UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED

                                  June 30, 1999

                                       OR

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

         For the transition period from                   to


                         Commission File Number 0-22223

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                 (Name of small business issuer in its charter)

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


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

Issuer's telephone number, including area code:               (937) 492-6129
                                                              --------------

           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 $0.01 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  Securities  Exchange  Act of 1934 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  herein,  and  no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

         State the issuer's revenues for its most recent fiscal year: $8,193,417
<PAGE>
         The aggregate  market value of the voting stock held by  non-affiliates
of the  registrant,  computed by reference to the closing price of such stock on
the NASDAQ System on August 30, 1999,  was $14.85  million.  (The exclusion from
such amount of the market  value of the shares  owned by any person shall not be
deemed an  admission by the  registrant  that such person is an affiliate of the
registrant.)

         As of August 30,  1999,  there were  issued and  outstanding  1,664,622
shares of the Registrant's Common Stock


                       DOCUMENTS INCORPORATED BY REFERENCE

         Parts II and IV of Form  10-KSB -  Portions  of the  Annual  Report  to
Stockholders for the fiscal year ended June 30, 1999.

         Part III of Form 10-KSB - Portions of Proxy  Statement  for 1999 Annual
Meeting of Stockholders.

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE)
         YES     [  ]      NO   [ X ]

<PAGE>
                                     PART I

Item 1.  Description of Business

General

         Peoples-Sidney  Financial  Corporation  (the  "Company")  is a Delaware
corporation  which  was  organized  in 1997 by  Peoples  Federal  Savings & Loan
Association of Sidney ("Peoples  Federal" or the  "Association") for the purpose
of  becoming a savings and loan  holding  company.  The Company  owns all of the
capital stock of the Association issued in connection with the completion of the
Association's  conversion from the mutual to stock form of organization on April
25, 1997.  Unless the context otherwise  requires,  all references herein to the
Company include the Company and the Association on a consolidated  basis, except
that  information  as of a date  prior to April  25,  1997  relates  only to the
Association.  The Association,  the Company's only subsidiary,  was organized in
1886 as an  Ohio-chartered  mutual  association  and  converted  to a  federally
chartered association in 1958.

         The  Association  is primarily  engaged in the  business of  attracting
savings  deposits from the general  public and investing such funds in permanent
mortgage  loans secured by one- to four-family  residential  real estate located
primarily  in  Shelby  County,  Ohio,  and the  contiguous  counties  of  Logan,
Auglaize, Miami, Darke and Champaign. The Association conducts business from its
main office in Sidney,  Ohio and its  full-service  branches in Anna and Jackson
Center, Ohio. The Association also originates loans for the construction of one-
to four-family real estate, loans secured by multi-family real estate (over four
units) and  nonresidential  real estate,  and consumer loans and invests in U.S.
government obligations, mortgage-backed and related securities, interest bearing
deposits in other  financial  institutions  and other  investments  permitted by
applicable law.

         The  Association's  operations  are  regulated  by the Office of Thrift
Supervision  (the "OTS").  The  Association is a member of the Federal Home Loan
Bank System  ("FHLB  System")  and a  stockholder  of the Federal Home Loan Bank
("FHLB")  of  Cincinnati.  The  Association  is  also a  member  of the  Savings
Association  Insurance Fund ("SAIF") and its deposit  accounts are insured up to
applicable  limits  by  the  Federal  Deposit  Insurance  Corporation  ("FDIC").
Accordingly,  the Association is also subject to regulation and oversight by the
FDIC.

         The  executive  offices  of the  Company  are  located  at 101 E. Court
Street, Sidney, Ohio 45365 and its telephone number is (937) 492-6129.

Forward-Looking Statements

         When used in this Form 10-KSB and in future filings by the Company with
the  Securities  and Exchange  Commission  (the "SEC"),  in the Company's  press
releases or other public or shareholder  communications,  and in oral statements
made with the approval of an authorized  executive officer, the words or phrases
"will likely  result,"  "are expected to," "will  continue,"  "is  anticipated,"
"estimate,"   "project"  or  similar   expressions   are  intended  to  identify
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation  Reform Act of 1995. Such statements are subject to certain risks and
uncertainties,  including, among other things, changes in economic conditions in
the  Company's  market  area,  changes  in  policies  by  regulatory   agencies,
fluctuations  in interest rates,  demand for loans in the Company's  market area
and  competition,  that could cause  actual  results to differ  materially  from
<PAGE>
historical  earnings and those presently  anticipated or projected.  The Company
wishes  to  caution   readers   not  to  place   undue   reliance  on  any  such
forward-looking  statements,  which speak only as of the date made.  The Company
wishes  to advise  readers  that the  factors  listed  above  could  affect  the
Company's financial performance and could cause the Company's actual results for
future periods to differ  materially  from any opinions or statements  expressed
with respect to future periods in any current statements.

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


                                       -2-

<PAGE>



Lending Activities

         General.   The  principal   lending  activity  of  the  Association  is
originating  for its portfolio  first mortgage  loans secured by  owner-occupied
one- to four-family  residential  properties located in its primary market area.
In addition, in order to increase the yield and/or the interest rate sensitivity
of its portfolio and in order to provide more  comprehensive  financial services
to families and businesses in the  Association's  primary  market area,  Peoples
Federal also originates  construction  or  development,  commercial real estate,
consumer,  land, multi-family and commercial business loans. The Association may
adjust or discontinue any product offering to respond to competitive or economic
factors.

                                       -3-

<PAGE>
         Loan Portfolio  Composition.  The following  information sets forth the
composition  of the  Association's  loan  portfolio  in  dollar  amounts  and in
percentages  (before  deductions  for loans in process,  deferred  loan fees and
allowance for loan losses) as of the dates indicated.
<TABLE>
<CAPTION>
                                                                                  June 30,
                                               ---------------------------------------------------------------------------------
                                                         1999                        1998                       1997
                                               -------------------------    ------------------------   ------------------------
                                                 Amount         Percent     Amount           Percent   Amount           Percent
                                                 ------         -------     ------           -------   ------           -------
                                                                            (Dollars in Thousands)
<S>                                            <C>                <C>       <C>               <C>      <C>               <C>
Real Estate Loans:
 One- to four-family......................     $  84,166          79.51%    $79,691           82.37%   $75,808           82.24%
 Construction and development.............         5,930           5.60       6,776            7.00      6,551            7.10
 Commercial...............................         9,408           8.89       6,608            6.83      5,843            6.34
 Multi-family.............................         1,359           1.28         655            0.68        219            0.24
 Land.....................................           867           0.82         868            0.90      1,447            1.57
                                               ---------        -------      ------          ------    -------          ------
     Total real estate loans..............       101,730          96.10      94,598           97.78     89,868           97.49
                                               ---------        -------      ------          ------    -------          ------

Other Loans:
 Consumer Loans:
  Automobile..............................         1,744           1.65       1,124            1.16      1,215            1.32
  Deposit account.........................           223           0.21         257            0.27        351            0.38
  Other...................................           771           0.73         672            0.69        719            0.78
                                               ---------        -------      ------          ------    -------          ------
     Total consumer loans.................         2,738           2.59       2,053            2.12      2,285            2.48
                                               ---------        -------      ------          ------    -------          ------

 Commercial business loans................         1,393           1.31         101            0.10         29            0.03
                                               ---------        -------      ------          ------    -------          ------

     Total loans..........................       105,861         100.00%     96,752          100.00%    92,182          100.00%
                                               ---------        -------      ------          ------    -------          ------

Less:
 Loans in process.........................       (2,311)                    (2,079)                    (2,703)
 Deferred loan fees.......................         (218)                      (195)                      (158)
 Allowance for loan losses................         (529)                      (426)                      (397)
                                                --------                    -------                    ------
 Total loans receivable, net..............      $102,803                    $94,052                    $88,924
                                                ========                    =======                    =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                    June 30,
                                               ---------------------------------------------------
                                                        1996                         1995
                                               ------------------------    -----------------------
                                                Amount         Percent      Amount         Percent
                                                ------         -------      ------         -------
<S>                                             <C>              <C>       <C>               <C>
Real Estate Loans:
 One- to four-family......................      $65,448          79.60%    $59,181           78.95%
 Construction and development.............        7,091           8.63       6,639            8.86
 Commercial...............................        5,302           6.45       5,750            7.67
 Multi-family.............................          485           0.59         335            0.45
 Land.....................................        1,342           1.63         909            1.21
                                                -------         ------     -------           ------
     Total real estate loans..............       79,668          96.90      72,814           97.14
                                                -------         ------     -------           ------

Other Loans:
 Consumer Loans:
  Automobile..............................        1,274           1.55       1,042            1.39
  Deposit account.........................          167           0.20         262            0.35
  Other...................................        1,027           1.25         821            1.09
                                                -------         ------     -------           ------
     Total consumer loans.................        2,468           3.00       2,125            2.83
                                                -------         ------     -------           ------

 Commercial business loans................           81           0.10          22            0.03
                                                -------         ------     -------           ------

     Total loans..........................       82,217         100.00%     74,961          100.00%
                                                -------         ------     -------           ------

Less:
 Loans in process.........................      (3,508)                    (2,579)
 Deferred loan fees.......................        (169)                      (198)
 Allowance for loan losses................        (307)                      (251)
                                                ------                  ----------
 Total loans receivable, net..............      $78,233                    $71,933
                                                =======                    =======

</TABLE>
                                       -4-

<PAGE>
         The following  table shows the  composition of the  Association's  loan
portfolios by fixed- and adjustable-rate at the dates indicated.
<TABLE>
<CAPTION>
                                                                                  June 30,
                                               ---------------------------------------------------------------------------------
                                                         1999                        1998                       1997
                                               -------------------------    ------------------------   ------------------------
                                                 Amount         Percent     Amount           Percent   Amount           Percent
                                                 ------         -------     ------           -------   ------           -------
                                                                            (Dollars in Thousands)
<S>                                            <C>                <C>       <C>               <C>        <C>            <C>
Fixed-Rate Loans:
 Real estate:
  One- to four-family...........               $  31,611           29.86%    $24,628           25.46%    $21,836         23.69%
  Construction and development.......              2,512            2.37       1,643            1.70         949          1.03
  Commercial.........................                600            0.57         386            0.40         259          0.28
  Multi-family.......................                ---             ---         ---             ---         ---           ---
  Land...............................                 20            0.02          80            0.08         184          0.20
                                               ---------          ------     -------          ------     -------        ------
     Total real estate loans.........             34,743           32.82      26,737           27.64      23,228         25.20
 Consumer loans......................              2,738            2.59       2,053            2.12       2,285          2.48
 Commercial business loans...........                641            0.60         101            0.10          29           .03
                                               ---------          ------     -------          ------     -------        ------
     Total fixed-rate loans..........             38,122           36.01      28,891           29.86      25,542         27.71

Adjustable-Rate Loans:
 Real estate:
  One- to four-family................             52,555           49.65      55,063           56.91       53,972        58.55
  Construction and development.......              3,418            3.23       5,133            5.30        5,602         6.07
  Commercial.........................              8,808            8.32       6,222            6.43        5,584         6.06
  Multi-family.......................              1,359            1.28         655            0.68          219         0.24
  Land...............................                847            0.80         788            0.82        1,263         1.37
                                               ---------          ------     -------           ------     -------        ------
     Total real estate loans.........             66,987           63.28      67,861           70.14       66,640        72.29
Consumer Loans.......................                ---           ---           ---           ---            ---        ---
Commercial Business Loans............                752            0.71         ---           ---            ---        ---
                                               ---------          ------     -------           ------     -------        ------
     Total adjustable-rate loans.....             67,739           63.99      67,861           70.14       66,640        72.29
                                               ---------          ------     -------           ------     -------        ------
     Total loans.....................            105,861          100.00%     96,752          100.00%      92,182       100.00%
                                                                  ======                      ======                    ======

Less:
 Loans in process....................             (2,311)                    (2,079)                      (2,703)
 Deferred loan fees..................               (218)                      (195)                        (158)
 Allowance for loan losses...........               (529)                      (426)                        (397)
                                                --------                     ------                       -------
    Total loans receivable, net......           $102,803                     $94,052                      $88,924
                                                ========                     =======                      =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                    June 30,
                                               ---------------------------------------------------
                                                        1996                         1995
                                               ------------------------     -----------------------
                                                Amount         Percent       Amount         Percent
                                                ------         -------       ------         -------
<S>                                              <C>                <C>      <C>                <C>
Fixed-Rate Loans:
 Real estate:
  One- to four-family................            $17,166            20.88%   $12,254            16.35%
  Construction and development.......                775             0.94        526             0.70
  Commercial.........................                179             0.22        313             0.42
  Multi-family.......................                ---              ---        ---           ---
  Land...............................                 20             0.02          5             0.01
                                                 -------           ------    -------           ------
     Total real estate loans.........             18,140            22.06     13,098            17.48
 Consumer loans......................              2,468             3.00      2,125             2.83
 Commercial business loans...........                 81             0.10         22             0.03
                                                 -------           ------    -------           ------
     Total fixed-rate loans..........             20,689            25.16     15,245            20.34

Adjustable-Rate Loans:
 Real estate:
  One- to four-family................             48,282           58.73      46,927           62.60
  Construction and development.......              6,316            7.68       6,113            8.15
  Commercial.........................              5,123            6.23       5,437            7.25
  Multi-family.......................                485            0.59         335            0.45
  Land...............................              1,322            1.61         904            1.21
                                                 -------           ------    -------           ------
     Total real estate loans.........             61,528           74.84      59,716           79.66
Consumer Loans.......................                ---           ---           ---             ---
Commercial Business Loans............                ---           ---           ---             ---
                                                 -------           ------    -------          ------
     Total adjustable-rate loans.....             61,528           74.84      59,716           79.66
                                                 -------           ------    -------          ------
     Total loans.....................             82,217          100.00%     74,961          100.00%
                                                                  ======                      ======

Less:
 Loans in process....................             (3,508)                     (2,579)
 Deferred loan fees..................               (169)                       (198)
 Allowance for loan losses...........               (307)                       (251)
                                                  ------                   ---------
    Total loans receivable, net......             $78,233                     $71,933
                                                  =======                     =======
</TABLE>
                                       -5-

<PAGE>
         The  following  schedule  presents the  contractual  maturities  of the
Association's loan portfolio at June 30, 1999. The schedule does not reflect the
effects of possible prepayments or enforcement of due-on-sale clauses.
<TABLE>
<CAPTION>
                                                        Real Estate
                                 -------------------------------------------------------------
                                   One- to Four-Family and               Multi-family,
                                 Construction and Development         Commercial and Land                  Consumer
                                 ----------------------------    -----------------------------     ----------------------------
                                                    Weighted                         Weighted                          Weighted
                                                    Average                          Average                           Average
                                     Amount          Rate           Amount            Rate          Amount              Rate
                                     ------          ----           ------            ----          ------              ----
                                                                    (Dollars in Thousands)

<C>                                <C>               <C>         <C>                 <C>            <C>        <C>
1 year or less(1)..........        $      52            8.64%    $      ---             ---%        $   456              8.40%
Over 1 year - 3 years......            1,009            8.04             43            7.59             819              9.41
Over 3 years - 5 years.....              677            7.89            204            7.77           1,247              8.91
Over 5 years -
 10 years..................            5,197            7.89          2,063            7.73             146              6.18
Over 10 years -
 20 years..................           37,123            7.52          5,742            7.37              70              8.50
Over 20 years..............           46,038            7.48          3,582            7.70             ---               ---
                                    --------            ----      ---------         -------       ---------             -----
    Total..................          $90,096           7.53%        $11,634           7.55%          $2,738              8.82%
                                     =======           ====         =======        =======           ======              ====
<CAPTION>


                                      Commercial Business               Total
                                   -----------------------   --------------------------
                                                  Weighted                     Weighted
                                                  Average                      Average
                                    Amount         Rate       Amount            Rate
                                    ------         ----       ------            ----
<S>                               <C>           <C>           <C>           <C>
1 year or less(1)..........        $    59         9.33%      $      567       8.52%
Over 1 year - 3 years......            444         9.01            2,315       8.70
Over 3 years - 5 years.....            743         8.93            2,871       8.59
Over 5 years -
 10 years..................            147         8.75            7,553       7.83
Over 10 years -
 20 years..................            ---          ---           42,935       7.50
Over 20 years..............            ---          ---           49,620       7.49
                                    ------        -----         --------      -----
    Total..................         $1,393         8.95%        $105,861       7.58%
                                    ======        =====         ========      =====
</TABLE>
         (1)  Includes  demand  loans,  loans  having  no  stated  maturity  and
overdraft loans.


      The total amount of loans due after June 30, 2000 which have predetermined
interest rates is $37,596,  while the total amount of loans due after such dates
which have floating or adjustable interest rates is $67,698.

                                       -6-
<PAGE>
         Under federal law, the aggregate  amount of loans that the  Association
is  permitted  to  make to any  one  borrower  is  generally  limited  to 15% of
unimpaired capital and surplus (25% if the security for such loan has a "readily
ascertainable" value or 30% for certain residential  development loans). At June
30,  1999,  based  on  the  above  limitation,   the  Association's   regulatory
loan-to-one  borrower limit was approximately  $1.97 million.  On the same date,
the  Association  had no borrowers with  outstanding  balances in excess of this
amount.  As of June 30, 1999, the largest dollar amount of  indebtedness  to one
borrower or group of related borrowers was $1,045,000,  secured by multiple one-
to four-family real estate properties.  The next largest loan to one borrower or
group of related  borrowers had an  outstanding  balance of $833,000 at June 30,
1999 and is also secured by multiple one-to  four-family real estate properties.
As of June 30, 1999, such loans were performing in accordance with their terms.

         Loan  applications  are  accepted  by  salaried  loan  officers  at the
Association's  office.  Loan  applications  are  presented  for  approval to the
Executive Committee of the Board of Directors or to the full Board of Directors,
depending on loan amount. All loans of $100,000 or more are approved by the full
Board of  Directors.  Decisions  on loan  applications  are made on the basis of
detailed applications and property valuations (consistent with the Association's
written  appraisal  policy),  by qualified  independent  appraisers  (unless the
Association's  exposure  will be $25,000  or less).  The loan  applications  are
designed  primarily to  determine  the  borrower's  ability to repay and include
length  of   employment,   past  credit   history  and  the  amount  of  current
indebtedness.  Significant  items on the application are verified through use of
credit reports,  financial  statements,  tax returns and/or  confirmations.  The
Association is an equal opportunity lender.

         Generally,  the Association requires an attorney's title opinion on its
mortgage  loans as well as fire and  extended  coverage  casualty  insurance  in
amounts  at least  equal to the  principal  amount  of the loan or the  value of
improvements  on the property,  depending on the type of loan.  The  Association
also requires flood insurance to protect the property securing its interest when
the property is located in a flood plain.

One- to Four-Family Residential Real Estate Lending

         The cornerstone of the Association's  lending program has long been the
origination of long-term  permanent loans secured by mortgages on owner-occupied
one- to four-family residences. At June 30, 1999, $84.2 million, or 79.5% of the
Association's   loan  portfolio,   consisted  of  permanent  loans  on  one-  to
four-family  residences.  At that date, the average outstanding residential loan
balance was $57,000 and the largest outstanding residential loan had a principal
balance of  $320,000.  Virtually  all of the  residential  loans  originated  by
Peoples Federal are secured by properties  located in the  Association's  market
area.

         Peoples Federal originates fixed-rate  residential loans in amounts and
at  rates  which  are   monitored   for   compliance   with  the   Association's
asset/liability   management  policy.   Currently,  the  Association  originates
fixed-rate  loans with  maturities  of up to 20 years for  retention  in its own
portfolio.  Limiting the  contractual  term to 20 years,  as opposed to the more
traditional  30 year period,  allows for  accelerated  principal  repayment  and
equity  build  up for the  borrower.  Currently,  all  such  loans  are  made on
owner-occupied  properties.  All fixed-rate  loans originated by the Association
are retained and serviced by it. At June 30,  1999,  the  Association  had $31.6
million  of  fixed-rate   permanent  one-to   four-family   residential   loans,
constituting 29.9% of the Association's loan portfolio at such date.
<PAGE>
         The  Association  has  offered  ARM  loans at rates,  terms and  points
determined in accordance with market and competitive  factors. The Association's
current one- to four-family  residential  ARMs are fully  amortizing  loans with
contractual maturities of up to 30 years. Applicants are qualified using a fully
indexed rate, and no ARMs allow for negative amortization. The interest rates on
the ARMs  originated by Peoples  Federal are generally  subject to adjustment at
one,  three,  and  five-year  intervals  based  on a margin  over the  analogous
Treasury  Securities  Constant  Maturity  Index.  Decreases  or increases in the
interest rate of the  Association's  ARMs are  generally  limited to 6% above or
below the  initial  interest  rate  over the life of the loan,  and up to 2% per
adjustment  period.  The Association's  ARMs are not convertible into fixed-rate
loans, and do not contain  prepayment  penalties.  ARM loans may be assumed on a
case by case basis with the Association's  consent.  At June 30, 1999, the total
balance  of  one- to  four-family  ARMs  was  $52.6  million,  or  49.7%  of the
Association's  loan  portfolio.  All  ARMs  originated  by the  Association  are
retained and serviced by it.


                                       -7-

<PAGE>
         The Association also offers the "7/1" ARM loan. This product  maintains
a constant  interest  rate and  payment  for the first  seven years of the loan.
Amortizable  for up to 30 years,  the loan will adjust  beginning  in the eighth
year,  subject  to the  rate  caps  discussed  above.  At  June  30,  1999,  the
Association had $140,000 in "7/1" loans.  In 1992, the  Association  initiated a
program specifically tailored to first time home buyers. These loans are made on
a five year adjustable  basis with a term up to 30 years.  The margin,  which is
lower than other products currently offered, is 200 basis points.  Additionally,
somewhat higher debt-to-income ratios are permitted,  although mandatory escrows
for taxes and insurance,  an acceptable credit rating and an employment  history
of at least one year are  required.  The maximum loan amount under this program,
which requires that the property be owner-occupied,  is currently $75,000, which
can be the lesser of the purchase price or 90% of appraised  value.  At June 30,
1999, the  Association had  approximately  $4.6 million of first-time home buyer
loans in its portfolio.

         As discussed  above,  the  Association  evaluates  both the  borrower's
ability to make  principal,  interest  and escrow  payments and the value of the
property  that will  secure the loan.  Peoples  Federal  originates  residential
mortgage loans with loan-to-value  ratios up to 90%. On mortgage loans exceeding
an 90%  loan-to-value  ratio at the time of  origination,  Peoples  Federal will
generally require private mortgage insurance in an amount intended to reduce the
Association's exposure to less than 90% of the appraised value of the underlying
property.

         The  Association's   residential  mortgage  loans  customarily  include
due-on-sale  clauses  giving  the  Association  the  right to  declare  the loan
immediately due and payable in the event that, among other things,  the borrower
sells or otherwise disposes of the property subject to the mortgage and the loan
is not repaid.

          The Association uses the same  underwriting  standards for home equity
lines of credit as it uses for one- to four-family  residential  mortgage loans.
The  Association's  home equity lines of credit are originated in amounts which,
together with the amount of the first  mortgage,  generally do not exceed 80% of
the appraised  value of the property  securing the loan.  At June 30, 1999,  the
Association  had  $251,000  of home  equity  lines of credit  and an  additional
$521,000 of additional funds committed, but undrawn, under such lines.

Construction and Development Lending

         The  Association  makes  construction  loans  to  individuals  for  the
construction  of their primary or secondary  residences and loans to builders or
developers for the construction of single-family  homes,  multi-family units and
commercial real estate  projects.  Loans to individuals for the  construction of
their  residences  typically run for 12 months.  The borrower pays interest only
during the construction  period.  Residential  construction  loans are generally
underwritten  pursuant to the same  guidelines  used for  originating  permanent
residential  loans. At June 30, 1999, the Association had 38 construction  loans
with  outstanding  aggregate  balances of $5.0  million  secured by  residential
property.  Of this amount,  $4.5 million in loans were  outstanding  directly to
borrowers  intending to live in the properties upon completion of  construction.
At that same date, the Association had three construction loans with outstanding
aggregate  balances  of  $495,000  secured  by one- to  four-family  residential
properties  constructed by builders who have pre-sold their houses to individual
purchasers.
<PAGE>
         The  Association  makes loans to builders and developers to finance the
construction  of residential  property.  Such loans  generally  have  adjustable
interest rates based upon prime or treasury  indexes with terms ranging from six
months to one year.  The proceeds of the loan are advanced  during  construction
based upon the percentage of completion as determined by an inspection. The loan
amount normally does not exceed 90% of projected  completed value for homes that
have been  pre-sold to the  ultimate  occupant.  For loans to  builders  for the
construction  of homes  not yet  presold,  which may  carry a higher  risk,  the
loan-to-value  ratio is generally  limited to 80%.  Whether the  Association  is
willing to provide  permanent  takeout financing to the purchaser of the home is
determined  independently of the construction loan by separate underwriting.  In
the event that upon completion the house is not sold, the builder is required to
make principal and interest  payments  until the house is sold. The  Association
also makes a limited  number of  commercial  real estate  construction  loans on
substantially  the same terms as loans to builders and developers to finance the
construction of residential property.

         Development  loans,  which include loans to develop vacant or raw land,
are made to various  builders and developers  with whom the  Association has had
long-standing relationships. All of such loans are secured by land zoned

                                       -8-

<PAGE>
for residential  developments and located within the Association's  market area.
Proceeds are used for excavation,  utility  placements and street  improvements.
Disbursements  related to acquisition and  development  land loans are typically
based on the construction cost estimate of an independent  architect or engineer
who inspects the project in connection with significant  disbursement  requests.
As lots are sold, a portion of the sale price is applied to the principal of the
outstanding loan. Interest payments are required at regular intervals (quarterly
or semi-annually)  and loan terms typically are written for three years. At June
30, 1999, the Association had $956,000,  or 0.9% of gross loans  receivable,  in
this category.

         Construction and development  lending generally affords the Association
an opportunity to receive  interest at rates higher than those  obtainable  from
residential  lending and to receive higher  origination  and other loan fees. In
addition,   such  loans  are  generally   made  for   relatively   short  terms.
Nevertheless,  construction  lending to persons  other than  owner-occupants  is
generally  considered  to  involve a higher  level of  credit  risk than one- to
four-family  permanent residential lending due to the concentration of principal
in a limited  number of loans and borrowers and the effects of general  economic
conditions on construction  projects,  real estate  developers and managers.  In
addition,  the  nature of these  loans is such that they are more  difficult  to
evaluate  and  monitor.  The  Association's  risk of loss on a  construction  or
development loan is dependent  largely upon the accuracy of the initial estimate
of the  property's  value upon  completion of the project and the estimated cost
(including  interest)  of the  project.  If the  estimate of value  proves to be
inaccurate,  the Association  may be confronted,  at or prior to the maturity of
the loan,  with a project  with a value  which is  insufficient  to assure  full
repayment  and/or the possibility of having to make  substantial  investments to
complete  and sell the  project.  Because  defaults in  repayment  may not occur
during the construction period, it may be difficult to identify problem loans at
an early stage.  When loan payments  become due, the cash flow from the property
may not be adequate to service the debt. In such cases,  the  Association may be
required to modify the terms of the loan.

Commercial Real Estate Lending

           The Association's  commercial real estate loan portfolio  consists of
loans  secured  by a variety  of  non-residential  properties  including  retail
facilities,  small office buildings,  farm real estate and churches. At June 30,
1999, the Association's largest commercial real estate loan totaled $692,000. At
that date, the Association  had 77 commercial  real estate loans,  totaling $9.4
million or 8.9% of gross loans receivable.

         The  Association   has  originated  both   adjustable-  and  fixed-rate
commercial real estate loans, although most current originations have adjustable
rates. Rates on the Association's  adjustable-rate  commercial real estate loans
generally  adjust  in  a  manner  consistent  with  the  Association's  one-  to
four-family  residential  ARMs,  although five year  adjustment  periods are not
currently  offered.  Commercial real estate loans are generally  underwritten in
amounts of up to 75% of the appraised value of the underlying property.
<PAGE>
         Appraisals  on  properties   securing   commercial  real  estate  loans
originated by the Association are performed by a qualified independent appraiser
at the time  the  loan is made.  In  addition,  the  Association's  underwriting
procedures  generally  require  verification  of the borrower's  credit history,
income and financial statements,  banking  relationships,  references and income
projections for the property. Personal guarantees are generally obtained for the
Association's commercial real estate loans.  Substantially all of the commercial
real estate  loans  originated  by the  Association  are  secured by  properties
located within the Association's market area.


                                       -9-

<PAGE>
         The table below sets forth by type of security  property the  estimated
number, loan amount and outstanding balance of Peoples Federal's commercial real
estate loans at June 30, 1999.
<TABLE>
<CAPTION>
                                                                      Outstanding
                                      Number of        Original        Principal
                                       Loans          Loan Amount        Balance
                                       -----          -----------        -------
                                               (Dollars in Thousands)
<S>                                   <C>               <C>              <C>
Office                                      18          $ 3,209          $ 2,607
Retail                                       6            1,257              964
Farm real estate                            49            6,301            5,277
Churches                                     4              659              560
                                       -------          -------          -------
   Total                                    77          $11,426          $ 9,408
                                       =======          =======          =======
</TABLE>

         Commercial real estate loans  generally  present a higher level of risk
than loans secured by one- to four-family  residences.  This greater risk is due
to several factors, including the concentration of principal in a limited number
of loans and  borrowers,  the effects of general  economic  conditions on income
producing  properties and the increased  difficulty of evaluating and monitoring
these types of loans. Furthermore,  the repayment of loans secured by commercial
real estate is typically dependent upon the successful  operation of the related
real estate project.  If the cash flow from the project is reduced (for example,
if leases are not obtained or renewed), the borrower's ability to repay the loan
may be impaired.

Multi-Family Lending

         The Association has historically made permanent  multi-family  loans in
its  primary  market  area.   However,   the  amount  of  such  loans  has  been
insignificant. At June 30, 1999, multi-family loans totaled $1.4 million, or1.3%
of gross loans receivable.

         The Association's multi-family loan portfolio includes loans secured by
five or more unit residential  buildings  located primarily in the Association's
market area.

Land Lending

         Peoples  Federal makes loans to individuals  who purchase and hold land
for various reasons, such as the future construction of a residence.  Such loans
are  generally  originated  with terms of three years and have maximum loan- to-
value ratios of 75%. At June 30, 1999, the Association had $867,000,  or 0.8% of
gross loans receivable, in land loans.

         Land  lending  generally  affords the  Association  an  opportunity  to
receive interest at rates higher than those obtainable from residential lending.
In addition,  land loans are limited to a maximum 75% loan-to-value and are made
with fixed and  adjustable  rates of interest  and for  relatively  short terms.
Nevertheless,  land lending is generally considered to involve a higher level of
credit  risk due to the fact that funds are  advanced  upon the  security of the
land, which is of uncertain value prior to its development.
<PAGE>
Consumer Lending

         Management  believes  that offering  consumer  loan  products  helps to
expand the  Association's  customer  base and to create  stronger  ties with its
existing  customer  base. In addition,  because  consumer  loans  generally have
shorter terms to maturity and carry higher rates of interest than do residential
mortgage  loans,  they can be valuable  asset/liability  management  tools.  The
Association currently originates  substantially all of its consumer loans in its
market area. At June 30, 1999,  the  Association's  consumer  loans totaled $2.7
million, or 2.6% of the Association's gross loan portfolio.

                                      -10-

<PAGE>
         Peoples Federal offers a variety of secured  consumer loans,  including
automobile loans,  loans secured by savings deposits and home improvement loans.
Although the  Association  primarily  originates  consumer loans secured by real
estate,  deposits or other  collateral,  the  Association  also makes  unsecured
personal loans.

         The largest component of the Association's  consumer lending program is
automobile  loans. At June 30, 1999,  automobile loans totaled $1.7 million,  or
1.7% of gross loans  receivable.  The  Association  makes loans  directly to the
consumer  to aid in the  purchase  of new and  used  vehicles,  which  serve  as
collateral  for the  loan.  The  Association  also  employs  other  underwriting
criteria discussed below in deciding whether to extend credit.

         The terms of other types of consumer  loans vary  according to the type
of  collateral,  length of contract and  creditworthiness  of the borrower.  The
underwriting  standards employed by the Association for consumer loans include a
determination  of  the  applicant's  payment  history  on  other  debts  and  an
assessment of the borrower's ability to meet payments on the proposed loan along
with his  existing  obligations.  In  addition  to the  creditworthiness  of the
applicant,  the underwriting  process also includes a comparison of the value of
the security, if any, in relation to the proposed loan amount.

         Consumer loans may entail greater risk than residential mortgage loans,
particularly  in the case of consumer  loans which are  unsecured  or secured by
rapidly  depreciable assets such as automobiles.  In such cases, any repossessed
collateral  for defaulted  consumer  loans may not provide  adequate  sources of
repayment  for  the  outstanding  loan  balances  as a  result  of  the  greater
likelihood  of  damage,  loss  or  depreciation.   In  addition,  consumer  loan
collections are dependent on the borrower's continuing financial stability,  and
thus  are  more  likely  to  be  affected  by  adverse  personal  circumstances.
Furthermore,  the  application  of various  federal  and state  laws,  including
federal and state bankruptcy and insolvency laws, may limit the amount which can
be recovered on such loans.

Commercial Business Lending

         In order to increase the yield and  interest  rate  sensitivity  of its
loan  portfolio  and in order to  satisfy  the  demand  for  financial  services
available  to  individuals  and  businesses  in its  primary  market  area,  the
Association  has  maintained a small  portfolio of  commercial  business  loans.
Although the portfolio  remains a small  percentage of gross loans  outstanding,
the Association did experience substantial growth in 1999 primarily from the new
branch facilities.  Unlike residential  mortgage loans, which generally are made
on the  basis  of the  borrower's  ability  to make  repayment  from  his or her
employment and other income,  and which are secured by real property whose value
tends to be more easily  ascertainable,  commercial business loans are generally
of higher risk and typically are made on the basis of the borrower's  ability to
make repayment from the cash flow of the borrower's  business.  As a result, the
availability  of funds for the  repayment of  commercial  business  loans may be
substantially  dependent on the success of the business itself (which,  in turn,
may be dependent upon the general  economic  environment).  During the past five
years, the Association has made commercial  business loans to businesses such as
small retail operations,  small  manufacturing  concerns and professional firms.
The  Association's  commercial  business  loans almost always  include  personal
guarantees and are usually, but not always,  secured by business assets, such as
accounts  receivable,   equipment,  inventory  and  real  estate.  However,  the
collateral  securing  the loans may  depreciate  over time,  may be difficult to
appraise and may fluctuate in value based on the success of the business.
<PAGE>
         Most of the Association's  commercial business loans have terms ranging
from three months to one year and may carry fixed or adjustable  interest rates.
The  underwriting  process for  commercial  business  loans  generally  includes
consideration of the borrower's financial statements,  tax returns,  projections
of future business operations and inspection of the subject collateral,  if any.
At June 30, 1999, commercial business loans totaled $1.4 million, or 1.3% of the
Association's gross loans receivable.


                                      -11-
<PAGE>
Originations, Purchases and Sales of Loans

         The  Association   originates  real  estate  and  other  loans  through
employees located at the Association's  office.  Walk-in customers and referrals
from real  estate  brokers  and  builders  are also  important  sources  of loan
originations.  The  Association  has  historically  not utilized the services of
mortgage or loan brokers,  nor purchased or sold loans from or to other lenders.
While a portfolio  lender,  the Association may in the future evaluate loan sale
opportunities as they arise and make sales depending on market conditions.

         The following table shows the loan origination and repayment activities
of the Association for the periods indicated.
<TABLE>
<CAPTION>
                                                                             Year Ended June 30,
                                                                     ------------------------------------
                                                                      1999           1998          1997
                                                                     -------------------------------------
                                                                               (In thousands)
<S>                                                                  <C>            <C>           <C>
Originations by type:
 Adjustable rate:
  Real estate - one- to four-family, construction and
       development and land...................................       $14,661        $16,076       $14,908
                  - commercial................................         3,178          2,839         2,849
                  - multi-family..............................           752            470           180
  Non-real estate - consumer..................................           ---            ---           ---
                           - commercial business..............         1,411            ---           ---
                                                                   ---------   ------------  ------------
         Total adjustable-rate................................        20,002         19,385        17,937
 Fixed rate:
  Real estate - one- to four-family, construction and
       development and land...................................        15,781          8,247         7,406
                  - commercial................................           598            266           461
                  - multi-family..............................           ---            ---           ---
  Non-real estate - consumer..................................         2,885          1,923         2,294
                           - commercial business..............           702            122            11
                                                                  ----------     ----------   -----------
         Total fixed-rate.....................................        19,966         10,558        10,172
                                                                    --------       --------      --------
         Total loans originated...............................        39,968         29,943        28,109

  Principal repayments........................................       (30,841)       (24,670)      (17,149)
Increase in other items, net(1)...............................          (188)           (66)         (134)
                                                                   ---------    -----------    ----------
         Net increase.........................................       $ 8,939       $  5,207       $10,826
                                                                     =======       ========       =======
</TABLE>
------------

(1) Includes  provision  for loan losses,  net  charge-offs,  net deferred  loan
origination fees and transfers to foreclosed assets.
<PAGE>


Delinquencies and Non-Performing Assets

         Delinquency  Procedures.  When a  borrower  fails  to  make a  required
payment  on a  loan,  the  Association  attempts  to  cure  the  delinquency  by
contacting  the  borrower.  A late  notice  is  sent on all  loans  over 30 days
delinquent. Another late notice is sent 60 days after the due date followed by a
letter from the President of the Association.

         If the  delinquency  is not cured by the 90th day,  the customer may be
provided  written  notice  that the  account  will be  referred  to counsel  for
collection and foreclosure, if necessary. A good faith effort by the borrower at
this time will defer  foreclosure  for a reasonable  length of time depending on
individual circumstances.  The Association may agree to accept a deed in lieu of
foreclosure.  If it becomes  necessary  to  foreclose,  the  property is sold at
public sale and

                                      -12-

<PAGE>
the Association may bid on the property to protect its interest. The decision to
foreclose is made by the Senior Loan Officer after  discussion  with the members
of the Executive Committee or Board of Directors.

         Consumer loans are  charged-off if they remain  delinquent for 120 days
unless the borrower and lender agree on a payment plan. If terms of the plan are
not met, they are then subject to charge-off.  The Association's  procedures for
repossession and sale of consumer collateral are subject to various requirements
under Ohio consumer protection laws.

         Real estate  acquired by Peoples  Federal as a result of foreclosure or
by deed in lieu of  foreclosure  is  classified as real estate owned until it is
sold.  When property is acquired by foreclosure or deed in lieu of  foreclosure,
it is  initially  recorded  at  fair  value  at the  date  of  acquisition.  Any
write-down  resulting  therefrom  is charged to the  allowance  for loan losses.
Subsequent  decreases  in the value of the  property  are charged to  operations
through the  creation of a valuation  allowance.  After  acquisition,  all costs
incurred  in  maintaining  the  property  are  expensed.  Costs  relating to the
development  and  improvement of the property,  however,  are capitalized to the
extent of estimated fair value.

         The following table sets forth the Association's  loan delinquencies by
type, by amount and by percentage of type at June 30, 1999.
<TABLE>
<CAPTION>
                                                                         Loans Delinquent For:
                                ----------------------------------------------------------------------------------------------------

                                         60-89 Days                        90 Days and Over                Total Delinquent Loans
                                ----------------------------------------------------------------------------------------------------
                                                         Percent                            Percent                         Percent
                                                         of Loan                            of Loan                         of Loan
                                Number    Amount         Category     Number     Amount     Category     Number   Amount    Category
                                ------    ------         --------     ------     ------     --------     ------   ------    --------
                                                                     (Dollars in Thousands)
Real Estate:
<S>                              <C>      <C>             <C>        <C>         <C>           <C>        <C>      <C>       <C>
  One- to four-family......         8     $  407            0.48%        21       $691         0.82%        29     $1,098      1.30%
  Construction and
   development.............       ---        ---             ---        ---        ---          ---        ---        ---       ---
  Commercial...............       ---        ---             ---          1         13          ---          1         13      0.14
  Multi-family.............       ---        ---             ---        ---        ---          ---        ---        ---       ---
  Land.....................         1         49            5.69        ---        ---          ---          1         49      5.69
Consumer...................         6          6            0.21          5         51         1.87         11         57      2.08
Commercial business........       ---        ---             ---        ---        ---          ---        ---        ---       ---
                                  ---    -------           -----        ---       ----        -----       ---      ------     -----

     Total.................        15       $462            0.44%        27       $755         0.71%        42     $1,217      1.15%
                                   ==       ====           =====        ===       ====         ====       ====     ======     =====
</TABLE>
<PAGE>
         Classification of Assets. Federal regulations require that each savings
institution  classify  its own  assets  on a  regular  basis.  In  addition,  in
connection  with  examinations of savings  institutions,  OTS and FDIC examiners
have authority to identify  problem assets 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 Association will sustain
some  loss if the  deficiencies  are not  corrected.  Doubtful  assets  have the
weaknesses of Substandard assets, with the additional  characteristics  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 on the balance  sheet of the
institution,   without  establishment  of  a  specific  valuation  allowance  or
charge-off,  is not  warranted.  Assets  classified as  Substandard  or Doubtful
require the institution to establish prudent general allowances for loan losses.
If an asset or portion  thereof  is  classified  as Loss,  the  institution  may
charge-off such amount against the loan loss allowance.  If an institution  does
not agree with an  examiner's  classification  of an asset,  it may appeal  this
determination to the District Director of the OTS.


                                      -13-

<PAGE>
         On the basis of  management's  review of its assets,  at June 30, 1999,
the Association had classified a total of $362,000 of its loans, as follows:

<TABLE>
<CAPTION>

                                     One- to Four-        Commercial
                                        Family            Real Estate         Land          Consumer          Total
                                        ------            -----------         ----          --------          -----
                                                                         (In Thousands)
<S>                                      <C>                   <C>            <C>             <C>              <C>
Substandard................              $302                  $13            $---            $---             $315
Doubtful...................               ---                  ---             ---             ---              ---
Loss.......................               ---                  ---             ---              47               47
                                         ----                  ---             ---             ---             ----
                                         $302                  $13             ---             $47             $362
                                         ====                  ===             ===             ===             ====

</TABLE>
         Peoples  Federal's  classified assets consist of the (i) non performing
loans and (ii) loans and other  assets of concern  discussed  herein.  As of the
date hereof,  these asset  classifications  are consistent with those of the OTS
and FDIC.


                                      -14-

<PAGE>
         The table below sets forth the amounts and categories of non-performing
assets.  Interest  income on loans is accrued  over the term of the loans  based
upon the  principal  outstanding  except  where  serious  doubt exists as to the
collectibility of a loan, in which case the accrual of interest is discontinued.
For all years presented, the Association has had no troubled debt restructurings
(which  involve  forgiving a portion of interest  or  principal  on any loans or
making loans at a rate  materially  less than that of market rates).  Foreclosed
assets include assets acquired in settlement of loans.
<TABLE>
<CAPTION>
                                                                        June 30,
                                                -------------------------------------------------------
                                                 1999        1998        1997         1996        1995
                                                -------------------------------------------------------
                                                                (Dollars in Thousands)
<S>                                              <C>         <C>         <C>         <C>         <C>
Non accruing loans:
  One- to four-family                            $  302      $  713      $  705      $  564      $  494
  Construction and development                     --          --          --          --          --
  Commercial real estate                             13        --            14         211        --
  Multi-family                                     --          --          --          --          --
  Land                                             --          --          --            51         214
  Consumer                                         --          --          --          --          --
  Commercial business                              --          --          --          --          --
                                                 ------      ------      ------      ------      ------
     Total                                          315         713         719         826         708
                                                 ------      ------      ------      ------      ------

Accruing loans delinquent more than 90 days:
  One- to four-family                               389         235         143         326         604
  Construction and development                     --          --          --          --          --
  Commercial real estate                           --          --          --            58          86
  Multi-family                                     --          --          --          --          --
  Land                                             --          --          --          --          --
  Consumer                                           51          11           5          11          20
  Commercial business                              --          --          --          --          --
                                                 ------      ------      ------      ------      ------
     Total                                          440         246         148         395         710
                                                 ------      ------      ------      ------      ------

Foreclosed assets:
  One- to four-family                              --          --          --          --          --
  Construction and development                     --          --          --          --          --
  Commercial real estate                           --          --          --          --          --
  Multi-family                                     --          --          --          --          --
  Land                                             --          --          --          --          --
  Consumer                                         --          --          --          --          --
  Commercial business                              --          --          --          --          --
                                                 ------      ------      ------      ------      ------
     Total                                         --          --          --          --          --
                                                 ------      ------      ------      ------      ------

Total non performing assets                      $  755      $  959      $  867      $1,221      $1,418
                                                 ======      ======      ======      ======      ======
Total as a percentage of total assets              0.65%       0.91%       0.84%       1.41%       1.80%
                                                 ======      ======      ======      ======      ======
</TABLE>
<PAGE>


         For the year ended June 30, 1999 gross interest income which would have
been recorded had the non accruing  loans been current in accordance  with their
original  terms  amounted to $25,901.  The amount that was  included in interest
income on such loans was $19,628 for the year ended June 30, 1999.

         Other Assets of Concern.  As of June 30, 1999, the  Association  had no
assets  that are not now  disclosed  because  of  known  information  about  the
possible  credit  problems of the  borrowers  or the cash flows of the  security
property  which would cause  management to have some doubts as to the ability of
the borrowers to comply with present loan  repayment  terms and which may result
in the future inclusion of such items in the non performing asset categories.



                                      -15-

<PAGE>
         Allowance for Loan Losses.  Management  estimates the allowance balance
required  based on past loan loss  experience,  known and inherent  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 terms of the
loan is not expected. Impairment is evaluated in total for smaller-balance loans
of similar  nature such as first  mortgage  loans secured by one- to four-family
residences, residential construction loans, credit card, automobile, home equity
and second mortgage loans.  Commercial loans and mortgage loans secured by other
properties are evaluated  individually for impairment.  If a loan is impaired, a
portion  of the  allowance  for loan  losses  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  90  days or  more,  or when  it is  probable  that  not all
principal  and  interest  payments  will be  collected  in  accordance  with the
original terms of the loan.

         As of June 30, 1999, the  Association's  allowance for loan losses as a
percent  of gross  loans  receivable  and as a percent  of  nonperforming  loans
amounted  to  0.50%  and  70.03%,  respectively.   In  light  of  the  level  of
nonperforming assets to total assets and the nature of these assets,  management
believes  that the  allowance  for loan  losses is  adequate.  While  management
believes that it uses the best information  available to determine the allowance
for loan losses, unforeseen market conditions could result in adjustments to the
allowance for loan losses, and net earnings could be significantly  affected, if
circumstances differ substantially from the assumptions used in making the final
determination.


                                      -16-

<PAGE>
         The  following  table  sets  forth  an  analysis  of the  Association's
allowance for loan losses.
<TABLE>
<CAPTION>
                                                                  Year Ended June 30,
                                                    --------------------------------------------
                                                    1999      1998      1997      1996      1995
                                                    ----      ----      ----      ----      ----
                                                              (Dollars in Thousands)
<S>                                                 <C>       <C>       <C>       <C>       <C>
Balance at beginning of period                      $426      $397      $307      $251      $198

Charge-offs:
  One- to four-family                                --          7       --          9       --
  Construction and development                       --        --        --        --        --
  Commercial real estate                             --        --        --        --        --
  Multi-family                                       --        --        --        --        --
  Consumer                                            23         8        22         6         4
  Commercial business                                --        --        --        --        --
                                                    ----      ----      ----      ----      ----
                                                      23        15        22        15         4
                                                    ----      ----      ----      ----      ----
Recoveries:
  One- to four-family                                 19       --        --          1       --
  Construction and development                       --        --        --        --        --
  Commercial real estate                             --        --        --        --        --
  Multi-family                                       --        --        --        --        --
  Consumer                                             3         3         9         2         2
  Commercial business                                --        --        --        --        --
                                                    ----      ----      ----      ----      ----
                                                      22         3         9         3         2
                                                    ----      ----      ----      ----      ----

Net charge-offs                                        1        12        13        12         2
Additions charged to operations                      104        41       103        68        55
                                                    ----      ----      ----      ----      ----
Balance at end of period                            $529      $426      $397      $307      $251
                                                    ====      ====      ====      ====      ====

Ratio of net charge-offs during the period to
 average loans outstanding(1) during the period     ---%      0.01%     0.02%     0.02%     ---%
                                                    ====      ====      ====      ====      ====

Ratio of net charge-offs during the period to
 nonperforming assets at the end of the period      0.08%     1.33%     1.49%     0.98%     0.14%
                                                    ====      ====      ====      ====      ====

</TABLE>
(1) Calculated net of deferred loan fees, loan  discounts,  loans in process and
allowance for loan losses.

                                      -17-

<PAGE>
         The distribution of the Association's  allowance for losses on loans at
the dates indicated is summarized as follows:
<TABLE>
<CAPTION>
                                                                        June 30,
                            --------------------------------------------------------------------------------------------------------
                                          1999                            1998                            1997
                            --------------------------------------------------------------------------------------------------------
                                                      Percent                         Percent                         Percent
                                                      of Loans                        of Loans                        of Loans
                                 Amount       Loan    in Each    Amount      Loan     in Each     Amount      Loan    in Each
                                   of       Amounts   Category     of       Amounts   Category      of      Amounts   Category
                               Loan Loss      by     to Total  Loan Loss      by      to Total  Loan Loss      by     to Total
                                Allowance   Category   Loans    Allowance  Category    Loans    Allowance   Category   Loans
                            --------------------------------------------------------------------------------------------------------
                                                                     (Dollars in Thousands)
<S>                                <C>     <C>        <C>          <C>    <C>            <C>        <C>    <C>        <C>
One- to four-family.........       $346    $84,166    79.51%       $335   $79,691        82.37%     $316   $75,808    82.24%
Construction and
development.................         13      5,930      5.60         16     6,776         7.00        14     6,551      7.10
Commercial real estate......         32      9,408      8.89         15     6,608         6.83        15     5,843      6.34
Multi-family................          4      1,359      1.28          2       655         0.68       ---       219      0.24
Land........................          3        867      0.82          2       868         0.90         3     1,447      1.57
Consumer....................        103      2,738      2.59         56     2,053         2.12        49     2,285      2.48
Commercial business.........         28      1,393      1.31        ---       101         0.10       ---        29      0.03
Unallocated.................        ---        ---       ---        ---       ---          ---       ---       ---       ---
                                   ----   --------   ------        ----   -------       ------      ----  -------    ------
     Total..................       $529   $105,861   100.00%       $426   $96,752       100.00%     $397  $92,182    100.00%
                                   ====   ========   ======        ====   =======       ======      ====  ========   ======

<CAPTION>
                                                            June 30,
                                ---------------------------------------------------------------
                                              1996                           1995
                                --------------------------------  -----------------------------
                                                       Percent                          Percent
                                                       of Loans                        of Loans
                                 Amount      Loan      in Each     Amount      Loan     in Each
                                   of       Amounts    Category      of      Amounts    Category
                                Loan Loss     by       to Total   Loan Loss     by      to Total
                                Allowance  Category      Loans    Allowance  Category    Loans
                                ---------  --------      -----    ---------  --------    -----
<S>                                <C>      <C>          <C>       <C>     <C>          <C>
One- to four-family.........       $ 211   $65,448        79.60%   $ 179   $59,181       78.95%
Construction and
development.................           4     7,091         8.63        5     6,639        8.86
Commercial real estate......          36     5,302         6.45        7     5,750        7.67
Multi-family................           1       485         0.59      ---       335        0.45
Land........................           2     1,342         1.63       21       909        1.21
Consumer....................          53     2,468         3.00       39     2,125        2.83
Commercial business.........         ---        81         0.10      ---        22        0.03
Unallocated.................         ---       ---          ---      ---       ---         ---
                                   -----   -------       ------    -----   -------      ------
     Total..................       $ 307   $82,217       100.00%   $ 251   $74,961      100.00%
                                   =====   =======       ======    =====   =======      ======
</TABLE>

                                      -18-
<PAGE>
Investment Activities

         As part of its  asset/liability  management  strategy,  the Association
invests in U.S. government and agency obligations and mortgage-backed securities
to supplement its lending activities.  The Association's  investment policy also
allows for  investments  in overnight  funds and  certificates  of deposit.  The
Association may consider the expansion of investments  into other  securities if
deemed appropriate. At June 30, 1999, the Association did not own any securities
of a single issuer which exceeded 10% of the  Association's  equity,  other than
U.S.  government or federal agency  obligations.  See Note 3 of the Notes to the
Consolidated  Financial  Statements  for  additional  information  regarding the
Association's securities portfolio.

         The  Association  is  required  by federal  regulations  to  maintain a
minimum amount of liquid assets that may be invested in specified securities and
is also  permitted  to make  certain  other  securities  investments.  Cash flow
projections are regularly reviewed and updated to assure that adequate liquidity
is provided.  As of June 30, 1999,  the  Association's  liquidity  ratio (liquid
assets as a percentage of net withdrawable  savings and current  borrowings) was
7.47% as compared to the OTS requirement of 4.0%.

         As of June 30,  1999  the  Association  had  securities  totaling  $7.9
million  classified as available for sale while there were no classified as held
to maturity.  As future  securities are acquired,  the  Association may elect to
classify them as either available for sale or held to maturity.

                                      -19-

<PAGE>
         The following  table sets forth the  composition  of the  Association's
investments in securities and time deposits at the dates indicated.
<TABLE>
<CAPTION>
                                                                                          June 30,
                                                         ---------------------------------------------------------------------------
                                                                  1999                       1998                       1997
                                                         ----------------------     ----------------------     ---------------------
                                                         Carrying         % of      Carrying        % of       Carrying       % of
                                                           Value          Total       Value         Total        Value        Total
                                                          --------       ------      -------         ------     -------      ------
                                                                                      (Dollars in Thousands)
<S>                                                      <C>             <C>         <C>              <C>       <C>           <C>
Securities and time deposits:
  U.S. government securities.........................    $     ---          ---%     $   ---            ---%    $   ---         ---%
  Federal agency obligations held to maturity........          ---          ---          ---            ---       1,999       20.45
  Federal agency obligations available for sale......        2,957        32.26        4,016          80.92       2,013       20.59
  Time deposits......................................          400         4.36          100           2.01       5,000       51.15
                                                          --------       ------      -------         ------     -------      ------
     Subtotal........................................        3,357        36.62        4,116          82.93       9,012       92.19
Mortgage-Backed Securities...........................        4,901        53.47
FHLB stock...........................................          908         9.91          847          17.07         763        7.81
                                                          --------       ------      -------         ------     -------      ------
     Total securities, time deposits, mortgaged-
         backed securities and FHLB stock............     $  9,166       100.00%     $ 4,963         100.00     $ 9,775      100.00%
                                                          ========       ======      =======         ======     =======      ======
Average remaining life of securities
  and time deposits..................................     2.77 years                 3.01 years                 1.04 years

Other interest-earning assets:
  Interest-bearing deposits with banks...............     $    635      100.00%      $ 2,292         53.40%     $ 1,498       59.97%
  Overnight deposits.................................          ---          ---        2,000         46.60        1,000       40.03
                                                          --------      ------       -------         ------     -------      ------
     Total...........................................     $    635      100.00%      $ 4,292        100.00%     $ 2,498      100.00%
                                                          ========      ======       =======        ======      =======      ======

</TABLE>
                                      -20-
<PAGE>
         The  composition  and  maturities  of the time  deposit and  securities
portfolios, excluding FHLB stock, are indicated in the following table.
<TABLE>
<CAPTION>
                                                                        June 30, 1999
                                       -----------------------------------------------------------------------------------
                                            Less Than                        1 to 5                   Total Securities
                                              1 Year                          Years                   and Time Deposits
                                       -----------------------       ------------------------      -----------------------
                                       Amortized                     Amortized                     Amortized
                                         Cost       Fair Value         Cost        Fair Value        Cost       Fair Value
                                         ----       ----------         ----        ----------        ----       ----------
                                                                     (Dollars in Thousands)

<S>                                      <C>            <C>            <C>            <C>            <C>            <C>
Time deposit                             $  400         $  400         $  ---         $  ---         $  400         $  400
Federal agency obligations
available for sale                         --             --            2,998          2,957          2,998          2,957
Mortgage-Backed Securities                 --             --             --             --            4,929          4,901
                                         ------         ------         ------         ------         ------         ------
Total securities and time deposit        $  400         $  400         $2,998         $2,957         $8,327         $8,258
                                         ======         ======         ======         ======         ======         ======

Weighted average yield                     4.94%          4.94%          5.63%          5.63%          6.41%          6.41%

</TABLE>
         Mortgage-Backed    Securities.    The    Association   had   one   GNMA
mortgage-backed  security at June 30, 1999.  From time to time, the  Association
may purchase such securities to supplement loan production, leverage its capital
position or manage its assets/liability structure.

Sources of Funds

         General.  The  Association's  primary  sources  of funds are  deposits,
amortization  and  prepayment  of  loan  principal,  maturities  of  securities,
short-term  investments  and  funds  provided  from  operations  as well as FHLB
advances.

         Deposits. Peoples Federal offers a variety of deposit accounts having a
wide range of interest rates and terms.  The  Association's  deposits consist of
passbook accounts, statement savings, NOW accounts, Christmas club, money market
and  certificate  accounts.  The  Association  relies  primarily on advertising,
including newspaper and radio, competitive pricing policies and customer service
to attract and retain these deposits. Neither premiums nor brokered deposits are
utilized.

         The flow of deposits is influenced  significantly  by general  economic
conditions,   changes  in  money  market  and  prevailing   interest  rates  and
competition.
<PAGE>
         The variety of deposit  accounts offered by the Association has allowed
it to be  competitive  in  obtaining  funds and to respond with  flexibility  to
changes in consumer  demand.  The  Association  has become more  susceptible  to
short-term fluctuations in deposit flows, as customers have become more interest
rate conscious.  The Association  manages the pricing of its deposits in keeping
with its asset/liability management,  profitability and growth objectives. Based
on its experience,  the Association  believes that its passbook,  demand and NOW
accounts are relatively stable sources of deposits.  However, the ability of the
Association to attract and maintain certificate deposits,  and the rates paid on
these  deposits,  has been and will  continue  to be  significantly  affected by
market conditions.


                                      -21-
<PAGE>
         The  following  table sets forth the savings  flows at the  Association
during the periods indicated.
<TABLE>
<CAPTION>
                                               Year Ended June 30,
                                   ---------------------------------------------
                                      1999              1998             1997
                                   ---------         --------          ---------
                                              (Dollars in Thousands)
<S>                                <C>               <C>               <C>
Opening balance                    $  79,054         $  77,045         $  77,318
Deposits                              90,648            87,133           111,312(1)
Withdrawals                           88,585            88,401           114,882(1)
Interest credited                      3,193             3,277             3,297
                                   ---------         ---------         ---------

Ending balance                     $  84,310         $  79,054         $  77,045
                                   ---------         =========         =========

Net increase (decrease)            $   5,256         $   2,009         $    (273)
                                   =========         =========         =========

Percent increase (decrease)             6.65%             2.61%            (0.35)%
                                   =========         =========         =========
</TABLE>
-------------

(1)  Includes stock subscription  deposit activity which was included in savings
     accounts in conjunction with the Association's mutual to stock conversion.


                                      -22-

<PAGE>
         The following table sets forth the dollar amount of savings deposits in
the various types of deposit  programs  offered by the  Association at the dates
indicated.
<TABLE>
<CAPTION>
                                                                                          June 30,
                                                        ----------------------------------------------------------------------------
                                                                 1999                       1998                      1997
                                                        ----------------------------------------------------------------------------
                                         Weighted
                                          Average
                                          Rate at                      Percent                    Percent                   Percent
                                       June 30, 1999     Amount        of Total      Amount       of Total      Amount      of Total
                                       -------------     ------        --------      ------       --------      ------      --------
                                                                            (Dollars in Thousands)
<S>
Transactions and Savings Deposits:

Noninterest Bearing Demand                 <C>          <C>            <C>           <C>            <C>        <C>           <C>
Savings Accounts                                        $   650           0.77%      $   169          0.22%    $   150         0.19%
NOW Accounts                               3.05%         19,544          23.17        18,456         23.34      17,685        22.94
Money Market Accounts                      2.44           4,874           5.78         3,362          4.25       3,469         4.50
                                           3.83           1,846           2.19           982          1.24         777         1.01
                                                        -------         ------       -------        ------     -------       ------
Total Non-Certificates
                                                         26,914          31.91        22,969         29.05      22,081        28.64
                                                        -------         ------       -------        ------     -------       ------
Certificates:

 0.00 -  1.99%
 2.00 -  3.99%                                               --             --            --            --           --         --
 4.00 -  5.99%                                               19           0.02            --            --           --         --
 6.00 -  7.99%                                           41,767          49.51        36,060         45.59       28,959      37.57
 8.00 -  9.99%                                           15,610          18.51        20,025         25.32       26,005      33.74
10.00% and over                                              --             --            --            --           --         --
                                                             --             --            --            --           --         --
                                                        -------         ------       -------        ------      -------     ------
Total Certificates
                                           5.38          57,396          68.04        56,085         70.91       54,964      71.31
Accrued Interest                                        -------         ------       -------        ------      -------     ------
                                                             44           0.05            35         0 .04           36       0.05
Total Deposits                                                                       -------        ------      -------     ------
                                           4.43%        $84,354         100.00%      $79,089        100.00%     $77,081     100.00%
                                                        =======         ======       =======        ======      =======     ======
</TABLE>


                                      -23-

<PAGE>
         The  following  table  shows  rate  and  maturity  information  for the
Association's certificates of deposit as of June 30, 1999.
<TABLE>
<CAPTION>
                                       2.00-        4.00-          6.00-                     Percent
                                       3.99%        5.99%          7.99%         Total      of Total
                                       -----        -----          -----         -----      --------
                                                            (Dollars in Thousands)
Certificate accounts
    maturing
in quarter ending:
------------------
<S>                                      <C>       <C>           <C>           <C>             <C>
September 30, 1999.............           19         6,445            61         6,525          11.37%
December 31, 1999..............          ---         6,901         1,378         8,279          14.42
March 31, 2000.................          ---         6,182         2,159         8,341          14.53
June 30, 2000..................          ---         4,614         3,845         8,459          14.74
September 30, 2000.............          ---         4,389         1,517         5,906          10.29
December 31, 2000..............          ---         4,138         1,330         5,468           9.53
March 31, 2001.................          ---         2,958           197         3,155           5.50
June 30, 2001..................          ---         1,727           138         1,865           3.25
September 30, 2001.............          ---         1,328           144         1,472           2.56
December 31, 2001..............          ---         1,243           559         1,802           3.14
March 31, 2002.................          ---           308           189           497           0.87
June 30, 2002..................          ---           127           271           398           0.69
September 30, 2002.............          ---            53           400           453           0.79
December 31, 2002..............          ---           275           458           733           1.28
March 31, 2003.................          ---           102         1,036         1,138           1.98
June 30, 2003..................          ---            54         1,177         1,231           2.14
September 30, 2003.............          ---           472           661         1,133           1.97
December 31, 2003..............          ---           152            90           242           0.42
March 31, 2004.................          ---           227           ---           227           0.40
June 30, 2004..................          ---            72           ---            72           0.13
                                         ---       -------       -------       -------         ------
   Total.......................          $19       $41,767       $15,610       $57,396         100.00%
                                         ===       =======       =======       =======         ======

    Percent of total...........         0.03%        72.77%        27.20%
                                        ====         =====         =====
</TABLE>
<PAGE>

         At June 30, 1999 the  Association  had  approximately  $4.5  million in
certificate accounts in amounts of $100,000 or more maturing as follows:
<TABLE>
<CAPTION>
                                                                                              Weighted
                        Maturity Period                                    Amount            Average Rate
---------------------------------------------------------------------------------------------------------
                                                                        (Dollars in
                                                                         Thousands)
<S>                                                                          <C>                  <C>
Three months or less..........................................               $224                 5.61%
Over three through six months.................................                612                 4.77
Over six through 12 months....................................              1,842                 5.23
Over 12 months................................................              1,785                 5.52
                                                                          -------              -------
Total.........................................................             $4,463                 5.30%
                                                                           ======               ======
</TABLE>


         For   additional   information   regarding  the   composition   of  the
Association's   deposits,   see  Note  8  of  Notes  to  Consolidated  Financial
Statements.


                                      -24-

<PAGE>
         Borrowings.  Peoples Federal's other available sources of funds include
advances from the FHLB of Cincinnati  and other  borrowings.  As a member of the
FHLB of Cincinnati, the Association is required to own capital stock in the FHLB
of  Cincinnati  and is  authorized  to  apply  for  advances  from  the  FHLB of
Cincinnati.  Each FHLB credit  program has its own interest  rate,  which may be
fixed or variable, and range of maturities. The FHLB of Cincinnati may prescribe
the acceptable  uses for these  advances,  as well as limitations on the size of
the advances and repayment pro visions.

         The  following  table  sets forth the  maximum  month-end  balance  and
average balance of FHLB advances for the periods indicated.
<TABLE>
<CAPTION>
                                                                        Year Ended June 30,
                                                                -----------------------------------
                                                                 1999           1998          1997
                                                                -------        -------       ------
                                                                   (Dollars in Thousands)
<S>                                                             <C>            <C>           <C>
Balance at period end:
  FHLB advances...........................................      $14,800        $7,000        $  ---

Maximum balance at any month end during the period:
  FHLB advances...........................................      $14,800        $7,000        $3,500

Average balance for the period:
  FHLB advances...........................................       $7,764      $     96        $1,163
  Weighted average rate...................................        6.05%         6.25%         5.59%

</TABLE>

Service Corporations

         As a  federally  chartered  savings  association,  Peoples  Federal  is
permitted by OTS  regulations to invest up to 2% of its assets,  or $2.3 million
at June 30, 1999 in the stock of, or loans to, service corporation subsidiaries.
As of such date, Peoples Federal had no investments in service corporations.


                                   REGULATION

General

         Peoples  Federal is a  federally  chartered  savings  association,  the
deposits of which are federally  insured and backed by the full faith and credit
of the United  States  Government.  Accordingly,  Peoples  Federal is subject to
broad federal regulation and oversight extending to all its operations.  Peoples
Federal is a member of the FHLB of Cincinnati and is subject to certain  limited
regulation  by the Board of Governors of the Federal  Reserve  System  ("Federal
Reserve Board"). As the savings and loan holding company of Peoples Federal, the
Company also is subject to federal regulation and oversight.  The purpose of the
regulation  of the Company and other  savings and loan  holding  companies is to
protect  subsidiary  savings  associations.  Peoples  Federal is a member of the
SAIF,  which  together  with the Bank  Insurance  Fund (the  "BIF")  are the two
deposit  insurance  funds  administered by the FDIC, and the deposits of Peoples
Federal are insured by the FDIC.  As a result,  the FDIC has certain  regulatory
and examination authority over Peoples Federal.
<PAGE>
         Certain of these regulatory requirements and restrictions are discussed
below or elsewhere in this document.

Federal Regulation of Savings Associations

         The  OTS  has  extensive  authority  over  the  operations  of  savings
associations.  As part of this  authority,  Peoples  Federal is required to file
periodic reports with the OTS and is subject to periodic examinations by the OTS
and the FDIC.  The last  regular OTS  examination  of Peoples  Federal was as of
March 31, 1998. When these  examinations  are conducted by the OTS and the FDIC,
the  examiners  may require  the  Association  to provide for higher  general or
specific  loan  loss  reserves.  All  savings  associations  are  subject  to  a
semi-annual assessment, based upon the savings association's

                                      -25-

<PAGE>
total  assets,  to  fund  the  operations  of the  OTS.  The  Association's  OTS
assessment for the fiscal year ended June 30, 1999 was $34,000.

         The OTS also  has  extensive  enforcement  authority  over all  savings
institutions  and their holding  companies,  including  Peoples  Federal and the
Company. This enforcement authority includes, among other things, the ability to
assess civil money penalties, to issue cease-and-desist or removal orders and to
initiate  injunctive  actions.  In  general,  these  enforcement  actions may be
initiated  for  violations  of  laws  and  regulations  and  unsafe  or  unsound
practices.  Other  actions or  inactions  may provide the basis for  enforcement
action,  including  misleading or untimely  reports  filed with the OTS.  Except
under certain  circumstances,  public disclosure of final enforcement actions by
the OTS is required.

         In addition,  the  investment,  lending and branching  authority of the
Association is prescribed by federal laws and it is prohibited  from engaging in
any activities not permitted by such laws. For instance,  no savings institution
may invest in non-investment grade corporate debt securities.  In addition,  the
permissible  level of  investment  by federal  associations  in loans secured by
non-residential real property may not exceed 400% of total capital,  except with
approval of the OTS. Federal savings  associations are also generally authorized
to  branch  nationwide.   Peoples  Federal  is  in  compliance  with  the  noted
restrictions.

         Peoples    Federal's    general    permissible    lending   limit   for
loans-to-one-borrower  is equal to the greater of $500,000 or 15% of  unimpaired
capital  and  surplus  (except  for  loans  fully  secured  by  certain  readily
marketable  collateral,  in  which  case  this  limit  is  increased  to  25% of
unimpaired  capital and surplus).  At June 30, 1999, the  Association's  lending
limit under this restriction was $1.97 million. Peoples Federal is in compliance
with the loans- to-one-borrower limitation.

         The OTS, as well as the other  federal  banking  agencies,  has adopted
guidelines  establishing  safety and soundness standards on such matters as loan
underwriting and  documentation,  asset quality,  earnings  standards,  internal
controls and audit  systems,  interest rate risk exposure and  compensation  and
other  employee  benefits.  Any  institution  which  fails to comply  with these
standards must submit a compliance plan.

Insurance of Accounts and Regulation by the FDIC

         Peoples  Federal is a member of the SAIF,  which is administered by the
FDIC.  Deposits  are  insured  up to  applicable  limits  by the  FDIC  and such
insurance  is  backed  by  the  full  faith  and  credit  of the  United  States
Government.  As insurer,  the FDIC  imposes  deposit  insurance  premiums and is
authorized to conduct  examinations of and to require  reporting by FDIC-insured
institutions. It also may prohibit any FDIC-insured institution from engaging in
any activity the FDIC  determines  by regulation or order to pose a serious risk
to the SAIF or the BIF. The FDIC also has the authority to initiate  enforcement
actions  against  savings  associations,  after giving the OTS an opportunity to
take such action,  and may terminate the deposit insurance if it determines that
the institution has engaged in unsafe or unsound practices or is in an unsafe or
unsound condition.
<PAGE>
         The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured  depository  institutions  are placed into one of
nine  categories  and  assessed  insurance  premiums  based upon their  level of
capital and supervisory evaluation. Under the system, institutions classified as
well  capitalized  (i.e., a core capital ratio of at least 5%, a ratio of Tier 1
or core capital to  risk-weighted  assets  ("Tier 1  risk-based  capital") of at
least 6% and a risk-based  capital ratio of at least 10%) and considered healthy
pay the  lowest  premium  while  institutions  that  are  less  than  adequately
capitalized (i.e., core or Tier 1 risk-based capital ratios of less than 4% or a
risk-based  capital  ratio  of less  than  8%)  and  considered  of  substantial
supervisory concern pay the highest premium.  Risk classification of all insured
institutions is made by the FDIC for each semi-annual assessment period.

         The FDIC is authorized to increase  assessment  rates,  on a semiannual
basis, if it determines that the reserve ratio of the SAIF will be less than the
designated  reserve  ratio of 1.25% of SAIF insured  deposits.  In setting these
increased  assessments,  the FDIC must seek to restore the reserve ratio to that
designated  reserve  level,  or such higher  reserve ratio as established by the
FDIC.  The FDIC may also impose  special  assessments  on SAIF  members to repay
amounts  borrowed from the United States Treasury or for any other reason deemed
necessary by the FDIC.


                                      -26-

<PAGE>
         In order to equalize the deposit  insurance  premium  schedules for BIF
and SAIF insured institutions, the FDIC imposed a one-time special assessment on
all  SAIF-assessable   deposits  pursuant  to  federal  legislation  enacted  on
September 30, 1996.  Peoples Federal's special  assessment,  which was $456,000,
was paid in November 1996, and included in federal deposit  insurance expense in
the fiscal  year ended June 30,  1997.  Effective  January 1, 1997,  the premium
schedule  for BIF and  SAIF  insurance  institutions  ranged  from 0 to 27 basis
points.  However,  SAIF-insured  institutions  are  required  to pay a Financing
Corporation (FICO) assessment,  in order to fund the interest on bonds issued to
resolve thrift failures in the 1980's,  equal to 6.48 basis points for each $100
in domestic deposits,  while BIF-insured institutions pay an assessment equal to
1.52 basis points for each $100 in domestic deposits. The assessment is expected
to be  reduced  to  2.43 no  later  than  January  1,  2000,  when  BIF  insured
institutions fully participate in the assessment.  These assessments,  which may
be revised based upon the level of BIF and SAIF  deposits,  will continue  until
the bonds mature in the year 2015.

Regulatory Capital Requirements

         Federally insured savings  associations,  such as Peoples Federal,  are
required  to  maintain  a  minimum  level  of  regulatory  capital.  The OTS has
established  capital  standards,  including a tangible  capital  requirement,  a
leverage  ratio  (or  core  capital)   requirement  and  a  risk-based   capital
requirement applicable to such savings associations.  These capital requirements
must be  generally  as  stringent as the  comparable  capital  requirements  for
national  banks.  The OTS is also  authorized to impose capital  requirements in
excess of these standards on individual associations on a case-by-case basis.

         The capital  regulations  require  tangible capital of at least 1.5% of
adjusted total assets (as defined by  regulation).  Tangible  capital  generally
includes  common   stockholders'   equity  and  retained  income,   and  certain
noncumulative  perpetual  preferred stock and related income.  In addition,  all
intangible  assets,  other than a limited amount of purchased mortgage servicing
rights,  must be deducted from tangible capital for calculating  compliance with
the  requirement.  At June 30, 1999, the Association did not have any intangible
assets.

         The OTS regulations establish special  capitalization  requirements for
savings associations that own subsidiaries.  In determining  compliance with the
capital requirements,  all subsidiaries engaged solely in activities permissible
for national  banks or engaged in certain other  activities  solely as agent for
its customers are  "includable"  subsidiaries  that are consolidated for capital
purposes in proportion to the association's  level of ownership.  For excludable
subsidiaries the debt and equity  investments in such  subsidiaries are deducted
from assets and capital. Peoples Federal does not have any subsidiaries.

         At June  30,  1999,  Peoples  Federal  had  tangible  capital  of $13.2
million, or 11.2% of adjusted total assets, which is approximately $11.4 million
above the minimum requirement of 1.5% of adjusted total assets in effect on that
date.

         The capital standards also require core capital equal to at least 3% of
adjusted total assets.  Core capital generally consists of tangible capital plus
certain intangible  assets,  including a limited amount of purchased credit card
receivables.  As a result of the prompt corrective  action provisions  discussed
<PAGE>
below,  however, a savings  association must maintain a core capital ratio of at
least  4%  to  be  considered  adequately  capitalized  unless  its  supervisory
condition is such to allow it to maintain a 3% ratio. At June 30, 1999,  Peoples
Federal had no intangible assets which were subject to these tests.

         At June 30,  1999,  Peoples  Federal  had core  capital  equal to $13.2
million,  or 11.2% of adjusted  total  assets,  which is $8.5 million  above the
minimum leverage ratio requirement of 4% as in effect on that date.

          The OTS risk-based  requirement  requires savings associations to have
total capital of at least 8% of risk- weighted assets. Total capital consists of
core capital, as defined above, and supplementary capital. Supplementary capital
consists of certain  permanent  and  maturing  capital  instruments  that do not
qualify as core capital and general  valuation loan and lease loss allowances up
to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used
to satisfy the risk-based  requirement  only to the extent of core capital.  The
OTS is  also  authorized  to  require  a  savings  association  to  maintain  an
additional  amount of total capital to account for  concentration of credit risk
and the risk of  non-traditional  activities.  At June 30, 1999, Peoples Federal
had  $482,000  of  general  loss   reserves,   which  was  less  than  1.25%  of
risk-weighted assets.

                                      -27-

<PAGE>
         Certain  exclusions from capital and assets are required to be made for
the purpose of calculating  total  capital.  Such  exclusions  consist of equity
investments  (as  defined  by  regulation)  and that  portion  of land loans and
nonresidential  construction  loans in excess of an 80% loan-to-value  ratio and
reciprocal  holdings of qualifying capital  instruments.  Peoples Federal had no
such exclusions from capital and assets at June 30, 1999.

         In  determining  the  amount  of  risk-weighted   assets,  all  assets,
including certain  off-balance sheet items, will be multiplied by a risk weight,
ranging from 0% to 100%,  based on the risk  inherent in the type of asset.  For
example,  the OTS has assigned a risk weight of 50% for  prudently  underwritten
permanent  one- to  four-family  first lien mortgage loans not more than 90 days
delinquent  and having a loan to value ratio of not more than 80% at origination
unless insured to such ratio by an insurer approved by the FNMA or FHLMC.

         On June 30, 1999,  Peoples  Federal had total  capital of $13.6 million
(including   $13.2   million  in  core  capital  and   $482,000  in   qualifying
supplementary  capital)  and  risk-weighted  assets of $75.9  million,  or total
capital of 18.0% of risk-weighted assets. This amount was $7.6 million above the
8% requirement in effect on that date.

         The OTS and the FDIC are authorized  and,  under certain  circumstances
required, to take certain actions against savings associations that fail to meet
their  capital  requirements.  The OTS is  generally  required to take action to
restrict the activities of an "undercapitalized  association" (generally defined
to be  one  with  less  than  either  a 4%  core  capital  ratio,  a 4%  Tier  1
risked-based  capital  ratio  or an  8%  risk-based  capital  ratio).  Any  such
association  must  submit a  capital  restoration  plan and  until  such plan is
approved by the OTS may not increase its assets,  acquire  another  institution,
establish a branch or engage in any new  activities,  and generally may not make
capital   distributions.   The  OTS  is  authorized  to  impose  the  additional
restrictions that are applicable to significantly undercapitalized associations.

          As a condition to the approval of the capital  restoration  plan,  any
company  controlling  an  undercapitalized  association  must agree that it will
enter  into  a  limited  capital  maintenance  guarantee  with  respect  to  the
institution's achievement of its capital requirements.

         Any savings  association  that fails to comply with its capital plan or
is  "significantly  undercapitalized"  (i.e.,  Tier 1 risk-based or core capital
ratios of less than 3% or a  risk-based  capital  ratio of less than 6%) must be
made  subject  to one or more of  additional  specified  actions  and  operating
restrictions  which may cover all aspects of its operations and include a forced
merger  or  acquisition  of  the   association.   An  association  that  becomes
"critically  undercapitalized" (i.e., a tangible capital ratio of 2% or less) is
subject to further mandatory restrictions on its activities in addition to those
applicable to significantly  undercapitalized associations. In addition, the OTS
must appoint a receiver (or conservator  with the concurrence of the FDIC) for a
savings  association,  with certain limited exceptions,  within 90 days after it
becomes critically  undercapitalized.  Any undercapitalized  association is also
subject to the general enforcement  authority of the OTS and the FDIC, including
the appointment of a conservator or a receiver.

         The OTS is also generally  authorized to reclassify an association into
a lower capital category and impose the restrictions applicable to such category
if the institution is engaged in unsafe or unsound  practices or is in an unsafe
or unsound condition.
<PAGE>
         The  imposition by the OTS or the FDIC of any of these  measures on the
Association  may  have  a  substantial  adverse  effect  on its  operations  and
profitability.

Limitations on Dividends and Other Capital Distributions

         OTS regulations  impose various  restrictions  on savings  associations
with respect to their ability to make  distributions  of capital,  which include
dividends,  stock  redemptions  or  repurchases,   cash-out  mergers  and  other
transactions  charged to the capital  account.  OTS regulations  also prohibit a
savings  association from declaring or paying any dividends or from repurchasing
any of its stock if, as a result,  the  regulatory  capital  of the  association
would be reduced below the amount  required to be maintained for the liquidation
account established in connection with its mutual to stock conversion.


                                      -28-
<PAGE>
Liquidity

         All savings  associations,  including Peoples Federal,  are required to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. For a discussion of what Peoples Federal
includes  in  liquid  assets,  see  "Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations - Liquidity and Capital Resources"
in the 1999  Annual  Report to  Stockholders  attached  hereto as Exhibit 13 and
incorporated by reference  herein.  This liquid asset ratio requirement may vary
from time to time  depending  upon economic  conditions and savings flows of all
savings associations. At the present time, the minimum liquid asset ratio is 4%.

Qualified Thrift Lender Test

         All savings  associations,  including Peoples Federal,  are required to
meet a qualified  thrift lender  ("QTL") test to avoid certain  restrictions  on
their operations.  This test requires a savings association to have at least 65%
of  its  portfolio  assets  (as  defined  by  regulation)  in  qualified  thrift
investments  on a monthly  average  for nine out of every 12 months on a rolling
basis. As an alternative, the savings association may maintain 60% of its assets
in those assets specified in Section 7701(a)(19) of the Internal Revenue Code of
1986, as amended (the "Code").  Under either test, such assets primarily consist
of  residential  housing  related loans and  investments.  At June 30, 1999, the
Association met the test and has always met the test since its effectiveness.

         Any savings association that fails to meet the QTL test must convert to
a national bank charter, unless it requalifies as a QTL and thereafter remains a
QTL. If an  association  does not  requalify  and  converts  to a national  bank
charter,  it must remain  SAIF-insured  until the FDIC permits it to transfer to
the BIF.  If such an  association  has not yet  requalified  or  converted  to a
national  bank,  its  new  investments  and  activities  are  limited  to  those
permissible  for both a  savings  association  and a  national  bank,  and it is
limited to national bank branching  rights in its home state.  In addition,  the
association is immediately  ineligible to receive any new FHLB borrowings and is
subject to national  bank limits for payment of dividends.  If such  association
has not requalified or converted to a national bank within three years after the
failure,  it must  divest  of all  investments  and  cease  all  activities  not
permissible  for a  national  bank.  In  addition,  it must repay  promptly  any
outstanding FHLB borrowings,  which may result in prepayment  penalties.  If any
association  that fails the QTL test is  controlled by a holding  company,  then
within one year after the failure,  the holding  company must register as a bank
holding  company  and  become  subject  to  all  restrictions  on  bank  holding
companies. See "- Regulation of the Company."

Community Reinvestment Act

         Under the  Community  Reinvestment  Act  ("CRA"),  every  FDIC  insured
institution has a continuing and affirmative obligation consistent with safe and
sound banking  practices to help meet the credit needs of its entire  community,
including  low and moderate  income  neighborhoods.  The CRA does not  establish
specific lending requirements or programs for financial institutions nor does it
limit an institution's  discretion to develop the types of products and services
that it believes are best suited to its particular  community,  consistent  with
the CRA. The CRA requires the OTS, in connection with the examination of Peoples
Federal,  to assess the institution's  record of meeting the credit needs of its
<PAGE>
community  and to take such record  into  account in its  evaluation  of certain
applications,  such as a merger or the  establishment  of a branch,  by  Peoples
Federal. An unsatisfactory  rating may be used as the basis for the denial of an
application by the OTS.

         Due to the heightened attention being given to the CRA in recent years,
the  Association may be required to devote  additional  funds for investment and
lending in its local community.  The Association was examined for CRA compliance
in 1998 and received a rating of satisfactory.

Transactions with Affiliates

         Generally,   transactions   between  a  savings   association   or  its
subsidiaries  and its affiliates are required to be on terms as favorable to the
association as transactions with non-affiliates.  In addition,  certain of these
transactions,  such as loans to an affiliate,  are restricted to a percentage of
the association's capital. Affiliates of Peoples Federal include

                                      -29-

<PAGE>
the Company and any company which is under common control with the  Association.
In addition,  a savings  association  may not lend to any  affiliate  engaged in
activities not  permissible for a bank holding company or acquire the securities
of most affiliates.  The OTS has the discretion to treat subsidiaries of savings
associations as affiliates on a case by case basis.

         Certain  transactions with directors,  officers or controlling  persons
are also subject to conflict of interest  regulations enforced by the OTS. These
conflict of interest  regulations and other statutes also impose restrictions on
loans to such persons and their  related  interests.  Among other  things,  such
loans must be made on terms  substantially the same as for loans to unaffiliated
individuals.

Regulation of the Company

         The Company is a unitary  savings and loan holding  company  subject to
regulatory  oversight  by the OTS. As such,  the Company is required to register
and file reports with the OTS and is subject to regulation  and  examination  by
the OTS. In addition, the OTS has enforcement authority over the Company and its
non-savings  association  subsidiaries which also permits the OTS to restrict or
prohibit  activities  that are determined to be a serious risk to the subsidiary
savings association.

         As a unitary savings and loan holding company, the Company generally is
not subject to activity restrictions. If the Company acquires control of another
savings association as a separate subsidiary, it would become a multiple savings
and loan  holding  company,  and the  activities  of the  Company and any of its
subsidiaries  (other  than  Peoples  Federal or any other  SAIF-insured  savings
association)  would  become  subject  to such  restrictions  unless  such  other
associations  each  qualify  as  a  QTL  and  were  acquired  in  a  supervisory
acquisition.

         If Peoples  Federal  fails the QTL test,  the  Company  must obtain the
approval of the OTS prior to continuing after such failure,  directly or through
its other  subsidiaries,  any business  activity  other than those  approved for
multiple savings and loan holding companies or their subsidiaries.  In addition,
within one year of such failure the Holding  Company must  register as, and will
become subject to, the restrictions  applicable to bank holding  companies.  The
activities  authorized for a bank holding  company are more limited than are the
activities  authorized  for a  unitary  or  multiple  savings  and loan  holding
company. See "--Qualified Thrift Lender Test."

         The Company must obtain approval from the OTS before acquiring  control
of  any  other  SAIF-insured   association.   Such  acquisitions  are  generally
prohibited  if they  result  in a  multiple  savings  and loan  holding  company
controlling  savings  associations  in  more  than  one  state.   However,  such
interstate  acquisitions are permitted based on specific state  authorization or
in a supervisory acquisition of a failing savings association.

Federal Securities Law

         The common  stock of the Company is  registered  with the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company is
subject to the information, proxy solicitation, insider trading restrictions and
other requirements of the SEC under the Exchange Act.
<PAGE>
         Company stock held by persons who are affiliates  (generally  officers,
directors and principal  stockholders)  of the Company may not be resold without
registration unless sold in accordance with certain resale restrictions.  If the
Company meets specified current public information requirements,  each affiliate
of the Company is able to sell in the public  market,  without  registration,  a
limited number of shares in any three-month period.

Federal Reserve System

         The Federal  Reserve  Board  requires all  depository  institutions  to
maintain   noninterest  bearing  reserves  at  specified  levels  against  their
transaction accounts (primarily checking,  NOW and Super NOW checking accounts).
At  June  30,  1999,  Peoples  Federal  was in  compliance  with  these  reserve
requirements.  The balances maintained to meet the reserve  requirements imposed
by the Federal Reserve Board may be used to satisfy liquidity  requirements that
may be imposed by the OTS. See "--Liquidity."

                                      -30-

<PAGE>
         Savings  associations are authorized to borrow from the Federal Reserve
Bank  "discount   window,"  but  Federal  Reserve  Board   regulations   require
associations to exhaust other reasonable alternative sources of funds, including
FHLB borrowings, before borrowing from the Federal Reserve Bank.

Federal Home Loan Bank System

         Peoples Federal is a member of the FHLB of Cincinnati,  which is one of
12 regional FHLBs that administers the home financing credit function of savings
associations.  Each FHLB  serves as a reserve  or central  bank for its  members
within its assigned  region.  It is funded  primarily from proceeds derived from
the sale of  consolidated  obligations  of the FHLB  System.  It makes  loans to
members (i.e., advances) in accordance with policies and procedures, established
by the board of directors of the FHLB, which are subject to the oversight of the
Federal  Housing  Finance  Board.  All advances from the FHLB are required to be
fully secured by  sufficient  collateral as determined by the FHLB. In addition,
all  long-term  advances  are  required to provide  funds for  residential  home
financing.

         As a member, Peoples Federal is required to purchase and maintain stock
in the FHLB of  Cincinnati.  At June 30, 1999,  Peoples  Federal had $908,000 in
FHLB  stock,  which was in  compliance  with this  requirement.  In past  years,
Peoples Federal has received  substantial  dividends on its FHLB stock. Over the
past five fiscal years such  dividends  have  averaged  6.97% and were 7.13% for
fiscal 1999.

         Under  federal  law,  the FHLBs are  required to provide  funds for the
resolution  of  troubled  savings  associations  and to  contribute  to low- and
moderately-priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income  housing
projects.  These  contributions  have  affected  adversely  the  level  of  FHLB
dividends  paid and could continue to do so in the future.  These  contributions
could also have an adverse  effect on the value of FHLB stock in the  future.  A
reduction in value of Peoples Federal's FHLB stock may result in a corresponding
reduction in Peoples Federal's capital.

         For the  year  ended  June  30,  1999,  dividends  paid by the  FHLB of
Cincinnati  to Peoples  Federal  totaled  $61,000,  which  constitutes  a $4,000
increase over the amount of dividends  received in fiscal year 1998. The $15,600
dividend  for the quarter  ended June 30, 1999  reflects an  annualized  rate of
6.98%, or 0.15% below the rate for fiscal 1999.

Federal and State Taxation

         Savings  associations  such  as  Peoples  Federal,  that  meet  certain
conditions  prescribed by the Code, are permitted to establish  reserves for bad
debts and to make annual additions  thereto which may, within specified  formula
limits,  be taken as a deduction in computing  taxable income for federal income
tax purposes.  The amount of the bad debt reserve  deduction was computed  under
the  experience  method.  Under  the  experience  method,  the bad debt  reserve
deduction is an amount  determined  under a formula based generally upon the bad
debts actually sustained by the savings association over a period of years.

         In August 1996, legislation was enacted that repealed the percentage of
taxable  income  method used by many  thrifts,  including  the  Association,  to
calculate  their bad debt reserve for federal income tax purposes.  As a result,
small thrifts such as the Association must recapture that portion of the reserve
<PAGE>
that exceeds the amount that could have been taken under the  experience  method
for tax years beginning after December 31, 1987. The recapture will occur over a
six-year  period,  the commencement of which was delayed until the first taxable
year beginning  after  December 31, 1997,  because  Peoples  Federal met certain
residential  lending  requirements.  At  June  30,  1999,  the  Association  had
approximately  $484,000 in bad debt  reserves  subject to recapture  for federal
income tax  purposes.  The deferred tax  liability  related to the recapture has
been previously  established so there will be no effect on future net income. In
fiscal 1999, $97,000 in bad debt reserves were recaptured.

         In addition to the regular income tax, corporations,  including savings
associations such as Peoples Federal, generally are subject to a minimum tax. An
alternative  minimum tax is imposed at a minimum tax rate of 20% on  alternative
minimum  taxable  income,  which is the sum of a  corporation's  regular taxable
income (with certain  adjustments) and tax preference  items, less any available
exemption. The alternative minimum tax is imposed to the

                                      -31-

<PAGE>
extent it exceeds the corporation's  regular income tax and net operating losses
can offset no more than 90% of alternative minimum taxable income.

         A portion of the  Association's  reserves  for losses on loans may not,
without adverse tax consequences,  be utilized for the payment of cash dividends
or other distributions to a shareholder (including  distributions on redemption,
dissolution or  liquidation) or for any other purpose (except to absorb bad debt
losses).  As of June 30, 1999, the portion of Peoples Federal's reserves subject
to this treatment for tax purposes totaled approximately $2.2 million.

         The Company and Peoples  Federal file  consolidated  federal income tax
returns on a fiscal year basis using the accrual method of accounting.

         Peoples  Federal  has  been  audited  by the  IRS,  or the  statute  of
limitations  for  assessment  has  closed,  with  respect to federal  income tax
returns through June 30, 1994. With respect to years examined by the IRS, either
all  deficiencies   have  been  satisfied  or  sufficient   reserves  have  been
established to satisfy asserted deficiencies.  In the opinion of management, any
examination  of still  open  returns  (including  returns  of  subsidiaries  and
predecessors of, or entities merged into, Peoples Federal) would not result in a
deficiency which could have a material adverse effect on the financial condition
of Peoples Federal.

         Ohio  Taxation.  The  Association  conducts  its  business  in Ohio and
consequently  is  subject  to the Ohio  corporate  franchise  tax.  A  financial
institution  subject  to the Ohio  corporate  franchise  tax  levied by the Ohio
Revised  Code  pays a tax  equal to 1.4 times its  apportioned  net  worth.  The
apportionment  factor  consists  of  a  gross  receipts  factor,  determined  by
reference to the total receipts of the financial institution from all sources, a
property factor,  determined by reference to the net book value of all loans and
fixed assets owned by the financial institution and a payroll factor.

         Delaware  Taxation.  As a  Delaware  holding  company,  the  Company is
exempted  from Delaware  corporate  income tax but is required to file an annual
report with and pay an annual fee to the State of Delaware.  The Company is also
subject to an annual franchise tax imposed by the State of Delaware. The Company
also files an Ohio franchise tax return and pays tax on its Ohio taxable income.

Impact of New Accounting Standards

         Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities" - SFAS 133 requires companies
to record derivatives on the balance sheet as assets or liabilities, measured at
fair  value.  Gains or losses  resulting  from  changes  in the  values of those
derivatives  would be accounted for depending on the use of the  derivative  and
whether  it  qualifies  for  hedge  accounting.  The  key  criterion  for  hedge
accounting  is that  the  hedging  relationship  must  be  highly  effective  in
achieving  offsetting  changes  in fair value or cash  flows.  SFAS 133 does not
allow  hedging  of  a  security   which  is  classified  as  held  to  maturity.
Accordingly,  upon adoption of SFAS 133,  companies may  reclassify any security
from held to maturity to available for sale if they wish to be able to hedge the
security in the  future.  SFAS 133,  as amended by SFAS 137,  is  effective  for
fiscal years  beginning  after June 15, 2000 with early adoption  encouraged for
any  fiscal  quarter  beginning  July 1,  1998  or  later,  with no  retroactive
application.  Management  does not  expect  the  adoption  of SFAS 133 to have a
significant impact on the Company's financial statements.
<PAGE>
         SFAS No. 134 "Accounting for Mortgaged-Backed Securities Retained After
the  Securitization  of  Mortgage  Loans  Held  for Sale by a  Mortgage  Banking
Enterprise"  - SFAS 134 changes the way companies  involved in mortgage  banking
activities  account for certain securities and other interests they retain after
securitizing  mortgage  loans  that  were  held for sale.  SFAS 134  allows  any
retained  mortgage-backed  securities after a  securitization  of mortgage loans
held for sale to be classified  based on holding intent in accordance  with SFAS
115, except in cases where the retained mortgage-backed security is committed to
be sold before or during the  securitization  process,  in which case it must be
classified as trading.  Previously, all retained mortgage-backed securities were
required to be  classified  as trading.  SFAS 134 was effective as of January 1,
1999  and  did  not  have  a  significant  impact  on  the  Company's  financial
statements.


                                      -32-
<PAGE>
Competition

         Peoples Federal experiences strong competition both in originating real
estate loans and in attracting  deposits.  This competition arises from a highly
competitive market area with numerous savings institutions and commercial banks,
as well as credit  unions,  mortgage  bankers and national and local  securities
firms.  The  Association  competes  for  loans  principally  on the basis of the
interest  rates and loan fees it charges,  the types of loans it originates  and
the quality of services it provides to borrowers.

         The Association  attracts all of its deposits  through the community in
which its  office is  located;  therefore,  competition  for those  deposits  is
principally from other savings institutions, commercial banks, securities firms,
money market and mutual funds and credit unions  located in the same  community.
The ability of the  Association  to attract and retain  deposits  depends on its
ability to provide an investment  opportunity that satisfies the requirements of
investors as to rate of return, liquidity,  risk, convenient locations and other
factors.  The  Association  competes for these deposits by offering a variety of
deposit  accounts  at  competitive  rates,   convenient  business  hours  and  a
customer-oriented staff.

Employees

         At  June  30,  1999,  the  Association  had a  total  of  26  full-time
employees,  13 of which have been  employed  by Peoples  Federal for at least 10
years, and five part-time  employees.  None of the  Association's  employees are
represented  by  any  collective  bargaining  group.  Management  considers  its
employee relations to be good.

Executive Officers of the Registrant Who Are Not Directors

         The following information as to the business experience during the past
five years is supplied with respect to the executive officers of the Company and
the Association who do not serve on the Company's Board of Directors.  Executive
officers of the Company are elected annually to serve until their successors are
elected or until they resign or are removed by the Board of Directors. There are
no arrangements or understandings between the persons named and any other person
pursuant to which such officers were elected.

         David R. Fogt.  Mr. Fogt,  age 48, is Vice  President of Operations and
Financial  Services  of the  Association.  He is  responsible  for  the  overall
administration  of the  Association  with  direct  responsibilities  in consumer
lending  and asset and  liability  management.  He has been  employed by Peoples
Federal since 1983.

         Gary N.  Fullenkamp.  Mr.  Fullenkamp,  age 43,  is Vice  President  of
Mortgage Loans and Corporate Secretary of the Association. He is responsible for
mortgage  lending  operations of the  Association,  including  underwriting  and
processing of mortgage loan  activity.  He has been employed by Peoples  Federal
since 1979.

         Debra A.  Geuy.  Mrs.  Geuy,  age 41, is Chief  Financial  Officer  and
Treasurer of the  Association.  She is responsible  for overseeing the financial
functions of the  Association.  She has been  employed by Peoples  Federal since
1978.


                                      -33-
<PAGE>
Item 2. Properties

         The  following  table sets forth  information  concerning  the main and
branch offices and a drive-in  facility of the Association at June 30, 1999. The
Association  believes that its current facilities are adequate.  The Association
also maintains a 24-hour ATM at its main and both branch office locations.


                                                                Net Book
                                                Owned            Value at
                                 Year             or            June 30,
Location                        Opened          Leased            1999
--------                        ------          ------            ----

Main Office:

101 East Court Street            1917           Owned                $252,000
Sidney, Ohio 45365

Drive-In:

232 S. Ohio Avenue               1971           Owned                $174,000
Sidney, Ohio 45365

Anna Branch:
403 South Pike Street            1998           Owned                $625,000
Anna, Ohio 45302

Jackson Center Branch:
115 East Pike Street             1998           Leased               $109,000
Jackson Center, Ohio 45334



         The Association's  depositor and borrower customer files are maintained
by an  independent  data  processing  company.  The net  book  value of the data
processing and computer  equipment  utilized by the Association at June 30, 1999
was approximately $257,000.

Item 3.  Legal Proceedings

         From  time to  time,  the  Association  is  involved  as  plaintiff  or
defendant  in various  legal  proceedings  arising  in the normal  course of its
business.  While the ultimate outcome of these various legal proceedings  cannot
be predicted with certainty, it is the opinion of management that the resolution
of these legal actions  should not have a material  effect on the  Association's
financial position or results of operations.


                                      -34-

<PAGE>
Item 4.  Submission of Matters to a Vote of Security Holders

         No matter was  submitted  to a vote of  security  holders,  through the
solicitations of proxies or otherwise, during the quarter ended June 30, 1999.

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

         Page  4  of  the  Company's  1999  Annual  Report  to  Stockholders  is
incorporated herein by reference.

Item 6.  Management's Discussion and Analysis or Plan of Operation

         Pages 8 through 22 of the Company's 1999 Annual Report to  Stockholders
are incorporated herein by reference.

Item 7.  Financial Statements

         Pages 23 through 49 of the Company's 1999 Annual Report to Stockholders
are incorporated herein by reference.

Item 8.  Changes in and Disagreements With Accountants on Accounting and
         Financial Disclosure

         There has been no  Current  Report  on Form 8-K filed  within 24 months
prior to the date of the most recent financial  statements reporting a change of
accountants and/or reporting disagreements on any matter of accounting principle
or financial statement disclosure.

                                    PART III


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

Directors

         Information  concerning directors of the Company is incorporated herein
by  reference  from the  Company's  definitive  Proxy  Statement  for the Annual
Meeting of Stockholders to be held in 1999, which has been filed with the SEC.

Executive Officers

         Information  concerning  the executive  officers of the Company who are
not directors is incorporated by reference from Part I of this Form 10-KSB under
the caption "Executive Officers of the Registrant Who Are Not Directors."

Section 16(a) Beneficial Ownership Reporting Compliance

         Information   concerning   compliance   with  Section  16(a)  reporting
requirements by the Company's  directors and executive  officers is incorporated
herein by reference from the Company's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held in 1999, which has been filed with the SEC.


                                      -35-
<PAGE>
Item 10.      Executive Compensation

         Information concerning executive compensation is incorporated herein by
reference from the Company's  definitive  Proxy Statement for the Annual Meeting
of Stockholders to be held in 1999, which has been filed with the SEC.

Item 11.      Security Ownership of Certain Beneficial Owners and Management

         Information  concerning security ownership of certain beneficial owners
and management is incorporated herein by reference from the Company's definitive
Proxy Statement for the Annual Meeting of Stockholders to be held in 1999, which
has been filed with the SEC.

Item 12.      Certain Relationships and Related Transactions

         Information  concerning certain  relationships and related transactions
is  incorporated  herein  by  reference  from  the  Company's  definitive  Proxy
Statement for the Annual Meeting of Stockholders  to be held in 1999,  which has
been filed with the SEC.


                                      -36-

<PAGE>
Item 13.      Exhibits and Reports on Form 8-K

         (a)  Exhibits


<TABLE>
<CAPTION>
                                                                             Reference to
                                                                             Prior Filing
                                                                              or Exhibit
    Regulation                                                                  Number
   S-B Exhibit                                                                 Attached
      Number                              Document                              Hereto
      ------                              --------                              ------
<S>               <C>                                                            <C>
        2         Plan of acquisition, reorganization, arrangement,              None
                  liquidation or succession
       3(i)       Certificate of Incorporation                                    *
      3(ii)       By-Laws                                                         *
        4         Instruments defining the rights of holders, including           *
                  indentures
        9         Voting trust agreement                                         None
       10.1       Employee Stock Ownership Plan                                   *
       10.2       Form of Employment Agreement with Douglas Stewart               *
       10.3       Forms of Employment Agreements with David R. Fogt,              *
                  Gary N. Fullenkamp, Debra A. Geuy and Steven Goins
       10.4       401k Plan                                                       *
       10.5       Incentive Bonus Plan                                            *
       10.6       Peoples-Sidney Financial Corporation Amended and               10.1
                  Restated 1998 Stock Option and Incentive Plan
       10.7       Peoples-Sidney Financial Corporation Amended and               10.2
                  Restated 1998 Management Recognition Plan
        11        Statement re: computation of per share earnings                None
        13        Annual report to security holders                               13
        16        Letter on change in certifying accountant                      None
        18        Letter on change in accounting principles                      None
        21        Subsidiaries of Registrant                                      21
        22        Published report regarding matters submitted to vote           None
        23        Consents of experts and counsel                                 23
        24        Power of attorney                                          Not required
        27        Financial data schedule                                         27
        99        Additional exhibits                                        Not required
</TABLE>
*    Filed as an exhibit to the  Registrant's  Form S-1  registration  statement
     (File No. 333-20461) and incorporated herein by reference.

         (b)  Reports on Form 8-K

         During the quarter ended June 30, 1999, the Company filed three Current
Reports on Form 8-K. On April 19, 1999,  under Item 5, the Company  reported the
issuance of a press release  announcing  the Company's  earnings for the quarter
ended March 31, 1999 and the  declaration of a cash  dividend.  On May 26, 1999,
under Item 5, the Company  reported the issuance of a press  release  announcing
its  intention to  repurchase up to 5% of its  outstanding  shares.  On June 21,
1999,  under  Item 5, the  Company  reported  the  issuance  of a press  release
announcing the completion of the repurchase of 5% of its outstanding shares.

                                      -37-
<PAGE>
                                   SIGNATURES


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


PEOPLES-SIDNEY FINANCIAL CORPORATION



By:     /s/Douglas Stewart
        ------------------
        Douglas Stewart
        President, Chief Executive Officer and Director
       (Duly Authorized Representative)


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this report has been signed below by the following persons in the capacities and
on the dates indicated.

/s/Douglas Stewart                                    /s/James W. Kerber
------------------                                    ------------------
Douglas Stewart                                       James W. Kerber
President, Chief Executive Officer                    Director
and Director
(Principal Executive Officer)
Date: September 27, 1999                              Date: September 27, 1999


/s/Richard T. Martin                                  /s/John W. Sargeant
--------------------                                  -------------------
Richard T. Martin                                     John W. Sargeant
Chairman of the Board                                 Director
Date: September 27, 1999                              Date: September 27, 1999


/s/Robert W. Bertsch                                  /s/Debra A. Geuy
--------------------                                  ----------------
Robert W. Bertsch                                     Debra A. Geuy
Director                                              Chief Financial Officer
                                                      and Treasurer
                                                      Principal Financial and
                                                      Accounting Officer)
Date: September 27, 1999                              Date: September 27, 1999


/s/Harry N. Faulkner
--------------------
Harry N. Faulkner
Director
Date: September 27, 1999

                                      -38-
<PAGE>


                                INDEX TO EXHIBITS


   Number
   ------

    10.1     Amended and Restated 1998 Stock Option and Incentive Plan

    10.2     Amended and Restated 1998 Management Recognition and Retention Plan

    13       Portions of Annual Report to Security Holders

    23       Consent of Crowe, Chizek and Company LLP

    21       Subsidiaries of the Registrant

    27       Financial Data Schedule