SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                                  FORM 10-K

               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                     THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2003    Commission File Number: 0-19212


                            JEFFERSONVILLE BANCORP
            (Exact name of Registrant as specified in its charter)


           New York                                    22-2385448
(State or other jurisdiction of           (I.R.S. employer identification no.)
incorporation or organization)


                 P.O. Box 398, Jeffersonville, New York 12748
                   (Address of principal executive offices)

Registrant's telephone number, including area code: (845) 482-4000


         Securities registered pursuant to Section 12(b) of the Act:
   Title of each class                  Name of exchange on which registered
          NONE                                          NONE


         Securities registered pursuant to Section 12 (g) of the Act:
                        Common Stock, $0.50 Par Value
                               (Title of Class)


Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such report(s), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any
amendment to this Form 10-K. [ ]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [ X ]

State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common
equity, as of the last business day of the Registrant's most recently
completed second fiscal quarter. $73,618,918

Indicate the number of shares outstanding in each of the issuer's classes of
common stock:

Class of Common Stock        Number of Shares Outstanding as of March 12, 2004
   $0.50 Par Value                                4,434,321


                     DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for its Annual Meeting of
Stockholders to be held on April 27, 2004.

<PAGE>

                           JEFFERSONVILLE BANCORP
                             INDEX TO FORM 10-K


                                    PART I                                 PAGE

Item 1.   Business                                                           1

Item 2.   Properties                                                         5

Item 3.   Legal Proceedings                                                  6

Item 4.   Submission of Matters to a Vote of Security Holders                6



                                   PART II

Item 5.   Market for the Registrant's Common Equity
          and Related Stockholder Matters                                    7

Item 6.   Selected Financial Data                                            8

Item 7.   Management's Discussion and Analysis of
          Financial Condition and Results of Operations                      9

Item 7A.  Quantitative & Qualitative Disclosures about Market Risk          25

Item 8.   Financial Statements and Supplementary Data                       26

Item 9.   Changes in and Disagreements with Accountants
          on Accounting and Financial Disclosure                            26

Item 9A.  Controls and Procedures                                           26


                                  PART III

Item 10.  Directors and Executive Officers of the Registrant                27

Item 11.  Executive Compensation                                            27

Item 12.  Security Ownership of Certain Beneficial Owners and Management    27

Item 13.  Certain Relationships and Related Transactions                    27

Item 14.  Principal Accountant and Fees and Services                        27


                                   PART IV

Item 15.  Exhibits, Financial Statement Schedules,
          and Reports on Form 8-K                                           28

          Signatures                                                        29

<PAGE>

                                   PART I


ITEM 1. BUSINESS

GENERAL

Jeffersonville Bancorp (the "Company") was organized as a New York
corporation on January 12, 1982, for the purpose of becoming a registered
bank holding company under the Bank Holding Company Act of 1956, as amended
(the "BHC Act"). Effective June 30, 1982, the Company became the registered
bank holding company for The First National Bank of Jeffersonville, a bank
chartered in 1913 and organized under the national banking laws of the United
States (the "Bank"). The Company is engaged in the business of managing or
controlling its subsidiary bank and such other business related to banking as
may be authorized under the BHC Act.

    At December 31, 2003 and 2002, the Company had total assets of
$352,204,000 and $325,025,000, available for sale securities of $115,564,000
and $117,942,000, securities held to maturity of $5,916,000 and $4,673,000
and net loans receivable of $193,106,000 and $168,909,000, respectively. At
December 31, 2003 and 2002, total deposits were $280,227,000 and
$252,792,000, respectively. At December 31, 2003 and 2002, shareholder's
equity was $35,786,000 and $32,497,000, respectively.

    The Bank is based in Sullivan County, New York. In addition to its main
office and operations center in Jeffersonville, the Bank has nine additional
branch office locations in Eldred, Liberty, Loch Sheldrake, Monticello,
Livingston Manor, Narrowsburg, Callicoon, Wurtsboro and one in a Wal*Mart
store in Monticello. The Bank is a full service banking institution employing
approximately 124 people and serving all of Sullivan County, New York as well
as some areas of adjacent counties in New York and Pennsylvania.

NARRATIVE DESCRIPTION OF BUSINESS

Through its community bank subsidiary, The First National Bank of
Jeffersonville, the Company provides traditional banking related services,
which constitute the Company's only business segment. Banking services
consist primarily of attracting deposits from the areas served by its banking
offices and using those deposits to originate a variety of commercial,
consumer, and real estate loans. The Company's primary sources of liquidity
are its deposit base; FHLB borrowings; repayments and maturities on loans;
short-term assets such as federal funds and short-term interest bearing
deposits in banks; and maturities and sales of securities available for sale.

    The Bank has one subsidiary, FNBJ Holding Corporation, which is a REIT
(Real Estate Investment Trust) and is wholly-owned by the Bank.

    The Company's filings with the Securities and Exchange Commission,
including this Annual Report on Form 10-K, are available on the Company's
website, www.jeffbank.com or upon request submitted to Charles E. Burnett,
P.O. Box 398, Jeffersonville, New York 12748.

DEPOSIT AND LOAN PRODUCTS

    DEPOSIT PRODUCTS. The Bank offers a variety of deposit products typical
of commercial banks and has designed product offerings responsive to the
needs of both individuals and businesses. Traditional demand deposit
accounts, interest-bearing transaction accounts (NOW accounts ) and savings
accounts are offered on a competitive basis to meet customers' basic banking
needs. Money market accounts, time deposits in the form of certificates of
deposit and IRA/KEOGH accounts provide customers with price competitive and
flexible investment alternatives. The Bank does not have a single depositor
or a small group of related depositors whose loss would have a material
adverse effect upon the business of the Bank.

    The Company originates residential and commercial real estate loans, as
well as commercial, consumer and agricultural loans, to borrowers in Sullivan
County, New York. A substantial portion of the loan portfolio is secured by
real estate properties located in that area. The ability of the Company's
borrowers to make principal and interest payments is dependent upon, among
other things, the level of overall economic activity and the real estate
market conditions prevailing within the Company's concentrated lending area.
Periodically, the Company purchases loans from other financial institutions
that are in markets outside of Sullivan County.

    Please refer to the Notes to Consolidated Financial Statements for
further information regarding loans and nonperforming loans.

    LOAN PRODUCTS. The Company offers a broad range of commercial and
consumer loan products designed to meet the banking needs of individual
customers, businesses and municipalities. Additional information is set forth
below relating to the Bank's loan products, including major loan categories,
general loan terms, credit underwriting criteria, and risks particular to
each category of loans. The Bank does not have a major loan concentration in
any individual industry.


                                      1

<PAGE>

COMMERCIAL LOANS AND COMMERCIAL REAL ESTATE LOANS. The Bank offers a variety
of commercial credit products and services to its customers. These include
secured and unsecured loan products specifically tailored to the credit needs
of the customers, underwritten with terms and conditions reflective of risk
profile objectives and corporate earnings requirements. These products are
offered at all branch locations. All loans are governed by a commercial loan
policy which was developed to provide a clear framework for determining
acceptable levels of credit risk, underwriting criteria, monitoring existing
credits, and managing problem credit relationships. Credit risk control
mechanisms have been established and are monitored closely for compliance by
the internal auditor and an external loan review company.

    Risks particular to commercial loans include borrowers' capacities to
perform according to contractual terms of loan agreements during periods of
unfavorable economic conditions and changing competitive environments.
Management expertise and competency are critical factors affecting the
customers' performance and ultimate ability to repay their debt obligations.
Commercial real estate loans are exposed to collateral value decreases.

    CONSUMER LOANS. The Bank also offers a variety of consumer loan products.
These products include both open-end credit (credit cards, home equity lines
of credit, unsecured revolving lines of credit) and closed-end credit secured
and unsecured direct and indirect installment loans. Most of these loans are
originated at the branch level. This delivery mechanism is supported by an
automated loan platform delivery system and a decentralized underwriting
process. The lending process is designed to ensure not only the efficient
delivery of credit products, but also compliance with applicable consumer
regulations while minimizing credit risk exposure.

    Credit decisions are made under the guidance of a standard consumer loan
policy, with the assistance of senior credit managers. The loan policy was
developed to provide definitive guidance encompassing credit underwriting,
monitoring and management. The quality and condition of the consumer loan
portfolio, as well as compliance with established standards, is also
monitored closely.

    A borrower's ability to repay consumer debt is generally dependent upon
the stability of the income stream necessary to service the debt. Adverse
changes in economic conditions resulting in higher levels of unemployment
increase the risk of consumer defaults. Risk of default is also impacted by a
customer's total debt obligation. While the Bank can analyze a borrower's
capacity to repay at the time a credit decision is made, subsequent
extensions of credit by other financial institutions may cause the customer
to become over-extended, thereby increasing the risk of default.

    RESIDENTIAL REAL ESTATE LOANS. The Company originates a variety of
mortgage loan products including balloon mortgages, adjustable rate mortgages
and fixed rate mortgages. All mortgage loans originated are held in the
Bank's portfolio. Residential real estate loans possess risk characteristics
much the same as consumer loans. Stability of the borrower's employment is a
critical factor in determining the likelihood of repayment. Market value
risk, where the value of the underlying collateral declines due to economic
conditions, is also a factor.

SUPERVISION AND REGULATION

The Company is a bank holding company, registered with the Board of Governors
of the Federal Reserve System ("Federal Reserve") under the Bank Holding
Company Act ("BHC Act"). As such, the Federal Reserve is the Company's
primary federal regulator, and the Company is subject to extensive
regulation, examination, and supervision by the Federal Reserve. The Bank is
a national association, chartered by the Office of the Comptroller of the
Currency ("OCC"). The OCC is the Bank's primary federal regulator, and the
Bank is subject to extensive regulation, examination, and supervision by the
OCC. In addition, as to certain matters, the Bank is subject to regulation by
the Federal Reserve and the Federal Deposit Insurance Corporation ("FDIC").

    The Company is subject to capital adequacy guidelines of the Federal
Reserve. The guidelines apply on a consolidated basis and require bank
holding companies having the highest regulatory ratings for safety and
soundness to maintain a minimum ratio of Tier 1 capital to total average
assets (or "leverage ratio") of 3%. All other bank holding companies are
required to maintain an additional capital cushion of 100 to 200 basis
points. The Federal Reserve capital adequacy guidelines also require bank
holding companies to maintain a minimum ratio of Tier 1 capital to
risk-weighted assets of 4% and a minimum ratio of qualifying total capital to
risk-weighted assets of 8%. As of December 31, 2003, the Company's leverage
ratio was 10.3%, its ratio of Tier 1 capital to risk-weighted assets was
16.7%, and its ratio of qualifying total capital to risk-weighted assets was
17.9%. The Federal Reserve may set higher minimum capital requirements for
bank holding companies whose circumstances warrant it, such as companies
anticipating significant growth or facing unusual risks. The Federal Reserve
has not advised the Company of any special capital requirement applicable to
it.

    Any bank holding company whose capital does not meet the minimum capital
adequacy guidelines is considered to be undercapitalized and is required to
submit an acceptable plan to the Federal Reserve for achieving capital
adequacy. Such a company's ability to pay dividends to


                                      2

<PAGE>

its shareholders could be restricted. In addition, the Federal Reserve has
indicated that it will consider a bank holding company's capital ratios and
other indications of its capital strength in evaluating any proposal to expand
its banking or nonbanking activities.

    The Bank is subject to leverage and risk-based capital requirements and
minimum capital guidelines of the OCC that are similar to those applicable to
the Company. As of December 31, 2003, the Bank was in compliance with all
minimum capital requirements. The Bank's leverage ratio was 9.2%, its ratio
of Tier 1 capital to risk-weighted assets was 15.7%, and its ratio of
qualifying total capital to risk-weighted assets was 16.9%.

    Any bank that is less than well-capitalized is subject to certain
mandatory prompt corrective actions by its primary federal regulatory agency,
as well as other discretionary actions, to resolve its capital deficiencies.
The severity of the actions required to be taken increases as the bank's
capital position deteriorates. A bank holding company must guarantee that a
subsidiary bank will meet its capital restoration plan, up to an amount equal
to 5% of the subsidiary bank's assets or the amount required to meet
regulatory capital requirements, whichever is less. In addition, under
Federal Reserve policy, a bank holding company is expected to serve as a
source of financial strength, and to commit financial resources to support
its subsidiary banks. Any capital loans made by a bank holding company to a
subsidiary bank are subordinate to the claims of depositors in the bank and
to certain other indebtedness of the subsidiary bank. In the event of the
bankruptcy of a bank holding company, any commitment by the bank holding
company to a federal banking regulatory agency to maintain the capital of a
subsidiary bank would be assumed by the bankruptcy trustee and would be
entitled to priority of payment.

    The Bank also is subject to substantial regulatory restrictions on its
ability to pay dividends to the Company. Under OCC regulations, the Bank may
not pay a dividend, without prior OCC approval, if the total amount of all
dividends declared during the calendar year, including the proposed dividend,
exceed the sum of its retained net income to date during the calendar year
and its retained net income over the preceding two years. As of December 31,
2003, approximately $8,972,000 was available for the payment of dividends
without prior OCC approval. The Bank's ability to pay dividends also is
subject to the Bank being in compliance with regulatory capital requirements.
The Bank is currently in compliance with these requirements.

    The deposits of the Bank are insured up to regulatory limits by the FDIC
and, accordingly, are subject to deposit insurance assessments to maintain
the insurance funds administered by the FDIC. The deposits of the Bank
historically have been subject to deposit insurance assessments to maintain
the Bank Insurance Fund ("BIF"). The FDIC has adopted regulations
establishing a permanent risk-related deposit insurance assessment system.
Under this system, the FDIC places each insured bank in one of three
capitalization categories and one of three supervisory categories, based on
evaluations provided by the institution's primary federal regulator. Each
insured bank's insurance assessment rate is determined by its combined risk
rating. Since January 1, 1997, the annual insurance premiums on bank deposits
insured by the BIF have varied between $0.00 per $100 of deposits for banks
classified in the highest capital and supervisory evaluation categories to
$0.27 per $100 of deposits for banks classified in the lowest categories. BIF
assessment rates are subject to semi-annual adjustment by the FDIC within a
range of five basis points without public comment. The FDIC also possesses
authority to impose special assessments from time to time.

    The Federal Deposit Insurance Act provides for additional assessments to
be imposed on insured depository institutions to pay for the cost of
Financing Corporation ("FICO") funding. The FICO assessments are adjusted
quarterly to reflect changes in the assessment bases of the FDIC insurance
funds and do not vary depending upon a depository institution's
capitalization or supervisory evaluation. During 2003, FDIC-insured banks
paid an average rate of approximately $0.017 per $100 for purposes of funding
FICO bond obligations. The assessment rate has been retained at this rate for
the first and second quarters of 2003.

    Transactions between the Bank and any affiliate, which includes the
Company, are governed by sections 23A and 23B of the Federal Reserve Act.
Generally, sections 23A and 23B are intended to protect insured depository
institutions from suffering losses arising from transactions with non-insured
affiliates, by limiting the extent to which a bank or its subsidiaries may
engage in covered transactions with any one affiliate and with all affiliates
of the bank in the aggregate, and requiring that such transactions be on
terms that are consistent with safe and sound banking practices.

    On April 1, 2003, a new regulation of the Federal Reserve, Regulation W,
went into effect, which comprehensively implements sections 23A and 23B. The
regulation unifies and updates staff interpretations issued over the years,
incorporates several new interpretative proposals (such as to clarify when
transactions with an unrelated third party will be attributed to an
affiliate), and addresses new issues arising as a result of the expanded
scope of nonbanking activities engaged in by banks and bank holding companies
in recent years and authorized for financial holding companies under the
Gramm-Leach-Bliley Act ("GLB Act").


                                      3
<PAGE>

    Under the GLB Act, all financial institutions, including the Company and
the Bank, are required to adopt privacy policies to restrict the sharing of
nonpublic customer data with nonaffiliated parties at the customer's request,
and establish procedures and practices to protect customer data from
unauthorized access. The Company has developed such policies and procedures
for itself and the Bank, and believes it is in compliance with all privacy
provisions of the GLB Act. On December 4, 2003, the Fair and Accurate Credit
Transactions Act of 2003 ("FACT Act") was signed into law. The FACT Act
includes many provisions concerning national credit reporting standards, and
permits consumers, including customers of the Company and the Bank, to opt
out of information sharing among affiliated companies for marketing purposes.
The FACT Act also requires banks and other financial institutions to notify
their customers if they report negative information about them to a credit
bureau or if they are granted credit on terms less favorable than those
generally available. The Federal Reserve and the Federal Trade Commission are
granted extensive rulemaking authority under the FACT Act, and the Company
and the Bank will be subject to those provisions after they are adopted.

    Under Title III of the USA PATRIOT Act, also known as the International
Money Laundering Abatement and Anti-Terrorism Financing Act of 2001, all
financial institutions, including the Company and the Bank, are required to
take certain measures to identify their customers, prevent money laundering,
monitor certain customer transactions and report suspicious activity to U.S.
law enforcement agencies, and scrutinize or prohibit altogether certain
transactions of special concern. Financial institutions also are required to
respond to requests for information from federal banking regulatory agencies
and law enforcement agencies concerning their customers and their
transactions. Information-sharing among financial institutions concerning
terrorist or money laundering activities is encouraged by an exemption
provided from the privacy provisions of the GLB Act and other laws. Financial
institutions that hold correspondent accounts for foreign banks or provide
private banking services to foreign individuals are required to take measures
to avoid dealing with certain foreign individuals or entities, including
foreign banks with profiles that raise money laundering concerns, and are
prohibited altogether from dealing with foreign "shell banks" and persons
from jurisdictions of particular concern. The federal banking regulators and
the Secretary of the Treasury have adopted regulations to implement several
of these provisions. All financial institutions also are required to adopt
internal anti-money laundering programs. The effectiveness of a financial
institution in combating money laundering activities is a factor to be
considered in any application submitted by the financial institution under
the Bank Merger Act, which applies to the Bank, or the BHC Act, which applies
to the Company. The Company and the Bank have in place a Bank Secrecy Act and
USA PATRIOT Act compliance program, and they engage in very few transactions
of any kind with foreign financial institutions or foreign persons.

    The Sarbanes-Oxley Act ("SOA"), signed into law on July 30, 2002, was
intended to increase corporate responsibility, enhance penalties for
accounting and auditing improprieties at publicly traded companies, and
protects investors by improving the accuracy and reliability of corporate
disclosures pursuant to the securities laws. SOA is the most far-reaching
U.S. securities legislation enacted in several years. It applies generally to
all companies that file or are required to file periodic reports with the SEC
under the Securities Exchange Act of 1934 ("Exchange Act"), including the
Company. SOA includes very specific additional disclosure requirements and
new corporate governance rules, requires the SEC and securities exchanges to
adopt extensive additional disclosure, corporate governance, and other
related rules, and mandates further studies of certain issues by the SEC and
the Comptroller General. SOA represents significant federal involvement in
matters traditionally left to state regulatory systems, such as the
regulation of the accounting profession, and to state corporate law, such as
the relationship between a board of directors and management and between a
board of directors and its committees. Certain provisions of SOA became
effective upon enactment, and other provisions became effective between 30
days and one year from enactment. The SEC has been delegated the task of
enacting rules to implement various provisions with respect to, among other
matters, disclosure in periodic filings pursuant to the Exchange Act. In
addition, the federal banking regulators have adopted generally similar
requirements concerning the certification of financial statements by bank
officials.


                                      4

<PAGE>

TAXATION

Except for the Bank's REIT subsidiary, the Company files a calendar year
consolidated federal income tax return on behalf of itself and its
subsidiaries. The Company reports its income and deductions using the accrual
method of accounting. The components of income tax expense are as follows for
the years ended December 31:

<TABLE>

<CAPTION>
                                            2003             2002              2001

<S>                                      <C>              <C>               <C>
Current tax expenses:
   Federal                               $2,159,000       $2,068,000        $1,761,000
   State                                    327,000          339,000           212,000
Deferred tax benefit                       (502,000)        (184,000)         (651,000)

      Total income tax expense           $1,984,000       $2,223,000        $1,322,000

</TABLE>

    For a detailed discussion of income taxes please refer to footnote 9 in
the Notes to Consolidated Financial Statements.

MONETARY POLICY AND ECONOMIC CONDITIONS

The earnings of the Company and the Bank are affected by the policies of
regulatory authorities, including the Federal Reserve System. Federal Reserve
System monetary policies have had a significant effect on the operating
results of commercial banks in the past and are expected to continue to do so
in the future. Because of the changing conditions in the national economy and
in the money markets, as a result of actions by monetary and fiscal
authorities, interest rates, credit availability and deposit levels may
change due to circumstances beyond the control of the Company and the Bank.

COMPETITION

The Bank faces strong competition for local business in the communities it
serves from other financial institutions. Throughout Sullivan County there
are 35 branches of commercial banks, savings banks, savings and loan
associations and other financial organizations.

    For most of the services, which the Bank performs, there is increasing
competition from financial institutions other than commercial banks due to
the relaxation of regulatory restrictions. Money market funds actively
compete with banks for deposits. Savings banks, savings and loan associations
and credit institutions, as well as consumer finance companies, insurance
companies and pension trusts are important competitors. Competition for loans
is also a factor the Bank faces in maintaining profitability.

NUMBER OF PERSONNEL

At December 31, 2003, there were 124 persons employed by the Company and the
Bank.


ITEM 2. PROPERTIES

In addition to the main office of the Company and the Bank in Jeffersonville,
New York, the Bank has nine branch locations and an operations center. Set
forth below is a description of the offices of the Company and the Bank.

MAIN OFFICE

The main office of the Bank is located at 4864 State Route 52,
Jeffersonville, New York. The premises occupied by the Bank consists of
approximately 6,700 total square feet of office space in a two-story office
building. The Bank owns the building and underlying land.

ELDRED BRANCH

The Eldred Branch of the Bank is located at 561 Route 55, Eldred, New York.
The premises consists of approximately 2,016 total square feet of office
space in a 1-story office building. The Bank owns the building and underlying
land.

LIBERTY BRANCH

The Liberty Branch of the Bank is located at 19 Church Street, Liberty, New
York. The premises consists of approximately 4,320 total square feet of
office space in a two-story office building. The Company owns the building
and underlying land.

LIVINGSTON MANOR BRANCH

The Livingston Manor Branch of the Bank is located at 33 Main Street,
Livingston Manor, New York. The premises consists of approximately 2,325
total square feet of office space. The Company owns the building and
underlying land.

LOCH SHELDRAKE BRANCH

The Loch Sheldrake Branch of the Bank is located on 1278 State Route 52, Loch
Sheldrake, New York. The premises consists of approximately 1,440 total
square feet of office space. The Company owns the building and underlying
land.


                                      5

<PAGE>

MONTICELLO BRANCH

The Monticello Branch of the Bank is located at 19 Forestburgh Road,
Monticello, New York. The premises consists of approximately 2,500 square
feet of office space. The Company owns the building and underlying land.

OPERATIONS CENTER

The Operations Center is located on 4866 State Route 52, Jeffersonville, New
York. The premises consists of approximately 10,788 square feet in a
two-story office building. The Company owns the building and underlying land.

SUPERMARKET BRANCHES

The Bank leases space in Peck's Supermarkets in Narrowsburg and Callicoon and
the IGA in Wurtsboro, New York. The branch facilities occupy between 650 and
1,000 square feet each and the lease payments range from approximately
$13,100 to $42,000 per year. The Bank leases space in Wal*Mart in Monticello
occupying 643 square feet with lease payments of $2,650 monthly.

    The major classifications of premises and equipment were as follows at
December 31:

                                                                    2003

Land                                                          $   387,000
Buildings                                                       2,711,000
Furniture and fixtures                                            106,000
Equipment                                                       2,457,000
Building and leasehold improvements                               920,000
Construction in progress                                          175,000

                                                                6,756,000
Less accumulated depreciation and amortization                 (3,693,000)

      Total premises and equipment, net                       $ 3,063,000


ITEM 3. LEGAL PROCEEDINGS

The Company and the Bank are not parties to any material legal proceedings
other than ordinary routine litigation incidental to business to which the
Company or any of its subsidiaries is a party or of which and of their
property is subject.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.


                                      6

<PAGE>

                                   PART II


ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        MATTERS

The Company's common stock is traded on the NASDAQ Small Cap Market under the
symbol JFBC. The following investment firms are known to handle
Jeffersonville Bancorp stock transactions: Boenning & Scattergood Inc, Ryan,
Beck & Co., Goldman, Sachs & Co., Knight Securities L.P. and FTN Financial
Securities Corp. The following table shows the range of high and low bid
prices for the Company's stock for the quarters indicated.

                                       Market Price                    Cash
                                                                  Dividends
Quarter Ended(1)                    Low             High               Paid

March 31, 2002                   $ 7.75           $ 9.83             $0.066
June 30, 2002                    $ 9.33           $12.42             $0.066
September 30, 2002               $10.95           $15.33             $0.066
December 31, 2002                $12.00           $16.58             $0.100

March 31, 2003                   $15.34           $18.33             $0.073
June 30, 2003                    $14.83           $21.50             $0.073
September 30, 2003               $17.00           $20.50             $0.080
December 31, 2003                $16.51           $19.01             $0.100

(1) Data has been restated for a 3 for 1 stock split in 2003.

    NUMBER OF HOLDERS OF RECORD. At the close of business on March 12, 2004,
the Company had 679 shareholders of record of the 4,434,321 shares of common
stock then outstanding.

    SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLAN. The
Company has no equity compensation plans under which options may be issued.

    Applicable laws and regulations restrict the ability of the Bank to pay
dividends to the Company, and the ability of the Company to pay dividends to
shareholders. Payment of dividends in the future will be at the sole
discretion of the Company's board of directors and will depend on a variety
of factors deemed relevant by the board of directors, including, but not
limited to, earnings, capital requirements and financial condition. See "Item
1. Business -- Supervision and Regulation."


                                      7

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>

FIVE-YEAR SUMMARY

<CAPTION>
                                        2003              2002              2001             2000              1999

<S>                             <C>               <C>               <C>              <C>               <C>
RESULTS OF OPERATIONS
Interest income                 $ 20,082,000      $ 20,635,000      $ 20,230,000     $ 19,379,000      $ 18,444,000
Interest expense                   4,037,000         5,331,000         7,627,000        8,295,000         7,711,000
Net interest income               16,045,000        15,304,000        12,603,000       11,084,000        10,733,000
Provision for loan losses            620,000           900,000           300,000          300,000           300,000
Net income                         5,732,000         5,242,000         3,625,000        2,823,000         2,873,000

FINANCIAL CONDITION
Total assets                    $352,204,000      $325,025,000      $298,110,000     $273,464,000      $256,960,000
Deposits                         280,227,000       252,792,000       238,029,000      223,278,000       201,603,000
Gross loans                      196,675,000       171,977,000       162,711,000      147,456,000       140,261,000
Stockholders' equity              35,786,000        32,497,000        27,313,000       25,109,000        22,001,000

AVERAGE BALANCES
Total assets                    $340,575,000      $313,022,000      $286,823,000     $268,967,000      $254,777,000
Deposits                         268,687,000       247,953,000       234,431,000      218,671,000       207,018,000
Gross loans                      183,335,000       165,607,000       157,165,000      143,954,000       137,696,000
Stockholders' equity              33,561,000        30,271,000        28,139,000       24,261,000        22,816,000

FINANCIAL RATIOS
Net income to average
  total assets                          1.68%             1.67%             1.26%            1.05%             1.13%
Net income to average
  stockholders' equity                 17.08%            17.32%            12.88%           11.64%            12.59%
Average stockholders' equity
  to average total assets               9.85%             9.67%             9.81%            9.02%             8.96%

SHARE AND PER SHARE DATA<F1>
Basic earnings per share        $       1.29      $       1.18      $       0.81     $       0.62      $       0.62
Dividends per share             $       0.33      $       0.30      $       0.25     $       0.24      $       0.21
Dividend payout ratio                  25.28%            25.39%            30.40%           38.72%            33.41%
Book value at year end          $       8.07      $       7.33      $       6.16     $       5.56      $       4.80
Total dividends paid            $  1,449,000      $  1,331,000      $  1,102,000     $  1,093,000      $    960,000
Average number of
  shares outstanding               4,434,321         4,434,321         4,472,664        4,551,777         4,602,864
Shares outstanding
  at year end                      4,434,321         4,434,321         4,434,321        4,512,255         4,585,077

<FN>

<F1> Share and per share data has been restated for a 3 for 1 stock split in 2003.

</FN>

</TABLE>


                                      8

<PAGE>

<TABLE>

SUMMARY OF QUARTERLY RESULTS
OF OPERATIONS FOR 2003 AND 2002

<CAPTION>

2003                               March 31           June 30       September 30      December 31          Total

<S>                              <C>               <C>               <C>              <C>              <C>
Interest income                  $ 4,930,000       $ 4,933,000       $ 5,103,000      $ 5,130,000      $ 20,096,000
Interest expense                  (1,058,000)       (1,023,000)       (1,014,000)        (956,000)       (4,051,000)

Net interest income                3,872,000         3,910,000         4,089,000        4,174,000        16,045,000

Provision for loan losses           (150,000)         (110,000)          (30,000)        (330,000)         (620,000)
Non-interest income                  994,000           920,000           907,000        1,134,000         3,955,000
Non-interest expenses             (2,689,000)       (2,903,000)       (2,875,000)      (3,197,000)      (11,664,000)

Income before taxes                2,027,000         1,817,000         2,091,000        1,781,000         7,716,000
Income taxes                        (601,000)         (422,000)         (545,000)        (416,000)       (1,984,000)

Net income                       $ 1,426,000       $ 1,395,000       $ 1,546,000      $ 1,365,000      $  5,732,000

Basic earnings per share<F1>     $      0.32       $      0.31       $      0.35      $      0.31      $       1.29


2002                                March 31           June 30      September 30      December 31            Total

Interest income                  $ 5,010,000       $ 5,135,000       $ 5,276,000      $ 5,214,000      $ 20,635,000
Interest expense                  (1,444,000)       (1,365,000)       (1,308,000)      (1,214,000)       (5,331,000)

Net interest income                3,566,000         3,770,000         3,968,000        4,000,000        15,304,000

Provision for loan losses           (100,000)         (200,000)         (300,000)        (300,000)         (900,000)
Non-interest income                  753,000           732,000           824,000          839,000         3,148,000
Non-interest expenses             (2,441,000)       (2,377,000)       (2,464,000)      (2,805,000)      (10,087,000)

Income before taxes                1,778,000         1,925,000         2,028,000        1,734,000         7,465,000
Income taxes                        (530,000)         (617,000)         (615,000)        (461,000)       (2,223,000)

Net income                       $ 1,248,000       $ 1,308,000       $ 1,413,000      $ 1,273,000      $  5,242,000

Basic earnings per share<F1>     $      0.28       $      0.29       $      0.32      $      0.29      $       1.18

<FN>

<F1> Data has been restated for a 3 for 1 stock split in 2003.

</FN>

</TABLE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

The following is a discussion of the factors which significantly affected the
consolidated results of operations and financial condition of Jeffersonville
Bancorp ("the Parent Company") and its wholly-owned subsidiary, The First
National Bank of Jeffersonville ("the Bank"). For purposes of this
discussion, references to the Company include both the Bank and Parent
Company, as the Bank is the Parent Company's only subsidiary. This discussion
should be read in conjunction with the consolidated financial statements and
notes thereto, and the other financial information appearing elsewhere in
this annual report.

    This document contains forward-looking statements, which are based on
assumptions and describe future plans, strategies and expectations of the
Company. These forward-looking statements are generally identified by use of
the words "believe," "expect," "intend," "anticipate," "estimate," "project,"
or similar words. The Company's ability to predict results and the actual
effect of future plans or strategies is uncertain. Factors which could have a
material adverse effect on operations include, but are not limited to,
changes in interest rates, general economic conditions,
legislative/regulatory changes, monetary and fiscal policies of the U.S.
Government, including policies of the U.S. Treasury and Federal Reserve
Board, the quality or composition of the loan or investment portfolios,
demand for loan products, deposit flows, competition, demand for financial
services in the Company's market areas and accounting principles and
guidelines. These risks and uncertainties should be considered in evaluating
forward-looking statements. Actual results could differ materially from
forward-looking statements.

GENERAL

The Parent Company is a bank holding company founded in 1982 and
headquartered in Jeffersonville, New York. The Parent Company owns 100% of
the outstanding shares of the Bank's common stock and derives substantially
all of its income from the Bank's operations in the


                                      9

<PAGE>

form of dividends paid to the Parent Company. The Bank is a New York
commercial bank chartered in 1913 serving Sullivan County, New York with
branch offices in Jeffersonville, Eldred, Liberty, Loch Sheldrake, Monticello
(2), Livingston Manor, Narrowsburg, Callicoon and Wurtsboro. The Bank's
administrative offices are located in Jeffersonville, New York.

    The Company's mission is to serve the community banking needs of its
borrowers and depositors, who predominantly are individuals, small businesses
and local municipal governments. The Company believes it understands its
local customer needs and provides quality service with a personal touch.

    The financial results of the Company are influenced by economic events
that affect the communities we serve as well as national economic trends,
primarily interest rates, affecting the entire banking industry. Changes in
net interest income have the greatest impact on the Company's net income.

    National economic policies have caused interest rates to drop
dramatically in the Company's marketplace over the past two years. As a
result, the Company's yields on interest earning assets and the costs of
interest bearing liabilities have decreased significantly. Locally, the
economy continued to exhibit strength in 2003. While the local economic
forecast has been bright, it should be acknowledged that the economy in most
other areas of New York State continues to be sluggish. Significant
improvement in the local economy continues to be demonstrated in the Sullivan
County real estate market. Several major projects continued to progress along
with a vibrant real estate market, which increase optimism in the county's
future. A permanent concert facility is planned to begin construction on the
original site of the Woodstock Festival in Bethel this year. A major health
care facility employing 300 people is on track to open in 2004. Monticello
Raceway will be opening a video slots gaming center in the summer of 2004.
Several Native American run casinos are still on the horizon. The success of
these projects, tourism, real estate values and the availability of qualified
labor is critical to the economy and the Company.

CRITICAL ACCOUNTING POLICIES

Management of the Company considers the accounting policy relating to the
allowance for loan losses to be a critical accounting policy given the
inherent uncertainty in evaluating the levels of the allowance required to
cover credit losses in the portfolio and the material effect that such
judgments can have on the results of operations. The allowance for loan
losses is maintained at a level deemed adequate by management based on an
evaluation of such factors as economic conditions in the Company's market
area, past loan loss experience, the financial condition of individual
borrowers, and underlying collateral values based on independent appraisals.
While management uses available information to recognize losses on loans,
future additions to the allowance for loan losses may be necessary based on
changes in economic conditions and values of real estate particularly in
Sullivan County. Collateral underlying certain real estate loans could lose
value which could lead to future additions to the allowance for loan losses.
In addition, Federal regulatory agencies, as an integral part of their
examination process, periodically review the Company's allowance for loan
losses and may require the Company to recognize additions to the allowance
based on their judgments about information available to them at the time of
their examination, which may not be currently available to management.

FINANCIAL CONDITION

Total assets increased by $27.2 million or 8.4% to $352.2 million at December
31, 2003 from $325.0 million at December 31, 2002. The increase was primarily
due to a $24.2 million or 14.3% increase in net loans from $168.9 million at
December 31, 2002 to $193.1 million at December 31, 2003. The overall assets
increase was funded by a $27.4 million increase in total deposits from $252.8
million at December 31, 2002 to $280.2 million at December 31, 2003. Much of
the securities portfolio remains funded with long term borrowings from the
Federal Home Loan Bank, a leveraging strategy implemented since 1997 in which
the Company funded security purchases with FHLB borrowings at a positive
interest rate spread.

    In 2003, total gross loans increased $24.7 million or 14.4% from $172.0
million to $196.7 million. Within the loan portfolio, commercial real estate
loans increased $15.0 million to $59.8 million at December 31, 2003,
residential real estate increased by $5.8 million to $78.3 million, home
equity loans increased $3.5 million to $18.3 million and consumer installment
loans decreased $2.0 million to $15.4 million. The growth in commercial real
estate loans reflects the Company's strategy to provide loans for local real
estate projects where there is strong loan to value ration (taking into
consideration possible speculation regarding casino gambling proposals). The
growth in residential mortgages reflects new products to meet the highly
competitive nature of this market. As a result of casino gambling proposals
and related local economic improvement, the Company anticipates continued
residential and commercial real estate loan opportunities. Accordingly,
additional growth is anticipated in real estate loans during 2004. The
overall loan portfolio is structured in accordance with management's


                                      10

<PAGE>

belief that loans secured by residential and commercial real estate generally
result in lower loan loss levels compared to other types of loans, because of
the value of the underlying collateral. In the event that the casino gambling
proposals do not progress, collateral underlying certain real estate projects
could lose value.

    Other real estate owned at December 31, 2003 was $43,000 compared to
$126,000 at December 31, 2002. Total non-performing loans decreased slightly
from $3.2 million at December 31, 2002 to $3.1 million at December 31, 2003.
Net loan charge-offs decreased from $446,000 in 2002 to $119,000 in 2003. At
December 31, 2003, the allowance for loan losses equaled $3.6 million
representing 1.81% of total gross loans outstanding and 114.3% of total
non-performing loans.

    Total deposits increased $27.4 million to $280.2 million at December 31,
2003 from $252.8 million at December 31, 2002. Within the deposit mix, lower
costing core deposits increased significantly as did higher costing time
deposits. Much of the increase in deposits was caused by the continued growth
of newer branches and the attraction of new customers from larger regional
banks. The Company continues to be successful in increasing demand deposit
balances, which provides a pool of low cost funds for reinvestment
opportunities. Demand deposits increased from $49.7 million at December 31,
2002 to $59.2 million at December 31, 2003, an increase of $9.5 million or
19.2%. Time deposits increased from $88.4 million at December 31, 2002 to
$102.0 million at December 31, 2003, an increase of $13.6 million or 15.4%.

    Total stockholders' equity was $35.8 million at December 31, 2003, an
increase of $3.3 million from December 31, 2002. The increase was due
primarily to net income of $5.7 million partially offset by cash dividends of
$1.4 million and a reduction in accumulated other comprehensive income of
$994,000.

RESULTS OF OPERATIONS 2003 VERSUS 2002

NET INCOME

Net income for 2003 of $5.7 million increased 9.3% or $490,000 from the 2002
net income of $5.2 million. The higher level of earnings in 2003 reflects the
interaction of a number of factors. The most significant factor which
increased 2003 net income was the decrease in interest expense, primarily
because of lower rates, to $4.0 million from $5.3 million in 2002, a decrease
of $1.3 million or 24.0%. An additional factor was the increase in
non-interest income, primarily as a result of service charge income and gains
on the sale of securities, to $4.0 million from $3.1 million in 2002, an
increase of $807,000 or 25.6%. Salary and employee benefit expense increased
$464,000 or 7.6% primarily due to the addition of new employees, normal
salary increases and the increased costs of providing pension and health care
benefits. Occupancy and equipment expense increased $500,000 or 29.5%,
primarily due to increases in insurance premiums, building and equipment
depreciation expense and maintenance expense.

INTEREST INCOME AND INTEREST EXPENSE

Throughout the following discussion, net interest income and its components
are expressed on a tax equivalent basis which means that, where appropriate,
tax exempt income is shown as if it were earned on a fully taxable basis.

    The largest source of income for the Company is net interest income,
which represents interest earned on loans, securities and short-term
investments, less interest paid on deposits and other interest bearing
liabilities. Tax equivalent net interest income of $17.0 million for 2003
represented an increase of 6.7% compared to $15.9 million for 2002. Net
interest margin increased to 5.56% in 2003 compared to 5.55% in 2002, as
decreases in cost of deposits and borrowings exceeded decreases in earning
asset yields.

    Total interest income for 2003 was $21.1 million, compared to $21.3
million in 2002. The decrease in 2003 is the result of a 53 basis point
decrease in the earning asset yield which was partially offset by an increase
in the average balance of interest earning assets from $287.5 million in 2002
to $306.3 million in 2003, an increase of 6.5%. Interest income from the
increase in earning assets was offset by an overall decrease in average yield
on earning assets of 53 basis points in 2003. Total average securities
(securities available for sale and securities held to maturity) increased
$2.8 million or 2.3% in 2003 to $121.1 million. The increase in 2003 reflects
the investment of excess funds from increased deposits, which were not needed
to fund new loans. The increased in average security balances was offset by a
lower yield on total securities which decreased from 6.27% in 2002 to 5.62%
in 2003 due to the overall decline in interest rates. In 2003, average loans
increased $17.7 million to $183.3 million from $165.6 million in 2002.
Concurrently the average loan yield decreased from 8.32% in 2002 to 7.76% in
2003. Average residential and commercial real estate loans continued to make
up a major portion of the loan portfolio at 72.0% of total loans in 2003. In
2004, any increases in funding will continue to be allocated first to meet
loan demand, as necessary, and then to the securities portfolios.

    Total interest expense in 2003 decreased $1.3 million or 24.3% over 2002.
The average balance of interest bearing liabilities increased from $230.4
million in 2002 to $248.3 million in 2003, an increase of 7.8%. During 2003,
the average cost of total interest bearing liabilities decreased by


                                      11

<PAGE>

68 basis points, reflecting the lower overall market interest rates during
the year.

    Average interest bearing deposits increased $14.3 million to reach $213.8
million in 2003, an increase of 7.2%. The lower interest rates paid on time
deposits resulted from general market conditions in 2003 as compared to 2002,
a reduction of 92 basis points from 3.21% in 2002 to 2.29%. Interest rates on
interest bearing deposits decreased from an average rate paid of 2.01% in
2002 to 1.30% in 2003. In 2003, average demand deposit balances increased
13.3% over 2002.

PROVISION FOR LOAN LOSSES

The provision for loan losses was $620,000 in 2003 as compared to $900,000 in
2002 as a result of improved asset quality. Provisions for loan losses are
recorded to maintain the allowance for loan losses at a level deemed adequate
by management based on an evaluation of such factors as economic conditions
in the Company's market area, past loan loss experience, the financial
condition of individual borrowers, and underlying collateral values based on
independent appraisals. While management uses available information to
recognize losses on loans, future additions to the allowance for loan losses
may be necessary based on changes in economic conditions, particularly in
Sullivan County. In addition, Federal regulatory agencies, as an integral
part of their examination process, periodically review the Company's
allowance for loan losses and may require the Company to recognize additions
to the allowance based on their judgments about information available to them
at the time of their examination, which may not be currently available to
management.

    The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged-off against the allowance when
management believes that the collectibility of all or a portion of the
principal is unlikely. Recoveries of loans previously charged-off are
credited to the allowance when realized.

    Total non-performing loans decreased slightly from $3.2 million at
December 31, 2002 to $3.1 million at December 31, 2003. Net loan charge-offs
decreased from $446,000 in 2002 to $119,000 in 2003 while gross charge-offs
decreased from $662,000 in 2002 to $488,000 in 2003.

SUMMARY OF LOAN LOSS EXPERIENCE

The following table indicates the amount of charge-offs and recoveries in the
loan portfolio by category.

<TABLE>

ANALYSIS OF THE CHANGES IN ALLOWANCE
FOR LOAN LOSSES FOR 2003, 2002 AND 2001

<CAPTION>

                                        2003              2002              2001             2000              1999

<S>                               <C>               <C>               <C>              <C>               <C>
Balance at beginning of year      $3,068,000        $2,614,000        $2,435,000       $2,336,000        $2,310,000
Charge-offs:
   Commercial, financial
     and agriculture                (141,000)         (404,000)          (29,000)          (9,000)          (29,000)
   Real estate -- mortgage            (5,000)          (84,000)          (35,000)         (28,000)          (74,000)
   Installment loans                (240,000)         (108,000)         (179,000)        (214,000)         (246,000)
   Other loans                      (102,000)          (66,000)          (76,000)         (95,000)          (96,000)

      Total charge-offs             (488,000)         (662,000)         (319,000)        (346,000)         (445,000)

Recoveries:
   Commercial, financial
     and agriculture                 235,000            17,000            43,000           31,000            15,000
   Real estate -- mortgage             7,000            97,000            38,000           16,000            59,000
   Installment loans                 104,000            84,000            95,000           71,000            82,000
   Other loans                        23,000            18,000            22,000           27,000            15,000

      Total recoveries               369,000           216,000           198,000          145,000           171,000

Net charge-offs                     (119,000)         (446,000)         (121,000)        (201,000)         (271,000)
Provision charged to operations      620,000           900,000           300,000          300,000           300,000

Balance at end of year            $3,569,000        $3,068,000        $2,614,000       $2,435,000        $2,336,000

Ratio of net charge-offs to
  average outstanding loans             0.06%             0.27%             0.08%            0.14%             0.20%

</TABLE>


                                      12

<PAGE>

    The Company manages asset quality with a review process which includes
ongoing financial analysis of credits and both internal and external loan
review of existing outstanding loans and delinquencies. Management strives to
identify potential non-performing loans early; take charge-offs promptly
based on a realistic assessment of probable losses; and maintain an adequate
allowance for loan losses based on the inherent risk of loss in the existing
portfolio.

    The allowance for loan losses was $3.6 million at December 31, 2003
compared to $3.1 million and $2.6 million at December 31, 2002 and 2001,
respectively. The allowance as a percentage of total loans was 1.81% at
December 31, 2003, compared to 1.78% and 1.61% at December 31, 2002 and 2001,
respectively. The allowance's coverage of non-performing loans was 114.3% at
December 31, 2003 compared to 95.3% and 157.7% at December 31, 2002 and 2001
respectively.

    No portion of the allowance for loan losses is restricted to any loan or
group of loans, as the entire allowance is available to absorb charge-offs in
any loan category. The amount and timing of future charge-offs and allowance
allocations may vary from current estimates and will depend on local economic
conditions. The following table shows the allocation of the allowance for
loan losses to major portfolio categories and the percentage of each loan
category to total loans outstanding.

<TABLE>

DISTRIBUTION OF ALLOWANCE FOR LOAN LOSSES AT DECEMBER 31,

<CAPTION>

                                2003                 2002                2001                2000                1999

                                    Percent             Percent             Percent              Percent             Percent
                                   of Loans            of Loans            of Loans             of Loans            of Loans
                        Amount of   in Each Amount of   in Each Amount of   in Each  Amount of   in Each Amount of   in Each
                        Allowance  Category  Allowance Category Allowance  Category  Allowance  Category Allowance  Category
                         for Loan  to Total  for Loan  to Total  for Loan  to Total   for Loan  to Total  for Loan  to Total
(Dollars in Thousands)     Losses     Loans    Losses     Loans    Losses     Loans     Losses     Loans    Losses     Loans

<S>                        <C>        <C>      <C>        <C>      <C>        <C>      <C>         <C>      <C>        <C>
Residential mortgages<F1>  $1,011      52.4%   $  890      52.2%   $  848      55.1%   $   802      56.0%   $  816      55.0%
Commercial mortgages          300      30.2       300      27.3       300      21.6        500      21.4       275      22.3
Commercial loans            1,255       8.7      1010       8.1       630       7.0        381       7.2       545       9.4
Installment loans             828       7.8       644      11.0       603      13.4        542      13.9       514      12.0
Other loans                   175       0.9       224       1.4       233       2.9        210       1.5       186       1.3

      Total                $3,569     100.0%   $3,068     100.0%   $2,614     100.0%    $2,435     100.0%   $2,336     100.0%

<FN>

<F1> Includes home equity loans.

</FN>

</TABLE>

NONACCRUAL AND PAST DUE LOANS

The Company places a loan on nonaccrual status when collectability of
principal or interest is doubtful, or when either principal or interest is 90
days or more past due and the loan is not well secured and in the process of
collection. Interest payments received on nonaccrual loans are applied as a
reduction of the principal balance when concern exists as to the ultimate
collection of principal. A distribution of nonaccrual loans and loans 90 days
or more past due and still accruing interest is shown in the following table.

<TABLE>

<CAPTION>

DECEMBER 31, 2003
                                                    90 Days or
                                                   More, Still
Loan Category                     Nonaccrual          Accruing             Total      Percentage<F1>       Percentage<F2>

<S>                               <C>               <C>               <C>                       <C>             <C>
Residential mortgages
  (includes home equity loans)    $  411,000        $  379,000        $  790,000                0.8%             25.3%
Commercial mortgages                 514,000         1,364,000         1,878,000                3.1              60.1
Commercial loans                     434,000             7,000           441,000                2.6              14.1
Installment loans                         --            14,000            14,000                0.1               0.5

      Total                       $1,359,000        $1,764,000        $3,123,000                1.6%            100.0%

<FN>

<F1> Percentage of gross loans outstanding for each loan category.

<F2> Percentage of total nonaccrual and 90 day past due loans.

</FN>

</TABLE>

<TABLE>

<CAPTION>

DECEMBER 31, 2002
                                                    90 Days or
                                                   More, Still
Loan Category                     Nonaccrual          Accruing             Total      Percentage<F1>       Percentage<F2>

<S>                               <C>                  <C>            <C>                       <C>             <C>
Residential mortgages             $1,766,000           $57,000        $1,823,000                2.5%             56.6%
Commercial mortgages                 367,000                --           367,000                0.8              11.4
Commercial loans                     888,000                --           888,000                5.1              27.6
Installment loans                    141,000                --           141,000                0.8               4.4

      Total                       $3,162,000           $57,000        $3,219,000                1.9%            100.0%

<FN>

<F1> Percentage of gross loans outstanding for each loan category.

<F2> Percentage of total nonaccrual and 90 day past due loans.

</FN>

</TABLE>


                                      13

<PAGE>

<TABLE>

<CAPTION>

DECEMBER 31, 2001
                                                    90 Days or
                                                   More, Still
Loan Category                     Nonaccrual          Accruing             Total      Percentage<F1>   Percentage<F2>

<S>                                 <C>               <C>             <C>                       <C>             <C>
Residential mortgages
  (includes home equity loans)      $126,000          $539,000        $  665,000                1.0%             40.1%
Commercial mortgages                 439,000            95,000           534,000                1.3              32.2
Commercial loans                     269,000           167,000           436,000                2.4              26.3
Installment loans                     15,000             8,000            23,000                0.1               1.4

      Total                         $849,000          $809,000        $1,658,000                1.0%            100.0%

<FN>

<F1> Percentage of gross loans outstanding for each loan category.

<F2> Percentage of total nonaccrual and 90 day past due loans.

</FN>

</TABLE>

    Total nonperforming residential mortgage, commercial mortgage and
commercial loans represent 0.8%, 3.1%, and 2.6% of the respective portfolio
totals, compared to 2.5%, 0.8%, and 5.1% at December 31, 2002, respectively.
The majority of the Company's total nonaccrual and past due loans are secured
loans and, as such, management anticipates there will be limited risk of loss
in their ultimate resolution.

    From time to time, loans may be renegotiated in a troubled debt
restructuring when the Company determines that it will ultimately receive
greater economic value under the new terms than through foreclosure,
liquidation, or bankruptcy. Candidates for renegotiation must meet specific
guidelines. There were no restructured loans as of December 31, 2003, 2002,
and 2001.

LOAN PORTFOLIO

Set forth below is selected information concerning the composition of our
loan portfolio in dollar amounts and in percentages as of the dates
indicated.

<TABLE>

<CAPTION>

LOAN PORTFOLIO COMPOSITION

At December 31,             2003                 2002                  2001               2000                1999

(Dollars in Thousands) Amount    Percent    Amount    Percent    Amount    Percent   Amount   Percent   Amount   Percent

<S>                  <C>          <C>     <C>         <C>     <C>         <C>     <C>         <C>     <C>          <C>
REAL ESTATE LOANS
Residential          $ 78,339      39.6%  $ 72,559     41.7%  $ 67,246     40.3%  $ 64,933     42.6%  $ 65,676      45.5%
Commercial             59,799      30.2     44,807     25.7     39,940     23.9     33,638     22.1     29,211      20.3
Home equity            18,337       9.3     14,825      8.5     12,756      7.6     11,496      7.6     10,359       7.2
Farm land               2,872       1.4      1,828      1.1      2,009      1.2      1,537      1.0      1,388       1.0
Construction            4,102       2.1      3,414      2.0      5,570      3.3      1,416      0.9      1,915       1.3

                     $163,449      82.6   $137,433     79.0   $127,521     76.3   $113,070     74.2   $108,549      75.3

OTHER LOANS
Commercial loans     $ 17,157       8.7%  $ 17,445     10.0%  $ 18,111     10.9%  $ 17,822     11.7%  $ 13,498       9.4%
Consumer
  installment loans    15,350       7.7     17,314      9.9     19,222     11.5     19,685     12.9     19,922      13.8
Other consumer loans    1,488       0.8      1,537      0.9      1,504      0.9      1,409      0.9      1,876       1.3
Agricultural loans        403       0.2        375      0.2        667      0.4        421      0.3        370       0.2

                       34,398      17.4     36,671     21.0     39,504     23.7     39,337     25.8     35,666      24.7

   Total loans        197,847     100.0%   174,104    100.0%   167,025    100.0%   152,357    100.0%   144,215     100.0%

Unearned discounts     (1,172)              (2,127)             (4,314)             (4,901)             (3,954)
Allowance for
  loan loss            (3,569)              (3,068)             (2,614)             (2,435)             (2,336)

   Total loans, net  $193,106             $168,909            $160,097            $145,021            $137,925

</TABLE>


                                      14

<PAGE>

    The following table indicates the amount of loans in portfolio categories
according to their period to maturity. The table also indicates the dollar
amount of these loans that have predetermined or fixed rates vs. variable or
adjustable rates.

<TABLE>

MATURITIES AND SENSITIVITIES OF LOANS TO
CHANGES IN INTEREST RATES AT DECEMBER 31, 2003

<CAPTION>
                                                                        One Year
                                                      One Year           Through            After
                                                       or Less        Five Years         Five Years          Total

<S>                                                    <C>                <C>              <C>              <C>
Commercial and agricultural                            $ 9,095            $5,966           $2,499           $17,560
Real estate construction                                 4,002               100               --             4,102

      Total                                            $13,097            $6,066           $2,499           $21,662

Interest sensitivity of loans:
   Predetermined rate                                  $10,221            $5,854           $2,049           $18,124
   Variable rate                                         2,876               212              450             3,538

      Total                                            $13,097            $6,066           $2,499           $21,662

</TABLE>

OTHER REAL ESTATE OWNED

Other real estate owned represents properties acquired through foreclosure
and is recorded on an individual-asset basis at the lower of (1) fair value
less estimated costs to sell or (2) cost, which represents the loan balance
at initial foreclosure. When a property is acquired, the excess of the loan
balance over the fair value of the property is charged to the allowance for
loan losses. Subsequent write downs to reflect further declines in fair value
are included in non-interest expense.

    The following are the changes in other real estate owned during the last
two years:

Years Ended December 31,         2003              2002

Beginning balance           $ 126,000       $ 1,237,000
Additions (includes
  costs capitalized)          176,000           414,000
Sales                        (230,000)       (1,515,000)
Write downs                   (29,000)          (10,000)

Ending balance              $  43,000       $   126,000


NON-INTEREST INCOME AND EXPENSE

Non-interest income primarily consists of service charges, commissions and
fees for various banking services, and securities gains and losses. Total
non-interest income in 2003 increased 25.6% or $807,000 over 2002. The
increase is attributable to securities gains, higher monthly service charges
for checking accounts, and income recorded for the increase in cash surrender
value of bank-owned life insurance.

    Non-interest expense increased by $1.6 million or 15.6% in 2003. Salaries
and employee benefit expense increased 7.6% to $6.5 million in 2003. This
increase was caused by increased expenses for normal salary increases and
increased costs of providing pension and healthcare benefits. Occupancy and
equipment expense increased 29.5% to reach $2.2 million in 2003, due to
increases in insurance premiums, building and equipment depreciation expense
and maintenance expense. Net other real estate owned expense (income)
increased $391,000 to $83,000 in 2003 from $308,000 of income in 2003
primarily due to the lack of gains on sales. Other non-interest expense
increased by $222,000 or 8.5% in 2003 to $2.8 million from $2.6 million in
2002.

INCOME TAX EXPENSE

Income tax expense totaled $1,984,000 in 2003 versus $2,223,000 in 2002. The
effective tax rate approximated 25.7% in 2003 and 29.8% in 2002. These
relatively low effective tax rates reflects the favorable tax treatment
received on tax-exempt interest income and net earnings from bank-owned life
insurance.

RESULTS OF OPERATIONS 2002 VERSUS 2001

NET INCOME

Net income for 2002 of $5.2 million increased 44.6% or $1.6 million from the
2001 net income of $3.6 million. The higher level of earnings in 2002
reflects the interaction of a number of factors. The most significant factor
which increased 2002 net income was the decrease in interest expense to $5.3
million from $7.6 million in 2001, a decrease of $2.3 million or 30.1%. An
additional factor was the increase in interest income to $20.6 million from
$20.2 million in 2001, an increase of $405,000 or 2.0%. The provision for
loan losses was $900,000 in 2002 versus $300,000 in 2001. Salary expense
increased $343,000 or 9.1% in 2002, primarily due to the addition of new
employees and normal salary increases. Employee benefit


                                      15

<PAGE>

expenses increased by $369,000 or 23.0% primarily due to increased costs of
providing pension and health care benefits. Net other real estate owned
expense decreased by $1,022,000 in 2002, primarily due to gains from the
disposition of foreclosed condominium units.

INTEREST INCOME AND INTEREST EXPENSE

The largest source of income for the Company is net interest income, which
represents interest earned on loans, securities and short-term investments,
less interest paid on deposits and other interest bearing liabilities. Tax
equivalent net interest income of $15.9 million for 2002 represented an
increase of 21.5% compared to $13.1 million for 2001. Net interest margin
increased to 5.55% in 2002 compared to 4.96% in 2001, as decreases in cost of
deposits and borrowings exceeded decreases in earning asset yields.

    Total interest income for 2002 was $21.3 million, compared to $20.8
million in 2001. The increase is the result of an increase in the average
balance of interest earning assets from $264.8 million in 2001 to $287.5
million in 2002, an increase of 8.6%. Interest income from the increase in
earning assets was offset by an overall decrease in average yield on earning
assets of 44 basis points in 2002. Total average securities (securities
available for sale and securities held to maturity) increased $16.6 million
or 16.4% in 2002 to $118.3 million. The increase in 2002 reflects the
investment of excess funds from increased deposits, which were not needed to
fund new loans. The increase in average security balances was offset by a
lower yield on total securities which decreased from 6.63% in 2001 to 6.27%
in 2002 due to the overall decline in interest rates. In 2002, average loans
increased $8.4 million to $165.6 million from $157.2 million in 2001.
Concurrently the average loan yield decreased from 8.75% in 2001 to 8.32% in
2002. Average residential and commercial real estate loans continued to make
up a major portion of the loan portfolio at 71.1% of total loans in 2002.

    Total interest expense in 2002 decreased $2.3 million or 30.1% over 2001.
The average balance of interest bearing liabilities increased from $214.5
million in 2001 to $230.4 million in 2002, an increase of 7.4%. During 2002,
the average cost of total interest bearing liabilities decreased by 125 basis
points, reflecting the lower overall market interest rates during the year.

    Average interest bearing deposits increased $6.6 million to reach $199.5
million in 2002, an increase of 3.4%. The lower interest rates paid on time
deposits resulted from general market conditions in 2002 as compared to 2001,
a reduction of 165 basis points from 4.86% in 2001 to 3.21%. Interest rates
on interest bearing deposits decreased from an average rate paid of 3.39% in
2001 to 2.01% in 2002. In 2002, average demand deposit balances increased
16.7% over 2001.

PROVISION FOR LOAN LOSSES

The provision for loan losses was $900,000 in 2002 versus $300,000 in 2001.
Provisions for loan losses are recorded to maintain the allowance for loan
losses at an amount management considers adequate to cover loan losses, which
are deemed probable and can be estimated. These provisions were based upon a
number of factors, including asset classifications, management's assessment
of the credit risk inherent in the portfolio, historical loan loss
experience, economic trends, industry experience and trends, estimated
collateral values and underwriting policies. Total non-performing loans
increased from $1.7 million at December 31, 2001 to $3.2 million at December
31, 2002. Net loan charge-offs increased from $121,000 in 2001 to $446,000
2002 At December 31, 2002 the allowance for loan losses equaled $3.1 million
representing 1.78% of total gross loans outstanding and 95.3% of total
non-performing loans.

NON-INTEREST INCOME AND EXPENSE

Non-interest income primarily consists of service charges, commissions and
fees for various banking services and securities gains and losses. Total
non-interest income in 2002 increased 11.8% or $332,000 over 2001. Increase
is attributable to ATM debit card revenue, income from ATM fees charged to
nonbank customers, increases in fees for NSF checks, higher monthly service
charges for checking accounts, and income recorded for the increase in cash
surrender value of bank-owned life insurance.

    Non-interest expense decreased by $85,000 or 0.8% in 2002. Salary and
wage expense combined with employee benefit expense increased 13.3% to $6.1
million in 2002. This increase was caused by increased expenses for normal
salary increases and increased costs of providing pension and healthcare
benefits. Occupancy and equipment expense increased 3.5% to reach $1.7
million in 2002. Net other real estate owned expense (income) decreased
$1,022,000 to ($308,000) in 2002 from $714,000 in 2001 primarily due to gains
from the sales of Grandview Palace units. Other non-interest expense
increased by $168,000 or 6.9% in 2002 to $2.6 million from $2.4 million in
2001.

INCOME TAX EXPENSE

Income tax expense totaled $2,223,000 in 2002 versus $1,322,000 in 2001. The
effective tax rate approximated 29.8% in 2002 and 26.7% in 2001. This
relatively low tax rate reflects the favorable tax treatment received on
tax-exempt interest income and net earnings from bank-owned life insurance.


                                      16

<PAGE>

OFF-BALANCE SHEET ARRANGEMENTS

In the normal course of operations, the Company engages in a variety of
financial transactions that, in accordance with generally accepted accounting
principles, are not recorded in the financial statements, or are recorded in
amounts that differ from the notional amounts. These transactions involve, to
varying degrees, elements of credit, interest rate, and liquidity risk. Such
transactions are used by us for general corporate purposes or for customer
needs. Corporate purpose transactions are used to help manage credit,
interest rate, and liquidity risk or to optimize capital. Customer
transactions are used to manage customers' requests for funding. See Note 16
of Notes to Consolidated Financial Statements contained elsewhere within this
report for further information concerning off-balance sheet arrangements.

LIQUIDITY

Liquidity is the ability to provide sufficient cash flow to meet financial
commitments such as additional loan demand and withdrawals of existing
deposits. The Company's primary sources of liquidity are its deposit base;
FHLB borrowings; repayments and maturities on loans; short-term assets such
as federal funds and short-term interest bearing deposits in banks; and
maturities and sales of securities available for sale. These sources are
available in amounts sufficient to provide liquidity to meet the Company's
ongoing funding requirements. The Bank's membership in the FHLB of New York
enhances liquidity in the form of overnight and 30 day lines of credit of
approximately $31.9 million, which may be used to meet unforeseen liquidity
demands. There were overnight borrowings of $5,000,000 at a rate of 1.04%
being used at December 31, 2003. Five separate FHLB term advances totaling
$27.0 million at December 31, 2003 were being used to fund securities
leverage transactions.

    In 2003, cash generated from operating activities amounted to $6.6
million and cash generated from financing activities amounted to $22.1
million. These amounts were offset by a use of cash in investing activities
of $25.5 million, resulting in a net increase in cash and cash equivalents of
$3.1 million. See the Consolidated Statements of Cash Flows for additional
information.

    The following table reflects the Maturities of Time Deposits of $100,000
or more:

MATURITY SCHEDULE OF TIME DEPOSITS
OF $100,000 OR MORE AT DECEMBER 31, 2003

Deposits

Due three months or less                    $ 7,833,000
Over three months through six months          2,691,000
Over six months through twelve months         2,960,000
Over twelve months                            9,379,000

                                            $22,863,000

    Management anticipates much of these maturing deposits to rollover at
maturity, and that liquidity will be adequate to meet funding requirements.

CAPITAL ADEQUACY

One of management's primary objectives is to maintain a strong capital
position to merit the confidence of depositors, the investing public, bank
regulators and shareholders. A strong capital position should help the
Company withstand unforeseen adverse developments and take advantage of
profitable investment opportunities when they arise. Stockholders' equity
increased $3.3 million or 10.1% in 2003 following an increase of 19.0% in
2002.

    The Company retained $4.3 million from 2003 earnings, while an other
comprehensive loss decreased stockholders' equity by $1.0 million. In
accordance with regulatory capital rules, the adjustment for the after tax
net unrealized gain or loss on securities available for sale is not
considered in the computation of regulatory capital ratios.

    Under the Federal Reserve Bank's risk-based capital rules, the Company's
Tier I risk-based capital was 16.7% and total risk-based capital was 17.9% of
risk-weighted assets. These risk-based capital ratios are well above the
minimum regulatory requirements of 4.0% for Tier I capital and 8.0% for total
capital. The Company's leverage ratio (Tier I capital to average assets) of
10.3% is well above the 4.0% minimum regulatory requirement.


                                      17

<PAGE>

The following table shows the Company's actual capital measurements compared
to the minimum regulatory requirements.

<TABLE>

<CAPTION>

As of December 31,                                                2003                  2002

<S>                                                          <C>                   <C>
TIER I CAPITAL
Stockholders' equity, excluding the after-tax net
  unrealized gain on securities available for sale           $ 35,013,000          $ 30,544,000

TIER II CAPITAL
Allowance for loan losses<F1>                                   2,604,000             2,287,000

Total risk-based capital                                     $ 37,617,000          $ 32,831,000

Risk-weighted assets<F2>                                     $209,678,000          $184,133,000

Average assets                                               $340,575,000          $313,022,000

RATIOS
Tier I risk-based capital (minimum 4.0%)                            16.70%                16.60%
Total risk-based capital (minimum 8.0%)                             17.90%                17.80%
Leverage (minimum 4.0%)                                             10.30%                 9.80%

<FN>

<F1> The allowance for loan losses is limited to 1.25% of risk-weighted
     assets for the purpose of this calculation.

<F2> Risk-weighted assets have been reduced for the portion allowance for
     loan losses excluded from total risk-based capital.

</FN>

</TABLE>

CONTRACTUAL OBLIGATIONS

The Company is contractually obligated to make the following payments on
long-term debt and leases as of December 31, 2003:

<TABLE>

<CAPTION>

                                   Less Than               1-3               3-5        More Than
                                      1 Year             Years             Years          5 Years             Total

<S>                                   <C>               <C>              <C>               <C>              <C>
Federal Home Loan
  Bank borrowings                     $8,500            $3,500           $10,000           $5,000           $27,000
Operating leases                         118               188                87               16               409

      Total                           $8,618            $3,688           $10,087           $5,016           $27,409

</TABLE>

RECENT ACCOUNTING PRONOUNCEMENTS

In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for
Asset Retirement Obligations, which addresses financial accounting and
reporting for obligations associated with retirement of tangible long-lived
assets and the associated asset retirement costs. This statement is effective
for financial statements issued for fiscal years beginning after June 15,
2002 and was adopted by the Company on January 1, 2003. The adoption of this
pronouncement did not have any effect on the Company's consolidated financial
statements.

    In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, which addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). This statement is effective for exit or disposal activities
initiated after December 31, 2002 and did not have any effect on the
Company's consolidated financial statements.

    In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities. This statement amends and
clarifies financial accounting and reporting for derivative instruments and
hedging activities under SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. This statement is effective for contracts entered
into or modified after June 30, 2003 and hedging relationships designated
after June 30, 2003. The adoption of this pronouncement did not have any
effect on the Company's consolidated financial statements.

    In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity.
This statement establishes standards for the classification and measurement
of certain financial instruments with characteristics of both liabilities and
equity. Under SFAS No. 150, certain freestanding financial instruments that
embody obligations of the issuer, and that are now classified as equity, must
be classified as liabilities


                                      18

<PAGE>

(or as assets in some circumstances). SFAS No. 150 also includes required
disclosures for financial instruments within its scope. For SEC registrants
such as the Company, SFAS No. 150 was generally effective for financial
instruments entered into or modified after May 31, 2003 and otherwise at the
beginning of the first interim period beginning after June 15, 2003. The
effective date has been deferred indefinitely for certain types of
mandatorily redeemable financial instruments. The Company currently does not
have any financial instruments that are within the scope of SFAS No. 150.

    In December 2003, the FASB issued Interpretation No. 46 (revised),
Consolidation of Variable Interest Entities (FIN No. 46R), which addresses
how a business enterprise should evaluate whether it has a controlling
financial interest in an entity through means other than voting rights and,
accordingly, should consolidate the variable interest entity (VIE). FIN No.
46R replaces FIN No. 46 that was issued in January 2003. The Company is
required to apply FIN No. 46R to variable interests generally as of March 31,
2004 and to special-purpose entities as of December 31, 2003. For any VIEs
that must be consolidated under FIN No. 46R that were created before January
1, 2004, the assets, liabilities and non-controlling interest of the VIE
initially would be measured at their carrying amounts, and any difference
between the net amount added to the balance sheet and any previously
recognized interest would be recorded as a cumulative effect of an accounting
change. If determining the carrying amounts is not practicable, fair value at
the date FIN No. 46R first applies may be used to measure the assets,
liabilities and non-controlling interest of the VIE. The Company held no
interest in special-purpose entities as December 31, 2003. Adoption of FIN
No. 46R with respect to other types of VIEs in the first quarter of 2004 is
not expected to have any impact on the Company's consolidated financial
statements.


                                      19

<PAGE>

DISTRIBUTION OF ASSETS, LIABILITIES & STOCKHOLDERS' EQUITY:
INTEREST RATES & INTEREST DIFFERENTIAL

The following schedule presents the condensed average consolidated balance
sheets for 2003, 2002 and 2001. The total dollar amount of interest income
from earning assets and the resultant yields are calculated on a tax
equivalent basis. The interest paid on interest-bearing liabilities,
expressed in dollars and rates, are also presented.

<TABLE>

CONSOLIDATED AVERAGE BALANCE SHEET 2003

<CAPTION>
                                                                       Percentage
                                                                         of Total
                                                           Average        Average           Interest        Average
                                                          Balance          Assets        Earned/Paid     Yield/Rate

<S>                                                   <C>                     <C>        <C>                     <C>
ASSETS
Securities available for sale and held to maturity:<F3>
Taxable securities                                    $ 75,504,000             22.17%    $ 3,893,000              5.16%
Tax exempt securities                                   45,579,000             13.38       2,913,000              6.39%

      Total securities                                 121,083,000             35.55       6,806,000              5.62%

Short-term investments                                   1,871,000              0.55          23,000              1.23%
Loans (net of unearned discount)
   Real estate mortgages                               131,978,000             38.75      10,108,000              7.66%
   Home equity loans                                    16,826,000              4.94       1,073,000              6.38%
   Time and demand loans                                14,387,000              4.22         947,000              6.58%
   Installment and other loans                          20,144,000              5.92       2,098,000             10.42%

      Total loans<F1>                                  183,335,000             53.83      14,226,000              7.76%

      Total interest earning assets                    306,289,000             89.93      21,055,000              6.87%

Allowance for loan losses                               (3,149,000)            (0.92)
Unrealized gains and losses on portfolio                 1,924,000              0.57
Cash and due from banks (demand)                        12,436,000              3.65
Fixed assets (net)                                       3,206,000              0.94
Bank owned life insurance                               12,005,000              3.52
Other assets                                             7,864,000              2.31

      Total assets                                    $340,575,000            100.00%

LIABILITIES AND STOCKHOLDERS' EQUITY
NOW and Super NOW deposits                            $ 37,363,000             10.97%        169,000              0.45%
Savings and insured money market deposits               86,323,000             25.34         542,000              0.63
Time deposits                                           90,067,000             26.45       2,067,000              2.29

      Total interest bearing deposits                  213,753,000             62.76       2,778,000              1.30

Federal funds purchased and other short-term debt        4,808,000              1.41          56,000              1.16
Long-term debt                                          29,753,000              8.74       1,203,000              4.04

      Total interest bearing liabilities               248,314,000             72.91       4,037,000              1.63

Demand deposits                                         54,934,000             16.13
Other liabilities                                        3,766,000              1.11

      Total liabilities                                307,014,000             90.15
Stockholders' equity                                    33,561,000              9.85

      Total liabilities and stockholders' equity      $340,575,000            100.00%

Net interest income                                                                      $17,018,000

Net interest spread                                                                                               5.24%

Net interest margin<F2>                                                                                           5.56%

<FN>

<F1> For purpose of this schedule, interest in nonaccruing loans has been
     included only to the extent reflected in the consolidated income statement.
     However, the nonaccrual loan balances are included in the average amount
     outstanding.

<F2> Computed by dividing net interest income by total interest earning assets.

<F3> Yields on securities available for sale are based on amortized cost.

</FN>

</TABLE>


                                      20
<PAGE>

DISTRIBUTION OF ASSETS, LIABILITIES & STOCKHOLDERS' EQUITY:
INTEREST RATES & INTEREST DIFFERENTIAL

<TABLE>

CONSOLIDATED AVERAGE BALANCE SHEET 2002

<CAPTION>
                                                                       Percentage
                                                                         of Total
                                                           Average        Average         Interest         Average
                                                          Balance          Assets      Earned/Paid      Yield/Rate

<S>                                                   <C>                   <C>        <C>                  <C>
ASSETS
Securities available for sale and held to maturity:<F3>
Taxable securities                                    $ 92,083,000           29.42%    $ 5,542,000           6.02%
Tax exempt securities                                   26,241,000            8.38       1,873,000           7.14%

      Total securities                                 118,324,000           37.80       7,415,000           6.27%

Short-term investments                                   3,550,000            1.13          78,000           2.20%
Loans (net of unearned discount)
   Real estate mortgages                               117,744,000           37.62       9,619,000           8.17%
   Home equity loans                                    13,973,000            4.46         981,000           7.02%
   Time and demand loans                                13,370,000            4.27         903,000           6.75%
   Installment and other loans                          20,520,000            6.56       2,283,000          11.13%

      Total loans<F1>                                  165,607,000           52.91      13,786,000           8.32%

      Total interest earning assets                    287,481,000           91.84      21,279,000           7.40%

Allowance for loan losses                               (2,666,000)          (1.00)
Unrealized gains and losses on portfolio                 1,593,000            0.51
Cash and due from banks (demand)                        10,299,000            3.29
Fixed assets (net)                                       3,106,000            0.99
Bank owned life insurance                                7,666,000            2.45
Other assets                                             5,543,000            1.77

      Total assets                                    $313,022,000          100.00%

LIABILITIES AND STOCKHOLDERS' EQUITY
NOW and Super NOW deposits                            $ 33,799,000           10.80%        241,000           0.71%
Savings and insured money market deposits               73,379,000           23.44         806,000           1.10
Time deposits                                           92,309,000           29.49       2,960,000           3.21

      Total interest bearing deposits                  199,487,000           63.73       4,007,000           2.01

Federal funds purchased and other short-term debt          927,000            0.30          20,000           2.16
Long-term debt                                          30,000,000            9.58       1,304,000           4.35

      Total interest bearing liabilities               230,414,000           73.61       5,331,000           2.31

Demand deposits                                         48,466,000           15.48
Other liabilities                                        3,871,000            1.24

      Total liabilities                                282,751,000           90.33
Stockholders' equity                                    30,271,000            9.67

      Total liabilities and stockholders' equity      $313,022,000          100.00%

Net interest income                                                                    $15,948,000

Net interest spread                                                                                          5.09%

Net interest margin<F2>                                                                                      5.55%

<FN>

<F1> For purpose of this schedule, interest in nonaccruing loans has been
     included only to the extent reflected in the consolidated income statement.
     However, the nonaccrual loan balances are included in the average amount
     outstanding.

<F2> Computed by dividing net interest income by total interest earning assets.

<F3> Yields on securities available for sale are based on amortized cost.

</FN>

</TABLE>


                                      21

<PAGE>

DISTRIBUTION OF ASSETS, LIABILITIES & STOCKHOLDERS' EQUITY:
INTEREST RATES & INTEREST DIFFERENTIAL

<TABLE>

CONSOLIDATED AVERAGE BALANCE SHEET 2001

<CAPTION>
                                                                       Percentage
                                                                         of Total
                                                           Average        Average          Interest        Average
                                                          Balance          Assets       Earned/Paid     Yield/Rate

<S>                                                   <C>                   <C>        <C>                   <C>
ASSETS
Securities available for sale and held to maturity:<F3>
Taxable securities                                    $ 81,577,000           28.44%    $ 5,204,000           6.38%
Tax exempt securities                                   20,099,000            7.01       1,542,000           7.67

      Total securities                                 101,676,000           35.45       6,746,000           6.63

Short-term investments                                   5,913,000            2.06         258,000           4.36
Loans (net of unearned discount)
   Real estate mortgages                               108,839,000           37.95       9,246,000           8.50
   Home equity loans                                    11,807,000            4.12         987,000           8.36
   Time and demand loans                                10,935,000            3.81         976,000           8.93
   Installment and other loans                          25,584,000            8.92       2,541,000           9.93

      Total loans<F1>                                  157,165,000           54.80      13,750,000           8.75

      Total interest earning assets                    264,754,000           92.31      20,754,000           7.84%

Allowance for loan losses                               (2,553,000)          (1.00)
Unrealized gains and losses on portfolio                   619,000            0.22
Cash and due from banks (demand)                         8,787,000            3.06
Fixed assets (net)                                       2,645,000            0.92
Bank owned life insurance                                7,112,000            2.48
Other assets                                             5,459,000            1.90

      Total assets                                    $286,823,000          100.00%

LIABILITIES AND STOCKHOLDERS' EQUITY
NOW and Super NOW deposits                            $ 29,668,000           10.34%        416,000           1.40%
Savings and insured money market deposits               63,864,000           22.27       1,295,000           2.03
Time deposits                                           99,384,000           34.65       4,833,000           4.86

      Total interest bearing deposits                  192,916,000           67.26       6,544,000           3.39

Federal funds purchased and other short-term debt          409,000            0.14          15,000           3.67
Long-term debt                                          21,156,000            7.38       1,068,000           5.05

      Total interest bearing liabilities               214,481,000           74.78       7,627,000           3.56

Demand deposits                                         41,515,000           14.47
Other liabilities                                        2,688,000            0.94

      Total liabilities                                258,684,000           90.19
Stockholders' equity                                    28,139,000            9.81

      Total liabilities and stockholders' equity      $286,823,000          100.00%

Net interest income                                                                    $13,127,000

Net interest spread                                                                                          4.28%

Net interest margin<F2>                                                                                      4.96%

<FN>

<F1> For purpose of this schedule, interest in nonaccruing loans has been
     included only to the extent reflected in the consolidated income statement.
     However, the nonaccrual loan balances are included in the average amount
     outstanding.

<F2> Computed by dividing net interest income by total interest earning assets.

<F3> Yields on securities available for sale are based on amortized cost.

</FN>

</TABLE>


                                      22

<PAGE>

The following schedule sets forth, for each major category of interest
earning assets and interest bearing liabilities, the dollar amount of
interest income (calculated on a tax equivalent basis) and interest expense,
and changes therein for 2003 as compared to 2002, and 2002 as compared to
2001.

    The changes in interest income and expense attributable to both rate and
volume have been allocated to rate on a consistent basis.

<TABLE>

VOLUME AND RATE ANALYSIS

<CAPTION>
                                   2003 Compared to 2002                        2002 Compared to 2001
                                     Increase (Decrease)                         Increase (Decrease)
                                       Due to Change In                            Due to Change In

                                    Volume           Rate         Total         Volume           Rate          Total

<S>                             <C>            <C>            <C>            <C>           <C>            <C>
INTEREST INCOME
Investment securities and
  securities available for sale $   173,000    $  (782,000)   $  (609,000)   $1,104,000    $  (435,000)   $   669,000
Short-term investments              (37,000)       (18,000)       (55,000)     (103,000)       (77,000)      (180,000)
Loans                             1,477,000     (1,037,000)       440,000       743,000       (707,000)        36,000

      Total interest income       1,613,000     (1,837,000)      (224,000)    1,744,000     (1,219,000)       525,000


INTEREST EXPENSE
NOW and
  Super NOW deposits              2,530,000     (2,602,000)       (72,000)       58,000       (233,000)      (175,000)
Savings and insured
  money market deposits             137,000       (401,000)      (264,000)      192,000       (704,000)      (512,000)
Time deposits                       (72,000)      (821,000)      (893,000)     (344,000)    (1,529,000)    (1,873,000)
Federal funds purchased
and other short-term debt           205,000       (169,000)        36,000        27,000          1,000         28,000
Long-term debt                      (11,000)       (90,000)      (101,000)      447,000       (211,000)       236,000

      Total interest expense      2,789,000     (4,083,000)    (1,294,000)      380,000     (2,676,000)    (2,296,000)

      Net interest income       $(1,176,000)    $2,246,000    $ 1,070,000    $1,364,000    $ 1,457,000    $ 2,821,000

</TABLE>

INFLATION

The Company's operating results are affected by inflation to the extent that
interest rates, loan demand and deposit levels adjust to inflation and impact
net interest income. Management can best counter the effect of inflation over
the long term by managing net interest income and controlling expenses.

<TABLE>

SECURITIES AVAILABLE FOR SALE AND INVESTMENT SECURITIES ANALYSIS<F1>

ANALYSIS BY TYPE AND BY PERIOD TO MATURITY

<CAPTION>
                                  Under 1 Year           1-5 Years          5-10 Years         After 10 Years

December 31, 2003              Balance    Rate      Balance    Rate       Balance    Rate      Balance     Rate       Total

<S>                          <C>           <C>     <C>           <C>     <C>           <C>     <C>           <C>     <C>
U.S. Government Agency       $17,485,000   5.27%   $ 7,488,000   5.11%   $ 9,964,000   4.48%   $24,900,000   5.40%   $ 59,837,000
Municipal securities --
  tax exempt<F2>               4,477,000   3.48     11,007,000   4.62     30,641,000   3.46      4,123,000   4.05      50,248,000
Mortgage backed securities
  and collateralized
  mortgage obligations         6,419,000   6.00        793,000   5.24        791,000   4.82      1,431,000   4.82       9,434,000

                             $28,381,000   5.15%   $19,288,000   4.83%   $41,396,000   2.65%   $30,454,000   4.64%   $119,519,000

<FN>

<F1> The analysis shown above combines the Company's Securities Available for
     Sale portfolio and the Investment Securities portfolio, excluding equity
     securities. All securities are included above at their amortized cost.

<F2> Yields on tax exempt securities have not been stated on a tax equivalent
     basis.

</FN>

</TABLE>


                                      23

<PAGE>

MANAGEMENT'S STATEMENT OF RESPONSIBILITY

The consolidated financial statements and related information in the 2003
Annual Report were prepared by management in conformity with accounting
principles generally accepted in the United States of America. Management is
responsible for the integrity and objectivity of the consolidated financial
statements and related information. Accordingly, it maintains internal
controls and accounting policies and procedures designed to provide
reasonable assurance of the accountability and safeguarding of the Company's
assets and of the accuracy of reported financial information. These controls
and procedures include management evaluations of asset quality and the impact
of economic events; organizational arrangements that provide an appropriate
division of responsibility; and a program of internal audits to evaluate
independently the effectiveness of internal controls and the extent of
ongoing compliance with the Company's adopted policies and procedures.

    The responsibility of the Company's independent auditors, KPMG LLP, is
limited to the expression of an opinion as to the fair presentation of the
consolidated financial statements based on their audit conducted in
accordance with auditing standards generally accepted in the United States of
America.

    The Board of Directors, through its Audit Committee, is responsible for
insuring that both management and the independent auditors fulfill their
respective responsibilities with regard to the consolidated financial
statements. The Audit Committee, which is comprised entirely of directors who
are not officers or employees of the Company, meets periodically with
management, the internal auditor and the independent auditors. The internal
auditor and independent auditors have full and free access to and meet with
the Audit Committee, without management being present, to discuss financial
reporting and other relevant matters.

    The consolidated financial statements have not been reviewed or confirmed
for accuracy or relevance by the Office of the Comptroller of the Currency.

/s/ Raymond Walter                       /s/ Charles E. Burnett
Raymond Walter                           Charles E. Burnett
President and Chief Executive Officer    Treasurer and Chief Financial Officer
Jeffersonville Bancorp                   Jeffersonville Bancorp

March 19, 2004


                                      24

<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

Management of interest rate risk involves continual monitoring of the
relative sensitivity of asset and liability portfolios to changes in rates
due to maturities or repricing. Interest rate sensitivity is a function of
the repricing of assets and liabilities through maturity and interest rate
changes. The objective of interest rate risk management to maintain an
appropriate balance between income growth and the risks associated with
maximizing income through the mismatch of the timing of interest rate is
changes between assets and liabilities. Perfectly matching the repricing of
assets and liabilities can eliminate interest rate risk, but net interest
income is not always enhanced. One measure of interest rate risk, the
so-called "gap," is illustrated in the table below as of December 31, 2003.
This table measures the incremental and cumulative gap, or difference between
assets and liabilities subject to repricing during the periods indicated. The
dollar amounts presented are stated on the basis of "contractual gap" which
measures the stated repricing and maturity of assets and liabilities. The
data presented indicates that rate sensitive liabilities are generally
subject to repricing sooner than rate sensitive assets. Management retains
the ability to change, or not change, interest rates on certain deposit
products as general market rates change in the future, and is also in the
position to liquidate a portion of its securities available for sale should
conditions warrant such action. The following is one of several different
analysis tools management utilizes in managing interest rate risk.

<TABLE>

<CAPTION>
                                                0 to 3         3 to 12         1 to 5          Over 5
Maturity                                        Months          Months          Years           Years          Total

<S>                                         <C>             <C>             <C>             <C>             <C>
Loans, net<F1>                              $  9,522,000    $ 18,968,000    $ 90,681,000    $ 73,935,000    $193,106,000
Taxable securities<F2>                         6,139,000      18,418,000       8,281,000      37,086,000      69,924,000
Non taxable securities<F2>                            --       4,477,000      11,007,000      34,764,000      50,248,000

      Total interest earning assets         $ 15,661,000    $ 41,863,000    $109,969,000    $145,785,000    $313,278,000

NOW and Super NOW accounts                  $  1,148,000    $  3,444,000    $ 16,834,000    $ 16,864,000    $ 38,290,000
Savings and insured
  money market deposits<F1><F3>                3,501,000      10,503,000      26,748,000      40,016,000      80,768,000
Time deposits<F3>                             24,350,000      32,502,000      45,108,000          20,000     101,980,000
Long term borrowings<F1>                              --       8,500,000      13,500,000       5,000,000      27,000,000
Short term borrowings<F1>                      5,521,000              --              --              --       5,521,000

      Total interest bearing liabilities    $ 34,520,000    $ 54,949,000    $102,190,000    $ 61,900,000    $253,559,000

Gap                                         $(18,859,000)   $(13,086,000)   $  7,779,000    $ 83,885,000    $ 59,719,000
Cumulative gap                               (18,859,000)    (31,945,000)    (24,166,000)     59,719,000
Cumulative gap as a percentage
  of total interest earning assets                 (6.02)%        (10.20)%         (7.71)%         19.06%

<FN>

<F1> Based on contractual maturity or period to repricing.

<F2> Based on anticipated maturity. Includes Securities Available for Sale and
     Securities Held to Maturity, at their amortized cost.

<F3> Fixed rate deposits and deposits with fixed pricing intervals are included
     in the period of contractual maturity. Deposits withdrawable on demand or
     within short notice periods (such as NOW and savings accounts) are shown
     in repricing periods based on management's estimate of the interest rate
     sensitivity of these accounts, based in part on the Company's favorable
     historical experience of a substantial portion of these balances during
     periods of changing interest rates.

</FN>

</TABLE>

    There are several significant shortcomings inherent in the gap analysis.
For example, although certain assets and liabilities have similar periods to
maturity or to repricing, they may react in different degrees to changes in
market interest rates. Also, the interest rates on certain types of assets
and liabilities may fluctuate in advance of changes in market interest rates,
while other interest rates may lag behind changes in market interest rates.
Management takes these factors, and others, into consideration when reviewing
the Company's gap position and establishing its asset/liability strategy.


                                      25

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated financial statements and supplementary data are found on pages 3
to 27 of this report.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

None.


ITEM 9A. CONTROLS AND PROCEDURES

The Company's management, including the Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of the design and operation of
the Company's disclosure controls and procedures as defined in Rule 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") as of December 31, 2003. Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective in ensuring that
information required to be disclosed by the Company in reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.

    There were no changes made in the Company's internal controls or in other
factors that could significantly affect these internal controls subsequent to
the date of the evaluation performed by the Company's Chief Executive Officer
and Chief Financial Officer.


                                      26

<PAGE>

                                  PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

See "Nomination of Directors and Election of Directors" on page 3 of the
proxy statement ("Proxy Statement") for the Company's 2004 annual meeting
which will be filed with the Securities and Exchange Commission within 120
days of the Company's 2003 fiscal year end, which is incorporated herein
by reference.


ITEM 11. EXECUTIVE COMPENSATION

See "Executive Compensation" on page 12 of the Proxy Statement, which is
incorporated herein by reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

See "Security Ownership of Certain Beneficial Owners and of Management" on
page 9 of the Proxy Statement, which is incorporated herein by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See "Director and Executive Officer Information" on pages 3-5, "Transactions
with Management" on page 17 and "Remuneration of Management and Others" on
pages 6, 12-15 and 17 of the Proxy Statement, which are incorporated herein by
reference.


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

See "Audit Fees" on page 16 of the Proxy Statement, which is incorporated
herein by reference.


                                     27

<PAGE>

                                   PART IV


ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. Consolidated financial statements and schedules of the Company and
       Bank. The following consolidated financial statements herein:

       Consolidated Balance Sheets -- December 31, 2003 and 2002
       Consolidated Statements of Income
       Years Ended December 31, 2003, 2002 and 2001
       Consolidated Statements of Changes in Stockholders' Equity
       Years Ended December 31, 2003, 2002 and 2001
       Consolidated Statements of Cash Flows
       Years Ended December 31, 2003, 2002 and 2001
       Notes to Consolidated Financial Statements
       Independent Auditors' Report

(a) 2. All schedules are omitted since the required information is either not
       applicable, not required or contained in the respective consolidated
       financial statements or in the notes thereto.

(a) 3. Exhibits (numbered in accordance with Item 601 of Regulation S-K)
       Exhibits not indicated below are omitted because the information is not
       applicable or is contained elsewhere within this report.

       3.1   Certificate of Incorporation of the Company (Incorporation by
             Reference to Exhibit 3.1, 3.2, 3.3 and 3.4 to Form 8 Registration
             Statement, effective June 29, 1991)

       3.2   The Bylaws of the Company (Incorporated by Reference to
             Exhibit 3.5 and 3.6 to Form 8 Registration Statement, effective
             June 29, 1991)

       4.1   Instruments defining the Rights of Security Holders.
             (Incorporated by Reference to Exhibit 4 to Form 8 Registration
             Statement, effective June 29, 1991)

       21.1  Subsidiaries of the Company

       31.1  Section 302 Certification of Chief Executive Officer

       31.2  Section 302 Certification of Chief Financial Officer

       32.1  906 certification of Chief Executive Officer

       32.2  906 certification of Chief Financial Officer

(b)    Reports on Form 8-K
       The Company filed a Form 8-K on November 11, 2003 reporting the
       Company's third quarter earnings.

(c)    Exhibits to this Form 10-K are attached or incorporated herein by
       reference.

(d)    Not applicable


                                      28

<PAGE>

                                 SIGNATURES

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

Dated: March 19, 2004  By: /s/ Raymond Walter      By: /s/ Charles E. Burnett
                           Chief Executive Officer     Chief Financial Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

SIGNATURE                            TITLE                       DATE

/s/ Arthur E. Keesler         Chairman-Director           March 19, 2004
Arthur E. Keesler

/s/ John M. Riley             Vice President              March 19, 2004
John M. Riley

/s/ John K. Gempler           Secretary-Director          March 19, 2004
John K. Gempler

/s/ Edward T. Sykes           Director                    March 19, 2004
Edward T. Sykes

/s/ Raymond Walter            Chief Executive Officer     March 19, 2004
Raymond Walter                President-Director

/s/ Earle A. Wilde            Director                    March 19, 2004
Earle A. Wilde

/s/ James F. Roche            Director                    March 19, 2004
James F. Roche

/s/ John W. Galligan          Director                    March 19, 2004
John W. Galligan

/s/ Kenneth C. Klein          Director                    March 19, 2004
Kenneth C. Klein

/s/ Gibson E. McKean          Director                    March 19, 2004
Gibson E. McKean

/s/ Solomon Katzoff           Director                    March 19, 2004
Solomon Katzoff

/s/ Douglas A. Heinle         Director                    March 19, 2004
Douglas A. Heinle


                                      29

<PAGE>

                                                                 EXHIBIT 31.1

                          CERTIFICATION SECTION 302

I, Raymond Walter, certify that:

1.   I have reviewed this annual report on Form 10-K of Jeffersonville
     Bancorp;

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

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

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

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

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures as of the
          end of the period covered by this report based on such evaluation;

     c)   disclosed in this report any changes in the registrant's internal
          control over financial reporting that occurred during the
          registrant's most recent fiscal quarter (the registrant's fourth
          quarter in the case of an annual report) that has materially
          affected, or is reasonably likely to affect, the registrant's
          internal control over financial reporting; and

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

     a)   all significant deficiencies and material weaknesses in the design
          or operations of internal control over financial reporting which
          are reasonably likely to adversely affect the registrant's ability
          to record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

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

                                       /s/ Raymond Walter
                                       Raymond Walter
March 19, 2004                         President and Chief Executive Officer


                                     30

<PAGE>

                                                                 EXHIBIT 31.2

                          CERTIFICATION SECTION 302

I, Charles E. Burnett, certify that:

1.   I have reviewed this annual report on Form 10-K of Jeffersonville
     Bancorp;

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

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

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

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

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures as of the
          end of the period covered by this report based on such evaluation;

     c)   disclosed in this report any changes in the registrant's internal
          control over financial reporting that occurred during the
          registrant's most recent fiscal quarter (the registrant's fourth
          quarter in the case of an annual report) that has materially
          affected, or is reasonably likely to affect, the registrant's
          internal control over financial reporting; and

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

     a)   all significant deficiencies and material weaknesses in the design
          or operations of internal control over financial reporting which
          are reasonably likely to adversely affect the registrant's ability
          to record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

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

                                       /s/ Charles E. Burnett
                                       Charles E. Burnett
March 19, 2004                         Treasurer and Chief Financial Officer


                                     31
<PAGE>

                        INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Jeffersonville Bancorp:

We have audited the accompanying consolidated balance sheets of
Jeffersonville Bancorp and subsidiary (the Company) as of December 31, 2003
and 2002, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 2003. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Jeffersonville Bancorp and subsidiary as of December 31, 2003 and 2002, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 2003 in conformity with accounting
principles generally accepted in the United States of America.

/s/ KPMG LLP
Albany, New York
February 13, 2004


                                      F-1

<PAGE>

<TABLE>

CONSOLIDATED BALANCE SHEETS

<CAPTION>

December 31,                                                                              2003                 2002

<S>                                                                               <C>                  <C>
ASSETS
Cash and due from banks (note 2)                                                  $ 15,992,000         $ 12,874,000
Securities available for sale, at fair value (notes 3 and 7)                       115,564,000          117,942,000
Securities held to maturity (estimated fair value of $5,947
  at December 31, 2003 and $4,789 at December 31, 2002) (note 3)                     5,916,000            4,673,000
Loans, net of allowance for loan losses of $3,569 at December 31, 2003
  and $3,068 at December 31, 2002 (notes 4, 7, and 8)                              193,106,000          168,909,000
Accrued interest receivable                                                          2,301,000            2,129,000
Premises and equipment, net (note 5)                                                 3,063,000            3,230,000
Federal Home Loan Bank stock (notes 7 and 8)                                         1,600,000            1,900,000
Other real estate owned                                                                 43,000              126,000
Cash surrender value of bank-owned life insurance                                   12,268,000           11,734,000
Other assets                                                                         2,351,000            1,508,000

         Total assets                                                             $352,204,000         $325,025,000

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Deposits:
      Demand deposits                                                             $ 59,189,000         $ 49,675,000
      NOW and Super NOW accounts                                                    38,290,000           35,630,000
      Savings and money market deposits                                             80,768,000           79,094,000
      Time deposits (note 6)                                                       101,980,000           88,393,000

         Total deposits                                                            280,227,000          252,792,000

   Federal Home Loan Bank borrowings (note 7)                                       27,000,000           30,000,000
   Short-term borrowings (note 8)                                                    5,521,000            6,433,000
   Accrued expenses and other liabilities                                            3,670,000            3,303,000

         Total liabilities                                                         316,418,000          292,528,000

Commitments and contingent liabilities (note 16)

Stockholders' equity (notes 11, 12, and 13):
   Series A preferred stock, no par value; 2,000,000 shares
     authorized; none issued                                                                --                   --
   Common stock, $0.50 par value; 11,250,000 shares authorized;
     4,767,786 shares issued at December 31, 2003 and
     1,589,262 shares issued at December 31, 2002                                    2,384,000              795,000
   Paid-in capital                                                                   6,483,000            8,072,000
   Treasury stock, at cost; 333,465 shares at December 31, 2003
     and 111,155 shares at December 31, 2002                                        (1,108,000)          (1,108,000)
   Retained earnings                                                                27,947,000           23,664,000
   Accumulated other comprehensive income, net of taxes of
     $57 at December 31, 2003 and $742 at December 31, 2002                             80,000            1,074,000

         Total stockholders' equity                                                 35,786,000           32,497,000

         Total liabilities and stockholders' equity                               $352,204,000         $325,025,000

</TABLE>

See accompanying notes to consolidated financial statements.


                                      F-2

<PAGE>

<TABLE>

CONSOLIDATED STATEMENTS OF INCOME

<CAPTION>

Years Ended December 31,                                                    2003             2002              2001

<S>                                                                  <C>              <C>               <C>
INTEREST INCOME
Loan interest and fees                                               $14,226,000      $13,786,000       $13,750,000
Securities:
   Taxable                                                             3,893,000        5,542,000         5,204,000
   Nontaxable                                                          1,940,000        1,229,000         1,018,000
Federal funds sold                                                        23,000           78,000           258,000

      Total interest income                                           20,082,000       20,635,000        20,230,000

INTEREST EXPENSE
Deposits                                                               2,778,000        4,007,000         6,544,000
Federal Home Loan Bank borrowings                                      1,203,000        1,304,000         1,068,000
Other                                                                     56,000           20,000            15,000

      Total interest expense                                           4,037,000        5,331,000         7,627,000

      Net interest income                                             16,045,000       15,304,000        12,603,000
Provision for loan losses (note 4)                                       620,000          900,000           300,000

      Net interest income after provision for loan losses             15,425,000       14,404,000        12,303,000

NON-INTEREST INCOME
Service charges                                                        2,054,000        1,777,000         1,553,000
Earnings from cash surrender value
  of bank-owned life insurance                                           534,000          379,000           364,000
Net security gains (losses) (note 3)                                     307,000           (1,000)            7,000
Other non-interest income                                              1,060,000          993,000           892,000

      Total non-interest income                                        3,955,000        3,148,000         2,816,000

NON-INTEREST EXPENSES
Salaries and employee benefits (note 15)                               6,548,000        6,084,000         5,372,000
Occupancy and equipment expenses                                       2,197,000        1,697,000         1,640,000
Other real estate owned expenses (income), net                            83,000         (308,000)          714,000
Other non-interest expenses (note 10)                                  2,836,000        2,614,000         2,446,000

      Total non-interest expenses                                     11,664,000       10,087,000        10,172,000

Income before income tax expense                                       7,716,000        7,465,000         4,947,000
Income tax expense (note 9)                                            1,984,000        2,223,000         1,322,000

Net income                                                           $ 5,732,000      $ 5,242,000       $ 3,625,000

Basic earnings per common share                                      $      1.29      $      1.18       $      0.81

</TABLE>

Per share data has been restated for a 3 for 1 stock split in 2003.

See accompanying notes to consolidated financial statements.


                                      F-3

<PAGE>

<TABLE>

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<CAPTION>
                                                                                         Accumulated
                                                                                               Other          Total
Years Ended December 31,          Common        Paid-in      Treasury        Retained  Comprehensive  Stockholders'
2003, 2002, and 2001               Stock        Capital         Stock        Earnings  Income (Loss)         Equity

<S>                           <C>           <C>           <C>             <C>             <C>           <C>
BALANCE AT
  DECEMBER 31, 2000           $  795,000    $ 8,072,000   $  (554,000)    $17,230,000     $ (434,000)   $25,109,000
Net income                            --             --            --       3,625,000             --      3,625,000
Other comprehensive income            --             --            --              --        235,000        235,000

Comprehensive income                                                                                      3,860,000
Cash dividends
  ($0.25 per share)                   --             --            --      (1,102,000)            --     (1,102,000)
Treasury stock purchased              --             --      (554,000)             --             --       (554,000)

BALANCE AT
  DECEMBER 31, 2001              795,000      8,072,000    (1,108,000)     19,753,000       (199,000)    27,313,000
Net income                            --             --            --       5,242,000             --      5,242,000
Other comprehensive income            --             --            --              --      1,273,000      1,273,000

Comprehensive income                                                                                      6,515,000
Cash dividends
  ($0.30 per share)                   --             --            --      (1,331,000)            --     (1,331,000)

BALANCE AT
  DECEMBER 31, 2002              795,000      8,072,000    (1,108,000)     23,664,000      1,074,000     32,497,000
Net income                            --             --            --       5,732,000             --      5,732,000
Other comprehensive loss              --             --            --              --       (994,000)      (994,000)

Comprehensive income                                                                                      4,738,000
Cash dividends
  ($0.33 per share)                   --             --            --      (1,449,000)            --     (1,449,000)
3 for 1 stock split
  (3,178,524 shares)           1,589,000     (1,589,000)           --              --             --             --

BALANCE AT
  DECEMBER 31, 2003           $2,384,000    $ 6,483,000   $(1,108,000)    $27,947,000     $   80,000    $35,786,000

</TABLE>

Per share data has been restated for a 3 for 1 stock split in 2003.

See accompanying notes to consolidated financial statements.


                                      F-4

<PAGE>

<TABLE>

CONSOLIDATED STATEMENTS OF CASH FLOWS

<CAPTION>

Years Ended December 31,                                                    2003             2002              2001

<S>                                                                 <C>              <C>               <C>
OPERATING ACTIVITIES
Net income                                                          $  5,732,000     $  5,242,000      $  3,625,000
Adjustments to reconcile net income to net
  cash provided by operating activities:
   Provision for loan losses                                             620,000          900,000           300,000
   Write down of other real estate owned                                  29,000           10,000            17,000
   Net gain on sales of other real estate owned                         (108,000)        (791,000)          (67,000)
   Depreciation and amortization                                         730,000          781,000           588,000
   Net loss on disposal of premises and equipment                         29,000           20,000                --
   Net earnings from cash surrender value
     of bank-owned life insurance                                       (534,000)        (379,000)         (364,000)
   Deferred income tax benefit                                          (502,000)        (184,000)         (651,000)
   Net security (gains) losses                                          (307,000)           1,000            (7,000)
   Increase in accrued interest receivable                              (172,000)         (96,000)          (67,000)
   Decrease (increase) in other assets                                   471,000         (937,000)          470,000
   Increase in accrued expenses and other liabilities                    554,000          573,000           385,000

      Net cash provided by operating activities                        6,542,000        5,140,000         4,229,000

INVESTING ACTIVITIES
Proceeds from maturities and calls:
   Securities available for sale                                      56,207,000       64,694,000        57,386,000
   Securities held to maturity                                         1,741,000        3,359,000         2,429,000
Proceeds from sales of securities available for sale                  20,343,000       10,336,000        13,086,000
Purchases:
   Securities available for sale                                     (75,858,000)     (85,744,000)      (79,443,000)
   Securities held to maturity                                        (2,984,000)      (2,246,000)       (2,807,000)
Disbursements for loan originations,
  net of principal collections                                       (24,993,000)      (9,889,000)      (15,560,000)
Purchase of Federal Home Loan Bank stock                                      --         (250,000)          (22,000)
Proceeds from sale of Federal Home Loan Bank Stock                       300,000               --                --
Purchase of bank-owned life insurance                                         --       (4,000,000)          (73,000)
Net purchases of premises and equipment                                 (592,000)      (1,266,000)         (705,000)
Capital improvements made on other real estate                                --         (237,000)         (603,000)
Proceeds from sales of other real estate owned                           338,000        2,306,000         2,164,000

      Net cash used in investing activities                          (25,498,000)     (22,937,000)      (24,148,000)


FINANCING ACTIVITIES
Net increase in deposits                                              27,435,000       14,763,000        14,751,000
Proceeds from Federal Home Loan Bank borrowings                        5,000,000        5,000,000        15,000,000
Repayments of Federal Home Loan Bank borrowings                       (8,000,000)      (5,000,000)       (5,000,000)
Net (decrease) increase in short-term borrowings                        (912,000)       6,395,000        (2,694,000)
Cash dividends paid                                                   (1,449,000)      (1,331,000)       (1,102,000)
Purchases of treasury stock                                                   --               --          (554,000)

      Net cash provided by financing activities                       22,074,000       19,827,000        20,401,000

Net increase in cash and cash equivalents                              3,118,000        2,030,000           482,000
Cash and cash equivalents at beginning of year                        12,874,000       10,844,000        10,362,000

Cash and cash equivalents at end of year                            $ 15,992,000     $ 12,874,000      $ 10,844,000

SUPPLEMENTAL INFORMATION
Cash paid for:
   Interest                                                         $  4,183,000     $  5,490,000      $  7,832,000
   Income taxes                                                        2,128,000        3,251,000         1,580,000
Transfers of loans to other real estate owned                            176,000          177,000           184,000

</TABLE>

See accompanying notes to consolidated financial statements.


                                     F-5

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The consolidated financial statements of Jeffersonville Bancorp (the Parent
Company) include its wholly owned subsidiary, The First National Bank of
Jeffersonville (the Bank). Collectively, these entities are referred to
herein as the "Company." All significant intercompany transactions have been
eliminated in consolidation.

    The Parent Company is a bank holding company whose principal activity is
the ownership of all outstanding shares of the Bank's stock. The Bank is a
commercial bank providing community banking services to individuals, small
businesses and local municipal governments in Sullivan County, New York.
Management makes operating decisions and assesses performance based on an
ongoing review of the Bank's community banking operations, which constitute
the Company's only operating segment for financial reporting purposes.

    The consolidated financial statements have been prepared, in all material
respects, in conformity with accounting principles generally accepted in the
United States of America. In preparing the consolidated financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and expenses. Material
estimates that are particularly susceptible to near-term change include the
allowance for loan losses and the valuation of other real estate owned, which
are described below. Actual results could differ from these estimates.

    For purposes of the consolidated statements of cash flows, the Company
considers cash and due from banks and federal funds sold, if any, to be cash
equivalents.

    Reclassifications are made to prior years' consolidated financial
statements whenever necessary to conform to the current year's presentation.

INVESTMENT SECURITIES

Management determines the appropriate classification of securities at the
time of purchase. If management has the positive intent and ability to hold
debt securities to maturity, they are classified as securities held to
maturity and are stated at amortized cost. If securities are purchased for
the purpose of selling them in the near term, they are classified as trading
securities and are reported at fair value with unrealized gains and losses
reflected in current earnings. All other debt and marketable equity
securities are classified as securities available for sale and are reported
at fair value. Net unrealized gains or losses on securities available for
sale are reported (net of income taxes) in stockholders' equity as
accumulated other comprehensive income (loss). Nonmarketable equity
securities are carried at cost. At December 31, 2003 and 2002, the Company
had no trading securities.

    Gains and losses on sales of securities are based on the net proceeds and
the amortized cost of the securities sold, using the specific identification
method. The amortization of premium and accretion of discount on debt
securities is calculated using the level-yield interest method over the
period to the earlier of the call date or maturity date. Unrealized losses on
securities that reflect a decline in value which is other than temporary, if
any, are charged to income.

LOANS

Loans are stated at unpaid principal balances, less unearned discounts and
the allowance for loan losses. Unearned discounts on certain installment
loans are accreted into income using a method which approximates the
level-yield interest method. Interest income is recognized on the accrual
basis of accounting. When, in the opinion of management, the collection of
interest is in doubt, the loan is classified as nonaccrual. Generally, loans
past due more than 90 days are classified as nonaccrual. Thereafter, no
interest is recognized as income until received in cash or until such time as
the borrower demonstrates the ability to make scheduled payments of interest
and principal.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged-off against the allowance when
management believes that the collectibility of all or a portion of the
principal is unlikely. Recoveries of loans previously charged-off are
credited to the allowance when realized.

    The Company identifies impaired loans and measures loan impairment in
accordance with Statement of Financial Accounting Standards (SFAS) No. 114,
Accounting by Creditors for Impairment of a Loan, as amended by SFAS No. 118.
Under SFAS No. 114, a loan is considered to be impaired when, based on
current information and events, it is probable that the creditor will be
unable to collect all principal and interest contractually due. SFAS No. 114
applies to loans that are individually evaluated for collectibility in
accordance with the Company's ongoing loan review procedure, principally
commercial mortgage


                                      F-6

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


loans and commercial loans. Smaller balance, homogeneous loans which are
collectively evaluated, such as consumer and smaller balance residential
mortgage loans are specifically excluded from the classification of impaired
loans. Creditors are permitted to measure impaired loans based on (i) the
present value of expected future cash flows discounted at the loan's
effective interest rate, (ii) the loan's observable market price or (iii) the
fair value of the collateral if the loan is collateral dependent. If the
approach used results in a measurement that is less than an impaired loan's
recorded investment, an impairment loss is recognized as part of the
allowance for loan losses.

    The allowance for loan losses is maintained at a level deemed adequate by
management based on an evaluation of such factors as economic conditions in
the Company's market area, past loan loss experience, the financial condition
of individual borrowers, and underlying collateral values based on
independent appraisals. While management uses available information to
recognize losses on loans, future additions to the allowance for loan losses
may be necessary based on changes in economic conditions, particularly in
Sullivan County. In addition, Federal regulatory agencies, as an integral
part of their examination process, periodically review the Company's
allowance for loan losses and may require the Company to recognize additions
to the allowance based on their judgments about information available to them
at the time of their examination, which may not be currently available to
management.

PREMISES AND EQUIPMENT

Premises and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation and amortization are provided over the estimated
useful lives of the assets using straight-line or accelerated methods.

FEDERAL HOME LOAN BANK STOCK

As a member institution of the Federal Home Loan Bank (FHLB), the Bank is
required to hold a certain amount of FHLB stock. This stock is considered to
be a nonmarketable equity security and, accordingly, is carried at cost.

OTHER REAL ESTATE OWNED

Other real estate owned consists of properties acquired through foreclosure
and is stated on an individual-asset basis at the lower of (i) fair value
less estimated costs to sell or (ii) cost which represents the fair value at
initial foreclosure. When a property is acquired, the excess of the loan
balance over the fair value of the property is charged to the allowance for
loan losses. If necessary, subsequent write downs to reflect further declines
in fair value are included in non-interest expenses. Fair value estimates are
based on independent appraisals and other available information. While
management estimates losses on other real estate owned using the best
available information, such as independent appraisals, future write downs may
be necessary based on changes in real estate market conditions, particularly
in Sullivan County, and the results of regulatory examinations.

BANK-OWNED LIFE INSURANCE

The investment in bank-owned life insurance, which covers certain officers of
the Bank, is carried at the policies' cash surrender value. Increases in the
cash surrender value of bank-owned life insurance, net of premiums paid, are
included in non-interest income.

INCOME TAXES

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to "temporary differences" between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets are reduced by a valuation
allowance when management determines that it is more likely than not that all
or a portion of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes the
enactment date.

EARNINGS PER COMMON SHARE

Basic earnings per share (EPS) is computed by dividing income available to
common stockholders (net income less dividends on preferred stock, if any) by
the weighted average number of common shares outstanding for the period.
Entities with complex capital structures must also present diluted EPS which
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common
shares. The Company does not have a complex capital structure and,
accordingly, has presented only basic EPS. All per share amounts have been
adjusted to give effect to the 3 for 1 stock split distributed on June 17,
2003.


                                      F-7

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    Basic earnings per common share was computed based on average outstanding
common shares (adjusted for the 3 for 1 stock split in 2003) of 4,434,000 in
2003, 4,434,000 in 2002, and 4,473,000 in 2001. Income available to common
stockholders equaled net income for each of these years.

RECENT ACCOUNTING PRONOUNCEMENTS

In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for
Asset Retirement Obligations, which addresses financial accounting and
reporting for obligations associated with retirement of tangible long-lived
assets and the associated asset retirement costs. This statement is effective
for financial statements issued for fiscal years beginning after June 15,
2002 and was adopted by the Company on January 1, 2003. The adoption of this
pronouncement did not have any effect on the Company's consolidated financial
statements.

    In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, which addresses financial
accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). This statement is effective for exit or disposal activities
initiated after December 31, 2002 and did not have any effect on the
Company's consolidated financial statements.

    In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities. This statement amends and
clarifies financial accounting and reporting for derivative instruments and
hedging activities under SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities. This statement is effective for contracts entered
into or modified after June 30, 2003 and hedging relationships designated
after June 30, 2003. The adoption of this pronouncement did not have any
effect on the Company's consolidated financial statements.

    In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
This statement establishes standards for the classification and measurement
of certain financial instruments with characteristics of both liabilities and
equity. Under SFAS No. 150, certain freestanding financial instruments that
embody obligations of the issuer, and that are now classified as equity, must
be classified as liabilities (or as assets in some circumstances). SFAS No.
150 also includes required disclosures for financial instruments within its
scope. For SEC registrants such as the Company, SFAS No. 150 was generally
effective for financial instruments entered into or modified after May 31,
2003 and otherwise at the beginning of the first interim period beginning
after June 15, 2003. The effective date has been deferred indefinitely for
certain types of mandatorily redeemable financial instruments. The Company
currently does not have any financial instruments that are within the scope
of SFAS No. 150.

    In December 2003, the FASB issued Interpretation No. 46 (revised),
Consolidation of Variable Interest Entities (FIN No. 46R), which addresses
how a business enterprise should evaluate whether it has a controlling
financial interest in an entity through means other than voting rights and,
accordingly, should consolidate the variable interest entity (VIE). FIN No.
46R replaces FIN No. 46 that was issued in January 2003. The Company is
required to apply FIN No. 46R to variable interests generally as of March 31,
2004 and to special-purpose entities as of December 31, 2003. For any VIEs
that must be consolidated under FIN No. 46R that were created before January
1, 2004, the assets, liabilities and non-controlling interest of the VIE
initially would be measured at their carrying amounts, and any difference
between the net amount added to the balance sheet and any previously
recognized interest would be recorded as a cumulative effect of an accounting
change. If determining the carrying amounts is not practicable, fair value at
the date FIN No. 46R first applies may be used to measure the assets,
liabilities and non-controlling interest of the VIE. The Company held no
interests in special-purpose entities as of December 31, 2003. Adoption of
FIN No. 46R with respect to other types of VIEs in the first quarter of 2004
is not expected to have any impact on the Company's consolidated financial
statements.


2. CASH AND DUE FROM BANKS

The Bank is required to maintain certain reserves in the form of vault cash
and/or deposits with the Federal Reserve Bank. The amount of this reserve
requirement, which is included in cash and due from banks, was $5,889,000 at
December 31, 2003 and $5,126,000 at December 31, 2002.


                                     F-8

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


3. INVESTMENT SECURITIES

The amortized cost and estimated fair value of securities available for sale
are as follows:

<TABLE>

<CAPTION>
                                                                           Gross            Gross
                                                     Amortized        Unrealized       Unrealized         Estimated
                                                          Cost             Gains           Losses        Fair Value

<S>                                               <C>                 <C>               <C>            <C>
DECEMBER 31, 2003
U.S. Government agency securities                 $ 59,837,000        $  331,000        $(753,000)     $ 59,415,000
Obligations of states and political subdivisions    44,332,000         1,614,000         (145,000)       45,801,000
Mortgage-backed securities and
  collateralized mortgage obligations                9,434,000           233,000          (71,000)        9,596,000

      Total debt securities                        113,603,000         2,178,000         (969,000)      114,812,000
Equity securities                                      653,000            99,000               --           752,000

      Total securities available for sale         $114,256,000        $2,277,000        $(969,000)     $115,564,000

</TABLE>

<TABLE>

<CAPTION>
                                                                           Gross            Gross
                                                     Amortized        Unrealized       Unrealized         Estimated
                                                          Cost             Gains           Losses        Fair Value

<S>                                               <C>                 <C>                <C>           <C>
DECEMBER 31, 2002
U.S. Government agency securities                 $ 41,527,000        $1,038,000         $     --      $ 42,565,000
Obligations of states and political subdivisions    32,875,000         1,151,000          (39,000)       33,987,000
Mortgage-backed securities and
  collateralized mortgage obligations               38,352,000         1,106,000          (24,000)       39,434,000
Corporate debt securities                            1,012,000            60,000               --         1,072,000

      Total debt securities                        113,766,000         3,355,000          (63,000)      117,058,000
Equity securities                                      875,000            11,000           (2,000)          884,000

      Total securities available for sale         $114,641,000        $3,366,000         $(65,000)     $117,942,000

</TABLE>

    Proceeds from sales of securities available for sale during 2003, 2002,
and 2001 were $20,343,000, $10,336,000, and $13,086,000, respectively. Gross
gains and gross losses realized on sales and calls of securities were as
follows:

<TABLE>

<CAPTION>
                                                                            2003             2002              2001

<S>                                                                     <C>              <C>               <C>
Gross realized gains                                                    $344,000         $ 15,000          $ 39,000
Gross realized losses                                                    (37,000)         (16,000)          (32,000)

      Net security gains (losses)                                       $307,000         $ (1,000)         $  7,000

</TABLE>

    The amortized cost and estimated fair value of debt securities available
for sale at December 31, 2003, by remaining period to contractual maturity,
are shown in the following table. Actual maturities will differ from
contractual maturities because of security prepayments and the right of
certain issuers to call or prepay their obligations.

                                           Amortized               Estimated
                                                Cost              Fair Value

Within one year                         $ 25,660,000            $ 25,835,000
One to five years                         16,991,000              17,621,000
Five to ten years                         40,498,000              41,304,000
Over ten years                            30,454,000              30,052,000

      Total                             $113,603,000            $114,812,000


                                      F-9

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    Substantially all mortgage-backed securities and collateralized mortgage
obligations are securities guaranteed by Freddie Mac or Fannie Mae, which are
U.S. government-sponsored entities. Securities available for sale with an
estimated fair value of $35,900,000 at December 31, 2003 were pledged to
secure public funds on deposit and for other purposes.

    The amortized cost and estimated fair value of securities held to
maturity are as follows:

<TABLE>

<CAPTION>
                                                                           Gross            Gross
                                                     Amortized        Unrealized       Unrealized         Estimated
                                                          Cost             Gains           Losses        Fair Value

<S>                                                 <C>                 <C>             <C>              <C>
DECEMBER 31, 2003
Obligations of states and political subdivisions    $5,916,000          $157,000        $(126,000)       $5,947,000

DECEMBER 31, 2002
Obligations of states and political subdivisions    $4,673,000          $193,000        $ (77,000)       $4,789,000

</TABLE>

    There were no sales of securities held to maturity in 2003, 2002, or
2001.

    The amortized cost and estimated fair value of these securities at
December 31, 2003, by remaining period to contractual maturity, are shown in
the following table. Actual maturities will differ from contractual
maturities because certain issuers have the right to call or prepay their
obligations.

                                     Amortized             Estimated
                                          Cost            Fair Value

Within one year                     $2,722,000            $2,750,000
One to five years                    2,296,000             2,343,000
Five to ten years                      898,000               854,000

      Total                         $5,916,000            $5,947,000


    Gross unrealized losses on investment securities and the fair value of
the related securities, aggregated by investment category and length of time
that individual securities have been in a continuous unrealized loss
position, at December 31, 2003 were as follows (in thousands):

<TABLE>

<CAPTION>
                                          Less Than 12 Months         12 Months or More              Total

                                         Estimated   Unrealized     Estimated Unrealized      Estimated  Unrealized
                                        Fair Value       Losses    Fair Value     Losses     Fair Value      Losses

<S>                                    <C>             <C>           <C>         <C>        <C>            <C>
AVAILABLE FOR SALE
U.S. Government agency securities      $33,719,000     $754,000      $     --    $    --    $33,719,000    $754,000
Obligations of states and
  political subdivisions                 7,780,000      144,000            --         --      7,780,000     144,000
Mortgage-backed securities and
  collateralized mortgage obligations    2,942,000       71,000            --         --      2,942,000      71,000

                                       $44,441,000     $969,000      $     --    $    --    $44,441,000    $969,000

HELD TO MATURITY
Obligations of states and
  political subdivisions               $   221,000     $ 61,000      $998,000    $65,000    $ 1,219,000    $126,000

</TABLE>

    The unrealized losses on securities at December 31, 2003 were caused by
increases in market interest rates. The contractual terms of the U.S.
Government agency securities and the obligations of states and political
subdivisions require the issuer to settle the securities at par upon maturity
of the investment. The contractual cash flows of the mortgage backed
securities and collateralized mortgage obligations are guaranteed


                                     F-10

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


by various government agencies or government sponsored enterprises such as
GNMA, FNMA, and FHLMC. Because the Company has the ability and intent to hold
these securities until a market price recovery or possibly to maturity, these
investments are not considered other-than-temporarily impaired.


4. LOANS

The major classifications of loans are as follows at December 31:

<TABLE>

<CAPTION>
                                                         2003                   2002

<S>                                              <C>                    <C>
REAL ESTATE LOANS
Residential                                      $ 78,339,000           $ 72,559,000
Commercial                                         59,799,000             44,807,000
Home equity                                        18,337,000             14,825,000
Farm land                                           2,872,000              1,828,000
Construction                                        4,102,000              3,414,000

                                                  163,449,000            137,433,000

OTHER LOANS
Commercial loans                                   17,157,000             17,445,000
Consumer installment loans                         15,350,000             17,314,000
Other consumer loans                                1,488,000              1,537,000
Agricultural loans                                    403,000                375,000

                                                   34,398,000             36,671,000

      Total loans                                 197,847,000            174,104,000
Unearned discounts                                 (1,172,000)            (2,127,000)
Allowance for loan losses                          (3,569,000)            (3,068,000)

      Total loans, net                           $193,106,000           $168,909,000

</TABLE>

    The Company originates residential and commercial real estate loans, as
well as commercial, consumer and agricultural loans, to borrowers in Sullivan
County, New York. A substantial portion of the loan portfolio is secured by
real estate properties located in that area. The ability of the Company's
borrowers to make principal and interest payments is dependent upon, among
other things, the level of overall economic activity and the real estate
market conditions prevailing within the Company's concentrated lending area.
Periodically, the Company purchases loans from other financial institutions
that are in markets outside of Sullivan County.

    Nonperforming loans are summarized as follows at December 31:

<TABLE>

<CAPTION>
                                                                            2003             2002              2001

<S>                                                                   <C>              <C>               <C>
Nonaccrual loans                                                      $1,359,000       $3,162,000        $  849,000
Loans past due 90 days or more and still accruing interest             1,764,000           57,000           809,000

      Total nonperforming loans                                       $3,123,000       $3,219,000        $1,658,000

Nonperforming loans as a percentage of total loans                           1.6%             1.9%              1.0%

</TABLE>

    Nonaccrual loans had the following effect on interest income for the
years ended December 31:

<TABLE>

<CAPTION>
                                                            2003             2002              2001

<S>                                                     <C>             <C>                <C>
Interest contractually due at original rates            $166,000        $ 278,000          $ 75,000
Interest income recognized                               (37,000)        (140,000)          (37,000)

      Interest income not recognized                    $129,000        $ 138,000          $ 38,000

</TABLE>


                                     F-11

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    Changes in the allowance for loan losses are summarized as follows for
the years ended December 31:

<TABLE>

<CAPTION>
                                                        2003             2002              2001

<S>                                               <C>              <C>               <C>
Balance at beginning of the year                  $3,068,000       $2,614,000        $2,435,000
Provision for loan losses                            620,000          900,000           300,000
Loans charged-off                                   (488,000)        (662,000)         (319,000)
Recoveries                                           369,000          216,000           198,000

      Balance at end of year                      $3,569,000       $3,068,000        $2,614,000

</TABLE>

    As of December 31, 2003 and 2002, the recorded investment in loans that
were considered to be impaired under SFAS No. 114 totaled $948,000 and
$1,255,000, respectively. There was no allowance for loan impairment under
SFAS No. 114 at December 31, 2003, primarily due to prior charge-offs and the
adequacy of collateral values on these loans. Included in the impaired loan
balance at December 31, 2002 were $211,000 of impaired loans for which the
related allowance for loan losses was $31,000. In addition, included in the
impaired loan balance at December 31, 2002 were $1,044,000 of impaired loans
that, primarily due to prior charge-offs and the adequacy of collateral
values, did not require an allowance for loan losses in accordance with SFAS
No. 114. During 2003, 2002, and 2001, the average recorded investment in
impaired loans was approximately $1,102,000, $1,050,000, and $735,000,
respectively. Interest income on impaired loans recognized on the cash basis
during the period of impairment was not significant in any year.


5. PREMISES AND EQUIPMENT

The major classifications of premises and equipment were as follows at
December 31:

<TABLE>

<CAPTION>
                                                                     2003                      2002

<S>                                                           <C>                       <C>
Land                                                          $   387,000               $   387,000
Buildings                                                       2,711,000                 2,757,000
Furniture and fixtures                                            106,000                   473,000
Equipment                                                       2,457,000                 4,510,000
Building and leasehold improvements                               920,000                 1,000,000
Construction in progress                                          175,000                    75,000

                                                                6,756,000                 9,202,000
Less accumulated depreciation and amortization                 (3,693,000)               (5,972,000)

      Total premises and equipment, net                       $ 3,063,000               $ 3,230,000

</TABLE>

    Depreciation and amortization expense was $730,000, $781,000, and
$588,000 in 2003, 2002, and 2001, respectively.


6. TIME DEPOSITS

The following is a summary of time deposits at December 31, 2003 by remaining
period to contractual maturity (in thousands):

Within one year                            $ 56,852,000
One to two years                             35,416,000
Two to three years                            3,308,000
Three to four years                           3,239,000
Four to five years                            3,145,000
Over five years                                  20,000

      Total time deposits                  $101,980,000

    Time deposits of $100,000 or more totaled $22,863,000 at December 31,
2003 and $20,084,000 at December 31, 2002. Interest expense related to time
deposits over $100,000 was $441,000, $587,000, and $1,089,000 for 2003, 2002,
and 2001, respectively.


                                     F-12

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


7. FEDERAL HOME LOAN BANK BORROWINGS

The following is a summary of FHLB advances outstanding at December 31:

<TABLE>

<CAPTION>
                                                                    2003                                 2002

                                                            Amount          Rate               Amount          Rate

<S>                                                    <C>                     <C>        <C>                     <C>
Variable rate advances maturing within one year        $ 5,000,000             1.20%      $ 5,000,000             1.35%
Fixed rate advances maturing in 2003                            --               --         3,000,000             3.75%
Fixed rate advances maturing in 2004                     3,500,000             4.40%        3,500,000             4.40%
Fixed rate advances maturing in 2005                     3,500,000             4.86%        3,500,000             4.86%
Fixed rate advances maturing in 2008                    10,000,000             5.02%       10,000,000             5.02%
Fixed rate advances maturing in 2009                     5,000,000             5.45%        5,000,000             5.45%

      Total FHLB advances                              $27,000,000             4.29%      $30,000,000             4.26%

</TABLE>

    Borrowings are secured by the Bank's investment in FHLB stock and by a
blanket security agreement. This agreement requires the Bank to maintain as
collateral certain qualifying assets (principally residential mortgage loans)
not otherwise pledged. The carrying value of the total qualifying residential
mortgage loan collateral at December 31, 2003 was $75.0 million which
satisfied the collateral requirements of the FHLB.


8. SHORT-TERM BORROWINGS

Short-term borrowings at December 31, 2003 and 2002 are primarily comprised
of overnight FHLB borrowings. The Bank, as a member of the FHLB, has access
to a line of credit program with a maximum borrowing capacity of $31.9
million and $29.9 million as of December 31, 2003 and 2002, respectively.
Borrowings under the overnight program at December 31, 2003, were $5.0
million at a rate of 1.04%. Borrowings under the overnight program at
December 31, 2002, were $6.0 million at a rate of 1.35%. The Bank has pledged
mortgage loans and FHLB stock as collateral on these borrowings. During 2003,
the maximum month-end balance was $23.0 million, the average balance was $4.5
million, and the average interest rate was 1.19%. During 2002, the maximum
month-end balance was $6.0 million, the average balance was $0.7 million, and
the average interest rate was 1.56%. Short-term borrowings at December 31,
2003 and 2002 also included $521,000 and $433,000, respectively of treasury,
tax and loan notes.


9. INCOME TAXES

The components of income tax expense are as follows for the years ended
December 31:

<TABLE>

<CAPTION>
                                                 2003             2002              2001

<S>                                        <C>              <C>               <C>
CURRENT TAX EXPENSES
Federal                                    $2,159,000       $2,068,000        $1,761,000
State                                         327,000          339,000           212,000
Deferred tax benefit                         (502,000)        (184,000)         (651,000)

      Total income tax expense             $1,984,000       $2,223,000        $1,322,000

</TABLE>

    Not included in the above table is net deferred income tax (benefit)
expense of ($685,000), $879,000, and $162,000, in 2003, 2002, and 2001,
respectively, associated with the unrealized gain or loss on securities
available for sale and a minimum pension liability, which are recorded
directly in stockholders' equity as components of accumulated other
comprehensive income.


                                     F-13

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    The reasons for the differences between income tax expense and taxes
computed by applying the statutory Federal tax rate of 34% to income before
income taxes are as follows:

<TABLE>

<CAPTION>
                                                                            2003             2002              2001

<S>                                                                   <C>              <C>               <C>
Tax at statutory rate                                                 $2,623,000       $2,538,000        $1,682,000
State taxes, net of Federal tax benefit                                  152,000          201,000            69,000
Tax-exempt interest                                                     (660,000)        (418,000)         (346,000)
Interest expense allocated to tax-exempt securities                       37,000           30,000            37,000
Net earnings from cash surrender value
  of bank-owned life insurance                                          (182,000)        (129,000)         (124,000)
Other adjustments                                                         14,000            1,000             4,000

      Income tax expense                                              $1,984,000       $2,223,000        $1,322,000

</TABLE>

    The tax effects of temporary differences and tax credits that give rise
to deferred tax assets and liabilities at December 31 are presented below:

<TABLE>

<CAPTION>
                                                                            2003                      2002

<S>                                                                   <C>                       <C>
DEFERRED TAX ASSETS
Allowance for loan losses in excess of tax bad debt reserve           $1,241,000                $1,023,000
Interest on nonaccrual loans                                               7,000                     7,000
Retirement benefits                                                      896,000                   668,000
Deferred compensation                                                     91,000                    84,000
Depreciation                                                             304,000                   252,000
Other real estate owned                                                  143,000                   143,000

      Total deferred tax assets                                        2,682,000                 2,177,000

DEFERRED TAX LIABILITIES
Prepaid expenses                                                        (294,000)                 (291,000)
Other taxable temporary differences                                       (4,000)                   (4,000)

      Total deferred tax liabilities                                    (298,000)                 (295,000)

      Net deferred tax asset                                          $2,384,000                $1,882,000

</TABLE>

    In addition to the deferred tax assets and liabilities described above,
the Company also has a deferred tax liability of $535,000 at December 31,
2003 related to the net unrealized gain on securities available for sale as
of December 31, 2003 and a deferred tax asset of $478,000 related to a
minimum pension liability as of December 31, 2003. In addition to the
deferred tax assets and liabilities described above, the Company also has a
deferred tax liability of $1,348,000 at December 31, 2002 related to the net
unrealized gain on securities available for sale as of December 31, 2002 and
a deferred tax asset of $606,000 related to a minimum pension liability as of
December 31, 2002.

    In assessing the realizability of the Company's total deferred tax
assets, management considers whether it is more likely than not that some
portion or all of those assets will not be realized. Based upon management's
consideration of historical and anticipated future pre-tax income, as well as
the reversal period for the items giving rise to the deferred tax assets and
liabilities, a valuation allowance for deferred tax assets was not considered
necessary at December 31, 2003 and 2002.


                                     F-14

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10. OTHER NON-INTEREST EXPENSES

The major components of other non-interest expenses are as follows for the
years ended December 31:

<TABLE>

<CAPTION>
                                                          2003             2002              2001

<S>                                                 <C>              <C>               <C>
Stationery and supplies                             $  348,000       $  283,000        $  287,000
Director expenses                                      227,000          244,000           228,000
ATM and credit card processing fees                    469,000          462,000           491,000
Professional services                                  406,000          247,000           259,000
Other expenses                                       1,386,000        1,378,000         1,181,000

      Other expenses                                $2,836,000       $2,614,000        $2,446,000

</TABLE>


11. REGULATORY CAPITAL REQUIREMENTS

National banks are required to maintain minimum levels of regulatory capital
in accordance with regulations of the Office of the Comptroller of the
Currency (OCC). The Federal Reserve Board (FRB) imposes similar requirements
for consolidated capital of bank holding companies. The OCC and FRB
regulations require a minimum leverage ratio of Tier 1 capital to total
adjusted assets of 4.0%, and minimum ratios of Tier I and total capital to
risk-weighted assets of 4.0% and 8.0%, respectively.

    Under its prompt corrective action regulations, the OCC is required to
take certain supervisory actions (and may take additional discretionary
actions) with respect to an undercapitalized bank. Such actions could have a
direct material effect on a bank's financial statements. The regulations
establish a framework for the classification of banks into five categories:
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. Generally, a bank is
considered well capitalized if it has a leverage (Tier I) capital ratio of at
least 5.0%, a Tier 1 risk-based capital ratio of at least 6.0%, and a total
risk-based capital ratio of at least 10.0%.

    The foregoing capital ratios are based in part on specific quantitative
measures of assets, liabilities and certain off-balance-sheet items as
calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgments by the regulators
about capital components, risk weightings and other factors.

    Management believes that, as of December 31, 2003 and 2002, the Bank and
the Parent Company met all capital adequacy requirements to which they are
subject. Further, the most recent OCC notification categorized the Bank as a
well-capitalized bank under the prompt corrective action regulations. There
have been no conditions or events since that notification that management
believes have changed the Bank's capital classification.


                                     F-15

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    The following is a summary of the actual capital amounts and ratios as of
December 31, 2003 and 2002 for the Bank and the Parent Company
(consolidated), compared to the required ratios for minimum capital adequacy
and for classification as well-capitalized:

<TABLE>

<CAPTION>
                                                                Actual                           Required Ratios

                                                                                            Minimum     Classification
                                                                                            Capital            as Well
                                                        Amount             Ratio           Adequacy        Capitalized

<S>                                                <C>                        <C>              <C>               <C>
DECEMBER 31, 2003
BANK
Leverage (Tier 1) capital                          $32,478,000                 9.2%             4.0%              5.0%
Risk-based capital:
   Tier 1                                           32,478,000                15.7              4.0               6.0
   Total                                            35,082,000                16.9              8.0              10.0

CONSOLIDATED
Leverage (Tier 1) capital                          $35,013,000                10.3%             4.0%
Risk-based capital:
   Tier 1                                           35,013,000                16.7              4.0
   Total                                            37,617,000                17.9              8.0

DECEMBER 31, 2002
BANK
Leverage (Tier 1) capital                          $27,202,000                 8.5%             4.0%              5.0%
Risk-based capital:
   Tier 1                                           27,202,000                14.9              4.0               6.0
   Total                                            29,489,000                16.2              8.0              10.0

CONSOLIDATED
Leverage (Tier 1) capital                          $30,544,000                 9.8%             4.0%
Risk-based capital:
   Tier 1                                           30,544,000                16.6              4.0
   Total                                            32,831,000                17.8              8.0

</TABLE>


12. STOCKHOLDERS' EQUITY

DIVIDEND RESTRICTIONS

Dividends paid by the Bank are the primary source of funds available to the
Parent Company for payment of dividends to its stockholders and for other
working capital needs. Applicable Federal statutes, regulations and
guidelines impose restrictions on the amount of dividends that may be
declared by the Bank. Under these restrictions, the dividends declared and
paid by the Bank to the Parent Company may not exceed the total amount of the
Bank's net profit retained in the current year plus its retained net profits,
as defined, from the two preceding years. The Bank's retained net profits
(after dividend payments to the Parent Company) for 2003 and 2002 totaled
$8,972,000.

PREFERRED STOCK PURCHASE RIGHTS

On July 9, 1996, the board of directors declared a dividend distribution of
one purchase right ("Right") for each outstanding share of Parent Company
common stock ("Common Stock"), to stockholders of record at the close of
business on July 9, 1996. The Rights have a 10-year term.

    The Rights become exercisable (i) 10 days following a public announcement
that a person or group has acquired, or obtained the right to acquire,
beneficial ownership of 20% or more of the outstanding shares of Common
Stock, or (ii) 10 days following the commencement of a tender offer or
exchange offer that, if successful, would result in an acquiring person or
group beneficially owning 30% or more of the outstanding Common Stock (unless
such tender or exchange offer is predicated upon the redemption of the
Rights).


                                     F-16

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    When the Rights become exercisable, a holder is entitled to purchase one
one-hundredth of a share, subject to adjustment, of Series A Preferred Stock
of the Parent Company or, upon the occurrence of certain events described
below, Common Stock of the Parent Company or common stock of an entity that
acquires the Company. The purchase price per one one-hundredth of a share of
Series A Preferred Stock (Purchase Price) will equal the board of directors'
judgment as to the "long-term investment value" of one share of Common Stock
at the end of the 10-year term of the Rights.

    Upon the occurrence of certain events (including certain acquisitions of
more than 20% of the Common Stock by a person or group), each holder of an
unexercised Right will be entitled to receive Common Stock having a value
equal to twice the Purchase Price of the Right. Upon the occurrence of
certain other events (including acquisition of the Parent Company in a merger
or other business combination in which the Parent Company is not the
surviving corporation), each holder of an unexercised Right will be entitled
to receive common stock of the acquiring person having a value equal to twice
the Purchase Price of the Right.

    The Parent Company may redeem the Rights (to the extent not exercised) at
any time, in whole but not in part, at a price of $0.01 per Right.


13. COMPREHENSIVE INCOME

Comprehensive income represents the sum of net income and items of "other
comprehensive income" which are reported directly in stockholders' equity,
such as the net unrealized gain or loss on securities available for sale and
minimum pension liability adjustments. The Company has reported its
comprehensive income for 2003, 2002, and 2001 in the consolidated statements
of changes in stockholders' equity.

    The Company's other comprehensive income consisted of the following
components for the years ended December 31:

<TABLE>

<CAPTION>
                                                                            2003             2002              2001

<S>                                                                    <C>             <C>                <C>
Net unrealized holding (losses) gains arising during the year,
  net of taxes of $688,000 in 2003, ($1,276,000) in 2002,
  and ($374,000) in 2001                                               $(998,000)      $1,848,000         $ 542,000
Reclassification adjustment for net realized (gains) losses
  included in income, net of taxes of $125,000 in 2003,
  $0 in 2002, and $3,000 in 2001                                        (182,000)           1,000            (4,000)
Minimum pension liability adjustment, net of taxes of
  ($128,000) in 2003, $397,000 in 2002, and $209,000 in 2001             186,000         (576,000)         (303,000)

      Other comprehensive (loss) income                                $(994,000)      $1,273,000         $ 235,000

</TABLE>


14. RELATED PARTY TRANSACTIONS

Certain directors and executive officers of the Company, as well as certain
affiliates of these directors and officers, have engaged in loan transactions
with the Company. Such loans were made in the ordinary course of business at
the Company's normal terms, including interest rates and collateral
requirements, and do not represent more than normal risk of collection.
Outstanding loans to these related parties are summarized as follows at
December 31:

                                  2003             2002

Directors                   $  961,000         $708,000
Executive offices
  (nondirectors)               266,000          262,000

                            $1,227,000         $970,000

    During 2003, total advances to these directors and officers were $944,000
and total payments made on these loans were $687,000. These directors and
officers had unused lines of credit with the Company of $1,206,000 at
December 31, 2003.


                                     F-17

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


15. EMPLOYEE BENEFIT PLANS

PENSION AND OTHER POSTRETIREMENT BENEFITS

The Company has a noncontributory defined benefit pension plan covering
substantially all of its employees. The benefits are based on years of
service and the employee's average compensation during the five consecutive
years in the last ten years of employment affording the highest such average.
The Company's funding policy is to contribute annually an amount sufficient
to satisfy the minimum funding requirements of ERISA, but not greater than
the maximum amount that can be deducted for Federal income tax purposes.
Contributions are intended to provide not only for benefits attributed to
service to date, but also for benefits expected to be earned in the future.

    The Company also sponsors postretirement medical and life insurance
benefit plans for retirees in the pension plan. Effective in 1993, employees
must retire after age 60 with at least 10 years of service to be eligible for
medical benefits. The plans are noncontributory, except that the retiree must
pay the full cost of spouse medical coverage. Both of the plans are unfunded.
The Company accounts for the cost of these postretirement benefits in
accordance with SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions. Accordingly, the cost of these benefits is
recognized on an accrual basis as employees perform services to earn the
benefits. The Company adopted SFAS No. 106 as of January 1, 1993 and elected
to amortize the accumulated benefit obligation at that date (transition
obligation) into expense over the allowed period of 20 years.

    In December 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (Medicare Act) was signed into law. The Medicare
Act introduced both a Medicare prescription-drug benefit and a federal
subsidy to sponsors of retiree health-care plans that provide a benefit at
least "actuarially equivalent" to the Medicare benefit. These provisions of
the Medicare Act will affect accounting measurements under SFAS No. 106.
Accordingly, the FASB staff has issued guidance allowing companies to
recognize or defer recognizing the effects of the Medicare Act in annual
financial statements for fiscal years ending after enactment of the Medicare
Act. The Company has elected to defer recognizing the effects of the Medicare
Act in its December 31, 2003 consolidated financial statements. Accordingly,
the reported measures of the accumulated postretirement benefit obligation
and net periodic postretirement benefit cost do not include the effects of
the Medicare Act. When issued, the specific authoritative literature on
accounting for the federal subsidy could require the Company to revise its
previously reported information.

    The Company expects to contribute $488,000 to its pension plan and
$80,000 to its other postretirement benefits plan in 2004. The pension
benefits expected to be paid in each year from 2004-2008 are $215,000,
$212,000, $233,000, $240,000, and $242,000, respectively. The aggregate
pension benefits expected to be paid in the five years from 2009-2013 are
$1,938,000. The expected benefits are based on the same assumptions used to
measure the Company's benefit obligation at September 30 and include
estimated future employee service. The other postretirement benefits expected
to be paid in each year from 2004-2008 are $102,000, $107,000, $128,000,
$145,000, and $163,000, respectively. The aggregate other postretirement
benefits expected to be paid in the five years from 2009-2013 are $1,192,000.
The expected benefits are based on the same assumptions used to measure the
Company's benefit obligation at December 31 and include estimated future
employee service.


                                     F-18

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    The following is a summary of changes in the benefit obligations and plan
assets for the pension plan as of a September 30 measurement date and the
other postretirement benefits plan as of a December 31 measurement date,
together with a reconciliation of each plan's funded status to the amounts
recognized in the consolidated balance sheets:

<TABLE>

<CAPTION>
                                                            Pension Benefits               Postretirement Benefits

                                                          2003              2002             2003              2002

<S>                                                <C>               <C>              <C>               <C>
CHANGES IN BENEFIT OBLIGATION
Beginning of year                                  $ 5,624,000       $ 4,525,000      $ 2,272,000       $ 2,530,000
Service cost                                           253,000           249,000          151,000           186,000
Interest cost                                          339,000           334,000          146,000           181,000
Actuarial (gain) loss                                   53,000           716,000        1,070,000          (589,000)
Benefits paid                                         (220,000)         (200,000)         (43,000)          (45,000)
Other                                                       --                --            8,000             9,000

End of year                                          6,049,000         5,624,000        3,604,000         2,272,000


CHANGES IN FAIR VALUE
OF PLAN ASSETS
Beginning of year                                    3,180,000         3,210,000               --                --
Actual return on plan assets                           511,000          (157,000)              --                --
Employer contributions                                 751,000           327,000           43,000            45,000
Benefits paid                                         (220,000)         (200,000)         (43,000)          (45,000)

End of year                                          4,222,000         3,180,000               --                --

Funded status at end of year                        (1,827,000)       (2,444,000)      (3,604,000)       (2,272,000)
Unrecognized net transition (asset) obligation         (10,000)          (15,000)         166,000           184,000
Unrecognized net actuarial loss                      2,202,000         2,493,000        1,437,000           374,000
Unrecognized prior service cost                        262,000           287,000               --                --

      Net amount recognized                        $   627,000       $   321,000      $(2,001,000)      $(1,714,000)

AMOUNTS RECOGNIZED IN THE
CONSOLIDATED BALANCE SHEET
CONSIST OF
Prepaid (accrued) benefit cost                     $   627,000       $   321,000      $(2,001,000)      $(1,714,000)
Additional minimum liability                        (1,433,000)       (1,772,000)              --                --
Intangible asset                                       262,000           287,000               --                --
Accumulated other comprehensive loss
  (pre-tax basis)                                    1,171,000         1,485,000               --                --

      Net amount recognized                        $   627,000       $   321,000      $(2,001,000)      $(1,714,000)

</TABLE>

    The accumulated benefit obligation for the pension plan was $5,028,000
and $4,631,000 at September 30, 2003 and 2002, respectively.


                                     F-19

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    The components of the net periodic benefit cost for these plans were as
follows:

<TABLE>

<CAPTION>
                                                                  Pension Benefits

                                                          2003             2002              2001

<S>                                                  <C>              <C>               <C>
Service cost                                         $ 253,000        $ 249,000         $ 202,000
Interest cost                                          339,000          334,000           299,000
Expected return on plan assets                        (278,000)        (271,000)         (306,000)
Amortization of prior service cost                      25,000           25,000            25,000
Amortization of transition asset                        (4,000)          (4,000)           (4,000)
Recognized net actuarial loss                          110,000          114,000            25,000

      Net periodic benefit cost                      $ 445,000        $ 447,000         $ 241,000

</TABLE>

<TABLE>

<CAPTION>
                                                               Postretirement Benefits

                                                          2003             2002              2001

<S>                                                   <C>              <C>               <C>
Service cost                                          $151,000         $186,000          $128,000
Interest cost                                          146,000          181,000           118,000
Amortization of transition obligation                   18,000           18,000            19,000
Recognized net actuarial loss                            8,000           42,000            10,000

      Net periodic benefit cost                       $323,000         $427,000          $275,000

</TABLE>

    Assumptions used to determine benefit obligations for the pension plan as
of a September 30 measurement date and for the other postretirement benefits
plan as of a December 31 measurement date were as follows:

<TABLE>

<CAPTION>
                                          Pension Benefits                 Postretirement Benefits

                                        2003              2002             2003              2002

<S>                                     <C>               <C>              <C>               <C>
Discount rate                           5.85%             6.50%            5.85%             6.50%
Rate of compensation increase           3.85              4.50

</TABLE>

    Assumptions used to determine net periodic benefit cost were as follows:

<TABLE>

<CAPTION>
                                                               Pension Benefits                 Postretirement Benefits

                                                             2003              2002             2003              2002

<S>                                                          <C>               <C>              <C>               <C>
Discount rate                                                6.50%             7.25%            6.50%             7.25%
Expected long-term rate of return on plan assets             8.25              8.50
Rate of compensation increase                                4.50              5.00

</TABLE>

    The Company's expected long-term rate of return on plan assets reflects
long-term earnings expectations and was determined based on historical
returns earned by existing plan assets adjusted to reflect expectations of
future returns as applied to plan's targeted allocation of assets.

    The assumed health care cost trend rate for retirees under age 65 which
was used to determine the benefit obligation for the other postretirement
benefits plan at December 31, 2003 was 9.0%, declining gradually to 5.0% in
2007 and remaining at that level thereafter. The assumed health care cost
trend rate for retirees over age 65 which was also used to determine the
benefit obligation for the other postretirement benefits plan at December 31,
2003 was 8.0%, declining gradually to 4.0% in 2007 and remaining at that
level thereafter. Increasing the assumed health care cost trend rates by one
percentage point in each year would increase the benefit obligation at
December 31, 2003 by approximately $670,000 and the net periodic benefit cost
for the year by approximately $63,000; a one percentage point decrease would
decrease the benefit obligation and benefit cost by approximately $524,000
and $49,000, respectively.


                                     F-20

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    The Company's pension plan asset allocation at September 30, 2003 and
2002, by asset category is as follows:

                                  2003             2002

ASSET CATEGORY
Equity securities                   49%              48%
Debt securities                     37               41
Other                               14               11

      Total                        100%             100%

    Plan assets are invested in six diversified investment funds of
Massachusetts Mutual Life Insurance Company (Mass Mutual). The investment
funds include three equity funds, two bond funds and one money market fund.
Mass Mutual has been given discretion by the Company to determine the
appropriate strategic asset allocation as governed by the Company's
Discretionary Asset Management Investment Policy Statement which provides
specific targeted asset allocations for each investment fund as follows:

                                       Allocation Range

MASS MUTUAL INVESTMENT FUNDS
Core Value Equity                             25% - 35%
Small Cap Equity                               5% - 15%
International Equity                           5% - 15%
Core Bond                                     15% - 30%
Short Duration Bond                            0% - 30%
Money Market                                   5% - 25%


TAX-DEFERRED SAVINGS PLAN

The Company maintains a qualified 401(k) plan for all employees, which
permits tax-deferred employee contributions up to 15% of salary and provides
for matching contributions by the Company. The Company matches 100% of
employee contributions up to 4% of the employee's salary and 25% of the next
2% of the employee's salary. The Company continues to match 25% of employee
contributions beyond 6% of the employee's salary until the total matching
contribution reaches $1,500 or 15%.

The Company contributed $144,000 in 2003, $130,000 in 2002, and $132,000 in
2001.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

In 2003, the Company established a Supplemental Executive Retirement Plan for
certain executive officers primarily to restore benefits cutback in certain
employee benefit plans due to Internal Revenue Service regulations. The
benefits accrued under this plan totaled $103,000 at December 31, 2003 and
are unfunded. The Company recorded an expense of $103,000 relating to this
plan during the year ended December 31, 2003.

DIRECTOR RETIREMENT PLAN

In 2003, the Company established a Director Retirement Plan in order to
provide certain retirement benefits to participating directors. Generally,
each participating director receives an annual retirement benefit of sixty to
eighty percent of their average annual cash compensation during the three
calendar years preceding their retirement date, as defined in the plan. This
annual retirement benefit is payable until death and may not exceed $40,000
per year. The benefits accrued under this plan totaled $80,000 at December
31, 2003 and are unfunded. The Company recorded an expense of $80,000
relating to this plan during the year ended December 31, 2003.


16. COMMITMENTS AND CONTINGENT LIABILITIES

LEGAL PROCEEDINGS

The Parent Company and the Bank are, from time to time, defendants in legal
proceedings relating to the conduct of their business. In the best judgment
of management, the consolidated financial position of the Company will not be
affected materially by the outcome of any pending legal proceedings.

OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS

The Company is a party to certain financial instruments with
off-balance-sheet risk in the normal course of business to meet the financing
needs of its customers. These are limited to commitments to extend credit and
standby letters of credit which involve, to varying degrees, elements of
credit risk in excess of the amounts recognized in the consolidated balance
sheets. The contract amounts of these instruments reflect the extent of the
Company's involvement in particular classes of financial instruments.

    The Company's maximum exposure to credit loss in the event of
nonperformance by the other party to these instruments represents the
contract amounts, assuming that they are fully funded at a later date and any
collateral proves to be worthless. The Company uses the same credit policies
in making commitments as it does for on-balance-sheet extensions of credit.


                                     F-21

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    Contract amounts of financial instruments that represent agreements to
extend credit are as follows at December 31:

<TABLE>

<CAPTION>
                                                                            2003                     2002

<S>                                                                  <C>                      <C>
Loan origination commitments and unused lines of credit:
   Mortgage loans                                                    $10,121,000              $10,837,000
   Commercial loans                                                   13,034,000                6,009,000
   Credit card lines                                                   3,044,000                3,010,000
   Home equity lines                                                   7,011,000                5,506,000
   Other revolving credit                                              2,157,000                1,995,000

                                                                      35,367,000               27,357,000
Standby letters of credit                                                630,000                  325,000

                                                                     $35,997,000              $27,682,000

</TABLE>

    These agreements to extend credit have been granted to customers within
the Company's lending area described in note 4 and relate primarily to
fixed-rate loans.

    Loan origination commitments and lines of credit are agreements to lend
to a customer as long as there is no violation of any condition established
in the contract. These agreements generally have fixed expiration dates or
other termination clauses and may require payment of a fee by the customer.
Since commitments and lines of credit may expire without being fully drawn
upon, the total contract amounts do not necessarily represent future cash
requirements.

    The Company evaluates each customer's creditworthiness on a case-by-case
basis. The amount of collateral, if any, required by the Company upon the
extension of credit is based on management's credit evaluation of the
customer. Mortgage commitments are secured by a first lien on real estate.
Collateral on extensions of credit for commercial loans varies but may
include accounts receivable, equipment, inventory, livestock, and
income-producing commercial property.

    FASB Interpretation No. 45 (FIN No. 45), Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others; an Interpretation of FASB Statements No. 5, 57, and
107 and rescission of FASB Interpretation No. 34, requires certain
disclosures and liability-recognition for the fair value at issuance of
guarantees that fall within its scope. Under FIN No. 45, the Company does not
issue any guarantees that would require liability-recognition or disclosure,
other than its standby letters of credit. The Company has issued conditional
commitments in the form of standby letters of credit to guarantee payment on
behalf of a customer and guarantee the performance of a customer to a third
party. Standby letters of credit generally arise in connection with lending
relationships. The credit risk involved in issuing these instruments is
essentially the same as that involved in extending loans to customers.
Contingent obligations under standby letters of credit totaled $630,000 and
$325,000 at December 31, 2003 and 2002, respectively, and represent the
maximum potential future payments the Company could be required to make.
Typically, these instruments have terms of twelve months or less and expire
unused; therefore, the total amounts do not necessarily represent future cash
requirements. Each customer is evaluated individually for creditworthiness
under the same underwriting standards used for commitments to extend credit
and on-balance sheet instruments. Company policies governing loan collateral
apply to standby letters of credit at the time of credit extension.
Loan-to-value ratios are generally consistent with loan-to-value requirements
for other commercial loans secured by similar types of collateral. The fair
value of the Company's standby letters of credit at December 31, 2003 and
2002 was insignificant.


17. FAIR VALUES OF FINANCIAL INSTRUMENTS

SFAS No. 107, Disclosures about Fair Value of Financial Instruments, requires
that the Company disclose estimated fair values for its on- and
off-balance-sheet financial instruments. SFAS No. 107 defines fair value as
the amount at which a financial instrument could be exchanged in a current
transaction between parties other than in a forced sale or liquidation.

    Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holding of a particular
financial


                                     F-22
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


instrument, nor do they reflect possible tax ramifications or transaction
costs. Because no market exists for a significant portion of the Company's
financial instruments, fair value estimates are based on judgments regarding
future expected net cash flows, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment, and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

    Fair value estimates are based on existing on- and off-balance-sheet
financial instruments without attempting to estimate the value of anticipated
future business or the value of nonfinancial assets and liabilities. In
addition, there are significant unrecognized intangible assets that are not
included in these fair value estimates, such as the value of "core deposits"
and the Company's branch network.

    The following is a summary of the net carrying values and estimated fair
values of the Company's financial assets and liabilities (none of which were
held for trading purposes) at December 31:

<TABLE>

<CAPTION>
                                                                 2003                               2002

                                                           Net                                Net
                                                      Carrying         Estimated         Carrying         Estimated
                                                         Value        Fair Value            Value        Fair Value

<S>                                               <C>               <C>              <C>               <C>
FINANCIAL ASSETS
Cash and due from banks                           $ 15,992,000      $ 15,992,000     $ 12,874,000      $ 12,874,000
Securities available for sale                      115,564,000       115,564,000      117,942,000       117,942,000
Securities held to maturity                          5,916,000         5,947,000        4,673,000         4,789,000
Loans, net                                         193,106,000       195,627,000      168,909,000       173,401,000
Accrued interest receivable                          2,301,000         2,301,000        2,129,000         2,129,000
FHLB stock                                           1,600,000         1,600,000        1,900,000         1,900,000

FINANCIAL LIABILITIES
Demand deposits (non-interest bearing)              59,189,000        59,189,000       49,675,000        49,675,000
Interest-bearing deposits                          221,038,000       221,038,000      203,117,000       203,117,000
FHLB advances                                       27,000,000        28,113,000       30,000,000        31,411,000
Short-term borrowings                                5,521,000         5,521,000        6,433,000         6,433,000
Accrued interest payable                               224,000           224,000          356,000           356,000

</TABLE>

    The specific estimation methods and assumptions used can have a
substantial impact on the estimated fair values. The following is a summary
of the significant methods and assumptions used by the Company to estimate
the fair values shown in the preceding table:

SECURITIES

The carrying values for securities maturing within 90 days approximate fair
values because there is little interest rate or credit risk associated with
these instruments. The fair values of longer-term securities are estimated
based on bid prices published in financial newspapers or bid quotations
received from securities dealers. The fair values of certain state and
municipal securities are not readily available through market sources;
accordingly, fair value estimates are based on quoted market prices of
similar instruments, adjusted for any significant differences between the
quoted instruments and the instruments being valued.

LOANS

Fair values are estimated for portfolios of loans with similar financial
characteristics. Loans are segregated by type such as commercial, consumer,
real estate and other loans. Each loan category is further segregated into
fixed and adjustable rate interest terms and by performing and nonperforming
categories. The fair values of performing loans are calculated by discounting
scheduled cash flows through estimated maturity using estimated market
discount rates that reflect the credit and interest rate risks inherent in
the loans. Estimated maturities are based on contractual terms and repricing
opportunities.

    The fair values of nonperforming loans are based on recent external
appraisals and discounted cash flow analyses. Estimated cash flows are
discounted using a rate commensurate with the risk associated with the
estimated cash flows. Assumptions regarding credit risk, cash flows and
discount rates are judgementally determined using available market
information and specific borrower information.


                                     F-23

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DEPOSIT LIABILITIES

The fair values of deposits with no stated maturity (such as checking,
savings and money market deposits) equal the carrying amounts payable on
demand. The fair values of time deposits are based on the discounted value of
contractual cash flows (but are not less than the net amount at which
depositors could settle their accounts). The discount rates are estimated
based on the rates currently offered for time deposits with similar remaining
maturities.

FHLB ADVANCES

The fair value was estimated by discounting scheduled cash flows through
maturity using current market rates.

OTHER FINANCIAL INSTRUMENTS

The fair values of cash and cash equivalents, FHLB stock, accrued interest
receivable, accrued interest payable and short-term debt approximated their
carrying values at December 31, 2003 and 2002.

    The fair values of the agreements to extend credit described in note 16
are estimated based on the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
present creditworthiness of the counterparties. For fixed rate loan
commitments, fair value estimates also consider the difference between
current market interest rates and the committed rates. At December 31, 2003
and 2002, the fair values of these financial instruments approximated the
related carrying values which were not significant.


18. CONDENSED PARENT COMPANY FINANCIAL STATEMENTS

The following are the condensed parent company only financial statements for
Jeffersonville Bancorp:

<TABLE>

BALANCE SHEETS

<CAPTION>

December 31,                                                      2003                     2002

<S>                                                        <C>                      <C>
ASSETS
Cash                                                       $   112,000              $   518,000
Securities available for sale                                  711,000                  844,000
Investment in subsidiary                                    33,377,000               29,453,000
Premises and equipment                                       1,024,000                1,086,000
Other assets                                                   605,000                  603,000

      Total assets                                         $35,829,000              $32,504,000

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities                                                $    43,000              $     7,000
Stockholders' equity                                        35,786,000               32,497,000

      Total liabilities and stockholders' equity           $35,829,000              $32,504,000

</TABLE>


                                     F-24

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>

STATEMENTS OF INCOME

<CAPTION>

Years Ended December 31,                                                    2003             2002              2001

<S>                                                                   <C>              <C>               <C>
Dividend income from subsidiary                                       $  700,000       $1,100,000        $1,600,000
Dividend income on securities available for sale                          48,000           92,000           127,000
Net security gains                                                            --               --            30,000
Rental income from subsidiary                                            313,000          313,000           313,000
Other non-interest income                                                     --            3,000                --

                                                                       1,061,000        1,508,000         2,070,000

Occupancy and equipment expenses                                         108,000          108,000           108,000
Other non-interest expenses                                              154,000           68,000            79,000

                                                                         262,000          176,000           187,000

Income before income taxes and undistributed
  income of subsidiary                                                   799,000        1,332,000         1,883,000
Income tax expense                                                        38,000           91,000           113,000

      Income before undistributed income of subsidiary                   761,000        1,241,000         1,770,000
Equity in undistributed income of subsidiary                           4,971,000        4,001,000         1,855,000

      Net income                                                      $5,732,000       $5,242,000        $3,625,000

</TABLE>

<TABLE>

STATEMENTS OF CASH FLOWS

<CAPTION>

Years Ended December 31,                                                    2003             2002              2001

<S>                                                                  <C>              <C>               <C>
OPERATING ACTIVITIES
Net income                                                           $ 5,732,000      $ 5,242,000       $ 3,625,000
Equity in undistributed income of subsidiary                          (4,971,000)      (4,001,000)       (1,855,000)
Depreciation and amortization                                             62,000           62,000            62,000
Net security gains                                                            --               --           (30,000)
Other adjustments, net                                                    (2,000)          46,000          (960,000)

      Net cash provided by operating activities                          821,000        1,349,000           842,000

INVESTING ACTIVITIES
Proceeds from calls of securities available for sale                     598,000          402,000           530,000
Purchase of securities available for sale                               (376,000)          (3,000)          (52,000)
Net purchases of premises and equipment                                       --               --          (139,000)

      Cash provided by investing activities                              222,000          399,000           339,000


FINANCING ACTIVITIES
Cash dividends paid                                                   (1,449,000)      (1,331,000)       (1,102,000)
Purchases of treasury stock                                                   --               --          (554,000)

      Net cash used in financing activities                           (1,449,000)      (1,331,000)       (1,656,000)

Net (decrease) increase in cash                                         (406,000)         417,000          (475,000)
      Cash at beginning of year                                          518,000          101,000           576,000

      Cash at end of year                                            $   112,000      $   518,000       $   101,000

</TABLE>


                                     F-25