|(MARK ONE)                                    
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|[X]                                           
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|[  ]                                          
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|Commission File Number 0-25518                
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|**SOBIESKI BANCORP, INC.**                    
|(Name of Small Business Issuer in its Charter)

|**Delaware**                                                       | **35-1942803**                      
|------------------------------------------------------------------ | ------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization)     | (IRS Employer Identification
Number)
|                                                                  
|**2930 West Cleveland Road, South Bend, Indiana**                  | **46628**                           
|(Address of Principal Executive Offices)                           | (Zip Code)                          
|                                                                  
|Issuer's telephone number, including area
code: **(574) 271-8300** |                                     
|                                                                  
|Securities Registered Under Section 12(b) of the Exchange Act:    
|                                                                  
|None                                                              
|                                                                  
|Securities Registered Under Section 12(g) of the Exchange Act:    
|                                                                  
|Common Stock, par value $.01 per share                            
|(Title of Class)                                                  

Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the past 12 months (or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES X.  NO __.

Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this
form, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [  ]

State Issuer's revenues for its most recent fiscal year $9,130,000.

As of September 19, 2003, there were issued and outstanding 677,032 shares of the Issuer's Common Stock.
The aggregate market value of the voting stock held by non-affiliates of the Issuer, computed by reference to the
closing price of such stock as of September 19, 2003 was approximately $6.7 million.  (The
exclusion from such amount of the market value of the shares owned by any person shall not be deemed an
admission by the Issuer that such person is an affiliate of the Issuer.)

**DOCUMENTS INCORPORATED BY REFERENCE**

Part II of Form 10-KSB - Portions of Annual Report to Stockholders for the fiscal year ended June 30, 2003.

Part III of Form 10-KSB - Portions of the Proxy Statement for the 2003 Annual Meeting of Shareholders.

**PART I**

**Item 1.      Description of Business**

**General**

**Sobieski 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 scope of the activities conducted by the Company beyond those currently conducted 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 transaction.  See "Regulation - Holding Company Regulation".

At June 30, 2003, the Company had consolidated assets of approximately $121.4 million, deposits of
approximately $74.6 million and stockholders' equity of approximately $9.1 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
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 or for sale to the secondary
market.  In addition, the Bank originates construction loans, consumer loans, and real estate-backed and other
secured small business commercial loans and other commercial loans.  See "Originations and Purchases of Loans
and Mortgage-Backed Securities". However, as noted below, the Bank currently operates under a supervisory
agreement with the Office of Thrift Supervision (the "OTS"), its primary federal regulator, under which the Bank
may not, among other things, grant any new commercial loans without the prior written non-objection of the OTS.
During both fiscal 2003 and 2002, the Bank held participation interests in commercial loans funded primarily by
advances from the Federal Home Loan Bank ("FHLB") of Indianapolis.

**Supervisory Agreement and Other Regulatory Matters**

On October 21, 2002, the Company announced that a moratorium on granting new commercial loans had been
instituted on the Bank as a result of a directive from the OTS.  Under this moratorium, which has been continued by
the supervisory agreement with the OTS discussed below, the Bank may not grant new commercial loans until
further notice from the OTS; however, it may fund commercial loan commitments and renew commercial loans in
existence at the time of the issuance of the OTS directive.  Commercial loans covered by the moratorium include
secured and unsecured loans for commercial, business or agricultural purposes and include all loans secured by
multi-family and commercial real estate.

On February 5, 2003, the OTS notified the Bank that the OTS deemed the Bank to be in "troubled condition",
primarily as a result of concerns associated with the unauthorized and fraudulent loans made by a former employee.
See "Asset Quality-Unauthorized and Fraudulent Loans."  As a result, until further notice from the OTS, the Bank
will be restricted significantly in its asset growth, will be subject to paying an increased deposit insurance premium
and be subject to other regulatory restrictions.

On May 12, 2003, the Bank entered into a supervisory agreement  with the OTS requiring the Bank to take a
number of actions and imposing a number of restrictions on the Bank's business activities, including, among other
things, the continuation of the moratorium described above on making new commercial loans, without the prior
written non-objection of the OTS, and a prohibition on increasing the Bank's asset size in excess of specified limits.
For additional information regarding the supervisory agreement, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Supervisory Agreement and Other Regulatory Matters" in the
Annual Report to Stockholders filed as Exhibit 13 to this Annual Report on Form 10-KSB.

**Forward-Looking Statements**

When 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 OTS that additional provisions for loan losses be made, including
possible additional provisions for loan losses necessitated by the unauthorized and fraudulent loans made by a
former employee of the Bank as discussed under "Asset Quality - Unauthorized and Fraudulent Loans"; (3) the
restrictions imposed on the Bank's business activities by the Supervisory Agreement with the OTS, including the
restrictions on the Bank's commercial lending activities and asset growth, as discussed under "Management's
Discussion and Analysis of Financial Condition and Results of Operations - Supervisory Agreement and Other
Regulatory Matters" and "Note 10 - Regulatory Matters" in the notes to the audited consolidated financial
statements in the Annual Report to Stockholders filed as Exhibit 13 to this Annual Report on Form 10-KSB; (4)
competitive pressures among depository institutions; (5) interest rate movements and their impact on customer
behavior and the Company's net interest margin; (6) the impact of repricing and competitors' pricing initiatives on
loan and deposit products; (7) the Company's ability to adapt successfully to technological changes to meet
customers' needs and developments in the marketplace; (8) the Company's ability to access cost-effective funding;
(9) changes in financial markets and general economic conditions; (10) new legislation or regulatory changes; and
(11) 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 Activities**

***General.*****The Bank originates primarily fixed and adjustable-rate, one-to-four family mortgage loans for
retention in its portfolio or for sale. To a lesser extent, it also originates commercial real estate and non-real estate commercial loans, construction and
consumer loans. Because of the supervisory agreement with the OTS and the moratorium on new commercial loans,
however, the Bank's origination efforts have consequently been focused on loan types other than those covered by
the moratorium.  As a result of the moratorium, the Company has experienced a decline in the amount of
commercial loans in its portfolio, which are the Company's highest yielding assets.  For as long as the moratorium is in place, the Company expects
that this trend will continue.  The Company will continue to focus its business strategy on originating single family
mortgage loans and increasing the originations of higher yielding consumer loans to offset the decline in
commercial loan originations.

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, 2003, the Bank's net loan
portfolio totaled $70.8 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/CFO and senior Lending Officer 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, 2003, the maximum amount which the Bank could loan to any
one borrower and the borrower's related entities was $1,274,000.

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.

The size of the Company's net loan portfolio decreased significantly during the last fiscal year, from $98.8
million at June 30, 2002 to $72.7 million at June 30, 2003.  This decrease is primarily attributable to a
significant increase in refinancing activity in one-to four family mortgage loans where the Bank originated and then sold the new loan to the secondary market or where the borrower obtained new
financing from another lender.  Also contributing to the decrease was the restriction on originating new commercial loans under the terms of the supervisory agreement with the OTS.

***Loan Portfolio Composition.*****The following information presents the composition of the Company's loan portfolio in dollar amounts and in percentages
before deductions for the allowances for loan losses as of the dates indicated.

|                          | At June 30,           
|------------------------- | ----------------------
|                          | 2003                  
|                          | Amount                
|                          | (Dollars in Thousands)
|                          |                       
|One-to-four family (1)    | $ 44,092              
|Commercial loans          | 22,437                
|Home equity               | 3,765                 
|Other consumer loans      | 2,432                 
|                          |                       
|Total loans               | $ 72,726              
|                          |                       
|Allowance for loan losses | (1,895)               
|                          |                       
|Total loans, net          | $ 70,831              

(1)  Includes residential construction loans and second mortgage loans.

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,                   
|------------------------- | ------------------------------
|                          | 2003                          
|                          | Amount                        
|                          | (Dollars in Thousands)        
|Fixed-Rate Loans:         |                               
|                          | One-to-four-family            
|                          | Consumer loans                
|                          | Commercial loans              
|                          |                               
|                          |                               
|                          |                               
|Adjustable-Rate Loans:    |                               
|                          | One-to-four-family            
|                          | Commercial loans              
|                          | Home equity and other consumer
|                          |                               
|                          |                               
|                          |                               
|                          |                               
|                          |                               
|Allowance for loan losses | (1,895)                       
|                          |                               
|                          |                               



|Real Estate                                
|-------------------------------------------
|                                           
|                                           
|                                           
|Due during the twelvemonths ending June 30,
|2004 (1)                                   
|2005                                       
|2006                                       
|2007 and 2008                              
|2009 to 2013                               
|2014 to 2033                               
|                                           
|Total                                      
|                                           
|Weighted average interest rate             

(1)  Includes demand loans, loans having no stated maturity and over-draft loans.

The following table shows the amount of non-mortgage commercial loans outstanding as of June 30, 2003,
based on remaining scheduled repayments of principal due in the periods indicated, classified according to
sensitivity to changes in interest rates.

|Maturing                             | Fixed
Rate             | VariableRate | Total  
|------------------------------------ | ---------------------- | ------------ | -------
|                                     | (Dollars in Thousands)
|                                     |                        |              |        
|Within  one year                     | $   192                | $ 1,417      | $ 1,609
|After one year but within five years | 2,278                  | 550          | 2,829  
|After five years                     | -0-                    | -0-          | -0-    
|                                     | $ 2,470                | $ 1,967      | $ 4,438

The total amount of loans due after June 30, 2004 that have predetermined interest rates is $38.0 million and
the total amount of loans due after that date that have adjustable interest rates is $20.7 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, 2003, the Company's one-to-four
family residential mortgage loan portfolio totaled $44.1 million, or 60.6% of the Company's gross loan portfolio.

This represents a significant decrease in the size of the Company's one- to four-family mortgage loan portfolio
from June 30, 2002, when such loans totaled $61.2 million, or 61.9% of the Company's gross loan portfolio.  This
decrease is attributable to a significant increase in refinancing activity where the Bank originated and then sold the new loan to the secondary market or where the borrower obtained new financing
from another lender.

The Bank currently offers fixed-rate and adjustable rate mortgage and home equity loans.  For the year ended
June 30, 2003, the Bank originated $32.8 million of one-to-four family real estate related loans.  At June 30, 2003,
the Bank had $5.2 million of one-to-four family adjustable-rate mortgage loans, and $38.9 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.  The Bank's ability to generate ARM loans is dependent upon the
interest rate environment and customer preferences.

The loans currently originated by the Bank are typically underwritten and documented pursuant to the guidelines of Freddie Mac.  As part of its interest rate risk management, the Bank has employed a strategy of originating some fixed rate
one to four family loans for sale.  During fiscal 2003 and 2002, the Bank originated for sale $23.9 million and $14.8
million of fixed rate one to four family loans, respectfully, and sold $23.2 million and $15.2 million of fixed rate
one to four family loans, respectfully.  All of such sales were made to Freddie Mac. The Company intends to continue to pursue the sale of one to four family
mortgage loans into the secondary market as a part of its asset/liability management strategy.



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 Bank also originates second mortgage and home equity lines of credit.  At June 30, 2003, the Bank's
second mortgage loans and home equity loans totaled $214,000 and $3.8 million, respectively, compared to
$301,000 and $4.4 million, respectively, at June 30, 2002.  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 originates loans for the construction of one-to-four family
residences.  For fiscal year ended June 30, 2003, the Bank's residential construction loan originations totaled $2.1
million and at June 30, 2003, residential construction loans in the Bank's loan portfolio totaled $2.8 million.  As of
June 30, 2003, 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, 2003, consumer loans excluding home equity loans
referred to above totaled approximately $2.4 million, while home equity loans totaled $3.8 million for a combined
total of $6.2 million or 8.5% of total loans. The Company plans to seek to increase the origination of consumer
loans and home equity loans as part of its strategy of offsetting the effect of the OTS-imposed restrictions on
originating commercial 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  Lending.*****Commercial loans at June 30, 2003 totaled $22.4 million or
30.9% 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.) Commercial real estate lending typically involves higher
loan principal amounts than residential mortgage loans and the repayment of the loans generally is dependent, in
large part, on the successful operation of the property securing the loan or the business conducted on the property
securing the loan.  These loans may therefore be more adversely affected by conditions in the real estate markets or
in the economy generally.  For example, if the cash flow from the borrower's project is reduced due to leases not
being obtained or renewed, the borrower's ability to repay the loan may be impaired.  In addition, many commercial
real estate loans are not fully amortized over the loan period, but have balloon payments due at maturity.  A
borrower's ability to make a balloon payment typically will depend on being able to either refinance the loan or
completing a timely sale of the underlying property.

Fixed-rate commercial loans at June 30, 2003 totaled $11.4 million or 15.7% of the Company's gross
loan portfolio and adjustable-rate commercial loans at June 30, 2003 totaled $11.0 million or 15.1% of the Company's gross loan portfolio.  These loans are originated internally or purchased participations originated by other financial
institutions.

Adjustable-rate 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.

As noted above, under the Bank's supervisory agreement with the OTS, the Bank may not, among other things, grant any new commercial loans without the prior written non-objection of the OTS.
Commercial loans covered by the moratorium include secured and unsecured loans for commercial, business or
agricultural purposes and include all loans secured by multi-family and commercial real estate.  For additional
information regarding the supervisory agreement, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Supervisory Agreement and Other Regulatory Matters" in the Annual Report
to Stockholders filed as Exhibit 13 to this Annual Report on Form 10-KSB.

**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, 2003, the Bank originated $36.5 million in loans, as
compared to $58.6 million for the year ended June 30, 2002 and $18.1 million for the fiscal year ended June 30,
2001.  Originations during fiscal 2003 consisted of $32.8 million of one-to-four family real estate and home



equity loans, and $3.8 million in other consumer and commercial loans. 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.  Originations during fiscal 2001 consisted of $15.4 million of one-to four family real estate and home equity
loans and $2.7 million in other consumer and commercial loans.

The Company believes the increase from fiscal 2001 to fiscal 2002 was a result of a much lower interest rate
environment in fiscal 2002 compared to fiscal 2001, which triggered high levels of refinancings of existing
mortgages and new loans, as well as the Bank's efforts during fiscal 2002 to originate more commercial and
consumer loans.  The Company believes the decrease from fiscal 2002 to fiscal 2003 is attributable to further
reductions in market interest rates to levels at which the Bank believed it would be imprudent, as part of its interest
rate risk management strategy, to originate, as well as the restrictions on originating commercial loans imposed by
the OTS.

Starting in fiscal 2000, as part of its interest rate risk management strategy, the Bank began to sell loans in the
secondary market; prior to that time, the Bank generally retained all of its loan originations in the portfolio.  During
the year ended June 30, 2003, net sales of loans totaled $22.5 million while sales during fiscal 2002 and
2001 were $14.9 million and $11.3 million, respectively.



The following table shows the loan origination and purchase activities of the Bank for the periods indicated.

|              |                                                |                         | Year Ended June 30,
|------------- | ---------------------------------------------- | ----------------------- | -------------------
|              |                                                |                         | 2003               
|              |                                                |                         | (In Thousands)     
|Originations: |                                                |                         |                    
|              | One-to-four family real estate and home equity | $32,764                 | $49,545            
|              | Other consumer and commercial loans            | 3,784                   | 9,099              
|              |                                                |                         |                    
|              |                                                | Total originations      | 36,548             
|              |                                                |                         |                    
|Purchases:    |                                                |                         |                    
|              | Purchases of commercial business loans         | -0-                     | 1,260              
|              |                                                |                         |                    
|Sales:        |                                                |                         |                    
|              | One-to-four family loans                       | (22,541)                | (14,915)           
|              |                                                |                         |                    
|Repayments:   |                                                |                         |                    
|              | Loans                                          | (37,633)                | (30,124)           
|              | Other, net                                     | (587)                   | (6,966)            
|              |                                                |                         |                    
|              |                                                | Total repayments        | (38,220)           
|              |                                                |                         |                    
|              |                                                | Net (decrease) increase | $(24,213)          

**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.  Loans delinquent less than 90 days may be placed on non-accrual status if the collection of principal and/or interest becomes doubtful.

The following table sets forth the Bank's delinquencies by type, by amount and by percentage of type as of
June 30, 2003.

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

***Non-Performing Assets.*****  The table below sets forth the amounts and categories of non-performing assets.  Foreclosed assets include assets acquired in settlement of loans.  The Bank had no accruing loans more than 90 days
delinquent at June 30, 2003.

At June 30,2003
2002
2001
2000
1999(Dollars in Thousands)Non-accruing loans:One-to-four family
$   667
$   447
$   121
$   144
$   125Commercial loans
3,784
6,119
-0-
93
-0-Consumer
209
591
2
31
57Total
4,660
7,157
123
268
182Restructured loans
-0-
-0-
$1,097
-0-
-0-Accruing over 90 days past due
-0-
76
-0-
-0-
-0-Foreclosed assets:One-to-four family
2,078
49
68
28
-0-Other
788
925
958
-0-
-0-Total
2,866
974
1,026
28
-0-Total non-performing and foreclosed assets
7,526
8,207
$2,246
$296
$182Total as a percentage of total assets
6.2%
5.9%
1.75%
.27%
.18%

         For the year ended June 30, 2003, gross interest income which would have been recorded had the non-accruing loans been current in accordance with their original terms amounted to $197,000.  The amounts of interest
income included in net income on these loans was $0.

***Unauthorized and Fraudulent Loans.*****In May of 2002, the Company's Audit Committee identified certain
loans that were made by a former employee of the Bank that were unauthorized and fraudulently conveyed or
otherwise made without properly following the Bank's lending policies and procedures. Approximately $9.6 million
of these loans, representing substantially all of such loans, 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 understanding of the financial condition of the borrowers, management determined that these loans
were primarily collateral dependent.  Accordingly, in the fourth quarter of fiscal 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 during fiscal 2002, based on the deficiency of the estimated collateral
value as compared to the outstanding balance of these loans and after consulting with the OTS and the Company's independent accountants on the amount of the
provision.  In addition, in the fourth quarter of fiscal 2002, the Company charged off approximately $3.3 million of
these loans.

As of June 30, 2003 and 2002, the outstanding balance of the above discussed unauthorized and fraudulent
loans totaled approximately $2.6 and $6.3 million.  As of June 30, 2003 and 2002, management allocated a specific
allowance allocation of approximately $0 and $1.0 million for these loans.  The Company continues to  vigorously
work with legal counsel and regulatory and federal authorities to pursue all available avenues for collection
including the repossession of significant assets.  The estimated fair value less selling costs for these assets has been
considered in management's determination of the allowance for loan losses.  During the year ended June 30, 2003,
the Company received bond claims of $1.5 million, stemming from the unauthorized and fraudulent loan activity by
the former employee.  This former employee has pleaded guilty to charges of bank fraud and mail fraud stemming
from his involvement in making these loans.

Also, as of June 30, 2003 and 2002, approximately $4.5 million and $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.  As of June 30, 2003 and 2002, the Company had specific allowance
for loan losses allocations on these additional impaired loans of approximately $1.3 million and $670,000.

The increase in foreclosed assets involving one to four family loans from $49,000 at June 30, 2002 to $2.1
million at June 30, 2003 is a result of foreclosures on properties securing some of the above discussed unauthorized
and fraudulent loans.



***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, 2003, the Bank had
classified a total of $9.4 million of its loans as substandard, $4.0 as doubtful and none as loss. This compares with
$11.8 million of loans classified as substandard, none as doubtful and none as loss at June 30, 2002 and $123,000
of loans classified as substandard, none as doubtful and none as loss at June 30, 2001.  The increase in classified loans from June 30, 2001 to June 30, 2002 is primarily due to the unauthorized and fraudulent loans made by a former employee of the Bank that were discovered by the Company's Audit Committee
in May 2002. The increase in classified loans from June 30, 2002 to June 30, 2003 is a result of other loans
classified 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. At June 30, 2003,
total classified loans comprised $13.4 million or 147% of the



Company's capital and 11% of the Company's total
assets compared with total classified loans at June 30, 2002 of $11.8 million or 122.5% of the Company's capital and 8.5% of the Company's total assets at that date, and total classified loans at June 30, 2001 of
$123,000 or 0.9% of the Company's capital and 0.1% of the Company's total assets at that date.  Classified loans
are inclusive of loans defined as non-performing.

***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 and 2003 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 the loan portfolio 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 review 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, 2003, the allowance for loan losses totaled approximately $1.9 million, compared to $2.5 million
at June 30, 2002 and $340,000 at June 30, 2001.  During fiscal 2003, a provision for loan losses of $1.2 million was
recorded compared to provisions for loan losses of $7.1 million and $56,000 for fiscal 2002 and fiscal 2001
respectively.  Charge-offs during fiscal 2003 totaled $1.8 million, as compared to $4.9 million for fiscal 2002 and
$105,000 for fiscal 2001.  Recoveries totaled $8,000 for fiscal 2003; no recoveries were recorded in fiscal 2002 or
fiscal 2001.   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.



Also, as of June 30, 2003, approximately $4.5 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.  As of June 30, 2003, the Bank has specific allowance for loan losses allocations on
these additional impaired loans of approximately $1.3 million.

The amount of allowance for loan losses determined to be necessary by management as of June 30, 2003 has
also been impacted by the overall decrease in the loan portfolio.  Decreased levels of mortgage and non-mortgage
consumer and commercial loans during the year have resulted in lower allowance allocations based on the lower
outstanding balances.  For such loans that were not considered to be impaired and therefore, specific loss allocations
were not considered on an individual loan basis, allocations totaled approximately $385,000 at June 30, 2003 as
compared to $796,000 at June 30, 2002.

The provision for loan losses totaled $1.2 million for the year ended June 30, 2003 compared to $7.1 million
during the previous year.  The provision expense recorded during fiscal 2003 is primarily related to the continued
review of updated collateral and financial information for certain of the Company's loans, including loans classified
as impaired and the unauthorized and fraudulent loans discussed above.  It is possible that additional provisions for
loan losses will have to be made in future periods as a result of subsequent developments in the unauthorized and
fraudulent loans matter and with other impaired loans.  Such additional provisions could result from management's
reassessment or at the direction of the OTS.



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

|                                                                              | Year Ended June 30,   
|----------------------------------------------------------------------------- | ----------------------
|                                                                              | 2003                  
|                                                                              | (Dollars in Thousands)
|                                                                              |                       
|Balance at beginning of period                                                | $   2,488             
|                                                                              |                       
|Charge-offs:                                                                  |                       
|One-to-four family                                                            | 27                    
|Commercial Loans                                                              | 1,716                 
|Consumer loans                                                                | 41                    
|Net Charge-Offs                                                               | 1,784                 
|                                                                              |                       
|Recoveries                                                                    | 8                     
|                                                                              |                       
|Provision charged to operations                                               | 1,183                 
|                                                                              |                       
|Balance at end of period                                                      | $1,895                
|                                                                              |                       
|Ratio of net charge-offs to average
   loans outstanding during the period    | 2.08%                 
|                                                                              |                       
|Ratio of net charge-offs to average
   non-performing loans during the period | 29.9%                 

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

|                     | At June 30,
|-------------------- | -----------
|                     | 2003       
|                     |            
|                     | Allowance  
|                     |            
|One-to-four family   | $   177    
|Commercial loans     | 1,659      
|Home equity          | 10         
|Other consumer loans | 49         
|Unallocated          | N/A        
|                     |            
|Total  (1)           | $1,895     

(1) Total loans represent the amount before deducting the loan loss allowance.



**Investment Activities**

***General.***The Bank's liquidity may increase or decrease depending upon the availability of funds and
comparative yields on investments in relation to the return on loans.  Historically, the Bank has generally
maintained liquid assets at levels believed adequate to meet the requirements of normal operations, including repayments of maturing
debt and potential deposit outflows.  Cash flow projections are regularly reviewed and updated to assure
that adequate liquidity is maintained.  At June 30, 2003, the Bank's liquidity ratio (measured as liquid assets as a
percentage of net withdrawable savings deposits and current borrowings) was 110.9%, compared to 57.6%
at June 30, 2002.  This increase is largely attributable to lower levels of deposits at June 30, 2003.

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 institutions 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 Steven C. Watts and Senior Vice President Gregory J.
Matthews.  Subject to the policies established by the Board of Directors, President Watts and Senior Vice
President Matthews 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, 2003, the amortized cost of the Bank's mortgage-backed securities was $20.7
million and the market value of these mortgage-backed securities was $20.8 million.

At June 30, 2003, $2.4 million (amortized cost) or 11% 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 $18.4 million or 89% 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, 2003, substantially all of the Bank's mortgage-backed securities were backed by government
sponsored agency programs.

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 and the retention
of a servicing spread by the loan servicer.  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, 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.

Included in mortgage-backed securities are 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 has 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.*****  In addition to mortgage-backed securities, the Bank has investments
consisting of U.S. Treasury notes, agency, municipal, and corporate debt securities.  At June 30, 2003, the
amortized cost of these securities totaled $4.3 million, or 3.3% of total assets.  The Bank also 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.

As of June 30, 2003, 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            | Type of
Security | Book
Value | Market
Value
|------------------------- | ---------------- | ---------- | ------------
|                          |                  |            |             
|Falcon Franchise Loan LLC | CMO              | $995,000   | $995,000    



The following table sets forth the maturities of the Bank's investment portfolio at June 30, 2003 based
on amortized cost.

|                                          | Maturities (In Thousands)
|----------------------------------------- | -------------------------
|                                          | Within
One Year          
|                                          |                          
|U.S. Government and agency securities (1) | $   -0-                  
|Municipal securities (2)                  | -0-                      
|Mortgage-backed securities (3)            | -0-                      
|Corporate obligations                     | -0-                      
|                                          |                          
|                                          | -0-                      
|                                          |                          
|Weighted average yield (2)                | -                        

(1) SBA agency securities are based on contractual maturities assuming principal repayments.
(2) Yields are presented on a non-tax equivalent basis.
(3) Based on weighted average contractual maturities assuming principal repayments.



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

|                                                      | At June 30,            
|----------------------------------------------------- | -----------------------
|                                                      | 2003                   
|                                                      | Book
Value             
|                                                      | (Dollars in  Thousands)
|Investment securities:                                |                        
|U.S. Treasury securities                              | $       613            
|U.S. agency securities                                | 978                    
|Municipal securities                                  | 995                    
|Corporate obligations                                 | 1,777                  
|                                                      |                        
|Mortgage-backed securities:                           |                        
|GNMA                                                  | 822                    
|FNMA                                                  | 2,351                  
|FHLMC                                                 | 1,190                  
|CMO's                                                 | 16,394                 
|Subtotal mortgage-backed securities                   | 20,757                 
|Total investment securities                           | $  25,120              
|                                                      |                        
|Other securities:                                     |                        
|FHLB stock                                            | $     1,900            
|Marketable equity securities                          | 25                     
|Total other securities                                | $     1,925            
|                                                      |                        
|Other interest-earning assets:                        |                        
|Interest-bearing deposits with financial institutions | $     9,590            
|Federal funds sold                                    | -0-                    
|Certificates of Deposit                               | -0-                    
|Total other interest-earning assets                   | $     9,590            



**Sources of Funds**

***General.*****The Bank's primary sources of funds are deposits, FHLB advances, payment of principal and interest on loans, interest earned on
mortgage-backed securities, investment securities, interest earned on interest-bearing deposits with other financial institutions and other funds provided
from operations.

***Deposits.*****Sobieski Bank offers a variety of deposit accounts having a wide range of interest rates and terms.  The Bank's deposits consist of
passbook, NOW checking, money market deposit and certificate accounts.  The current certificate account product offerings range in terms from seven
days to four years.

The Bank relies primarily on advertising (including direct mail, company newsletter, promotions and newspaper), competitive pricing policies and
customer service to attract and retain these deposits.  Sobieski Bank solicits deposits primarily from its market area, and currently does not engage in
any type of premium, gift or promotional programs beyond the advertising vehicles mentioned above.  Under the terms of its supervisory agreement
with the OTS, the Bank is prohibited from accepting, renewing or rolling over brokered deposits without OTS approval.  See "Management's
Discussion and Analysis of Financial Condition and Results of Operations - Supervisory Agreement and Other Regulatory Matters" in the Annual
Report to Stockholders filed as Exhibit 13 to this Annual Report on Form 10 KSB. The flow of deposits is influenced significantly by general economic
conditions, changes in money market and prevailing interest rates and competition.

The Bank continues to be susceptible to short-term fluctuations in deposit flows as customers have become more interest rate conscious.  The Bank
endeavors to manage the pricing of its deposits in keeping with its asset/liability management and profitability objectives.  The ability of the Bank to
attract and maintain savings accounts and certificates of deposit, and the rates paid on these deposits, has been and will continue to be significantly
affected by market conditions. The Bank's total deposits decreased by approximately $17.0 million during the year ended June 30, 2003.  The decrease
in deposits is primarily attributable to the maturity of significant public deposits which were not retained by the Bank.  The reduction in these public
deposits reflects the Bank's efforts to mitigate interest rate risk by allowing the run-off of more costly deposits.  The Bank may seek public deposits as
a potential funding source again in the future.



The following table sets forth the savings flows at the Bank during the periods indicated.

|                            | 2003                   | 2002    | 2001    
|--------------------------- | ---------------------- | ------- | --------
|                            | (Dollars in Thousands)
|Opening balance             | $91,573                | $78,995 | $73,928 
|Net deposits (withdrawals)  | (17,256)               | 12,221  | 4,661   
|Interest credited (1)       | 245                    | 357     | 406     
|                            |                        |         |         
|Ending balance              | 74,562                 | 91,573  | $78,995 
|                            |                        |         |         
|Net increase (decrease)     | ($17,011)              | $12,578 | $  5,067
|                            |                        |         |         
|Percent increase (decrease) | (18.6%)                | 15.9%   | 6.85%   

(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.

|                                      | 2003                    | 2002             | 2001             
|------------------------------------- | ----------------------- | ---------------- | -----------------
|                                      | Average
Amount          | Percent
of Total | Average
Rate Paid
|                                      | (Dollars in  Thousands)
|**Transaction and Savings Deposits:**
|NOW and MMDA accounts                 | $  9,903                | 11.4%            | 1.04%            
|Savings deposits                      | 13,090                  | 15.1%            | 1.09%            
|Total non-certificates                | 22,993                  | 26.5%            | 1.07%            
|                                     
|**Certificates**                      | 63,922                  | 73.5%            | 3.93%            
|                                      |                         |                  |                  
|Total average deposits                | $86,915                 | 100.0%           | 3.17%            



The following table shows rate and maturity information for the Bank's certificates of deposit as of June
30, 2003.

|                                  | Total                  | Percent
of Total
|--------------------------------- | ---------------------- | ----------------
|                                  | (Dollars in Thousands)
|Certificate accounts maturing in: |                        |                 
|12 months or less                 | $ 18,728               | 35.7%           
|Over 12 months to 36 months       | 29,367                 | 56.1            
|Over 36 months                    | 4,306                  | 8.2             
|                                  |                        |                 
|Total                             | $ 52,401               | 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, 2003.

|                                              | Maturity               |                   
|--------------------------------------------- | ---------------------- | ------------------
|                                              | (Dollars in Thousands)
|                                              | 3 months
or less       | Over 3 to
6 months
|Certificates of deposit of $100,000
  or more | $863                   | $796              

***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 Bank'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, 2003, the Bank
had borrowings of $35.6 million consisting entirely of advances from the FHLB of Indianapolis.  Collateral
on the FHLB borrowings consisted of $26.7 million of mortgage loans, investment securities with a
carrying value of $24.0 million, and deposits at the FHLB of $4.4 million.

The following table sets forth the maximum month-end balance, average balance, year-end balance
and weighted average cost of FHLB of Indianapolis advances for the periods indicated.

|                                                  | **Year ended June 30,**
|------------------------------------------------- | -----------------------
|                                                  | (Dollars in Thousands) 
|                                                  | **2003**               
|Maximum month-end balance for the year ended      | $ 36,000               
|Average balance for the year ended                | $ 35,750               
|Balance at June 30                                | $35,550                
|                                                 
|Weighted average cost of funds for the year ended | 5.55%                  
|Weighted average cost of funds as June 30         | 5.55%                  



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

|                                       | 2003                                         | 2002     | 2001   
|-------------------------------------- | -------------------------------------------- | -------- | -------
|                                       | (Dollars in thousands except per share data)
|Average stockholders' equity           | $9,719                                       | $13,263  | $12,916
|Net Income (loss)                      | ($393)                                       | ($3,414) | $607   
|Return on average assets               | (.29%)                                       | (2.53%)  | .52    
|Average equity to average total assets | 7.16%                                        | 9.83%    | 11.02% 
|Return on average stockholders' equity | (4.04%)                                      | (25.75%) | 4.70%  
|Basic earnings (loss) per share        | ($0.61)                                      | ($5.33)  | $.94   
|Cash dividends declared per share      | $.34                                         | $.325    | $.32   
|Dividend payout percentage             | N/A                                          | N/A      | 34%    

**Service Corporation Activities**

****As a federally chartered savings association, Sobieski Bank is permitted by OTS regulations to invest up
to 2% of its assets, or approximately $2.2 million at June 30, 2003, in the stock of, or loans to, service corporation
subsidiaries.  Sobieski Bank may invest an additional 1% of its assets in service corporations where such
additional funds are used for community, inner-city or community development purposes and make additional loans to service corporations subject to prescribed limits.  In addition to investments in service corporations, federal savings associations are permitted to invest an
unlimited amount in operating subsidiaries engaged solely in activities in which a federal savings
association may engage in directly.  At June 30, 2003, Sobieski Bank had no active service corporation
activities.

**Competition**

****Sobieski Bank faces strong competition, both in originating loans and in attracting deposits.
Competition in originating loans comes primarily from commercial banks, savings institutions,
mortgage bankers and credit unions located in the Bank's market area. Commercial banks, savings
institutions and credit unions provide vigorous competition in consumer lending.  The Bank competes for
real estate and other loans principally on the basis of the quality of services it provides to borrowers, the
interest rates and loan fees it charges, and the types of loans it originates.  See "Business-Lending
Activities".

The Bank attracts all of its deposits through its retail banking offices, primarily from the communities in
which those retail banking offices are located.  Therefore, competition for those deposits is principally
from commercial banks, savings banks, brokerage firms and credit unions located in these communities.
The Bank competes for these deposits by offering a variety of account alternatives at competitive rates and
by providing convenient business hours, branch locations and inter-branch deposit and withdrawal
privileges.



**Employees**

****At June 30, 2003, the Bank had a total of 33 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 Directors**

****The business experience of each executive officer of the Bank and the Company who is not also a
director is set forth below.

**Steven C. Watts**, age 52.  Mr. Watts is currently the President and Chief Executive Officer and joined
the Bank in January 2003.  Mr. Watts previously served as Regional President for Republic Bank in
Lansing, Michigan and prior to that as President and Group Manager for Norwest Bank Indiana, located in
South Bend, Indiana.  Mr. Watts has over thirty-years experience in the commercial banking industry.

**Gregory J. Matthews**, age 43.  Mr. Matthews joined the Company in March 1998.  He is currently
serves as Senior Vice President and Chief Operations Officer/Acting Chief Financial Officer.  He is
responsible for finance and budget planning, 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**

**General**

****Sobieski 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 Associations**

****The 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.  The last regular OTS examinations of the Bank were as of December 31, 2000 and June 30, 2002.
The OTS conducted compliance examinations as of August 31, 1999 and as of February 28, 2002. In
addition, as a result of the unauthorized and fraudulent loans made by a former employee discovered by the
Company's Audit Committee in May 2002, the OTS conducted a special examination of the Bank as of
April 21, 2003. 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, 2003 was $41,000.

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
The Bank is in compliance with the noted restrictions.  Federal savings associations are generally
authorized to branch nationwide.

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, 2003, the Bank's lending limit under this restriction was $1,274,000.  Because of the unauthorized
and fraudulent loans made by a former employee, the Bank is currently not in compliance with the loans-to-one-borrower limitation.

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 FDIC**

****Sobieski 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 Requirements**

****Federally insured savings associations, such as the Bank, are subject to prompt corrective action
regulations under which an institution that is not at least adequately capitalized is subject to various
penalties.  Under these regulations, to be adequately capitalized, an institution generally must have a ratio
of Tier 1 capital to total assets of at least 4%, a ratio of Tier 1 capital to risk-weighted assets of at least 4%
and a ratio of total capital to risk-weighted assets of at least 8%.  An institution is generally considered well
capitalized if it has a ratio of Tier 1 capital to total assets of at least 5%, a ratio of Tier 1 capital to risk-weighted assets of at least 6% and a ratio of total capital to risk-weighted assets of at least 10%.  In
addition, to be well capitalized,  an institution must not be subject to a written agreement, capital directive,
or prompt corrective action directive requiring it to maintain a specific capital level.

Tier 1 (or core) capital generally consists of common stockholders equity including retained earnings,
certain noncumulative perpetual preferred stock and related surplus, and certain minority interests in
subsidiaries, reduced by certain intangible assets, servicing assets, interest only strips and investments in
certain subsidiaries.

Total capital generally consists of Tier 1 capital plus Tier 2 (or supplementary) capital.  Tier 2 capital
generally consists of certain preferred stock and subordinated debt, allowance for loan and lease losses (up
to 1.25% of risk-weighted assets) and up to 45% of certain unrealized gains on available for sale securities.
Tier 2 capital included in total capital may not exceed 100% of Tier 1 capital.

Risk-weighted assets are determined by assigning risk weights ranging from 5% to 100% to categories
of an institutions assets.  For example, prudently underwritten permanent 1-4 family first lien mortgage
loans, not more than 90 days delinquent and having a loan to value ratio of at least 80% or insurance by an
approved insurer, are risk-weighted at 50%.



At June 30, 2003, the Bank had a ratio of Tier 1 capital to total assets of 5.36%, a ratio of Tier 1 capital
to risk-weighted assets of 9.81% and a ratio of total capital to risk-weighted assets of 11.08%.

The OTS is generally required to take action to restrict the activities of an institution that is not at least
adequately capitalized.  On a case by case basis, the OTS may generally classify an institution in a lower
capital category.  Any such institution 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.

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., has ratios of Tier 1 capital to total assets or Tier 1 capital to risk-weighted assets of less than 3% or a
ratio of total capital to risk-weighted assets of less than 6%) is subject to various requirements and
operating restrictions, including, for example, requiring the issuance of additional voting securities;
limitations on asset growth; mandated asset reduction; changes in senior management; divestiture, merger
or acquisition of the institution; restrictions on executive compensation; and any other action the OTS
deems appropriate.  An institution that becomes "critically undercapitalized"(i.e., has a ratio of tangible
equity to total assets of 2% or less) is subject to further mandatory restrictions.  In addition, with certain
limited exceptions, the OTS must appoint a receiver (or conservator with the concurrence of the FDIC) for
an institution within 90 days after it becomes critically undercapitalized.

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.

In addition to the prompt corrective action regulations, the OTS capital regulations establish certain
additional minimum capital requirements generally requiring an institution to have a ratio of tangible
capital to total assets of at least 1.5%, a ratio of core capital to total assets of at least 4%, and a ratio of total
capital to risk-weighted assets of at least 8%.  Tangible capital is similar to core capital with certain
exceptions.  In general, the minimum capital requirements under these regulations are lower than the
requirements to qualify as adequately capitalized under the prompt corrective action regulations.  On a case
by case basis, the OTS may require higher capital levels.  At June 30, 2003, the Bank's capital exceeded the
requirements of the OTS capital regulations.

**Limitations on Dividends and Other Capital Distributions**

****OTS 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, 2003, 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 Test**

****All 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,
2003, 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 Act**

****Under 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 Affiliates**

****Generally, 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 generally
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 institution subsidiary which also permits the OTS to restrict or prohibit
activities that are determined to be a serious risk to the subsidiary institution.

As a grandfathered 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, would become subject to restrictions limiting it to activities permissible for multiple savings
and loan holding companies.

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, which are more limited than are the activities authorized for a 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
institution.  Such acquisitions are generally prohibited if they result in a multiple savings and loan holding
company controlling savings institutions in more than one state except where the acquisition would be
allowed under applicable state law or is a supervisory acquisition of a failing institution.

**Federal Securities Law**

****The 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 System**

****The 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, 2003, 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, like commercial banks, are eligible to borrow from the Federal Reserve Bank
"discount window."  In some instances, eligible institutions may be required to exhaust other reasonable
alternative sources of funds, including FHLB borrowings, before borrowing from the Federal Reserve
Bank.

**Federal Home Loan Bank System**

****The 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

As a member, the Bank is required to purchase and maintain stock in the FHLB of Indianapolis.  At
June 30, 2003, the Bank had $1.9 million of FHLB stock, which was in compliance with this requirement.
During fiscal 2003 and prior years, the Bank received substantial dividends on its FHLB stock.  The
dividends averaged 6% for fiscal year 2003.  For the years ended June 30, 2003 and 2002, dividend income
from FHLB stock totaled $106,000 and $120,000, 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 Taxation**

****In 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.



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,
2003.  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 Company.

***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,
2003.  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, 2003 was $1,906,000.  See Note
5 of the "Notes to Consolidated Financial Statements".

|Location                                                | Year
Leased
or Acquired | Total
Approximate
Square
Footage | Net Book Value at
June 30, 2003
|------------------------------------------------------- | ----------------------- | -------------------------------- | -------------------------------
|                                                        |                         |                                  | (In Thousands)                 
|Main Office: (Owned)                                    |                         |                                  |                                
|2930 West Cleveland Road
   South Bend, Indiana 46628   | 1995                    | 10,080                           | $1,336                         
|                                                       
|Branch Offices:                                         |                         |                                  |                                
|4606 W. Western Ave. (Leased)Belleville Shopping Center | 1978                    | 1,600                            | $     -0-                      
|                                                        |                         |                                  |                                
|740 S. Walnut Street (Owned)                            | 1952                    | 1,900                            | $    121                       

Sobieski Bank believes that its main office and Walnut facilities are adequate to meet the present and
foreseeable needs of the Bank and the Company.  The lease on the Belleville Shopping Center location
expires in February 2004.  This facility is inadequate to meet the needs of a growing customer base and a
new location is being constructed one mile west of the current facility, located at 23761Western Avenue.
This facility is scheduled to open in February 2004 with no disruption in service to the current customer
base.

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, 2003 was
$89,000.

**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 consolidated financial condition or results
of operations.

On or about July 7, 2003, Arthur Skale, the former Chief Financial Officer for the Company and the Bank,
filed charges with the U.S. Equal Employment Opportunity Commission alleging that the Bank
discriminated against him because of his age and disability in violation of the Age Discrimination in
Employment Act of 1967 and the Americans with Disabilities Act of 1990.  On or about July 20, 2003, the
Bank received notice that Mr. Skale filed charges with the U.S. Department of Labor claiming the
Company and the Bank violated the so-called "whistle blower protection" provisions of the Sarbanes-Oxley Act of 2002.  Mr. Skale claimed to have objected to the adoption of certain internal financial
statements by the Company's Board of Directors.  Mr. Skale further alleged that because of his claimed
objection, he was subjected to heightened performance scrutiny and that his employment was ultimately
terminated.



The Bank vigorously contested the charges filed by Mr. Skale and maintains that his claims were
without merit.  On September 23, 2003, the Bank reached an agreement with Mr. Skale settling his age and
disability discrimination claims in consideration for payment to him of an amount the Company does not
consider to be material.  In addition, Mr. Skale has agreed to withdraw his whistle blower protection claim.
As part of the settlement, Mr. Skale has also agreed to sign an acknowledgment to the effect that the
financial reports that were publicly filed with the Securities and Exchange Commission while he served as
Chief Financial Officer fairly represented the financial condition and results of operations of the Company
and that such financial reports did not contain any material misstatements or omit any material information.

**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, 2003.



**PART II**

**Item 5.  Market for Common Equity and Related Stockholder Matters**

The information under the heading "Market and Dividend Information on page 57 of the attached 2003
Annual Report to Stockholders filed as Exhibit 13 to this Form 10-KSB is herein incorporated by
reference.

**Item 6.  Management's Discussion and Analysis or Plan of Operation**

The information under the heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 6 to 20 of the attached 2003 Annual Report to Stockholders filed as Exhibit 13 to this Form 10-KSB is herein incorporated by reference.

**Item 7.  Financial Statements**

The following pages of the attached 2003 Annual Report to Stockholders are herein incorporated by
reference.

|Report of Independent Accountants                                                                          | Page 21   
|---------------------------------------------------------------------------------------------------------- | ----------
|Consolidated Statements of Financial Condition at   
   June 30, 2003 and 2002                             | Page 22   
|Consolidated Statements of Operations for the years
     ended June 30, 2003 and 2002                      | Page 23   
|Consolidated Statement of Comprehensive Loss for
     years ended June 30, 2003 and 2002                   | Page 24   
|Consolidated Statements of Changes in Stockholders' Equity  
   for the years ended June 30, 2003 and 2002 | Page 25   
|Consolidated Statements of Cash Flows for the years
     ended June 30, 2003 and 2002                      | Page 26-27
|Notes to Consolidated Financial Statements                                                                 | Page 28-56

**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 8A.  Controls and Procedures**

| | (a)         Evaluation of Disclosure Controls and Procedures: An evaluation of the Company's disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the
"Act")) was carried out as of June 30, 2003 under the supervision and with the participation of the
Company's Chief Executive Officer and Acting Chief Financial Officer.  The Company's Chief Executive
Officer and Acting Chief Financial Officer concluded that, as of June 30, 2003, the Company's disclosure
controls and procedures are effective in ensuring that the information the Company is required to disclose
in the reports it files or submits under the Act is (i) accumulated and communicated to the Company's
management (including the Chief Executive Officer and Acting Chief Financial Officer) in a timely
manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the
SEC's rules and forms.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b)         Changes in Internal Control Over Financial Reporting: During the quarter ended June 30, 2003, no
change occurred in the Company's internal control over financial reporting that has materially affected, or
is reasonably likely to materially affect, our internal control over financial reporting.

Following the discovery by the Company in May 2002 of the unauthorized and fraudulent loans made by a
former employee, the Company made changes to its internal controls intended to address weaknesses in the
areas of loan approvals, loan documentation and loan disbursements.  The significant changes initially
made 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 created a new 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.  The results of
that review were presented to the Company's Board of Directors and management in October 2002.  After
thorough review of the accounting firm's recommendations for strengthening internal controls and
procedures, management developed an Internal Control Plan for the Bank, which was presented to the
Board of Directors.  Based on board review and discussion, a final plan was developed with a timetable for
implementation of the key recommendations.  Pursuant to the Bank's Supervisory Agreement with the
OTS, the OTS may require that modifications be made to this plan.  The significant changes made to date
based on the recommendations include the following:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - having the data processing vendor which prepares statements for loan customers send these
statements directly to customers.  Previously, these statements were sent to the Bank, and then the Bank
forwarded the statements to customers.

- further segmentation of duties among loan department personnel.  Specifically, employees
responsible for loan disbursements are no longer involved in the loan approval and booking process, and
vice versa.

- movement of all commercial loans from their existing loan tracking systems, which were designed for
mortgage loans, to loan tracking systems designed for commercial loans.  This change is expected to enable
better monitoring of and reporting on commercial loans.

- engagement of the independent accounting firm which conducted the review of the Company's
internal control systems to perform the Company's internal audit function for calendar year 2003 under the
direct supervision of the Company's Audit Committee.  The first internal audit performed by the
independent accounting firm engaged for this purpose was presented to the Company's Audit Committee
on May 2, 2003.

- hiring an employee to perform post-closing loan review to confirm proper authorization and to ensure
proper documentation, booking and disbursement of funds.

In addition to taking the steps described above, the Company had identified an additional matter requiring
attention.  Specifically, the Company noted that certain accounts maintained by the Bank required current
reconciliation procedures.  The Company was aided by the independent accounting firm that performs the
internal audit function and all June 30, 2003 account balances have been reconciled.

In September 2003, the Company discovered that several overdrafts were permitted and funds advanced to
a Bank customer without obtaining required approvals of designated senior management personnel.  These funds were primarily advanced after the Company's June 30, 2003 fiscal year end.  The
employment of each of the two Bank employees responsible for the transactions was terminated as a result.
Based on its review of the matter to date, the Company believes the amount involved is approximately
$175,000, and the customer involved has acknowledged the overdrafts and advances.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



**Item 9.  Directors, Executive Officers, Promoters and Control Persons; Compliance**
              **with
Section 16(a) of the Exchange Act**

**Directors**

Information concerning directors of the Company is incorporated herein by reference from the
Company's definitive proxy statement for the 2003 Annual Meeting of Shareholders,  which has been 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 Who Are Not Directors" contained in Part I of this Form 10-KSB.

**Section 16(a) Beneficial Ownership Reporting Compliance**

Information concerning Section 16(a) beneficial ownership reporting compliance is incorporated herein
by reference from the Company's definitive proxy statement for the 2003 Annual Meeting of Shareholders,
which has been filed with the Securities and Exchange Commission.

**Item 10.  Executive Compensation**

Information concerning executive compensation is incorporated herein by reference from the
Company's definitive proxy statement for the 2003 Annual Meeting of Shareholders,   which has been 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 2003 Annual
Meeting of Shareholders, which has been filed with the Securities and Exchange Commission.  The
following table sets forth information as of June 30, 2003 with respect to compensation plans under which
shares of Company common stock may be issued.



**Equity Compensation Plan Information**

|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 the
First Column)
|--------------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------------------------------ | -----------------------------------------------------------------------------------------------------------------------------------------
|                                                         
|Equity compensation plans approved by
   stockholders     | 74,300                                                             | $13.44                                                 | 25,338 (1)                                                                                                                               
|Equity compensation plans not approved
   by stockholders | N/A                                                                | N/A                                                    | N/A                                                                                                                                      
|Total                                                     | 74,300                                                             | $13.44                                                 | 25,338 (1)                                                                                                                               

___________________
(1)	Includes 3,038 shares available for future awards of restricted stock under the Company's Recognition
and Retention Plan.

**Item 12.  Certain Relationship and Related Transactions**

Information concerning certain relationships and transactions is incorporated herein by reference from
the Company's definitive Proxy Statement for the 2003 Annual Meeting of Shareholders, which has been
filed with the Securities and Exchange Commission.



**Item 13.  Exhibits and Reports on Form 8-K**

(a)  Exhibits:

|Regulation S-B
Exhibit Number | Document                                                                    | Reference to
Prior Filing or
Exhibit Number
Attached Hereto
|----------------------------- | --------------------------------------------------------------------------- | -----------------------------------------------------------
|2                             | Plan of Acquisition, Reorganization, Arrangement,
Liquidation or Succession | None                                                       
|3.1                           | Certificate of Incorporation                                                | *                                                          
|3.2                           | Bylaws                                                                      | *                                                          
|9                             | Voting Trust Agreement and Amendments                                       | None                                                       
|10                            | Executive Compensation Plans and Arrangements:                              |                                                            
|                              | Employee Stock Ownership Plan                                               | *                                                          
|                              | Stock Option and Incentive Plan                                             | *                                                          
|                              | Amendment to Stock Option Plan                                              | **                                                         
|                              | Recognition and Retention Plan                                              | *                                                          
|                              | Amendment to Recognition and Retention Plan                                 | **                                                         
|                              | Sobieski Bancorp, Inc. Fee Continuation Plan for Retired Directors          | ***                                                        
|                              | Sobieski Bank Bank Fee Continuation Plan for Retired Directors              | ***                                                        
|                              | Sobieski Bank Supplemental Executive Retirement Plans                       | ***                                                        
|                              | Employment contract with Steven C. Watts                                    | **                                                         
|                              | Agreement and General Release with Thomas F. Gruber                         | **                                                         
|11                            | Statement re: computation of per share earnings                             | Not Required                                               
|13                            | Annual Report to Security Holders                                           | 13                                                         
|16                            | Letter re: change in certifying accountant                                  | None                                                       
|18                            | Letter re: change in accounting principles                                  | None                                                       
|20                            | Other documents or statements to security holders                           | None                                                       
|21                            | Subsidiaries of Registrant                                                  | 21                                                         
|22                            | Published report regarding matter submitted to vote                         | None                                                       
|23                            | Consent of Crowe Chizek and Company LLC                                     | 23                                                         
|24                            | Power of Attorney                                                           | Not Required                                               
|31.1                          | Rule 13a - 14(a) Certification of CEO                                       | 31.1                                                       
|31.2                          | Rule 13a - 14(a) Certification of CFO                                       | 31.2                                                       
|32                            | Section 1350 Certification                                                  | 32                                                         

_______________
*
Filed on December 30, 1994, as exhibits to the Company's Form S-1 registration statement (File
number 33-88078).  All of such previously filed documents are hereby incorporated by reference in
accordance with Item 601 of Regulation S-B.**
Filed as exhibits with the December 31, 2002 Form 10-QSB filing (File No 0-25518) and
incorporated herein by reference.***
Filed as exhibits with the September 30, 1999 Form 10-QSB filing (File No. 0-25518) and incorporated
herein by reference.(b)  Reports on Form 8-K:

On May 22, 2003 the Company furnished on Form 8-K a press release regarding the financial results for
the quarter ended March 31, 2003.

**Item 14.  Principal Accountant Fees and Services**

Information concerning principal accountant fees and services is incorporated herein by reference
from the Company's definitive proxy statement for the 2003 Annual Meeting of Shareholders, which has
been filed with the Securities and Exchange Commission.



**SIGNATURES**

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

|      |                    |  | **SOBIESKI BANCORP, INC.**
|----- | ------------------ |  | --------------------------
|Date: | September 29, 2003 |  | By:                       

In accordance with the Exchange Act, 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. Urbanski
Robert J. Urbanski, Chairman of the Board                                         |                    | /s/ Joseph A. GornyJoseph A. Gorny, Director              
|                                                                                                        
|Date:                                                                                                    | September 29, 2003 |                                                            | Date: | September 29, 2003
|                                                                                                        
|/s/ Joseph F. Nagy
Joseph F. Nagy, Director                                                              |                    | /s/ Leonard J. DobosiewiczLeonard J. Dobosiewicz, Director
|                                                                                                        
|Date:                                                                                                    | September 29, 2003 |                                                            | Date: | September 29, 2003
|                                                                                                        
|/s/ Richard J. Cullar
Richard J. Cullar, Director                                                        |                    | /s/ Thomas F. GruberThomas F. Gruber, Director            
|                                                                                                        
|Date:                                                                                                    | September 29, 2003 |                                                            | Date: | September 29, 2003
|                                                                                                        
|/s/ Steven C. Watts
Steven C. Watts, Chief Executive Officer and Director*Principal Executive Director)* |                    | /s/ Gregory J. MatthewsGregory J. Matthews, Director      
|                                                                                                        
|Date:                                                                                                    | September 29, 2003 |                                                            | Date: | September 29, 2003



SOBIESKI BANCORP, INC. AND SUBSIDIARY
CORPORATE INFORMATION**INDEX TO EXHIBITS**

|Exhibit
Number
|--------------
|13            
|21            
|23            
|31.1          
|31.2          
|33