FORM 10-QSB

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)
  [ X ]

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

For the quarterly period ended September 30, 1999
  [  ]

                   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 (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

Yes  [ X ]           No  [   ]

As of November 9, 1999, the latest  practicable  date,  1,664,622  shares of the
issuer's common shares, $.01 par value, were issued and outstanding.


Transitional Small Business Disclosure Format (Check One):

Yes  [   ]           No  [ X ]
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION

                                      INDEX


PART I - FINANCIAL INFORMATION

  Item 1.     Financial Statements (Unaudited)

              Consolidated Balance Sheets

              Consolidated Statements of Income

              Consolidated Statements of Comprehensive Income

              Condensed Consolidated Statements of Changes in Shareholders'
              Equity

              Consolidated Statements of Cash Flows

              Notes to Consolidated Financial Statements

  Item 2.     Management's Discussion and Analysis


Part II - Other Information

  Item 1.     Legal Proceedings

  Item 2.     Changes in Securities and Use of Proceeds

  Item 3.     Defaults Upon Senior Securities

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

  Item 5.     Other Information

  Item 6.     Exhibits and Reports on Form 8-K

  SIGNATURES
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION

                           CONSOLIDATED BALANCE SHEETS

                                   (Unaudited)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------

Item 1.  Financial Statements

                                                                                    September 30,          June 30,
                                                                                       1999                 1999
                                                                                       ----                 ----

<S>                                                                             <C>                <C>
ASSETS
Cash and due from banks                                                         $       897,276    $      1,298,357
Interest-bearing deposits in other financial institutions                               535,119             634,621
Overnight deposits                                                                    1,700,000                  --
                                                                                ---------------    ----------------
     Total cash and cash equivalents                                                  3,132,395           1,932,978

Time deposits in other financial institutions                                         1,400,000             400,000
Securities available for sale                                                         8,780,850           7,858,111
Federal Home Loan Bank stock                                                            924,200             907,700
Loans receivable, net                                                               105,785,115         102,802,845
Accrued interest receivable                                                             813,917             759,913
Premises and equipment, net                                                           1,964,034           1,985,608
Other assets                                                                            172,061             235,104
                                                                                ---------------    ----------------

     Total assets                                                               $   122,972,572    $    116,882,259
                                                                                ===============    ================

LIABILITIES
Deposits                                                                        $    88,206,983    $     84,310,492
Borrowed funds                                                                       17,000,000          14,800,000
Accrued interest payable and other liabilities                                          320,738             409,550
                                                                                ---------------    ----------------
     Total liabilities                                                              105,527,721          99,520,042

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                                                           10,776,131          10,779,941
Retained earnings                                                                    10,666,836          10,643,040
Treasury stock, 120,753 shares at cost                                               (1,766,399)         (1,766,399)
Unearned employee stock ownership plan shares                                        (1,477,078)         (1,520,139)
Unearned management recognition plan shares                                            (699,034)           (746,692)
Accumulated other comprehensive income                                                  (73,459)            (45,388)
                                                                                ---------------    ----------------
     Total shareholders' equity                                                      17,444,851          17,362,217
                                                                                ---------------    ----------------

     Total liabilities and shareholders' equity                                 $   122,972,572    $    116,882,259
                                                                                ===============    ================

-----------------------------------------------------------------------------------------------------------------------
</TABLE>

          See accompanying notes to consolidated financial statements.
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION

                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                                                                         Three Months Ended
                                                                                            September 30,
                                                                                            -------------
                                                                                       1999               1998
                                                                                       ----               ----
<S>                                                                               <C>               <C>
Interest income
     Loans, including fees                                                        $    2,007,976    $     1,872,303
     Securities                                                                          130,145             64,033
     Interest-bearing demand, time and overnight deposits                                 40,860             48,727
     Dividends on Federal Home Loan Bank stock                                            16,587             15,469
                                                                                  --------------    ---------------
         Total interest income                                                         2,195,568          2,000,532

Interest expense
     Deposits                                                                          1,011,861            977,941
     Borrowed funds                                                                      250,789            108,314
                                                                                  --------------    ---------------
         Total interest expense                                                        1,262,650          1,086,255
                                                                                  --------------    ---------------

Net interest income                                                                      932,918            914,277

Provision for loan losses                                                                 17,301             36,780
                                                                                  --------------    ---------------
Net interest income after provision for loan losses                                      915,617            877,497

Noninterest income
     Service fees and other charges                                                       22,733             14,291

Noninterest expense
     Compensation and benefits                                                           364,425            383,034
     Director fees                                                                        30,000             30,000
     Occupancy and equipment                                                              77,707             47,302
     Computer processing expense                                                          47,479             42,882
     FDIC deposit insurance premiums                                                      12,203             11,910
     State franchise taxes                                                                75,323             68,356
     Professional fees                                                                    29,477             33,371
     Other                                                                                77,669             91,620
                                                                                  --------------    ---------------
         Total noninterest expense                                                       714,283            708,475
                                                                                  --------------    ---------------

Income before income taxes                                                               224,067            183,313

Income tax expense                                                                        92,816             66,137
                                                                                  --------------    ---------------

Net income                                                                        $      131,251    $       117,176
                                                                                  ==============    ===============

Earnings per common share - basic                                                 $         0.09    $         0.07
                                                                                  ==============    ==============

Earnings per common share - diluted                                               $         0.09    $         0.07
                                                                                  ==============    ==============
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

          See accompanying notes to consolidated financial statements
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                   (Unaudited)


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                                                                         Three Months Ended
                                                                                            September 30,
                                                                                            -------------
                                                                                       1999               1998
                                                                                       ----               ----
<S>                                                                               <C>               <C>
Net income                                                                        $      131,251    $       117,176

Other comprehensive income
     Unrealized holding gain (loss) on available for
       sale securities arising during the period                                         (42,531)            12,843
     Tax effect                                                                           14,460             (4,366)
                                                                                  --------------    ---------------
         Other comprehensive income                                                      (28,071)             8,477
                                                                                  --------------    ---------------

Comprehensive income                                                              $      103,180    $       125,653
                                                                                  ==============    ===============
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
          See accompanying notes to consolidated financial statements

<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
                              SHAREHOLDERS' EQUITY
                                   (Unaudited)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------

                                                                                            Three Months
                                                                                         Ended September 30,
                                                                                         -------------------
                                                                                     1999                1998
                                                                                     ----                ----
<S>                                                                             <C>                <C>
Balance, beginning of period                                                    $    17,362,217    $     19,626,016

Net income for period                                                                   131,251             117,176

Cash dividends, $.07 per share in 1999 and 1998                                        (107,455)           (114,280)

Purchase of 30,000 shares of treasury stock in 1998, at cost                                 --            (578,750)

Commitment to release 2,856 management recognition plan shares                           47,658                  --

Commitment to release 3,671 and 3,812 employee stock ownership
  plan shares in 1999 and 1998, at fair value                                            39,251              77,703

Change in fair value on securities available for sale, net of tax                       (28,071)              8,477
                                                                                ---------------    ----------------

Balance, end of period                                                          $    17,444,851    $     19,136,342
                                                                                ===============    ================
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
          See accompanying notes to consolidated financial statements

<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------

                                                                                         Three Months Ended

                                                                                            September 30,
                                                                                       1999               1998
Cash flows from operating activities
<S>                                                                               <C>               <C>
     Net income                                                                   $      131,251    $       117,176
     Adjustments to reconcile net income to net cash from
       operating activities
         Depreciation                                                                     38,204             13,580
         Provision for loan losses                                                        17,301             36,780
         FHLB stock dividends                                                            (16,500)           (15,400)
         Compensation expense for ESOP shares                                             39,251             77,703
         Compensation expense for MRP shares                                              47,658                 --
         Change in:
              Accrued interest receivable and other assets                                 8,447             38,310
              Accrued expense and other liabilities                                      (74,351)            27,076
              Deferred loan fees                                                           8,414              7,716
                                                                                  --------------    ---------------
                  Net cash from operating activities                                     199,675            302,941

Cash flows from investing activities
     Purchases of securities available for sale                                       (1,000,000)                --
     Maturities of securities available for sale                                              --            500,000
     Principal repayments on mortgage-backed securities                                   35,321                 --
     Purchases of time deposits in other financial institutions                       (1,000,000)                --
     Net increase in loans                                                            (3,007,985)        (2,114,173)
     Premises and equipment expenditures                                                 (16,630)          (592,354)
                                                                                  --------------    ---------------
         Net cash from investing activities                                           (4,989,294)        (2,206,527)

Cash flows from financing activities
     Net change in deposits                                                            3,896,491            633,236
     Net change in short-term borrowings                                              (2,800,000)         1,000,000
     Proceeds form long-term borrowings                                                5,000,000                 --
     Cash dividends paid                                                                (107,455)          (114,280)
     Purchase of treasury stock                                                               --           (578,750)
                                                                                  --------------    ---------------
         Net cash from financing activities                                            5,989,036            940,206
                                                                                  --------------    ---------------

Net change in cash and cash equivalents                                                1,199,417           (963,380)
Cash and cash equivalents at beginning of period                                       1,932,978          4,947,253
                                                                                  --------------    ---------------

Cash and cash equivalents at end of period                                        $    3,132,395    $     3,983,873
                                                                                  ==============    ===============
Supplemental disclosures of cash flow information
     Cash paid during the period for
         Interest                                                                 $    1,260,290    $       982,737
         Income taxes                                                                     65,000                 --
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
          See accompanying notes to consolidated financial statements

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

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 September 30, 1999
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 consolidated  financial statements and notes thereto of the
Corporation for the fiscal year ended June 30, 1999, included in its 1999 Annual
Report.  Reference  is  made  to the  accounting  policies  of  the  Corporation
described in the notes to  consolidated  financial  statements  contained in its
1999 Annual Report. The Corporation has consistently  followed these policies in
preparing this Form 10-QSB.

The Corporation  provides  financial services through its main office in Sidney,
Ohio, and branch offices in 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 real estate.  Commercial loans are expected
to be repaid from cash flow from operations of businesses. Real estate loans are
secured by both  residential  and  commercial  real  estate.  Substantially  all
revenues  and  services  are derived  from  financial  institution  products and
services in Shelby County and contiguous 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 disclosures provided,  and future results could differ.
The allowance for loan losses,  fair values of financial  instruments and status
of contingencies are particularly subject to change.
<PAGE>
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  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.

Basic  earnings per share ("EPS") is based on net income divided by the weighted
average number of shares outstanding during the period.  Unallocated ESOP shares
are not considered outstanding for this calculation. Management recognition plan
("MRP")  shares are considered  outstanding  as they become vested.  Diluted EPS
shows the  dilutive  effect  of MRP  shares  and the  additional  common  shares
issuable under stock options.
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
--------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

A reconciliation  of the numerators and denominators  used in the computation of
the basic  earnings  per common  share and diluted  earnings per common share is
presented below:
<TABLE>
<CAPTION>
                                                                            Three Months Ended
                                                                               September 30,
                                                                               -------------
                                                                            1999           1998
                                                                            ----           ----
<S>                                                                    <C>              <C>
Basic Earnings Per Common Share
    Numerator
      Net income                                                       $   131,251      $   117,176
                                                                       ===========      ===========
    Denominator
      Weighted average common shares outstanding                         1,664,622        1,769,822
      Less:  Average unallocated ESOP shares                              (127,716)        (142,893)
      Less:  Average unearned MRP shares                                   (43,319)              --
                                                                       -----------      -----------
      Weighted average common shares outstanding for
        basic earnings per common share                                  1,493,587        1,626,929
                                                                       ===========      ===========
    Basic earnings per common share                                    $      0.09      $      0.07
                                                                       ===========      ===========
Diluted Earnings Per Common Share
    Numerator
      Net income                                                       $   131,251      $   117,176
                                                                       ===========      ===========
    Denominator
      Weighted average common shares outstanding for
        basic earnings per common share                                  1,493,587        1,626,929
      Add:  Dilutive effects of average unearned MRP shares                     --               --
      Add:  Dilutive effects of assumed exercises of stock options              --               --
                                                                       -----------      -----------
      Weighted average common shares and dilutive
        potential common shares outstanding                              1,493,587        1,626,929
                                                                       ===========      ===========
    Diluted earnings per common share                                  $      0.09      $      0.07
                                                                       ===========      ===========
</TABLE>
Unearned MRP shares and stock options  granted did not have a dilutive effect on
EPS for the three months ended  September  30, 1999 as the fair value of the MRP
shares on the date of grant and the exercise  price of  outstanding  options was
greater than the average market price for the period. For the three months ended
September 30, 1998,  stock options granted did not have a dilutive effect on EPS
as the exercise price of outstanding options was greater than the average market
price for the period. Unearned MRP shares did not have a dilutive effect on EPS,
as no shares had been purchased by the MRP plan as of September 30, 1998.
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Statement of Financial  Accounting  Standards  (SFAS) No. 133,  "Accounting  for
Derivative  Instruments  and Hedging  Activities"  requires  companies to record
derivatives  on the  balance  sheet as assets or  liabilities,  measured at fair
value. Gains or losses resulting from changes in the values of those derivatives
would be accounted  for  depending on the use of the  derivative  and whether it
qualifies for hedge  accounting.  The key criterion for hedge accounting is that
the  hedging  relationship  must be highly  effective  in  achieving  offsetting
changes  in fair  value or cash  flows.  SFAS 133 does not  allow  hedging  of a
security which is classified as held to maturity.  Accordingly, upon adoption of
SFAS 133,  companies  may  reclassify  any  security  from held to  maturity  to
available  for sale if they wish to be able to hedge the security in the future.
SFAS 133, as amended by SFAS 137, is effective for fiscal years  beginning after
June 15, 2000 with early adoption  encouraged  for any fiscal quarter  beginning
July 1, 1998 or later,  with no  retroactive  application.  Management  does not
expect the adoption SFAS 133 to have a significant  impact on the  Corporation's
financial statements.

NOTE 2 - SECURITIES
<TABLE>
<CAPTION>
Securities were as follows:

                                                                Gross           Gross          Estimated
                                               Amortized     Unrealized      Unrealized          Fair
                                                 Cost           Gains          Losses            Value
                                                 ----           -----          ------            -----
<S>                                        <C>                <C>           <C>             <C>
September 30, 1999
------------------
Securities available for sale
    U.S. Government agencies               $     3,998,379    $       --    $   (56,358)    $    3,942,021
    Mortgage-backed securities                   4,893,772            --        (54,943)         4,838,829
                                           ---------------    ----------    -----------     --------------

       Total                               $     8,892,151    $       --    $  (111,301)    $    8,780,850
                                           ===============    ==========    ===========     ==============
June 30, 1999
-------------
Securities available for sale
    U.S. Government agencies               $     2,998,229    $       --    $   (41,509)    $    2,956,720
    Mortgage-backed securities                   4,928,652            --        (27,261)         4,901,391
                                           ---------------    ----------    -----------     --------------

       Total                               $     7,926,881    $       --    $   (68,770)    $    7,858,111
                                           ===============    ==========    ===========     ==============
</TABLE>
<PAGE>
NOTE 2 - SECURITIES (Continued)

Contractual  maturities  of  securities  at September  30, 1999 were as follows.
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.  Securities not due at a single maturity,  primarily  mortgage-backed
securities, are shown separately.
<TABLE>
<CAPTION>
                                                                                             Estimated
                                                                          Amortized            Fair
                                                                            Cost               Value
                                                                            ----               -----
<S>                                                                    <C>               <C>
        Securities available for sale
           Due after one year through five years                       $    3,998,379    $     3,942,021
           Mortgage-backed securities                                       4,893,772          4,838,829
                                                                       --------------    ---------------

                                                                       $    8,892,151    $     8,780,850
                                                                       ==============    ===============
</TABLE>
No securities  were sold during the three month period ended  September 30, 1999
and 1998. No securities were pledged as collateral at September 30, 1999 or June
30, 1999.

NOTE 3 - LOANS RECEIVABLE
<TABLE>
<CAPTION>
Loans receivable were as follows:
                                                                            September 30,       June 30,
                                                                               1999              1999
                                                                               ----              ----
<S>             <C>                                                     <C>               <C>
           Mortgage loans:
                1-4 family residential                                  $    86,085,474   $     84,165,483
                Multi-family residential                                      1,345,031          1,358,906
                Commercial real estate                                        9,241,428          9,407,998
                Real estate construction and
                  development                                                 7,173,450          5,930,241
                Land                                                            844,812           866,988
                    Total mortgage loans                                    104,690,195        101,729,616
           Consumer and other loans                                           4,457,154          4,131,469
                                                                        ---------------   ----------------
                    Total loans receivable                                  109,147,349        105,861,085
           Less:
                Allowance for loan losses                                      (546,199)          (528,898)
                Loans in process                                             (2,589,648)        (2,311,369)
                Deferred loan fees                                             (226,387)          (217,973)
                                                                        ---------------   ----------------

                                                                        $   105,785,115   $    102,802,845
                                                                        ===============   ================
</TABLE>
<PAGE>
NOTE 3 - LOANS RECEIVABLE (Continued)
<TABLE>
<CAPTION>
Activity in the allowance for loan losses is summarized as follows:
                                                                                   Three Months Ended
                                                                                      September 30,
                                                                                      -------------
                                                                                   1999          1998
                                                                                   ----          ----
<S>                                                                           <C>             <C>
        Balance at beginning of period                                        $    528,898    $    425,642
        Provision for losses                                                        17,301          36,780
        Charge-offs                                                                     --         (16,277)
        Recoveries                                                                      --              --
                                                                              ------------    ------------
        Balance at end of period                                              $    546,199    $    446,145
                                                                              ============    ============
</TABLE>
As of and for the  three  months  ended  September  30,  1999  and  1998,  loans
considered impaired within the scope of SFAS No. 114 were not material.

NOTE 4 - BORROWED FUNDS

At September 30, 1999 and June 30, 1999, the  Association  had a cash management
line of credit enabling it to borrow up to $5,360,000 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.  No
borrowings  were  outstanding  on this  line of credit at  September  30,  1999.
Borrowings  outstanding on this line of credit at June 30, 1999 were  $2,800,000
with interest rates of 4.90% and 6.02%.

As a member  of the FHLB  system,  the  Association  has the  ability  to obtain
borrowings up to a maximum total of $18,484,000 at September 30, 1999, including
the cash management line-of-credit.  Advances from the Federal Home Loan Bank at
September 30, 1999 and June 30, 1999 were as follows:
<TABLE>
<CAPTION>
                                                                          September 30,        June 30,
                                                                              1999               1999
                                                                              ----               ----
<S>                                                                    <C>                <C>
         4.90% FHLB cash management advance,
           due September 17, 1999                                      $            --    $      2,300,000
         4.90% FHLB cash management advance,
           due September 22, 1999                                                   --             300,000
         6.02% FHLB cash management advance,
           due September 28, 1999                                                   --             200,000
         6.13% FHLB advance, due June 25, 2008                               7,000,000           7,000,000
         6.00% FHLB advance, due June 11, 2009                               5,000,000           5,000,000
         5.84% FHLB advance, due April 4, 2000                               5,000,000                  --
                                                                       ---------------    ----------------
                                                                       $    17,000,000    $     14,800,000
                                                                       ===============    ================
</TABLE>
Advances under the borrowing  agreements are  collateralized by a blanket pledge
of the Association's residential mortgage loan portfolio and its FHLB stock.
<PAGE>
NOTE 5 - 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 and
interest rate risk in excess of amounts reported in the financial statements.

Exposure to credit loss if the other  party does not perform is  represented  by
the  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.

As of September 30, 1999 and June 30, 1999, the  Corporation  had commitments to
make fixed-rate commercial and residential real estate mortgage loans at current
market rates approximating $454,000 and $375,000,  and variable-rate  commercial
and residential real estate mortgage loans at current market rates approximating
$773,000 and $394,000.  Loan commitments are generally for 30 days. The interest
rates on fixed-rate commitments ranged from 7.75% to 8.25% at September 30, 1999
and  ranged  from  7.00%  to  7.75%  at June 30,  1999.  The  interest  rates on
variable-rate  commitments  ranged from 7.00% to 8.00% at September 30, 1999 and
7.00% to 7.75% at June 30, 1999.

The  Corporation  also had unused lines of credit  approximating  $1,612,000 and
$1,434,000 at September 30, 1999 and June 30, 1999.

At September 30, 1999 and June 30, 1999,  the  Association  was required to have
$485,000 and $532,000 on deposit with its correspondent  banks as a compensating
clearing requirement.

The Association entered into employment  agreements with certain officers of the
Corporation.  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.

--------------------------------------------------------------------------------
<PAGE>
NOTE 6 - EMPLOYEE STOCK OWNERSHIP PLAN

The Corporation offers an employee stock ownership plan ("ESOP") for the benefit
of substantially  all employees of the  Corporation.  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  Peoples in order to  acquire  common  shares of
Peoples.  The loan is secured by the shares purchased with the loan proceeds and
will be repaid  by the 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.  When loan
payments are made, ESOP shares are allocated to  participants  based on relative
compensation.

During  fiscal  1998,  the  Corporation  declared  and  paid a $4.00  per  share
distribution of which $3.99 was a tax-free return of capital  distribution.  The
ESOP  received  approximately  $539,000 on 134,262  unallocated  shares from the
return of capital  distribution.  The ESOP used the proceeds to purchase  26,000
additional  shares.  The additional shares are held in suspense and allocated to
participants in a manner similar to the shares originally in the ESOP.

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 $39,251
and $77,703 for the three months ended September 30, 1999 and 1998.
<TABLE>
<CAPTION>
ESOP shares as of September 30, 1999 and June 30, 1999 were as follows:
                                                                                    September 30,         June 30,
                                                                                        1999                1999
<S>                                                                              <C>               <C>
       Allocated shares                                                                  39,279             39,279
       Shares committed to be released for allocation                                     3,671                 --
       Unreleased shares                                                                125,880            129,551
                                                                                 --------------    ---------------
           Total ESOP shares                                                            168,830            168,830
                                                                                 ==============    ===============
       Fair value of unreleased shares                                           $    1,321,740    $     1,295,510
                                                                                 ==============    ===============
</TABLE>
<PAGE>
NOTE 7 - STOCK OPTION AND INCENTIVE PLAN

The Stock  Option and  Incentive  Plan was approved by the  shareholders  of the
Corporation  on May 22,  1998.  The Board of  Directors  has granted  options to
purchase  shares of common  stock at an exercise  price  ranging  from $16.01 to
$18.75 to certain  employees,  officers and  directors of the  Corporation.  The
exercise price for options  granted prior to June 10, 1998,  were reduced by the
$3.99 return of capital  distribution.  One-fifth of the options  awarded become
first exercisable on each of the first five  anniversaries of the date of grant.
The option period expires 10 years from the date of grant.  141,824 options were
outstanding  at  September  30,  1999 and June 30,  1999.  28,365  options  were
exercisable at September 30, 1999 and June 30, 1999. In addition, 36,714 options
to purchase  common stock are reserved for future  grants at September  30, 1999
and June 30, 1999.

NOTE 8 - MANAGEMENT RECOGNITION PLAN

A Management  Recognition Plan ("MRP") was adopted by the Board of Directors and
approved  by the  shareholders  of the  Corporation  on May 22, 1998 to purchase
71,415  common  shares,  which  is  equal  to 4% of the  common  shares  sold in
connection  with the  conversion.  The MRP will be used as a means of  providing
directors  and  certain  key  employees  of the  Corporation  with an  ownership
interest in the  Corporation in a manner  designed to compensate  such directors
and key employees for services to the Corporation.

In  conjunction  with the  adoption  of the MRP on May 22,  1998,  the  Board of
Directors awarded 57,128 shares to certain directors,  officers and employees of
the Corporation. No shares had been previously awarded. One-fifth of such shares
will be earned and nonforfeitable on each of the first five anniversaries of the
date of the award.  At September 30, 1999 and June 30, 1999,  11,429 shares have
vested.  In the event of the death or disability of a participant or a change in
control of the Corporation,  however,  the  participant's  shares will be deemed
earned and  nonforfeitable  upon such date. At June 30, 1999,  there were 14,287
shares  reserved  for future  awards and held as  treasury  stock.  Compensation
expense  related  to MRP  shares  is based  upon the cost of the  shares,  which
approximates  fair  value at the  date of  grant.  For the  three  months  ended
September 30, 1999 and 1998, compensation expense totaled $47,658 and $60,000.
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                                   (Continued)
--------------------------------------------------------------------------------

Item 2.  Management's Discussion and Analysis

Introduction

In the  following  pages,  management  presents an analysis of the  consolidated
financial condition of Peoples-Sidney  Financial Corporation (the "Corporation")
as of September 30, 1999,  compared to June 30, 1999,  and results of operations
for the three months ended September 30, 1999,  compared with the same period in
1998.  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.

When used in this  discussion  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  which  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  September  30,  1999 were  $123.0  million  compared to $116.9
million at June 30, 1999, an increase of $6.1 million,  or 5.2%. The increase in
total  assets was due to  increases in loans,  cash and cash  equivalents,  time
deposits in other  financial  institutions  and  securities  available  for sale
funded by proceeds from increased deposits and borrowings.
<PAGE>
Loans receivable  increased $3.0 million from $102.8 million at June 30, 1999 to
$105.8  million at September 30, 1999. The increase was primarily in real estate
construction  and  development  loans which  increased  $1.2 million and one- to
four-family  residential  loans which  increased $1.9 million.  Changes in other
types of mortgage  loans were not  significant.  The  overall  increase in total
mortgage loans is reflective of a strong local economy  coupled with  attractive
loan rates and products compared to local competition. Expansion into new market
areas  through  the  Association's  two  new  Branch  banking   facilities  also
contributed to the growth.

The Corporation's  consumer and other loan portfolio  increased $326,000 between
June 30, 1999 and September 30, 1999. The increase was primarily  related to new
auto loans and commercial lines of credit  originated at the  Association's  two
new branch locations. Even with the increase,  consumer and other loans remain a
small portion of the entire loan portfolio and represented only 4.1% and 3.9% of
gross loans at September 30, 1999 and June 30, 1999.

Cash and  cash  equivalents  increased  $1.2  million,  time  deposits  in other
financial  institutions increased $1.0 million and securities available for sale
increased  $900,000  primarily as temporary  earning  sources  until loan growth
utilizes all the funds provided from time deposit growth.

Total  deposits  increased  $3.9 million from $84.3  million at June 30, 1999 to
$88.2 million at September 30, 1999.  The deposit growth was the result of a new
15-month certificate of deposit.  This product totaled $7.1 million at September
30, 1999. NOW accounts  declined $367,000 and savings accounts declined $651,000
since June 30,  1999.  Money  market  accounts  and  noninterest-bearing  demand
deposits had little change since June 30, 1999.

Borrowed  funds were $17.0  million at  September  30,  1999  compared  to $14.8
million at June 30, 1999. Borrowings at September 30, 1999 consisted entirely of
long-term fixed-rate 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 other  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.

Net Income.  The Corporation  earned net income of $131,000 for the three months
ended  September  30,  1999  compared  to $117,000  for the three  months  ended
September 30, 1998.  The increase in net income was primarily due to an increase
in net interest income and lower provision for loan losses.
<PAGE>
Net Interest  Income.  Net interest income totaled $933,000 for the three months
ended  September  30,  1999  compared  to $914,000  for the three  months  ended
September  30, 1998.  The increase was the result of higher  income on loans and
securities  partially  offset by an increase in interest expense on deposits and
borrowings.

Interest and fees on loans increased  $136,000,  or 7.2% from $1,872,000 for the
three months ended  September 30, 1998 to $2,008,000  for the three months ended
September 30, 1999. The increase in interest  income was due to a higher average
balance of loans  partially  offset by a decline  in the yield  earned on loans.
Interest  earned on  securities  increased  $66,000 for the three  months  ended
September  30,  1999 as  compared  to the same  period  in the prior  year.  The
increase  was the result of having a much higher  balance in  securities  than a
year ago.  Securities  were increased and funded with borrowings to leverage the
Corporation's capital position.

Interest paid on deposits increased $34,000 for the three months ended September
30, 1999 compared to the three months ended September 30, 1998. The average rate
paid on  deposits  declined.  However,  the effect of an increase in the average
balance of deposits offset the decrease in the average cost.

Interest  paid on borrowed  funds  totaled  $251,000  for the three months ended
September 30, 1999 compared to $108,000 for the three ended  September 30, 1998.
The  increase  in  interest  expense on borrowed  funds  resulted  from a higher
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 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
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  which is  considered
adequate to absorb probable 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.
<PAGE>
The  provision  for loan losses for the three  months ended  September  30, 1999
totaled  $17,000  compared to $37,000 for the three months ended  September  30,
1998. No charge-offs  occurred during the three months ended September 30, 1999,
which was the primary  reason for the decline in the  provision for loan losses.
Past  charge-offs  experienced  by the  Corporation  have  primarily  related to
consumer and other non-real  estate loans. As indicated  previously,  such loans
make up an insignificant portion of the Corporation's total loan portfolio.  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 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, as well as a low volume of nonperforming loans,  management believes it
is prudent to continue to increase the  allowance for loan losses as total loans
increase.  The allowance  for loan losses  totaled  $546,000,  or .51 % of loans
receivable, net of loans in process, at September 30, 1999 compared to $529,000,
or .51% of loans receivable, net of loan in process, at June 30, 1999.

Noninterest   income.   Noninterest  income  includes  service  fees  and  other
miscellaneous  income and totaled  $23,000 for the three months ended  September
30, 1999 and $14,000 for the three months ended September 30, 1998. The increase
was primarily due to an increase in service charges on deposit accounts.

Noninterest  expense.  Noninterest expense totaled $714,000 for the three months
ended  September  30,  1999  compared  to $708,000  for the three  months  ended
September 30, 1998, an increase of $6,000,  or 0.8%. The increase was the result
of an increase in occupancy and equipment expense due to the two new branches.
<PAGE>
Income  Tax  Expense.   The  volatility  of  income  tax  expense  is  primarily
attributable  to the change in income before  income  taxes.  Income tax expense
totaled  $93,000 for the three  months  ended  September  30,  1999  compared to
$66,000 for the three months ended September 30, 1998,  representing an increase
of $27,000,  or 40.3 %. The effective tax rate was 41.4% and 36.1% for the three
months ended September 30, 1999 and 1998.

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 three months ended September 30, 1999 and 1998.
<TABLE>
<CAPTION>
                                                                                              Three Months
                                                                                           Ended September 30,
                                                                                           -------------------
                                                                                           1999            1998
                                                                                           ----            ----
                                                                                          (Dollars in thousands)

<S>                                                                                   <C>              <C>
Net income                                                                            $        131     $        117
Adjustments to reconcile net income to net cash from
  operating activities                                                                          68              186
                                                                                      ------------     ------------
Net cash from operating activities                                                             199              303
Net cash from investing activities                                                          (4,989)          (2,206)
Net cash from financing activities                                                           5,989              940
                                                                                      ------------     ------------
Net change in cash and cash equivalents                                                      1,199             (963)
Cash and cash equivalents at beginning of period                                             1,933            4,947
                                                                                      ------------     ------------
Cash and cash equivalents at end of period                                            $      3,132     $      3,984
                                                                                      ============     ============
</TABLE>
The  Corporation's  principal  sources of funds are deposits,  loan  repayments,
maturities of securities and other funds provided by operations. The Association
also has the ability to borrow from the FHLB.  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  Association  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.
<PAGE>
OTS regulations  presently  require the Association to maintain an average daily
balance of investments in United States Treasury, federal agency obligations and
other  investments  in an  amount  equal  to 4% 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 on which the Association
may rely, if necessary,  to fund deposit withdrawals or other short-term funding
needs. At September 30, 1999, the Association's  regulatory liquidity was 14.5%.
At such date, the Corporation had commitments to originate fixed-rate commercial
and residential real estate loans totaling $454,000 and variable-rate commercial
and residential real estate mortgage loans totaling  $773,000.  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
5 of the Notes to Consolidated Financial Statements.
<PAGE>
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.  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.  Failure to meet minimum  capital  requirements  can  initiate  certain
mandatory  actions that, if undertaken,  could have a direct  material effect on
the Corporation's financial statements. At September 30, 1999 and June 30, 1999,
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  September  30,  1999 and June 30,  1999.  No  conditions  or events have
occurred  subsequent  to the last  notification  by regulators  that  management
believes would have changed the Association's category.

At September 30, 1999 and June 30, 1999, the Association's actual capital levels
and minimum required levels were:
<TABLE>
<CAPTION>
                                                                   Minimum                      Minimum
                                                               Required To Be               Required To Be
                                                           Adequately Capitalized          Well Capitalized
                                                           Under Prompt Corrective      Under Prompt Corrective
                                         Actual              Action Regulations           Action Regulations
                                  Amount         Ratio      Amount         Ratio         Amount          Ratio
                                  ------         -----      ------         -----         ------          -----
                                                             (Dollars in Thousands)
<S>                            <C>               <C>      <C>               <C>      <C>                 <C>
September 30, 1999
Total capital (to risk-
  weighted assets)             $  13,929         17.6%    $  6,317          8.0%     $    7,896          10.0%
Tier 1 (core) capital (to
  risk-weighted assets)           13,389         17.0        3,158          4.0           4,738           6.0
Tier 1 (core) capital (to
  adjusted total assets)          13,389         10.9        4,923          4.0           6,153           5.0
Tangible capital (to
  adjusted total assets)          13,389         10.9        1,846          1.5             N/A
June 30, 1999
Total capital (to risk-
  weighted assets)             $  13,634         18.0%    $  6,069          8.0%     $    7,586          10.0%
Tier 1 (core) capital (to
  risk-weighted assets)           13,152         17.3        3,035          4.0           4,552           6.0
Tier 1 (core) capital (to
  adjusted total assets)          13,152         11.2        4,677          4.0           5,847           5.0
Tangible capital (to
  adjusted total assets)          13,152         11.2        1,754          1.5             N/A
</TABLE>
<PAGE>
Year 2000 ("Y2K") Issue

The Corporation's  lending and deposit  activities are almost entirely dependent
upon  computer  systems  which  process and record  transactions,  although  the
Corporation can  effectively  operate with manual systems for brief periods when
its electronic systems  malfunction or cannot be accessed.  The Corporation uses
the services of a  nationally-recognized  data  processing  service  bureau that
specializes in data  processing for financial  institutions.  In addition to its
basic operating  activities,  the Corporation's  facilities and  infrastructure,
such as security systems and communications equipment, are dependent, to varying
degrees, upon computer systems.

The  Corporation  began by identifying  mission  critical  systems in the fourth
quarter of 1997.  Every system was reviewed and inventoried and determined to be
"mission critical" or "nonmission  critical." Mission critical systems are those
critical to providing service to the customers by maintaining  customer records,
general  accounting  functions  and those  that would  impact the  Corporation's
liquidity if they should fail.

The following systems were identified as mission critical by management. A brief
description on the status of each system is listed below.

   1. File servers and Novell network
   2. Teller equipment and NCR BMS teller and new accounts software
   3. Other personal computers
   4. NCR Starcom account processing including ACH items and EDS (Jeannie)
   5. IPS accounting software
   6. Federal Home Loan Bank
   7. Bankers Systems, Inc. new loan software
   8. EDS

File Servers and Novell Network

Due to two new branches,  two new Compaq file servers were purchased in 1998 and
have been verified as Y2K compliant.  The Novell  operating  software was either
upgraded or purchased and has been verified as Y2K compliant. One file server at
a branch  location will not rollover the date into the next century,  but can be
manually set and will  correctly  handle dates forward  including leap year. The
file server and  software  were tested at the Sidney  location in August 1998 by
advancing the date to the next century and performing daily teller functions.

Teller Equipment and NCR Software

All personal  computer-based  equipment  and NCR software  were updated and then
tested in August 1998. The testing included running of transactions in Year 2000
environment  against an  on-line  test file.  Review of the  results  showed the
processing operated correctly and is Y2K compliant.
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
--------------------------------------------------------------------------------
NCR Starcom Account Processing

The Starcom account processing was tested in August 1998 in conjunction with the
teller  equipment  and  software.  The results of these tests were  reviewed and
showed that the system operated as expected and is Y2K compliant.  An additional
test was performed in July 1999 for items that had been added since the previous
test.  The results of this test  indicate  these items will operate as expected.
NCR also tested  with EDS  (Jeannie)  and the ACH  networks on a proxy basis and
have certified that they are compliant.

IPS Accounting Software

The IPS accounting was presented as being Y2K compliant by the  manufacturer and
was  tested  in  December  1998 by the  Corporation.  The test  results  were as
expected and showed the system to be compliant.

Federal Home Loan Bank

The FHLB is the  primary  correspondent  of the  Corporation  and  provides  the
Corporation  with  liquidity  through  advances,  and  cash  and  also  acts  as
settlement agent with the Federal Reserve Bank. The FHLB has reported completion
of all mission-critical testing.

Bankers Systems, Inc. Loan Processing Software

The Bankers  Systems,  Inc. loan  processing  software has been certified as Y2K
compliant  by  the   manufacturer  and  was  tested  in  December  1998  by  the
Corporation. All tests showed the software to be compliant.

EDS

EDS provides the Corporation with on-us check clearing, statement mailing, check
encoding and depositing. They have reported being Y2K compliant.

Bank Security

All security  systems have been  certified as Y2K compliant or do not use a date
function in the operation of the system.

Other Nonmission Critical Systems

All nonmission critical systems have been reviewed and made Y2K ready or will be
removed from service prior to year-end.
<PAGE>
Y2K Costs

The total direct cost of upgrading equipment and software, personnel and testing
associated fees will be  approximately  $21,000.  Some other indirect costs were
incurred due to upgrading  equipment  that would have needed to be replaced over
the coming year.

Business Resumption Contingency Plan

The Corporation's  contingency  plans have been reviewed and updated.  A special
Y2K addendum was also added to cover  special  concerns and needs of the century
change.  These  included  liquidity  and  cash  needs  of the  Association.  The
Corporation  has  secured  a  guaranteed  Y2K  line  from the FHLB to be used in
addition  to the  normal  line of credit  that has been  recently  renewed.  The
Corporation  plans to maintain  higher levels of liquidity the remainder of 1999
through maturing  investments,  normal cash flows and FHLB advances.  As part of
the  contingency  plan,  however,  the  Corporation  has determined that if such
service  providers  were to have  their  systems  fail,  the  Corporation  would
implement  manual  systems  until  such  systems  could be  re-established.  The
Corporation does not anticipate that such short term manual systems would have a
material  adverse  effect on the  Corporation's  operations.  The expense of any
change  in  suppliers  or  servicers  is  not  expected  to be  material  to the
Corporation.

In addition to the possible expense related to its own systems,  the Corporation
could  incur  losses if loan  payments  are  delayed  due to Year 2000  problems
affecting  any of the  Corporation's  significant  borrowers  or  impairing  the
payroll  systems of large  employers in the  Corporation's  primary market area.
Because the  Corporation's  loan portfolio is highly  diversified with regard to
individual  borrowers  and types of  businesses  and the  Corporation's  primary
market area is not  significantly  dependent on one  employer or  industry,  the
Corporation  does not expect any  significant  or  prolonged  Year 2000  related
difficulties will affect net earnings or cash flow.
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION

                           PART II - OTHER INFORMATION

--------------------------------------------------------------------------------
Item 1.    Legal Proceedings
           None.

Item 2.    Changes in 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

           There were no matters  brought to a vote of security  holders  during
           the quarter ended September 30, 1999.

Item 5.    Other Information
           None.

Item 6.    Exhibits and Reports on Form 8-K

           (a)      Exhibit No. 27:  Financial Data Schedule

           (b)      Form 8-K  was  filed  on July  16, 1999. Under Item 5, Other
                    Events, the  Corporation  reported  the  issuance of a press
                    release to  announce  the  quarterly  and  year-end  earning
                    and  declare a dividend.
<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 9, 1999                           /s/ Douglas Stewart
     ----------------------                           ------------------------
                                                      Douglas Stewart
                                                      President


Date:      November 9, 1999                           /s/ Debra Geuy
     ----------------------                           ------------------------
                                                      Debra Geuy
                                                      Chief Financial Officer
<PAGE>
                                INDEX TO EXHIBITS

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

   27           Financial Data Schedule