Exhibit 13
                                                                      ----------

                               TABLE OF CONTENTS

Message to Shareholders ................................    2

Selected Consolidated Financial Data ...................    3

Management's Discussion and Analysis ...................    4

Independent Accountants' Report ........................   17

Consolidated Balance Sheets ............................   18

Consolidated Statements of Income ......................   19

Consolidated Statements of Shareholders' Equity.........   20

Consolidated Statements of Cash Flows ..................   21

Notes to Consolidated Financial Statements .............   22

Directors and Officers .................................   39

Market Information .....................................   41


Description of Business

City Savings Financial Corporation (the "Holding Company" and, together with its
subsidiary,  the  "Company")  is an Indiana  corporation  organized in September
2001, to become a savings and loan holding  company upon its  acquisition of all
the issued and  outstanding  capital  stock of  Michigan  City  Savings and Loan
Association (the "Bank") in connection with the Bank's conversion from mutual to
stock form. The Holding  Company  became the Bank's holding  company on December
27, 2001;  therefore,  all  historical  financial  and other data  contained for
periods  prior to  December  27,  2001  herein  relate  solely to the Bank while
historical  financial  and other data  contained  herein  for the  period  after
December 27, 2001 relate to the Company. Effective December 1, 2002, the name of
the Bank was changed to City  Savings  Bank to bring the Bank's  image and brand
under the Holding Company's name and to eliminate any suggestion  created by the
Bank's  former name that its  operations  are conducted  only in Michigan  City,
Indiana.  The principal asset of the Holding Company currently  consists of 100%
of the issued and outstanding shares of capital stock, without par value, of the
Bank.

At June 30, 2003, the Bank, a state savings association,  conducted its business
from two  full-service  offices located in Michigan City,  Indiana,  and Rolling
Prairie, Indiana, with the main office located in Michigan City.

The Bank offers a variety of lending,  deposit and other  financial  services to
its retail and commercial  customers.  The Bank's principal business consists of
attracting deposits from the general public and originating mortgage loans, most
of which are secured by one-to four-family residential real property in La Porte
County.  The Bank also offers commercial real estate loans, home equity,  second
mortgage  loans and other types of  consumer  loans,  real  estate  construction
loans,   commercial  loans,   automobile  loans,  land  loans  and  multi-family
residential  loans. The Bank derives most of its funds for lending from deposits
of its customers,  which consist  primarily of certificates  of deposit,  demand
accounts and savings accounts.
<PAGE>

To Our Shareholders:

     On  behalf  of the  directors,  officers  and  employees  of  City  Savings
Financial Corporation and its wholly-owned  subsidiary,  City Savings Bank, I am
pleased  to present  to you,  our  shareholders,  our  second  Annual  Report to
Shareholders.  We have  successfully  completed  our first full fiscal year as a
publicly traded  company.  We converted from a mutual to stock form of ownership
in December 2001 and  immediately  began trading on the OTC Electronic  Bulletin
Board under the symbol  "CSFC." On December 1, 2002,  we changed the name of our
wholly-owned  subsidiary from Michigan City Savings and Loan Association to City
Savings  Bank to align  the  Bank's  image and  brand  with that of the  holding
company's and to eliminate any  suggestion  that our operations are limited only
to Michigan City, Indiana.

     In  addition to our home  office in  Michigan  City and a branch  office in
Rolling  Prairie,  Indiana,  we have broken ground on a facility in  Chesterton,
Indiana.  We are  excited  about  the  opportunities  in this  new and  thriving
residential  community.  We have chosen this area because of the growing housing
market, current lack of any  community-oriented  financial service providers and
the  opportunity  this  affords us to attract new core  deposits.  We expect our
Chesterton  facility to be fully operational by January 2004. The Bank will also
be opening a loan production office in Crown Point,  Indiana. This office should
be open  before the end of  calendar  year  2003.  Crown  Point  offers the same
opportunities  for  us  as  does  the  Chesterton  area,  with  rapidly  growing
residential  and commercial  activity.  We have identified a strong local banker
whose values match ours to head up this effort.  With this addition to our team,
we are confident of success in this market.

     City Savings  Financial  Corporation  has experienced  another  outstanding
year.  The  fiscal  year ended  June 30,  2003 was a record  year by a number of
financial measures.

     Our total  assets at June 30,  2003 were $139.8  million  compared to $81.4
million at June 30,  2002, a growth of $58.4  million or 71.7%.  The increase in
assets was primarily  attributable  to an increase in net loans  receivable from
$68 million at June 30, 2002 to $117  million at June 30,  2003,  an increase of
$49  million  or 72.1%.  To fund this  growth,  we  issued $5  million  of trust
preferred  capital  securities  and  $155,000  in  principal  amount  of  common
securities of our wholly-owned  subsidiary,  City Savings Statutory Trust I. The
proceeds from this trust  preferred  offering  provided the Bank with additional
capital to support our growth.

     Despite a challenging  interest rate environment,  we were not only able to
maintain  our net  interest  margin,  but were able to increase it from 3.48% at
year-end  2002,  to 3.63% this year.  We attribute  this progress to our team of
seasoned   lenders'  ability  to  efficiently  price  coupled  with  our  widely
recognized reputation for outstanding customer service.

     City Savings has had  substantial  success  toward its goal of  operational
efficiency as well. Our efficiency  ratio improved from 74.3% for the year ended
June 30, 2002 to 60.4% at year-end 2003,  virtually achieving  management's goal
of 60%.  Further progress in this area is evidenced by this fiscal year's fourth
quarter ratio of 56.5%.

     Net  income  for the year ended  June 30,  2003 was a record  $1.3  million
compared to $470,000 at June 30, 2002, an increase of $856,000,  or 182.1%.  Our
return on equity, that is net income divided by average total equity,  increased
significantly.  At June 30, 2003,  our return on equity was 12.43%,  compared to
6.16% at June 30,  2002.  Our  return on assets,  that is net income  divided by
average total assets, also increased significantly. At June 30, 2003, our return
on assets was 1.11%,  compared to 0.63% at June 30,  2002.  Our return on equity
for  fiscal  year 2001 was 3.25%,  and our return on assets for the fiscal  year
2001 was 0.26%.

     The  Management  and the  Board of  Directors  want to  thank  you for your
business,  support and  confidence  in City Savings  Financial  Corporation.  We
encourage you to recommend us to your friends,  neighbors and associates, and we
look forward to serving you with the same  professional  service that has marked
our performance for over 115 years.

                                   Sincerely,


                                   /s/ Thomas F. Swirski

                                   Thomas F. Swirski
                                   President & Chief Executive Officer
<PAGE>

                    SELECTED CONSOLIDATED FINANCIAL DATA OF
              CITY SAVINGS FINANCIAL CORPORATION AND SUBSIDIARIES

     The  following  selected  consolidated  financial  data of the  Company  is
qualified  in its  entirety  by, and  should be read in  conjunction  with,  the
consolidated financial statements,  including notes thereto,  included elsewhere
in this Annual Report.

<TABLE>
<CAPTION>
                                                                       At June 30,
                                                           ---------------------------------
                                                             2003         2002        2001
                                                           ---------------------------------
                                                                 (Dollars in thousands)
<S>                                                        <C>          <C>         <C>
Selected Financial Condition Data:
Total assets ...........................................   $139,840     $81,394     $66,253
Loans receivable .......................................    118,197      68,651      57,407
Allowance for loan losses ..............................      1,097         579         423
Net loans receivable ...................................    117,100      68,072      56,984
Cash and cash equivalents ..............................      4,952       3,215       1,322
Securities available for sale ..........................     12,187       6,847       4,655
Securities to be held to maturity ......................        249         334         432
Total borrowings .......................................     22,170       6,488       1,670
Deposits ...............................................    103,579      63,211      58,966
Shareholders' equity - substantially restricted ........     11,075      10,197       5,103

Selected Operating Data:
Total interest income ..................................   $  7,096     $ 5,052     $ 4,784
Total interest expense .................................      2,888       2,553       2,932
                                                           --------     --------    -------
Net interest income ....................................      4,208       2,499       1,852
Provision for loan losses ..............................        592         258         274
                                                           --------     --------    -------
Net interest income after provision for loan losses ....      3,616       2,241       1,578
                                                           --------     --------    -------
Noninterest income:
Service charges on deposit accounts ....................        113          92          50
Commission income ......................................         75          97         101
Gain on sale of investments ............................        320          49          --
Net gains on loan sales ................................        359         104          29
Other ..................................................        362         148         132
                                                           --------     --------    -------
Total noninterest income ...............................      1,229         490         312
                                                           --------     --------    -------
Noninterest expense:
Compensation and benefits ..............................      1,468       1,024         833
Occupancy and equipment ................................        260         268         284
Professional fees ......................................        178         110          48
Data processing ........................................        186         163         131
Advertising ............................................        137         122          73
Goodwill impairment ....................................         --          --          98
Other ..................................................        436         305         268
                                                           --------     --------    -------
Total noninterest expense ..............................      2,665       1,993       1,735
                                                           --------     --------    -------
Income before taxes ....................................      2,180         738         155
Income tax expense (benefit) ...........................        854         268          (9)
                                                           --------     --------    -------
Net income .............................................   $  1,326     $   470     $   164
                                                           ========     =======     =======
--------------------
Table continued on following page
<PAGE>
                                                                       At June 30,
                                                           ---------------------------------
                                                             2003         2002        2001
                                                           ---------------------------------
Supplemental Data:
Dividends per share ....................................        .20          --          --
Dividend payout ratio ..................................       8.38%         --          --
Interest rate spread during period .....................       3.33%       3.04%       2.68%
Net yield on interest-earning assets (1) ...............       3.63        3.48        3.05
Return on assets (2) ...................................       1.11        0.63        0.26
Return on equity (3) ...................................      12.43        6.16        3.25
Equity to assets (4) ...................................       7.92       12.53        7.70
Average interest-earning assets to average
  interest-bearing liabilities .........................     112.16      112.46      107.74
Nonperforming assets to total assets (4) ...............       1.83        2.19        1.68
Allowance for loan losses to total loans outstanding (4)       0.94        0.85        0.74
Allowance for loan losses to nonperforming loans (4) ...      43.58       38.63       45.05
Net charge-offs to average total loans outstanding .....       0.07        0.17        0.06
Other expenses to average assets (5) ...................       2.24        2.68        2.75
Number of full-service offices (4) .....................          2           2           2
---------------------
(1)  Net interest income divided by average interest-earning assets.
(2)  Net income divided by average total assets.
(3)  Net income divided by average total equity.
(4)  At end of period.
(5)  Other expenses divided by average total assets.
</TABLE>



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

     The Holding Company was  incorporated  for the purpose of owning all of the
outstanding shares of Michigan City Savings and Loan Association.  The following
discussion  and analysis of the  Company's  financial  condition  and results of
operations  should  be  read in  conjunction  with  and  with  reference  to the
consolidated financial statements and the notes thereto included herein.

     In addition to the historical  information  contained herein, the following
discussion   contains   forward-looking   statements   that  involve  risks  and
uncertainties.  The Company's  operations and the Company's actual results could
differ  significantly  from those discussed in the  forward-looking  statements.
Some of the  factors  that could cause or  contribute  to such  differences  are
discussed  herein but also include,  but not limited to,  changes in the economy
and interest  rates in the nation and the  Company's  general  market area.  The
forward-looking  statements  contained  herein include,  but are not limited to,
those with respect to the following matters:

     1)   Management's determination of the amount of loan loss allowance;
     2)   The effect of changes in interest rates; and
     3)   Changes in deposit insurance premiums.


Average Balances and Interest Rates and Yields

     The following  tables  present for the years ended June 30, 2003,  2002 and
2001,  the balances,  interest rates and average daily balances of each category
of the Company's interest-earning assets and interest-bearing  liabilities,  and
the interest earned or paid on such amounts.
<PAGE>
<TABLE>
<CAPTION>

                                               AVERAGE BALANCE SHEET/YIELD ANALYSIS

                                                                               Year Ended June 30,
                                             ---------------------------------------------------------------------------------------
                                                       2003                            2002                        2001
                                             ---------------------------------------------------------------------------------------
                                                     Interest                       Interest                     Interest
                                             Average  Earned/  Average      Average  Earned/  Average     Average Earned/  Average
                                             Balance   Paid   Yield/Rate    Balance   Paid   Yield/Rate   Balance  Paid   Yield/Rate
                                             ---------------------------------------------------------------------------------------
                                                                               (Dollars in thousands)
<S>                                         <C>       <C>        <C>        <C>       <C>       <C>       <C>     <C>         <C>
Assets:
Interest-earning assets:
 Interest-earning deposits .........        $  4,265  $    58    1.36%      $ 2,847   $   76    2.67%     $ 1,913 $   120     6.27%
 Securities available for sale (1)            10,142      501    4.94         6,785      371    5.47          758      41     5.41
 Securities to be held to
  maturity .........................             295       14    4.75           381       23    6.04        3,741     229     6.12
 Loans receivable (2) (5) ..........         100,272    6,479    6.46        61,318    4,556    7.43       53,903   4,365     8.10
 Stock in Federal Home Loan
  Bank of Indianapolis .............             842       44    5.23           396       26    6.57          354      29     8.19
                                            --------  -------               -------   ------              ------- -------
   Total interest-earning assets ...         115,816    7,096    6.13        71,727    5,052    7.04       60,669   4,784     7.89
                                                      -------                         ------                      -------
Noninterest earning assets, net
 of allowance for loan losses ......           3,331                          2,711                         2,479
                                            --------                        -------                       -------
   Total assets ....................        $119,147                        $74,438                       $63,148
                                            ========                        =======                       =======

Liabilities and equity capital:
 Savings deposits ..................        $ 10,860      175    1.61       $ 9,829      243    2.47      $ 8,861     306     3.45
 Interest-bearing demand
  deposits .........................          17,022      341    2.00        14,787      426    2.88       11,416     477     4.18
 Certificates of deposit ...........          60,357    1,903    3.15        35,703    1,718    4.81       34,577   2,065     5.97
 Other borrowed money ..............             965       16    1.66
 Federal Home Loan Bank
  advances .........................          14,060      453    3.22         3,459      166    4.80        1,455      84     5.77
                                            --------  -------               -------   ------              ------- -------
   Total interest-bearing
    liabilities ....................         103,264    2,888    2.80        63,778    2,553    4.00       56,309   2,932     5.21
                                                      -------                         ------                      -------
 Other liabilities .................           5,218                          3,025                         1,800
                                            --------                        -------                       -------
   Total liabilities ...............         108,482                         66,803                        58,109
 Equity capital ....................          10,665                          7,635                         5,039
                                            --------                        -------                       -------
   Total liabilities and equity
    capital ........................        $119,147                        $74,438                       $63,148

Net earning assets .................        $ 12,552                        $ 7,949                       $ 4,360
Net interest income ................                  $ 4,208                         $2,499                        1,852
                                                      =======                         ======                      =======

Interest rate spread (3) ...........                             3.33%                          3.04%                         2.68%
                                                                 ====                           ====                          ====
Net yield on average earning
 assets (4) ........................                             3.63%                          3.48%                         3.05%
                                                                 ====                           ====                          ====
Average interest-earning assets
 to average interest-bearing
 liabilities .......................          112.16%                        112.46%                       107.74%
                                              ======                         ======                        ======
</TABLE>
-------------------
(1)  Mortgage-backed   securities   available  for  sale  and  other  investment
     securities  available for sale are at amortized  cost prior to SFAS No. 115
     adjustments.
(2)  Total loans, less loans in process and deferred loan fees.
(3)  Interest rate spread is calculated by subtracting weighted average interest
     rate  cost  from  weighted  average  interest  rate  yield  for the  period
     indicated.
(4)  The net yield on weighted average  interest-earning assets is calculated by
     dividing net interest income by weighted  average  interest-earning  assets
     for the period indicated.
(5)  The balances include nonaccrual loans.
<PAGE>

Interest Rate Spread

     The Company's  results of operations have been determined  primarily by net
interest income and, to a lesser extent,  fee income,  miscellaneous  income and
general and  administrative  expenses.  The  Company's  net  interest  income is
determined by the interest  rate spread  between the yields the Company earns on
interest-earning  assets and the rates it pays on interest-bearing  liabilities,
and by the  relative  amounts of  interest-earning  assets and  interest-bearing
liabilities.

     The following table sets forth the weighted average effective interest rate
that the Company  earned on its loan and  investment  portfolios,  the  weighted
average  effective cost of its deposits and advances,  the interest rate spread,
and net yield on  weighted  average  interest-earning  assets  for the  periods.
Average balances are based on average daily balances.

                                                            Year Ended June 30,
                                                           ---------------------
                                                           2003    2002    2001
                                                           ---------------------
Weighted average interest rate earned on:
  Interest-earning deposits .............................  1.36%   2.67%   6.27%
  Securities available for sale .........................  4.94    5.47    5.41
  Securities to be held to maturity .....................  4.75    6.04    6.12
  Loans receivable ......................................  6.46    7.43    8.10
  Federal Home Loan Bank stock ..........................  5.23    6.57    8.19
    Total interest-earning assets .......................  6.13    7.04    7.89

Weighted average interest rate cost of:
  Savings deposits ......................................  1.61    2.47    3.45
  Interest-bearing demand deposits ......................  2.00    2.88    4.18
  Certificates of deposit ...............................  3.15    4.81    5.97
  Federal Home Loan Bank advances .......................  3.22    4.80    5.77
  Other Borrowed Money ..................................  1.66      --      --
    Total interest-bearing liabilities ..................  2.80    4.00    5.21
Interest rate spread (1) ................................  3.33    3.04    2.68
Net yield on weighted average interest-earning assets (2)  3.63    3.48    3.05
--------------------------
(1)  Interest rate spread is calculated by subtracting combined weighted average
     interest rate cost from combined  weighted average interest rate earned for
     the period  indicated.  Interest rate spread  figures must be considered in
     light of the relationship  between the amounts of  interest-earning  assets
     and interest-bearing liabilities.
(2)  The net yield on weighted average  interest-earning assets is calculated by
     dividing net interest income by weighted  average  interest-earning  assets
     for the period indicated.
<PAGE>

     The following table describes the extent to which changes in interest rates
and changes in volume of  interest-related  assets and liabilities have affected
the Company's interest income and expense during the periods indicated. For each
category of interest-earning asset and interest-bearing  liability,  information
is provided  on changes  attributable  to (1)  changes in rate  (changes in rate
multiplied  by old  volume)  and  (2)  changes  in  volume  (changes  in  volume
multiplied  by old rate).  Changes  attributable  to both rate and volume  which
cannot be segregated  have been  allocated  proportionally  to the change due to
volume and the change due to rate.

                                     Increase (Decrease) in Net Interest Income
                                     ------------------------------------------
                                            Due to   Due to   Total Net
                                             Rate    Volume    Change
                                     ------------------------------------------
                                                   (In thousands)
Year ended June 30, 2003, compared
to year ended June 30, 2002
  Interest-earning assets:
    Interest-earning deposits ..........    $ (37)   $   19    $  (18)
    Securities available for sale ......      (36)      166       130
    Securities held to maturity ........       (5)       (4)       (9)
    Loans receivable ...................     (594)    2,517     1,923
    Federal Home Loan Bank stock .......       (5)       23        18
                                            -----    ------    ------
      Total interest-earning assets ....     (677)    2,721     2,044
                                            -----    ------    ------
  Interest-bearing liabilities:
    Savings deposits ...................      (85)       17       (68)
    Interest-bearing demand deposits ...     (130)       45       (85)
    Certificates of deposit ............     (592)      777       185
    Other Borrowed Money ...............       --        16        16
    Federal Home Loan Bank advances ....      (55)      342       287
                                            -----    ------    ------
      Total interest-bearing liabilities     (861)    1,196       335

  Change in net interest income
      Total Liabilities ................    $ 184    $1,525    $1,709
                                            =====    ======    ======
Year ended June 30, 2002, compared
to year ended June 30, 2001
  Interest-earning assets:
    Interest-earning deposits ..........    $ (69)   $   25    $  (44)
    Securities available for sale ......       --       330       330
    Securities held to maturity ........       (3)     (203)     (206)
    Loans receivable ...................     (361)      552       191
    Federal Home Loan Bank stock .......       (6)        3        (3)
                                            -----    ------    ------
      Total interest-earning assets ....     (439)      707       268
                                            -----    ------    ------
  Interest-bearing liabilities:
    Savings deposits ...................      (87)       24       (63)
    Interest-bearing demand deposits ...     (148)       97       (51)
    Certificates of deposit ............     (401)       54      (347)
    Federal Home Loan Bank advances ....      (14)       96        82
                                            -----    ------    ------
      Total interest-bearing liabilities     (650)      271      (379)
                                            -----    ------    ------
  Change in net interest income ........    $ 211    $  436    $  647
                                            =====    ======    ======
<PAGE>

Sale of the Whybrew Insurance Agency

     The Company sold its property  and casualty and health  insurance  lines of
business  and all rights to the name  "Whybrew  Insurance  Agency"  to  Michiana
Insurance  on  January 2,  2003.  A net gain of  $110,000  was  recorded  on the
transaction.  The sales  agreement  prohibits  the Company from  engaging in the
property and casualty and health  insurance lines of business in La Porte County
or the surrounding  counties for a period of two years following the date of the
agreement.


Loans Purchased Under Agreements to Resell

     In September of 2002,  the Company  entered into mortgage  loan  repurchase
agreements with two mortgage  companies.  Through these agreements,  the Company
buys  conventional  single family mortgage loans from the mortgage  companies at
par and  subsequently  resells the loan to the mortgage  companies or others for
transfer to an end investor.  During the holding  period,  which typically lasts
thirty days, the Company earns a prime-based  return and fee income. The Company
had $12.9 million in loans  outstanding  purchased under agreements to resell at
June 30, 2003 and reports these loans as residential  mortgage loans. During the
twelve  months  ended June 30, 2003,  the Company  recorded  interest  income of
$531,000 and fee income of $62,000 on loans purchased via the program.

     The Company's primary federal  regulator,  the Office of Thrift Supervision
("OTS"),  has  asked  the  Company  to limit the  outstanding  balance  of loans
purchased  from  any one  mortgage  company  to 25% of the  Bank's  capital  and
unimpaired  surplus which is substantially  below the limits currently in place.
The Company has agreed and has given the mortgage  companies 120 days notice per
the terms of the outstanding agreements.  Given that the funding requirements of
these  mortgage  companies  greatly  exceed the newly  established  self-imposed
limits, the Company believes the participants will seek funding elsewhere.


Trust Preferred Capital Securities

     In  June of  2003,  the  Company  formed  City  Savings  Statutory  Trust I
("Trust").  The Trust is a statutory  business  trust and is wholly owned by the
Company.  The Trust issued $5 million of trust preferred capital securities as a
participant  in a pooled  trust  preferred  securities  offering and $155,000 in
principal  amount of  common  securities  to the  Company.  The  Trust  used the
proceeds to  purchase  $5,155,000  in junior  subordinated  deferrable  interest
debentures  from the Company.  The junior  subordinated  debentures are the sole
assets of the Trust. The junior subordinated  debentures and the trust preferred
securities pay interest and dividends,  respectively,  on a quarterly basis. The
junior subordinated  debentures and the securities bear interest at a rate of 90
day LIBOR plus 3.10% and mature on June 26, 2033 and are  non-callable  for five
years and,  after that period,  the  securities  may be called at any  quarterly
interest  payment  date  at  par.  Dividends  on  the  trust  preferred  capital
securities are recorded as interest expense.  Costs associated with the issuance
of the securities  totaling  $150,000 were  capitalized  and are being amortized
over the estimated life of the securities.


Financial Condition at June 30, 2003 Compared to Financial Condition at June 30,
2002

     Total assets at June 30, 2003 were $139.8 million compared to $81.4 million
at June 30, 2002, an increase of $58.4 million, or 71.7%. The increase in assets
was  primarily  attributable  to an  increase  in net loans of $49.0  million or
72.0%.

     Real Estate Loans.  Real estate loans,  including loans available for sale,
increased $21.8 million or 40.7% from June 30, 2002 to $75.4 million at June 30,
2003.  The increase in real estate  loans was  attributable  to a $12.9  million
increase in single family mortgage loans  purchased  under  agreements to resell
and to a $10.0 million increase in commercial nonresidential real estate loans.

     Consumer Loans.  Consumer loans increased $16.1 million or 209.9% from June
30, 2002 to $23.7 million at June 30, 2003.  The increase in consumer  loans was
attributable to the acquisition of a pool of Home Equity Line of Credit Loans in
September of 2002, with an outstanding  balance of $12.6 million.  The purchased
home equity  loans are secured by first and second  mortgages  on single  family
residences located in the western suburbs of Chicago.  The terms of the purchase
agreement give the seller the option to repurchase the pool of loans with ninety
days notice.  The  outstanding  balance of the pool of home equity loans at June
30, 2003 was $7.8 million.  The increase in consumer loans was also attributable
to year over year growth in the Company's  portfolio of  dealer-originated  boat
loans of $6.6 million, which totaled $7.5 million at June 30, 2003.

     Commercial Loans.  Commercial  non-mortgage loans increased $7.7 million or
182.6% from June 30, 2002 to $11.9 million at June 30, 2003. In May of 2002, the
Company hired an experienced  commercial loan officer for the purpose of growing
the Company's commercial loan portfolio.

     Construction Loans. Construction loans increased $4.3 million or 91.3% from
June 30, 2002 to $9.1 million at June 30, 2003. The increase in the construction
loan portfolio was primarily  attributable  to the origination of a $1.4 million
loan secured by a  condominium  project  located in New Buffalo,  Michigan,  the
purchase  of a $750,000  participation  interest  in a loan  originated  for the
purpose of  constructing  a  condominium  project in La Porte,  Indiana and $1.4
million in loans  extended to a single family real estate  developer  located in
Porter County,  Indiana for the purpose of  constructing  pre-sold single family
dwellings.

     Other  factors  contributing  to the  increase in total  assets were a $5.3
million  increase in investments  available for sale, a $1.8 million increase in
interest bearing demand deposits,  a $1.3 million increase in other assets and a
$646,000 increase in Federal Home Loan Bank stock.

     The Company's allowance for loan losses increased $518,000 or 89.5% to $1.1
million at June 30, 2003,  from  $579,000 at June 30, 2002.  Over this same time
period  non-performing loans increased $855,000 or 57.0% to $2.4 million at June
30, 2003. The increase in non-performing loans is primarily  attributable to one
single family mortgage loan with an outstanding principal balance of $880,000 in
which the borrower is experiencing cash flow difficulties.  The Company believes
its  position  is well  secured  and no loss is  anticipated.  The Bank has also
experienced an increase in loans 30-89 days  delinquent.  Loans in this category
increased  $4.7 million or 228.5% to $6.7  million at June 30, 2003.  Management
attributes the increase to the slow economy.  Although  Management believes that
its  allowance  for loan  losses at June 30,  2003 was  adequate  based upon the
available facts and  circumstances,  there can be no assurance that additions to
such allowance will not be necessary in future periods,  which could  negatively
affect the Company's results of operations.

     Total deposits  increased $40.4 million or 63.9%, to $103.6 million at June
30, 2003 from $63.2  million at June 30,  2002.  The  increase  in deposits  was
attributable to a $33.1 million increase in certificate of deposit  balances,  a
$3.7 million increase in non-interest  bearing deposits, a $2.5 million increase
in NOW and money market account  balances and a $1.1 million increase in savings
account  balances.  During the twelve  months  ended June 30,  2003,  Management
competitively priced municipal, jumbo and retail certificate of deposit rates to
meet the  Company's  growth  objectives.  The increase in  non-interest  bearing
deposits is largely due to accounts  held by two mortgage  companies the Company
purchases loans from under agreements to resell.  The balances in these accounts
fluctuate  significantly  from period to period and totaled $3.0 million at June
30, 2003. The increase in NOW and money market account  balances is attributable
to an increase in  promotional  and marketing  efforts by Management to grow the
base of these accounts.

     Advances from the Federal Home Loan Bank ("FHLB") increased $9.7 million to
$16.2  million at June 30, 2003 from $6.5 million at June 30, 2002.  The Company
utilized  advances  to fund  loan  growth.  The  weighted  average  cost of FHLB
advances at June 30, 2003 was 3.11% with a weighted average  remaining  maturity
of 1.9 years.

     Other  borrowings  increased  $6.0  million  year over year.  The  Company,
through  a newly  formed  statutory  business  trust,  participated  in a pooled
offering of trust preferred  securities,  raising $5.0 million of long term debt
in June of 2003.

     Other liabilities increased $1.5 to $3.0 million at June 30, 2003 from $1.5
million  at June 30,  2002.  The  increase  in other  liabilities  is  primarily
attributable to increases in accrued income taxes payable, accounts payable, and
mortgage escrow balances.

     Shareholders' equity totaled $11.1 million at June 30, 2003, an increase of
$900,000 or 8.8% from $10.2 million at June 30, 2002. The increase resulted from
net income for the twelve  months  ended  June 30,  2003 of $1.3  million  and a
$67,000  increase  related to the  allocation  of  Employee  Stock  Option  Plan
("ESOP")  shares offset by the purchase of $367,000 in recognition and retention
plan   stock,   the   after-tax   decrease  in  the   unrealized   gain  on  the
available-for-sale  investment  portfolio of $36,000 and the payment of $111,000
in common stock dividends.


Comparison of Operating Results for the Years Ended June 30, 2003 and 2002

     General.  Net  income for the twelve  months  ended June 30,  2003 was $1.3
million,  an increase of $856,000 or 182.1% from the  $470,000  reported for the
year ended June 30, 2002.  The return on average  assets was 1.11% and 0.63% for
the years ended June 30, 2003 and 2002, respectively,  and the return on average
equity was 12.43% and 6.16% for the same respective time periods.

     Interest Income.  Interest income was $7.1 million for the fiscal year 2003
compared to $5.1  million for the prior  fiscal  year.  The increase in interest
income was  primarily  due to an  increase  in average  earning  assets of $44.1
million,  or 61.5% from $71.7  million for fiscal  year 2002  compared to $115.8
million for fiscal year 2003. The growth in average assets was attributable to a
$39.0 million or 63.5% increase in average loans  outstanding and a $3.4 million
or 49.5% increase in average  securities  outstanding  over the same  respective
time periods. The average yield on interest-earning  assets decreased from 7.04%
for the year ended June 30, 2002 to 6.13% for the year ended June 30, 2003.

     Interest Expense.  Interest expense increased  $335,000,  or 13.1%, for the
year ended June 30, 2003 compared to the year ended June 30, 2002.  The increase
in interest expense was primarily due to an increase in average interest bearing
liabilities of $39.5 million,  or 61.9%, to $103.3 million for the twelve months
ended June 30, 2003,  from $63.8 million for the same period last year.  Average
deposits  increased  $27.9 million or 46.3%,  to $88.2 million during the fiscal
year 2003 from $60.3 million during the prior fiscal year. Average FHLB advances
increased  $10.6  million or 302.9%,  to $14.1 million for the fiscal year 2003,
from $3.5 million for the prior year.  The average yield on the cost of interest
bearing  liabilities  decreased  to 2.80% for the twelve  months  ended June 30,
2003, from 4.00% for the same period last year. As a result of declining  market
rates of interest  during the fiscal year 2003, the Company lowered the rates of
interest  paid on NOW  accounts,  money market  accounts,  savings  accounts and
certificates of deposit.  The increase in average interest  bearing  liabilities
was utilized to fund loan growth.

     Net Interest  Income.  Net interest income increased $1.7 million or 68.0%,
to $4.2 million for the twelve months ended June 30, 2002, from $2.5 million for
the twelve months ended June 30, 2002.  The increase in net interest  income was
primarily due to an increase in the interest rate spread from 3.04% for the year
ended June 30, 2002 to 3.33% for the year ended June 30, 2003 and to an increase
in average interest earning assets.

     Provision for Loan Losses. A provision for loan losses is charged to income
to bring the total allowance for loan losses to a level  considered  appropriate
by Management based upon historical  experience,  the volume and type of lending
conducted by the Bank,  the status of past due principal and interest  payments,
general  economic  conditions,  particularly  as such  conditions  relate to the
Bank's  market area,  and other  factors  related to the  collectability  of the
Bank's  loan  portfolio.  As a result of such  analysis,  Management  recorded a
$592,000  provision  for  losses  on loans  for the year  ended  June 30,  2003,
compared  to  $258,000  recorded  in the 2002  period.  The 2003  provision  was
predicated on the increase in the level of nonperforming loans year-to-year,  an
overall  increase in the loan  portfolio as well as increases in the  commercial
loan portfolios. While Management believes that the allowance for loan losses is
adequate at June 30, 2003, based upon available facts and  circumstances,  there
can be no  assurance  that the loan loss  allowance  will be  adequate  to cover
losses on loans in the future.

     Noninterest Income. Noninterest income for the twelve months ended June 30,
2003 was $1.2 million  compared to $490,000 for the twelve months ended June 30,
2002, an increase of $738,000 or 150.6%.  The increase in noninterest income was
primarily  the  result of a  $255,000  increase  in net gains on loan  sales,  a
$110,000  gain  recorded  on the  sale of the  Company's  insurance  agency,  an
increase of $271,000 in net gains on the sale of  available-for-sale  securities
and a $105,000 increase in other income.

     Noninterest  Expense.  Noninterest expense for the twelve months ended June
30, 2003 was $2.7 million  compared to $2.0 million for the twelve  months ended
June 30, 2002, an increase of $671,000 or 33.7%. Several factors contributing to
the  increase  were a $444,000  increase  in  compensation  expense,  a $130,000
increase in other expense,  a $68,000  increase in  professional  expenses and a
$23,000  increase in data  processing  expense.  The  increase  in  compensation
expense was primarily  attributable  to an adjustment for the change in estimate
for the estimated expenses related to the supplemental director retirement plan,
an increase in staffing,  normal salary  increases  and expenses  related to the
Company's ESOP and Recognition and Retention Plan ("RRP").

     Income  Taxes.  The  provision  for income taxes  totaled  $854,000 for the
twelve  months  ended June 30,  2003,  an increase  of  $586,000  or 218.5%,  as
compared to the same period in 2002.  The effective tax rates  amounted to 39.2%
and 36.3% for the twelve months ended June 30, 2003 and 2002, respectively.


Comparison of Operating Results for Years Ended June 30, 2002 and 2001

     General. Net income for the twelve months ended June 30, 2002 was $470,000,
an increase of $306,000 or 186.6% from the $164,000  reported for the year ended
June 30,  2001.  The return on average  assets was 0.63% and 0.26% for the years
ended June 30, 2002 and 2001, respectively.

     Interest Income.  Interest income was $5.1 million for the fiscal year 2002
compared to $4.8  million for the prior  fiscal  year.  The increase in interest
income was  primarily  due to an  increase  in average  earning  assets of $11.0
million,  or 18.1%, from $60.7 million for fiscal year 2001 to $71.7 million for
fiscal  year  2002.  The growth in average  assets  was  attributable  to a $7.4
million or 13.7%  increase in average  loans  outstanding  and a $2.7 million or
60.0% increase in average  securities  outstanding over the same respective time
periods.  The average yield on interest- earning assets decreased from 7.89% for
the year ended June 30, 2001 to 7.04% for the year ended June 30, 2002.

     Interest Expense.  Interest expense decreased  $379,000,  or 12.9%, for the
year ended June 30, 2002 compared to the year ended June 30, 2001.  The decrease
in  interest   expense  was   primarily  due  to  a  decrease  in  the  cost  of
interest-bearing liabilities to 4.00% for the twelve months ended June 30, 2002,
from 5.21% for the same period last year. As a result of declining  market rates
of  interest  during the fiscal  year 2002,  the  Company  lowered  the rates of
interest  paid on NOW  accounts,  money market  accounts,  savings  accounts and
certificates of deposit.  Average  interest-bearing  liabilities  increased $7.5
million,  or 13.3%,  to $63.8 million for the twelve months ended June 30, 2002,
from $56.3  million for the same period last year.  Average  deposits  increased
$5.4 million or 9.8%,  to $60.3  million  during the fiscal year 2002 from $54.9
million  during the prior fiscal  year.  Average FHLB  advances  increased  $2.0
million or 133.3%,  to $3.5 million for the fiscal year 2002,  from $1.5 million
for the prior year.  The increase in average  interest-bearing  liabilities  was
utilized to fund loan growth.

     Net Interest Income.  Net interest income  increased  $647,000 or 34.9%, to
$2.5 million for the twelve  months  ended June 30, 2002,  from $1.9 million for
the twelve months ended June 30, 2001.  The increase in net interest  income was
primarily due to an increase in the interest rate spread from 2.68% for the year
ended June 30, 2001 to 3.04% for the year ended June 30, 2002 and to an increase
in average interest earning assets.

     Provision for Loan Losses. A provision for loan losses is charged to income
to bring the total allowance for loan losses to a level  considered  appropriate
by management based upon historical  experience,  the volume and type of lending
conducted  by the  Company,  the  status  of past  due  principal  and  interest
payments, general economic conditions, particularly as such conditions relate to
the Company's  market area, and other factors related to the  collectibility  of
the Company's loan portfolio. As a result of such analysis,  management recorded
a $258,000  provision  for  losses on loans for the year  ended  June 30,  2002,
compared  to  $274,000  recorded  in the 2001  period.  The 2002  provision  was
predicated on the increase in the level of nonperforming loans year-to-year,  an
overall  increase in the loan  portfolio as well as increases in the  commercial
loan portfolios.

     Noninterest Income. Noninterest income for the twelve months ended June 30,
2002 was  $490,000  compared to $312,000  for the twelve  months  ended June 30,
2001, an increase of $178,000,  or 57.1%. The increase in noninterest income was
primarily the result of a $75,000 increase in net gains on loan sales, a $43,000
increase in service charges on deposit accounts and a $49,000 gain on securities
available for sale. The increase in service charges on deposit  accounts was due
to an increase in nonsufficient fee income on transaction accounts.

     Noninterest  Expense.  Noninterest expense for twelve months ended June 30,
2002 was $2.0 million  compared to $1.7 million for the twelve months ended June
31, 2001, an increase of $258,000 or 15.2%.  Several factors contributing to the
increase were a $191,000 increase in compensation expense, a $62,000 increase in
professional  fees, a $49,000 increase in advertising and promotion  expense,  a
$38,000  increase  in other  expense and a $32,000  increase in data  processing
expense. The increase in compensation  expense was primarily  attributable to an
adjustment for the change in estimate for the estimated  expenses related to the
supplemental director retirement plan, an increase in staffing as well as normal
salary  increases.  The increase in professional fees is related to higher audit
and legal costs and the increase in data processing  expense was due to a higher
level of utilization of the Company's data  processing  system.  The increase in
advertising and promotion expense is related to an increase in marketing efforts
by management to increase loan and deposit relationships.

     Income  Taxes.  The  provision  for income taxes  totaled  $277,000 for the
twelve months ended June 30, 2002, an increase of $268,000  compared to the same
period in 2001 in which the  Company  recorded  an income tax benefit of $9,000.
The increase in the  provision  resulted from a $583,000 year over year increase
in income  before  taxes.  Additionally,  in the prior fiscal year,  the Company
adjusted  its deferred tax asset at July 1, 2001,  by  approximately  $59,000 to
record  additional  deferred tax benefits on the  allowance  for loan losses not
previously  recognized.  The effective tax rate for the twelve months ended June
30, 2002 was 36.3%.


Liquidity and Capital Resources

     The following is a summary of the Company's cash flows,  which are of three
major  types.  Cash flows from  operating  activities  consist  primarily of net
income generated by cash.  Investing  activities generate cash flows through the
origination and principal  collection on loans as well as purchases and sales of
securities.  Investing  activities will generally  result in negative cash flows
when the Company experiences loan growth.  Cash flows from financing  activities
include savings deposits,  withdrawals and maturities and changes in borrowings.
The  following  table  summarizes  cash flows for the years ended June 30, 2003,
2002 and 2001.
<PAGE>
<TABLE>
<CAPTION>
                                                                      Year Ended June 30,
                                                              ----------------------------------
                                                                 2003        2002         2001
                                                              ----------------------------------
                                                                         (In thousands)
<S>                                                           <C>         <C>           <C>
Operating activities ......................................   $(11,619)   $  1,708      $   221
                                                              --------    --------      -------
Investing activities:
  Net change in interest-bearing time deposits ............        396          (2)        (395)
  Purchase of securities available for sale ...............    (21,154)     (6,378)        (349)
  Proceeds from sales of securities available for sale ....     13,872       2,394           --
  Proceeds from maturities of securities available for sale      2,168       1,898          914
  Purchase of securities held to maturity .................         --          --       (1,655)
  Proceeds from maturities of securities held to maturity .         84          96           --
  Net change in loans .....................................    (36,194)    (11,346)      (6,035)
  Purchases of premises and equipment .....................       (742)        (99)        (213)
  Proceeds from sales of premises and equipment ...........         --          15           --
  Purchase of Federal Home Loan Bank stock ................       (646)        (53)         (38)
                                                              --------    --------      -------
    Net cash used by investing activities .................    (42,216)    (13,475)      (7,771)
                                                              --------    --------      -------
Financing activities:
  Net change in deposits ..................................     40,368       4,245        9,265
  Proceeds from Federal Home Loan Bank advances ...........     23,100      10,600        1,500
  Payments on Federal Home Loan Bank advances .............    (13,428)     (5,782)      (3,092)
  Proceeds from other borrowings ..........................      6,010          --           --
  Proceeds from sale of common stock, net of costs ........         --       5,042           --
  Cash dividends ..........................................       (111)         --           --
  Contribution of unearned RRP shares .....................       (367)         --           --
  Contribution of unearned ESOP shares ....................         --        (445)          --
                                                              --------    --------      -------
    Net cash provided by financing activities .............     55,572      13,660        7,673
                                                              --------    --------      -------
Net increase (decrease) in cash and cash equivalents ......   $  1,737    $  1,893      $   123
                                                              ========    ========      =======
</TABLE>


     Pursuant to OTS capital  regulations,  savings  associations must currently
meet a 1.5% tangible  capital  requirement,  a leverage  ratio (or core capital)
requirement of 3% and a total risk-based  capital to risk-weighted  assets ratio
of 8%. At June 30, 2003,  the Bank's  capital  levels  exceeded  all  applicable
regulatory  capital  requirements  currently  in  effect.  The  following  table
provides the minimum  regulatory  capital  requirements  and the Bank's  capital
ratios as of June 30, 2003:

                                         June 30, 2003
                        ----------------------------------------------------
                         OTS Requirement        The Bank's Capital Level
                        ----------------------------------------------------
                         % of                % of                   Amount
Capital Standard        Assets    Amount   Assets(1)   Amount     of Excess
---------------------   ----------------------------------------------------
                                    (Dollars in thousands)

Tangible Capital ...     1.5%     $2,090      9.8%     $13,592     $11,502
Core Capital (2) ...     4.0%     $5,573      9.8%     $13,592     $ 8,019
Risk-based Capital .     8.0%     $8,763     13.3%     $14,547     $ 5,784

-----------------
(1)  Tangible and core capital levels are shown as a percentage of total assets;
     risk-based  capital  levels  are  shown as a  percentage  of  risk-weighted
     assets.
(2)  The OTS core capital requirement for savings  associations is comparable to
     the Office of the  Comptroller  of the  Currency  requirement  for national
     banks. The OTS regulation requires at least 3% of total adjusted assets for
     savings associations that receive the highest supervisory rating for safety
     and soundness, and 4% to 5% for all other savings associations. The Bank is
     in compliance with this regulation.


     As of June 30, 2003, Management is not aware of any current recommendations
by regulatory authorities which, if they were to be implemented,  would have, or
are  reasonably  likely  to  have,  a  material  adverse  effect  on the  Bank's
liquidity, capital resources or results of operations.


Critical Accounting Policies

     Allowance  for Loan  Losses.  The  allowance  for loan losses  ("ALL") is a
significant estimate that can and does change based on Management's  assumptions
about specific borrowers and applicable  economic and environmental  conditions,
among other  factors.  Management  reviews the adequacy of the ALL on at least a
quarterly basis.  This review is based on four components:  specific  identified
risks or anticipated  losses in individual  loans, a percentage  factor based on
the  type of loan and the  classification  assigned  to the  credit,  growth  or
shrinkage in the overall portfolio and Management's analysis of overall economic
conditions  such as employment,  bankruptcy  trends,  property value changes and
change in delinquency levels.

     Credits are evaluated  individually  based on degree of delinquency  and/or
identified  risk ratings of special mention or worse.  Credits with  delinquency
levels of less than 90 days and not subject to  classification  are  reviewed in
the aggregate.  Percentage  factors  applied to individual  credits are based on
risk  rating,  the type of credit and  estimated  potential  losses in the event
liquidation  becomes necessary.  Percentage factors applied to loans reviewed in
the  aggregate  are based  solely on the type of credit.  Anticipated  losses on
other real estate owned are recognized immediately upon recording the asset.

     The ALL may also include a component based on  Management's  assumptions of
changes  in risk in  non-qualified  areas  such as market  conditions,  property
values, employment conditions and perceived changes in overall portfolio quality
due to changes in  concentration,  underwriting  changes and both  national  and
regional trends.

     External  factors such as increases in unemployment,  regional  softness in
property  values,   increasing   national   numbers  in  bankruptcy,   unsecured
delinquency and charge-offs and internal factors such as the continuing increase
in the  commercial  loan  portfolios  may  result  in larger  losses in  current
economic conditions.

     Changes in  concentration,  delinquency and portfolio are addressed through
the variation in percentages  used in calculating  the reserve for various types
of credit as well as individual review of "high risk" credits and large loans.

     Foreclosed  asset and real  estate  acquired  for  development.  Foreclosed
assets and real estate acquired for development are carried at the lower of cost
or fair value less estimated selling costs.  Management estimates the fair value
of the properties based on current appraisal  information.  Fair value estimates
are particularly susceptible to significant changes in the economic environment,
market  conditions,  and real estate market. A worsening or protracted  economic
decline would increase the likelihood of a decline in property  values and could
create the need to write down the properties through current operations.


Current Accounting Issues

     In May 2003,  the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 150,  Accounting for
Certain  Financial  Instruments  with  Characteristics  of both  Liabilities and
Equity. SFAS 150 establishes standards for classification and measurement in the
statement  of  financial   position  of  certain   financial   instruments  with
characteristics  of both liabilities and equity. The Company has determined that
it has no such instruments.

     In April 2003, the FASB issued SFAS No. 149,  Amendment of Statement 133 on
Derivative   Instruments  and  Hedging  Activities.   This  statement  clarifies
reporting of contracts as either derivatives or hybrid instruments.  The Company
has determined that it has no such instruments.

     In January  2003,  the FASB issued FASB  Interpretation  No. 46 ("FIN 46"),
Consolidation  of Variable  Interest  Entities.  FIN 46 provides  guidance  with
respect  to  variable  interest  entities  and  when  the  assets,  liabilities,
noncontrolling interest, and results of operations of a variable interest entity
need to be included in a company's consolidated financial statements. A variable
interest  entity  exists when either the total equity  investment at risk is not
sufficient  to permit the entity to finance  its  activities  by itself,  or the
equity  investors  lack one of three  characteristics  associated  with owning a
controlling financial interest. Those characteristics are the direct or indirect
ability to make decisions about an entity's  activities through voting rights or
similar  rights,  the  obligation to absorb the expected  losses of an entity if
they occur, and the right to receive the expected residual returns of the entity
if they occur.

     FIN 46 was  effective  immediately  for new  entities  that were created or
acquired  after  January  31,  2003,  and became  effective  on July 1, 2003 for
entities in which the Company had a variable interest prior to February 1, 2003.
The Company  adopted FIN 46 on a prospective  basis and,  accordingly,  will not
restate prior periods. The effect of the adoption did not have a material impact
on the results of operations, financial position or cash flows of the Company.

     In December 2002, the FASB issued SFAS No. 148,  Accounting for Stock-based
Compensation - Transition and Disclosure, which provides guidance for transition
from the intrinsic value method of accounting for stock-based compensation under
Accounting  Principles Board ("APB") Opinion No. 25 to SFAS No. 123's fair value
method of accounting,  if a company so elects.  The Company  applies APB Opinion
No. 25 and related  Interpretations  in  accounting  for the stock  option plan.
Accordingly,  no compensation costs have been recognized, as all options granted
had an exercise price equal to the market value of the  underlying  common stock
on the date of grant. Had compensation  cost for the Company's stock option plan
been  recorded  based on the fair value at the grant dates for awards  under the
plan consistent  with the method  prescribed by SFAS No. 123, net income and net
income per share would have been adjusted to the pro forma amounts  indicated in
Note 1.

     In  November  2002,  FASB  Interpretation  No. 45 ("FIN  45"),  Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of Indebtedness of Others was issued. FIN 45 requires the disclosures
to be made by a guarantor  in its  financial  statements  about its  obligations
under certain  guarantees that it has issued. It also clarifies that a guarantor
is required to recognize,  at the inception of a guarantee,  a liability for the
fair value of the  obligation  undertaken  in issuing  the  guarantee.  The most
significant FIN 45 instruments of the Company are standby letters of credit. The
Company has determined that its standby letters of credit  obligations under FIN
45 are not material for disclosure.


Impact of Inflation

     The consolidated  financial  statements presented herein have been prepared
in accordance with generally accepted  accounting  principles.  These principles
require the measurement of financial  position and operating results in terms of
historical dollars, without considering changes in the relative purchasing power
of money over time due to inflation.

     The Company's  primary assets and liabilities are monetary in nature.  As a
result,  interest  rates  have  a  more  significant  impact  on  the  Company's
performance  than the effects of general  levels of inflation.  Interest  rates,
however,  do not  necessarily  move  in the  same  direction  or with  the  same
magnitude as the price of goods and services,  since such prices are affected by
inflation.  In a period of rapidly  rising  interest  rates,  the  liquidity and
maturities  structures of the Company's  assets and  liabilities are critical to
the maintenance of acceptable performance levels.

     The  principal  effect of  inflation,  as distinct  from levels of interest
rates, on earnings is in the area of noninterest expense.  Such expense items as
employee  compensation,  employee benefits and occupancy and equipment costs may
be  subject to  increases  as a result of  inflation.  An  additional  effect of
inflation  is the  possible  increase  in the  dollar  value  of the  collateral
securing loans that the Company has made. The Company is unable to determine the
extent,  if any, to which  properties  securing  its loans have  appreciated  in
dollar value due to inflation.


Off-Balance Sheet Arrangements

     As of the date of this Report,  the Company  does not have any  off-balance
sheet  arrangements  that have or are  reasonably  likely  to have a current  or
future  effect  on  the  Company's  financial  condition,  change  in  financial
condition,  revenues or  expenses,  results of  operations,  liquidity,  capital
expenditures  or capital  resources  that are  material to  investors.  The term
"off-balance sheet arrangement" generally means any transaction,  agreement,  or
other contractual arrangement to which an entity unconsolidated with the Company
is a party  under  which the  Company  has (i) any  obligation  arising  under a
guarantee  contract,  derivative  instrument  or  variable  interest;  or (ii) a
retained or contingent  interest in assets transferred to such entity or similar
arrangement  that serves as credit,  liquidity  or market risk  support for such
assets.
<PAGE>





                        Independent Accountants' Report



To the Board of Directors
City Savings Financial Corporation
Michigan City, Indiana

     We have  audited  the  accompanying  consolidated  balance  sheets  of City
Savings  Financial  Corporation  as of June 30,  2003 and 2002,  and the related
consolidated statements of income,  shareholders' equity, and cash flows for the
years then ended. 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  described  above
present fairly, in all material respects, the consolidated financial position of
City Savings Financial  Corporation as of June 30, 2003 and 2002 and the results
of its operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.




/s/ BKD, LLP

Indianapolis, Indiana
August 1, 2003
<PAGE>
<TABLE>
<CAPTION>

                       City Savings Financial Corporation
                          Consolidated Balance Sheets
                             June 30, 2003 and 2002


                                                                   2003              2002
--------------------------------------------------------------------------------------------
<S>                                                            <C>               <C>
Assets
  Cash and due from banks .................................    $  1,262,961      $ 1,327,315
  Interest-bearing deposits ...............................       3,689,408        1,888,148
                                                               ------------      -----------
    Cash and cash equivalents .............................       4,952,369        3,215,463
  Interest-bearing time deposits ..........................         299,000          695,000
  Investment securities
    Available for sale ....................................      12,187,159        6,847,072
    Held to maturity (fair value of $253,481 and $339,887)          249,137          334,409
                                                               ------------      -----------
      Total investment securities .........................      12,436,296        7,181,481
  Loans held for sale .....................................      13,426,130               --
  Loans, net of allowance for loan losses of $1,096,673 and
    579,148 ...............................................     103,673,914       68,071,945
  Premises and equipment ..................................       1,455,882          815,567
  Federal Home Loan Bank stock ............................       1,081,700          435,300
  Interest receivable .....................................         675,841          471,886
  Other assets ............................................       1,838,652          507,377
                                                               ------------      -----------
      Total assets ........................................    $139,839,784      $81,394,019
                                                               ============      ===========

Liabilities
  Deposits
    Noninterest-bearing ...................................    $  5,232,170      $ 1,491,233
    Interest-bearing ......................................      98,346,878       61,719,588
                                                               ------------      -----------
      Total deposits ......................................     103,579,048       63,210,821
  Federal Home Loan Bank advances .........................      16,159,869        6,487,921
  Other borrowings ........................................       6,010,120               --
  Other liabilities .......................................       3,015,623        1,498,442
                                                               ------------      -----------
      Total liabilities ...................................     128,764,660       71,197,184
                                                               ------------      -----------
Commitments and Contingencies

Equity Received From Contributions to the ESOP ............          66,655               --
                                                               ------------      -----------
Shareholders' Equity
  Common stock, no par value
    Authorized - 20,000,000 shares
    Issued and outstanding - 555,450 shares ...............       4,597,741        4,597,741
  Retained earnings .......................................       6,738,011        5,523,364
  Unearned recognition and retention plan .................        (366,606)              --
  Accumulated other comprehensive income ..................          39,323           75,730
                                                               ------------      -----------
      Total equity capital ................................      11,008,469       10,196,835
                                                               ------------      -----------
      Total liabilities and equity capital ................    $139,839,784    $  81,394,019
                                                               ============      ===========


See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
                       City Savings Financial Corporation
                       Consolidated Statements of Income
                       Years Ended June 30, 2003 and 2002


                                                         2003         2002
-----------------------------------------------------------------------------
Interest Income
  Loans receivable ................................   $6,479,259   $4,555,793
  Investment securities ...........................      515,213      394,708
  Federal Home Loan Bank stock ....................       43,536       25,925
  Interest-bearing deposits .......................       57,937       75,776
                                                      ----------   ----------
    Total interest income .........................    7,095,945    5,052,202
                                                      ----------   ----------

Interest Expense
  Deposits ........................................    2,418,814    2,387,282
  Federal Home Loan Bank advances .................      468,801      165,832
                                                      ----------   ----------
    Total interest expense ........................    2,887,615    2,553,114
                                                      ----------   ----------


Net Interest Income ...............................    4,208,330    2,499,088
  Provision for loan losses .......................      591,979      257,881
                                                      ----------   ----------
Net Interest Income After Provision for Loan Losses    3,616,351    2,241,207
                                                      ----------   ----------

Other Income
  Service charges on deposit accounts .............      112,999       92,346
  Net realized gains on sales of available-for-sale
          securities ..............................      320,485       49,499
  Net gains on loan sales .........................      358,777      104,090
  Commission income ...............................       74,409       97,076
  Other income ....................................      362,029      147,429
                                                      ----------   ----------
    Total other income ............................    1,228,699      490,440
                                                      ----------   ----------


Other Expenses
  Compensation and benefits .......................    1,467,600    1,024,018
  Net occupancy expenses ..........................      111,032      112,638
  Equipment expense ...............................      149,662      155,490
  Professional fees ...............................      177,831      110,016
  Advertising .....................................      136,528      122,183
  Data processing .................................      186,045      163,120
  Other expenses ..................................      436,414      306,183
                                                      ----------   ----------
    Total other expenses ..........................    2,665,112    1,993,648
                                                      ----------   ----------


Income Before Income Tax ..........................    2,179,938      737,999
  Income tax expense ..............................      854,201      268,191
                                                      ----------   ----------
Net Income ........................................   $1,325,737   $  469,808
                                                      ==========   ==========

Basic Earnings Per Share ..........................   $     2.64
                                                      ==========

Diluted Earnings Per Share ........................   $     2.62
                                                      ==========


See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>
                       City Savings Financial Corporation
                Consolidated Statements of Shareholders' Equity
                       Years Ended June 30, 2003 and 2002


                                                                                              Accumulated
                                                                          Unearned               Other
                                          Common         Retained            RRP             Comprehensive
                                          Stock          Earnings        Compensation            Income           Total
                                       ---------------------------------------------------------------------------------

<S>            <C>                                     <C>                                      <C>            <C>
Balances, July 1, 2001 .............                   $5,053,556                               $49,020        5,102,576
  Comprehensive income
    Net income .....................                      469,808                                                469,808
    Other comprehensive
      income, unrealized
      gains on securities,
      net of tax of $17,519 ........                                                             26,710           26,710
  Comprehensive income .............                                                                             496,518
  Stock issued in conversion
    at no par value, net of
    costs ..........................    $5,042,101                                                             5,042,101
  Contribution of unearned
    ESOP shares ....................      (444,360)                                                             (444,360)
                                        ----------     ----------                               -------      -----------
Balances, June 30, 2002 ............     4,597,741      5,523,364                                75,730       10,196,835
  Comprehensive income
    Net income .....................                    1,325,737                                              1,325,737
    Other comprehensive loss,
      unrealized loss on securities,
      net of tax of $23,879 ........                                                            (36,407)         (36,407)
                                                                                                              ----------
  Comprehensive income .............                                                                           1,289,330
  Dividends on common stock $.20
      per share ....................                     (111,090)                                              (111,090)
  Contribution of unearned RRP
    Shares .........................                                   $(366,606)                               (366,606)
                                        ----------     ----------      ---------                -------      -----------

Balances, June 30, 2003 ............    $4,597,741     $6,738,011      $(366,606)               $39,323      $11,008,469
                                        ==========     ==========      =========                =======      ===========




See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                       City Savings Financial Corporation
                     Consolidated Statements of Cash Flows
                       Years Ended June 30, 2003 and 2002

                                                                              2003                   2002
------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                     <C>
Operating Activities
  Net income .........................................................  $   1,325,737           $    469,808
  Items not requiring (providing) cash
    Provision for loan losses ........................................        591,979                257,881
    Depreciation .....................................................        101,384                114,725
    Deferred income tax ..............................................       (264,524)               (86,792)
    Proceeds from sale of mortgage loans .............................    207,600,724              5,583,265
    Mortgage loans originated for sale ...............................   (220,668,077)            (5,479,175)
    Investment securities amortization (accretion), net ..............         35,716                (10,319)
    Investment securities gains ......................................       (320,485)               (49,499)
    Amortization of ESOP shares ......................................         66,655                     --
    Gains on loan sales ..............................................       (358,777)              (104,090)
  Net change in
    Interest receivable ..............................................       (203,955)               (47,479)
    Other assets .....................................................     (1,066,752)                76,098
    Other liabilities ................................................      1,541,050                983,475
                                                                        -------------           ------------
      Net cash provided by (used in) operating activities ............    (11,619,325)             1,707,898
                                                                        -------------           ------------

Investing Activities
  Net change in interest-bearing time deposits .......................        396,000                 (2,000)
  Purchases of securities available for sale .........................    (21,154,851)            (6,378,209)
  Proceeds from sales of securities available for sale ...............     13,872,275              2,394,124
  Proceeds from maturities and calls of securities available for sale       2,168,000              1,898,000
  Proceeds from maturities and paydowns of securities held to maturity         84,255                 95,538
  Net change in loans ................................................    (36,193,948)           (11,345,930)
  Purchases of premises and equipment ................................       (741,699)               (98,851)
  Proceeds from sales of premises and equipment ......................             --                 14,824
  Purchase of FHLB stock .............................................       (646,400)               (52,900)
                                                                        -------------           ------------
    Net cash used in investing activities ............................    (42,216,368)           (13,475,404)
                                                                        -------------           ------------

Financing Activities
  Net change in
    Demand and savings deposits ......................................      7,224,220              4,368,800
    Certificate of deposits ..........................................     33,144,007               (123,959)
  Proceeds from FHLB advances ........................................     23,100,000             10,600,000
  Payments on FHLB advances ..........................................    (13,428,052)            (5,781,903)
  Proceeds from other borrowings .....................................      6,010,120                     --
  Proceeds from sale of common stock, net of costs ...................             --              5,042,101
  Cash dividends .....................................................       (111,090)                    --
  Contribution of unearned RRP shares ................................       (366,606)                    --
  Contribution of unearned ESOP shares ...............................             --               (444,360)
                                                                        -------------           ------------
    Net cash provided by financing activities ........................     55,572,599             13,660,679
                                                                        -------------           ------------
Net Change in Cash and Cash Equivalents ..............................      1,736,906              1,893,173

Cash and Cash Equivalents, Beginning of Year .........................      3,215,463              1,322,290
                                                                        -------------           ------------
Cash and Cash Equivalents, End of Year ...............................  $   4,952,369           $  3,215,463
                                                                        =============           ============
Additional Cash Flows Information
  Interest paid ......................................................  $   2,866,141           $  2,566,010
  Income tax paid ....................................................        313,282                339,661



See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
                       City Savings Financial Corporation
                   Notes to Consolidated Financial Statements
                             June 30, 2003 and 2002
           (Table Dollar Amounts in Thousands, Except Per Share Data)


Note 1: Nature of Operations and Summary of Significant Accounting Policies

The  accounting  and reporting  policies of City Savings  Financial  Corporation
(Company),  its wholly owned  subsidiaries,  the City Savings  Statutory Trust I
(Trust),  the City Savings Bank (Bank),  and the Bank's wholly owned subsidiary,
City Savings Financial Services,  Inc. (CSFS),  conform to accounting principles
generally  accepted  in the United  States of America  and  reporting  practices
followed  by the thrift  industry.  The more  significant  of the  policies  are
described below.

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.

The  Company  is a  thrift  holding  company  whose  principal  activity  is the
ownership  and  management of the Bank.  The Bank operates  under a state thrift
charter and provides full banking  services.  As a state-chartered  thrift,  the
Bank is subject to  regulation  by the State of Indiana  Department of Financial
Institutions,  Office of Thrift  Supervision,  and the Federal Deposit Insurance
Corporation.

The Company  generates  commercial,  mortgage  and  consumer  loans and receives
deposits from  customers  located  primarily in La Porte County and  surrounding
counties.  The  Company's  loans are  generally  secured  by  specific  items of
collateral including real property, consumer assets and business assets.

Consolidation - The consolidated  financial  statements  include the accounts of
the Company,  the Trust,  the Bank,  and CSFS after  elimination of all material
intercompany transactions.

Cash and Cash  Equivalents - The Company  considers all liquid  investments with
original maturities of three months or less to be cash equivalents.

Investment  Securities - Debt securities are classified as held to maturity when
the  Company  has the  positive  intent and  ability to hold the  securities  to
maturity.  Securities  held to maturity  are  carried at  amortized  cost.  Debt
securities not classified as held to maturity and marketable  equity  securities
are classified as available for sale.  Securities available for sale are carried
at  fair  value  with  unrealized  gains  and  losses  reported   separately  in
accumulated other comprehensive income, net of tax.

Amortization  of premiums and  accretion  of discounts  are recorded as interest
income from  securities.  Realized gains and losses are recorded as net security
gains  (losses).  Gains and losses on sales of securities  are determined on the
specific-identification method.

Loans held for sale - Mortgage  loans  originated  and  intended for sale in the
secondary  market are  carried  at the lower of  aggregate  cost or market.  Net
unrealized  losses,  if any,  are  recognized  through a valuation  allowance by
charges to income.

Loans are carried at the principal amount outstanding.  A loan is impaired when,
based on current  information or events, it is probable that the Company will be
unable to collect all amounts due  (principal  and  interest)  according  to the
contractual terms of the loan agreement. Loans with payment delays not exceeding
90 days outstanding are not considered  impaired.  Delinquent  loans,  including
loans delinquent  greater than 90 days, are reviewed on a loan-by-loan  basis to
determine which loans are placed on non-accrual  status.  Certain nonaccrual and
substantially  delinquent  loans may be considered  to be impaired.  The Company
considers its investment in one-to-four  family  residential  loans and consumer
loans to be homogeneous and therefore excluded from separate  identification for
evaluation of impairment.  Interest income is accrued on the principal  balances
of  loans.  The  accrual  of  interest  on  impaired  and  nonaccrual  loans  is
discontinued when, in management's  opinion,  the borrower may be unable to make
payments as they become due. When interest accrual is  discontinued,  all unpaid
accrued interest is reversed when considered  uncollectible.  Interest income is
subsequently  recognized only to the extent cash payments are received.  Certain
loan fees and direct costs are being  deferred and amortized as an adjustment of
yield on the loans.  When a loan is paid off, any unamortized  loan  origination
fee balance is credited to income.

Allowance for loan losses is  maintained  to absorb losses  inherent in the loan
portfolio.  The  allowance  is based on ongoing,  quarterly  assessments  of the
probable  estimated  losses  inherent in the loan  portfolio.  The  allowance is
increased by provisions for loan losses charged against income.  Loan losses are
charged against the allowance when management believes the uncollectibility of a
loan balance is confirmed.  Subsequent  recoveries,  if any, are credited to the
allowance.  The Company's  methodology for assessing the  appropriateness of the
allowance  consists  of several  key  elements,  which  include  the formula for
general allowance and specific allowances for identified problem loans.

The  formula  allowance  is  calculated  by  applying  loss  factors  to certain
classified  loans,  pools of loans and certain  unused  commitments.  Changes in
classifications of both performing and nonperforming  loans affect the amount of
the formula allowance.  Loss factors are based on the Company's  historical loss
experience  and may be adjusted for  significant  factors that, in  management's
judgment, affect the collectibility of the portfolio as of the evaluation date.

Specific  allowances are  established  in cases where  management has identified
significant  conditions  or  circumstances  related to a credit that  management
believes indicate the probability that a loss has been incurred in excess of the
amount determined by the application of the formula allowance.

The  unallocated  allowance  is based upon  management's  evaluation  of various
conditions,  the effects of which are not directly measured in the determination
of the formula and specific allowances. The evaluation of the inherent loss with
respect to these conditions is subject to a higher degree of uncertainty because
they are not  identified  with specific  credits.  The  conditions  evaluated in
connection with the unallocated  allowance may include existing general economic
and business conditions affecting the Company's key lending area, credit quality
trends,  collateral values,  loan volumes and  concentrations,  seasoning of the
loan portfolio,  specific industry conditions within portfolio segments,  recent
loss experience in particular segments of the portfolio, duration of the current
business cycle, and regulatory examination results.

The  allowance  for loan  losses  also  incorporates  the  results of  measuring
impaired  loans as  provided  in SFAS  Nos.  114 and 118.  A loan is  considered
impaired when management determines that it is probable that the Company will be
unable to collect all amounts due according to the original contractual terms of
the loan  agreement.  Impairment  is  measured  by the  difference  between  the
recorded  investment  in the  loan  and the  estimated  present  value  of total
expected future cash flows, discounted at the loan's effective rate, or the fair
value of the  collateral  of the loan, if  collateral  dependent.  Impairment is
recognized by adjusting an allocation of the existing allowance for loan losses.

The  determination  of the adequacy of the allowance for loan losses is based on
estimates  that are  particularly  susceptible  to  significant  changes  in the
economic environment and market conditions.  Management believes that as of June
30,  2003,  the  allowance  for loan  losses is  adequate  based on  information
currently  available  and includes  all known and inherent  losses that are both
probable and reasonable to estimate.  A worsening or protracted economic decline
in the areas within which the Bank  operates  would  increase the  likelihood of
additional  losses due to credit and market  risks and could create the need for
additional loss provisions.

Premises  and  equipment  are carried at cost net of  accumulated  depreciation.
Depreciation is computed using the straight-line and accelerated methods ranging
from three to forty years and is based principally on the estimated useful lives
of the assets.  Maintenance  and repairs  are  expensed as incurred  while major
additions and improvements are capitalized. Gains and losses on dispositions are
included in current operations.

Federal Home Loan Bank stock is a required  investment for institutions that are
members of the Federal Home Loan Bank system.  The  required  investment  in the
common stock is based on a predetermined formula.

Stock options - The Company has a stock-based employee  compensation plan, which
is described more fully in Note 13. The Company accounts for this plan under the
recognition  and  measurement  principles of APB Opinion No. 25,  Accounting for
Stock Issued to Employees, and related interpretations.  No stock-based employee
compensation  cost is reflected in net income,  as all options granted under the
plan had an exercise  price equal to the market value of the  underlying  common
stock on the grant  date.  The  following  table  illustrates  the effect on net
income  and  earnings  per  share if the  Company  had  applied  the fair  value
provisions  of  Statement  of  Financial  Accounting  Standards  (SFAS) No. 123,
Accounting for Stock-Based Compensation, to stock-based employee compensation in
2003.


Net income, as reported ...............................................  $1,326
Less:  Total stock-based employee compensation cost
  determined under the fair value based method, net of income taxes ...     (64)
                                                                         ------
Pro forma net income ..................................................  $1,262
                                                                         ======
Earnings per share
  Basic - as reported .................................................  $ 2.64
  Basic - pro forma ...................................................    2.51
  Diluted - as reported ...............................................    2.62
  Diluted - pro forma .................................................    2.50


Income tax in the consolidated statements of income includes deferred income tax
provisions or benefits for all significant  temporary differences in recognizing
income and expenses for financial reporting and income tax purposes. The Company
files consolidated income tax returns with its subsidiary.

Earnings per share is computed  based on the weighted  average common and common
equivalent  shares  outstanding  during  the  periods  subsequent  to the Bank's
conversion to a stock  institution  in December 2001. Net income per share prior
to the  conversion  and during the period that  contained the conversion are not
meaningful.  Unearned  ESOP shares are  excluded  from  weighted-average  shares
outstanding.


Note 2: Restriction on Cash

The Bank is required to maintain  reserve  funds in cash and/or on deposit  with
the Federal Reserve Bank. The reserve required at June 30, 2003, was $233,000.


Note 3: Conversion

On December 27, 2001, the Bank completed the conversion  from a  state-chartered
mutual savings association to a state-chartered  stock savings association.  The
Company  was formed on  September  20, 2001 for the purpose of owning all of the
capital stock of the Bank following the  conversion.  As part of the conversion,
the Company issued 555,450 shares of common stock at $10 per share. Net proceeds
of the  Company's  stock  issuance,  after costs of $512,000 and  excluding  the
shares issued for the ESOP,  were  $4,598,000,  of which  $4,042,000 was used to
purchase  100  percent  of  the  Bank.  The  transaction  was  accounted  for at
historical cost in a manner similar to that utilized in a pooling of interests.

Note 4: Investment Securities

                                                        2003
                                     -------------------------------------------
                                                   Gross       Gross
                                     Amortized  Unrealized   Unrealized   Fair
                                       Cost        Gains       Losses     Value
--------------------------------------------------------------------------------
Available for sale
  Federal agencies ...............    $ 5,325       $ 22        $(14)   $  5,333
  State and municipal ............      3,277         50         (56)      3,271
  Corporate obligations ..........      3,520         92         (29)      3,583
                                      ------------------------------------------
    Total available for sale .....     12,122        164         (99)     12,187

Held to maturity - mortgage-backed
  securities .....................        249          4          --         253
                                      ------------------------------------------
    Total investment securities ..    $12,371       $168        $(99)   $ 12,440
                                      ==========================================


                                                        2002
                                     -------------------------------------------
                                                   Gross       Gross
                                     Amortized  Unrealized   Unrealized   Fair
                                       Cost        Gains       Losses     Value
--------------------------------------------------------------------------------
Available for sale
  Federal agencies ...............    $ 2,250       $ 30        $ (6)   $  2,274
  State and municipal ............      2,368         55          (5)      2,418
  Corporate obligations ..........      2,103         53          (1)      2,155
                                      ------------------------------------------
    Total available for sale .....      6,721        138         (12)      6,847

Held to maturity-mortgage-backed
  securities .....................        334          6          --         340
                                      ------------------------------------------
    Total investment securities ..    $ 7,055       $144        $(12)   $  7,187
                                      ==========================================


At June 30,  2003 and  2002,  mortgage-backed  securities  consisted  solely  of
Federal Home Loan Mortgage  Corporation,  Federal National Mortgage  Corporation
and Government National Mortgage Association issues.

The amortized  cost and fair value of securities  available for sale at June 30,
2003, by contractual maturity,  are shown below. Expected maturities will differ
from contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.

                                               Amortized      Fair
                                                 Cost         Value
                                              ----------------------
Within one year ..............................  $   500       $  502
One to five years.............................    3,161        3,239
Five to ten years.............................    4,717        4,744
Thereafter ...................................    3,744        3,702
                                                -------      -------
  Totals .....................................  $12,122      $12,187
                                                =======      =======

Securities  with a carrying  value of $161,000 and $213,000 were pledged at June
30, 2003 and 2002 to secure certain deposits and for other purposes as permitted
or required by law.

Proceeds  from  sales of  securities  available  for sale  during  2003 and 2002
totaled  $13,872,000  and  $2,394,000  with gross gains of $320,000  and $49,000
recognized  on  those  sales.   The  tax  expense  for  the  gains  on  security
transactions for 2003 and 2002 was $127,000 and $19,000.

<TABLE>
<CAPTION>

Note 5:  Loans and Allowance

                                                                      2003        2002
                                                                    --------------------
<S>                                                                 <C>          <C>
Commercial and industrial loans not secured by real property ...    $ 11,874     $ 4,202
Real estate loans
  One-to-four family ...........................................      40,462      42,478
  Commercial ...................................................      18,911       8,951
  Land .........................................................       1,708       1,145
  Multi-family .................................................         895         978
Construction loans .............................................       9,089       4,751
Individuals' loans for household and other personal expenditures      23,744       7,663
                                                                    --------     -------
                                                                     106,683      70,168
Unamortized deferred loan fees, net ............................        (107)        (97)
Undisbursed portion of loans ...................................      (1,805)     (1,420)
Allowance for loan losses ......................................      (1,097)       (579)
                                                                    --------     -------
    Total loans ................................................    $103,674     $68,072
                                                                    ========     =======


                                                                      2003        2002
                                                                    --------------------
Allowance for loan losses
  Balances, beginning of year ..................................    $    579        $423
  Provision for losses .........................................         592         258
  Loans charged off ............................................         (74)       (102)
                                                                    --------     -------
  Balances, end of year ........................................    $  1,097     $   579
                                                                    ========     =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

Information on impaired loans is summarized below.
                                                                       2003        2002
                                                                    --------------------
<S>                                                                   <C>         <C>
Impaired loans with an allowance ...............................      $  308      $  588
Impaired loans for which the discounted cash flows or collateral
  value exceeds the carrying value of the loan .................       1,851         978
                                                                      ------      ------
    Total impaired loans .......................................      $2,159      $1,566
                                                                      ======      ======
Allowance for impaired loans (included in the Company's
  allowance for loan losses) ...................................      $   71      $  124
                                                                      ======      ======



                                                                       2003        2002
                                                                    --------------------
Average balance of impaired loans ..............................      $2,499      $1,496
Interest income recognized on impaired loans ...................         127          73
Cash-basis interest included above .............................         118          68


The following table summarizes the Company's non-performing loans:
                                                                       2003        2002
                                                                    --------------------
Non-accrual ....................................................      $2,354      $1,499
Loans more than 90 days past due and still accruing ............          --          --
                                                                      ------      ------
  Total non-performing loans ...................................      $2,354      $1,499
                                                                      ======      ======

Note 6:  Premises and Equipment
                                                                       2003        2002
                                                                    --------------------
Land ...........................................................      $  149      $  149
Buildings ......................................................         849         846
Equipment ......................................................         625         578
Construction in process ........................................         695           4
                                                                      ------      ------
  Total cost ...................................................       2,318       1,577
Accumulated depreciation........................................        (862)       (761)
                                                                      ------      ------
  Net ..........................................................      $1,456      $  816
                                                                      ======      ======


Note 7:  Deposits
                                                                       2003        2002
                                                                    --------------------
Demand and money-market deposits ...............................    $ 23,797     $17,650
Savings deposits ...............................................      11,406      10,328
Certificates and other time deposits of $100,000 or more .......      32,088       9,981
Other certificates and time deposits ...........................      36,288      25,252
                                                                    --------     -------
  Total deposits ...............................................    $103,579     $63,211
                                                                    ========     =======
</TABLE>

Certificates and other time deposits maturing in years ending June 30:
      2004 ...........................  $45,369
      2005 ...........................    6,960
      2006 ...........................    6,890
      2007 ...........................    4,306
      2008 ...........................    3,734
      Thereafter .....................    1,117
                                        -------
                                        $68,376
                                        =======

Brokered deposits at June 30, 2003 and 2002 were $17,257,000 and $198,000.

Deposits in excess of $100,000 are not federally insured.

Deposits from related parties held by the Bank at June 30, 2003 and 2002 totaled
$774,000 and $665,000.


Note 8:  Borrowings

Federal Home Loan Bank advances  totaled  $16,160,000 and $6,488,000 at June 30,
2003 and 2002.  At June 30, 2003,  the advances  were at interest  rates ranging
from 2.20 to 5.64 percent.

The  Federal  Home Loan Bank  advances  are  secured  by  first-mortgage  loans,
investment securities totaling $49,967,000. Advances are subject to restrictions
or penalties in the event of prepayment.

Maturities in years ending June 30

   2004 ...........................    $10,332
   2005 ...........................        401
   2006 ...........................      1,370
   2007 ...........................      1,338
   2008 ...........................        788
   Thereafter .....................      1,931
                                        ------
                                       $16,160
                                       =======


On June 26,  2003,  the Company  formed the City Savings  Statuary  Trust I (the
Trust).  On June 26,  2003,  the Trust  issued 5,000  floating  Preferred  Trust
Securities  with a  liquidation  amount of $1,000 per  preferred  Security  in a
private  placement  to an offshore  entity for an  aggregate  offering  price of
$5,000,000.  The  proceeds  of  $5,000,000  were used by the  Trust to  purchase
$5,155,000  in Floating  Rate  Subordinated  Debentures  from the  Company.  The
Debentures and Securities  have a term of 30 years,  bear interest at the annual
rate of 4.10 percent  adjusted  quarterly at the rate of the 3-Month  LIBOR plus
3.15 percent.  The proceeds of the offering  will be used for general  corporate
purposes of the Company.

The Company has a $4,000,000 line of credit from another financial  institution.
Interest  accrues on the account at the federal funds borrowing rate. As of June
30, 2003, there was $1,010,000 outstanding on the line.


Note 9:  Income Tax

                                                             2003     2002
                                                          --------------------
Income tax expense (credit)
  Currently payable
    Federal .............................................   $ 912     $ 285
    State ...............................................     207        70
  Deferred
    Federal .............................................    (225)      (74)
    State ...............................................     (40)      (13)
                                                            -----     -----
      Total income tax expense ..........................   $ 854     $ 268

Reconciliation of federal statutory to actual tax expense
  Federal statutory income tax at 34% ...................   $ 741     $ 251
  Tax-exempt interest ...................................     (36)      (25)
  Effect of state income taxes ..........................     110        38
  Other .................................................      39         4
                                                            -----     -----
    Actual tax expense ..................................   $ 854     $ 268
                                                            =====     =====
Effective tax rate ......................................    39.2%     36.3%


A cumulative  net deferred tax asset of $529,000 at June 30, 2003 is included in
other assets. The components of the net asset are as follows:

                                                     2003     2002
                                                    ------   ------
Assets
  Amortization ..................................   $   2    $  32
  Allowance for loan losses .....................     376      190
  State income tax ..............................      69       35
  Deferred compensation .........................      90       32
  Pensions and employee benefits ................      24        8
                                                    -----    -----
    Total assets ................................     561      297
                                                    -----    -----

Liabilities
  Other .........................................      (6)      (7)
  Securities available for sale .................     (26)     (50)
                                                    -----    -----
    Total liabilities ...........................     (32)     (57)
                                                    -----    -----
                                                    $ 529    $ 240
                                                    =====    =====

No valuation allowance was necessary for 2003 and 2002.

Retained  earnings include  approximately  $543,000 for which no deferred income
tax  liability  has been  recognized.  This amount  represents  an allocation of
income  to bad debt  deductions  as of June  30,  1987  for tax  purposes  only.
Reduction of amounts so allocated for purposes other than tax bad debt losses or
adjustments  arising from carryback of net operating  losses would create income
for tax  purposes  only,  which  income  would be  subject  to the  then-current
corporate income tax rate. At June 30, 2003, the unrecorded  deferred income tax
liability on the above amount was approximately $209,000.
<PAGE>

Note 10:  Commitments and Contingent Liabilities

In  the  normal  course  of  business  there  are  outstanding  commitments  and
contingent  liabilities,  such as  commitments  to extend  credit and letters of
credit,  which are not included in the accompanying  financial  statements.  The
Company's  exposure to credit loss in the event of  nonperformance  by the other
party to the financial  instruments for commitments to extend credit and standby
letters of credit is represented by the  contractual or notional amount of those
instruments.   The  Company  uses  the  same  credit  policies  in  making  such
commitments  as they do for  instruments  that are included in the  consolidated
balance sheets.

Financial  instruments  whose  contract  amount  represents  credit risk were as
follows:

<TABLE>
<CAPTION>
                                                                     2003      2002
                                                                  --------------------
<S>                                                                <C>        <C>
Loan commitments
  At variable rates ............................................   $ 5,055    $2,907
  At fixed rates ranging from 4.625% to 7.25% at June 30, 2003..
    and 6.0% to 8.5% at June 30, 2002 ..........................     3,026     1,953
Letters of credit ..............................................     2,283        39
Unused lines of credit .........................................    10,964     3,795
</TABLE>

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment of a fee. Since many of the  commitments are expected to expire
without  being  drawn  upon,  the total  commitment  amounts do not  necessarily
represent future cash requirements. The Company evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Company  upon  extension  of credit,  is based on  management's
credit evaluation.  Collateral held varies but may include accounts  receivable,
inventory, real property, equipment, and income-producing commercial properties.

Letters of credit are conditional commitments issued by the Company to guarantee
the performance of a customer to a third party.

The Bank is a party to a lawsuit  asserting,  among other things,  that the Bank
interfered with transactional  relationships between the Indiana Housing Finance
Authority (IHFA) and the Greater Michigan City Community Development Corporation
(GMCCDC).  Among other  defendants is the Bank's  president,  who also served as
president  of the  GMCCDC  during the period  covered by the  lawsuit.  The Bank
accepted  deeds in lieu of  foreclosure  on  properties  that it  believed to be
collateral  on loans to the GMCCDC.  The IHFA  asserts  certain  rights to those
properties among other claims. The total amount received by the Bank on the sale
of the foreclosed properties was approximately  $320,000.  The IHFA is suing for
unspecified damages and other costs.

The  defense  and  other  costs of  litigation  of the Bank  may be  covered  by
insurance, but the Bank's insurer is currently reviewing that determination, and
there  are  certain  exclusions  in the  policies,  which  might  apply  to deny
coverage.  The Bank and its president intend to vigorously defend the action. It
is  impossible  at this time for the Bank to predict the outcome of this pending
litigation or its impact on the Bank's operations or financial condition.

The Company and Bank are also subject to other  claims and lawsuits  which arise
primarily in the ordinary  course of business.  It is the opinion of  management
that the disposition or ultimate resolution of such claims and lawsuits will not
have a material  adverse effect on the  consolidated  financial  position of the
Company.


Note 11:  Dividend and Capital Restrictions

The  Company  is not  subject  to  regulatory  restrictions  on the  payment  of
dividends to its shareholders,  although the source of such dividends depends in
part upon the  receipt  of  dividends  from the Bank.  Without  prior  approval,
current regulations allow the Bank to pay dividends to the Company not exceeding
retained  net  income  for the  current  year plus  those for the  previous  two
calendar years.

At the time of conversion,  a liquidation  account was  established in an amount
equal to the Bank's net worth as reflected in the latest statements of condition
used in its final  conversion  offering  circular.  The  liquidation  account is
maintained  for the benefit of eligible  deposit  account  holders who  maintain
their deposit account in the Bank after  conversion.  In the event of a complete
liquidation,  and only in such event,  each eligible deposit account holder will
be entitled to receive a liquidation  distribution from the liquidation  account
in the  amount of the then  current  adjusted  subaccount  balance  for  deposit
accounts  then  held,  before  any  liquidation  distribution  may  be  made  to
shareholders.  Except for the repurchase of stock and payment of dividends,  the
existence of the liquidation account will not restrict the use or application of
net worth. The initial balance of the liquidation account was $5,216,000.

At June 30, 2003, the shareholder's  equity of the Bank was $13,631,000 of which
$11,902,000 was not available for dividend payments.  Although well capitalized,
under current  regulations in effect,  the Bank is required to provide notice to
the Office of Thrift Supervision before making any capital  distributions to the
Company.


Note 12:  Regulatory Capital

The Bank is subject to various regulatory capital  requirements  administered by
the federal banking agencies and is assigned to a capital category. The assigned
capital  category is largely  determined  by three  ratios  that are  calculated
according to the regulations:  total risk adjusted capital,  Tier 1 capital, and
Tier 1 leverage  ratios.  The ratios are intended to measure capital relative to
assets and  credit  risk  associated  with those  assets and  off-balance  sheet
exposures of the entity.  The capital category assigned to an entity can also be
affected by  qualitative  judgments  made by regulatory  agencies about the risk
inherent in the entity's activities that are not part of the calculated ratios.

There are five capital categories defined in the regulations,  ranging from well
capitalized to critically  undercapitalized.  Classification of a bank in any of
the  undercapitalized  categories can result in actions by regulators that could
have a material  effect on a bank's  operations.  At June 30, 2003 and 2002, the
Bank was categorized as well  capitalized  and met all subject capital  adequacy
requirements.  There  are no  conditions  or  events  since  June 30,  2003 that
management believes have changed the Bank's classification.

<TABLE>
<CAPTION>

The Bank's actual and required capital amounts and ratios are as follows:



                                                                             Required for           To Be Well
                                                          Actual           Adequate Capital        Capitalized
                                                    ---------------------------------------------------------------
                                                     Amount     Ratio     Amount      Ratio     Amount       Ratio
-------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>         <C>       <C>          <C>      <C>          <C>
As of June 30, 2003
Total risk-based capital (to risk-weighted assets)  $14,547     13.3%     $8,763       8.0%     $10,954      10.0%
Tier 1 capital (to risk-weighted assets) .........   13,592     12.4       4,381       4.0        6,572       6.0
Core capital (to adjusted total assets) ..........   13,592      9.8       5,573       4.0        6,967       5.0
Core capital (to adjusted tangible assets) .......   13,592      9.8       2,787       2.0          N/A       N/A
Tangible capital (to adjusted total assets) ......   13,592      9.8       2,090       1.5          N/A       N/A

As of June 30, 2002
Total risk-based capital (to risk-weighted assets)  $10,092     18.7%     $4,317       8.0%      $5,396      10.0%
Tier 1 capital (to risk-weighted assets) .........    9,571     17.7       2,158       4.0        3,238       6.0
Core capital (to adjusted total assets) ..........    9,571     11.8       3,251       4.0        4,064       5.0
Core capital (to adjusted tangible assets) .......    9,571     11.8       1,625       2.0           --       N/A
Tangible capital (to adjusted total assets) ......    9,571     11.8       1,219       1.5           --       N/A

</TABLE>


Note 13:  Employee Benefits

The Company has a  retirement  savings  401(k) plan in which  substantially  all
employees may participate. The Bank matches employees' contributions at the rate
of fifty  percent for the first  three  percent of base  salary  contributed  by
participants.  The  Company's  expense  for the plan was $19,300 and $18,900 for
2003 and 2002.

The Company has a supplemental retirement plan for the benefit of all directors.
The plan provides for the  continuation of directors fees for 120 months after a
director's status is terminated,  subject to a pre-determined  vesting schedule.
In the event of a  director's  death,  no further  payments are  required.  This
defined-benefit  plan is unfunded and the expense  recognized by the Company was
$172,000 and $84,500 during 2003 and 2002.

The Company has established an ESOP covering  substantially all employees of the
Company and the Bank. The ESOP provides for the Company to issue a put option to
any participant who receives a distribution of Company stock. The option permits
the  participant  to sell the stock to the Company at any time during two option
periods, as defined in the plan, at the fair market value of the stock. The ESOP
acquired  44,436  shares  of the  Company  common  stock at $10 per share in the
conversion  with funds  provided by a loan from the  Company.  Unallocated  ESOP
shares  totaled 37,771 and 42,214 at June 30, 2003 and 2002 and had a fair value
of $859,000 and  $611,000.  Allocated  ESOP shares  totaled 4,443 as of June 30,
2003. Shares are released to participants proportionately as the loan is repaid.
Dividends on allocated  shares are recorded as dividends and charged to retained
earnings.  Dividends  on  unallocated  shares are used to repay the loan and are
treated as  compensation  expense.  Expense is recorded equal to the fair market
value of the stock when shares are  committed to be released.  At June 30, 2003,
there were 2,222  committed to be released  shares and ESOP expense for 2003 and
2002 totaled $87,000 and $22,000.
<PAGE>

Below are the transactions affecting the ESOP equity accounts:

                                              Additional    Unearned
                                    Common      Paid-in      ESOP
                                     Stock      Capital      Shares        Total
--------------------------------------------------------------------------------

Common stock acquired by ESOP....  $444,360     $    --    $(444,360)    $    --
ESOP shares earned ..............        --          --           --          --
                                   ---------------------------------------------
Balance, June 30, 2002 ..........   444,360          --     (444,360)         --
ESOP shares earned ..............        --      22,219       44,436      66,655
                                   ---------------------------------------------
Balance, June 30, 2003 ..........  $444,360     $22,219    $(399,924)    $66,655
                                   =============================================

The Company also has a Recognition  and Retention  Plan (RRP) which provides for
the award and issuance of up to 22,218 shares of the Company's  stock to members
of the Board of Directors and management. The RRP has purchased 22,218 shares of
the  Company's  common  stock in the open  market and at June 30 2003,  all such
shares had been awarded. Common stock awarded under the RRP vests ratably over a
five-year  period,  commencing with the date of the award.  Expenses  recognized
under the RRP plan totaled approximately $56,000 for 2003.


Note 14:  Stock Option Plan

The Company has a fixed  option plan under which it may grant  options that vest
over five years to employees.  The exercise  price of each option is intended to
equal the fair value of the  Company's  stock on the date of grant.  An option's
maximum term is ten years.

During 2003,  the Company  granted  options to purchase  46,770 shares of common
stock and there were no exercises, forfeitures, or expiration of the options for
the year ended June 30, 2003.

The fair value of options granted is estimated on the date of the grant using an
option-pricing model with the following weighted-average assumptions:

                                                                     2003
                                                                  -----------
Dividend yields ..............................................       1.36%
Volatility factors of expected market price of common stock ..       6.40%
Risk-free interest rates .....................................       3.96%
Expected life of options .....................................    10 years

Weighted-average fair value of options granted during the year       $3.19


The following table summarizes information about stock options under
the plan outstanding at June 30, 2003:

                                          Options Outstanding
                                            Weighted-Average
       Exercise            Number              Remaining              Options
        Prices          Outstanding         Contractual Life        Exercisable
--------------------------------------------------------------------------------
        $14.00             23,604               9.3 years               --
        $14.99              4,166               9.4 years               --
        $17.20             19,000               9.6 years               --
<PAGE>
<TABLE>
<CAPTION>

Note 15:  Other Comprehensive Income
                                                                        2003
                                                                         Tax
                                                          Before-Tax  (Expense)    Net-of-Tax
                                                            Amount     Benefit       Amount
                                                          -----------------------------------
<S>                                                         <C>         <C>         <C>
Unrealized gains on securities
  Unrealized holding gains arising during the year ......   $ 260       $(103)      $ 157
  Less: reclassification adjustment for gains realized in
    net income ..........................................     320        (127)        193
                                                            -----------------------------
                                                            $ (60)      $ (24)       $(36)
                                                            =============================


                                                                        2002
                                                                         Tax
                                                          Before-Tax  (Expense)    Net-of-Tax
                                                            Amount     Benefit       Amount
                                                          -----------------------------------
Unrealized gains on securities
  Unrealized holding gains arising during the year ......   $  94       $ (36)      $  58
  Less: reclassification adjustment for gains realized in
    net income ..........................................      49         (18)         31
                                                            -----------------------------
                                                            $  45       $ (18)      $  27
                                                            =============================


At June 30, 2003 and 2002,  accumulated  other  comprehensive  income  consisted
solely of unrealized gains on securities.
</TABLE>


Note 16:  Earnings Per Share

Earnings per share (EPS) were computed as follows:

                                                   Year Ended June 30, 2003
                                                -------------------------------
                                                           Weighted-  Per Share
                                                Income  Average Shares  Amount
                                                -------------------------------
                                                    (not in thousands)
Basic earnings per share
  Income available to common stockholders ...   $1,326     502,921       $2.64

Effect of dilutive stock options ............                2,146
                                                ------------------
Diluted earnings per share
  Income available to common stockholders and
    assumed conversions .....................   $1,326     505,067       $2.62
                                                ==============================

Options  to  purchase  19,000  shares of common  stock at $17.20  per share were
outstanding  at June 30,  2003,  but were not  included  in the  computation  of
diluted EPS because the  options'  exercise  price was greater  than the average
market price of the common shares.


Note 17:  Fair Values of Financial Instruments

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instrument:

Cash  and cash  equivalents  - The  fair  value  of cash  and  cash  equivalents
approximates carrying value.

Interest-bearing  time  deposits  - The  fair  value  of  interest-bearing  time
deposits approximates carrying value.

Securities  and  mortgage-backed  securities  - Fair  values are based on quoted
market prices.

Loans  -  For  both  short-term  loans  and  variable-rate  loans  that  reprice
frequently and with no significant  change in credit risk, fair values are based
on  carrying  values.  The fair  values for certain  mortgage  loans,  including
one-to-four  family  residential,  are based on quoted  market prices of similar
loans  sold  in  conjunction  with  securitization  transactions,  adjusted  for
differences in loan characteristics. The fair value for other loans is estimated
using discounted cash flow analyses using interest rates currently being offered
for loans with similar terms to borrowers of similar credit quality.

Loans  held  for  sale - The fair  value  of  loans  held for sale  approximates
carrying value

Interest  receivable  - The  fair  values  of  interest  receivable  approximate
carrying values.

FHLB  Stock - The fair value of FHLB stock is based on the price at which it may
be resold to the FHLB.

Deposits - The fair values of  noninterest-bearing,  interest-bearing demand and
savings  accounts are equal to the amount payable on demand at the balance sheet
date. The carrying amounts for variable rate, fixed-term certificates of deposit
approximate  their  fair  values at the  balance  sheet  date.  Fair  values for
fixed-rate  certificates  of deposit are estimated  using a discounted cash flow
calculation  that applies interest rates currently being offered on certificates
to a schedule of aggregated expected monthly maturities on such time deposits.

Federal Home Loan Bank  Advances and Other  Borrowings - The fair value of these
borrowings  are estimated  using a discounted  cash flow  calculation,  based on
current rates for similar debt.

Off-Balance Sheet Commitments - The fair value of these commitments are based on
fees currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the counterparties'  credit standing.  The
difference  between the fair value and  notional  amounts of  off-balance  sheet
commitments at June 30, 2003 and 2002 was not material.

The estimated fair values of the Company's financial instruments are as follows:

                                                 2003               2002
                                           -------------------------------------
                                           Carrying   Fair     Carrying     Fair
                                            Amount    Value     Amount     Value
                                           -------------------------------------
Assets
  Cash and cash equivalents .............. $ 4,952   $ 4,952   $ 3,215   $ 3,215
  Interest-bearing time deposits .........     299       299       695       695
  Investment securities available for sale  12,187    12,187     6,847     6,847
  Investment securities held to maturity .     249       253       334       340
  Loans, net ............................. 103,674   105,022    68,072    68,619
  Loans held for sale ....................  13,426    13,426
  Interest receivable ....................     676       676       472       472
  Stock in FHLB ..........................   1,082     1,082       435       435

Liabilities
  Deposits ............................... 103,579   105,346    63,211    63,879
  FHLB advances ..........................  16,160    16,628     6,488     6,546
  Other borrowings .......................   6,010     6,010        --        --

<TABLE>
<CAPTION>

Note 18:  Note Condensed Financial Information (Parent Company Only)

Presented  below is condensed  financial  information as to financial  position,
results of operations and cash flows of the Company.

                            Condensed Balance Sheets

                                                                   2003         2002
                                                                  -------------------
<S>                                                               <C>         <C>
Assets
  Cash .......................................................    $ 2,275     $   558
  Investment in subsidiaries .................................     13,786       9,647
  Other assets ...............................................        191          17
                                                                  -------------------
    Total assets .............................................    $16,252     $10,222
                                                                  ===================

Liabilities
  Borrowings .................................................    $ 5,155     $    --
  Other ......................................................         22          25
                                                                  -------------------
    Total Liabilities ........................................      5,177          25
                                                                  -------------------

Equity Received From Contributions to the ESOP ...............         67          --
                                                                  -------------------
Shareholders' equity
  Common stock ...............................................      4,598       4,598
  Retained earnings ..........................................      6,738       5,523
  Unearned RRP ...............................................       (367)         --
  Accumulated other comprehensive income .....................         39          76
                                                                  -------------------
                                                                   11,008      10,197
                                                                  -------------------
    Total liabilities and shareholders' equity ...............    $16,252     $10,222
                                                                  ===================
<PAGE>
                         Condensed Statements of Income
                                                                   2003         2002
                                                                  -------------------
Income - interest ............................................    $    30     $    15

Expenses .....................................................         95          24
                                                                  -------------------
Loss before equity in undistributed income of subsidiaries and
        income tax expense ...................................        (65)         (9)
Equity in undistributed income of subsidiaries ...............      1,365         475
                                                                  -------------------
Income before income tax .....................................      1,300         466
Income tax benefit ...........................................        (26)         (4)
                                                                  -------------------
Net income ...................................................    $ 1,326     $   470
                                                                  ===================


Condensed Statements of Cash Flows

                                                                    2003        2002
                                                                  -------------------
Cash flows from operating activities
  Net income .................................................    $ 1,326     $   470
  Other ......................................................     (1,476)       (505)
                                                                  -------------------
    Net cash used in operating activities ....................       (150)        (35)
                                                                  -------------------
Cash flows from investing activity - investment in subsidiary      (3,177)     (4,042)
                                                                  -------------------
Cash flows from financing activities
  Proceeds from issuance of stock ............................         --       5,079
  Proceeds from issuance of debt .............................      5,155          --
  Dividends paid .............................................       (111)         --
  Contribution of unearned ESOP shares .......................         --        (444)
                                                                  -------------------
   Net cash provided by financing activities .................      5,044       4,635
                                                                  -------------------
Net change in cash ...........................................      1,717         558

Cash at beginning of year ....................................        558          --
                                                                  -------------------
Cash at end of year ..........................................    $ 2,275     $   558
                                                                  ===================
</TABLE>
<PAGE>
                             DIRECTORS AND OFFICERS

                               BOARD OF DIRECTORS

        Bruce W. Steinke                            Thomas F. Swirski
      Chairman of the Board                        President and Chief
   Retired President and Chief                Executive Officer of Holding
   Executive Officer of the Bank                   Company and the Bank
   and Chairman of the Board of
        Holding Company


         Richard G. Cook                             George L. Koehm
    Secretary of Holding Company               Treasurer of Holding Company
       and the Bank, Retired                   and Executive Vice President,
         Business Manager,                       Treasurer and Controller
     Michigan City Area Schools                       of the Bank

                                Mark T. Savinski
                               District Director,
                                U.S. Congressman,
                               Peter J. Visclosky




            EXECUTIVE OFFICERS OF CITY SAVINGS FINANCIAL CORPORATION

         Thomas F. Swirski                           George L. Koehm
           President and                                Treasurer
       Chief Executive Officer




                    EXECUTIVE OFFICERS OF CITY SAVINGS BANK

         Thomas F. Swirski                           George L. Koehm
           President and                         Executive Vice President,
      Chief Executive Officer                    Treasurer and Controller


        Debra L. Moffitt                             James E. Drader
     Vice President, Mortgage                         Vice President,
        and Consumer Lending                        Commercial Lending
<PAGE>

DIRECTORS AND OFFICERS

     Richard G. Cook (age 66) has served as Secretary of City Savings Bank since
2000 and of the  Holding  Company  since its  inception.  He  retired in 1999 as
Business Manager of the Michigan City Area Schools,  a position that he held for
25 years. He currently serves as an outside consultant for Educational  Services
based in Indianapolis.

     James E. Drader (age 37) has served as Vice President of Commercial Lending
of the City Savings Bank since  November 2002. Mr. Drader joined the Bank in May
2002.  From  1997  to  2002,  Mr.  Drader  served  as  General  Manager  for D&M
Excavating, Inc. in Michigan City, Indiana. From 1993 to 1997, Mr. Drader served
as Assistant Vice President of Commercial Lending for First of America Bank with
a promotion to Vice  President in 1995.  From 1989 to 1993, Mr. Drader served in
various capacities for INB Northwest,  N.A. Mr. Drader has a Bachelor of Science
Degree in Agricultural Economics from Purdue University.

     George L. Koehm (age 41) has served as  Treasurer  and  Controller  of City
Savings Bank since April 1999,  Treasurer of City  Savings  Financial  Services,
Inc. since April 2000, and Treasurer of the Holding Company since its inception.
From 1997 until 1999, he served as Executive Vice President and Chief  Operating
Officer of Argo Federal  Savings Bank. From 1989 until 1997, Mr. Koehm served as
Vice President and Treasurer of Community Bank,  F.S.B.,  and as Chief Financial
Officer of Community Bank's holding company, CB Bancorp, Inc.

     Debra L.  Moffitt  (age 45) has served as Vice  President  of Mortgage  and
Consumer  Lending of the City Savings Bank since  November  2002, and Manager of
the Mortgage and Consumer  Lending  Department  since November  2000.  From 1997
until 2000, Ms. Moffitt served as Asst. Vice President of Community Bank, FSB in
many  different  capacities  including  Branch  Management  and  Lending  in the
Consumer and Mortgage areas.  Ms. Moffitt has served in management  positions at
several other local banks since 1975.

     Mark T.  Savinski  (age 49) has served since 1998 as District  Director for
U.S. Congressman, Peter J. Visclosky, First District of Indiana. From 1989 until
1998, Mr.  Savinski  served as Human Resource  Manager for Modine  Manufacturing
Company in La Porte, Indiana.

     Bruce W. Steinke (age 71) retired as President and Chief Executive  Officer
of City Savings Bank in 2000.  Mr.  Steinke was employed by the Bank for over 30
years and has served on the board of directors since 1969.

     Thomas F. Swirski (age 48) has been President,  Chief Executive Officer and
Compliance  Officer of City  Savings Bank since  February  2000 and City Savings
Financial  Services,  Inc.  since November 1999 and has been President and Chief
Executive  Officer of the Holding  Company since its inception.  From 1981 until
his  appointment as President,  Mr.  Swirski served as Secretary,  Mortgage Loan
Manager and Compliance  Officer of the Bank. Mr. Swirski has a Masters degree in
Finance from Indiana University and is a graduate of the University of Wisconsin
Graduate School of Banking.
<PAGE>

Market Information

     The Bank converted from a state mutual savings association to a state stock
savings  association  effective December 27, 2001, and  simultaneously  formed a
savings and loan holding  company,  the Holding Company.  The Holding  Company's
Common Stock,  is traded on the OTC  Electronic  Bulletin Board under the symbol
"CSFC." As of July 31, 2003, there were  approximately 333 record holders of the
Holding Company's Common Stock.

     Any dividends paid by the Holding Company will be subject to  determination
and declaration by the Board of Directors in its discretion.  In determining the
level of any future dividends, the Board of Directors will consider, among other
factors,  the  following:  tax  considerations;   industry  standards;  economic
conditions;  capital levels; regulatory restrictions on dividend payments by the
Bank to the Holding Company; and general business practices.

     The Holding  Company is not subject to OTS regulatory  restrictions  on the
payment of dividends to its  shareholders  although the source of such dividends
will depend in part upon the receipt of dividends from the Bank.  Applicable law
restricts  the  amount  of  dividends  the Bank may pay to the  Holding  Company
without  obtaining  the prior  approval  of the OTS to an  amount  that does not
exceed the Bank's  year-to-date  net income plus its retained net income for the
preceding  two  years.  The  Holding  Company  is  subject,   however,   to  the
requirements  of Indiana law, which  generally limit the payment of dividends to
amounts  that will not affect  the  ability of the  Holding  Company,  after the
dividend  has been  distributed,  to pay its  debts in the  ordinary  course  of
business and will not exceed the difference  between the Holding Company's total
assets and total liabilities plus  preferential  amounts payable to shareholders
with rights  superior to those of the  holders of the Holding  Company's  common
stock.

     In addition to the foregoing,  the portion of the Bank's earnings which has
been  appropriated  for bad debt  reserves and  deducted for federal  income tax
purposes cannot be used by the Bank to pay cash dividends to the Holding Company
without  the  payment of federal  income  taxes by the Bank at the then  current
income  tax rate on the amount  deemed  distributed,  which  would  include  any
federal income taxes attributable to the distribution.  The Holding Company does
not contemplate any distribution by the Bank that would result in a recapture of
the Bank's bad debt reserve or otherwise create federal tax liabilities.

                           Stock Bid
                        ----------------
Quarter Ended            High      Low
------------------      ----------------
December 31, 2001       $12.55    $12.20
March 31, 2002           14.00     12.25
June 30, 2002            14.50     13.17

September 30, 2002       14.00     13.50
December 31, 2002        16.40     13.25
March 31, 2003           18.00     16.00
June 30, 2003            21.00     17.75

Quotations reflect  inter-dealer  prices,  without retail mark-up,  mark-down or
commission  and  may  not  represent  actual  transactions.  The  source  of bid
information is the OTC Bulletin Board.

Market Makers
Moors and Cabot, Inc.
Trident Securities, Inc.
Howe Barnes Investments, Inc.
Monroe Securities, Inc.

Transfer Agent and Registrar
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey  10701
(800) 525-7686

General Counsel
Barnes & Thornburg
11 South Meridian Street
Indianapolis, Indiana  46204

Independent Auditor
BKD, LLP
201 N. Illinois Street, Suite 700S
Indianapolis, Indiana  46204

Shareholders and General Inquiries

The Company will file an Annual  Report on Form 10-KSB for its fiscal year ended
June 30, 2003 with the Securities and Exchange Commission. Copies of this annual
report may be obtained without charge upon written request to:

        George L. Koehm
        Treasurer
        2000 Franklin Street
        Michigan City, IN  46360