FORM 10-QSB

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

 (Mark One)

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

             For Quarterly Period ended March 31, 1998

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

           For the transition period from __________ to ____________.

                         Commission File Number 0-22223

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

             Delaware                                         31-1499862
             --------                                         ----------
(State or other jurisdiction of                             (IRS Employer
  incorporation or organization)                            Identification No.)

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

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

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

                            Yes   [ X ]     No  [   ]


As of May 1, 1998, the latest practicable date, 1,785,375 shares of the issuer's
common shares, $.01 par value, were issued and outstanding.
<PAGE>


                      PEOPLES-SIDNEY FINANCIAL CORPORATION

                                      INDEX







                                                                                


PART I - FINANCIAL INFORMATION

  Item 1.     Financial Statements (Unaudited)

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

              Consolidated Statements of 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 of
                Financial Condition and Results of Operations...................


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


Item 1.  Financial Statements
                                                                     March 31,         June 30,
                                                                      1998               1997
                                                                -------------      -------------
<S>                                                             <C>                <C>
ASSETS
Cash and amounts due from depository institutions .........     $     692,243      $     297,722
Interest-bearing deposits in other banks ..................         1,381,509          1,498,104
Overnight deposits ........................................         1,500,000          1,000,000
                                                                -------------      -------------
     Total cash and cash equivalents ......................         3,573,752          2,795,826

Time deposits with other financial institutions ...........         2,000,000          5,000,000
Securities available for sale .............................         4,016,020          2,012,802
Securities held to maturity (Estimated fair value of
  $1,996,795 at June 30, 1997) ............................              --            1,999,375
Loans receivable, net .....................................        93,180,732         88,924,339
Accrued interest receivable ...............................           793,678            735,462
Premises and equipment, net ...............................           892,658            755,286
Federal Home Loan Bank stock available for sale ...........           804,600            762,500
Other assets ..............................................           260,901            156,772
                                                                -------------      -------------

     Total assets .........................................     $ 105,522,341      $ 103,142,362
                                                                =============      =============

LIABILITIES
Deposits ..................................................     $  78,613,404      $  77,045,430
Accrued expense and other liabilities .....................           362,637            385,219
                                                                -------------      -------------
     Total liabilities ....................................        78,976,041         77,430,649


SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 500,000 shares authorized,
  none issued and outstanding
Common stock, $.01 par value, 3,500,000 shares authorized,
  1,785,375 shares issued and outstanding .................            17,854             17,854
Additional paid-in capital ................................        17,291,603         17,234,087
Retained earnings .........................................        10,470,928          9,776,982
Unearned employee stock ownership plan shares .............        (1,245,520)        (1,326,280)
Unrealized gain on securities available for sale ..........            11,435              9,070
                                                                -------------      -------------
     Total shareholder's equity ...........................        26,546,300         25,711,713
                                                                -------------      -------------

     Total liabilities and shareholders' equity ...........     $ 105,522,341      $ 103,142,362
                                                                =============      =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
                                  CONSOLIDATED STATEMENTS OF INCOME
                                             (Unaudited)

                                              Three Months Ended              Nine Months Ended
                                                   March 31,                       March 31,
                                            1998             1997            1998            1997
                                        -----------      -----------     -----------     -----------
<S>                                     <C>              <C>             <C>             <C> 
Interest income
     Loans, including fees ........     $ 1,882,434      $ 1,722,638     $ 5,585,430     $ 5,031,133
     Securities ...................          61,030           28,828         187,318          92,000
     Interest-bearing deposits and
       overnight deposits .........          65,887           25,199         236,602          71,557
     Dividends on Federal Home
       Loan Bank stock ............          14,131           11,920          42,253          35,598
                                        -----------      -----------     -----------     -----------
         Total interest income ....       2,023,482        1,788,585       6,051,603       5,230,288

Interest expense
     Deposits .....................         984,109        1,017,264       2,977,100       2,981,100
     Other borrowings .............            --             26,446            --            60,665
                                        -----------      -----------     -----------     -----------
         Total interest expense ...         984,109        1,043,710       2,977,100       3,041,765
                                        -----------      -----------     -----------     -----------

Net interest income ...............       1,039,373          744,875       3,074,503       2,188,523
Provision for loan losses .........          (9,383)          55,621          26,377          97,397
                                        -----------      -----------     -----------     -----------

Net interest income after
  provision for loan losses .......       1,048,756          689,254       3,048,126       2,091,126

Noninterest income
     Service fees and other charges          15,369           16,544          46,490          46,963

Noninterest expense
     Compensation and benefits ....         257,870          186,058         725,670         553,045
     Occupancy and equipment ......          38,504           33,986         120,175         101,649
     Computer processing expense ..          43,168           41,475         117,096         113,088
     FDIC deposit insurance
       premiums ...................          11,935            2,449          36,766         546,540
     State franchise taxes ........          67,259           35,100         137,420          98,552
     Other ........................         129,231           88,878         392,675         265,362
                                        -----------      -----------     -----------     -----------
         Total noninterest expense          547,967          387,946       1,529,802       1,678,236
                                        -----------      -----------     -----------     -----------

Income before income taxes ........         516,158          317,852       1,564,814         459,853

Provision for income taxes ........         183,700          108,070         556,846         156,350
                                        -----------      -----------     -----------     -----------

Net income ........................     $   332,458      $   209,782     $ 1,007,968     $   303,503
                                        ===========      ===========     ===========     ===========

Earnings per common share .........     $       .20      $      --       $       .61     $      --
                                        ===========      ===========     ===========     ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
                        CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
                                      SHAREHOLDERS' EQUTY
                                          (Unaudited)



                                                                         Nine Months
                                                                       Ended March 31,
                                                                    1998              1997
                                                               ------------      ------------
<S>                                                            <C>               <C>
Balance, beginning of period .............................     $ 25,711,713      $  9,212,537

Net income for period ....................................        1,007,968           303,503

Cash dividends of $.19 per share .........................         (314,022)             --

Commitment to release 8,076 employee stock ownership plan
  shares at fair value ...................................          138,276              --

Change in unrealized gain on securities available for sale            2,365              --
                                                               ------------      ------------

Balance, end of period ...................................     $ 26,546,300      $  9,516,040
                                                               ============      ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>                                                                                              
                             PEOPLES FEDERAL SAVINGS LOAN ASSOCIATION
                               CONSOLIDATED STATEMENTS OF CASH FLOWS
                                            (Unaudited)
                                                                           Nine Months Ended
                                                                               March 31,
                                                                         1998             1997
                                                                     -----------      -----------
<S>                                                                  <C>              <C>
Cash flows from operating activities
     Net income ................................................     $ 1,007,968      $   303,503
     Adjustments to reconcile net income to net cash from
       operating activities
         Depreciation ..........................................          37,687           40,004
         Provision for loan losses .............................          26,377           97,397
         FHLB stock dividends ..................................         (42,100)         (35,500)
         Compensation expense on ESOP shares ...................         138,276             --
         Change in
              Accrued interest receivable and other assets .....        (163,463)        (264,304)
              Accrued expense and other liabilities ............         (23,801)         (17,158)
              Deferred loan fees ...............................          23,310           (6,441)
                                                                     -----------      -----------
                  Net cash from operating activities ...........       1,004,254          117,501

Cash flows from investing activities
     Purchases of securities available for sale ................      (1,999,141)            --
     Maturities of securities held to maturity .................       2,000,000          600,000
     Purchases of time deposits in other financial institutions       (3,000,000)            --
     Maturities of time deposits in other financial institutions       6,000,000        1,100,000
     Net increase in loans .....................................      (4,306,080)      (8,120,332)
     Premises and equipment expenditures .......................        (175,059)          (8,926)
     Proceeds from sale of real estate owned ...................            --             42,652
                                                                     -----------      -----------
         Net cash from investing activities ....................      (1,480,280)      (6,386,606)

Cash flows from financing activities
     Net increase in deposits ..................................       1,567,974        4,065,365
     Net change in short-term borrowings .......................            --          2,500,000
     Cash dividends paid .......................................        (314,022)            --
                                                                     -----------      -----------
         Net cash from financing activities ....................       1,253,952        6,565,365
                                                                     -----------      -----------

Net change in cash and cash equivalents ........................         777,926          296,260

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

Cash and cash equivalents at end of period .....................     $ 3,573,752      $ 3,017,069
                                                                     ===========      ===========
Supplemental disclosures of cash flow information
     Cash paid during the period for
         Interest ..............................................     $ 2,982,098      $ 3,085,140
         Income taxes ..........................................         546,000          100,000

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

These interim  financial  statements are prepared  without audit and reflect all
adjustments which, in the opinion of management, are necessary to present fairly
the   financial   position  of   Peoples-Sidney   Financial   Corporation   (the
"Corporation")  at March 31, 1998 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,  1997,  included  in its  1997  Annual  Report.  Reference  is  made  to the
accounting  policies of the  Corporation  described in the notes to consolidated
financial  statements  contained in its 1997 Annual Report.  The Corporation has
consistently followed these policies in preparing this Form 10-QSB.

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

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

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

The provision for income taxes is based on the effective tax rate expected to be
applicable  for  the  entire  year.  Income  tax  expense  is  the  sum  of  the
current-year  income tax due or refundable and the change in deferred tax assets
and  liabilities.  Deferred tax assets and  liabilities  are expected future tax
consequences of temporary differences between the carrying amounts and tax basis
of assets  and  liabilities,  computed  using  enacted  tax rates.  A  valuation
allowance,  if needed,  reduces deferred tax assets to the amount expected to be
realized.

Earnings  per common  share is computed  under the  provisions  of SFAS No. 128,
"Earnings  Per Share," which was adopted  retroactively  by the  Corporation  on
December 31, 1997. SFAS No. 128 requires dual  presentation of basic and diluted
earnings per share ("EPS") for entities with complex capital  structures.  Basic
EPS includes no dilution and is computed by dividing income  available to common
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

shareholders by the  weighted-average  common shares outstanding for the period.
Diluted  EPS  reflects  potential  dilution  of  securities  that could share in
earnings  such as stock  options,  warrants or other common  stock  equivalents.
Adoption  of  SFAS  No.  128 did not  change  the  earnings  per  share  amounts
previously   reported  as  the   Corporation   currently  has  no  common  stock
equivalents.

Earnings  per common  share is computed by dividing  net income by the  weighted
average number of shares outstanding during the year. As more fully discussed in
Note 2, the  Association  converted  from a mutual to a stock form of  ownership
with the concurrent formation of a holding company effective April 25, 1997. The
weighted  average  number of shares  outstanding  for the three- and  nine-month
periods  ended March 31, 1998 were  1,658,803  and  1,656,198.  Unreleased  ESOP
shares are not  considered to be  outstanding  shares for  determining  weighted
average number of shares used in the earnings per common share  calculation.  No
earnings per common share is shown for the three- and  nine-month  periods ended
March 31, 1997, as before April 25, 1997, the  Association was a mutual company.
The  financial  information  for the three and nine months ended March 31, 1997,
reflects the Association before the conversion.

SFAS No. 129,  "Disclosures  of  Information  about Capital  Structure,"  became
effective for the Corporation as of December 31, 1997. SFAS No. 129 consolidated
existing  accounting  guidance  relating to disclosure about a company's capital
structure. SFAS No. 129 did not affect the Corporation's disclosures.

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

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

In June 1997,  the FASB issued SFAS No. 131,  "Disclosures  about Segments of an
Enterprise and Related Information." This Standard significantly changes the way
public business  enterprises  report  information  about  operating  segments in
annual  financial  statements,  and requires those  enterprises  report selected
information  about reportable  segments in interim  financial  reports issued to
shareholders.  It also  establishes  standards  for  related  disclosures  about
products and services, geographic areas and major customers. SFAS No. 131 uses a
"management approach" to disclose financial and descriptive information about an
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

enterprise's   reportable   operating  segments  which  is  based  on  reporting
information the way management  organizes the segments within the enterprise for
making operating decisions and assessing performance.  For many enterprises, the
management  approach  will likely  result in more segments  being  reported.  In
addition,  the Standard requires significantly more information be disclosed for
each  reportable  segment than is presently  being reported in annual  financial
statements.  The Standard  also  requires  selected  information  be reported in
interim financial statements. SFAS No. 131 is effective for financial statements
for periods beginning after December 15, 1997.
 
NOTE 2 - CONSUMMATION OF THE CONVERSION TO A STOCK SAVINGS  AND LOAN ASSOCIATION
         WITH THE CONCURRENT FORMATION OF A HOLDING COMPANY

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

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

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

Under Office of Thrift  Supervision  (OTS)  regulations,  limitations  have been
imposed on all "capital  distributions" by savings institutions,  including cash
dividends.  The regulation  establishes a three-tiered  system of  restrictions,
with greatest flexibility afforded to thrifts that are both well-capitalized and
given favorable qualitative examination ratings by the OTS.
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 3 - SECURITIES

The amortized  cost and estimated  fair values of securities  are  summarized as
follows:
<TABLE>
<CAPTION>
                                                              March 31, 1998
                                    ---------------------------------------------------------------
                                                           Gross          Gross          Estimated
                                        Amortized       Unrealized     Unrealized          Fair
                                          Cost            Gains           Losses           Value
<S>                                 <C>                <C>           <C>            <C>
Securities available for sale
  U.S. Government agencies          $    3,998,694     $   23,896    $     6,570    $     4,016,020
                                    ==============     ==========    ===========    ===============

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

Securities held to maturity
  U.S. Government agencies          $    1,999,375     $       --    $     2,580    $     1,996,795
                                    ==============     ==========    ===========    ===============
</TABLE>
Amortized  cost and  estimated  fair values of  securities at March 31, 1998, by
contractual  maturity,  are shown  below.  Actual  maturities  could differ from
contractual  maturities  because  borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
                                                                      Estimated
                                                      Amortized          Fair
                                                         Cost            Value
                                                     -----------     -----------
<S>                                                  <C>             <C>
Securities available for sale
           Due after one year through five years     $ 3,998,694     $ 4,016,020
                                                     ===========     =========== 
</TABLE>


No securities were sold during the three- or nine-month  periods ended March 31,
1998 and 1997.  No  securities  were pledged as  collateral at March 31, 1998 or
June 30, 1997.
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 4 - LOANS RECEIVABLE

Loans receivable are summarized as follows:
<TABLE>
<CAPTION>


                                                     March 31,         June 30,
                                                      1998               1997
                                                  ------------      ------------
<S>                                               <C>               <C>
Mortgage loans:
     1-4 family residential .................     $ 79,200,095      $ 75,808,323
     Multi-family residential ...............          667,169           219,153
     Commercial real estate .................        6,541,061         5,842,476
     Real estate construction and development        5,566,362         6,551,430
     Land ...................................        1,882,485         1,446,838
                                                  ------------      ------------
         Total mortgage loans ...............       93,857,172        89,868,220
Consumer and other loans ....................        2,179,678         2,314,263
                                                  ------------      ------------
         Total loans receivable .............       96,036,850        92,182,483
Less:
     Allowance for loan losses ..............         (410,548)         (397,159)
     Loans in process .......................       (2,264,070)       (2,702,795)
     Deferred loan fees .....................         (181,500)         (158,190)
                                                  ------------      ------------

                                                  $ 93,180,732      $ 88,924,339
                                                  ============      ============
</TABLE>

Activity in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
                                      Three Months Ended             Nine Months Ended
                                            March 31,                    March 31,
                                   ------------------------      ------------------------           
                                      1998           1997           1998           1997
                                   ---------      ---------      ---------      ---------
<S>                                <C>            <C>            <C>            <C>
Balance at beginning of period     $ 418,075      $ 340,475      $ 397,159      $ 307,308
Provision for losses .........        (9,383)        55,621         26,377         97,397
Charge-offs ..................          --           (3,229)       (15,036)       (15,160)
Recoveries ...................         1,856            703          2,048          4,025
                                   ---------      ---------      ---------      ---------

Balance at end of period .....     $ 410,548      $ 393,570      $ 410,548      $ 393,570
                                   =========      =========      =========      =========
</TABLE>
As of and for the three and nine months ended March 31, 1998 and 1997,  no loans
were considered impaired within the scope of SFAS No. 114.
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 5 - OTHER BORROWINGS

At March 31, 1998, the Association had a cash management line of credit enabling
it to  borrow  up to  $5,100,000  from the  Federal  Home  Loan  Bank  (FHLB) of
Cincinnati. The line of credit must be renewed on an annual basis. There were no
borrowings  outstanding  on this line of  credit  at March 31,  1998 or June 30,
1997. As a member of the Federal Home Loan Bank system,  the Association has the
ability to obtain  additional  borrowings up to a maximum total of approximately
$16,092,000,  including  the  line  of  credit.  Advances  under  the  borrowing
agreements  are   collateralized  by  a  blanket  pledge  of  the  Association's
residential mortgage loan portfolio and Federal Home Loan Bank stock.


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

Various  contingent  liabilities are not reflected in the financial  statements,
including  claims and legal actions  arising in the ordinary course of business.
In the opinion of management,  after  consultation with legal counsel,  ultimate
disposition  of these  matters is not expected to have a material  effect on the
Corporation's 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, more credit
risk than the amount reported in the financial statements.

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

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there  is  no  violation  of  any  condition   established  in  the  commitment.
Commitments  generally have fixed expiration dates or other termination  clauses
and may require payment of a fee. Since many  commitments are expected to expire
without being used, total  commitments do not necessarily  represent future cash
requirements.

As of March 31, 1998 and June 30, 1997, the  Corporation had commitments to make
fixed-rate  commercial  and  residential  real estate  mortgage loans at current
market rates totaling $338,000 and $156,000,  and  variable-rate  commercial and
residential  real  estate  mortgage  loans  at  current  market  rates  totaling
$1,183,500  and  $876,000.  Loan  commitments  are  generally  for 30 days.  The
interest rates on fixed-rate commitments ranged from 7.50% to 8.25% at March 31,
1998  and were  8.25% at June 30,  1997.  The  interest  rates on  variable-rate
commitments  ranged from 7.00% to 7.75% at March 31, 1998, and 7.25% to 8.50% at
June 30, 1997. The Corporation also had unused lines of credit totaling $565,000
and $622,000 at March 31, 1998 and June 30, 1997.
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


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

At March 31, 1998 and June 30,  1997,  compensating  balances  of  $437,000  and
$298,000  were  required as deposits  with various  correspondent  banks.  These
balances do not earn interest.

The Association entered into employment  agreements with certain officers of the
Corporation and  Association.  The agreements  provide for terms of one to three
years, and an annual salary and performance review by the Board of Directors, as
well as inclusion of the employee in any formally-established  employee benefit,
bonus,  pension and  profit-sharing  plans for which  management  personnel  are
eligible. The agreements provide for extensions for a period of one year on each
annual  anniversary  date,  subject to review and  approval of the  extension by
disinterested  members  of  the  Board  of  Directors  of the  Association.  The
employment agreements also provide for vacation and sick leave.

NOTE 7 - EMPLOYEE STOCK OWNERSHIP PLAN

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

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

The  Corporation  accounts for the ESOP in accordance with Statement of Position
("SOP") 93-6. Accordingly, 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 $53,850 and $138,276 for the three and nine months ended March 31, 1998.
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


NOTE 7 - EMPLOYEE STOCK OWNERSHIP PLAN (Continued)

The ESOP shares as of March 31, 1998 and June 30, 1997 were as follows:
<TABLE>
<CAPTION>
                                                        March 31,       June 30,
                                                           1998           1997
                                                       ----------     ----------
<S>                                                    <C>            <C>

Allocated shares .................................          8,204          8,204
Shares committed to be released for allocation ...         10,074          1,998
Unreleased shares ................................        124,552        132,628
                                                       ----------     ----------
    Total ESOP shares ............................        142,830        142,830
                                                       ==========     ==========

Fair value of unreleased shares ..................     $2,241,936     $1,865,081
                                                       ==========     ==========

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

Item 2.  Management's Discussion and Analysis of Financial Condition
            and Results of Operations

Introduction

In the  following  pages,  management  presents  an  analysis  of the  financial
condition of  Peoples-Sidney  Financial  Corporation (the  "Corporation")  as of
March 31, 1998,  compared to June 30, 1997,  and results of  operations  for the
three and nine months  ended March 31, 1998,  compared  with the same periods in
1997.  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.

In  addition to the  historical  information  contained  herein,  the  following
discussion   contains    forward-looking    statements   involving   risks   and
uncertainties.  Economic circumstances,  the Corporation's operations and actual
results could differ  significantly from those discussed in the  forward-looking
statements.  Some factors that could cause or contribute to such differences are
discussed herein,  but also include changes in the economy and interest rates in
the nation and the Association's general market area.

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

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

The Corporation is a thrift holding company,  primarily  engaged in the business
of attracting  savings deposits from the general public and investing such funds
in permanent  mortgage  loans secured by one- to  four-family  residential  real
estate located in Shelby, Logan, Auglaize,  Miami, Darke and Champaign Counties,
Ohio.  The  Corporation  also  originates,  to a lesser  extent,  loans  for the
construction  of one- to  four-family  residential  real estate loans secured by
multi-family  residential real estate (over four units) and nonresidential  real
estate  and  consumer  loans,  and  invests  in  U.S.  government   obligations,
interest-bearing  deposits in other financial institutions and other investments
permitted by applicable law.
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Financial Condition

Total assets at March 31, 1998 were $105.5 million compared to $103.1 million at
June 30,  1997,  an increase of $2.4  million,  or 2.3%.  The  increase in total
assets was  primarily  due to increase  in loans.  The  Corporation  was able to
reinvest   proceeds  from   maturities  of  time  deposits  in  other  financial
institutions in higher yielding  loans.  Additional  funding for loan growth was
provided by increased deposits.

Loans receivable  increased $4.3 million from $88.9 million at June 30, 1997, to
$93.2 million at March 31, 1998. The  Corporation  experienced  increases in all
mortgage loan categories  except for real estate  construction  and development.
The largest  increase was in one- to four-family  residential  real estate loans
which  increased $3.4 million.  These increases are reflective of a strong local
economy  coupled  with  attractive  loan rates and  products  compared  to local
competition.  The  Corporation's  consumer  loan  portfolio  decreased  $135,000
between June 30, 1997 and March 31, 1998.  Consumer loans remain a small portion
of the entire loan portfolio and  represented  only 2.3% and 2.5% of gross loans
at March 31, 1998 and June 30, 1997.

A $3.0 million  decrease in time deposits with other financial  institutions was
the  result  of  redirection  of  funds  provided  from the  maturities  of such
investments,  in addition to increased deposits, to provide for loan growth. The
excess of such funds which were not used to fund loan growth,  were  invested in
overnight deposits to provide liquidity for future loan growth.  Overnight funds
increased  $500,000  from $1.0 million at June 30, 1997 to $1.5 million at March
31, 1998. Total securities  remained  relatively  unchanged as funds provided by
maturities  of  securities  classified  as held to maturity  were  reinvested in
securities classified as available for sale.

Total  deposits  increased  $1.6 million from $77.0  million at June 30, 1997 to
$78.6  million at March 31,  1998.  The  Corporation  experienced  increases  in
savings accounts and  certificates of deposit which increased  $412,000 and $1.7
million,  respectively.  Offsetting  such  increases was a $558,000  decrease in
negotiable order of withdrawal ("NOW") accounts.  Management  believes the shift
of funds  between  savings and NOW accounts is the result of normal  patterns of
consumer  use of funds.  Certificate  of  deposit  growth has been due to normal
operating  procedures as the Corporation has not used any special  promotions to
attract increased volume. Almost all certificates of deposit mature in less than
five years with the majority maturing in the next two years.

As an additional source of liquidity,  the Association  maintains a $5.1 million
cash  management  line of credit  with the  Federal  Home Loan Bank  ("FHLB") of
Cincinnati.  There were no  advances  outstanding  at March 31, 1998 or June 30,
1997. Advances are variable rate and can be prepaid at any time without penalty.
Advances may be obtained  from the FHLB to fund future loan growth and liquidity
as needed.
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Results of Operations

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.

The  Corporation  earned net income of $332,000 and $1,008,000 for the three and
nine months ended March 31, 1998 compared to net income of $210,000 and $304,000
for the three and nine months ended March 31,  1997.  The increase in income for
the three months  ended March 31,  1998,  was due to an increase in net interest
income  partly  offset by  increased  noninterest  expense.  The increase in net
income for the nine  months  ended  March 31, 1998 was due to an increase in net
interest  income  combined  with a decrease in FDIC deposit  insurance  premiums
which  resulted  from the special  deposit  insurance  assessment  recognized as
expense in the nine months ended March 31, 1997. The special  assessment is more
fully discussed below.

Net interest  income  totaled  $1,039,000  and $3,075,000 for the three and nine
months ended March 31, 1998  compared to $745,000 and  $2,189,000  for the three
and nine months ended March 31,  1997,  representing  increases of $294,000,  or
39.5%, and $886,000, or 40.5%,  respectively.  The change in net interest income
is  attributable  to higher  average  balances of interest  earning assets being
funded with the proceeds from the mutual to stock conversion.

Interest and fees on loans totaled  $1,882,000  and $5,585,000 for the three and
nine months ended March 31, 1998 compared to $1,723,000  and  $5,031,000 for the
three and nine months ended March 31, 1997,  representing increases of $159,000,
or 9.3%, and $554,000, or 11.0%,  respectively.  The increase in interest income
was due to higher average loans receivable, related primarily to the origination
of new one- to four-family first mortgages.

Interest  earned on securities  increased  $32,000 and $95,000 for the three and
nine months ended March 31, 1998,  as compared to the same periods in 1997.  The
increase was a result of higher average balances of securities.

Interest on interest-bearing demand and overnight deposits increased $41,000 and
$165,000 for the three and nine months ended March 31, 1998,  as compared to the
same periods in 1997. The increase was the result of higher average  balances of
interest-bearing demand and overnight funds.
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Dividends on FHLB stock  increased  slightly for the three and nine months ended
March 31,  1998,  compared  to the three and nine months  ended March 31,  1997,
primarily due to an increase in the number of shares of FHLB stock owned.

Interest paid on deposits totaled $984,000 and $2,977,000 for the three and nine
months ended March 31, 1998 compared to $1,017,000  and $2,981,000 for the three
and nine months ended March 31, 1997.  Interest expense decreased by $33,000 for
the  comparable  three month periods due to a temporary  increase in the average
balance of deposit  accounts because of the stock  subscription  deposits during
the three months ended March 31, 1997.  However,  interest expense has decreased
only slightly for the nine month  comparable  periods as the interest rates paid
on  various  types of  deposit  accounts  have  remained  fairly  stable and the
Corporation has not  experienced  any significant  change in the overall average
balance or composition of its deposit portfolio.

Interest on borrowings totaled $26,000 and $61,000 for the three and nine months
ended March 31, 1997. The Corporation borrowed funds from the FHLB for the first
time during  fiscal 1997.  The  borrowings  were used as a source of  short-term
liquidity to provide  funding for loan demand before  conversion.  There were no
borrowings during the three and nine months ended March 31, 1998.

The  Corporation  maintains an allowance  for loan losses in an amount that,  in
management's  judgment,  is adequate  to absorb  reasonably  foreseeable  losses
inherent in the loan portfolio.  While management utilizes its best judgment and
information  available,  ultimate  adequacy of the  allowance  is dependent on a
variety of factors,  including  performance of the loan portfolio,  the economy,
changes in real  estate  values and  interest  rates and the view of  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 considered adequate to absorb potential 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 size and composition of the
loan portfolio and specific  borrower  considerations,  including ability of the
borrower to repay the loan and the estimated value of the underlying collateral.

The  provision  for loan losses  totaled  $(9,000) and $26,000 for the three and
nine months  ended March 31, 1998  compared to $56,000 and $97,000 for the three
and nine months ended March 31,  1997,  representing  decreases  of $65,000,  or
116.9%,  and $71,000 or 72.9%,  respectively.  The reduction in the provision is
reflective  of the fact that the  Corporation  has seen a  reduction  in problem
loans coupled with the fact that has not experienced  significant charge-offs in
any period presented.  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
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

defined  ratios of debt to income.  Notwithstanding  the  historical  charge-off
history, as well as a low volume of non-performing loans, management believes it
is prudent to continue to increase the  allowance for loan losses as total loans
increase. Accordingly, management anticipates it will continue its provisions to
the allowance for loan losses as loan growth  continues.  The allowance for loan
losses totaled  $411,000,  or .43% of gross loans  receivable at March 31, 1998,
compared with $394,000, or .44% of gross loans receivable at March 31, 1997.

Noninterest income includes service fees and other miscellaneous income. For the
three and nine months ended March 31, 1998,  noninterest  income totaled $15,000
and $46,000  compared to $17,000 and $47,000 for the three and nine months ended
March 31, 1997.

Noninterest  expense  totaled  $548,000 and  $1,530,000,  for the three and nine
months ended March 31, 1998 compared to $388,000 and $1,678,000 for same periods
in 1997. Increases in compensation and benefits, state franchise taxes and other
expenses were the primary reasons for the increase in the comparable three month
periods.  These  increases were more than offset by a decrease  federal  deposit
insurance  premiums  for the  comparable  nine month  periods.  The  increase in
compensation and benefits was the result of normal, annual merit increases,  the
addition of new employees  and the  Corporation's  establishment  of an employee
stock ownership plan. The employee stock ownership plan represented 75.0% of the
increase for the three months ended March 31, 1998 and 80.1% of the increase for
the nine months ended March 31,1998.  State franchise taxes increased due to the
change in corporate structure during fiscal 1997 and the resulting tax impact of
higher capital levels at the  Association and earnings at the  Corporation.  The
three months  ended March 31, 1998 was the first period  impacted by the capital
raised in the  conversion.  The increase in other  expense was  attributable  to
increases in director fees, professional service fees and printing costs related
to the  Corporation's  first annual report.  These increases were largely due to
the mutual to stock conversion.  FDIC deposit insurance expense during the three
and nine months ended March 31, 1998 was $12,000 and $37,000, compared to $2,000
and $547,000 for the three and nine months ended March 31, 1997. Included in the
prior nine-month period was a special deposit  insurance  assessment of $456,000
resulting from legislation passed and enacted into law on September 30, 1996, to
recapitalize the Savings Association Insurance Fund ("SAIF"). The SAIF was below
the level required by law because a significant portion of assessments paid into
the SAIF by thrifts,  like the  Association,  were used to pay the cost of prior
thrift failures.  The legislation called for a one-time assessment of $0.657 for
each $100 in deposits held as of March 31, 1995. Because of the recapitalization
of the SAIF, the disparity between the bank and thrift insurance assessments was
reduced.  Thrifts had been  paying  assessments  of $0.23 per $100 of  deposits,
which,  for most thrifts,  was reduced to $0.064 per $100 in deposits in January
1997 and will be reduced to $0.024 per $100 in deposits by no later than January
2000.

The volatility of income tax expense is primarily  attributable to the change in
net income before income taxes.  The provision for income taxes totaled $184,000
and $557,000,  representing  an effective  tax rate of 35.6%,  for the three and
nine months ended March 31, 1998 compared to $108,000 and $156,000, representing
an  effective  tax rate of 34.0%,  for the three and nine months ended March 31,
1997.
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

In  August  1996,  legislation  was  enacted  repealing  the  reserve  method of
accounting  used by many thrifts to calculate their bad debt reserve for federal
income tax purposes.  Therefore,  small thrifts,  such as the Association,  must
recapture that portion of the reserve  exceeding the amount that could have been
taken under the  experience  method for tax years  beginning  after December 31,
1987. The legislation also requires thrifts to account for bad debts for federal
income  tax  purposes  on the  same  basis as  commercial  banks  for tax  years
beginning  after  December 31, 1995.  The  recapture  will occur over a six-year
period,  commencement  of which will be  delayed  until the first  taxable  year
beginning  after  December 31,  1997,  provided the  institution  meets  certain
residential  lending  requirements.  At March  31,  1998,  the  Association  had
approximately  $581,000 in bad debt  reserves  subject to recapture  for federal
income tax  purposes.  The deferred tax  liability  related to the recapture has
been previously established so there will be no effect on future net income.

Liquidity and Capital Resources

The Corporation's  liquidity,  primarily  represented by cash equivalents,  is a
result of operating,  investing and financing  activities.  These activities are
summarized below for the nine months ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>
                                                                Nine Months
                                                              Ended March 31,
                                                             1998          1997
                                                          (Dollars in thousands)
<S>                                                        <C>          <C>
Net income ...........................................     $ 1,008      $   304
Adjustments to reconcile net income to net cash from
  operating activities ...............................          (4)        (186)
                                                           -------      -------
Net cash from operating activities ...................       1,004          118
Net cash from investing activities ...................      (1,480)      (6,387)
Net cash from financing activities ...................       1,254        6,565
                                                           -------      -------
Net change in cash and cash equivalents ..............         778          296
Cash and cash equivalents at beginning of period .....       2,796        2,721
                                                           -------      -------
Cash and cash equivalents at end of period ...........     $ 3,574      $ 3,017
                                                           =======      =======
</TABLE>
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


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 (1) need for funds,  (2) expected
deposit  flows,  (3)  yields  available  on  short-term  liquid  assets  and (4)
objectives of the asset/liability management program.

OTS regulations  presently  require the Association to maintain an average daily
balance of investments in United States Treasury, federal agency obligations and
other  investments  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 March 31, 1998, the Association's  regulatory  liquidity was 11.2%. At
such date, the Corporation had  commitments to originate  fixed-rate  commercial
and  residential  real  estate  loans  totaling   $338,000,   and  variable-rate
commercial and residential real estate mortgage loans totaling $1,184,000.  Loan
commitments are generally for 30 days. The  Corporation  considers its liquidity
and capital  reserves  sufficient to meet its  outstanding  short- and long-term
needs. See Note 6 of the Notes to Consolidated Financial Statements.

The  Association  is  subject  to  various   regulatory   capital   requirements
administered  by federal  regulatory  agencies.  Failure to meet minimum capital
requirements can initiate certain mandatory  actions that, if undertaken,  could
have a direct material affect on the Association's  financial statements.  Under
capital adequacy  guidelines and the regulatory  framework for prompt corrective
action,  the  Association  must  meet  specific  capital  guidelines   involving
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 regulators about the  Association's  components,  risk
weightings  and other factors.  At March 31, 1998 and June 30, 1997,  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 March
31, 1998 and June 30, 1997. Management is not aware of any matters subsequent to
March 31, 1998 that would cause the Association's capital category to change.
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

At March 31, 1998 and June 30, 1997, the Association's actual capital levels (in
thousands) and minimum required levels were:
<TABLE>
<CAPTION>

                                                                                                Minimum
                                                                                            Required To Be
                                                              Minimum Required             Well Capitalized
                                                                 For Capital            Under Prompt Corrective
                                         Actual               Adequacy Purposes           Action Regulations
                                  Amount         Ratio      Amount         Ratio         Amount          Ratio
                                  ------         -----      ------         -----         ------          -----
                                                           (Dollars in Thousands)
<S>                            <C>               <C>      <C>              <C>       <C>                <C>
March 31, 1998
Total capital (to risk
  weighted assets)             $  18,453         27.4%    $  5,383          8.0%     $    6,728          10.0%
Tier 1 (core) capital to
  risk-weighted assets)           18,045         26.8        2,691          4.0           4,037           6.0
Tier 1 (core) capital to
  adjusted total assets)          18,045         17.1        4,220          4.0           5,275           5.0
Tangible capital (to
  adjusted total assets)          18,045         17.1        1,583          1.5             N/A

June 30, 1997
Total capital (to risk
  weighted assets)             $  17,481         26.9%    $  5,208          8.0%     $    6,510          10.0%
Tier 1 (core) capital to
  risk-weighted assets)           17,088         26.3        2,604          4.0           3,906           6.0
Tier 1 (core) capital to
  adjusted total                  17,088         16.6        3,094          3.0           5,156           5.0
Tangible capital (to
  adjusted total assets)          17,088         16.6        1,547          1.5             N/A
</TABLE>

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

OTS regulations  applicable to all savings and loan associations  provide that a
savings  association which,  immediately prior to and on a pro forma basis after
giving effect to a proposed  capital  distribution  (including a dividend),  has
total  capital  (as  defined by OTS  regulations)  equal to or greater  than the
amount of its capital  requirements is generally  permitted without OTS approval
(but   subsequent  to  30  days  prior  notice  to  the  OTS)  to  make  capital
distributions,  including dividends,  during a calendar year in an amount not to
exceed the greater of (1) 100% of its net  earnings to date during the  calendar
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

year,  plus an amount equal to one-half  that which its total  capital to assets
ratio  exceeded  its required  capital to assets  ratio at the  beginning of the
calendar  year, or (2) 75% of its net earnings for the most recent  four-quarter
period.   Savings   associations  with  total  capital  more  than  the  capital
requirements  that have been  notified  by the OTS that they are in need of more
than normal supervision will be subject to restrictions on dividends.  A savings
association  failing to meet current minimum capital  requirements is prohibited
from making any capital distributions without the prior approval of the OTS.

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

In December  1997,  the  Association  acquired  real estate in Anna,  Ohio,  and
announced  plans to construct a new,  full-service  branch banking  office.  The
total projected cost of construction is expected to be $805,000. As of March 31,
1998, the Association has paid $109,000 in costs related to such construction.


Year 2000 Issue

Many computer  programs use only two digits to identify a year in the date field
and were apparently designed and developed without considering the impact of the
upcoming change in the century. Such programs could erroneously read entries for
the Year 2000 as the Year 1900. This could result in major systems  failures and
miscalculations.  Rapid  and  accurate  data  processing  is  essential  to  the
operations of financial institutions,  such as the Corporation.  The Corporation
has  formed a Year  2000  committee  to  assess  the  extent to which it and its
outside vendors may be adversely affected by Year 2000 problems.  Management has
determined  that most programs are or will be capable of identifying the turn of
the century. The issue is closely monitored by management and full compliance is
expected by the end of 1998.  While the Corporation does not anticipate that any
Year 2000 computer  problems or expenses  required to correct such problems will
materially  affect  its  financial  condition  and  results  of  operations,  no
assurance can be given in this regard.
<PAGE>


                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                           PART II - OTHER INFORMATION

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


Item 1.    Legal Proceedings
           None

Item 2.    Changes in Securities
           None.

Item 3.    Defaults Upon Senior Securities
           Not applicable

Item 4.    Submission of Matters to a Vote of Security Holders
           On October 10, 1997,  the Annual Meeting of the  Shareholders  of the
           Corporation was held. The following members of the Board of Directors
           of the  Corporation  were  reelected by the votes set forth below for
           terms expiring in 2000:

           Harry N. Faulkner     FOR:  1,340,264           WITHHELD:      22,153
           John W. Sargeant      FOR:  1,350,187           WITHHELD:      13,230

           One  other  matter  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, 1998.

           FOR:  1,305,180       AGAINST:  12,000           ABSTAIN:  3,230

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  January  28,  1998.  Under  Item 5, Other
                Matters,  the  Corporation  reported  the  issuance  of a  press
                release to announce its operating  results for the quarter ended
                December 31, 1997 and the  declaration  of a $.07 per share cash
                dividend  payable on February 6, 1998 to  shareholders of record
                on January 23, 1998.
<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:      May 8, 1998                                /s/ Douglas Stewart
                                                      -------------------
                                                      Douglas Stewart
                                                      President





Date:      May 8, 1998                                /s/ Debra Geuy
                                                      --------------
                                                      Debra Geuy
                                                      Chief Financial Officer








<PAGE>


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

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                                                                  
                                INDEX TO EXHIBITS


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


     27                Financial Data Schedule