EXHIBIT 13

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





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EMCLAIRE FINANCIAL CORP.



2002



A N N U A L
R E P O R T



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Table of Contents

<S>                                                                                                       <C>
       Consolidated Financial Highlights...................................................................1
       Chairman's Letter...................................................................................2
       Selected Consolidated Financial Data................................................................3
       Customer Service...Staying the Course...............................................................4
       Management's Discussion and Analysis of
                Financial Condition and Results of Operations..............................................6
       Consolidated Financial Statements..................................................................21
       Notes to Consolidated Financial Statements.........................................................25
       Report of Independent Auditors.....................................................................43
       Stock and Dividend Information.....................................................................44
       Corporate Information..............................................................................45
       Board of Directors and Officers....................................................................46
       Office Locations and Branch Managers................................................Inside Back Cover
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Corporate Profile

       Emclaire Financial Corp. (OTCBB: EMCF), a publicly traded Pennsylvania
       corporation and bank holding company, provides a wide 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 Farmers National Bank of Emlenton is an FDIC-insured national banking
       association, which conducts business through ten offices in Venango,
       Butler, Clarion, Clearfield, Elk and Jefferson counties, Pennsylvania. To
       complement retail operations conducted through its bank offices, the
       Corporation also invests in U.S. Government, municipal, mortgage-backed
       and corporate marketable securities primarily through its subsidiary
       bank.


Farmers National Bank of Emlenton Branch Network

                  [Insert Map of Branches with Addresses Here]


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<CAPTION>
Consolidated Financial Highlights
---------------------------------------------------------------------------------------
(Dollar amounts in thousands, except share data)

                                                     As of or for the
                                                  year ended December 31,
                                                   2002           2001         Change
                                                 ----------    -----------    ---------

       Balance Sheet:

<S>                                               <C>            <C>                <C>
          Total assets                            $238,577       $216,717           10%
          Loans receivable, net                    169,557        160,540            6%
          Total deposits                           204,425        189,470            8%
          Stockholders' equity                      22,680         21,111            7%
          Stockholders' equity per share             17.02          15.84            7%

       Income Statement:

          Net income                                $2,257         $1,705           32%
          Net interest income                        9,492          8,492           12%
          Net income per share                        1.69           1.28           32%
          Cash dividends per share                    1.03           0.70           47%

       Key Ratios:

          Return on average assets                    0.99%          0.84%          18%
          Return on average stockholders' equity     10.21%          8.35%          22%
          Efficiency ratio                           64.98%         69.58%         (7%)

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         Asset & Loan Growth                Deposit and Equity Growth

        1998  1999 2000 2001 2002           1998 1999 2000 2001 2002
Assets  $194  $192 $194 $217 $239  Deposits $170 $168 $171 $189 $204
Loans   $134  $139 $152 $161 $170  Equity    $21  $21  $20  $21  $23


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Emclaire Financial Corp.               1                      2002 Annual Report

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Chairman's Letter
--------------------------------------------------------------------------------

Dear Stockholders and Friends:


                                  David L. Cox
                           Chairman, President and CEO

The year 2002 was an indication what hard work, planning, and dedicated
employees can accomplish. Over the last several years, we have been building a
management team and a vision to lead us into the future as a community bank.
This year we witnessed a result of the effort we have put forth over the past
several years. Net income increased over 30% and we achieved a record earnings
year. Deposit growth was strong, increasing 8% and loans increased almost 6%.
The record earnings allowed us to declare a special dividend to shareholders in
the fourth quarter as an indication of our continued success.

The vision we have been building over the past several years is to be the
"number one community bank in western Pennsylvania". The strong growth and
increased earnings are indications we are having success in this area. We
planned and opened a new office in the Butler area to help us succeed in our
vision. Our office at the intersection of route 68 and Meridian road opened on
January 23, 2003. This is our first office attached to a convenience store and
will offer customers in the Butler and Meridian area another avenue for banking
with a community bank.

In 2002, we also began a major remodeling project in the Emlenton Office. When
completed, Emlenton will see a new and expanded office, loan processing
department, and enhanced executive and board offices. This project was
undertaken not only to provide a better facility for our Emlenton customers, but
also to show our commitment to the Emlenton community and to our dedication to
remain an independent community bank. Lee Ligo of Slippery Rock was chosen to
design the renovations and Joe McNany of Emlenton is the general contractor. We
are working closely with the Historical Society to restore the original look of
the outside of the building. We hope to have this project completed by mid year
and look forward to an open house that will show off our newly remodeled
facility.

We continue to bring new products to our customers. We had been working on a new
internet banking product in 2002 and have now introduced it to our customers in
January 2003. This product will offer our customers the convenience of doing
their banking from their home or from anywhere in the world. It includes the
ability to review balances and statements, transfer funds between accounts, and
to utilize bill payments over the internet. This type of product is a great
addition to the others we offer, such as telephone banking and debit cards. We
have the unique opportunity to offer technology that circumvents the globe with
a hometown attitude.

Our employees continue to be one of the most important keys to our success. The
past year was one of becoming more efficient with our staff. We are
consolidating our two branches in Clarion and we are also using more part-time
employees to help serve our customers more efficiently. The employees have been
very supportive and the board of directors and management remain dedicated to
the needs of our employees. By having a loyal and dedicated staff, we are able
to offer excellent customer service. This translates into more efficiency and
better shareholder value. We can see the results of these changes in our
profitable performance over the past year. We are positioned to continue to grow
in the future, with dedicated employees, strong capital, and the ability to
compete in a very competitive market. I would like to thank all the shareholders
for their continued confidence and support of our efforts.

Very truly yours,

/s/ David L. Cox

David L. Cox
Chairman of the Board,
President and Chief Executive Officer                           January 29, 2003


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Emclaire Financial Corp.               2                      2002 Annual Report

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<CAPTION>
Selected Consolidated Financial Data
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(Dollar amounts in thousands, except share data)

                                                             -------------------------------------------------------
                                                                               As of December 31,
Financial Condition Data                                           2002       2001       2000       1999     1998(3)
------------------------                                     -------------------------------------------------------

<S>                                                            <C>        <C>        <C>        <C>        <C>
   Total assets                                                $238,577   $216,717   $194,165   $192,004   $192,132
   Securities                                                    48,748     38,755     26,688     34,838     31,421
   Loans receivable, net                                        169,557    160,540    150,332    138,089    132,913
   Deposits                                                     204,425    189,470    171,125    168,425    169,870
   Borrowed funds                                                10,000      5,000      2,000      2,000      2,000
   Stockholders' equity                                          22,680     21,111     20,045     20,804     21,101
   Stockholders' equity per common share                         $17.02     $15.84     $15.04     $15.11     $15.12
   Tangible stockholders' equity per common share                $15.82     $14.54     $13.53     $12.87     $12.81

                                                             -------------------------------------------------------
                                                                         For the year ended December 31,
Operations Data                                                    2002       2001      2000(1)     1999     1998(3)
---------------                                              -------------------------------------------------------

   Interest income                                              $14,653    $14,589    $14,402    $13,652    $11,343
   Interest expense                                               5,161      6,097      5,832      5,647      4,669
                                                             ----------- ---------- ---------- ---------- ----------
   Net interest income                                            9,492      8,492      8,570      8,005      6,674
   Provision for loan losses                                        381        154        209        162        200
                                                             ----------- ---------- ---------- ---------- ----------
   Net interest income after provision for loan losses            9,111      8,338      8,361      7,843      6,474
   Noninterest income                                             1,400      1,339      1,187        860        793
   Noninterest expense                                            7,420      7,254      8,977      6,167      5,354
                                                             ----------- ---------- ---------- ---------- ----------
   Net income before income taxes                                 3,091      2,423        571      2,536      1,913
   Provision for income taxes                                       834        718        567        782        590
                                                             ----------- ---------- ---------- ---------- ----------

   Net income                                                    $2,257     $1,705         $4     $1,754     $1,323
                                                             =========== ========== ========== ========== ==========

      Average common shares outstanding                       1,332,835  1,332,835  1,348,210  1,394,473  1,186,540
      Net income per common share                                 $1.69      $1.28      $0.00      $1.26      $1.12
      Dividends per share (4)                                     $1.03      $0.70      $0.62      $0.57      $0.50

                                                             -------------------------------------------------------
                                                                    As of or for the year ended December 31,
Other Data                                                         2002       2001      2000(1)     1999     1998(3)
----------                                                   -------------------------------------------------------

   Performance Ratios
      Return on average assets                                     0.99%      0.84%         -       0.90%      0.85%
      Return on average equity                                    10.21%      8.35%      0.02%      8.27%      8.08%
      Yield on interest-earning assets (2)                         6.93%      7.69%      8.04%      7.70%      7.94%
      Cost of interest-bearing liabilities                         2.99%      3.99%      4.06%      3.89%      4.02%
      Cost of funds                                                2.53%      3.35%      3.38%      3.29%      3.36%
      Interest rate spread (2)                                     3.94%      3.70%      3.98%      3.81%      3.92%
      Net interest margin (2)                                      3.94%      4.52%      4.83%      4.56%      4.71%
      Efficiency ratio (2)                                        64.98%     69.58%     86.99%     64.01%     65.63%
      Noninterest expense to average assets                        3.25%      3.56%      4.62%      3.18%      3.43%
      Interest-earning assets to average assets                   94.65%     94.42%     93.39%     92.71%     92.56%
      Loans to deposits                                           82.94%     84.73%     87.85%     81.99%     78.24%
      Dividend payout ratio (4)                                   60.95%     54.72%         -      45.24%     44.64%
   Asset Quality Ratios
      Non-performing loans to total loans                          0.68%      0.78%      0.59%      0.50%      0.98%
      Non-performing assets to total assets                        0.49%      0.58%      0.48%      0.42%      0.72%
      Allowance for loan losses to total loans                     0.93%      0.90%      0.96%      0.98%      1.00%
      Allowance for loan losses to non-performing loans          136.81%    117.59%    162.22%    195.31%    102.06%
   Capital Ratios
      Stockholders' equity to assets                               9.51%      9.74%     10.32%     10.84%     10.98%
      Tangible stockholders' equity to tangible assets             8.90%      9.01%      9.38%      9.38%      9.47%
      Average equity to average assets                             9.69%     10.02%     10.71%     10.94%     10.50%

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(1)  Exclusive of $2.0 million ($1.8 million net of applicable income tax
     benefits) in charges for the write-down of an intangible asset assessed as
     impaired of $1.6 million and a decline in the value of a marketable
     security determined to be other than temporary of $448,000, net income,
     noninterest expense, return on average assets, return on average equity,
     noninterest expense to average assets, and efficiency ratio would have been
     $1.8 million, $6.5 million, 0.94%, 8.77%, 3.36% and 65.32%, respectively,
     for the year ended December 31, 2000.
(2)  Interest income utilized in calculation is on a fully tax equivalent basis.
(3)  In August 1998 the Corporation acquired Peoples Savings Financial
     Corporation.
(4)  Includes $0.25 per share special cash dividend paid in December 2002.

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Emclaire Financial Corp.               3                      2002 Annual Report

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Customer Service...Staying the Course
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     Community banking remained the focus throughout 2002 and now into 2003. In
all aspects of the Bank's operations - from customer satisfaction to new product
development, from community involvement to expanding our service area, and from
employee development to system enhancement - the Farmers National Bank of
Emlenton's vision to be the Number One Community Bank in Western Pennsylvania
has continued.
     To reinforce and realize the Bank's vision during the past year, the Bank
sponsored employee meeting nights, continued the "Donuts with Dave" employee and
President meeting program, encouraged customer and community feedback through
the "Tell it to the President" campaign, introduced a new home equity loan
product and began construction on improvements to the Bank's main office and
corporate headquarters. During early 2003, the Bank launched Internet banking
and opened a new branch office in Butler, Pennsylvania.
     During 2002, management sponsored two employee "Vision" nights where all
employees and management met to review past accomplishments and set forth future
goals. In June, with a baseball field as the backdrop and all Farmers employees
wearing team hats and shirts, our emphasis was on the importance of all 102
employees moving in unison to accomplish organizational goals. Management
discussed and reviewed objectives on how each team member was integral to the
Bank's success. In the fall, a second vision night focused on the various
departments and branch offices of the Bank. Each area exhibited - through skits,
presentations, poems and songs - the positive aspects that make Farmers National
Bank a special place to work and bank.
     At the end of the evening, a video tied all the teams together presenting
one team working to be the number one community bank in Western Pennsylvania.
     Again this year, employees had the chance to meet regularly in small groups
with Dave Cox, the Bank's President, to discuss current issues and concerns
during "Donuts with Dave" meetings. These informal meetings provide Dave with
direct feedback and the opportunity to discuss the organization as well as
offering a forum for direct employee questions. This program, in place for a
couple of years, has proven to be successful in facilitating management-employee
communication.
     Farmers is not only concerned with employee feedback, but also wants to
know what customers and the community are thinking about the Bank and the
service received. The "Tell it to the President" campaign addressed this issue.
Displays and feedback cards were strategically placed throughout the branch
offices, affording customers the opportunity to fill out a card and drop it in
the box. All cards were reviewed and addressed directly by Dave. The results of
this campaign were positive and served as a good barometer of what customers are
thinking.

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Emclaire Financial Corp.               4                      2002 Annual Report


     A Home Equity Loan Campaign was also offered during the year in an
old-fashioned lighthearted way. This campaign read "Are you steamed over high
credit card bills?" and presented customers a great home equity loan product as
well as a free iron with each loan application. The results were quite favorable
as this campaign generated more than 150 loan accounts during a three-month
period.
     Farmers demonstrated its commitment to the local area and to providing a
safe, pleasant place to bank and work with the commencement of a $1 million
renovation project for its main office and corporate headquarters in Emlenton,
Pennsylvania. This project, reviewed by management and the Board of Directors
throughout 2002 and started in December 2002, will provide historical
significance to the Emlenton area as the historic integrity of the building is
being restored. Included in the renovations of this 100 year-old building is an
expanded and improved lobby as well as enhanced, more efficient corporate and
administrative offices. The Bank is working with a local architect, contractors
and state and federal historic agencies to complete this project by mid-year
2003.
     Internet banking @ www.farmersnb.com was launched in January 2003 as
another service convenience to customers. This service allows customers to go
on-line to check account balances or transfer funds 24 hours a day, seven days a
week. Customers can also download financial information from other financial
software packages and pay bills and order new checks on-line from their home,
business or other location.
     Farmers' commitment to providing expanded service and to growing our
franchise was evidenced by the recent opening of its newest office on Meridian
Road in Butler, Pennsylvania. This full service office with three drive-thru
lanes and an automatic teller machine will serve the east-Butler area. A
dignitary night kicked off the opening in late-January 2003.
     We will continue to seek favorable growth investment opportunities, similar
to this new Meridian Office, as we move forward to expand our franchise and
service area.
     The Farmers National Bank of Emlenton's commitment to community banking is
paying off as we continue to grow after more than 102 years of operation.
"Serving this Area from this Area" is more than Farmer's slogan, it's the way we
do business.

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Emclaire Financial Corp.               5                      2002 Annual Report


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

Overview
--------

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 offices in Venango, Butler, Clarion,
Clearfield, Elk and Jefferson counties, Pennsylvania. The Corporation and the
Bank are headquartered in Emlenton, Pennsylvania.

The Bank is 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, as a registered bank holding
company, is subject to regulation by the Federal Reserve Board.

Forward Looking Statements
--------------------------

Discussions of certain matters in this Annual Report and other related year end
documents may constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and as
such, may involve risks and uncertainties. Forward-looking statements, which are
based on certain assumptions and describe future plans, strategies, and
expectations, are generally identifiable by the use of words or phrases such as
"believe", "plan", "expect", "intend", "anticipate", "estimate", "project",
"forecast", "may increase", "may fluctuate", "may improve" and similar
expressions of future or conditional verbs such as "will", "should", "would",
and "could". These forward-looking statements relate to, among other things,
expectations of the business environment in which the Corporation operates,
projections of future performance, potential future credit experience, perceived
opportunities in the market, and statements regarding the Corporation's mission
and vision. The Corporation's actual results, performance, and achievements may
differ materially from the results, performance, and achievements expressed or
implied in such forward-looking statements due to a wide range of factors. These
factors include, but are not limited to, changes in interest rates, general
economic conditions, the demand for the Corporation's products and services,
accounting principles or guidelines, legislative and regulatory changes,
monetary and fiscal policies of the U.S. Government, U.S. Treasury, and Federal
Reserve, real estate markets, competition in the financial services industry,
attracting and retaining key personnel, performance of new employees, regulatory
actions, changes in and utilization of new technologies, and other risks
detailed in the Corporation's reports filed with the Securities and Exchange
Commission (SEC) from time to time, including the Quarterly Reports on Form
10-QSB. These factors should be considered in evaluating the forward-looking
statements, and undue reliance should not be placed on such statements. The
Corporation does not undertake, and specifically disclaims any obligation, to
update any forward-looking statements to reflect occurrences or unanticipated
events or circumstances after the date of such statements.

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Emclaire Financial Corp.               6                      2002 Annual Report


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Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
--------------------------------------------------------------------------------

Changes in Financial Condition
------------------------------

Total assets increased $21.9 million or 10.1% to $238.6 million at December 31,
2002 from $216.7 million at December 31, 2001. This increase was primarily due
to increases in securities of $10.0 million, and loans receivable of $9.0
million. Also contributing to the increase in total assets was the purchase of
$4.0 million in bank-owned life insurance during the third quarter of 2002.
Partially offsetting the net increase in assets was a decrease in cash and cash
equivalents of $1.4 million as these funds were utilized, in part, to fund
growth in the aforementioned earning-asset categories.

The increase in the Corporation's total assets was primarily funded by increases
in total liabilities of $20.3 million or 10.4% and total stockholders' equity of
$1.6 million or 7.4%. The increase in total liabilities was primarily due to
increases in customer deposits of $15.0 million or 7.9% and borrowed funds of
$5.0 million. This increase in deposits, experienced industry-wide, reflects
lower stock market returns in recent years and the corresponding desire of
customers to seek the safety of government insured bank deposits.

Cash and cash equivalents. Cash on hand, interest-earning deposits and federal
funds sold decreased a combined $1.4 million or 15.7% to $7.7 million at
December 31, 2002 from $9.2 million at December 31, 2001. These accounts are
typically increased by net operating results, deposits by customers into savings
and checking accounts, loan and security repayments and proceeds from borrowed
funds. Decreases result from customer deposit withdrawals, new loan originations
or other loan fundings, security purchases, repayments of borrowed funds and
cash dividends to stockholders. The decrease experienced during 2002 was a
direct result of funding shorter-term higher yielding investment securities,
loan growth and concerted efforts by management to reduce the levels of
non-earning cash reserves maintained in the Bank's branch network.

Securities. Securities increased $10.0 million or 25.8% to $48.7 million at
December 31, 2002 from $38.8 million at December 31, 2001. This net increase
resulted from security purchases totaling $42.6 million, comprised of purchases
of short-term commercial paper, U.S. Government agency and municipal securities
of $17.3 million, $20.0 million and $5.3 million, respectively, during 2002.
Partially offsetting the net increase in securities were security maturities and
calls totaling $33.5 million, comprised of commercial paper, U.S. Government
agency and municipal securities of $17.3 million, $15.5 million and $715,000,
respectively, during 2002. Also contributing to the change in securities for the
year was an increase in the unrealized gain on securities available for sale.
The overall increase in securities for the year resulted from management
deploying funds obtained through deposit growth as well as borrowed funds, that
outpaced loan production, into marketable securities within targeted maturity
terms and where optimal yields could be realized.

Loans receivable. Net loans receivable increased $9.0 million or 5.6% to $169.6
million at December 31, 2002 from $160.5 million at December 31, 2001. This
increase can be attributed to growth in the Corporation's commercial loan
portfolios. Commercial real estate loans increased $8.5 million or 32.2% and
commercial business loans increased $1.1 million or 5.3% as business activity in
the Bank's markets have increased as a result of the lower interest rate
environment as well as an increased focus by management on commercial lending.
Also contributing to the growth in the loan portfolio was an increase in home
equity loans of $3.7 million or 23.9% due primarily to home equity loan
campaigns put forth during the year. First mortgage loans decreased $2.5 million
or 3.0% during the year amid considerable refinancing activity. During the year
$1.3 million of fixed-rate conforming 20- and 30-year mortgages were sold in
connection with managing interest rate risk. As noted, during the year the
Corporation experienced significant refinancing activity in its real estate loan
portfolios as a result of the decline in market interest rates.

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Emclaire Financial Corp.               7                      2002 Annual Report


<PAGE>

Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
--------------------------------------------------------------------------------

Non-performing assets. Non-performing assets include non-accrual loans and real
estate acquired through foreclosure (REO). Non-performing assets decreased
$102,000 or 8.0% to $1.2 million or 0.49% of total assets at December 31, 2002
from $1.3 or 0.58% of total assets at December 31, 2001. Non-performing assets
consisted of non-performing loans and REO of $1.2 million and $3,000,
respectively, at December 31, 2002 and $1.3 million and $20,000, respectively,
at December 31, 2001.

Federal bank stocks. Federal bank stocks were comprised of FHLB stock and FRB
stock of $965,000 and $333,000, respectively, at December 31, 2002. These stocks
are purchased and redeemed at par as directed by the federal banks and levels
maintained are based primarily on borrowing and other correspondent
relationships between the Corporation and the banks.

Bank-owned life insurance (BOLI). On September 30, 2002, the Corporation paid
$4.0 million in BOLI premiums to obtain single premium life insurance policies
on twenty officers and employees of the Bank. In addition to providing life
insurance coverage, whereby the Bank as well as the officers and employees
receive life insurance benefits, the appreciation of the cash surrender value of
the BOLI will serve to offset and finance existing and future employee benefit
costs. The BOLI premium paid is projected to preliminarily yield approximately
5.40% in tax-free non-cash appreciation on an annual basis.

Premises and equipment. Premises and equipment increased $290,000 or 8.6% to
$3.7 million at December 31, 2002 from $3.4 million at December 31, 2001. The
net increase resulted from capital expenditures of $750,000, primarily for
remodeling of the Corporation's headquarters, investment in a new branch office,
and data processing equipment upgrades, partially offset by normal depreciation
of fixed assets of $460,000.

Goodwill and Core deposit intangibles. Core deposit intangibles decreased
$146,000 or 46.3% to $169,000 at December 31, 2002 from $315,000 at December 31,
2001 as a result of normal amortization during the year. Upon adopting new
accounting guidance effective January 1, 2002, the Corporation ceased amortizing
goodwill.

Deposits. Total deposits increased $15.0 million or 7.9% to $204.4 million at
December 31, 2002 from $189.5 million at December 31, 2001. The increase in
customer deposits can be attributed to internal growth within the Bank's branch
network across all major deposit categories. For the year, noninterest-bearing
demand, interest-bearing demand and time deposits increased $3.5 million or
12.1%, $3.0 million or 4.3% and $8.5 million or 9.3%, respectively. This
increase in deposits can be attributed primarily to a shift of customer funds
from mutual funds and other equity investments to FDIC insured bank deposit
products. This shift has happened industry-wide and has resulted from the
national economic downturn and overall weaker stock market performance
experienced during recent years.

Borrowed funds. Borrowed funds, or advances from the FHLB, increased $5.0
million to $10.0 million at December 31, 2002 from $5.0 million at December 31,
2001. The increase in advances was the result of management's matching long term
borrowed funds with municipal investment securities with similar maturity terms
to obtain an acceptable spread.

Accrued expenses and other liabilities. Accrued expenses and other liabilities
increased $349,000 or 53.2% to $1.0 million at December 31, 2002 from $656,000
at December 31, 2001 primarily as a result of increased accruals for incentive
bonus and professional fee expenses to be paid in early 2003.

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Emclaire Financial Corp.               8                      2002 Annual Report


<PAGE>

Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
--------------------------------------------------------------------------------

Capital Resources
-----------------

Total stockholders' equity increased $1.6 million or 7.4% to $22.7 million at
December 31, 2002 from $21.1 million at December 31, 2001. Net income of $2.3
million in 2002, represented growth in earnings of $552,000 or 32.4% compared to
last year. Returns on averages equity and assets were 10.21% and 0.99%,
respectively for 2002.

The Corporation has maintained a strong capital position with a capital to
assets ratio of 9.5% at December 31, 2002, a slight decline over the ratio of
9.7% a year earlier. While continuing to sustain this strong capital position,
stockholders received dividends of $1.4 million in 2002, including a special
fourth quarter 2002 cash dividend of $333,000. Exclusive of the special cash
dividend, regular quarterly dividends increased to $1.0 million in 2002 from
$931,000 in 2001. Stockholders have taken part in the Corporation's dividend
reinvestment plan introduced during 2002 with 36% of registered shareholder
accounts active in the plan at December 31, 2002.

Capital adequacy is the Corporation's ability to support growth while protecting
the interest of shareholders and depositors and to ensure that capital ratios
are in compliance with regulatory minimum requirements. Regulatory agencies have
developed certain capital ratio requirements that are used to assist them in
monitoring the safety and soundness of financial institutions. At December 31,
2002, the Corporation and the Bank were in compliance with all regulatory
capital requirements.

Liquidity
---------

The Corporation's primary sources of funds generally have been deposits obtained
through the offices of the Bank, borrowings from the FHLB, and amortization and
prepayments of outstanding loans and maturing securities. During 2002 the
Corporation used its sources of funds primarily to fund loan commitments and
purchase securities. As of December 31, 2002, the Corporation had outstanding
loan commitments, including undisbursed loans and amounts available under credit
lines, totaling $14.2 million, and standby letters of credit totaling $686,000.
The Bank is required by the OCC to establish policies to monitor and manage
liquidity levels to ensure the Bank's ability to meet demands for customer
withdrawals and the repayment of short-term borrowings, and the Bank is
currently in compliance with all liquidity policy limits.

At December 31, 2002, time deposits amounted to $99.0 million or 48.4% of the
Corporation's total consolidated deposits, including approximately $31.0
million, which are scheduled to mature within the next year. Management of the
Corporation believes that they have adequate resources to fund all of its
commitments, that all of its commitments will be funded as required by related
maturity dates and that, based upon past experience and current pricing
policies, it can adjust the rates of time deposits to retain a substantial
portion of maturing liabilities.

Aside from liquidity available from customer deposits or through sales and
maturities of securities, the Corporation has alternative sources of funds such
as a line of credit and term borrowing capacity from the FHLB and, to a limited
and rare extent, through the sale of loans. At December 31, 2002, the
Corporation's borrowing capacity with the FHLB, net of funds borrowed, was $93.0
million.

Management is not aware of any conditions, including any regulatory
recommendations or requirements, that would adversely impact its liquidity or
its ability to meet funding needs in the ordinary course of business.

--------------------------------------------------------------------------------
Emclaire Financial Corp.               9                      2002 Annual Report


<PAGE>

Management's Discussion and Analysis of
Financial Condition and Results of Operations (continued)
--------------------------------------------------------------------------------

Changes in Results of Operations
--------------------------------

The Corporation reported net income of $2.3 million, $1.7 million and $4,000 in
2002, 2001 and 2000, respectively. The following "Average Balance Sheet and
Yield/Rate Analysis" and "Analysis of Changes in Net Interest Income" tables
should be utilized in conjunction with the discussion of net interest income.

Average Balance Sheet and Yield/Rate Analysis. The following table sets forth,
for periods indicated, information concerning the total dollar amounts of
interest income from interest-earning assets and the resultant average yields,
the total dollar amounts of interest expense on interest-bearing liabilities and
the resulting average costs, net interest income, interest rate spread and the
net interest margin earned on average interest-earning assets. For purposes of
this table, average loan balances include non-accrual loans and exclude the
allowance for loan losses, and interest income includes accretion of net
deferred loan fees. Interest and yields on tax-exempt loans and securities
(tax-exempt for federal income tax purposes) are shown on a fully tax equivalent
basis.

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)                      Year ended December 31,

                                                       2002                      2001                      2000
                                             --------------------------------------------------- --------------------------
                                              Average           Yield / Average           Yield / Average           Yield /
                                              Balance  Interest  Rate   Balance  Interest  Rate   Balance  Interest  Rate
---------------------------------------------------------------------------------------------------------------------------

Interest-earning assets:
------------------------

<S>                                          <C>       <C>       <C>   <C>       <C>       <C>   <C>       <C>        <C>
 Loans receivable                            $167,062  $12,441   7.45% $155,769  $12,668   8.13% $148,482  $12,481    8.41%
                                             --------- -------- ------ --------- -------- ------ --------- -------- -------

 Securities, taxable                           29,745    1,485   4.99%   19,871    1,202   6.05%   24,122    1,515    6.28%
 Securities, tax exempt                        12,970      902   6.95%    8,157      565   6.93%    7,089      480    6.77%
                                             --------- -------- ------ --------- -------- ------ --------- -------- -------
                                               42,715    2,387   5.59%   28,028    1,767   6.30%   31,211    1,995    6.39%
                                             --------- -------- ------ --------- -------- ------ --------- -------- -------

 Interest-earning cash equivalents              4,719       73   1.55%    7,296      272   3.73%      766       46    6.01%
 Federal bank stocks                            1,314       55   4.19%    1,255       80   6.37%    1,130       77    6.81%
                                             --------- -------- ------ --------- -------- ------ --------- -------- -------
                                                6,033      128   2.12%    8,551      352   4.12%    1,896      123    6.49%
                                             --------- -------- ------ --------- -------- ------ --------- -------- -------

 Total interest-earning assets                215,810   14,956   6.93%  192,348   14,787   7.69%  181,589   14,599    8.04%

 Cash and due from banks                        5,467                     6,168                     6,136
 Other noninterest-earning assets               6,741                     5,205                     6,707
                                             ---------                 ---------                 ---------

    Total assets                             $228,018                  $203,721                  $194,432
                                             =========                 =========                 =========

Interest-bearing liabilities:
--------------------------------------------
 Interest-bearing demand deposits             $71,983     $799   1.11%  $65,595   $1,312   2.00%  $65,393   $1,523    2.33%
 Time deposits                                 94,301    4,094   4.34%   85,696    4,714   5.50%   75,160    4,110    5.47%
                                             --------- -------- ------ --------- -------- ------ --------- -------- -------
                                              166,284    4,893   2.94%  151,291    6,026   3.98%  140,553    5,633    4.01%
                                             --------- -------- ------ --------- -------- ------ --------- -------- -------

 Borrowed funds                                 6,203      268   4.32%    1,370       71   5.18%    3,122      199    6.37%
                                             --------- -------- ------ --------- -------- ------ --------- -------- -------

 Total interest-bearing liabilities           172,487    5,161   2.99%  152,661    6,097   3.99%  143,675    5,832    4.06%
 Noninterest-bearing demand deposits           31,679        -      -    29,411        -      -    29,041        -       -
                                             --------- -------- ------ --------- -------- ------ --------- -------- -------

 Funding and cost of funds                    204,166    5,161   2.53%  182,072    6,097   3.35%  172,716    5,832    3.38%

 Other noninterest-bearing liabilities          1,748                     1,232                       925
                                             ---------                 ---------                 ---------
    Total liabilities                         205,914                   183,304                   173,641
    Stockholders' equity                       22,104                    20,417                    20,791
                                             ---------                 ---------                 ---------

    Total liabilities and equity             $228,018                  $203,721                  $194,432
                                             ========= --------        ========= --------        ========= --------

Net interest income                                     $9,795                    $8,690                    $8,767
                                                       ========                  ========                  ========

Interest rate spread (difference between
 weighted average rate on interest-earning
 assets and interest-bearing liabilities)                        3.94%                     3.70%                      3.98%
                                                                ======                    ======                    =======

Net interest margin (net interest
 income as a percentage of average
 interest-earning assets)                                        4.54%                     4.52%                      4.83%
                                                                ======                    ======                    =======
</TABLE>

--------------------------------------------------------------------------------
Emclaire Financial Corp.               10                     2002 Annual Report

<PAGE>

Analysis of Changes in Net Interest Income. The following table analyzes the
changes in interest income and interest expense in terms of: (1) changes in
volume of interest-earning assets and interest-bearing liabilities and (2)
changes in yields and rates. The table reflects the extent to which changes in
the Corporation's interest income and interest expense are attributable to
changes in rate (change in rate multiplied by prior year volume), changes in
volume (changes in volume multiplied by prior year rate) and changes
attributable to the combined impact of volume/rate (change in rate multiplied by
change in volume). The changes attributable to the combined impact of
volume/rate are allocated on a consistent basis between the volume and rate
variances. Changes in interest income on loans and securities reflect the
changes in interest income on a fully tax equivalent basis.


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------

 (In thousands)                                2002 versus 2001             2001 versus 2000

                                         Increase (decrease) due to    Increase (decrease) due to
                                       ------------------------------ ----------------------------
                                         Volume      Rate      Total    Volume    Rate     Total
--------------------------------------------------------------------------------------------------
 Interest income:
<S>                                         <C>     <C>        <C>        <C>     <C>        <C>
    Loans                                   $883    $(1,110)   $(227)     $601    $(414)     $187
    Securities                               839       (219)     620      (201)     (27)     (228)
    Interest-earning cash equivalents        (75)      (124)    (199)      250      (24)      226
    Federal bank stocks                        4        (29)     (25)        8       (5)        3
                                       ---------- ---------- -------- --------- -------- ---------

    Total interest-earning assets          1,651     (1,482)     169       658     (470)      188
                                       ---------- ---------- -------- --------- -------- ---------

 Interest expense:
    Deposits                                 554     (1,687)  (1,133)      428      (35)      393
    Borrowed funds                           211        (14)     197       (96)     (32)     (128)
                                       ---------- ---------- -------- --------- -------- ---------

    Total interest-bearing liabilities       765     (1,701)    (936)      332      (67)      265
                                       ---------- ---------- -------- --------- -------- ---------

 Net interest income                        $886       $219   $1,105      $326    $(403)     $(77)
                                       ========== ========== ======== ========= ======== =========

</TABLE>

2002 Results Compared to 2001 Results

The Corporation reported net income of $2.3 million and $1.7 million for 2002
and 2001, respectively. The $552,000 increase or 32.4% increase in net income
can be attributed to increases in net interest income and noninterest income of
$1.0 million and $61,000, respectively, partially offset by increases in the
provision for loan losses, noninterest expense and the provision for income
taxes of $227,000, $166,000 and $116,000, respectively.

Net interest income. The primary source of the Corporation's revenue is net
interest income. Net interest income is the difference between interest income
on earning assets such as loans and securities, and interest expense on
liabilities, such as deposits and borrowed funds, used to fund the earning
assets. Net interest income is impacted by the volume and composition of
interest-earning assets and interest-bearing liabilities, and changes in the
level of interest rates. Tax equivalent net interest income increased $1.1
million or 12.7% to $9.8 million for 2002, compared to $8.7 million for 2001.
This increase in net interest income can be attributed to an increase in tax
equivalent interest income of $169,000 and a decrease in interest expense of
$936,000.

Interest income. Tax equivalent interest income increased $169,000 or 1.1% to
$15.0 million for 2002, compared to $14.8 million for 2001. This increase can be
attributed to an increase in interest earned on securities of $620,000,
partially offset by decreases in interest earned on loans, interest-earning cash
equivalents and federal bank stocks of $227,000, $199,000 and $25,000,
respectively.

--------------------------------------------------------------------------------
Emclaire Financial Corp.               11                     2002 Annual Report


<PAGE>

Tax equivalent interest earned on loans receivable decreased $227,000 or 1.8% to
$12.4 million for 2002, compared to $12.7 million for 2001. During that time,
average loans increased $11.3 million or 7.3%, accounting for $880,000 in
additional loan interest income. Due to the continually lower interest rate
environment in 2002 versus 2001, this volume increase was more than offset by a
decrease of $1.2 million relating to the 68 basis point reduction in the average
interest rate earned on the loan portfolio.

Aside from changes in the volume and rates of loans receivable discussed above,
$93,000 of the increase in loan net interest income between the years can be
attributed to the payoff of a previously non-performing commercial real estate
loan in March 2002 that had been on non-accrual status. In connection with the
loan payoff, the Corporation received all principal and interest due under the
contractual terms of the loan agreement and therefore interest collected was
recorded as loan interest income during the current period.

Tax equivalent interest earned on securities increased $620,000 or 35.1% to $2.4
million for 2002, compared to $1.8 million for 2001. The average volume of these
assets increased $14.7 million or 52.4% - as a result of the deployment of funds
from deposit growth, in excess of loan demand, into short-term commercial paper,
tax-free municipal securities and U.S. Government agency securities - accounting
for $839,000 of the increase in interest income. The average rate of securities
decreased 71 basis points during 2002 resulting in an offsetting reduction in
such interest income of $219,000.

Interest earned on interest-earning deposit accounts, including federal funds
sold, decreased $199,000 to $73,000 for 2002, compared to $272,000 for 2001, as
a result of lower average balances maintained and a decline in the yield on
these funds. Interest earned on federal bank stocks declined primarily as a
result of lower yields on these instruments in 2002 versus 2001.

Interest expense. Interest expense decreased $936,000 or 15.4% to $5.2 million
for 2002, compared to $6.1 million for 2001. This decrease in interest expense
can be attributed to a decrease in interest incurred on deposits of $1.1
million, partially offset by an increase in interest incurred on borrowed funds
of $197,000.

Deposit interest expense decreased $1.1 million or 18.8% to $4.9 million for
2002, compared to $6.0 million for 2001. This decrease in interest expense can
be attributed to a 104 basis point decline in the cost of interest-bearing
deposits to 2.94% for 2002 versus 3.98% for 2001 resulting in a reduction in
expense due to rate of $1.7 million. The favorable rate variance was partially
offset by an increase in average interest-bearing deposits of $15.0 million or
9.9% between 2002 and 2001 resulting in additional interest expense of $554,000.
As noted, this increase in deposits, despite the historically low interest rate
environment, has been market driven as stock market investors nationwide have
returned to community banks as a safer alternative for investing funds.

Interest expense on borrowed funds increased $197,000 to $268,000 for 2002,
compared to $71,000 for 2001 due to a $5.0 million FHLB term borrowing placed in
November 2002 and a similar $5.0 million FHLB term borrowing placed in late
2001.

Provision for loan losses. The Corporation records provisions for loan losses to
bring the total allowance for loan losses to a level deemed adequate to cover
probable losses inherent in the loan portfolio. In determining the appropriate
level of allowance for loan losses, management considers historical loss
experience, the present and prospective financial condition of borrowers,
current and prospective economic conditions (particularly as they relate to
markets where the Corporation originates loans), the status of non-performing
assets, the estimated underlying value of the collateral and other factors
related to the collectibility of the loan portfolio.

--------------------------------------------------------------------------------
Emclaire Financial Corp.               12                     2002 Annual Report


<PAGE>

The provision for loan losses increased $227,000 to $381,000 for 2002, compared
to $154,000 for 2001. The Corporation's allowance for loan losses amounted to
$1.6 million or 0.93% of the Corporation's total loan portfolio at December 31,
2002, compared to $1.5 million or 0.90% at December 31, 2001. The allowance for
loan losses as a percentage of non-performing loans at December 31, 2002 and
2001 was 136.8% and 117.6%, respectively. The increase in the provision for loan
losses from 2001 to 2002 was primarily due to increased charge-offs in 2002 and
continued growth in the loan portfolio.

Noninterest income. Noninterest income includes items that are not related to
interest rates, but rather to services rendered and activities conducted in the
financial services industry, including fees on depository accounts, general
transaction and service fees, security and loan gains and losses, and earnings
on BOLI. Noninterest income increased $61,000 or 4.6% to $1.4 million for 2002,
compared to $1.3 million for 2001. This increase can be attributed to a gain of
$39,000 on loans sold during the third quarter 2002, $58,000 on BOLI earnings as
a result of the Corporation's aforementioned BOLI purchase during 2002 and a
gain on the sale of a former office facility. Partially offsetting this increase
in noninterest income was decrease of $61,000 in service fees earned - primarily
overdraft fees as customers have followed previously prescribed guidelines to
assist in managing account overdrafts.

Noninterest expense. Noninterest expense increased $166,000 or 2.3% to $7.4
million for 2002, compared to $7.3 million for 2001. This increase in
noninterest expense is comprised of increases in compensation and employee
benefits, premises and equipment and other expenses of $134,000, $43,000 and
$119,000, respectively, partially offset by reduction in intangible amortization
expense of $130,000.

The largest component of noninterest expense is compensation and employee
benefits. This expense increased $134,000 or 3.4%. Normal annual salary and wage
adjustments, increased pension costs and a higher accrual for incentive
compensation, which is based on return on average asset and equity ratios, were
the major components of this increase. Partially offsetting this increase was a
reduction in headcount through normal attrition between 2002 and 2001, an
increase in standard loan costs deferred associated with personnel early in
2002, and the elimination of temporary staffing costs incurred in 2001, but not
2002.

In October 2002, the Bank entered into supplemental executive retirement plan
(SERP) agreements with six of its executives. In addition, effective January 1,
2003, the Corporation elected to begin matching employee contributions under the
Bank's 401(k) retirement plan and expects increased compensation as a result of
these matching contributions. The Bank has purchased the aforementioned BOLI
policies out of general assets to provide sufficient funds to pay the benefits
provided under the SERP agreements and to fund the 401(k) match. The Corporation
expects an additional $50,000 and $72,000 per year in compensation expense to
fund the additional costs under the SERP agreements and the 401(k) match,
respectively, over the next five years.

Premises and equipment expense increased $43,000 or 3.9% as a result of
depreciation in connection with capital improvement projects, primarily the Knox
office consolidation, that occurred in late 2001 and certain equipment upgrades
realized in 2002. Also contributing to the increase was an increase in rent on
the Knox office after consolidation and certain repair and maintenance projects
during the year.

Intangible amortization expense decreased $130,000 as a result of the
Corporation's adoption of the Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS) No.'s 142, "Goodwill and
Other Intangible Assets" and 147, "Acquisitions of Certain Financial
Institutions," effective January 1, 2002.

--------------------------------------------------------------------------------
Emclaire Financial Corp.               13                     2002 Annual Report


<PAGE>



Other expense increased $119,000 or 6.0% primarily as a result of increased
professional fees due principally to legal counsel fees associated with new
corporate governance legislation and the retention of new accounting firms and
separating the internal and external audit functions at the beginning of 2002;
retaining a transfer agent in late 2001 to assist in shareholder record keeping
and maintenance; and increased telephone and data communication costs, among
other variances between the two years. Partially offsetting this increase was a
decrease in software amortization expense as certain amortization periods
expired in late 2001 and in 2002 and a reduction of other expenses primarily as
a result of reevaluating deferred standard loans costs at the beginning of 2002.

2001 Results Compared to 2000 Results

The Corporation reported net income of $1.7 million and $4,000 for 2001 and
2000, respectively. The $1.7 million increase in net income between 2001 and
2000, can primarily be attributed to charges taken in the fourth quarter of 2000
totaling $2.0 million ($1.8 million net of applicable income tax benefit). These
charges included the write down of intangible assets assessed as permanently
impaired of $1.6 million and a decline in the value of a marketable security
determined to have an other than temporary decline in value of $448,000.

During the fourth quarter of 2000, as part of a regular assessment of the value
of intangible assets related to branch offices that were purchased as part of a
stock acquisition in 1998, the Corporation recorded a write-down of $1.6
million. The decision to revalue these intangible assets was based on several
factors including, necessary capital improvements, unanticipated personnel
changes and weaker than expected deposit growth associated with these offices. A
combination of these and other factors resulted in the decision to adjust the
value of the intangible assets and shorten the periods over which the remaining
balances would be amortized.

During the fourth quarter of 2000, a non-recurring charge of $448,000 was
recorded to recognize a decline in the value of a marketable equity security
investment in another financial institution that was determined to be other than
temporary. In assessing the operations and financial performance of the issuing
entity, no weaknesses or adverse trends were noted. However, due to the general
decline in the value of financial sector securities, management's determination,
at that time, was that this decline would not be recovered in the foreseeable
future. This investment had a cost and market value of $1.5 million and
$959,000, respectively, at December 31, 2000, near the time of the write-down
charge. At December 31, 2002, the market value of this investment was $1.5
million.

Exclusive of these charges, net income would have been $1.8 million for 2000,
and would have decreased $118,000 or 6.5% to $1.7 million for 2001 on an
adjusted basis. The decrease in net income, excluding consideration of the
nonrecurring charges, can be attributed to a decrease in net interest income of
$78,000 and an increase in noninterest expenses of $324,000, partially offset by
an increase in noninterest income of $152,000 and decreases in the provisions
for loan losses and income taxes of $55,000 and $77,000, respectively.

During 2001, the Corporation and the nation experienced a historically dramatic
drop in national market interest rates with the federal funds discount rate
decreasing 375 basis points to 1.75% in December 2001 from 5.50% in January
2001. Over the same period, the national prime-lending rate has declined
similarly from 9.50% to 4.75%.

--------------------------------------------------------------------------------
Emclaire Financial Corp.               14                     2002 Annual Report


<PAGE>



As outlined in detail below, this declining rate environment has resulted in a
significant repricing of the Corporation's loan products, reducing the yield of
the Corporation's interest-earning assets as new loan production and refinancing
of existing loans during 2001 has resulted in lower yielding loan assets.
Because the Corporation's time deposit products don't afford a call feature, the
cost of funds during 2001, did not decrease as quickly as the yield on
interest-earning assets, however, such repricing of deposits is expected to
approach that of interest-earning assets, particularly as the current lower
interest rate environment continues. The Corporation continues to evaluate the
pricing of interest-bearing demand deposits (checking, savings and money market
products) in light of the current rate environment and will adjust pricing to
reflect current market conditions. Specifically, the Corporation expects to see
a decrease in the cost of time deposits as approximately $50.5 million of these
deposits are expected to mature and reprice within the next year. The
Corporation does not expect a significant decrease in deposit balances as this
repricing occurs. And the repricing of these time deposits could result in a
lower cost of funds and a more stabilized or higher interest rate spread
especially if the current lower rate environment persists.

Net interest income. Tax equivalent net interest income decreased $77,000 or
approximately 1.0% to $8.7 million for 2001, compared to $8.8 million for 2000.
This decrease in net interest income can be attributed to an increase in
interest expense of $265,000, partially offset by an increase in interest income
of $188,000.

Interest income. Tax equivalent interest income increased $188,000 or 1.3% to
$14.8 million for 2001, compared to $14.6 million for 2000. This increase in
interest income can be attributed to increases in interest earned on loans
receivable, interest-earning cash equivalents and federal bank stocks of
$187,000, $226,000 and $3,000, respectively, partially offset by a decrease in
interest earned on securities of $228,000.

Tax equivalent interest earned on loans receivable increased $187,000 or 1.5% to
$12.7 million for 2001, compared to $12.5 million for 2000. This increase was
primarily attributable to an increase in the average balance of loans
outstanding of $7.3 million or 4.9% to $155.8 million for 2001 compared to
$148.5 million for 2000. Partially offsetting this volume increase was a decline
in the yield on loans to 8.13% for 2001, compared to 8.41% for 2000. As noted
previously, the increase in average loans receivable can be attributed to the
development of certain new consumer loan products and increased sales efforts in
the Bank's branch network, as well as increased market demand. The 28 basis
point decline in the yield on loans can be directly attributed to the decline in
national market interest rates noted above and the corresponding effect of this
decline on the Corporation's variable rate loans, mortgage refinancings and
lower attainable yields on new loan originations.

Tax equivalent interest earned on securities decreased $228,000 or 11.4% to $1.8
million for 2001, compared to $2.0 million for 2000. This decrease was
attributable to a decrease in the average balance of securities of $3.2 million
or 10.2% to $28.0 million for 2001, compared to $31.2 million for 2000. Also
contributing to the decrease in interest earned on securities was a slight
decline in the yield on securities to 6.30% for 2001, compared to 6.39% for
2000.

Interest earned on cash equivalents increased $226,000 to $272,000 for 2001,
compared to $46,000 for 2000 as the average balance increased $6.5 million to
$7.3 million for 2001, compared to $766,000 for 2000. The yield on
interest-earning cash equivalents decreased 228 basis points, as a direct result
of the aforementioned decline in the federal funds rate, to 3.73% for 2001,
compared to 6.01% for 2000.

The net increase in the combined average balances of securities and
interest-earning cash equivalents between 2001 and 2000 resulted from increases
in funding through deposit growth and borrowed fund balances during 2001.

--------------------------------------------------------------------------------
Emclaire Financial Corp.               15                     2002 Annual Report


<PAGE>



Income from federal bank stocks and related average balances and yields remained
relatively consistent at $80,000, $1.3 million and 6.37%, respectively, for
2001, compared to $77,000, $1.1 million and 6.81%, respectively, for 2000.

Interest expense. Interest expense increased $265,000 or 4.5% to $6.1 million
for 2001, compared to $5.8 million for 2000. This increase in interest expense
can be attributed to increases in interest incurred on deposits of $393,000,
partially offset by a decrease in interest incurred on borrowed funds of
$128,000.

Interest incurred on deposits increased $393,000 or 7.0% to $6.0 million for
2001, compared to $5.6 million for 2000. This increase was primarily
attributable to an increase in the average balance of interest-bearing deposits
of $10.7 million or 7.6% to $151.3 million for 2001, compared to $140.6 million
for 2000. Partially offsetting the increase in interest incurred on
interest-bearing deposits was a decrease in the cost of deposits to 3.98% for
2001, compared to 4.01% for 2000.

As noted previously, this increase in average deposits can be attributed to the
development of new deposit products and services, and enhanced sales efforts in
the Bank's branch offices. Also contributing to the increase in deposits is the
shift of customer funds from mutual funds and other equity investments to FDIC
insured bank deposit products as the result of the national economic downturn
and overall weaker stock market performance experienced during 2001.

Interest incurred on borrowed funds decreased $128,000 to $ 71,000 for 2001,
compared to $199,000 for 2000. This decrease was attributable to a decrease in
the average balance of borrowings of $1.8 million to $1.4 million for 2001,
compared to $3.1 million for 2000. Also contributing to the decrease in interest
incurred on borrowings was a decrease in the cost of these funds to 5.18% for
2001, compared to 6.37% for 2000.

Provision for loan losses. The provision for loan losses decreased $55,000 or
26.3% to $154,000 for 2001, compared to $209,000 for 2000. The Corporation's
allowance for loan losses amounted to $1.5 million or 0.90% of the Corporation's
total loan portfolio at December 31, 2001, compared to $1.5 million or 0.96% at
December 31, 2000. The allowance for loan losses as a percentage of
non-performing loans at December 31, 2001 and 2000 was 117.59% and 162.22%,
respectively.

Noninterest income. Noninterest income increased $152,000 or 12.8% to $1.3
million for 2001, compared to $1.2 million for 2000. This increase in
noninterest income is primarily attributed to increased transactional activity
associated with the growth of the deposit and loan portfolios during 2001.

Noninterest expense. Noninterest expense, exclusive of the aforementioned fourth
quarter 2000 nonrecurring charges for intangible impairment and the investment
security write-down of $1.6 million and $448,000, respectively, increased
$324,000 or 4.3% to $7.3 million for 2001, compared to $6.9 million for 2000.
This increase in noninterest expense can be attributed to increases in
compensation and employee benefits, premises and equipment and other expenses of
$270,000, $64,000 and $32,000, respectively. Partially offsetting the overall
increase in noninterest expense were decreases in intangible amortization of
$42,000.

Provision for income taxes. The provision for income taxes, exclusive of
consideration of the impact of the fourth quarter 2000 charges, decreased
$77,000 or 9.7% to $718,000 for 2001, compared to $795,000 for 2000. This
decrease was primarily the result of a decrease in pre-tax income between the
two years. The Corporation's effective income tax rate remained relatively
consistent between 2001 and 2000 at approximately 30%.

--------------------------------------------------------------------------------
Emclaire Financial Corp.               16                     2002 Annual Report



<PAGE>



Market Risk Management
----------------------

The primary objective of the Corporation's asset liability management function
is to maximize the Corporation's net interest income while simultaneously
maintaining an acceptable level of interest rate risk given the Corporation's
operating environment, capital and liquidity requirements, performance
objectives and overall business focus. One of the primary measures of the
exposure of the Corporation's earnings to interest rate risk is the timing
difference between the repricing or maturity of interest-earning assets and the
repricing or maturity of its interest-bearing liabilities.

The Corporation's Board of Directors has established a Finance Committee,
consisting of five outside directors, the President and Chief Executive Officer
and the Chief Financial Officer, to monitor market risk, including primarily
interest rate risk. This committee, which meets at least quarterly, generally
establishes and monitors the investment, interest rate risk and asset and
liability management policies established by the Corporation.

Interest Rate Sensitivity Gap Analysis

The implementation of asset and liability initiatives and strategies and
compliance with related policies, combined with other external factors such as
demand for the Corporation's products and economic and interest rate
environments in general, has resulted in the Corporation maintaining a one-year
cumulative interest rate sensitivity gap ranging between a positive and negative
20% of total assets. The one-year interest rate sensitivity gap is identified as
the difference between the Corporation's interest-earning assets that are
scheduled to mature or reprice within one year and its interest-bearing
liabilities that are scheduled to mature or reprice within one year.

The interest rate sensitivity gap is defined as the difference between the
amount of interest-earning assets maturing or repricing within a specific time
period and the amount of interest-bearing liabilities maturing or repricing
within that time period. A gap is considered positive when the amount of
interest rate-sensitive assets exceeds the amount of interest rate-sensitive
liabilities, and is considered negative when the amount of interest
rate-sensitive liabilities exceeds the amount of interest rate-sensitive assets.
Generally, during a period of rising interest rates, a negative gap would
adversely affect net interest income while a positive gap would result in an
increase in net interest income. Conversely, during a period of falling interest
rates, a negative gap would result in an increase in net interest income and a
positive gap would adversely affect net interest income. The closer to zero, or
more neutral, that gap is maintained, generally, the lesser the impact of market
interest rate changes on net interest income.

At December 31, 2002, the Corporation's interest-earning assets maturing or
repricing within one year totaled $81.8 million while the Corporation's
interest-bearing liabilities maturing or repricing within one-year totaled
$103.7 million, providing an excess of interest-bearing liabilities over
interest-earning assets of $21.8 million or a negative 9.2% of total assets. At
December 31, 2002, the percentage of the Corporation's assets to liabilities
maturing or repricing within one year was 78.9%.

--------------------------------------------------------------------------------
Emclaire Financial Corp.               17                     2002 Annual Report


<PAGE>


The following table presents the amounts of interest-earning assets and
interest-bearing liabilities outstanding as of December 31, 2002 which are
expected to mature, prepay or reprice in each of the future time periods
presented:

<TABLE>
<CAPTION>

(Dollar amounts in thousands)                    Due in    Due within  Due within  Due within   Due in
                                               six months  six months    one to     three to     over
                                                 or less   to one year three years five years five years   Total
------------------------------------------------------------------------------------------------------------------

<S>                                               <C>         <C>         <C>        <C>        <C>      <C>
Total interest-earning assets                     $58,875     $22,964     $70,512    $32,025    $38,035  $222,411

Total interest-bearing liabilities                 88,139      15,547      36,031     27,714     14,233   181,664
                                               ----------- ----------- ----------- ---------- ---------- ---------

Maturity or repricing gap during the period      $(29,264)     $7,417     $34,481     $4,311    $23,802   $40,747
                                               =========== =========== =========== ========== ========== =========

Cumulative gap                                   $(29,264)   $(21,847)    $12,634    $16,945    $40,747
                                               =========== =========== =========== ========== ==========

Ratio of gap during the period to total assets    (12.27%)       3.11%      14.45%      1.81%      9.98%
                                               =========== =========== =========== ========== ==========

Ratio of cumulative gap to total assets           (12.27%)     (9.16%)       5.30%      7.10%     17.08%
                                               =========== =========== =========== ========== ==========

Total assets                                                                                             $238,577
                                                                                                         =========

</TABLE>


Although certain assets and liabilities may have similar maturities or periods
of repricing, they may react in different degrees to changes in market interest
rates. The interest rates on certain types of assets and liabilities may
fluctuate in advance of changes in market interest rates, while interest rates
on other types of assets and liabilities may lag behind changes in market
interest rates. In the event of a change in interest rates, prepayment and early
withdrawal levels would likely deviate significantly from those assumed in
calculating the table. The ability of many borrowers to service their debt may
decrease in the event of an interest rate increase.

The one-year interest rate sensitivity gap has been the most common industry
standard used to measure an institution's interest rate risk position regarding
maturities, repricing and prepayments. In recent years, in addition to utilizing
interest rate sensitivity gap analysis, the Corporation has increased its
emphasis on the utilization of interest rate sensitivity simulation analysis to
evaluate and manage interest rate risk.

Interest Rate Sensitivity Simulation Analysis

The Corporation also utilizes income simulation modeling in measuring its
interest rate risk and managing its interest rate sensitivity. The Finance
Committee of the Corporation believes that simulation modeling enables the
Corporation to more accurately evaluate and manage the possible effects on net
interest income due to the exposure to changing market interest rates, the slope
of the yield curve and different loan and security prepayment and deposit decay
assumptions under various interest rate scenarios.

As with gap analysis and earnings simulation modeling, assumptions about the
timing and variability of cash flows are critical in net portfolio equity
valuation analysis. Particularly important are the assumptions driving mortgage
prepayments and the assumptions about expected attrition of the core deposit
portfolios. These assumptions are based on the Corporation's historical
experience and industry standards and are applied consistently across the
different rate risk measures.

--------------------------------------------------------------------------------
Emclaire Financial Corp.               18                     2002 Annual Report


<PAGE>



The Corporation has established the following guidelines for assessing interest
rate risk:

       Net interest income simulation. Given a 200 basis point parallel and
       gradual increase or decrease in market interest rates, net interest
       income may not change by more than 25% for a one-year period.

       Portfolio equity simulation. Portfolio equity is the net present value of
       the company's existing assets and liabilities. Given a 200 basis point
       immediate and permanent increase or decrease in market interest rates,
       portfolio equity may not correspondingly decrease or increase by more
       than 30% of stockholders' equity.

These guidelines take into consideration the current interest rate environment,
the Corporation's financial asset and financial liability product mix and
characteristics and liquidity sources among other factors. Given the current
rate environment, a drop in short-term market interest rates of 200 basis points
immediately or over a one-year horizon would seem unlikely. This should be
considered in evaluating modeling results outlined in the table below.

The following table presents the simulated impact of a 100 basis point or 200
basis point upward or downward shift of market interest rates on net interest
income, return on average equity and the change in portfolio equity. This
analysis was done assuming that the interest-earning asset and interest-bearing
liability levels at December 31, 2002 remained constant. The impact of the
market rate movements on net interest income and return on average equity was
developed by simulating the effects of rates changing gradually over a one-year
period from the December 31, 2002 levels for net interest income and return on
average equity. The impact of market rate movements on portfolio equity was
developed by simulating the effects of an immediate and permanent change in
rates at December 31, 2002:

<TABLE>
<CAPTION>
                                                        Increase          Decrease
                                                   ------------------------------------
                                                     +100     +200     -100     -200
                                                      BP        BP       BP       BP
---------------------------------------------------------------------------------------

<S>                                                    <C>      <C>   <C>      <C>
Net interest income - increase (decrease)              5.38%    6.84% (16.26%) (35.09%)

Return on average equity - increase (decrease)         5.38%    6.84% (16.26%) (35.09%)

Portfolio equity - increase (decrease)               (0.75%)  (6.62%)  (5.70%) (10.72%)
</TABLE>

Impact of Inflation and Changing Prices
---------------------------------------

The consolidated financial statements of the Corporation and related notes
presented herein have been prepared in accordance with accounting principles
generally accepted in the United States of America which require the measurement
of financial condition and operating results in terms of historical dollars,
without considering changes in the relative purchasing power of money over time
due to inflation.

Unlike most industrial companies, substantially all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates have a more significant impact on a financial institution's
performance than the effects of general levels of inflation. Interest rates do
not necessarily move in the same direction or in the same magnitude as the
prices of goods and services since such prices are affected by inflation to a
larger degree than interest rates. In the current interest rate environment,
liquidity and the maturity structure of the Corporation's assets and liabilities
are critical to the maintenance of acceptable performance levels.

--------------------------------------------------------------------------------
Emclaire Financial Corp.               19                     2002 Annual Report


<PAGE>


Recent Accounting and Regulatory Pronouncements
-----------------------------------------------

On January 1, 2002, the Corporation adopted SFAS No. 142, "Goodwill and Other
Intangible Assets." This statement changed the accounting for goodwill from an
amortization method to an impairment-only approach. Thus amortization of
goodwill, including goodwill recorded in past business combinations, ceased upon
adoption of this statement. However, this statement did not amend SFAS No. 72,
"Accounting for Certain Acquisitions of Banking or Thrift Institutions," which
requires recognition and amortization of unidentified intangible assets relating
to the acquisitions of certain financial institutions or branches thereof.

In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions," which amends and reconsiders certain provisions of SFAS
No. 72. This statement addresses the financial accounting and reporting for the
acquisition of all or part of a financial institution. The statement provides
that unidentified intangible assets associated with branch acquisitions,
considered a business combination under the provisions of SFAS No. 141,
"Business Combinations," should be reclassified as goodwill and accounted for
under the provisions of SFAS No. 142. This statement was effective on October 1,
2002, with earlier application permitted. In September 2002, the Corporation
adopted SFAS No. 147. At December 31, 2002, the Corporation had $484,000 in
previously classified SFAS No. 72 unidentified intangible assets classified as
goodwill.

On July 30, 2002, President Bush signed into law new legislation that addresses
accounting oversight and corporate governance. The new law creates a five-member
oversight board appointed by the Securities and Exchange Commission (SEC) that
will set standards for accountants and have investigative and disciplinary
powers. The new legislation bars accounting firms from providing a number of
consulting services to audit clients and requires accounting firms to rotate
partners among client assignments every five years. The new legislation also
increases penalties for financial crimes, requires expanded disclosure of
corporate operations and internal controls, enhances controls on and reporting
of insider trading, expands the SEC's budget, and places statutory separations
between investment bankers and analysts. Management is currently evaluating
recently adopted SEC rulemaking and its impact upon the Corporation. The
Corporation utilizes its external attestation auditor only for audit services
and assistance with the preparation of tax returns.


--------------------------------------------------------------------------------
Emclaire Financial Corp.               20                     2002 Annual Report


<PAGE>

<TABLE>
<CAPTION>
Consolidated Balance Sheets
--------------------------------------------------------------------------------
(Dollar amounts in thousands, except share data)
                                                                                   December 31,
                                                                         --------------------------------
                                                                             2002               2001
                                                                         -------------      -------------

                                 Assets
                                 -----

<S>                                                                            <C>                <C>
Cash and due from banks                                                        $5,495             $7,127
Interest-earning deposits in banks                                              2,221                620
Federal funds sold                                                                  -              1,410
                                                                         -------------      -------------
  Cash and cash equivalents                                                     7,716              9,157
Securities available for sale                                                  48,719             38,695
Securities held to maturity; fair value of $29 and $61                             29                 60
Loans receivable, net of allowance for loan losses of $1,587 and $1,464       169,557            160,540
Federal bank stocks                                                             1,298              1,261
Bank-owned life insurance                                                       4,054                  -
Accrued interest receivable                                                     1,325              1,251
Premises and equipment, net                                                     3,678              3,388
Goodwill                                                                        1,422              1,422
Core deposit intangibles                                                          169                315
Prepaid expenses and other assets                                                 610                628
                                                                         -------------      -------------

        Total assets                                                         $238,577           $216,717
                                                                         =============      =============

                  Liabilities and Stockholders' equity
                  ------------------------------------

Liabilities:
  Deposits:
       Noninterest bearing                                                    $32,762            $29,199
       Interest bearing                                                       171,663            160,271
                                                                         -------------      -------------
        Total deposits                                                        204,425            189,470
  Borrowed funds                                                               10,000              5,000
  Accrued interest payable                                                        467                480
  Accrued expenses and other liabilities                                        1,005                656
                                                                         -------------      -------------

       Total liabilities                                                      215,897            195,606
                                                                         -------------      -------------

Stockholders' equity:
  Preferred stock, $1.00 par value, 3,000,000 shares authorized;
       none issued                                                                  -                  -
  Common stock, $1.25 par value, 12,000,000 shares authorized;
       1,395,852 shares issued; 1,332,835 shares outstanding                    1,745              1,745
  Additional paid-in capital                                                   10,871             10,871
  Treasury stock, at cost; 63,017 shares                                         (971)              (971)
  Retained earnings                                                             9,978              9,094
  Accumulated other comprehensive income                                        1,057                372
                                                                         -------------      -------------

       Total stockholders' equity                                              22,680             21,111
                                                                         -------------      -------------

        Total liabilities and stockholders' equity                           $238,577           $216,717
                                                                         =============      =============
</TABLE>

See accompanying notes to consolidated financial statements.


--------------------------------------------------------------------------------
Emclaire Financial Corp.               21                     2002 Annual Report


<PAGE>

Consolidated Statements of Income
--------------------------------------------------------------------------------
(Dollar amounts in thousands, except share data)


<TABLE>
<CAPTION>
                                                               Year ended December 31,
                                                    ---------------------------------------------
                                                           2002            2001           2000
                                                    --------------   -------------   ------------

Interest and dividend income:
<S>                                                       <C>             <C>            <C>
  Loans receivable, including fees                        $12,419         $12,646        $12,433
  Securities:
    Taxable                                                 1,485           1,202          1,515
    Exempt from federal income tax                            621             389            331
  Federal bank stocks                                          55              80             77
  Deposits with banks and federal funds sold                   73             272             46
                                                    --------------   -------------   ------------
    Total interest and dividend income                     14,653          14,589         14,402
                                                    --------------   -------------   ------------

Interest expense:
  Deposits                                                  4,893           6,026          5,633
  Borrowed funds                                              268              71            199
                                                    --------------   -------------   ------------
    Total interest expense                                  5,161           6,097          5,832
                                                    --------------   -------------   ------------

Net interest income                                         9,492           8,492          8,570
  Provision for loan losses                                   381             154            209
                                                    --------------   -------------   ------------

Net interest income after provision for loan losses         9,111           8,338          8,361
                                                    --------------   -------------   ------------

Noninterest income:
  Fees and service charges                                    969           1,030            864
  Gain on the sale of loans                                    39               -              -
  Earnings on bank-owned life insurance                        58               -              -
  Other                                                       334             309            323
                                                    --------------   -------------   ------------
    Total noninterest income                                1,400           1,339          1,187
                                                    --------------   -------------   ------------

Noninterest expense:
  Compensation and employee benefits                        4,021           3,887          3,617
  Premises and equipment, net                               1,136           1,093          1,029
  Intangible amortization expense                             146             276            318
  Other                                                     2,117           1,998          4,013
                                                    --------------   -------------   ------------
    Total noninterest expense                               7,420           7,254          8,977
                                                    --------------   -------------   ------------

Income before provision for income taxes                    3,091           2,423            571
  Provision for income taxes                                  834             718            567
                                                    --------------   -------------   ------------

Net income                                                 $2,257          $1,705             $4
                                                    ==============   =============   ============

Net income per share                                        $1.69           $1.28             $-
Dividends per share                                         $1.03           $0.70          $0.62

Average common shares outstanding                       1,332,835       1,332,835      1,348,210

</TABLE>

See accompanying notes to consolidated financial statements.


--------------------------------------------------------------------------------
Emclaire Financial Corp.               22                     2002 Annual Report


<PAGE>




<TABLE>
<CAPTION>
Consolidated Statements of Changes in Stockholders' Equity
--------------------------------------------------------------------------------
(Dollar amounts in thousands, except share data)


                                                                                         Accumulated
                                                       Additional                          Other          Total
                                              Common    Paid-in   Treasury   Retained   Comprehensive Stockholder's
                                              Stock     Capital     Stock    Earnings   Income (Loss)    Equity
                                            ---------- ---------- --------- ----------- ----------------------------

<S>                                            <C>       <C>         <C>        <C>           <C>           <C>
Balance at December 31, 1999                   $1,745    $10,871     $(300)     $9,151        $(663)        $20,804

Comprehensive income:
  Net income                                                                         4                            4
  Change in net unrealized gain on
    securities available for sale, net of
    taxes of $384                                                                               743             743
                                                                            ----------------------------------------

Comprehensive income                                                                 4          743             747
                                                                            ----------------------------------------

Dividends declared, $0.62 per share                                               (835)                        (835)

Treasury stock acquired                                               (671)                                    (671)
                                            ---------- ---------- --------- ----------- ------------ ---------------

Balance at December 31, 2000                    1,745     10,871      (971)      8,320           80          20,045

Comprehensive income:
  Net income                                                                     1,705                        1,705
  Change in net unrealized gain on
    securities available for sale, net of
    taxes of $149                                                                               292             292
                                                                            ----------------------------------------

Comprehensive income                                                             1,705          292           1,997
                                                                            ----------------------------------------

Dividends declared, $0.70 per share                                               (931)                        (931)
                                            ---------- ---------- --------- ----------- ------------ ---------------

Balance at December 31, 2001                    1,745     10,871      (971)      9,094          372          21,111

Comprehensive income:
  Net income                                                                     2,257                        2,257
  Change in net unrealized gain on
    securities available for sale, net of
    taxes of $353                                                                               685             685
                                                                            ----------------------------------------

Comprehensive income                                                             2,257          685           2,942
                                                                            ----------------------------------------

Dividends declared, $1.03 per share                                             (1,373)                      (1,373)
                                            ---------- ---------- --------- ----------- ------------ ---------------

Balance at December 31, 2002                   $1,745    $10,871     $(971)     $9,978       $1,057         $22,680
                                            ========== ========== ========= =========== ============ ===============

</TABLE>

--------------------------------------------------------------------------------
Emclaire Financial Corp.               23                     2002 Annual Report


See accompanying notes to consolidated financial statements.

<PAGE>



<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
--------------------------------------------------------------------------------
(Dollar amounts in thousands, except share data)


                                                                       Year ended December 31,
                                                                   --------------------------------
                                                                     2002       2001       2000
                                                                   ---------- ---------- ----------

Operating activities:
<S>                                                                   <C>        <C>            <C>
  Net income                                                          $2,257     $1,705         $4
  Adjustments to reconcile net income to net cash from
    operating activities:
      Depreciation and amortization for premises and equipment           460        432        425
      Provision for loan losses                                          381        154        209
      Amortization of premiums and accretion of discounts, net           236         17         50
      Amortization of intangible assets                                  146        276        318
      Gain on sale of loans                                               39          -          -
      Earnings on bank-owned life insurance, net                         (54)         -          -
      Changes in:
        Accrued interest receivable                                      (74)        (4)       (50)
        Prepaid expenses and other assets                                 18        175      2,161
        Accrued interest payable                                         (13)       (25)       129
        Accrued expenses and other liabilities                           349        166         91
        Other                                                           (356)      (165)       (99)
                                                                   ---------- ---------- ----------
    Net cash provided by operating activities                          3,389      2,731      3,238
                                                                   ---------- ---------- ----------

Investing activities:
  Loan originations and payments, net                                 (9,570)   (10,362)   (12,606)
  Purchases of securities available for sale                         (42,561)   (19,595)    (1,788)
  Purchases of federal bank stocks                                       (37)       (22)         -
  Repayment, maturities and calls of securities available for sale    33,475      7,809      8,223
  Principal repayments of securities held to maturity                     31        159      2,043
  Purchase of bank-owned life insurance                               (4,000)         -          -
  Purchases of premises and equipment                                   (750)      (487)      (389)
                                                                   ---------- ---------- ----------
    Net cash used in investing activities                            (23,412)   (22,498)    (4,517)
                                                                   ---------- ---------- ----------

Financing activities:
  Net increase in deposits                                            14,955     18,345      2,700
  Borrowings from the FHLB                                             5,000      5,000          -
  Repayments of borrowed funds                                             -     (2,000)         -
  Dividends paid                                                      (1,373)      (931)      (835)
  Payments to acquire treasury stock                                       -          -       (671)
                                                                   ---------- ---------- ----------
    Net cash provided by financing activities                         18,582     20,414      1,194
                                                                   ---------- ---------- ----------

Net increase (decrease) in cash equivalents                           (1,441)       647        (85)
Cash equivalents at beginning of period                                9,157      8,510      8,595
                                                                   ---------- ---------- ----------
Cash equivalents at end of period                                     $7,716     $9,157     $8,510
                                                                   ========== ========== ==========

Supplemental information:

  Interest paid                                                       $5,174     $6,122     $5,703
  Income taxes paid                                                      725        922        886
</TABLE>

See accompanying notes to consolidated financial statements.

--------------------------------------------------------------------------------
Emclaire Financial Corp.               24                     2002 Annual Report

<PAGE>


Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

1.     Summary of Significant Accounting Policies

       Basis of Presentation and Consolidation. The consolidated financial
       statements include the accounts of Emclaire Financial Corp. (the
       Corporation) and its wholly owned subsidiary, the Farmers National Bank
       of Emlenton (the Bank). All significant intercompany balances and
       transactions have been eliminated in consolidation.

       Business. The Corporation provides a variety of financial services to
       individuals and businesses through its offices in western Pennsylvania.
       Its primary deposit products are checking, savings and term certificate
       accounts and its primary lending products are consumer and commercial
       mortgage loans.

       Use of Estimates and Classifications. The preparation of financial
       statements in conformity with accounting principles generally accepted in
       the United States of America requires management to make estimates and
       assumptions based on available information that affect the reported
       amounts in the consolidated financial statements and accompanying notes.
       Actual results could differ from those estimates. Material estimates that
       are particularly susceptible to significant change in the near term
       relate to the determination of the allowance for loan losses, fair value
       of financial instruments and deferred tax assets. Certain amounts
       previously reported have been reclassified to conform to the current year
       financial statement presentation. Such reclassifications did not affect
       net income or stockholders' equity.

       Cash Equivalents. Cash equivalents include cash on hand and in banks,
       interest-earning deposits and federal funds sold. Interest-earning
       deposits mature within one year and are carried at cost. Net cash flows
       are reported for loan and deposit transactions.

       Restrictions on Cash. Cash on hand or on deposit with the Federal Reserve
       Bank of approximately $200,000 was required to meet regulatory reserve
       and clearing requirements at December 31, 2002 and 2001. Such balances do
       not earn interest.

       Securities. Securities include investments primarily in bonds and notes
       and are classified as either available for sale or held to maturity at
       the time of purchase based on management's intent. Such intent includes
       consideration of the interest rate environment, prepayment risk, credit
       risk, maturity and repricing characteristics, liquidity considerations,
       investment and asset liability management policies and other pertinent
       factors. Securities for which the Corporation has the positive intent and
       ability to hold to maturity are classified as held to maturity and are
       reported at cost, adjusted for premiums and discounts. Available for sale
       securities consist of securities that are not classified as held to
       maturity. Unrealized holding gains and losses, net of applicable income
       taxes, on available for sale securities are reported as accumulated other
       comprehensive income until realized.

       Purchase premiums and discounts on securities are recognized in interest
       income using the interest method over the term of the securities.
       Declines in the fair value of securities below their cost that are other
       than temporary result in the security being written down to fair value on
       an individual basis. Any related write-downs are included in operations.
       Gains and losses on the sale of securities are recorded on the trade date
       and are determined using the specific identification method and are
       included in operations in the period sold.

       Loans Held for Sale. Loans originated and intended for sale in the
       secondary market are carried at the lower of cost or estimated fair value
       in the aggregate. Net unrealized losses, if any, are recognized through a
       valuation allowance by charges to income.


--------------------------------------------------------------------------------
Emclaire Financial Corp.               25                     2002 Annual Report


<PAGE>

1.     Summary of Significant Accounting Policies (continued)

       Loans Receivable. The Corporation grants mortgage, commercial and
       consumer loans to customers. A substantial portion of the loan portfolio
       is represented by mortgage loans throughout western Pennsylvania. The
       ability of the Corporation's debtors to honor their contracts is
       dependent upon real estate and general economic conditions in this area.

       Loans that management has the intent and ability to hold for the
       foreseeable future or until maturity or net pay-off generally are
       reported at their outstanding unpaid principal balances adjusted for
       charge-offs, the allowance for loan losses, and any deferred fees or
       costs on originated loans or premiums or discounts on purchased loans.
       Interest income is accrued on the unpaid principal balance. Loan
       origination fees, net of certain direct origination costs, and premiums
       and discounts are deferred and recognized as an adjustment of the related
       loan yield using the interest method.

       The accrual of interest on loans is typically discontinued at the time
       the loan is 90 days or more delinquent unless the credit is well secured
       and in the process of collection. Loans are placed on nonaccrual or
       charged off at an earlier date if collection of principal or interest is
       considered doubtful. All interest accrued but not collected for loans
       that are placed on nonaccrual status or charged off is reversed against
       interest income. The interest on these loans is accounted for on the
       cash-basis or cost-recovery method, until qualifying for return to
       accrual. Loans are returned to accrual status when all principal and
       interest amounts contractually due are brought current and future
       payments are reasonably assured.

       Allowance for Loan Losses. The allowance for loan losses is established
       for probable incurred credit losses through a provision for loan losses
       charged to earnings. Loan losses are charged against the allowance when
       management believes the uncollectibility of a loan balance is confirmed.
       Subsequent recoveries, if any, are typically credited to the allowance.

       The allowance for loan losses is evaluated on a regular basis by
       management and is based upon management's periodic review of the
       collectibility of loans in light of historic experience, the nature and
       volume of the loan portfolio, adverse situations that may affect the
       borrower's ability to repay, estimated value of any underlying collateral
       and prevailing economic conditions. This evaluation is inherently
       subjective as it requires estimates that are susceptible to significant
       revision as more information becomes available.

       A loan is considered impaired when, based on current information and
       events, it is probable that the Corporation will be unable to collect the
       scheduled payments of principal or interest when due according to the
       contractual terms of the loan agreement. Factors considered by management
       in determining impairment include payment status, collateral value, and
       the probability of collecting scheduled principal and interest payments
       when due. Loans that experience insignificant payment delays and payment
       shortfalls generally are not classified as impaired. Management
       determines the significance of payment delays and payment shortfalls on a
       case-by-case basis, taking into consideration all the circumstances
       surrounding the loan and the borrower, including the length of the delay,
       the reasons for the delay, the borrower's prior payment record, and the
       amount of the shortfall in relation to the principal and interest owed.
       Impairment is measured on a loan-by-loan basis for commercial loans by
       either the present value of expected future cash flows discounted at the
       loans effective interest rate, the loan's obtainable market price, or the
       fair value of the underlying collateral, if the loan is collateral
       dependent. Large groups of homogeneous loans are evaluated collectively
       for impairment. Accordingly, the Corporation does not identify individual
       consumer and residential mortgage loans for impairment disclosures.

--------------------------------------------------------------------------------
Emclaire Financial Corp.               26                     2002 Annual Report


<PAGE>



1.     Summary of Significant Accounting Policies (continued)

       Bank-Owned Life Insurance (BOLI). The Bank purchased life insurance
       policies on certain key officers and employees. BOLI is recorded at its
       cash surrender value, or the amount that can be realized.

       Premises and Equipment. Land is carried at cost. Premises, furniture and
       equipment, and leasehold improvements are carried at cost less
       accumulated depreciation or amortization. Depreciation is calculated on a
       straight-line basis over the estimated useful lives of the related
       assets, which are twenty-five to fifty years for buildings and three to
       ten years for furniture and equipment. Amortization of leasehold
       improvements is computed using the straight-line method over the term of
       the related lease. Premises and equipment are reviewed for impairment
       when events indicate their carry amount may not be recoverable from
       future undiscounted cash flows. If impaired, assets are recorded at fair
       value.

       Goodwill and Intangible Assets. Goodwill results from prior business
       acquisitions and represents the excess of the purchase price over the
       fair value of acquired assets and liabilities. Upon adopting new
       accounting guidance on January 1, 2002, the Corporation ceased
       amortization of goodwill. Core deposit intangible assets arise from whole
       bank or branch acquisitions and are measured at fair value and then are
       amortized on a straight-line basis over their estimated lives, generally
       less than 10 years. Intangible assets are assessed at least annually for
       impairment and any such impairment will be recognized in the period
       identified.

       Servicing Assets: Servicing assets represent purchased rights and the
       allocated value of retained servicing rights on loans sold. Servicing
       assets are expensed in proportion to, and over the period of, estimated
       net servicing revenues. Impairment is evaluated based on the fair value
       of the assets, using groupings of the underlying loans as to interest
       rates. Fair value is determined using prices for similar assets with
       similar characteristics, when available, or based upon discounted cash
       flows using market-based assumptions. Any impairment of a grouping is
       reported as a valuation allowance.

       Real Estate Acquired Through Foreclosure. Real estate properties acquired
       through foreclosure are initially recorded at the lower of cost or fair
       value at the date of foreclosure, establishing a new cost basis. After
       foreclosure, valuations are periodically performed by management and the
       real estate is carried at the lower of cost or fair value less estimated
       costs to sell. Revenue and expenses from operations of the properties,
       gains and losses on sales and additions to the valuation allowance are
       included in operating results. Real estate acquired through foreclosure
       is classified in prepaid expenses and other assets and totaled $3,000 and
       $20,000 at December 31, 2002 and 2001, respectively.

       Income Taxes. Deferred tax assets and liabilities are reflected at
       currently enacted income tax rates applicable to the period in which the
       deferred tax assets or liabilities are expected to be realized or
       settled. As changes in tax laws or rates are enacted, deferred tax assets
       and liabilities are adjusted through the provision for income taxes.

       Net Income Per Common Share. The Corporation maintains a simple capital
       structure with no common stock equivalents. As such earnings per share
       computations are based on the weighted average number of common shares
       outstanding for the respective reporting periods.


--------------------------------------------------------------------------------
Emclaire Financial Corp.               27                     2002 Annual Report


<PAGE>



1.     Summary of Significant Accounting Policies (continued)

       Comprehensive Income. Comprehensive income includes net income from
       operating results and the net change in accumulated other comprehensive
       income. Accumulated other comprehensive income is comprised exclusively
       of unrealized holding gains and losses on securities available for sale.
       The effects of other comprehensive income are presented as part of the
       statement of changes in stockholders' equity.

       Operating Segments. Operations are managed and financial performance is
       evaluated on a corporate-wide basis. Accordingly, all financial services
       operations are considered by management to be aggregated in one
       reportable operating segment.

       Retirement Plans. The Corporation maintains a noncontributory defined
       benefit plan covering substantially all employees and officers. The plan
       calls for benefits to be paid to eligible employees at retirement based
       primarily on years of service and compensation rates near retirement. The
       Corporation also maintains a 401(k) plan and a supplemental executive
       retirement plan for key executive officers.

       Newly Issued But Not Yet Effective Accounting Standards. New accounting
       standards on asset retirement obligations, restructuring activities and
       exit costs, operating leases, and early extinguishment of debt were
       issued in 2002. Management determined that when the new accounting
       standards are adopted in 2003 they will not have a material impact on the
       Corporation's financial condition or results of operations.

       Transfers of Financial Assets. Transfers of financial assets are
       accounted for as sales, when control over the assets has been
       surrendered. Control over transferred assets is deemed to be surrendered
       when (1) the assets have been isolated from the Corporation, (2) the
       transferee obtains the right (free of conditions that constrain it from
       taking advantage of that right) to pledge or exchange the transferred
       assets, and (3) the Corporation does not maintain effective control over
       the transferred assets through an agreement to repurchase them before
       their maturity.

       Repurchase Agreements. Substantially all repurchase agreement liabilities
       represent amounts advanced by various customers. Securities are pledged
       to cover these liabilities, which are not covered by federal deposit
       insurance.

       Off Balance Sheet Financial Instruments. In the ordinary course of
       business, the Corporation has entered into off-balance sheet financial
       instruments, consisting of commitments to extend credit, commitments
       under line of credit lending arrangements and letters of credit. Such
       financial instruments are recorded in the financial statements when they
       are funded or related fees are received.

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

--------------------------------------------------------------------------------
Emclaire Financial Corp.               28                     2002 Annual Report


<PAGE>


2.     Securities

       The following table summarizes the Corporation's securities as of
December 31:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------

(In thousands)                             Amortized    Unrealized   Unrealized     Fair
                                             cost         gains        losses       value
-------------------------------------------------------------------------------------------

Available for sale:
-------------------
   December 31, 2002:
<S>                                         <C>              <C>            <C>    <C>
      U.S. Government securities            $17,486          $350           $-     $17,836
      Municipal securities                   16,515           391          (99)     16,807
      Corporate securities                   12,146           421           (5)     12,562
      Equity securities                         971           543            -       1,514
                                           ---------    ----------   ----------   ---------
                                            $47,118        $1,705        $(104)    $48,719
                                           =========    ==========   ==========   =========
   December 31, 2001:
      U.S. Government securities            $12,978          $441         $(14)    $13,405
      Municipal securities                   11,919            24         (176)     11,767
      Corporate securities                   12,264           157         (115)     12,306
      Equity securities                         971           246            -       1,217
                                           ---------    ----------   ----------   ---------
                                            $38,132          $868        $(305)    $38,695
                                           =========    ==========   ==========   =========
Held to maturity:
-----------------
   December 31, 2002:
      Mortgage-backed securities                $29            $-           $-         $29
                                           ---------    ----------   ----------   ---------
                                                $29            $-           $-         $29
                                           =========    ==========   ==========   =========
   December 31, 2001:
      Mortgage-backed securities                $60            $1           $-         $61
                                           ---------    ----------   ----------   ---------
                                                $60            $1           $-         $61
                                           =========    ==========   ==========   =========
</TABLE>

       The following table summarizes scheduled maturities of the Corporation's
securities as of December 31, 2002:


<TABLE>
<CAPTION>

(In thousands)                                 Available for sale       Held to maturity
                                           ------------------------------------------------
                                           Amortized      Fair       Amortized      Fair
                                             cost         value        cost         value
-------------------------------------------------------------------------------------------

<S>                                          <C>          <C>              <C>          <C>
Due in one year or less                      $7,872       $7,991           $-           $-
Due from one year to five years              21,600       22,241            -            -
Due after ten years                          16,675       16,973           29           29
No scheduled maturity                           971        1,514            -            -
                                           ---------    ---------    ---------    ---------
                                            $47,118      $48,719          $29          $29
                                           =========    =========    =========    =========
</TABLE>


       Expected maturities may differ from contractual maturities because
       issuers may have the right to call or prepay obligations with or without
       call or prepayment penalties.

       A charge of $448,000 was recorded in 2000 in other noninterest expense to
       recognize an other than temporary decline in the value of a marketable
       equity security.

       Securities with carrying values of $9.5 million and $9.9 million as of
       December 31, 2002 and 2001, respectively, were pledged to secure public
       deposits and for other purposes required or permitted by law.

--------------------------------------------------------------------------------
Emclaire Financial Corp.               29                     2002 Annual Report



<PAGE>


3.     Loans Receivable

       The following table summarizes the Corporation's loans receivable as of
December 31:


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

(In thousands)                             2002                  2001
------------------------------------------------------------------------

Mortgage loans:
  Residential first mortgage              $82,449               $84,974
  Home equity                              19,136                15,446
  Commercial                               34,986                26,470
                                         ---------             ---------
                                          136,571               126,890
Other loans:
  Commercial business                      21,913                20,806
  Consumer                                 12,660                14,308
                                         ---------             ---------
                                           34,573                35,114
                                         ---------             ---------

Total gross loans                         171,144               162,004

Less allowance for loan losses              1,587                 1,464
                                         ---------             ---------

                                         $169,557              $160,540
                                         =========             =========

       Following is an analysis of the changes in the allowance for loan losses
for the years ended December 31:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------

(In thousands)                                             2002         2001         2000
                                                     ---------------------------------------

<S>                                                        <C>          <C>          <C>
Balance at the beginning of the year                       $1,464       $1,460       $1,373

Provision for loan losses                                     381          154          209
Loans charged-off                                            (331)        (197)        (156)
Recoveries                                                     73           47           34
                                                        ----------   ----------   ----------

Balance at the end of the year                             $1,587       $1,464       $1,460
                                                        ==========   ==========   ==========

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


       Non-performing loans, which include primarily non-accrual loans, were
       $1.2 million and $1.3 million at December 31, 2002 and 2001,
       respectively. The Corporation is not committed to lend significant
       additional funds to debtors whose loans are on non-accrual status. At
       December 31, 2002 and 2001, the recorded investment in loans considered
       to be impaired was $635,000 and $947,000, respectively, against which
       approximately $147,000 and $156,000, respectively, of the allowance for
       loan losses was allocated. During 2002 and 2001, impaired loans averaged
       $789,000 and $875,000, respectively. The Corporation recognized interest
       income on impaired loans of approximately $13,000, $30,000 and $47,000,
       on a cash basis, during 2002, 2001 and 2000, respectively. Nonperforming
       loans and impaired loans are defined differently. Some loans may be
       included in both categories whereas other loans may be included in only
       one category.

       The Corporation conducts its business through ten offices in Venango,
       Butler, Clarion, Clearfield, Elk and Jefferson counties, Pennsylvania and
       primarily lends in this geographical area. The Corporation does not have
       any significant concentrations of credit risk to any one industry or
       customer.

       The Corporation was servicing loans with unpaid principal balances of
       $1.2 million at December 31, 2002 for a third party investor. Such loans
       are not reflected in the consolidated balance sheet and servicing
       operations result in the generation of annual fee income of approximately
       0.25% of the unpaid principal balances of such loans.


--------------------------------------------------------------------------------
Emclaire Financial Corp.               30                     2002 Annual Report

<PAGE>



4.     Federal Bank Stocks

       The Bank is a member of the Federal Home Loan Bank of Pittsburgh (FHLB)
       and the Federal Reserve Bank of Cleveland (FRB). As a member of these
       federal banking systems, the Bank maintains an investment in the capital
       stock of the respective regional banks, at cost. These stocks are
       purchased and redeemed at par as directed by the federal banks and levels
       maintained are based primarily on borrowing and other correspondent
       relationships. The Bank's investment in FHLB and FRB stocks was $965,000
       and $333,000, respectively, at December 31, 2002, and $928,000 and
       $333,000, respectively, at December 31, 2001.

5.     Premises and Equipment

       Premises and equipment at December 31 are summarized by major
       classification as follows:


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
(In thousands)                                            2002                2001
-----------------------------------------------------------------------------------

<S>                                                       <C>                 <C>
Land                                                      $296                $306
Buildings and improvements                               2,981               2,957
Leasehold improvements                                     481                 198
Furniture, fixtures and equipment                        3,111               2,839
Construction in progress                                   416                 243
                                                      ---------           ---------

                                                         7,285               6,543
Less accumulated depreciation and amortization           3,607               3,155
                                                      ---------           ---------

                                                        $3,678              $3,388
                                                      =========           =========
</TABLE>


       Depreciation and amortization expense for the years December 31, 2002,
       2001 and 2000 were $460,000, $432,000 and $425,000, respectively.

       Rent expense under non-cancelable operating lease agreements for the
       years ended December 31, 2002, 2001 and 2000 was $146,000, $135,000 and
       $118,000, respectively. Rent commitments under non-cancelable long term
       operating lease agreements for certain branch offices for the years ended
       December 31, are as follows, before considering renewal options that are
       generally present:


                                                        (In thousands)

                                         2003                    $123
                                         2004                     107
                                         2005                      97
                                         2006                      92
                                         2007                      94
                                    Thereafter                    380
                                                ----------------------
                                                                    -
                                                                 $893
                                                ======================


--------------------------------------------------------------------------------
Emclaire Financial Corp.               31                     2002 Annual Report


<PAGE>

6.     Goodwill and Intangible Assets

       Goodwill is no longer amortized starting in 2002. The effect of not
       amortizing goodwill is summarized as follows for the years ended December
       31:


<TABLE>
<CAPTION>
In thousands, except per share data                            2002      2001      2000
----------------------------------------------------------------------------------------

Net income:

<S>                                                          <C>       <C>           <C>
 Reported net income                                         $2,257    $1,705        $4
 Add back goodwill amortization                                   -       130       130
                                                           --------- --------- ---------

 Adjusted net income                                         $2,257    $1,835      $134
                                                           ========= ========= =========

Net income per share:

 Reported net income per share                                $1.69     $1.28        $-
 Add back goodwill amortization                                   -      0.10      0.10
                                                           --------- --------- ---------

 Adjusted net income per share                                $1.69     $1.38     $0.10
                                                           ========= ========= =========

</TABLE>

       At December 31, 2002, core deposit intangibles had a gross carrying
       amount and accumulated amortization of $1.2 million and $1.0 million,
       respectively. Estimated amortization expense for core deposit intangibles
       for 2003, 2004 and 2005 is estimated to be $115,000, $32,000, and
       $22,000, respectively.

       During the fourth quarter of 2000, a charge totaling $1.6 million was
       recorded to recognize the impairment of goodwill and core deposit
       intangible assets related to an acquisition in 1998. In addition to the
       adjustment, the period over which the remaining goodwill and core deposit
       intangible assets were to be amortized was shortened to thirteen and
       three years, respectively.

7.     Related Party Balances and Transactions

       In the ordinary course of business, the Bank maintains loan and deposit
       relationships with employees, principal officers and directors. The Bank
       has granted loans to principal officers and directors and their
       affiliates amounting to $1.9 million at both December 31, 2002 and 2001.
       During 2002, total principal additions and total principal repayments
       associated with these loans were $383,000 and $422,000, respectively.
       Deposits from principal officers and directors held by the Bank at
       December 31, 2002 and 2001 totaled $2.1 million and $2.2 million,
       respectively.

       In addition, directors and their affiliates may provide certain
       professional and other services to the Corporation and the Bank in the
       ordinary course of business at market fee rates. During 2002, 2001 and
       2000, amounts paid to affiliates for such services totaled $79,000,
       $59,000 and $51,000, respectively.

--------------------------------------------------------------------------------
Emclaire Financial Corp.               32                     2002 Annual Report


<PAGE>



8.     Deposits

       The following table summarizes the Corporation's deposits as of December
       31:

<TABLE>
<CAPTION>

(Dollar amounts in thousands)                     2002                                  2001
                                    ----------------------------------     --------------------------------
                                       Weighted                                Weighted
                                        average                                average
         Type of accounts                rate       Amount         %             rate    Amount         %
-----------------------------------------------------------------------------------------------------------

<S>                                                <C>           <C>                     <C>          <C>
Noninterest-bearing deposits                 -     $32,762       16.0%             -     $29,237      15.4%
Interest-bearing demand deposits          0.88%     72,637       35.5%          1.32%     69,665      36.8%
Time deposits                             3.97%     99,026       48.5%          4.83%     90,568      47.8%
                                                ----------- ----------                ----------- ---------

                                          2.24%   $204,425      100.0%          2.79%   $189,470     100.0%
                                                =========== ==========                =========== =========

Time deposits mature as follows:

Three months or less                                $8,008        3.9%                   $19,382      10.2%
Over three months through one year                  23,041       11.3%                    31,140      16.4%
Over one year through three years                   36,030       17.6%                    20,232      10.7%
Over three years through five years                 27,714       13.6%                    16,731       8.8%
Thereafter                                           4,233        2.2%                     3,083       1.6%
                                                ----------- ----------                ----------- ---------

                                                   $99,026       48.5%                   $90,568      47.8%
                                                =========== ==========                =========== =========
</TABLE>


       The Corporation had a total of $18.6 million and $14.6 million in time
       deposits of $100,000 or more at December 31, 2002 and 2001, respectively.

9.     Borrowed Funds

       The Corporation had outstanding advances with the FHLB of $10.0 million
       and $5.0 million at December 31, 2002 and 2001, respectively. The $10.0
       million in outstanding borrowed funds at December 31, 2002, consists of
       two advances with the FHLB, one that matures in November 2011 and one
       that matures in October 2012. One advance has a fixed interest rate of
       4.61%, the other a fixed interest rate of 3.73%. Both advances are
       callable quarterly, one after November 2003, the other after November
       2004, based on a strike rate of 8.0% compared to the three month LIBOR
       rate.

       The Bank maintains a credit arrangement with the FHLB as a source of
       additional liquidity. This credit line has an available limit of $10.0
       million at December 31, 2002, is subject to annual renewal and, along
       with other FHLB advances, is secured by a blanket security agreement on
       certain outstanding mortgage loans and U.S. Government securities of
       $112.8 million and $17.0 million, respectively, and FHLB stock. The total
       maximum borrowing capacity with the FHLB, excluding loans outstanding, at
       December 31, 2002 was $93.0 million.


--------------------------------------------------------------------------------
Emclaire Financial Corp.               33                     2002 Annual Report


<PAGE>

10.    Insurance of Accounts and Regulatory Matters

       Insurance of Accounts

       The Federal Deposit Insurance Corporation (FDIC) insures deposits of
       account holders up to $100,000 per insured depositor. To provide this
       insurance, the Bank must pay an annual premium. In connection with the
       insurance of deposits, the Bank is required to maintain certain minimum
       levels of regulatory capital as outlined below.

       Restrictions on Dividends, Loans and Advances

       The Bank is subject to a regulatory dividend restriction that generally
       limits that amount of dividends that can be paid by the Bank to the
       Corporation. Prior regulatory approval is required if the total of all
       dividends declared in any calendar year exceeds net profits (as defined
       in the regulations) for the year combined with net retained earnings (as
       defined) for the two preceding calendar years. In addition, dividends
       paid by the Bank to the Corporation would be prohibited if the effect
       thereof would cause the Bank's capital to be reduced below applicable
       minimum capital requirements.

       Loans or advances from the Bank to the Corporation are limited to 10
       percent of the Bank's capital stock and surplus on a secured basis. Funds
       available for loans or advances by the Bank to the Corporation amounted
       to approximately $2.0 million.

       Minimum Regulatory Capital Requirements

       The Corporation (on a consolidated basis) and the Bank are subject to
       various regulatory capital requirements administered by the federal
       banking agencies. Failure to meet minimum capital requirements can
       initiate certain mandatory and possibly additional discretionary actions
       by regulators that, if undertaken, could have a direct material effect on
       the Corporation's and the Bank's financial statements. Under capital
       adequacy guidelines and the regulatory framework for prompt corrective
       action, the Corporation and the Bank must meet specific capital
       guidelines that involve quantitative measures of assets, liabilities and
       certain off-balance-sheet items as calculated under regulatory accounting
       practices. The capital amounts and classification are also subject to
       qualitative judgments by the regulators about components, risk
       weightings, and other factors. Prompt corrective action provisions are
       not applicable to bank holding companies.

       Quantitative measures established by regulation to ensure capital
       adequacy require the Corporation and the Bank to maintain minimum amounts
       and ratios (set forth in the following table) of total and Tier 1 capital
       (as defined in the regulations) to risk-weighted assets (as defined) and
       of Tier 1 capital (as defined) to average assets (as defined). As of
       December 31, 2002 and 2001, the Corporation and the Bank met all capital
       adequacy requirements to which they are subject.

       As of December 31, 2002, the most recent notification from the FDIC
       categorized the Bank as well capitalized under the regulatory framework
       for prompt corrective action. To be categorized as well capitalized, an
       institution must maintain minimum total risk-based, Tier 1 risk-based and
       Tier 1 leverage ratios as set forth in the following table. There are no
       conditions or events since the notification that management believes have
       changed the Bank's category.


--------------------------------------------------------------------------------
Emclaire Financial Corp.               34                     2002 Annual Report


<PAGE>

10.    Insurance of Accounts and Regulatory Matters (continued)

       The following table sets forth certain information concerning regulatory
       capital of the consolidated Corporation and the Bank as of the dates
       presented:


<TABLE>
<CAPTION>
(Dollar amounts in thousands)                      December 31, 2002                      December 31, 2001
                                        --------------------------------------- -----------------------------------
                                           Consolidated            Bank           Consolidated          Bank
                                        ------------------ -------------------- ----------------- -----------------
                                         Amount    Ratio     Amount    Ratio     Amount   Ratio    Amount   Ratio
-------------------------------------------------------------------------------------------------------------------

Total capital to risk weighted assets:
<S>                                      <C>        <C>      <C>         <C>     <C>       <C>     <C>       <C>
  Actual                                 $21,858    13.11%   $20,498     12.38%  $20,739   14.54%  $19,334   13.65%
  For capital adequacy purposes           13,338     8.00%    13,248      8.00%   11,411    8.00%   11,329    8.00%
  To be well capitalized                  16,675    10.00%    16,561     10.00%   14,263   10.00%   14,161   10.00%
Tier 1 capital to risk-weighted assets:
  Actual                                 $20,032    12.04%   $18,906     11.42%  $19,163   13.43%  $17,859   12.61%
  For capital adequacy purposes            6,655     4.00%     6,624      4.00%    5,708    4.00%    5,664    4.00%
  To be well capitalized                   9,983     6.00%     9,936      6.00%    8,561    6.00%    8,497    6.00%
Tier 1 capital to average assets:
  Actual                                 $20,032     8.60%   $18,906      8.15%  $19,163    9.10%  $17,859    8.56%
  For capital adequacy purposes            9,317     4.00%     9,275      4.00%    8,423    4.00%    8,343    4.00%
  To be well capitalized                  11,647     5.00%    11,594      5.00%   10,529    5.00%   10,429    5.00%
</TABLE>

11.    Income Taxes

       The Corporation and the Bank file a consolidated federal income tax
       return. The provision for income taxes for the years ended December 31 is
       comprised of the following:


--------------------------------------------------------------------
(In thousands)                    2002          2001           2000
--------------------------------------------------------------------

   Current                        $984          $908           $964
   Deferred                       (150)         (190)          (397)
                             ----------     ---------   ------------

                                  $834          $718           $567
                             ==========     =========   ============

       A reconciliation between the provision for income taxes and the amount
       computed by multiplying operating results before income taxes by the
       statutory federal income tax rate of 34% for the years ended December 31
       is as follows:


<TABLE>
<CAPTION>

(Dollars in thousands)                           2002             2001              2000
                                           ----------------- ---------------- -----------------
                                                   % Pre-tax        % Pre-tax        % Pre-tax
                                            Amount  Income   Amount  Income   Amount   Income
                                           ----------------- ---------------- -----------------

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

<S>                                         <C>        <C>     <C>      <C>     <C>       <C>
Provision at statutory tax rate             $1,051     34.0%   $824     34.0%   $194      34.0%
Increase (decrease) resulting from:
   Tax free interest, net of disallowance     (226)   (7.3%)   (166)   (6.9%)   (153)   (26.8%)
   Goodwill                                      -      0.0%     44      1.8%    504      88.3%
   Other, net                                    9      0.3%     16      0.7%     22       3.9%
                                           ----------------- ---------------- -----------------

Reported rate                                 $834     27.0%   $718     29.6%   $567      99.4%
                                           ================= ================ =================

</TABLE>

--------------------------------------------------------------------------------
Emclaire Financial Corp.               35                     2002 Annual Report


<PAGE>

11.    Income Taxes (continued)

       The tax effects of temporary differences between the financial reporting
       basis and income tax basis of assets and liabilities that are included in
       the net deferred tax asset as of December 31 relate to the following:


(In thousands)                                2002         2001
------------------------------------------------------------------

Deferred tax assets:

   Loss on securities                          $152          $152
   Provision for loan losses                    486           440
   Deferred loan fees                            23            30
   Intangible assets                            150            85
   Accrued pension cost                         103           115
   Other                                         15             -
                                          ----------  ------------

   Gross deferred tax assets                    929           822

Deferred tax liabilities:
                                                  -
   Net unrealized gain on securities            544           191
   Depreciation                                 150           184
   Loan servicing                                 4             -
   Other                                        158           171
                                          ----------  ------------

   Gross deferred tax liabilities               856           546
                                          ----------  ------------

   Net deferred tax asset                       $73          $276
                                          ==========  ============


       The Corporation determined that it was not required to establish a
       valuation allowance for deferred tax assets in accordance with SFAS No.
       109, "Accounting for Income Taxes," since it is more likely than not that
       the deferred tax asset will be realized through carry-back to taxable
       income in prior years, future reversals of existing taxable temporary
       differences, and, to a lesser extent, future taxable income.

12.    Commitments and Legal Contingencies

       In the ordinary course of business, the Corporation has various
       outstanding commitments and contingent liabilities that are not reflected
       in the accompanying consolidated financial statements. In addition, the
       Corporation is involved in certain claims and legal actions arising in
       the ordinary course of business. The outcome of these claims and actions
       are not presently determinable; however, in the opinion of the
       Corporation's management, after consulting legal counsel, the ultimate
       disposition of these matters will not have a material adverse effect on
       the consolidated financial statements.


--------------------------------------------------------------------------------
Emclaire Financial Corp.               36                     2002 Annual Report


<PAGE>



13.    Employee Benefit Plans

       Defined Benefit Plan

       The Corporation provides pension benefits for eligible employees through
       a defined benefit pension plan. Substantially all employees participate
       in the retirement plan on a non-contributing basis, and are fully vested
       after five years of service. Information pertaining to activity in the
       plan for the years ended December 31 is as follows:


------------------------------------------------------------------------------
(In thousands)                                       2002      2001      2000
------------------------------------------------------------------------------

Change in plan assets:
 Fair value of plan assets at beginning of year    $2,117    $2,244    $2,234
 Actual (loss) return on plan assets                 (264)     (114)      (20)
 Employer contribution                                194        43        81
 Benefits paid                                        (64)      (56)      (51)
                                                  --------  --------  --------

 Fair value of plan assets at end of year           1,983     2,117     2,244
                                                  --------  --------  --------

Change in benefit obligation:
 Benefit obligation at beginning of year            2,358     2,087     1,950
 Service cost                                         186       173       171
 Interest cost                                        169       150       140
 Actuarial loss (gain)                                152         4      (123)
 Benefits paid                                        (64)      (56)      (51)
                                                  --------  --------  --------

 Benefit obligation at end of year                  2,801     2,358     2,087
                                                  --------  --------  --------

Funded status                                        (818)     (241)      157
Unrecognized prior service cost                         1         1         1
Unrecognized net actuarial gain                       586       (18)     (339)
Unrecognized transition asset                         (73)      (81)      (89)
                                                  --------  --------  --------

Accrued pension cost                                $(304)    $(339)    $(270)
                                                  ========  ========  ========

       The components of the periodic pension cost are as follows:


(In thousands)                               2002     2001       2000
----------------------------------------------------------------------

Service cost                                 $186     $173       $171
Interest cost                                 169      150        140
Expected return on plan assets               (188)    (197)      (192)
Transition asset                               (8)      (8)        (8)
Recognized net actuarial loss                   -       (6)       (11)
                                         --------- -------- ----------

Net periodic pension cost                    $159     $112       $100
                                         ========= ======== ==========

       For 2002, 2001 and 2000, actuarial assumptions include an assumed
       discount rate on benefit obligation of 6.80%, 7.25% and 7.25%
       respectively, and expected long-term rate of return on plan assets of
       8.50% for all years and an annual salary increase of 4.50% for all years.

--------------------------------------------------------------------------------
Emclaire Financial Corp.               37                     2002 Annual Report


<PAGE>


13.    Employee Benefit Plans (continued)

       Defined Benefit Plan (continued)

       In December 2002, the Corporation amended the defined benefit plan to
       allow an increase in benefits for certain eligible employees who elected
       to retire under an early retirement window program. In addition, the plan
       was amended to modestly reduce future benefit accruals. The net effect of
       these amendments will reduce future expense related to this plan
       beginning in 2003.

       Defined Contribution Plan

       The Corporation maintains a defined contribution 401(k) Plan. Employees
       are eligible to participate by providing tax-deferred contributions up to
       20% of qualified compensation. Employee contributions are vested at all
       times. The Corporation may make matching contributions as approved at the
       discretion of the Board of Directors. No matching contributions had been
       made to the plan prior to December 31, 2002.

       Supplemental Executive Retirement Plan

       During 2002, the Corporation established a Supplemental Executive
       Retirement Plan (SERP) to provide certain additional retirement benefits
       to participating executive officers. The SERP was adopted in order to
       provide benefits to such executives whose benefits are reduced under the
       Corporation's tax-qualified benefit plans pursuant to limitations under
       the Internal Revenue Code. The SERP is subject to certain vesting
       provisions, and provides that the executives shall receive a supplemental
       retirement benefit if the executive's employment is terminated after
       reaching the normal retirement age of 62. For the year ended December 31,
       2002, the Corporation recognized expense under the SERP of $11,000.

14.    Financial Instruments

       Fair Value of Financial Instruments

       The following table sets forth the carrying amount and fair value of the
       Corporation's financial instruments included in the consolidated balance
       sheet as of December 31:


<TABLE>
<CAPTION>
(In thousands)                                          2002                2001
                                                 ------------------- -------------------
                                                 Carrying    Fair    Carrying    Fair
                                                  amount     value    amount    amount
----------------------------------------------------------------------------------------

Financial assets:
<S>                                                <C>       <C>       <C>       <C>
 Cash equivalents                                  $7,716    $7,716    $9,157    $9,157
 Securities                                        48,748    48,748    38,755    38,756
 Loans receivable                                 169,557   178,195   160,540   164,815
 Federal bank stocks                                1,298     1,298     1,261     1,261
 Accrued interest receivable                        1,325     1,325     1,251     1,251

Financial liabilities:
 Deposits                                         204,425   209,158   189,470   189,749
 Borrowed funds                                    10,000    10,582     5,000     4,982
 Accrued interest payable                             467       467       480       480
</TABLE>

--------------------------------------------------------------------------------
Emclaire Financial Corp.               38                     2002 Annual Report


<PAGE>



14.    Financial Instruments (continued)

       Fair Value of Financial Instruments (continued)

       The methods and assumptions used to estimate fair value are described as
       follows.

       Carrying amount is the estimated fair value for cash and cash
       equivalents, short-term borrowings, federal bank stocks, accrued interest
       receivable and payable, demand deposits, short-term debt, and variable
       rate loans or deposits that reprice frequently and fully. Security fair
       values are based on market prices or dealer quotes, and if no such
       information is available, on the rate and term of the security and
       information about the issuer. For fixed rate loans or deposits and for
       variable rate loans or deposits with infrequent repricing or repricing
       limits, fair value is based on discounted cash flows using current market
       rates applied to the estimated life and credit risk. Fair values for
       impaired loans are estimated using discounted cash flow analysis or
       underlying collateral values. Fair value of loans held for sale is based
       on market quotes. Fair value of debt is based on current rates for
       similar financing. The fair value of off-balance-sheet items is based on
       the current fees or cost that would be charged to enter into or terminate
       such arrangements.

       Off Balance Sheet Financial Instruments

       The Corporation is party to credit related financial instruments with
       off-balance sheet risk in the normal course of business to meet the
       financing needs of its customers. These financial instruments include
       commitments to extend credit and commercial letters of credit.
       Commitments to extend credit involve, to a varying degree, elements of
       credit and interest rate risk in excess of amounts recognized in the
       consolidated statement of financial condition. The Corporation's exposure
       to credit loss in the event of non-performance by the other party for
       commitments to extend credit is represented by the contractual amount of
       these commitments, less any collateral value obtained. The Corporation
       uses the same credit policies in making commitments as for on-balance
       sheet instruments. The Corporation's distribution of commitments to
       extend credit approximates the distribution of loans receivable
       outstanding.

       The following table presents the notional amount of the Corporation's
       off-balance sheet commitment financial instruments as of December 31:

<TABLE>
<CAPTION>

(In thousands)                                   2002                     2001
                                        Fixed Rate Variable Rate Fixed Rate  Variable Rate
------------------------------------------------------------------------------------------

<S>                                        <C>              <C>      <C>               <C>
Commitments to make loans                  $2,864           $-       $1,810            $-
Unused lines of credit                        124       11,229          132        11,826
Standby letters of credit                       -          686            -           805
</TABLE>


       Commitments to make loans are generally made for periods of 30 days or
       less. The fixed rate loan commitments have interest rates ranging from
       5.50% to 12.00% and maturities ranging from five to thirty years at both
       year-end dates. Commitments to extend credit include agreements to lend
       to a customer as long as there is no violation of any condition
       established in the contract. These commitments generally have fixed
       expiration dates or other termination clauses and may require payment of
       a fee. Commitments to extend credit also include unfunded commitments
       under commercial and consumer lines-of-credit, revolving credit lines and
       overdraft protection agreements. These lines-of-credit may be
       collateralized and usually do not contain a specified maturity date and
       may be drawn upon to the total extent to which the Corporation is
       committed.


--------------------------------------------------------------------------------
Emclaire Financial Corp.               39                     2002 Annual Report


<PAGE>



14.    Financial Instruments (continued)

       Off Balance Sheet Financial Instruments (continued)

       Standby letters of credit are conditional commitments issued by the
       Corporation usually for commercial customers to guarantee the performance
       of a customer to a third party. Essentially all letters of credit issued
       have expiration dates within one year. The credit risk involved in
       issuing letters of credit is essentially the same as that involved in
       extending loan facilities to customers. The Corporation generally holds
       collateral supporting those commitments if deemed necessary.

15.    Emclaire Financial Corp. - Condensed Financial Statements, Parent
       Corporation Only

       Following are condensed financial statements for the parent company as of
       and for the years ended December 31:

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------
Condensed Statements of Financial Condition                        As of December 31,
(In thousands)                                                      2002         2001
--------------------------------------------------------------------------------------

Assets:
<S>                                                                  <C>          <C>
 Cash in banks                                                       $14          $14
 Securities available for sale                                     1,503        1,217
 Equity in net assets of subsidiary bank                          21,203       19,805
 Other assets                                                         14           87
                                                                --------- ------------

  Total assets                                                   $22,734      $21,123
                                                                ========= ============

Liabilities and stockholders' equity:
 Accrued expenses and other liabilities                               54           12
 Stockholders' equity                                             22,680       21,111
                                                                --------- ------------

  Total liabilities and stockholders' equity                     $22,734      $21,123
                                                                ========= ============
--------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Condensed Statements of Operations                    For the years ended December 31,
(In thousands)                                            2002      2001         2000
--------------------------------------------------------------------------------------

Income:
<S>                                                     <C>         <C>        <C>
 Dividends from subsidiary                              $1,373      $941       $1,507
 Investment income                                          56        60           39
                                                      --------- --------- ------------

  Total income                                           1,429     1,001        1,546

Expense:
 Noninterest expense                                        80        55          479
                                                      --------- --------- ------------

  Total expense                                             80        55          479
                                                      --------- --------- ------------

 Income before income taxes and equity in
  undistributed operating results of subsidiary          1,349       946        1,067

 Equity (deficit) in net income (loss) of subsidiary       901       752       (1,222)
                                                      --------- --------- ------------

 Income (loss) before income taxes                       2,250     1,698         (155)

 Income tax benefit                                         (7)       (7)        (159)
                                                      --------- --------- ------------

Net income                                              $2,257    $1,705           $4
                                                      ========= ========= ============
</TABLE>

--------------------------------------------------------------------------------
Emclaire Financial Corp.               40                     2002 Annual Report

<PAGE>


15. Emclaire Financial Corp. - Condensed Financial Statements, Parent
    Corporation Only (continued)

<TABLE>
<CAPTION>

Condensed Statements of Cash Flows                          For the years ended December 31,
(In thousands)                                                2002       2001       2000
--------------------------------------------------------------------------------------------

Operating activities:
<S>                                                            <C>       <C>             <C>
 Net income                                                    $2,257    $1,705          $4
 Adjustments to reconcile net income to net cash provided
  by operating activities:
   Equity in undistributed operating results of subsidiary       (901)     (752)      1,222
   Other, net                                                      17        (4)        311
                                                            ---------- --------- -----------
    Net cash provided by operating activities                   1,373       949       1,537
                                                            ---------- --------- -----------

Investing activities:
   Purchases of securities                                          -       (12)        (39)
                                                            ---------- --------- -----------
    Net cash used in investing activities                           -       (12)        (39)
                                                            ---------- --------- -----------

Financing activities:
   Dividends paid                                              (1,373)     (931)       (835)
   Payments to acquire treasury stock                               -         -        (671)
                                                            ---------- --------- -----------
    Net cash used in financing activities                      (1,373)     (931)     (1,506)
                                                            ---------- --------- -----------

Increase (decrease) in cash equivalents                             -         6          (8)
Cash equivalents at beginning of period                            14         8          16
                                                            ---------- --------- -----------

Cash equivalents at end of period                                 $14       $14          $8
                                                            ========== ========= ===========

</TABLE>

16. Other Noninterest Expenses

    The following summarizes the Corporation's other noninterest expenses for
    the years ended December 31:

<TABLE>
<CAPTION>

(In thousands)                                                2002        2001        2000
-------------------------------------------------------------------------------------------

<S>                                                           <C>         <C>         <C>
Telephone and data communications                             $287        $250        $225
Professional fees                                              273         133         101
Customer bank card processing                                  225         218         215
Pennsylvania shares tax                                        189         167         142
Correspondent and courier fees                                 174         165         156
Postage and freight                                            150         142         145
Marketing and advertising                                      127         119         132
Printing and supplies                                          122         125         144
Software amortization                                          112         162         166
Travel, entertainment and conferences                          102         107         102
Other                                                          356         410         438
                                                          ---------   ---------   ---------

                                                             2,117       1,998       1,966

Intangible asset impairment charge                               -           -       1,599
Other than temporary decline in value of security                -           -         448
                                                          ---------   ---------   ---------

                                                            $2,117      $1,998      $4,013
                                                          =========   =========   =========

</TABLE>

--------------------------------------------------------------------------------
Emclaire Financial Corp.               41                     2002 Annual Report


<PAGE>



17.    Quarterly Financial Data (unaudited)

       The following is a summary of selected quarterly data for the years ended
       December 31:

<TABLE>
<CAPTION>

(Dollar amounts in thousands, except share data)         First    Second     Third    Fourth
                                                        Quarter   Quarter   Quarter   Quarter
----------------------------------------------------------------------------------------------

2002:
-----
<S>                                                      <C>       <C>       <C>       <C>
 Interest income                                         $3,681    $3,655    $3,653    $3,664
 Interest expense                                         1,288     1,290     1,302     1,281
                                                       --------- --------- --------- ---------
 Net interest income                                      2,393     2,365     2,351     2,383
 Provision for loan losses                                  111        90        90        90
                                                       --------- --------- --------- ---------
 Net interest income after provision for loan losses      2,282     2,275     2,261     2,293
 Noninterest income                                         297       342       357       404
 Noninterest expense                                      1,915     1,868     1,773     1,864
                                                       --------- --------- --------- ---------
 Net income before income taxes                             664       749       845       833
 Provision for income taxes                                 181       219       264       170
                                                       --------- --------- --------- ---------

 Net income                                                $483      $530      $581      $663
                                                       ========= ========= ========= =========

 Net income per share                                     $0.36     $0.40     $0.44     $0.50
                                                       ========= ========= ========= =========

2001:
-----
 Interest income                                         $3,648    $3,656    $3,661    $3,624
 Interest expense                                         1,590     1,574     1,494     1,439
                                                       --------- --------- --------- ---------
 Net interest income                                      2,058     2,082     2,167     2,185
 Provision for loan losses                                   46        36        36        36
                                                       --------- --------- --------- ---------
 Net interest income after provision for loan losses      2,012     2,046     2,131     2,149
 Noninterest income                                         309       344       343       343
 Noninterest expense                                      1,763     1,793     1,767     1,931
                                                       --------- --------- --------- ---------
 Net income before income taxes                             558       597       707       561
 Provision for income taxes                                 167       176       216       159
                                                       --------- --------- --------- ---------

 Net income                                                $391      $421      $491      $402
                                                       ========= ========= ========= =========

 Net income per share                                     $0.29     $0.32     $0.37     $0.30
                                                       ========= ========= ========= =========
</TABLE>

--------------------------------------------------------------------------------
Emclaire Financial Corp.               42                     2002 Annual Report

<PAGE>


Report of Independent Auditors
--------------------------------------------------------------------------------

The Board of Directors and Stockholders
Emclaire Financial Corp.

We have audited the accompanying consolidated balance sheet of Emclaire
Financial Corp. as of December 31, 2002 and the related consolidated statements
of income, stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Emclaire Financial Corp. as of December
31, 2001 and for the years ended December 31, 2001 and 2000 were audited by
other auditors whose report dated March 8, 2002 expressed an unqualified opinion
on those statements.

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

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

As disclosed in Note 6, during 2002 the Corporation adopted new accounting
guidance for goodwill and intangible assets.



                                          /s/ Crowe, Chizek and Company LLP

Cleveland, Ohio
January 10, 2003


--------------------------------------------------------------------------------
Emclaire Financial Corp.               43                     2002 Annual Report


<PAGE>


Stock and Dividend Information
--------------------------------------------------------------------------------

Listings and Markets

Emclaire Financial Corp. common stock is traded on the Over the Counter
Bulletin Board (OTCBB) under the symbol "EMCF". The listed market makers for the
Corporation's common stock include:

<TABLE>
<CAPTION>

<S>                       <C>                      <C>                        <C>
E.E. Powell & Co., Inc.   Ferris, Baker Watts, Inc. F.J. Morrissey & Co., Inc. Parker Hunter, Inc.
1100 Gulf Tower           100 Light Street          1700 Market Street         600 Grant Street - Suite 3100
Pittsburgh, PA   15219    Baltimore, MD 21202       Philadelphia, PA 19103     Pittsburgh, PA 15219
Telephone:  800 289-7865  Telephone:  800 638-7411  Telephone:  215 563-8500   Telephone:  412 562-8000
</TABLE>


Stock Price and Cash Dividend Information

The bid and ask price of the Corporation's common stock were $23.50 and $25.50,
respectively, as of February 26, 2003. The Corporation traditionally has paid
regular quarterly cash dividends.

The following table sets forth the high and low sale market prices of the
Corporation's common stock as well as cash dividends paid for the quarterly
periods presented:

                             Market Price                            Cash
                          High          Low          Close         Dividend
-------------------------------------------------------------------------------

2002:
-----
  Fourth quarter            $21.75        $19.25        $21.75           $0.46
  Third quarter              20.50         19.00         19.50            0.19
  Second quarter             20.00         17.25         20.00            0.19
  First quarter              17.25         16.50         17.25            0.19

2001:
-----
  Fourth quarter            $17.75        $13.95        $17.15           $0.19
  Third quarter              14.35         13.25         14.00            0.17
  Second quarter             14.75         12.50         13.00            0.17
  First quarter              15.00         14.00         14.00            0.17


Number of Stockholders and Shares Outstanding

As of December 31, 2002, there were approximately 680 stockholders of record and
1,332,835 shares of common stock entitled to vote, receive dividends and
considered outstanding for financial reporting purposes. The number of
stockholders of record does not include the number of persons or entities who
hold their stock in nominee or "street" name.


Dividend Reinvestment and Stock Purchase Plan

Common stockholders may have Corporation dividends reinvested to purchase
additional shares. Participants may also make optional cash purchases of common
stock through this plan and pay no brokerage commissions or fees. To obtain a
plan document and authorization card call 800 757-5755.

--------------------------------------------------------------------------------
Emclaire Financial Corp.               44                     2002 Annual Report

<PAGE>


Corporate Information
--------------------------------------------------------------------------------

Corporate Headquarters

       Emclaire Financial Corp.
       612 Main Street
       Emlenton, PA 16373
       Phone:     724 867-2311
       Website:   www.farmersnb.com

Subsidiary Bank

       The Farmers National Bank of Emlenton

Annual Meeting

       The annual meeting of the Corporation's stockholders will be held at 7:00
       p.m., on Tuesday, April 29, 2003, at the Holiday Inn, Interstate 80 and
       Route 68, Clarion, PA 16214.

Stockholder and Investor Information

       Copies of annual reports, quarterly reports and related stockholder
       literature are available upon written request without charge to
       stockholders. Requests should be addressed to William C. Marsh, Chief
       Financial Officer, Emclaire Financial Corp., 612 Main Street, Emlenton,
       PA 16373.

       In addition, other public filings of the Corporation, including the
       Annual Report on Form 10-KSB can be obtained from the Securities and
       Exchange Commission's web site at http://www.sec.gov.

Independent Accountants

      Crowe, Chizek and Company LLP
      5900 Landerbrook Corporate Center, Suite 205
      Cleveland, OH 44124

Special Counsel

       Manatt, Phelps & Phillips, LLP
       1501 M Street NW, Suite 700
       Washington, DC 20005

Registrar and Transfer Agent

       Illinois Stock Transfer Company
       209 West Jackson Boulevard, Suite 903
       Chicago, IL 60606
       www.ilstockstransfer.com
       800 757-5755


--------------------------------------------------------------------------------
Emclaire Financial Corp.               45                     2002 Annual Report


<PAGE>




Board of Directors and Officers
--------------------------------------------------------------------------------


EMCLAIRE FINANCIAL CORP. AND
THE FARMERS NATIONAL BANK OF EMLENTON

<TABLE>
<CAPTION>
Board of Directors
------------------

<S>                                            <C>                                       <C>
Ronald L. Ashbaugh                             David L. Cox                               Bernadette H. Crooks
Retired President                              Chairman, President and CEO                Retired Retailer
Emclaire Financial Corp.                       Emclaire Financial Corp.                   Crooks Clothing
Farmers National Bank of Emlenton              Farmers National Bank of Emlenton

George W. Freeman                              Rodney C. Heeter                           Robert L. Hunter
Freeman's Tree Farm                            Heeter Lumber, Co.                         Hunter Truck Sales and Service
                                                                                          Hunter Leasing

J. Michael King                                John B. Mason                              Brian C. McCarrier
Senior Partner                                 President                                  President
Lynn, King & Schreffler                        H.B. Beels & Sons, Inc.                    Interstate Pipe and Supply
Attorneys at Law

Elizabeth C. Smith
Retired Former Owner
The Inn at Oakmont
</TABLE>


EMCLAIRE FINANCIAL CORP.

Senior Officers
---------------

David L. Cox                                   William C. Marsh
Chairman, President and                        Treasurer/Secretary
Chief Executive Officer                        Chief Financial Officer


THE FARMERS NATIONAL BANK OF EMLENTON

<TABLE>
<CAPTION>
Senior Officers
---------------

<S>                                            <C>                                      <C>
David L. Cox                                   William C. Marsh                         Raymond M. Lawton
Chairman, President and                        Senior Vice President                    Senior Vice President
Chief Executive Officer                        Chief Financial Officer                  Chief Lending Officer
</TABLE>


<TABLE>
<CAPTION>

<S>                          <C>                            <C>                         <C>
Scott B. Daum                Robert W. Foust                Fred S. Port                Stan Simons
Vice President               Vice President                 Vice President              Vice President
Operations                   Business Development           Branch Administration       Human Resources Director

Other Officers
--------------

Andrew M. Hogue              David J. Stuber                Richard E. Grejda           Lisa R. Zigo
Assistant Vice President     Assistant Vice President       Assistant Vice President    Assistant Vice President
Compliance and Security      Marketing Director             Commercial Lending          Manager of Credit Administration
</TABLE>


--------------------------------------------------------------------------------
Emclaire Financial Corp.               46                     2002 Annual Report



<PAGE>

Office Locations and Branch Managers
--------------------------------------------------------------------------------


     Corporate Headquarters

     612 Main Street
     Emlenton, PA 16373
     724 867-2311

     Retail Banking Offices                      Branch Manager/Telephone

     Emlenton Office                             Michael J. Meals
     612 Main Street                             724 867-1001
     Emlenton, PA 16373

     Bon Aire Office                             R. Dennis Fehl
     1101 N. Main Street, Suite 1                Assistant Vice President
     Butler, PA 16003                            724 283-4666

     Brookville Office                           C. Sue Solida
     263 Main Street                             814 849-8363
     Brookville, PA 15825

     Butler Meridian Office                      Deborah A. Sanford
     101 Meridian Road                           724 482-0133
     Butler, PA 16001

     Clarion Office                              Timothy G. Slaugenhoup
     Sixth and Wood Street                       814 226-7523
     Clarion, PA 16214

     DuBois Office                               Frank J. Calderone
     861 Beaver Drive                            814 371-2166
     DuBois, PA 15801

     East Brady Office                           R. Dennis Fehl
     323 Kellys Way                              Assistant Vice President
     East Brady, PA 16028                        724 526-5793

     Eau Claire Office                           Cindy L. Elder
     207 S. Washington Street                    Assistant Vice President
     Eau Claire, PA 16030                        724 791-2591

     Knox Office                                 Allan I. Johnson
     Route 338 South                             814 797-2200
     Knox, PA 16232

     Ridgway Office                              Gregory A. Kowatch
     173 Main Street                             814 773-3195
     Ridgway, PA 15853

--------------------------------------------------------------------------------
Emclaire Financial Corp.               47                     2002 Annual Report



                            EMCLAIRE FINANCIAL CORP.
                                 612 Main Street
                          Emlenton, Pennsylvania 16373
                              Phone: (724) 867-2311