<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB

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

      For the Fiscal Year Ended December 31, 2002

|_|   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934 FOR THE TRANSITION PERIOD FROM _________ to __________

                         Commission File Number: 0-31847

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                 (Name of small business issuer in its charter)

--------------------------------------------------------------------------------
                Maryland                                  31-1724442
    (state or other jurisdiction               (IRS employer identification no.)
  of incorporation or organization)
--------------------------------------------------------------------------------
 311 South Fifth Street, Ironton, Ohio                      45638
(address of principal executive offices)                  (zip code)
--------------------------------------------------------------------------------

         Issuer's telephone number, including area code: (740) 532-0263
        Securities registered pursuant to Section 12(b) of the Act: None
           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.01 per share
                                (Title of Class)

      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 |_|

      Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the Form 10-KSB
or any amendment to this Form 10-KSB. |X|

      The issuer's gross revenues for the fiscal year ended December 31, 2002
were $9,508,000.

      The aggregate market value of the voting and non-voting common equity held
by non-affiliates was $12,556,113 based upon the average of the bid and asked
price ($18.53 per share) as quoted on the OTC-Bulletin Board on February 28,
2003. Solely for purposes of this calculation, the shares held by the directors
and officers of the registrant are deemed to be held by affiliates.

      The number of shares outstanding of the registrant's common stock as of
February 28, 2003 was 677,610.

      Documents incorporated by reference: Portions of the proxy statement for
the 2003 annual meeting of stockholders are incorporated by reference in Parts
II and III, respectively, of this Form 10-KSB.

      Transitional Small Business Disclosure Format (check one): Yes |_| No |X|

<PAGE>

                                      INDEX

                                     Part I
                                                                            Page

Item 1.  Description of Business ...........................................   3
Item 2.  Description of Property ...........................................  29
Item 3.  Legal Proceedings .................................................  30
Item 4.  Submission of Matters to a Vote of Security Holders ...............  30

                                    Part II

Item 5.  Market for Common Equity and Related Stockholder Matters ..........  30
Item 6.  Management's Discussion and Analysis ..............................  31
Item 7.  Financial Statements ..............................................  41
Item 8.  Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure ............................................  41

                                    Part III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
           Compliance with Section 16(a) of the Exchange Act ...............  41
Item 10. Executive Compensation ............................................  42
Item 11. Security Ownership of Certain Beneficial Owners and Management ....  43
Item 12. Certain Relationships and Related Transactions ....................  43
Item 13. Exhibits, List and Reports on Form 8-K ............................  44
Item 14. Controls and Procedures ...........................................  45


                                       2
<PAGE>

      This report contains certain "forward-looking statements" within the
meaning of the federal securities laws. These statements are not historical
facts, rather statements based on Lawrence Financial Holdings, Inc.'s current
expectations regarding its business strategies, intended results and future
performance. Forward-looking statements are preceded by terms such as "expects,"
"believes," "anticipates," "intends" and similar expressions.

      Management's ability to predict results or the effect of future plans or
strategies is inherently uncertain. Factors which could affect actual results
include interest rate trends, the general economic climate in the market area in
which Lawrence Financial Holding's, Inc. operates, as well as nationwide,
Lawrence Financial Holdings, Inc.'s ability to control costs and expenses,
competitive products and pricing, loan delinquency rates and changes in federal
and state legislation and regulation. These factors should be considered in
evaluating the forward-looking statements and undue reliance should not be
placed on such statements. Lawrence Financial Holdings, Inc. assumes no
obligation to update any forward-looking statements.

                                     PART I

Item 1. Description of Business

General

      Lawrence Financial Holdings, Inc., headquartered in Ironton, Ohio, was
organized as a Maryland business corporation in August 2000 to become the
holding company for Lawrence Federal Savings Bank in connection with the
conversion of Lawrence Federal from mutual to stock form of ownership. The
conversion was completed on December 28, 2000. As a result of the conversion,
Lawrence Federal is a wholly owned subsidiary of Lawrence Financial and all of
the issued and outstanding capital stock of Lawrence Federal is owned by
Lawrence Financial.

      Lawrence Federal operates as a community-oriented financial institution,
specializing in the acceptance of retail deposits from the general public in the
areas surrounding its five full-service banking offices and using those funds,
together with funds generated from operations and borrowings, to originate
loans. The principal lending activity of Lawrence Federal is the origination of
mortgage loans for the purpose of purchasing or refinancing one- to four-family
residential property. Lawrence Federal also originates a variety of consumer
loans and multi-family and commercial real estate loans. Lawrence Federal
originates loans primarily for long-term investment purposes. Lawrence Federal's
revenues are derived principally from the generation of interest and fees on
loans originated and, to a lesser extent, interest and dividends on investments.
Lawrence Federal's primary sources of funds are deposits, principal and interest
payments on loans and investments and advances from the Federal Home Loan Bank
of Cincinnati.

Market Area

      Lawrence Federal conducts business in southern Ohio from five full-service
offices. Lawrence Federal's main office is in Ironton, Ohio. Ironton is in
Lawrence County, which is the southernmost county in Ohio. Located on the Ohio
River in the heart of the tri-state area of Ohio, Kentucky and West Virginia,
Ironton is the county seat of Lawrence County. Four of Lawrence Federal's branch
offices are also in Lawrence County and the fifth is in adjacent Scioto County.
Lawrence and Scioto Counties, Ohio constitute Lawrence



                                       3
<PAGE>

Federal's primary market area. Lawrence Federal also serves depositors and
borrowers in Greenup and Boyd Counties, Kentucky and Cabell and Wayne Counties,
West Virginia.

      Lawrence Federal's market area is predominantly rural. The largest
employment sectors in this area are services, wholesale retail sales and
manufacturing. Lawrence Federal's market area has a lower per capita median
household income when compared to Ohio and the United States. While the economy
in Lawrence County has been stable over the last year and a half, plant closings
in 2000 and 2001 have resulted in job losses. Over the past several years,
unemployment in Lawrence County has been greater than the state and national
rate.

Competition

      Lawrence Federal faces intense competition for the attraction of deposits
and origination of loans in its market area. Its most direct competition for
deposits has historically come from the several financial institutions operating
in Lawrence Federal's market area and, to a lesser extent, from other financial
service companies, such as brokerage firms, credit unions and insurance
companies. Lawrence Federal's competition for loans comes primarily from
financial institutions in its market area, and to a lesser extent from other
financial service providers, such as mortgage companies and mortgage brokers.
Additionally, competition for loans may increase due to the increasing number of
non-depository financial service companies entering the mortgage market, such as
insurance companies, securities companies and specialty finance companies.
Lawrence Federal expects competition to increase in the future as a result of
legislative, regulatory and technological changes and the continuing trend of
consolidation in the financial services industry. Technological advances, for
example, have lowered barriers to entry, allowed banks to expand their
geographic reach by providing services over the Internet and made it possible
for non-depository institutions to offer products and services that
traditionally have been provided by banks. Some of the institutions with which
Lawrence Federal competes are significantly larger than Lawrence Federal and,
therefore, have significantly greater resources. Due to its relatively small
size, Lawrence Federal has fewer resources to devote to marketing and is less
able to take advantage of technological advancements. Competition for deposits
and the origination of loans could limit Lawrence Federal's growth in the
future.

Lending Activities

      General. Lawrence Federal's loan portfolio primarily consists of one- to
four-family mortgage loans, a variety of consumer loans and mobile home loans.
To a lesser degree, Lawrence Federal's loan portfolio includes multi-family and
commercial real estate loans.

      Lawrence Federal's loans are subject to federal laws and regulations.
Interest rates charged by Lawrence Federal on loans are affected principally by
Lawrence Federal's current asset/liability strategy, the demand for various
types of loans, the supply of money available for lending purposes and the rates
offered by competitors. These factors are, in turn, affected by general and
economic conditions, monetary policies of the federal government, including the
Federal Reserve Board, legislative tax policies and governmental budgetary
matters.


                                       4
<PAGE>

      Loan Portfolio Analysis. The following table presents the composition of
Lawrence Federal's loan portfolio at the dates indicated. Lawrence Federal had
no concentration of loans exceeding 10% of total loans receivable other than as
disclosed below.

<TABLE>
<CAPTION>
                                                  -------------------------------------------------------
                                                                      At December 31,
                                                  -------------------------------------------------------
                                                            2002                           2001
                                                  -------------------------------------------------------
                                                                   Percent                       Percent
                                                  Amount           of Total      Amount          of Total
                                                  ------           --------       ------         --------
                                                                  (Dollars in thousands)
<S>                                               <C>              <C>           <C>             <C>
Real estate loans:
   One- to four-family ......................     $43,967            46.3        $46,423            45.7
   Multi-family and commercial ..............      10,166            10.7          9,537             8.6
                                                  -------           -----       --------           -----
      Total real estate loans ...............      54,133            57.0         55,960            54.3
Consumer loans:
   Automobile ...............................      18,742            19.7         21,476            20.8
   Other ....................................       6,857             7.2          8,744             8.5
                                                  -------           -----       --------           -----
      Total consumer loans ..................      25,599            26.9         30,220            29.3
                                                  -------           -----       --------           -----
Mobile home loans ...........................      15,193            16.1         16,904            16.4
                                                  -------           -----       --------           -----
      Total loans ...........................      94,925           100.0        103,084           100.0
                                                                    =====                          =====
Less:
   Net deferred loan origination costs ......       2,643                          3,166
   Allowance for loan losses ................      (1,111)                        (1,232)
                                                  -------                       --------
   Total loans, net .........................     $96,457                       $105,018
                                                  =======                       ========
</TABLE>

      The following table presents certain information at December 31, 2002
regarding the dollar amount of loans maturing in Lawrence Federal's portfolio
based on their contractual terms to maturity or scheduled amortization, but does
not include potential prepayments. Demand loans, loans having no stated schedule
of repayments and no stated maturity, and overdrafts are reported as becoming
due in one year or less. Loan balances do not include undisbursed loan proceeds,
net deferred loan origination costs and allowance for loan losses.

<TABLE>
<CAPTION>
                                                 ------------------------------------------------
                                                                At December 31, 2002
                                                 ------------------------------------------------
                                                               Multi-
                                                 One- to     Family and       Consumer
                                                  Four-      Commercial           &         Total
                                                 Family      Real Estate     Mobile Home    Loans
                                                 ------      -----------     -----------    -----
                                                                   (In thousands)
<S>                                              <C>           <C>             <C>         <C>
Amounts due in:
   One year or less .........................       $365          $134          $1,135      $1,634
   After one year:
   More than one year to three years ........         81            --           6,753       6,834
   More than three years to five years ......        162           146          12,382      12,690
   More than five years to 10 years .........      4,535           952           5,320      10,807
   More than 10 years to 15 years ...........     10,685         2,180           7,566      20,431
   More than 15 years .......................     28,139         6,754           7,636      42,529
                                                 -------       -------         -------     -------
      Total amount due ......................    $43,967       $10,166         $40,792     $94,925
                                                 =======       =======         =======     =======
</TABLE>

      Scheduled contractual principal repayments of loans do not reflect the
actual life of the loans. The average life of a loan is substantially less than
its contractual term because of prepayments. In addition, due-


                                       5
<PAGE>

on-sale clauses on loans generally give Lawrence Federal the right to declare
loans immediately due and payable if, among other things, the borrower sells the
real property with the mortgage and the loan is not repaid. The average life of
a mortgage loan tends to increase, however, when current mortgage loan market
rates are substantially higher than rates on existing mortgage loans and,
conversely, tends to decrease when rates on existing mortgage loans are
substantially higher than current mortgage loan market rates.

      The following table sets forth, at December 31, 2002, the dollar amount of
loans contractually due after December 31, 2003, and whether such loans have
fixed interest rates or adjustable interest rates.

                                               ---------------------------------
                                                  Due After December 31, 2003
                                               ---------------------------------
                                                Fixed     Adjustable      Total
                                                -----     ----------      -----
                                                        (In thousands)
Real estate loans:
   One- to four-family ..................      $29,916      $13,686      $43,602
   Multi-family and commercial ..........        5,975        3,206        9,181
   Other ................................          104          747          851
                                               -------      -------      -------
      Total real estate loans ...........       35,995       17,639       53,634
Consumer and mobile home loans ..........       36,030        3,627       39,657
                                               -------      -------      -------
      Total loans .......................      $72,025      $21,266      $93,291
                                               =======      =======      =======

      One- to Four-Family Real Estate Loans. Lawrence Federal's primary lending
activity is the origination of loans secured by one- to four-family residences
located in its market area. Lawrence Federal offers one-year adjustable-rate
mortgage loans and fixed-rate mortgage loans. Historically, Lawrence Federal has
found that borrowers in its market area have a preference for fixed-rate
mortgage loans. At December 31, 2002, approximately 65% of Lawrence Federal's
residential mortgage loans had fixed interest rates and 35% had adjustable
interest rates.

      Lawrence Federal offers fixed-rate loans with terms up to 20 years,
although most loans have terms of 20 years or less. Lawrence Federal's
adjustable-rate mortgage loans are based on an amortization schedule of up to 30
years. The loan fees charged, interest rates and other provisions of Lawrence
Federal's mortgage loans are determined by Lawrence Federal on the basis of its
own pricing criteria and market conditions. Interest rates and payments on
Lawrence Federal's adjustable-rate mortgage loans are adjusted annually based on
the Federal Housing Finance Board's national average mortgage contract rate for
major lenders on the purchase of previously occupied homes. The maximum amount
by which the interest rate may be increased or decreased on Lawrence Federal's
adjustable-rate mortgage loans is generally 1% per year and the lifetime
interest rate cap is generally 6% over the initial interest rate of the loan.
Lawrence Federal qualifies the borrower based on the borrower's ability to repay
the loan based on the current index rate plus the applicable margin. Lawrence
Federal's adjustable-rate mortgage loans typically include a prepayment penalty
if the loan is paid off within three years. The terms and conditions of the
adjustable-rate mortgage loans offered by Lawrence Federal, including the index
for interest rates, may vary from time to time.

      Lawrence Federal occasionally makes loans to individuals for the
construction of their principal residence. These loans are structured as
permanent mortgage loans. Upon the closing of the loan, the proceeds are
disbursed into an escrow account at Lawrence Federal. Funds are disbursed from
the escrow as the house is built following review of the construction project by
an independent inspector.


                                       6
<PAGE>

      Adjustable-rate mortgage loans help reduce Lawrence Federal's exposure to
changes in interest rates. There are, however, unquantifiable credit risks
resulting from the potential of increased costs due to changed rates to be paid
by the borrower. During periods of rising interest rates, the risk of default on
adjustable-rate mortgage loans may increase as a result of repricing and the
increased payments required by the borrower. In addition, although
adjustable-rate mortgage loans help make Lawrence Federal's asset base more
responsive to changes in interest rates, the extent of this interest sensitivity
is limited by the annual and lifetime interest rate adjustment limits. Because
of these considerations, yields on adjustable-rate mortgage loans may not be
sufficient to offset increases in Lawrence Federal's cost of funds during
periods of rising interest rates.

      Multi-family and Commercial Real Estate Loans. Lawrence Federal originates
both fixed- and adjustable-rate mortgage loans for the acquisition and
refinancing of multi-family and commercial real estate properties. In addition,
Lawrence Federal occasionally participates in commercial real estate loans with
other financial institutions in its market area. Nearly all of the properties
securing Lawrence Federal's multi- family and commercial real estate loans are
located in Lawrence Federal's market area.

      Most of the multi-family loans and commercial real estate loans originated
by Lawrence Federal are fully amortizing loans with a term of ten years.
Generally, the maximum loan-to-value ratio for a multi- family or commercial
real estate loan is 70%. Lawrence Federal requires written appraisals prepared
by an approved independent appraiser of all properties securing multi-family or
commercial real estate loans.

      At December 31, 2002, Lawrence Federal's commercial real estate loans were
secured by a variety of properties, including retail and small office
properties, hotels and churches. At December 31, 2002, Lawrence Federal's
largest commercial real estate loan had an outstanding balance of $633,000. The
loan is secured by a real estate mortgage and personal guarantees. At December
31, 2002, this loan was performing according to its original terms.

      Multi-family and commercial real estate lending affords Lawrence Federal
an opportunity to receive interest at rates higher than those generally
available from one- to four-family residential lending. However, loans secured
by these properties usually are greater in amount and are more difficult to
evaluate and monitor and, therefore, involve a greater degree of risk than one-
to four-family residential mortgage loans. Because payments on loans secured by
income producing properties are often dependent on the successful operation and
management of the properties, repayment of these loans may be affected by
adverse conditions in the real estate market or the economy. Lawrence Federal
seeks to minimize these risks by generally limiting the maximum loan-to-value
ratio to 70% for multi-family and commercial real estate loans and by strictly
scrutinizing the financial condition of the borrower, the cash flow of the
project, the quality of the collateral and the management of the property
securing the loan. Lawrence Federal also attempts to minimize credit risk by
lending almost solely on local properties to businesses with which Lawrence
Federal is familiar. Lawrence Federal also generally obtains personal loan
guarantees from financially capable parties.

      Mobile Home Loans. Since 1976, Lawrence Federal has originated mobile home
loans through Lanco Services, Inc., a company that specializes in mobile home
lending. Increasing delinquency trends and an overall decline in the market for
the resale of used mobile homes lead Lawrence Federal to cease originating
direct and indirect mobile home loans in April, 2002. Except for the few loans
that were in-process during April, and the refinancing of distressed units to
qualified borrowers, Lawrence Federal did not originate mobile home loans in the
last eight months of 2002. There are currently no plans to restart the mobile
home lending program in 2003.

      Prior to April, 2002 Lanco Services assembled the required loan documents
and provided them to Lawrence Federal for review. Lawrence Federal had the
opportunity to accept or reject each loan. Lawrence Federal generally financed
up to a maximum of 95% of the purchase price of new mobile home units and up to
a maximum of 80% of the market value of used mobile home units. Lawrence Federal
required that the


                                       7
<PAGE>

borrower surrender the title to the mobile home unit during the term of the loan
and also required homeowner's insurance on the unit at least equal to the amount
financed. Lawrence Federal's mobile home loans, which were made to borrowers in
Kentucky, Ohio and Indiana, have terms ranging from five to 20 years and have
either fixed or adjustable interest rates. At December 31, 2002, Lawrence
Federal had 698 mobile home loans, the average size of which was $24,609.

      Mobile home lending generally entails greater risk than traditional
residential mortgage lending. Loans secured by mobile homes involve more credit
risk than mortgage loans because of the type and nature of the collateral, which
depreciates over time, and because mobile home borrowers tend to have lower
incomes than Lawrence Federal's residential mortgage borrowers. In many cases,
any repossessed collateral for a defaulted mobile home loan will not provide an
adequate source of repayment of the outstanding loan balance because of
depreciation or improper repair and maintenance of the underlying asset. When
Lawrence Federal stopped originating mobile home loans in April, 2002 it
increased the staff of the collection area and changed the role of Lanco
Services in the collection process. Lanco Services continues to provide valuable
assistance with collection efforts but Lawrence Federal's collection area has
assumed the lead in the collection process. The expansion of the internal
collection process and a more aggressive approach to pursuing repayment of
delinquencies related to the mobile home portfolio have generated additional
expenses to Lawrence Federal including, but not limited to, salaries and
benefits, legal fees, and expenses related to the relocation and sale of a
distressed unit.

      Consumer Loans. Lawrence Federal offers a variety of consumer loans,
including automobile loans, other secured loans, home equity credit lines,
second mortgage loans, and unsecured personal loans. Lawrence Federal sold its
credit card portfolio in November 2002.

      Lawrence Federal offers fixed-rate automobile loans with terms of up to 72
months. Loan-to-value ratios and maximum loan terms vary depending on the age of
the vehicle. Lawrence Federal originates automobile loans through approximately
15 automobile dealers in southern Ohio, western West Virginia and northeastern
Kentucky. These dealers provide Lawrence Federal applications to finance new and
used vehicles sold by their dealerships. Lawrence Federal has the opportunity to
accept or reject each loan. Generally, Lawrence Federal makes automobile loans
only to borrowers who have higher credit ratings. Lawrence Federal does not make
automobile loans that would be considered "sub-prime." Lawrence Federal pays a
fee to the automobile dealer based on the interest rate on the loan. This fee,
or dealer reserve, is deposited into an account at Lawrence Federal and paid to
the dealer monthly. If a loan is paid off or charged off within a specified time
period, Lawrence Federal is credited with a portion of the dealer reserve, which
it may withhold from the dealer's account or credit against future payments to
the dealer. At December 31, 2002, Lawrence Federal held $14.5 million of
indirect auto loans.

      Lawrence Federal also originates consumer loans secured by boats,
motorcycles, campers, motor homes and other recreational vehicles. These loans
have fixed interest rates and terms of up to five years. At December 31, 2002,
Lawrence Federal had $7.9 million of such loans.

      Lawrence Federal offers home equity lines of credit and second mortgage
loans. At December 31, 2002, these loans totaled $1.7 million. The underwriting
standards applicable to these loans generally are the same as for one- to
four-family first mortgage loans, except that the combined loan-to-value ratio,
including the balance of the first mortgage, cannot exceed 89% of the appraised
value of the property.

      Lawrence Federal makes unsecured personal loans in amounts generally not
in excess of $10,000. Lawrence Federal also provides overdraft protection on
checking accounts. At December 31, 2002, unsecured loans totaled $709,000.


                                       8
<PAGE>

      Lawrence Federal believes that it will benefit from the higher yields
earned on consumer loans and that the shorter duration of consumer loans will
improve Lawrence Federal's interest rate risk position. However, consumer loans
entail greater risk than do residential mortgage loans, particularly in the case
of loans that are unsecured or secured by rapidly depreciating assets such as
automobiles. In these cases, any repossessed collateral for a defaulted consumer
loan may not provide an adequate source of repayment of the outstanding loan
balance as a result of the greater likelihood of damage, loss or depreciation.
The remaining deficiency often does not warrant further substantial collection
efforts against the borrower beyond obtaining a deficiency judgment. In
addition, consumer loan collections are dependent on the borrower's continuing
financial stability, and thus are more likely to be adversely affected by job
loss, divorce, illness or personal bankruptcy. Lawrence Federal expects that it
will increase its allowance for loan losses as its consumer loan portfolio grows
by charging a provision for loan losses against income.

      Loans to One Borrower. The maximum amount that Lawrence Federal may lend
to one borrower is limited by regulation. At December 31, 2002, Lawrence
Federal's regulatory limit on loans to one borrower was $1.95 million. At that
date, Lawrence Federal's largest amount of loans to one borrower, including the
borrower's related interests, was approximately $1.1 million and consisted of
commercial and residential real estate loans. These loans were performing
according to their original terms at December 31, 2002.


                                       9
<PAGE>

      Loan Originations, Purchases and Sales. Lawrence Federal's lending
activities are conducted by its employees operating through Lawrence Federal's
offices. Except in connection with its indirect automobile lending, Lawrence
Federal relies on advertising, referrals from realtors and customers, and
personal contact by Lawrence Federal's staff to generate loan originations.
Lawrence Federal occasionally purchases participation interests in commercial
mortgage loans through other financial institutions in its market area. Lawrence
Federal's ability to originate adjustable-rate and fixed-rate loans is dependent
upon the relative customer demand for such loans, which is affected by the
current and expected future level of interest rates.

      The following table presents activity in the loan portfolio during the
periods indicated.

                                                      --------------------------
                                                        Year Ended December 31,
                                                      --------------------------
                                                         2002             2001
                                                      ---------         --------
                                                            (In thousands)

Loans at beginning of period ..................        $103,084         $103,035
  Originations:
    Real estate loans:
     One- to four-family ......................          10,981           10,373
     Multi-family and commercial ..............           4,182            3,426
                                                      ---------        ---------
       Total real estate loans ................          15,163           13,799
    Consumer:
     Automobile ...............................           7,976           13,754
     Other ....................................           7,516            6,324
    Mobile home ...............................           2,183            4,137
                                                      ---------        ---------
       Total loans originated .................          32,838           38,014

Participation loans purchased .................           1,950               --
Deduct:
    Principal loan repayments
     and prepayments ..........................          40,801           37,965
                                                      ---------        ---------
    Transfers to REO ..........................             196               --
       Sub-total ..............................          40,997           37,965
                                                      ---------        ---------
Net loan activity .............................          (8,159)              49
                                                      ---------        ---------
    Loans at end of period ....................         $94,925         $103,084
                                                      =========        =========


                                       10
<PAGE>

      Nonperforming Assets and Delinquencies. The following table presents
information with respect to Lawrence Federal's nonperforming assets at the dates
indicated.

                                                    --------------------------
                                                          At December 31,
                                                    --------------------------
                                                       2002             2001
                                                    ---------         --------
                                                      (Dollars in thousands)

Accruing loans past due 90 days or more:
   One- to four-family real estate ............          $225              $--
   Multi-family and commercial real estate ....             5               --
   Automobile .................................            11              174
   Other consumer .............................           210               53
   Mobile home ................................           960              291
                                                       ------           ------
     Total ....................................         1,411              518
Nonaccruing loans:
   One- to four-family real estate ............           239              160
   Multi-family and commercial real estate ....            --               --
   Automobile .................................           102              131
   Other consumer .............................            10               32
   Mobile home ................................           180              429
                                                       ------           ------
     Total ....................................           531              752
Real estate owned (REO) .......................           151               31
Other repossessed assets ......................            --               --
                                                       ------           ------
     Total nonperforming assets ...............         2,093            1,301
Troubled debt restructurings ..................            --               --
                                                       ------           ------
Troubled debt restructurings and
   total nonperforming assets .................        $2,093           $1,301
                                                       ======           ======
Total nonperforming loans and
   troubled debt restructurings as a
   percentage of total loans ..................          2.20%            1.20%
Total nonperforming assets and
   troubled debt restructurings as a
   percentage of total assets .................          1.56%            0.95%

      Interest income that would have been recorded for the year ended December
31, 2002 had nonaccruing loans been current according to their original terms
amounted to approximately $12,000. No interest related to these loans was
included in interest income for the year ended December 31, 2002.

      Lawrence Federal ceases accruing interest on loans when principal or
interest payments are delinquent 120 days or more unless the loan is adequately
collateralized and in the process of collection. Once the accrual of interest on
a loan is discontinued, all interest previously accrued is reversed against
current period interest income once management determines that interest is
uncollectible.


                                       11
<PAGE>

      The following table sets forth the delinquencies in Lawrence Federal's
loan portfolio as of the dates indicated.

<TABLE>
<CAPTION>
                                                    At December 31, 2002                           At December 31, 2001
                                         -----------------------------------------      ------------------------------------------
                                             60-89 Days           90 Days or More          60-89 Days            90 Days or More
                                         ------------------     ------------------      ------------------      ------------------
                                                  Principal                                      Principal
                                         Number    Balance      Number   Principal      Number    Balance       Number   Principal
                                           of        of          of       Balance        of         of           of       Balance
                                         Loans     Loans        Loans    of Loans       Loans      Loans        Loans    of Loans
                                         -----     -----        -----    --------       -----      -----        -----    --------
                                                                         (Dollars in thousands)
<S>                                      <C>      <C>           <C>      <C>           <C>       <C>          <C>        <C>
Real estate loans:
   One- to four-family ............        16       $695           8        $464          13        $395           6        $160
   Multi-family and commercial ....         1        167          --          --           1         225          --          --
   Other ..........................        --         --          --          --          --          --          --          --
Consumer loans:
   Automobile .....................        13        110          29         274          14         167          29         305
   Other ..........................         6         12          15          62          29          82          27          85
Mobile home loans .................        18        416          54       1,170          25         537          33         720
                                         ----     ------                  ------      ------      ------      ------      ------
      Total .......................        54     $1,400         106      $1,970          82      $1,406          95      $1,270
                                         ====     ======                  ======      ======      ======      ======      ======
Delinquent loans to total gross
  loans ...........................                 1.44%                   2.02%                   1.32%                   1.20%
</TABLE>

      Real Estate Owned. Real estate acquired by Lawrence Federal as a result of
foreclosure or by deed- in-lieu of foreclosure is classified as real estate
owned until sold. When property is acquired it is recorded at the lower of its
cost, which is the unpaid principal balance of the loan plus foreclosure costs,
or fair market value at the date of foreclosure, establishing a new cost basis.
Holding costs and declines in fair value after acquisition of the property
result in charges against income. At December 31, 2002, Lawrence Federal had
$151,000 in real estate owned.


                                       12
<PAGE>

      Asset Classification. Federal banking regulators have adopted various
regulations and practices regarding problem assets of savings institutions.
Under such regulations, examiners have authority to identify problem assets
during examinations and, if appropriate, require them to be classified. There
are three classifications for problem assets: substandard, doubtful and loss.
Substandard assets have one or more defined weaknesses and are characterized by
the distinct possibility that the insured institution will sustain some loss if
the deficiencies are not corrected. Doubtful assets have the weaknesses of
substandard assets with the additional characteristic that the weaknesses make
collection or liquidation in full on the basis of currently existing facts,
conditions and values questionable, and there is a high possibility of loss. An
asset classified as loss is considered uncollectible and of such little value
that continuance as an asset of the institution is not warranted. If an asset or
portion thereof is classified as loss, the insured institution establishes
specific allowances for loan losses for the full amount of the portion of the
asset classified as loss. All or a portion of general loan loss allowances
established to cover probable losses related to assets classified substandard or
doubtful can be included in determining an institution's regulatory capital,
while specific valuation allowances for loan losses generally do not qualify as
regulatory capital. Assets that do not currently expose the insured institution
to sufficient risk to warrant classification in one of the aforementioned
categories but possess weaknesses are designated "special mention." Lawrence
Federal monitors "special mention" assets.

      Allowance for Loan Losses. In originating loans, Lawrence Federal
recognizes that losses will be experienced on loans and that the risk of loss
will vary with, among other things, the type of loan being made, the
creditworthiness of the borrower over the term of the loan, general economic
conditions and, in the case of a secured loan, the quality of the security for
the loan. Lawrence Federal maintains an allowance for loan losses to absorb
losses incurred in the loan portfolio. The allowance for loan losses represents
management's estimate of probable and incurred losses based on information
available as of the date of the financial statements. The allowance for loan
losses is based on management's evaluation of the collectibility of the loan
portfolio, including past loan loss experience, probable and estimable losses,
information about specific borrower situations and estimated collateral values,
economic conditions and other factors.

      The loan portfolio and other credit exposures are regularly reviewed by
management to evaluate the adequacy of the allowance for loan losses. The
methodology for assessing the appropriateness of the allowance includes
comparison to actual losses, peer group comparisons, industry data and economic
conditions. In addition, the regulatory agencies, as an integral part of their
examination process, periodically review Lawrence Federal's allowance for loan
losses. Such agencies may require Lawrence Federal to make additional provisions
for estimated losses based upon judgments different from those of management.

      In connection with assessing the allowance, loss factors are applied to
various pools of outstanding loans. Lawrence Federal segregates the loan
portfolio according to risk characteristics (i.e., mortgage loans, consumer).
Loss factors are derived using Lawrence Federal's historical loss experience and
may be adjusted for significant factors that, in management's judgment, affect
the collectibility of the portfolio as of the evaluation date. In addition,
management assesses the allowance using factors that cannot be associated with
specific credit or loan categories. These factors include management's
subjective evaluation of local and national economic and business conditions,
portfolio concentration and changes in the character and size of the loan
portfolio.

      To facilitate long-term improvement to the quality of the Bank's loan
portfolios, the Bank's loan review and collection processes have been enhanced
by: the addition of an experienced collection officer in October, 2001; the
reorganization of the collection area of the Bank in the first quarter of 2002;
and the addition of a Loan Review Officer in the second quarter of 2002. In
addition to these improvements the Bank has hired an experienced Certified
Public Accountant to implement a full time internal audit


                                       13
<PAGE>

department within the Company. The individual charged with this responsibility
started with the Bank late in the second quarter of 2002. Management believes
that these changes have already served to improve the quality of the information
used to analyze the credit risk contained on the balance sheet and the adequacy
of the Bank's allowance for loan losses. The Bank also believes that these
recent investments in personnel will better position the Company for future
growth.

      At December 31, 2002, Lawrence Federal's allowance for loan losses
represented 1.14% of total gross loans and 53.08% of nonperforming loans.
Non-performing assets were $2.1 million at December 31, 2002, an increase of
$792,000, or 61%, compared to December 31, 2001. The increase in non-performing
indirect mobile home loans accounted for $420,000, or 53%, of the aforementioned
increase in total non-performing assets. During the last half of 2001 and
continuing through 2002 a gradual increase in the volume of non-performing
indirect mobile home loans occurred. At year end 2002 the volume of indirect
mobile home loans 90 to 119 days delinquent increased by $312,000, from $131,000
at September 30, 2002 to $443,000 at December 31, 2002. Historically,
significant increases have occurred during the months of November, December and
January due to the holiday season. These historic increases in delinquency have
also been followed by reductions in delinquency volumes occurring in February,
March and April.

      Although management believes that it uses the best information available
to establish the allowance for loan losses, future adjustments to the allowance
for loan losses may likely be necessary and results of operations could be
adversely affected. Furthermore, while Lawrence Federal believes it has
established its existing allowance for loan losses in conformity with generally
accepted accounting principles, there can be no assurance that regulators, in
reviewing Lawrence Federal's loan portfolio, will not request Lawrence Federal
to increase its allowance for loan losses. In addition, because future events
affecting borrowers and collateral cannot be predicted with certainty, there can
be no assurance that the existing allowance for loan losses is adequate or that
increases will not be necessary should the quality of any loans deteriorate as a
result of the factors discussed above. Any material increase in the allowance
for loan losses may adversely affect Lawrence Federal's financial condition and
results of operations.

      Management continues to monitor closely the risk characteristics of the
loan portfolio, local economic conditions and, as stated earlier, will consider
these factors when evaluating the appropriate amount of provision and allowance
for loan losses. Management believes the company to be adequately reserved at
December 31, 2002.

      The following table represents an analysis of Lawrence Federal's allowance
for loan losses. When comparing fiscal year 2002 to 2001 an increase in
charged-off loans occurred in all three loan categories, with the largest
increase, $644,000, occurring in charge-offs related to indirect mobile homes.
Lawrence Federal increased provision for loan loss expense in 2001 and again in
2002 to keep pace with current and projected charge-off experiences. Total
provision for loan losses taken in years 2001 and 2002 was $1.6 million and
total net charge-offs taken during the same two year period equaled $1.3
million. The result is a net increase in allowance for loan losses of $336,000
from January 01, 2001 to December 31, 2002.


                                       14
<PAGE>

      The following table presents an analysis of Lawrence Federal's allowance
for loan losses.

                                                        Year Ended December 31,
                                                        -----------------------
                                                          2002           2001
                                                        --------       --------
                                                        (Dollars in Thousands)
                                                        -----------------------

Allowance for loan losses, beginning of year ........    $1,232          $775
Charged-off loans:
   Real estate ......................................       (79)          (31)
   Consumer .........................................      (383)         (219)
   Mobile home ......................................      (644)           --
                                                         ------        ------
      Total charged-off loans .......................    (1,106)         (250)
Recoveries on loans previously charged off:
   Real estate ......................................        --            --
   Consumer .........................................        24            14
   Mobile home ......................................        34            --
                                                         ------        ------
      Total recoveries ..............................        58            14
                                                         ------        ------
Net loans charged-off ...............................    (1,048)         (236)
Provision for loan losses ...........................       927           693
                                                         ------        ------

Allowance for loan losses, end of period ............    $1,111        $1,232
                                                         ======        ======

Net loans charged-off to average loans ..............      1.10%         0.22%
Allowance for loan losses to total loans ............      1.14%         1.16%
Allowance for loan losses to nonperforming loans and
   troubled debt restructuring ......................     53.08%        96.93%


                                       15
<PAGE>

      The following table presents the approximate allocation of the allowance
for loan losses by loan category at the dates indicated. Management believes
that the allowance can be allocated by category only on an approximate basis.
The allocation of the allowance to each category is not indicative of future
losses and does not restrict the use of any of the allowance to absorb losses in
any category.

<TABLE>
<CAPTION>
                                                          At December 31,
                        ----------------------------------------------------------------------------------------
                                           2002                                        2001
                        ------------------------------------------- --------------------------------------------
                                       Percent of       Percent                     Percent of       Percent
                                       Allowance       of Loans                    Allowance in      of Loans
                                        in Each         in Each                        Each          in Each
                                      Category to      Category                     Category to      Category
                                         Total         to Total                        Total         to Total
                          Amount       Allowance         Loans         Amount        Allowance        Loans
                        ---------     -----------     ----------     ----------    ------------     ----------
                                                        (Dollars in thousands)
<S>                     <C>           <C>             <C>            <C>           <C>              <C>
Real estate ..........     $120           10.8            57.1           $249           20.2           54.3
Consumer .............      362           32.6            26.9            311           25.2           29.3
Mobile home ..........      629           56.6            16.0            672           54.6           16.4
Unallocated ..........       --             --             N/A             --             --            N/A
   Total allowance
     for loan losses..   $1,111          100.0                         $1,232          100.0
                         ======          =====                         ======          =====
</TABLE>

Investment Activities

      Under federal law, Lawrence Federal has authority to invest in various
types of liquid assets, including U.S. Government obligations, securities of
various federal agencies and of state and municipal governments, deposits at the
Federal Home Loan Bank of Cincinnati and certificates of deposit of federally
insured institutions. Within certain regulatory limits, Lawrence Federal may
also invest a portion of its assets in corporate securities, including
non-mortgage, asset-backed instruments. Savings institutions like Lawrence
Federal are also required to maintain an investment in Federal Home Loan Bank of
Cincinnati stock. Lawrence Federal is required under federal regulations to
maintain a minimum amount of liquid assets.

      The primary objectives of Lawrence Federal's investment portfolio are to
provide a source of liquidity sufficient to meet regulatory and operating
requirements, provide an alternative source of income through interest and
dividends, improve Lawrence Federal's interest rate risk position, diversify
Lawrence Federal's assets and provide collateral for pledging. Investment
decisions are made in accordance with Lawrence Federal's investment policy and
are based upon the quality of a particular investment, its inherent risks, the
composition of the balance sheet, market expectations, Lawrence Federal's
liquidity, income and collateral needs and how the investment fits within
Lawrence Federal's interest rate risk strategy.

      The investment portfolio consists primarily of debt issues. It is the
current practice of Lawrence Federal to invest in debt securities with
maturities of twenty years or less issued by the United States Treasury,


                                       16
<PAGE>

United States government agencies, or state and municipal governments. All of
the securities in the portfolio carry market risk, insofar as increases in
market interest rates may cause a decrease in market value.

      Generally accepted accounting principles require that securities be
categorized as either "held-to- maturity," "trading securities" or
"available-for-sale," based on management's intent as to the ultimate
disposition of each security. Debt securities may be classified as
"held-to-maturity" and reported in financial statements at amortized cost only
if the reporting entity has the positive intent and ability to hold those
securities to maturity. Securities that might be sold in response to changes in
market interest rates, changes in the security's prepayment risk, increases in
loan demand, or other similar factors cannot be classified as
"held-to-maturity." Debt and equity securities held for current resale are
classified as "trading securities." These securities are reported at fair value,
and unrealized gains and losses on the securities would be included in earnings.
Lawrence Federal does not currently use or maintain a trading account. Debt and
equity securities not classified as either "held-to-maturity" or "trading
securities" are classified as "available-for-sale." These securities are
reported at fair value, and unrealized gains and losses on the securities are
excluded from earnings and reported, net of deferred taxes, as a separate
component of equity. Lawrence Federal currently classifies all of its securities
as available-for-sale.

      At December 31, 2002, Lawrence Federal did not own any securities, other
than U.S. Government, agency securities and state or municipal government, that
had an aggregate book value in excess of 10% of Lawrence Federal's retained
earnings at that date.

      The following table presents the amortized cost and fair value of Lawrence
Federal's securities at the dates indicated.

<TABLE>
<CAPTION>
                                                               At December 31,
                                                    --------------------------------------
                                                           2002                2001
                                                    ------------------  ------------------
                                                    Amortized    Fair   Amortized    Fair
                                                       Cost     Value      Cost     Value
                                                    ---------  -------  ---------  -------
                                                                (In thousands)
<S>                                                   <C>       <C>      <C>       <C>
Obligations of State and Political Subdivisions ..    $1,646    $1,644   $    --   $    --
Obligations of U.S. government agencies ..........     4,754     4,910     9,988    10,037
Mortgage backed securities .......................     7,568     7,638        --        --
Other Securities .................................        --        --     1,008     1,009
                                                     -------   -------   -------   -------

    Total ........................................   $13,968   $14,192   $10,996   $11,046
                                                     =======   =======   =======   =======
</TABLE>

      The following presents the activity in the securities portfolio for the
periods indicated.


                                       17
<PAGE>

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                                ------------------------
                                                                    2002         2001
                                                                ------------  ----------
                                                                      (In thousands)
                                                                ------------------------
<S>                                                              <C>           <C>
Investment securities, beginning of period .................     $11,046       $6,431
Purchases:
   Investment securities - available-for-sale ..............      14,398       11,483
Sales:
   Investment securities - available-for-sale ..............      (7,557)      (3,782)
Calls and maturities:
   Investment securities - available-for-sale ..............      (3,863)      (3,219)
(Amortization) accretion of premium/discount ...............          (6)          (6)
Increase (decrease) in unrealized appreciation/depreciation          174          139
                                                                 -------      -------
     Net increase (decrease) in investment securities ......       3,146        4,615
                                                                 -------      -------
Investment securities, end of period .......................     $14,192      $11,046
                                                                 =======      =======
</TABLE>

      The table below sets forth certain information regarding the amortized
cost, weighted average yields and contractual maturities of Lawrence Federal's
debt securities as of December 31, 2002.

<TABLE>
<CAPTION>
                                                                    At December 31, 2002
                          ----------------------------------------------------------------------------------------------------------
                                                More than One Year      More than Five
                           One Year or Less      to Five Years        Years to Ten Years    More than Ten Years        Total
                          -------------------  --------------------   -------------------   -------------------  -------------------
                                     Weighted              Weighted              Weighted             Weighted             Weighted
                          Amortized  Average   Amortized   Average    Amortized  Average   Amortized  Average   Amortized  Average
                            Cost      Yield      Cost       Yield       Cost      Yield       Cost     Yield       Cost     Yield
                          ---------  -------   ---------   -------    ---------  -------   ---------  -------   ---------  -------
                                                                   (Dollars in thousands)
<S>                       <C>        <C>       <C>         <C>        <C>        <C>       <C>        <C>       <C>        <C>
Obligations of U.S. ......
  Government agencies ....    --         --    $2,504        5.22%      $2,250      6.49%        --        --     $4,754     5.83%
Obligations of State and
  Political Subdivisions .    --         --        --          --           --        --     $1,646      4.42%     1,646     4.42%
Mortgage backed securities    --         --        --          --           --        --      7,568      5.34      7,568     5.34%
                            ----       ----    ------        ----       ------      ----     ------      ----    -------     ----
   Total debt securities
   at fair value .........    --         --    $2,504        5.22%      $2,250      6.49%    $9,214      5.18%   $13,968     5.39%
                            ====       ====    ======        ====       ======      ====     ======      ====    =======     ====
</TABLE>

Deposit Activities and Other Sources of Funds

      General. Deposits are the major external source of funds for Lawrence
Federal's lending and other investment activities. In addition, Lawrence Federal
also generates funds internally from loan principal repayments and prepayments
and maturing securities. Scheduled loan repayments are a relatively stable
source of funds, while deposit inflows and outflows and loan prepayments are
influenced significantly by general interest rates and money market conditions.
Lawrence Federal may use borrowings from the Federal Home Loan Bank of
Cincinnati to compensate for reductions in the availability of funds from other
sources. Presently, Lawrence Federal has no other borrowing arrangements aside
from the Federal Home Loan Bank. Until recent years, Lawrence Federal relied
almost exclusively on deposits and internally generated funds as


                                       18
<PAGE>

its source of funds. Lawrence Federal anticipates that it will increase its use
of borrowed funds in the future, depending on market conditions and its need for
funds.

      Deposit Accounts. Nearly all of Lawrence Federal's depositors reside in
Ohio, Kentucky or West Virginia. Lawrence Federal offers a wide variety of
deposit accounts with a range of interest rates and terms. Lawrence Federal's
deposit accounts consist of a variety of savings accounts, checking and NOW
accounts, certificates of deposit, individual retirement accounts and money
market accounts. The maturities of Lawrence Federal's certificate of deposit
accounts range from 91 days to five years. Deposit account terms vary with the
principal differences being the minimum balance deposit, early withdrawal
penalties, limits on the number of transactions and the interest rate. Lawrence
Federal reviews its deposit mix and pricing weekly.

      Lawrence Federal believes it is competitive in the interest rates it
offers on its deposit products. Lawrence Federal determines the rates paid based
on a number of factors, including rates paid by competitors, Lawrence Federal's
need for funds and cost of funds, borrowing costs and movements of market
interest rates. Lawrence Federal does not utilize brokers to obtain deposits and
at December 31, 2002 had no brokered deposits.

      The following table shows the composition of Lawrence Federal's deposit
accounts at the dates indicated.

                                                             At December 31
                                                       -------------------------
                                                         2002             2001
                                                       --------         --------
                                                             (In thousands)

Noninterest-bearing accounts .................           $1,996           $1,465
Passbook accounts ............................           33,711           22,210
Money market accounts ........................           14,963           14,114
Certificates of deposit ......................           68,256           79,007
                                                       --------         --------
  Total deposits .............................         $118,926         $116,796
                                                       ========         ========

      The following table presents the deposit activity of Lawrence Federal for
the periods indicated:

                                                        Year Ended December 31,
                                                       -------------------------
                                                         2002             2001
                                                       --------         --------
                                                            (In thousands)

Beginning balance ............................         $116,796         $103,107
Increase (decrease) before interest credited .           (1,501)           8,507
Interest credited ............................            3,631            5,182
                                                       --------         --------
Net increase .................................            2,130           13,689
                                                       --------         --------
  Ending balance .............................         $118,926         $116,796
                                                       ========         ========

      At December 31, 2002, Lawrence Federal had $17.7 million in certificates
of deposit with principal balances of $100,000 or more maturing as follows:


                                       19
<PAGE>

                                                                      Weighted
             Maturity Period                        Amount          Average Rate
----------------------------------------------     -------          ------------
                                                     (Dollars in thousands)

Three months or less .........................        $340             3.76%
Over 3 through 6 months ......................       1,578             3.04%
Over 6 through 12 months .....................      10,653             2.93%
Over 12 months ...............................       5,162             3.36%
                                                   -------
   Total .....................................     $17,733             3.08%
                                                   =======

      Borrowings. Lawrence Federal has the ability to use advances from the
Federal Home Loan Bank of Cincinnati to supplement its supply of lendable funds
and to meet deposit withdrawal requirements. The Federal Home Loan Bank of
Cincinnati functions as a central reserve bank providing credit for savings
banks and certain other member financial institutions. As a member of the
Federal Home Loan Bank of Cincinnati, Lawrence Federal is required to own
capital stock in the Federal Home Loan Bank of Cincinnati and is authorized to
apply for advances on the security of the capital stock and certain of its
mortgage loans and other assets, principally securities that are obligations of,
or guaranteed by, the U.S. Government or its agencies, provided certain
creditworthiness standards have been met. Advances are made under several
different credit programs. Each credit program has its own interest rate and
range of maturities. Depending on the program, limitations on the amount of
advances are based on the financial condition of the member institution and the
adequacy of collateral pledged to secure the credit. At December 31, 2002,
Lawrence Federal had arranged the ability to borrow a total of approximately $15
million from the Federal Home Loan Bank of Cincinnati.

      The following table presents certain information regarding Lawrence
Federal's borrowed funds at or for the periods ended on the dates indicated:

                                                        -----------------------
                                                        Year Ended December 31,
                                                        -----------------------
                                                          2002           2001
                                                        --------       --------
                                                        (Dollars in thousands)

FHLB advances:
   Average balance outstanding ........................  $1,973         $2,065
   Maximum amount outstanding at any month-end
      during the period ...............................   2,000          2,000
   Balance outstanding at end of period ...............      --          2,000
   Weighted average interest rate during the period ...    5.92%          5.96%
   Weighted average interest rate at end of period ....      --           5.91%


                                       20
<PAGE>

Subsidiaries

      Lawrence Federal has one subsidiary, Lawrence Financial Services Corp.
Federal savings associations generally may invest up to 3% of their assets in
service corporations, provided that any amount in excess of 2% is used primarily
for community, inner-city and community development projects. At December 31,
2002, Lawrence Federal's equity investment in its subsidiary was $181,000 or
1.4% of total assets. Lawrence Financial Services Corp. holds real property for
investment purposes.

Personnel

      As of December 31, 2002, Lawrence Federal had 43 full-time employees and
no part-time employees, none of whom is represented by a collective bargaining
unit. Lawrence Federal believes its relationship with its employees is good.

                      REGULATION AND SUPERVISION

General

      As a savings and loan holding company, Lawrence Financial is required by
federal law to file reports with, and otherwise comply with, the rules and
regulations of the Office of Thrift Supervision. Lawrence Federal is subject to
extensive regulation, examination and supervision by the Office of Thrift
Supervision, as its primary federal regulator, and the Federal Deposit Insurance
Corporation, as the deposit insurer. Lawrence Federal is a member of the Federal
Home Loan Bank System and, with respect to deposit insurance, of the Savings
Association Insurance Fund managed by the Federal Deposit Insurance Corporation.
Lawrence Federal must file reports with the Office of Thrift Supervision and the
Federal Deposit Insurance Corporation concerning its activities and financial
condition in addition to obtaining regulatory approvals prior to entering into
certain transactions such as mergers with, or acquisitions of, other savings
institutions. The Office of Thrift Supervision and/or the Federal Deposit
Insurance Corporation conduct periodic examinations to test Lawrence Federal's
safety and soundness and compliance with various regulatory requirements. This
regulation and supervision establishes a comprehensive framework of activities
in which an institution can engage and is intended primarily for the protection
of the insurance fund and depositors. The regulatory structure also gives the
regulatory authorities extensive discretion in connection with their supervisory
and enforcement activities and examination policies, including policies with
respect to the classification of assets and the establishment of adequate loan
loss reserves for regulatory purposes. Any change in such regulatory
requirements and policies, whether by the Office of Thrift Supervision, the
Federal Deposit Insurance Corporation or the U.S. Congress, could have a
material adverse impact on Lawrence Financial, Lawrence Federal and their
operations. Certain of the regulatory requirements applicable to Lawrence
Federal and to Lawrence Financial are referred to below or elsewhere in this
report. The description of statutory provisions and regulations applicable to
savings institutions and their holding companies included in this report does
not purport to be a complete description of such statutes and regulations and
their effects on Lawrence Federal and Lawrence Financial. As a condition to the
approval of Lawrence Federal's conversion, the Office of Thrift Supervision has
required Lawrence Federal to operate under a charter that subjects it to the
supervision of the Office of Thrift Supervision for a period of three years.


                                       21
<PAGE>

Holding Company Regulation

      Lawrence Financial is a nondiversified unitary savings and loan holding
company within the meaning of federal law. Under prior law, a unitary savings
and loan holding company, such as Lawrence Financial, was not generally
restricted as to the types of business activities in which it may engage,
provided that Lawrence Federal continued to be a qualified thrift lender. The
Gramm-Leach-Bliley Act of 1999, however, restricts unitary savings and loan
holding companies not existing or applied for before May 4, 1999 to activities
permissible for financial holding companies under the law or for multiple
savings and loan holding companies. Lawrence Financial is not grandfathered and
is limited to the activities permissible for financial holding companies or
multiple savings and loan holding companies. A financial holding company may
engage in activities that are financial in nature, incidental to financial
activities or complementary to a financial activity. A multiple savings and loan
holding company is generally limited to activities permissible for bank holding
companies under Section 4(c)(8) of the Bank Holding Company Act, subject to the
prior approval of the Office of Thrift Supervision, and certain additional
activities authorized by Office of Thrift Supervision regulation.

      A savings and loan holding company is prohibited from, directly or
indirectly, acquiring more than 5% of the voting stock of another savings
institution or savings and loan holding company without prior written approval
of the Office of Thrift Supervision and from acquiring or retaining control of a
depository institution that is not insured by the Federal Deposit Insurance
Corporation. In evaluating applications by holding companies to acquire savings
institutions, the Office of Thrift Supervision considers the financial and
managerial resources and future prospects of the holding company and institution
involved, the effect of the acquisition on the risk to the deposit insurance
funds, the convenience and needs of the community and competitive factors.

      The Office of Thrift Supervision may not approve any acquisition that
would result in a multiple savings and loan holding company controlling savings
institutions in more than one state, subject to two exceptions: (1) the approval
of interstate supervisory acquisitions by savings and loan holding companies and
(2) the acquisition of a savings institution in another state if the laws of the
state of the target savings institution specifically permit such acquisitions.
The states vary in the extent to which they permit interstate savings and loan
holding company acquisitions.

      Although savings and loan holding companies are not subject to specific
capital requirements or specific restrictions on the payment of dividends or
other capital distributions, federal regulations do prescribe such restrictions
on subsidiary savings institutions as described below. Lawrence Federal must
notify the Office of Thrift Supervision 30 days before declaring any dividend to
Lawrence Financial. In addition, the financial impact of a holding company on
its subsidiary institution is a matter that is evaluated by the Office of Thrift
Supervision and the agency has authority to order cessation of activities or
divestiture of subsidiaries deemed to pose a threat to the safety and soundness
of the institution.

Federal Savings Institution Regulation

      Business Activities. The activities of federal savings institutions are
governed by federal law and regulations. These laws and regulations delineate
the nature and extent of the activities in which federal associations may
engage. In particular, many types of lending authority for federal associations,
e.g., commercial, non-residential real property loans and consumer loans, are
limited to a specified percentage of the institution's capital or assets.

      Capital Requirements. The Office of Thrift Supervision capital regulations
require savings institutions to meet three minimum capital standards: a 1.5%
tangible capital ratio, a 4% leverage ratio (3% for


                                       22
<PAGE>

institutions receiving the highest rating on the CAMELS rating system) and an 8%
risk-based capital ratio. In addition, the prompt corrective action standards
discussed below also establish, in effect, a minimum 2% tangible capital
standard, a 4% leverage ratio (3% for institutions receiving the highest rating
on the CAMELS financial institution rating system), and, together with the
risk-based capital standard itself, a 4% Tier 1 risk-based capital standard. The
Office of Thrift Supervision regulations also require that, in meeting the
tangible, leverage and risk-based capital standards, institutions must generally
deduct investments in and loans to subsidiaries engaged in activities as
principal that are not permissible for a national bank.

      The risk-based capital standard for savings institutions requires the
maintenance of Tier 1 (core) and total capital (which is defined as core capital
and supplementary capital) to risk-weighted assets of at least 4% and 8%,
respectively. In determining the amount of risk-weighted assets, all assets,
including certain off-balance sheet assets, are multiplied by a risk-weight
factor of 0% to 100%, assigned by the Office of Thrift Supervision capital
regulation based on the risks believed inherent in the type of asset. Core (Tier
1) capital is defined as common stockholders' equity (including retained
earnings), certain noncumulative perpetual preferred stock and related surplus
and minority interests in equity accounts of consolidated subsidiaries less
intangibles other than certain mortgage servicing rights and credit card
relationships. The components of supplementary capital currently include
cumulative preferred stock, long-term perpetual preferred stock, mandatory
convertible securities, subordinated debt and intermediate preferred stock, the
allowance for loan and lease losses limited to a maximum of 1.25% of
risk-weighted assets and up to 45% of unrealized gains on available-for-sale
equity securities with readily determinable fair market values. Overall, the
amount of supplementary capital included as part of total capital cannot exceed
100% of core capital. At December 31, 2002, Lawrence Federal met each of its
capital requirements.

      The following table presents Lawrence Federal's capital position at
December 31, 2002.

                                                                  Capital
                                                             -------------------
                            Actual    Required     Excess     Actual    Required
                            Capital    Capital     Amount    Percent    Percent
                            -------    -------     ------    -------    -------
                                          (Dollars in thousands)

Tangible ................   $12,976     $5,368     $7,608       9.67       4.00
Core (Leverage) .........    12,976      5,368      7,608       9.67       4.00
Risk-based ..............    13,806      7,271      6,535      15.19       8.00

      Prompt Corrective Regulatory Action. The Office of Thrift Supervision is
required to take certain supervisory actions against undercapitalized
institutions, the severity of which depends upon the institution's degree of
undercapitalization. Generally, a savings institution that has a ratio of total
capital to risk weighted assets of less than 8%, a ratio of Tier 1 (core)
capital to risk-weighted assets of less than 4% or a ratio of Tier 1 (core)
capital to total assets of less than 4% (3% or less for institutions with the
highest examination rating) is considered to be "undercapitalized." A savings
institution that has a total risk-based capital ratio less than 6%, a Tier 1
capital ratio of less than 3% or a leverage ratio that is less than 3% is
considered to be "significantly undercapitalized" and a savings institution that
has a tangible capital to assets ratio equal to or less than 2% is deemed to be
"critically undercapitalized." Subject to a narrow exception, the Office of
Thrift Supervision is required to appoint a receiver or conservator for an
institution that is "critically undercapitalized." The regulation also provides
that a capital restoration plan must be filed with the Office of Thrift
Supervision within 45 days of the date a savings institution receives notice
that it is "undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." Compliance with the


                                       23
<PAGE>

plan must be guaranteed by any parent holding company. In addition, numerous
mandatory supervisory actions become immediately applicable to an
undercapitalized institution, including, but not limited to, increased
monitoring by regulators and restrictions on growth, capital distributions and
expansion. The Office of Thrift Supervision could also take any one of a number
of discretionary supervisory actions, including the issuance of a capital
directive and the replacement of senior executive officers and directors.

      Insurance of Deposit Accounts. Lawrence Federal is a member of the Savings
Association Insurance Fund. The Federal Deposit Insurance Corporation maintains
a risk-based assessment system by which institutions are assigned to one of
three categories based on their capitalization and one of three subcategories
based on examination ratings and other supervisory information. An institution's
assessment rate depends upon the categories to which it is assigned. Assessment
rates for insured institutions are determined semiannually by the Federal
Deposit Insurance Corporation and currently range from zero basis points for the
healthiest institutions to 27 basis points for the riskiest.

      In addition to the assessment for deposit insurance, institutions are
required to make payments on bonds issued in the late 1980s by the Financing
Corporation to recapitalize the predecessor to the Savings Association Insurance
Fund. Since January 1, 2000, there has been equal sharing of Financing
Corporation payments between members of both insurance funds.

      The Federal Deposit Insurance Corporation has authority to increase
insurance assessments. A significant increase in Savings Association Insurance
Fund insurance premiums would likely have an adverse effect on the operating
expenses and results of operations of Lawrence Federal. Management cannot
predict what insurance assessment rates will be in the future.

      Insurance of deposits may be terminated by the Federal Deposit Insurance
Corporation upon a finding that the institution has engaged in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations or has
violated any applicable law, regulation, rule, order or condition imposed by the
Federal Deposit Insurance Corporation or the Office of Thrift Supervision. The
management of Lawrence Federal does not know of any practice, condition or
violation that might lead to termination of deposit insurance.

      Loans to One Borrower. Federal law provides that savings institutions are
generally subject to the limits on loans to one borrower applicable to national
banks. A savings institution may not make a loan or extend credit to a single or
related group of borrowers in excess of 15% of its unimpaired capital and
surplus. An additional amount may be lent, equal to 10% of unimpaired capital
and surplus, if secured by specified readily marketable collateral.

      QTL Test. The HOLA requires savings institutions to meet a qualified
thrift lender test. Under the test, a savings association is required to either
qualify as a "domestic building and loan association" under the Internal Revenue
Code or maintain at least 65% of its "portfolio assets" (total assets less: (1)
specified liquid assets up to 20% of total assets; (2) intangibles, including
goodwill; and (3) the value of property used to conduct business) in certain
"qualified thrift investments" (primarily residential mortgages and related
investments, including certain mortgage-backed securities) in at least 9 months
out of each 12-month period.

      A savings institution that fails the qualified thrift lender test is
subject to certain operating restrictions and may be required to convert to a
bank charter. As of December 31, 2002, Lawrence Federal met the qualified thrift
lender test. Recent legislation has expanded the extent to which education
loans, credit card loans and small business loans may be considered "qualified
thrift investments."


                                       24
<PAGE>

      Limitations on Capital Distributions. Office of Thrift Supervision
regulations impose limitations upon all capital distributions by a savings
institution, including cash dividends, payments to repurchase its shares and
payments to shareholders of another institution in a cash-out merger. Under
current regulations, an application to and the prior approval of the Office of
Thrift Supervision is required prior to any capital distribution if the
institution does not meet the criteria for "expedited treatment" of applications
under Office of Thrift Supervision regulations (i.e., generally, examination
ratings in the two top categories), the total capital distributions for the
calendar year exceed net income for that year plus the amount of retained net
income for the preceding two years, the institution would be undercapitalized
following the distribution or the distribution would otherwise be contrary to a
statute, regulation or agreement with Office of Thrift Supervision. If an
application is not required, the institution must still provide prior notice to
Office of Thrift Supervision of the capital distribution if, like Lawrence
Federal, it is a subsidiary of a holding company. In the event Lawrence
Federal's capital fell below its regulatory requirements or the Office of Thrift
Supervision notified it that it was in need of more than normal supervision,
Lawrence Federal's ability to make capital distributions could be restricted. In
addition, the Office of Thrift Supervision could prohibit a proposed capital
distribution by any institution, which would otherwise be permitted by the
regulation, if the Office of Thrift Supervision determines that such
distribution would constitute an unsafe or unsound practice.

      Assessments. Savings institutions are required to pay assessments to the
Office of Thrift Supervision to fund the agency's operations. The general
assessments, paid on a semi-annual basis, are computed upon the savings
institution's total assets, including consolidated subsidiaries, as reported in
Lawrence Federal's latest quarterly thrift financial report.

      Transactions with Related Parties. Lawrence Federal's authority to engage
in transactions with "affiliates" (e.g., any company that controls or is under
common control with an institution, including Lawrence Financial and its
non-savings institution subsidiaries) is limited by federal law. The aggregate
amount of covered transactions with any individual affiliate is limited to 10%
of the capital and surplus of the savings institution. The aggregate amount of
covered transactions with all affiliates is limited to 20% of the savings
institution's capital and surplus. Certain transactions with affiliates are
required to be secured by collateral in an amount and of a type described in
federal law. The purchase of low quality assets from affiliates is generally
prohibited. The transactions with affiliates must be on terms and under
circumstances that are at least as favorable to the institution as those
prevailing at the time for comparable transactions with non-affiliated
companies. In addition, savings institutions are prohibited from lending to any
affiliate that is engaged in activities that are not permissible for bank
holding companies and no savings institution may purchase the securities of any
affiliate other than a subsidiary.

      Lawrence Federal's authority to extend credit to executive officers,
directors and 10% shareholders ("insiders"), as well as entities such persons
control, is also governed by federal law. Such loans are required to be made on
terms substantially the same as those offered to unaffiliated individuals and
not involve more than the normal risk of repayment. An exception exists for
loans made pursuant to a benefit or compensation program that is widely
available to all employees of the institution and does not give preference to
insiders over other employees. The law limits both the individual and aggregate
amount of loans Lawrence Federal may make to insiders based, in part, on
Lawrence Federal's capital position and requires certain board approval
procedures to be followed. Loans to executive officers are subject to additional
restrictions.

      Enforcement. The Office of Thrift Supervision has primary enforcement
responsibility over savings institutions and has the authority to bring actions
against the institution and all institution-affiliated parties, including
stockholders, and any attorneys, appraisers and accountants who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured institution. Formal enforcement


                                       25
<PAGE>

action may range from the issuance of a capital directive or cease and desist
order to removal of officers and/or directors to institution of receivership,
conservatorship or termination of deposit insurance. Civil penalties cover a
wide range of violations and can amount to $25,000 per day, or even $1 million
per day in especially egregious cases. The Federal Deposit Insurance Corporation
has the authority to recommend to the Director of the Office of Thrift
Supervision that enforcement action to be taken with respect to a particular
savings institution. If action is not taken by the Director, the Federal Deposit
Insurance Corporation has authority to take such action under certain
circumstances. Federal law also establishes criminal penalties for certain
violations.

      Standards for Safety and Soundness. The federal banking agencies have
adopted Interagency Guidelines prescribing Standards for Safety and Soundness.
The guidelines set forth the safety and soundness standards that the federal
banking agencies use to identify and address problems at insured depository
institutions before capital becomes impaired. If the Office of Thrift
Supervision determines that a savings institution fails to meet any standard
prescribed by the guidelines, the Office of Thrift Supervision may require the
institution to submit an acceptable plan to achieve compliance with the
standard.

Federal Home Loan Bank System

      Lawrence Federal is a member of the Federal Home Loan Bank System, which
consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank
provides a central credit facility primarily for member institutions. Lawrence
Federal, as a member of the Federal Home Loan Bank, is required to acquire and
hold shares of capital stock in that Federal Home Loan Bank in an amount at
least equal to 1.0% of the aggregate principal amount of its unpaid residential
mortgage loans and similar obligations at the beginning of each year, or 1/20 of
its advances (borrowings) from the Federal Home Loan Bank, whichever is greater.
Lawrence Federal was in compliance with this requirement with an investment in
Federal Home Loan Bank stock at December 31, 2002 of $614,400.

Federal Reserve System

      The Federal Reserve Board regulations require savings institutions to
maintain non-interest-earning reserves against their transaction accounts
(primarily NOW and regular checking accounts). The regulations generally provide
that reserves be maintained against aggregate transaction accounts as follows: a
3% reserve ratio is assessed on net transaction accounts up to and including
$42.1 million: a 10% reserve ratio is applied above $42.1 million. The first
$6.0 million of otherwise reservable balances (subject to adjustments by the
Federal Reserve Board) are exempted from the reserve requirements. Lawrence
Federal complies with the foregoing requirements.

Prospective Legislation

      Lawrence Federal and Lawrence Financial, as a savings and loan holding
company, are extensively regulated and supervised. Regulations, which affect
Lawrence Federal on a daily basis, may be changed at any time, and the
interpretation of the relevant law and regulations may also change because of
new interpretations by the authorities who administer those laws and
regulations. Any change in the regulatory structure or the applicable statutes
or regulations, whether by the Office of Thrift Supervision, the Federal Deposit
Insurance Corporation or the U.S. Congress, could have a material impact on
Lawrence Financial, Lawrence Federal or its operations.

      Legislation enacted several years ago provided that the Bank Insurance
Fund and the Savings Association Insurance Fund would have merged on January 01,
1999 if there had been no more savings associations as of that date. Congress
did not enact legislation eliminating the savings association charter by


                                       26
<PAGE>

that date. Lawrence Federal is unable to predict whether the Savings Association
Insurance Fund and Bank Insurance Fund will eventually be merged and what
effect, if any, that may have on its business.

                           FEDERAL AND STATE TAXATION

Federal Income Taxation

      General. Lawrence Financial and Lawrence Federal report their income on a
calendar year basis using the accrual method of accounting. The federal income
tax laws apply to Lawrence Financial and Lawrence Federal in the same manner as
to other corporations with some exceptions, including particularly Lawrence
Federal's reserve for bad debts discussed below. The following discussion of tax
matters is intended only as a summary and does not purport to be a comprehensive
description of the tax rules applicable to Lawrence Federal or Lawrence
Financial. Lawrence Federal's federal income tax returns have been either
audited or closed under the statute of limitations through tax year 1998. For
its 2002 year, Lawrence Federal's maximum federal income tax rate was 34%.

      Bad Debt Reserves. For fiscal years beginning before December 31, 1996,
thrift institutions that qualified under certain definitional tests and other
conditions of the Internal Revenue Code were permitted to use certain favorable
provisions to calculate their deductions from taxable income for annual
additions to their bad debt reserve. A reserve could be established for bad
debts on qualifying real property loans, generally secured by interests in real
property improved or to be improved, under the percentage of taxable income
method or the experience method. The reserve for nonqualifying loans was
computed using the experience method.

      Federal legislation enacted in 1996 repealed the reserve method of
accounting for bad debts and the percentage of taxable income method for tax
years beginning after 1995 and require savings institutions to recapture or take
into income certain portions of their accumulated bad debt reserves.
Approximately $1.5 million of Lawrence Federal accumulated bad debt reserves
would not be recaptured into taxable income unless Lawrence Federal makes a
"non-dividend distribution" to Lawrence Financial as described below.

      Distributions. If Lawrence Federal makes "non-dividend distributions" to
Lawrence Financial, the distributions will be considered to have been made from
Lawrence Federal's unrecaptured tax bad debt reserves, including the balance of
its reserves as of December 31, 1988, to the extent of the "non-dividend
distributions," and then from Lawrence Federal's supplemental reserve for losses
on loans, to the extent of those reserves, and an amount based on the amount
distributed, but not more than the amount of those reserves, will be included in
Lawrence Federal's taxable income. Non-dividend distributions include
distributions in excess of Lawrence Federal's current and accumulated earnings
and profits, as calculated for federal income tax purposes, distributions in
redemption of stock, and distributions in partial or complete liquidation.
Dividends paid out of Lawrence Federal's current or accumulated earnings and
profits will not be so included in Lawrence Federal's taxable income.

      The amount of additional taxable income triggered by a non-dividend is an
amount that, when reduced by the tax attributable to the income, is equal to the
amount of the distribution. Therefore, if Lawrence Federal makes a non-dividend
distribution to Lawrence Financial, approximately one and one-half times the
amount of the distribution not in excess of the amount of the reserves would be
includable in income for federal income tax purposes, assuming a 34% federal
corporate income tax rate. Lawrence Federal does not intend to pay dividends
that would result in a recapture of any portion of its bad debt reserves.


                                       27
<PAGE>

State Taxation

      Ohio State Taxation. Lawrence Financial is subject to the Ohio corporation
franchise tax, which, as applied to it, is a tax measured by both net income and
net worth. In general, the tax liability is the greater of 5.1% on the first
$50,000 of computed Ohio taxable income and 8.5% of computed Ohio taxable income
in excess of $50,000, or 0.40% of taxable net worth. Under these alternative
measures of computing the tax liability, complex formulas determine the
jurisdictions to which total net income and total net worth are apportioned or
allocated. The minimum tax is $50 per year and maximum tax liability as measured
by net worth is limited to $150,000 per year.

      A special litter tax also applies to all corporations, including Lawrence
Financial, subject to the Ohio corporation franchise tax. This litter tax does
not apply to "financial institutions." If a corporation pays franchise tax on
the basis of net income, the litter tax is equal to 0.11% of the first $50,000
of computed Ohio taxable income and 0.22% of computed Ohio taxable income in
excess of $50,000. If a corporation pays franchise tax on the basis of net
worth, the litter tax is equal to 0.014% times taxable net worth.

      A statutory exemption from the net worth tax is available to Lawrence
Financial if certain conditions are satisfied. Lawrence Financial expects to
qualify for this exemption, which would restrict its tax liability to the tax
measured by net income.

      Lawrence Federal is a "financial institution" for Ohio tax purposes.
Accordingly, it must pay the Ohio corporate franchise tax on "financial
institutions," which is imposed annually at a rate of 1.4% of the Lawrence
Federal's apportioned book net worth, determined under generally accepted
accounting principles, less any statutory deduction. As a "financial
institution," Lawrence Federal does not pay any Ohio tax based upon net income
or net profits.

      Maryland State Taxation. As a Maryland corporation not earning income in
Maryland, Lawrence Financial is exempt from Maryland corporate income tax.

Item 2. Description of Property

      Lawrence Federal currently conducts its business through its main office
located in Ironton, Ohio, and four other full-service banking offices, all of
which it owns.


                                       28
<PAGE>

                                                             Net Book Value
                                                              of Property
                                                              or Leasehold
                                       Original Year        Improvements at
 Location                                Acquired          December 31, 2002

Main/Executive Office:                                       (In thousands)

311 South 5th Street
Ironton, Ohio 45638                       1976                    $712

Drive Through Facility:
511 Vernon Street
Ironton, Ohio 45638                       1997                     182

Branch Offices:

401 2nd Avenue
Chesapeake, Ohio 45619                    1960                     155

7510 State Route 7
Proctorville, Ohio 45669                  1993                     137

404 Solida Road
South Point, Ohio 45680                   1975                     149

9000 Ohio River Road
Wheelersburg, Ohio 45694                  1998                     632
                                                                ------

     Total                                                      $1,967
                                                                ======

Item 3. Legal Proceedings

      Periodically, there have been various claims and lawsuits involving
Lawrence Federal, such as claims to enforce liens, condemnation proceedings on
properties in which Lawrence Federal holds security interests, claims involving
the making and servicing of real property loans and other issues incident to
Lawrence Federal's business. Neither Lawrence Financial nor Lawrence Federal is
a party to any pending legal proceedings that it believes would have a material
adverse effect on the financial condition or operations of Lawrence Financial.

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

      None.

                                    PART II

Item 5. Market for Common Equity and Related Stockholder Matters

      Lawrence Financial's common stock began trading on the OTC-Bulletin Board
under the symbol "LWFH" on December 29, 2000. The initial offering price was
$10.00 per share. As of December 31, 2002,


                                       29
<PAGE>

there were 705,110 shares of common stock outstanding and 181 stockholders,
excluding persons or entities who hold stock in nominee or "street name."

      The following table shows the high and low sales price and dividends paid
on Lawrence Financial's common stock for the periods indicated.

<TABLE>
<CAPTION>
Quarter Ended                                           High          Low      Dividends Paid
-------------                                           ----          ---      --------------
<S>                                                    <C>          <C>           <C>
March 31, 2001 .................................       $11.81       $11.06        $   --
June 30, 2001 ..................................        13.00        11.37            --
September 30, 2001 .............................        16.37        12.25            --
December 31, 2001 ..............................        15.50        13.90          0.07
March 31, 2002 .................................        17.80        14.45          0.07
June 30, 2002 ..................................        18.05        16.15          0.07
September 30, 2002 .............................        16.75        14.30          0.07
December 31, 2002 ..............................        16.85        13.75          0.07
</TABLE>

      Dividend payments by Lawrence Financial are dependent primarily on
dividends received by Lawrence Financial from Lawrence Federal. Under federal
regulations, the dollar amount of dividends Lawrence Federal may pay is
dependent upon its capital position and recent net income. Generally, if
Lawrence Federal satisfies its regulatory capital requirements, it may make
dividend payments up to the limits prescribed by the OTS regulations. In
addition, institutions that have converted to the stock form of ownership are
prohibited from engaging in such activities if the effect thereof would cause
the regulatory capital of the institution to be reduced below the amount
required for the liquidation account which was established in the conversion in
accordance with the Office of Thrift Supervision regulations.


                                       30
<PAGE>

Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations

General

      Lawrence Federal's results of operations depend primarily on net interest
income, which is the difference between the interest income earned on Lawrence
Federal's interest-earning assets, such as loans and securities, and the
interest expense on its interest-bearing liabilities, such as deposits and
borrowings. Lawrence Federal also generates noninterest income primarily from
loan fees and service charges. Lawrence Federal's noninterest expenses primarily
consist of employee compensation and benefits, occupancy expense, data
processing costs, and other operating expenses. Lawrence Federal's results of
operations are also affected by general economic and competitive conditions,
notably changes in market interest rates, government policies and regulations.

      Operating Strategy

      Lawrence Financial Holdings, Inc. (Company), through its wholly owned
subsidiary Lawrence Federal Savings Bank (Bank), operates as a
community-oriented financial institution focused on meeting the financial
service needs of consumers in its market area. To accomplish this objective,
Lawrence Federal offers a variety of mortgage and consumer loans and retail
deposit products. Lawrence Federal has historically extended its lending
activities outside of its market area through programs for originating mobile
home and automobile loans through a network of dealers. These indirect lending
programs have helped Lawrence Federal originate a larger amount of consumer
loans, which typically have shorter terms and higher yields than mortgage loans,
than the Bank would otherwise be able to originate. In addition, the origination
of shorter term consumer loans helps the Company manage it's interest rate risk.
However, indirect lending programs may result in greater risk and require
careful monitoring by management.

CRITICAL ACCOUNTING POLICIES

Accounting policies involving significant judgments and assumptions by
management, which have, or could have, a material impact on the carrying
value of certain assets and impact income, are considered critical
accounting policies. Lawrence Federal Savings Bank considers the following
to be its critical accounting policies: allowance for loan losses. There
have been no significant changes in the methods or assumptions used in the
accounting policies that require material estimates and assumptions.

Allowance for loan losses

Arriving at an appropriate level of allowance for loan and lease losses
necessarily involves a high degree of judgment. The ongoing evaluation process
includes a formal analysis of the allowance each quarter, which considers, among
other factors, the character and size of the loan portfolio, business and
economic conditions, loan growth, delinquency trends, nonperforming loans
trends, charge-off experience and other asset quality factors. Provisions for
losses on the loan portfolio is calculated by applying historical charge-off and
recovery experience to the current outstanding balance in each loan category,
with consideration given to loan growth over the preceding twenty four months.
Although management uses available information to establish the appropriate
level of the allowance for loan and lease losses, future additions to the
allowance may be necessary based on estimates that are susceptible to change as
a result of changes in economic conditions and other factors. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review Lawrence Federal Savings Bank's allowance for loan losses.
Such agencies may


                                       31
<PAGE>

require Lawrence Federal Savings Bank to recognize adjustments to the allowance
based on their judgments about information available to them at the time of
their examination.

Deferred Income Taxes

Lawrence Federal Savings Bank uses the asset and liability method of accounting
for income taxes. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. If current available information raises doubt as to
the realization of the deferred tax assets, a valuation allowance would be
established. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Management exercises
significant judgment in evaluating the amount and timing of recognition of the
resulting tax liabilities and assets, including projections of future taxable
income. These judgments and estimates are reviewed on a continual basis as
regulatory and business factors change.

Comparison of Financial Condition at December 31, 2002 and 2001

      During the fiscal year 2002, total assets decreased $888,000, or ..66%, to
$134.4 million at December 31, 2002. The decrease in assets in 2002 primarily
reflected runoff from the loan portfolio. At December 31, 2002, cash and cash
equivalent balances had increased $4.1 million, or 34%, and securities available
for sale had increased by $3.1 million, or 29%, when compared to the same date
in 2001. During the year ended December 31, 2002, gross loans receivable
decreased $8.6 million, or 8.2%. Consumer loans decreased $5.1 million, or 17%,
real estate loans decreased $5.5 million, or 10%, and mobile home loans
decreased $2.1 million, or 11%. The majority of the decrease in consumer loans
is primarily due to reducing the number of indirect automobile loans and
indirect mobile home loans originated in 2002, while real estate loans decreased
as a result of highly competitive fixed-rate, long-term loans being offered by
several regional banks and mortgage brokers. The outstanding balance of mobile
home loans has been declining during the year, which reflects the Bank's efforts
to reduce the concentration of mobile home loans in the portfolio.

      During 2002, total deposits and borrowings increased $130,000, or 1%, to
$118.9 million at December 31, 2002. For the fiscal year 2002, deposits
increased $2.1 million, or 2%, and Federal Home Loan Bank advances decreased by
$2.0 million.

      Equity decreased $1.0 million, or 6%, during fiscal year 2002 to $14.8
million at December 31, 2002. During the year ending December 31, 2002, treasury
stock purchased totaled $1,683,600, retained earnings increased $606,000 as a
result of net income while accumulated other comprehensive income increased from
an unrealized gain of $33,000 to $148,000, primarily as a result of changes to
the securities available-for-sale portfolio arising during the period, and
$197,000 of cash dividends were paid to shareholders.

Comparison of Operating Results for the Years Ended December 31, 2002 and 2001

      General. The Company's net income increased 5% to $606,000 for 2002 from
$576,000 for 2001. Return on average assets was 0.45% in 2002 and 0.44% in 2001,
and return on average equity was 4.07% in 2002 and 3.70% in 2001. Net interest
income increased $643,000, or 15%, while noninterest income, exclusive of sale
of securities, increased $46,000, or 7%. The increase in net interest income was
primarily the result of an increase of 40 basis points in the Company's net
interest margin and an increase of $4.0 million in average earning asset
balances during fiscal year 2002. Offsetting the increase in net interest


                                       32
<PAGE>

income was a $425,000 or 12% increase in noninterest expense. There are several
causes for the increase in non-interest expense. The Company has expensed
$177,000 for its Employee Stock Ownership Program (ESOP) and for the stock
awards compared to $157,000 during 2001. The Company has also experienced
increases in: salaries and wages paid; the addition of an employee in the loan
collection department; increased costs of employee benefits; increased data
processing fees; increased costs related to the collection of delinquent mobile
home loans; and other non-interest expenses related to the growth of the
Company's customer base.

      Interest Income. Interest income decreased $915,000, or 10%, in 2002
compared to 2001. Interest income on loans decreased $1.0 million, or 12%,
primarily as a result of decreasing interest rates and customers refinancing
loans with various local institutions with more favorable rates. Interest income
on short term investments decreased $47,000, or 25%. The average yield on
interest-earning assets decreased to 6.98% in 2002 from 7.95% in 2001, as short
term investments became a greater percentage of the interest-earning asset mix.

      Interest Expense. Interest expense decreased $1.6 million, or 29%, in 2002
compared to 2001. Interest paid on deposits decreased $1.6 million, or 30%, as a
result of a reduction of interest rates paid on the average balances of deposits
during the year. Interest paid on Federal Home Loan Bank advances was $117,000
in 2002 compared to $123,000 in 2001. The average cost of interest-bearing
liabilities decreased 149 basis points to 3.17% in 2002 from 4.66% in 2001,
primarily as a result of reduced market rates on certificates of deposit and
savings accounts.

      Provision for Loan Losses. Activity in the allowance for loan losses
consists of increases due to monthly provisions for loan losses and decreases
for periodic charge offs, net of recoveries. Management analyzes the adequacy of
the allowance balance quarterly by determining its estimate of probable losses
in the portfolio and comparing that estimate to the allowance balance.
Management calculates its estimate of probable losses primarily by applying loss
percentages to classified loans within the major loan categories.

      The provision for loan losses was $927,000 for 2002 compared to $693,000
for 2001. The provision for 2002 and 2001 reflected management's assessment of
probable losses, which is impacted by changes in the composition of the loan
portfolio. The increase in provision was driven by the Bank experiencing a
trend, particularly over the last twelve months, showing a deterioration in
asset quality evidenced by an increase in total non-performing assets. (See
pages 13 through 16 of this filing for more information.)

      At December 31, 2002, the Company's allowance for loan losses as a
percentage of gross loans outstanding decreased by 2 basis points, to 1.14% from
1.16%, when compared to the same period in 2001. Allowance for loan losses
totaled $1.1 million at December 31, 2002, a decrease of $120,000, or 10%,
compared to the same date in 2001. The mix of the allowance also changed with
the portion allocated to real estate loans decreasing by $129,000, or 52%, the
portion of the allowance allocated to consumer loans increasing by $40,000, or
13%, mobile home reserves decreasing by $43,000, or 6%, and commercial reserves
increasing by $10,000 or 100%. Management believes that the average balance of
outstanding indirect automobile loans will not grow significantly beyond its
ending balance at December 31, 2002. Management also believes that the average
balance of outstanding indirect mobile home loans will decrease from its ending
balance at December 31, 2002.

      While management believes the existing level of reserves is adequate,
future adjustments to the allowance may be necessary due to economic, operating,
regulatory, and other conditions that may be beyond Lawrence Federal's control.


                                       33
<PAGE>

      Noninterest Income. The following table shows the components of
noninterest income and the dollar and percentage change from 2002 to 2001.

                                                             Dollar   Percentage
                                       2002       2001       Change     Change
                                       ----       ----       ------     ------
                                               (Dollars in Thousands)
Net securities gains ..............     $55        $21        $34        162%
Service charges ...................     452        430         22          5
Other .............................     255        231         24         10
                                       ----       ----        ---
   Total ..........................    $762       $682        $80         12
                                       ====       ====        ===

      Net securities gains increased in fiscal year 2002 as Lawrence Federal
sold securities at a gain of $55,000 compared to $21,000 in gain reported in the
same period of 2001. Service charges increased in 2002 as a result of
adjustments to fee schedules. Lawrence Federal will continue to monitor the fee
schedules of in-market competitors and adjust our products to reflect current
market pricing. Other income consists of increases in the cash surrender value
of bank owned life insurance and other miscellaneous items.


                                       34
<PAGE>

Noninterest Expense. The following table shows the components of noninterest
expense and the dollar and percentage change from 2002 to 2001.

                                                             Dollar   Percentage
                                            2002     2001    Change     Change
                                            ----     ----    ------     ------
                                                   (Dollars in Thousands)

Salaries and benefits ..................   $1,725   $1,600     $125         8%
Deposit insurance premiums .............       37       37       --        --
Occupancy and equipment ................      371      376       (5)       (1)
Data processing ........................      535      529        6         1
Franchise tax ..........................      127       83       44        53
Advertising expense ....................      110       88       22        25
Other ..................................    1,052      819      233        28
                                           ------   ------     ----
      Total ............................   $3,957   $3,532     $425        12
                                           ======   ======     ====

      Salaries and benefits increased as a result of: normal annual merit
increases in salaries, a 27% increase in premiums paid for employee health care
insurance; and the recognition of the expense related to employee stock
ownership and incentive plans. Making up the bulk of the increase in "Other" are
expenses related to the repossession of mobile home units, which accounted for
$126,000 of the increase. In addition to this increase, the Company experienced
increases in various other expense items.

      Income Tax Expense. The provision for income tax was $270,000 in 2002
compared to $235,000 in 2001. The provision increased as a result of greater
taxable income. The effective tax rate for 2002 was 30.8% compared with 29.0%
for 2001.


                                       35
<PAGE>

Average Balances, Interest and Average Yields/Cost

      The following table presents certain information regarding average
balances of assets and liabilities, as well as the total dollar amounts of
interest income from average interest-earning assets and interest expense on
average interest-bearing liabilities and the resulting average yields and costs.
The yields and costs for the periods indicated are derived by dividing income or
expense by the average balances of assets or liabilities, respectively, for the
periods presented. Average balances were derived from daily balances.

<TABLE>
<CAPTION>
                                                    -------------------------------------------------------------------
                                                                          Year ended December 31,
                                                    -------------------------------------------------------------------
                                                                  2002                                2001
                                                    --------------------------------   --------------------------------
                                                                             Average                             Average
                                                    Average                   Yield/   Average                    Yield/
                                                    Balance     Interest       Rate    Balance      Interest       Rate
                                                    -------     --------       ----    -------      --------       ----
                                                                           (Dollars in Thousands)
<S>                                                <C>           <C>         <C>       <C>          <C>          <C>
Interest-earning assets:
    Loans (1) ..................................   $101,737      $7,931        7.80%   $107,231      $8,967        8.36%
    Securities (2) .............................     12,358         671        5.71       8,171         502        6.14
    Interest-bearing deposits ..................     11,355         145        1.28       6,082         192        3.16
                                                   --------      ------                --------      ------
        Total interest-earning assets ..........    125,450       8,747        6.98     121,484       9,661        7.95
Non-interest-earning assets ....................      9,155                               9,775
                                                   --------                            --------
        Total assets ...........................   $134,605                            $131,259
                                                   ========                            ========
Interest-bearing liabilities:
    Deposits:
      Passbook accounts ........................    $29,058         577        1.98     $20,416         548        2.68
      Money market accounts ....................      1,001          23        2.29         786          25        3.18
      NOW accounts .............................     15,449         194        1.25      13,335         288        2.16
      Certificates of deposit ..................     70,583       2,837        4.02      77,268       4,321        5.59
                                                   --------      ------                --------      ------
        Total deposits .........................    116,091       3,631        3.11     111,805       5,182        4.64
    FHLB advances ..............................      1,973         117        5.92       2,065         123        5.96
                                                   --------      ------                --------      ------
        Total interest-bearing
         liabilities ...........................    118,064       3,748        3.18     113,870       5,305        4.66
                                                                 ------                              ------
Non-interest-bearing liabilities ...............      1,631                               1,801
                                                   --------                            --------
        Total liabilities ......................    119,695                             115,671
Total retained earnings ........................     14,910                              15,588
                                                   --------                            --------
        Total liabilities and retained
         earnings ..............................   $134,605                            $131,259
                                                   ========                            ========

    Net interest-earning assets ................     $7,386                               7,027
                                                   ========                            ========
    Net interest income/interest rate spread (3)                 $4,999        3.80%                 $4,356        3.29%
                                                                 ======        ====                  ======        ====
    Net interest margin (4) ....................                   4.00%                               3.59%
                                                                 ======                              ======
    Ratio of interest-earning assets
     to interest-bearing liabilities ...........     106.26%                             115.27%
                                                   ========                            ========
</TABLE>

(1)   Balances are net of deferred loan origination costs, undisbursed proceeds
      of construction loans in process, and include non- accrual loans.

(2)   Includes investment securities available-for-sale, stock in the Federal
      Home Loan Bank of Cincinnati and mutual funds.

(3)   Net interest rate spread represents the difference between the weighted
      average yield on interest-earning assets and the weighted average cost of
      interest-bearing liabilities.

(4)   Net interest margin represents net interest income as a percentage of
      average interest-earning assets.


                                       36
<PAGE>

Rate/Volume Analysis

      The following table presents the effects of changing rates and volumes on
the interest income and interest expense of Lawrence Federal. The rate column
shows the effects attributable to changes in rate (changes in rate multiplied by
prior volume). The volume column shows the effects attributable to changes in
volume (changes in volume multiplied by prior rate). The net column represents
the sum of the prior columns. For purposes of this table, changes attributable
to changes in both rate and volume that cannot be segregated have been allocated
proportionately based on the absolute value of the change due to rate and the
change due to volume.

                                                --------------------------------
                                                  Year Ended December 31, 2002
                                                           Compared to
                                                  Year Ended December 31, 2001
                                                --------------------------------
                                                 Increase (Decrease)
                                                       Due to
                                                -------------------    -------
                                                  Rate      Volume       Net
                                                -------     -------    -------
                                                     (Dollars in thousands)
Interest-earning assets:
   Loans ....................................     $(577)      $(459)   $(1,036)
   Securities ...............................       (88)        257        169
   Interest-earning deposits ................      (214)        167        (47)
                                                -------     -------    -------
       Total interest-earning assets ........      (879)        (35)      (914)
Interest-bearing liabilities:
   Deposits:
     Passbook accounts ......................      (203)        232         29
     Money market accounts ..................        (8)          6         (2)
     NOW accounts ...........................      (140)         46        (94)
     Certificates of deposit ................    (1,110)       (374)    (1,484)

   FHLB advances ............................        (1)         (5)        (6)
                                                -------     -------    -------
       Total interest-bearing liabilities ...    (1,462)        (95)    (1,557)
                                                -------     -------    -------
Increase (decrease) in net interest income ..      $583         $60       $643
                                                =======     =======    =======

Management of Interest Rate Risk and Market Risk Analysis

      Qualitative Aspects of Market Risk. Lawrence Federal's most significant
form of market risk is interest rate risk. The principal objectives of Lawrence
Federal's interest rate risk management are to evaluate the interest rate risk
inherent in certain balance sheet accounts, determine the level of risk
appropriate given Lawrence Federal's business strategy, operating environment,
capital and liquidity requirements and performance objectives, and manage the
risk consistent with the Board of Director's approved guidelines. Lawrence
Federal has an Asset/Liability Committee, responsible for reviewing its
asset/liability policies and interest rate risk position, which meets monthly
and reports trends and interest rate risk position to the Board of Directors
quarterly. The extent of the movement of interest rates is an uncertainty that
could have a negative impact on the earnings of Lawrence Federal.

      Lawrence Federal's assets include a high percentage of fixed-rate mortgage
loans. This exposes Lawrence Federal to the risk that during periods of rising
interest rates Lawrence Federal's interest expense will increase faster than its
interest income. In recent years, Lawrence Federal has used the following
strategies to manage interest rate risk: (1) emphasizing shorter term consumer
loans; (2) maintaining a high quality portfolio of short- to intermediate-term
securities; (3) maintaining high levels of liquidity; and


                                       37
<PAGE>

(4) emphasizing longer-term certificates of deposit to better structure
maturities of its interest rate sensitive liabilities. Lawrence Federal intends
to increase its emphasis on adjustable-rate loans in order to help reduce its
interest rate risk. Lawrence Federal currently does not participate in hedging
programs, interest rate swaps or other activities involving the use of
off-balance sheet derivative financial instruments.

      Quantitative Aspects of Market Risk. Lawrence Federal primarily utilizes
an interest sensitivity analysis prepared by the Office of Thrift Supervision to
review the level of interest rate risk. This analysis measures interest rate
risk by computing changes in the net portfolio value of Lawrence Federal's cash
flows from assets, liabilities and off-balance sheet items in the event of a
range of assumed changes in market interest rates. Net portfolio value
represents the market value of portfolio equity and is equal to the market value
of assets minus the market value of liabilities, with adjustments made for
off-balance sheet items. This analysis assesses the risk of loss in market risk
sensitive instruments in the event of a sudden and sustained 100 to 300 basis
point increase or decrease in market interest rates with no effect given to any
steps that management might take to counter the effect of that interest rate
movement. The following table, which is based on information provided to
Lawrence Federal by the Office of Thrift Supervision, presents the change in
Lawrence Federal's net portfolio value at December 31, 2002, that would occur
upon an immediate change in interest rates based on Office of Thrift Supervision
assumptions, but without giving effect to any steps that management might take
to counteract that change.

                                                          ---------------------
---------------                                           NPV as % of Portfolio
   Change in        ---------------------------------        Value of Assets
Interest Rates             Net Portfolio Value            ---------------------
In Basis Points     ---------------------------------      NPV          Change
 (Rate Shock)        Amount     $ Change     % Change     Ratio           (1)
---------------     -------     --------     --------     ------        -------
                              (Dollars in thousands)

      300           $14,790     $(2,685)        (15)      10.99%         (153)
      200            16,062      (1,413)         (8)      11.76%          (76)
      100            16,976        (499)         (3)      12.28%          (24)
   Static            17,475          --          --       12.52%           --
     -100            17,728         253           1       12.61%            8

----------
(1) Expressed in basis points.

      The preceding table shows that in the event of a sudden and sustained
increase in market interest rates of 2% or more, the net portfolio value of
Lawrence Federal would decrease moderately.

      The Office of Thrift Supervision uses certain assumptions in assessing the
interest rate risk of savings associations. These assumptions relate to interest
rates, loan prepayment rates, deposit decay rates, and the market values of
certain assets under differing interest rate scenarios, among others.

      As with any method of measuring interest rate risk, certain shortcomings
are inherent in the method of analysis presented in the foregoing table. For
example, although certain assets and liabilities may have similar maturities or
periods to repricing, they may react in different degrees to changes in market
interest rates. Also, the interest rates on certain types of assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other types may lag behind changes in market rates.


                                       38
<PAGE>

Additionally, certain assets, such as adjustable rate mortgage loans, have
features which restrict changes in interest rates on a short-term basis and over
the life of the asset. Further, if interest rates change, expected rates of
prepayments on loans and early withdrawals from certificates of deposit could
deviate significantly from those assumed in calculating the table.

Liquidity and Capital Resources

      On January 28, 2003 Lawrence Financial announced that the Company's Board
of Directors had approved the repurchase of up to 55,000 shares, or
approximately 8% of the Company's outstanding common stock. The program began
January 31, 2003, three business days after the release of earnings for the year
ended December 31, 2002. Repurchases, which will be conducted through open
market purchases or privately negotiated transactions, will be made from time to
time depending on market conditions and other factors. Funding for the
repurchase of stock may serve to reduce liquidity levels and/or increase the
amount of borrowed funds at the Company. Repurchased shares will be held in
treasury, reducing the Company's total equity, and will be available for the
Company's benefit plans.

      Liquidity is the ability to meet current and future financial obligations
of a short-term nature. Lawrence Federal further defines liquidity as the
ability to respond to the needs of depositors and borrowers as well as
maintaining the flexibility to take advantage of investment opportunities.
Lawrence Federal's primary sources of funds consist of deposit inflows, loan
repayments, maturities and sales of investment securities and borrowings from
the Federal Home Loan Bank. While maturities and scheduled amortization of loans
and securities are predictable sources of funds, deposit flows and mortgage
prepayments are greatly influenced by general interest rates, economic
conditions and competition.

      Liquidity management is both a daily and long-term responsibility of
management. Lawrence Federal adjusts its investments in liquid assets based upon
management's assessment of (1) expected loan demand, (2) expected deposit flows,
(3) yields available on interest-earning deposits and securities, and (4) the
objectives of its asset/liability management program. Excess liquid assets are
invested generally in interest-earning overnight deposits and short- and
intermediate-term U.S. Government and agency obligations.

      Lawrence Federal's most liquid assets are cash and short-term investments
(securities maturing in one year or less). The levels of these assets are
dependent on Lawrence Federal's operating, financing, lending and investing
activities during any given period. At December 31, 2002, cash and short-term
investments totaled $16.3 million. Securities classified as available-for-sale
totaled $14.2 million at December 31, 2002. In addition, at December 31, 2002,
Lawrence Federal had arranged the ability to borrow a total of approximately
$15.0 million from the Federal Home Loan Bank of Cincinnati.

      The primary investing activities of Lawrence Federal are the origination
of loans and the purchase of securities. In 2002, Lawrence Federal originated
$32.8 million of loans and purchased $14.4 million of securities. In 2001,
Lawrence Federal originated $38.0 million of loans and purchased $11.5 million
of securities.

      Financing activities consist primarily of activity in deposit accounts and
Federal Home Loan Bank advances. Lawrence Federal experienced a net increase in
total deposits of $2.1 million and $13.7 million for 2002 and 2001,
respectively. Deposit flows are affected by the overall level of interest rates,
the interest rates and products offered by Lawrence Federal and its local
competitors and other factors. Lawrence Federal generally manages the pricing of
its deposits to be competitive and to increase core deposit


                                       39
<PAGE>

relationships. Occasionally, Lawrence Federal offers promotional rates on
certain deposit products in order to attract deposits. In 2002, Federal Home
Loan Bank advances decreased $2.0.

      At December 31, 2002, Lawrence Federal had outstanding commitments to
originate loans of $2.6 million. These loans are to be secured by properties
located in its market area. Lawrence Federal anticipates that it will have
sufficient funds available to meet its current loan commitments. Certificates of
deposit that are scheduled to mature in one year or less from December 31, 2002
totaled $42.1 million. Management believes, based on past experience, that a
significant portion of those deposits will remain with Lawrence Federal. Based
on the foregoing, Lawrence Federal considers its liquidity and capital resources
sufficient to meet its outstanding short-term and long- term needs.

      Lawrence Federal is subject to various regulatory capital requirements
administered by the Office of Thrift Supervision including a risk-based capital
measure. The risk-based capital guidelines include both a definition of capital
and a framework for calculating risk-weighted assets by assigning balance sheet
assets and off-balance sheet items to broad risk categories. At December 31,
2002, Lawrence Federal exceeded all of its regulatory capital requirements.
Lawrence Federal is considered "well capitalized" under regulatory guidelines.
See "Regulation and Supervision--Federal Savings Institution Regulation--Capital
Requirements" and note 11 of the notes to the financial statements.

Impact of Accounting Pronouncements

      On December 31, 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure". This Statement amends
SFAS No. 123, "Accounting for Stock-Based Compensation", to provide alternative
methods for transition to SFAS No. 123's fair value method of accounting for
stock-based employee compensation. SFAS No. 148 also amends the disclosure
provision of SFAS No. 123 and APB Opinion No. 28, Interim Financial Reporting,
to require disclosure in the summary of significant accounting policies of the
effects of an entity's accounting policy with respect to stock-based employee
compensation on reported net income and earnings per share in annual and interim
financial statements. While the Statement does not amend SFAS No. 123 to require
companies to account for employee stock options using the fair value method, the
disclosure provisions of SFAS No. 148 are applicable to all companies with
stock-based employee compensation regardless of whether they account for that
compensation using the fair value method of SFAS No. 123 or the intrinsic value
method of APB Opinion No. 25. The Company currently accounts for stock-based
employee compensation using the intrinsic value method of APB Opinion No. 25.
These financial statements disclose stock-based employee compensation
information in accordance with SFAS No. 148.

      New accounting standards on asset retirement obligations, restructuring
activities and exit costs, operating leases, and early extinguishment of debt
were issued in 2002. The Company determined that when the new accounting
standards are adopted in 2003, they would not have a material impact on the
Company's financial condition or results of operations.

Effect of Inflation and Changing Prices

      The consolidated financial statements and related financial data presented
in this prospectus have been prepared following generally accepted accounting
principles, which require the measurement of financial position and operating
results in terms of historical dollars without considering the change in the
relative purchasing power of money over time due to inflation. The primary
impact of inflation is reflected in the increased cost of Lawrence Federal's
operations. Unlike most industrial companies, virtually all the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a


                                       40
<PAGE>

more significant impact on a financial institution's performance than do general
levels of inflation. Interest rates do not necessarily move in the same
direction or to the same extent as the prices of goods and services.

Item 7. Financial Statements

      The financial statements listed at Item 13 of this Form 10-KSB are
incorporated by reference into this Item 7 of Part II of Form 10-KSB.

Item 8. Change in and Disagreements with Accountants on Accounting and Financial
Disclosure

      None.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act

      The information relating to the directors and officers of Lawrence
Financial and information regarding compliance with Section 16(a) of the
Exchange Act is incorporated herein by reference to Lawrence Financial's Proxy
Statement for the 2003 Annual Meeting of Stockholders.

      The following sets forth certain information regarding the executive
officers and key employees of Lawrence Federal Savings Bank who are not also
directors. The following individuals are elected annually and hold office until
their successors have been elected and qualified or until they are removed or
replaced. Ages are as of February 28, 2003.

      RobRoy Walters has served as Executive Vice President and Chief Financial
Officer of Lawrence Federal Savings Bank since 2000. From 1989 until joining
Lawrence Federal Savings Bank, Mr. Walters was with Peoples Bank NA and Peoples
Bancorp, Inc. where he served in various capacities.

      Mary Kratzenberg has been associated with Lawrence Federal Savings Bank
for 26 years. She has served as Vice President, Secretary and Treasurer since
1996.

      Mark R. Potter has been associated with Lawrence Federal Savings Bank
since 1990. He has served as Vice President since 1996.

      Joseph W. Martin has been associated with Lawrence Federal Savings Bank
since 2000. He was appointed Vice President effective January 14, 2003. Prior to
joining Lawrence Federal Savings Bank, Mr. Martin was with Fifth Third and Ohio
River Bank where he served in various capacities including branch manager and
Assistant Vice President.

      Carey Dunfee has been associated with Lawrence Federal Savings Bank since
1994 and since that time has served as Controller.


                                       41
<PAGE>

Item 10. Executive compensation

      The information regarding executive compensation is incorporated herein by
reference to Lawrence Financial's Proxy Statement for the 2003 Annual Meeting of
Stockholders.


                                       42
<PAGE>

Item 11. Security ownership of certain beneficial owners and management

      The information relating to security ownership of certain beneficial
owners and management is incorporated herein by reference to Lawrence
Financial's Proxy Statement for the 2003 Annual Meeting of Stockholders.

1Equity Compensation Plan Information

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Plan category                  Number of securities to be   Weighted-average exercise   Number of securities
                               issued upon exercise of      price of outstanding        remaining available for
                               outstanding options,         options, warrants and       future issuance under
                               warrants and rights          rights                      equity compensation plans
                                                                                        (excluding securities
                                                                                        reflected in column (a))

                               (a)                         (b)                          (c)
-----------------------------------------------------------------------------------------------------------------
<S>                            <C>                         <C>                          <C>
Equity compensation plans
approved by security holders                    58,187                      $14.45                  19,395
-----------------------------------------------------------------------------------------------------------------
Equity compensation plans
not approved by security
holders                                             --                          --                      --
-----------------------------------------------------------------------------------------------------------------
Total                                           58,187                      $14.45                  19,395
-----------------------------------------------------------------------------------------------------------------
</TABLE>

Item 12. Certain relationships and related transactions

      The information relating to certain relationships and related transactions
is incorporated herein by reference to Lawrence Financial's Proxy Statement for
the 2003 Annual Meeting of Stockholders.


                                       43
<PAGE>

      (a) (1) The following consolidated financial statements of Lawrence
              Federal are filed as part of this document under Item 7.
              o   Report of Independent Auditors.
              o   Consolidated Balance Sheets for the years ended December 31,
                  2002 and 2001.
              o   Consolidated Statements of Income for the years ended December
                  31, 2002 and 2001.
              o   Consolidated Statements of Comprehensive Income for the years
                  ended December 31, 2002 and 2001.
              o   Consolidated Statements of Equity for the years ended December
                  31, 2002 and 2001.
              o   Consolidated Statements of Cash Flows for the years ended
                  December 31, 2002 and 2001.
              o   Notes to Consolidated Financial Statements

            (2)   All financial statement schedules are omitted because they are
                  not required or applicable, or the required information is
                  shown in the consolidated financial statements or the notes
                  thereto.

            (3)   Exhibits
                  3.1   Certificate of Incorporation of Lawrence Financial
                        Holdings, Inc.(1)
                  3.2   Bylaws of Lawrence Financial Holdings, Inc.(1)
                  4.0   Specimen Stock Certificate of Lawrence Financial
                        Holdings, Inc.(1)
                  10.1  Lawrence Federal Savings Bank Employment Agreement with
                        Jack L. Blair(2)
                  10.2  Lawrence Financial Holdings, Inc. Employment Agreement
                        with Jack L. Blair(2)
                  10.3  Lawrence Federal Savings Bank 401 (k) Savings Plan(1)
                  10.4  Lawrence Federal Savings Bank Employee Severance
                        Compensation Plan(2)
                  10.5  Lawrence Federal Savings Bank Supplemental Executive
                        Retirement Plan(2)
                  10.6  Deferred Compensation Agreement dated as of June 25,
                        1996 between Lawrence Federal Savings Bank and Jack L.
                        Blair(1)
                  10.7  Form of Deferred Fee Agreement between Lawrence Federal
                        Savings Bank and individual directors(1)
                  10.8  Form of Director Emeritus Agreement between Lawrence
                        Federal Savings Bank and individual directors(1)
                  10.9  Agreement dated December 1, 1992 between Lawrence
                        Federal Savings Bank and Lanco Services, Inc.(1)
                  10.10 Lawrence Financial Holdings, Inc. 2001 Stock-Based
                        Incentive Plan.(3)
                  21.0  Subsidiary information is incorporated herein by
                        reference to Part I, Item 1, "Description of
                        Business-Subsidiaries."
                  23.0  Consent of Crowe, Chizek and Company LLP
                  99.1  Certification of Chief Financial Officer
                  99.2  Certification of Chief Executive Officer
            (1)   Incorporated herein by reference from the Exhibits to Form
                  SB-2, Registration Statement and amendments thereto, initially
                  filed on September 8, 2000, Registration No. 333-45404.
            (2)   Incorporated herein by reference from the Exhibits to the
                  Company's Annual Report on Form 10-KSB for the year ended
                  December 31, 2001.
            (3)   Incorporated herein by reference to Appendix A to the
                  Company's Proxy Statement for its 2002 annual meeting of
                  shareholders filed on May 24, 2001.

      (b)   Reports on Form 8-K

                  None


                                       44
<PAGE>

ITEM 14

                             Controls and Procedures

      (a) Evaluation of disclosure controls and procedures. Lawrence Financial
maintains controls and procedures designed to ensure that information required
to be disclosed in the reports that Lawrence Financial files or submits under
the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the
Securities and Exchange Commission. Based upon their evaluation of those
controls and procedures performed within 90 days of the filing date of this
report, the chief executive and chief financial officers of Lawrence Financial
concluded that lawrence financial's disclosure controls and procedures were
adequate.

      (b) Changes in internal controls. Lawrence Financial made no significant
changes in its internal controls or in other factors that could significantly
affect these controls subsequent to the date of the evaluation of those controls
by the Chief Executive and Chief Financial officers.


                                       45
<PAGE>

CONFORMED SIGNATURES

      In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                              LAWRENCE FINANCIAL HOLDINGS, INC.

Date: March 14, 2003          By: /s/ Jack L. Blair
                                  ------------------------------------
                                  Jack L. Blair
                                  President Chief Executive Officer and Director

      In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.

Name                           Title                                  Date
----                           -----                                  ----

/s/ Jack L. Blair              President, Chief Executive        March 14, 2003
---------------------------    Officer and Director
Jack L. Blair                  (principal executive officer)

/s/ RobRoy Walters             Chief Financial Officer           March 14, 2003
---------------------------    (principal financial and
RobRoy Walters                 accounting officer)

/s/ Tracy E. Brammer, Jr.      Chairman of the Board             March 14, 2003
---------------------------
Tracy E. Brammer, Jr.

/s/ Charles E. Austin, II      Director                          March 14, 2003
---------------------------
Charles E. Austin, II

/s/ Herbert J. Karlet          Director                          March 14, 2003
---------------------------
Herbert J. Karlet

/s/ Phillip O. McMahon         Director                          March 14, 2003
---------------------------
Phillip O. McMahon

/s/ Robert N. Taylor           Director                          March 14, 2003
---------------------------
Robert N. Taylor


                                       46
<PAGE>

                                 CERTIFICATIONS

I, RobRoy Walters, certify that:

1.    I have reviewed this annual report on Form 10-KSB of Lawrence Financial
      Holdings, Inc;
2.    Based on my knowledge, the annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this annual report;
3.    Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of and for the periods presented in this annual report;
4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
      have:

      a)    designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this annual
            report is being prepared;

      b)    evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this annual report (the "Evaluation Date"); and

      c)    presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent function):

      a)    all significant deficiencies in the design or operation of the
            internal controls which could adversely affect the registrant's
            ability to record, process, summarize and report financial data and
            have identified for the registrant's auditors any material
            weaknesses in internal controls; and

      b)    any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

6.    The registrant's other certifying officers and I have indicated in this
      annual report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect the internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

Date: March 14, 2003
     ---------------------------

/s/ RobRoy Walters
--------------------------------
RobRoy Walters
Chief Financial Officer


                                       47
<PAGE>

I, Jack Blair, certify that:

1.    I have reviewed this annual report on Form 10-KSB of Lawrence Financial
      Holdings, Inc;
2.    Based on my knowledge, the annual report does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the circumstances under which such
      statements were made, not misleading with respect to the period covered by
      this annual report;
3.    Based on my knowledge, the financial statements, and other financial
      information included in this annual report, fairly present in all material
      respects the financial condition, results of operations and cash flows of
      the registrant as of and for the periods presented in this annual report;
4.    The registrant's other certifying officers and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
      have:

      a)    designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this annual
            report is being prepared;

      b)    evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this annual report (the "Evaluation Date"); and

      c)    presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on
      our most recent evaluation, to the registrant's auditors and the audit
      committee of registrant's board of directors (or persons performing the
      equivalent function):

      a)    all significant deficiencies in the design or operation of the
            internal controls which could adversely affect the registrant's
            ability to record, process, summarize and report financial data and
            have identified for the registrant's auditors any material
            weaknesses in internal controls; and

      b)    any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

6.    The registrant's other certifying officers and I have indicated in this
      annual report whether or not there were significant changes in internal
      controls or in other factors that could significantly affect the internal
      controls subsequent to the date of our most recent evaluation, including
      any corrective actions with regard to significant deficiencies and
      material weaknesses.

Date: March 14, 2003
     ---------------------------

/s/ Jack L. Blair
--------------------------------
Jack L. Blair
Chief Executive Officer


                                       48

<PAGE>



                         REPORT OF INDEPENDENT AUDITORS



Board of Directors
Lawrence Financial Holdings, Inc.
Ironton, Ohio


We have audited the accompanying consolidated balance sheets of Lawrence
Financial Holdings, Inc. as of December 31, 2002 and 2001, and related
consolidated statements of income, comprehensive income, changes in
shareholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Lawrence Financial Holdings, Inc. as of December 31, 2002 and 2001, and the
consolidated results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.


                                         /s/ Crowe, Chizek and Company LLP

                                         Crowe, Chizek and Company LLP

Columbus, Ohio
January 22, 2003

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

                                                                              1.

<PAGE>
<TABLE>
<CAPTION>
                                     LAWRENCE FINANCIAL HOLDINGS, INC.
                                        CONSOLIDATED BALANCE SHEETS
                                        December 31, 2002 and 2001

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

                                                                                 2002             2001
                                                                                 ----             ----
<S>                                                                          <C>              <C>
ASSETS
     Cash and due from banks                                                 $  16,140,900    $  11,984,642
     Merrill Lynch money market fund                                               179,600          213,124
                                                                             -------------    -------------
         Total cash and cash equivalents                                        16,320,500       12,197,766
     Securities available for sale, at fair value                               14,192,370       11,045,872
     Loans receivable - net                                                     96,457,033      105,017,604
     Federal Home Loan Bank stock                                                  614,400          587,000
     Premises and equipment, net                                                 3,340,888        3,315,192
     Accrued interest receivable                                                   685,755          797,483
     Cash surrender value of life insurance                                      2,131,685        1,975,177
     Other assets                                                                  645,916          340,858
                                                                             -------------    -------------

                                                                             $ 134,388,547    $ 135,276,952
                                                                             =============    =============

LIABILITIES AND SHAREHOLDERS' EQUITY
     Liabilities
         Noninterest-bearing deposits                                        $   1,995,918    $   1,465,129
         Interest-bearing deposits                                             116,930,237      115,330,755
                                                                             -------------    -------------
              Total deposits                                                   118,926,155      116,795,884
         Federal Home Loan Bank borrowings                                              --        2,000,000
         Other liabilities                                                         673,601          702,770
                                                                             -------------    -------------
              Total liabilities                                                119,599,756      119,498,654

     Shareholders' Equity
         Common stock; par value $0.01 per share; shares
           authorized:  4,000,000; shares issued:  799,110                           7,991            7,991
         Additional paid-in capital                                              7,467,042        7,426,239
         Retained earnings                                                       9,485,971        9,076,779
         Treasury stock, at cost; shares: 94,000 in 2002                        (1,683,600)              --
         Unearned ESOP shares; unearned shares: 43,458
           in 2002 and 49,666 in 2001                                             (434,580)        (496,660)
         Unearned restricted stock awards; unearned
           shares: 13,965 in 2002 and 18,620 in 2001                              (201,794)        (269,059)
         Accumulated other comprehensive income, net
           of tax of $76,119 in 2002 and $17,004 in 2001                           147,761           33,008
                                                                             -------------    -------------
              Total shareholders' equity                                        14,788,791       15,778,298
                                                                             -------------    -------------

                  Total liabilities and shareholders' equity                 $ 134,388,547    $ 135,276,952
                                                                             =============    =============

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

                      See accompanying notes to consolidated financial statements.
                                                                                                          2.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                             LAWRENCE FINANCIAL HOLDINGS, INC.
                             CONSOLIDATED STATEMENTS OF INCOME
                           Years ended December 31, 2002 and 2001

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

                                                                       2002          2001
                                                                       ----          ----
<S>                                                                <C>            <C>
INTEREST INCOME
     Loans, including fees                                         $ 7,930,951    $ 8,966,555
     Taxable securities                                                647,490        502,083
     Tax exempt securities                                              23,027             --
     Overnight deposits                                                144,785        192,083
                                                                   -----------    -----------
                                                                     8,746,253      9,660,721
INTEREST EXPENSE
     Deposits                                                        3,631,129      5,182,311
     Federal Home Loan Bank borrowings                                 116,905        122,998
                                                                   -----------    -----------
                                                                     3,748,034      5,305,309
                                                                   -----------    -----------

NET INTEREST INCOME                                                  4,998,219      4,355,412

Provision for loan losses                                              927,000        692,958
                                                                   -----------    -----------

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                  4,071,219      3,662,454

NONINTEREST INCOME
     Net securities gains                                               54,564         20,851
     Service charges                                                   451,963        430,359
     Other                                                             255,104        230,390
                                                                   -----------    -----------
                                                                       761,631        681,600
NONINTEREST EXPENSE
     Salaries and benefits                                           1,724,568      1,599,545
     Deposit insurance premiums                                         37,104         36,660
     Occupancy and equipment                                           371,174        376,065
     Data processing                                                   535,132        529,323
     Franchise tax                                                     127,152         83,391
     Loss on disposal of premises and equipment                         25,079             --
     Advertising expense                                               109,649         88,315
     Other                                                           1,026,580        819,192
                                                                   -----------    -----------
                                                                     3,956,438      3,532,491
                                                                   -----------    -----------

INCOME BEFORE INCOME TAX                                               876,412        811,563

Provision for income tax                                               269,963        235,482
                                                                   -----------    -----------

NET INCOME                                                         $   606,449    $   576,081
                                                                   ===========    ===========

Basic earnings per common share                                    $      0.91    $      0.80
                                                                   ===========    ===========

Diluted earnings per common share                                  $      0.90    $      0.80
                                                                   ===========    ===========

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

              See accompanying notes to consolidated financial statements.
                                                                                           3.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                           LAWRENCE FINANCIAL HOLDINGS, INC.
                     CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                          Years ended December 31, 2002 and 2001

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

                                                                      2002          2001
                                                                      ----          ----

<S>                                                                <C>           <C>
Net income                                                         $ 606,449     $ 576,081
Other comprehensive income:
     Unrealized gains (losses) arising during period                 228,432       159,351
     Reclassification adjustment for gains
       included in income                                            (54,564)      (20,851)
                                                                   ---------     ---------
                                                                     173,868       138,500
     Income tax expense                                              (59,115)      (47,090)
                                                                   ---------     ---------
         Other comprehensive income, net of tax                      114,753        91,410
                                                                   ---------     ---------

Comprehensive income                                               $ 721,202     $ 667,491
                                                                   =========     =========











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

                  See accompanying notes to consolidated financial statements.
                                                                                         4.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                  LAWRENCE FINANCIAL HOLDINGS, INC.
                                     CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                               Years ended December 31, 2002 and 2001
----------------------------------------------------------------------------------------------------------------------------------

                                                                                              Unearned   Accumulated
                                             Additional                           Unearned   Restricted    Other
                                   Common     Paid-In     Retained   Treasury       ESOP        Stock   Comprehensive
                                    Stock     Capital     Earnings     Stock       Shares      Awards   Income (Loss)     Total
                                    -----     -------     --------     -----       ------      ------   -------------     -----

<S>                               <C>       <C>          <C>        <C>          <C>         <C>         <C>          <C>
Balance - January 1, 2001         $  7,696  $ 6,994,305  $8,555,006  $       --  $ (558,660) $       --  $   (58,402) $ 14,939,945

Net Income                              --           --     576,081          --          --          --          --        576,081

Net unrealized appreciation on
 securities available for sale,
 net of tax of $47,090                  --           --          --          --          --          --      91,410         91,410

Cash dividend - $0.07 per share         --           --     (54,308)         --          --          --          --        (54,308)

Stock based compensation - 23,283
 stock awards issued, 4,663 stock
 awards earned, and 6,200 shares
 committed to be released under
 ESOP                                  295      431,934          --          --      62,000    (269,059)         --        225,170
                                  --------  -----------  ---------- -----------  ----------  ----------  ----------   ------------

Balance December 31, 2001            7,991    7,426,239   9,076,779          --    (496,660)   (269,059)     33,008     15,778,298

Net Income                              --           --     606,449          --          --          --          --        606,449

Net unrealized appreciation on
 securities available for sale,
  net of tax of $59,115                 --           --          --          --          --          --     114,753        114,753

Treasury stock acquired -
 94,000 shares                          --           --          --  (1,683,600)         --          --          --     (1,683,600)

Cash dividend - $0.28 per share         --           --    (197,257)         --          --          --          --       (197,257)

Stock based compensation - 4,655
 stock awards earned and 6,208
 shares committed to be released
 under ESOP                             --       40,803          --          --      62,080      67,265          --        170,148
                                  --------  -----------  ---------- -----------  ----------  ----------  ----------   ------------

Balance December 31, 2002         $  7,991  $ 7,467,042  $9,485,971 $(1,683,600) $ (434,580) $ (201,794) $  147,761   $ 14,788,791
                                  ========  ===========  ========== ===========  ==========  ==========  ==========   ============



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

                                   See accompanying notes to consolidated financial statements.
                                                                                                                                5.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                   LAWRENCE FINANCIAL HOLDINGS, INC.
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 Years ended December 31, 2002 and 2001

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

                                                                              2002               2001
                                                                              ----               ----
<S>                                                                       <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income                                                             $     606,449      $     576,081
   Adjustments to reconcile net income to net cash from
     operating activities
       Depreciation                                                             208,121            208,601
       Provision for loan losses                                                927,000            692,958
       Stock dividend on Federal Home Loan Bank stock                           (27,400)           (37,900)
       Premium amortization                                                       6,161              6,317
       Net securities gains                                                     (54,564)           (20,851)
       Loss on disposal of fixed assets                                          25,079                 --
       Deferred tax benefit                                                     ( 2,252)          (198,886)
       ESOP expense                                                             100,272             89,590
       Restricted stock award expense                                            69,876             67,381
       Change in other assets and liabilities                                  (239,972)           240,848
                                                                          -------------      -------------
            Net cash from operating activities                                1,618,770          1,624,139
                                                                          -------------      -------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of:
       Securities available for sale                                        (14,398,213)       (11,482,985)
       Premises and equipment                                                  (258,896)          (139,357)
   Proceeds from:
       Sale of securities available for sale                                  7,610,827          3,782,100
       Calls, maturities and principal repayments of securities
         available for sale                                                   3,863,159          3,250,000
   Net change in loans                                                        7,437,673           (356,201)
                                                                          -------------      -------------
            Net cash from investing activities                                4,254,550         (4,946,443)

CASH FLOWS FROM FINANCING ACTIVITIES
   Net change in:
       Deposits                                                               2,130,271         13,689,299
       Federal Home Loan Bank short-term borrowings                                  --         (3,000,000)
   Repayment of Federal Home Loan Bank long-term borrowings                  (2,000,000)                --
   Cash dividend paid                                                          (197,257)           (54,308)
   Purchase of treasury stock                                                (1,683,600)                --
                                                                          -------------      -------------
            Net cash from financing activities                               (1,750,586)        10,634,991
                                                                          -------------      -------------

Net change in cash and cash equivalents                                       4,122,734          7,312,687

Cash and cash equivalents at beginning of year                               12,197,766          4,885,079
                                                                          -------------      -------------

CASH AND CASH EQUIVALENTS AT END OF YEAR                                  $  16,320,500      $  12,197,766
                                                                          =============      =============

SUPPLEMENTAL DISCLOSURES:
   Cash paid during the year for:
       Interest                                                           $   3,757,756      $   5,328,737
       Income taxes                                                             386,500            339,000

   Non-cash transactions
       Transfer of loans to real estate owned                             $     195,898      $      31,036

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

                       See accompanying notes to consolidated financial statements.
                                                                                                          6.
</TABLE>

<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
Lawrence Financial Holdings, Inc. and its wholly-owned subsidiary, Lawrence
Federal Savings Bank (the "Bank") and the Bank's wholly-owned subsidiary,
Lawrence Financial Services Company (together, the "Company"). Intercompany
transactions and balances are eliminated in consolidation.

NATURE OF OPERATIONS: The Company provides financial services through its
offices in Lawrence and Scioto Counties located in Southeastern Ohio. Its
primary deposit products are checking, savings, and term certificate accounts,
and its primary lending products are real estate mortgage and installment loans.
Substantially all loans are secured by specific items of collateral including
consumer assets and real estate. Lawrence Financial Services Company holds real
property for investment purposes. Management considers the Company to operate in
one segment, banking.

USE OF ESTIMATES: To prepare financial statements in conformity with accounting
principles generally accepted in the United States of America, management makes
estimates and assumptions based on available information. These estimates and
assumptions affect the amounts reported in the financial statements and the
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.

CASH FLOWS: Cash and cash equivalents include cash on hand and deposits with
other financial institutions with original maturities of 90 days or less. Net
cash flows are reported for loan and deposit transactions and short-term
borrowings.

SECURITIES: Securities are classified as available for sale as they might be
sold before maturity. Securities available for sale are carried at fair value,
with unrealized holding gains and losses reported in other comprehensive income.
Other securities such as Federal Home Loan Bank stock are carried at cost.
Securities are written down to fair value when a decline in fair value is not
temporary. Gains and losses on sales are based on the amortized cost of the
security sold. Interest and dividend income, adjusted by amortization of
purchase premium or discount using the interest method, is included in earnings.

LOANS: Loans are reported at principal balance outstanding, net of unearned
interest, deferred loan fees and costs, and an allowance for loan losses.
Interest income is reported on the interest method and includes amortization of
net deferred loan fees and costs over contractual life of the loan.

--------------------------------------------------------------------------------
                                  (Continued)
                                                                              7.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Interest on real estate and certain consumer loans is accrued over the term of
the loans based on the principal balance outstanding. Where serious doubt exists
as to the collectibility of a loan, the accrual of interest is discontinued. The
carrying values of impaired loans are periodically adjusted to reflect cash
payments, revised estimates of future cash flows and increases in the present
value of expected cash flows due to the passage of time. Cash payments
representing interest income are reported as such. Other cash payments are
reported as reductions in carrying value, while increases or decreases due to
changes in estimates of future payments and due to the passage of time are
reported as adjustments to the allowance for loan losses. If these adjustments
cause the allowance for loan losses to require adjustment, such adjustment is
reported as an adjustment to the provision for loan losses.

ALLOWANCE FOR LOAN LOSSES: Because some loans may not be repaid in full, an
allowance for loan losses is maintained. The allowance for loan losses is a
valuation allowance, increased by the provision for loan losses and decreased by
charge-offs less recoveries. Management estimates the allowance balance required
based on past loan loss experience, known risks in the portfolio, information
about specific borrower situations and estimated collateral values, economic
conditions and other factors. Allocations of the allowance may be made for
specific loans, but the entire allowance is available for any loan that, in
management's judgment, should be charged-off.

Loan impairment is reported when full payment under the loan terms is not
expected. Impairment is evaluated in total for smaller-balance loans of similar
nature such as residential mortgage, consumer, and credit card loans, and on an
individual loan basis for other loans. If a loan is impaired, a portion of the
allowance is allocated so that the loan is reported, net, at the present value
of estimated future cash flows using the loan's existing rate or at the fair
value of collateral if repayment is expected solely from the collateral. Loans
are evaluated for impairment when payments are delayed, typically 120 days or
more, or when it is probable that not all principal and interest amounts will be
collected according to the original terms of the loan. While the factors that
identify a credit for consideration for measurement of impairment or nonaccrual
are similar, the measurement considerations differ. A loan is impaired when
management believes it is probable that they will be unable to collect all
amounts due according to the contractual terms of the loan agreement. A loan is
placed on nonaccrual when payments are more than 120 days past due unless the
loan is adequately collateralized and in the process of collection.

PREMISES AND EQUIPMENT: Land is carried at cost. Premises and equipment are
stated at cost less accumulated depreciation. Depreciation is computed over the
useful lives of the respective premises and equipment, which are primarily 30 to
50 years for premises and 5 to 10 years for furniture, fixtures and equipment.
Maintenance and repairs are charged to expense as incurred and improvements that
extend the useful lives of assets are capitalized.

--------------------------------------------------------------------------------
                                  (Continued)
                                                                              8.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

REAL ESTATE OWNED: Real estate properties acquired in collection of a loan are
recorded at the lower of cost, which is the unpaid balance plus foreclosure
costs or fair value at acquisition. Any reduction to fair value from the
carrying value of the related loan is accounted for as a loan loss. After
acquisition, a valuation allowance reduces the reported amount to the lower of
the initial amount or fair value less costs to sell. Expenses, gains and losses
on disposition, and changes in the valuation allowance are reported in other
expenses.

INCOME TAXES: 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 the expected future tax consequences of temporary
differences between the carrying amounts and tax bases 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.

LONG-TERM ASSETS: Premises and equipment and other long-term assets are reviewed
for impairment when events indicate its carrying amount may not be recoverable
from future undiscounted cash flows. If impaired, the assets are recorded at
discounted amounts.

EMPLOYEE STOCK OWNERSHIP PLAN: The cost of shares issued to the ESOP, but not
yet allocated to participants, is shown as a reduction of shareholders' equity.
Compensation expense is based on the market price of shares as they are
committed to be released to participant accounts.

STOCK-BASED COMPENSATION: Employee compensation under the stock option plan is
reported if options are granted below market price at grant date. Pro forma
disclosures of compensation cost of stock-based awards have been determined
using the fair value method that considers the time value of the option
considering the volatility of the Company's stock, expected dividend yield, and
the risk-free interest rate over the expected life of the option using a
Black-Scholes valuation model.

The options granted on December 31, 2001 have an exercise price of $14.45 and
expire in December 2011. One-fifth of the options vested on the date of grant;
the remaining options vest over four years. The fair value of options granted in
2001 was estimated using the following assumptions: Risk-free interest rate of
4.49%, expected life of 5 years, expected volatility of stock price of 27% and
expected dividend yield of 1.94%. Based on these assumptions, the estimated fair
value of options granted in 2001 was $3.77 per option.


--------------------------------------------------------------------------------
                                  (Continued)
                                                                              9.

<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The following pro forma information presents net income and earnings per common
share had the fair value of the options been used to measure compensation cost
for the stock option plan.

                                                           2002        2001
                                                           ----        ----

      Reported net income                              $  606,449   $  576,081
      Pro forma impact                                    (38,901)     (38,901)
                                                       ----------   ----------
      Pro forma net income                             $  567,548   $  537,180
                                                       ==========   ==========

      Reported basic earnings per common share         $     0.91   $     0.80
      Pro forma impact                                      (0.06)       (0.06)
                                                       ----------   ----------
      Pro forma basic earnings per common share        $     0.85   $     0.74
                                                       ==========   ==========

      Reported diluted earnings per common share       $     0.90   $     0.80
      Pro forma impact                                      (0.05)       (0.06)
                                                       ----------   ----------
      Pro forma diluted earnings per common share      $     0.85   $     0.74
                                                       ==========   ==========

COMPREHENSIVE INCOME: Comprehensive income consists of net income and other
comprehensive income. Other comprehensive income includes unrealized gains and
losses on securities available for sale, which are also recognized as a separate
component of equity.

EARNINGS PER COMMON SHARE: Basic earnings per common share is net income divided
by the weighted average number of common shares outstanding during the period.
ESOP shares are considered to be outstanding for this calculation unless they
are unearned. Restricted stock awards are considered outstanding as they are
earned. Diluted earnings per common share includes the dilutive effect of
additional potential common shares issuable under stock options and unearned
restrictive stock awards.

The weighted average number of common shares outstanding for basic and diluted
earnings per share computations were as follows.

                                                           2002        2001
                                                           ----        ----

   Net weighted-average shares outstanding - Basic        663,893     723,074
   Effect of stock options                                  5,436          --
   Effect of non-vested stock awards                        1,133          13
                                                        ---------   ---------

   Weighted-average shares outstanding - Diluted          670,462     723,087
                                                        =========   =========

--------------------------------------------------------------------------------
                                  (Continued)
                                                                             10.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

RECLASSIFICATION: Some items in the prior consolidated financial statements have
been reclassified to conform to current presentation.

NEW ACCOUNTING PRONOUNCEMENTS: On December 31, 2002, the FASB issued SFAS No.
148, "Accounting for Stock-Based Compensation - Transition and Disclosure". This
Statement amends SFAS No. 123, "Accounting for Stock-Based Compensation", to
provide alternative methods for transition to SFAS No. 123's fair value method
of accounting for stock-based employee compensation. SFAS No. 148 also amends
the disclosure provision of SFAS No. 123 and APB Opinion No. 28, Interim
Financial Reporting, to require disclosure in the summary of significant
accounting policies of the effects of an entity's accounting policy with respect
to stock-based employee compensation on reported net income and earnings per
share in annual and interim financial statements. While the Statement does not
amend SFAS No. 123 to require companies to account for employee stock options
using the fair value method, the disclosure provisions of SFAS No. 148 are
applicable to all companies with stock-based employee compensation regardless of
whether they account for that compensation using the fair value method of SFAS
No. 123 or the intrinsic value method of APB Opinion No. 25. The Company
currently accounts for stock-based employee compensation using the intrinsic
value method of APB Opinion No. 25. These financial statements disclose
stock-based employee compensation information in accordance with SFAS No. 148.

New accounting standards on asset retirement obligations, restructuring
activities and exit costs, operating leases, and early extinguishment of debt
were issued in 2002. The Company determined that when the new accounting
standards are adopted in 2003, they would not have a material impact on the
Company's financial condition or results of operations.

NOTE 2 - SECURITIES

The fair value of securities available for sale at year-end is as follows.
<TABLE>
<CAPTION>
                                            Unrealized     Unrealized         Fair
                                               Gains         Losses          Value
                                               -----         ------          -----
<S>                                         <C>           <C>            <C>
   2002:
   U.S. Government agencies                 $  155,967    $        --    $  4,910,298
   Mortgage backed securities                   78,905         (8,873)      7,637,755
   State and municipal securities                   --         (2,119)      1,644,317
                                            ----------    -----------    ------------

                                            $  234,872    $   (10,992)   $ 14,192,370
                                            ==========    ===========    ============

   2001:
   U.S. Government agencies                 $  150,729    $  (101,326)   $ 10,037,072
   Trust preferred securities                    5,625         (5,016)      1,008,800
                                            ----------    -----------    ------------

                                            $  156,354    $  (106,342)   $ 11,045,872
                                            ==========    ===========    ============
</TABLE>
--------------------------------------------------------------------------------
                                  (Continued)
                                                                             11.

<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

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

NOTE 2 - SECURITIES (Continued)

Contractual maturities of securities at year-end 2002 were as follows.
Securities not due at a single maturity date are shown separately.

                                                          Fair
                                                         Value
                                                         -----

     Due after one year through five years           $  2,610,719
     Due after five years through ten years             2,299,579
     Due after ten years                                1,644,317
     Mortgage backed securities                         7,637,755
                                                     ------------

                                                     $ 14,192,370
                                                     ============

Proceeds from sales of securities were $7,610,827 and $3,782,100 for 2002 and
2001. Gross gains of $54,564 and $20,851 were recognized on those sales in 2002
and 2001.

Securities with fair value of $4,996,292 and $2,738,961 at December 31, 2002 and
2001 were pledged to secure public deposits.

NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans are as follows.
                                                        December 31,
                                                        ------------
                                                  2002                 2001
                                                  ----                 ----
     1-4 family residential
       mortgage loans                         $ 43,967,493        $  46,422,589
     Other real estate loans                    10,165,401            9,537,384
     Automobile loans                           18,742,226           21,476,262
     Mobile home loans                          15,193,054           16,903,860
     Other                                       6,857,022            8,743,537
                                              ------------        -------------
                                                94,925,196          103,083,632
     Net deferred loan origination
       costs                                     2,642,650            3,166,057
     Allowance for loan losses                  (1,110,813)          (1,232,085)
                                              ------------        -------------

          Total                               $ 96,457,033        $ 105,017,604
                                              ============        =============


--------------------------------------------------------------------------------
                                  (Continued)
                                                                             12.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

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

NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)

Activity in the allowance for loan losses is as follows.

                                                     Years Ended December 31,
                                                     ------------------------
                                                      2002              2001
                                                      ----              ----

     Beginning balance                            $  1,232,085      $   774,630
     Provision for loan losses                         927,000          692,958
     Charge-offs                                    (1,105,773)        (249,988)
     Recoveries                                         57,501           14,485
                                                  ------------      -----------

     Ending balance                               $  1,110,813      $ 1,232,085
                                                  ============      ===========

Impaired loans for the years ended December 31, 2002 and 2001 were not material.

                                                          At December 31,
                                                          ---------------
                                                      2002              2001
                                                      ----              ----
   Accruing loans past due 90 days or more        $  1,411,000      $   518,000
   Nonaccruing loans                                   531,000          752,000
                                                  ------------      -----------

   Total nonperforming loans                      $  1,942,000      $ 1,270,000
                                                  ============      ===========

In the normal course of business, the Company has made loans to certain
directors, executive officers and their associates. Loan activity relating to
these individuals for the year ended December 31, 2002 is as follows.

   Beginning balance                                       $  722,130
   New loans                                                  320,000
   Repayments                                                 (69,927)
   Other changes                                              116,255
                                                           ----------

   Ending balance                                          $1,088,458
                                                           ==========

Other changes represent loans applicable to the current reporting period that
are excludable from the other report period, due to a change of individuals
considered to be executive officers.


--------------------------------------------------------------------------------
                                  (Continued)
                                                                             13.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

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

NOTE 4 - PREMISES AND EQUIPMENT

Office properties and equipment consisted of the following.

                                                           December 31,
                                                           ------------
                                                      2002              2001
                                                      ----              ----

   Land                                           $  1,041,609      $ 1,041,609
   Buildings and improvements                        3,375,251        3,266,761
   Furniture and equipment                           1,096,497        1,009,977
   Automobile                                           37,749           17,288
                                                  ------------      -----------
        Total cost                                   5,551,106        5,335,635
   Accumulated depreciation                         (2,210,218)      (2,020,443)
                                                  ------------      -----------

                                                  $  3,340,888      $ 3,315,192
                                                  ============      ===========

NOTE 5 - DEPOSITS

Interest-bearing deposits consisted of the following.
                                                           December 31,
                                                           ------------
                                                      2002              2001
                                                      ----              ----

   Passbook accounts                              $ 33,710,735      $ 22,210,258
   Money market and NOW accounts                    14,963,336        14,113,291
   Certificates of deposit                          68,256,166        79,007,206

                                                  $116,930,237      $115,330,755
                                                  ============      ===========

Certificates of deposit of greater than $100,000 were $17,732,485 and
$15,062,364 at December 31, 2002 and 2001. Deposits greater than $100,000 are
not federally insured.

Maturities of certificates of deposits are as follows.

                                                   December 31,
                                                       2002
                                                       ----

             2003                                 $  42,073,080
             2004                                    13,797,783
             2005                                     5,581,889
             2006                                     1,806,211
             2007                                       919,614
             Thereafter                               4,077,589
                                                  -------------

                                                  $  68,256,166
                                                  =============

--------------------------------------------------------------------------------
                                  (Continued)
                                                                             14.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

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

NOTE 6 - FEDERAL HOME LOAN BANK (FHLB) BORROWINGS

At December 31, 2002, the Company had no FHLB borrowings. At December 31, 2001,
the Company had FHLB borrowings of $2,000,000 with a fixed interest rate of
5.91% maturing December 27, 2002. At December 31, 2002, the Company had letters
of credit from the FHLB totaling $10,500,000, for which $14,175,000 of eligible
1-4 family residential mortgage loans and $614,400 of FHLB stock were pledged to
the FHLB to secure these letters of credit. The letters of credit are pledged by
the Company to secure public deposits.


NOTE 7 - COMMITMENTS, CONTINGENCIES AND FINANCIAL
  INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

Some financial instruments are used to meet customer-financing needs, including
commitments to make loans. These involve, to varying degrees, credit and
interest-rate risks more than the amount reported in the consolidated balance
sheet.

Commitments to extend credit were as follows.

                                                        December 31,
                                                        ------------
                                                2002                   2001
                                                ----                   ----

     Fixed rate                             $    696,675          $   3,552,635
     Variable rate                             4,471,941              2,260,523
                                            $  5,168,616          $   5,813,158

     Range of interest rates on
       commitments                         4.25% to 6.75%        4.75% to 16.80%

Commitments to make loans are agreements to lend to a customer as long as there
is no violation of any condition established in the commitment, and generally
have fixed expiration dates. Exposure to credit loss if the other party does not
perform is represented by the contractual amount of these items. Collateral or
other security is normally not obtained for these financial instruments before
their use, and many of the commitments are expected to expire without being
used.

At December 31, 2002,the Company had $14,321,943 in demand deposits due from the
Federal Home Loan Bank of Cincinnati.

The Company is, from time to time, involved in various lawsuits and claims that
arise in the normal course of business. In the opinion of management, any
liability that may result from these lawsuits and claims will not materially
affect the financial position or results of operations of the Company.

--------------------------------------------------------------------------------
                                  (Continued)
                                                                             15.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

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

NOTE 8 - EMPLOYEE BENEFITS

RETIREMENT PLAN: The Company sponsors a 401(k) profit sharing plan for eligible
employees. Under the plan, employees who are at least 21 1/2 years of age and
have completed six months of service are eligible to participate. The Company
matches each employee's contribution at a rate of 100% of employees'
contributions up to 5% of gross compensation. Participants become 100% vested as
to the Company's contributions after three years of service. Contributions and
expense for the years ended December 31, 2002 and 2001 totaled $38,276 and
$33,034.

EMPLOYEE STOCK OWNERSHIP PLAN: Employees participate in an Employee Stock
Ownership Plan (ESOP). On December 29, 2000, the ESOP borrowed $620,660 from the
Company to purchase 62,066 shares of common stock at $10 per share. The Company
makes discretionary contributions to the ESOP, and the ESOP uses funds it
receives to repay the loan. Cash dividends paid on unallocated shares are used
to reduce the accrued interest and principal payable amount of the ESOP's loan
payable to the Company. ESOP shares are allocated to participants based on
relative compensation and expense is recorded. Participants receive the shares
at the end of employment.

Contributions to the ESOP during 2002 and 2001 were $90,373 and $90,373. Expense
for 2002 and 2001 was $100,272 and $89,590.

Shares held by the ESOP at December 31, 2002 and 2001 were as follows.

                                                        December 31,
                                                        ------------
                                                    2002            2001
                                                    ----            ----

     Allocated to participants                       18,608          12,400
     Unearned                                        43,458          49,666
                                                  ---------       ---------

     Total ESOP shares                               62,066          62,066
                                                  =========       =========

     Fair value of unearned shares                $ 699,674       $ 717,674
                                                  =========       =========

DEFERRED COMPENSATION PLAN: The Bank makes payments to retired directors under a
plan approved by the Board of Directors. Outside directors who currently serve
on the Board are also eligible for payments under deferred fee and director
emeritus retirement plans approved by the Board of Directors upon retirement. In
addition, there is an incentive retirement plan in place for the current
President and CEO. The present value of payments expected to be provided are
accrued during the service period of the covered individuals. Expenses related
to the plans amounted to $44,625 and $40,322 for the years ended December 31,
2002 and 2001.

--------------------------------------------------------------------------------
                                  (Continued)
                                                                             16.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

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

NOTE 8 - EMPLOYEE BENEFITS  (Continued)

STOCK-BASED INCENTIVE PLAN: On July 5, 2001, the shareholders approved the
Lawrence Financial Holdings, Inc. 2001 Stock-Based Incentive Plan (the "Plan").
The Plan authorized the granting of up to 77,582 shares of common stock as
options and 31,033 shares of common stock as restricted stock awards. On
December 31, 2001, the Board of Directors granted options to purchase 58,187
shares of common stock at an exercise price equal to the market value (as
defined in the Plan) to certain employees, officers and directors of the
Company. One-fifth of the options awarded become exercisable on each of the four
anniversaries of the date of grant; the first fifth became exercisable on the
grant date. The option period expires 10 years from the date of grant.

Following is a summary of stock option plan activity during 2002 and 2001.

<TABLE>
<CAPTION>
                                                  2002                       2001
                                        ------------------------   ------------------------
                                                       Weighted                   Weighted
                                                        Average                    Average
                                                       Exercise                   Exercise
                                         Shares         Price       Shares         Price
                                         ------         -----       ------         -----
<S>                                       <C>          <C>           <C>          <C>
   Outstanding at beginning of year       58,187       $  14.45          --       $     --
   Granted                                    --             --      58,187          14.45
                                        --------                   --------

   Outstanding at end of year             58,187       $  14.45      58,187       $  14.45
                                        ========                   ========

   Options exercisable at year-end        23,278       $  14.45      11,640       $  14.45

   Remaining shares available
     for grant as options                 19,395                     19,395
</TABLE>


At December 31, 2002, the 58,187 options outstanding had a weighted average
remaining contractual life of 9 years.

Restrictive stock awards are used as a means of providing directors and certain
key employees of the Company with an ownership interest in the Company in a
manner designed to compensate such directors and key employees for services to
the Company.

On December 31, 2001, the Board of Directors awarded 23,283 shares of restricted
stock to outside directors and certain officers of the Company. No shares had
been previously awarded. One-fifth of such shares are earned and nonforfeitable
on each of the first four anniversaries of the date of the award; the first
fifth became exercisable on the award date. 9,318 shares have vested at December
31, 2002. In the event of the death or disability of a participant or a change
in control of the Company, however, the participant's shares will be

--------------------------------------------------------------------------------
                                  (Continued)
                                                                             17.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

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

NOTE 8 - EMPLOYEE BENEFITS  (Continued)

deemed earned and nonforfeitable upon such date. At December 31, 2002, there
were 7,750 shares reserved for future awards. Compensation expense related to
restrictive shares awards is based upon the cost of the shares, which
approximates fair value at the date of grant. The compensation expense totaled
$69,876 and $67,381 for the years ended December 31, 2002 and 2001,
respectively.

NOTE 9 - INCOME TAXES

An analysis of the provision for income tax is as follows.

                                                             December 31,
                                                     --------------------------
                                                       2002             2001
                                                       ----             ----

   Current                                           $  272,215     $  434,368
   Deferred                                              (2,252)      (198,886)
                                                     ----------     ----------

                                                     $  269,963     $  235,482
                                                     ==========     ==========

The sources of gross deferred tax assets and liabilities are as follows.

                                                            December 31,
                                                     --------------------------
                                                       2002             2001
                                                       ----             ----
   Total deferred tax assets
       Allowance for loan losses                     $  367,933     $  418,909
       Deferred compensation                            164,608        116,766
       Accrued ESOP                                      22,898             --
       Accrued restrictive stock awards                     408             --

   Total deferred tax liabilities
       FHLB stock dividends                            (128,138)      (118,822)
       Deferred loan fees/cost                          (24,142)       (30,325)
       Net unrealized gain on securities
          available for sale                            (76,119)       (17,004)
       Accrued ESOP                                          --         (1,947)
       Depreciation                                     (27,710)       (10,976)
                                                     ----------     ----------

          Net deferred tax asset                     $  299,738     $  356,601
                                                     ==========     ==========

The bank has sufficient taxes paid in current and prior years to warrant
recording the full deferred tax asset without a valuation allowance.


--------------------------------------------------------------------------------
                                  (Continued)
                                                                             18.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

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

NOTE 9 - INCOME TAXES (Continued)

Total federal income tax expense differs from the expected amounts computed by
applying the statutory federal tax rate of 34% to income before taxes. The
reasons for this difference are as follows.

<TABLE>
<CAPTION>
                                                            Years Ended December 31,
                                              ------------------------------------------------
                                                       2002                       2001
                                              ----------------------     ---------------------
                                                Amount        Rate         Amount        Rate
                                                ------        ----         ------        ----

<S>                                           <C>             <C>        <C>            <C>
    Tax expense at statutory rate             $ 297,980       34.0%      $ 275,932      34.0%
    Net earnings of insurance
      contracts                                 (53,212)      (6.1)        (35,682)     (4.4)
    Tax-exempt interest income                  (17,937)      (2.0)        (12,777)     (1.6)
    Other                                        43,132        4.9           8,009       1.0
                                              ---------       ----       ---------      ----

         Tax expense at effective rate        $ 269,963       30.8%      $ 235,482      29.0%
                                              =========       ====       =========      ====
</TABLE>

Retained earnings at December 31, 2002 and 2001 include $1,493,442 for both
years for which no provision for federal income taxes has been made. If this
portion of retained earnings is used in the future for any purpose other than to
absorb bad debts, the amount used will be added to future taxable income. The
unrecorded deferred tax liability on the above amount at December 31, 2002 and
2001 was $507,770 for both years.


NOTE 10 - REGULATORY CAPITAL REQUIREMENTS

The Bank 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 Bank's financial statements. Under capital adequacy
guidelines and regulatory framework for prompt-corrective action, the Bank must
meet specific capital guidelines involving quantitative measures of the Bank's
assets, liabilities and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Bank's capital amounts and classifications
are also subject to qualitative judgments by regulators about the Bank's
components, risk weightings and other factors. At December 31, 2002 and 2001,
management believes the Bank complies with all regulatory capital requirements.
Based on the Bank's computed regulatory capital ratios, the Bank was considered
well capitalized under Section 38 of the Federal Deposit Insurance Act as of its
last regulatory exam. Management is unaware of any events or circumstances that
would change the Bank's classification since that time.


--------------------------------------------------------------------------------
                                  (Continued)
                                                                             19.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

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

NOTE 10 - REGULATORY CAPITAL REQUIREMENTS (Continued)

The Bank's actual capital levels and minimum required levels were as follows.

<TABLE>
<CAPTION>
                                                                                           Minimum
                                                                                        Required to be
                                                             Minimum Required       Well Capitalized Under
                                                                for Capital           Prompt Corrective
                                         Actual              Adequacy Purposes        Action Regulations
                                         ------              -----------------        ------------------
(dollars in thousands)            Amount        Ratio      Amount        Ratio        Amount        Ratio
                                  ------        -----      ------        -----        ------        -----
<S>                              <C>            <C>       <C>             <C>        <C>           <C>
DECEMBER 31, 2002:
Total capital (to risk-
  weighted assets)               $ 13,806       15.19%    $ 7,271         8.0%       $ 9,089       10.0%
Tier 1 (core) capital (to
  risk-weighted assets)          $ 12,976       14.28%    $ 3,635         4.0%       $ 5,452        6.0%
Tier 1 (core) capital (to
  adjusted total assets)         $ 12,976        9.67%    $ 5,368         4.0%       $ 6,709        5.0%

DECEMBER 31, 2001:
Total capital (to risk-
  weighted assets)               $ 14,467       14.58%    $ 7,936         8.0%       $ 9,921       10.0%
Tier 1 (core) capital (to
  risk-weighted assets)          $ 13,212       13.32%    $ 3,968         4.0%       $ 5,952        6.0%
Tier 1 (core) capital (to
  adjusted total assets)         $ 13,212        9.82%    $ 5,381         4.0%       $ 6,726        5.0%
</TABLE>

Regulations of the Office of Thrift Supervision (OTS) limit the amount of cash
dividends, repurchase of common stock and other capital distributions that may
be paid by a bank without prior approval of the OTS. The regulatory restriction
provides that the Bank may make a capital distribution without notifying the OTS
or applying to the OTS for approval provided that (1) the total amount of all
capital at the institution (including the proposed capital distribution) for the
applicable calendar year does not exceed the institution's net income for that
year to date plus the institution's retained net income for the preceding two
years; (2) the institution will be well capitalized following the proposed
capital distributions; and, (3) certain other conditions are met.

--------------------------------------------------------------------------------
                                  (Continued)
                                                                             20.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

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

NOTE 10 - REGULATORY CAPITAL REQUIREMENTS (Continued)

In addition to the restriction described above, the Bank may not declare or pay
cash dividends or repurchase any of its shares of common stock if the effect
thereof would reduce the Bank's capital level below the aggregate balance
required for the liquidation account, which was established at the time of the
Bank's conversion from a federal mutual savings bank to a federal stock savings
bank, which was consummated on December 28, 2000. The liquidation account was
established in an amount equal to the Bank's total net worth as of the latest
statement of financial condition appearing in the final prospectus ($8,336,785
at September 30, 2000). The liquidation account is maintained for the benefit of
eligible depositors who continue to maintain their accounts at the Bank after
the conversion. The liquidation account will be reduced annually to the extent
the eligible depositors have reduced their qualifying deposits. Subsequent
increases in an eligible depositor's deposit account will not restore such
person's interest in the liquidation account. In the event of a complete
liquidation of the Bank, each eligible depositor will be entitled to receive a
distribution from the liquidation account in an amount proportionate to the
current adjusted qualified balances for accounts then held.

NOTE 11 - FAIR VALUES OF FINANCIAL INSTRUMENTS

Estimated fair values and the related carrying values of the Company's financial
instruments at yearend are as follows.
<TABLE>
<CAPTION>
                                                         2002                                2001
                                                         ----                                ----
                                              Carrying             Fair            Carrying            Fair
                                               Value               Value             Value             Value
                                               -----               -----             -----             -----
<S>                                      <C>                <C>               <C>               <C>
    Financial assets
       Cash and cash equivalents         $    16,320,500    $    16,320,000   $    12,197,766   $   12,198,000
       Securities available for sale          14,192,370         14,192,000        11,045,872       11,046,000
       Loans, net                             96,457,033         99,378,000       105,017,604      108,495,000
       Federal Home Loan Bank
         stock                                   614,400            614,000           587,000          587,000
       Accrued interest receivable               685,755            686,000           797,483          797,000

    Financial liabilities
       Deposits                             (118,926,155)      (119,527,000)     (116,795,884)    (117,722,000)
       Federal Home Loan Bank
         advances                                     --                 --        (2,000,000)      (2,066,000)
       Accrued interest payable                   (8,355)            (8,000)          (18,077)         (18,000)
</TABLE>





--------------------------------------------------------------------------------
                                  (Continued)
                                                                             21.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

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

NOTE 11 - FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

For purposes of the above disclosures of estimated fair values, certain
assumptions were used. The carrying value for cash and cash equivalents, accrued
interest receivable, Federal Home Loan Bank stock and accrued interest payable
are considered to approximate fair value. The estimated fair value for
securities available for sale is based on quoted market values for the
individual securities or for equivalent securities. The estimated fair value for
loans is based on estimates of the difference in interest rates the Company
would charge the borrowers for similar such loans with similar maturities made
at December 31, 2002 and 2001, applied for an estimated time period until the
loan is assumed to reprice or to be paid. The estimated fair value for demand
deposits, savings deposits and the variable-rate line of credit from Federal
Home Loan Bank is based on their carrying value. The estimated fair value for
time deposits and fixed-rate advances from Federal Home Loan Bank is based on
estimates of the rate the Bank would pay on such deposits or borrowings at
December 31, 2002 and 2001, applied for the time period until maturity. The
estimated fair value for other financial instruments and off-balance-sheet loan
commitments approximate cost at December 31, 2002 and 2001 and are not
considered significant to this presentation. While these estimates of fair value
are based on management's judgment of the most appropriate factors, there is no
assurance that, were the Company to have disposed of such items at December 31,
2002 and 2001, the estimated fair values would necessarily have been realized at
that date, since market values may differ depending on various circumstances.
The estimates of fair values at December 31, 2002 and 2001 should not
necessarily be considered to apply at subsequent dates. In addition, other
assets and liabilities of the Company that are not defined as financial
instruments are not included in the above disclosures, such as premises and
equipment and life insurance contracts. Also, nonfinancial instruments typically
not recognized in the financial statements nevertheless may have value but are
not included in the above disclosures. These include, among other items, the
estimated earnings power of core deposit accounts, the trained work force,
customer goodwill and similar items.








--------------------------------------------------------------------------------
                                  (Continued)
                                                                             22.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

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NOTE 12 - CONDENSED PARENT COMPANY FINANCIAL INFORMATION

Presented below are condensed financial statements for the parent company,
Lawrence Financial Holdings, Inc.

<TABLE>
<CAPTION>
                              CONDENSED BALANCE SHEETS
                             December 31, 2002 and 2001
                                                                  2002            2001
                                                                  ----            ----
<S>                                                           <C>             <C>
  Assets
      Cash and cash equivalents                               $     695,665   $  2,052,022
      Investment in subsidiary                                   13,123,120     13,244,985
      Loans receivable from ESOP                                    447,199        490,933
      Dividends receivable from subsidiary                          515,000             --
      Deferred tax asset                                             59,037         48,130
                                                              -------------   ------------

             Total assets                                     $  14,840,021   $ 15,836,070
                                                              =============   ============
  Liabilities
      Accrued expenses and other liabilities                  $      51,230   $     57,772

  Shareholders' equity                                           14,788,791     15,778,298
                                                              -------------   ------------
             Total liabilities and shareholders' equity       $  14,840,021   $ 15,836,070
                                                              =============   ============

<CAPTION>

                          CONDENSED STATEMENTS OF INCOME
                      Years ended December 31, 2002 and 2001

                                                                  2002            2001
                                                                  ----            ----
<S>                                                           <C>             <C>
  Interest income                                             $      58,601   $     96,033
  Dividends from subsidiary bank                                    533,000        540,000
                                                              -------------   ------------
  Income before income taxes and equity in
    undistributed earnings of subsidiary bank                       591,601        636,033

  Equity in undistributed earnings of subsidiary bank               177,911        125,725
                                                              -------------   ------------
  Total income                                                      769,512        761,758

  Non-interest expense                                              216,877        231,857
                                                              -------------   ------------
  Income before income taxes                                        552,635        529,901
  Income tax benefit                                                 53,814         46,180
                                                              -------------   ------------

  Net Income                                                  $     606,449   $    576,081
                                                              =============   ============
</TABLE>

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                                  (Continued)
                                                                             23.
<PAGE>

                        LAWRENCE FINANCIAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

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

NOTE 12 - CONDENSED PARENT COMPANY FINANCIAL INFORMATION (Continued)

<TABLE>
<CAPTION>
                               CONDENSED STATEMENTS OF CASH FLOWS
                             Years ended December 31, 2002 and 2001

                                                                           2002            2001
                                                                           ----            ----
<S>                                                                    <C>             <C>
Cash flows from operating activities
   Net income                                                          $    606,449    $   576,081
   Adjustments to reconcile net income to net cash from
     operating activities
       Equity in undistributed earnings of subsidiary bank                 (710,911)      (665,725)
       Dividend received                                                    533,000        540,000
       Restrictive stock award expense                                       69,876         67,381
       Net change in accrued expenses and other liabilities                 (17,648)      (684,628)
                                                                       ------------    -----------
            Net cash from operating activities                              480,766       (166,891)

Cash flows from investing activities
       Repayment on loan receivable from ESOP                                43,734         39,940
                                                                       ------------    -----------
            Net cash from investing activities                               43,734         39,940

Cash flows from financing activities
   Payment of dividends                                                    (197,257)       (54,308)
   Purchase of treasury stock                                            (1,683,600)            --
                                                                       ------------    -----------
            Net cash from financing activities                           (1,880,857)       (54,308)

   Net change in cash and cash equivalents                               (1,356,357)      (181,259)

Cash and cash equivalents at beginning of period                          2,052,022      2,233,281
                                                                       ------------    -----------

Cash and cash equivalents at end of period                             $    695,665    $ 2,052,022
                                                                       ============    ===========
</TABLE>


The extent to which the Company may pay cash dividends to shareholders will
depend on the cash currently available at the Company, as well as the Bank's
ability to pay dividends to the Company (see Note 10).


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                                                                             24.