UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

      |X|   QUARTERLY  REPORT  UNDER  SECTION  13 OR 15 (d)  OF  THE  SECURITIES
            EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2004

      |_|   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

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 issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during  the past 12  months,  and (2) has been
subject to such filing requirements for the past 90 days.

Yes |X| No |_|

As of  February 4, 2005 the latest  practicable  date,  1,432,648  shares of the
issuer's common shares, $.01 par value, were issued and outstanding.

Transitional Small Business Disclosure Format (Check One):

Yes |_| No |X|


--------------------------------------------------------------------------------

                                                                              1.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION

                                      INDEX

<TABLE>
<CAPTION>
                                                                                    Page
                                                                                    ----
<S>                                                                                  <C>
PART I - FINANCIAL INFORMATION

 Item 1.  Financial Statements (Unaudited)

          Consolidated Balance Sheets.............................................    3

          Consolidated Statements of Income ......................................    4

          Consolidated Statements of Comprehensive Income.........................    5

          Condensed Consolidated Statements of Changes in Shareholders' Equity....    6

          Consolidated Statements of Cash Flows ..................................    7

          Notes to Consolidated Financial Statements .............................    8

 Item 2.  Management's Discussion and Analysis or Plan or Operation...............   15

 Item 3.  Controls and Procedures.................................................   22

PART II - OTHER INFORMATION

 Item 1.  Legal Proceedings.......................................................   23

 Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.............   23

 Item 3.  Defaults Upon Senior Securities.........................................   23

 Item 4.  Submission of Matters to a Vote of Security Holders.....................   23

 Item 5.  Other Information.......................................................   23

 Item 6.  Exhibits................................................................   23

SIGNATURES .......................................................................   24

INDEX TO EXHIBITS.................................................................   25
</TABLE>


--------------------------------------------------------------------------------

                                                                              2.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

--------------------------------------------------------------------------------

Item 1. Financial Statements
        --------------------

<TABLE>
<CAPTION>
                                                              December 31,       June 30,
                                                                  2004             2004
                                                                  ----             ----
<S>                                                          <C>              <C>
ASSETS
Cash and due from financial institutions                     $   1,126,075    $   1,327,745
Interest-bearing deposits in other financial institutions        5,369,918        4,705,943
Overnight deposits                                                      --        4,000,000
                                                             -------------    -------------
     Total cash and cash equivalents                             6,495,993       10,033,688
Securities available for sale                                    5,409,220        5,288,280
Federal Home Loan Bank stock                                     1,635,700        1,601,400
Loans, net of allowance of $777,700 and $752,900               118,640,317      115,651,910
Accrued interest receivable                                        707,002          670,521
Premises and equipment, net                                      2,109,728        2,124,986
Real estate owned                                                  185,400           99,085
Other assets                                                       196,351          301,160
                                                             -------------    -------------

     Total assets                                            $ 135,379,711    $ 135,771,030
                                                             =============    =============

LIABILITIES
Deposits                                                     $  87,379,887    $  86,764,253
Borrowed funds                                                  30,053,838       31,140,388
Accrued interest payable and other liabilities                     371,430          435,476
                                                             -------------    -------------
     Total liabilities                                         117,805,155      118,340,117

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                               17,854           17,854
Additional paid-in capital                                      10,770,752       10,748,851
Retained earnings                                               11,615,946       11,642,982
Treasury stock, 352,727 shares, at cost                         (4,113,716)      (4,113,716)
Unearned employee stock ownership plan shares                     (658,045)        (727,121)
Accumulated other comprehensive loss                               (58,235)        (137,937)
                                                             -------------    -------------
     Total shareholders' equity                                 17,574,556       17,430,913
                                                             -------------    -------------

     Total liabilities and shareholders' equity              $ 135,379,711    $ 135,771,030
                                                             =============    =============
</TABLE>


--------------------------------------------------------------------------------

          See accompanying notes to consolidated financial statements.

                                                                              3.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                          Three Months Ended            Six Months Ended
                                                             December 31,                 December 31,
                                                             ------------                 ------------
                                                          2004           2003          2004           2003
                                                          ----           ----          ----           ----
<S>                                                   <C>            <C>           <C>            <C>
Interest income
     Loans, including fees                            $ 1,835,396    $ 1,879,314   $ 3,673,206    $ 3,831,112
     Securities                                            50,868         60,590        96,458        130,919
     Demand, time and overnight deposits                   18,416          8,816        29,299         25,659
     Dividends on FHLB Stock                               17,290         15,673        34,398         31,189
                                                      -----------    -----------   -----------    -----------
         Total interest income                          1,921,970      1,964,393     3,833,361      4,018,879

Interest expense
     Deposits                                             378,596        440,641       748,493        949,853
     Borrowed funds                                       405,966        420,701       816,829        846,575
                                                      -----------    -----------   -----------    -----------
         Total interest expense                           784,562        861,342     1,565,322      1,796,428
                                                      -----------    -----------   -----------    -----------

Net interest income                                     1,137,408      1,103,051     2,268,039      2,222,451

Provision for loan losses                                     700          9,934        27,469         23,985
                                                      -----------    -----------   -----------    -----------

Net interest income after provision for loan losses     1,136,708      1,093,117     2,240,570      2,198,466

Noninterest income
     Service fees and other charges                        32,995         33,194        64,672         67,326
     Gain (loss) on real estate owned                     (23,328)         7,724       (23,328)         7,724
                                                      -----------    -----------   -----------    -----------
         Total noninterest income                           9,667         40,918        41,344         75,050

Noninterest expense
     Compensation and benefits                            389,221        397,123       798,958        785,235
     Director fees                                         24,300         24,300        48,600         48,600
     Occupancy and equipment                               94,012         98,156       196,628        199,128
     Computer processing                                   61,778         61,257       120,720        123,078
     State franchise taxes                                 53,049         50,515       105,847         99,073
     Professional fees                                     36,109         37,850        64,503         65,666
     Other                                                 90,757         86,420       174,335        179,136
                                                      -----------    -----------   -----------    -----------
         Total noninterest expense                        749,226        755,621     1,509,591      1,499,916
                                                      -----------    -----------   -----------    -----------

Income before income taxes                                397,149        378,414       772,323        773,600

Income tax expense                                        143,200        140,300       278,500        286,900
                                                      -----------    -----------   -----------    -----------

Net income                                            $   253,949    $   238,114   $   493,823    $   486,700
                                                      ===========    ===========   ===========    ===========

Earnings per common share - basic                     $      0.18    $      0.17   $      0.36    $      0.36
                                                      ===========    ===========   ===========    ===========

Earnings per common share - diluted                   $      0.18    $      0.17   $      0.36    $      0.36
                                                      ===========    ===========   ===========    ===========
</TABLE>


--------------------------------------------------------------------------------

          See accompanying notes to consolidated financial statements.

                                                                              4.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                   (Unaudited)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                  Three Months Ended         Six Months Ended
                                                     December 31,              December 31,
                                                     ------------              ------------
                                                   2004         2003         2004         2003
                                                   ----         ----         ----         ----
<S>                                             <C>          <C>          <C>          <C>
Net income                                      $ 253,949    $ 238,114    $ 493,823    $ 486,700

Other comprehensive income (loss)
     Unrealized holding gains and (losses) on
       available-for-sale securities                  (84)     (73,985)     120,761     (172,730)
     Tax effect                                        28       25,155      (41,059)      58,729
                                                ---------    ---------    ---------    ---------
         Other comprehensive income (loss)            (56)     (48,830)      79,702     (114,001)
                                                ---------    ---------    ---------    ---------

Comprehensive income                            $ 253,893    $ 189,284    $ 573,525    $ 372,699
                                                =========    =========    =========    =========
</TABLE>


--------------------------------------------------------------------------------

          See accompanying notes to consolidated financial statements.

                                                                              5.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
                              SHAREHOLDERS' EQUITY
                                   (Unaudited)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                           Three Months Ended               Six Months Ended
                                                              December 31,                    December 31,
                                                              ------------                    ------------
                                                          2004            2003            2004            2003
                                                          ----            ----            ----            ----
<S>                                                   <C>             <C>             <C>             <C>
Balance, beginning of period                          $ 17,605,981    $ 17,432,268    $ 17,430,913    $ 17,384,280

Net income for period                                      253,949         238,114         493,823         486,700

Cash dividends, $.24 and $.23 per share for
  the three months ended December 31, 2004
  and 2003, $.38 and $.36 per share for the
  six months ended December 31, 2004 and 2003             (328,964)       (313,989)       (520,859)       (491,461)

Purchase of 6,853 shares of
  treasury stock for the three and six months
  ended December 31, 2003, at cost                              --         (92,516)             --         (92,516)

Commitment to release 2,943 and 3,091 employee
  stock ownership plan shares for the three
  months ended December 31, 2004 and 2003 and
  5,887 and 6,182 employee stock ownership plan
  shares for the six months ended December 31, 2004
  and 2003, at fair value                                   43,646          43,640          90,977          85,685

Change in fair value on securities available for
  sale, net of tax                                             (56)        (48,830)         79,702        (114,001)
                                                      ------------    ------------    ------------    ------------

Balance, end of period                                $ 17,574,556    $ 17,258,687    $ 17,574,556    $ 17,258,687
                                                      ============    ============    ============    ============
</TABLE>


--------------------------------------------------------------------------------

          See accompanying notes to consolidated financial statements.

                                                                              6.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                              Six Months Ended
                                                                                December 31,
                                                                                ------------
                                                                            2004            2003
                                                                            ----            ----
<S>                                                                    <C>             <C>
Cash flows from operating activities
     Net income                                                        $    493,823    $    486,700
     Adjustments to reconcile net income to net cash from
       operating activities
         Depreciation                                                        89,054          94,062
         Provision for loan losses                                           27,469          23,985
         (Gain) loss on real estate owned                                    23,328          (7,724)
         FHLB stock dividends                                               (34,300)        (31,100)
         Compensation expense for ESOP shares                                90,977          85,685
         Change in:
              Accrued interest receivable and other assets                   68,149         178,473
              Accrued expense and other liabilities                        (105,105)       (265,141)
              Deferred loan fees                                              1,526          23,498
                                                                       ------------    ------------
                  Net cash from operating activities                        654,921         588,438

Cash flows from investing activities
     Proceeds from maturities/calls of securities available for sale             --       4,000,000
     Net change in loans                                                 (3,127,045)     (3,050,393)
     Premises and equipment expenditures                                    (73,796)       (427,151)
     Proceeds from sale of real estate owned                                     --         181,787
                                                                       ------------    ------------
         Net cash from investing activities                              (3,200,841)        704,243

Cash flows from financing activities
     Net change in deposits                                                 615,634      (5,469,776)
     Repayments of long-term FHLB advances                               (1,086,550)     (1,183,975)
     Cash dividends paid                                                   (520,859)       (491,461)
     Purchase of treasury stock                                                  --         (92,516)
                                                                       ------------    ------------
         Net cash from financing activities                                (991,775)     (7,237,728)
                                                                       ------------    ------------

Net change in cash and cash equivalents                                  (3,537,695)     (5,945,047)

Cash and cash equivalents at beginning of period                         10,033,688      12,300,598
                                                                       ------------    ------------

Cash and cash equivalents at end of period                             $  6,495,993    $  6,355,551
                                                                       ============    ============

Supplemental disclosures of cash flow information
     Cash paid during the period for
         Interest                                                      $  1,563,685    $  1,810,043
         Income taxes                                                       295,000         282,000
Noncash transactions
         Transfer from loans to other real estate owned                $    109,643    $     64,760
</TABLE>


--------------------------------------------------------------------------------

          See accompanying notes to consolidated financial statements.

                                                                              7.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

--------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation:  The accompanying consolidated financial statements
include accounts of  Peoples-Sidney  Financial  Corporation  ("Peoples") and its
wholly-owned   subsidiary,   Peoples  Federal   Savings  and  Loan   Association
("Association"), a federal stock savings and loan association, together referred
to as the Corporation.  All significant  intercompany  transactions and balances
have been eliminated.

These interim  consolidated  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 the  Corporation at December 31, 2004
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 for
Form  10-QSB  and,  therefore,  do not  purport  to  contain  all the  necessary
financial  disclosures  required by accounting  principles generally accepted in
the  United  States  of  America  that  might  otherwise  be  necessary  in  the
circumstances, and should be read in conjunction with the consolidated financial
statements and notes thereto of the  Corporation  for the fiscal year ended June
30, 2004,  included in the  Corporation's  2004 Annual Report on Form 10-KSB for
the  fiscal  year  ended  June 30,  2004.  Reference  is made to the  accounting
policies of the  Corporation  described in the notes to  consolidated  financial
statements  contained in such report. The Corporation has consistently  followed
these policies in preparing this Form 10-QSB.

Nature of Operations:  The Corporation  provides  financial services through its
main  office in Sidney,  Ohio,  and branch  offices in Sidney,  Anna and Jackson
Center,  Ohio.  Its primary  deposit  products  are  checking,  savings and term
certificate accounts, and its primary lending products are residential mortgage,
commercial  and  installment  loans.  Substantially  all  loans are  secured  by
specific items of collateral  including  business  assets,  consumer  assets and
commercial  and  residential  real estate.  Commercial  loans are expected to be
repaid from cash flow from operations of businesses.  Substantially all revenues
and  services are derived from  financial  institution  products and services in
Shelby County and contiguous  counties.  Management considers the Corporation to
operate primarily in one segment, banking.

Use of Estimates:  To prepare financial statements in conformity with accounting
principles generally accepted in the United States of America,  management makes
estimates and assumptions  based on available  information.  These estimates and
assumptions  affect  the  amounts  reported  in  the  financial  statements  and
disclosures  provided,  and actual results could differ.  The allowance for loan
losses and fair values of  financial  instruments  are  particularly  subject to
change.

Income Taxes:  Income tax expense is based on the effective tax rate expected to
be  applicable  for the  entire  year.  Income  tax  expense is the total of the
current year income tax due or refundable  and the change in deferred tax assets
and liabilities. Deferred tax assets and liabilities are the expected future tax
amounts for the temporary differences between 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.


--------------------------------------------------------------------------------

                                   (Continued)

                                                                              8.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

--------------------------------------------------------------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Earnings Per Common Share: Basic earnings per common share ("EPS") is net income
divided by the weighted average number of common shares  outstanding  during the
period. Employee stock ownership plan ("ESOP") shares are considered outstanding
for this calculation unless unearned. Management recognition plan ("MRP") shares
are considered outstanding as they become vested. Diluted EPS shows the dilutive
effect of additional common shares upon exercise of stock options.

Stock-Based Compensation: Employee compensation expense under stock option plans
is reported using the intrinsic value method.  No stock-based  compensation cost
is reflected in net income,  as all options  granted had an exercise price equal
to or greater than the market price of the  underlying  common stock at the date
of grant.  All outstanding  options  finished vesting during the year ended June
30, 2003.

NOTE 2 - SECURITIES AVAILABLE FOR SALE

Securities available for sale were as follows.

                                                       Gross           Gross
                                         Fair        Unrealized      Unrealized
                                         Value         Gains           Losses
                                      -----------    -----------    -----------
December 31, 2004
    U.S. Government agencies          $ 5,409,220    $    10,470    $   (98,704)
                                      ===========    ===========    ===========

June 30, 2004
    U.S. Government agencies          $ 5,288,280    $    13,280    $  (222,275)
                                      ===========    ===========    ===========

Contractual  maturities  of  securities  available for sale at December 31, 2004
were as  follows.  Actual  maturities  may differ  from  contractual  maturities
because  borrowers  may have the  right to call or  prepay  obligations  with or
without call or prepayment penalties.

                                                              Fair
                                                              Value
                                                           -----------
       Due after one year through five years               $ 2,508,910
       Due after five years through ten years                2,900,310
                                                           -----------

                                                           $ 5,409,220
                                                           ===========

There were no sales of securities  during the three or six months ended December
31, 2004 or 2003. No securities  were pledged as collateral at December 31, 2004
or June 30, 2004.


--------------------------------------------------------------------------------

                                   (Continued)

                                                                              9.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

--------------------------------------------------------------------------------

NOTE 2 - SECURITIES AVAILABLE FOR SALE (Continued)

Securities with unrealized losses at December 31, 2004 and June 30, 2004,
aggregated by investment category and length of time that individual securities
have been in a continuous unrealized loss position, are as follows.

<TABLE>
<CAPTION>
                                   Less than 12 Months          12 Months or More                 Total
                                   -------------------          -----------------                 -----
                                  Fair       Unrealized        Fair       Unrealized        Fair       Unrealized
Description of Securities         Value         Loss           Value         Loss           Value         Loss
-------------------------         -----         ----           -----         ----           -----         ----
<S>                            <C>           <C>            <C>           <C>            <C>           <C>
December 31, 2004
-----------------
U.S. Government agencies       $ 1,998,440   $    (1,105)   $ 2,900,310   $   (97,599)   $ 4,898,750   $   (98,704)
                               ===========   ===========    ===========   ===========    ===========   ===========

June 30, 2004
-------------
U.S. Government agencies       $ 2,949,380   $   (50,109)   $ 1,825,620   $  (172,166)   $ 4,775,000   $  (222,275)
                               ===========   ===========    ===========   ===========    ===========   ===========
</TABLE>

Unrealized  losses on the investment  securities  have not been  recognized into
income  because the securities  are of high credit  quality,  management has the
intent and ability to hold for the foreseeable  future,  and the decline in fair
value is largely due to changes in interest rates. The fair value is expected to
recover as the securities approach their maturity date or reset date.

NOTE 3 - LOANS

Loans were as follows.

                                          December 31,        June 30,
                                              2004              2004
                                              ----              ----
    Mortgage loans:
         1-4 family residential          $  90,375,982     $  89,974,734
         Multi-family residential            1,313,223         1,330,844
         Commercial real estate             12,498,663        11,847,794
         Real estate construction and
           development                       4,085,230         3,056,172
         Land                                1,330,959         1,694,844
                                         -------------     -------------
             Total mortgage loans          109,604,057       107,904,388
    Consumer loans                           4,815,920         4,211,193
    Commercial loans                         5,372,407         4,662,070
                                         -------------     -------------
             Total loans                   119,792,384       116,777,651
    Less:
         Allowance for loan losses            (777,700)         (752,900)
         Deferred loan fees                   (374,367)         (372,841)
                                         -------------     -------------

                                         $ 118,640,317     $ 115,651,910
                                         =============     =============


--------------------------------------------------------------------------------

                                   (Continued)

                                                                             10.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

--------------------------------------------------------------------------------

NOTE 3 - LOANS (Continued)

Activity in the allowance for loan losses is summarized as follows.

<TABLE>
<CAPTION>
                                    Three Months Ended           Six Months Ended
                                       December 31,                December 31,
                                       ------------                ------------
                                     2004         2003          2004          2003
                                     ----         ----          ----          ----
<S>                               <C>          <C>           <C>           <C>
Balance at beginning of period    $ 777,000    $ 750,000     $ 752,900     $ 766,000
Provision for losses                    700        9,934        27,469        23,985
Charge-offs                              --        (2034)       (2,669)      (32,524)
Recoveries                               --           --            --           439
                                  ---------    ---------     ---------     ---------

Balance at end of period          $ 777,700    $ 757,900     $ 777,700     $ 757,900
                                  =========    =========     =========     =========
</TABLE>

Impaired loans were as follows.

<TABLE>
<CAPTION>
                                                                          December 31,   June 30,
                                                                              2004         2004
                                                                              ----         ----
<S>                                                                        <C>          <C>
Period-end impaired loans with no allowance for loan losses allocated      $      --    $      --
Period-end impaired loans with allowance for loan losses allocated           220,000      129,000
Amount of the allowance allocated to impaired loans                          110,000      129,000

<CAPTION>
                                                  Three Months Ended          Six Months Ended
                                                     December 31,               December 31,
                                                     ------------               ------------
                                                   2004         2003         2004         2003
                                                   ----         ----         ----         ----
<S>                                             <C>          <C>          <C>          <C>
Average of impaired loans during the period     $ 190,000    $      --    $ 159,000    $      --
Interest income recognized during the period        2,194           --        5,376           --
Cash-basis interest income recognized                 539           --        1,069           --
</TABLE>

Nonperforming loans were as follows.

                                                      December 31,    June 30,
                                                          2004          2004
                                                          ----          ----

     Loans past due over 90 days still on accrual     $   861,000    $   587,000
     Nonaccrual loans                                   1,532,000        624,000

Nonperforming   loans  include  smaller  balance   homogeneous  loans,  such  as
residential  mortgage and consumer  loans that are  collectively  evaluated  for
impairment.


--------------------------------------------------------------------------------

                                   (Continued)

                                                                             11.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

--------------------------------------------------------------------------------

NOTE 4 - BORROWED FUNDS

At December 31, 2004 and June 30, 2004, the  Association  had a cash  management
line of credit enabling it to borrow up to $8,000,000 from the Federal Home Loan
Bank of  Cincinnati  ("FHLB").  All cash  management  advances  have an original
maturity  of 90 days.  The line of credit  must be renewed  on an annual  basis.
There were no outstanding borrowings on this line of credit at December 31, 2004
and June 30, 2004.

As a member  of the FHLB  system,  the  Association  has the  ability  to obtain
borrowings up to a maximum total of $66.0 million  including the cash management
line of credit. Advances from the Federal Home Loan Bank were as follows.

<TABLE>
<CAPTION>
                                                          December 31,       June 30,
                                                              2004            2004
                                                              ----            ----
<S>                                                       <C>             <C>
      6.13% FHLB fixed-rate advance, due June 25, 2008    $  7,000,000    $  7,000,000
      6.00% FHLB convertible advance, fixed-rate until
        June 2004, due June 11, 2009                         5,000,000       5,000,000
      6.27% FHLB convertible advance, fixed-rate until
        September 2006, due September 8, 2010                5,000,000       5,000,000
      5.30% select pay mortgage-matched advance, final
        maturity May 1, 2011                                 1,021,524       1,087,505
      5.35% select pay mortgage-matched advance, final
        maturity July 1, 2011                                2,088,941       2,466,217
      3.92% select pay mortgage-matched advance, final
        maturity November 1, 2012                              742,441         823,214
      3.55% select pay mortgage-matched advance, final
        maturity March 1, 2013                                 849,570         893,507
      4.09% select pay mortgage-matched advance, final
        maturity November 1, 2017                              724,887         828,866
      3.31% select pay mortgage-matched advance, final
        maturity April 1, 2019                                 965,286         991,393
      4.72% select pay mortgage-matched advance, final
        maturity November 1, 2022                            2,529,159       2,709,021
      4.38% select pay mortgage-matched advance, final
        maturity December 1, 2022                              843,487         903,923
      3.92% select pay mortgage-matched advance, final
        maturity December 1, 2022                              754,461         854,173
      3.64% select pay mortgage-matched advance, final
        maturity March 1, 2023                               2,534,082       2,582,569
                                                          ------------    ------------

                                                          $ 30,053,838    $ 31,140,388
                                                          ============    ============
</TABLE>

Advances under the borrowing  agreements are  collateralized by a blanket pledge
of the Association's residential mortgage loan portfolio and its FHLB stock.

The interest rates on the convertible  advances are fixed for a specified number
of years,  then convertible to a variable rate at the option of the FHLB. If the
convertible  option is exercised,  the advance may be prepaid without prepayment
fee. The select pay  mortgage-matched  advances  require  monthly  principal and
interest payments and annual additional principal payments.


--------------------------------------------------------------------------------

                                   (Continued)

                                                                             12.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

--------------------------------------------------------------------------------

NOTE 4 - BORROWED FUNDS (Continued)

Maturities  of FHLB  advances  for the next five  years and  thereafter  were as
follows.

          Year ended December 31,
                   2005                              $  1,917,259
                   2006                                 1,712,434
                   2007                                 1,531,457
                   2008                                 8,371,551
                   2009                                 6,230,280
                Thereafter                             10,290,857
                                                     ------------

                                                     $ 30,053,838
                                                     ============

NOTE 5 - OFF-BALANCE-SHEET ACTIVITIES

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

Some financial instruments,  such as loan commitments,  credit lines, letters of
credit and overdraft  protection,  are issued to meet customer  financing needs.
These are  agreements to provide  credit or to support the credit of others,  as
long as  conditions  established  in the  contract  are met,  and  usually  have
expiration dates.  Commitments may expire without being used.  Off-balance-sheet
risk of credit loss exists up to the face amount of these instruments,  although
material losses are not  anticipated.  The same credit policies are used to make
such  commitments  as are used for  loans,  including  obtaining  collateral  at
exercise of the commitment.

The contractual amount of financial instruments with  off-balance-sheet risk was
as follows.

                                                      December 31,     June 30,
                                                          2004           2004
                                                          ----           ----

1-4 family residential real estate - fixed rate       $    74,000    $   299,000
1-4 family residential real estate - variable rate        302,000        212,000
Commercial real estate - variable rate                         --        265,000
Commercial lines of credit                              3,379,000      3,186,000
Home equity lines of credit                               849,000        823,000

The  interest  rate on  fixed-rate  commitments  ranged  from 6.50% to 6.625% at
December 31, 2004 and 5.88% to 6.75% at June 30, 2004. Commitments to make loans
are  generally  made for a period of 30 days or less.  The maximum  maturity for
fixed-rate commitments range from 10 years to 20 years.

At December 31, 2004 and June 30,  2004,  the  Corporation  was required to have
$2,020,000  and  $3,454,000  on  deposit  with  its  correspondent  banks  as  a
compensating clearing requirement.


--------------------------------------------------------------------------------

                                   (Continued)

                                                                             13.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

--------------------------------------------------------------------------------

NOTE 5 - OFF-BALANCE-SHEET ACTIVITIES (Continued)

The Corporation entered into employment agreements with certain of its officers.
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 6 - EARNINGS PER SHARE

The factors used in the earnings per share computation follow.

<TABLE>
<CAPTION>
                                                      Three Months Ended             Six Months Ended
                                                      ------------------             ----------------
                                                         December 31,                  December 31,
                                                         ------------                  ------------
                                                     2004           2003           2004           2003
                                                     ----           ----           ----           ----
<S>                                               <C>            <C>            <C>            <C>
Basic Earnings Per Common Share
       Net income                                 $   253,949    $   238,114    $   493,823    $   486,700
                                                  ===========    ===========    ===========    ===========

    Weighted average common shares
         outstanding                                1,432,648      1,435,702      1,432,648      1,437,602
    Less:  Average unallocated ESOP shares            (57,550)       (69,694)       (59,022)       (71,239)
                                                  -----------    -----------    -----------    -----------
    Weighted average common shares
      outstanding for basic earnings
      per common share                              1,375,098      1,366,008      1,373,626      1,366,363
                                                  ===========    ===========    ===========    ===========

    Basic earnings per common share               $      0.18    $      0.17    $      0.36    $      0.36
                                                  ===========    ===========    ===========    ===========

Diluted Earnings Per Common Share
    Net income                                    $   253,949    $   238,114    $   493,823    $   486,700
                                                  ===========    ===========    ===========    ===========

    Weighted average common shares
      outstanding for basic earnings
      per common share                              1,375,098      1,366,008      1,373,626      1,366,363
    Add:  Dilutive effects of assumed
    exercises of stock options                             --             --            183             --
                                                  -----------    -----------    -----------    -----------
    Weighted average common shares
      and dilutive potential common
      shares outstanding                            1,375,098      1,366,008      1,373,809      1,366,363
                                                  ===========    ===========    ===========    ===========

    Diluted earnings per common share             $      0.18    $      0.17    $      0.36    $      0.36
                                                  ===========    ===========    ===========    ===========

Stock options not considered in calculation
  Because they were not dilutive                      140,824        140,824          1,245        140,824
</TABLE>


--------------------------------------------------------------------------------

                                                                             14.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

--------------------------------------------------------------------------------

Item 2. Management's Discussion and Analysis
        ------------------------------------

Introduction

In the  following  pages,  management  presents an analysis of the  consolidated
financial condition of the Corporation as of December 31, 2004, compared to June
30, 2004,  and results of operations for the three and six months ended December
31, 2004, compared with the same periods in 2003. This discussion is designed to
provide a more comprehensive  review of 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.

Forward-Looking Statements

When  used  in this  filing  or  future  filings  by the  Corporation  with  the
Securities   and   Exchange   Commission,   or  other   public  or   shareholder
communications,  or in oral  statements  made with the approval of an authorized
executive officer, the words or phrases "will likely result," "are expected to,"
"will continue," "is anticipated,"  "estimate,"  "project," "believe" or similar
expressions  are intended to identify  "forward-looking  statements"  within the
meaning of the Private Securities Litigation Reform Act of 1995. The Corporation
wishes  to  caution   readers   not  to  place   undue   reliance  on  any  such
forward-looking statements,  which speak only as of the date made, and to advise
readers  that  various  factors,   including   regional  and  national  economic
conditions,  changes in levels of market interest rates, credit risks of lending
activities   and   competitive   and  regulatory   factors,   could  affect  the
Corporation's  financial  performance and could cause the  Corporation's  actual
results  for future  periods to differ  materially  from  those  anticipated  or
projected.

The Corporation is not aware of any trends,  events or  uncertainties  that will
have or are  reasonably  likely  to have a  material  effect  on its  liquidity,
capital resources or operations  except as discussed herein.  The Corporation is
not aware of any current  recommendations  by regulatory  authorities that would
have such effect if implemented.

The Corporation does not undertake,  and specifically disclaims,  any obligation
to  publicly  release  the  result  of any  revisions  that  may be  made to any
forward-looking statements to reflect occurrence of anticipated or unanticipated
events or circumstances after the date of such statements.

Financial Condition

Total assets at December 31, 2004 were $135.4 million compared to $135.8 million
at June 30, 2004, a decrease of $0.4  million.  The decrease in total assets was
primarily  due to a  decrease  in  cash  and  cash  equivalents  used to fund an
increase in loans and scheduled repayments of long term FHLB advances.

As  anticipated,  the Federal  Reserve Board has continued to increase  interest
rates.  It is  anticipated  that this will  have a  slowing  effect on  consumer
spending.  If this  occurs,  loan demand may soften,  especially  for the larger
balance  items.  We do,  however,  feel  that  loan  activity  related  to  home
construction and purchases will increase during our third quarter. With the rise
in interest rates, we also anticipate that depositors will eventually move funds
into higher yielding certificates of deposit versus shorter-term liquid types of
accounts.


--------------------------------------------------------------------------------

                                   (Continued)

                                                                             15.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

--------------------------------------------------------------------------------

Cash and cash equivalents  decreased $3.5 million from $10.0 million at June 30,
2004 to $6.5 million at December  31, 2004.  These funds were used to repay FHLB
advances and fund the increase in loans.

The securities  portfolio,  which is classified as available for sale, increased
$0.1 million, from $5.3 million at June 30, 2004 to $5.4 million at December 31,
2004.  The  increase is related to an  increase in the fair market  value of the
securities during the reporting period as no securities transactions occurred.

Loans  increased  $3.0  million  from $115.6  million at June 30, 2004 to $118.6
million at December 31,  2004.  The most  significant  change was in real estate
construction  and  development  loans,  which  increased  $1.0 million from $3.1
million at June 30, 2004 to $4.1  million at December 31,  2004.  This  increase
resulted as the borrowers of the related  construction  projects requested funds
from the previously  undisbursed  amounts of existing loans.  One to four-family
residential  loans  increased  $0.4  million and  commercial  real estate  loans
increased  $0.7 million  from June 30, 2004 to December  31, 2004.  Consumer and
commercial  loans also provided  increases to the loan  portfolio with growth of
$0.6  million and $0.7 million  respectively  from June 30, 2004 to December 31,
2004.  The only  significant  decrease in the loan  portfolio was in land loans,
which  decreased $0.4 million from $1.7 million at June 30, 2004 to $1.3 million
at December 31, 2004.

Premises and  equipment  decreased  $15,000 from  $2,125,000 at June 30, 2004 to
$2,110,000 at December 31, 2004. This decrease resulted from normal depreciation
of  existing  assets  partially  offset  by  equipment   purchases  and  routine
improvements to the office building.

Total  deposits  increased  $0.6 million from $86.8  million at June 30, 2004 to
$87.4  million at December 31, 2004 due to  increases  in NOW,  money market and
non-interest  bearing commercial demand accounts,  partially offset by decreases
in savings and certificate accounts. The most significant change was an increase
of $1.0 million in non-interest bearing commercial demand accounts from June 30,
2004 to December 31, 2004.  Savings  accounts  decreased $0.3 million since June
30, 2004.  Certificates  of deposit also decreased  $1.2 million  resulting from
matured  certificates,  which  were not  renewed  due to the low  interest  rate
environment. A portion of these funds most likely shifted to the more liquid NOW
and money  market  accounts,  which  increased  $0.8  million and $0.3  million,
respectively from June 30, 2004 to December 31, 2004.

Borrowed  funds  decreased  $1.1 million from $31.1  million at June 30, 2004 to
$30.0  million at December 31, 2004.  This  decrease was the result of scheduled
repayments of the long-term advances.

Results of Operations

The  operating  results of the  Corporation  are  affected  by general  economic
conditions,  monetary and fiscal  policies of federal  agencies  and  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 demand
for real  estate  loans and other  types of loans,  which in turn is affected by
interest  rates at which such loans are made,  general  economic  conditions and
availability of funds for lending activities.

The Corporation's net income primarily depends on its net interest income, which
is the difference  between  interest income earned on  interest-earning  assets,
such as loans and securities and interest expense  incurred on  interest-bearing
liabilities,  such as deposits and borrowings.  The level of net interest income
is dependent on the interest  rate  environment  and 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.


--------------------------------------------------------------------------------

                                   (Continued)

                                                                             16.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

--------------------------------------------------------------------------------

Three Months Ended December 31, 2004 Compared to the Three Months Ended December
31, 2003

Net Income.  The Corporation  earned net income of $254,000 for the three months
ended December 31, 2004 compared to $238,000 for the three months ended December
31, 2003. The increase of $16,000 in net income was primarily due to an increase
in net interest  income coupled with a decrease in the provision for loan losses
and noninterest expense partially offset by a decrease in noninterest income and
a small increase in income tax expense.

Net Interest Income. Net interest income totaled $1,137,000 for the three months
ended  December  31, 2004  compared to  $1,103,000  for the three  months  ended
December 31,  2003,  representing  an increase of $34,000.  The increase was the
result of a larger  decrease in interest  expense on deposits and borrowed money
compared  to the  decline  in  interest  income on loans and  other  sources  of
interest income.

Interest and fees on loans  decreased  $44,000,  or 2.3% from $1,879,000 for the
three months ended  December 30, 2003 to  $1,835,000  for the three months ended
December 31, 2004. The decrease in interest  income was due primarily to a lower
average  yield  earned  on loans  due to the  lower  interest  rate  environment
partially  offset by an  increase  in the  average  balance.  The yield on loans
declined  from 6.42% for the three months  ended  December 31, 2003 to 6.25% for
the three months ended December 31, 2004.

Interest on securities  decreased $10,000 due to a lower average balance for the
current  three-month  period  partially  offset  by a  slightly  higher  average
interest rate. This was offset by a $10,000 increase in interest on demand, time
and overnight deposits.

Interest  paid on deposits  decreased  $62,000,  or 14.1% from  $441,000 for the
three  months  ended  December  31, 2003 to $379,000  for the three months ended
December 31, 2004.  The decrease  resulted  from a lower  average  interest rate
coupled with a lower average  balance of deposits.  The average cost of deposits
declined  from 1.97% for the three months  ended  December 31, 2003 to 1.76% for
the three months ended December 31, 2004.

Interest  paid on borrowed  funds  totaled  $406,000  for the three months ended
December 31, 2004  compared to $421,000 for the three months ended  December 31,
2003.  The  decrease  in  interest  expense on borrowed  funds  resulted  from a
decrease in the average balance of borrowed funds.

Provision  for Loan Losses.  The  Corporation  maintains  an allowance  for loan
losses in an amount  that,  in  management's  judgment,  is  adequate  to absorb
probable  losses  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
Corporation's  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 that is considered adequate
to absorb  probable  incurred  losses 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  December  31, 2004
totaled $1,000 compared to $10,000 for the three months ended December 31, 2003.
The  allowance  for loan  losses  totaled  $777,700,  or  0.65%  of gross  loans
receivable   net  of  deferred  loan   origination   fees  and  32.5%  of  total
nonperforming  loans at December 31, 2004,  compared with $753,000,  or 0.65% of
gross loans receivable, net of deferred loan origination fees and 62.2% of total
nonperforming loans at June 30, 2004.  Nonperforming loans increased due to five
1-4 family loans  exceeding 90 days past due during December and being placed on
nonaccrual status. As of the end of January 2005, nonaccrual loans have declined
to $995,000. The


--------------------------------------------------------------------------------

                                   (Continued)

                                                                             17.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

--------------------------------------------------------------------------------

Corporation's  charge-off  history  remains  very modest and 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 80% for
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.

Noninterest   income.   Noninterest   income   includes   service  fees,   other
miscellaneous  income and the gain or loss  realized  on the sale of real estate
owned and decreased $31,000 from $41,000 for the three months ended December 31,
2003 to $10,000 for the three months ended  December  31,  2004.  This  decrease
resulted  primarily  from a pre-tax  loss of  $23,000  relating  to a  valuation
adjustment  on  a  property  held  in  real  estate  owned  during  the  current
three-month  period  coupled  with a pre-tax  gain of $8,000 on the sale of real
estate owned during the same period a year ago.

Noninterest  expense.  Noninterest expense totaled $749,000 for the three months
ended December 31, 2004 compared to $755,000 for the three months ended December
31, 2003, a decrease of $6,000. This decrease was primarily due to a decrease in
benefits expense relating to a change of insurance  providers during the current
three-month  period.  This decrease was slightly  offset by normal  increases in
compensation as compared to the same period a year ago.

Income Tax  Expense.  Income tax expense  totaled  $143,000 for the three months
ended December 31, 2004 compared to $140,000 for the three months ended December
31, 2003, representing an increase of $3,000. The increase in income tax expense
is  reflective  of the increase in income  before  income  taxes  coupled with a
slight  decrease in the effective tax rate. The effective tax rate was 36.1% and
37.1% for the three months ended December 31, 2004 and 2003 respectively.

Six Months Ended December 31, 2004 Compared to the Six Months Ended December 31,
2003

Net Income.  The  Corporation  earned net income of $494,000  for the six months
ended  December 31, 2004 compared to $487,000 for the six months ended  December
31, 2003, representing an increase of $7,000. An increase in net interest income
was offset by an  increase  in the  provision  for loan  losses,  a decrease  in
noninterest  income and an increase in  noninterest  expense  during the current
six-month period.  The final  contributing  factor to the increase in net income
was a decrease in income tax expense as compared to the  six-month  period ended
December 31, 2003.

Net Interest Income.  Net interest income totaled  $2,268,000 for the six months
ended December 31, 2004 compared to $2,222,000 for the six months ended December
31,  2003,  an  increase  of $46,000.  The  increase  was the result of a larger
decrease in interest  expense on deposits  and  borrowed  money  compared to the
decline in interest income on loans and other sources of interest income.

Interest and fees on loans decreased  $158,000,  or 4.1% from $3,831,000 for the
six months  ended  December  30,  2003 to  $3,673,000  for the six months  ended
December 31, 2004. The decrease in interest  income was due primarily to a lower
average  yield  earned  on loans  due to the  lower  interest  rate  environment
partially  offset by an  increase  in the  average  balance.  The yield on loans
declined from 6.58% for the six months ended  December 31, 2003 to 6.28% for the
six months ended December 31, 2004.

Interest on securities  decreased $34,000 due to a lower average balance for the
current  six-month period partially offset by a slightly higher average interest
rate.

Interest paid on deposits decreased $201,000, or 21.2% from $950,000 for the six
months ended December 31, 2003 to $749,000 for the six months ended December 31,
2004.  The decrease  resulted from a lower average  interest rate coupled with a
lower average balance of deposits. The average cost of


--------------------------------------------------------------------------------

                                   (Continued)

                                                                             18.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

--------------------------------------------------------------------------------

deposits declined from 2.09% for the six months ended December 31, 2003 to 1.74%
for the six months ended December 31, 2004.

Interest  paid on  borrowed  funds  totaled  $817,000  for the six months  ended
December 31, 2004  compared to $847,000  for the six months  ended  December 31,
2003.  The decrease of $30,000 in interest  expense on borrowed  funds  resulted
from a decrease in the average balance of borrowed funds.

Provision  for Loan  Losses.  The  provision  for loan losses for the six months
ended December 31, 2004 totaled  $27,000  compared to $24,000 for the six months
ended  December 31, 2003. The increase of $3,000 in the provision for losses was
due to an increase in the total outstanding  balance of loans during the current
six-month period compared to the same period a year ago.

Noninterest   income.   Noninterest   income   includes   service  fees,   other
miscellaneous  income and the gain or loss  realized  on the sale of real estate
owed and  decreased  $34,000 from $75,000 for the six months ended  December 31,
2003 to $41,000  for the six months  ended  December  31,  2004.  This  decrease
resulted  primarily  from a pre-tax  loss of  $23,000  relating  to a  valuation
adjustment on a property held in real estate owned during the current  six-month
period  coupled  with a pre-tax  gain of $8,000 on the sale of real estate owned
during the same period a year ago.

Noninterest  expense.  Noninterest expense totaled $1,510,000 for the six months
ended December 31, 2004 compared to $1,500,000 for the six months ended December
31,  2003,  an increase of $10,000 and was  primarily  related to an increase in
compensation  and benefits.  This increase was partially due to normal increases
in salaries plus the impact of the  Corporation's  increased  stock price on the
ESOP plan.  Also  affecting  the  increase in  compensation  and  benefits was a
$21,000  decrease in the amount of  compensation  expense  that was deferred for
loan  origination  costs during the current  six-month period as compared to the
same period a year ago due to the slowdown of mortgage loan  refinancing.  These
increases were partially offset by a reduction of $16,000 in insurance  benefits
expense resulting from a change in insurance providers.

Income Tax Expense. Income tax expense totaled $279,000 for the six months ended
December 31, 2004  compared to $287,000  for the six months  ended  December 31,
2003,  representing a decrease of $8,000.  The decrease in income tax expense is
reflective of a decrease in the  effective tax rate.  The effective tax rate was
36.1%  and  37.1%  for  the  six  months  ended   December  31,  2004  and  2003
respectively.


--------------------------------------------------------------------------------

                                   (Continued)

                                                                             19.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

--------------------------------------------------------------------------------

Liquidity and Capital Resources

The Corporation's liquidity, primarily represented by cash and cash equivalents,
is a result of operating,  investing and financing activities.  These activities
are summarized below for the six months ended December 31, 2004 and 2003.

<TABLE>
<CAPTION>
                                                                                Six Months Ended
                                                                                  December 31,
                                                                                  ------------
                                                                               2004         2003
                                                                               ----         ----
<S>                                                                          <C>          <C>
Net income                                                                   $    494     $    487
Adjustments to reconcile net income to net cash from operating activities         161          102
                                                                             --------     --------
Net cash from operating activities                                                655          589
Net cash from investing activities                                             (3,201)         704
Net cash from financing activities                                               (992)      (7,238)
                                                                             --------     --------
Net change in cash and cash equivalents                                        (3,538)      (5,945)
Cash and cash equivalents at beginning of period                               10,034       12,301
                                                                             --------     --------

Cash and cash equivalents at end of period                                   $  6,496     $  6,356
                                                                             ========     ========
</TABLE>

The  Corporation's  principal  sources of funds are deposits,  loan  repayments,
maturities of securities and other funds provided by operations. While scheduled
loan  repayments and maturing  investments are relatively  predictable,  deposit
flows and early loan prepayments are more influenced by interest rates,  general
economic conditions and competition.  The Corporation  maintains  investments in
liquid assets based on  management's  assessment of the (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.  Management believes that
loan  repayments  and  other  sources  of  funds  will be  adequate  to meet the
Corporation's foreseeable liquidity needs.

The  Corporation  also has the  ability to borrow  from the FHLB up to a maximum
total of $66.0 million including the cash management line of credit.  See Note 4
of  the  Notes  to  Consolidated  Financial  Statements  for  a  detail  of  the
Corporation's borrowings from the FHLB at December 31, 2004.

At December 31, 2004, the Corporation  had  commitments to originate  fixed-rate
residential  real estate loans totaling  $74,000 and  variable-rate  residential
real estate loans totaling $302,000. Loan commitments are generally for 30 days.
See Note 5 of the Notes to Consolidated Financial Statements for a detail of the
Corporation's  loan  commitments  at  December  31,  2004.  The Office of Thrift
Supervision regulations require the Corporation's insured subsidiary to maintain
a safe and sound level of liquid assets. The Corporation considers its liquidity
and capital  reserves  sufficient  to meet its  outstanding  short and long-term
needs, and believes it is in compliance with regulatory requirements.

The  Association  is  subject  to  various   regulatory   capital   requirements
administered  by  the  federal  regulatory  agencies.   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.  Capital amounts and
classifications  are also subject to  qualitative  judgments by the  regulators.
Failure to meet minimum capital requirements can initiate regulatory action.


--------------------------------------------------------------------------------

                                   (Continued)

                                                                             20.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

--------------------------------------------------------------------------------

Prompt  corrective  action  regulations  provide  five   classifications:   well
capitalized,    adequately    capitalized,    undercapitalized,    significantly
undercapitalized, and critically undercapitalized,  although these terms are not
used to  represent  overall  financial  condition.  If  adequately  capitalized,
regulatory   approval   is   required   to   accept   brokered   deposits.    If
undercapitalized,  capital  distributions  are  limited,  as is asset growth and
expansion, and capital restoration plans are required.

At December 31, 2004 and June 30,  2004,  management  believes  the  Association
complies 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 December 31, 2004 and
June 30, 2004.  No  conditions  or events have  occurred  subsequent to the last
notification  by  regulators  that  management  believes  would have changed the
Association's category.

At December 31, 2004 and June 30, 2004, the Association's actual capital levels,
minimum required levels and levels to be considered "well  capitalized"  were as
follows.

<TABLE>
<CAPTION>
                                                                                   To Be
                                                                              Well Capitalized
                                                         For Capital       Under Prompt Corrective
                                    Actual            Adequacy Purposes      Action Regulations
                                    ------            -----------------      ------------------
                              Amount      Ratio       Amount      Ratio       Amount     Ratio
                              ------      -----       ------      -----       ------     -----
                                                    (Dollars in Thousands)
                                                    ----------------------
<S>                          <C>          <C>        <C>           <C>       <C>          <C>
December 31, 2004
-----------------
Total capital (to risk-
  weighted assets)           $ 16,236     20.2%      $  6,421      8.0%      $  8,026     10.0%
Tier 1 (core) capital (to
  risk-weighted assets)        15,480     19.3          3,210      4.0          4,815      6.0
Tier 1 (core) capital (to
  adjusted total assets)       15,480     11.4          5,419      4.0          6,774      5.0
Tangible capital (to
  adjusted total assets)       15,480     11.4          2,032      1.5            N/A

June 30, 2004
-------------
Total capital (to risk-
  weighted assets)           $ 15,448     20.0%      $  6,176      8.0%      $  7,720     10.0%
Tier 1 (core) capital (to
  risk-weighted assets)        14,855     19.2          3,088      4.0          4,632      6.0
Tier 1 (core) capital (to
  adjusted total assets)       14,855     10.9          5,440      4.0          6,801      5.0
Tangible capital (to
  adjusted total assets)       14,855     10.9          2,040      1.5            N/A
</TABLE>


--------------------------------------------------------------------------------

                                                                             21.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                             CONTROLS AND PROCEDURES

--------------------------------------------------------------------------------

Item 3. Controls and Procedures
        -----------------------

Any control system,  no matter how well designed and operated,  can provide only
reasonable   (not  absolute)   assurance  that  its  objectives   will  be  met.
Furthermore,  no evaluation of controls can provide absolute  assurance that all
control issues and instances of fraud, if any, have been detected.

Disclosure Controls and Procedures

The Corporation's management,  with the participation of the Corporation's Chief
Executive Officer and Chief Financial  Officer,  has evaluated the effectiveness
of its  disclosure  controls  and  procedures  (as such term is defined in Rules
13a-15(e)  and 15d-15(e)  under the  Securities  Exchange Act of 1934  (Exchange
Act))  as of the  end of the  period  covered  by  this  report.  Based  on such
evaluation,  the  Corporation's  Chief  Executive  Officer  and Chief  Financial
Officer have  concluded  that, as of the end of such period,  the  Corporation's
disclosure  controls and  procedures  are  effective in  recording,  processing,
summarizing  and  reporting,  on a  timely  basis,  information  required  to be
disclosed by the  Corporation  in the reports that it files or submits under the
Exchange Act.

Internal Control Over Financial Reporting

There  have not been any  changes in the  Corporation's  internal  control  over
financial  reporting  (as such term is defined in Rules  13a-15(f) and 15d-15(f)
under the Exchange Act) during the fiscal  quarter to which this report  relates
that have materially  affected,  or are reasonably likely to materially  affect,
the Corporation's internal control over financial reporting.


--------------------------------------------------------------------------------

                                                                             22.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                           PART II - OTHER INFORMATION

--------------------------------------------------------------------------------

Item 1. Legal Proceedings
        -----------------

        The Company is not involved in any pending legal  proceedings other than
        routine legal proceedings  occurring in the ordinary course of business,
        which,  in the  aggregate,  involved  amounts  which are  believed to be
        immaterial to the consolidated financial condition and operations of the
        Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
        -----------------------------------------------------------

        None.

Item 3. Defaults Upon Senior Securities
        -------------------------------

        Not applicable.

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

        On  October  15,  2004  the  Annual  Meeting  of   Shareholders  of  the
        Corporation was held. The following members of the Board of Directors of
        the  Corporation  were  re-elected  by the votes set forth below for the
        terms expiring in 2007.

        James W. Kerber            FOR: 1,215,413           WITHHELD: 15,670
        Douglas Stewart            FOR: 1,213,713           WITHHELD: 17,370

        The  following  members  of the Board of  Directors  of the  Corporation
        continued in office.

                                    Term Expires
        Richard T. Martin               2005
        Harry N. Faulkner               2006
        John T. Sargeant                2006

        One  other  matter  was  submitted  to the  Shareholders,  for which the
        following votes were cast:

        Ratification  of the  selection of Crowe,  Chizek and Company LLP as the
        auditors of the Corporation for the fiscal year ending June 30, 2005.

        FOR: 1,221,175             AGAINST:  3,308           ABSTAIN:  6,600

Item 5. Other Information
        -----------------

        None

Item 6. Exhibits
        --------

        (a)   (1)   Exhibits 31.1 and 31.2: Section 302 Certifications

              (2)   Exhibit 32: Section 906 Certifications


--------------------------------------------------------------------------------

                                                                             23.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                                   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:  February 14, 2005              /s/ Douglas Stewart
       ------------------------       ------------------------------------------
                                      Douglas Stewart
                                      President and Chief Executive Officer


Date:  February 14, 2005              /s/ Debra Geuy
       ------------------------       ------------------------------------------
                                      Debra Geuy
                                      Chief Financial Officer


--------------------------------------------------------------------------------

                                                                             24.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER      DESCRIPTION
------      -----------
<S>         <C>                                       <C>
 3.1        Articles of Incorporation of              Incorporated  by reference to the  Registration  Statement
            Peoples-Sidney Financial                  on Form S-1 filed by Peoples-Sidney  Financial Corporation
            Corporation                               on January 27, 1997 (the  "S-1") with the  Securities  and
                                                      Exchange Commission (the "SEC"), Exhibit 3.1.

 3.2        Bylaws  of  Peoples-Sidney  Financial     Incorporated by reference to the S-1, Exhibit 3.2.
            Corporation

 10.1       Employee Stock Ownership Plan             Incorporated by reference to the S-1, Exhibit 10.1

 10.2       Form  of  Employment  Agreement  with     Incorporated by  Pre-Effective  Amendment No. 1 to the S-1
            Douglas Stewart                           filed with the SEC on March 12, 1997, Exhibit 10.2

 10.3       Form  of  Employment Agreements  with     Incorporated by  Pre-Effective  Amendment No. 1 to the S-1
            David R. Fogt, Gary N. Fullenkamp and     filed with the SEC on March 12, 1997, Exhibit 10.3
            Debra A. Geuy

 10.4       Form  of  Severance   Agreement  with     Incorporated by  Pre-Effective  Amendment No. 1 to the S-1
            Steve Goins                               filed with the SEC on March 12, 1997, Exhibit 10.4

 10.5       401 (k) Plan                              Incorporated by  Pre-Effective  Amendment No. 1 to the S-1
                                                      filed with the SEC on March 12, 1997, Exhibit 10.5

 10.6       Peoples-Sidney  Financial Corporation     Filed as an exhibit to the  Registrant's  Annual Report on
            Amended   and   Restated  1998  Stock     Form  10-KSB for the fiscal year ended June 30, 1999 (File
            Option and Incentive Plan                 No. 0-22223) and incorporate herein by reference.

 10.7       Peoples-Sidney  Financial Corporation     Filed as an exhibit to the  Registrant's  Annual Report on
            Amended and Restated  1998 Management     Form  10-KSB for the fiscal year ended June 30, 1999 (File
            Recognition Plan                          No. 0-22223) and incorporate herein by reference.

 11         Statement  Regarding  Computation  of     See Note 6 to the consolidated financial statements.
            Earnings per Share

 31.1       Certification of Principal  Executive
            Officer  Pursuant  to  Section 302 of
            the Sarbanes-Oxley Act of 2002

 31.2       Certification of Principal  Financial
            Officer  Pursuant to  Section  302 of
            the Sarbanes-Oxley Act of 2002
</TABLE>


--------------------------------------------------------------------------------

                                                                             25.
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                                INDEX TO EXHIBITS

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

 32         Certifications of the Chief Executive
            Officer   and  the   Chief  Financial
            Officer Pursuant  to  Section  906 of
            the Sarbanes-Oxley Act of 2002


--------------------------------------------------------------------------------

                                                                             26.