U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549FORM 10-KSB

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934
        For the Fiscal Year Ended June 30, 2002

OR

[  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
      For the transition period from ________________to________________

PART I

Item 1.      Description of Business
GeneralSobieski Bancorp, Inc.     Sobieski Bancorp, Inc. (the "Company") was incorporated under the laws of the State of Delaware in December 1994 by authorization of the Board of Directors of Sobieski Bank (the "Bank") for the purpose of acquiring all of the outstanding stock of the Bank issued upon the conversion of the Bank from the mutual to the stock form of ownership (the "Conversion").  The Bank's name was changed to "Sobieski Bank" from "Sobieski Federal Savings and Loan Association of South Bend" on September 1, 2001.
     The Company is a unitary savings and loan holding company.  Through the unitary holding company structure, it is possible to expand the size and scope of the financial services offered beyond those currently offered by the Bank.  The holding company structure also provides the Company with greater flexibility than the Bank would have to diversify its business activities, through existing or newly formed subsidiaries, or through acquisitions or mergers of both mutual and stock thrift institutions as well as other companies.  There are no current arrangements, understandings or agreements regarding any such acquisition.  See "Regulation - Holding Company Regulation" and "Regulation  - Federal and State Taxation".  Activities of the Company may also be funded through sales of additional securities or income generated by other activities of the Company.  At this time, there are no plans regarding such activities.
     At June 30, 2002, the Company had consolidated assets of approximately $138.8 million, deposits of approximately $91.6 million and stockholders' equity of approximately $9.6 million.
     The executive office of the Company is located at 2930 West Cleveland Road, South Bend, Indiana 46628, telephone (574) 271-8300.Sobieski Bank     The Bank is a federal savings association headquartered in South Bend, Indiana.  The Bank was originally chartered under the laws of the State of Indiana in 1893 and converted to a federally chartered mutual savings and loan association in 1936.  Its deposits are insured up to the maximum allowable amount by the Federal Deposit Insurance Corporation (the "FDIC") under the Savings Association Insurance Fund (the "SAIF").  Through its main office and two branch offices, Sobieski Bank primarily serves communities located in St. Joseph County, Indiana.
     Sobieski Bank has been, and intends to continue to be, a community-oriented financial institution offering financial products and services to meet the needs of the communities it serves.  The Bank attracts deposits from the general public and uses such deposits, together with other funds, to originate primarily one-to-four family, fixed-rate and variable-rate residential mortgage loans for retention in its portfolio or for sale.  In addition, the Bank originates construction loans, consumer loans, real estate-backed small business commercial loans and other commercial loans.  During both fiscal 2001 and 2000, the Bank purchased participation interests in commercial loans funded primarily by advances from the Federal Home Loan Bank ("FHLB") of Indianapolis.  See "Originations and Purchases of Loans and Mortgage-Backed Securities".Forward-Looking StatementsWhen used in this Form 10-KSB, in other filings by the Company with the Securities and Exchange Commission, in the Company's press releases or other public shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases "believe," "will likely result," "expects," "are expected to, " "will continue," "is anticipated," "estimate," "project," "plans" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made.  These statements may relate to the Company's future financial performance, strategic plans or objectives or other financial items.  By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements.
Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following:  (1) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and charge-offs; (2) changes in management's estimate of the adequacy of the allowance for loan losses and requirements by the Bank's primary federal regulators, the Office of Thrift Supervision, that provisions be made for loan losses, including possible additional provisions for loan losses necessitated by the unauthorized and fraudulent loans made by a former employee of the Bank as discussed in this Form 10-KSB and in the Company's Annual Report to stockholders filed in Exhibit 13 under "Results of Operations - 2002 Compared with 2001 - Provision for Loan Losses"; (3) competitive pressures among depository institutions; (4) interest rate movements and their impact on customer behavior and the Company's net interest margin; (5) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (6) the Company's ability to adapt successfully to technological changes to meet customers' needs and developments in the marketplace; (7) the Company's ability to access cost-effective funding; (8) changes in financial markets and general economic conditions; (9) new legislation or regulatory changes; and (10) changes in accounting principles, policies or guidelines.
The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date on which the forward-looking statement is made.Lending ActivitiesGeneral.The Bank originates primarily fixed and adjustable-rate, one-to-four family mortgage loans for retention in its portfolio or for sale. In response to customer demand, the Bank continues to originate fixed-rate mortgage loans.
     To a lesser extent, it also originates commercial real estate and non-real estate secured loans, construction and consumer loans.  During fiscal 2002, the Bank purchased participation interests in commercial loans aggregating $1.3 million funded with one to ten-year advances from the FHLB of Indianapolis.  The Bank has in the past purchased participations of the Small Business Administration (the "SBA").  Substantially all of the Bank's loans are originated in its market area.  At June 30, 2002, the Bank's net loan portfolio totaled $96.4 million.
All loans are subject to approval by the appropriate loan committee or, if above specified amounts, the full Board of Directors of the Bank.  With respect to one-to four-family residential loans and home equity loans, a loan committee comprised of three of the Bank's directors serving on a three-month rotating basis has authority to approve such loans up to $300,000; any such loans over $300,000 must be approved by the full Board of Directors of the Bank.  With respect to commercial and consumer loans, a loan committee comprised of the Bank's CEO, COO and CFO has authority to approve such loans up to $250,000; any such loans over $250,000 must be approved by the full Board of Directors of the Bank.

Under regulations of the Office of Thrift Supervision (the "OTS"), the Bank's loans-to-one-borrower limit is generally limited to the greater of 15% of unimpaired capital and surplus or $500,000.  See "Regulation - Federal Regulation of Savings Associations".  At June 30, 2002, the maximum amount which the Bank could loan to any one borrower and the borrower's related entities was $1,327,000.  At June 30, 2002, the Bank had three loan relationships which exceeded the bank's legal lending limit, one of which is a related group of loans with an aggregate outstanding balance regarding the unauthorized loans matter of $6.4 million, net of previous charge-offs of $3.3 million.  These loans were among $9.6 million of unauthorized and fraudulent loans made by a former employee of the Bank which were discovered by the Company in May 2002.  (For additional discussions regarding the unauthorized loan matters, see the discussion below under "Asset Quality -  Non-Performing Assets" and in the Company's 2002 Annual Report.)
     All of the Bank's lending is subject to its written underwriting standards and loan origination procedures.  Decisions on loan applications are made on the basis of detailed applications and property valuations.  Properties securing real estate loans made by Sobieski Bank are generally appraised by Board-approved independent appraisers.  In the loan approval process, Sobieski Bank assesses the borrower's ability to repay the loan, the adequacy of the proposed collateral, the employment stability of the borrower, the credit worthiness of the borrower as well as the strength of the business and the personal guarantors of business loan requests.
     The Bank requires evidence of marketable title and lien position or appropriate title insurance (except on certain home equity loans) on all loans secured by real property.  The Bank also requires fire and extended coverage casualty insurance in amounts at least equal to the lesser of the principal amount of the loan or the value of improvements on the property, depending on the type of loan.  As required by federal regulations, the Bank also requires flood insurance to protect the property securing its interest if property is located in a designated flood area.



|                          | At June 30,
|------------------------- | -----------
|                          | 2002       
|                          | Amount     
|(Dollars in Thousands)   
|One-to-four family        | $ 68,342   
|Commercial loans          | 20,224     
|Home equity               | 4,365      
|Other consumer loans      | 5,957      
|                          |            
|Total loans               | $98,888    
|                          |            
|                          |            
|Allowance for loan losses | (2,488)    
|                          |            
|Total loans, net          | $  96,400  
|                          |            
|                          |            

The following table shows the composition of the Company's loan portfolio by fixed and adjustable-rate loans at the dates indicated.

|                               | At June 30,
|------------------------------ | -----------
|                               | 2002       
|                               | Amount     
|(Dollars in Thousands)        
|Fixed-Rate Loans:             
|One-to-four-family             | $ 63,189   
|Consumer loans                 | 4,584      
|Commercial loans               | 6,763      
|                               |            
|Total fixed-rate loans         | 74,536     
|                               |            
|Adjustable-Rate Loans:         |            
|One-to-four-family             | 5,153      
|Commercial loans               | 13,461     
|Home equity and other consumer | 5,738      
|                               |            
|Total adjustable-rate loans    | 24,352     
|                               |            
|Total loans                    | 98,888     
|                               |            
|Allowance for loan losses      | (2,488)    
|                               |            
|Total loans, net               | $ 96,400   

The following schedule illustrates the amortization schedule by contractual maturity of the Company's loan portfolio at June 30, 2002.  Loans which have adjustable or renegotiable interest rates are shown as maturing in the period during which the contract is due.  The schedule does reflect scheduled principal amortization but does not reflect the effects of possible prepayments or enforcement of due-on-sale clauses.

|Real Estate                                 |                 |                           |                                     
|------------------------------------------- | --------------- | ------------------------- | ------------------------------------
|                                            | One-Four Family | Multi-Family & Commercial | Home Equity Consumer & Deposit Loans
|                                            |                 | (Dollars in Thousands)    |                                     
|Due during the twelvemonths ending June 30, |                 |                           |                                     
|2003(1)                                     | $  2,715        | $  1,093                  | $   3,125                           
|2004                                        | 2,908           | 785                       | 999                                 
|2005                                        | 3,113           | 550                       | 1,082                               
|2006 and 2007                               | 6,872           | 1,231                     | 1,301                               
|2008 to 2012                                | 18,886          | 3,992                     | 790                                 
|2013 to 2032                                | 33,848          | 3,973                     | 3,025                               
|                                            |                 |                           |                                     
|Total                                       | $  68,342       | $ 11,624                  | $  10,322                           
|                                            |                 |                           |                                     
|Weighted average interest rate              | 7.05%           | 7.28%                     | 7.15%                               



The following table shows the amount of non-mortgage commercial loans outstanding as of June 30, 2002, based on remaining scheduled repayments of principal due in the periods indicated, classified according to sensitivity to changes in interest rates.



|Maturing                             | FixedRate | VariableRate | Total
|------------------------------------ | --------- | ------------ | -----
|Within  one year                     | 1,287     | 5,646        | 6,933
|After one year but within five years | 1,029     | -0-          | 1,029
|After five years                     | 638       | -0-          | 638  
|                                     | 2,954     | 5,646        | 8,600

The total amount of loans due after June 30, 2003 that have predetermined interest rates is $68.3 million.

One-to-Four Family Residential Mortgage and Home Equity Lending.  Residential loan originations are generated by the Bank's marketing efforts, its present customers, walk-in customers and referrals from real estate brokers.  Historically, the Bank has focused its lending efforts primarily on the origination of fixed-rate loans secured by first mortgages on owner-occupied, single-family residences in its market area.  In September 1994, the Bank began to originate adjustable rate mortgage ("ARM") loans.  At June 30, 2002, the Company's one-to-four family residential mortgage loan portfolio totaled $68.3 million, or 69.1% of the Company's gross loan portfolio.
     The Bank currently offers fixed-rate and adjustable rate mortgage and home equity loans.  For the year ended June 30, 2002, the Bank originated $49.5 million of one-to-four family real estate related loans.  At June 30, 2002, the Bank had $5.1 million of one-to-four family adjustable-rate mortgage loans, and $63.2 million of one-to-four family fixed-rate mortgage loans.
     The Bank currently originates fixed-rate loans with terms of maturity up to 30 years.  Interest rates charged on these fixed-rate loans are priced on a regular basis according to market conditions.  The Bank also offers adjustable-rate mortgage loans at rates and on terms determined in accordance with market and competitive factors.  The Bank currently originates one-to-five year ARM loans, with up to a 30-year amortization schedule, with a stated interest rate margin over the one-year Constant Maturity Treasury Index.  These loans provide for a 1.5% maximum annual cap and a cap over the life of the loan of 4.50%.  As a consequence of using caps, the interest rates on these loans may not be as rate sensitive as is the Bank's cost of funds.  Currently, all ARM loans originated provide for an interest rate floor below which the interest rate charged may not fall.
     Borrowers with adjustable-rate mortgage loans are qualified at the fully indexed rate.  Adjustable-rate loans decrease the risk to the Bank associated with changes in interest rates but involve other risks, primarily because as interest rates rise, the payment by the borrower may rise to the extent permitted by the terms of the loan, thereby increasing the potential for default.  At the same time, the market value of the underlying property may be adversely affected by higher interest rates.
     
     Currently, Sobieski Bank will loan up to 80% of the appraised value on fixed-rate conventional mortgages of the security property without private mortgage insurance ("PMI") on owner occupied, one-to-four family loans and up to 97% with PMI on the sale price of such security properties.  Sobieski will also loan up to 85% of the appraised value on adjustable rate mortgages on the security property without private mortgage insurance.  Residential loans do not include prepayment penalties, are not assumable and do not produce negative amortization.  Real estate loans originated by the Bank contain a "due on sale" clause allowing the Bank to declare the unpaid principal balance due and payable upon the sale of the security property.
     The loans currently originated by the Bank are typically underwritten and documented pursuant to the guidelines of Freddie Mac.  The Bank currently may retain some loans originated in its portfolio for selling originated-for-sale loans to primarily Freddie Mac.

The Bank also originates second mortgage and home equity lines of credit.  At June 30, 2002, the Bank's second mortgage loans and home equity loans totaled $301,000 and $4.4 million, respectively.  Second mortgage loans have fixed or variable rates of interest and have terms up to 15 years.  Home equity loans have adjustable interest rates and terms of up to 12 years.  These loans are underwritten using similar guidelines as for single family mortgage lending.
     Residential Construction Lending.  The Bank also originates loans for the construction of one-to-four family residences.  For fiscal year ended June 30, 2002, the Bank's construction loan origination totaled $1.5 million.  As of June 30, 2002, all of these loans were secured by property located within the Bank's market area.
     All of the construction loans to individuals for their residences are structured to be converted to permanent loans at the end of the construction phase, which typically runs from four to six months.  These construction loans have rates and terms comparable to one-to-four family loans offered by the Bank, except that during the construction phase, the borrower pays interest only.  The maximum loan-to-value ratio of owner occupied single-family construction loans is 80% without PMI and 95% with PMI.  Residential construction loans are generally underwritten pursuant to the same guidelines for originating permanent residential loans.
     Construction loans are obtained primarily from walk-in customers and builder and realtor referrals.  The application process includes submission to the Bank of plans and costs of the project to be constructed.  These items are used to determine the appraised value of the subject property.  Loans are based on the lesser of current appraised value or the cost of construction (land plus building).
     The Bank's construction loan agreements generally provide that loan proceeds are disbursed in increments as construction progresses.  The Bank periodically reviews the progress of the underlying dwelling before disbursements are made.  Nevertheless, construction lending is generally considered to involve a higher level of credit risk than one-to-four family residential lending since the risk of loss on construction loans is dependent largely upon the accuracy of the initial estimate of the individual property's value upon completion of the project and the estimated cost (including interest) of the project.
     Consumer Lending.  The Bank also originates consumer loans.  The product line includes personal lines of credit, overdraft protection, automobile, marine, motorcycle, and recreational vehicle loans.  The revolving and overdraft lines of credit feature variable rates of interest with the remaining product lines featuring fixed rates having repayment terms of one to six years.  As of June 30, 2002, consumer loans excluding home equity loans referred to above totaled approximately $5.9 million, while home equity loans totaled $4.4 million for a combined total of $10.3 million or 10.4% of total loans.  
     The underwriting standards employed by the Bank for consumer loans include a determination of the applicant's payment history on other debts and an assessment of the borrower's ability to meet payments on the proposed loan along with their existing obligations.  In addition to the creditworthiness of the applicant, the underwriting process also includes a comparison of the value of the security, if any, in relation to the proposed loan amount.
     Consumer loans may entail greater risk than residential mortgage loans, particularly in the case of consumer loans which are unsecured or secured by rapidly depreciable assets such as automobiles.  In such cases, any repossessed collateral for defaulted consumer loans may not provide adequate sources of repayment for the outstanding loan balances as a result of the greater likelihood of damage, loss, or depreciation.  In addition, consumer loan collections are dependent on the borrower's continuing financial stability, and thus are more likely to be affected by adverse personal circumstances.  Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.
     Commercial Business Lending.Commercial adjustable-rate loans at June 30, 2002 totaled $13.5 million or 13.6% of the Company's gross loan portfolio.  These loans consist of participation certificates guaranteed by the SBA, participations with other financial institutions in commercial real estate and non-real estate loans and internally originated commercial real estate and non-real estate loans.  Unlike residential mortgage loans, which generally are made on the basis of the borrower's ability to make repayment from his or her employment and other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial business loans are generally of higher risk and typically are made on the basis of the borrower's ability to make repayment from the cash flow of the borrower's business.  As a result, the ability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself (which, in turn, may be dependent upon the general economic environment.)
     Fixed-rate commercial business loans at June 30, 2002 totaled $6.8 million or 6.9% of the Company's gross loan portfolio.  These loans are originated internally or purchased participations originated by other financial institutions.
     Commercial loans are predominately set to re-price on a basis that ranges from monthly through 5 years.  Due to the nature of fixed-asset commercial lending and larger dollar amounts associated with this type of transaction, adjustable rate agreements commonly utilized are mutually beneficial to the borrower, by paying interest rates that reflect current market climate, and to the lending institution, particularly in regard to interest rate risk management.Originations and Purchases of Loans     Loan originations are developed from continuing business with depositors and borrowers, soliciting realtors, builders, walk-in customers and small business entities.
     While the Bank originates both adjustable-rate and fixed-rate loans, its ability to originate loans to a certain extent is dependent upon the relative customer demand for loans in its market, which is affected by the interest rate environment, among other factors.  For the year ended June 30, 2002, the Bank originated $58.6 million in loans, as compared to $18.1 million for the year ended June 30, 2001.  Originations during fiscal 2002 consisted of $49.5 million of one-to-four family real estate and home equity loans, and $9.1 million in other consumer and commercial loans.
     Loan originations during the year ended June 30, 2002 were higher than the prior year.  The Bank believes the increase was caused by a very low interest rate environment throughout the period triggering high levels of refinancing of existing mortgages and new loans.  Historically, the Bank generally retained all its loan originations in its portfolio.  Starting in fiscal 2000, the Bank began to sell loans in the secondary market.  During the fiscal 2002-year, sales of loans to Freddie Mac totaled $14.9 million while last fiscal period sales were $11.3 million.  Both the current and prior year loan sales are part of interest risk management strategy.
     The following table shows the loan origination and purchase activities of the Bank for the periods indicated.

|                                               | Year Ended June 30,
|---------------------------------------------- | -------------------
|                                               | 2002               
|                                               |                    
|Originations:                                  |                    
|One-to-four family real estate and home equity | $49,545            
|Deposit loans                                  | 22                 
|Other consumer and commercial loans            | 9,077              
|                                               |                    
|Total originations                             | 58,644             
|                                               |                    
|Purchases:                                     |                    
|Purchases of commercial business loans         | 1,260              
|                                               |                    
|Sales:                                         |                    
|One-to-four family loans                       | (14,915)           
|                                               |                    
|Repayments:                                    |                    
|Loans                                          | (30,124)           
|Other, net                                     | (6,966)            
|                                               |                    
|Total repayments                               | (37,090)           
|                                               |                    
|Net (decrease) increase                        | $   7,899          

Asset Quality
     General.When a borrower fails to make a required payment on a loan, the Bank attempts to cause the delinquency to be cured by contacting the borrower.  In the case of loans secured by real estate, a reminder notice is sent to the borrower on all loans over 15 days delinquent.  When a loan becomes 15 days delinquent, late charges are assessed and a notice of late charges is sent to the borrower.  An additional late notice is sent to the borrower if the delinquency is not cured within 30 days of the required payment date.  If the loan becomes 60 days delinquent and the borrower has not attempted to contact the Bank to arrange an acceptable plan to bring the loan current, the borrower is contacted by telephone.  If the borrower contacts the Bank with a reasonable explanation for the delinquency, the Bank generally will attempt to reach workable accommodations with the borrower to bring the loan current.  All proposed workout arrangements are evaluated on a case by case basis, based on the best judgement of the Bank's management, considering, among other things, the borrower's past credit history, current financial status, cooperativeness, future prospects and

the reason for the delinquency.  If the loan is more than 90 days delinquent, the loan will be referred to the Bank's legal counsel for collection.  In all cases, if the Bank believes that its collateral is at risk and added delay would place the collectibility of the balance of the loan in further question, management may refer loans for collection even sooner than the 90 days described above.
     
     When a loan becomes delinquent 90 days or more, the Bank will place the loan on non-accrual status.  The loan will remain on a non-accrual status as long as the loan is 90 days delinquent.
     The following table sets forth the Bank's delinquencies by type, by amount and by percentage of type as of June 30, 2002.

|Loans Delinquent For:
|---------------------
|                     
|                     
|                     
|One-to four family   
|Home equity          
|Commercial           
|                     
|Total                
|                     

Non-Performing Assets.  The table below sets forth the amounts and categories of non-performing assets.  Loans are placed on non-accrual status when the collection of principal and/or interest becomes doubtful.  Foreclosed assets include assets acquired in settlement of loans.  The Bank had $76,000 of accruing loans more than 90 days delinquent at June 30, 2002.

|                                           | At June 30,
|------------------------------------------ | -----------
|                                           | 2002       
|                                           |            
|Non-accruing loans:                        |            
|One-to-four family                         | $  447     
|Commercial loans                           | 6,119      
|Consumer                                   | 591        
|                                           |            
|Total                                      | 7,157      
|                                           |            
|Restructured loans                         | -0-        
|                                           |            
|Accruing over 90 days past due             | 76         
|                                           |            
|Foreclosed assets:                         |            
|One-to-four family                         | 49         
|Other                                      | 925        
|                                           |            
|Total                                      | 974        
|                                           |            
|Total non-performing and foreclosed assets | 8,207      
|                                           |            
|Total as a percentage of total assets      | 5.9%       

For the year ended June 30, 2002 gross interest income which would have been recorded had the non-accruing loans been current in accordance with their original terms amounted to $3,700.  The amounts of interest income included in net income on these loans was $7,700.

Other Loans of Concern.At June 30, 2001, management classified a loan participation interest in the amount of $1,097,113 as impaired due to the restructuring of the payments due from the borrower.  On August 22, 2001, the borrower filed for Chapter 11 bankruptcy protection.  On November 9, 2001, the bankruptcy court ordered surrender of the aircraft securing the loan to the lead lender under the stipulation that the lead lender and the Company enter into a long-term lease agreement for the continued use of this aircraft.  At the time of repossession, the Company, based on its lease interest in the estimated cash flows and net realizable residual fair value, charged $74,900 against the allowance for loan losses.  As of June 30, 2002, the lease is current.
In May of 2002, the Bank's Audit Committee identified certain loans that were made by an individual former employee of the Bank that were unauthorized and fraudulently conveyed or otherwise made without properly following the Bank's lending policies and procedures.  The majority of these loans, totaling approximately $9.6 million, were made in the Company's fiscal year 2002.  Based on an initial review of the documentation supporting these loans, including collateral and borrower financial information, the Company recorded a provision for loan losses of $715,000 for these loans in the third quarter of 2002.

The Bank's further review and investigation of the $9.6 million loans and other loans, aided by outside contractors and law enforcement agencies, revealed various fraudulent activities and irregularities.  Based on management's current understanding of the financial condition of the borrowers, management currently believes that these loans are primarily collateral dependent.  Accordingly, in the fourth quarter of 2002, the Company considered all these loans impaired, placed all of these loans on non-accrual and recorded an additional provision for loan losses of approximately $3.6 million for these loans, based on the deficiency of the estimated collateral value as compared to the outstanding balance of these loans and after consulting with the Office of Thrift Supervision, the Bank's primary federal regulator, and the Company's independent accountants, on the amount of the provision.  In addition, in the fourth quarter of 2002, the Company charged off approximately $3.3 million of these loans.  The Office of Thrift Supervision is continuing to review the unauthorized loans matter, and it is possible that they could direct the Bank to classify additional loans and/or make additional provisions for loan losses.  No assurance can be made as to the amount or timing of such additional classification.

As of June 30, 2002, the outstanding balance of these loans totaled approximately $6.3 million.  Management has allocated a specific allowance allocation of approximately $1.0 million for these loans.  The Company is vigorously working with legal counsel and regulatory and federal authorities to pursue all available avenues for collection.  Through mid-September, the Company, aided by federal authorities, has repossessed approximately 51% of this collateral value, is pursuing recovery of substantial additional assets and anticipates bond claims of up to $1.5 million, stemming from the unauthorized and fraudulent loan activity by the former employee.  As previously announced by the Company in August of 2002, this former employee pleaded guilty to charges of bank fraud stemming from his involvement in making these loans.

Also, as of June 30, 2002, approximately $7.8 million of additional loans, exclusive of the aforementioned unauthorized and fraudulent loans, were classified as impaired because of unauthorized lending activities, credit quality concerns and loan documentation issues, primarily attributable to the actions of the former employee involved in the bank fraud.  During fiscal 2002,the Company recorded approximately $2.1 million of additional provisions for these loans after consulting with the Office of Thrift Supervision and the Company's independent accountants.

Classified Assets.Federal regulations provide for the classification of loans and other assets, such as debt and equity securities considered by the OTS to be of lesser quality, as "substandard", "doubtful" or "loss".  An asset is considered "substandard" if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.  "Substandard" assets include those characterized by the "distinct possibility" that the insured institution will sustain "some loss" if the deficiencies are not corrected.  Assets classified as "doubtful" have all of the weaknesses inherent in those classified "substandard" with the added characteristic that the weaknesses present make "collection or liquidation in full" on the basis of currently existing facts, conditions and values, "highly questionable and improbable."  Assets classified as "loss" are those considered "uncollectable" and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.
     When an insured institution classifies problem assets as either substandard or doubtful, it may establish specific allowances for loan losses in an amount deemed prudent by management.  General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets.  When an insured institution classifies problem assets as "loss", it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset as classified or to charge-off such amount.  An institution's determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the regulatory authorities, who may order the establishment of additional general or specific loss allowances.
     In connection with the filing of its periodic reports with the OTS and in accordance with its classification of assets policy, the Bank regularly reviews problem loans and real estate acquired through foreclosure to determine whether such assets require classification in accordance with applicable regulations.  On the basis of management's review of its loans and after consultations with the Office of Thrift Supervision as of June 30, 2002, the Bank had classified a total of $11.8 million of its loans as substandard, none as doubtful and none as loss. This compares with $123,000 of loans classified as substandard, none as doubtful and none as loss at June 30, 2001.  The increase in classified loans is primarily due to the unauthorized and fraudulent loans made by a former employee of the Bank and discovered by the Bank's Audit Committee in May 2002 and other loans of concern attributable to the former loan officer involved in the bank fraud.  As noted elsewhere in this Form 10-KSB, the Office of Thrift Supervision is continuing to review the unauthorized loans matter, and it is possible that the Office of Thrift Supervision could direct the Bank to classify additional loans.  No assurance can be made as to the amount or timing of any such additional classifications.  At June 30, 2002, total classified loans comprised $11.8 million or 122.5% of the Company's capital and 8.5% of the Company's total assets. Allowance for Loan Losses.  Management believes the allowance for loan losses accounting policy is critical to the portrayal and understanding of the Company's financial condition and results of operations.  As such, selection and application of this "critical accounting policy" involves judgments, estimates, and uncertainties that are susceptible to change.  In the event that different assumptions or conditions were to prevail, and depending upon the severity of such changes, the possibility of materially different financial condition or results of operations is a reasonable likelihood.
Management performs periodic evaluations of the adequacy of the allowance. Management determines the need to individually evaluate loans based on known information about the loan, including the financial condition of the borrower and the delinquency status of the loan. Management evaluates such loans using a process that considers specific factors affecting the individual borrower including the financial condition of the borrower and current regional and national economic conditions affecting the borrower, ability of the borrower to repay the loan and the underlying estimated fair value of collateral.  All loans that are not individually evaluated are grouped.  A percentage allocation requirement is applied based on historical loss factors and current regional and national economic factors.  A higher percentage allocation requirement is applied to groups of consumer and commercial loans than to mortgage loans.  Historical loss factors exclude the losses incurred during fiscal 2002 on the fraudulent and unauthorized loans discussed elsewhere herein.  Management at times allocates specific allowance amounts for individual loans; however, the entire allowance is available for any loan charge-off.  Charge-offs on specific loans are charged against the allowance for loan losses when uncollectability of the loan is confirmed.  Management expects that as loan growth continues and economic and other factors change, the allowance for loan losses may change.  In addition, the Bank's regulators, as part of the examination process, periodically reviews the Company's allowance for loan losses.  The regulators may require additions to the allowance based on their assessment of the information available to them at the time of examination.  No assurance can be made as to the amount or timing of additional provisions that may be required by the regulators.
At June 30, 2002, the allowance for loan losses totaled approximately $2.5 million.  During fiscal 2002, a provision for loan losses of $7.1 million was recorded compared to a provision for loan losses of $50,000 for fiscal 2001.  Charge-offs during fiscal 2002 totaled approximately $4.9 million, which compares to approximately $105,000 for fiscal 2001.  No recoveries were recorded in either year.   Of the $7.1 million provision in fiscal 2002, approximately $4.3 million relates to $9.6 million of fraudulent or otherwise unauthorized loans and approximately $2.1 million relates to other credit quality concerns attributable to the former loan officer, as discussed above under "non-Performing Assets".

Additionally, $7.8 million of commercial loans were subsequently identified for improper lending, credit and documentation issues.  These loans are primarily attributable to the former employee.  During fiscal 2002, the Bank allocated $1.9 million in reserves for these loans and charged off $1.7 million.

In addition, increased levels of mortgage and non-mortgage consumer and commercial loans during the year have resulted in higher allowance allocations based on the higher outstanding balances, the historical loss experience for non-mortgage consumer and commercial loans and the impact of various economic factors on these loans.  These allocations totaled approximately $796,000 at June 30, 2002 as compared to $285,000 for such loans at June 30, 2001.

The following table sets forth an analysis of the Company's allowance for loan losses.

|                                                                              | Year Ended June 30,
|----------------------------------------------------------------------------- | -------------------
|                                                                              | 2002               
|                                                                              |                    
|Balance at beginning of period                                                | $   340            
|                                                                              |                    
|Charge-offs:                                                                  |                    
|Commercial Loans                                                              | 4,923              
|One-to-four family                                                            | -0-                
|                                                                              |                    
|Recoveries                                                                    | -0-                
|                                                                              |                    
|Provision charged to operations                                               | 7,071              
|                                                                              |                    
|Balance at end of period                                                      | $2,488             
|                                                                              |                    
|Ratio of net charge-offs to average
   loans outstanding during the period    | 5.06%              
|                                                                              |                    
|Ratio of net charge-offs to average
   non-performing loans during the period | 227.3%             

The distribution of the Company's allowance for loan losses at the dates indicated is summarized as follows:

|                     | At June 30,
|-------------------- | -----------
|                     | 2002       
|                     | Allowance  
|One-to-four family   | $  181     
|Commercial loans     | 2,091      
|Home equity          | 15         
|Other consumer loans | 201        
|Unallocated          | N/A        
|                     |            
|Total  (2)           | $2,488     



Investment Activities
     General.

Federally chartered savings institutions have the authority to invest in various types of liquid assets, including United States Treasury obligations, securities of various federal agencies, certain certificates of deposit of insured banks and savings institutions, certain bankers' acceptances, repurchase agreements and federal funds.  Subject to various restrictions, federally chartered savings institution may also invest their assets in commercial paper, investment grade corporate debt securities and mutual funds whose assets conform to the investments that a federally chartered savings institution is otherwise authorized to make directly.
     Generally, the investment policy of the Bank, as established by the Board of Directors, is to invest funds among various categories of investments and maturities based upon the Bank's liquidity needs, asset/liability management policies, investment quality, marketability and performance objectives.  The Investment Committee consists of three outside directors, Robert J. Urbanski, Joseph F. Nagy, and Richard J. Cullar, plus President and Chief Executive Officer Thomas F. Gruber and Vice President of Finance Arthur Skale.  Subject to the policies established by the Board of Directors, President Gruber and Vice President Skale are authorized to purchase and sell securities.  All securities transactions are reported to the Bank's Board of Directors at their next regular meeting.
     Mortgage-Backed Securities.The Bank purchases mortgage-backed securities to supplement residential loan production and as part of its asset/liability strategy.  The type of securities purchased is based upon the Bank's asset/liability management strategy and balance sheet objectives.  For instance, most of the mortgage-backed securities purchased by the Bank over the last several years have had adjustable rates of interest.  At June 30, 2002, the amortized cost of the Bank's mortgage-backed securities was $21.06 million and the market value of these mortgage-backed securities was $21.22 million.
     At June 30, 2002, $4.46 million or 21% of the Bank's mortgage-backed securities have been classified as held-to-maturity and, accordingly, are included in its financial statements at amortized cost.  Mortgage-backed securities with an amortized cost of $16.60 million or 79% have been classified as available-for-sale and are included in the financial statements at fair value.  See Note 3 of the Notes to Consolidated Financial Statements for additional information regarding the amortized cost and estimated fair value of the Bank's mortgage-backed securities as of June 30, 2002.

As of June 30, 2002, all of the Bank's mortgage-backed securities were backed by government sponsored agency programs.  Accordingly, management believes that the Bank's mortgage-backed securities are generally resistant to credit problems.
     The Bank's mortgage-backed securities portfolio consists of securities issued under government-sponsored agency programs, including those of Fannie Mae, Freddie Mac and the Government National Mortgage Association ("GNMA"). Fannie Mae, Freddie Mac and GNMA certificates are modified pass-through mortgage-backed securities that represent undivided interests in underlying pools of fixed-rate, or certain types of adjustable rate, predominantly single-family and, to a lesser extent, multi-family residential mortgages issued by those government-sponsored entities.  As a result, the interest rate risk characteristics of the underlying pool of mortgages, i.e., fixed rate or adjustable rate, as well as prepayment risk, are passed on to the certificate holder.  Fannie Mae and Freddie Mac generally provide the certificate holder a guarantee of timely payments of interest and ultimate collection of principal, whether or not collected.  GNMA's guarantee to the holder is timely payments of principal and interest, backed by the full faith and credit of the U.S. Government.
     Mortgage-backed securities generally yield less than the loans that underlie such securities, because of the cost of payment guarantees or credit enhancements that reduce credit risk to holders.  Since federal agency mortgage-backed securities generally carry a yield approximately 50 to 100 basis points below that of the corresponding type of residential loan (due to the implied federal agency guarantee fee and the retention of a servicing spread by the loan servicer), in the event that the proportion of the Bank's assets consisting of mortgage-backed investments increase in the future, the Bank's asset yield would be adversely affected.  Mortgage-backed securities are also more liquid than individual mortgage loans and may be used to collateralize obligations of the Bank.  In general, mortgage-backed securities issued or guaranteed by Fannie Mae and Freddie Mac are weighted at no more than 20% for risk-based capital purposes, and mortgage-backed securities issued or guaranteed by GNMA are weighted at 0% for risk-based capital purposes, compared to an assigned risk weighting of 50% to 100% for whole residential mortgage loans.
     While mortgage-backed securities carry a reduced credit risk as compared to whole loans, such securities remain subject to the risk that a fluctuating interest rate environment, along with other factors such as the geographic distribution of the underlying mortgage loans, may alter the prepayment rate of such mortgage loans and so affect the prepayment speed, and value, of such securities.  Mortgage-backed securities involve a risk that actual prepayments will differ from estimated prepayments over the life of the security which may require adjustments to the amortization of any premium or accretion of any discount relating to such instruments, thereby changing the net yield on such securities.  There is also reinvestment risk associated with the cash flows from such securities.  In addition, the market value of such securities may be adversely affected by changes in interest rates.  The adjustable rate and/or short maturity of the Bank's portfolio is designed to minimize that risk.
     The Bank also invested in collateralized mortgage obligations and certain participating interests in real estate mortgage investment conduits ("REMICs") (hereinafter collectively referred to as "CMOs).  CMOs are special types of pass-through certificates in which the stream of principal and interest payments on the underlying mortgages or mortgage-backed securities is used to create classes with different maturities and, in some cases, amortization schedules, as well as a residual interest, with each such class possessing different risk characteristics.
The CMO instruments the Bank purchased are most like debt instruments because these CMO instruments have stated principal amounts and traditionally defined interest-rate terms.  Purchasers of certain other CMO instruments are entitled to the excess, if any, of the issuer's cash inflows, including reinvestment earnings, over the cash outflows for debt service and administrative expenses.  These CMO instruments may include instruments designated as residual interests and are thought to be "high risk" in that these CMO instruments could result in the loss of a portion of the original investment.  Cash flows from residual interests are extremely sensitive to prepayments and, thus, contain a high degree of interest-rate risk.  The Bank has no such residual interest CMO's.Investment Securities and Other Interest-Earning Assets.  At June 30, 2002, Sobieski Bank's interest-bearing deposits with financial institutions totaled $1.9 million, certificates of deposit of other federally insured institutions totaled $0.6 million, and Federal funds sold totaled $1.9 million for a total of $4.4 million or 3.2% of total assets.
Other investment securities, consisting of U.S. Government Treasury notes, agency, municipal, and corporate debt securities, totaled $5.0 million, or 3.6% of total assets.  In addition, the Bank had an investment of $1.9 million in FHLB stock, satisfying its requirement for membership in the FHLB of Indianapolis.  It is the Bank's general policy to purchase securities which are U.S. Government securities or federal agency obligations or other issues that are rated investment grade.  At June 30, 2002, the weighted average maturity of the securities portfolio (excluding FHLB stock) was 18.3 years.

As of June 30, 2002, individual investments, other than issuances by the U.S. Government and government agencies,  in excess of 10% of the Company's stockholders equity in the aggregate were as follows:



|Name of
Issuer  |  | Book
Value | Market
Value
|--------------- |  | ---------- | ------------
|                |  |            |             
|CIT Group, Inc. |  | $988,010   | $988,010    







| |  |  | 
| |  |  | 



The following table sets forth the maturities of the Bank's investment portfolio at June 30, 2002.

|                                                       |                 | Maturities (In Thousands)           |                                      |               
|------------------------------------------------------ | --------------- | ----------------------------------- | ------------------------------------ | --------------
|                                                       | Within One Year | After One Year
But WithinFive Years | After Five Years
But WithinTen Years | AfterTen Years
|U.S. Treasury and U.S. Government Agency securities(1) | -0-             | 617                                 | 502                                  | 879           
|Obligations of states and political Subdivision(2)     | -0-             | 496                                 | 252                                  | 250           
|Mortgage-backed securities(3)                          | -0-             | -0-                                 | 1,931                                | 19,255        
|Corporate obligations                                  | 988             | 1,023                               | -0-                                  | -0-           
|Equity securities                                      | -0-             | -0-                                 | -0-                                  | 25            
|                                                       |                 |                                     |                                      |               
|                                                       | 988             | 2,136                               | 2,685                                | 20,409        
|                                                       |                 |                                     |                                      |               
|Weighted average yield(2)                              | 7.38%           | 5.48%                               | 3.92%                                | 5.23%         



The following table sets forth the composition of the Bank's investment and mortgage-backed securities at the dates indicated.

|                                                      | At June 30,
|----------------------------------------------------- | -----------
|                                                      | 2002       
|                                                      | BookValue  
|                                                      |            
|Investment securities:                                |            
|U.S. Government securities                            | $     617  
|U.S. agency securities                                | 1,381      
|Municipal securities                                  | 998        
|Corporate Obligations                                 | 2,011      
|Equity securities                                     | 25         
|Subtotal                                              | 5,032      
|FHLB stock                                            | 1,877      
|Total investment securities and FHLB stock            | $    6,909 
|                                                      |            
|Other interest-earning assets:                        |            
|Interest-bearing deposits with financial institutions | $    1,915 
|Federal funds sold                                    | 1,900      
|Certificates of Deposit                               | 594        
|Total other interest-earning assets                   | $    4,409 
|                                                      |            
|Mortgage-backed securities:                           |            
|GNMA                                                  | $    1,230 
|FNMA                                                  | 3,247      
|FHLMC                                                 | 1,933      
|CMO's                                                 | 14,709     
|Subtotal                                              | 21,119     
|                                                      |            
|Unamortized premium, net                              | 67         
|Total mortgage-backed securities                      | $   21,186 

Sources of Funds
     General.



|                     | 2002                   | 2001    | 2000   
|-------------------- | ---------------------- | ------- | -------
|                     | (Dollars in Thousands)
|Opening balance      | $78,995                | $73,928 | $64,231
|New deposits         | 10,173                 | 4,661   | 9,236  
|Interest credited(1) | 2,405                  | 406     | 461    
|                     |                        |         |        
|Ending balance       | 91,573                 | $78,995 | $73,928
|                     |                        |         |        
|Net increase         | $12,578                | $ 5,067 | $ 9,697
|                     |                        |         |        
|Percent increase     | 15.9%                  | 6.85%   | 15.10% 

(1) Includes interest credited to passbook, NOW and money market deposit accounts, but not certificates of deposit.

The following table sets forth the dollar amount of average savings deposits and the average weighted rate paid in the various types of deposit programs offered by the Bank for the years indicated.

|                                  | 2002          | 2001            | 2000            
|--------------------------------- | ------------- | --------------- | ----------------
|                                  | AverageAmount | Percentof Total | AverageRate Paid
|                                  |               |                 |                 
|Transaction and Savings Deposits: |               |                 |                 
|NOW and MMDA accounts             | $  8,465      | 9.9%            | 1.57%           
|Savings deposits                  | 13,070        | 15.3%           | 1.71%           
|                                  |               |                 |                 
|Total non-certificates            | 21,535        | 25.2%           | 1.65%           
|                                  |               |                 |                 
|Certificates                      | 63,696        | 74.8%           | 4.97%           
|                                  |               |                 |                 
|Total average deposits            | 85,231        | 100.0%          | 4.13%           

The following table shows rate and maturity information for the Bank's certificates of deposit as of June 30, 2002.



|                                  | Total          | Percentof Total
|--------------------------------- | -------------- | ---------------
|Certificate accounts maturing in: |                |                
|12 months or less                 | $   40,983,172 | 60.1%          
|Over 12 months to 36 months       | 25,063,404     | 36.7           
|Over 36 months                    | 2,209,567      | 3.2            
|                                  |                |                
|Total                             | $  68,256,143  | 100.0%         

The following table indicates the amount of the Bank's certificates of deposit of $100,000 and over by time remaining until maturity as of June 30, 2002.

|                                                 |                 | Maturity          |                    |              
|------------------------------------------------ | --------------- | ----------------- | ------------------ | -------------
|                                                 |                 | (In Thousands)    |                    |              
|                                                 | 3 monthsor less | Over 3 to6 months | Over 6 to12 months | Over 12months
|Certificates of deposit of $100,000 
    or more | 2,574           | 17,448            | 506                | 4,429        

Borrowings.Although deposits are the Bank's primary source of funds, the Bank may utilize FHLB advances or other borrowings to support lending activities and to assist the Banks's asset/liability management strategy when they are a less costly source of funds and may be invested at a positive interest rate spread or when the Bank desires additional capacity to fund loan demand.  At  June 30, 2002, the Bank had borrowings of $36.0 million.

Earnings, Stockholders' Equity and Dividend Information.The following table sets forth earnings, earnings related data and per share data:



|                                       | 2002                                 | 2001     | 2000    
|-------------------------------------- | ------------------------------------ | -------- | --------
|                                       | (In thousands except per share data)
|Average stockholders' equity           | $13,263                              | $12,916  | $12,710 
|Net Income (loss)                      | ($ 3,414)                            | $   607  | $   667 
|Return on average assets               | (2.53%)                              | .52%     | .60%    
|Average equity to average total assets | 9.83%                                | 11.02%   | 11.37%  
|Return on average stockholders' equity | (25.75%)                             | 4.70%    | 5.25%   
|Basic earnings (loss)per share         | ($  5.33)                            | $    .94 | $   1.00
|Cash dividends declared per share      | $   .325                             | $    .32 | $   0.32
|Dividend payout percentage             | N/A                                  | 34%      | 32%     

Service Corporation Activities

Employees
     At June 30, 2002, the Bank had a total of 28.5 full-time equivalent employees.  The Bank's employees are not represented by any collective bargaining group.  Management considers its employee relations to be good.Executive Officers Who Are Not DirectorsThe business experience of each executive officer of the Bank and the Company who is not also a director is set forth below.
     Jeanie M. Martz, age 46.  Ms. Martz is secretary/treasurer of the Bank.  In that capacity she serves as Secretary to the Board of Directors and is responsible for the record keeping of the Company.  Ms. Martz joined the Bank in February 1999.
     Arthur Skale, age 61.  Mr. Skale is currently the Chief Financial Officer.  In that capacity, he is responsible for the investment, cash management and budget planning of the Bank.  Mr. Skale joined the Bank in 1997.  Mr. Skale previously served for three years as vice president, treasurer and chief financial officer at SJS Bancorp, Inc. in St. Joseph, Michigan.  He also previously worked for 11 years most recently as chief financial officer and also as vice-president in charge of internal audits at NBD F&M Bank, NA, Benton Harbor, Michigan.
     Gregory J. Matthews, age 42.  Mr. Matthews joined the Company in March 1998 as Vice President and Chief Operations Officer.  He is responsible for retail banking, operations, and information systems.  Mr. Matthews worked for 19 years in operations and funds management at 1st Source Bank in South Bend, most recently as vice president of the Funds Management Division.REGULATION
GeneralSobieski Bank is a federal savings association, the deposits of which are federally insured and backed by the full faith and credit of the United States Government.  Accordingly, Sobieski Bank is subject to broad federal regulation and oversight extending to all its operations.  The Bank is a member of the FHLB of Indianapolis and is subject to certain limited regulation by the Board of Governors of the Federal Reserve System ("Federal Reserve Board").  As the savings and loan holding company of the Bank, the Holding Company also is subject to federal regulation and oversight.  The Bank is a member of the Savings Association Insurance Fund ("SAIF") and the deposits of the Bank are insured by the FDIC.  As a result, the FDIC has certain regulatory and examination authority over the Bank.
     Certain of these regulatory requirements and restrictions are discussed below or elsewhere in this document.Federal Regulation of Savings AssociationsThe OTS has extensive authority over the operations of savings associations.  As part of this authority, the Bank is required to file periodic reports with the OTS and is subject to periodic examinations by the OTS and the FDIC.  The last regular OTS examinations of the Bank were as of September 1999 and December 31, 2000 and the Bank is currently being examined as of June 30, 2002.  The OTS conducted a compliance examination as of August 31, 1999 and as of February 28, 2002.  When examinations are conducted by the OTS and FDIC, the examiners may require the Bank to provide for higher general or specific loan loss reserves.
     All federal savings associations are subject to a semiannual assessment, based upon the savings association's total assets, to fund the operations of the OTS.  The Bank's OTS assessment for the fiscal year ended June 30, 2002 was $37,000.
     The OTS also has extensive enforcement authority over all savings institutions and their holding companies, including the Bank and the Company.  This enforcement authority includes, among other things, the ability to assess civil money penalties, to issue cease-and-desist or removal orders and to initiate injunctive actions.  In general, these enforcement actions may be initiated for violations of laws and regulation and unsafe or unsound practices.  Other actions or inactions may provide the basis for enforcement action, including misleading or untimely reports filed with the OTS.  Except under certain circumstances, public disclosure of final enforcement actions by the OTS is required.
     In addition, the investment, lending and branching authority of the Bank is prescribed by federal laws and regulations, and it is prohibited from engaging in any activities not permitted by such laws and regulations.  For instance, no savings institution may invest in non-investment grade corporate debt securities.  In addition, the permissible level of investment by federal savings associations in loans secured by non-residential real property may not exceed 400% of total capital, except with approval of the OTS.  federal savings associations are also generally authorized to branch nationwide.  The Bank is in compliance with the noted restrictions.
     The Bank's general permissible lending limit for loans-to-one-borrower is equal to the greater of $500,000 or 15% of unimpaired capital and surplus (except for loans fully secured by certain readily marketable collateral, in which case this limit is increased to 25% of unimpaired capital and surplus).  At June 30, 2002, the Bank's lending limit under this restriction was $1,327,000.  Because of the unauthorized and fraudulent loans made by a former employee, (see "Lending Activities" discussion.) the Bank is currently not in compliance with the loans-to-one-borrower limitation.  In addition, there are two other loan relationships that exceed this restriction.
      The OTS, as well as the other federal banking agencies, has adopted guidelines establishing safety and soundness standards on such matters as loan underwriting and documentation, asset quality, earnings standards, internal controls and audit systems, interest rate risk exposure and compensation and other employee benefits.  Any institution which fails to comply with these standards must submit a compliance plan.  A failure to submit a plan or to comply with an approved plan will subject the institution to further enforcement action.Insurance of Accounts and Regulation by the FDICSobieski Bank is a member of the SAIF, which is administered by the FDIC.  Deposits are insured up to applicable limits by the FDIC and such insurance is backed by the full faith and credit of the United States Government.  As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require reporting by FDIC-insured institutions.  It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious risk to the FDIC.  The FDIC also has the authority to initiate enforcement actions against savings associations, after giving the OTS an opportunity to take such action, and may terminate the deposit insurance if it determines that the institution has engaged or is engaging in unsafe or unsound practices, or is in an unsafe or unsound condition.Regulatory Capital RequirementsFederally insured savings associations, such as the Bank, are required to maintain a minimum level of regulatory capital.  The OTS has established capital standards, including a tangible capital requirement, a leverage ratio (or core capital) requirement and risk-based capital requirement applicable to such savings associations.  These capital requirements must be generally as stringent as the comparable capital requirements for national banks. The OTS is also authorized to impose capital requirements in excess of these standards on individual savings associations on a case-by-case basis.
     The capital regulations require tangible capital of at least 1.5% of adjusted total assets (as defined by regulation).  Tangible capital generally includes common stockholders' equity and retained income, and certain noncumulative perpetual preferred stock and related income and excludes unrealized appreciation or depreciation on securities available for sale.  In addition, all intangible assets, other than a limited amount of purchased mortgage-servicing rights, must be deducted from tangible capital.  At June 30, 2002, the Bank did not have any recorded intangible assets other than mortgage servicing rights.  Also, at June 30, 2002, approximately $600,000 of deferred tax assets were not included in tangible capital due to regulatory limitations.
     The OTS regulations establish special capitalization requirements for savings associations that own subsidiaries.  Under these regulations certain subsidiaries are consolidated for capital purposes and others are excluded from assets and capital.  In determining compliance with the capital  requirements, all subsidiaries engaged solely in activities permissible for national banks or engaged in certain other activities solely as agent for its customers are "includable" subsidiaries that are consolidated for capital purposes in proportion to the association level of ownership, including the assets of includable subsidiaries in which the association has a minority interest that is not consolidated for GAAP purposes.  For excludable subsidiaries, the debt and equity investments in such subsidiaries are deducted from assets and capital.  At June 30, 2002, the Bank did not have any active subsidiaries.
     At June 30, 2002, the Bank had tangible capital of $5.8 million, or 4.2% of adjusted total assets, which is approximately $3.7 million above the minimum requirement of 1.5% of adjusted total assets in effect on that date.
     The capital standards also require core capital equal to at least 3% of adjusted total assets (as defied by regulation).  Core capital generally consists of tangible capital plus certain intangible assets, including supervisory goodwill (which is phased-out over a five-year period) and a limited amount of purchased credit card relationships.  As a result of the prompt corrective action provisions of FDICIA discussed below, however, a savings Bank must maintain a core capital ratio of at least 4% to be considered adequately capitalized unless its supervisory condition is such to allow it to maintain a 3% ratio.  At June 30, 2002, the Bank had no intangible assets which were subject to these tests.
     At June 30, 2002, the Bank had core capital of $5.8 million, or 4.2% of adjusted total assets, which is $.3 million above the minimum leverage ratio requirement of 4% in effect on that date.
     The OTS risk-based requirement requires savings associations to have total capital of at least 8% of risk-weighted assets.  Total capital consists of core capital, as defined above and supplementary capital.  Supplementary capital consists of certain permanent and maturing capital instruments that do not qualify as core capital and general valuation loan and lease loss allowances up to a maximum of 1.25% of risk-weighted assets.  Supplementary capital may be used to satisfy the risk-based requirement only to the extent of core capital.  At June 30, 2002, the Bank had no capital instruments that qualify as supplementary capital and $988,000 of general loss reserves, which were limited to 1.25% of risk-weighted assets.
     In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet items, will be multiplied by a risk weight, ranging from 0% to 100%, based on the risk inherent in the type of asset.  For example, the OTS has assigned a risk weight of 50% for prudently underwritten permanent one-to-four family first lien mortgage loans not more than 90 days delinquent and having a loan to value ratio of not more than 80% at origination unless insured to such ratio by an insurer approved by the FNMA or FHLMC.
     On June 30, 2002, the Bank had risk-based capital of $6.8 million (including $5.8 million in core capital and $1.0 million in general loss reserves) and risk-weighted assets of $78.4 million or total capital of 8.6% of risk-weighted assets.  This amount was $.5 million above the 8% requirement in effect on that date.
     The OTS and the FDIC are authorized and, under certain circumstances required, to take certain actions against savings associations that fail to meet their capital requirements.  The OTS is generally required to take action to restrict the activities of an "undercapitalized Bank" (generally defined to be one with less than either a 4% core capital ratio, a 4% Tier 1 risk-based capital ratio or an 8% risk-based capital ratio).  Any such Bank must submit a capital restoration plan and until such plan is approved by the OTS may not increase its assets, acquire another institution, establish a branch or engage in any new activities, and generally may not make capital distributions.  The OTS is authorized to impose the additional restrictions, discussed below, that are applicable to significantly undercapitalized associations.
     As a condition to the approval of the capital restoration plan, any company controlling an undercapitalized associations must agree that it will enter into a limited capital maintenance guarantee with respect to the institution's achievement of its capital requirements.
     Any savings association that fails to comply with its capital plan or is "significantly undercapitalized" (i.e. Tier 1 risk-based or core capital ratios of less than 3% or a risk-based capital ratio of less than 6%) must be made subject to one or more of additional specified actions and operating restrictions mandated by FDICIA.  These actions and restrictions include requiring the issuance of additional voting securities; limitations on asset growth; mandated asset reduction; changes in senior management; divestiture, merger or acquisition of the association; restrictions on executive compensation; and any other action the OTS deems appropriate.  An associations that becomes "critically undercapitalized"(i.e., a tangible capital ratio of 2% or less) is subject to further mandatory restrictions on its activities in addition to those applicable to significantly undercapitalized associations.  In addition, the OTS must appoint a receiver (or conservator with the concurrence of the FDIC) for a savings association, with certain limited exceptions, within 90 days after it becomes critically undercapitalized.
     Any undercapitalized association is also subject to other possible enforcement actions by the OTS or the FDIC.  Such actions could include a capital directive, a cease-and-desist order, civil money penalties, the establishment of restrictions on all aspects of the association's operations or the appointment of a receiver or conservator or a forced merger into another institution.
     The OTS is also generally authorized to reclassify any association into a lower capital category and impose the restrictions applicable to such category if the institution is engaged in unsafe or unsound practices or is in an unsafe or unsound condition.
      The imposition by the OTS or the FDIC of any of these measures on Sobieski Bank may have a substantial adverse effect on the Bank's operations and profitability.Limitations on Dividends and Other Capital DistributionsOTS regulations impose various restrictions on savings institutions with respect to their ability to make distributions of capital, which include dividends, stock redemptions or repurchases, cash-out mergers and other transactions charged to the capital account.
     Generally, savings institutions such as the Bank, may make capital distributions during any calendar year equal to the greater of 100% of net income for the year-to date period plus retained net income for the two preceding years provided that before and after the proposed distribution the Bank will remain well-capitalized.   However, an institution deemed to be in need of more than normal supervision by the OTS may have its dividend authority restricted by OTS.  The Bank may pay dividends in accordance with this general authority.  At June 30, 2002, none of the Bank's retained earnings were available for distribution to the Company without obtaining prior regulatory approval.
     Savings institutions proposing to make any capital distribution need not submit written notice to the OTS prior to such distribution unless they are, as is the Bank, a subsidiary of a holding company, or would not remain well-capitalized following the distribution.  Savings institutions that do not, or would not, meet their current minimum capital requirements following a proposed capital distribution or propose to exceed these net income limitations must obtain OTS approval prior to making such distribution.  The OTS may object to the distribution during that 30-day period based on safety and soundness concerns.Liquidity     Federal regulations require the Bank to maintain sufficient liquidity to maintain its safe and sound operation.  Management believes that the level of the bank liquid assets as well as loan repayments and other sources of funds will be adequate to meet the Company's foreseeable liquidity needs. Qualified Thrift Lender TestAll savings associations, including Sobieski Bank, are required to meet a qualified thrift lender ("QTL") test to avoid certain restrictions on their operations.  This test requires a savings association to have at least 65% of its portfolio assets (as defined by regulation) in qualified thrift investments on a monthly average for nine out of every 12 months on a rolling basis.  As an alternative, the savings association may maintain 60% of its assets in those assets specified in Section 7701(a)(19) of the Internal Revenue Code.  Under either test, such assets primarily consist of residential housing related loans and investments.  At June 30, 2002, the Bank met the test and has always met the QTL test since its effectiveness.
     Any savings association that fails to meet the QTL test must convert to a national bank charter, unless it requalifies as a QTL and thereafter remains a QTL.  If a Bank does not requalify and converts to a national bank charter, it must remain SAIF-insured until the FDIC permits it to transfer to the Bank Insurance Fund.  If an association that fails the test has not yet requalified and has not converted to a national bank, its new investments and activities are limited to those permissible for both a savings bank and a national bank, and it is limited to national bank branching rights in its home state.  In addition, the association is immediately ineligible to receive any new FHLB borrowings and is subject to national bank limits for payment of dividends.
     If such association has not requalified or converted to a national bank within three years after the failure, it must divest of all investments and cease all activities not permissible for a national bank.  In addition, it must repay promptly any outstanding FHLB borrowings, which may result in pre-payment penalties.  If any bank that fails the QTL test is controlled by a holding company, then within one year after the failure, the holding company must register as a bank holding company and become subject to all restrictions on bank holding companies.  See "Regulation-Holding Company Regulation".Community Reinvestment ActUnder the Community Reinvestment Act ("CRA"), every FDIC insured institution has a continuing and affirmative obligation consistent with safe and sound banking practices to help meet the credit needs of its entire community, including low and moderate-income neighborhoods.  The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA.  The CRA requires the OTS, in connection with the examination of the Bank, to assess the institution's record of meeting the credit needs of its community and to take such record into account in its evaluation of certain applications, such as a merger or the establishment of a branch, by Sobieski Bank.  An unsatisfactory rating may be used as the basis for the denial of an application by the OTS.
     Due to the heightened attention being given to the CRA in recent years, the Bank may be required to devote additional funds for investment and lending in its local community. The Bank was examined for CRA compliance in February 2002 and received a rating of satisfactory.Transactions with AffiliatesGenerally, transactions between a savings association or its subsidiaries and its affiliates are required to be on terms as favorable to the association as transactions with non-affiliates.  In addition, certain of these transactions are restricted to a percentage of the association's capital.  Affiliates of the Bank include the Company and any company which is under common control with the Bank.  In addition, a savings association may not lend to any affiliate engaged in activities not permissible for a bank holding company or acquire the securities of most affiliates
     Certain transactions with directors, officers or controlling persons are also subject to conflict of interest regulations enforced by the OTS.  These conflict of interest regulations and other statutes also impose restrictions on loans to such persons and their related interests.  Among other things, such loans must be made on terms substantially the same as for loans to unaffiliated individuals.Holding Company Regulation     The Company is a unitary savings and loan holding company subject to regulatory over-sight by the OTS.  As such, the Company is required to register and file reports with the OTS and is subject to regulation and examination by the OTS.  In addition, the OTS has enforcement authority over the Holding Company and its non-savings association subsidiary which also permits the OTS to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings Bank.
     As a unitary savings and loan holding company, the Company generally is not subject to activity restrictions.  If the Company acquires control of another savings association as a separate subsidiary, it would become a multiple savings and loan holding company, and the activities of the company and any of its subsidiaries (other than the Bank or any other SAIF-insured savings association) would become subject to such restrictions unless such other associations each qualify as a QTL and were acquired in a supervisory acquisition.
     If the Bank fails the QTL test, the Company must obtain the approval of the OTS prior to continuing after such failure, directly or through its other subsidiaries, any business activity other than those approved for multiple savings and loan holding companies or their subsidiaries.  In addition, within one year of such failure the Company must register as, and will become subject to, the restrictions applicable to bank holding companies.  The activities authorized for a bank holding company are more limited than are the activities authorized for a unitary or multiple savings and loan holding company.  See "Regulation-Qualified Thrift Lender Test".
     The Company must obtain approval from the OTS before acquiring control of any other SAIF-insured bank.  Such acquisitions are generally prohibited if they result in a multiple savings and loan holding company controlling savings banks in more than one state.  However, such interstate acquisitions are permitted based on specific state authorization or in a supervisory acquisition of a failing savings bank.Federal Securities LawThe common stock of the Company is registered with the SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act").  The Company is subject to the information, proxy solicitation, insider trading restrictions and other requirements of the SEC under the Exchange Act.
     Company stock held by persons who are affiliates (generally officers, directors and principal stockholders) of the Company may not be resold without registration or unless sold in accordance with certain resale restrictions.  If the Company meets specified current public information requirements, each affiliate of the Company is able to sell in the public market, without registration, a limited number of shares in any three-month period.Federal Reserve SystemThe Federal Reserve Board requires all depository institutions to maintain non-interest bearings reserves at specified levels against their transaction accounts (primarily checking, NOW and Super NOW checking accounts).  At June 30, 2002, the Bank was in compliance with these reserve requirements.  The balances maintained to meet the reserve requirements imposed by the Federal Reserve Board may be used to satisfy liquidity requirements that may be imposed by the OTS.  See "Regulation-Liquidity".
     Savings associations are authorized to borrow from the Federal Reserve Bank "discount window", but Federal Reserve Board regulations require banks to exhaust other reasonable alternative sources of funds, including FHLB borrowings, before borrowing from the Federal Reserve Bank.Federal Home Loan Bank SystemThe Bank is a member of the FHLB of Indianapolis, which is one of 12 regional FHLB's that administer the home financing credit function of savings banks.  Each FHLB serves as a reserve or central bank for its members within its assigned region.  It is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB system.  It makes loans to members (i.e. advances) in accordance with policies and procedures established by the board of directors of the FHLB.  These policies and procedures are subject to the regulation and oversight of the Federal Housing Finance Board.  All advances from the FHLB are required to be fully secured by sufficient collateral as determined by the FHLB.  In addition, all long-term advances are required to provide funds for residential home financing.
     As a member, the Bank is required to purchase and maintain stock in the FHLB of Indianapolis.  At June 30, 2002, the Bank had $1.9 million of FHLB stock, which was in compliance with this requirement.  During fiscal 2002 and prior years, the Bank received substantial dividends on its FHLB stock.  The dividends averaged 6.6% for fiscal year 2002.  For the years ended June 30, 2002 and 2001, dividends paid by the FHLB of Indianapolis to the Bank totaled $120,000 and $126,000, respectively.
     Under federal law, the FHLB's are required to provide funds for the resolution of troubled savings associations and to contribute to low and moderately priced housing programs through direct loans or interest subsidies or other advantages targeted for community investment and low and moderate-income housing projects.  These contributions have affected adversely the level of FHLB dividends paid and could continue to do so in the future.  A reduction in value of the Bank's FHLB stock may result in a corresponding reduction in the Bank's capital.Federal and State TaxationIn addition to the regular income tax, corporations, including savings banks such as the Bank, generally are subject to a minimum tax.  An alternative minimum tax is imposed at a minimum tax rate of 20% on alternative minimum taxable income, which is the sum of a corporation's regular taxable income (with certain adjustments) and tax preference items, less any available exemption.  The alternative minimum tax is imposed to the extent it exceeds the corporation's regular income tax and net operating losses can offset no more than 90% of alternative minimum taxable income.  For taxable years beginning after 1986 and before 1996, corporations, including savings associations such as the Bank, are also subject to an environmental tax equal to 0.12% of the excess of alternative minimum taxable income for the taxable year (determined without regard to net operating losses and the deduction for the environmental tax) over $2 million.
     The Bank files federal income tax returns on a fiscal year basis using the accrual method of accounting.  The Company files consolidated federal income tax returns with the Bank.  Savings associations, such as the Bank, that file federal income tax returns as part of a consolidated group are required by applicable Treasury regulations to reduce their taxable income for purposes of computing the percentage bad debt deduction for losses attributable to activities of the non-savings association members of the consolidated group that are functionally related to the activities of the savings bank member.
     The Bank has not been audited by the IRS with respect to federal income tax returns through June 30, 2002.  With respect to years examined by the IRS, either all deficiencies have been satisfied or sufficient reserves have been established to satisfy asserted deficiencies.  In the opinion of management, any examination of still open returns (including returns of subsidiaries and predecessors of, or entities merged into, the Bank) would not result in a deficiency which could have a material adverse effect on the financial condition of the Bank and its consolidated subsidiaries.
     Indiana Taxation.  The Company and the Bank are subject to an 8.5% franchise tax, imposed by the State of Indiana, on the net income of financial (including thrift) institutions, exempting them from the current gross income, supplemental net income and intangible taxes.  Net income for franchise tax purposes will constitute federal taxable income before net operating loss deductions and special deductions, adjusted for certain items, including Indiana income taxes, charitable contributions, tax exempt interest and bad debt.  Other applicable Indiana taxes include sales, use and property taxes.
     Delaware Taxation.  As a Delaware holding company, the Company is exempt from Delaware corporate income tax but is required to file an annual report with and pay an annual fee to the State of Delaware.  The Company is also subject to an annual franchise tax imposed by the State of Delaware.Item 2. Description of Property     The Bank conducts its business through its main office and two branch offices located in South Bend, Indiana.  The following table sets forth information relating to each of the Bank's offices as of June 30, 2002.  The total net book value of the Bank's premises and equipment (including land, buildings and leasehold improvements and furniture, fixtures and equipment) at June 30, 2002 was approximately $1,877,000.  See Note 5 of the "Notes to Consolidated Financial Statements".

|Location                                                    | Year
Leasedor Acquired | Total
Approximate
SquareFootage | Net Book Value atJune 30, 2002
|----------------------------------------------------------- | ---------------------- | ------------------------------- | ------------------------------
|                                                            |                        |                                 | (In Thousands)                
|Main Office: (Owned)                                        |                        |                                 |                               
|2930 West Cleveland Road
   South Bend, Indiana 46628       | 1995                   | 10,080                          | $1,376                        
|Branch Offices:                                             |                        |                                 |                               
|4606 W. Western Ave. (Leased)
   Belleville Shopping Center | 1978                   | 1,600                           | $ -0-                         
|                                                            |                        |                                 |                               
|740 S. Walnut Street (Owned)                                | 1952                   | 1,900                           | $   143                       

Sobieski Bank believes that its current facilities including its main office facilities are adequate to meet the present and foreseeable needs of the Bank and the Company.
     The Bank maintains an on-line database with a service bureau servicing financial institutions.  The net book value of the data processing and computer equipment utilized by the Bank at June 30, 2002 was $99,000.Item 3.  Legal Proceedings
     The Company and Sobieski Bank are involved, from time to time, as plaintiff or defendant in various legal actions arising in the normal course of their businesses.  While the ultimate outcome of these proceedings cannot be predicted with certainty, it is the opinion of management, after consultation with counsel representing Sobieski Bank and the Company in the proceedings, that the resolution of these proceedings should not have a material effect on the Company's financial position or results of operations on a consolidated basis.Item 4.  Submission of Matters to a Vote of Security Holders
     No matter was submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the quarter ended June 30, 2002.

PART II
Item 5.  Market for common equity and Related Stockholder Matters
     Page 53 of the attached 2002 Annual Report to Stockholders is herein incorporated by reference.Item 6.  Management's Discussion and Analysis of Financial Condition and Results of             Operation
     Pages 6 to 17 of the attached 2002 Annual Report to Stockholders are herein incorporated by reference.Item 7.  Financial Statements
     The following pages of the attached 2002 Annual Report to Stockholders are herein incorporated by reference.



|Report of Independent Accountants                                                                        | Page 18   
|-------------------------------------------------------------------------------------------------------- | ----------
|Consolidated Statements of Financial Condition at 
   June 30, 2002 and 2001                             | Page 19   
|Consolidated Statements of Income for the years
   ended June 30, 2002 and 2001                          | Page 20   
|Consolidated Statement of Comprehensive Income for
   years ended June 30, 2002 and 2001                 | Page 21   
|Consolidated Statements of Changes in Stockholders' Equity
   for the years ended June 30, 2002 and 2001 | Page 22   
|Consolidated Statements of Cash Flows for the years
   ended June 30, 2002 and 2001                      | Page 23-24
|Notes to Consolidated Financial Statements                                                               | Page 25-52

Item 8.  Changes in and Disagreements with Accountants on Accounting and Financial              Disclosure     There is no information requiring disclosure pursuant to Item 304 of Regulation S-B.Item 9.  Directors, Executive Officers, Promoters and Control Persons; Compliance              with Section 16(a) of the Exchange ActDirectors     Information concerning directors of the Company is incorporated herein by reference from the Company's definitive Proxy Statement for the 2002 Annual Meeting of Shareholders, a copy of which will be filed with the Securities and Exchange Commission.

Executive Officers
     Information concerning the executive officers of the Company is incorporated herein by reference from "Executive Officers of the Company" contained in Part I of this Form 10-KSB.Section 16(a) Beneficial Ownership Reporting Compliance     Section 16(a) of the Exchange Act requires the Company's officers and directors, and persons owning more than 10% of a registered class of the Company's equity securities, to file periodic reports of ownership and changes in ownership with the Securities and Exchange Commission and to provide the Company with copies of such reports.  Based solely upon information provided to the Company by the directors and officers subject to Section 16(a), all Section 16(a) filing requirements applicable to such persons were complied with during fiscal 2002.Item 10.  Executive Compensation     Information concerning executive compensation is incorporated herein by reference from the Company's definitive Proxy Statement for the 2002 Annual Meeting of Shareholders, a copy of which will be filed with the Securities and Exchange Commission.

Item 11.  Security Ownership of Certain Beneficial Owners and Management     Information concerning security ownership of certain beneficial owners and management is incorporated herein by reference from the Company's definitive Proxy Statement for the 2002 Annual Meeting of Shareholders, a copy of which will be filed with the Securities and Exchange Commission.



|Plan Category                                             | Number of Shares to be Issued Upon Exercise of Outstanding Options | Weighted-Average Exercise Price of Outstanding Options | Number of Shares Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Shares Reflected in theFirst Column)
|--------------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------
|Equity compensation plans approved by
   stockholders     | 76,500                                                             | $13.39                                                 | 29,139 (1)                                                                                                                              
|Equity compensation plans not approved
   By stockholders | N/A                                                                | N/A                                                    | N/A                                                                                                                                     
|Total                                                     | 76,500                                                             | $13.39                                                 | 29,139 (1)                                                                                                                              

___________________

1. Includes 9,039 shares available for future awards of restricted stock under the Company's Recognition and Retention Plan.



Item 13.  Exhibits and Reports on Form 8-K               (a)  Exhibits:

|Regulation S-BExhibit Number | Document | Reference to
Prior Filing or
Exhibit NumberAttached Hereto                  
|---------------------------- | -------- | ----------------------------------------------------------------------------
|2                            |          | Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession 
|4.1                          |          | Certificate of Incorporation                                                
|4.2                          |          | Bylaws                                                                      
|9                            |          | Voting Trust Agreement                                                      
|10                           |          | Executive Compensation Plans and Arrangements:                              
|                             |          | Employee Stock Ownership Plan                                               
|                             |          | Stock Option and Incentive Plan                                             
|                             |          | Recognition and Retention Plan                                              
|                             |          | Sobieski Bancorp, Inc. Fee Continuation Plan for
          Retired Directors
|                             |          | Sobieski Bank Bank Fee
          Continuation Plan for Retired Directors    
|                             |          | Sobieski Bank Bank
          Supplemental Executive Retirement Plan         
|                             |          | Employment contract with Thomas F. Gruber                                   
|11                           |          | Statement re: computation of per share earnings                             
|13                           |          | Annual Report to Security Holders                                           
|16                           |          | Letter re: change in certifying accountant                                  
|18                           |          | Letter re: change in accounting principles                                  
|21                           |          | Subsidiaries of Registrant                                                  
|22                           |          | Published report regarding matter submitted to vote                         
|23                           |          | Consent of Crowe, Chizek and Company LLP                                    
|24                           |          | Power of Attorney                                                           
|                             |          |                                                                             

_______________









Item 14.   Controls and Procedures

Following the discovery by the Company in May 2002 of the unauthorized and fraudulent loans made by a former employee, the Company made several changes to its internal controls intended to address weaknesses in the areas of loan approvals, loan documentation and loan disbursements.  The significant changes include the following:

- increased documentation of the loan approval process and requiring written evidence of  all loan approvals prior to the preparation of loan documents and the booking of loans;

- implementation of additional safeguards intended to prevent an individual

employee from controlling the loan approval process and disbursements of funds, including the elimination of all individual loan approval authority by requiring approval by the appropriate loan committee of all lending relationships under specified amounts, depending on the type of loan (and continuing to require full Board approval of all lending relationships above specified amounts, depending on the type of loan), the requirement as a matter of general policy that all loan disbursements be made by check and the requirement of dual signatures for loan disbursements of $50,000 or more; and

- separation of the loan documentation and approval functions.

In addition, the Company hired an individual to fill a newly created position responsible for credit review and administration and supervision of loan operations.  In September 2002, the Company also engaged an independent accounting firm (not affiliated with the Company's independent auditors) to conduct a review of the Company's internal controls.  It is likely that additional changes to the Company's internal controls will be made following completion of that review and the Company's evaluation of any recommendations resulting from the review.

SIGNATURES
     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|                                                                                                                                                                                                              | SOBIESKI BANCORP, INC.                                                                                           
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------
|Date: October 11, 2002                                                                                                                                                                                        | By: /s/Thomas F. Gruber                                                                                          
|                                                                                                                                                                                                              | Thomas F. Gruber
        (President and Chief Executive
        Officer)
        (Duly Authorized Representative)
|Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
|                                                                                                                                                                                                              |                                                                                                                  
|/s/Robert J. UrbanskiRobert J. Urbanski, Chairman of the Board                                                                                                                                                | /s/Joseph A. GornyJoseph A. Gorny, Director                                                                      
|Date: October 11, 2002                                                                                                                                                                                        | Date: October 11, 2002                                                                                           
|                                                                                                                                                                                                              |                                                                                                                  
|/s/Joseph F. NagyJoseph F. Nagy, Director                                                                                                                                                                     | /s/Leonard J. DobosiewiczLeonard J. Dobosiewicz, Director                                                        
|Date: October 11, 2002                                                                                                                                                                                        | Date: October 11, 2002                                                                                           
|                                                                                                                                                                                                              |                                                                                                                  
|/s/Richard J. CullarRichard J. Cullar, Director                                                                                                                                                               | /s/Arthur Skale                                                                                                  
|Arthur Skale, Chief Financial Officer                                                                                                                                                                        
|Date: October 11, 2002                                                                                                                                                                                        | (Principal Financial and Accounting                                                                              
|                                                                                                                                                                                                              | Officer)                                                                                                         
|                                                                                                                                                                                                              | Date: October 11, 2002                                                                                           
|/s/Thomas F. GruberThomas F. Gruber, President and 
Chief Executive Officer and Director(Principal Executive Officer)                                                                                         |                                                                                                                  
|Date: October 11, 2002                                                                                                                                                                                        |                                                                                                                  

CERTIFICATION

I, Thomas F. Gruber, certify that:
          1. I have reviewed this annual report on Form 10-KSB of Sobieski Bancorp, Inc.;
          2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; and
          3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.
Date: October 11, 2002             /s/ Thomas F. Gruber__________
                                                   Thomas F. Gruber	
                                                   President and Chief Executive Officer

CERTIFICATION

I, Arthur Skale, certify that:
          I have reviewed this annual report on Form 10-KSB of Sobieski, Inc.;
          2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; and
          3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.
Date: October 11, 2002              /s/ Arthur Skale_______________________
                                                   Arthur Skale
                                                   Chief Financial Officer

CERTIFICATION PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned hereby certifies in his capacity as an officer of Sobieski Bancorp, Inc. (the "Company") that the Annual Report of the Company on Form 10-KSB for the fiscal year ended June 30, 2002 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the financial statements included in such report.

Date: October 11, 2002              By:  	/s/ Thomas F. Gruber___________
                                                            Thomas F. Gruber	
                                                            President and Chief
                                                            Executive Officer
Date: October 11, 2002              By:  /s/ Arthur Skale_________________
                                                           Arthur Skale
                                                           Chief Financial Officer

INDEX TO EXHIBITS

|13 |  | Annual Report to Security Holders       
|-- |  | ----------------------------------------
|21 |  | Subsidiaries of the Registrant          
|23 |  | Consent of Crowe, Chizek and Company LLP

Exhibit 13



SOBIESKI BANCORP, INC. AND SUBSIDIARY









TABLE OF CONTENTS







MESSAGE TO OUR STOCKHOLDERS		1

CORPORATE PROFILE		3

SELECTED FINANCIAL INFORMATION		4

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS		6

CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT ACCOUNTANTS		18

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION		19

CONSOLIDATED STATEMENTS OF INCOME		20

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME		21

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY		22

CONSOLIDATED STATEMENTS OF CASH FLOWS		23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		25

STOCKHOLDER INFORMATION		53

CORPORATE INFORMATION		54

MESSAGE TO OUR STOCKHOLDERS



On behalf of the directors, officers and staff of Sobieski Bancorp, Inc., and its subsidiary, Sobieski Bank, I want to report to you on the state of our company for the fiscal year ended June 30, 2002.

Fiscal 2002 presented challenges to management and the board that we had not experienced in Sobieski's 109-year history.

The Company incurred a net consolidated loss of $3.41 million, or ($5.33) per diluted share, for the fiscal year ended June 30, 2002, compared with net income of $606,804, or $.94, per diluted share for fiscal 2001. The loss for Fiscal Year 2002 is primarily attributable to unauthorized and fraudulent loan activity and other credit quality concerns attributable to a former loan officer of the Bank.

Despite the Fiscal Year 2002 loss, the Bank remains adequately capitalized within regulatory capital guidelines. Furthermore, the Company's Board of Directors infused $750,000 additional capital into the Bank since the close of the fiscal year that will be reflected in the quarterly financial report for the period ended September 30, 2002.

In May 2002, the Audit Committee of the Board of Directors discovered a series of loans were made by an individual employee of the Bank that were unauthorized, fraudulent or otherwise made without properly following the Bank's lending policies and procedures.

The majority of these loans, totaling approximately $9.6 million, were made to a group of related entities during the Company's 2002 fiscal year.  Based on our understanding of the financial condition of the borrowers, management determined that these loans were impaired and primarily collateral dependent.

After extensive review of the unauthorized and fraudulent loan activity and other loans of concern with outside auditors and regulators, the Company recorded increased provisions for loan losses of approximately $7.07 million (net of tax $4.7 million) for the 2002 fiscal year. The Company charged off approximately $4.9 million of these loans during fiscal 2002.

The former employee has pleaded guilty to federal bank fraud, including actions to conceal his activity from the Board and management. A federal investigation continues into suspected fraudulent loan activities by other non-employee participants.

Since the unauthorized loan activity was discovered, management has reviewed and strengthened its internal controls in the reviewing, handling and reporting of loans.   A comprehensive internal control audit is being undertaken by an outside contractor to identify possible further changes to minimize the possibility that such breaches could occur in the future.

Sobieski officials are vigorously working with legal counsel, as well as federal regulatory and law enforcement agencies to protect the bank's interests and to pursue all available avenues for collection on the unauthorized loans.

That effort already has started to have positive results.  Through the end of September, the Company has obtained and repossessed approximately 51% of the collateral value securing the unauthorized and fraudulent loans and has identified and is pursuing recovery of additional assets.

The Company also anticipates receipt of up to $1.5 million from bond claims stemming from the unauthorized and fraudulent loan activity.

Despite the unfortunate fraudulent loan activity, Sobieski Bank continued to serve an ever-increasing core of customers during the past year.  Without the increases in loan loss provisions, the Company would have realized a very positive financial performance for the fiscal year.

Substantial increases were realized in net portfolio loans, non-interest income primarily from gains on sale of loans on the secondary market, net interest income, and deposits.

During the past year, we continued to pay regular dividends that increased from $.08 per share to $$.085 per share during the last quarter of fiscal 2002.

The Sobieski staff and Board of Directors look forward to 2003 with a sense of determined commitment - commitment to build long-term shareholder value through stronger core earnings capacity; commitment to pursue all available avenues for collection on unauthorized loans through recovery and disposition of collateral and bond claims on fraudulent activity; commitment to build an even stronger Company based on our sound strategic plan to provide safe, personal community banking services to families and small businesses in the greater South Bend market.

The Sobieski staff remains dedicated to our customers, to our community and to our shareholders.  On behalf of our employees and the Board of Directors, I reiterate our commitment to increase your shareholder value and thank you for your investment in our company.

Sincerely,



Thomas F. Gruber

President and CEO





CORPORATE PROFILE

Business Conducted by Sobieski Bancorp, Inc.

Sobieski Bancorp, Inc. (the "Company" or "Bancorp") is a Delaware corporation that was organized in December 1994.  Bancorp, as a unitary savings and loan holding company, generally is not restricted in the types of business activities in which it may engage, provided that its wholly-owned subsidiary, Sobieski Bank ("Sobieski Bank" or the "Bank"), retains a specified amount of its assets in housing-related investments.  The holding company structure facilitates diversification into non-banking activities. There are no present plans, however, regarding such activities.

The Company's activities to date have primarily been limited to its investment in Sobieski Bank, the purchase of loans from Sobieski Bank, and a loan to the Company's Employee Stock Ownership Plan (the "ESOP") which enabled the ESOP to purchase shares of stock of the Company in its initial public offering.  The loans and transactions bear interest rates and have terms and conditions which prevailed in the market at the time of such transactions.

Business Conducted by Sobieski Bank of South Bend

Sobieski Bank is a federally chartered stock savings and loan association located in South Bend, Indiana, conducting business through three full service offices in South Bend.  The Bank was formed in 1893. Its deposits are insured up to the maximum allowable limit by the Federal Deposit Insurance Corporation (the "FDIC") under the Savings Association Insurance Fund (the "SAIF").

Sobieski Bank is a community-oriented financial institution offering selected financial products and services to meet the needs of the communities it serves.  The Bank attracts deposits from the general public and uses such deposits, together with other funds, to originate primarily one-to-four family,fixed-rate and adjustable-rate residential mortgage loans for retention in its portfolio.  In addition, the Bank originates construction loans, consumer loans and real estate-backed and other secured small business commercial loans.  During both fiscal 2002 and 2001, the Bank held participation interests in commercial loans funded primarily by advances from the Federal Home Loan Bank ("FHLB") of Indianapolis.

SELECTED FINANCIAL INFORMATION

The following consolidated financial data does not purport to be complete and is qualified in its entirety by reference to the more detailed financial information contained elsewhere herein.  Such consolidated financial data should be read in conjunction with the consolidated financial statements, including notes thereto, included elsewhere in this Annual Report.

At June 30,

2002	2001	2000	1999	1998

(In thousands)

Selected Financial Condition Data:

Total assets	$	138,754	$	128,417	$	110,833	$	103,698	$	92,497

Loans, net		96,400		88,501		93,281		87,900		76,713

Securities available for sale		19,257		23,536		5,621		3,021		1,094

Securities held to maturity		6,961		4,847		4,757		7,684		9,944

Deposits		91,573		78,995		73,928		64,231		60,517

Federal Home Loan Bank advances		36,000		34,000		21,500		25,250		18,450

Stockholders' equity		9,633		13,067		12,816		12,572		12,864

Year Ended June 30,

2002	2001	2000	1999	1998

(In thousands, except per share data)

Selected Operations Data:

Total interest income	$	8,789	$	8,492	$	8,084	$	7,258	$	6,476

Total interest expense	5,402	5,398	4,765	4,244	3,610

Net interest income		3,387		3,094		3,319		3,014		2,866

Provision for loan losses	7,071	50	120	70	40

Net interest income (loss) after

provision for loan losses	(3,684)	3,044	3,199	2,944	2,826

Total non-interest income		874		443		218		208		145

Total non-interest expense	2,902	2,476	2,301	2,141	2,029

Income (loss) before income taxes		(5,712)		1,011		1,116		1,011		942

Income taxes	(2,298)	404	449	414	398

Net income (loss)	$	(3,414)	$	607	$	667	$	597	$	544

Earnings (loss) per common share:

Basic	$	(5.33)	$	.94	$	1.00	$	.86	$	.76

Diluted	$	(5.33)	$	.94	$	1.00	$	.85	$	.75

SELECTED FINANCIAL INFORMATION

Year Ended June 30,

2002	2001	2000	1999	1998

Selected Financial Ratios and Other Data:

Performance Ratios:

Return on assets (ratio of net

income (loss) to average total assets)	(2.53)%	.52%	.60%	.58%	.62%

Return on equity (ratio of net

income (loss) to average equity)	(25.73)	4.70	5.25	4.70	4.32

Net interest rate spread	2.36	2.35	2.67	2.62	2.87

Net interest margin (1)	2.65	2.78	3.09	3.08	3.43

Ratio of operating expense to

average total assets	2.15	2.11	2.06	2.10	2.32

Ratio of average interest-earning

assets to average interest-bearing

liabilities	106.93	108.93	109.56	110.72	112.95

Quality Ratios:

Non-performing loans to net

loans at end of period	7.42	1.38	.29	.21	.25

Allowance for loan losses to

non-performing loans at

end of period	34.76	27.86	147.54	170.33	127.66

Allowance for loan losses to

loans receivable, net,

at end of period	2.58	.38	.42	.35	.31

Capital Ratios:

Equity to total assets at end of period	6.94	10.18	11.56	12.12	13.91

Average equity to average assets	9.83	11.02	11.37	12.44	14.39

Other Data:

Number of full-service offices	3	3	3	3	3

(1)  Net interest income divided by average interest-earning assets.

Management's Discussion and Analysis of

Financial Condition and Results of Operations



Forward-Looking Statements

When used in this Annual Report, in filings by the Company with the Securities and Exchange Commission, in the Company's press releases or other public shareholder communications, or in oral statements made with the approval of an authorized executive officer, the words or phrases "believe," "will likely result," "expects," "are expected to, " "will continue," "is anticipated," "estimate," "project," "plans" or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date made.  These statements may relate to the Company's future financial performance, strategic plans or objectives or other financial items.  By their nature, these statements are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the statements.

Important factors that could cause actual results to differ materially from the results anticipated or projected include, but are not limited to, the following:  (1) the credit risks of lending activities, including changes in the level and direction of loan delinquencies and charge-offs; (2) changes in management's estimate of the adequacy of the allowance for loan losses, and requirements by the Bank's primary federal regulator, the Office of Thrift Supervision, that provisions be made for such loans, including possible additional provisions for loan losses necessitated by the unauthorized and fraudulent loans made by a former employee of the Bank as discussed in this Annual Report under "Results of Operations - 2002 Compared with 2001 - Provision for Loan Losses"; (3) competitive pressures among depository institutions; (4) interest rate movements and their impact on customer behavior and the Company's net interest margin; (5) the impact of repricing and competitors' pricing initiatives on loan and deposit products; (6) the Company's ability to adapt successfully to technological changes to meet customers' needs and developments in the marketplace; (7) the Company's ability to access cost-effective funding; (8) changes in financial markets and general economic conditions; (9) new legislation or regulatory changes; and (10) changes in accounting principles, policies or guidelines.

The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date on which the forward-looking statement is made.

General

The principal business of the Company consists of attracting deposits from the general public and investing those funds in the origination of one-to-four family residential mortgage loans, consumer loans, construction loans and commercial loans.  The Company also invests in mortgage-backed securities, which are insured or guaranteed by federal agencies, investment securities, consisting primarily of obligations of the U.S. Government, municipal securities or U.S. agency obligations, corporate securities, financial institution certificates of deposit insured by the FDIC, and other liquid assets.  The Company's profitability depends primarily on its net interest income, which is the difference between interest income earned on its loans, investments and mortgage-backed securities and the interest expense incurred on its deposits, federal funds purchased and FHLB borrowings.  Net interest income is affected by rates received on and the amounts of interest-earning assets and the rates paid on and the amounts of interest-bearing liabilities.

The Company's profitability is also affected by its provision for loan losses, non-interest income and non-interest expense.  Non-interest income principally consists of fees and service charges, gains or losses on security and loan sales and life insurance proceeds and net lease income.  Non-interest expense is principally comprised of operating expenses, including compensationand benefits, federal deposit insurance premiums, advertising and promotion, service bureau data processing, and occupancy and equipment costs.  The Company's earnings are also affected significantly by general economic and competitive conditions, particularly changes in general interest rate levels.



Business Strategy

Sobieski Bank has concentrated its lendingefforts on the origination of one-to-four family mortgage loans along with home equity loans and mortgage-backed and other secured commercial loans for portfolio retention.  During 2001 and 2002, the Bank also sold certain mortgage loans.  At June 30, 2002, the ratio of Sobieski Bank's nonperforming loans to net loans was 7.42% and the ratio of its allowance for loan losses to nonperforming loans was 34.76%.   At June 30, 2001, these ratios were 1.38% and 27.86%, respectively.  The increase in the ratio of nonperforming loans to net loans resulted primarily from certain unauthorized and fraudulent loans made by a former employee of the Bank uncovered by the Bank's Audit Committee in May 2002, as discussed below under "Results of Operations - 2002 Compared with 2001 - Provision for Loan Losses."  Historically, the loans originated by Sobieski Bank have been principally fixed-rate, one-to-four family mortgage loans, while its investments in mortgage-backed securities have been principally in adjustable rate products.  At June 30, 2002, $73.9 million, or 78.7%, of the Bank's combined single-family mortgage loans, home equity loans and mortgage-backed securities portfolio had fixed rates of interest and $20.0 million, or 21.3%, had adjustable interest rates.  The Bank's business strategy emphasizes retail deposits along with FHLB advances as its principal sources of funds.

The Bank's primary objective is to remain an independent, community oriented financial institution serving customers in its primary market area. The Board of Directors has sought to accomplish this objective through the adoption of a strategy designed to maintain profitability, a strong capital position and high asset quality. This strategy has been implemented primarily by (i) emphasizing the origination of one-to-four family residential mortgage lending, home equity lending, consumer and commercial lending, (ii) purchasing participation interests in commercial loans, (iii) maintaining a substantial portfolio of adjustable-rate mortgage-backed securities and short to intermediate term investment securities, (iv) controlling operating expenses and (v) increasing fee income.

Asset/Liability Management

Sobieski Bank, like other financial institutions, is vulnerable to increases in interest rates because interest-bearing liabilities reprice more quickly than interest-earning assets.  Historically, Sobieski Bank has invested in fixed-rate, long-term mortgage loans secured by one-to-four family residences and its primary source of funds has been deposits with much

shorter terms to maturity. This mismatched position generally produces lower net interest income through compressed interest spreads during periods of rising interest rates and improved net interest income resulting from larger interest spreads during periods of declining interest rates.  Accordingly, increases in general market interest rates adversely impact the Bank's interest rate spread and, therefore, have a negative impact on the Company's results of operations and financial condition.

To reduce interest rate risk through asset/liability management, Sobieski Bank has taken steps to mitigate the sensitivity of its interest-earning assets by investing in short to intermediate term investments and adjustable-rate mortgage-backed securities, which, although long-term in nature, adjust periodically in response to changes in general levels of interest rates. Additionally, to decrease interest rate sensitivity, Sobieski Bank originates variable-rate home equity products and adjustable mortgage-backed commercial loans along with purchased participation interests in adjustable rate commercial loans.  The funding for these originations and purchases has come primarily from deposits and advances from the FHLB.  At June 30, 2002, Sobieski Bank had $65.7 million in long-term fixed-rate loans and $33.2 million in adjustable-rate loans.  The Bank's ability to generate adjustable-rate mortgage ("ARM") loans is dependent upon the interest rate environment and customer preferences.

Net Portfolio Analysis

The Office of Thrift Supervision ("OTS") provides a Net Portfolio Value ("NPV") approach to the quantification of interest rate risk.  This approach calculates the difference between the present value of expected cash flows from assets and the present value of expected cash flows from liabilities, as well as cash flows from off-balance-sheet contracts.

Presented below, as of June 30, 2002, is an analysis of the Bank's interest rate risk as measured by changes in NPV for instantaneous and sustained parallel shifts in the yield curve, in 100 basis point increments, up 300 and down 100 basis points in accordance with OTS regulations.  As illustrated in the table, NPV is more sensitive to rising rates than declining rates. This occurs principally because, as rates rise, the market value of fixed-rate loans decline due to the rate increase.  When rates decline, the Bank does not experience as significant a rise in market value for these loans because borrowers prepay at relatively high rates.  The following table is based on assets and liabilities of the Bank only.

Change in

Interest Rate	Net Portfolio Value

(Basis Points)	$ Change	% Change

(Dollars in thousands)



+200		(2,118)	23

+100		(775)	9

0		-	-

- 100		(467)	5

Management reviews the NPV measurements on a quarterly basis.  In addition to monitoring selected measures of NPV, management also monitors effects on net interest income resulting from increases or decreases in rates. This measure is used in conjunction with NPV measures to identify excessive interest rate risk.

The change in the Bank's NPV, based on a rise in interest rates of 2%, was a 23% decrease representing a dollar decrease in equity value of approximately $2.1 million at June 30, 2002. In contrast, based on a decline in interest rates of 1% the Bank's NPV was estimated to decrease 5% or approximately $.5 million at June 30, 2002.  The most significant factor contributing to its liability sensitive position was the Bank's balance of fixed rate mortgage loans.  At June 30, 2002, 66% of the Bank's loan portfolio was comprised of long-term, fixed-rate mortgage loans.

As with any method of measuring interest rate risk, certain shortcomings are inherent in the method of analysis presented in the foregoing table.  For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates.  Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates.  Additionally, certain assets, such as ARM loans, have features which restrict changes in interest rates on a short-term basis and over the life of the asset.  Further, in the event of a change in interest rates, expected rates of prepayments on loans and early withdrawals from certificates could likely deviate significantly from those assumed in calculating the table.

Impact Of Inflation And Changing Prices

The consolidated financial statements and notes thereto presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America, which require the measurement of financial position and operating results in terms of historical dollars without considering the change in the relative purchasing power of money over time due to inflation.  The impact of inflation is reflected in the increased cost of the Company's operations.  Nearly all the assets and liabilities of the Company are financial in nature, unlike most industrial companies. As a result, the Company's performance is directly impacted by changes in interest rates, which are indirectly influenced by inflationary expectations.  The Company's ability to match the interest sensitivity of its financial assets to the interest sensitivity of its financial liabilities through its asset/liability management strategy may tend to minimize the effects of changes in interest rates on the Company's performance.  Changes in interest rates do not necessarily move to the same extent as changes in the prices of goods and services. In the current interest rate environment, liquidity and the maturity structure of the Company's assets and liabilities are critical to the maintenance of acceptable performance levels.



Net Interest Income Analysis

The primary determinant of the Company's earnings is net interest income, which is the difference between interest income and interest expense.  Net interest income is affected by (1) rates received on interest-earning assets, (2) rates paid on interest-bearing liabilities, and (3) the relative amounts of interest-earning assets versus interest-bearing liabilities.  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 the interest expense on average interest-bearing liabilities, expressed both in dollars and rates.  No tax equivalent adjustments were made.  All average balances are monthly average balances.  Non-accruing loans have been included in the table as loans carrying a zero yield.

Year Ended June 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

Interest-earning assets:

Loans and loans held for sale (1)	$	97,303	$	7,292		7.49%	$	90,825	$	7,186		7.91%	$	93,554	$	7,244		7.74%

Securities available for sale		23,244		1,175		5.06		14,183		914		6.44		5,096		285		5.60

Securities held to maturity		5,416		202		3.73		4,713		266		5.64		7,160		439		6.12

FHLB stock	1,826	120		6.57	1,537	126		8.20	1,441	116		8.05

Total interest-earning assets (1)		127,789		8,789		6.88		111,258		8,492		7.63		107,251		8,084		7.54

Non interest-earning assets	7,135					5,952					4,572

Total assets	$	134,924					$	117,210					$	111,823

Interest-bearing liabilities:

Savings deposits	$	8,465	$	133		1.57%	$	12,924	$	295		2.28%	$	13,920	$	349		2.51%

NOW and MMDA accounts		13,070		224		1.71		6,504		109		1.68		6,116		114		1.86

Certificate accounts		63,696		3,164		4.97		55,870		3,385		6.06		52,174		2,879		5.52

FHLB advances and federal funds purchased	34,279	1,881		5.49	26,842	1,609		5.99	25,680	1,423		5.54

Total interest-bearing liabilities		119,510	5,402		4.52		102,140	5,398		5.28		97,890	4,765		4.87

Non interest-bearing liabilities	2,151						2,154					1,223

Total liabilities		121,661							104,294						99,113

Stockholders' equity	13,263						12,916					12,710

Total liabilities and stockholders' equity	$	134,924						$	117,210					$	111,823

Net interest income			$	3,387						$	3,094					$	3,319

Net interest rate spread					2.36%					2.35%					2.67%

Net earning assets	$	8,279						$	9,118					$	9,361

Net yield on average interest-earning assets					2.65%					2.78%					3.09%

Average interest-earning assets to average

interest-bearing liabilities	106.93%			108.93%	109.56%

(1)	Calculated net of deferred loan fees and costs and loans in process.

The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities.  It distinguishes between the changes related to outstanding balances and those due to the changes in interest rates.  For each category of interest-earning asset and interest-bearing liabilities, information is provided on changes attributable to (i) changes in volume (i.e., changes in volume multiplied by old rate) and (ii) changes in rate (i.e., changes in rate multiplied by old volume).  For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.

Year Ended June 30,

2002 vs. 2001	2001 vs. 2000

Increase		Increase

(Decrease)	Total	(Decrease)	Total

Due to	Increase	Due to	Increase

Volume	Rate	(Decrease)	Volume	Rate	(Decrease)

Interest-earning assets:

Loans	$	497	$	(391)	$	106	$	(214)	$	156	$	(58)

Securities available for sale		490		(229)		261		580		49		629

Securities held to maturity		36		(100)		(64)		(140)		(33)		(173)

FHLB stock	21	(27)	(6)	8	2	10

Total interest-earning assets	$	1,044	$	(747)	$	297	$	234	$	174	$	408

Interest-bearing liabilities:

Savings deposits	$	(85)	$	(77)	$	(162)	$	(24)	$	(30)	$	(54)

NOW and MMDA accounts		112		3		115		7		(12)		(5)

Certificate accounts		437		(658)		(221)		212		294		506

FHLB advances and federal funds purchased	417	(145)	272	66	120	186

Total interest-bearing liabilities	$	881	$	(877)	$	4	261	$	372	633

Net interest income					$	293					$	(225)

Financial Condition

General

Total assets increased $10.3 million or 8.0%, from $128.4 million at June 30, 2001 to $138.8 million at June 30, 2002.  The increase in total assets was primarily the result of increases of $2.3 million in cash and cash equivalents, $7.9 million in net loans and $3.1 million in other assets, offset by decreases in certificates of deposit and securities of $.8 million and $2.2 million.  Funding for the asset growth primarily came from $12.6 million of increased deposits and a $2.0 million increase in FHLB advances.

Cash and Cash Equivalents

Cash andcash equivalents, consisting of cash, interest-bearing deposits and federal funds sold increased $2.3 million from $3.7 million at June 30, 2001 to $6.0 million at June 30, 2002 due to normal fluctuations in these accounts.

Securities

Securities available for sale and held to maturity decreased $2.2 million or 7.6% from $28.4 million at June 30, 2001 to $26.2 million at June 30, 2002.  This decrease was primarily due to $14.0 million of security purchases, reduced by $.4 million of calls and maturities, principal repayments of $7.0 million and $9.0 million of security sales.  At June 30, 2002, the Company had classified approximately $19.3 million or 73% of its securities as available for sale and approximately $7.0 million or 27% of its securities as held to maturity.

Loans, Net

Net loans increased $7.9 million, or 8.9%, from $88.5 million at June 30, 2001 to $96.4 million at June 30, 2002.  The increase in net loans was offset by $7.1 million of loan loss provision primarily related to $9.6 million of unauthorized and fraudulent loans made by a former employee and approximately $7.8 million of other loans with credit quality concerns attributable to the actions of the former employee involved in the bank fraud.  These issues are discussed below under "Results of Operations - 2002 to 2001 - Provision for Loan Losses".  Additionally, $1.1 million of loans were transferred to other assets and real estate owned (see "results of operations -- provision for loan losses").  During the current fiscal year, the Company originated $14.8 million in loans to be sold; for 2001 the Company originated $4.0 million in loans to be sold.  Inventory of loans to be sold at June 30, 2002 was $47,000.  Both the portfolio loans sold in 2001 and the sales of loans originated for sale in 2002 and 2001 are a part of the Company's interest rate risk management strategy.  The Company continues to experience increased demand and expanding market areas for residential mortgages in conjunction with continued origination of home equity and mortgage-backed commercial loans.

Deposits

Deposits increased $12.6 million, or 15.9%, from $79.0 million at June 30, 2001 to $91.6 million at June 30, 2002.  The Bank actively continues pursuing a deposit retention and growth program including public fund deposits.  The program offers more competitive special short-term and long-term certificates of deposit.  Monitoring of local market rates, special certificate offerings and wholesale alternatives will continue to be utilized as management focuses on viable funding sources.



Stockholders' Equity

Stockholders' equity decreased $3.4 million from $13.1 million at June 30, 2001 to $9.6 million at June 30, 2002.  The decrease was primarily the result of the net loss of $3.4 million and cash dividends of $209,000 offset by employee benefit plan stock allocation and vesting of $130,000 and $70,000 of other comprehensive income.

Results Of Operations

2002 Compared with 2001

General

Net income decreased $4.0 million from $607,000 for 2001 to a net loss of $3.4 million for 2002. The decrease in net income is due primarily from the increased provision for loan losses of $7.1 million and increased non-interest expense of $426,000 offset by increased net interest income of $294,000, increased non-interest income of $431,000 and tax benefits of $2.7 million.

Net interest income

Net interest income increased $294,000 from $3.1 million for 2001 to $3.4 million for 2002.  The increase was primarily due to increased interest income of $297,000 generated by higher average interest-earning assets offset by 75 basis points of lower yield.  Funding cost remained level only increasing by $4,000.  Net interest spread increased 1 basis point from 2.35% for the year end June 30, 2001 to 2.36% for the year end June 30, 2002.

Interest Income

Interest income increased $297,000 from $8.5 million for 2001 to $8.8 million for 2002. The increase was the result of higher average balances of $6.5 million in loans, $9.8 million of securities and $.3 million of FHLB stock. The increases in net volume added $1.0 million to interest income while yield decreases cost $747,000.  The yield on average interest-earning assets decreased 75 basis points, from 7.63% in 2001 to 6.88% in 2002.

Interest Expense

Interest expense remained stable at $5.4 million in 2002 compared to 2001, primarily as a result of $272,000 of additional expense related to FHLB advances and $115,000 of added expense related to NOW and MMDA deposits offset by $162,000 of lower savings deposit expense and $221,000 of lower certificate account expense.  The average rate paid for interest-bearing liabilities decreased 76 basis points from 5.28% in 2001 to 4.52% in 2002.  The average balance of interest-bearing liabilities for fiscal 2002 was $119.5 million representing an increase of $17.4 million from $102.1 million for fiscal 2001.

Provision for Loan Losses

Management believes the allowance for loan losses accounting policy is critical to the portrayal and understanding of the Company's financial condition and results of operations.  As such, selection and application of this "critical accounting policy" involves judgments, estimates, and uncertainties that are susceptible to change.  In the event that different assumptions or conditions were to prevail, and depending upon the severity of such changes, the possibility of materially different financial condition or results of operations is a reasonable likelihood.

Management performs periodic evaluations of the adequacy of the allowance. Management determines the need to individually evaluate loans based on known information about the loan, including the financial condition of the borrower and the delinquency status of the loan. Management evaluates such loans using a process that considers specific factors affecting the individual borrower including the financial condition of the borrower and current regional and national economic conditions affecting the borrower, ability of the borrower to repay the loan and the underlying estimated fair value of collateral.  All loans that are not individually evaluated are grouped.  A percentage allocation requirement is applied based on historical loss factors and current regional and national economic factors.  A higher percentage allocation requirement is applied to groups of consumer and commercial loans than to mortgage loans.  Historical loss factors exclude the losses incurred during fiscal 2002 on the fraudulent and unauthorized loans that are discussed elsewhere herein.  Management at times allocates specific allowance amounts for individual loans; however, the entire allowance is available for any loan charge-off.  Charge-offs on specific loans are charged against the allowance for loan losses when uncollectability of the loan is confirmed.  Management expects that as loan growth continues and economic and other factors change, the allowance for loan losses may change.  In addition, the Banks regulators, as part of the examination process, periodically review the Company's Allowance for Loan Losses.  The regulators may require additions to the Allowance for Loan Losses based on their assessment of the information available to them at the time of examination.  There is no assurance as to the amount or timing of additional provision that may be required by the regulators.

At June 30, 2002, the allowance for loan losses totaled approximately $2.5 million.    During fiscal 2002, a provision for loan losses of $7.1 million was recorded compared to a provision for loan losses of $50,000 for fiscal 2001.  Charge-offs during fiscal 2002 totaled approximately $4.9 million, which compares to approximately $105,000 for fiscal 2001.  No recoveries were recorded in either year.   Of the $7.1 million provision in fiscal 2002, approximately $4.3 million relates to $9.6 million of fraudulent or otherwise unauthorized loans discussed below. Also, as of June 30, 2002, approximately $7.8 million of additional loans, exclusive of the aforementioned unauthorized and fraudulent loans, were classified as impaired because of unauthorized lending activities, credit quality concerns and loan documentation issues, primarily attributable to the actions of the former employee involved in the bank fraud.  During fiscal 2002, the Bank has recorded approximately $2.1 million of additional provisions for these loans.

At June 30, 2001, management classified a loan participation interest in the amount of $1.1 million as impaired due to the restructuring of the payments due from the borrower.  On August 22, 2001, the borrower filed for Chapter 11 bankruptcy protection.  On November 9, 2001, the bankruptcy court ordered surrender of the aircraft securing the loan to the lead lender under the stipulation that the lead lender and the Company enter into a long-term lease agreement for the continued use of this aircraft.  At the time of repossession, the Company, based on its lease interest in the estimated cash flows and net realizable residual fair value, charged $74,900 against the allowance for loan losses.  At June 30, 2001, management determined that no specific allocation was necessary for this loan.  As of June 30, 2002, the lease is current.

In May of 2002, the Bank's Audit Committee identified certain loans that were made by an individual former employee of the Bank that were unauthorized and fraudulently conveyed or otherwise made without properly following the Bank's lending policies and procedures.  The majority of these loans, totaling approximately $9.6 million, were made in the Company's fiscal year 2002.  Based on an initial review of the documentation supporting these loans, including collateral and borrower financial information, the Company recorded a provision for loan losses of $715,000 for these loans in the third quarter of 2002.

The Bank's further review and investigation of the $9.6 million of loans and other loans, aided by outside contractors and law enforcement agencies, revealed various fraudulent activities and irregularities.  Based on management's current understanding of the financial condition of the borrowers, management currently believes that these loans are primarily collateral dependent.  Accordingly, in the fourth quarter of 2002, the Company considered all these loans impaired, placed all of these loans on non-accrual and recorded an additional provision for loan losses of approximately $3.6 million for these loans, based on the deficiency of the estimated collateral value as compared to the outstanding balance of these loans and after consulting with the Office of Thrift Supervision, the Bank's primary federal regulator, and the Company's independent accountants on the amount of the provision.  In addition, in the fourth quarter of 2002, the Company charged off approximately $3.3 million of these loans.  The Office of Thrift Supervision is continuing to review the unauthorized loans matter, and it is possible that they could direct the Bank to classify additional loans.  No assurance can be made as to the amount or timing of such additional classification.

As of June 30, 2002, the outstanding balance of these loans totaled approximately $6.3 million.  Management has allocated a specific allowance allocation of approximately $1.0 million for these loans.  The Company is vigorously working with legal counsel and regulatory and federal authorities to pursue all available avenues for collection.  Through mid-September, the Company, aided by federal authorities, has repossessed approximately 51% of this collateral value, is pursuing recovery of substantial additional assets and anticipates bond claims of up to $1.5 million, stemming from the unauthorized and fraudulent loan activity by the former employee.  As previously announced by the Company in August of 2002, this former employee pleaded guilty to charges of bank fraud stemming from his involvement in making these loans.



In addition, increased levels of mortgage and non-mortgage consumer and commercial loans during the year have resulted in higher allowance allocations based on the higher outstanding balances, the historical loss experience for non-mortgage consumer and commercial loans and the impact of various economic factors on these loans.  These allocations totaled approximately $796,000 at June 30, 2002 as compared to $285,000 for such loans at June 30, 2001.

Noninterest Income

Noninterest income increased $431,000 from $443,000 in 2001 to $874,000 in 2002 resulting from increased fees and service charges of $55,000, loan sales gains of $51,000, investment sales gains of $170,000, non-taxable death benefit insurance proceeds of $99,000 and other income of $50,000 primarily from net lease payments and gain on sale of foreclosed assets.

Noninterest Expense

Noninterest expense increased $426,000 or 17.21% from $2.5 million in 2001 to $2.9 million in 2002. The increased expenditures are the result of: (a) $126,000 of compensation and benefits increases primarily attributable to higher wages and staffing increases, (b) $27,000 of occupancy expenses to improve branch facilities, (c) $16,000 of product and service advertising, (d) $23,000 of additional service bureau expenses in connection with system upgrades and expanded product lines and services (e) $261,000 of other operating expense including legal, audit and other outside services in connection with the $9.6 million irregular loans, offset by: (1) $5,000 of lower equipment and computer maintenance, and (2) $23,000 of reduced Federal Deposit insurance premiums.

Income Taxes

Income tax expense decreased $2.7 million from $404,000 expense in 2001 to $2.3 million benefit in 2002 principally as a result of the pretax loss of $5.7 million.  The effective tax rate for 2002 was 40.2% versus 40.0% in 2001.

Liquidity And Capital Resources

The Bank's primary sources of funds consist of deposits, repayment and prepayment of loans and mortgage-backed securities, maturities of securities, FHLB Advances, temporary cash investments, and funds provided by operations.  While scheduled loan and mortgage-backed securities repayments and maturities of securities are predictable sources of funds, deposit flows and loan and mortgage-backed securities prepayments are significantly influenced by the general level of interest rates, economic conditions and competition.  Sobieski Bank uses its liquidity resources to fund existing and future loan commitments, purchase securities, fund maturing certificates of deposit and other savings deposit withdrawals to invest in other interest-earning assets, maintain liquidity, and meet operating expenses.  Management believes that loan and security repayments and other sources of funds will be adequate to meet Sobieski Bank's current liquidity needs.

The Bank is required by the OTS to meet minimum capital adequacy requirements, which include tangible capital, core capital and risk-based capital requirements.  The Bank's actual capital as reported to the OTS at June 30, 2002 exceeded all three requirements.  The following chart sets forth the actual and required minimum levels of regulatory capital for the Bank under applicable OTS regulations as of June 30, 2002 (dollars in thousands):

Actual	Percent	Required	Percent	Excess

Core	$	5,762		4.22%	$	5,461		4.0%	$	301

Tangible		5,762		4.22		2,048		1.5		3,714

Risk-based		6,760		8.63		6,268		8.0		492

The OTS has proposed to increase the minimum required core capital ratio from the current 3% level to a range of 4% to 5% for all but the most highly rated financial institutions.  While the OTS has not taken final action on such proposal, it has adopted a prompt corrective action regulation that classifies any savings institution that maintains a core capital ratio of less than 4% (3% in the event the institution was assigned a composite 1 rating in its most recent report of examination) as "undercapitalized".  As of June 30, 2002, the Bank met the requirement for a "adequately capitalized" institution.  On September 30, 2002, Sobieski Bancorp, Inc. infused into Sobieski Bank $750,000, increasing the Bank's capital position by this amount.

Under OTS regulations, limitations have been imposed on all "capital distributions" by savings institutions, including cash dividends.  The regulation establishes a three-tiered system of restrictions, with the greatest flexibility afforded to thrifts which are both well-capitalized and given favorable qualitative examination ratings by the OTS.  For example, a thrift which is given one of the two highest examination ratings and has "capital" equal to its fully phased-in regulatory capital requirements (a tier 1 institution) could make capital distributions in any year of 100% of its retained net income for the calendar year-to-date period plus net income for the previous two calendar years (less any dividends previously paid) as long as the thrift would remain "well capitalized", following the proposed distribution.  Other thrifts would be subject to more stringent procedural and substantive requirements, the most restrictive being prior OTS approval of any capital distribution.  At June 30, 2002, none of the Bank's retained earnings were available for distribution to the Company, without obtaining prior regulatory approval.   Thus without such regulatory approval, cash dividends to the Company's shareholders are limited as of June 30, 2002 to funds available at Sobieski Bancorp, Inc. (parent company).











REPORT OF INDEPENDENT ACCOUNTANTS



Stockholders and Board of Directors

Sobieski Bancorp, Inc.

South Bend, Indiana

We have audited the accompanying consolidated statements of financial condition of Sobieski Bancorp, Inc. and Subsidiary as of June 30, 2002 and 2001 and the related consolidated statements of income, comprehensive income, changes in stockholders' equity and cash flows for the years then ended.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sobieski Bancorp, Inc. and Subsidiary as of June 30, 2002 and 2001 and the results of their operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.







Crowe, Chizek and Company LLP

South Bend, Indiana

October 9, 2002

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

June 30, 2002 and 2001





2002	2001

ASSETS

Cash and due from banks	$	2,217,805	$	2,507,386

Interest-bearing deposits in other financial institutions		1,915,394		1,249,409

Federal funds sold	1,900,000	-

Total cash and cash equivalents		6,033,199		3,756,795

Certificates of deposit in other financial institutions		594,000		1,388,000

Securities available for sale		19,257,163		23,536,227

Securities held to maturity (fair value of

$7,057,158 and $4,840,939, respectively)		6,961,341		4,847,290

Loans held for sale, net of valuation allowance of $-0-		46,714		197,700

Loans, net of allowance for loan losses of $2,487,793

in 2002 and $339,900 in 2001		96,399,833		88,500,704

Federal Home Loan Bank stock, at cost		1,875,500		1,775,800

Accrued interest receivable		736,685		739,182

Property and equipment, net		1,876,568		1,825,003

Other assets		4,972,971	1,850,474



Total assets	$	138,753,974	$	128,417,175



LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Deposits	$	91,573,090	$	78,995,030

Federal Home Loan Bank advances		36,000,000		34,000,000

Advances from borrowers for taxes and insurance		304,200		337,959

Accrued interest payable		228,262		1,188,454

Accrued expenses and other liabilities	1,015,692	828,285

Total liabilities		129,121,244		115,349,728



Stockholders' equity

Preferred stock, $.01 par value: 500,000 shares authorized;

none issued		-		-

Common stock, $.01 par value: 3,500,000 shares authorized;

966,000 shares issued; 671,962 shares outstanding		9,660		9,660

Additional paid-in capital		9,280,419		9,262,652

Retained earnings		4,591,232		8,213,706

Accumulated other comprehensive income (loss) 		65,985		(3,366)

Treasury stock, at cost, 294,038 shares		(4,032,439)		(4,026,100)

Unearned Recognition and Retention Plan (RRP)

shares; 3,322 and 6,573 shares, respectively		(46,126)		(91,266)

Unallocated Employee Stock Ownership Plan (ESOP)

shares; 23,600 and 29,784 shares, respectively	(236,001)	(297,839)

Total stockholders' equity	9,632,730	13,067,447



Total liabilities and stockholders' equity	$	138,753,974	$	128,417,175

CONSOLIDATED STATEMENTS OF INCOME

Years ended June 30, 2002 and 2001



2002	2001

Interest income

Loans		$	7,291,731	$	7,186,065

Securities - taxable		1,343,722		1,043,572

Securities  - tax exempt		43,743		44,008

Interest-bearing deposits	109,629	217,905

Total interest income		8,788,825		8,491,550

Interest expense:

Interest on deposits		3,521,128		3,788,822

Interest on borrowings	1,880,420	1,609,039

Total interest expense	5,401,548	5,397,861

Net interest income		3,387,277		3,093,689

Provision for loan losses	7,071,252	50,000



Net interest income (loss) after provision for loan losses		(3,683,975)		3,043,689

Noninterest income

Fees and service charges		309,586		254,631

Gain on sales and calls of securities		173,028		3,125

Gain on sale of loans		242,510		191,348

Gain (loss) on sale of foreclosed assets		18,219		(6,727)

Proceeds from life insurance		99,202		-

Lease income, net		31,313		-

Other income	305	982

Total noninterest income		874,163		443,359

Noninterest expense

Compensation and benefits		1,488,044		1,362,308

Occupancy and equipment		336,200		313,847

Federal deposit insurance premiums		14,947		37,656

Advertising and promotion		71,863		55,842

Service bureau expense		195,648		172,026

Other operating expenses	795,724	534,477

Total noninterest expense	2,902,426	2,476,156



Income (loss) before income taxes		(5,712,238)		1,010,892

Income taxes expense (benefit)	(2,298,467)	404,088

Net income	(loss)	$	(3,413,771)	$	606,804

Basic and diluted earnings (loss) per common share	$	(5.33)	$	.94

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended June 30, 2002 and 2001





2002	2001

Net income (loss)	$	(3,413,771)	$	606,804

Other comprehensive income:

Unrealized gains on securities

available for sale arising during the year			285,778		150,890

Reclassification adjustments for gains

included in net income (loss)			(173,028)		(3,125)

Tax effects		(43,399)	(50,387)

Total other comprehensive income		69,351	97,378



Comprehensive income (loss)	$	(3,344,420)	$	704,182

Balance, July 1, 2000	$	9,660	$	9,252,680	$	7,812,384	$	(100,744)	$	(3,621,842)	$	(173,438)	$	(363,093)	$	12,815,607

Net income		-		-		606,804		-		-		-		-		606,804

Cash dividends declared

($.32 per share)		-		-		(205,482)		-		-		-		-		(205,482)

6,525 common shares committed to be

released under the ESOP		-		15,061		-		-		-		-		65,254		80,315

5,918 shares issued to vested RRP

participants		-		(5,089)		-		-		-		82,172		-		77,083

Purchase of treasury stock, 33,200

shares		-		-		-		-		(404,258)		-		-		(404,258)

Net unrealized appreciation of

available for sale securities	-	-	-	97,378	-	-	-	97,378

Balance, June 30, 2001		9,660		9,262,652		8,213,706		(3,366)		(4,026,100)		(91,266)		(297,839)		13,067,447

Net loss		-		-		(3,413,771)		-		-		-		-		(3,413,771)

Cash dividends declared

($.325 per share)		-		-		(208,703)		-		-		-		-		(208,703)

6,184 common shares committed to be

released under the ESOP		-		23,481		-		-		-		-		61,838		85,319

3,251 shares issued to vested RRP

participants		-		(582)		-		-		-		45,140		-		44,558

Proceeds from issuance of 4,830  shares of

treasury stock due to stock option

exercises		-		(5,132)		-		-		66,135		-		-		61,003

Purchase of treasury stock, 4,830

shares		-		-		-		-		(72,474)		-		-		(72,474)

Net unrealized appreciation of

available for sale securities	-	-	-	69,351	-	-	-	69,351

Balance, June 30, 2002	$	9,660	$	9,280,419	$	4,591,232	$	65,985	$	(4,032,439)	$	(46,126)	$	(236,001)	$	9,632,730

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended June 30, 2002 and 2001



2002	2001

Cash flows from operating activities

Net income	(loss)	$	(3,413,771)	$	606,804

Adjustments to reconcile net income (loss) to net

cash from operating activities

Depreciation		119,028		111,772

Provision for loan losses		7,071,252		50,000

(Gain) loss on sales of foreclosed assets, net		(18,219)		6,727

Gain on sales and calls of securities		(173,028)		(3,125)

Gain on sales of loans 		(242,510)		(191,348)

Deferred income taxes		(998,477)		(29,491)

Release of Employee Stock Ownership Plan shares		85,319		80,315

Vesting of Recognition and Retention Plan shares		26,042		55,058

Write down of other assets		97,354		-

Amortization of premiums and accretion of

discounts, net		126,101		85,784

Proceeds from sales of loans held for sale		15,157,419		3,979,963

Loans originated for sale		(14,763,923)		(4,037,921)

Net change in

Accrued interest receivable		2,497		(149,984)

Other assets		(2,274,798)		(378,382)

Accrued interest payable		(960,192)		800,100

Accrued expenses and other liabilities	205,923	386,635

Net cash from operating activities		46,017		1,372,907

Cash flows from investing activities

Net change in certificates of deposit		794,000		(1,388,000)

Proceeds from calls and  maturities of securities		400,000		3,003,125

Proceeds from sales of securities		8,951,159		-

Purchase of securities		(14,021,835)		(23,297,919)

Principal reductions of securities		6,995,366		2,354,013

Net change in loans 		(16,092,329)		(3,703,791)

Proceeds from sale of foreclosed assets		1,150,192		48,219

Proceeds from sales of loans		-		7,416,366

Purchase of property and equipment, net		(170,593)		(67,973)

Purchase of Federal Home Loan Bank stock	(99,700)	(276,000)

Net cash from investing activities		(12,093,740)		(15,911,960)

Cash flows from financing activities

Net change in deposits		12,578,060		5,066,863

Net change in advances from borrowers for

taxes and insurance		(33,759)		665

Net change in federal funds purchased		-		(1,400,000)

Advances from Federal Home Loan Bank		13,000,000		19,000,000

Repayment of Federal Home Loan Bank advances		(11,000,000)		(6,500,000)

Proceeds from exercise of stock options		61,003		-

Purchase of treasury stock		(72,474)		(404,258)

Cash dividends paid	(208,703)	(205,482)

Net cash from financing activities	14,324,127	15,557,788

Net change in cash and cash equivalents		2,276,404		1,018,735

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended June 30, 2002 and 2001



Cash and cash equivalents at beginning of year	3,756,795		2378,060

Cash and cash equivalents at end of year	$	6,033,199		$	3,756,795





Supplemental disclosures of cash flow information

Cash paid for:

Interest		$	6,361,740	$	4,597,761

Income taxes		509,000		424,000

Transfer of:

Loans to real estate owned	$	99,735	$	84,100

Loans to other assets		1,022,213		984,892





NOTE 1 -  ORGANIZATION AND ACCOUNTING POLICIES

The following is a summary of the significant accounting policies followed in the preparation of the consolidated financial statements of Sobieski Bancorp, Inc. ("Sobieski") and its subsidiary (collectively referred to as the "Company"), Sobieski Bank (the "Bank").

Nature of Operations and Industry Segments:  Sobieski is a savings and loan holding company  and its business is concentrated in the banking industry segment.  The business of commercial and retail banking accounts for more than 90% of its revenues, operating income and assets.  While the Company's chief decision makers monitor the revenue stream of various company products and services, operations are managed and financial performance is evaluated on a company-wide basis.  Accordingly, all of the Company's banking operations are considered by management to be aggregated into one operating segment.  The Company offers individuals and businesses a full range of banking services primarily in St. Joseph County, Indiana and in the areas immediately surrounding known as Michiana.  The Company grants commercial, real estate and consumer loans to customers.  The majority of loans are secured by business assets, commercial and residential real estate and consumer assets.  There are no foreign loans.

Organization:  The Bank is a federally chartered stock savings and loan association and as a member of the Federal Home Loan Bank System ("FHLB") is required to maintain an investment in the capital stock of the FHLB equal to at least 5% of outstanding advances.  As of June 30, 2002 and 2001, the Bank was in compliance with this requirement.

Principles of Consolidation

Use of Estimates in the Preparation of Financial Statements:  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.  Certain estimates that are more susceptible to change in the near term include the allowance for loan losses and the fair value of securities and other financial instruments.

NOTE 1 -  ORGANIZATION AND ACCOUNTING POLICIES (Continued)

Securities:  Management determines the appropriate classification of securities at the time of purchase.  If management has the intent and the Company has the ability at the time of purchase to hold securities until maturity, they are classified as held to maturity and carried at amortized historical cost.  Securities to be held for indefinite periods of time and not intended to be held to maturity are classified as available for sale and carried at fair value, with unrealized gains and losses reported in other comprehensive income (loss), net of tax.  Securities classified as available for sale include securities that management intends to use as part of its asset/liability management strategy and that may be sold in response to changes in interest rates, resultant prepayment risk and other factors.

Premiums and discounts on securities are recognized in interest income using the level yield method over the estimated life of the security.  Gains and losses on the sale of available for sale securities are determined using the specific identification method.  Securities are written down to fair value when a decline in fair value is not temporary.

Loans:  Loans that management has the positive intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, deferred loan fees and costs, and an allowance for loan losses.  Interest income is reported on the interest method and includes amortization of net deferred loan fees and costs over the loan term.  A majority of the Company's loan activity is with customers located in St. Joseph County in Northern Indiana with a concentration in single-family residential lending.  Single-family residential loans comprise approximately 70% of the net loan portfolio as of June 30, 2002.

Most loans are collateralized by real estate.  The loans are expected to be repaid from cash flow or proceeds from the sale of selected assets of the borrowers.  The Company's policy for requiring collateral is dependent upon management's credit evaluation of the borrower.

Interest income is not reported when full loan repayment is in doubt, typically when payments are past due over 90 days, unless the loan is both well secured and in the process of collection.  Payments received on such loans are reported as principal reductions.

Loans Held for Sale:  The company originates loans for sale in the secondary market.  Loans held for sale are carried at the lower of cost or market in the aggregate with adjustments for unrealized losses recorded in a valuation account by a charge against current earnings.  Sales in the secondary market are recognized when full acceptance and funding has been received.  Gains and losses on the sale of loans are determined by the sum of the sales price, net deferred fees and costs and related servicing asset offset by the carrying basis of the loans sold.

Servicing rights on originated loans sold with servicing retained are recorded as assets.  Servicing assets are expensed in proportion to and over the period of estimated servicing revenue.  Servicing asset impairment is evaluated on the basis of pricing of similar assets or discounted cash flows using market rates.  At June 30, 2002 and 2001, servicing assets totaled approximately $237,000 and $151,000.

NOTE 1 -  ORGANIZATION AND ACCOUNTING POLICIES (Continued)

Allowance for Loan Losses:  The allowance for loan losses is a valuation allowance for probable incurred credit losses and is established through periodic provisions for loan losses charged to current earnings based on management's evaluation of the risks inherent in the Bank's loan portfolio and changes in the nature and volume of its loan activity, including those loans which are specifically monitored by management.  Estimating the risk of loss and the amount of loss on any loan is necessarily subjective and includes review when management determines that full collectability of a loan may not be reasonably assured.  In establishing an allowance, reviews of an individual loan include among other risk factors, the classification of the loan, the estimated fair value of the underlying collateral and the discounted present value of expected future cash flows.

Management performs periodic evaluations of the adequacy of the allowance.  Management determines the need to individually evaluate loans based on known information about the credit, including the financial condition of the borrower and the delinquency status of the loan. Management evaluates such loans using a process that considers specific factors affecting the individual borrower including the financial condition of the borrower and current regional and national economic conditions affecting the borrower, ability of the borrower to repay the loan and the underlying estimated fair value of collateral.  All loans that are not individually evaluated are grouped.  A percentage allocation requirement is applied based on historical loss factors and current regional and national economic factors.  A higher percentage allocation requirement is applied to groups of consumer and commercial loans than to mortgage loans.  Historical loss factors exclude the losses incurred during 2002 on the fraudulent loans that are discussed later.  Management at times allocates specific allowance amounts for individual loans; however, the entire allowance is available for any loan charge-off.  Charge-offs on specific loans are charged against the allowance for loan losses when uncollectability of the loan is confirmed.

Loan impairment is reported when full payment under the original loan terms is not expected.  Impairment is evaluated in total for smaller-balance loans of similar nature such as residential mortgage and consumer loans and on an individual loan basis for other loans.  If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan's existing rate or at the fair value of collateral if repayment is expected solely from the collateral.  Loans are evaluated for impairment when payments are delayed, typically 90 days or more, or when it is probable that all principal and interest amounts will not be collected according to the original terms of the loan.

Property and Equipment:  Land is carried at cost.  Property andequipment are carried at cost less accumulated depreciation and amortization.  Depreciation and amortization are determined using the straight-line method based on the estimated useful lives of the applicable assets which range from 3 to 39 years.  These assets are reviewed for impairment when events indicate that their carrying value may not be recoverable from future undiscounted cash flows.  Repairs and minor alterations are charged to expense.  Major improvements are capitalized.

NOTE 1 - ORGANIZATION AND ACCOUNTING POLICIES (Continued)

Foreclosed Assets:  Real estate and other foreclosed properties acquired through, or in lieu of, loan foreclosure are initially recorded at the lower of carrying amount or fair value less cost to sell at the date of foreclosure, establishing a new cost basis.  Any reduction to fair value less the cost to sell from the carrying value of the related loan at the time of acquisition is accounted for as a loan loss and charged against the allowance for loan losses.  Subsequent valuations are performed by management and valuation allowances are adjusted through a charge to income for changes in fair value or estimated selling costs to reflect the lower of the current basis or the current fair value less cost to sell.

Income Taxes:  Sobieski and its subsidiary file consolidated federal and state income tax returns.  Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities.  Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates.  A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

Earnings (loss) Per Share:  Basic earnings (loss) per common share is based on net income (loss) divided by the weighted average number of common shares outstanding during the period.  ESOP shares are considered outstanding for basic earnings (loss) per common share calculations as they are committed to be released; unearned shares are not considered outstanding.  RRP shares are considered outstanding for basic earnings (loss) per common share as they become vested.  Diluted earnings (loss) per common share includes the dilutive effect of additional potential common shares issuable under stock option plans and nonvested shares issued under the RRP.  Earnings (loss) and dividends per common shares are restated for all stock splits and dividends.

Comprehensive Income (Loss):  Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss).  Other comprehensive income (loss) includes the net changes in net unrealized gains and losses on securities available for sale, net of tax, which is also recognized as a separate component of stockholders' equity.

Stock Compensation:  Expense for employee compensation under stock option plans is based on Accounting Principles Board ("APB") Opinion 25, with expense reported only if options are granted below market price at grant date.  Disclosures of net income (loss) and earnings (loss) per share are provided as if the fair value method of Statement of Financial Accounting Standards (SFAS) No. 123 were used for stock-based compensation.









NOTE 1 - ORGANIZATION AND ACCOUNTING PRINCIPLES (Continued)

Employee Stock Ownership Plan:  The Company accounts for its employee stock ownership plan (ESOP) in accordance with AICPA Statement of Position (SOP) 93-6.  Under SOP 93-6, the cost of shares issued to the ESOP, but not yet allocated to participants, is presented in the consolidated statements of financial condition as a reduction of stockholders' equity.  Compensation expense is recorded based on the market price of the shares as they are committed to be released for allocation to participant accounts.  The difference between the market price and the cost of shares committed to be released is recorded as an adjustment to additional paid-in capital.  Dividends on allocated ESOP shares reduce retained earnings; dividends on unearned ESOP shares maybe used to reduce debt and accrued interest accumulating in an interest earning account.

Cash and Cash Equivalents:  For purposes of reporting cash flows, cash and cash equivalents is defined to include the Company's cash on hand and in other banks, federal funds sold, and interest-earning deposits in other financial institutions with original maturities of 90 days or less.  The Company reports net cash flows for customer loan and deposit transactions, federal funds and advances from borrowers for taxes and insurance.

Fair Values of Financial Instruments:  Fair values of financial instruments are estimated using relevant market information and other assumptions.  Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments and other factors, especially in the absence of broad markets for particular items.  Changes in assumptions or in market conditions could significantly affect such estimates.

Financial Instruments with Off-Balance Sheet Risk:  The Company, in the normal course of business, makes commitments to extend credit which are not reflected in the consolidated financial statements.

Loss Contingencies:  Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.  Management does not believe there are now such matters that will have a material effect on the consolidated financial statements at June 30, 2002 and 2001.

Derivatives:  All derivative instruments are recorded at their fair values.  If derivative instruments are designated as hedges of fair values, both the change in the fair value of the hedge and the hedged item are included in current earnings.  Fair value adjustments related to cash flow hedges are recorded in other comprehensive income and reclassified to earnings when the hedged transactions are reflected in earnings.  Ineffective portions of hedges are reflected in income currently.

NOTE 2 - EARNINGS  (LOSS) PER SHARE

A reconciliation of the numerators and denominators used in the computation of the basic earnings (loss)  per common share and diluted earnings (loss) per common share is presented below:

Year ended June 30,

Basic earnings (loss) per common share	2002	2001

Numerator

Net income (loss)	$	(3,413,771)	$	606,804

Denominator

Weighted average common shares outstanding		671,962		686,932

Less:  Average unallocated ESOP shares		(26,692)		(33,047)

Less:  Average non-vested RRP shares	(4,350)	(8,462)

Weighted average common shares outstanding

for basic earnings (loss) per common share	640,920	645,423

Basic earnings (loss) per common share	$	(5.33)	$	.94

Diluted earnings (loss) per common share

Numerator

Net income (loss)	$	(3,413,771)	$	606,804

Denominator

Weighted average common shares outstanding

for basic earnings (loss) per common share		640,920		645,423

Add:  Dilutive effects of assumed exercises

of stock options		-		1,723

Add:  Dilutive effects of average non-vested RRP

shares	-	161

Weighted average common shares and

dilutive potential common shares outstanding	640,920	647,307

Diluted earnings (loss) per common share	$	(5.33)	$	.94

At June 30, 2002 and 2001, stock options not considered in computing diluted earnings per share because they were antidilutive totaled 76,500 and 68,130 and non-vested RRP shares not considered in computing diluted earnings per share because they were antidilutive totaled 3,322 and 3,973.

NOTE 3 - SECURITIES

The amortized cost and estimated fair value of securities at June 30, 2002 are as follows:

Available For Sale

Gross	Gross

Unrealized	Unrealized

Amortized	Holding	Holding 	Estimated

Cost	Gains	Losses	Fair Value

U.S. Government and agency securities	$	501,434	$	491	$	-	$	501,925

Mortgage-backed securities		2,832,103		58,709		(6,199)		2,884,613

Collateralized mortgage obligations		13,765,309		90,083		(21,095)		13,834,297

Corporate obligations		2,001,966		21,464		(11,985)		2,011,445

Marketable equity securities	24,883	-	-	24,883

$	19,125,695	$	170,747	$	(39,279)	$	19,257,163

Held To Maturity

Gross	Gross

Unrealized	Unrealized

Amortized	Holding	Holding 	Estimated

Cost	Gains	Losses	Fair Value

U.S. Government and agency securities	$	1,495,844	$	24,706	$	(8,003)	$	1,512,547

Municipal securities		998,228		45,706		-		1,043,934

Mortgage-backed securities		3,539,834		41,758		(8,486)		3,573,106

Collateralized mortgage obligations	927,435	136	-	927,571

$	6,961,341	$	112,306	$	(16,489)	$	7,057,158

NOTE 3 - SECURITIES (Continued)

The amortized cost and estimated fair value of securities at June 30, 2002, by contractual maturity, are shown in the following table.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Available For Sale	Held To Maturity

Amortized	Estimated	Amortized	 Estimated

Cost	Fair Value	Cost	Fair Value

Due within one year	$	999,996	$	988,010	$	-	$	-

Due after one year through five years		1,001,971		1,023,435		1,112,893		1,160,289

Due after five years through ten years		501,433		501,925		252,564		261,165

Due after ten years		-		-		1,128,615		1,135,027

Mortgage-backed securities and

collateralized mortgage obligations		16,597,412		16,718,910		4,467,269		4,500,677

Marketable equity securities	24,883	24,883	-	-

$	19,125,695	$	19,257,163	$	6,961,341	$	7,057,158

The amortized cost and estimated fair value of securities at June 30, 2001 are as follows:

Available For Sale

Gross	Gross

Unrealized	Unrealized

Amortized	Holding	Holding 	Estimated

Cost	Gains	Losses	Fair Value

U.S. Government and agency securities	$	1,000,000	$	6,560	$	-	$	1,006,560

Mortgage-backed securities		9,108,337		58,902		(38,349)		9,128,890

Collateralized mortgage obligations		11,609,407		58,608		(66,216)		11,601,799

Corporate obligations		1,771,727		10,633		(8,265)		1,774,095

Marketable equity securities	24,883	-	-	24,883

$	23,514,354	$	134,703	$	(112,830)	$	23,536,227

NOTE 3 - SECURITIES (Continued)

Held To Maturity

Gross	Gross

Unrealized	Unrealized

Amortized	Holding	Holding 	Estimated

Cost	Gains	Losses	Fair Value

U.S. Government and agency securities	$	2,300,706	$	8,125	$	(31,526)	$	2,277,305

Municipal securities		1,001,050		31,048		-		1,032,098

Mortgage-backed securities	1,545,534	5,689	(19,687)	1,531,536

$	4,847,290	$	44,862	$	(51,213)	$	4,840,939

Sales and calls of securities were as follows:

2002	2001

Proceeds for sales of securities available for sale	$	8,951,159	$	-

Proceeds from calls of securities		-		3,003,125

Gross gains		173,028		3,125

Gross losses		-		-

There were no sales of securities held to maturity during 2002 and 2001.

The mortgage-backed securities and collateralized mortgage obligations held by Sobieski consist primarily of FNMA, GNMA, SBA and FHLMC pass-through certificates which are issued by each of the respective agency programs, as sponsored by the United States Government.

NOTE 4 - LOANS, NET

Loans consist of the following:

June 30,

2002	2001

Mortgage loans:

Secured by one-to-four family properties	$	68,341,907	$	62,282,662

Commercial and other properties	11,624,045	7,840,026

79,965,952		70,122,688

Commercial loans:

Commercial loans		5,975,781		8,753,541

Commercial loans - participations	2,624,241	3,300,396

8,600,022		12,053,937

Consumer loans:

Home equity		4,365,126		3,932,981

Other	5,956,526	2,730,998

10,321,652	6,663,979

98,887,626		88,840,604

Less:  allowance for loan losses	(2,487,793)	(339,900)

$	96,399,833	$	88,500,704

Certain directors and executive officers of the Company and the Bank, including their associates and companies in which they are principal owners, were loan customers.  The following is a summary of loans exceeding $60,000 in the aggregate to these individuals and their associates.

2002	2001

Balance at July 1	$	1,019,309	$	818,927

New loans		488,574		590,151

Repayments		(250,273)		(432,795)

Other changes, net	(22,815)	43,026

Balance at June 30	$	1,234,795	$	1,019,309

During 2001, the Company sold certain loans with a principal balance of $7,364,760 out of portfolio on the secondary market as part of an overall asset/liability management strategy.  Proceeds from the sale of such loans were $7,416,366.  There were no such sales of loans out of portfolio in 2002.

NOTE 4 - LOANS, NET (Continued)

The following is a summary of activity in the allowance for loan losses:

Years Ended June 30,

2002	2001

Balance, beginning of year	$	339,900	$	395,000

Provision charged to expense		7,071,252		50,000

Gross charge-offs	(4,923,359)	(105,100)

Balance, end of year	$	2,487,793	$	339,900

Nonaccrual loans totaled approximately $7,157,000 and $123,000 at June 30, 2002 and 2001.

Information regarding impaired loans follows:

2002	2001

Year end loans with no allowance for

loan losses allocated	$	-	$	1,097,113

Year end loans with allowance for

loan losses allocated	13,516,421	123,125

Total impaired loans	$	13,516,421	$	1,220,238

Amount of allowance allocated to these loans	$	1,691,581	$	12,312

Average balance of impaired loans during the year		2,180,600		560,687

Cash basis interest income recognized during impairment		-		-

Interest income recognized during impairment		-		-

At June 30, 2001, management classified a loan participation interest in the amount of $1,097,113 as impaired due to the restructuring of the payments due from the borrower.  On August 22, 2001, the borrower filed for Chapter 11 bankruptcy protection.  On November 9, 2001, the bankruptcy court ordered surrender of the aircraft securing the loan to the lead lender under the stipulation that the lead lender and the Company enter into a long-term lease agreement for the continued use of this aircraft.  At the time of repossession, the Company, based on its lease interest in the estimated cash flows and net realizable residual fair value, charged $74,900 against the allowance for loan losses.  As of June 30, 2002, the lease is current.



NOTE 4 - LOANS, NET (Continued)

In May of 2002, the Bank's Audit Committee identified certain loans that were made by an individual former employee of the Bank that were unauthorized and fraudulently conveyed or otherwise made without properly following the Bank's lending policies and procedures.  The majority of these loans, totaling approximately $9.6 million, were made in the Company's fiscal year 2002.  Based on an initial review of the documentation supporting these loans, including collateral and borrower financial information, the Company recorded a provision for loan losses of $715,000 for these loans in the third quarter of 2002.

The Bank's further review and investigation of these and other loans, aided by outside contractors and law enforcement agencies, revealed various fraudulent activities and irregularities.  Based on management's current understanding of the financial condition of the borrowers, management currently believes that these loans are primarily collateral dependent.  Accordingly, in the fourth quarter of 2002, the Company considered all these loans impaired, placed all of these loans on non-accrual and recorded an additional provision for loan losses of approximately $3.6 million for these loans, based on the deficiency of the estimated collateral value as compared to the outstanding balance of these loans.  In addition, in the fourth quarter of 2002, the Company charged off approximately $3.3 million of these loans.

As of June 30, 2002, the outstanding balance of these loans totaled approximately $6.3 million.  Management has allocated a specific allowance allocation of approximately $1.0 million for these loans.  The Company is vigorously working with legal counsel and regulatory and federal authorities to pursue all available avenues for collection.  Through mid-September, the Company, aided by federal authorities, has repossessed approximately 51% of this collateral value, is pursuing recovery of substantial additional assets and anticipates bond claims of up to $1.5 million, stemming from the unauthorized and fraudulent loan activity by the former employee.  As previously announced by the Company in August of 2002, this former employee pleaded guilty to charges of bank fraud stemming from his involvement in making these loans.

Also, as of June 30, 2002, approximately $7.8 million of additional loans, exclusive of the aforementioned unauthorized and fraudulent loans, were classified as impaired because of unauthorized lending activities, credit quality concerns and loan documentation issues, primarily attributable to the actions of the former employee involved in the bank fraud.  The bank has recorded approximately $2.1 million of additional provisions for these loans.

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment and related accumulated depreciation and amortization consisted of the following:

June 30,

2002	2001

Land	$	121,787	$	121,787

Office buildings		1,710,133		1,710,133

Leasehold improvements		70,731		71,481

Furniture and equipment	855,371	766,407

2,758,022		2,669,808

Less: Accumulated depreciation and amortization	(881,454)	(844,805)

Property and equipment, net	$	1,876,568	$	1,825,003



NOTE 6 - DEPOSITS

Deposits consisted of the following:

June 30,

2002	2001

Percent		Percent

Amount	of Total	Amount	of Total

NOW and money market accounts 	$	9,805,818		10.7%	$	6,237,914		7.9%

Passbook accounts		13,511,129		14.8		12,573,460		15.9

Certificates of deposit and

IRA accounts	68,256,143	74.5	60,183,656	76.2

Total	$	91,573,090	100.0%	$	78,995,030	100.0%



The aggregate amount of certificates of deposit and IRA accounts with a minimum denomination of $100,000 was approximately $24,957,000 and $20,269,000 at June 30, 2002 and 2001, respectively.

NOTE 6 - DEPOSITS (Continued)

At June 30, 2002, scheduled maturities of certificates of deposit and IRA accounts for the years ending June 30, are as follows:

2003	$	40,983,172

2004		9,874,640

2005		15,188,764

2006		2,142,300

2007	67,267

Totals	$	68,256,143



NOTE 7 - FEDERAL HOME LOAN BANK ADVANCES

At June 30, 2002, outstanding Federal Home Loan Bank advances consisted of fixed rate advances totaling $16,000,000 with interest rates ranging from 3.4% to 7.3% and variable rate advances totaling $20,000,000 with interest rates ranging from 4.9% to 6.7%.  Maturity dates range from 2004 to 2010.  At June 30, 2001, outstanding Federal Home Loan Bank advances consisted of fixed and variable rate advances aggregating $34,000,000 with interest rates ranging from 4.0% to 7.3% and maturity dates ranging from 2001 to 2010.

The advances are required to be repaid in the years ending June 30, as follows:

2003	$	-

2004		2,000,000

2005		3,000,000

2006		3,000,000

2007		4,000,000

Thereafter	24,000,000

$	36,000,000

The advances are collateralized by all qualifying mortgage loans totaling approximately $55,664,000 at June 30, 2002.

NOTE 8 - INCOME TAXES

Income taxes consist of the following:

Years Ended June 30,

2002	2001

Current:

Federal	$	(1,299,990)	$	357,543

State	-	76,036

(1,299,990)		433,579

Deferred	(998,477)	(29,491)

Total expense (benefit)	$	(2,298,467)	$	404,088

The provision for income taxes differs from the expected amounts (computed by applying the federal statutory corporate income tax rate of 34% to income before income taxes) as follows:

Years Ended June 30,

2002	2001

Computed statutory tax provision	$	(1,942,161)	$	343,703

State income taxes, net of federal

income tax benefit		(319,024)		61,300

Non-deductible portion of ESOP contributions		7,984		5,100

Tax-exempt interest		(12,041)		(12,000)

Tax-exempt insurance benefit		(33,488)		-

Other, net	263	5,985

$	(2,298,467)	$	404,088

Effective tax rate	40.2%	40.0%

NOTE 8 - INCOME TAXES (Continued)

The components of the net deferred tax asset at June 30, 2002 and 2001 were as follows:

June 30,

2002		2001

Deferred tax asset (liabilities):

Other asset write downs	$	37,764	$	-

Deferred loan costs		(5,942)		(10,719)

State tax NOL carryforward, net of federal effect		170,483		-

Allowance for loan losses		911,072		134,634

Tax bad debt deductions		-		(16,867)

Depreciation and amortization		11,934		7,178

Net unrealized (appreciation)/depreciation

of available for sale securities		(52,074)		(8,675)

Originated mortgage servicing rights		(94,916)		(56,702)

Deferred income		1,964		2,105

Accrued benefits		79,069		56,989

Other, net	10,334	6,667

Net deferred tax asset	$	1,069,688	$	114,610

Federal income tax laws provided savings associations with additional bad debt deductions through 1987, totaling $875,000 for the Bank.  Accounting standards do not require a deferred tax liability to be recorded on this amount, which liability otherwise would total $298,500 at June 30, 2002 and 2001.  If the Bank were liquidated or otherwise ceased to be a savings association or if tax laws were to change, the $298,500 would be recorded as expense.

NOTE 9 - BENEFIT PLANS

Defined Contribution Plan



The Company has a defined contribution retirement plan under Section 401(k) of the Internal Revenue Code. Substantially all employees of the Company are eligible to participate in the plan. Under the plan, the Company matches a percentage of participating employee contributions and may also provide an additional annual discretionary contribution.  Plan expense for the years ended June 30, 2002 and 2001 was $8,113 and $8,415.



Employee Stock Ownership Plan:



The Company has an ESOP for the benefit of employees who meet certain eligibility requirements including having completed 1,000 hours of credited service within a twelve-month period.  The ESOP trust acquired 77,280 shares of Sobieski's common stock with proceeds from a loan from Sobieski.  The Bank makes cash contributions to the ESOP on a semi-annual basis in amounts sufficient to enable the ESOP trustee to make its required debt service payments to Sobieski.

The promissory note payable to Sobieski by the ESOP bears interest at 7.78% with interest and principal payments due in twenty-four (24) consecutive semi-annual installments on the last day of June and December continuing until December 31, 2006. The note is collateralized by the unallocated shares of the Company's common stock held by the ESOP.

As the ESOP promissory note is repaid, shares of the Company's common stock are released from collateral and allocated to qualified ESOP participants based on the proportion of debt service paid during the period to total debt service.  Sobieski accounts for the ESOP in accordance with AICPA Statement of Position 93-6.  Accordingly, the unallocated shares pledged as collateral are reported as a reduction of stockholders' equity in the consolidated statements of financial condition.  As shares are committed for release from collateral, the Company records expense equal to the average market value of the released shares, and the released shares become outstanding for earnings per common share computations.  ESOP expense was $85,319 and $80,315 for the years ended June 30, 2002 and 2001.  During 2001, participants withdrew 3,206 allocated shares from the plan.  No shares were withdrawn from the plan during 2002.

NOTE 9 - BENEFIT PLANS (Continued)

Following is a summary of shares held by the ESOP trust as of June 30, 2002 and 2001:

2002	2001

Allocated shares		50,474		44,290

Unallocated shares	23,600	29,784

Total ESOP shares	74,074	74,074

Fair value of unallocated shares at year end	$	318,364	$	394,638



Supplemental Retirement Plans:



Effective July 1, 1998, the Company established supplemental retirement plans for its directors and certain of its officers.  These plans generally provide for the payment of supplemental retirement benefits over a period of ten (10) years, beginning with the later of (a) the officer's or director's attainment of a specified retirement age; or (b) upon termination of the officer's employment or the director's termination as a member of the Board of Directors subject to certain vesting conditions with payments to be made at the specified retirement age.  The Company has established a liability in the amount of the present value of vested officer and director benefits under these plans.  The Company also maintains life insurance contracts on the officers and directors.  Net compensation expense associated with these supplemental retirement plans aggregated $38,784 and $37,726 for the years ended June 30, 2002 and 2001.

Recognition and Retention Plan (RRP):

Under the RRP, an aggregate of 38,640 shares of Sobieski's common stock have been reserved for awarding to directors, officers and employees. Awards of common stock granted under the RRP vest in five equal annual installments beginning on the first anniversary of the date of award and are subject to forfeiture in the event the recipient terminates employment with the Company for any reason other than death or disability. RRP shares become free of all restrictions and are distributed to recipients on the date on which they vest.  As of June 30, 2002 and 2001, an aggregate of 29,602 shares of Sobieski's common stock, with a market value of $364,332 at the respective dates of grant, have been awarded under the RRP.  Expense recognized for the years ended June 30, 2002 and 2001 related to the awardof RRP shares was $26,042 and $55,058.



NOTE 9 - BENEFIT PLANS (Continued)

Stock Option Plan:

Pursuant to the Stock Option Plan, an aggregate of 96,600 shares of Sobieski's common stock have been reserved for the granting of stock options and Stock Appreciation Rights (SARs) to the Company's directors, officers and employees. Incentive and non-qualified stock options may be granted under the Stock Option Plan at exercise prices of not less than the fair market value of Sobieski's common stock at the date of grant, become exercisable at the rate of 20% per year commencing on the first anniversary of the date of grant and have terms not exceeding ten years.  At June 30, 2002 and 2001, no SARs had been granted.

The following is a summary of the activity with respect to the Stock Option Plan for the two years ended June 30, 2002.

Weighted-Average

Number of	Exercise Price

Shares	Per Share

Outstanding, July 1, 2000		80,130	$	13.30

Granted	7,500		10.63

Outstanding, June 30, 2001		87,630		13.07

Forfeited		(6,300)		11.15

Exercised	(4,830)		12.63

Outstanding, June 30, 2002	76,500		13.39





NOTE 9 - BENEFIT PLANS (Continued)

Options outstanding and exercisable at June 30, 2002 were as follows:

Outstanding	Exercisable

Weighted

Average		Weighted	Weighted

Remaining		Average	Average

Contractual		Exercise	Fair Value

Exercise Price	Number	Life	Number	Price	of Grants

$	10.625		4,500		8.01		900	$	10.625	$	2.80

11.625		8,700		7.33		3,480		11.625	2.07

12.500		19,320		4.18		19,320		12.500	3.81

12.625		27,650		3.32		27,650		12.625	3.58

13.125		4,830		6.56		2,898		13.125	3.70

18.125		7,500		5.33		6,000		18.125	5.43

21.250	4,000		5.73	3,200		21.250	6.18

76,500		4.80	63,448	$	13.482

The fair value of each option grant is estimated on the date of grant using the Black-Scholes Option-PricingModel.  The following assumptions were used in the calculation of the fair value for options granted in the last two years.

Risk free interest rate:	6.25%	Expected stock price volatility rate: 	 21.30%

Expected option life:	7 years	Expected dividends:  2.84%

Pro forma net income (loss) and earnings (loss) per share, reported as if compensation expense had been recognized under the fair value provisions of SFAS No. 123, were as follows for the years ended June 30:

2002	2001

Net income (loss) as reported	$	(3,413,771)	$	606,804

Pro forma net income (loss)		 (3,449,849)		562,847

Basic and diluted earnings (loss)

per share as reported		(5.33)		.94

Pro forma basic and diluted earnings (loss)

per share		(5.38)		.87

NOTE 10 -  REGULATORY MATTERS

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies.  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 Company's financial statements.  Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices.  The Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

As of June 30, 2002, the Bank was categorized as adequately capitalized under the regulatory framework for prompt corrective action.  To be categorized as adequately capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios.

The following are details of the Bank's regulatory capital position and the related capital requirements.  The Company's consolidated amounts and ratios are not considered significant for this presentation.

To Be Well

Capitalized Under

For Capital			Prompt Corrective

Actual	Adequacy Purposes		Action Provisions

Amount	Ratio	Amount	Ratio	Amount	Ratio

(Dollars in Thousands)

As of June 30, 2002

Risk-Based Capital

(to Risk-Weighted Assets)	$	6,760		8.63%	$	6,268		8.0%	$	7,835		10.0%

Tier I Capital

(to Risk-Weighted Assets)		5,762		7.35		3,134		4.0		4,701		6.0

Tier I Capital

(to Adjusted Assets)		5,762		4.22		5,461		4.0		6,858		5.0

Tier I Capital

(to Tangible Assets) 		5,762		4.22		4,096		3.0		N/A		N/A

As of June 30, 2001

Risk-Based Capital

(to Risk-Weighted Assets)	$	10,500		15.52%	$	5,412		8.0%	$	6,765		10.0%

Tier I Capital

(to Risk-Weighted Assets)		10,160		15.02		2,708		4.0		4,059		6.0

Tier I Capital

(to Adjusted Assets)		10,160		8.04		5,053		4.0		6,317		5.0

Tier I Capital

(to Tangible Assets) 		10,160		8.04		3,790		3.0		N/A		N/A

NOTE 10 - REGULATORY MATTERS (Continued)

The Qualified Thrift Lender (QTL) test requires that approximately 65% of assets be maintained in housing-related finance and other specified areas.  If the QTL test is not met, limits are placed on growth, branching, new investments, FHLB advances and dividends, or the Bank must convert to a commercial bank charter.  Management believes that the QTL test has been met.

Under OTS regulations, limitations have been imposed on all "capital distributions" by savings institutions, including cash dividends.  The regulation establishes a three-tiered system of restrictions, with the greatest flexibility afforded to thrifts which are both well-capitalized and given favorable qualitative examination ratings by the OTS.  For example, a thrift which is given one of the two highest examination ratings and has "capital" equal to its fully phased-in regulatory capital requirements (a tier 1 institution) could make capital distributions in any year of 100% of its retained net income for the calendar year-to-date period plus net income for the previous two calendar years (less any dividends previously paid) as long as the thrift would remain "well capitalized", following the proposed distribution.  Other thrifts would be subject to more stringent procedural and substantive requirements, the most restrictive being prior OTS approval of any capital distribution.  At June 30, 2002, none of the Bank's retained earnings were available for distribution to the Company, without obtaining prior regulatory approval.  Thus, without such regulatory approval, cash dividends to the Company's shareholders are limited as of June 30, 2002 to funds available at Sobieski Bancorp, Inc. (parent company).

The Bank established a liquidation account of approximately $5,800,000, which is equal to its total net worth as of the date of the latest audited balance sheet appearing in the final conversion prospectus for the Company's stock offering related to converting from a mutual to a stock ownership structure.  The liquidation account is maintained for the benefit of eligible depositors who continue to maintain their accounts at the Bank after the conversion.  The liquidation account is reduced annually to the extent that eligible depositors have reduced their qualifying deposits.  Subsequent increases will not restore an eligible account holder's interest in the liquidation account.  In the event of a complete liquidation, each eligible depositor will be entitled to receive a distribution from the liquidation account in an amount proportionate to the current adjusted qualifying balances for accounts then held.  The Bank may not pay dividends that reduce stockholders' equity below the required liquidation account balance.

NOTE 11 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK



There are various contingent liabilities that are not reflected in the consolidated financial statements, including claims and legal actions arising in the ordinary course of business.  In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material effect on the Company's consolidated financial position or results of operations.

The Company is a party to loan commitments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers.  The loan commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated statements of financial condition.

The Company's exposure to credit loss in the event of nonperformance by the parties to the loan commitments is represented by the contractual dollar amounts of those commitments ($9.8 million and $10.8 million at June 30, 2002 and 2001, respectively).  The Company uses the same credit policies in making loan commitments as it does for on-balance-sheet instruments.

Loan commitments are agreements to lend to a customer as long as there is no violation of any condition established in the contract.  Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.  The Company evaluates each customer's creditworthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management's credit evaluation of the borrower.  Collateral held consists primarily of the real estate being financed.

On April 1, 2002, the Company made a 14.691% investment in a limited partnership formed to construct, own and manage an affordable housing project.  The Company is one of five investors.  As of June 30, 2002, the Bank had invested $250,000 and had not recorded any adjustments to the original investment.  The Company receives its pro-rata share of the tax credits of the partnership.  In addition, the Company has a commitment to make a $250,000 second mortgage loan to the partnership as the funds are needed to construct the project.  As of June 30, 2002, no funds had been advanced on this loan.



NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the Company's financial instruments as of June 30, 2002 and 2001 are as follows:

2 0 0 2	2 0 0 1

Carrying	Estimated	Carrying	Estimated

Amount	Fair Value	Amount	Fair Value

Assets:

Cash and cash equivalents	$	6,033,199	$	6,033,199	$	3,756,795	$	3,756,795

Certificates of deposit in

other financial institutions		594,000		594,000		1,388,000		1,388,000

Securities available for sale		19,257,163		19,257,163		23,536,227		23,536,227

Securities held to maturity		6,961,341		7,057,158		4,847,290		4,840,939

Loans held for sale		46,714		49,403		197,700		197,700

Loans, net		96,399,833		98,440,107		88,500,704		88,523,000

Federal Home Loan

Bank stock		1,875,500		1,875,500		1,775,800		1,775,800

Accrued interest receivable		736,685		736,685		739,182		739,182

Liabilities:

Deposits		(91,573,090)		(92,758,000)		(78,995,030)		(80,385,000)

Federal Home Loan

Bank advances		(36,000,000)		(36,333,000)		(34,000,000)		(34,887,000)

Advances from borrowers

for taxes and insurance		(304,200)		(304,200)		(337,959)		(337,959)

Accrued interest payable		(228,262)		(228,262)		(1,188,454)		(1,188,454)

The following methods and assumptions were used to estimate the fair value of the Company's financial instruments.

Cash and Cash Equivalents, Certificates of Deposit in Other Financial Institutions, FederalHome Loan Bank Stock, Advances from Borrowers for Taxes and Insurance and Accrued Interest:  The carrying amounts of cash and cash equivalents, certificates of deposit in other financial institutions, Federal Home Loan Bank stock, advances from borrowers for taxes and insurance and accrued interest are reasonable estimates of their respective fair values.

Securities Available for Sale and Securities Held to Maturity:  Estimated fair values of securities available for sale and securities held to maturity are based on quoted market prices, where available.  If quoted market prices are not available, fair values are estimated using quoted market prices for similar instruments.

NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

Loans Held For Sale:  The estimated fair value of loans held for sale is based on market quotes.

Loans, Net:  Fair values are estimated for portfolios with similar financial characteristics. Loans are segregated by type, such as residential mortgages, nonresidential mortgages, commercial and consumer loans.  Each loan category is further segmented into fixed and variable interest categories, with residential mortgage loans (the Company's largest category) further segregated by similar note rates and maturities.  Future cash flows of these loans are discounted using the current rates at which similar loans would be made to borrowers with similar credit ratings for the same remaining maturities.

Deposits:  The estimated fair value of passbook, money market accounts and negotiable orders of withdrawal are based on their carrying amount.  Certificates of deposit and IRA accounts are segregated by original and remaining term and estimated future cash flows are discounted using rates currently offered for certificate and IRA accounts of similar remaining maturity.

Federal Home Loan Bank Advances

Other Financial Instruments and Loan Commitments:  The estimated fair value of other financial instruments and off-balance sheet loan commitments approximate cost and are not considered significant for this presentation.

While these estimates of fair value are based on management's judgment of the most appropriate factors, there is no assurance that were the Company to have disposed of such items at June 30, 2002 and 2001, the estimated fair values would necessarily have been achieved at those dates, since market values may differ depending on various circumstances.  The estimated fair values at June 30, 2002 and 2001 should not necessarily be considered to apply at subsequent dates.



NOTE 13 - PARENT COMPANY FINANCIAL INFORMATION

Sobieski Bancorp, Inc.'s statements of financial condition at June 30, 2002 and 2001, and its related statements of income and cash flows for the years ended June 30, 2002 and 2001 are as follows:

STATEMENTS OF FINANCIAL CONDITION

June 30, 2002 and 2001

2002	2001

ASSETS

Cash and cash equivalents	$	1,384,359	$	504,558

Securities available for sale		9,883		475,848

Loans		1,156,209		1,902,909

Note receivable from subsidiary		289,800		354,200

Investment in subsidiary		6,422,452		10,140,826

Land held for sale		53,896		53,896

Other assets	356,156	76,888

Total assets	$	9,672,755	$	13,509,125



LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Note payable to subsidiary	$	-	$	391,783

Accrued expenses and other liabilities	40,025	49,895

40,025		441,678

Stockholders' equity	9,632,730	13,067,447

Total liabilities and stockholders' equity	$	9,672,755	$	13,509,125



NOTE 13 - PARENT COMPANY FINANCIAL INFORMATION (Continued)

STATEMENTS OF INCOME

Years ended June 30, 2002 and 2001

2002	2001

Income

Interest income on loans	$	119,910	$	174,563

Interest income on investments		29,098		36,762

Gain on sale of securities		24,541		-

Dividends received from subsidiary		498,000		695,000

Interest on note receivable from subsidiary	26,304	31,314

Total income		697,853		937,639

Expenses

Compensation and benefits		104,393		100,257

Occupancy and equipment		6,000		6,000

Professional fees		15,783		17,105

Interest on note payable to subsidiary		11,071		69,215

Other operating expenses	47,305	52,250

Total expenses	184,552	244,827



Income before income taxes and equity in

undistributed (excess distributed) earnings (loss) of subsidiary		513,301		692,812

Income taxes	7,519	2,697



Income before equity in undistributed (excess distributed)

earnings (loss) of subsidiary		505,782		690,115

Equity in undistributed (excess distributed)

earnings (loss) of subsidiary	(3,919,553)	(83,311)



Net income (loss)	$	(3,413,771)	$	606,804

Comprehensive income (loss)	$	(3,344,420)	$	704,182

NOTE 13 - PARENT COMPANY FINANCIAL INFORMATION (Continued)

STATEMENTS OF CASH FLOWS

Years ended June 30, 2002 and 2001

2002	2001

Cash flows from operating activities

Net income (loss)	$	(3,413,771)	$	606,804

Adjustments to reconcile net income (loss) to net

cash from operating activities

Equity in undistributed (excess distributed) net

income (loss) of subsidiary		3,919,553		83,311

Gain on sale of securities		(24,541)		-

Net change in other assets		(275,020)		(38,271)

Net change in accrued expenses

and other liabilities	(9,870)	19,282

Net cash from operating activities		196,351		671,126

Cash flows from investing activities

Purchase of securities		-		(469,649)

Proceeds from sale of securities		484,307		-

Payments received on note receivable from subsidiary		64,400		64,400

Net change in loans	746,700	347,058

Net cash from investing activities		1,295,407		(58,191)

Cash flows from financing activities

Payments on note payable to subsidiary		(391,783)		(282,518)

Proceeds from exercise of stock options		61,003		-

Purchase of treasury stock		(72,474)		(404,258)

Cash dividends	(208,703)	(205,482)

Net cash from financing activities	(611,957)	(892,258)

Net change in cash and cash equivalents		879,801		(279,323)

Cash and cash equivalents at beginning of year	504,558	783,881

Cash and cash equivalents at end of year	$	1,384,359	$	504,558





ANNUAL MEETING

The Annual Meeting of Stockholders will be held at 2:00 p.m., South Bend, Indiana, time on November 12, 2002 at the office of Sobieski Bancorp Inc., 2930 W. Cleveland Road, South Bend, Indiana, 46628

STOCK LISTING

Sobieski Bancorp, Inc. common stock is traded on the NASDAQ System under the symbol "SOBI".

MARKET AND DIVIDEND INFORMATION

The following table sets forth the per share price range of the Company's common stock and dividends paid for each quarter of fiscal 2002 and 2001.  The prices reflect interdealer quotations without retail markup, markdown or commissions, and do not necessarily reflect actual transactions.

2 0 0 2	2 0 0 1

High	Low	Dividends	High	Low	Dividends

First Quarter	$	15.00	$	12.51	$	0.080	$	12.50	$	10.75	$	0.08

Second Quarter		13.89		12.75		0.080		12.63		11.50		0.08

Third Quarter		15.10		13.45		0.080		13.00		12.38		0.08

Fourth Quarter		16.80		13.10		0.085		14.31		12.51		0.08

The Company's ability to pay cash dividends to stockholders is substantially dependent on the dividend payments it receives from the Bank.  For a discussion of the regulatory restrictions on the ability of the Bank to pay dividends to the Company, see Management's Discussion and Analysis of Financial Condition and Results of Operation - Liquidity and Capital Resources and Note 10 to the Notes to Consolidated Financial Statements included in this Annual Report.

At September 10, 2002, there were 671,962 shares of Sobieski Bancorp, Inc. common stock issued and outstanding and there were approximately 305 holders of record.

STOCKHOLDER AND GENERAL INQUIRIES	TRANSFER AGENT

Thomas F. Gruber	Registrar and Transfer Co.

President and Chief Executive Officer	10 Commerce Drive

Sobieski Bancorp, Inc.	Cranford, NJ 07016

2930 W. Cleveland Road

South Bend, Indiana 46628

(574) 271-8300

ANNUAL AND OTHER REPORTS

A copy of Sobieski Bancorp, Inc.'s Annual Report on Form 10-KSB for the year ended June 30, 2002, as filed with the Securities and Exchange Commission, may be obtained without charge by contacting Thomas F. Gruber, President and Chief Executive Officer, Sobieski Bancorp, Inc., 2930 W. Cleveland Road, South Bend, Indiana (574) 271-8300.





COMPANY AND BANK ADDRESS

2930 W. Cleveland Road

South Bend, Indiana  46628

Telephone:  (574) 271-8300

Fax:  (574) 271-3269



|BOARD OF DIRECTORS                                                                                 |                                                                                                                             
|-------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------
|Thomas F. Gruber
President and Chief Executive Officer
of Sobieski Bancorp, Inc. and Sobieski Bank | Robert J. Urbanski
President of TransTech Electric Co. and Chairman of the Board of Sobieski Bancorp, Inc. and Sobieski Bank
|                                                                                                   |                                                                                                                             
|Joseph F. Nagy
Auditor, St. Joseph County                                                          | Leonard J. Dobosiewicz
Maintenance Professional                                                                             
|                                                                                                   |                                                                                                                             
|Joseph A. Gorny
Business Owner                                                                     | Richard J. Cullar
Certified Public Accountant                                                                               
|                                                                                                   |                                                                                                                             
|EXECUTIVE OFFICERS                                                                                 |                                                                                                                             
|Thomas F. Gruber
President and Chief Executive Officer                                             | Jeanie Martz
Secretary and Treasurer                                                                                        
|                                                                                                   |                                                                                                                             
|Arthur Skale
Chief Financial Officer                                                               | Gregory J. Matthews
Vice President of Operations                                                                            
|                                                                                                   |                                                                                                                             
|INDEPENDENT AUDITORS                                                                               | GENERAL COUNSEL                                                                                                             
|Crowe, Chizek and Company LLP
330 East Jefferson Blvd.
South Bend, Indiana 46624                   | Kenneth Fedder, Esq.
53600 N. Ironwood
South Bend, Indiana 46635                                                            

Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

|Parent                 | Subsidiary    | State ofIncorporation | Percentageof Ownership
|---------------------- | ------------- | --------------------- | ----------------------
|Sobieski Bancorp, Inc. | Sobieski Bank | United States         | 100%                  

Exhibit 23

Consent of Independent Auditors

We hereby consent to the incorporation by reference in the Registration Statements of Sobieski Bancorp, Inc. on Forms S-8 (Registration No. 333-40983 and Registration No. 333-40985) of our report dated October 9, 2002 on the consolidated financial statements of Sobieski Bancorp, Inc., and subsidiary, which report is included in the 2002 Annual Report on Form 10-KSB of Sobieski Bancorp, Inc.
                                                                                         /s/Crowe, Chizek and Company LLP
South Bend, Indiana

October 9, 2002