FORM 10-QSB

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

 (Mark One)

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

                 For Quarterly Period ended September 30, 1997

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

           For the transition period from __________ to ____________.

                         Commission File Number 0-22223

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
        (Exact name of small business issuer as specified in its charter)

             Delaware                                         31-1499862

(State or other jurisdiction of                             (IRS Employer
  incorporation or organization)                            Identification No.)

                     101 E. Court Street, Sidney, Ohio 45365
                    (Address of principal executive offices)

                                 (937) 492-6129  
                           (Issuer's telephone number)

Check whether the small business issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the  Securities  Exchange Act during the past 12
months (or for such shorter period that the small  business  issuer was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days.

                            Yes   [ X ]     No  [   ]

As of November 3, 1997, the latest  practicable  date,  1,785,375  shares of the
small  business   issuer's  common  shares,   no  par  value,  were  issued  and
outstanding.
<PAGE>


                     PEOPLES - SIDNEY FINANCIAL CORPORATION



                                      INDEX







                                                                                


PART I - FINANCIAL INFORMATION (UNAUDITED)

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

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

      Condensed Consolidated Statements of Changes of Shareholders' Equity......

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

      Notes to Financial Statements.............................................


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



PART II - OTHER INFORMATION.....................................................

SIGNATURES .....................................................................



<PAGE>
<TABLE>
<CAPTION>
                              PEOPLES - SIDNEY FINANCIAL CORPORATION
                                   CONSOLIDATED BALANCE SHEETS
                                           (Unaudited)

                                                                 September 30,          June 30,
                                                                     1997                1997
                                                                -------------      -------------
<S>                                                             <C>                <C>
ASSETS
Cash and amounts due from depository institutions .........     $     750,599      $     297,722
Interest-bearing deposits in other banks ..................         1,183,791          1,498,104
Overnight deposits ........................................              --            1,000,000
                                                                -------------      -------------
     Total cash and cash equivalents ......................         1,934,390          2,795,826

Time deposits with other financial institutions ...........         3,000,000          5,000,000
Securities available for sale .............................         2,523,358          2,012,802
Securities held to maturity (Estimated fair value of
  $1,499,375 and $1,996,795 at September 30, 1997
  and June 30, 1997) ......................................         1,499,609          1,999,375
Loans receivable, net .....................................        91,405,358         88,924,339
Accrued interest receivable ...............................           806,092            735,462
Premises and equipment, net ...............................           751,656            755,286
Federal Home Loan Bank stock available for sale ...........           776,400            762,500
Other assets ..............................................           137,880            156,772
                                                                -------------      -------------

     Total assets .........................................     $ 102,834,743      $ 103,142,362
                                                                =============      =============

LIABILITIES
Deposits ..................................................     $  76,398,709      $  77,045,430
Accrued expense and other liabilities .....................           421,951            385,219
                                                                -------------      -------------
     Total liabilities ....................................        76,820,660         77,430,649


SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 500,000 shares authorized,
  none issued and outstanding
Common stock, $.01 par value, 3,500,000 shares authorized,
  1,785,375 shares issued and outstanding .................            17,854             17,854
Additional paid-in capital ................................        17,248,648         17,234,087
Retained earnings .........................................        10,031,903          9,776,982
Unearned employee stock ownership plan shares .............        (1,300,780)        (1,326,280)
Unrealized gain on securities available for sale ..........            16,458              9,070
                                                                -------------      -------------
     Total shareholders' equity ...........................        26,014,083         25,711,713
                                                                -------------      -------------

     Total liabilities and shareholder's equity ...........     $ 102,834,743      $ 103,142,362
                                                                =============      =============

</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
                              PEOPLES - SIDNEY FINANCIAL CORPORATION
                                CONSOLIDATED STATEMENTS OF INCOME
                                           (Unaudited)

                                                                         Three Months Ended
                                                                            September 30,
                                                                       1997              1996
                                                                   -----------       -----------
<S>                                                                <C>               <C>
Interest income
     Loans, including fees .................................       $ 1,836,110       $ 1,608,487
     Securities ............................................            63,563            33,828
     Interest-bearing demand and overnight deposits ........            80,784            26,443
     Dividends on Federal Home Loan Bank stock .............            13,934            11,736
                                                                   -----------       -----------
         Total interest income .............................         1,994,391         1,680,494

Interest expense
     Deposits ..............................................           979,265           947,429
     Other borrowings ......................................              --              21,013
                                                                   -----------       -----------
         Total interest expense ............................           979,265           968,442
                                                                   -----------       -----------

Net interest income ........................................         1,015,126           712,052
Provision for loan losses ..................................            26,083            18,308
                                                                   -----------       -----------

Net interest income after provision for loan losses ........           989,043           693,744
                                                                   -----------       -----------

Noninterest income
     Service fees and other charges ........................            15,868            12,730
                                                                   -----------       -----------

Noninterest expense
     Compensation and benefits .............................           223,013           169,842
     Occupancy and equipment ...............................            39,426            35,650
     Computer processing expense ...........................            36,926            35,566
     FDIC deposit insurance premiums .......................            12,710           499,936
     State franchise taxes .................................            35,081            31,726
     Other .................................................           133,701            81,330
                                                                   -----------       -----------
         Total noninterest expense .........................           480,857           854,050
                                                                   -----------       -----------

Income (loss) before income taxes ..........................           524,054          (147,576)

Provision for income taxes .................................           186,495           (50,176)
                                                                   -----------       -----------

Net income (loss) ..........................................       $   337,559       $   (97,400)
                                                                   ===========       ===========

Earnings per common share ..................................       $      0.20       $      --
                                                                   ===========       ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
                              PEOPLES - SIDNEY FINANCIAL CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
                              SHAREHOLDERS' EQUITY
                                   (Unaudited)

                                                                          Three Months
                                                                         Ended September 30,
                                                                       1997              1996
<S>                                                               <C>               <C>
Balance, beginning of period ................................     $ 25,711,713      $  9,212,537

Net income (loss) ...........................................          337,559           (97,400)

Cash dividends of $.05 per share ............................          (82,638)             --

Commitment to release 2,550 employee stock ownership plan
  shares at fair value ......................................           40,061              --

Change in unrealized gain on
  securities available for sale .............................            7,388              --
                                                                  ------------      ------------

Balance, end of period ......................................     $ 26,014,083      $  9,115,137
                                                                  ============      ============
</TABLE>

See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
                              PEOPLES - SIDNEY FINANCIAL CORPORATION
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           (Unaudited)

                                                                           Three Months Ended
                                                                               September 30,
                                                                           1997             1996
                                                                      -----------      -----------
<S>                                                                   <C>              <C>
Cash flows from operating activities
     Net income (loss) ..........................................     $   337,559      $   (97,400)
     Adjustments to reconcile net income to net cash from
       operating activities
         Depreciation ...........................................          11,784           13,246
         Provision for loan losses ..............................          26,083           18,308
         FHLB stock dividends ...................................         (13,900)         (11,700)
         Gain on sale of premises and equipment
         Compensation expense related to ESOP shares ............          40,061             --
         Change in
              Accrued interest receivable and other assets ......         (44,114)        (121,557)
              Accrued expense and other liabilities .............          32,925          348,183
              Deferred loan fees ................................          (5,343)          (2,302)
                                                                      -----------      -----------
                  Net cash from operating activities ............         385,055          146,778

Cash flows from investing activities
     Purchases of securities available for sale .................        (499,219)            --
     Maturities of securities held to maturity ..................         500,000          500,000
     Proceeds from maturities of time deposits in other financial
       institutions .............................................       3,000,000             --
     Purchase of time deposits in other financial institutions ..      (1,000,000)            --
     Net increase in loans ......................................      (2,509,759)      (3,790,845)
     Premises and equipment expenditures ........................          (8,154)            --
     Proceeds from sale of real estate owned ....................            --             42,652
                                                                      -----------      -----------
         Net cash from investing activities .....................        (517,132)      (3,248,193)

Cash flows from financing activities
     Net increase in deposits ...................................        (646,721)      (1,674,526)
     Net change in Federal Home Loan Bank advances ..............            --          3,500,000
     Cash dividends paid ........................................         (82,638)            --
                                                                      -----------      -----------
         Net cash from financing activities .....................        (729,359)       1,825,474
                                                                      -----------      -----------

Net change in cash and cash equivalents .........................        (861,436)      (1,275,941)

Cash and cash equivalents at beginning of period ................       2,795,826        2,720,809
                                                                      -----------      -----------

Cash and cash equivalents at end of period ......................     $ 1,934,390      $ 1,144,868
                                                                      ===========      ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                              PEOPLES - SIDNEY FINANCIAL CORPORATION
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           (Unaudited)
                                           (continued)

                                                                           Three Months Ended
                                                                               September 30,
                                                                           1997             1996
                                                                      -----------      -----------
<S>                                                                   <C>              <C>
Supplemental disclosures of cash flow information
     Cash paid during the year for
         Interest ...............................................     $   983,034      $   987,732
         Income taxes ...........................................         100,000             --

     Noncash transactions
         Transfer from loans to real estate owned ...............            --             42,652

</TABLE>
See accompanying notes to financial statements.
<PAGE>
                     PEOPLES - SIDNEY FINANCIAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These interim  financial  statements are prepared  without audit and reflect all
adjustments which, in the opinion of management, are necessary to present fairly
the financial position of Peoples - Sidney Financial Corporation ("Corporation")
at September  30,  1997,  and its results of  operations  and cash flows for the
periods presented.  All such adjustments are normal and recurring in nature. The
accompanying  consolidated financial statements have been prepared in accordance
with the instructions of Form 10-QSB and therefore do not purport to contain all
the necessary  financial  disclosures  required by generally accepted accounting
principles that might otherwise be necessary in the circumstances, and should be
read in  conjunction  with the  financial  statements  and notes  thereto of the
Corporation  for the year  ended  June 30,  1997,  included  in its 1997  Annual
Report.  Reference  is  made  to the  accounting  policies  of  the  Corporation
described  in the notes to  financial  statements  contained  in its 1997 Annual
Report.  The Corporation has  consistently  followed these policies in preparing
this Form 10-QSB.

The  accompanying  consolidated  financial  statements  include  accounts of the
Corporation  and its  wholly-owned  subsidiary,  The Peoples Federal Savings and
Loan Association (the Association).  All significant  intercompany  transactions
and balances have been eliminated.

The Corporation and the Association's revenues,  operating income and assets are
primarily from the financial  institution  industry.  The Association is engaged
primarily in the business of making  residential real estate loans and accepting
deposits. Its operations are conducted solely through its main office located in
Sidney,  Ohio. The Association's  market area consists of Shelby and surrounding
counties.

To prepare financial statements in conformity with generally accepted accounting
principles,  management  makes  estimates  and  assumptions  based on  available
information.  These estimates and assumptions affect the amounts reported in the
financial  statements  and the  disclosures  provided,  and future results could
differ.  The  collectibility of loans, fair values of financial  instruments and
status of contingencies are particularly subject to change.

The  provision for income taxes is based upon the effective tax rate expected to
be applicable for the entire year.  Income tax expense is the sum of the current
year  income tax due or  refundable  and the change in  deferred  tax assets and
liabilities.  Deferred  tax  assets  and  liabilities  are  expected  future tax
consequences of temporary differences between the carrying amounts and tax basis
of assets  and  liabilities,  computed  using  enacted  tax rates.  A  valuation
allowance,  if needed,  reduces deferred tax assets to the amount expected to be
realized.
<PAGE>
                     PEOPLES - SIDNEY FINANCIAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Earnings  per common  share is computed by dividing  net income by the  weighted
average number of shares outstanding during the year. As more fully discussed in
Note 2, the  Association  converted  from  mutual  to stock  ownership  with the
concurrent formation of a holding company effective April 25, 1997. The weighted
average number of shares  outstanding for the three-month period ended September
30,  1997  was  1,653,615.  Unreleased  ESOP  shares  are not  considered  to be
outstanding shares for the purpose of determining the weighted average number of
shares used in the earnings per common share calculation. No earnings per common
share is shown for the three months ended  September 30, 1996, as prior to April
25, 1997, the Association was a mutual  company.  The financial  information for
the three months ended  September  30, 1996  reflects the  Association  prior to
conversion.

Statement of Financial  Accounting  Standards ("SFAS") No. 125,  "Accounting for
Transfers and Servicing of Financial Assets and Extinquishments of Liabilities,"
was issued by the  Financial  Accounting  Standards  Board  ("FASB") in 1996. It
revises the  accounting  for  transfers of financial  assets,  such as loans and
securities,  and for distinguishing between sales and secured borrowings. It was
originally  effective for some transactions in 1997 and others in 1998. SFAS No.
127, "Deferral of the Effective Date of Certain Provisions of FASB Statement No.
125" was issued in December 1996.  SFAS 127 defers,  for one year, the effective
date of provisions  related to securities  lending,  repurchase  agreements  and
other similar transactions.  The remaining portions of SFAS 125 will continue to
be  effective  January 1, 1997.  SFAS 125 did not have a material  impact on the
Corporation's financial statements.

In March  1997,  the FASB issued SFAS No.  128,  "Earnings  Per Share"  which is
effective for financial  statements  for periods ending after December 15, 1997,
including  interim periods.  SFAS 128 simplifies the calculation of earnings per
share  ("EPS") by replacing  primary EPS with basic EPS. It also  requires  dual
presentation  of basic EPS and diluted EPS for  entities  with  complex  capital
structures.  Basic EPS includes no dilution  and is computed by dividing  income
available  to  common  shareholders  by  the   weighted-average   common  shares
outstanding  for the period.  Diluted EPS  reflects  the  potential  dilution of
securities that could share in earnings such as stock options, warrants or other
common stock equivalents.  All prior period EPS data will be restated to conform
with the new presentation.  This statement will not impact the Corporation as it
currently has no common stock equivalents.

In February  1997,  the FASB issued SFAS No. 129,  "Disclosures  of  Information
about Capital Structure." SFAS No. 129 consolidated existing accounting guidance
relating to disclosure  about a company's  capital  structure.  Public companies
generally have always been required to make disclosures now required by SFAS No.
129 and, therefore, SFAS No. 129 should have no impact on the Corporation.  SFAS
No. 129 is effective for financial  statements for periods ending after December
15, 1997.
<PAGE>
                     PEOPLES - SIDNEY FINANCIAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In June 1997, the FASB issued SFAS No. 130,  "Reporting  Comprehensive  Income."
SFAS No. 130  establishes  standards for reporting and display of  comprehensive
income and its components (revenues,  expenses,  gains and losses) in a full set
of general-purpose  financial  statements.  SFAS No. 130 requires that all items
that are required to be recognized under  accounting  standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same  prominence  as other  financial  statements.  It does  not  require  a
specific  format for that  financial  statement  but requires that an enterprise
display an amount representing total comprehensive income for the period in that
financial statement.

SFAS  No.  130  requires  that  an  enterprise   (a)  classify  items  of  other
comprehensive  income by their nature in a financial  statement  and (b) display
the accumulated balance of other  comprehensive  income separately from retained
earnings and additional  paid-in capital in the equity section of a statement of
financial  position.  SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997.  Reclassification of financial statements for earlier periods
provided for comparative purposes is required.

In June 1997,  the FASB issued SFAS No. 131,  "Disclosures  about Segments of an
Enterprise and Related  Information." This Statement  significantly  changes the
way that public business enterprises report information about operating segments
in annual  financial  statements  and  requires  that those  enterprises  report
selected  information  about reportable  segments in interim  financial  reports
issued to shareholders.  It also establishes  standards for related  disclosures
about products and services,  geographic areas and major customers. SFAS No. 131
uses a "management  approach" to disclose financial and descriptive  information
about an enterprise's  reportable operating segments which is based on reporting
information the way that management organizes the segments within the enterprise
for making operating decisions and assessing performance.  For many enterprises,
the management  approach will likely result in more segments being reported.  In
addition,  the Statement requires significantly more information to be disclosed
for each reportable segment than is presently being reported in annual financial
statements. The Statement also requires that selected information be reported in
interim financial statements. SFAS No. 131 is effective for financial statements
for periods beginning after December 15, 1997
<PAGE>
                     PEOPLES - SIDNEY FINANCIAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)



NOTE 2 - CONSUMMATION OF THE CONVERSION TO A STOCK SAVINGS
AND LOAN ASSOCIATION WITH THE CONCURRENT FORMATION OF
A HOLDING COMPANY

On November 8, 1996,  the Board of  Directors  of the  Association,  unanimously
adopted a Plan of  Conversion  to  convert  from a  federally  chartered  mutual
savings and loan  association  to a federally  chartered  stock savings and loan
association with the concurrent  formation of a holding company,  Peoples-Sidney
Financial  Corporation.  The  conversion  was  consummated  on April 25, 1997 by
amending the Association's  charter and the sale of the holding company's common
stock in an amount  equal to the market  value of the  Association  after giving
effect to the  conversion.  Common  shares of the  Corporation  were  offered in
accordance  with the plan of conversion.  A total of 1,785,375  common shares of
the  Corporation  were sold at $10.00 per share and net  proceeds  from the sale
were $17,217,944 after deducting the costs of conversion.

The Corporation retained 50% of the net proceeds from the sale of common shares.
The  remainder of the net proceeds  were invested in the capital stock issued by
the Association to the Corporation as a result of the conversion.

At the time of conversion,  the Association established a liquidation account in
an amount  equal to its  regulatory  capital as of the latest  practicable  date
prior to the conversion.  In the event of a complete liquidation,  each eligible
depositor  will be  entitled  to  receive a  distribution  from the  liquidation
account in an amount  proportionate to the current adjusted  qualifying balances
for accounts then held.

Under Office of Thrift  Supervision  (OTS)  regulations,  limitations  have been
imposed on all "capital  distributions" by savings institutions,  including cash
dividends.  The regulation  establishes a three-tiered  system of  restrictions,
with  the   greatest   flexibility   afforded   to   thrifts   which   are  both
well-capitalized and given favorable qualitative examination ratings by the OTS.

NOTE 3 - SECURITIES

The amortized  cost and estimated  fair values of securities  are  summarized as
follows:
<TABLE>
<CAPTION>
                                                                September 30, 1997
                                        ----------------------------------------------------------------
                                                              Gross          Gross           Estimated
                                             Amortized     Unrealized     Unrealized           Fair
                                               Cost           Gains         Losses             Value
                                         --------------     ----------    -----------    ---------------
<S>                                      <C>                <C>           <C>            <C>
Securities available for sale
  U.S. Government agencies               $    2,498,421     $   24,937    $        --    $     2,523,358
                                         ==============     ==========    ===========    ===============
Securities held to maturity
  U.S. Government agencies               $    1,499,609     $       80    $       314    $     1,499,375
                                         ==============     ==========    ===========    ===============
</TABLE>
<PAGE>
                     PEOPLES - SIDNEY FINANCIAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                   June 30, 1997
                                        ----------------------------------------------------------------
                                                              Gross          Gross           Estimated
                                             Amortized     Unrealized     Unrealized           Fair
                                               Cost           Gains         Losses             Value
                                         --------------     ----------    -----------    ---------------
<S>                                      <C>                <C>           <C>            <C>
Securities available for sale
  U.S. Government agencies               $    1,999,060     $   13,742    $        --    $     2,012,802
                                         ==============     ==========    ===========    ===============

Securities held to maturity
  U.S. Government agencies               $    1,999,375     $       --    $     2,580    $     1,996,795
                                         ==============     ==========    ===========    ===============
</TABLE>

The  amortized  cost and estimated  fair values of  securities,  by  contractual
maturity,  at September 30, 1997 are shown below. Actual maturities could differ
from  contractual  maturities  because  borrowers  may have the right to call or
prepay obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
                                                                                     Estimated
                                                                  Amortized            Fair
                                                                    Cost               Value
                                                               --------------    ---------------
<S>                                                            <C>               <C>
Securities available for sale
           Due after one year through five years               $    2,498,421    $     2,523,358
                                                               ==============    ===============

Securities held to maturity
           Due in one year or less                             $      999,609    $       999,295
           Due after one year through five years                      500,000            500,080
                                                               --------------    ---------------

                                                               $    1,499,609    $     1,499,375
                                                               ==============    ===============
</TABLE>
NOTE 3 - SECURITIES (Continued)

No securities  were sold during the three month periods ended September 30, 1997
and 1996. No securities were pledged as collateral at September 30, 1997 or June
30, 1997.
<PAGE>
                     PEOPLES - SIDNEY FINANCIAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 4 - LOANS RECEIVABLE

Loans receivable are summarized as follows:
<TABLE>
<CAPTION>
                                                  September 30,        June 30,
                                                       1997              1997
                                                  ------------      ------------
<S>                                               <C>               <C>
Mortgage loans:
     1-4 family residential .................     $ 76,979,931      $ 75,808,323
     Multi-family residential ...............          384,680           219,153
     Commercial real estate .................        6,159,926         5,842,476
     Real estate construction and development        6,991,883         6,551,430
     Land ...................................        1,088,867         1,446,838
                                                  ------------      ------------
         Total mortgage loans ...............       91,605,287        89,868,220
Consumer and other loans ....................        2,501,205         2,314,263
                                                  ------------      ------------
         Total loans receivable .............       94,106,492        92,182,483
Less:
     Allowance for loan losses ..............         (412,695)         (397,159)
     Loans in process .......................       (2,135,592)       (2,702,795)
     Deferred loan fees .....................         (152,847)         (158,190)
                                                  ------------      ------------

                                                  $ 91,405,358      $ 88,924,339
                                                  ============      ============
</TABLE>

Activity in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
                                                           Three Months
                                                        Ended September 30,
                                                  -----------------------------
                                                       1997            1996
                                                  ------------     ------------
<S>                                               <C>              <C>

         Balance at beginning of period           $    397,159     $    307,308
         Provision for losses                           26,083           18,308
         Charge-offs                                   (10,547)          (5,073)
         Recoveries                                         --               --
                                                  ------------     ------------

         Balance at end of period                 $    412,695     $    320,543
                                                  ============     ============
</TABLE>

As of and for the three months ended  September 30, 1997 and 1996, no loans were
required to be evaluated for impairment on a loan-by-loan basis within the scope
of SFAS No. 114.
<PAGE>
                     PEOPLES - SIDNEY FINANCIAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)



NOTE 5 - BORROWINGS

At September 30, 1997 and June 30, 1997, the  Association  had a cash management
line of credit enabling it to borrow up to $5,000,000 with the Federal Home Loan
Bank  (FHLB) of  Cincinnati.  The line of credit  must be  renewed  on an annual
basis.  No borrowings  were  outstanding on this line of credit at September 30,
1997 and June 30, 1997.  As a member of the Federal  Home Loan Bank system,  the
Association  has the  ability to obtain  additional  borrowings  up to a maximum
total of approximately $15,528,000, including the line of credit. Advances under
the  borrowing  agreements  are  collateralized  by  a  blanket  pledge  of  the
Association's  residential  mortgage  loan  portfolio and Federal Home Loan Bank
stock.


NOTE 6 - COMMITMENTS, CONTINGENCIES AND FINANCIAL INSTRUMENTS
WITH OFF-BALANCE SHEET RISK

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

Some  financial  instruments  are used in the normal  course of business to meet
financing needs of customers and reduce exposure to interest rate changes. These
financial  instruments include commitments to extend credit,  standby letters of
credit and financial guarantees.  These involve, to varying degrees, credit risk
in excess of the amount reported in the financial statements.

Exposure to credit loss if the other  party does not perform is  represented  by
contractual  amount for commitments to extend credit,  standby letters of credit
and  financial  guarantees  written.  The  same  credit  policies  are  used for
commitments  and  conditional  obligations as are used for loans.  The amount of
collateral  obtained,  if deemed  necessary,  on extension of credit is based on
management's   credit  evaluation  and  generally  consists  of  residential  or
commercial real estate.

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there  is  no  violation  of  any  condition   established  in  the  commitment.
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 used, the total  commitments do not  necessarily  represent
future cash requirements.
<PAGE>
                     PEOPLES - SIDNEY FINANCIAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 6 - COMMITMENTS, CONTINGENCIES AND FINANCIAL INSTRUMENTS
WITH OFF-BALANCE SHEET RISK (Continued)

As of September 30, 1997 and June 30, 1997, the  Corporation  had commitments to
make fixed rate commercial and residential real estate mortgage loans at current
market rates approximating  $232,000 and $156,000,  and variable rate commercial
and residential real estate mortgage loans at current market rates approximating
$449,000 and $876,000.  Loan commitments are generally for 30 days. The interest
rates on fixed rate commitments ranged from 7.75% to 8.25% at September 30, 1997
and were 8.25% at June 30, 1997. The interest rates on variable rate commitments
ranged from 7.50% to 8.25% at September  30, 1997 and 7.25% to 8.50% at June 30,
1997. The Corporation also had unused lines of credit approximating $562,000 and
$622,000 at September 30, 1997 and June 30, 1997.

At September 30, 1997 and June 30, 1997,  the  Association  was required to have
$258,000 and $298,000 on deposit with its  correspondent  banks as  compensating
clearing requirement.

The Association entered into employment  agreements with certain officers of the
Corporation and Association.  The agreements  provide for a term of one to three
years and a salary and  performance  review by the Board of  Directors  not less
often than  annually,  as well as  inclusion  of the  employee  in any  formally
established employee benefit,  bonus, pension and profit-sharing plans for which
management  personnel are eligible.  The agreements provide for extensions for a
period of one year on each  annual  anniversary  date,  subject  to  review  and
approval of the extension by disinterested  members of the Board of Directors of
the  Association.  The employment  agreements also provide for vacation and sick
leave.


NOTE 7 - EMPLOYEE STOCK OWNERSHIP PLAN

The Corporation offers an employee stock ownership plan ("ESOP") for the benefit
of substantially  all employees of the Corporation and the  Association.  During
July 1997, the ESOP received a favorable  determination letter from the Internal
Revenue Service on the qualified status of the ESOP under applicable  provisions
of the Internal Revenue Code.

The ESOP borrowed  funds from the  Corporation in order to acquire common shares
of the  Corporation.  The loan is secured by the shares  purchased with the loan
proceeds  and  will  be  repaid  by  ESOP  with  funds  from  the  Association's
discretionary  contributions  to the  ESOP  and  earnings  on ESOP  assets.  All
dividends  on  unallocated  shares  received  by the  ESOP  are used to pay debt
service.  The shares  purchased  with the loan  proceeds  are held in a suspense
account for allocation among participants as the loan is repaid. As payments are
made and the shares are released from the suspense account,  such shares will be
validly issued, fully paid and nonassessable.
<PAGE>
                     PEOPLES - SIDNEY FINANCIAL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 7 - EMPLOYEE STOCK OWNERSHIP PLAN (Continued)

The  Corporation  accounts for the ESOP in accordance with Statement of Position
("SOP") 93-6.  Accordingly,  the shares  pledged as  collateral  are reported as
unearned ESOP shares in the Consolidated  Balance Sheets. As shares are released
from  collateral,  the  Corporation  reports  compensation  expense equal to the
current  market  price of the  shares  and the  shares  become  outstanding  for
earnings-per-share computations. Dividends on allocated ESOP shares are recorded
as a reduction of retained  earnings;  dividends on unallocated  ESOP shares are
recorded as a reduction of debt and accrued interest.  ESOP compensation expense
was $40,061 for the three months ended September 30, 1997.

The ESOP shares as of September 30, 1997 and June 30, 1997 were as follows:
<TABLE>
<CAPTION>


                                                 September 30,          June 30,
                                                      1997                1997
                                                   ----------         ----------
<S>                                                <C>                <C>


Allocated shares .........................         $   10,202         $   10,202
Shares released for allocation ...........              2,550
Unreleased shares ........................            130,078            132,628
                                                   ----------         ----------
     Total ESOP shares ...................         $  142,830         $  142,830
                                                   ==========         ==========

Fair value of unreleased shares ..........         $2,146,287         $1,865,081
                                                   ==========         ==========

</TABLE>
<PAGE>
                     PEOPLES - SIDNEY FINANCIAL CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

On the  following  pages,  management  presents  an  analysis  of the  financial
condition of Peoples - Sidney Financial  Corporation (the  "Corporation")  as of
September 30, 1997, compared to June 30, 1997, and results of operations for the
three months ended  September  30, 1997,  compared with the same period in 1996.
This  discussion  is  designed  to  provide a more  comprehensive  review of the
operating  results  and  financial  position  than  could  be  obtained  from an
examination of the financial  statements  alone. This analysis should be read in
conjunction with the interim financial statements and related footnotes included
herein.

In  addition to the  historical  information  contained  herein,  the  following
discussion   contains   forward-looking   statements   that  involve  risks  and
uncertainties.  Economic circumstances,  the Corporation's operations and 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  changes in the economy and
interest rates in the nation and the Association's general market area.

On November 8, 1996, the Board of Directors of the Peoples  Federal  Savings and
Loan Association (the "Association") unanimously adopted a Plan of Conversion to
convert from a federally  chartered  mutual  savings and loan  association  to a
federally  chartered  stock  savings and loan  association  with the  concurrent
formation  of a  holding  company,  Peoples-Sidney  Financial  Corporation.  The
conversion  was  consummated  on April 25,  1997 by amending  the  Association's
charter and the sale of the holding company's common stock in an amount equal to
the market value of the  Association  after giving effect to the  conversion.  A
total of  1,785,375  common  shares of the  Corporation  were sold at $10.00 per
share and net proceeds from the sale were $17,217,944  after deducting the costs
of conversion.

The Corporation retained 50% of the net proceeds from the sale of common shares.
The  remainder of the net proceeds  were invested in the capital stock issued by
the Association to the Corporation as a result of the conversion.

The Corporation is a financial intermediary primarily engaged in the business of
attracting  savings deposits from the general public and investing such funds in
permanent mortgage loans secured by one- to four-family  residential real estate
located in Shelby, Logan, Auglaize,  Miami, Darke and Champaign Counties,  Ohio.
The Corporation also originates,  to a lesser extent, loans for the construction
of one- to  four-family  residential  real estate loans secured by  multi-family
residential real estate (over four units) and  nonresidential  real estate,  and
consumer  loans and  invests in U.S.  government  obligations,  interest-bearing
deposits in other  financial  institutions  and other  investments  permitted by
applicable law.

Financial Condition

Total  assets at  September  30,  1997 were  $102.8  million  compared to $103.1
million at June 30,  1997,  a decrease of $ 300,000,  or 0.3%.  The  decrease in
total  assets was  primarily  due to a decline in  overnight  deposits  and time
deposits with other financial  institutions  partially  offset by an increase in
loans.
<PAGE>
                     PEOPLES - SIDNEY FINANCIAL CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Loans  receivable  increased $2.5 million from June 30, 1997 to $91.4 million at
September 30, 1997. The Corporation  experienced  increases in all mortgage loan
categories  except  for  land  loans.  The  largest  increase  was  in  one-  to
four-family  residential  real estate loans which increased $1.2 million.  These
increases are reflective of a strong local economy  coupled with attractive loan
rates and products compared to the local competition. The Corporation's consumer
loan portfolio  increased $187,000 between June 30, 1997 and September 30, 1997.
Consumer  loans  remain  a  small  portion  of the  entire  loan  portfolio  and
represented  2.7% and 2.6% of gross  loans at  September  30,  1997 and June 30,
1997.

The  decrease in  overnight  deposits  and time  deposits  with other  financial
institutions  was the  result  of the  redirection  of funds  provided  from the
maturities  of time  deposits  and other  available  funds to  provide  for loan
growth.  Total  securities  remained  relatively  unchanged  as the  Corporation
replaced  a  matured   held-to-maturity   security  with  an  available-for-sale
security.

Total deposits  decreased  $647,000 from $77.0 million at June 30, 1997 to $76.4
million at September 30, 1997. The  Corporation  experienced  the most change in
passbook savings accounts and negotiable order of withdrawal ("NOW") accounts as
they  declined  $605,000  and  $578,000  respectively.  Management  believes the
decline was the result of special  interest rate  promotions on  certificates of
deposit by its local  competitors,  which  attracted  funds  from  these  liquid
deposit accounts. The decline in passbook savings and NOW accounts was partially
offset by an  increase in  certificates  of deposit,  Christmas  club  accounts,
statement savings and Individual Retirement Accounts. Almost all certificates of
deposit  mature in less than five years with the  majority  maturing in the next
two years.

As a secondary source of liquidity,  the Association maintains a $5 million cash
management  arrangement  with the Federal Home Loan Bank ("FHLB") of Cincinnati.
There were no advances  outstanding  at September 30, 1997 or June 30, 1997. The
advances  are  variable  rate and can be prepaid at any time  without a penalty.
Advances may be obtained  from the FHLB to fund future loan growth and liquidity
as needed.

Results of Operations

The operating  results of the Corporation  are affected by the general  economic
conditions,  the  monetary  and  fiscal  policies  of federal  agencies  and the
regulatory  policies of  agencies  that  regulate  financial  institutions.  The
Corporation's  cost of funds  is  influenced  by  interest  rates  on  competing
investments  and  general  market  rates of  interest.  Lending  activities  are
influenced  by the demand for real estate loans and other types of loans,  which
in turn is affected by the interest rates at which such loans are made,  general
economic conditions and the availability of funds for lending activities.
<PAGE>
                     PEOPLES - SIDNEY FINANCIAL CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The  Corporation's  net income  primarily  depends upon its net interest income,
which is the difference  between the interest income earned on  interest-earning
assets,  such  as  loans  and  securities,  and  interest  expense  incurred  on
interest-bearing  liabilities,  such as deposits and other borrowings. The level
of net interest  income is dependent upon the interest rate  environment and the
volume  and  composition  of   interest-earning   assets  and   interest-bearing
liabilities.  Net income is also affected by provisions for loan losses, service
charges,  gains on the sale of assets and other income,  noninterest expense and
income taxes.

The  Corporation  earned  net  income of  $338,000  for the three  months  ended
September  30, 1997,  compared to net loss of $97,000 for the three months ended
September 30, 1996. The increase in income for the three months ended  September
30, 1997 was due to an increase  in net  interest  income and a decrease in FDIC
deposit  insurance  premiums which resulted from the special  deposit  insurance
assessment  recognized as expense in the three months ended  September 30, 1996.
The special assessment is more fully discussed below.

Net interest income totaled  $1,015,000 for the three months ended September 30,
1997,  as compared to $712,000 for the three months  ended  September  30, 1996,
representing  an  increase of  $303,000,  or 42.6%.  The change in net  interest
income is  attributable  to higher average  balances of interest  earning assets
being funded with the proceeds from the mutual to stock conversion.

Interest and fees on loans  increased  approximately  $228,000,  or 14.2%,  from
$1,608,000  for the three months ended  September 30, 1996 to $1,836,000 for the
three months ended  September 30, 1997. The increase in interest  income was due
to higher average loans receivable,  primarily related to the origination of new
one- to four-family first mortgages.

Interest  earned  on  securities  totaled  $64,000  for the three  months  ended
September 30, 1997, as compared to $34,000 for the three months ended  September
30, 1996. The increase was a result of higher average balances of securities.

Interest on interest-bearing demand and overnight deposits increased $54,000 for
the three months ended September 30, 1997, as compared to the three months ended
September 30, 1996.  The increase was the result of higher  average  balances of
interest-bearing demand and overnight funds.

Dividends on FHLB stock increased  slightly for the three months ended September
30, 1997,  compared to the three months ended September 30, 1996,  primarily due
to an increase in the number of shares of FHLB stock owned.

Interest paid on deposits increased $32,000 for the three months ended September
30, 1997, as compared to the three months ended September 30, 1996. The increase
in interest expense was due to an increase in the cost of funds. The increase in
the average cost of deposits was the result of  certificates of deposits being a
larger part of the total portfolio.

Interest  on  other  borrowings  totaled  $21,000  for the  three  months  ended
September 30, 1996. The  Corporation  borrowed funds from the FHLB for the first
time during  fiscal 1997.  The  borrowings  were used as a source of  short-term
liquidity to provide funding for loan demand prior to the conversion. There were
no borrowings during the three months ended September 30, 1997.
<PAGE>
                     PEOPLES - SIDNEY FINANCIAL CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The  Corporation  maintains an allowance for loan losses in an amount which,  in
management's  judgment,  is adequate  to absorb  reasonably  foreseeable  losses
inherent in the loan portfolio.  While management utilizes its best judgment and
information available,  the ultimate adequacy of the allowance is dependent upon
a variety of factors,  including  the  performance  of the loan  portfolio,  the
economy,  changes in real estate  values and interest  rates and the view of the
regulatory  authorities  toward loan  classifications.  The  provision  for loan
losses is  determined  by  management as the amount to be added to the allowance
for loan losses after net charge-offs  have been deducted to bring the allowance
to a level which is considered  adequate to absorb  losses  inherent in the loan
portfolio.  The amount of the provision is based on management's  monthly review
of the loan  portfolio  and  consideration  of such factors as  historical  loss
experience,  general  prevailing  economic  conditions,  changes in the size and
composition  of  the  loan  portfolio  and  specific  borrower   considerations,
including the ability of the borrower to repay the loan and the estimated  value
of the underlying collateral.

The  provision  for loan losses for the three  months ended  September  30, 1997
totaled  $26,000  compared to $18,000 for the three months ended  September  30,
1996,  representing  an increase of $8,000,  or 42.5%.  The  Corporation has not
experienced  significant  net charge-offs in any of the periods  presented.  The
Corporation's low historical  charge-off  history is the product of a variety of
factors,  including the Corporation's  underwriting guidelines,  which generally
require  a  loan-to-value  or  projected  completed  value  ratio of 90% for the
purchase or construction of one- to four-family  residential  properties and 75%
for commercial real estate and land loans,  established  income  information and
defined  ratios of debt to income.  Notwithstanding  the  historical  charge-off
history, however,  management believes it is prudent to continue to increase the
allowance  for loan  losses as total  loans  increase.  Accordingly,  management
anticipates  it will continue its provisions to the allowance for loan losses at
current levels for the foreseeable future,  provided the volume of nonperforming
loans remains low. The allowance for loan losses totaled  $413,000,  or 0.44% of
gross loans receivable at September 30, 1997,  compared with $321,000,  or 0.35%
of gross loans receivable at September 30, 1996.

Noninterest income includes service fees and other miscellaneous income. For the
three  months  ended  September  30, 1997  noninterest  income  totaled  $16,000
compared to $13,000 for the three months ended September 30, 1996.

Noninterest  expense for the three months ended  September 30, 1997 was $481,000
compared to $854,000  for same period in 1996.  Increases  in  compensation  and
benefits  and other  expenses  were  offset by a  decrease  in  federal  deposit
insurance premiums.  The increase in compensation and benefits was the result of
normal,  annual  merit  increases  and  the  Corporation's  establishment  of an
employee stock  ownership  plan.  Increase in other expense was  attributable to
increases in director fees, professional service fees and printing costs related
to the  Corporation's  first annual report.  These increases were largely due to
the mutual to stock conversion.  FDIC deposit insurance expense during the three
months ended  September 30, 1996 was $500,000  compared to $13,000 for the three
months ended September 30, 1997.  Included in the prior three month period was a
special  deposit  insurance  assessment of $456,000  resulting from  legislation
passed and enacted into law on September  30, 1996 to  recapitalize  the Savings
<PAGE>
                     PEOPLES - SIDNEY FINANCIAL CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Association  Insurance Fund  ("SAIF").  The SAIF was below the level required by
law  because a  significant  portion  of the  assessments  paid into the SAIF by
thrifts,  like  the  Association,  were  used to pay the  cost of  prior  thrift
failures.  The legislation  called for a one-time  assessment of $0.657 for each
$100 in deposits held as of March 31, 1995. As a result of the  recapitalization
of the SAIF, the disparity between the bank and thrift insurance assessments was
reduced.  Thrifts had been  paying  assessments  of $0.23 per $100 of  deposits,
which,  for most thrifts,  was reduced to $0.064 per $100 in deposits in January
1997 and will be reduced to $0.024 per $100 in deposits by no later than January
2000.

The legislation  also provides for the merger of the SAIF and the Bank Insurance
Fund  ("BIF")  effective  January  1,  1999,   assuming  there  are  no  savings
associations under federal law. Under separate proposed legislation, Congress is
considering  elimination of the federal thrift charter and the separate  federal
regulation of thrifts. As a result, the Association would be required to convert
to a different financial institution charter and possibly become subject to more
restrictive  activity limits.  The Association  cannot predict the impact of any
such legislation until it is enacted.

The volatility of income tax expense is primarily  attributable to the change in
net income before income taxes.  The provision for income taxes totaled $186,000
for the three  months ended  September  30, 1997  compared to $(50,000)  for the
three months ended September 30, 1996.

Prior to the enactment of legislation discussed below, thrifts which met certain
tests  relating to the  composition  of assets had been  permitted  to establish
reserves for bad debts and to make annual additions thereto which could,  within
specified  formula limits,  be taken as a deduction in computing  taxable income
for federal  income tax purposes.  The amount of the bad debt reserve  deduction
for  "nonqualifying  loans" was computed under the experience method. The amount
of the bad debt reserve  deduction for "qualifying real property loans" could be
computed under either the experience  method or the percentage of taxable income
method, based on an annual election.

In August  1996,  legislation  was enacted  that  repeals the reserve  method of
accounting  used by many thrifts to calculate their bad debt reserve for federal
income tax purposes.  As a result,  small thrifts such as the  Association  must
recapture that portion of the reserve  exceeding the amount that could have been
taken under the  experience  method for tax years  beginning  after December 31,
1987. The legislation also requires thrifts to account for bad debts for federal
income  tax  purposes  on the  same  basis as  commercial  banks  for tax  years
beginning  after  December 31, 1995.  The  recapture  will occur over a six-year
period,  the  commencement of which will be delayed until the first taxable year
beginning  after  December 31,  1997,  provided the  institution  meets  certain
residential  lending  requirements.  At September 30, 1997, the  Association had
approximately  $581,000 in bad debt  reserves  subject to recapture  for federal
income tax  purposes.  The deferred tax  liability  related to the recapture has
been previously established so there will be no effect on future net income.
<PAGE>
                     PEOPLES - SIDNEY FINANCIAL CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Liquidity and Capital Resources

The Corporation's  liquidity,  primarily  represented by cash equivalents,  is a
result of its operating,  investing and financing  activities.  These activities
are summarized below for the three months ended September 30, 1997 and 1996.
<TABLE>
<CAPTION>

                                                                 Three Months
                                                              Ended September 30,
                                                           ----------------------
                                                            1997            1996
                                                           -------      -------
                                                           (Dollars in thousands)
<S>                                                        <C>          <C>
Net income (loss) ....................................     $   338      $   (97)
Adjustments to reconcile net income to net cash from
  operating activities ...............................          47          244
                                                           -------      -------
Net cash from operating activities ...................         385          147
Net cash from investing activities ...................        (517)      (3,248)
Net cash from financing activities ...................        (730)       1,825
                                                           -------      -------
Net change in cash and cash equivalents ..............        (862)      (1,276)
Cash and cash equivalents at beginning of period .....       2,796        2,721
                                                           -------      -------
Cash and cash equivalents at end of period ...........     $ 1,934      $ 1,445
                                                           =======      =======
</TABLE>

The  Corporation's  principal  sources of funds are deposits,  loan  repayments,
maturities  of  securities,   and  other  funds  provided  by  operations.   The
Association  has the  ability  to borrow  from the FHLB.  While  scheduled  loan
repayments and maturing securities are relatively predictable, deposit flows and
early loan  prepayments are more influenced by interest rates,  general economic
conditions,  and competition.  The Association  maintains  investments in liquid
assets based upon  management's  assessment of (1) need for funds,  (2) expected
deposit  flows,  (3)  yields  available  on  short-term  liquid  assets  and (4)
objectives of the asset/liability management program.

OTS regulations  presently  require the Association to maintain an average daily
balance of investments in United States Treasury, federal agency obligations and
other investments  having maturities of five years or less in an amount equal to
5% of the sum of the  Association's  average daily  balance of net  withdrawable
deposit  accounts  and  borrowings  payable in one year or less.  The  liquidity
requirement,  which  may be  changed  from  time to  time by the OTS to  reflect
changing  economic  conditions,  is intended  to provide a source of  relatively
liquid funds upon which the Association may rely, if necessary,  to fund deposit
withdrawals  or other  short-term  funding  needs.  At September  30, 1997,  the
Association's  regulatory liquidity was 11.8%. At such date, the Corporation had
commitments to originate fixed-rate commercial and residential real estate loans
<PAGE>
                     PEOPLES - SIDNEY FINANCIAL CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


totaling  $232,000,  and  variable-rate  commercial and residential  real estate
mortgage loans totaling  $449,000.  Loan  commitments are generally for 30 days.
The Corporation  considers its liquidity and capital reserves sufficient to meet
its  outstanding  short-  and  long-term  needs.  See  Note  6 of the  Notes  to
Consolidated Financial Statements. 

The  Association  is  subject  to  various   regulatory   capital   requirements
administered by the federal regulatory agencies. Failure to meet minimum capital
requirements can initiate certain mandatory  actions that, if undertaken,  could
have a direct material affect on the Association's  financial statements.  Under
capital adequacy  guidelines and the regulatory  framework for prompt corrective
action,  the  Association  must meet specific  capital  guidelines  that involve
quantitative  measures  of the  Association's  assets,  liabilities  and certain
off-balance-sheet items as calculated under regulatory accounting practices. The
Association's   capital  amounts  and   classifications   are  also  subject  to
qualitative judgments by the regulators about the Association's components, risk
weightings  and  other  factors.  At  September  30,  1997 and  June  30,  1997,
management believes the Association is in compliance with all regulatory capital
requirements. Based on the Association's computed regulatory capital ratios, the
Association is considered well capitalized  under the Federal Deposit  Insurance
Act at September 30, 1997 and June 30, 1996.

At September 30, 1997 and June 30, 1997, the Association's actual capital levels
(in thousands) and minimum required levels were:
<TABLE>
<CAPTION>
                                                                                                      Minimum
                                                                                                  Required To Be
                                                                        Minimum Required         Well Capitalized
                                                                           For Capital        Under Prompt Corrective
                                                   Actual               Adequacy Purposes       Action Regulations

                                               Amount    Ratio          Amount     Ratio         Amount      Ratio
                                               ------    -----          ------     -----         ------      -----
<S>                                          <C>           <C>         <C>           <C>        <C>          <C>
September 30, 1997
Total capital (to risk-weighted assets)      $  17,804     27.7%       $   5,136     8.0%       $   6,420    10.0%
Tier 1 (core) capital (to
  risk-weighted assets)                         17,401     27.1            2,568     4.0            3,852     6.0
Tier 1 (core) capital (to adjusted
  total assets)                                 17,401     16.9            3,085     3.0            5,334     5.0
Tangible capital (to adjusted total assets)     17,401     16.9            1,542     1.5            N/A

June 30, 1997
Total capital (to risk-weighted assets)      $  17,481     26.9%       $   5,208     8.0%       $   6,510    10.0%
Tier 1 (core) capital (to
  risk-weighted assets)                         17,088     26.3            2,604     4.0            3,906     6.0
Tier 1 (core) capital (to adjusted
  total assets)                                 17,088     16.6            3,094     3.0            5,156     5.0
Tangible capital (to adjusted total assets)     17,088     16.6            1,547     1.5            N/A
</TABLE>
<PAGE>
                     PEOPLES - SIDNEY FINANCIAL CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


In addition to certain federal income tax  considerations,  the Office of Thrift
Supervision (OTS) regulations impose limitations on the payment of dividends and
other  capital  distributions  by savings  associations.  Under OTS  regulations
applicable to converted savings  associations,  the Association is not permitted
to pay a cash dividend on its common shares if its regulatory  capital would, as
a result of payment of such dividends,  be reduced below the amount required for
the Liquidation  Account,  or below applicable  regulatory capital  requirements
prescribed by the OTS.

OTS regulations  applicable to all savings and loan associations  provide that a
savings  association  which immediately prior to, and on a pro forma basis after
giving  effect to, a proposed  capital  distribution  (including a dividend) has
total capital (as defined by OTS  regulations)  that is equal to or greater than
the amount of its  capital  requirements  is  generally  permitted  without  OTS
approval  (but  subsequent  to 30 days' prior notice to the OTS) to make capital
distributions,  including dividends,  during a calendar year in an amount not to
exceed the greater of (1) 100% of its net  earnings to date during the  calendar
year,  plus an amount equal to one-half  that which its total  capital to assets
ratio  exceeded  its required  capital to assets  ratio at the  beginning of the
calendar  year, or (2) 75% of its net earnings for the most recent  four-quarter
period.  Savings  associations  with  total  capital  in excess  of the  capital
requirements  that have been  notified  by the OTS that they are in need of more
than normal supervision will be subject to restrictions on dividends.  A savings
association  that  fails  to  meet  current  minimum  capital   requirements  is
prohibited from making any capital  distributions  without the prior approval of
the OTS.

The Association  currently meets all of its capital requirements and, unless the
OTS determines that the Association is an institution requiring more than normal
supervision,  the Association may pay dividends in accordance with the foregoing
provisions of OTS regulations.

At September 30, 1997, the Corporation  had no material  commitments for capital
expenditures.
<PAGE>


                     PEOPLES - SIDNEY FINANCIAL CORPORATION
                           PART II - OTHER INFORMATION



Item 1.    Legal Proceedings
           None

Item 2.    Changes in Securities
           None

Item 3.    Defaults Upon Senior Securities
           Not applicable

Item 4.    Submission of Matters to a Vote of Security Holders
           There no matters  brought to a vote of  security  holders  during the
           quarter ended September 30, 1997.

Item 5.    Other Information
           None

Item 6.    Exhibits and Reports on Form 8-K

           (a)  Exhibit No. 27:  Financial Data Schedule
           (b)  No current  reports on Form 8-K were filed by the small business
                issuer during the quarter ended September 30, 1997.


<PAGE>


                                   SIGNATURES

 


Pursuant to the  requirement of the  Securities  Exchange Act of 1934, the small
business  issuer has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.




Date: November 10, 1997                                     /s/ Douglas Stewart
                                                            -------------------
                                                            Douglas Stewart
                                                            President





Date: November 10, 1997                                     /s/ Debra Geuy
                                                            --------------
                                                            Debra Geuy
                                                            Treasurer

<PAGE>
                                INDEX TO EXHIBITS


           EXHIBIT
           NUMBER                  DESCRIPTION   
           ------                  -----------   


              27             Financial Data Schedule