EXHIBIT 13

Annual Report to Stockholders for the fiscal year ended December 31, 2003


                                       21


<PAGE>


EMCLAIRE FINANCIAL CORP.

2003

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



<PAGE>

<TABLE>
<CAPTION>


Table of Contents

<S>                                                                                                       <C>
       Consolidated Financial Highlights...................................................................1
       Chairman's Letter...................................................................................2
       For More Than 100 Years....Our Family Serving Your Family...........................................4
       Selected Consolidated Financial Data................................................................6
       Management's Discussion and Analysis of
                Financial Condition and Results of Operations..............................................7
       Consolidated Financial Statements..................................................................23
       Notes to Consolidated Financial Statements.........................................................27
       Report of Independent Auditors.....................................................................49
       Stock and Dividend Information.....................................................................50
       Corporate Information..............................................................................51
       Board of Directors and Officers....................................................................52
       Branch Managers............................................................................Back Cover
</TABLE>


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

<TABLE>
<CAPTION>


<S>                       <C>                         <C>                          <C>
Bon Aire                  Brookville                  Clarion                      DuBois
1101 N. Main Street       263 Main St.                6th & Wood St.               861 Beaver Dr.
Suite 1                   Brookville, PA 15825        Clarion, PA 16214            DuBois, PA 15801
Butler, PA 16003          Telephone: (814) 849-8363   Telephone: (814) 226-7523    Telephone: (814) 371-2166
Telephone: (724) 283-4666

East Brady                Eau Claire                  Emlenton                     Knox
323 Kellys Way            207 S. Washington St.       612 Main St.                 Route 338 South
East Brady, PA 16028      Eau Claire, PA 16030        Emlenton, PA 16373           Knox, PA 16232
Telephone: (724) 526-5793 Telephone: (724) 791-2591   Telephone: (724) 867-1001    Telephone: (814) 797-2200

Meridian                  Ridgway
101 Meridian Road         173 Main St.
Butler, PA 16001          Ridgway, PA 15853
Telephone: (724) 482-0133 Telephone: (814) 773-3195
</TABLE>





<PAGE>

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



                                              As of or for the
                                           year ended December 31,
                                               2003           2002      Change
                                          ----------    -----------    ---------

Balance Sheet:

   Total assets                            $262,512       $238,577           10%
   Loans receivable, net                    190,482        169,557           12%
   Total deposits                           217,110        204,425            6%
   Stockholders' equity                      22,655         22,680            -
   Stockholders' equity per share             17.87          17.02            5%

Income Statement:

   Net income                                $2,492         $2,257           10%
   Net interest income                        9,308          9,492          (2%)
   Basic earnings per share                    1.91           1.69           13%
   Cash dividends per share                    1.11           1.03            8%

Key Ratios:

   Return on average assets                    0.99%          0.99%           -
   Return on average stockholders'
    equity                                    10.96%         10.21%           7%
   Efficiency ratio                           64.16%         64.98%           1%


--------------------------------------------------------------------------------
Emclaire Financial Corp.                 1                    2003 Annual Report


<PAGE>

Chairman's Letter (continued)
--------------------------------------------------------------------------------
Dear Stockholders and Friends:

     We have completed a record year of growth and earnings in 2003. All of this
was  accomplished by offering the hometown  friendly  service our customers have
enjoyed for more than 100 years.  During 2003, deposits grew by $12.7 million or
6.2%,  providing for a record year for loan production,  with the loan portfolio
increasing by $20.9 million or 12.3%.  This strong growth  resulted in increased
earnings by $235,000 or 10.4%.  The Board of Directors  elected to pay a special
dividend of $.25 per share along with our regular quarterly dividend of $.23 per
share in December.  This  dividend is  reflective  of the  excellent  growth and
earnings for the year along with our desire to reward our loyal shareholders.
     Continued  growth of your bank only tells  part of the story.  We have been
serving this area for more than 100 years,  and the  experience,  dedication and
commitment of our Board of Directors  and employees are our true success  story.
The Board alone has 200 plus years of  experience  in the banking  industry.  We
have also been able to attract  employees  who want to work in a community  bank
environment.  These dedicated  employees are committed to treating our customers
like  family and  friends.  We serve many  families  who have banked with us for
generations.
     We are dedicated to the communities we serve and encourage our employees to
be leaders in these local markets. We have given back to the communities in time
and employment  opportunities.  We have also made sure our facilities are modern
and  attractive,  which is evident in the  renovations  at our  headquarters  in
Emlenton.  After  finishing  this  project,  we will have  remodeled  the entire
Emlenton  headquarter  building and returned it to its original  storefront look
with the assistance of the Pennsylvania Historical Society.

     The  challenge  for the future is to  continue  offering  personalized  and
efficient service to our customers. We intend

--------------------------------------------------------------------------------
2                                                       Emclaire Financial Corp.


<PAGE>

Chairman's Letter (continued)
--------------------------------------------------------------------------------

to offer wealth management and investment  advisory  services  beginning in
mid-2004. We believe that our community bank must continue to offer new products
and services  that meet all the  financial  needs of people  within the areas we
serve. And we will continue  challenging our employees to offer great service in
a community bank atmosphere. While we may not have invented the idea of treating
our  customers  like  friends  and  family,  we believe we do it better than our
competitors. We are large enough to offer financial solutions to people who need
them, yet small enough to know their names.
     Maintaining a strong income is another  challenge for the coming year.  The
low rate  environment  has made it more and more  essential to find  alternative
income  streams to augment our net interest  income.  This  challenge is another
reason to offer alternative  products,  such as wealth management and investment
advisory  services.  The nature of community banking is changing,  and it is our
customers  and  communities  who will benefit from the changes.
     I would like to take this opportunity to thank Rod Heeter for his loyal and
faithful  service  to our  community  bank.  Rod is  retiring  from the Board of
Directors  after 16 years of  service.  He is an example of the  dedication  and
commitment  our  Board  of  Directors  show  to  our  employees,  customers  and
shareholders. The entire Board wishes Rod the best in his retirement.

Sincerely,
David L. Cox
Chairman, President & CEO

--------------------------------------------------------------------------------
2003 Annual Report                                                            3

<PAGE>

For More Than 100 Years...Our Family Serving Your Family
--------------------------------------------------------------------------------

     The Farmers  National  Bank of Emlenton  has been  serving the  families of
western Pennsylvania for more than 100 years. Generations after generations have
depended on Farmers National Bank to be their financial institution. Farmers has
helped thousands of families  purchase homes,  further their education and start
businesses.  These numbers continue to grow and expand as the bank moves through
its second 100 years of serving this area from this area.
     Farmers  National Bank enjoyed a tremendous  year of growth in deposits and
loans in 2003. This success was due in large part to our customers and employees
and the relationships they have created.  Farmers' family of employees,  many of
whom have been with us for years,  make a difference  by  discussing  customers'
needs and wants and then meeting them. Times change and customers' needs change,
but the basic definition of quality service and  relationship  banking does not.
Our employees work very hard to uphold the fabric that this  institution is made
of, which is servicing our customers through sound banking relationships at each
stage of a family's financial growth.
     Many of our mature  customers like to bank the  traditional way by visiting
our branch offices and developing personal relationships with our staff. For us,
it's a great way to get to know our customers and help us learn their individual
financial needs.  Customer service  continues to be the focus at Farmers through
internal  training  programs,   corporate-wide  motivational  nights  and  small
employee group meetings with Dave Cox, Farmers National Bank President and CEO.
     Farmers has remodeled  offices,  staffed our branches to cover peak periods
so more  employees are  available  during busy times and made  drive-thru  lanes
available at most branches to ensure the branch office  experience is a pleasant
one.
     Our branch  offices  give back to the  community  with  events  such as car
cruises featuring live entertainment,  free gifts, refreshments and bank product
specials;  Spring  Curb  Appeal  seminars  on how to sell your  home,  featuring
realtors,  landscapers, home improvement specialists and real estate appraisers;
Home Buyers  seminars  with real estate and mortgage  lending  professionals  to
guide attendees on the process of buying a home; and Customer  Appreciation Days
marking Farmers' service to the area.
     For those on the go,  with  growing  families,  and not much time to spare,
Farmers has  expanded  its ATM network at the  Ridgway,  Brookville  and Clarion
offices with the  installation of Star ATMs. This expansion  brings Farmers' ATM
network to 12, including the one installed at Clarion University to make banking
easier for college students.
     To make it even more convenient for our customers,  Farmers is now a member
of the Freedom ATM Alliance.SM The Freedom Alliance is comprised of more than 27
regional  banks  offering  each  member  a  surcharge-free  ATM  network.   This
membership  gives  customers   surcharge-free  access  to  more  than  500  ATMs
throughout western Pennsylvania.
     The younger generation has grown up with technology that wasn't around when
Farmers was founded. This generation is comfortable with technology and likes to
incorporate it in various areas of their life including banking.

--------------------------------------------------------------------------------
4                                                       Emclaire Financial Corp.


<PAGE>

For More Than 100 Years...Our Family Serving Your Family (continued)
-------------------------------------------------------------------------

     Farmers has made the commitment to meet their demands by incorporating  new
technologies, such as our Teller-Fone automated banking system, Internet Banking
@  www.farmersnb.com  and  Internet  Bill Pay.  These  services  allow  Farmers'
customers to do most of their  banking  transactions  24 hours a day, 365 days a
year from the convenience of their home, office or on the go.
     Farmers National Bank employees and management continue to give back to the
local  communities by being involved in and supporting  various youth  programs,
civic groups and non-profit organizations. Whether it's coaching a Little League
team,  serving on the board of a Boys and Girls  Club or being a Rotary  member,
Farmers'  employees  recognize  that being part of the community goes beyond the
four walls of the bank. As an example, Farmers was able to contribute $10,000 to
the Keystone Smiles Community Center in Knox through the Educational Improvement
Tax Code Program.  This money will be used for approved  innovative  educational
programs  offered  by the  Center.  This  example  is just  one of many tax code
programs the bank has participated in throughout the year.
     Meeting  the  needs of our  customers  in a  changing  world is an  ongoing
process.  For  instance,  nowadays  people  of all  ages  are  looking  for more
investment  alternatives  to  the  traditional  passbook  savings  accounts  and
certificates.  That's  why in 2004,  Farmers  will  introduce  Farmers  National
Financial  Services,  a new division which will offer  customers a wide range of
investment options,  including  annuities,  mutual funds and brokerage services.
After more than a century of service,  the Farmers  National  Bank of Emlenton's
commitment to community  banking -- our family  serving your family -- continues
to be the  hallmark  of our  organization.  The  western  Pennsylvania  area has
embraced  this concept and is reflected in Farmers'  continued  growth.  Serving
this  area  from this  area is more  than  Farmers'  slogan,  it's the way we do
business.


Meet the Rhoades
---------------

     Richard and Martha Rhoades,  owners of Rich- Mar farms, have been customers
of Farmers  National  Bank in Emlenton  since 1950.  The 500+ acre dairy farm is
well  known  in the  area.  Richard  and his  wife  of 66  years  are  respected
throughout  the community for their hard work and  dedication.  The Rhoades have
three  children,  David,  Ann and  Elaine,  and  seven  grandchildren  and seven
great-grandchildren.  The  farm  has  grown  since  it was  founded  and now has
approximately   150  cattle  for  milking,   plus  some  raised  for  beef.  The
family-owned  farm  employs a crew of eight with son David  overseeing  the farm
operation. "Several years ago, I was in need of some money," related Richard. "I
called the bank and told them of my situation.  I showed up the very next day at
the bank to get my money.  Farmers was very accommodating and lent me the money,
although  the bank  manager  laughed  and asked me if I could  please give him a
little advanced warning next time." Throughout the years Farmers has helped many
families just like the Rhoades family throughout western Pennsylvania.

--------------------------------------------------------------------------------
2003 Annual Report                                                          5
<PAGE>



Selected Consolidated Financial Data
--------------------------------------------------------------------------------
(Dollar amounts in thousands, except share data)



<TABLE>
<CAPTION>

                                                                      As of December 31,
Financial Condition Data                              2003       2002       2001       2000              1999
------------------------------------------------ -------------------------------------------------------------

<S>                                               <C>        <C>        <C>        <C>               <C>
   Total assets                                   $262,512   $238,577   $216,717   $194,165          $192,004
   Securities                                       49,162     48,748     38,755     26,688            34,838
   Loans receivable, net                           190,482    169,557    160,540    150,332           138,089
   Deposits                                        217,110    204,425    189,470    171,125           168,425
   Borrowed funds                                   20,700     10,000      5,000      2,000             2,000
   Stockholders' equity                             22,655     22,680     21,111     20,045            20,804
   Stockholders' equity per common share            $17.87     $17.02     $15.84     $15.04            $15.11
   Tangible stockholders' equity per common
    share                                           $16.70     $15.82     $14.54     $13.53            $12.87

                                                 -------------------------------------------------------------
                                                                For the year ended December 31,
Operations Data                                       2003       2002       2001     2000(1)             1999
------------------------------------------------ -------------------------------------------------------------

   Interest income                                 $14,209    $14,653    $14,589    $14,402           $13,652
   Interest expense                                  4,901      5,161      6,097      5,832             5,647
                                                 ---------- ---------- ---------- ---------- -----------------
   Net interest income                               9,308      9,492      8,492      8,570             8,005
   Provision for loan losses                           330        381        154        209               162
                                                 ---------- ---------- ---------- ---------- -----------------
   Net interest income after provision for loan
    losses                                           8,978      9,111      8,338      8,361             7,843
   Noninterest income                                1,785      1,400      1,339      1,187               860
   Noninterest expense                               7,522      7,420      7,254      8,977             6,167
                                                 ---------- ---------- ---------- ---------- -----------------
   Net income before income taxes                    3,241      3,091      2,423        571             2,536
   Provision for income taxes                          749        834        718        567               782
                                                 ---------- ---------- ---------- ---------- -----------------

   Net income                                       $2,492     $2,257     $1,705         $4            $1,754
                                                 ========== ========== ========== ========== =================

      Average common shares outstanding          1,301,714  1,332,835  1,332,835  1,348,210         1,394,473
      Basic earnings per share                       $1.91      $1.69      $1.28      $0.00             $1.26
      Dividends per share (3)                        $1.11      $1.03      $0.70      $0.62             $0.57

                                                 -------------------------------------------------------------
                                                           As of or for the year ended December 31,
Other Data                                            2003       2002       2001     2000(1)             1999
------------------------------------------------ -------------------------------------------------------------

   Performance Ratios
      Return on average assets                        0.99%      0.99%      0.84%         -              0.90%
      Return on average equity                       10.96%     10.21%      8.35%      0.02%             8.27%
      Yield on interest-earning assets (2)            6.28%      6.93%      7.69%      8.04%             7.70%
      Cost of interest-bearing liabilities            2.56%      2.99%      3.99%      4.06%             3.89%
      Cost of funds                                   2.16%      2.53%      3.35%      3.38%             3.29%
      Interest rate spread (2)                        3.72%      3.94%      3.70%      3.98%             3.81%
      Net interest margin (2)                         4.18%      4.54%      4.52%      4.83%             4.56%
      Efficiency ratio (2) (4)                       64.16%     64.98%     69.58%     86.99%            64.01%
      Noninterest expense to average assets           2.99%      3.25%      3.56%      4.62%             3.18%
      Interest-earning assets to average assets      92.69%     94.65%     94.42%     93.39%            92.71%
      Loans to deposits                              87.74%     82.94%     84.73%     87.85%            81.99%
      Dividend payout ratio (3)                      57.98%     60.95%     54.72%         -             45.24%
   Asset Quality Ratios
      Non-performing loans to total loans             0.69%      0.68%      0.78%      0.59%             0.50%
      Non-performing assets to total assets           0.52%      0.49%      0.58%      0.48%             0.42%
      Allowance for loan losses to total loans        0.92%      0.93%      0.90%      0.96%             0.98%
      Allowance for loan losses to non-
       performing loans                             133.71%    136.81%    117.59%    162.22%           195.31%
   Capital Ratios
      Stockholders' equity to assets                  8.63%      9.51%      9.74%     10.32%            10.84%
      Tangible stockholders' equity to tangible
       assets                                         8.11%      8.90%      9.01%      9.38%             9.38%
      Average equity to average assets                9.02%      9.69%     10.02%     10.71%            10.94%
--------------------------------------------------------------------------------

(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)  Includes  $.25 per share  special cash  dividend  paid in December 2003 and
     December 2002.

(4)  The  efficiency  ratio is calculated by dividing  operating  expenses (less
     intangible  amortization) by net income (TE basis) and noninterest  income.
     The  efficiency  ratio  gives us a  measure  of how  effectively  a bank is
     operating.

</TABLE>


--------------------------------------------------------------------------------
Emclaire Financial Corp.             6                        2003 Annual Report




<PAGE>


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 10 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 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 local economy, 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. 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.

--------------------------------------------------------------------------------
Emclaire Financial Corp.                   7                  2003 Annual Report


<PAGE>

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


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

Total assets increased $23.9 million or 10.0% to $262.5 million at December 31,
2003 from $238.6 million at December 31, 2002. This increase was primarily due
to increases in loans of $20.9 million and premises and equipment of $1.5
million. Also contributing to the increase in total assets were increases in
securities of $414,000, federal bank stocks of $684,000, bank-owned life
insurance of $218,000 and prepaid expenses and other assets of $332,000.
Offsetting the net increase in assets were decreases in cash equivalents of
$13,000, accrued interest receivable of $55,000 and intangible assets of
$115,000.

The increase in the Corporation's total assets was primarily funded by increases
in total liabilities of $24.0 million or 11.1% to $239.9 million at December 31,
2003 from $215.9 million at December 31, 2002. The increase in total liabilities
was primarily due to increases in customer deposits of $12.7 million or 6.2% and
borrowed funds of $10.7 million or 107.0%. Also contributing to the increase in
total liabilities were increases in accrued interest payable of $10,000 or 2.1%
and accrued expenses and other liabilities of $565,000 or 56.2%.

Cash and cash equivalents. Cash on hand, interest-earning deposits and federal
funds sold decreased a combined $13,000 to $7.703 million at December 31, 2003
from $7.716 million at December 31, 2002. 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.

Securities. Securities increased $414,000 or 1.0% to $49.2 million at December
31, 2003 from $48.7 million at December 31, 2002 as a result of excess liquidity
and an advance from the Federal Home Loan Bank in the amount of $5.0 million
(See Borrowed Funds). This excess liquidity and advance resulted in security
purchases totaling $36.8 million, comprised of purchases of short-term
commercial paper, corporate, U.S. Government agency and marketable equity
securities of $6.0 million, $1.5 million, $28.2 million and $1.1 million,
respectively, during 2003. Partially offsetting the net increase in securities
were security maturities, calls and sales totaling $37.2 million, comprised of
commercial paper, corporate, U.S. Government agency, municipal and marketable
equity securities of $8.2 million, $1.8 million, $24.7 million, $1.8 million and
$647,000, respectively, during 2003. Also contributing to the change in
securities for the year was an increase in the unrealized gain on available for
sale securities.

Loans receivable. Net loans receivable increased $20.9 million or 12.3% to
$190.5 million at December 31, 2003 from $169.6 million at December 31, 2002.
This increase can primarily be attributed to growth in the Corporation's
commercial loan portfolios. Commercial real estate loans increased $9.9 million
or 28.4% and commercial business loans increased $4.6 million or 20.8% as
business activity in the Bank's markets has increased as a result of the lower
interest rate environment as well as the continued focus by management on
commercial lending. Also contributing to the growth in the loan portfolio was an
increase in home equity loans of $11.2 million or 58.4% due primarily to home
equity loan campaigns put forth during the year. First mortgage loans decreased
$6.1 million or 7.3% during the year amid considerable refinancing activity as a
result of the decline in market interest rates. During the year, $2.0 million of
fixed-rate conforming 20-year and 30-year mortgages were sold in connection with
managing interest rate risk.

--------------------------------------------------------------------------------
Emclaire Financial Corp.                   8                  2003 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, real
estate acquired through foreclosure (REO) and repossessions. Non-performing
assets increased $209,000 or 17.9% to $1.4 million or 0.52% of total assets at
December 31, 2003 from $1.2 million or 0.49% of total assets at December 31,
2002. Non-performing assets consisted of non-performing loans, REO and
repossessions of $1.3 million, $0, and $45,000, respectively, at December 31,
2003 and $1.2 million, $3,000 and $0, respectively, at December 31, 2002.

Federal bank stocks. Federal bank stocks were comprised of Federal Home Loan
Bank stock and Federal Reserve Bank stock of $1.65 million and $333,000,
respectively, at December 31, 2003. 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). BOLI is comprised of single premium life
insurance policies of $4.0 million on 20 officers and employees of the Bank.
During 2003, the BOLI increased $218,000 or 5.4% to $4.3 million at December 31,
2003 from $4.1 million at December 31, 2002. This net increase was comprised of
the appreciation of the cash surrender value of $233,000 offset by executive
life insurance expense of $15,000.

Premises and equipment. Premises and equipment increased $1.5 million or 42.0%
to $5.2 million at December 31, 2003 from $3.7 million at December 31, 2002. The
net increase resulted from capital expenditures of $1.9 million, primarily for
the renovation of the Corporation's headquarters, offset by normal depreciation
of fixed assets of $404,000.

Goodwill and Core deposit intangibles. Core deposit intangibles decreased
$115,000 or 68.0% to $54,000 at December 31, 2003 from $169,000 at December 31,
2002 as a result of normal amortization during the year. Upon adopting new
accounting guidance in 2002, the Corporation ceased amortizing goodwill.

Deposits. Total deposits increased $12.7 million or 6.2% to $217.1 million at
December 31, 2003 from $204.4 million at December 31, 2002. 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 $3.6 million or
10.9%, $5.8 million or 8.0% and $3.3 million or 3.3%, respectively. Contributing
to the increase in customer deposits was the opening of a new branch in January
2003 and also the marketing efforts put forth during the year throughout our
branch network. This increase in deposits can also be attributed 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 $10.7
million or 107.0% to $20.7 million at December 31, 2003 from $10.0 million at
December 31, 2002. The increase in advances was the result of management's
matching long-term borrowed funds of $5.0 million with U.S. Government agency
securities with similar maturity terms to obtain an acceptable spread. Also
contributing to the increase in borrowed funds was $5.7 million of overnight
borrowings with the FHLB obtained primarily to fund stronger than expected loan
growth in the fourth quarter of 2003.

Accrued expenses and other liabilities. Accrued expenses and other liabilities
increased $565,000 or 56.2% to $1.6 million at December 31, 2003 from $1.0
million at December 31, 2002 primarily as a result of increased accruals for
income taxes, incentive bonus and other pension expenses to be paid in early
2004.

--------------------------------------------------------------------------------
Emclaire Financial Corp.                   9                  2003 Annual Report

<PAGE>

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


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

Total stockholders' equity decreased $25,000 to $22.7 million at December 31,
2003 from $22.7 million at December 31, 2002. Contributing to this decrease was
the purchase of treasury stock of $1.7 million and dividends declared of $1.4
million offset by net income of $2.5 million and an increase in accumulated
other comprehensive income of $602,000. Returns on average equity and assets
were 10.96% and 0.99%, respectively for 2003.

The Corporation has maintained a strong capital position with an equity to
assets ratio of 8.6% at December 31, 2003, a slight decline from the ratio of
9.5% a year earlier. While continuing to sustain this strong capital position,
stockholders received dividends of $1.4 million in 2003, including a special
fourth quarter cash dividend of $317,000, or $.25 per share. Exclusive of the
special cash dividend, regular quarterly dividends increased to $1.1 million in
2003 from $1.0 million in 2002. Stockholders have taken part in the
Corporation's dividend reinvestment plan introduced during 2002 with 38% of
registered shareholder accounts active in the plan at December 31, 2003.

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,
2003, 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 2003, the
Corporation used its sources of funds primarily to fund loan commitments and
purchase securities. As of December 31, 2003, the Corporation had outstanding
loan commitments, including undisbursed loans and amounts available under credit
lines, totaling $12.2 million. 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. The Bank is currently in compliance with all liquidity policy
limits.

At December 31, 2003, time deposits amounted to $102.3 million or 47.2% of the
Corporation's total consolidated deposits, including approximately $24.6
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 term borrowing capacity from the FHLB and, to a limited extent, through the
sale of loans. At December 31, 2003, the Corporation's borrowing capacity with
the FHLB, net of funds borrowed, was $108.4 million.

--------------------------------------------------------------------------------
Emclaire Financial Corp.                   10                 2003 Annual Report

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



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

Critical Accounting Policies
----------------------------

The most significant accounting policies followed by the Company are presented
in Note 1 to the consolidated financial statements. These policies, along with
the disclosures presented in the other financial statement notes and in this
financial review, provide information on how significant assets and liabilities
are valued in the financial statements and how those values are determined.
Management views critical accounting policies to be those which are highly
dependent on subjective or complex judgments, estimates and assumptions and
where changes in those estimates and assumptions could have a significant impact
on the financial statements. Management currently views the determination of the
allowance for loan losses as a critical accounting policy.

The allowance for loan losses represents management's estimate of probable
credit losses inherent in the loan portfolio. Estimating the amount of the
allowance for loan losses requires significant judgment and the use of estimates
related to the amount and timing of expected future cash flows on impaired
loans, estimated losses on pools of homogeneous loans based on historical loss
experience, and consideration of current economic trends and conditions, all of
which may be susceptible to significant change. Loan losses are charged against
the allowance while recoveries of amounts previously charged-off are credited to
the allowance. Loan loss provisions are charged against current earnings based
on management's periodic evaluation and review of the factors indicated above.



--------------------------------------------------------------------------------
Emclaire Financial Corp.                   11                 2003 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 $2.5 million, $2.3 million and $1.7
million in 2003, 2002 and 2001, 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,

                                                  2003                     2002                     2001
                                              ------------------------ ------------------------ ------------------------
                                               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                             $178,030  $12,130  6.81% $167,062  $12,441  7.45% $155,769  $12,668  8.13%
                                              --------- -------- ----- --------- -------- ----- --------- -------- -----

 Securities, taxable                            35,635    1,391  3.90%   29,745    1,485  4.99%   19,871    1,202  6.05%
 Securities, tax exempt                         16,070    1,066  6.63%   12,970      902  6.95%    8,157      565  6.93%
                                              --------- -------- ----- --------- -------- ----- --------- -------- -----
                                                51,705    2,457  4.75%   42,715    2,387  5.59%   28,028    1,767  6.30%
                                              --------- -------- ----- --------- -------- ----- --------- -------- -----

 Interest-earning cash equivalents               1,996       25  1.25%    4,719       73  1.55%    7,296      272  3.73%
 Federal bank stocks                             1,749       48  2.74%    1,314       55  4.19%    1,255       80  6.37%
                                              --------- -------- ----- --------- -------- ----- --------- -------- -----
                                                 3,745       73  1.95%    6,033      128  2.12%    8,551      352  4.12%
                                              --------- -------- ----- --------- -------- ----- --------- -------- -----

 Total interest-earning assets                 233,480   14,660  6.28%  215,810   14,956  6.93%  192,348   14,787  7.69%

 Cash and due from banks                         6,066                    5,467                    6,168
 Other noninterest-earning assets               12,355                    6,741                    5,205
                                              ---------                ---------                ---------

   Total assets                               $251,901                 $228,018                 $203,721
                                              =========                =========                =========

Interest-bearing liabilities:
---------------------------------------------
 Interest-bearing demand deposits              $77,058     $596  0.77%  $71,983     $799  1.11%  $65,595   $1,312  2.00%
 Time deposits                                  99,562    3,775  3.79%   94,301    4,094  4.34%   85,696    4,714  5.50%
                                              --------- -------- ----- --------- -------- ----- --------- -------- -----
                                               176,620    4,371  2.47%  166,284    4,893  2.94%  151,291    6,026  3.98%
                                              --------- -------- ----- --------- -------- ----- --------- -------- -----

 Borrowed funds                                 14,724      530  3.60%    6,203      268  4.32%    1,370       71  5.18%
                                              --------- -------- ----- --------- -------- ----- --------- -------- -----

 Total interest-bearing liabilities            191,344    4,901  2.56%  172,487    5,161  2.99%  152,661    6,097  3.99%
 Noninterest-bearing demand deposits            35,970        -     -    31,679        -     -    29,411        -     -
                                              --------- -------- ----- --------- -------- ----- --------- -------- -----

 Funding and cost of funds                     227,314    4,901  2.16%  204,166    5,161  2.53%  182,072    6,097  3.35%

 Other noninterest-bearing liabilities           1,856                    1,748                    1,232
                                              ---------                ---------                ---------
   Total liabilities                           229,170                  205,914                  183,304
   Stockholders' equity                         22,731                   22,104                   20,417
                                              ---------                ---------                ---------

   Total liabilities and equity               $251,901                 $228,018                 $203,721
                                              ========= --------       ========= --------       ========= --------

Net interest income                                      $9,759                   $9,795                   $8,690
                                                        ========                 ========                 ========

Interest rate spread (difference between
 weighted average rate on interest-earning
 assets and interest-bearing liabilities)                        3.72%                    3.94%                    3.70%
                                                                 =====                    =====                    =====

Net interest margin (net interest
 income as a percentage of average
 interest-earning assets)                                        4.18%                    4.54%                    4.52%
                                                                 =====                    =====                    =====

</TABLE>


--------------------------------------------------------------------------------
Emclaire Financial Corp.                  12                  2003 Annual Report

<PAGE>

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


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>

 (Dollar amounts in thousands)         2003 versus 2002             2002 versus 2001

                                       Increase (decrease) due to   Increase (decrease) due to
                                      ---------------------------- ----------------------------
                                       Volume    Rate      Total   Volume    Rate      Total
-----------------------------------------------------------------------------------------------
 Interest income:
<S>                                      <C>    <C>         <C>     <C>     <C>          <C>
    Loans                                $787   $(1,098)    $(311)  $883    $(1,110)     $(227)
    Securities                            458      (388)       70    839       (219)       620
    Interest-earning cash equivalents     (36)      (12)      (48)   (75)      (124)      (199)
    Federal bank stocks                    15       (22)       (7)     4        (29)       (25)
                                      -------- --------- --------- ------ ---------- ----------

    Total interest-earning assets       1,224    (1,520)     (296) 1,651     (1,482)       169
                                      -------- --------- --------- ------ ---------- ----------

 Interest expense:
    Deposits                              291      (813)     (522)   554     (1,687)    (1,133)
    Borrowed funds                        313       (51)      262    211        (14)       197
                                      -------- --------- --------- ------ ---------- ----------

    Total interest-bearing
     liabilities                          604      (864)     (260)   765     (1,701)      (936)
                                      -------- --------- --------- ------ ---------- ----------

 Net interest income                     $620     $(656)     $(36)  $886       $219     $1,105
                                      ======== ========= ========= ====== ========== ==========

</TABLE>

2003 Results Compared to 2002 Results

The Corporation reported net income of $2.5 million and $2.3 million for 2003
and 2002, respectively. The $235,000 or 10.4% increase in net income can be
attributed to increases in noninterest income of $385,000 and decreases in the
provision for loan losses and the provision for income taxes of $51,000 and
$85,000, respectively, offset by a decrease in net interest income of $184,000
and an increase in noninterest expense of $102,000.

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 decreased $36,000 to
$9.75 million for 2003, compared to $9.79 million for 2002. This decrease in net
interest income can be attributed to a decrease in tax equivalent interest
income of $296,000 and a decrease in interest expense of $260,000.

Interest income. Tax equivalent interest income decreased $296,000 or 2.0% to
$14.7 million for 2003, compared to $15.0 million for 2002. This decrease can be
attributed to decreases in interest earned on loans, interest-earning cash
equivalents and federal bank stocks of $311,000, $48,000 and $7,000,
respectively, offset by an increase in securities of $70,000.


--------------------------------------------------------------------------------
Emclaire Financial Corp.                  13                  2003 Annual Report

<PAGE>

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


Tax equivalent interest earned on loans receivable decreased $311,000 or 2.5% to
$12.1 million for 2003, compared to $12.4 million for 2002. During that time,
average loans increased $11.0 million or 6.6%, accounting for $787,000 in
additional loan interest income. Due to the continually lower interest rate
environment in 2003 versus 2002, this volume increase was more than offset by a
decrease of $1.1 million relating to the 64 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 decrease 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 2002.

Tax equivalent interest earned on securities increased $70,000 or 2.9% to $2.5
million for 2003, compared to $2.4 million for 2002. The average volume of these
assets increased $9.0 million or 21.0% - as a result of the deployment of funds
from deposit growth, in excess of loan demand, into short-term commercial paper,
corporate, U.S. Government agency and equity securities - accounting for
$458,000 of the increase in interest income. The average rate of securities
decreased 84 basis points during 2003 resulting in an offsetting reduction in
such interest income of $388,000.

Interest earned on interest-earning deposit accounts, including federal funds
sold, decreased $48,000 or 65.8% to $25,000 for 2003, compared to $73,000 for
2002, 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 2003 versus 2002.

Interest expense. Interest expense decreased $260,000 or 5.0% to $4.9 million
for 2003, compared to $5.2 million for 2002. This decrease in interest expense
can be attributed to a decrease in interest incurred on deposits of $522,000,
offset by an increase in interest incurred on borrowed funds of $262,000.

Deposit interest expense decreased $522,000 or 10.7% to $4.4 million for 2003,
compared to $4.9 million for 2002. This decrease in interest expense can be
attributed to a 47 basis point decline in the cost of interest-bearing deposits
to 2.47% for 2003 versus 2.94% for 2002 resulting in a reduction in expense due
to rate of $813,000. The favorable rate variance was partially offset by an
increase in average interest-bearing deposits of $10.3 million or 6.2% between
2003 and 2002 resulting in additional interest expense of $291,000. 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 $262,000 or 97.8% to $530,000 for
2003, compared to $268,000 for 2002 due to a $5.0 million FHLB term borrowing
placed in June 2003 and the increase in the average balance of overnight
borrowings of $1.7 million to $1.8 million for 2003 compared to $161,000 in
2002. Offsetting the increase was interest capitalization on the renovations of
the main headquarters in Emlenton, Pennsylvania.

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.                   14                 2003 Annual Report

<PAGE>

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


The provision for loan losses decreased $51,000 or 13.4% to $330,000 for 2003,
compared to $381,000 for 2002. The Corporation's allowance for loan losses
amounted to $1.8 million or 0.92% of the Corporation's total loan portfolio at
December 31, 2003, compared to $1.6 million or 0.93% at December 31, 2002. The
allowance for loan losses as a percentage of non-performing loans at December
31, 2003 and 2002 was 133.71% and 136.81%, respectively. The decrease in the
provision for loan losses from 2002 to 2003 was primarily due to decreased
charge-offs in 2003 while impaired and other nonperforming loans remained
relatively stable.

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, such as fees on depository accounts, general
transaction and service fees, security and loan gains and losses, and earnings
on BOLI. Noninterest income increased $385,000 or 27.5% to $1.8 million for
2003, compared to $1.4 million for 2002. This can be attributed to increases in
fees and service charges, gains on the sale of loans and marketable securities
and earnings on BOLI of $65,000, $8,000, $170,000 and $175,000, respectively.
Offsetting this increase was a decrease in other noninterest income of $33,000.

In 2003, Management began to diversify its security portfolio with an emphasis
on marketable equity securities into community banks with growth potential,
increasing dividend yields and the potential to diversify the Corporation's
business. Reducing risk and increasing the return on equity and asset ratios
were also contributing factors. The unrealized gain on the equity portfolio is
attributable largely to one equity security holding which management has held
during several years of appreciation in price. As these securities are
classified as available for sale, they may be sold in the future. Gains on the
sale of these available for sale marketable equity securities are anticipated to
be recognized over the next two years. The increase in the gains on the sale of
marketable equity securities of $170,000 in 2003 was a direct result of this
diversification.

The earnings on BOLI increased $175,000 to $233,000 for 2003, compared to
$58,000 for 2002. The difference consists of an entire year of earnings
recognized in 2003 versus only three months in 2002.

Other noninterest income decreased $33,000 or 9.9% to $301,000 for 2003,
compared to $334,000 for 2002. Other noninterest income consists primarily of
miscellaneous customer fees for ATM and debit card privileges, wire transfer
fees, commissions on insurance and gains on the sale of foreclosed assets.

Noninterest expense. Noninterest expense increased $102,000 or 1.4% to $7.5
million for 2003, compared to $7.4 million for 2002. This increase in
noninterest expense is comprised of increases in compensation and employee
benefits and other noninterest expenses of $155,000 and $64,000, respectively,
offset by the reduction in intangible amortization expense and premises and
equipment expense of $31,000 and $86,000, respectively.

The largest component of noninterest expense is compensation and employee
benefits. This expense increased $155,000 or 3.9%. 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 2003 and 2002, a
decrease in employee benefits expense as a result of the decrease in staffing
levels and an increase in standard loan costs deferred associated with
personnel.

Premises and equipment expense decreased $86,000 or 7.6% primarily as a result
of the cessation of depreciation on certain data processing equipment in the
fourth quarter 2002. In 2004, depreciation will increase as a result of the
final renovations of the main office and the purchases of new data processing
equipment that will be placed in service throughout the year.


--------------------------------------------------------------------------------
Emclaire Financial Corp.                   15                 2003 Annual Report

<PAGE>

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


Intangible amortization expense decreased $31,000 or 21.2% as a result of the
cessation of intangible amortization expense on three branches previously
acquired which have been fully amortized.

Other expense increased $64,000 or 3.0% primarily as a result of increased
printing and office supplies, postage, marketing and other noninterest expenses.
Other noninterest expenses consists primarily of loan servicing costs, credit
bureau and loan expenses, contributions, bad checks and other losses, and other
miscellaneous operating expenses. Contributing to the increase in these expenses
was the addition of a new branch early in 2003 and increased loan volume
throughout the year. Partially offsetting this increase in other expenses were
decreases in software amortization expense as certain amortization periods
expired in late 2002 and in 2003, telephone and data communications,
professional fees and Pennsylvania shares tax expenses.

Provision for income taxes decreased $85,000 or 10.2% to $749,000 for 2003,
compared to $834,000 for 2002. Contributing to this change was the effective tax
rate decreasing to 23.1% for 2003 from 27.0% for 2002 as a direct result of an
increase in nontaxable interest income on tax-free investments and loans,
nontaxable BOLI income and a historical tax credit related to the renovations of
the main office building.

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.

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.

--------------------------------------------------------------------------------
Emclaire Financial Corp.                  16                  2003 Annual Report


<PAGE>

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


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.

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.



--------------------------------------------------------------------------------
Emclaire Financial Corp.                   17                 2003 Annual Report

<PAGE>

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


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 a 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 a 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.

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.

--------------------------------------------------------------------------------
Emclaire Financial Corp.                  18                  2003 Annual Report

<PAGE>


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

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 interest-bearing liabilities.

The Bank's Board of Directors has established a Finance Committee, consisting of
five outside directors, the President and Chief Executive Officer and the
Principal Financial and Accounting 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, 2003, the Corporation's interest-earning assets maturing or
repricing within one year totaled $89.8 million while the Corporation's
interest-bearing liabilities maturing or repricing within one-year totaled
$108.8 million, providing an excess of interest-bearing liabilities over
interest-earning assets of $19.0 million or a negative 7.2% of total assets. At
December 31, 2003, the percentage of the Corporation's assets to liabilities
maturing or repricing within one year was 82.6%.


--------------------------------------------------------------------------------
Emclaire Financial Corp.                  19                  2003 Annual Report

<PAGE>

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


The following table presents the amounts of interest-earning assets and
interest-bearing liabilities outstanding as of December 31, 2003 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       six       one to    three to   over
                                      months    months
                                     or less   to one    three      five      five      Total
                                                 year     years     years     years
-----------------------------------------------------------------------------------------------

<S>                                  <C>       <C>       <C>       <C>       <C>      <C>
Total interest-earning assets        $63,856   $25,977   $73,311   $39,596   $40,261  $243,001

Total interest-bearing liabilities    96,868    11,926    54,641    15,919    22,124   201,478
                                    --------- --------- --------- --------- --------- ---------

Maturity or repricing gap during
 the period                         $(33,012)  $14,051   $18,670   $23,677   $18,137   $41,523
                                    ========= ========= ========= ========= ========= =========

Cumulative gap                      $(33,012) $(18,961)    $(291)  $23,386   $41,523
                                    ========= ========= ========= ========= =========

Ratio of gap during the period to
 total assets                        (12.58%)     5.35%     7.11%     9.02%     6.91%
                                    ========= ========= ========= ========= =========

Ratio of cumulative gap to total
 assets                              (12.58%)   (7.22%)   (0.11%)     8.91%    15.82%
                                    ========= ========= ========= ========= =========

Total assets                                                                          $262,512
                                                                                      =========
</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 Bank 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.                  20                  2003 Annual Report

<PAGE>

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


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 drop has not
been 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 a 100 basis point downward shift of market interest rates
on net interest income. This analysis was done assuming that the
interest-earning asset and interest-bearing liability levels at December 31,
2003 remained constant. The impact of the market rate movements on net interest
income was developed by simulating the effects of rates changing gradually
during a one-year period from the December 31, 2003 levels for net interest
income.

                                                     Increase       Decrease
                                               ---------------------------------
                                                   +100      +200      -100
                                                    BP        BP        BP
--------------------------------------------------------------------------------

Net interest income - increase (decrease           1.32%     0.59%    (4.49%)


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.                  21                  2003 Annual Report


<PAGE>

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

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

During 2003, the Corporation adopted FASB Statement 149, Amendment of Statement
133 on Derivative Instruments and Hedging Activities, FASB Statement 150,
Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equities, FASB Statement 132 (revised 2003), Employers'
Disclosures about Pensions and Other Postretirement Benefits, FASB
Interpretation 45, Guarantor's Accounting and Disclosure Requirements for
Guarantees, and FASB Interpretation 46, Consolidation of Variable Interest
Entities. Adoption of the new standards did not materially affect the
Corporation's operating results or financial condition.

FASB Statement 149 indicates that commitments to make mortgage loans should be
accounted for as derivatives if the loans are to be held for sale, because the
commitment represents a written option and accordingly is recorded at the fair
value of the option liability.

FASB Statement 150 requires reporting mandatory redeemable shares as
liabilities, as well as obligations not in the form of shares to repurchase
shares that may require cash payment and some obligations that may be settled by
issuing a variable number of equity shares.

FASB Statement 132 (revised 2003) requires additional disclosures about assets,
obligations, cash flows of defined benefit pension and postretirement plans, as
well as the expense recorded for such plans.

FASB Interpretation 45 requires recognizing the fair value of guarantees made
and information about the maximum potential payments that might be required, as
well as the collateral or other recourse obtainable. Interpretation 45 covers
guarantees such as standby letters of credit, performance guarantees, and direct
or indirect guarantees of the indebtedness of others, but not guarantees of
funding.

FASB Interpretation 46, as revised in December 2003, changes the accounting
model for consolidation from one based on consideration of control through
voting interests. Whether to consolidate an entity will now also consider
whether the entity has sufficient equity at risk to enable it to operate without
additional financial support, whether the equity owners in that entity lack the
obligation to absorb expected losses or the right to receive residual returns of
the entity, or whether voting rights in the entity are not proportional to the
equity interest and substantially all the entity's activities are conducted for
an investor with few voting rights.


--------------------------------------------------------------------------------
Emclaire Financial Corp.                  22                  2003 Annual Report


<PAGE>




Consolidated Balance Sheets
--------------------------------------------------------------------------------
(Dollar amounts in thousands, except share data)


<TABLE>
<CAPTION>


                                                                                    December 31,
                                                                          --------------------------------
                                                                              2003                2002
                                                                          ------------        ------------

                              Assets
------------------------------------------------------------------

<S>                                                                            <C>                 <C>
Cash and due from banks                                                        $6,776              $5,495
Interest-earning deposits in banks                                                927               2,221
                                                                          ------------        ------------
   Cash and cash equivalents                                                    7,703               7,716
Securities available for sale                                                  49,145              48,719
Securities held to maturity; fair value of $17 and $29                             17                  29
Loans receivable, net of allowance for loan losses of $1,777 and
 $1,587                                                                       190,482             169,557
Federal bank stocks                                                             1,982               1,298
Bank-owned life insurance                                                       4,272               4,054
Accrued interest receivable                                                     1,270               1,325
Premises and equipment, net                                                     5,223               3,678
Goodwill                                                                        1,422               1,422
Core deposit intangibles                                                           54                 169
Prepaid expenses and other assets                                                 942                 610
                                                                          ------------        ------------

         Total assets                                                        $262,512            $238,577
                                                                          ============        ============

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

Liabilities:
   Deposits:
      Noninterest bearing                                                     $36,332             $32,762
      Interest bearing                                                        180,778             171,663
                                                                          ------------        ------------
         Total deposits                                                       217,110             204,425
   Borrowed funds                                                              20,700              10,000
   Accrued interest payable                                                       477                 467
   Accrued expenses and other liabilities                                       1,570               1,005
                                                                          ------------        ------------

      Total liabilities                                                       239,857             215,897
                                                                          ------------        ------------

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                                                   1,745               1,745
   Additional paid-in capital                                                  10,871              10,871
   Treasury stock, at cost; 128,017 shares and 63,017 shares                   (2,653)               (971)
   Retained earnings                                                           11,033               9,978
   Accumulated other comprehensive income                                       1,659               1,057
                                                                          ------------        ------------

      Total stockholders' equity                                               22,655              22,680
                                                                          ------------        ------------

         Total liabilities and stockholders' equity                          $262,512            $238,577
                                                                          ============        ============

See accompanying notes to consolidated financial statements.

</TABLE>

--------------------------------------------------------------------------------
Emclaire Financial Corp.                   23                 2003 Annual Report




<PAGE>




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

<TABLE>
<CAPTION>


                                                                      Year ended December 31,
                                                            -------------------------------------------
                                                                  2003           2002             2001
                                                            -----------    -----------    -------------

Interest and dividend income:
<S>                                                            <C>            <C>              <C>
   Loans receivable, including fees                            $12,009        $12,419          $12,646
   Securities:
      Taxable                                                    1,391          1,485            1,202
      Exempt from federal income tax                               736            621              389
   Federal bank stocks                                              48             55               80
   Deposits with banks and federal funds sold                       25             73              272
                                                            -----------    -----------    -------------
      Total interest and dividend income                        14,209         14,653           14,589
                                                            -----------    -----------    -------------

Interest expense:
   Deposits                                                      4,371          4,893            6,026
   Borrowed funds                                                  530            268               71
                                                            -----------    -----------    -------------
      Total interest expense                                     4,901          5,161            6,097
                                                            -----------    -----------    -------------

Net interest income                                              9,308          9,492            8,492
   Provision for loan losses                                       330            381              154
                                                            -----------    -----------    -------------

Net interest income after provision for loan losses              8,978          9,111            8,338
                                                            -----------    -----------    -------------

Noninterest income:
   Fees and service charges                                      1,034            969            1,030
   Gain on the sale of loans                                        47             39                -
   Gain on the sale of securities                                  170              -                -
   Earnings on bank-owned life insurance                           233             58                -
   Other                                                           301            334              309
                                                            -----------    -----------    -------------
      Total noninterest income                                   1,785          1,400            1,339
                                                            -----------    -----------    -------------

Noninterest expense:
   Compensation and employee benefits                            4,176          4,021            3,887
   Premises and equipment, net                                   1,050          1,136            1,093
   Intangible amortization expense                                 115            146              276
   Other                                                         2,181          2,117            1,998
                                                            -----------    -----------    -------------
      Total noninterest expense                                  7,522          7,420            7,254
                                                            -----------    -----------    -------------

Income before provision for income taxes                         3,241          3,091            2,423
   Provision for income taxes                                      749            834              718
                                                            -----------    -----------    -------------

Net income                                                      $2,492         $2,257           $1,705
                                                            ===========    ===========    =============

Basic earnings per share                                         $1.91          $1.69            $1.28

Average common shares outstanding                            1,301,714      1,332,835        1,332,835

See accompanying notes to consolidated financial statements.

</TABLE>

--------------------------------------------------------------------------------
Emclaire Financial Corp.                    24                2003 Annual Report


<PAGE>




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

<TABLE>
<CAPTION>

                                                                                              Accumulated
                                                                 Additional                      Other         Total
                                                         Common   Paid-in   Treasury Retained ComprehensiveStockholders'
                                                          Stock   Capital    Stock   Earnings    Income       Equity
                                                         ------- ---------- -------- -------- ------------ -------------

<S>                <C>                                   <C>       <C>        <C>     <C>             <C>       <C>
Balance at January 1, 2001                               $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                                                                                              1,997

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                                                                                              2,942

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

Comprehensive income:
 Net income                                                                            2,492                      2,492
 Change in net unrealized gain on
  securities available for sale, net of
  taxes of $310                                                                                       602           602
                                                                                                           -------------

Comprehensive income                                                                                              3,094

Purchase of treasury stock, 65,000 Shares                                    (1,682)                             (1,682)
Dividends declared, $1.11 per share                                                   (1,437)                    (1,437)
                                                         ------- ---------- -------- -------- ------------ -------------

Balance at December 31, 2003                             $1,745    $10,871  $(2,653) $11,033       $1,659       $22,655
                                                         ======= ========== ======== ======== ============ =============

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

--------------------------------------------------------------------------------
Emclaire Financial Corp.                       25             2003 Annual Report

<PAGE>






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

<TABLE>
<CAPTION>
                                                                             Year ended December 31,
                                                                      --------------------------------------
                                                                           2003         2002           2001
                                                                      ----------   ----------   ------------

Operating activities:
<S>                                                                      <C>          <C>            <C>
   Net income                                                            $2,492       $2,257         $1,705
   Adjustments to reconcile net income to net cash from
      operating activities:
         Depreciation and amortization for premises and equipment           404          460            432
         Provision for loan losses                                          330          381            154
         Amortization of premiums and accretion of discounts, net           253          236             17
         Amortization of intangible assets                                  115          146            276
         Gain on sale of securities                                        (170)           -              -
         Gain on sale of loans                                              (47)         (39)             -
         Earnings on bank-owned life insurance, net                        (218)         (54)             -
         Changes in:
            Accrued interest receivable                                      55          (74)            (4)
            Prepaid expenses and other assets                              (332)          18            175
            Accrued interest payable                                         10          (13)           (25)
            Accrued expenses and other liabilities                          565          349            166
            Other                                                           180         (278)          (165)
                                                                      ----------   ----------   ------------
      Net cash provided by operating activities                           3,637        3,389          2,731
                                                                      ----------   ----------   ------------

Investing activities:
   Loan originations and payments, net                                  (21,297)      (9,570)       (10,362)
   Purchases of available for sale securities                           (37,014)     (42,561)       (19,595)
   Purchases of federal bank stocks                                        (684)         (37)           (22)
   Repayment, maturities and calls of available for sale securities      36,369       33,475          7,809
   Proceeds from the sale of available for sale securities                  647            -              -
   Principal repayments of held to maturity securities                       12           31            159
   Purchase of bank-owned life insurance                                      -       (4,000)             -
   Purchases of premises and equipment                                   (1,949)        (750)          (487)
                                                                      ----------   ----------   ------------
      Net cash used in investing activities                             (23,916)     (23,412)       (22,498)
                                                                      ----------   ----------   ------------

Financing activities:
   Net increase in deposits                                              12,685       14,955         18,345
   Borrowings from the FHLB                                              10,700        5,000          5,000
   Repayments of borrowed funds                                               -            -         (2,000)
   Dividends paid                                                        (1,437)      (1,373)          (931)
   Payments to acquire treasury stock                                    (1,682)           -              -
                                                                      ----------   ----------   ------------
      Net cash provided by financing activities                          20,266       18,582         20,414
                                                                      ----------   ----------   ------------

Net increase (decrease) in cash equivalents                                 (13)      (1,441)           647
Cash equivalents at beginning of period                                   7,716        9,157          8,510
                                                                      ----------   ----------   ------------
Cash equivalents at end of period                                        $7,703       $7,716         $9,157
                                                                      ==========   ==========   ============

Supplemental information:

   Interest paid                                                         $4,891       $5,174         $6,122
   Income taxes paid                                                        828          725            922

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

--------------------------------------------------------------------------------
Emclaire Financial Corp.                  26                  2003 Annual Report

<PAGE>


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

1.     Summary of Significant Accounting Policies

       Nature of Operations and Basis of Presentation.

       Emclaire Financial Corp. (the "Corporation") is a Pennsylvania company
       organized as the holding company of Farmers National Bank of Emlenton
       (the "Bank"). 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 certificate of
       deposit accounts and its primary lending products are residential and
       commercial mortgage, commercial business and consumer loans.

       The consolidated financial statements include the accounts of the
       Corporation and its wholly owned subsidiary, the Bank. All intercompany
       transactions and balances have been eliminated in preparing the
       consolidated financial statements.

       Use of Estimates and Classifications.

       To prepare financial statements in conformity with accounting principles
       generally accepted in the United States of America, management makes
       estimates and assumptions based on available information. These estimates
       and assumptions affect the amounts reported in the 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, loan servicing rights, 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 and Cash Equivalents.

       Cash and cash equivalents include cash on hand and in banks,
       interest-earning deposits with other financial institutions 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 $2.5 million and $200,000 was required to meet
       regulatory reserve and clearing requirements at December 31, 2003 and
       2002, respectively. Such balances do not earn interest.

       Securities.

       Investment securities are classified as either available for sale or held
       to maturity at the time of purchase based on management's intent and
       ability. Securities acquired with the intent and ability to hold to
       maturity are stated at cost adjusted for amortization of premium and
       accretion of discount which are computed using the interest method and
       recognized as adjustments of interest income. Available for sale
       securities consist of securities that are not classified as held to
       maturity and are carried at fair value, with unrealized holding gains and
       losses reported as a separate component of stockholders' equity, net of
       tax, until realized. Realized gains and losses are computed using the
       specific identification method and are included in operations in the
       period sold. Interest and dividends on investment securities are
       recognized as income when earned. Securities are written down to fair
       value when a decline in fair value is not temporary.


--------------------------------------------------------------------------------
Emclaire Financial Corp.                  27                  2003 Annual Report

<PAGE>


Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------

1.     Summary of Significant Accounting Policies (continued)

       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.

       Loans Receivable.

       Loans that management has the intent and ability to hold for the
       foreseeable future or until maturity or payoff are reported at their
       outstanding 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 a valuation allowance established for
       probable incurred credit losses, increased by the provision for loan
       losses and decreased by charge-offs less recoveries. Loan losses are
       charged against the allowance when management believes the
       uncollectibility of a loan balance is confirmed. Subsequent recoveries,
       if any, are 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. 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. 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.                  28                  2003 Annual Report

<PAGE>

Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------

1.     Summary of Significant Accounting Policies (continued)

       Bank-Owned Life Insurance (BOLI).

       The Corporation has 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 for the
       estimated useful lives of the related assets, which are 39 to 40 years
       for buildings and three to 10 years for furniture and equipment.
       Amortization of leasehold improvements is computed using the
       straight-line method for 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 above the fair value of acquired assets and
       liabilities. Upon adopting new accounting guidance in 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 for 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 for 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, to the extent that fair value is less than the capitalized
       amount for a grouping.

       Real Estate Acquired Through Foreclosure.

       Real estate properties acquired through foreclosure (REO) are initially
       recorded at the lower of cost or fair value at the date of foreclosure,
       establishing a new cost basis. If fair value declines subsequent to
       foreclosure, a valuation is recorded through expense. Costs after
       acquisition are expensed. Real estate acquired through foreclosure is
       classified in prepaid expenses and other assets and totaled $0 and $3,000
       at December 31, 2003 and 2002, respectively.

--------------------------------------------------------------------------------
Emclaire Financial Corp.                  29                  2003 Annual Report

<PAGE>



Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------

1.     Summary of Significant Accounting Policies (continued)

       Income Taxes.

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

       Basic Earnings per Common Share.

       The Corporation maintains a simple capital structure with no common stock
       equivalents. Basic earnings per common share is calculated using net
       income divided by the weighted average number of common shares
       outstanding during the period. The Corporation's capital structure
       contains no potentially dilutive securities.

       Comprehensive Income.

       Comprehensive income consists of net income and other comprehensive
       income. Other comprehensive income includes unrealized gains and losses
       on securities available for sale which are also recognized as separate
       components of 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 which covers substantially all employees and a
       supplemental executive retirement plan for key executive officers.

       Adoption of New Accounting Standards.

       During 2003, the Corporation adopted FASB Statement 149, Amendment of
       Statement 133 on Derivative Instruments and Hedging Activities, FASB
       Statement 150, Accounting for Certain Financial Instruments with
       Characteristics of both Liabilities and Equities, FASB Statement 132
       (revised 2003), Employers' Disclosures about Pensions and Other
       Postretirement Benefits, FASB Interpretation 45, Guarantor's Accounting
       and Disclosure Requirements for Guarantees, and FASB Interpretation 46,
       Consolidation of Variable Interest Entities. Adoption of the new
       standards did not materially affect the Corporation's operating results
       or financial condition.


--------------------------------------------------------------------------------
Emclaire Financial Corp.                  30                  2003 Annual Report

<PAGE>

Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------


1.     Summary of Significant Accounting Policies (continued)

       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.                  31                  2003 Annual Report

<PAGE>

Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------

2.     Securities

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

<TABLE>
<CAPTION>

(Dollar amounts in thousands)              Carrying     Unrecognized Unrecognized   Fair
                                            Amount        gains       losses        value
-------------------------------------------------------------------------------------------

Available for sale:
---------------------------------------
   December 31, 2003:
<S>                                         <C>              <C>        <C>        <C>
      U.S. Government securities            $19,061          $83        $(249)     $18,895
      Mortgage-backed securities              1,691            -          (22)       1,669
      Municipal securities                   14,680          811            -       15,491
      Corporate securities                    9,599          273           (1)       9,871
      Equity securities                       1,601        1,622           (4)       3,219
                                           ---------    ---------    ---------    ---------
                                            $46,632       $2,789        $(276)     $49,145
                                           =========    =========    =========    =========
   December 31, 2002:
      U.S. Government securities            $17,486         $350           $-      $17,836
      Mortgage-backed securities                  -            -            -            -
      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
                                           =========    =========    =========    =========
Held to maturity:
---------------------------------------
   December 31, 2003:
      Mortgage-backed securities                $17           $-           $-          $17
                                           ---------    ---------    ---------    ---------
                                                $17           $-           $-          $17
                                           =========    =========    =========    =========
   December 31, 2002:
      Mortgage-backed securities                $29           $-           $-          $29
                                           ---------    ---------    ---------    ---------
                                                $29           $-           $-          $29
                                           =========    =========    =========    =========

</TABLE>

       Sales of available for sale securities were as follows:



      (Dollar amounts in thousands)            2003         2002         2001
------------------------------------------------------------------------------

      Proceeds                                 $647           $-           $-
      Gross Gains                               170            -            -

       The following table summarizes scheduled maturities of the Corporation's
       securities as of December 31, 2003:


<TABLE>
<CAPTION>


(Dollar amounts in thousands)                        Available for        Held to maturity
                                                           sale
                                           ---------                 ----------------------
                                           Amortized      Fair       Amortized      Fair
                                             cost         value        cost         value
-------------------------------------------------------------------------------------------

<S>                                          <C>          <C>              <C>          <C>
Due in one year or less                      $6,481       $6,606           $-           $-
Due from one year to five years              19,963       20,021            -            -
Due from five to ten years                    3,907        3,808            -            -
Due after ten years                          14,680       15,491           17           17
No scheduled maturity                         1,601        3,219            -            -
                                           ---------    ---------    ---------    ---------
                                            $46,632      $49,145          $17          $17
                                           =========    =========    =========    =========

</TABLE>

--------------------------------------------------------------------------------
Emclaire Financial Corp.                   32                 2003 Annual Report

<PAGE>

Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------


2.     Securities (continued)

       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.

       Securities with carrying values of $8.6 million and $9.5 million as of
       December 31, 2003 and 2002, respectively, were pledged to secure public
       deposits and for other purposes required or permitted by law.

       At year end 2003 and 2002, there were no holdings of securities of any
       one issuer, other than the U.S. Government and its agencies, in an amount
       greater than 10% of shareholders' equity.

       Securities with unrealized losses at year end 2003 not recognized in
       income are as follows:

<TABLE>
<CAPTION>


(Dollar amounts in thousands)                                          Less than 12 Months
                                                                      -----------------------
Description of                                                          Fair       Unrealized
 Securities
                                                                        Value         Loss
---------------------------------------------------------------------------------------------

U.S. Government
<S>                                                                    <C>             <C>
 securities                                                            $11,316         $(249)
Mortgage-backed
 securities                                                              1,669           (22)
Municipal securities                                                         -             -
Corporate securities                                                       809            (1)
Equity securities                                                          214            (4)
                                                                      ---------    ----------
                                                                       $14,008         $(276)
                                                                      =========    ==========
</TABLE>


       Unrealized losses on available for sale securities have not been
       recognized into income because the issuers' bonds are of high credit
       quality (rated AA or higher), management has the intent and ability to
       hold for the foreseeable future, and the decline in the fair value is
       largely due to increase in market interest rates. The fair value is
       expected to recover as the bonds approach their maturity dates and/or
       market rates decline.

3.     Loans Receivable

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

<TABLE>
<CAPTION>

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

(Dollar amounts in thousands)                            2003                        2002
------------------------------------------------------------------------------------------

Mortgage loans:
<S>                                                   <C>                         <C>
  Residential first mortgage                          $76,396                     $82,449
  Home equity                                          30,316                      19,136
  Commercial                                           44,935                      34,986
                                                    ----------                  ----------
                                                      151,647                     136,571
Other loans:
  Commercial business                                  26,470                      21,913
  Consumer                                             14,142                      12,660
                                                    ----------                  ----------
                                                       40,612                      34,573
                                                    ----------                  ----------

Total loans, gross                                    192,259                     171,144

Less allowance for loan losses                          1,777                       1,587
                                                    ----------                  ----------

Total loans, net                                     $190,482                    $169,557
                                                    ==========                  ==========

</TABLE>

--------------------------------------------------------------------------------
Emclaire Financial Corp.                  33                  2003 Annual Report


<PAGE>

Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------


3.     Loans Receivable (continued)

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

<TABLE>
<CAPTION>


(Dollar amounts in thousands)                                2003         2002         2001
--------------------------------------------------------------------------------------------

<S>                                                        <C>          <C>          <C>
Balance at the beginning of the year                       $1,587       $1,464       $1,460

Provision for loan losses                                     330          381          154
Loans charged-off                                            (205)        (331)        (197)
Recoveries                                                     65           73           47
                                                        ----------   ----------   ----------

Balance at the end of the year                             $1,777       $1,587       $1,464
                                                        ==========   ==========   ==========

</TABLE>

       Non-performing loans, which include primarily non-accrual loans, were
       $1.3 million and $1.2 million at December 31, 2003 and 2002,
       respectively. The Corporation is not committed to lend significant
       additional funds to debtors whose loans are on non-accrual status. At
       December 31, 2003 and 2002, the recorded investment in loans considered
       to be impaired was $821,000 and $635,000, respectively, against which
       approximately $202,000 and $147,000, respectively, of the allowance for
       loan losses was allocated. During 2003, 2002 and 2001, impaired loans
       averaged $728,000, $789,000 and $875,000, respectively. The Corporation
       recognized interest income on impaired loans of approximately $29,000,
       $13,000 and $30,000, on a cash basis, during 2003, 2002 and 2001,
       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 10 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
       $2.8 million and $1.2 million at December 31, 2003 and 2002,
       respectively, 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. Servicing assets related to these loans
       are not material.

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 $1.65
       million and $333,000, respectively, at December 31, 2003, and $965,000
       and $333,000, respectively, at December 31, 2002.

--------------------------------------------------------------------------------
Emclaire Financial Corp.                  34                  2003 Annual Report

<PAGE>

Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------


5.     Premises and Equipment

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


(Dollar amounts in thousands)                              2003           2002
-------------------------------------------------------------------------------

Land                                                       $349           $296
Buildings and improvements                                4,201          2,981
Leasehold improvements                                      696            481
Furniture, fixtures and equipment                         3,532          3,111
Construction in progress                                    456            416
                                                     -----------    -----------

                                                          9,234          7,285
Less accumulated depreciation and
 amortization                                             4,011          3,607
                                                     -----------    -----------

                                                         $5,223         $3,678
                                                     ===========    ===========


       Depreciation and amortization expense for the years December 31, 2003,
       2002 and 2001 were $404,000, $460,000 and $432,000, respectively.

       Rent expense under non-cancelable operating lease agreements for the
       years ended December 31, 2003, 2002 and 2001 was $124,000, $146,000 and
       $135,000, 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:


                   (Dollar amounts in thousands)

      2004                       $107
      2005                         99
      2006                         91
      2007                         94
      2008                         99
 Thereafter                       308
                          ------------
                                    -
                                 $798
                          ============


--------------------------------------------------------------------------------
Emclaire Financial Corp.                  35                  2003 Annual Report

<PAGE>


Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------

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>
(Dollar amounts in thousands, except per share
 data)                                                         2003      2002      2001
----------------------------------------------------------------------------------------

Net income:

<S>                                                          <C>       <C>       <C>
 Reported net income                                         $2,492    $2,257    $1,705
 Add back goodwill amortization                                   -         -       130
                                                           --------- --------- ---------

 Adjusted net income                                         $2,492    $2,257    $1,835
                                                           ========= ========= =========

Basic earnings per share:

 Reported basic earnings per share                            $1.91     $1.69     $1.28
 Add back goodwill amortization                                   -         -      0.10
                                                           --------- --------- ---------

 Adjusted basic earnings per share                            $1.91     $1.69     $1.38
                                                           ========= ========= =========

</TABLE>

       At December 31, 2003, core deposit intangibles had a gross carrying
       amount and accumulated amortization of $1.24 million and $1.19 million,
       respectively. Remaining estimated amortization expense for core deposit
       intangibles for 2004 and 2005 is estimated to be $32,000 and $22,000,
       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 $1.7 million and $1.9 million at December 31,
       2003 and 2002, respectively. During 2003, total principal additions and
       total principal repayments associated with these loans were $582,000 and
       $833,000, respectively. Deposits from principal officers and directors
       held by the Bank at December 31, 2003 and 2002 totaled $3.2 million and
       $2.1 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. During 2003, 2002 and 2001, amounts paid to
       affiliates for such services totaled $74,000, $79,000 and $59,000,
       respectively.

--------------------------------------------------------------------------------
Emclaire Financial Corp.                  36                  2003 Annual Report

<PAGE>


Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------

8.     Deposits

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


<TABLE>
<CAPTION>

(Dollar amounts in
 thousands)                              2003                          2002
                           ----------------------------- -----------------------------

                           Weighted                      Weighted
                            average                       average
    Type of accounts         rate     Amount           %   rate     Amount           %
--------------------------------------------------------------------------------------

Noninterest-bearing
<S>                                   <C>          <C>              <C>          <C>
 deposits                         -   $36,332      16.7%        -   $32,762      16.0%
Interest-bearing demand
 deposits                      0.68%   78,468      36.1%     0.88%   72,637      35.5%
Time deposits                  3.73%  102,310      47.2%     3.97%   99,026      48.5%
                                     --------- ---------           --------- ---------

                               2.01% $217,110     100.0%     2.24% $204,425     100.0%
                                     ========= =========           ========= =========

Time deposits mature as
 follows:

Three months or less                   $5,953       2.7%             $8,008       3.9%
Over three months through
 one year                              18,673       8.6%             23,041      11.3%
Over one year through
 three years                           54,641      25.2%             36,030      17.6%
Over three years through
 five years                            15,919       7.3%             27,714      13.6%
Thereafter                              7,124       3.4%              4,233       2.2%
                                     --------- ---------           --------- ---------

                                     $102,310      47.2%            $99,026      48.5%
                                     ========= =========           ========= =========

</TABLE>

       The Corporation had a total of $20.5 million and $18.6 million in time
       deposits of $100,000 or more at December 31, 2003 and 2002, respectively.

9.     Borrowed Funds

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


<TABLE>
<CAPTION>


(Dollar amounts in thousands)                                      2003                2002
                                                     ------------------- -------------------

                                                      Weighted           Weighted
                                                      average             average
                                                        rate    Amount     rate     Amount
--------------------------------------------------------------------------------------------

FHLB advances:
<S>           <C>                                         <C>    <C>         <C>         <C>
   Due within 12 months                                   1.06%  $5,700      0.00%       $-
   Due beyond 12 months but within 5 years                0.00%       -      0.00%        -
   Due beyond 5 years but within 10 years                 4.13%  15,000      4.17%   10,000
   Due beyond 10 years                                    0.00%       -      0.00%        -
                                                               ---------          ----------
                                                                $20,700             $10,000
                                                               =========          ==========

</TABLE>

       The Bank maintains a credit arrangement with the FHLB as a source of
       additional liquidity. The total maximum borrowing capacity with the FHLB,
       excluding loans outstanding, at December 31, 2003 was $108.4 million.

--------------------------------------------------------------------------------
Emclaire Financial Corp.                  37                  2003 Annual Report

<PAGE>

Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------


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 the 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. As of December 31, 2003, $2.7 million of
       undistributed earnings of the company was available for distribution as
       dividends, without prior regulatory approval.

       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 $1.0 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, 2003 and 2002, the Corporation and the Bank met all capital
       adequacy requirements to which they are subject.

--------------------------------------------------------------------------------
Emclaire Financial Corp.                  38                  2003 Annual Report

<PAGE>

Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------

10.    Insurance of Accounts and Regulatory Matters (continued)

       Minimum Regulatory Capital Requirement (continued).

       As of December 31, 2003, 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.

       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,                    December 31,
                                      2003                            2002
                                ------------------------------- -------------------------------
                                 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                         $22,018  11.72% $19,669  10.61% $21,858  13.11% $20,498  12.38%
 For capital adequacy purposes   15,025   8.00%  14,837   8.00%  13,338   8.00%  13,248   8.00%
 To be well capitalized          18,781  10.00%  18,546  10.00%  16,675  10.00%  16,561  10.00%
Tier 1 capital to risk-weighted
 assets:
 Actual                         $19,520  10.39% $17,885   9.64% $20,032  12.04% $18,906  11.42%
 For capital adequacy purposes    7,513   4.00%   7,418   4.00%   6,655   4.00%   6,624   4.00%
 To be well capitalized          11,269   6.00%  11,128   6.00%   9,983   6.00%   9,936   6.00%
Tier 1 capital to average
 assets:
 Actual                         $19,520   7.59% $17,885   7.00% $20,032   8.60% $18,906   8.15%
 For capital adequacy purposes   10,288   4.00%  10,220   4.00%   9,317   4.00%   9,275   4.00%
 To be well capitalized          12,860   5.00%  12,775   5.00%  11,647   5.00%  11,594   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:

<TABLE>
<CAPTION>

(Dollar amounts in thousands)             2003             2002             2001
---------------------------------------------------------------------------------

<S>                                       <C>              <C>              <C>
   Current                                $618             $984             $908
   Deferred                                131             (150)            (190)
                                       --------         --------         --------

                                          $749             $834             $718
                                       ========         ========         ========

</TABLE>

--------------------------------------------------------------------------------
Emclaire Financial Corp.                  39                  2003 Annual Report

<PAGE>

Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------


11.    Income Taxes (continued)

       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>

(Dollar amounts in thousands)             2003             2002             2001
-----------------------------------------------------------------------------------------
                                                % Pre-           % Pre-           % Pre-
                                                  tax              tax              tax
                                        Amount  Income   Amount  Income   Amount  Income
                                       ---------------- ---------------- ----------------

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

<S>                                     <C>       <C>    <C>       <C>      <C>     <C>
Provision at statutory tax rate         $1,102    34.0%  $1,051    34.0%    $824    34.0%
Increase (decrease) resulting from:
   Tax free interest, net of
    disallowance                          (312)  (9.6%)    (226)  (7.3%)    (166)  (6.9%)
   Goodwill                                  -     0.0%       -     0.0%      44     1.8%
   Earnings on BOLI                        (79)  (2.4%)       -     0.0%       -     1.8%
   Other, net                               38     1.2%       9     0.3%      16     0.7%
                                       ---------------- ---------------- ----------------

Reported rate                             $749    23.1%    $834    27.0%    $718    31.4%
                                       ================ ================ ================

</TABLE>

       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:

<TABLE>
<CAPTION>
(Dollar amounts in thousands)                              2003             2002
---------------------------------------------------------------------------------

Deferred tax assets:

<S>                                                        <C>              <C>
   Loss on securities                                      $134             $152
   Provision for loan losses                                550              486
   Deferred loan fees                                        39               23
   Intangible assets                                        158              150
   Accrued pension cost                                       -              103
   Other                                                     25               15
                                                        --------         --------

   Gross deferred tax assets                                906              929

Deferred tax liabilities:
                                                              -                -
   Net unrealized gain on securities                        855              544
   Depreciation                                             302              150
   Loan servicing                                            10                4
   Other                                                    108              158
                                                        --------         --------

   Gross deferred tax liabilities                         1,275              856
                                                        --------         --------

   Net deferred tax
    asset/(liability)                                     $(369)             $73
                                                        ========         ========

</TABLE>

       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.

--------------------------------------------------------------------------------
Emclaire Financial Corp.                  40                  2003 Annual Report

<PAGE>

Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------

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.

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.

       The Corporation uses a December 31 measurement date for its plans.

       Information pertaining to changes in obligations and funded status of the
       defined benefit pension plan is as follows:

<TABLE>
<CAPTION>
(Dollar amounts in thousands)                               2003        2002        2001
-----------------------------------------------------------------------------------------

Change in plan assets:
<S>                                                       <C>         <C>         <C>
 Fair value of plan assets at beginning of year           $1,983      $2,117      $2,244
 Actual (loss) return on plan assets                         316        (264)       (114)
 Employer contribution                                       248         194          43
 Benefits paid                                               (64)        (64)        (56)
                                                        ---------   ---------   ---------

 Fair value of plan assets at end of year                  2,483       1,983       2,117
                                                        ---------   ---------   ---------

Change in benefit obligation:
 Benefit obligation at beginning of year                   2,801       2,358       2,087
 Service cost                                                147         186         173
 Interest cost                                               164         169         150
 Actuarial loss (gain)                                       235         152           4
 Effect of Plan Amendment                                   (580)          -           -
 Effect of Change in Assumptions                             209           -           -
 Benefits paid                                               (64)        (64)        (56)
                                                        ---------   ---------   ---------

 Benefit obligation at end of year                         2,912       2,801       2,358
                                                        ---------   ---------   ---------

Funded status (plan assets less benefit obligations)        (429)       (818)       (241)
Unrecognized prior service cost                             (548)          1           1
Unrecognized net actuarial (gain) loss                       843         586         (18)
Unrecognized transition asset                                (65)        (73)        (81)
                                                        ---------   ---------   ---------

Prepaid (Accrued) pension cost                             $(199)      $(304)      $(339)
                                                        =========   =========   =========
</TABLE>

--------------------------------------------------------------------------------
Emclaire Financial Corp.                  41                  2003 Annual Report

<PAGE>

Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------

13.    Employee Benefit Plans (continued)

       Amounts recognized in the balance sheet consist of:

<TABLE>
<CAPTION>

                                                           Pension Benefits         Other Benefits
(Dollar amounts in thousands)                               2003        2002        2003        2002
-----------------------------------------------------------------------------------------------------
<S>                                                           <C>         <C>         <C>         <C>
Prepaid benefit cost                                          $-          $-          $-          $-
Accrued benefit cost                                        (199)       (304)          -           -
Intangible assets                                              -           -           -           -
Accumulated other comprehensive income                         -           -           -           -
                                                        ---------   ---------   ---------   ---------

Net amount recognized                                      $(199)      $(304)         $-          $-
                                                        =========   =========   =========   =========

</TABLE>

       The accumulated benefit obligation for all defined benefit pension plans
       was $2.4 million and $1.9 million at year end 2003 and 2002,
       respectively.

       The projected benefit obligation, accumulated benefit obligation, and
       fair value of plan assets for the pension plans were $2.9 million, $2.4
       million and $2.5 million, respectively, as of year end 2003, and $2.8
       million, $1.9 million and $2.0 million, respectively, as of year end
       2002.

       The components of the periodic pension cost are as follows:

<TABLE>
<CAPTION>

(Dollar amounts in thousands)                               2003        2002        2001
-----------------------------------------------------------------------------------------

<S>                                                         <C>         <C>         <C>
Service cost                                                $147        $186        $173
Interest cost                                                164         169         150
Expected return on plan assets                              (176)       (188)       (197)
Transition asset                                              (8)         (8)         (8)
Prior service costs                                          (31)          -           -
Recognized net actuarial (gain) loss                          47           -          (6)
                                                        ---------   ---------   ---------

Net periodic pension cost                                   $143        $159        $112
                                                        =========   =========   =========
</TABLE>

       Weighted-average actuarial assumptions include the following:

<TABLE>
<CAPTION>

(Dollar amounts in thousands)                               2003        2002        2001
-----------------------------------------------------------------------------------------

<S>                                                         <C>         <C>         <C>
Discount rate for benefit obligations and net cost          6.30%       6.80%       7.25%
Rate of increase in future compensation levels              4.50%       4.50%       4.50%
Expected rate of return on plan assets                      8.50%       8.50%       8.50%
</TABLE>

--------------------------------------------------------------------------------
Emclaire Financial Corp.                  42                  2003 Annual Report

<PAGE>


Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------

13.    Employee Benefit Plans (continued)

       Plan Assets.

       The Corporation's pension plan asset allocation at year end 2003 and
       2002, target allocation for 2004, and expected long-term rate of return
       by asset category are as follows:


                                Target    Percentage of Plan Weighted-Average
                               Allocation   Assets at Year     Expected Long-
                                                  End          Term Rate of
                                                                   Return
Asset Category                   2004      2003      2002                2003
------------------------------------------------------------------------------

Equity Securities                  50%       52%       10%                6.0%
Debt Securities                    22%       18%        0%                2.0%
Other                              28%       30%       90%                0.5%
                                         ------- ---------  ------------------

                                            100%      100%                8.5%
                                         ======= =========  ==================

       The intent of the Plan is to provide a range of investment options for
       building a diversified asset allocation strategy that will provide the
       highest likelihood of meeting the aggregate actuarial projections. In
       selecting the options and asset allocation strategy, the Corporation has
       determined that the benefits of reduced portfolio risk are best received
       through asset style diversification. The following asset classes or
       investment categories are utilized to meet the Plan's objectives: Small
       company stock, International stock, Mid-cap stock, Large company stock,
       Diversified bond, Money Market/Stable Value and Cash.

       Contributions.

       The Corporation's contributions to its pension plan for 2003, 2002 and
       2001 were $247,498, $193,949 and $43,290, respectively.

       The Corporation expects to contribute $209,292 to its pension plan in
       2004.

       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 makes matching contributions as approved by the
       Board of Directors. Matching contributions for 2003 was $68,000. No
       matching contributions had been made to the plan prior to December 31,
       2002.

--------------------------------------------------------------------------------
Emclaire Financial Corp.                  43                  2003 Annual Report


<PAGE>


Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------

13.    Employee Benefit Plans (continued)

       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,
       2003, the Corporation recognized SERP expense of $33,000.

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>
(Dollar amounts in thousands)                        2003                2002
----------------------------------------------------------------------------------------
                                                 Carrying    Fair    Carrying    Fair
                                                  amount     value    amount    amount
----------------------------------------------------------------------------------------

Financial assets:
<S>                                                <C>       <C>       <C>       <C>
 Cash equivalents                                  $7,703    $7,703    $7,716    $7,716
 Securities                                        49,162    49,162    48,748    48,748
 Loans receivable                                 190,482   198,092   169,557   178,195
 Federal bank stocks                                1,982     1,982     1,298     1,298
 Accrued interest receivable                        1,270     1,270     1,325     1,325

Financial liabilities:
 Deposits                                         217,110   218,915   204,425   209,158
 Borrowed funds                                    20,700    20,699    10,000    10,582
 Accrued interest payable                             477       477       467       467
</TABLE>

       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 and is not material.

--------------------------------------------------------------------------------
Emclaire Financial Corp.                  44                  2003 Annual Report

<PAGE>

Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------

14.    Financial Instruments (continued)

       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>

(Dollar amounts in thousands)                        2003                2002
                                                     Fixed   Variable    Fixed  Variable
                                                      Rate       Rate     Rate      Rate
----------------------------------------------------------------------------------------

<S>                                                  <C>         <C>   <C>           <C>
Commitments to make loans                            $969        $-    $2,864        $-
Unused lines of credit                              1,898     9,300       124    11,229
</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
       4.00% to 11.00% and maturities ranging from five to 30 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.

       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.

--------------------------------------------------------------------------------
Emclaire Financial Corp.                   45                 2003 Annual Report

<PAGE>

Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------

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                                 December 31,
(Dollar amounts in thousands)                                              2003         2002
---------------------------------------------------------------------------------------------

Assets:
<S>                                                                         <C>          <C>
 Cash in banks                                                              $93          $14
 Securities available for sale                                            3,204        1,503
 Equity in net assets of subsidiary bank                                 19,963       21,203
 Other assets                                                                12           14
                                                                       ---------   ----------

  Total assets                                                          $23,272      $22,734
                                                                       =========   ==========

Liabilities and stockholders' equity:
 Accrued expenses and other liabilities                                    $617          $54
 Stockholders' equity                                                    22,655       22,680
                                                                       ---------   ----------

  Total liabilities and stockholders' equity                            $23,272      $22,734
                                                                       =========   ==========
</TABLE>

<TABLE>
<CAPTION>

Condensed Statements of Operations                                           Year Ended December 31,
(Dollar amounts in thousands)                                                  2003           2002            2001
-----------------------------------------------------------------------------------------------------------------------

Income:
<S>                                                                             <C>            <C>               <C>
    Dividends from subsidiary                                                   $ 1,437        $ 1,373           $ 941
    Investment income                                                               202             56              60
                                                                            ------------   ------------    ------------

      Total income                                                                1,639          1,429           1,001

Expense:
    Noninterest expense                                                              91             80              55
                                                                            ------------   ------------    ------------

      Total expense                                                                  91             80              55
                                                                            ------------   ------------    ------------

    Income before income taxes and equity in undistributed
      operating results of subsidiary                                             1,548          1,349             946

    Equity in undistributed net income of subsidiary                                966            901             752
                                                                            ------------   ------------    ------------

    Income before income taxes                                                    2,514          2,250           1,698

    Income tax expense (benefit)                                                     22             (7)             (7)
                                                                            ------------   ------------    ------------

Net income                                                                      $ 2,492        $ 2,257         $ 1,705
                                                                            ============   ============    ============


</TABLE>

--------------------------------------------------------------------------------
Emclaire Financial Corp.                 46                  2003 Annual Report

<PAGE>

Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>

Condensed Statements of Cash Flows                              Year ended December 31,
(Dollar amounts in thousands)                                  2003        2002         2001
---------------------------------------------------------------------------------------------

Operating activities:
<S>                                                          <C>         <C>          <C>
 Net income                                                  $2,492      $2,257       $1,705
 Adjustments to reconcile net income to net cash
  provided
  by operating activities:
   Equity in undistributed operating results of
    subsidiary                                                 (966)       (901)        (752)
   Other, net                                                 2,176          17           (4)
                                                           ---------   ---------   ----------
    Net cash provided by operating activities                 3,702       1,373          949
                                                           ---------   ---------   ----------

Investing activities:
   Purchases of securities                                     (748)          -          (12)
   Proceeds from the sale of available for sale
    securities                                                  244           -            -
                                                           ---------   ---------   ----------
    Net cash used in investing activities                      (504)          -          (12)
                                                           ---------   ---------   ----------

Financing activities:
   Dividends paid                                            (1,437)     (1,373)        (931)
   Payments to acquire treasury stock                        (1,682)          -            -
                                                           ---------   ---------   ----------
    Net cash used in financing activities                    (3,119)     (1,373)        (931)
                                                           ---------   ---------   ----------

Increase (decrease) in cash equivalents                          79           -            6
Cash equivalents at beginning of period                          14          14            8
                                                           ---------   ---------   ----------

Cash equivalents at end of period                               $93         $14          $14
                                                           =========   =========   ==========

</TABLE>


16.    Other Noninterest Expenses

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


<TABLE>
<CAPTION>
(Dollar amounts in thousands)                              2003        2002        2001
----------------------------------------------------------------------------------------

<S>                                                        <C>         <C>         <C>
Telephone and data communications                          $228        $287        $250
Professional fees                                           238         273         133
Customer bank card processing                               228         225         218
Pennsylvania shares tax                                     159         189         167
Correspondent and courier fees                              177         174         165
Postage and freight                                         172         150         142
Marketing and advertising                                   143         127         119
Printing and supplies                                       154         122         125
Software amortization                                        86         112         162
Travel, entertainment and conferences                        98         102         107
Other                                                       498         356         410
                                                       ---------   ---------   ---------

                                                         $2,181      $2,117      $1,998
                                                       =========   =========   =========
</TABLE>

--------------------------------------------------------------------------------
Emclaire Financial Corp.                  47                  2003 Annual Report

<PAGE>


Notes to Consolidated Financial Statements (continued)
--------------------------------------------------------------------------------

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   First      Second       Third      Fourth
 data)
                                            Quarter     Quarter     Quarter     Quarter
----------------------------------------------------------------------------------------

2003:
------
<S>                                          <C>         <C>         <C>         <C>
 Interest income                             $3,544      $3,539      $3,534      $3,592
 Interest expense                             1,217       1,207       1,227       1,250
                                           ---------   ---------   ---------   ---------
 Net interest income                          2,327       2,332       2,307       2,342
 Provision for loan losses                       75          75          75         105
                                           ---------   ---------   ---------   ---------
 Net interest income after provision for
  loan losses                                 2,252       2,257       2,232       2,237
 Noninterest income                             383         469         467         466
 Noninterest expense                          1,920       1,898       1,841       1,863
                                           ---------   ---------   ---------   ---------
 Net income before income taxes                 715         828         858         840
 Provision for income taxes                     174         203         209         163
                                           ---------   ---------   ---------   ---------

 Net income                                    $541        $625        $649        $677
                                           =========   =========   =========   =========

 Basic earnings per share                     $0.41       $0.47       $0.51       $0.53
                                           =========   =========   =========   =========

2002:
------
 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
                                           =========   =========   =========   =========

 Basic earnings per share                     $0.36       $0.40       $0.44       $0.50
                                           =========   =========   =========   =========

</TABLE>

--------------------------------------------------------------------------------
Emclaire Financial Corp.                   48                 2003 Annual Report


<PAGE>


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

Board of Directors and Stockholders
Emclaire Financial Corp.
Emlenton, Pennsylvania

We have audited the accompanying consolidated balance sheets of Emclaire
Financial Corp. as of December 31, 2003 and 2002, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
years 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 audits. The financial statements of Emclaire
Financial Corp. for the year ended December 31, 2001 were audited by other
auditors whose report dated March 8, 2002 expressed an unqualified opinion on
those statements.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Emclaire Financial
Corp. as of December 31, 2003 and 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 LLC

Columbus, Ohio
January 9, 2004

--------------------------------------------------------------------------------
Emclaire Financial Corp.                  49                  2003 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 was $25.75 and $26.50,
respectively, as of March 10, 2004. 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:


<TABLE>
<CAPTION>


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

      2003:
------------
<S>                                       <C>         <C>         <C>                      <C>
  Fourth quarter                          $26.50      $25.25      $25.75                   $0.48
  Third
   quarter                                 26.20       24.65       25.45                    0.21
  Second
   quarter                                 27.60       25.75       26.20                    0.21
  First
   quarter                                 27.60       21.50       27.60                    0.21

      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

</TABLE>

Number of Stockholders and Shares Outstanding

As of December 31, 2003, there were approximately 680 stockholders of record and
1,267,835 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.                  50                  2003 Annual Report

<PAGE>



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

Corporate Headquarters

       Emclaire Financial Corp.
       612 Main Street
       Emlenton, Pennsylvania 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
       11:00 a.m., on Wednesday, May 19, 2004, at the main office building in
       Emlenton, Pennsylvania 16373.

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 Shelly L. Rhoades,
       Treasurer of Emclaire Financial Corp., 612 Main Street, Emlenton,
       Pennsylvania 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 website at http://www.sec.gov.

Independent Accountants

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

Special Counsel

       Manatt, Phelps & Phillips, LLP
       1501 M Street NW, Suite 700
       Washington, D.C.  20005

Registrar and Transfer Agent

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


--------------------------------------------------------------------------------
Emclaire Financial Corp.                  51                  2003 Annual Report

<PAGE>




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

EMCLAIRE FINANCIAL CORP. AND
THE FARMERS NATIONAL BANK OF EMLENTON

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

<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                            Retired                                    Hunter Truck Sales and Service
                                               Heeter Lumber Co.                          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


THE FARMERS NATIONAL BANK OF EMLENTON

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

David L. Cox                 Raymond M. Lawton              Robert W. Foust             Fred S. Port
Chairman, President and      Senior Vice President          Vice President              Vice President
Chief Executive Officer      Chief Lending Officer          Business Development        Branch Administration

Gerald D. Prestopine         Stanley C. Simons              David J. Stuber             Shelly L. Rhoades
Vice President               Vice President                 Vice President              Assistant Vice President
Operations                   Human Resources Director       Marketing Director          Controller

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

Andrew M. Hogue             Richard E. Grejda               Lisa R. Zigo
Assistant Vice President    Assistant Vice President        Assistant Vice President
Compliance and Security     Commercial Lending              Manager of Credit Administration

Tammy L. Bennetti
Assistant Vice President
Credit Operations Manager

</TABLE>

--------------------------------------------------------------------------------
Emclaire Financial Corp.                  52                  2003 Annual Report

<PAGE>



Branch Managers
--------------------------------------------------------------------------------

                             Corporate Headquarters
                             ----------------------
                             612 Main Street
                             Emlenton, PA 16373
                             724-867-2311

Emlenton Office                                 DuBois Office
---------------                                 -------------
Aubery L. Hulings                               Frank J. Calderone
724-867-1001                                    814-371-2166

Bon Aire Office                                 East Brady Office
---------------                                 -----------------
Donna J. Daniels                                Timothy G. Slaugenhoup
724-283-4666                                    Assistant Vice President
                                                724-526-5793

Brookville Office                               Eau Claire Office
-----------------                               -----------------
C. Sue Solida                                   Cindy L. Elder
Assistant Vice President                        Assistant Vice President
814-849-8363                                    724-791-2591

Butler Meridian Office                          Knox Office
----------------------                          -----------
Deborah A. Sanford                              Allan I. Johnson
724-482-0133                                    Assistant Vice President
                                                814-797-2200

Clarion Office                                  Ridgway Office
--------------                                  --------------
Timothy G. Slaugenhoup                          Gregory A. Kowatch
Assistant Vice President                        814 773-3195
814-226-7523