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

                                   FORM 10-KSB

(Mark One):

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

                       For the fiscal year ended:  December 31, 2002

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

                       For the transition period from:  ___________ to _________

                       Commission File Number: 000-18464

                            EMCLAIRE FINANCIAL CORP.
--------------------------------------------------------------------------------
                 (Name of small business issuer in its charter)

          Pennsylvania                               25-1606091
--------------------------------------------------------------------------------
(State or other jurisdiction of         (I.R.S. Employer Identification No.)
 incorporation or organization)

            612 Main Street, Emlenton, PA                 16373
--------------------------------------------------------------------------------
       (Address of principal executive office)          (Zip Code)

Issuer's telephone number:  724 867-2311

Securities registered under Section 12(b) of the Exchange Act:  None.

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

                     Common Stock, par value $1.25 per share
                     ---------------------------------------
                                (Title of Class)

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES [ ] NO [X].

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

     State issuer's revenues for its most recent fiscal year. $16,053,000

     As of February 28, 2003, there were issued and outstanding 1,332,835 shares
     of the Registrant's Common Stock.

The Registrant's Common Stock trades on the OTC Electronic Bulletin Board under
the symbol "EMCF." The aggregate market value of the Common Stock held by
non-affiliates of the registrant, based on the last price the registrant's
Common Stock was sold on March 12, 2003, was $27,495,732 ($25.50 per share
average bid and ask prices of $26.00 and $25.00, respectively, based on
1,078,264 shares of Common Stock outstanding).

                       DOCUMENTS INCORPORATED BY REFERENCE

1. Portions of the Annual Report to Stockholders for the Fiscal Year ended
   December 31, 2002 (Parts I, II, and IV).
2. Portions of the Proxy Statement for the April 29, 2003Annual Meeting of
   Stockholders (Part III).

   Transition Small Business Disclosure Format (Check one)  YES [   ]  NO [X]


<PAGE>


<TABLE>
<CAPTION>

                            EMCLAIRE FINANCIAL CORP.

                                TABLE OF CONTENTS


                                     PART I
                                     ------

<S>  <C>                                                                                                               <C>
Item 1.       Description of Business...................................................................................1

Item 2.       Description of Properties................................................................................16

Item 3.       Legal Proceedings........................................................................................17

Item 4.       Submission of Matters to a Vote of Security Holders......................................................17

                                     PART II
                                     -------

Item 5.       Market for Common Equity and Related Stockholder Matters.................................................17

Item 6.       Management's Discussion and Analysis or Plan of Operation................................................17

Item 7.       Financial Statements.....................................................................................17

Item 8.       Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.....................17

                                    PART III
                                    --------

Item 9.       Directors, Executive Officers, Promoters, and Control Persons; Compliance with
              Section 16(a) of the Exchange Act........................................................................18

Item 10.      Executive Compensation...................................................................................18

Item 11.      Security Ownership of Certain Beneficial Owners and Management...........................................18

Item 12.      Certain Relationships and Related Transactions...........................................................19

Item 13.      Exhibits and Reports on Form 8-K.........................................................................19

Item 14.      Controls and Procedures..................................................................................20

Signatures    .........................................................................................................21

Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002...............................................22

</TABLE>


<PAGE>

PART I

Item 1.  Description of Business
--------------------------------

General

Emclaire Financial Corp. (the Corporation) is a Pennsylvania corporation and
bank holding company that provides a full range of retail and commercial
financial products and services to customers in western Pennsylvania through its
wholly owned subsidiary bank, the Farmers National Bank of Emlenton (the Bank).

The Bank was organized in 1900 as a national banking association and is a
financial intermediary whose principal business consists of attracting deposits
from the general public and investing such funds in real estate loans secured by
liens on residential and commercial property, consumer loans, commercial
business loans, marketable securities and interest-earning deposits. The Bank
operates through a network of ten retail branch offices in Venango, Butler,
Clarion, Clearfield, Elk and Jefferson counties, Pennsylvania. The Corporation
and the Bank are headquartered in Emlenton, Pennsylvania.

The Corporation and the Bank are subject to examination and comprehensive
regulation by the Office of the Comptroller of the Currency (OCC), which is the
Bank's chartering authority, and the Federal Deposit Insurance Corporation
(FDIC), which insures customer deposits held by the Bank to the full extent
provided by law. The Bank is a member of the Federal Reserve Bank of Cleveland
(FRB) and the Federal Home Loan Bank of Pittsburgh (FHLB). The Corporation is a
registered bank holding company pursuant to the Bank Holding Company Act of 1956
(BHCA), as amended.

At December 31, 2002, the Corporation had $238.6 million in total assets, $22.7
million in stockholders' equity, $169.6 million in loans and $204.4 million in
deposits.

Lending Activities

General. The principal lending activities of the Bank are the origination of
residential mortgage, commercial mortgage, commercial business and consumer
loans. Generally, loans are originated in the Bank's primary market area.

One-to-Four Family Mortgage Loans. The Bank offers first mortgage loans secured
by one-to-four family residences located in the Bank's primary lending area.
Typically such residences are single-family owner occupied units. The Bank is an
approved, qualified lender for the Federal Home Loan Mortgage Corporation
(FHLMC). As a result, the Bank may sell loans to and service loans for the FHLMC
in market conditions and circumstances where this is advantageous in managing
interest rate risk.

Home Equity Loans. The Bank originates home equity loans secured by
single-family residences. These loans may be either a single advance fixed-rate
loan with a term of up to 15 years, or a variable rate revolving line of credit.
These loans are made only on owner-occupied single-family residences.

Commercial and Commercial Real Estate Loans. Commercial lending constitutes a
significant portion of the Bank's lending activities comprising a combined total
of 33.3% of the total loan portfolio at December 31, 2002. Commercial real
estate loans generally consist of loans granted for commercial purposes secured
by commercial or other nonresidential real estate. Commercial loans consist of
secured and unsecured loans for such items as capital assets, inventory,
operations, and other commercial purposes.

Consumer Loans. Consumer loans generally consist of fixed-rate term loans for
automobile purchases, home improvements not secured by real estate, capital, and
other personal expenditures. In addition, the Bank funds education loans, under
various government guaranteed student loan programs, that are serviced for the
Bank by a third party. The Bank also offers unsecured revolving personal lines
of credit and overdraft protection.

                                       1

<PAGE>

Loans to One Borrower. National banks are subject to limits on the amount of
credit that they can extend to one borrower. Under current law, loans to one
borrower are limited to an amount equal to 15% of unimpaired capital and surplus
on an unsecured basis, and an additional amount equal to 10% of unimpaired
capital and surplus if the loan is secured by readily marketable collateral. At
December 31, 2002, the Bank's loans-to-one borrower limit based upon 15% of
unimpaired capital was $2.9 million. At December 31, 2002, the Bank's largest
aggregation of loans to one borrower was approximately $2.5 million of loans
secured by equipment and commercial real estate. At December 31, 2002, all of
these loans were performing in accordance with their terms.

The following table sets forth the composition and percentage of the
Corporation's loans receivable in dollar amounts and in percentages of the
portfolio as of December 31:

<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)            2002             2001            2000             1999             1998
                                  ---------------- ---------------- ---------------- ---------------- ----------------
                                   Dollar           Dollar           Dollar           Dollar           Dollar
                                   Amount        %  Amount        %  Amount        %  Amount        %  Amount        %
----------------------------------------------------------------------------------------------------------------------

Mortgage loans:
<S>                               <C>        <C>   <C>        <C>    <C>       <C>    <C>       <C>    <C>       <C>
  Consumer                        $101,585   59.4% $100,420   62.0%  $92,429   60.9%  $90,232   64.7%  $87,137   64.9%
  Commercial                        34,986   20.4%   26,470   16.3%   24,661   16.2%   20,360   14.5%   18,381   13.6%
                                  --------- ------ --------- ------ --------- ------ --------- ------ --------- ------

    Total real estate loans        136,571   79.8%  126,890   78.3%  117,090   77.1%  110,592   79.2%  105,518   78.5%

Other loans:
  Commercial business               21,913   12.9%   20,806   12.9%   20,084   13.3%   14,660   10.6%   14,223   10.7%
  Consumer                          12,660    7.4%   14,308    8.8%   14,618    9.6%   14,210   10.2%   14,508   10.8%
                                  --------- ------ --------- ------ --------- ------ --------- ------ --------- ------

    Total other loans               34,573   20.2%   35,114   21.7%   34,702   22.9%   28,870   20.8%   28,731   21.5%
                                  --------- ------ --------- ------ --------- ------ --------- ------ --------- ------

Total loans receivable             171,144  100.0%  162,004  100.0%  151,792  100.0%  139,462  100.0%  134,249  100.0%
                                            ======           ======           ======           ======           ======
Less:
  Allowance for loan losses          1,587            1,464            1,460            1,373            1,336
                                  ---------        ---------        ---------        ---------        ---------

Net loans receivable              $169,557         $160,540         $150,332         $138,089         $132,913
                                  =========        =========        =========        =========        =========

</TABLE>

The following table sets forth the scheduled contractual principal repayments or
interest repricing of loans in the Corporation's portfolio as of December 31,
2002. Demand loans having no stated schedule of repayment and no stated maturity
are reported as due within one year.



<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------
 (In thousands)                  Due in one     Due from one  Due from five   Due after
                                year or less   to five years  to ten years   ten years         Total
----------------------------------------------------------------------------------------------------------

<S>                                  <C>          <C>           <C>             <C>              <C>
Consumer mortgage                    $6,176       $12,447       $26,882         $56,080          $101,585
Commercial mortgage                   6,065        16,449         6,124           6,348            34,986
Commercial business                  10,711         6,953         3,224           1,025            21,913
Consumer                              6,730         5,875            55               -            12,660
                                ------------  ------------   -----------    ------------  ----------------

                                    $29,682       $41,724       $36,285         $63,453          $171,144
                                ============  ============   ===========    ============  ================
</TABLE>


The following table sets forth the dollar amount of the Corporation's fixed- and
adjustable-rate loans as of December 31:

----------------------------------------------------------------------
 (In thousands)                             Fixed          Adjustable
                                           rates             rates
----------------------------------------------------------------------

Consumer mortgage                             $96,635           $4,950
Commercial mortgage                            12,798           22,188
Commercial business                            13,018            8,895
Consumer                                       11,699              961
                                      ----------------  --------------

                                             $134,150          $36,994
                                      ================  ==============

                                       2

<PAGE>

Contractual maturities of loans do not reflect the actual term of the
Corporation's loan portfolio. The average life of mortgage loans is
substantially less than their contractual terms because of loan prepayments and
enforcement of due-on-sale clauses, which give the Corporation the right to
declare a loan immediately payable in the event, among other things, that the
borrower sells the real property subject to the mortgage. Scheduled principal
amortization also reduces the average life of the loan portfolio. The average
life of mortgage loans tends to increase when current market mortgage rates
substantially exceed rates on existing mortgages and conversely, decrease when
rates on existing mortgages substantially exceed current market interest rates.

Delinquencies and Classified Assets

Delinquent Loans and Real Estate Acquired Through Foreclosure (REO). Typically,
a loan is considered past due and a late charge is assessed when the borrower
has not made a payment within fifteen days from the payment due date. When a
borrower fails to make a required payment on a loan, the Corporation attempts to
cure the deficiency by contacting the borrower. The initial contact with the
borrower is made shortly after the seventeenth day following the due date for
which a payment was not received. In most cases, delinquencies are cured
promptly.

If the delinquency exceeds 60 days, the Corporation works with the borrower to
set up a satisfactory repayment schedule. Typically loans are considered
non-accruing upon reaching 90 days delinquency, although the Corporation may be
receiving partial payments of interest and partial repayments of principal on
such loans. When a loan is placed in non-accrual status, previously accrued but
unpaid interest is deducted from interest income. The Corporation institutes
foreclosure action on secured loans only if all other remedies have been
exhausted. If an action to foreclose is instituted and the loan is not
reinstated or paid in full, the property is sold at a judicial or trustee's sale
at which the Corporation may be the buyer.

Real estate properties acquired through, or in lieu of, loan foreclosure are to
be sold and are initially recorded at fair value at the date of foreclosure
establishing a new cost basis. After foreclosure, management periodically
performs valuations and the real estate is carried at the lower of carrying
amount or fair value less cost to sell. Revenue and expenses from operations and
changes in the valuation allowance are included in loss on foreclosed real
estate. The Corporation generally attempts to sell its REO properties as soon as
practical upon receipt of clear title. The original lender typically handles
disposition of those REO properties resulting from loans purchased in the
secondary market.

As of December 31, 2002, the Corporation's non-performing assets, which include
non-accrual loans, loans delinquent due to maturity, troubled debt restructuring
and REO, amounted to $1.2 million or 0.49% of the Corporation's total assets.

Classified Assets. Regulations applicable to insured institutions require the
classification of problem assets as "substandard," "doubtful," or "loss"
depending upon the existence of certain characteristics as discussed below. A
category designated "special mention" must also be maintained for assets
currently not requiring the above classifications but having potential weakness
or risk characteristics that could result in future problems. An asset is
classified as substandard if not adequately protected by the current net worth
and paying capacity of the obligor or of the collateral pledged, if any. A
substandard asset is characterized by the distinct possibility that the
Corporation will sustain some loss if the deficiencies are not corrected. Assets
classified as doubtful have all the weaknesses inherent in those classified as
substandard. In addition, these weaknesses make collection or liquidation in
full, on the basis of currently existing facts, conditions and values, highly
questionable and improbable. Assets classified as loss are considered
uncollectible and of such little value that their continuance as assets is not
warranted.

The Corporation's classification of assets policy requires the establishment of
valuation allowances for loan losses in an amount deemed prudent by management.
Valuation allowances represent loss allowances that have been established to
recognize the inherent risk associated with lending activities. When the
Corporation classifies a problem asset as a loss, the asset is charged off
immediately.

                                       3

<PAGE>

The Corporation regularly reviews the problem loans and other assets in its
portfolio to determine whether any require classification in accordance with the
Corporation's policy and applicable regulations. As of December 31, 2002, the
Corporation's classified and criticized assets amounted to $7.7 million with
$3.3 million classified as substandard, $13,000 classified as loss and $4.4
million identified as special mention.

The following table sets forth information regarding the Corporation's
non-performing assets as of December 31:


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)                        2002       2001       2000       1999       1998
------------------------------------------------------------------------------------------------------

<S>                                                <C>        <C>          <C>        <C>      <C>
Non-performing loans                               $1,160     $1,245       $900       $703     $1,309

 Total as a percentage of gross loans                0.69%      0.78%      0.59%      0.50%      0.98%
                                                ---------- ---------- ---------- ---------- ----------

Real estate acquired through foreclosure                3         20         33        104         80
                                                ---------- ---------- ---------- ---------- ----------
 Total as a percentage of total assets               0.00%      0.01%      0.02%      0.05%      0.04%
                                                ---------- ---------- ---------- ---------- ----------

Total non-performing assets                        $1,163     $1,265       $933       $807     $1,389
                                                ========== ========== ========== ========== ==========

Total non-performing assets
 as a percentage of total assets                     0.49%      0.58%      0.48%      0.42%      0.72%
                                                ========== ========== ========== ========== ==========

Allowance for loan losses as a
 percentage of non-performing loans                136.81%    117.59%    162.22%    195.31%    102.06%
                                                ========== ========== ========== ========== ==========

------------------------------------------------------------------------------------------------------
</TABLE>

Allowance for Loan Losses. Management establishes reserves for estimated losses
on loans based upon its evaluation of the pertinent factors underlying the types
and quality of loans; historical loss experience based on volume and types of
loans; trend in portfolio volume and composition; level and trend on
non-performing assets; detailed analysis of individual loans for which full
collectibility may not be assured; determination of the existence and realizable
value of the collateral and guarantees securing such loans; and the current
economic conditions affecting the collectibility of loans in the portfolio. The
Corporation analyzes its loan portfolio and REO properties each month for
valuation purposes and to determine the adequacy of its allowance for losses.
Based upon the factors discussed above, management believes that the
Corporation's allowance for losses as of December 31, 2002 of $1.6 million is
adequate to cover probable losses inherent in the portfolio.

The following table sets forth an analysis of the allowance for losses on loans
receivable for the years ended December 31:


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)                       2002      2001      2000      1999      1998
-------------------------------------------------------------------------------------------------

<S>                                               <C>       <C>       <C>       <C>         <C>
Balance at beginning of period                    $1,464    $1,460    $1,373    $1,336      $874

 Provision for loan losses                           381       154       209       162       200

 Allowance for loan losses of acquired
  companies                                            -         -         -         -       349

 Charge-offs:
  Mortgage loans                                     (36)      (27)      (34)      (12)      (21)
  Consumer and commercial business loans            (295)     (170)     (122)     (143)      (92)
                                                --------- --------- --------- --------- ---------
                                                    (331)     (197)     (156)     (155)     (113)

 Recoveries                                           73        47        34        30        26
                                                --------- --------- --------- --------- ---------

Balance at end of period                          $1,587    $1,464    $1,460    $1,373    $1,336
                                                ========= ========= ========= ========= =========

Ratio of net charge-offs to average loans
 outstanding                                        0.15%     0.10%     0.08%     0.09%     0.09%
                                                ========= ========= ========= ========= =========

Ratio of allowance to total loans at end of
 period                                             0.93%     0.90%     0.96%     0.98%     1.00%
                                                ========= ========= ========= ========= =========

Balance at end of period applicable to:
 Mortgage loans                                     $784      $607      $704      $613      $596
 Consumer and commercial business loans              803       857       756       760       740
                                                --------- --------- --------- --------- ---------
Balance at end of period                          $1,587    $1,464    $1,460    $1,373    $1,336
                                                ========= ========= ========= ========= =========
</TABLE>

                                       4

<PAGE>

Investment Portfolio

General. The Corporation maintains an investment portfolio of securities such as
U.S. government and agency securities, state and municipal debt obligations,
corporate notes and bonds, and to a lesser extent, mortgage-backed and equity
securities. Management generally maintains an investment portfolio with
relatively short maturities to minimize overall interest rate risk. However, at
December 31, 2002 approximately $16.5 million was invested in longer-term
callable municipal securities, as part of strategy to moderate federal income
taxes. The Bank has no investment with any one issuer in an amount greater than
10% of capital.

Investment decisions are made within policy guidelines established by the Board
of Directors. This policy is aimed at maintaining a diversified investment
portfolio, which complements the overall asset/liability and liquidity
objectives of the Bank, while limiting the related credit risk to an acceptable
level.

The following table sets forth certain information regarding the amortized cost,
fair value, weighted average yields and contractual maturities of the
Corporation's securities as of December 31, 2002:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
 (In thousands)               Due in 1   Due from 1   Due from 5  Due after     No scheduled
                            year or less to 5 years  to 10 years  10 years        maturity        Total
----------------------------------------------------------------------------------------------------------

<S>                             <C>         <C>              <C>    <C>               <C>         <C>
U.S. Government securities      $3,494      $11,994          $-     $1,998            $-          $17,486
Mortgage-backed securities           -            -           -         29             -               29
Municipal securities               879          959           -     14,677             -           16,515
Corporate securities             3,499        8,647           -          -             -           12,146
Equity securities                    -            -           -          -           971              971
                             ---------- ------------ ----------- ---------- ------------- ----------------

                                $7,872      $21,600          $-    $16,704          $971          $47,147
                             ========== ============ =========== ========== ============= ================

Estimated fair value            $7,991      $22,241          $-    $17,002        $1,514          $48,748
                             ========== ============ =========== ========== ============= ================

Weighted average yield (1)        4.63%        4.68%       0.00%      4.98%         4.53%            4.78%
                             ========== ============ =========== ========== ============= ================

(1) Weighted average yield is on a taxable equivalent basis and is calculated based upon amortized cost.
</TABLE>

For additional information regarding the Corporation's investment portfolio see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Notes to Consolidated Financial Statements" in the Annual
Report incorporated herein by reference.

Sources of Funds

General. Deposits are the primary source of the Bank's funds for lending and
investing activities. Secondary sources of funds are derived from loan
repayments and investment maturities. Loan repayments can be considered a
relatively stable funding source, while deposit activity is greatly influenced
by interest rates and general market conditions. The Bank also has access to
funds through credit facilities available from the FHLB. In addition, the Bank
can obtain advances from the FRB discount window. For a description of the
Bank's sources of funds see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Annual Report incorporated herein by
reference.

Deposits. The Bank offers a wide variety of retail deposit account products to
both consumer and commercial deposit customers, including time deposits,
non-interest bearing and interest bearing demand deposit accounts, savings
deposits, and money market accounts.

Deposit products are promoted in periodic newspaper and radio advertisements,
along with notices provided in customer account statements. The Bank's market
strategy is based on its reputation as a community bank that provides quality
products and personal customer service.

The Bank pays interest rates on its interest bearing deposit products that are
competitive with rates offered by other financial institutions in its market
area. Management reviews interest rates on deposits weekly and considers a
number of factors, including (1) the Bank's internal cost of funds; (2) rates
offered by competing financial institutions; (3) investing and lending
opportunities; and (4) the Bank's liquidity position.

                                       5

<PAGE>

For additional information regarding the Corporation's deposit base and borrowed
funds see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Notes to Consolidated Financial Statements" in the
Annual Report incorporated herein by reference.

Subsidiary Activity

The Corporation has one wholly owned subsidiary, the Bank, a national
association. As of December 31, 2002, the Bank had no subsidiaries.

Personnel

At December 31, 2002, the Bank had 102 full time equivalent employees. There is
no collective bargaining agreement between the Bank and its employees, and the
Bank believes its relationship with its employees to be satisfactory.

Competition

The Bank competes for loans, deposits, and customers with other commercial
banks, savings and loan associations, securities and brokerage companies,
mortgage companies, insurance companies, finance companies, money market funds,
credit unions, and other nonbank financial service providers.

Risk Factors

The following discusses certain factors that may affect the Corporation's
financial condition and results of operations and should be considered in
evaluating the Corporation.

Ability Of The Corporation To Execute Its Business Strategy. The financial
performance and profitability of the Corporation will depend, in large part, on
its ability to favorably execute its business strategy. This execution entails
risks in, among other areas, technology implementation, market segmentation,
brand identification, banking operations, and capital and human resource
investments. Accordingly, there can be no assurance that the Corporation will be
successful in its business strategy.

Economic Conditions And Geographic Concentration. The Corporation's operations
are located in western Pennsylvania and are concentrated in Venango, Clarion and
Butler Counties, Pennsylvania. Although management has diversified the
Corporation's loan portfolio into other Pennsylvania counties, and to a very
limited extent into other states, the vast majority of the Corporation's credits
remain concentrated in the three primary counties. As a result of this
geographic concentration, the Corporation's results depend largely upon economic
and real estate market conditions in these areas. Deterioration in economic or
real estate market conditions in the Corporation's primary market areas could
have a material adverse impact on the quality of the Corporation's loan
portfolio, the demand for its products and services, and its financial condition
and results of operations.

Interest Rates. By nature, all financial institutions are impacted by changing
interest rates, due to the impact of such upon:

     |X|  the demand for new loans
     |X|  prepayment speeds experienced on various asset classes, particularly
          residential mortgage loans
     |X|  credit profiles of existing borrowers
     |X|  rates received on loans and securities
     |X|  rates paid on deposits and borrowings.

As presented previously, the Corporation is financially exposed to parallel
shifts in general market interest rates, changes in the relative pricing of the
term structure of general market interest rates, and relative credit spreads.
Therefore, significant fluctuations in interest rates may present an adverse
effect upon the Corporation's financial condition and results of operations.

                                       6

<PAGE>

Government Regulation And Monetary Policy. The financial services industry is
subject to extensive federal and state supervision and regulation. Significant
new laws, changes in existing laws, or repeals of present laws could cause the
Corporation's financial results to materially differ from past results. Further,
federal monetary policy, particularly as implemented through the Federal Reserve
System, significantly affects credit conditions for the Corporation, and a
material change in these conditions could present an adverse impact on the
Corporation's financial condition and results of operations.

Competition. The financial services business in the Corporation's market areas
is highly competitive, and is becoming more so due to technological advances
(particularly Internet based financial services delivery), changes in the
regulatory environment, and the enormous consolidation that has occurred among
financial services providers. Many of the Corporation's competitors are much
larger in terms of total assets and market capitalization, enjoy greater
liquidity in their equity securities, have greater access to capital and
funding, and offer a broader array of financial products and services. In light
of this environment, there can be no assurance that the Corporation will be able
to compete effectively. The results of the Corporation may materially differ in
future periods depending upon the nature or level of competition.

Credit Quality. A significant source of risk arises from the possibility that
losses will be sustained because borrowers, guarantors, and related parties may
fail to perform in accordance with the terms of their loans. The Corporation has
adopted underwriting and credit monitoring procedures and credit policies,
including the establishment and review of the allowance for loan losses, that
management believes are appropriate to control this risk by assessing the
likelihood of non-performance, tracking loan performance, and diversifying the
credit portfolio. Such policies and procedures may not, however, prevent
unexpected losses that could have a material adverse effect on the Corporation's
financial condition or results of operations. Unexpected losses may arise from a
wide variety of specific or systemic factors, many of which are beyond the
Corporation's ability to predict, influence, or control.

Other Risks. From time to time, the Corporation details other risks with respect
to its business and financial results in its filings with the SEC.

Supervision and Regulation

Bank holding companies and banks are extensively regulated under both federal
and state law. Set forth below is a summary description of certain provisions of
certain laws that relate to the regulation of the Corporation and the Bank. The
description does not purport to be complete and is qualified in its entirety by
reference to the applicable laws and regulations.

Regulation - The Corporation

The Corporation is a registered bank holding company and is subject to
regulation under the Bank Holding Company Act (BCHA). The Corporation is
required to file quarterly reports and annual reports with the Federal Reserve
Board and such additional information as the Federal Reserve Board may require
pursuant to the BHCA. The Federal Reserve Board may conduct examinations of the
Corporation and its subsidiaries.

The Federal Reserve Board may require that the Corporation terminate an
activity, or terminate control of or liquidate or divest certain subsidiaries or
affiliates when the Federal Reserve Board believes the activity or the control
of the subsidiary or affiliate constitutes a significant risk to the financial
safety, soundness or stability of any of its banking subsidiaries. The Federal
Reserve Board also has the authority to regulate provisions of certain bank
holding company debt, including the authority to impose interest rate ceilings
and reserve requirements on such debt. Under certain circumstances, the
Corporation must file written notice and obtain approval from the Federal
Reserve Board prior to purchasing or redeeming its equity securities.

Further, the Corporation is required by the Federal Reserve Board to maintain
certain levels of capital. See "Regulation - The Bank - Capital Standards."

                                       7

<PAGE>

The Corporation is required to obtain the prior approval of the Federal Reserve
Board for the acquisition of more than 5% of the outstanding shares of any class
of voting securities or substantially all of the assets of any bank or bank
holding company. Prior approval of the Federal Reserve Board is also required
for the merger or consolidation of the Corporation and another bank holding
company.

The Corporation is prohibited by the BHCA, except in certain statutorily
prescribed instances, from acquiring direct or indirect ownership or control of
more than 5% of the outstanding voting shares of any company that is not a bank
or bank holding company and from engaging directly or indirectly in activities
other than those of banking, managing or controlling banks, or furnishing
services to its subsidiaries. However, the Corporation, subject to the prior
approval of the Federal Reserve Board, may engage in, or acquire shares of
companies engaged in, activities that are deemed by the Federal Reserve Board to
be so closely related to banking or managing or controlling banks as to be
proper incidents thereto.

Under Federal Reserve Board regulations, a bank holding company is required to
serve as a source of financial and managerial strength to its subsidiary banks
and may not conduct its operations in an unsafe or unsound manner. In addition,
it is the Federal Reserve Board's policy that a bank holding company should
stand ready to use available resources to provide adequate capital funds to its
subsidiary banks during periods of financial stress or adversity and should
maintain the financial flexibility and capital-raising capacity to obtain
additional resources for assisting its subsidiary banks. A bank holding
company's failure to meet its obligations to serve as a source of strength to
its subsidiary banks will generally be considered by the Federal Reserve Board
to be an unsafe and unsound banking practice or a violation of the Federal
Reserve Board's regulations or both.

The Corporation's securities are registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). As such, the Corporation is subject to the information, proxy
solicitation, insider trading, corporate governance and other requirements and
restrictions of the Exchange Act.

Regulation - The Bank

The Bank is subject to supervision and examination by the OCC and the FDIC. The
Bank is also subject to various requirements and restrictions under federal and
state law, including requirements to maintain reserves against deposits,
restrictions on the types, amount and terms and conditions of loans that may be
granted and limitations on the types of investments that may be made and the
types of services that may be offered. Various consumer laws and regulations
also affect the operations of the Bank.

The Sarbanes-Oxley Act of 2002

On July 30, 2002, President Bush signed into law The Sarbanes-Oxley Act of 2002.
This new legislation addresses accounting oversight and corporate governance
matters, including:

     |X|  the creation of a five-member oversight board appointed by the
          Securities & Exchange Commission that will set standards for
          accountants and have investigative and disciplinary powers
     |X|  the prohibition of accounting firms from providing various types of
          consulting services to public clients and requiring accounting firms
          to rotate partners among public client assignments every five years
     |X|  enhanced independence of board audit committees
     |X|  the prohibition of most personal loans to directors and executive
          officers (loans by the Bank in accordance with Regulation O are
          exempt)
     |X|  protection of whistle blowers
     |X|  increased civil and criminal penalties for financial crimes
     |X|  expanded disclosure of corporate operations and internal controls and
          required certification of SEC filings containing financial information
     |X|  enhanced controls on, and reporting of, insider trading
     |X|  statutory separations between investment bankers and analysts.

                                       8

<PAGE>

The Corporation is currently evaluating what impacts the new legislation and its
implementing regulations will have upon our operations, including a likely
increase in certain outside professional costs.

USA Patriot Act of 2001

On October 26, 2001, President Bush signed the USA Patriot Act of 2001. The
Patriot Act is intended to strengthen U.S. law enforcement's and the
intelligence communities' abilities to work cohesively to combat terrorism on a
variety of fronts. The potential impact of the Act on financial institutions of
all kinds is significant and wide ranging. The Act contains sweeping anti-money
laundering and financial transparency laws, in addition to current requirements,
and requires various regulations, including:

     |X|  due diligence requirements for financial institutions that administer,
          maintain, or manage private banks accounts or correspondent accounts
          for non-US persons
     |X|  standards for verifying customer identification at account opening
     |X|  rules to promote cooperation among financial institutions, regulators,
          and law enforcement entities in identifying parties that may be
          involved in terrorism or money laundering
     |X|  reports by nonfinancial businesses filed with the Treasury
          Department's Financial Crimes Enforcement Network for cash
          transactions exceeding $10,000, and
     |X|  filing of suspicious activities reports by brokers and dealers if they
          believe a customer may be violating U.S. laws and regulations.

On July 23, 2002, the Treasury proposed regulations requiring institutions to
incorporate into their written money laundering plans, a board approved customer
identification program implementing reasonable procedures for:

     |X|  verifying the identity of any person seeking to open an account, to
          the extent reasonable and practicable;
     |X|  maintaining records of the information used to verify the person's
          identity; and
     |X|  determining whether the person appears on any list of known or
          suspected terrorists or terrorist organizations.

Account is defined as a formal banking or business relationship established to
provide ongoing services, dealings, or other financial transactions.

Financial Services Modernization Legislation

General. On November 12, 1999, President Clinton signed into law the
Gramm-Leach-Bliley Act of 1999 (the "GLBA"). The general effect of the law is to
establish a comprehensive framework to permit affiliations among commercial
banks, insurance companies, securities firms, and other financial service
providers by revising and expanding the BHCA framework to permit a holding
company system to engage in a full range of financial activities through a new
entity known as a financial holding company.

The law also:

     |X|  broadened the activities that may be conducted by national banks,
          banking subsidiaries of bank holding companies, and their financial
          subsidiaries;
     |X|  provided an enhanced framework for protecting the privacy of consumer
          information;
     |X|  adopted a number of provisions related to the capitalization,
          membership, corporate governance, and other measures designed to
          modernize the Federal Home Loan Bank system;
     |X|  mdified the laws governing the implementation of the Community
          Reinvestment Act; and
     |X|  adressed a variety of other legal and regulatory issues affecting both
          day-to-day operations and long-term activities of financial
          institutions.

                                       9

<PAGE>

The Corporation and the Bank do not believe that the GLBA will have a material
adverse effect on operations in the near-term. However, to the extent that it
permits banks, securities firms, and insurance companies to affiliate, the
financial services industry may experience further consolidation. The GLBA is
intended to grant to community banks certain powers as a matter of right that
larger institutions have accumulated on an ad hoc basis. Nevertheless, this act
may have the result of increasing the amount of competition that the Corporation
and the Bank face from larger institutions and other types of companies offering
financial products, many of which may have substantially more financial
resources than the Corporation and the Bank.

Financial Holding Companies. Bank holding companies that elect to become a
financial holding company may affiliate with securities firms and insurance
companies and engage in other activities that are financial in nature or are
incidental or complementary to activities that are financial in nature.
"Financial in nature" activities include:

     |X|  securities underwriting,
     |X|  dealing and market making,
     |X|  sponsoring mutual funds and investment companies,
     |X|  insurance underwriting and agency sales,
     |X|  merchant banking, and
     |X|  activities that the Federal Reserve Board, in consultation with the
          Secretary of the Treasury, determines from time to time to be so
          closely related to banking or managing or controlling banks as to be
          proper incident thereto.

Prior to filing a declaration of its election to become a financial holding
company, all of the bank holding company's depository institution subsidiaries
must be well capitalized, well managed, and, except in limited circumstances, in
satisfactory compliance with the Community Reinvestment Act (CRA).

Failure to comply with the financial holding company election requirements or
correct any noncompliance within a fixed period of time could lead to
divestiture of subsidiary banks or require all activities of such company to
conform to those permissible for a bank holding company. No Federal Reserve
Board approval is required for a financial holding company to acquire a company
(other than a bank holding company, bank or savings association) engaged in
activities that are financial in nature or incidental to activities that are
financial in nature, as determined by the Federal Reserve Board:

     |X|  lending, exchanging, transferring, investing for others, or
          safeguarding financial assets other than money or securities;
     |X|  providing any devise or other instrumentality for transferring money
          or other financial assets; or
     |X|  arranging, effecting or facilitating financial transactions for the
          account of third parties.

A bank holding company that is not also a financial holding company can only
engage in banking and such other activities determined by the Federal Reserve
Board to be so closely related to banking or managing or controlling banks as to
be a proper incident thereto.

Expanded Bank Activities. The GLBA also permits national banks to engage in
expanded activities through the formation of financial subsidiaries. A national
bank may have a subsidiary engaged in any activity authorized for national banks
directly or any financial activity, except for insurance underwriting, insurance
investments, real estate investment or development, or merchant banking, which
may only be conducted through a subsidiary of a financial holding company.
Financial activities include all activities permitted under new sections of the
BHCA or permitted by regulation.

A national bank seeking to have a financial subsidiary, and each of its
depository institution affiliates, must be "well-capitalized," "well-managed"
and in compliance with the CRA. The total assets of all financial subsidiaries
may not exceed the lesser of 45% of a bank's total assets or $50 billion. A
national bank must exclude from its assets and equity all equity investments,
including retained earnings, in a financial subsidiary. The assets of the
subsidiary may not be consolidated with the bank's assets. The bank must also
have policies and procedures to assess financial subsidiary risk and protect the
bank from such risks and potential liabilities.

                                       10

<PAGE>

Privacy. Under the GLBA, federal banking regulators adopted rules that limit the
ability of banks and other financial institutions to disclose non-public
information about consumers to nonaffiliated third parties. Pursuant to these
rules, effective July 1, 2001, financial institutions must provide:

     |X|  initial notices to customers about their privacy policies, describing
          the conditions under which they may disclose nonpublic personal
          information to nonaffiliated third parties and affiliates;
     |X|  annual notices of their privacy policies to current customers; and
     |X|  a reasonable method for customers to "opt out" of disclosures to
          nonaffiliated third parties.

These privacy provisions will affect how consumer information is transmitted
through diversified financial companies and conveyed to outside vendors. Since
the GLBA's enactment, a number of states have implemented their own versions of
privacy laws. The Corporation has implemented its privacy policies in accordance
with the law.

Dividends and Other Transfers of Funds

Dividends from the Bank constitute the principal source of income to the
Corporation. The Corporation is a legal entity separate and distinct from the
Bank. The Bank is subject to various statutory and regulatory restrictions on
its ability to pay dividends to the Corporation.

The FDIC and the Comptroller also have authority to prohibit the Bank from
engaging in activities that, in the FDIC's or the Comptroller's opinion,
constitute unsafe or unsound practices in conducting its business. It is
possible, depending upon the financial condition of the bank in question and
other factors, that the FDIC and the Comptroller could assert that the payment
of dividends or other payments might, under some circumstances, be such an
unsafe or unsound practice. Further, the Comptroller and the Federal Reserve
Board have established guidelines with respect to the maintenance of appropriate
levels of capital by banks or bank holding companies under their jurisdiction.
Compliance with the standards set forth in such guidelines and the restrictions
that are or may be imposed under the prompt corrective action provisions of
federal law could limit the amount of dividends which the Bank or the
Corporation may pay. An insured depository institution is prohibited from paying
management fees to any controlling persons or, with certain limited exceptions,
making capital distributions if after such transaction the institution would be
undercapitalized. See "- Prompt Corrective Action and Other Enforcement
Mechanisms" and "- Capital Standards" for a discussion of these additional
restrictions on capital distributions.

The Bank is subject to certain restrictions imposed by federal law on any
extensions of credit to, or the issuance of a guarantee or letter of credit on
behalf of, the Corporation or other affiliates, the purchase of, or investments
in, stock or other securities thereof, the taking of such securities as
collateral for loans, and the purchase of assets of the Corporation or other
affiliates. Such restrictions prevent the Corporation and such other affiliates
from borrowing from the Bank unless the loans are secured by marketable
obligations of designated amounts. Further, such secured loans and investments
by the Bank to or in the Corporation or to or in any other affiliate are
limited, individually, to 10% of the Bank's capital and surplus (as defined by
federal regulations), and such secured loans and investments are limited, in the
aggregate, to 20% of the Bank's capital and surplus (as defined by federal
regulations). Additional restrictions on transactions with affiliates may be
imposed on the Bank under the prompt corrective action provisions of federal
law. See - "Prompt Corrective Action and Other Enforcement Mechanisms."

Capital Standards

The federal banking agencies have adopted risk-based minimum capital guidelines
intended to provide a measure of capital that reflects the degree of risk
associated with a banking organization's operations for both transactions
reported on the balance sheet as assets and transactions that are recorded as
off balance sheet items. Under these guidelines, nominal dollar amounts of
assets and credit equivalent amounts of off balance sheet items are multiplied
by one of several risk adjustment percentages, which range from 0% for assets
with low credit risk federal banking agencies, to 100% for assets with
relatively high credit risk.

                                       11

<PAGE>

The guidelines require a minimum ratio of qualifying total capital to
risk-adjusted assets of 8% and a minimum ratio of Tier 1 capital to
risk-adjusted assets of 4%. In addition to the risk-based guidelines, federal
banking regulators require banking organizations to maintain a minimum amount of
Tier 1 capital to total assets, referred to as the leverage ratio. For a banking
organization rated in the highest of the five categories used by regulators to
rate banking organizations, the minimum leverage ratio of Tier 1 capital to
total assets must be 3%. In addition to these uniform risk-based capital
guidelines and leverage ratios that apply across the industry, the regulators
have the discretion to set individual minimum capital requirements for specific
institutions at rates significantly above the minimum guidelines and ratios.

At December 31, 2002, the Bank's respective total and Tier 1 risk-based capital
ratios and leverage ratios exceeded the minimum regulatory requirements. See
Note 10 in the audited consolidated financial statements included in the Annual
Report and incorporated herein by reference.

Prompt Corrective Action and Other Enforcement Mechanisms

Federal banking agencies possess broad powers to take corrective and other
supervisory action to resolve the problems of insured depository institutions,
including but not limited to those institutions that fall below one or more
prescribed minimum capital ratios. Each federal banking agency has promulgated
regulations defining the following five categories in which an insured
depository institution will be placed, based on its capital ratios: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. At December 31, 2002, the
Bank and the Corporation exceeded the required ratios for classification as
"well capitalized."

An institution that, based upon its capital levels, is classified as well
capitalized, adequately capitalized, or undercapitalized may be treated as
though it were in the next lower capital category if the appropriate federal
banking agency, after notice and opportunity for hearing, determines that an
unsafe or unsound condition or an unsafe or unsound practice warrants such
treatment. At each successive lower capital category, an insured depository
institution is subject to more restrictions. The federal banking agencies,
however, may not treat a significantly undercapitalized institution as
critically undercapitalized unless its capital ratio actually warrants such
treatment.

In addition to measures taken under the prompt corrective action provisions,
commercial banking organizations may be subject to potential enforcement actions
by the federal regulators for unsafe or unsound practices in conducting their
businesses or for violations of any law, rule, regulation, or any condition
imposed in writing by the agency or any written agreement with the agency.

Safety and Soundness Standards

The federal banking agencies have adopted guidelines designed to assist the
federal banking agencies in identifying and addressing potential safety and
soundness concerns before capital becomes impaired. The guidelines set forth
operational and managerial standards relating to: (i) internal controls,
information systems and internal audit systems, (ii) loan documentation, (iii)
credit underwriting, (iv) asset growth, (v) earnings, and (vi) compensation,
fees and benefits. In addition, the federal banking agencies have also adopted
safety and soundness guidelines with respect to asset quality and earnings
standards. These guidelines provide six standards for establishing and
maintaining a system to identify problem assets and to prevent those assets from
deteriorating. Under these standards, an insured depository institution should:
(i) conduct periodic asset quality reviews to identify problem assets, (ii)
estimate the inherent losses in problem assets and establish reserves that are
sufficient to absorb estimated losses, (iii) compare problem asset totals to
capital, (iv) take appropriate corrective action to resolve problem assets, (v)
consider the size and potential risks of material asset concentrations, and (vi)
provide periodic asset quality reports with adequate information for management
and the board of directors to assess the level of asset risk. These new
guidelines also set forth standards for evaluating and monitoring earnings and
for ensuring that earnings are sufficient for the maintenance of adequate
capital and reserves.

                                       12

<PAGE>

Premiums for Deposit Insurance

Through the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund
("SAIF"), the FDIC insures the deposits of the Bank up to prescribed limits for
each depositor. The amount of FDIC assessments paid by each BIF/SAIF member
institution is based on its relative risk of default as measured by regulatory
capital ratios and other factors. Specifically, the assessment rate is based on
the institution's capitalization risk category and supervisory subgroup
category. An institution's capitalization risk category is based on the FDIC's
determination of whether the institution is well capitalized, adequately
capitalized or less than adequately capitalized. An institution's supervisory
subgroup category is based on the FDIC's assessment of the financial condition
of the institution and the probability that FDIC intervention or other
corrective action will be required.

FDIC-insured depository institutions pay an assessment rate equal to the rate
assessed on deposits insured by the insurance fund.

The assessment rate currently ranges from zero to 27 cents per $100 of domestic
deposits. The FDIC may increase or decrease the assessment rate schedule on a
semi-annual basis. Due to continued growth in deposits and some recent bank
failures, the BIF is nearing its minimum ratio of 1.25% of insured deposits as
mandated by law. If the ratio drops below 1.25%, it is likely the FDIC will be
required to assess premiums on all banks for the first time since 1996. Any
increase in assessments or the assessment rate could have a material adverse
effect on the Corporation's earnings, depending on the amount of the increase.

The FDIC is authorized to terminate a depository institution's deposit insurance
upon a finding by the FDIC that the institution's financial condition is unsafe
or unsound or that the institution has engaged in unsafe or unsound practices or
has violated any applicable rule, regulation, order or condition enacted or
imposed by the institution's regulatory agency. The termination of deposit
insurance for the Bank could have a material adverse effect on the Corporation's
earnings, depending on the collective size of the particular institutions
involved.

All FDIC-insured depository institutions must pay an annual assessment to
provide funds for the payment of interest on bonds issued by the Financing
Corporation, a federal corporation chartered under the authority of the Federal
Housing Finance Board. The bonds, commonly referred to as FICO bonds, were
issued to capitalize the Federal Savings and Loan Insurance Corporation. The
FDIC established the FICO assessment rates effective for the fourth quarter of
2002 at approximately $.0170 per $100 annually for assessable deposits. The FICO
assessments are adjusted quarterly to reflect changes in the assessment bases of
the FDIC's insurance funds and do not vary depending on a depository
institution's capitalization or supervisory evaluations.

                                       13

<PAGE>

Proposed Legislation

From time to time, new laws are proposed that could have an effect on the
financial institutions industry. For example, deposit insurance reform
legislation has recently been introduced in the U.S. Senate House of
Representatives that would:

     |X|  Merge the BIF and the SAIF.
     |X|  Increase the current deposit insurance coverage limit for insured
          deposits to $130,000 and index future coverage limits to inflation.
     |X|  Increase deposit insurance coverage limits for municipal deposits.
     |X|  Double deposit insurance coverage limits for individual retirement
          accounts.
     |X|  Replace the current fixed 1.25% designated reserve ratio with a
          reserve range of 1.15%-1.40%, giving the FDIC discretion in
          determining a level adequate within this range.

While we cannot predict whether such proposals will eventually become law, they
could have an effect on our operations and the way we conduct business.

Interstate Banking and Branching

The BHCA permits bank holding companies from any state to acquire banks and bank
holding companies located in any other state, subject to certain conditions,
including certain nationwide- and state-imposed concentration limits. The Bank
has the ability, subject to certain restrictions, to acquire by acquisition or
merger branches outside its home state. The establishment of new interstate
branches is also possible in those states with laws that expressly permit it.
Interstate branches are subject to certain laws of the states in which they are
located. Competition may increase further as banks branch across state lines and
enter new markets.

Community Reinvestment Act and Fair Lending Developments

The Bank is subject to certain fair lending requirements and reporting
obligations involving home mortgage lending operations and CRA activities. The
CRA generally requires the federal banking agencies to evaluate the records of a
financial institution in meeting the credit needs of its local communities,
including low- and moderate-income neighborhoods. A bank may be subject to
substantial penalties and corrective measures for a violation of certain fair
lending laws. The federal banking agencies may take compliance with such laws
and CRA obligations into account when regulating and supervising other
activities. Furthermore, financial institutions are subject to annual reporting
and public disclosure requirements for certain written agreements that are
entered into between insured depository institutions or their affiliates and
nongovernmental entities or persons that are made pursuant to, or in connection
with, the fulfillment of the CRA.

A bank's compliance with its CRA obligations is based on a performance-based
evaluation system that bases CRA ratings on an institution's lending service and
investment performance. When a bank holding company applies for approval to
acquire a bank or another bank holding company, the Federal Reserve Board will
review the assessment of each subsidiary bank of the applicant bank holding
company, and such records may be the basis for denying the application. Based on
an examination conducted March 22, 1999, the Bank was rated satisfactory in
complying with its CRA obligations.

                                       14

<PAGE>

Federal Reserve System

The Federal Reserve Board requires all depository institutions to maintain
non-interest bearing reserves at specified levels against their transaction
accounts (primarily checking and NOW accounts) and non-personal time deposits.
At December 31, 2002, the Bank was in compliance with these requirements.

Federal Home Loan Bank System

The Bank is a member of the FHLB system. Among other benefits, each FHLB serves
as a reserve or central bank for its members within its assigned region. Each
FHLB is financed primarily from the sale of consolidated obligations of the FHLB
system. Each FHLB makes available loans or advances to its members in compliance
with the policies and procedures established by the Board of Directors of the
individual FHLB. As an FHLB member, the Bank is required to own capital stock in
an FHLB in an amount equal to the greater of:

     |X|  1% of its aggregate outstanding principal amount of its residential
          mortgage loans, home purchase contracts and similar obligations at the
          beginning of each calendar year; or
     |X|  a certain percentage of its FHLB advances or borrowings.

The Bank's required investment in FHLB stock, based on December 31, 2002
financial data, was approximately $965,000. At December 31, 2002, the Bank had
$965,000 of FHLB stock.

The GLBA made significant reforms to the FHLB system, including:

     |X|  Expanded Membership - (i) expands the uses for, and types of,
          collateral for advances; (ii) eliminates bias toward QTL lenders; and
          (iii) removes capital limits on advances using real estate related
          collateral (e.g., commercial real estate and home equity loans).
     |X|  New Capital Structure - each FHLB is allowed to establish two classes
          of stock: Class A is redeemable within six months of notice; and Class
          B is redeemable within five years of notice. Class B is valued at 1.5
          times the value of Class A stock. Each FHLB will be required to
          maintain minimum capital equal to 5% of equity. Each FHLB, including
          our FHLB of Pittsburgh, submitted capital plans for review and
          approval by the Federal Housing Finance Board.
     |X|  Voluntary Membership - federally chartered savings associations, such
          as the Bank, are no longer required to be members of the system.
     |X|  REFCorp Payments - changes the amount paid by the system on debt
          incurred in connection with the thrift crisis in the late 1980s from a
          fixed amount to 20% of net earnings after deducting certain expenses.

At this time it is not possible to predict the impact, if any, such changes or
the recently submitted capital plan will have on the Corporation's financial
condition or results of operations.

                                       15

<PAGE>

Item  2.  Description of Property

(a) Properties. The Corporation owns no real property but utilizes the main
office of the Bank. The Corporation's and the Bank's executive offices are
located at 612 Main Street, Emlenton, Pennsylvania. The Corporation pays no rent
or other form of consideration for the use of this facility. The following table
sets forth information with respect to the Bank's offices at December 31, 2002:

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------
Dollar amounts in thousands                                           Owned     Lease      Net Book    Deposits
                                                                       or     Expiration   Value or       at
Location                                                    County   Leased    Date (1)   Annual Rent 12/31/2002
-----------------------------------------------------------------------------------------------------------------

Corporate and Bank Main Offices:
--------------------------------

<S>                                                        <C>        <C>            <C>       <C>       <C>
   Headquarters and Main Office                            Venango    Owned           --       $513      $46,997
   612 Main Street, Emlenton, Pennsylvania 16373

   Data Center                                             Venango    Owned           --        884           --
   708 Main Street, Emlenton, Pennsylvania 16373

Bank Branch Offices
-------------------

   Bon Aire Office                                          Butler   Leased      May 2011        35       26,439
   1101 North Main Street, Butler, Pennsylvania 16003

   Brookville Office                                      Jefferson   Owned           --        232       20,629
   263 Main Street, Brookville, Pennsylvania 15825

   Clarion Wood Street Office                              Clarion    Owned           --        369       27,990
   Sixth & Wood Street, Clarion, Pennsylvania 16214

   Clarion Mall Office (2)                                 Clarion   Leased     March 2003       66        5,236
   Room 400, Clarion Mall, Clarion, Pennsylvania 16214

   DuBois Office                                          Clearfield Leased     June 2005        20       12,104
   861 Beaver Drive, Dubois, Pennsylvania 15801

   East Brady Office                                       Clarion    Owned           --         54       16,331
   323 Kelly's Way, East Brady, Pennsylvania
    16028

   Eau Claire Office                                        Butler    Owned           --        158       12,685
   207 Washington Street, Eau Claire, Pennsylvania 16030

   Knox Office                                             Clarion   Leased    December 2011     25       24,910
   Route 338 South, Knox, Pennsylvania 16232

   Meridian Office (3)                                      Butler   Leased    December 2012      -           42
   101 Meridian Road, Butler, Pennsylvania 16003

   Ridgway Office                                            Elk      Owned           --        159       11,062
   173 Main Street, Ridgway, Pennsylvania 15853
                                                                                                     ------------

                                                                                                        $204,425
                                                                                                     ============

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

(1) Lease agreements for leased offices typically include renewal options.
(2) The Clarion Mall office will be closed at the expiration of its lease in the first quarter of 2003 and
    operations will be consolidated with the Clarion Wood Street Office.
(3) The Meridian Office opened for business in January 2003.

The Bank also maintains remote ATM facilities within its market area.
</TABLE>

                                       16

<PAGE>



(b) Investment Policies. See "Item 1. Business" above for a general description
of the Bank's investment policies and any regulatory or Board of Directors'
percentage of assets limitations regarding certain investments. All of the
Bank's investment policies are reviewed and approved by the Board of Directors
of the Bank, and such policies, subject to regulatory restrictions (if any), can
be changed without a vote of stockholders. The Bank's investments are primarily
acquired to produce income, and to a lesser extent, possible capital gains.

     (1) Investments in Real Estate or Interests in Real Estate. See "Item 1.
     Business - Lending Activities," "Item 1. Business - Regulation of the
     Bank," and "Item 2. Description of Property - (a) Properties" above.

     (2) Investments in Real Estate Mortgages. See "Item 1. Business - Lending
     Activities" and "Item 1. Business - Regulation of the Bank."

     (3) Investments in Securities of or Interests in Persons Primarily Engaged
     in Real Estate Activities. See "Item 1. Business - Lending Activities,"
     "Item 1. Business - Regulation of the Bank," and "Item 1. Business -
     Subsidiary Activity."

(c) Description of Real Estate and Operating Data. Not Applicable.


Item  3.  Legal Proceedings
---------------------------

Neither the Bank nor the Corporation is involved in any material legal
proceedings. The Bank, from time to time, is party to litigation that arises in
the ordinary course of business, such as claims to enforce liens, claims
involving the origination and servicing of loans, and other issues related to
the business of the Bank. In the opinion of management the resolution of any
such issues would not have a material adverse impact on the financial position,
results of operation, or liquidity of the Bank or the Corporation.

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

No matters were submitted to stockholders for a vote during the quarter ended
December 31, 2002.

PART II

Item  5.  Market for the Registrant's Common Equity and Related Stockholder
          Matters
---------------------------------------------------------------------------

The information contained under the section captioned "Common Stock Information"
in the Corporation's Annual Report for the fiscal year ended December 31, 2002,
is incorporated herein by reference. For information with respect to equity
compensation plans, see "Item 11 - Security Ownership of Certain Beneficial
Owners and Management."

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

The required information is contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report and is incorporated herein by reference.

Item  7.  Financial Statements
------------------------------

The Corporation's consolidated financial statements required herein are
contained in the Annual Report and are incorporated herein by reference.

                                       17

<PAGE>

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

Effective March 21, 2002, the Corporation replaced its independent auditors,
S.R. Snodgrass, A.C. (S.R. Snodgrass) with Crowe, Chizek and Company LLP (Crowe
Chizek). S.R. Snodgrass' report on the Corporation's financial statements during
the two most recent fiscal years preceding the date hereof contained no adverse
opinion or a disclaimer of opinions, and was not qualified or modified as to
uncertainty, audit scope or accounting principles. The decision to change
accountants was approved by the Corporation's Audit Committee. During the last
two fiscal years and the subsequent interim period to the date hereof, there
were no disagreements between the Corporation and S.R. Snodgrass on any matters
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreement(s), if not resolved to the
satisfaction of S.R. Snodgrass, would have caused it to make a reference to the
subject matter of the disagreement(s) in connection with its reports. None of
the "reportable events" described in Item 304(a)(1)(v) of Regulation S-B
occurred with respect to the Corporation within the last two fiscal years and
the subsequent interim period to the date hereof.

During the two fiscal years and the subsequent interim period prior to March 21,
2002, the Corporation did not consult Crowe Chizek regarding any of the matters
or events set forth in Item 304(a)(2)(v) and (ii) of Regulation S-B.


PART III

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

The information contained under the sections captioned "Principal Beneficial
Owners of the Corporation's Common Stock" and "Information as to Nominees,
Directors and Executive Officers" is incorporated by reference to the
Corporation's definitive proxy statement for the Corporation's Annual Meeting of
Stockholders to be held on April 29, 2003 (the Proxy Statement) which will be
filed no later than 120 days following the Corporation's fiscal year end.

Item 10.  Executive Compensation
--------------------------------

The information contained under the section captioned "Information as to
Nominees, Directors and Executive Officers" in the Proxy Statement is
incorporated herein by reference.

Item 11.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

         (a)      Security Ownership of Certain Beneficial Owners

                  Information required by this item is incorporated herein by
                  reference to the section captioned "Principal Beneficial
                  Owners of the Corporation's Common Stock" in the Proxy
                  Statement.

         (b)      Security Ownership of Management

                  Information required by this item is incorporated herein by
                  reference to the section captioned "Principal Beneficial
                  Owners of the Corporation's Common Stock" in the Proxy
                  Statement.

         (c)      Changes in Control

                  Management of the Corporation knows of no arrangements,
                  including any pledge by any person of securities of the
                  Corporation, the operation of which may at a subsequent date
                  result in a change in control of the Registrant.

         (d)      Securities Authorized for Issuance Under Equity Compensation
                  Plans

                  Not applicable. The Corporation does not maintain any equity
                  compensation plans.

                                       18

<PAGE>


Item 12.  Certain Relationships and Related Transactions
--------------------------------------------------------

The information required by this item is incorporated herein by reference to the
section captioned "Information as to Nominees, Directors and Executive Officers"
in the Proxy Statement.


Item 13.  Exhibits, Lists and Reports on Form 8-K
-------------------------------------------------

(a) Exhibits are either attached as part of this Report or incorporated herein
by reference.

              3.1     Articles of Incorporation of Emclaire Financial Corp. (1)

              3.2     Bylaws of Emclaire Financial Corp. (1)

              4       Specimen Stock Certificate of Emclaire Financial Corp. (2)

              10.1    Form of Change in Control Agreement between Registrant
                      and two executive officers. (3)

              10.2    Form of Group Term Carve-Out Plan between the Farmers
                      National Bank of Emlenton and 20 Officers and Employees.

              10.3    Form of Supplemental Executive Retirement Plan Agreement
                      between the Farmers National Bank of Emlenton and Six
                      Officers.

              11      Statement regarding computation of earnings per share
                      (see Note 1 to the Notes to Consolidated Financial
                      Statements in the Annual Report).

              13      Annual Report to Stockholders for the fiscal year ended
                      December 31, 2002.

              20      Emclaire Financial Corp. Dividend Reinvestment and Stock
                      Purchase Plan.(4)

              21      Subsidiaries of the Registrant (see information contained
                      herein under "Business - Subsidiary Activity").

              99.1    Chief Executive Officer 906 Certification.

              99.2    Chief Financial Officer 906 Certification.


(b) Reports on Form 8-K.

    None.

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

(1)  Incorporated by reference to the Registrant's Registration Statement on
     Form SB-2, as amended, (File No. 333-11773) declared effective by the SEC
     on October 25, 1996.
(2)  Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
     for the year ended December 31, 1997.
(3)  Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
     for the year ended December 31, 1996.
(4)  Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
     for the year ended December 31, 2001.

                                       19

<PAGE>


Item 14.  Controls And Procedures.
----------------------------------

(a)  The Corporation maintains disclosure controls and procedures that are
     designed to ensure that information required to be disclosed in the
     Corporation's reports in compliance with the Securities Exchange Act of
     1934, as amended ("Exchange Act"), is recorded, processed, summarized, and
     reported within the time periods specified in the Securities and Exchange
     Commission's ("SEC") rules and forms, and that such information is
     accumulated and communicated to the Corporation's Management, including its
     Chief Executive Officer and Chief Financial Officer, as appropriate, to
     allow timely decisions regarding required disclosure based closely on the
     definition of "disclosure controls and procedures" in Rule 13a-14(c)
     promulgated under the Exchange Act. Within 90 days prior to the date of
     this report, the Corporation carried out an evaluation, under the
     supervision and with the participation of the Corporation's Management,
     including the Corporation's Chief Executive Officer and the Corporation's
     Chief Financial Officer, of the effectiveness of the design and operation
     of the Corporation's disclosure controls and procedures. Based on the
     foregoing, the Corporation's Chief Executive Officer and Chief Financial
     Officer concluded that the Corporation's disclosure controls and procedures
     were effective.

(b)  There have been no significant changes in the Corporation's internal
     controls or in other factors that could significantly affect the internal
     controls subsequent to the date of the evaluation referenced in paragraph
     (a) above.

                                       20

<PAGE>


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                            EMCLAIRE FINANCIAL CORP.

Dated:  March 20, 2003     By:   /s/ David L. Cox
                                ------------------------------------------------
                                David L. Cox
                                President, Chief Executive Officer, and Director
                                (Duly Authorized Representative)

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

<TABLE>
<CAPTION>

<S>     <C>                                                   <C>
By:    /s/ David L. Cox                                       By:  /s/ William C. Marsh
      -----------------------------------------------              ------------------------------------------------
      David L. Cox                                                 William C. Marsh
      President, Chief Executive Officer, and Director             Secretary/Treasurer
      (Principal Executive Officer)                                (Principal Financial and Accounting Officer)

Date: March 20, 2003                                          Date: March 20, 2003

By:    /s/ Ronald L. Ashbaugh                                 By:   /s/ Brian C. McCarrier
      -----------------------------------------------              ------------------------------------------------
      Ronald L. Ashbaugh                                           Brian C. McCarrier
      Director                                                     Director

Date: March 20, 2003                                          Date:March 20, 2003


By:    /s/ Bernadette H. Crooks                               By:   /s/ George W. Freeman
      -----------------------------------------------              ------------------------------------------------
      Bernadette H. Crooks                                         George W. Freeman
      Director                                                     Director

Date: March 20, 2003                                          Date: March 20, 2003


By:    /s/ Rodney C. Heeter                                   By:   /s/ Robert L. Hunter
      -----------------------------------------------              ------------------------------------------------
      Rodney C. Heeter                                             Robert L. Hunter
      Director                                                     Director

Date: March 20, 2003                                          Date: March 20, 2003


By:    /s/ J. Michael King                                    By:  /s/ John B. Mason
      -----------------------------------------------              ------------------------------------------------
      J. Michael King                                              John B. Mason
      Director                                                     Director

Date: March 20, 2003                                          Date: March 20, 2003


By:    /s/ Elizabeth C. Smith
      -----------------------------------------------
      Elizabeth C. Smith
      Director

Date:  March 20, 2003
</TABLE>

                                       21

<PAGE>

                                 CERTIFICATIONS

                Certification of the Principal Executive Officer
                 (Section 302 of the Sarbanes-Oxley Act of 2002)


I, David L. Cox, Chief Executive Officer and President, certify that:

1.   I have reviewed this annual report on Form 10-KSB of Emclaire Financial
     Corp.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statement, and other financial
     information included in this annual report, fairly present in all material
     respects, the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

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

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

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

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

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

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

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

Date: March 20, 2003

                                    By:      /s/ David L. Cox
                                             ----------------
                                             David L. Cox
                                             Chairman, Chief Executive Officer
                                             and President

                                       22

<PAGE>

                Certification of the Principal Financial Officer
                 (Section 302 of the Sarbanes-Oxley Act of 2002)


I, William C. Marsh, Secretary and Treasurer, certify that:

1.   I have reviewed this annual report on Form 10-KSB of Emclaire Financial
     Corp.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary
     to make the statements made, in light of the circumstances under which
     such statements were made, not misleading with respect to the period
     covered by this annual report;

3.   Based on my knowledge, the financial statements and other financial
     information included in this annual report, fairly present in all
     material respects, the financial condition, results of operations and
     cash flows of the registrant as of, and for, the periods presented in
     this annual report;

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as
     defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
     we have:

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

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

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

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

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

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

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


Date: March 20, 2003

                                            By:      /s/ William C. Marsh
                                                     -----------------------
                                                     William C. Marsh
                                                     Chief Financial Officer
                                                     Treasurer and Secretary


                                       23