized but unissued shares of common
    stock at fair value at the date of grant. Options granted in fiscal 2002
    totaled 25,728 at an exercise price equal to fair value of $20.25. In fiscal
    2001, the Corporation granted 94,861 options at an exercise price equal to
    fair value of $14.00. The Plan provides that one-fifth of the options
    granted become exercisable on each of the first five anniversaries of the
    date of grant. The remaining shares in the Plan may be granted to employees
    in increments of 20% per year based on management's discretion.

    The Corporation accounts for the Plan in accordance with SFAS No. 123,
    "Accounting for Stock-Based Compensation," which contains a fair value-based
    method for valuing stock-based compensation that entities may use, which
    measures compensation cost at the grant date based on the fair value of the
    award. Compensation is then recognized over the service period, which is
    usually the vesting period. Alternatively, SFAS No. 123 permits entities to
    continue to account for stock options and similar equity instruments under
    Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
    Issued to Employees." Entities that continue to account for stock options
    using APB Opinion No. 25 are required to make pro forma disclosures of net
    earnings and earnings per share, as if the fair value-based method of
    accounting defined in SFAS No. 123 had been applied.

    In fiscal 2001, the Corporation applied APB Opinion No. 25 and related
    Interpretations in accounting for the Plan. Accordingly, no compensation
    cost had been recognized for the Plan. Had compensation cost for the Plan
    been determined based on the fair value at the grant date for awards under
    the Plan consistent with the accounting method utilized in SFAS No. 123, the
    Corporation's net earnings and earnings per share would have been reported
    as the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                                  For the year ended
                                                                                  September 30, 2001
<S>                                         <C>                                            <C>
    Net earnings (In thousands)           As reported                                    $2,324
                                                                                          =====

                                            Pro-forma                                    $2,236
                                                                                          =====

    Earnings per share
      Basic                               As reported                                     $1.08
                                                                                           ====

                                            Pro-forma                                     $1.04
                                                                                           ====

      Diluted                             As reported                                     $1.08
                                                                                           ====

                                            Pro-forma                                     $1.04
                                                                                           ====
</TABLE>



                                       46
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE M - STOCK OPTION PLAN (continued)

    During fiscal 2002, the Corporation elected to recognize expense related to
    the vesting of its stock options in accordance with the provisions of SFAS
    No. 123. Total expense related to options in fiscal 2002 amounted to
    $143,000.

    The fair value of the option grants are estimated on the date of grant using
    the modified Black-Scholes options-pricing model with the following
    assumptions used for grants in fiscal 2002 and 2001: no dividend yield;
    expected volatility of 20.0% for both years; a risk-free interest rate of
    2.0% and 4.0% in fiscal 2002 and 2001, respectively, and an expected life of
    ten years for all grants.

    A summary of the status of the Plan as of and for the years ended September
30 is presented below:
<TABLE>
<CAPTION>
                                                                    2002                           2001
                                                                          Weighted-                     Weighted-
                                                                           average                       average
                                                                          exercise                      exercise
                                                            Shares          price          Shares         price
<S>                                                           <C>            <C>             <C>             <C>
    Outstanding at beginning of year                        94,861         $14.00              -          $   -
    Granted                                                 25,728          20.25          94,861          14.00
    Exercised                                                   -              -               -              -
    Forfeited                                                 (260)         14.00              -              -
                                                           -------          -----          ------          -----

    Outstanding at end of year                             120,329         $15.34          94,861         $14.00
                                                           =======          =====          ======          =====

    Options exercisable at year-end                         18,924         $14.00             -           $   -
                                                           =======          =====          ======          =====

    Weighted-average fair value of
      options granted during the year                                      $ 6.19                         $ 5.70
                                                                            =====                          =====
</TABLE>

    The following information applies to options outstanding at September 30,
    2002:

    Number outstanding                                               120,329
    Range of exercise prices                                 $14.00 - $20.25
    Weighted-average exercise price                                   $15.34
    Weighted-average remaining contractual life                    9.0 years


















                                       47
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE N - CONDENSED FINANCIAL STATEMENTS OF PEOPLES COMMUNITY BANCORP, INC.

    The following condensed financial statements summarize the financial
    position of Peoples Community Bancorp, Inc. as of September 30, 2002 and
    2001, and the results of its operations and its cash flows for the periods
    ended September 30, 2002, 2001 and 2000.

                         PEOPLES COMMUNITY BANCORP, INC.
<TABLE>
<CAPTION>
                        STATEMENTS OF FINANCIAL CONDITION
                           September 30, 2002 and 2001
                                 (In thousands)

    ASSETS                                                                                 2002           2001
<S>                                                                                        <C>            <C>
    Cash and cash equivalents                                                           $    17        $    94
    Loan receivable from ESOP                                                               476            666
    Investment in Peoples Community Bank                                                 55,857         38,778
    Accrued interest receivable from ESOP                                                    28              7
    Prepaid federal income taxes                                                            388             -
                                                                                         ------         ------

          Total assets                                                                  $56,766        $39,545
                                                                                         ======         ======

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Accrued expenses and other liabilities                                              $   826        $   767
    Borrowings                                                                              450             -
    Guaranteed preferred beneficial interests in junior
      subordinated debentures                                                            12,500             -
                                                                                         ------         ------
          Total liabilities                                                              13,776            767

    Stockholders' equity
      Common stock and additional paid-in capital                                        23,480         22,498
      Retained earnings                                                                  19,447         16,298
      Unrealized gains (losses) on securities designated as
        available for sale, net of tax effects                                               63            (18)
                                                                                         ------         ------
         Total stockholders' equity                                                      42,990         38,778
                                                                                         ------         ------

         Total liabilities and stockholders' equity                                     $56,766        $39,545
                                                                                         ======         ======
</TABLE>


















                                       48
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE N - CONDENSED FINANCIAL STATEMENTS OF PEOPLES COMMUNITY
BANCORP, INC. (continued)

                         PEOPLES COMMUNITY BANCORP, INC.
<TABLE>
<CAPTION>
                             STATEMENTS OF EARNINGS
             For the periods ended September 30, 2002, 2001 and 2000
                                 (In thousands)

                                                                            2002           2001           2000
<S>                                                                         <C>            <C>            <C>
    Revenue
      Interest income                                                     $   66         $   68           $ 33
      Equity in earnings of Peoples Community Bank                         3,900          2,324            733
                                                                           -----          -----            ---
         Total revenue                                                     3,966          2,392            766

    Expense
      Interest expense                                                     1,139             -              -
      General and administrative expenses                                     66             68             33
                                                                           -----          -----            ---
         Total expense                                                     1,205             68             33
                                                                           -----          -----            ---

         Earnings before income taxes                                      2,761          2,324            733

    Federal income tax benefits                                             (388)            -              -
                                                                           -----          -----            ---

         NET EARNINGS                                                     $3,149         $2,324           $733
                                                                           =====          =====            ===
</TABLE>




































                                       49
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE N - CONDENSED FINANCIAL STATEMENTS OF PEOPLES COMMUNITY
BANCORP, INC. (continued)

                         PEOPLES COMMUNITY BANCORP, INC.
<TABLE>
<CAPTION>
                            STATEMENTS OF CASH FLOWS
                 Periods ended September 30, 2002, 2001 and 2000
                                 (In thousands)

                                                                              2002           2001           2000
<S>                                                                           <C>            <C>            <C>
    Cash provided by (used in) operating activities:
      Net earnings for the period                                          $ 3,149         $2,324        $   733
      Adjustments to reconcile net earnings to net
      cash provided by (used in) operating activities
        Undistributed earnings of consolidated subsidiary                   (3,900)        (2,324)          (733)
        Increase (decrease) in cash due to changes in:
          Other assets                                                        (410)            (7)             2
          Other liabilities                                                     59           (125)           890
                                                                            ------          -----         ------
          Net cash provided by (used in) operating activities               (1,102)          (132)           892

    Cash flows provided by (used in) investing activities:
      Issuance of loan to ESOP                                                  -              -            (952)
      Proceeds from repayment of loan to ESOP                                  190            191             95
      Purchase of common shares of Peoples Community Bank                       -              -          (4,400)
      Acquisition of Harvest Home Financial Corporation                         -              -          (5,900)
      Contribution to Peoples Community Bank                               (12,115)            -              -
                                                                            ------          -----         ------
          Net cash provided by (used in) investing activities              (11,925)           191        (11,157)

    Cash flows provided by financing activities:
      Proceeds from borrowings                                                 450             -              -
      Proceeds from issuance of junior subordinated debentures              12,500             -              -
      Proceeds from issuance of common shares - net                             -              -          10,300
                                                                            ------          -----         ------
          Net cash provided by financing activities                         12,950             -          10,300
                                                                            ------          -----         ------

    Net increase (decrease) in cash and cash equivalents                       (77)            59             35

    Cash and cash equivalents at beginning of period                            94             35             -
                                                                            ------          -----         ------

    Cash and cash equivalents at end of period                             $    17         $   94        $    35
                                                                            ======          =====         ======
</TABLE>

    The Bank is subject to regulations imposed by the OTS regarding the amount
    of capital distributions payable by the Bank to the Corporation. Generally,
    the Bank's payment of dividends is limited, without prior OTS approval, to
    net earnings for the current calendar year plus the two preceding calendar
    years, less capital distributions paid over the comparable time period.
    Insured institutions are required to file an application with the OTS for
    capital distributions in excess of this limitation.





                                       50
<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE O - BUSINESS COMBINATIONS

     On March 29, 2000, the Corporation acquired Harvest Home utilizing the
     purchase method of accounting. Harvest Home was dissolved upon
     consummation, with Harvest Home's banking subsidiary, Harvest Home Savings
     Bank, merging with and into Peoples. The results of Harvest Home's
     operations subsequent to March 29, 2000, are included in the consolidated
     financial statements. The Corporation paid $7.9 million in cash and issued
     787,733 of its common shares in connection with the acquisition. The excess
     of consideration paid and fair value of liabilities assumed over the fair
     value of assets received, totaling approximately $5.0 million, was assigned
     to goodwill.

    Additionally, on March 30, 2001, the Corporation acquired Market utilizing
    the purchase method of accounting. Market was dissolved upon consummation,
    with Market's banking subsidiary, Market Bank, merging with and into
    Peoples. The results of Market's operations subsequent to March 30, 2001,
    are included in the consolidated financial statements. The Corporation paid
    $7.8 million in cash and issued 527,930 of its common shares in connection
    with the acquisition. Under the terms of the agreement each share of
    Market's common stock was exchanged for cash and/or shares of the
    Corporation totaling $13.00 per share.

    On April 26, 2002, the Corporation completed its acquisition of Kenwood
    Bancorp, Inc. ("Kenwood") for consideration of $25.22 per outstanding share,
    totaling $7.9 million in cash. The results of Kenwood's operations
    subsequent to April 26, 2002, are included in the consolidated financial
    statements. The Corporation acquired $56.6 million in total assets and
    recorded approximately $3.4 million in goodwill as part of the transaction.

     Presented below are pro-forma condensed consolidated statements of earnings
     which have been prepared as if the Kenwood acquisition had been consummated
     as of the beginning of each of the fiscal years ended September 30, 2002
     and 2001, as if the Market acquisition had been consummated as of the
     beginning of each of the fiscal years ended September 30, 2001 and 2000,
     and as if the Harvest Home acquisition had been consummated as of the
     beginning of the fiscal year ended September 30, 2000.

<TABLE>
<CAPTION>
                                                                       2002              2001             2000
                                                                                   (In thousands)
                                                                                     (Unaudited)
<S>                                                                    <C>              <C>             <C>
    Total interest income                                           $35,606           $30,903          $23,025
    Total interest expense                                           17,170            18,918           13,813
                                                                     ------            ------           ------
         Net interest income                                         18,436            11,985            9,212

    Provision for losses on loans                                     5,265             2,614              156
    Other income                                                      2,687             5,201              123
    General, administrative and other expense                        10,195            10,092            7,227
                                                                     ------            ------           ------
         Earnings before income taxes                                 5,663             4,480            1,952

    Federal income taxes                                              2,431             2,272              782
                                                                     ------            ------           ------

         Net earnings                                               $ 3,232           $ 2,208          $ 1,170
                                                                     ======            ======           ======
</TABLE>





                                       51

<PAGE>


                         PEOPLES COMMUNITY BANCORP, INC.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

===============================================================================


NOTE P - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

    The following table summarizes the Corporation's quarterly results for the
    fiscal years ended September 30, 2002 and 2001. Certain amounts, as
    previously reported, have been reclassified to conform to the 2002
    presentation.
<TABLE>
<CAPTION>
                                                                          Three Months Ended
                                                    December 31,       March 31,     June 30,    September 30,
    2002:                                                        (In thousands, except per share data)
<S>                                                         <C>             <C>          <C>              <C>
    Total interest income                                 $7,666          $7,973       $8,667           $9,406
    Total interest expense                                 3,707           3,462        3,798            4,631
                                                           -----           -----        -----            -----

    Net interest income                                    3,959           4,511        4,869            4,775
    Provision for losses on loans                          1,057           1,412        1,300            1,496
    Other income                                             284           1,628          291              306
    General, administrative and other expense              2,234           3,074        2,412            2,097
                                                           -----           -----        -----            -----

    Earnings before income taxes                             952           1,653        1,448            1,488
    Federal income taxes                                     367             941          530              554
                                                           -----           -----        -----            -----

    Net earnings                                          $  585          $  712       $  918           $  934
                                                           =====           =====        =====            =====

    Earnings per share
      Basic                                                 $.25            $.29         $.38             $.37
                                                             ===             ===          ===              ===

      Diluted                                               $.25            $.29         $.37             $.36
                                                             ===             ===          ===              ===

                                                                          Three Months Ended
                                                    December 31,       March 31,     June 30,    September 30,
    2001:                                                        (In thousands, except per share data)

    Total interest income                                 $5,687          $5,874       $6,916           $7,420
    Total interest expense                                 4,023           3,695        3,963            3,862
                                                           -----           -----        -----            -----

    Net interest income                                    1,664           2,179        2,953            3,558
    Provision for losses on loans                            150             150        1,082            1,067
    Other income                                             869           1,193        2,566              219
    General, administrative and other expense              1,476           2,245        2,716            1,687
                                                           -----           -----        -----            -----

    Earnings before income taxes                             907             977        1,721            1,023
    Federal income taxes                                     522             437          958              387
                                                           -----           -----        -----            -----

    Net earnings                                          $  385          $  540       $  763           $  636
                                                           =====           =====        =====            =====

    Earnings per share
      Basic                                                 $.19            $.28         $.32             $.29
                                                             ===             ===          ===              ===

      Diluted                                               $.19            $.28         $.32             $.29
                                                             ===             ===          ===              ===
</TABLE>



                                       52
<PAGE>


                         Peoples Community Bancorp, Inc.


                             DIRECTORS AND OFFICERS

===============================================================================

<TABLE>
<CAPTION>

           PEOPLES COMMUNITY BANCORP, INC. AND PEOPLES COMMUNITY BANK

                                    DIRECTORS
<S>                                                          <C>
Paul E. Hasselbring                                      Thomas J. Noe
Chairman of the Board                                    Treasurer and Executive Vice-President

Jerry D. Williams                                        John E. Rathkamp
President and Chief Executive Officer                    Secretary and Chief Lending Officer

John L. Buchanan                                         Nicholas N. Nelson
President of Buchanan's Power Equipment                  County Advisor, Warren County, Ohio
  Center, Inc.

James R. Van DeGrift                                     Donald L. Hawke
Trustee, Turtlecreek Township, Lebanon,                  Retired
  Ohio


                               EXECUTIVE OFFICERS

Paul E. Hasselbring                                      John E. Rathkamp
Chairman of the Board                                    Secretary and Chief Lending Officer

Jerry D. Williams                                        Dennis J. Slattery
President and Chief Executive Officer                    Chief Operating Officer

Thomas J. Noe                                            Jerry L. Boate
Treasurer and Executive Vice-President                   Director of Human Resources and Marketing

Teresa A. O'Quinn
Chief Financial Officer
</TABLE>






























                                       53
<PAGE>


                         Peoples Community Bancorp, Inc.


                  BANKING LOCATIONS AND STOCKHOLDER INFORMATION

===============================================================================


                                BANKING LOCATIONS

         Peoples Community Bancorp, Inc. is a Maryland-incorporated thrift
holding company conducting business through its wholly-owned subsidiary, Peoples
Community Bank. Peoples Community Bank is a federally-chartered, SAIF-insured
stock savings bank operating through eleven offices in Hamilton, Warren, and
Butler counties in southwest Ohio.
                                   Main Office

                             6100 West Chester Road
                            West Chester, Ohio 45069
<TABLE>
<CAPTION>

                                   Branch Offices
<S>                                     <C>                                   <C>
3621 Harrison Avenue              3924 Isabella Avenue                  3663 Ebenezer Road
Cheviot, Ohio  45211             Cincinnati, Ohio  45209              Cincinnati, Ohio 45248

 7522 Hamilton Avenue               11 South Broadway                  1101 Columbus Avenue
Cincinnati, Ohio  45248           Lebanon, Ohio  45036                 Lebanon, Ohio  45036

5797 South State Route 48           125 Miami Avenue                  7711 Montgomery Road  *
  Maineville, Ohio 45039         North Bend, Ohio 45052               Cincinnati, Ohio 45236

                                 3530 Springdale Road  *
                                 Cincinnati, Ohio 45251
</TABLE>

*  Represents offices of Kenwood Savings Bank

                                 ANNUAL MEETING

         The Annual Meeting of Stockholders of Peoples Community Bancorp will be
held on February 26, 2003, at 10:00 AM Eastern Standard Time, at Peoples
Bancorp's main office, 6100 West Chester Road, West Chester, Ohio 45069.

                            TRANSFER AGENT/REGISTRAR

                         Registrar and Transfer Company
                                10 Commerce Drive
                           Cranford, New Jersey 07016
                                 (908) 272-8511

                              STOCKHOLDER REQUESTS

   Requests for annual reports, quarterly reports and related stockholder
literature should be directed to John E. Rathkamp, Secretary, Peoples
Community Bancorp, Inc., 6100 West Chester Road, P. O. Box 1130,
West Chester, Ohio  45071.

   Stockholders needing assistance with stock records, transfers or lost
certificates, please contact Peoples Community Bancorp's transfer agent,
Registrar and Transfer Company.



                                       54