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EXHIBIT 13

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                                  Sidney, Ohio

                                  ANNUAL REPORT
                                  June 30, 2001


                                                                              43
<PAGE>


                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                                  Sidney, Ohio

                                  ANNUAL REPORT
                                  June 30, 2001







                                    CONTENTS






TO OUR SHAREHOLDERS.....................................................  F-2

BUSINESS OF PEOPLES-SIDNEY FINANCIAL CORPORATION........................  F-4

MARKET PRICE OF THE CORPORATION'S COMMON SHARES
  AND RELATED SHAREHOLDER MATTERS.......................................  F-4

SELECTED CONSOLIDATED FINANCIAL INFORMATION
  AND OTHER DATA........................................................  F-6

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
  CONDITION AND RESULTS OF OPERATIONS...................................  F-8

REPORT OF INDEPENDENT AUDITORS ......................................... F-20

CONSOLIDATED FINANCIAL STATEMENTS

           Consolidated Balance Sheets ................................. F-21

           Consolidated Statements of Income ........................... F-22

           Consolidated Statements of Changes in Shareholders' Equity .. F-23

           Consolidated Statements of Cash Flows ....................... F-26

           Notes To Consolidated Financial Statements .................. F-28

SHAREHOLDER INFORMATION................................................. F-46

CORPORATE INFORMATION................................................... F-47


                                                                             F-1
<PAGE>
BUSINESS OF PEOPLES-SIDNEY FINANCIAL CORPORATION

Peoples-Sidney Financial Corporation ("Peoples"), a unitary thrift holding
company incorporated under the laws of the State of Delaware, owns all of the
issued and outstanding capital stock of Peoples Federal Savings and Loan
Association ("Association"), a savings and loan association chartered under the
laws of the United States together referred to as the Corporation. On April 25,
1997, Peoples acquired all of the common stock issued by the Association upon
its conversion from a mutual savings and loan association to a stock savings and
loan association ("Conversion"). Peoples' activities have been limited primarily
to holding the common shares of the Association.

Serving the Sidney, Ohio area since 1886, the Association conducts business from
its main office at 101 East Court Street, Sidney, Ohio and full-service branches
in Sidney, Anna, and Jackson Center, Ohio. The Association's business involves
attracting deposits from the general public and using such deposits to originate
one- to four-family permanent and construction residential mortgages and, to a
lesser extent, commercial real estate, consumer, land, multi-family and
commercial business loans in its market area, consisting primarily of Shelby
County and contiguous counties in Ohio. The Association also invests in
securities consisting primarily of U.S. government obligations, mortgage-backed
and related securities and various types of short-term liquid assets.

As a savings and loan holding company, Peoples is subject to regulation,
supervision and examination by the Office of Thrift Supervision of the United
States Department of the Treasury ("OTS"). As a savings and loan association
chartered under the laws of the United States, the Association is subject to
regulation, supervision and examination by the OTS and the Federal Deposit
Insurance Corporation (the "FDIC"). The FDIC insures deposits in the Association
up to applicable limits. The Association is also a member of the Federal Home
Loan Bank of Cincinnati ("FHLB").


MARKET PRICE OF THE CORPORATION'S COMMON SHARES AND
  RELATED SHAREHOLDER MATTERS

The Corporation had 1,501,546 common shares outstanding on August 31, 2001, held
of record by 856 shareholders. Price information with respect to the
Corporation's common shares is quoted on The NASDAQ National Market System. The
high and low daily closing prices for the common shares of the Corporation as
quoted by The NASDAQ Stock Market, Inc. and cash dividends paid by quarter are
shown below.

<TABLE>
<CAPTION>

                                   September 30,             December 31,          March 31,                           June 30,
                                       2000                    2000                  2001                                2001
                                 -------------------      -----------------     --------------------       -------------------------

<S>                              <C>                      <C>                   <C>                        <C>
               High              $            8.50        $           8.00      $         9.00             $                    9.83
               Low                            6.88                    7.25                8.00                                  8.63
               Cash Dividends                  .07                     .08                 .08                                   .08
<CAPTION>

                                   September 30,             December 31,          March 31,                           June 30,
                                       1999                    1999                  2000                                2000
                                 -------------------      -----------------     --------------------       -------------------------
<S>                              <C>                      <C>                   <C>                        <C>
               High              $           11.50        $          10.50      $        10.75             $                   10.75
               Low                            9.88                    7.94                8.88                                  8.50
               Cash Dividends                  .07                     .07                 .07                                   .07


</TABLE>
                                                                             F-4
<PAGE>


Peoples' primary source of funds with which to pay dividends to shareholders is
from dividends received from the Association. In addition to certain federal
income tax considerations, OTS regulations impose limitations on the payment of
dividends and other capital distributions by savings associations. Under OTS
regulations applicable to converted savings associations, the Association is not
permitted to pay a cash dividend on its common shares if its regulatory capital
would, as a result of payment of such dividend, be reduced below the amount
required for the Liquidation Account (the account established for the purpose of
granting a limited priority claim on the assets of the Association in the event
of complete liquidation to those members of the Association before the
Conversion who maintain a savings account at the Association after the
Conversion), or applicable regulatory capital requirements prescribed by the
OTS.


An application must be submitted and approval from the OTS must be obtained by a
subsidiary of a savings and loan holding company (1) if the proposed
distribution would cause total distributions for the calendar year to exceed net
income for that year to date plus the savings association's retained net income
for the preceding two years; (2) if the savings association will not be at least
adequately capitalized following the capital distribution; (3) if the proposed
distribution would violate a prohibition contained in any applicable statute,
regulations or agreement between the savings association and the OTS (or the
FDIC), or a condition imposed on the savings association in an OTS-approved
application or notice; or, (4) if the savings association has not received
certain favorable examination ratings from the OTS. If a savings association
subsidiary of a holding company is not required to file an application, it must
file a notice with the OTS.




                                                                             F-5
<PAGE>


SELECTED CONSOLIDATED FINANCIAL
  INFORMATION AND OTHER DATA

The following tables set forth certain information concerning the consolidated
financial condition and earnings of and other data regarding the Corporation at
the dates and for the periods indicated.
<TABLE>
<CAPTION>


Selected Financial Condition                                         At June 30,
----------------------------               -------------------------------------------------------------
  and Other Data:                            2001         2000         1999        1998         1997
  --------------                           --------     --------     --------     --------     --------
                                                                 (In thousands)
<S>                                        <C>          <C>          <C>          <C>          <C>
Total amount of:
         Assets ......................     $134,304     $129,287     $116,882     $105,903     $103,142
         Time deposits in other
           financial institutions ....         --           --            400          100        5,000
         Securities available for sale        3,002        8,447        7,858        4,016        2,013
         Securities held to maturity .         --           --           --           --          1,999
         FHLB stock ..................        1,397        1,023          908          847          763
         Loans, net (1) ..............      120,482      114,650      102,803       94,053       88,924
         Deposits ....................       91,341       93,057       84,310       79,054       77,045
         Borrowed funds ..............       25,475       19,000       14,800        7,000         --
         Shareholders' equity ........       17,150       16,960       17,362       19,626       25,712


<CAPTION>

                                                                Year ended June 30,
                                           ------------------------------------------------------------
Selected Operations Data:                    2001         2000         1999        1998         1997
------------------------                   --------     --------     --------     --------     --------
                                                                  (In thousands)
<S>                                        <C>          <C>          <C>          <C>          <C>
Interest income ......................     $ 10,130     $  9,170     $  8,117     $  8,067     $  7,189
Interest expense .....................        6,266        5,376        4,353        3,944        4,051
                                           --------     --------     --------     --------     --------
Net interest income ..................        3,864        3,794        3,764        4,123        3,138
Provision for loan losses ............           73           61          104           41          103
                                           --------     --------     --------     --------     --------
Net interest income after
  provision for loan losses ..........        3,791        3,733        3,660        4,082        3,035
Noninterest income ...................          204           68           77           63           63
Noninterest expense ..................        2,837        2,787        2,873        2,205        2,222
                                           --------     --------     --------     --------     --------
Income before income taxes ...........        1,158        1,014          864        1,940          876
Income tax expense ...................          418          378          354          707          312
                                           --------     --------     --------     --------     --------
Net income ...........................     $    740     $    636     $    510     $  1,233     $    564
                                           ========     ========     ========     ========     ========

Earnings per common
  share - basic (2) ..................     $    .52     $    .43     $    .32     $    .74     $    .09
                                           ========     ========     ========     ========     ========
Earnings per common
  share - diluted (2) ................     $    .52     $    .43     $    .32     $    .74     $    .09
                                           ========     ========     ========     ========     ========
Dividends declared per share (2) .....     $    .31     $    .28     $    .28     $   4.26     $   --
                                           ========     ========     ========     ========     ========

</TABLE>
                                                                             F-6

<PAGE>
<TABLE>
<CAPTION>
Selected Financial Ratios and Other Data:
----------------------------------------

Performance Ratios: .........................          2001         2000         1999         1998         1997
                                                     -------      -------      -------      -------      -------
<S>                                                     <C>          <C>          <C>          <C>          <C>
         Return on assets (ratio of net
           income to average total assets) ..           0.56%        0.51%        0.47%        1.17%        0.60%
         Return on equity (ratio of net
           income to average equity) ........           4.33         3.70         2.73         4.77         4.70
         Dividend payout ratio (2)(7) .......          59.62        65.12        87.50       575.68         0.00
         Interest rate spread (3) ...........           2.38         2.53         2.82         2.78         2.81
         Net interest margin (4) ............           3.01         3.14         3.58         4.01         3.45
         Ratio of operating expense to
           average total assets .............           2.15         2.23         2.65         2.10         2.38
         Ratio of average interest-earning
           assets to average interest-bearing
           liabilities ......................           1.13x        1.14x        1.18x        1.32x        1.14x
Quality Ratios:
         Nonperforming assets to total
           assets at end of period (5) ......           0.94%        0.81%        0.65%        0.91%        0.84%
         Allowance for loan losses to
           nonperforming loans ..............          52.32        56.59        70.03        44.41        45.78
         Allowance for loan losses to
           gross loans (6) ..................           0.53         0.50         0.50         0.44         0.43
Capital Ratios:
         Shareholders' equity to total
           assets at end of period ..........          12.77        13.12        14.85        18.53        24.93
         Average equity to average assets ...          12.92        13.77        17.24        24.59        12.87
Other Data:
         Number of full service offices .....              4            3            3            1            1
</TABLE>

(1)  Loans are shown net of net deferred loan fees, loans in process and the
     allowance for loan losses.
(2)  Earnings per share for the period ended June 30, 1997 was computed based on
     net income of the Corporation from April 25, 1997 to June 30, 1997. The
     dividends for 1998 include a $4.00 per share special dividend of which
     $3.99 was a return of capital distribution.
(3)  The average interest rate spread represents the difference between the
     weighted average yield on interest-earning assets and the weighted average
     cost of interest-bearing liabilities.
(4)  The net interest margin represents net interest income as a percent of
     average interest-earning assets.
(5)  Nonperforming assets consist of nonperforming loans and foreclosed assets.
     Nonperforming loans consist of all accruing loans 90 days or more past due
     and all nonaccrual loans.
(6)  Gross loans are stated at unpaid principal balances.
(7)  Dividends declared per share divided by basic earnings per common share.


                                                                             F-7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General
-------

The following is management's analysis of the Corporation's consolidated
financial condition and consolidated results of operations as of and for the
year ended June 30, 2001, compared to prior years. This discussion is designed
to provide a more comprehensive review of the operating results and financial
position than could be obtained from an examination of the consolidated
financial statements alone. This analysis should be read in conjunction with the
consolidated financial statements and related footnotes and the selected
financial data included elsewhere in this report.

The Corporation provides financial services through its main office in Sidney,
Ohio, and branch offices in Sidney, Anna, and Jackson Center, Ohio. Their
primary deposits products are checking, savings and term certificate accounts,
and its primary lending products are residential mortgage, commercial and
installment loans. Substantially all loans are secured by specific items of
collateral including business assets, consumer assets and real estate.
Commercial loans are expected to be repaid from cash flow from operations of
businesses. Real estate loans are secured by both residential and commercial
real estate. Substantially all revenues and services are derived from financial
institution products and services in Shelby County and contiguous counties.


Forward-Looking Statements

When used in this discussion or future filings by the Corporation with the
Securities and Exchange Commission, or other public or shareholder
communications, or in oral statements made with the approval of an authorized
executive officer, the words or phrases "will likely result," "are expected to,"
"will continue," "is anticipated," "estimate," "project," "believe" or similar
expressions are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. The Corporation
wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made, and to advise
readers that various factors, including regional and national economic
conditions, changes in levels of market interest rates, credit risks of lending
activities and competitive and regulatory factors, could affect the
Corporation's financial performance and could cause the Corporation's actual
results for future periods to differ materially from those anticipated or
projected.

The Corporation is not aware of any trends, events or uncertainties that will
have or are reasonably likely to have a material effect on its liquidity,
capital resources or operations except as discussed herein. The Corporation is
not aware of any current recommendations by regulatory authorities that would
have such effect if implemented.

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


Financial Condition

Total assets at June 30, 2001 were $134.3 million compared to $129.3 million at
June 30, 2000, an increase of $5.0 million, or 3.9%. The increase in total
assets was primarily due to an increase in loans, funded by an increase in
borrowed funds and a decline in securities.


                                   (Continued)
                                                                             F-8
<PAGE>


Cash and cash equivalents in other financial institutions increased from $2.2
million at June 30, 2000 to $6.4 million at June 30, 2001. The additional
liquidity was primarily due to $4 million of FHLB select pay mortgage-matched
advances taken in June 2001. See Note 8 to the consolidated financial statements
for the detail of all the Corporation's FHLB advances and the scheduled
principal repayments.

The securities portfolio, which is classified as available for sale, decreased
$5.4 million from June 30, 2000 to June 30, 2001. The Corporation had nominal
activity in its securities portfolio during 2001, except for the sale of its
mortgaged-backed security. Management elected to sell this security to realize a
$99,000 gain from an increase in market value and increase liquidity for lending
opportunities.

Federal Home Loan Bank stock increased from $1.0 million at June 30, 2000 to
$1.4 million at June 30, 2001 due to stock dividends and purchases required to
increase borrowings.

Loans increased $5.8 million from $114.7 million at June 30, 2000 to $120.5
million at June 30, 2001. The Corporation experienced increases in one- to
four-family residential mortgage loans, consumer loans and commercial loans. The
increase and continued growth in one- to four-family residential mortgage loans
is reflective of attractive loan rates and products compared to local
competition. A significant portion of the loan growth occurred during the last
quarter of the fiscal year due to the decrease in interest rates.

The Corporation's consumer loan portfolio increased $1.1 million between June
30, 2000 and June 30, 2001. Commercial loans increased $1.2 million between June
30, 2000 and June 30, 2001. The increases were primarily related to new auto
loans and commercial lines of credit originated at the Association's Anna and
Jackson Center branch locations. Even with the increase, non-mortgage loans
remain a small portion of the entire loan portfolio and represented only 6.7% of
gross loans at June 30, 2001 compared to 5.0% at June 30, 2000.

Premises and equipment increased $0.1 million from $1.9 million at June 30, 2000
to $2.0 million at June 30, 2001. The increase resulted from the Association's
new branch in the new Wal-Mart Superstore in Sidney.

Total deposits decreased $1.7 million from $93.0 million at June 30, 2000 to
$91.3 million at June 30, 2001. The decrease was primarily due to a large jumbo
certificate of deposit for $901,000, which matured and was withdrawn, as well as
a decline in 15-month certificates of deposit. The Corporation had offered a
special interest rate on a 15-month certificate of deposit from July 1999
through October 1999 that resulted in approximately $17.2 million of 15-month
certificates of deposit with scheduled maturities ranging from October 2000
through January 2001. Although a large percentage of the maturing 15-month
certificates of deposit renewed in a current certificate of deposit offering,
some were withdrawn. The Corporation did experience growth in three-year and
four-year certificates of deposit. Management believes this increase was due to
customers wanting to lock in at higher interest rates in a declining interest
rate environment combined with the sluggish performance of the stock market. NOW
accounts, money market accounts and savings accounts all increased since June
30, 2000, while noninterest-bearing demand deposits declined since June 30,
2000. With the new branch in the Wal-Mart Superstore, management expects an
increase in transaction deposit accounts.

Borrowed funds totaled $25.5 million at June 30, 2001 and $19.0 million at June
30, 2000. The additional borrowings were taken to fund ongoing loan demand and
replace withdrawn certificates of deposit. Based on the FHLB stock owned by the
Association at June 30, 2001, the Association had the ability to obtain
borrowings up to a maximum of $27.9 million. However, the Association can obtain
advances up to the lower of 50% of the Association's total assets or 80% of the
Association's pledgable residential mortgage loan portfolio by purchasing more
FHLB stock. Based upon the 50% of total assets limitation, management estimates
the maximum borrowing capacity from the FHLB to be approximately $67.2 million
at June 30, 2001.



                                   (Continued)

                                                                             F-9
<PAGE>


Total shareholders' equity increased $0.2 million from June 30, 2000 to June 30,
2001. The nominal increase is due to the purchase of treasury stock and paying
out a substantial portion of the Corporation's 2001 earnings in dividends.
Maintaining capital at the current level is part of Management's capital
planning strategy.


Results of Operations

The operating results of the Corporation are affected by general economic
conditions, the monetary and fiscal policies of federal agencies and the
regulatory policies of agencies that regulate financial institutions. The
Corporation's cost of funds is influenced by interest rates on competing
investments and general market rates of interest. Lending activities are
influenced by the demand for real estate loans and other types of loans, which
in turn is affected by the interest rates at which such loans are made, general
economic conditions and the availability of funds for lending activities.

The Corporation's net income primarily depends upon its net interest income,
which is the difference between the interest income earned on interest-earning
assets, such as loans and securities, and interest expense incurred on
interest-bearing liabilities, such as deposits and borrowings. The level of net
interest income is dependent upon the interest rate environment and the volume
and composition of interest-earning assets and interest-bearing liabilities. Net
income is also affected by provisions for loan losses, service charges, gains on
the sale of assets and other income, noninterest expense and income taxes.


Comparison of Results of Operations for the
  Year Ended June 30, 2001 and June 30, 2000

Net Income. The Corporation earned net income of $740,000 for the year ended
June 30, 2001 compared to net income of $636,000 for the year ended June 30,
2000. The increase in net income was primarily due to an increase in net
interest income combined with the realized gain on the sale of a mortgage-backed
security, partially offset by an increase in noninterest expenses.

Net Interest Income. Net interest income totaled $3,864,000 for the year ended
June 30, 2001 compared to $3,794,000 for the year ended June 30, 2000, an
increase of $70,000, or 1.8%. The increase was the result of an increase in the
volume of interest-earning assets partially offset by a decrease in the net
interest margin.

Interest and fees on loans increased $1,041,000 or 12.3%, from $8,448,000 for
the year ended June 30, 2000 to $9,489,000 for the year ended June 30, 2001. The
increase in interest income was due to higher average loans receivable, related
primarily to the origination of new one- to four-family residential, consumer
and commercial loans and an increase in the overall yield of the loan portfolio.
The yield earned on loans increased from 7.75% for 2000 to 8.04% for 2001 due to
the higher interest rate environment that occurred for the majority of fiscal
2001.

Interest earned on securities totaled $457,000 for the year ended June 30, 2001
compared to $577,000 for the year ended June 30, 2000. Interest on
interest-bearing demand, time and overnight deposits with other financial
institutions increased to $91,000 for the year ended June 30, 2001 compared to
$78,000 for the year ended June 30, 2000. The decrease in interest on securities
was the result of lower average balance of securities, partially offset by a
higher yield earned on securities. The increase in interest-earning deposits was
the result of higher average balances of those funds and an increase in the
average yield earned on such investments.

Dividends on FHLB stock increased over the comparable period, primarily due to
an increase in the number of shares of FHLB stock owned.

Interest paid on deposits increased $457,000 for the year ended June 30, 2001
compared to the year ended June 30, 2000. Although deposits were lower at June
30, 2001 than the June 30, 2000 total, the average balance for interest-bearing
deposits increased from 2000 to 2001. The higher average balance combined with
an increase in the average cost of deposits from 4.86% for the year ended June
30, 2000 to 5.27% for the year ended June 30, 2001, resulted in the increase in
deposit interest expense. The average cost of funds should decline as
certificates of deposit reprice at the current lower interest rate environment.


                                   (Continued)
                                                                            F-10
<PAGE>

Interest paid on borrowed funds totaled $1,508,000 for the year ended June 30,
2001 compared to $1,076,000 for the year ended June 30, 2000. Management
increased its borrowings from the FHLB during 2001 to fund loan growth.
Additionally, the average cost of borrowings was higher in 2001 than 2000 due to
the higher interest rate environment that occurred for the majority of fiscal
2001.

During the last part of fiscal 2001, short-term interest rates declined 275
basis points. However, the impact on the Corporation will not be evident until
fiscal 2002 when its interest-earning assets and interest-bearing liabilities
reprice at current rates. For further discussion about the Corporation's
interest-rate risk management, see the Asset and Liability Management section.

Provision for Loan Losses. The Corporation maintains an allowance for loan
losses in an amount that, in management's judgment, is adequate to absorb
probable losses in the loan portfolio. While management utilizes its best
judgment and information available, the ultimate adequacy of the allowance is
dependent upon a variety of factors, including the performance of the
Corporation's loan portfolio, the economy, changes in real estate values and
interest rates and the view of the regulatory authorities toward loan
classifications. The provision for loan losses is determined by management as
the amount to be added to the allowance for loan losses after net charge-offs
have been deducted to bring the allowance to a level that is considered adequate
to absorb probable losses in the loan portfolio. The amount of the provision is
based on management's monthly review of the loan portfolio and consideration of
such factors as historical loss experience, general prevailing economic
conditions, changes in the size and composition of the loan portfolio and
specific borrower considerations, including the ability of the borrower to repay
the loan and the estimated value of the underlying collateral.

The provision for loan losses for the year ended June 30, 2001 totaled $73,000
compared to $61,000 for the year ended June 30, 2000, an increase of $12,000, or
19.6%. The allowance for loan losses totaled $661,000, or 0.53% of gross loans
receivable and 52.3% of total nonperforming loans at June 30, 2001, compared
with $591,000, or 0.50% of gross loans receivable and 56.6% of total
nonperforming loans at June 30, 2000. Charge-offs experienced by the Corporation
have primarily related to consumer and other non-real estate loans. As indicated
previously, such loans make up a small portion of the Corporation's total loan
portfolio. The Corporation's low historical charge-off history is the product of
a variety of factors, including the Corporation's underwriting guidelines, which
generally require a loan-to-value or projected completed value ratio of 90% for
purchase or construction of one- to four-family residential properties and 75%
for commercial real estate and land loans, established income information and
defined ratios of debt to income.

Noninterest income. Noninterest income, which includes service fees and other
miscellaneous income and gains or losses on sale of available-for-sale
securities, totaled $204,000 for the year ended June 30, 2001 compared to
$68,000 for the year ended June 30, 2000. The primary reason for the increase
was the $99,000 gain on sale of available-for-sale securities compared to a
$16,000 loss realized in 2000. Additionally, the Corporation had higher income
from service charges on NOW accounts due to the increase in the number of
accounts.

Noninterest expense. Noninterest expense totaled $2,837,000 for the year ended
June 30, 2001 compared to $2,787,000 for the year ended June 30, 2000, an
increase of $50,000, or 1.8%. The increase is primarily related to higher
compensation and benefits, occupancy and equipment and computer processing
expense partially offset by lower Director fees and state franchise taxes.

Compensation and benefits expense increased $57,000, or 3.8% due to an increase
in the number of personnel, normal annual salary adjustments and increased
hospitalization premiums. These increases were partially offset by lower expense
associated with the Corporation's ESOP. ESOP expense was lower in 2001 due to
the Corporation's lower average stock price during the period. Occupancy and
equipment and computer processing expense increased due to the overall growth of
the Corporation and the costs associated with the opening of the Sidney branch
in the new Super Wal-Mart store in June 2001. Director fees declined due to the
retirement of a Director in October 2000. This Director was not replaced. State
franchise taxes decreased $55,000, or 22.8%. The Association pays franchise
taxes on a calendar-year basis based on its net worth at June 30 of the
preceding year. The Association paid a large dividend to Peoples prior to June
30, 1999. As a result, the Association lowered its franchise taxes beginning
January 1, 2000. Fiscal 2000 only had one-half year impact of the lower capital
levels compared to the full-year for fiscal 2001.

                                   (Continued)
                                                                            F-11
<PAGE>

Income Tax Expense. The volatility of income tax expense is primarily
attributable to the increase in income before income taxes. Income tax expense
totaled $418,000 for the year ended June 30, 2001 compared to $378,000 for the
year ended June 30, 2000, an increase of $40,000, or 10.3%. The effective tax
rates were 36.1% and 37.3% for the years ended June 30, 2001 and 2000,
respectively. The decrease in the effective tax rate primarily relates to the
Corporation's stock-based benefit plans and their relative tax impact resulting
from higher pretax earnings, combined with the Corporation's lower average stock
price in fiscal 2001.


Comparison of Results of Operations for the
  Year Ended June 30, 2000 and June 30, 1999

Net Income. The Corporation earned net income of $636,000 for the year ended
June 30, 2000 compared to net income of $510,000 for the year ended June 30,
1999. The increase in net income was primarily due to a slight increase in net
interest income combined with a decrease in the provision for loan losses and
noninterest expense.

Net Interest Income. Net interest income totaled $3,794,000 for the year ended
June 30, 2000 compared to $3,764,000 for the year ended June 30, 1999, an
increase of $30,000, or 0.8%. The increase was the result of an increase in the
volume of interest-earning assets almost entirely offset by a decrease in the
net interest margin.

Interest and fees on loans increased $739,000, or 9.6%, from $7,709,000 for the
year ended June 30, 1999 to $8,448,000 for the year ended June 30, 2000. The
increase in interest income was due to higher average loans receivable, related
primarily to the origination of new one- to four-family residential, real estate
construction and development, commercial real estate, consumer and commercial
loans. The increase in interest and fees on loans due to volume was partially
offset by a decline in the yield earned on loans, which dropped from 7.89% for
1999 to 7.75% for 2000.

Interest earned on securities totaled $577,000 for the year ended June 30, 2000
compared to $229,000 for the year ended June 30, 1999. Interest on
interest-earning deposits decreased to $78,000 for the year ended June 30, 2000
compared to $117,000 for the year ended June 30, 1999. The increase in interest
on securities was the result of a higher average balance of securities combined
with a higher yield earned on securities. The decrease in interest-earning
deposits was the result of a lower average balance and a decrease in the average
yield earned on such investments.

Dividends on FHLB stock increased slightly over the comparable periods due to an
increase in the number of shares of FHLB stock owned.


                                   (Continued)
                                                                            F-12
<PAGE>


Interest paid on deposits increased $417,000 for the year ended June 30, 2000
compared to the year ended June 30, 1999. The average balance for all
interest-bearing deposits increased and due to the majority of the growth being
in certificates of deposit, the mix of the deposit portfolio shifted from lower
yielding transaction accounts to higher yielding certificates of deposit. As a
result, the average cost of deposits increased from 4.80% for the year ended
June 30, 1999 to 4.86% for the year ended June 30, 2000.

Interest paid on borrowed funds totaled $1,076,000 for the year ended June 30,
2000 compared to $470,000 for the year ended June 30, 1999. Management increased
its borrowings from the FHLB throughout 2000 to fund loan growth.

Provision for Loan Losses. The provision for loan losses for the year ended June
30, 2000 totaled $61,000 compared to $104,000 for the year ended June 30, 1999,
a decrease of $43,000, or 40.8%. The allowance for loan losses totaled $591,000,
or 0.50% of gross loans receivable and 56.6% of total nonperforming loans at
June 30, 2000, compared with $529,000, or 0.50% of gross loans receivable and
70.0% of total nonperforming loans at June 30, 1999.

Noninterest income. Noninterest income totaled $68,000 for the year ended June
30, 2000 compared to $77,000 for the year ended June 30, 1999. The primary
reason for the decrease was the $16,000 loss on the sale of available-for-sale
securities partially offset by increased service charges on NOW accounts due to
the increase in the number of accounts.

Noninterest expense. Noninterest expense totaled $2,787,000 for the year ended
June 30, 2000 compared to $2,872,000 for the year ended June 30, 1999, a
decrease of $85,000, or 3.0%. The decrease is primarily related to state
franchise taxes and other expense.

Compensation and benefits expense decreased $9,000, or 0.6%. Increases in
salaries were more than offset by a decrease in expense associated with the
Corporation's ESOP. ESOP expense was lower in 2000 due to the Corporation's
lower average stock price during the period. Occupancy and equipment expense and
computer processing expense increased due to the added costs associated with the
Anna and Jackson Center branches which opened in fiscal 1999. The 2000 fiscal
year reflected a full year of operation for these two branches while 1999
included only a partial year of operation. State franchise taxes decreased
$45,000, or 15.8%. The Association pays franchise taxes on a calendar-year basis
based on its net worth at June 30 of the preceding year. The lower capital
levels at the Association at June 30, 1999, after the large dividend paid to
Peoples prior to June 30, 1999, resulted in lower franchise taxes beginning
January 1, 2000. Other expenses declined $50,000, or 13.2%, due to costs such as
advertising and supplies incurred in 1999 associated with the opening of two new
branches, which were not repeated in 2000, along with lower professional fees.

Income Tax Expense. The volatility of income tax expense is primarily
attributable to the change in income before income taxes. Income tax expense
totaled $378,000 for the year ended June 30, 2000 compared to $354,000 for the
year ended June 30, 1999, an increase of $24,000, or 6.9%. The effective tax
rates were 37.3% and 40.9% for the years ended June 30, 2000 and 1999,
respectively. The decrease in the effective tax rate primarily relates to the
Corporation's stock-based benefit plans and their relative tax impact resulting
from higher pretax earnings combined with the Corporation's lower average stock
price in fiscal 2000.


                                   (Continued)
                                                                            F-13
<PAGE>


Yields Earned and Rates Paid. The following table sets forth certain information
relating to the Corporation's average balance sheet and reflects the average
yield on interest-earning assets and the average cost of interest-bearing
liabilities for the periods indicated. Such yields and costs are derived by
dividing income or expense by the average balances of interest-earning assets or
interest-bearing liabilities, respectively, for the periods presented. Average
balances are derived from average daily balances. Nonaccruing loans have been
included in the table as loans carrying a zero yield.
<TABLE>
<CAPTION>

                                                                        Year ended June 30,
                              ------------------------------------------------------------------------------------------------------
                                             2001                              2000                              1999
                              ---------------------------------  --------------------------------  ---------------------------------
                                Average    Interest                Average    Interest                Average    Interest
                              outstanding   earned/     Yield/   outstanding   earned/     Yield/  outstanding   earned/    Yield/
                                balance      paid        rate      balance     paid        rate      balance      paid       rate
                                -------      ----        ----      -------     ----        ----      -------      ----       ----
                                                                   (Dollars in thousands)
<S>                             <C>         <C>           <C>      <C>        <C>           <C>      <C>         <C>           <C>
ASSETS:
Interest-earning assets:
     Interest-earning
       deposits                 $  2,425    $     91      3.74%    $  2,203   $     78      3.53%    $  2,853    $    117      4.10%
     Securities available
       for sale (1)                6,605         457      6.88        8,344        577      6.76        3,635         229      6.31
     Loans (2)                   117,990       9,489      8.04      109,030      8,448      7.75       97,702       7,709      7.89
     FHLB stock                    1,262          93      7.34          942         67      7.16          870          62      7.13
                                --------    --------               --------   --------               --------    --------

         Total interest-
           earning assets        128,282      10,130      7.89      120,519      9,170      7.60      105,060       8,117      7.73
                                --------    --------               --------   --------               --------    --------

Noninterest-earning
  assets:
     Cash and due from
       banks                         923                              1,257                               725
     Premises and
       equipment, net              1,887                              1,947                             1,809
     Accrued interest and
       other assets                1,152                              1,006                               950
                                --------                           --------                          --------

         Total noninterest-
           earning assets          3,962                              4,210                             3,484
                                --------                           --------                          --------

Total assets                    $132,244                           $124,729                          $108,544
                                ========                           ========                          ========

</TABLE>
                                   (Continued)

                                                                            F-14
<PAGE>
<TABLE>
<CAPTION>
                                                                               Year ended June 30,
                                    ------------------------------------------------------------------------------------------------
                                                     2001                              2000                           1999
                                    ----------------------------------- ------------------------------- ----------------------------
                                        Average     Interest              Average     Interest            Average   Interest
                                     outstanding     earned/   Yield/   outstanding    earned/   Yield/ outstanding  earned/  Yield/
                                        balance       paid      rate      balance       paid      rate    balance     paid     rate
                                        -------       ----      ----      -------       ----      ----    -------     ----     ----
                                                                                (Dollars in thousands)
<S>                                    <C>        <C>           <C>      <C>        <C>           <C>    <C>        <C>        <C>
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing
  liabilities:
     Savings deposits .............    $ 18,211   $    555      3.05%    $ 18,738   $    572      3.05%  $ 18,939   $    571   3.01%
     Demand and NOW
       deposits ...................       6,798        190      2.78        6,719        189      2.81      5,591        152   2.72
     Certificate accounts .........      65,192      4,013      6.16       63,078      3,539      5.61     56,415      3,160   5.60
                                       --------   --------      ----     --------   --------      ----   --------   --------   ----
     Total deposits ...............      90,201      4,758      5.27       88,535      4,300      4.86     80,945      3,883   4.80
     Borrowed funds ...............      23,477      1,508      6.42       17,603      1,076      6.11      7,764        470   6.05
                                       --------   --------      ----     --------   --------      ----   --------   --------   ----
         Total interest-
          bearing liabilities .....     113,678      6,266      5.51      106,138      5,376      5.07     88,709      4,353   4.91
                                       --------   --------      ----     --------   --------      ----   --------   --------   ----

Noninterest-bearing
  liabilities
     Demand deposits ..............         647                               691                             440
     Accrued interest
       payable and other
       liabilities ................         830                               722                             681
                                       --------                         --------                         --------
         Total noninterest-
           bearing
           liabilities ............       1,477                             1,413                           1,121
                                       --------                         --------                         --------

Total liabilities .................     115,155                           107,551                          89,830

Total shareholders'
  equity ..........................      17,089                            17,178                          18,714
                                       --------                          --------                        --------

Total liabilities and
  shareholders'
  equity ..........................    $132,244                          $124,729                        $108,544
                                       ========                          ========                        ========

Net interest income;
  interest rate
  spread (3) ......................               $  3,864      2.38%               $  3,794      2.53%             $  3,764   2.82%
                                                  ========      ====                ========      ====              ========   ====

Net earning assets ................    $ 14,604                          $ 14,381                        $ 16,351
                                       ========                          ========                        ========
Net interest margin (4) ...........                             3.01%                             3.14%                        3.58%
                                                                ====                              ====                         ====
Average interest-earning
  assets to interest-
  bearing liabilities .............        1.13x                             1.14x                           1.18x
                                           ====                              ====                            ====
</TABLE>

(1)  Average balance includes unrealized gains and losses while yield is based
     on amortized cost.
(2)  Calculated net of deferred loan fees, loan discounts, loans in process and
     allowance for loan losses and includes nonperforming loans.
(3)  Net interest rate spread represents the difference between the yield on
     interest-earning assets and the cost of interest-bearing liabilities.
(4)  Net interest margin represents net interest income divided by average
     interest-earning assets.

                                   (Continued)


                                                                            F-15
<PAGE>
The table below describes the extent to which changes in interest rates and
changes in volume of interest-earning assets and interest-bearing liabilities
have affected the Corporation's interest income and expense during the years
indicated. For each category of interest-earning assets and interest-bearing
liabilities, information is provided on changes attributable to (1) changes in
volume (multiplied by prior year rate), (2) changes in rate (multiplied by prior
year volume) and (3) total changes in rate and volume. The combined effects of
changes in both volume and rate, that are not separately identified, have been
allocated proportionately to the change due to volume and change due to rate:

<TABLE>
<CAPTION>
                                                                                      Year ended June 30,
                                                         ------------------------------------------------------------------------
                                                                 2001 vs. 2000                           2000 vs. 1999
                                                         ----------------------------------    ----------------------------------
                                                                     Increase                               Increase
                                                                    (decrease)                             (decrease)
                                                                      due to                                  due to
                                                         ---------------------------------      ---------------------------------
                                                          Volume       Rate        Total        Volume        Rate         Total
                                                         -------      -------      -------      -------      -------      -------
<S>                                                      <C>          <C>          <C>          <C>          <C>          <C>
Interest income attributable to:
         Interest-earning deposits .................     $     8      $     5      $    13      $   (24)     $   (15)     $   (39)
         Securities available for sale .............        (130)          10         (120)         331           17          348
         Loans receivable ..........................         712          329        1,041          880         (141)         739
         FHLB stock ................................          24            2           26            5           --            5
                                                         -------      -------      -------      -------      -------      -------

                  Total interest-earning assets ....     $   614      $   346          960      $ 1,192      $  (139)       1,053
                                                         =======      =======      -------      =======      =======      -------

Interest expense attributable to:
         Savings deposits ..........................     $   (16)     $    (1)         (17)     $    (6)     $     7            1
         Demand and NOW deposits ...................           2           (1)           1           32            5           37
         Certificates accounts .....................         122          352          474          374            5          379
         Borrowed funds ............................         375           57          432          601            5          606
                                                         -------      -------      -------      -------      -------      -------

                  Total interest-bearing liabilities     $   483      $   407          890      $ 1,001      $    22        1,023
                                                         =======      =======      -------      =======      =======      -------

Net interest income ................................                               $    70                                $    30
                                                                                   =======                                =======

</TABLE>

Asset and Liability Management

The Association, like other financial institutions, is subject to interest rate
risk to the extent that its interest-earning assets reprice differently than its
interest-bearing liabilities. As part of its effort to monitor and manage
interest rate risk, the Association uses the "net portfolio value" ("NPV")
methodology adopted by the OTS as part of its capital regulations. Although the
Association is not currently subject to NPV regulation because such regulation
does not apply to institutions with less than $300 million in assets and
risk-based capital in excess of 12%, application of NPV methodology may
illustrate the Association's interest rate risk.

Generally, NPV is the discounted present value of the difference between
incoming cash flows on interest-earning and other assets and outgoing cash flows
on interest-bearing and other liabilities. The application of the methodology
attempts to quantify interest rate risk as the change in the NPV that would
result from a theoretical 200 basis point (1 basis point equals 0.01%) change in
market interest rates. Both a 200 basis point increase in market interest rates
and a 200 basis point decrease in market interest rates are considered. If the
NPV would decrease by more than 2% of the present value of the institution's
assets with either an increase or a decrease in market rates, the institution
must deduct 50% of the amount of decrease in excess of such 2% in the
calculation of the institution's risk-based capital.

At March 31, 2001, the most recent date with available data, 2% of the present
value of the Association's assets was $2,669,000. Because the interest rate risk
of a 200 basis point decrease in market interest rates (which was greater than
the interest rate risk of a 200 basis point increase) was $4,585,000 at March
31, 2001, the Association would have been required to make additional deductions
from its capital of $958,000 in determining whether the Association met its


                                   (Continued)
                                                                            F-16
<PAGE>

risk-based capital requirement. Even with the deduction, the Association would
have still exceeded its risk-based capital requirement by more than $5.8
million.

Presented below, as of March 31, 2001, is an analysis of the Association's
interest-rate risk as measured by changes in the NPV for instantaneous and
sustained parallel shifts of 100 basis points in market interest rates. The
table below represents the new Thrift Bulletin 13a reporting requirements and
the new target limits set by the Association. As illustrated in the table, the
Association is more sensitive to declining rates than increasing rates. This is
the result of decreases in short term interest rates by 2.75% since July 2000
and the movement of capital from the Association to Peoples, which not only
lowered capital of the Association, but also increased interest-bearing
liabilities. The decrease is interest rates to current levels is being monitored
by the Board of Directors and management and is being viewed as an opportunity
to lengthen the maturity of Federal Home Loan Bank advances at the lower
interest rates. These advances may be used to match the origination of
fixed-rate mortgages. Management is continuing efforts to lengthen maturities of
deposit liabilities and to lower the overall cost of funds through reduced
interest rates. Even though the interest rate sensitivity for a 200 basis point
decline in interest rates is slightly higher than what is desired, it is not
considered to be a problem with interest rates at current levels. With interest
rates at the current low levels, there would appear to be a greater chance that
interest rates will increase in the future.

<TABLE>
<CAPTION>

                                                                                             Target Limit
                                    Economic Value                         NPV Ratio         Under Asset
                                     -------------                         --------            Liability
      Change            Market Value                Market Value              MVE/             Management
      In Rates              Equity                     Assets                 MVTA               Policy
      --------              ------                    ------                  ----               ------
                                               (Dollars in thousands)
<S>                     <C>                        <C>                        <C>                  <C>
       +400             $   14,434                 $   122,522                11.78%                 4%
       +300                 15,339                     125,815                12.19                  4
       +200                 15,844                     128,844                12.30                  4
       +100                 15,620                     131,292                11.90                  4
       STATIC               14,951                     133,456                11.20
       -100                 12,900                     134,412                 9.60                  4
       -200                 10,366                     135,076                 7.67                  4
       -300                  8,122                     136,237                 5.96                  4
       -400                  6,006                     137,259                 4.38                  4
</TABLE>

As with any method of measuring interest rate risk, certain shortcomings are
inherent in the NPV approach. For example, although certain assets and
liabilities may have similar maturities or periods of repricing, they may react
in different degrees to changes in market interest rates. Also, the interest
rates on certain types of assets and liabilities may fluctuate in advance of
changes in market interest rates, while interest rates on other types may lag
behind changes in market rates. Further, in the event of a change in interest
rates, expected rates of prepayment on loans and mortgage-backed securities and
early withdrawal levels from certificates of deposit would likely deviate
significantly from those assumed in making risk calculations.


Liquidity and Capital Resources

The Corporation's liquidity, primarily represented by cash and cash equivalents,
is a result of its operating, investing and financing activities. These
activities are summarized below for the years ended June 30, 2001, 2000 and
1999.

                                   (Continued)
                                                                            F-17
<PAGE>
<TABLE>
<CAPTION>

                                                               Year Ended June 30,
                                                     ------------------------------------
                                                      2001           2000         1999
                                                     --------      --------      --------
<S>                                                  <C>           <C>           <C>
Net income .....................................     $    740      $    636      $    510
Adjustments to reconcile net income to net
  cash from operating activities ...............          352           355           824
                                                     --------      --------      --------
Net cash from operating activities .............        1,092           991         1,334
Net cash from investing activities .............         (718)      (12,372)      (14,237)
Net cash from financing activities .............        3,771        11,654         9,889
                                                     --------      --------      --------
Net change in cash and cash equivalents ........        4,145           273        (3,014)
Cash and cash equivalents at beginning of period        2,206         1,933         4,947
                                                     --------      --------      --------
Cash and cash equivalents at end of period .....     $  6,351      $  2,206      $  1,933
                                                     ========      ========      ========
</TABLE>

The Corporation's principal sources of funds are deposits, loan repayments,
maturities of securities and other funds provided by operations. The Corporation
also has the ability to borrow from the FHLB. While scheduled loan repayments
and maturing investments are relatively predictable, deposit flows and early
loan prepayments are more influenced by interest rates, general economic
conditions and competition. The Corporation maintains investments in liquid
assets based upon management's assessment of (1) need for funds; (2) expected
deposit flows; (3) yields available on short-term liquid assets; and, (4)
objectives of the asset/liability management program.

The Association is subject to various regulatory capital requirements
administered by the federal regulatory agencies. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Association must meet specific capital guidelines that involve quantitative
measures of the Association's assets, liabilities and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Association's
capital amounts and classifications are also subject to qualitative judgments by
the regulators about the Association's components, risk weightings and other
factors. Failure to meet minimum capital requirements can initiate certain
mandatory actions that, if undertaken, could have a direct material effect on
the Corporation's financial statements. At June 30, 2001 and 2000, management
believes the Association complies with all regulatory capital requirements.
Based on the Association's computed regulatory capital ratios, the Association
is considered well capitalized under the Federal Deposit Insurance Act at June
30, 2001 and 2000. No conditions or events have occurred subsequent to the last
notification by regulators that management believes would have changed the
Association's category.

The following table summarizes the Association's minimum regulatory capital
requirements and actual capital at June 30, 2001.
<TABLE>
<CAPTION>
                                                                                                Excess of Actual
                                                                                             Capital Over Current
                                Actual capital             Current requirement                    Requirement
                          -----------------------        --------------------------          ---------------------       Applicable
                          Amount          Percent        Amount             Percent          Amount        Percent       Asset Total
                          ------          -------        ------             -------          ------        -------      -----------
                                                         (Dollars in thousands)
<S>                  <C>                    <C>     <C>                       <C>        <C>                  <C>        <C>
Total risk-based
  capital            $     13,934           15.6%   $     7,168               8.0%       $     6,766          7.6%       $  89,605
Tier 1 risk-based
  capital                  13,277           14.8          3,584               4.0              9,693         10.8           89,605
Core capital               13,277            9.9          5,374               4.0              7,903          5.9          134,357
Tangible capital           13,277            9.9          2,015               1.5             11,262          8.4          134,357


</TABLE>

                                                                            F-18
<PAGE>


Impact of New Accounting Standards

Statement of Financial Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" requires companies to record derivatives on
the balance sheet as assets or liabilities, measured at fair value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. The key criterion for hedge accounting is that the hedging
relationship must be highly effective in achieving offsetting changes in fair
value or cash flows. SFAS No. 133, as delayed by SFAS No. 137 and amended by
SFAS No. 138, was effective for fiscal years beginning after June 15, 2000.
Consequently, the Corporation adopted SFAS No. 133 on July 1, 2000. The adoption
of SFAS No. 133 has had no significant impact on the Corporation's financial
statements.

In September 2000, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." SFAS No. 140 replaces SFAS No. 125 and resolves
various implementation issues while carrying forward most of the provisions of
SFAS No. 125 without change. SFAS No. 140 revises standards for transfers of
financial assets by clarifying criteria and expanding guidance for determining
whether the transferor has relinquished control and the transfer is therefore
accounted for as a sale. SFAS No. 140 also adopts new accounting requirements
for pledged collateral and requires new disclosures about securitizations and
pledged collateral. SFAS No. 140 was effective for transfers occurring after
March 31, 2001 and for disclosures relating to securitization transactions and
collateral for fiscal years ending after December 15, 2000. The adoption of this
standard did not have a material effect on the Corporation's financial
statements.

In June 2001, FASB issued SFAS No. 141, "Business Combinations." SFAS No. 141
requires all business combinations within its scope to be accounted for using
the purchase method, rather than the pooling-of-interests method. The provisions
of this Statement apply to all business combinations initiated after June 30,
2001. The adoption of this statement will only have an impact on the
Corporation's financial statements if it enters into a business combination.

Also in June 2001, FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," which addresses the accounting for such assets arising from prior and
future business combinations. Upon the adoption of this Statement, goodwill
arising from business combinations will no longer be amortized, but rather will
be assessed regularly for impairment, with any such impairment recognized as a
reduction to earnings in the period identified. Other identified intangible
assets, such as core deposit intangible assets, will continue to be amortized
over their estimated useful lives. The Corporation is required to adopt this
Statement on July 1, 2002, and early adoption is permitted on July 1, 2001. The
adoption of this Statement will not have an impact on the Corporation's
financial statements, as it does not have any intangible assets.


Impact of Inflation and Changing Prices

The Consolidated Financial Statements and Notes included herein have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP"). Presently, GAAP requires the Corporation to
measure financial position and operating results primarily in terms of historic
dollars. Changes in the relative value of money due to inflation or recession
are generally not considered.

In management's opinion, changes in interest rates affect the financial
condition of a financial institution to a far greater degree than changes in the
inflation rate. While interest rates are greatly influenced by changes in the
inflation rate, they do not change at the same rate or in the same magnitude as
the inflation rate. Rather, interest rate volatility is based on changes in the
expected rate of inflation, as well as on changes in monetary and fiscal
policies.


                                                                            F-19

<PAGE>







                         REPORT OF INDEPENDENT AUDITORS



Board of Directors and Shareholders
Peoples-Sidney Financial Corporation
Sidney, Ohio


We have audited the accompanying consolidated balance sheets of Peoples-Sidney
Financial Corporation as of June 30, 2001 and 2000, and the related consolidated
statements of income, changes in shareholders' equity and cash flows for each of
the three years in the period ended June 30, 2001. These financial statements
are the responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Peoples-Sidney
Financial Corporation as of June 30, 2001 and 2000, and the results of its
operations and its cash flows for each of the three years in the period ended
June 30, 2001, in conformity with accounting principles generally accepted in
the United States of America.




                                                /s/Crowe, Chizek and Company LLP
                                                --------------------------------
                                                   Crowe, Chizek and Company LLP

Columbus, Ohio
July 20, 2001


                                                                            F-20
<PAGE>
<TABLE>
<CAPTION>
                               PEOPLES-SIDNEY FINANCIAL CORPORATION
                                   CONSOLIDATED BALANCE SHEETS
                                      June 30, 2001 and 2000

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


                                                                     2001               2000
                                                                -------------      -------------
<S>                                                             <C>                <C>
ASSETS
Cash and due from financial institutions ..................     $   1,015,400      $     820,629
Interest-bearing deposits in other financial institutions .         4,335,495            885,364
Overnight deposits ........................................         1,000,000            500,000
                                                                -------------      -------------
         Total cash and cash equivalents ..................         6,350,895          2,205,993

Securities available for sale .............................         3,001,715          8,446,681
Federal Home Loan Bank stock ..............................         1,397,200          1,023,000
Loans, net ................................................       120,481,894        114,649,700
Accrued interest receivable ...............................           921,864            893,569
Premises and equipment, net ...............................         1,977,435          1,890,886
Other assets ..............................................           173,398            177,387
                                                                -------------      -------------

         Total assets .....................................     $ 134,304,401      $ 129,287,216
                                                                =============      =============


LIABILITIES
Deposits ..................................................     $  91,341,201      $  93,056,941
Borrowed funds ............................................        25,474,596         19,000,000
Accrued interest payable and other liabilities ............           338,991            270,477
                                                                -------------      -------------
         Total liabilities ................................       117,154,788        112,327,418

SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 500,000 shares authorized,
  none issued and outstanding
Common stock, $.01 par value, 3,500,000 shares authorized,
  1,785,375 shares issued .................................            17,854             17,854
Additional paid-in capital ................................        10,705,048         10,754,463
Retained earnings .........................................        11,150,845         10,856,394
Treasury stock, 271,829 and 207,060 shares at cost ........        (3,178,640)        (2,636,295)
Unearned employee stock ownership plan shares .............        (1,182,471)        (1,347,800)

Unearned management recognition plan shares ...............          (365,394)          (556,043)

Accumulated other comprehensive income (loss) .............             2,371           (128,775)
                                                                -------------      -------------
         Total shareholders' equity .......................        17,149,613         16,959,798
                                                                -------------      -------------

         Total liabilities and shareholders' equity .......     $ 134,304,401      $ 129,287,216
                                                                =============      =============

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


                                                                            F-21
<PAGE>
<TABLE>
<CAPTION>

                                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                                       CONSOLIDATED STATEMENTS OF INCOME
                                    Years Ended June 30, 2001, 2000 and 1999

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


                                                                      2001             2000            1999
                                                                  -----------      ----------      -----------
<S>                                                               <C>              <C>             <C>
Interest income
         Loans, including fees ..............................     $ 9,489,584      $8,448,175      $ 7,709,470
         Securities .........................................         456,934         577,292          228,786
         Demand, time and overnight deposits ................          90,806          77,798          117,218
         Dividends on Federal Home Loan Bank stock ..........          92,670          67,490           61,386
                                                                  -----------      ----------      -----------
                  Total interest income .....................      10,129,994       9,170,755        8,116,860

Interest expense
         Deposits ...........................................       4,757,395       4,299,957        3,883,143
         Borrowed funds .....................................       1,508,215       1,076,346          469,997
                                                                  -----------      ----------      -----------
                  Total interest expense ....................       6,265,610       5,376,303        4,353,140
                                                                  -----------      ----------      -----------

Net interest income .........................................       3,864,384       3,794,452        3,763,720

Provision for loan losses ...................................          73,565          61,503          103,803
                                                                  -----------      ----------      -----------

Net interest income after provision for loan losses .........       3,790,819       3,732,949        3,659,917

Noninterest income
         Service fees and other charges .....................         104,652          84,273           76,557
         Gain (loss) on sale of available for sale securities          98,912         (15,781)            --
                                                                  -----------      ----------      -----------
                  Total noninterest income ..................         203,564          68,492           76,557

Noninterest expense
         Compensation and benefits ..........................       1,547,347       1,490,680        1,499,573
         Director fees ......................................         104,800         120,000          120,000
         Occupancy and equipment ............................         340,056         312,827          285,073
         Computer processing expense ........................         229,581         204,123          185,542
         Professional fees ..................................         103,412          92,679          120,163
         State franchise taxes ..............................         184,609         239,118          283,863
         Other ..............................................         326,970         328,019          378,019
                                                                  -----------      ----------      -----------
                  Total noninterest expense .................       2,836,775       2,787,446        2,872,233
                                                                  -----------      ----------      -----------

Income before income taxes ..................................       1,157,608       1,013,995          864,241

Income tax expense ..........................................         417,554         378,397          353,865
                                                                  -----------      ----------      -----------

Net income ..................................................     $   740,054     $   635,598      $   510,376
                                                                  ===========     ===========      ===========

Earnings per common share - basic ...........................     $       .52     $       .43      $       .32
                                                                  ===========     ===========      ===========
Earnings per common share - diluted .........................     $       .52     $       .43      $       .32
                                                                  ===========     ===========      ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                                                            F-22


<PAGE>
<TABLE>
<CAPTION>
                                             PEOPLES-SIDNEY FINANCIAL CORPORATION
                                  CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                           Years Ended June 30, 2001, 2000 and 1999

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



                                                              Additional                                          Unearned
                                                  Common       Paid-In         Retained         Treasury            ESOP
                                                   Stock       Capital         Earnings          Stock             Shares
                                                   -----       -------         --------          -----             ------
<S>                                              <C>          <C>             <C>               <C>              <C>
Balance, July 1, 1998 ......................     $ 17,854     $10,717,991     $ 10,581,096      $      --        $(1,702,114)

Comprehensive income:

     Net income for the year ended
       June 30, 1999 .......................         --              --            510,376             --               --

     Change in net unrealized gain (loss) on
       securities available for sale, net of
       reclassification and tax effects ....         --              --               --               --               --


         Total comprehensive income ........

Cash dividends - $.28 per share ............         --              --           (448,432)            --               --

Commitment to release 15,248 employee
  stock ownership plan shares ..............         --            61,950             --               --            181,975

Purchase of 177,881 treasury shares,
  at cost ..................................         --              --               --         (2,719,692)            --

Transfer of 57,128 shares from treasury
  stock to management recognition plan .....         --              --               --            953,293             --

12,378 shares earned under
  management recognition plan ..............         --              --               --               --               --
                                                 --------     -----------     ------------      -----------      -----------

Balance, June 30, 1999 .....................     $ 17,854     $10,779,941     $ 10,643,040      $(1,766,399)     $(1,520,139)
                                                 ========     ===========     ============      ===========      ===========

<CAPTION>
                                                             Accumulated
                                                 Unearned        Other
                                                    MRP      Comprehensive
                                                  Shares     Income (Loss)        Total
                                                  ------     -------------        -----
<S>                                              <C>            <C>           <C>
Balance, July 1, 1998 ......................     $    --        $ 11,189      $ 19,626,016

Comprehensive income:

     Net income for the year ended
       June 30, 1999 .......................          --            --             510,376

     Change in net unrealized gain (loss) on
       securities available for sale, net of
       reclassification and tax effects ....          --         (56,577)          (56,577)
                                                                              ------------

         Total comprehensive income ........                                       453,799

Cash dividends - $.28 per share ............          --            --            (448,432)

Commitment to release 15,248 employee
  stock ownership plan shares ..............          --            --             243,925

Purchase of 177,881 treasury shares,
  at cost ..................................          --            --          (2,719,692)

Transfer of 57,128 shares from treasury
  stock to management recognition plan .....      (953,293)         --                --

12,378 shares earned under
  management recognition plan ..............       206,601          --             206,601
                                                 ---------      --------      ------------

Balance, June 30, 1999 .....................     $(746,692)     $(45,388)     $ 17,362,217
                                                 =========      ========      ============

</TABLE>
                                   (Continued)
                                                                            F-23


<PAGE>
<TABLE>
<CAPTION>
                                              PEOPLES-SIDNEY FINANCIAL CORPORATION
                             CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Continued)
                                            Years Ended June 30, 2001, 2000 and 1999

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

                                                              Additional                                          Unearned
                                                  Common       Paid-In         Retained         Treasury            ESOP
                                                   Stock       Capital         Earnings          Stock             Shares
                                                   -----       -------         --------          -----             ------
<S>                                              <C>          <C>               <C>               <C>              <C>
Balance, July 1, 1999 ......................     $ 17,854     $ 10,779,941      $ 10,643,040      $(1,766,399)     $(1,520,139)

Comprehensive income:


     Net income for the year ended
       June 30, 2000 .......................         --               --             635,598             --               --

     Change in unrealized gain (loss) on
       securities available for sale, net of
       reclassification and tax effects ....         --               --                --               --               --


         Total comprehensive income ........

Cash dividends - $.28 per share ............         --               --            (422,244)            --               --

Commitment to release 14,687 employee
  stock ownership plan shares ..............         --            (25,478)             --               --            172,339

Purchase of 86,307 treasury shares,
  at cost ..................................         --               --                --           (869,896)            --

11,425 shares earned under
  management recognition plan ..............         --               --                --               --               --
                                                 --------     ------------      ------------      -----------      -----------

Balance, June 30, 2000 .....................     $ 17,854     $ 10,754,463      $ 10,856,394      $(2,636,295)     $(1,347,800)
                                                 ========     ============      ============      ===========      ===========

<CAPTION>
                                                             Accumulated
                                                 Unearned        Other
                                                    MRP      Comprehensive
                                                  Shares     Income (Loss)        Total
                                                  ------     -------------        -----
<S>                                              <C>            <C>           <C>
Balance, July 1, 1999 ......................     $(746,692)     $ (45,388)     $ 17,362,217

Comprehensive income:


     Net income for the year ended
       June 30, 2000 .......................          --             --             635,598

     Change in unrealized gain (loss) on
       securities available for sale, net of
       reclassification and tax effects ....          --          (83,387)          (83,387)
                                                                               ------------

         Total comprehensive income ........                                        552,211

Cash dividends - $.28 per share ............          --             --            (422,244)

Commitment to release 14,687 employee
  stock ownership plan shares ..............          --             --             146,861

Purchase of 86,307 treasury shares,
  at cost ..................................          --             --            (869,896)

11,425 shares earned under
  management recognition plan ..............       190,649           --             190,649
                                                 ---------      ---------      ------------

Balance, June 30, 2000 .....................     $(556,043)     $(128,775)     $ 16,959,798
                                                 =========      =========      ============

</TABLE>

                                   (Continued)

                                                                            F-24

<PAGE>
<TABLE>
<CAPTION>
                                              PEOPLES-SIDNEY FINANCIAL CORPORATION
                             CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Continued)
                                            Years Ended June 30, 2001, 2000 and 1999

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

                                                              Additional                                          Unearned
                                                   Stock       Capital         Earnings          Stock             Shares
                                                   -----       -------         --------          -----             ------
<S>                                              <C>          <C>               <C>               <C>              <C>
Balance, July 1, 2000 ......................     $17,854     $ 10,754,463      $ 10,856,394      $(2,636,295)     $(1,347,800)

Comprehensive income:

     Net income for the year ended
       June 30, 2001 .......................        --               --             740,054             --               --

     Change in unrealized gain (loss) on
       securities available for sale, net of
       reclassification and tax effects ....        --               --                --               --               --


         Total comprehensive income ........        --               --                --               --               --

Cash dividends - $.31 per share ............        --               --            (445,603)            --               --

Commitment to release 14,090 employee
  stock ownership plan shares ..............        --            (49,415)             --               --            165,329

Purchase of 64,769 treasury shares,
  at cost ..................................        --               --                --           (542,345)            --

11,425 shares earned under
  management recognition plan ..............        --               --                --               --               --
                                                 -------     ------------      ------------      -----------      -----------

Balance, June 30, 2001 .....................     $17,854     $ 10,705,048      $ 11,150,845      $(3,178,640)     $(1,182,471)
                                                 =======     ============      ============      ===========      ===========


<CAPTION>
                                                             Accumulated
                                                 Unearned        Other
                                                    MRP      Comprehensive
                                                  Shares     Income (Loss)        Total
                                                  ------     -------------        -----
<S>                                              <C>            <C>           <C>

Balance, July 1, 2000 ......................     $(556,043)     $(128,775)     $ 16,959,798

Comprehensive income:

     Net income for the year ended
       June 30, 2001 .......................          --             --             740,054

     Change in unrealized gain (loss) on
       securities available for sale, net of
       reclassification and tax effects ....          --          131,146           131,146
                                                                               ------------


         Total comprehensive income ........          --             --             871,200

Cash dividends - $.31 per share ............          --             --            (445,603)

Commitment to release 14,090 employee
  stock ownership plan shares ..............          --             --             115,914

Purchase of 64,769 treasury shares,
  at cost ..................................          --             --            (542,345)

11,425 shares earned under
  management recognition plan ..............       190,649           --             190,649
                                                 ---------      ---------      ------------

Balance, June 30, 2001 .....................     $(365,394)     $   2,371      $ 17,149,613
                                                 =========      =========      ============




</TABLE>

          See accompanying notes to consolidated financial statements.


                                                                            F-25
<PAGE>
<TABLE>
<CAPTION>
                                             PEOPLES-SIDNEY FINANCIAL CORPORATION
                                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           Years Ended June 30, 2001, 2000 and 1999

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


                                                                                  2001             2000               1999
                                                                              -----------      ------------      ------------
<S>                                                                           <C>              <C>               <C>
Cash flows from operating activities
         Net income .....................................................     $   740,054      $    635,598      $    510,376
         Adjustments to reconcile net income to net cash
           from operating activities
                  Depreciation ..........................................         164,078           156,886           124,252
                  Provision for loan losses .............................          73,565            61,503           103,803
                  Loss (gain) on sale of real estate owned ..............          12,066              --              (3,086)
                  Loss (gain) on sale of securities available for sale ..         (98,912)           15,781              --
                  FHLB stock dividends ..................................         (92,500)          (67,300)          (61,200)
                  Deferred taxes ........................................         (22,664)          (29,183)          (56,025)
                  Compensation expense for ESOP shares ..................         115,914           146,861           243,925
                  Compensation expense for MRP shares ...................         190,649           190,649           186,601
                  Change in:
                           Accrued interest receivable and other assets .         (91,867)          (75,939)          (28,444)
                           Accrued interest payable and other liabilities          85,498           (71,249)          291,106
                           Deferred loan fees ...........................          15,651            27,339            22,600
                                                                              -----------      ------------      ------------
                                    Net cash from operating activities ..       1,091,532           990,946         1,333,908

Cash flows from investing activities
         Purchase of securities available for sale ......................      (2,000,000)       (2,997,813)       (7,926,777)
         Proceeds from maturities of securities
           available for sale ...........................................       3,000,000         1,000,000         4,000,000
         Principal repayments on mortgage-
           backed securities available for sale .........................         339,731           287,215              --
         Proceeds from sale of securities
           available for sale ...........................................       4,408,534           984,219              --
         Purchase of time deposits in other financial
           institutions .................................................            --          (1,000,000)         (900,000)
         Proceeds from maturities of time deposits
           in other financial institutions ..............................            --           1,400,000           600,000
         Purchase of Federal Home Loan Bank stock .......................        (281,700)          (48,000)             --
         Net increase in loans ..........................................      (6,059,224)      (11,935,697)       (8,939,161)
         Premises and equipment expenditures ............................        (250,627)          (62,164)       (1,136,457)
         Proceeds from sale of real estate owned ........................         125,748              --              65,530
                                                                              -----------      ------------      ------------
                  Net cash from investing activities ....................        (717,538)      (12,372,240)      (14,236,865)
                                                                              ===========      ============      ============
</TABLE>

                                  (Continued)
                                                                            F-26
<PAGE>
<TABLE>
<CAPTION>

                                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                               CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                    Years ended June 30, 2001, 2000 and 1999

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


                                                                   2001               2000             1999
                                                               ------------      ------------      -----------
<S>                                                            <C>               <C>               <C>
Cash flows from financing activities
         Net change in deposits ..........................     $ (1,715,740)     $  8,746,449      $ 5,256,806
         Proceeds from long-term FHLB advances ...........       11,000,000         7,000,000        5,000,000
         Repayments of long-term FHLB advances ...........       (4,525,404)
         Net change in short-term FHLB advances ..........             --          (2,800,000)       2,800,000
         Cash dividends paid .............................         (445,603)         (422,244)        (448,432)
         Purchase of treasury shares .....................         (542,345)         (869,896)      (2,719,692)
                                                               ------------      ------------      -----------
                  Net cash from financing activities .....        3,770,908        11,654,309        9,888,682
                                                               ------------      ------------      -----------

Net change in cash and cash equivalents ..................        4,144,902           273,015       (3,014,275)

Cash and cash equivalents at beginning of year ...........        2,205,993         1,932,978        4,947,253
                                                               ------------      ------------      -----------

Cash and cash equivalents at end of year .................     $  6,350,895      $  2,205,993      $ 1,932,978
                                                               ============      ============      ===========


Supplemental disclosures of cash flow information
                  Interest paid ..........................     $  6,250,033      $  5,385,712      $ 4,343,587
                  Income taxes paid ......................          455,000           448,000          191,000

         Noncash transactions
                  Transfer from loans to real estate owned          137,814              --             62,444
                  Transfer of treasury stock to MRP ......             --                --            953,293

</TABLE>

          See accompanying notes to consolidated financial statements.


                                                                            F-27
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          June 30, 2001, 2000 and 1999

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The consolidated financial statements include
Peoples-Sidney Financial Corporation ("Peoples") and its wholly-owned
subsidiary, Peoples Federal Savings and Loan Association (the "Association"), a
federal stock savings and loan association, together referred to as the
Corporation. Intercompany accounts and transactions have been eliminated in
consolidation.

Nature of Operations: The Corporation provides financial services through its
main office in Sidney, Ohio, and branch offices in Sidney, Anna and Jackson
Center, Ohio. Its primary deposit products are checking, savings and term
certificate accounts, and its primary lending products are residential mortgage,
commercial and installment loans. Substantially all loans are secured by
specific items of collateral including business assets, consumer assets and real
estate. Commercial loans are expected to be repaid from cash flow from
operations of businesses. Real estate loans are secured by both residential and
commercial real estate. Substantially all revenues and services are derived from
financial institution products and services in Shelby County and contiguous
counties. Management considers the Corporation to operate primarily in one
segment, banking.

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

Cash Flows: Cash and cash equivalents are defined as cash, deposits with
financial institutions, overnight deposits and time deposits with original
maturities of 90 days or less. Overnight deposits are sold for one-day periods.
Net cash flows are reported for loan and deposit transactions, as well as
short-term borrowings under its cash management line of credit with the Federal
Home Loan Bank of Cincinnati.

Securities: Securities are classified as held to maturity and carried at
amortized cost when management has the positive intent and ability to hold them
to maturity. Securities are classified as available for sale when they might be
sold before maturity. Securities available for sale are carried at fair value,
with unrealized holding gains or losses reported in other comprehensive income.
Other securities such as Federal Home Loan Bank stock are carried at cost.

Interest income includes amortization of premiums and accretion of discounts.
Realized gains and losses on sales of securities are determined using the
amortized cost of the specific security sold. Securities are written down to
fair value when a decline in fair value is not temporary.

Loans: Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at the principal
balance outstanding, less net deferred loan fees, loans in process and the
allowance for loan losses.

Interest income is reported on the interest method and includes amortization of
net deferred loan fees over the loan term. Interest income is not reported when
full loan repayment is in doubt, typically when the loan is impaired or payments
are past due over 90 days. Payments received on such loans are reported as
principal reductions.


                                   (Continued)
                                                                            F-28
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          June 30, 2001, 2000 and 1999

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Allowance for Loan Losses: The allowance for loan losses is a valuation
allowance for probable incurred credit losses, increased by the provision for
loan losses and decreased by charge-offs less recoveries. Management estimates
the allowance balance required based on past loan loss experience, 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.
Loan losses are charged against the allowance when management believes the
uncollectibility of a loan balance is confirmed.

A loan is impaired when full payment under the loan terms is not expected.
Impairment is evaluated in total for smaller-balance loans of similar nature
such as first mortgage loans secured by one- to four-family residences,
residential construction loans, automobile, home equity and second mortgage
loans. Commercial loans and mortgage loans secured by other properties are
evaluated individually for impairment. If a loan is impaired, a portion of the
allowance for loan losses is allocated so that the loan is reported net, at the
present value of estimated future cash flows using the loan's existing rate or
at the fair value of collateral if repayment is expected solely from the
collateral.

Foreclosed Assets: Assets acquired through or instead of loan foreclosure are
initially recorded at fair value at acquisition, establishing a new cost basis.
Any reduction to fair value from the carrying value of the related loan at the
time the property is acquired is accounted for as a loan charge-off. After
acquisition, a valuation allowance reduces the reported amount to the lower of
the initial amount or fair value less costs to sell. Expenses, gains and losses
on disposition, and changes in the valuation allowance are reported in net gain
or loss on other real estate. The Corporation had no foreclosed assets at
year-end 2001 or 2000.

Premises and Equipment: Asset cost is reported net of accumulated depreciation.
Depreciation expense is calculated using the straight-line method based on the
estimated useful lives of the assets. These assets are reviewed for impairment
when events indicate the carrying amount may not be recoverable. Maintenance and
repairs are charged to expense as incurred and improvements are capitalized.

Stock Compensation: Employee compensation expense under stock option plans is
reported if options are granted below market price at grant date. Pro forma
disclosures of net income and earnings per share are shown using the fair value
method to measure expense using an option-pricing model to estimate fair value.

Employee Stock Ownership Plan: The cost of shares issued to the Employee Stock
Ownership Plan ("ESOP"), but not yet allocated to participants, is shown as a
reduction of shareholders' equity. Compensation expense is based on the market
price of shares as they are committed to be released to participant accounts.
Dividends on allocated ESOP shares reduce retained earnings; dividends on
unearned ESOP shares reduce debt and accrued interest.

Income Taxes: Income tax expense is the total of the current year income tax due
or refundable and the change in deferred tax assets and liabilities. Deferred
tax assets and liabilities are the expected future tax amounts for the temporary
differences between carrying amounts and tax basis of assets and liabilities,
computed using enacted tax rates. A valuation allowance, if needed, reduces
deferred tax assets to the amount expected to be realized.

                                   (Continued)
                                                                            F-29
<PAGE>

                     PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          June 30, 2001, 2000 and 1999

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Concentration of Credit Risk: The Corporation's loan portfolio consists
principally of long-term conventional loans secured by first mortgage deeds on
single-family residences located in its primary lending area of Shelby County
and its contiguous counties. Mortgage loans comprise approximately 93% and 95%
of the Corporation's loan portfolio at June 30, 2001 and 2000.


Financial Instruments: Financial instruments include off-balance sheet credit
instruments, such as commitments to make loans and standby letters of credit,
issued to meet customer-financing needs. The face amount for these items
represents the exposure to loss, before considering customer collateral or
ability to repay. Such financial instruments are recorded when they are funded.

Earnings Per Common Share: Basic earnings per common share ("EPS") are based on
net income divided by the weighted average number of common shares outstanding
during the period. ESOP shares are considered outstanding for this calculation
unless unearned. Management recognition plan ("MRP") shares are considered
outstanding as they become vested. Diluted EPS shows the dilutive effect of MRP
shares and the additional common shares issuable under stock options.

Dividend Restriction: Financial institution regulations require the maintenance
of certain capital levels and may limit the amount of dividends that may be
paid. For detail on dividend restrictions and regulatory capital requirements,
see a separate Note.

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

Loss Contingencies: Loss contingencies, including claims and legal actions
arising in the ordinary course of business, are recorded as liabilities when the
likelihood of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there now are such matters that will have
a material effect on the financial statements.

Fair Values of Financial Instruments: Fair values of financial instruments are
estimated using relevant market information and other assumptions, as more fully
disclosed separately. Fair value estimates involve uncertainties and matters of
significant judgment regarding interest rates, credit risk, prepayments and
other factors, especially in the absence of broad markets for particular items.
Changes in assumptions or in market conditions could significantly affect the
estimates.

Reclassification: Reclassification of certain amounts in the prior year
consolidated financial statements has been made to conform to the 2001
presentation.
                                   (Continued)
                                                                            F-30
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          June 30, 2001, 2000 and 1999

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

NOTE 2 - SECURITIES AVAILABLE FOR SALE

Securities available for sale at year-end were as follows:

<TABLE>
<CAPTION>
                                                        Gross          Gross         Estimated
                                       Amortized      Unrealized      Unrealized       Fair
                                         Cost           Gains          Losses          Value
                                      ----------     ------------     ---------      ----------
<S>                                   <C>            <C>              <C>            <C>
2001
----
       U.S. Government agencies       $2,998,122     $     18,288     $ (14,695)     $3,001,715
                                      ==========     ============     =========      ==========

2000
----
       U.S. Government agencies       $3,996,736     $       --       $(100,336)     $3,896,400
       Mortgage-backed securiti        4,645,059             --         (94,778)      4,550,281
                                      ----------     ------------     ---------      ----------

              Total ......            $8,641,795     $       --       $(195,114)     $8,446,681
                                      ==========     ============     =========      ==========
</TABLE>

Contractual maturities of securities available for sale at year-end 2001 were as
follows. Actual maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>

                                                                                         Estimated
                                                                  Amortized                Fair
                                                                     Cost                  Value
                                                                --------------         -------------
<S>                                                             <C>                    <C>
       Due after one year through five years                    $      500,000         $     498,670
       Due after five years through ten years                        2,498,122             2,503,045
                                                                --------------         -------------

                                                                $    2,998,122         $   3,001,715
                                                                ==============         =============
</TABLE>

No securities were pledged as collateral at year-end 2001 or 2000.

Sales of available-for-sale securities were as follows:

<TABLE>
<CAPTION>
                                                 2001                  2000                1999
                                                 ----                  ----                ----
<S>                                       <C>                    <C>                   <C>
                  Proceeds                $    4,408,534         $     984,219         $      --
                  Gross gains                     98,912                    --                --
                  Gross losses                        --                15,781                --

</TABLE>
                                   (Continued)
                                                                            F-31
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          June 30, 2001, 2000 and 1999

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


NOTE 3 - LOANS

Year-end loans were as follows:
<TABLE>
<CAPTION>
                                                          2001               2000
                                                      -------------      -------------
<S>                                                   <C>                <C>
Mortgage loans:
         1-4 family residential .................     $  96,717,463      $  92,116,695
         Multi-family residential ...............         1,239,141          1,300,151
         Commercial real estate .................        10,025,284         10,047,775
         Real estate construction and development         6,131,040          8,088,290
         Land ...................................         1,370,376            991,864

                  Total mortgage loans ..........       115,483,304        112,544,775
Consumer loans ..................................         4,657,828          3,571,071
Commercial loans ................................         3,629,987          2,406,064

                  Total loans ...................       123,771,119        118,521,910
Less:
         Allowance for loan losses ..............          (660,800)          (591,350)
         Loans in process .......................        (2,367,462)        (3,035,548)
         Deferred loan fees .....................          (260,963)          (245,312)
                                                      -------------      -------------

                                                      $ 120,481,894      $ 114,649,700
                                                      =============      =============
</TABLE>

Activity in the allowance for loan losses was as follows:
<TABLE>
<CAPTION>

                                        2001          2000          1999
                                     ---------      --------     ---------
<S>                                  <C>            <C>          <C>
    Balance at beginning of year     $ 591,350      $528,898     $ 425,642
    Provision for losses .......        73,565        61,503       103,803
    Charge-offs ................        (4,563)         --         (22,621)
    Recoveries .................           448           949        22,074
                                     ---------      --------     ---------

    Balance at end of year .....     $ 660,800      $591,350     $ 528,898
                                     =========      ========     =========
</TABLE>

Nonperforming loans at year-end were as follows:

<TABLE>
<CAPTION>
                                                            2001               2000
                                                            ----               ----

<S>                                                   <C>                 <C>
    Loans past due over 90 days still on accrual      $   498,000         $   289,000
    Nonaccrual loans                                      764,000             756,000
</TABLE>

Nonperforming loans include smaller balance homogeneous loans, such as
residential mortgage and consumer loans, which are collectively evaluated for
impairment.

As of June 30, 2001 and 2000, and for the years ended June 30, 2001, 2000 and
1999, no loans were required to be evaluated for impairment on an individual
loan basis.
                                   (Continued)
                                                                            F-32
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          June 30, 2001, 2000 and 1999

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


NOTE 3 - LOANS (Continued)

Loans to executive officers, directors and companies with which they are
affiliated aggregating $60,000 or more to any one related party for the year
ended June 30, 2001, were as follows.


                  Balance at beginning of period       $   438,186
                  New loans                                     --
                  Principal repayments                     (21,347)
                                                       -----------

                  Balance at end of period             $   416,839
                                                       ===========


NOTE 4 - ACCRUED INTEREST RECEIVABLE

Year-end accrued interest receivable was as follows:

                                        2001                2000
                                   ------------         ------------

                  Loans            $    852,070         $    791,454
                  Securities             69,794              102,115
                                   ------------         ------------

                                   $    921,864         $    893,569
                                   ============         ============



NOTE 5 - PREMISES AND EQUIPMENT

Year-end premises and equipment was as follows:

                                                 2001                  2000
                                             ------------        --------------

            Land                             $    225,166        $      225,166
            Buildings and improvements          1,856,903             1,785,182
            Furniture and equipment             1,352,030             1,173,124
            Automobile                             22,416                22,416
                                             ------------        --------------
                     Total cost                 3,456,515             3,205,888
            Accumulated depreciation            1,479,080             1,315,002
                                             ------------        --------------

                                             $  1,977,435        $    1,890,886
                                             ============        ==============


The Jackson Center branch facility is leased under an operating lease that began
in September 1998. The lease term is for ten years. At the conclusion of the
fifth year, the rent shall be adjusted by the cumulative increase in the
Consumer Price Index over the previous five years with a maximum increase of 15%
for the remaining five years of the lease term. The lease agreement includes an
option to purchase the property at any time during the lease term.

The Association entered into a lease for a branch in the Super Wal-Mart in
Sidney that commenced in June 2001. The lease term is for five years with two
five-year renewal options. Annual rent is $31,800 for the first five years and
increases to $39,750 annually for the first five-year renewal period and $49,688
annually for the second five-year renewal period. Total rental expense for the
two branch offices was $25,243, $24,271 and $20,226 for the years ended June 30,
2001, 2000 and 1999.

                                   (Continued)
                                                                            F-33
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          June 30, 2001, 2000 and 1999

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

NOTE 5 - PREMISES AND EQUIPMENT (Continued)

Rental commitments under these noncancelable operating leases, assuming a
maximum increase of 15% after year five on the Jackson Center lease, were:

                    Year ending June 30,
                            2002                      $  56,071
                            2003                         56,071
                            2004                         57,584
                            2005                         57,886
                            2006                         56,914
                            Thereafter                   56,520
                                                      ---------

                                                      $ 341,046
                                                      =========


NOTE 6 - FEDERAL INCOME TAXES

Income tax expense was as follows:

                              2001          2000            1999
                          ---------      ---------      ---------

             Current      $ 440,218      $ 407,580      $ 409,890
             Deferred       (22,664)       (29,183)       (56,025)
                          ---------      ---------      ---------

                          $ 417,554      $ 378,397      $ 353,865
                          =========      =========      =========

Year-end deferred tax assets and deferred tax liabilities were due to the
following:
<TABLE>
<CAPTION>

                                                                 2001           2000
                                                              ---------      ---------
<S>                                                           <C>            <C>
Items giving rise to deferred tax assets
         Deferred loan fees                                   $  75,788      $  67,630
         Reserve for delinquent interest                          4,115          5,372
         Allowance for loan losses                              125,896         69,034
         Accrued ESOP expense                                    25,012         19,548
         Accrued MRP expense                                      5,401          5,401
         Unrealized loss on securities available for sale          --           66,339
                                                              ---------      ---------
                  Total deferred tax assets                     236,212        233,324

Items giving rise to deferred tax liabilities
         Unrealized gain on securities available for sale        (1,221)          --
         Depreciation                                           (89,892)       (74,779)
         Federal Home Loan Bank
           stock dividends                                     (168,572)      (137,122)
                                                              ---------      ---------

                  Total deferred tax liabilities               (259,685)      (211,901)
                                                              ---------      ---------

                  Net deferred tax asset (liability)          $ (23,473)     $  21,423
                                                              =========      =========

</TABLE>

                                   (Continued)
                                                                            F-34
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          June 30, 2001, 2000 and 1999

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



NOTE 6 - FEDERAL INCOME TAXES (Continued)

Effective tax rates differ from federal statutory rates applied to financial
statement income due to the following:
<TABLE>
<CAPTION>

                                                            2001            2000          1999
                                                          ---------       --------      --------
<S>                                                       <C>             <C>           <C>
Income taxes computed at the statutory
  tax rate on pretax income                               $ 393,587       $344,758      $293,842
Add tax effect of:
       ESOP fair value book expense and tax deduction          (741)         8,082        39,481
       MRP cost in excess of fair value                      24,072         25,102        19,884
       Nondeductible expenses and other                         636            455           658
                                                          ---------       --------      --------

                                                          $ 417,554       $378,397      $353,865
                                                          =========       ========      ========

Statutory tax rate                                             34.0%          34.0%         34.0%
                                                          =========       ========      ========
Effective tax rate                                             36.1%          37.3%         40.9%
                                                          =========       ========      ========
</TABLE>

In August 1996, legislation was enacted that repeals the reserve method of
accounting used by many thrifts to calculate their bad debt reserve for federal
income tax purposes. Therefore, small thrifts such as the Association must
recapture that portion of the reserve that exceeds the amount that could have
been taken under the experience method for tax years beginning after December
31, 1987. The legislation also requires thrifts to account for bad debts for
federal income tax purposes on the same basis as commercial banks for tax years
beginning after December 31, 1995. The recapture is occurring over a six-year
period, the commencement of which was delayed until the first taxable year
beginning after December 31, 1997, because the Association met certain
residential lending requirements. At June 30, 2001 and 2000, the Association had
approximately $291,000 and $387,000 in bad debt reserves subject to recapture
for federal income tax purposes. The deferred tax liability related to the
recapture has been previously established. In fiscal 2001 and 2000, $97,000 bad
debt reserves were recaptured.

Retained earnings at June 30, 2001 and 2000 included approximately $2,174,000
for which no provision for federal income taxes had been made. This amount
represents the qualifying and nonqualifying tax bad debt reserve as of December
31, 1987, which is the end of the Association's base year for purposes of
calculating the bad debt deduction for tax purposes. The related amount of
unrecognized deferred tax liability was approximately $739,000 at June 30, 2001
and 2000. If this portion of retained earnings is used in the future for any
purpose other than to absorb bad debts, it will be added to future taxable
income.


NOTE 7 - DEPOSITS

Year-end deposits were as follows:

                                            2001            2000
                                        -----------     -----------
            Noninterest-bearing
              demand deposits           $   662,446     $   870,734
            NOW accounts                  5,816,704       4,940,258
            Money market accounts         1,713,300       1,562,590
            Savings accounts             19,353,977      18,888,875
            Certificates of deposit      63,794,774      66,794,484
                                        -----------     -----------

                                        $91,341,201     $93,056,941
                                        ===========     ===========

                                   (Continued)
                                                                            F-35
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          June 30, 2001, 2000 and 1999

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


NOTE 7 - DEPOSITS (Continued)

The aggregate amount of certificates of deposit with a minimum denomination of
$100,000 was $5,323,000 and $6,312,000 at June 30, 2001 and 2000, respectively.
Deposits more than $100,000 are not insured by the FDIC.

The scheduled maturities of certificates of deposit as of June 30, 2001 were as
follows:

                  Year ended June 30,
                         2002                             $    33,213,067
                         2003                                  18,233,991
                         2004                                   8,194,502
                         2005                                   1,581,103
                         2006                                   2,572,111
                                                          ---------------

                                                          $    63,794,774
                                                          ===============



NOTE 8 - BORROWED FUNDS

At June 30, 2001, the Association had a cash management line of credit enabling
it to borrow up to $8,000,000 from the Federal Home Loan Bank of Cincinnati
("FHLB"). All cash management advances have an original maturity of 90 days. The
line of credit must be renewed on an annual basis. There were no borrowings
outstanding on this line of credit at June 30, 2001 and 2000.

As a member of the FHLB system, the Association has the ability to obtain
borrowings up to a maximum total of $27,944,000, including the cash management
line of credit. However, the Association can obtain advances up to the lower of
50% of the Association's total assets or 80% of the Association's pledgable
residential mortgage loan portfolio by purchasing more FHLB stock. Advances from
the Federal Home Loan Bank at year-end were as follows:


 <TABLE>
<CAPTION>
                                                                      2001               2000
                                                                      ----               ----
<S>                                                              <C>                <C>
        7.15% fixed-rate advance, due May 2, 2001                $         --       $  2,500,000
        7.41% fixed-rate advance, due May 15, 2001                         --          2,000,000
        7.40% fixed-rate advance, due May 2, 2002                   2,500,000          2,500,000
        6.13% fixed-rate advance, due June 25, 2008                 7,000,000          7,000,000
        6.00% convertible advance, fixed-rate until June 2004,
          due June 11, 2009                                         5,000,000          5,000,000
        6.27% convertible advance, fixed-rate until
          September 2003, due September 8, 2010                     5,000,000                 --
        5.30% select pay mortgage-matched advance, final
          maturity May 1, 2011                                      1,974,596                 --
        5.35% select pay mortgage-matched advance, final
          maturity July 1, 2011                                     4,000,000                 --
                                                                 ------------       ------------

                                                                 $ 25,474,596       $ 19,000,000
                                                                 ============       ============
</TABLE>

                                   (Continued)
                                                                            F-36
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          June 30, 2001, 2000 and 1999

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


NOTE 8 - BORROWED FUNDS (Continued)

The interest rates on the convertible advances are fixed for a specified number
of years, then convertible to a variable rate at the option of the FHLB. If the
convertible option is exercised, the advance may be prepaid without penalty. The
select pay mortgage-matched advances require monthly principal and interest
payments and annual additional principal payments.

The maximum month-end balance of advances outstanding was $26,500,000 in 2001
and $19,800,000 in 2000. Average balances of borrowings outstanding during 2001
and 2000 were $23,477,000 and $17,603,000. Advances under the borrowing
agreements are collateralized by a blanket pledge of the Association's
residential mortgage loan portfolio and its FHLB stock.

Maturities of FHLB advances for the next fives years and thereafter were:

                    Year ended June 30,
                            2002                     $   3,518,782
                            2003                           895,497
                            2004                           785,627
                            2005                           687,777
                            2006                           600,692
                         Thereafter                     18,986,221
                                                     -------------

                                                     $  25,474,596
                                                     =============



NOTE 9 - RETIREMENT PLANS

The Corporation maintains a 401(k) profit sharing plan. With certain exceptions,
all employees who have attained the age of 21 and who have completed one year of
employment, during which they worked at least 1,000 hours, are eligible to
participate in the plan. The Corporation provides a matching contribution on
behalf of participants who make elective compensation deferrals at the rate of
50% of the first 6% of participant contributions up to a maximum match of 3% of
the participant's compensation. The Corporation may also contribute additional
amounts at its discretion. Employee contributions are vested at all times and
the Corporation's matching contributions vest evenly over 5 years of service.
The cash contribution and related expense included in salaries and employee
benefits was $26,586, $25,172 and $15,951 for the years ended June 30, 2001,
2000 and 1999.


NOTE 10 - EMPLOYEE STOCK OWNERSHIP PLAN

The Corporation offers an employee stock ownership plan ("ESOP") for the benefit
of substantially all employees of the Corporation. The ESOP received a favorable
determination letter from the Internal Revenue Service on the qualified status
of the ESOP under applicable provisions of the Internal Revenue Code. The ESOP
borrowed funds from Peoples in order to acquire common shares of Peoples. The
loan is secured by the shares purchased with the loan proceeds and will be
repaid by the ESOP with funds from the Association's discretionary contributions
to the ESOP and earnings on ESOP assets. All dividends on unallocated shares
received by the ESOP are used to pay debt service. When loan payments are made,
ESOP shares are allocated to participants based on relative compensation.

                                   (Continued)
                                                                            F-37
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          June 30, 2001, 2000 and 1999

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


NOTE 10 - EMPLOYEE STOCK OWNERSHIP PLAN (Continued)

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

ESOP compensation expense was $115,914, $146,861 and $243,925 for the years
ended June 30, 2001, 2000 and 1999.

Year-end ESOP shares were as follows:

                                                  2001         2000
                                               --------     --------

           Allocated shares                      68,056       53,966
           Unreleased shares                    100,774      114,864
                                               --------     --------

                    Total ESOP shares           168,830      168,830
                                               ========     ========

           Fair value of unreleased shares     $957,353     $976,344
                                               ========     ========


NOTE 11 - STOCK OPTION AND INCENTIVE PLAN

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

A summary of the activity in the plan was as follows:

<TABLE>
<CAPTION>

                                                           2001                       2000                      1999
                                                           ----                       ----                      ----
                                                                Weighted                   Weighted                 Weighted
                                                                Average                    Average                  Average
                                                                Exercise                   Exercise                 Exercise
                                                  Shares          Price       Shares        Price       Shares       Price
                                                  ------            -----     ------        -----       ------       -----
<S>                                                <C>        <C>             <C>         <C>           <C>        <C>
          Outstanding at beginning of year         140,824    $    16.03      141,824     $   16.03     142,824    $   16.03
          Granted                                       --            --           --            --          --           --
          Exercised                                     --            --           --            --          --           --
          Forfeited                                     --            --       (1,000)        16.01      (1,000)       16.01
                                                   -------    ----------      -------     ---------     -------    ---------
          Outstanding at end of year               140,824    $    16.03      140,824     $   16.03     141,824    $   16.03
                                                   =======    ==========      =======     =========     =======    =========

          Options exercisable at year-end           84,494    $    16.03       56,330     $   16.03      28,365    $   16.03
          Remaining shares available
            for grant                               37,714                     37,714                    36,714
</TABLE>

                                   (Continued)
                                                                            F-38
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          June 30, 2001, 2000 and 1999

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


NOTE 11 - STOCK OPTION AND INCENTIVE PLAN (Continued)

Options outstanding at year-end were as follows:

<TABLE>
<CAPTION>
                                                                             Weighted Average
                                                                                Remaining
                  Exercise                              Number                 Contractual                 Number
                  Prices                             Outstanding                   Life                 Exercisable
                  ------                             -----------                   ----                 -----------
<S>                                                     <C>                       <C>                       <C>
                  $16.01                                139,579                   6.89 yrs                  83,747
                  $18.75                                  1,245                   6.95 yrs                     747
                                                       --------                   --------                 -------

                  Outstanding at year-end               140,824                   6.89 yrs                  84,494
                                                        =======                   ========                 =======
</TABLE>

The fair value of options granted in 1998 was estimated using the Black-Scholes
options pricing model with the following weighted-average information: risk-free
interest rate of 5.44%, expected life of 10 years, expected volatility of stock
price of 32.65% and expected dividend rate of 1.47%. Based on these assumptions,
the estimated fair value per share of options granted in 1998 was $8.89.

The following pro forma information presents net income and earnings per share
for 2001, 2000 and 1999 had Statement of Financial Accounting Standards No. 123
fair value method been used to measure compensation cost for stock options
granted. No compensation expense was recognized for the year ended June 30,
2001, 2000 and 1999.
<TABLE>
<CAPTION>

                                                                  2001              2000              1999
                                                                  ----              ----              ----
<S>                                                           <C>              <C>              <C>
                  Net income as reported                      $  740,054       $   635,598      $    510,376
                  Pro forma net income                           528,518           425,988           297,210
                  Basic earnings per share as reported               .52               .43               .32
                  Pro forma basic earnings per share                 .37               .29               .19
                  Diluted earnings per share as reported             .52               .43               .32
                  Pro forma diluted earnings per share               .37               .29               .19

</TABLE>

NOTE 12 - MANAGEMENT RECOGNITION PLAN

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

In conjunction with the adoption of the MRP on May 22, 1998, the Board of
Directors awarded 57,128 shares to certain directors, officers and employees of
the Corporation. No shares had been previously awarded. One-fifth of such shares
is earned and nonforfeitable on each of the first five anniversaries of the date
of the award. At June 30, 2001, 34,276 shares have vested. In the event of the
death or disability of a participant or a change in control of the Corporation,
however, the participant's shares will be deemed earned and nonforfeitable upon
such date. At June 30, 2001, there were 14,287 shares reserved for future awards
and held as treasury stock. Compensation expense related to MRP shares is based
upon the cost of the shares, which approximates fair value at the date of grant.
For the years ended June 30, 2001, 2000 and 1999, compensation expense totaled
$190,649, $190,649 and $186,601.

NOTE 13 - REGULATORY MATTERS

The Association is subject to various regulatory capital requirements
administered by the federal regulatory agencies. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Association must meet specific capital guidelines that involve quantitative
measures of the Association's assets, liabilities and certain off-balance-sheet
items as calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgments by the regulators.
Failure to meet minimum capital requirements can initiate regulatory action.

Prompt corrective action regulations provide five classifications: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized, although these terms are not
used to represent overall financial condition. If adequately capitalized,
regulatory approval is required to accept brokered deposits. If



                                   (Continued)
                                                                            F-39
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          June 30, 2001, 2000 and 1999

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

undercapitalized, capital distributions are limited, as is asset growth and
expansion, and capital restoration plans are required.

At June 30, 2001 and 2000, management believes the Association complies with all
regulatory capital requirements. Based on the Association's computed regulatory
capital ratios, the Association is considered well capitalized under the Federal
Deposit Insurance Act at June 30, 2001 and 2000. No conditions or events have
occurred subsequent to the last notification by regulators that management
believes would have changed the Association's category.

At year-end 2001 and 2000, the Association's actual capital levels and minimum
required levels were:


<TABLE>
<CAPTION>
                                                                                                     Minimum Required
                                                                                                       To Be Well
                                                                          Minimum Required          Capitalized Under
                                                                             For Capital            Prompt Corrective-
                                                      Actual              Adequacy Purposes        Action Regulations
                                                --------------------     --------------------      --------------------
                                                Amount         Ratio     Amount         Ratio      Amount        Ratio
                                                ------         -----     ------         -----      ------        -----
                                                                        (Dollars in thousands)
<S>                                             <C>             <C>      <C>             <C>       <C>            <C>
2001
----
Total capital (to risk-weighted assets) ...     $13,934         15.6%    $7,168          8.0%      $8,961         10.0%
Tier 1 (core) capital (to risk-weighted
  assets) .................................      13,277         14.8      3,584          4.0        5,376          6.0
Tier 1 (core) capital (to adjusted
  total assets) ...........................      13,277          9.9      5,374          4.0        6,718          5.0
Tangible capital (to adjusted total assets)      13,277          9.9      2,015          1.5          N/A

2000
----
Total capital (to risk-weighted assets) ...     $14,773         17.2%    $6,858          8.0%      $8,572         10.0%
Tier 1 (core) capital (to risk-weighted
  assets) .................................      14,183         16.5      3,429          4.0        5,143          6.0
Tier 1 (core) capital (to adjusted
  total assets) ...........................      14,183         10.9      5,183          4.0        6,479          5.0
Tangible capital (to adjusted total assets)      14,183         10.9      1,944          1.5          N/A


</TABLE>

                                   (Continued)
                                                                            F-40
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          June 30, 2001, 2000 and 1999

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


NOTE 13 - REGULATORY MATTERS (Continued)

The Qualified Thrift Lender test requires at least 65% of assets be maintained
in housing-related finance and other specified areas. If this test is not met,
limits are placed on growth, branching, new investments, FHLB advances and
dividends, or the Association must convert to a commercial bank charter.
Management believes the Association satisfies this test.

When the Association converted from a mutual to a stock institution, a
"liquidation account" was established at $9,307,000, which was net worth
reported in the conversion prospectus. Eligible depositors who have maintained
their accounts, less annual reductions to the extent they have reduced their
deposits, would receive a distribution from this account if the Association
liquidated. Dividends may not reduce shareholders' equity below the required
liquidation account balance.

OTS regulations limit capital distributions by savings associations. Generally,
capital distributions are limited to the current year to date undistributed net
income and prior two years' undistributed net income, as long as the institution
remains well capitalized after the proposed distribution. At year-end 2001, no
amount is available to pay dividends to the holding company without prior
approval from the OTS.


NOTE 14 - OFF-BALANCE-SHEET ACTIVITIES

Some financial instruments, such as loan commitments, credit lines, letters of
credit and overdraft protection, are issued to meet customer-financing needs.
These are agreements to provide credit or to support the credit of others, as
long as conditions established in the contract are met, and usually have
expiration dates. Commitments may expire without being used. Off-balance-sheet
risk to credit loss exists up to the face amount of these instruments, although
material losses are not anticipated. The same credit policies are used to make
such commitments as are used for loans, including obtaining collateral at
exercise of the commitment.

The contractual amount of financial instruments with off-balance-sheet risk was
as follows at year-end.

<TABLE>
<CAPTION>
                                                              2001                                    2000
                                                              ---                                     ----
                                                    Fixed              Variable             Fixed            Variable
                                                    Rate                 Rate               Rate               Rate
                                                    ----                 ----               ----               ----
<S>                                            <C>               <C>                  <C>                <C>
                  Residential real estate      $    412,000      $      113,000       $     15,000       $      879,000
                  Commercial real estate                 --             600,000                 --                   --
                  Interest rates                  7.00-7.25%          7.00-7.50%              9.00%           8.25-9.50%
</TABLE>

Commitments to make loans are generally made for a period of 30 days or less.
Maturities for fixed-rate loan commitments range from 10 years to 20 years.

The Corporation also had unused lines of credit approximating $2,539,000 and
$2,200,000 at year-end 2001 and 2000.

At June 30, 2001 and 2000, the Association was required to have $698,000 and
$419,000 on deposit with its correspondent banks as a compensating clearing
requirement.

                                   (Continued)
                                                                            F-41
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          June 30, 2001, 2000 and 1999

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

NOTE 14 - OFF-BALANCE-SHEET ACTIVITIES (Continued)

The Association entered into employment agreements with certain officers of the
Corporation. The agreements provide for a term of one to three years and a
salary and performance review by the Board of Directors not less often than
annually, as well as inclusion of the employee in any formally established
employee benefit, bonus, pension and profit-sharing plans for which management
personnel are eligible. The agreements provide for extensions for a period of
one year on each annual anniversary date, subject to review and approval of the
extension by disinterested members of the Board of Directors of the Association.
The employment agreements also provide for vacation and sick leave.


NOTE 15 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments at year-end were as follows:

<TABLE>
<CAPTION>
                                                        2001                                  2000
                                                        ----                                  ----
                                                              Estimated                             Estimated
                                              Carrying          Fair            Carrying              Fair
                                               Value            Value             Value               Value
                                               -----            -----             -----               -----
<S>                                        <C>               <C>               <C>              <C>
Financial assets:
         Cash and cash equivalents ...     $  6,350,895      $  6,351,000      $  2,205,993     $   2,206,000
         Securities available for sale        3,001,715         3,002,000         8,446,681         8,447,000
         Federal Home Loan Bank stock         1,397,000         1,397,000         1,023,000         1,023,000
         Loans, net ..................      120,481,894       120,362,408       114,649,700       111,633,000
         Accrued interest receivable .          921,864           922,000           893,569           894,000

Financial liabilities:
         Deposits ....................      (91,341,201)      (93,162,000)      (93,056,941)      (92,484,000)
         Borrowed funds ..............      (25,474,596)      (25,217,000)      (19,000,000)      (17,736,000)
         Accrued interest payable ....          (50,259)          (50,000)          (34,682)          (35,000)
</TABLE>



The estimated fair value approximates carrying amounts for all items except
those described below. Security fair values are based on market prices or dealer
quotes, and if no such information is available, on the rate and term of the
security and information about the issuer. For fixed rate loans or deposits and
for variable rate loans or deposits with infrequent repricing or repricing
limits, fair value is based on discounted cash flows using current market rates
applied to the estimated life and credit risk. Fair values for impaired loans
are estimated using discounted cash flow analysis or underlying collateral
values. Fair value of debt is based on current rates for similar financing. The
fair value of off-balance-sheet items is based on the current fees or cost that
would be charged to enter into or terminate such arrangements, which are not
material.



                                   (Continued)
                                                                            F-42
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          June 30, 2001, 2000 and 1999

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


NOTE 16 - EARNINGS PER SHARE

A reconciliation of the numerators and denominators used in the computation of
the basic earnings per common share and diluted earnings per common share is
presented below:

<TABLE>
<CAPTION>

                                                             2001             2000            1999
                                                         -----------      -----------      -----------
<S>                                                      <C>              <C>              <C>
Basic Earnings Per Common Share
         Numerator
              Net income ...........................     $   740,054      $   635,598      $   510,376
                                                         ===========      ===========      ===========
         Denominator
              Weighted average common shares
                outstanding ........................       1,550,747        1,635,106        1,777,192
              Less:  Average unallocated ESOP shares        (107,819)        (122,208)        (137,176)
              Less:  Average nonvested MRP shares ..         (27,609)         (39,037)         (50,463)
                                                         -----------      -----------      -----------
              Weighted average common shares
                outstanding for basic earnings per
                common share .......................       1,415,319        1,473,861        1,589,553
                                                         ===========      ===========      ===========

         Basic earnings per common share ...........     $       .52      $       .43      $       .32
                                                         ===========      ===========      ===========

Diluted Earnings Per Common Share
         Numerator
              Net income ...........................     $   740,054      $   635,598      $   510,376
                                                         ===========      ===========      ===========
         Denominator
              Weighted average common shares
                outstanding for basic earnings per
                common share .......................       1,415,319        1,473,861        1,589,553
              Add:  Dilutive effects of average
                nonvested MRP shares ...............            --               --               --
              Add:  Dilutive effects of assumed
                exercises of stock options .........            --               --               --
                                                         -----------      -----------      -----------
              Weighted average common shares
                and dilutive potential common
                shares outstanding .................       1,415,319        1,473,861        1,589,553
                                                         ===========      ===========      ===========

         Diluted earnings per common share .........     $       .52      $       .43      $       .32
                                                         ===========      ===========      ===========

</TABLE>

Stock options granted did not have a dilutive effect on EPS for the years ended
June 30, 2001, 2000 and 1999, as the exercise price of outstanding options was
greater than the average market price for the period. As of June 30, 2001, 2000
and 1999, there were 140,824, 140,824 and 141,824 options outstanding that were
not dilutive. Unearned MRP shares did not have a dilutive effect on EPS for the
year ended June 30, 2001, 2000 and 1999, as the fair value of MRP shares on the
date of grant was greater than the average market price for the period.

                                   (Continued)
                                                                            F-43

<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          June 30, 2001, 2000 and 1999

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


NOTE 17 - OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss) components and related taxes were as follows:


<TABLE>
<CAPTION>
                                                    2001          2000          1999
                                                 ---------      ---------      --------
<S>                                              <C>            <C>            <C>
Unrealized holding gains and (losses) on
  available-for-sale securities ............     $ 297,619      $(142,125)     $(85,724)
Reclassification adjustments for (gains) and
  losses later recognized in income ........       (98,912)        15,781          --
                                                 ---------      ---------      --------
Net unrealized gains and losses ............       198,707       (126,344)      (85,724)
Tax effect .................................       (67,561)        42,957        29,147
                                                 ---------      ---------      --------

Other comprehensive income (loss) ..........     $ 131,146      $ (83,387)     $(56,577)
                                                 =========      =========      ========

</TABLE>

NOTE 18 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Following is condensed financial information of Peoples-Sidney Financial
Corporation as of June 30, 2001 and 2000, and for the periods ended June 30,
2001, 2000 and 1999:
<TABLE>
<CAPTION>

                                   CONDENSED BALANCE SHEETS
                                    June 30, 2001 and 2000

                                                                     2001            2000
                                                                     ----            ----
<S>                                                              <C>             <C>
Assets
         Cash and cash equivalents .........................     $ 2,951,700     $ 1,975,217
         Investment in subsidiary ..........................      13,279,448      14,054,239
         Loans receivable from ESOP ........................         918,193       1,020,214
         Other assets ......................................             272            --
                                                                 -----------     -----------


                  Total assets .............................     $17,149,613     $17,049,670
                                                                 ===========     ===========

Liabilities
         Other liabilities $ ...............................            --       $    89,872

         Shareholders' Equity ..............................      17,149,613      16,959,798
                                                                 -----------     -----------

                  Total liabilities and shareholders' equity     $17,149,613     $17,049,670
                                                                 ===========     ===========

</TABLE>

                                   (Continued)
                                                                            F-44
<PAGE>
                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          June 30, 2001, 2000 and 1999

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

NOTE 18 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (Continued)
<TABLE>
<CAPTION>

                                           CONDENSED STATEMENTS OF INCOME

                                                              2001             2000             1999
                                                          -----------      -----------      -----------
<S>                                                       <C>              <C>              <C>
Income:
       Dividend income from subsidiary ..............     $ 2,000,000      $      --        $ 5,250,000
       Interest on loans ............................          71,166           78,497           85,399
                                                          -----------      -----------      -----------
                                                            2,071,166           78,497        5,335,399
Other expenses ......................................          91,515          112,955          122,303
                                                          -----------      -----------      -----------
Income (loss) before taxes and undistributed earnings
  of subsidiary .....................................       1,979,651          (34,458)       5,213,096
Income tax benefit ..................................          (8,510)         (13,307)         (12,548)
                                                          -----------      -----------      -----------
Income (loss) before undistributed earnings
  of subsidiary .....................................       1,988,161          (21,151)       5,225,644
Equity in undistributed earnings of subsidiary
  (distributions in excess of earnings) .............      (1,248,107)         656,749       (4,715,268)
                                                          -----------      -----------      -----------

       Net income ...................................     $   740,054      $   635,598      $   510,376
                                                          ===========      ===========      ===========
<CAPTION>


                                           CONDENSED STATEMENTS OF CASH FLOWS

                                                              2001            2000             1999
                                                          -----------      -----------      -----------
<S>                                                       <C>              <C>              <C>
Cash flows from operating activities
Net income ..........................................     $   740,054      $   635,598      $   510,376
Adjustments to reconcile net income to cash
  provided by operations:
       (Equity in undistributed income of subsidiary)
         distributions in excess of earnings ........       1,248,107         (656,749)       4,715,268
       Net change in other assets and liabilities ...         (90,143)          68,592           34,365
                                                          -----------      -----------      -----------
              Net cash from operating activities ....       1,898,018           47,441        5,260,009

Cash flows from investing activities
Proceeds from loan principal repayments .............         102,021          102,022          102,021
                                                          -----------      -----------      -----------
              Net cash from investing activities ....         102,021          102,022          102,021

Cash flows from financing activities
Purchase of treasury shares .........................        (542,345)        (869,896)      (2,719,692)
57,128 shares contributed to MRP from treasury ......            --               --            953,293
Cash dividends paid .................................        (445,603)        (422,244)        (448,432)
Dividends on unallocated ESOP shares ................         (35,608)         (36,274)         (40,404)
                                                          -----------      -----------      -----------
              Net cash from financing activities ....      (1,023,556)      (1,328,414)      (2,255,235)
                                                          -----------      -----------      -----------

Net change in cash and cash equivalents .............         976,483       (1,178,951)       3,106,795
Cash and cash equivalents at beginning of year ......       1,975,217        3,154,168           47,373
                                                          -----------      -----------      -----------

Cash at end of year .................................     $ 2,951,700      $ 1,975,217      $ 3,154,168
                                                          ===========      ===========      ===========
</TABLE>

                                                                            F-45
<PAGE>


                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                             SHAREHOLDER INFORMATION
                             -----------------------


ANNUAL MEETING

The Annual Meeting of Shareholders will be held at 11:00 a.m., Sidney, Ohio on
October 12, 2001 at the Holiday Inn, I-75 and S.R. 47, Sidney, Ohio.


STOCK LISTING

Peoples-Sidney Financial Corporation common stock is traded on the NASDAQ
National Market under the symbol "PSFC."


SHAREHOLDERS AND GENERAL INQUIRIES                  TRANSFER AGENT

Douglas Stewart, President                          Registrar and Transfer Co.
Peoples-Sidney Financial Corporation                10 Commerce Drive
101 East Court Street                               Cranford, NJ  07016
P.O. Box 727
Sidney, Ohio 45365-3021
(937) 492-6129


ANNUAL AND OTHER REPORTS

A copy of Peoples-Sidney Financial Corporation's Annual Report on Form 10-KSB
for the year ended June 30, 2001, as filed with the Securities and Exchange
Commission, may be obtained without charge by contacting Douglas Stewart,
President and Chief Executive Officer, Peoples-Sidney Financial Corporation, 101
East Court Street, P.O. Box 727, Sidney, Ohio 45365-3021.


                                                                            F-46
<PAGE>

                      PEOPLES-SIDNEY FINANCIAL CORPORATION
                              CORPORATE INFORMATION

CORPORATION AND ASSOCIATION ADDRESS

101 East Court Street                             Telephone:     (937) 492-6129
P.O. Box 727                                      Fax:           (937) 498-4554
Sidney, Ohio 45365-3021


DIRECTORS OF THE BOARD

Douglas Stewart
         President and Chief Executive Officer of
         Peoples Federal Savings and Loan Association

John W. Sargeant
         Part Owner of Sidney Tool and Die Co. and
         BenSar Development, a warehouse provider

Richard T. Martin (Chairman of the Board)
         Certified Public Accountant, in private
         practice

Harry N. Faulkner
            Partner in the law firm of Faulkner, Garmhausen,
            Keister & Shenk LPA

James W. Kerber
            Owner of James W. Kerber CPA, a private practice
            accounting firm






Officers of the Corporation and the Association:
-----------------------------------------------

Douglas Stewart, President & CEO
David R. Fogt, VP Financial Services and
  Operations
Gary N. Fullenkamp, VP Mortgage Loans
  and Corporate Secretary
Debra A. Geuy, Chief Financial Officer



Special Counsel                                    Independent Auditors
---------------                                    --------------------

Katten Muchin Zavis                                Crowe, Chizek and Company LLP
1025 Thomas Jefferson Street, N.W.                 One Columbus
East Lobby, Suite 700                              10 West Broad Street
Washington, D.C. 20007-5201                        Columbus, Ohio  43215



                                                                            F-47