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

                                   FORM 10-KSB

(Mark one)

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

      For the fiscal year ended June 30, 2003

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

      For the transition period from ___________________ to ___________________

                           Commission File No. 0-22223

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

                    Delaware                                 31-1499862
       (State or other jurisdiction of                   (I.R.S. Employer
       incorporation or organization)                  Identification Number)

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

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

         Securities registered under Section 12(b) of the Exchange Act:

                                      None

         Securities registered under Section 12(g) of the Exchange 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 Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_|

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of 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. |X|

Issuer's revenues for the fiscal year ended June 30, 2003 were:   $8,916,941.

At August 29, 2003, there were issued and outstanding 1,439,501 of the
Registrant's Common Shares.

The aggregate market value of the voting and non-voting common stock held by
non-affiliates as of August 29, 2003, was $15,467,000.

                       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, 2003.

Part III of Form 10-KSB - Portions of Proxy Statement for 2003 Annual Meeting of
Stockholders.

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

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                                                                              1.
<PAGE>

                                      INDEX

                                   FORM 10-KSB

<TABLE>
<CAPTION>
                                                                                          Page(s)
                                                                                          -------
<S>                                                                                        <C>
PART I

      Item 1.  Description of Business                                                     3-35

      Item 2.  Description of Property                                                       36

      Item 3.  Legal Proceedings                                                             36

      Item 4.  Submission of Matters to a Vote of Security Holders                           36

PART II

      Item 5.  Market for Common Equity and Related Shareholder Matters                      37

      Item 6.  Management's Discussion and Analysis of Financial Condition
               and Results of Operation                                                      37

      Item 7.  Financial Statements                                                          37

      Item 8.  Changes in and Disagreements with Accountants on
               Accounting and Financial Disclosure                                           37

      Item 8A. Controls and Procedures                                                       37

PART III

      Item 9.  Directors, Executive Officers, Promoters and Control Persons;
               Compliance with Section 16(a) of the Exchange Act                             38

      Item 10. Executive Compensation                                                        38

      Item 11. Security Ownership of Certain Beneficial Owners and Management
               and Related Stockholder Matters                                               38

      Item 12. Certain Relationships and Related Transactions                                39

      Item 13. Exhibits and Reports on Form 8-K                                              40

      Item 14. Principal Accountant Fees and Services                                        42

Signatures                                                                                   43

Exhibits                                                                                     44
</TABLE>

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                                                                              2.
<PAGE>

                                     PART I

ITEM 1 - DESCRIPTION OF BUSINESS

General

      Peoples-Sidney Financial Corporation ("Peoples") is a Delaware
corporation, which was organized in 1997 by Peoples Federal Savings and Loan
Association of Sidney ("Association") for the purpose of becoming a savings and
loan holding company, together referred to as the Corporation. Peoples 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 Corporation include Peoples and the Association on a consolidated basis. The
Association, Peoples' 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 Sidney, 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, consumer and commercial 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 ("OTS"). The Association is a member of the Federal Home Loan Bank
("FHLB") System and a stockholder of the 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 Corporation 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, 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 Corporation's market area,
changes in policies by regulatory agencies, fluctuations in interest rates,
demand for loans in the Corporation's market area and competition, that could
cause actual results to differ materially from historical earnings and those
presently anticipated or projected. The Corporation wishes to caution readers
not to place undue reliance on any such forward-looking statements, which speak
only as of the date made. The Corporation wishes to advise readers that the
factors listed above could affect the Corporation's financial performance and
could cause the Corporation's actual results for future periods to differ
materially from any opinions or statements expressed with respect to future
periods in any current statements.

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                                                                              3.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS  (Continued)

      The Corporation 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 the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.

Lending Activities

      General: The principal lending activity of the Corporation 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 Corporation's primary market area, the
Corporation also originates construction or development, commercial real estate,
consumer, land, multi-family and commercial business loans. The Corporation may
adjust or discontinue any product offering to respond to competitive or economic
factors.

      Loan Portfolio Composition: The following information sets forth the
composition of the Corporation'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.

                                                      June 30,
                                   --------------------------------------------
                                           2003                     2002
                                     Amount     Percent      Amount     Percent
                                   ---------   --------     --------    -------
                                              (Dollars in thousands)
Real estate loans
    One- to four-family            $  89,931      76.02%    $ 96,007      76.94%
    Construction and
      development                      5,906       4.99        7,097       5.69
    Commercial                        10,307       8.71       10,111       8.10
    Multi-family                       1,657       1.40        1,913       1.53
    Land                               1,852       1.57        1,310       1.05
                                   ---------     ------     --------     ------
       Total real estate
            Loans                    109,653      92.69      116,438      93.31
                                   ---------     ------     --------     ------

Other loans
    Consumer
       Automobile                      3,311       2.80        3,122       2.50
       Deposit account                   300       0.25          506       0.41
       Other                           1,025       0.87          997       0.80
                                   ---------     ------     --------     ------
          Total consumer
            loans                      4,636       3.92        4,625       3.71
                                   ---------     ------     --------     ------

    Commercial business
      loans                            4,006       3.39        3,717       2.98
                                   ---------     ------     --------     ------

    Total loans                      118,295     100.00%     124,780     100.00%
                                   ---------     ======     --------     ======
Less:
    Loans in process                  (1,907)                 (2,516)
    Deferred loan fees                  (362)                   (331)
    Allowance for loan losses           (766)                   (708)
                                   ---------                --------

          Total loans, net         $ 115,260                $121,225
                                   =========                ========

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                                                                              4.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS  (Continued)

      The following table shows the composition of the Corporation's loan
portfolios by fixed- and adjustable-rate at the dates indicated.

                                                      June 30,
                                      ------------------------------------------
                                             2003                   2002
                                       Amount      Percent     Amount    Percent
                                      --------     -------    --------   -------
                                                 (Dollars in thousands)
Fixed-rate loans:
    Real estate
       One- to four-family             $ 49,501      41.84%   $ 45,687    36.61%
       Construction and
         development                      3,914       3.31       4,455     3.57
       Commercial                         1,541       1.30       1,171     0.94
       Multi-family                          --        --           --      --
       Land                                 728       0.62         385     0.31
                                       --------     ------    --------   ------
          Total real estate loans        55,684      47.07      51,698    41.43
    Consumer loans                        4,636       3.92       4,625     3.71
    Commercial business loans             2,119       1.79       2,108     1.69
                                       --------     ------    --------   ------

          Total fixed-rate loans         62,439      52.78      58,431    46.83

Adjustable-rate loans:
    Real estate
       One- to four-family               40,430      34.18      50,320    40.33
       Construction and
         development                      1,992       1.68       2,642     2.12
       Commercial                         8,766       7.41       8,940     7.16
       Multi-family                       1,657       1.40       1,913     1.53
       Land                               1,124       0.95         925     0.74
                                       --------     ------    --------   ------
          Total real estate loans        53,969      45.62      64,740    51.88
    Consumer loans                           --        --           --       --
    Commercial business loans             1,887       1.60       1,609     1.29
                                       --------     ------    --------   ------
          Total adjustable-
            rate loans                   55,856      47.22      66,349    53.17
                                       --------     ------    --------   ------

    Total loans                         118,295     100.00%     124,78   100.00%
                                       --------     ======    --------   ======

Less:
    Loans in process                     (1,907)                (2,516)
    Deferred loan fees                     (362)                  (331)
    Allowance for loan losses              (766)                  (708)
                                       --------               --------

          Total loans, net             $115,260               $121,225
                                       ========               ========

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                                                                              5.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS  (Continued)

      The following schedule presents the contracted maturities of the
Corporation's loan portfolio at June 30, 2003. The schedule does not reflect the
effects of possible prepayments or enforcement of the due-on-sale clauses. The
amortizing loans, such as one- to four-family and installment loans, the entire
current principal balance as show as being due at maturity.

<TABLE>
<CAPTION>
                                            Real Estate
                             --------------------------------------
                                One- to Four-
                                 Family and         Multi-family,
                              Construction and       Commercial                               Commercial
                                 Development          and Land            Consumer             Business                Total
                             ------------------   ------------------    ----------------    -----------------     ------------------

                                       Weighted            Weighted             Weighted             Weighted               Weighted
                                       Average             Average               Average              Average                Average
                              Amount    Rate      Amount     Rate       Amount    Rate      Amount     Rate       Amount      Rate
                              ------    ----      ------     ----       ------    ----      ------     ----       ------      ----
                                                                          (Dollars in thousands)
<S>                          <C>         <C>      <C>         <C>       <C>        <C>       <C>        <C>      <C>          <C>
1 year or less*              $    24     8.41%    $    41     9.50%     $  879     6.29%     $  618     6.02%    $  1,562     6.30%
Over 1 year - 3 years            164     6.77         776     6.87       1,645     8.28       1,745     6.73        4,330     7.34
Over 3 years - 5 years           739     7.29         554     5.36       1,866     6.97       1,191     6.47        4,350     6.68
Over 5 years - 10 years        6,244     6.52       1,181     5.68         141     6.32         452     6.69        8,018     6.40
Over 10 years - 20 years      52,932     6.52       7,556     6.22         105     8.26          --       --       60,593     6.49
Over 20 years                 35,734     6.56       3,708     6.13          --       --          --       --       39,442     6.52
                             -------     ----     -------     ----      ------     ----      ------     ----     --------     ----
    Total                    $95,837     6.54%    $13,816     6.16%     $4,636     7.32%     $4,006     6.54%    $118,295     6.53%
                             =======     ====     =======     ====      ======     ====      ======     ====     ========     ====
</TABLE>

*Include demand loans, loans having no stated maturity and overdraft loans.

The total amount of loans due after June 30, 2004 that have predetermined
interest rates is $61,254, while the total amount of loans due after such dates
which have floating or adjustable interest rates is $55,479.

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                                                                              6.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS  (Continued)

      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, 2003, based on the above limitation, the Association's regulatory
loan-to-one borrower limit was approximately $2.34 million. On the same date,
the Association had no borrowers with outstanding balances in excess of this
amount. As of June 30, 2003, the largest dollar amount of indebtedness of one
borrower or group of related borrowers was $1,067,309, secured by multiple one-
to four-family real estate properties, commercial real estate and land. The next
largest loan to one borrower or group of related borrowers had an outstanding
balance of $925,481 at June 30, 2003 and is secured by multiple one-to
four-family real estate properties. As of June 30, 2003, such loans were
performing in accordance with their terms.

      Loan applications are accepted by salaried loan officers at the
Association's offices. 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 $75,000 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, 2003, $89.9 million, or 76.02% 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 $65,835 and the largest outstanding residential loan had a principal
balance of $528,000. Virtually all of the residential loans originated by the
Association are secured by properties located in the Association's market area.

      The Association originates fixed-rate residential loans in amounts and at
rates that 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,
2003, the Association had $49.5 million of fixed-rate permanent one-to
four-family residential loans, constituting 41.84% of the Association's loan
portfolio at such date.

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


                                                                              7.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS  (Continued)

      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 the Association 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, 2003, the total
balance of one- to four-family ARMs was $40.4 million, or 34.18% of the
Corporation's loan portfolio. All ARMs originated by the Association are
retained and serviced by it.

      In 1992, the Association initiated a program specifically tailored to
first-time homebuyers. 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 unless Board of Director
approval is obtained, which can be the lesser of the purchase price or 90% of
appraised value. At June 30, 2003, the Association had approximately $2.6
million of first-time homebuyer 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. The Association originates residential mortgage loans
with loan-to-value ratios up to 90%. On mortgage loans exceeding a 90%
loan-to-value ratio at the time of origination, the Association 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, 2003, the
Association had $636,000 of home equity lines of credit and an additional
$736,000 of funds committed, but undrawn, under such lines.

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


                                                                              8.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS (Continued)

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, 2003, the Association had 34 construction loans
with outstanding aggregate balances of $5,325,000 secured by residential
property. Of this amount, $4,535,000 in loans were outstanding directly to
borrowers intending to live in the properties upon completion of construction.

      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 85% 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 pre-sold, 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. At June 30, 2003,
the Association did not have any construction loans with builders that pre-sold
their homes and six loans with an outstanding aggregate balance of $790,000
secured by one-to four-family residential properties constructed by builders who
have not pre-sold their homes to individual purchasers. The Association also
makes a limited number of commercial real estate construction loans with the
loan amount generally not to exceed 75% of the completed value. At June 30,
2003, the Association had one loan with an outstanding balance of $581,000.

      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,
2003, the Association's largest commercial real estate loan totaled $471,000. At
that date, the Association had 79 commercial real estate loans, totaling
$10,307,000, or 8.71% of gross loans receivable.

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                                                                              9.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS  (Continued)

      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.

      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.

      The table below sets forth by type of security property the estimated
number, loan amount and outstanding balance of the Association's commercial real
estate loans at June 30, 2003.

                                                 Original       Outstanding
                                  Number of        Loan          Principal
                                    Loans          Amount         Balance
                                    -----          ------         -------
                                             (Dollars in thousands)
         Office                         6        $      847      $      582
         Retail                         3               978             488
         Farm real estate              20             3,926           3,400
         Churches                      50             7,399           5,837
                                     ----        ----------      ----------
             Total                     79        $   13,150      $   10,307
                                     ====        ==========      ==========

      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
of 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, 2003, multi-family loans totaled $1.7 million, or 1.40% 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.

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


                                                                             10.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS  (Continued)

Land Lending

      Land loans include loans to develop vacant or raw land and 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 for residential or
commercial 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 inspections to determine the progress of the project. As lots are sold,
a portion of the sale price is applied to the principal of the outstanding loan
in order to ensure the loan is paid in full prior to all lots in the development
being sold. Interest payments are required at regular intervals (quarterly or
semi-annually) and loan terms typically are written for three years. At June 30,
2003, the Association had $520,000 of loans receivable in this category.

      The Association also 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 five years and have maximum loan- to-
value ratios of 85% for loans on improved residential building lots and 75% on
undeveloped acreage. At June 30, 2003, the Association had $1,332,000 in land
loans to individuals.

      Land lending generally affords the Association an opportunity to receive
interest at rates higher than those obtainable from residential lending.
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.

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, 2003, the Association's consumer loans totaled $4.6 million, or
3.92% of the Association's gross loan portfolio.

      The Association 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, 2003, automobile loans totaled $3.3 million, or
2.80% 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.

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


                                                                             11.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS  (Continued)

      Consumer loans may entail greater risk than residential mortgage loans,
particularly in the case of consumer loans that 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
has experienced substantial growth over the last few years 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 seven
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.

      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, 2003, commercial business loans totaled $4.0 million, or 3.39% of
the Association's gross loans receivable.

Originations, Purchases and Sales of Loans

      The Association originates real estate and other loans through employees
located at the Association's offices. 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.

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


                                                                             12.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS  (Continued)

      The following table shows the loan origination and repayment activities of
the Corporation for the periods indicated.

                                                           Year Ended June 30,
                                                         -----------------------
                                                          2003            2002
                                                          ----            ----
                                                            (in thousands)
      Originations by type:
          Adjustable rate:
             Real estate:
                One- to four-family, construction,
                  development and land                   $  8,960      $ 10,690
                Commercial                                  1,987         2,861
                   Multi-family                                --         1,084
                   Nonreal estate:
                Consumer                                       --            --
                   Commercial business                      2,230           498
                                                         --------      --------
                   Total adjustable rate                   13,177        15,133

          Fixed rate:
             Real estate:
                One- to four-family, construction,
                  development and land                     30,881        25,317
                    Commercial                                906           294
                    Multi-family                               --            --
             Nonreal estate
                Consumer                                    3,014         2,398
                   Commercial business                      1,361         1,190
                                                         --------      --------
                   Total fixed rate                        36,162        29,199
                                                         --------      --------
                   Total loans originated                  49,339        44,332
          Principal repayments                            (54,471)      (43,348)
             Increase in other items, net*                   (411)         (118)
                                                         --------      --------
                   Net (decrease) increase               $ (5,543)     $    866
                                                         ========      ========

      *     Includes provision for loan losses, net charge-offs, net deferred
            loan origination fees and transfers to foreclosed assets.

Delinquencies and Nonperforming Assets

      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 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.

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


                                                                             13.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS (Continued)

      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, the customer's loan is 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 the Association 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.

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


                                                                             14.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS  (Continued)

The following table sets forth the Corporation's loan delinquencies by type, by
amount and by percentage of type at June 30, 2003.

<TABLE>
<CAPTION>
                                                           Loans Delinquent For:
                                      ------------------------------------------------------------
                                                60-89 Days                   90 Days and Over              Total Delinquent Loans
                                      ---------------------------    -----------------------------    ------------------------------
                                      Number    Amount   Category    Number     Amount    Category    Number      Amount    Category
                                      ------    ------   --------    ------     ------    --------    ------      ------    --------
                                                                          (Dollars in thousands)
<S>                                       <C>   <C>         <C>          <C>    <C>         <C>           <C>     <C>         <C>
Real estate:
    One- to four-family                    7    $  364      0.40%        29     $2,002      2.23%         36      $2,366      2.63%
    Construction and development          --        --        --         --         --        --          --          --        --
    Commercial                            --        --        --         --         --        --          --          --        --
    Multi-family                          --        --        --         --         --        --          --          --        --
    Land                                  --        --        --         --         --        --          --          --        --
Consumer                                  12        42      0.91          6         11      0.24          18          53      1.14
Commercial Business                        2        47      1.17         --         --        --           2          47      1.17
                                      ------    ------      ----     ------     ------      ----      ------      ------      ----
       Total                              21    $  453      0.38%        35     $2,013      1.70%         56      $2,466      2.08%
                                      ======    ======      ====     ======     ======      ====      ======      ======      ====
</TABLE>

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


                                                                             15.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS (Continued)

Classification of Assets: Federal regulations require that savings institution
classify its 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.

      On the basis of management's review of its assets, at June 30, 2003, the
Association had classified a total of $1,648,000 of its loans, as follows:

                        One-      Commercial
                      To Four-       Real
                       Family       Estate        Land      Consumer      Total
                       ------       ------        ----      --------      -----
                                            (in thousands)
      Substandard      $1,604      $     --      $   --      $   33      $1,637
      Doubtful             --            --          --          --          --
      Loss                 --            --          --          11          11
                       ------      --------      ------      ------      ------

                       $1,604      $     --      $   --      $   44      $1,648
                       ======      ========      ======      ======      ======

      The Association's classified assets consist of the (i) nonperforming 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.

      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.

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


                                                                             16.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS (Continued)

                                                          June 30,
                                                   ----------------------
                                                    2003           2002
                                                    ----           ----
                                                    (Dollars in thousands)
      Nonaccruing loans
          One- to four-family                      $1,604          $  585
          Construction and
            Development                                --              --
          Commercial real estate                       --              --
          Multi-family                                 --              --
          Land                                         --              13
          Consumer                                     --              --
          Commercial business                          --              --
                                                   ------          ------
             Total                                  1,604             598

      Accruing loans delinquent
        more than 90 days
          One- to four-family                         398             322
          Construction and
            Development                                --              --
          Commercial real estate                       --              --
          Multi-family                                 --              --
          Land                                         --              --
          Consumer                                     11               9
          Commercial business                          --             141
                                                   ------          ------
             Total                                    409             472

      Foreclosed assets
          One- to four-family                         109              --
          Construction and
            development                                --              --
          Commercial real estate                       --              --
          Multi-family                                 --              --
          Land                                         --              --
          Consumer                                     --              --
          Commercial business                          --              --
                                                   ------          ------
             Total                                    109              --
                                                   ------          ------

      Total nonperforming assets                   $2,122          $1,070
                                                   ======          ======
      Total as a percentage of
        total assets                                 1.47%           0.79%
                                                   ======          ======

      For the year ended June 30, 2003 gross interest income which would have
been recorded had the nonaccruing loans been current in accordance with their
original terms amounted to $118,835. The amount that was included in interest
income on such loans was $84,013 for the year ended June 30, 2003.

Other Assets of Concern: As of June 30, 2003, 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 nonperforming asset categories.

Allowance for Loan Losses: Management estimates the allowance balance required
based on past loan loss experience, the nature and volume of 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.

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


                                                                             17.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS (Continued)

      A loan is impaired when full payment under the terms of the loan is not
expected. Commercial and commercial real estate loans are individually evaluated
for impairment. If a loan is impaired, a portion of the allowance is allocated
so that the loan is reported, net, at the present value of estimated future cash
flows using the loan's existing rate or at the fair value of collateral if
repayment is expected solely from the collateral. Large groups of smaller
balance homogeneous loans, such as consumer and residential real estate loans,
are collectively evaluated for impairment, and accordingly, they are not
separately identified for impairment disclosures.

      As of June 30, 2003, the Association's allowance for loan losses as a
percent of gross loans receivable and as a percent of nonperforming loans
amounted to 0.65% and 38.26%, 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.

      The following table sets forth an analysis of the Corporation's allowance
for loan losses.

                                                            Year ended June 30,
                                                          ----------------------
                                                             2003         2002
                                                             ----         ----
                                                          (Dollars in thousands)

      Balance at beginning of period                        $  708       $  661

      Charge-offs
          One- to four-family                                   --           --
          Construction and
          Development                                           --           --
          Commercial real estate                                --           --
          Multi-family                                          --           --
          Consumer                                              15            6
          Commercial business                                   --           --
                                                            ------       ------
                                                                15            6
                                                             ------       ------
      Recoveries
          One- to four-family                                   --           --
          Construction and
            Development                                         --           --
          Commercial real estate                                --           --
          Multi-family                                          --           --
          Consumer                                               4            1
          Commercial business                                   --           --
                                                            ------       ------
                                                                 4            1
                                                            ------       ------

      Net charge-offs                                           11            5
      Additions charged to operations                           69           52
                                                            ------       ------
      Balance at end of period                              $  766       $  708
                                                            ======       ======

      Ratio of net charge-offs during the period to
        average loans outstanding* during the period          0.01%          --%
                                                            ======       ======

      Ratio of net charge-offs during the period to
        nonperforming assets at the  end of the period        0.50%        0.48%
                                                            ======       ======

      *     Calculated net of deferred loan fees, loan discounts, loans in
            process and allowance for loan losses.

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


                                                                             18.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS (Continued)

The distribution of the Corporation's allowance for losses on loans at the dates
indicated is summarized as follows:

<TABLE>
<CAPTION>
                                                                   June 30,
                                  ---------------------------------------------------------------------------
                                                 2003                                     2002
                                  ----------------------------------      -----------------------------------
                                  Allowance     Category       Loans      Allowance      Category       Loans
                                  ---------     --------       -----      ---------      --------       -----
                                                             (Dollars in thousands)
<S>                               <C>           <C>           <C>          <C>           <C>           <C>
One- to four-family               $    478      $ 89,931       76.02%      $    411      $ 96,007       76.94%
Construction and development            14         5,906        4.99             21         7,097        5.69
Commercial real estate                  24        10,307        8.71             31        10,111        8.10
Multi-family                             4         1,657        1.40              6         1,913        1.53
Land                                     4         1,852        1.57              6         1,310        1.05
Consumer                               115         4,636        3.92            113         4,625        3.71
Commercial business                    127         4,006        3.39            120         3,717        2.98
Unallocated                             --            --          --             --            --          --
                                  --------      --------      ------       --------      --------      ------

    Total                         $    766      $118,295      100.00%      $    708      $124,780      100.00%
                                  ========      ========      ======       ========      ========      ======
</TABLE>

Investment Activities

      As part of its asset/liability management strategy, the Corporation
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, 2003, the Corporation did not own any securities
of a single issuer that exceeded 10% of the Association's equity, other than
U.S. Government or federal agency obligations. See Note 2 of the Notes to the
Consolidated Financial Statements for additional information regarding the
Association's securities portfolio.

      As of June 30, 2003 the Corporation had securities totaling $11.5 million
classified as available for sale while there were no securities classified as
held to maturity. As future securities are acquired, the Corporation may elect
to classify them as either available for sale or held to maturity.

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


                                                                             19.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS  (Continued)

The following table sets forth the composition of the Corporation's investments
in securities and time deposits at the dates indicated.

<TABLE>
<CAPTION>
                                                                    June 30,
                                              -----------------------------------------------------
                                                        2003                          2002
                                                        ----                          ----
                                              Carrying         % of         Carrying         % of
                                               Value          Total           Value          Total
                                               -----          -----           -----          -----

                                                               (Dollars in thousands)

<S>                                           <C>             <C>          <C>              <C>
U.S. Government Agencies                      $  11,517        88.21%      $    3,526        70.51%

FHLB stock                                        1,539        11.79            1,475        29.49
                                              ---------       ------       ----------       ------
       Total securities
                                              $  13,056       100.00%      $    5,001       100.00%
                                              =========       ======       ==========       ======

Average remaining life of securities          6.16 years                   4.39 years

Other interest-earning assets
    Interest-bearing deposits with banks      $   6,482        56.46%      $    3,771        82.50%
    Overnight deposits                            5,000        43.54              800        17.50
                                              ---------       ------       ----------       ------

          Total                               $  11,482       100.00%      $    4,571       100.00%
                                              =========       ======       ==========       ======
</TABLE>

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


                                                                             20.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS (Continued)

The composition and maturities of the securities portfolio, excluding FHLB
stock, are indicated in the following table.

<TABLE>
<CAPTION>
                                                                           June 30, 2003
                              -----------------------------------------------------------------------------------------------------

                                  Less than 1 year            1 to 5 years              5 to 10 years          Total Securities
                              -----------------------   -----------------------   -----------------------   -----------------------
                               Carrying      Fair        Carrying       Fair       Carrying       Fair       Carrying       Fair
                                 Value       Value         Value       Value         Value        Value        Value       Value
                                 -----       -----         -----       -----         -----        -----        -----       -----
                                                                       (Dollars in thousands)
<S>                           <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
U.S. Government Agencies
    available for sale        $       --   $       --   $    4,044   $    4,044   $    7,473   $    7,473   $   11,517   $   11,517
                              ==========   ==========   ==========   ==========   ==========   ==========   ==========   ==========

Weighted average yield                --%          --%        3.20%        3.20%        3.20%        3.20%        3.20%        3.20%
</TABLE>

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


                                                                             21.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS  (Continued)

Sources of Funds

General. The Corporation'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. The Association 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.

      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.

The following table sets forth the savings flows at the Corporation during the
periods indicated.

                                                        Year Ended June 30,
                                                     --------------------------
                                                        2003            2002
                                                        ----            ----
                                                        (Dollars in thousands)

      Opening balance                                $  94,787        $  91,341
      Deposits                                         136,612          134,335
      Withdrawals                                     (140,469)        (134,420)
      Interest credited                                  2,522            3,531
                                                     ---------        ---------

      Ending balance                                 $  93,452        $  94,787
                                                     =========        =========

      Net increase (decrease)                        $  (1,335)       $   3,446
                                                     =========        =========

      Percent increase (decrease)                        (1.41)%           3.77%
                                                     =========        =========

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


                                                                             22.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS (Continued)

The following table sets forth the dollar amount of savings deposits in the
various types of deposit programs offered by the Corporation at the dates
indicated.

<TABLE>
<CAPTION>
                                                                       June 30,
                                                     --------------------------------------------
                                                            2003                      2002
                                                     -------------------      -------------------
                                      Weighted
                                       Average
                                       Rate at                   Percent                  Percent
                                      June 30,                     of                        of
                                        2003         Amount       Total       Amount       Total
                                        ----         ------       -----       ------       -----
                                                          (Dollars in thousands)
<S>                                      <C>        <C>          <C>          <C>          <C>
Transactions and savings deposits
    Noninterest-bearing demand             --%      $   850        0.86%      $   850        0.90%
    Savings account                      1.00        28,559       30.55        23,949       25.24
    NOW accounts                         0.25         6,361        6.80         6,614        6.97
    Money market accounts                1.22         4,445        4.76         2,887        3.04
                                                    -------      ------       -------      ------
       Total noncertificates             0.89        40,170       42.97        34,300       36.15
                                                    -------      ------       -------      ------

Certificates
    0.00 - 1.99%                         1.61        10,088       10.79            --          --
    2.00 - 3.99%                         2.71        24,367       26.07        20,966       22.10
    4.00 - 5.99%                         4.84        10,292       11.01        17,366       18.31
    6.00 - 7.99%                         7.01         8,535        9.13        22,155       23.35
                                                    -------      ------       -------      ------
       Total certificates                3.60        53,282       57.00        60,487       63.76
                                                    -------      ------       -------      ------
       Accrued interest                                  30        0.03            81        0.09
                                                    -------      ------       -------      ------
       Total deposits                    2.42%      $93,482      100.00%      $94,868      100.00%
                                       ======       =======      ======       =======      ======
</TABLE>

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


                                                                             23.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS (Continued)

The following table shows rate and maturity information for the Corporation's
certificates of deposit as of June 30, 2003.

<TABLE>
<CAPTION>
                                       0.00-         2.00         4.00-          6.00-                      Percent
                                       1.99%         3.99%        5.99%          7.99%         Total       of Total
                                       -----         -----        -----          -----         -----       --------
                                                                (Dollars in thousands)
<S>                                   <C>           <C>           <C>           <C>           <C>           <C>
Certificate accounts maturing in
  quarter ending
     September 30, 2003               $ 2,635       $ 5,378       $ 1,677       $ 1,689       $11,379        21.36%
     December 31, 2003                  2,644         2,595         1,538         2,159         8,936        16.77
     March 31, 2004                     1,157         2,170         1,408            36         4,771         8.95
     June 30, 2004                      1,233         2,753           165           436         4,587         8.61
     September 30, 2004                 1,392         2,377            42           551         4,362         8.19
     December 31, 2004                    877         1,195            --           192         2,264         4.25
     March 31, 2005                         5         1,781            21           183         1,990         3.73
     June 30, 2005                        145         1,498            28           719         2,390         4.49
     September 30, 2005                    --         1,599            53         1,184         2,836         5.32
     December 31, 2005                     --         1,830            70         1,278         3,178         5.97
     March 31, 2006                        --           118            84           108           310         0.58
     June 30, 2006                         --           159           260            --           419         0.79
     September 30, 2006                    --            25         1,996            --         2,021         3.79
     December 31, 2006                     --           185           125            --           310         0.58
     March 31, 2007                        --           128            --            --           128         0.24
     June 30, 2007                         --            15         2,131            --         2,146         4.03
     September 30, 2007                    --            --           597            --           597         1.12
     December 31, 2007                     --           167            97            --           264         0.49
     March 31, 2008                        --           319            --            --           319         0.60
     June 30, 2008                         --            75            --            --            75         0.14
                                      -------       -------       -------       -------       -------       ------
                Total                 $10,008       $24,367       $10,292       $ 8,535       $53,282       100.00%
                                      =======       =======       =======       =======       =======       ======

                Percent of total        18.93%        45.73%        19.32%        16.02%       100.00%
</TABLE>

      At June 30, 2003, the Association had approximately $5,123,000 in
certificate accounts in amounts of $100,000 or more maturing as follows:

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

      Three months or less                            $   1,145         2.80%
      Over three through six months                         725         2.18
      Over six through 12 months                            583         2.19
      Over 12 months                                      2,670         4.55
                                                      ---------         ----
          Total                                       $   5,123         3.56%
                                                      =========         ====

      For additional information regarding the composition of the Corporation's
deposits, see Note 7 of Notes to Consolidated Financial Statements.

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


                                                                             24.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS (Continued)

Borrowings

      The Corporation'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 provisions.

      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,
                                                                ----------------------
                                                                  2003         2002
                                                                  ----         ----
                                                                (Dollars in thousands)
<S>                                                              <C>          <C>
      Balance at end of period
          FHLB advances                                          $32,190      $22,456
          Maximum balance at any month-end during the period
          FHLB advances                                           32,633       25,462

      Average balance for the period
          FHLB advances                                           28,052       24,836
          Weighted average rate                                     5.34%        6.05%
</TABLE>

Service Corporations

      As a federally chartered savings association, the Association is permitted
by OTS regulations to invest up to 2.0% of its assets, or $2.9 million at June
30, 2003 in the stock of, or loans to, service corporation subsidiaries. As of
such date, the Association had no investments in service corporations.

                                   REGULATION

      USA Patriot Act of 2001. In October 2001, the USA Patriot Act of 2001 was
enacted in response to the terrorist attacks in New York, Pennsylvania and
Washington, D.C., which occurred on September 11, 2001. The Patriot Act is
intended to strengthen U.S. law enforcement's and the intelligence communities'
abilities to work cohesively to combat terrorism on a variety of fronts. The
potential impact of the Patriot Act on financial institutions of all kinds is
significant and wide ranging. The Patriot Act contains sweeping anti-money
laundering and financial transparency laws and imposes various regulations,
including standards for verifying client identification at account opening, and
rules to promote cooperation among financial institutions, regulators and law
enforcement entities in identifying parties that may be involved in terrorism or
money laundering.

      Sabanes-Oxley Act of 2002. On July 30, 2002, President Bush signed into
law the Sarbanes-Oxley Act of 2002, or the SOA. The SOA is the most far-reaching
U.S. securities legislation enacted in many years, and includes many substantive
and disclosure-based requirements. The stated goals of the SOA are to increase
corporate responsibility, to provide for enhanced penalties for accounting and
auditing improprieties at publicly traded companies and to protect investors by
improving the accuracy and reliability of corporate disclosures pursuant to the
securities laws. The SOA generally applies to all companies, both U.S. and
non-U.S., that file or are required to file periodic reports with the Securities
and Exchange Commission under the Securities Exchange Act of 1934 (the "Exchange
Act").

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


                                                                             25.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS  (Continued)

      The law creates an independent auditing-oversight board under the SEC. The
law also increases penalties for corporate wrongdoers, forces faster and
more-extensive financial disclosure, and creates avenues of recourse for
aggrieved shareholders. The SOA also contains separate provisions that require
signed certifications to be made by the chief executive officer and chief
financial officer of all public companies, and provides criminal penalties of up
to $1.0 million and imprisonment of up to 10 years for an officer that provides
a certification knowing it to be untrue.

      The Act also addresses functions and responsibilities of audit committees
of public companies. Each audit committee is directly responsible for the
appointment, compensation and oversight of the work of the Company's outside
auditors, and the auditors must report directly to the audit committee. Each
audit committee member must be independent, which under the Act means that he or
she cannot (other than in his or her capacity as a member of the audit
committee, the board or any other board committee) accept any consulting,
advisory or other compensatory fees from the Company or be affiliated with the
Company or any of its subsidiaries. Each audit committee must establish
procedures to receive and respond to any complaints and concerns regarding the
Company's accounting, accounting controls or auditing matters. These procedures
would include enabling the Company's employees to transmit concerns regarding
questionable accounting or auditing matters by confidential, anonymous
submission. In recognition of the audit committee's independent status, each
audit committee is authorized to engage independent counsel and other advisors.
The Company must also provide the appropriate funding, as determined by the
audit committee, for payment of compensation to the auditors and advisors of the
audit committee.

General

      The Association 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 up to applicable limits. The Association is subject to
broad federal regulation and oversight extending to all its operations,
principally by its primary federal regulator, the OTS. The Association 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 the Association, Peoples also is
subject to federal regulation and oversight, principally by the OTS. The purpose
of the regulation of Peoples and other savings and loan holding companies is to
protect subsidiary savings associations. The Association 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. As a result, the FDIC has
certain regulatory and examination authority over the Association.

      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, such as the Association. As part of this authority, the
Association is required to file periodic reports with the OTS and is subject to
periodic examinations by the OTS. The last regular OTS examination of the
Association was as of March 31, 2003. When these examinations are conducted by
the OTS, the examiners may require the Association to provide for higher general
or specific loan loss reserves and take other corrective action. All savings
associations are subject to a semi-annual assessment, based upon the savings
association's total assets, to fund the operations of the OTS. The Association's
OTS assessment for the fiscal year ended June 30, 2003 was $41,000.

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


                                                                             26.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS  (Continued)

      The OTS also has extensive enforcement authority over all savings
institutions and their holding companies, including the Association and Peoples.
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 law and it is prohibited from engaging in
any activities not permitted by such laws. For example, the permissible level of
investment by federal associations, subject to safety and soundness
restrictions, (1) in loans secured by non-residential real property may not
exceed 400% of total capital, (2) in commercial loans may not exceed 20% of
assets, provided that amounts in excess of 10% of assets may only be small
business loans, (3) related to leasing of tangible personal property may not
exceed 10% of assets, and (4) in loans for personal, family and household
purposes when combined with commercial paper and corporate debt securities, may
not exceed 35% of assets. Federal savings associations are also generally
authorized to branch nationwide. The Association is in compliance with the noted
restrictions. Federal associations such as the Association may designate under
which investment authority (or basket) it made a loan or investment if that loan
or investment is authorized under different sections of the law.

      The Association'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, 2003, the Association's lending
limit under this restriction was $2.34 million. The Association 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 that fails to comply with these
standards must submit a compliance plan.

Insurance of Accounts and Regulation by the FDIC

      The Association 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.

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


                                                                             27.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS (Continued)

      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. As of
June 30, 2003, the Association was designated as a well-capitalized institution.

      The FDIC is authorized to increase assessment rates, on a semi-annual
basis, if it determines that the reserve ratio of the SAIF will be less than the
designated reserve ratio of 1.25% of the 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 FIDC may also impose special assessments on SAIF members to repay
amounts borrowed from the U.S. Treasury or for any other reason deemed necessary
by the FDIC.

Regulatory Capital Requirements

      Federally insured savings associations, such as the Association, 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, 2003, 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. The Association does not have any subsidiaries.

      At June 30, 2003, the Association had tangible capital of $15.6 million,
or 10.9% of adjusted total assets, which is approximately $13.5 million above
the minimum requirement of 1.5% of adjusted total assets in effect on that date.

      The capital standards also effective require core capital equal to at
least 4% of adjusted total assets. Core capital generally consists of tangible
capital plus certain intangible assets, including a limited amount of purchased
credit card receivables. At June 30, 2003, the Association had core capital
equal to $15.6 million, or 10.9% of adjusted total assets, which is $9.9 million
above the minimum leverage ratio requirement of 4.0% as in effect on that date.

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


                                                                             28.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS (Continued)

      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, 2003, the Association
had $755,000 of its total $766, 000 of allowance for loan losses that were
general loss reserves, which was less than 1.25% of risk-weighted assets.

      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. The Association had no
such exclusions from capital and assets at June 30, 2003.

      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, 2003, the Association had total capital of $16.4 million
(including $15.6 million in core capital and $755,000 in qualifying
supplementary capital) and risk-weighted assets of $87.3 million, or total
capital of 18.8% of risk-weighted assets. This amount was $9.4 million above the
8.0% 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.

      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.

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


                                                                             29.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS  (Continued)

      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. Assuming the absence of supervisory
problems, OTS regulations generally permit a federal savings association to pay
dividends in any calendar year equal to net income for that year plus retained
earnings for the preceding two years less any dividends paid. As of July 1,
2003, approximately $1,584,000, plus current fiscal 2004 earnings, is available
for dividends from the Association to Peoples without prior approval from the
OTS.

      Assuming the absence of supervisory problems, savings associations that
before and after the proposed distribution remain well-capitalized, may make
capital distributions during any calendar year equal to the greater of 100% of
net income for the year-to-date plus retained net income for the two preceding
years (less any dividends paid). However, an institution deemed to be in need of
more than normal supervision by the OTS may have its dividend authority
restricted by the OTS. The Association may pay dividends in accordance with this
general authority.

      Savings associations proposing to make any capital distribution need only
submit written notice to the OTS 30 days prior to such distribution. Savings
associations that do not, or would not meet their current minimum capital
requirements following a proposed capital distribution, however, must obtain OTS
approval prior to making such distribution. The OTS may object to the
distribution during that 30-day period based on safety and soundness concerns.

Qualified Thrift Lender Test

      All savings associations, including the Association, 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.

      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 -"Holding Company Regulation of Peoples."

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


                                                                             30.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS (Continued)

      If the Association fails the QTL test, Peoples 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 Peoples 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."

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 the
Association, to assess the institution's record of meeting the credit needs of
its 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 the
Association. 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 2003 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 the Association include Peoples and any
company that 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.

Holding Company Regulation of Peoples

      Peoples is a unitary savings and loan holding company subject to
regulatory oversight by the OTS. As such, Peoples 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 Peoples and its
nonsavings association subsidiaries that also permits the OTS to restrict or
prohibit activities that are determined to be a serious risk to the subsidiary
savings association.

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


                                                                             31.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS (Continued)

      As a unitary savings and loan holding company that has been in existence
prior to May 4, 1999, Peoples generally is not subject to activity restrictions.
If Peoples acquires control of another savings association as a separate
subsidiary, it would become a multiple savings and loan holding company, and the
activities of Peoples and any of its subsidiaries (other than the Association or
any other SAIF-insured savings association) would become subject to such
restrictions.

Federal Securities Law

      The common stock of Peoples is registered with the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Peoples is
subject to the information, proxy solicitation, insider trading restrictions and
other requirements of the SEC under the Exchange Act.

      Peoples' stock held by persons who are affiliates (generally officers,
directors and principal stockholders) of Peoples may not be resold without
registration unless sold in accordance with certain resale restrictions. If
Peoples meets specified current public information requirements, each affiliate
of Peoples 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,
2003, the Association 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."

      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

      The Association 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, the Association is required to purchase and maintain stock in
the FHLB of Cincinnati. At June 30, 2003, the Association had $1,539,000 in FHLB
stock, which was in compliance with this requirement.

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


                                                                             32.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS (Continued)

      For the year ended June 30, 2003, dividends paid by the FHLB of Cincinnati
to the Association totaled $64,700, which constitutes a $13,000 decrease over
the amount of dividends received in fiscal year 2002. The $15,200 dividend for
the quarter ended June 30, 2003 reflects an annualized rate of 3.99%.

      Recently, the FHLB of Cincinnati decided to actively engage in the process
of the voluntary registration of its stock with the SEC. While not bound to do
so legally, it is anticipated that such registration will raise the FHLB of
Cincinnati's costs, if such registration occurs. The effect on dividends, if
any, is not known at this time. In addition, the FHLB of Cincinnati recently
adopted a new capital plan changing the components of its capital structure. It
is uncertain what effects, if any the new capital plan will have on the
Association.

Federal and State Taxation

      In addition to the regular income tax, corporations, including savings
associations such as the Association, 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 extent it exceeds the
corporation's regular income tax and net operating losses can offset no more
than 90% of alternative minimum taxable income. However, as provided in the Job
Creation and Worker Assistance Act of 2002, this 90% limitation does not apply
to net operating losses originated in tax years ending during calendar years
2001 and 2002.

      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, 2003, the portion of the Association's reserves subject
to this treatment for tax purposes totaled approximately $2.2 million.

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

      The Corporation 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, 1999. 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 the Corporation) would not result in a deficiency that
could have a material adverse effect on the financial condition of the
Corporation.

      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 1.3 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. Peoples
also files an Ohio franchise tax return and pays tax on its Ohio taxable income.

      Delaware Taxation: As a Delaware holding company, Peoples 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. Peoples is also subject to an annual
franchise tax imposed by the State of Delaware.

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                                                                             33.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS (Continued)

Impact of New Accounting Standards

      On December 31, 2002, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure." This Statement amends
SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative
methods for transition to SFAS No. 123's fair value method of accounting for
stock-based employee compensation. SFAS No. 148 also amends the disclosure
provision of SFAS No. 123 and APB Opinion No. 28, Interim Financial Reporting,
to require disclosure in the summary of significant accounting policies of the
effects of an entity's accounting policy with respect to stock-based employee
compensation on reported net income and earnings per share in annual and interim
financial statements. While the Statement does not amend SFAS No. 123 to require
companies to account for employee stock options using the fair value method, the
disclosure provisions of SFAS No. 148 are applicable to all companies with
stock-based employee compensation regardless of whether they account for that
compensation using the fair value method of SFAS No. 123 or the intrinsic value
method of APB Opinion No. 25. The Corporation currently accounts for stock-based
employee compensation using the intrinsic value method of APB Opinion No. 25.
The impact of the adoption of this Statement is presented in Note 1 to the
financial statements.

      In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133
on Derivative Instruments and Hedging Activities". This Statement amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities. This
Statement is effective for contracts entered into or modified after June 30,
2003, with certain exceptions, and for hedging relationships designated after
June 30, 2003. The adoption of this statement did not have an impact on the
Corporation's financial statements since it does not have any of these types of
instruments.

      In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". This
Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability (or an asset in some circumstances). This
Statement is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003, except for mandatorily redeemable
financial instruments of nonpublic entities. The adoption of this statement did
not have an impact on the Corporation's financial statements since it does not
have any of these types of instruments.

Competition

      The Association 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 communities in
which its offices are 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 communities.
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.

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                                                                             34.
<PAGE>

ITEM 1 - DESCRIPTION OF BUSINESS (Continued)

Employees

      At June 30, 2003, the Association had a total of 29 full-time employees,
13 of whom have been employed by the Association for at least 10 years, and 5
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 Peoples and the
Association who do not serve on Peoples' or the Association's Board of
Directors. Executive officers 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 52, 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 the
Association since 1983.

      Gary N. Fullenkamp. Mr. Fullenkamp, age 47, 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 the Association since 1979.

      Debra A. Geuy. Mrs. Geuy, age 45, 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 the Association since 1978.

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


                                                                             35.
<PAGE>

ITEM 2 - DESCRIPTION OF PROPERTY

      The following table sets forth information concerning the main and branch
offices and a drive-in facility of the Association at June 30, 2003. 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
                                                                      Value at
                                              Year       Owned        June 30,
                                             Opened    or Leased        2003
                                             ------    ---------        ----
      Main Office
          101 East Court Street               1917       Owned       $  228,787
          Sidney, Ohio 45365

      Drive-In
          232 South Ohio Avenue               1971       Owned       $  149,128
          Sidney, Ohio 45365

      Anna Branch
          403 South Pike Street               1998       Owned       $  561,559
          Anna, Ohio 45302

      Jackson Center Branch
          115 East Pike Street                1998       Leased      $   62,731
          Jackson Center, Ohio 45334

      Sidney Wal-Mart Branch
          2400 West Michigan Avenue           2001       Leased      $  180,915
          Sidney, Ohio 45365

      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, 2003
was approximately $171,559.

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.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended June 30, 2003.

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                                                                             36.
<PAGE>

                                     PART II

ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

      Page 4 of Peoples' 2003 Annual Report to Stockholders, attached hereto as
Exhibit 13, is incorporated herein by reference.

ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATION

      Pages 8 through 20 of the Peoples' 2003 Annual Report to Stockholders,
attached hereto as Exhibit 13, are incorporated herein by reference.

ITEM 7 - FINANCIAL STATEMENTS

      Pages 21 through 48 of the Peoples' 2003 Annual Report to Stockholders,
attached hereto as Exhibit 13, are incorporated herein by reference.

ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

      Not applicable.

ITEM 8A - CONTROLS AND PROCEDURES

      We carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief
Financial Officer, of the design and operation of our disclosure controls and
procedures. Based on this evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that, as of June 30, 2003, our disclosure controls
and procedures were effective to provide reasonable assurance that the
information we are required to disclose in the reports we file or submit under
the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms.

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

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                                                                             37.
<PAGE>

                                    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 Peoples is incorporated herein by
reference from Peoples' definitive Proxy Statement for the Annual Meeting of
Stockholders to be held in 2003, which was filed with the SEC on September 17,
2003.

Executive Officers

      Information concerning the executive officers of Peoples 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 Peoples' directors and executive officers is incorporated herein
by reference from the Peoples' definitive Proxy Statement for the Annual Meeting
of Stockholders to be held in 2003, which was filed with the SEC on September
17, 2003.

ITEM 10 - EXECUTIVE COMPENSATION

      Information concerning executive compensation is incorporated herein by
reference from Peoples' definitive Proxy Statement for the Annual Meeting of
Stockholders to be held in 2003, which has been filed with the SEC on September
17, 2003.

ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDERS

      Information concerning security ownership of certain beneficial owners and
management is incorporated herein by reference from Peoples' definitive Proxy
Statement for the Annual Meeting of Stockholders to be held in 2003, which has
been filed with the SEC on September 17, 2003.

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


                                                                             38.
<PAGE>

      The following table provides information as of June 30, 2003 related to
our equity compensation plans in effect at that time.

                      Equity Compensation Plan Information

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
                                         (a)                       (b)                            (c)
------------------------------------------------------------------------------------------------------------------
                                                                                         Number of securities
                                 Number of securities                                    remaining available for
                                 to be issued upon           Weighted-average            equity compensation plans
                                 exercise of                 exercise price of           (excluding securities
Plan Category                    outstanding options         outstanding options         reflected in column (a))
------------------------------------------------------------------------------------------------------------------
<S>                                   <C>                          <C>                          <C>
Equity compensation plans
approved by security holders.         140,824                      $16.03                       37,714
------------------------------------------------------------------------------------------------------------------
</TABLE>

ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Information concerning certain relationships and related transactions is
incorporated herein by reference from Peoples' definitive Proxy Statement for
the Annual Meeting of Stockholders to be held in 2003, which has been filed with
the SEC on September 17, 2003.

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


                                                                             39.
<PAGE>

ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K

(a)   EXHIBITS

<TABLE>
<CAPTION>
                                                                                         Incorporation
                                                                                               by
                                                                                          Reference to
  Regulation S-B                                                                        Prior Filing or
     Exhibit                                                                             Exhibit Number
      Number                        Description of Document                              Attached Hereto
      ------                        -----------------------                              ---------------
<S>                 <C>                                                                        <C>
      3(i)          Certificate of Incorporation                                                *

      3(ii)         By-Laws                                                                     *

      4             Instruments defining the rights of holders,
                    including indentures                                                        *

      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          401(k) Plan                                                                 *

      10.5          Incentive Bonus Plan                                                        *

      10.6          Peoples-Sidney Financial Corporation Amended and
                    Restated 1998 Stock Option and Incentive Plan                               **

      10.7          Peoples-Sidney Financial Corporation Amended and
                    Restated 1998 Management Recognition Plan                                   **

      11            Statement re: computation of per-share earnings            See Note 16 to the Consolidated
                                                                             Financial Statements on pages 45-46
                                                                                  of the 2003 Annual Report
                                                                                Stockholders attached hereto
                                                                                        as Exhibit 13

      13            Annual report to Stockholders                                               13

      21            Subsidiaries of Registrant                                                  21

      23            Consents of experts and counsel                                             23

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

      31.2          Certification of the Chief Financial Officer
                    Pursuant to Section 302 of the Sarbanes-Oxley Act
                    of 2002                                                                     31.2

      32.1          Certification of the Chief Executive Officer
                    Pursuant to Section 906 of the Sarbanes-Oxley Act
                    of 2002                                                                     32.1

</TABLE>


                                                                             40.
--------------------------------------------------------------------------------

<PAGE>
<TABLE>
<CAPTION>

<S>                 <C>                                                                        <C>

      32.2         Certification of the Chief Financial Officer
                   Pursuant to Section 906 of the Sarbanes-Oxley Act
                   of 2002                                                                      32.2

</TABLE>

*   Filed as an exhibit to the Registrant's Form S-1 registration statement
    (File No. 333-20461) and incorporated herein by reference.

**  Filed as an exhibit to the Registrant's Annual Report on Form 10-KSB for the
    fiscal year ended June 30, 1999 (File No. 0-22223) and incorporate herein by
    reference.


(b)   REPORTS ON FORM 8-K

      During the quarter ended June 30, 2003, Peoples furnished one Current
Report on Form 8-K. On April 15, 2003, under Item 5 therein, Peoples reported
the issuance of a press release announcing Peoples earnings for the quarter
ended March 31, 2003 and the declaration of a cash dividend.

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                                                                             41.
<PAGE>

ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

      Information concerning principal accountant fees and services is
incorporated herein by reference from Peoples' definitive Proxy Statement for
The Annual Meeting of Stockholders to be held in 2003, which has been filed with
the SEC on September 17, 2003.

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


                                                                             42.
<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 under
signed, thereunto duly authorized.

    September 26, 2003                     PEOPLES-SIDNEY FINANCIAL CORPORATION
-------------------------
         Date
                                            By:   /s/ DOUGLAS STEWART
                                               ---------------------------------
                                                Douglas Stewart
                                                President, CEO and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on September 26, 2003.

           Signatures                                  Signatures
           ----------                                  ----------

    /s/ DOUGLAS STEWART                        /s/ JAMES W. KERBER
-------------------------------------      -------------------------------------
Douglas Stewart                            James W. Kerber
Douglas Stewart, President,                Director
CEO and Director
                                               /s/ JOHN W. SARGEANT
    /s/ RICHARD T. MARTIN                  -------------------------------------
-------------------------------------      John W. Sargeant
Richard T. Martin                          Director
Chairman of the Board
                                               /s/ DEBRA A. GEUY
    /s/ HARRY N. FAULKNER                  -------------------------------------
-------------------------------------      Debra A. Geuy
Harry N. Faulkner                          Chief Financial Officer and Treasurer
Director

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                                                                             43.