EXHIBIT 13

    Annual Report to Stockholders for the fiscal year ended December 31, 1997


<PAGE>
The Cover

Located in Clarion  and Forest  counties  along the Clarion  River,  Cook Forest
consists of  approximately  7,500 acres of natural  forest  land.  The area that
became  known as Cook  Forest  was  originally  settled by John Cook in the late
1820s.  The family operated lumber and boat businesses  which under the guidance
of Anthony Wayne Cook,  grandson of John Cook,  had procured  timberlands as far
away as Oregon and Washington by the early 1900s.

Cook Forest is the home to eastern  white pine trees whose  straight,  resilient
trunks were used as masts for British ships during the 1700's.  During the early
to mid-1800's,  the lightweight and workable pine timber was prized by settlers.
Though  small  sections of the forest were  selectively  logged in the 1800s and
early 1900s,  Anthony Wayne Cook and other family members  preserved large areas
of the forest.  By 1911,  the idea of creating a public park from the forest was
presented to public officials.

In 1928,  after years of  political  wrangling  and private fund  raising,  Cook
Forest became the first forest land acquired by the Commonwealth of Pennsylvania
for the purpose of preserving a natural landmark.  In 1969, the Forest Cathedral
area was  designated a National  Natural  Landmark by the National Park Service,
U.S. Department of the Interior.

Photograph:  Old-growth  eastern  white  pine  canopy
photographed  over the Forest  Cathedral  of The Cook
Forest from the top of an ancient eastern hemlock.

Acknowledgment:  The photograph  was reproduced  from
The Cook  Forest:  An  Island  in Time,  photographed
and  written by Anthony E. Cook,  grandson of Anthony
Wayne Cook.  The  photograph  and  excerpts  from The
Cook  Forest:  An Island in Time,  are used  courtesy
of  the author.

<PAGE>
TABLE OF CONTENTS

President's letter                                       1
Selected Financial Data                                  2
Consolidated Financial Statements                        3-6
Notes to Consolidated Financial Statements               7-22
Report of Independent Auditors                           23
Management's Discussion and Analysis of
     Financial Condition and Results of Operations      24-35
Common Stock Information                                 35
<PAGE>
Dear stockholders and friends:

The past year, 1997, has been dedicated to rebuilding  income from the expansion
experienced  in  1996.  We  were  able  to  take  advantage  of the  new  market
opportunities  in Knox and Butler to increase  our customer  relationships.  Our
loan portfolio  increased by an impressive 26% and our deposits increased by 3%,
giving our bank total loans and deposits,  as of year end 1997, of $86.1 million
and $117.7 million,  respectively.  Our loan to deposit ratio increased from 59%
to 72% during 1997.  This helped  increase net interest income by 22% and offset
certain costs  associated with the previously  mentioned  expansion.  Net income
increased by 27% from $981 thousand in 1996 to $1,244  thousand in 1997, and our
earnings per share remained at $1.15.

Although the year was dedicated to absorbing  expansion costs, we do not believe
in  remaining  status quo in the  future.  To this end, we decided to expand our
data  processing  facility to prepare  for the future of our Bank.  In August we
broke  ground  on a new  data  processing  center  in  downtown  Emlenton.  When
completed  in April of 1998,  this  center  will house our  bookkeeping,  proof,
computer,  and customer support departments.  We also began plans for our eighth
branch  office to be  located in the  Clarion  Mall and to be opened in March of
1998. With the opening of this office,  we will provide  expanded service to our
customers in Clarion and also offer the  convenience of our first MAC machine in
Clarion.  We are proud of our Bank and our  efforts  to expand our  markets  and
philosophy of friendly community banking.

During  1997 we offered  our  customers  the  ability to access  their  checking
accounts for  purchases  with the new debit card.  We chose the  MasterMoney(TM)
card to enable our  customers to make  purchases at 14 million  stores and other
locations worldwide, wherever MasterCard(R) is accepted. My daughter, Amy, spent
five months in Kenya, Africa, and she was able to access her checking account in
Emlenton,  Pennsylvania, to make purchases or to receive cash. The technology is
available  to make small  community  banks like ours  competitive,  and with the
added personal hometown service we are able to provide,  the future of community
banks, such as ours, remains bright.

The effects of the 1996 stock sale and  subsequent  quoting of  Emclaire  common
stock on the OTC Bulletin Board provided our shareholders  additional  liquidity
for their shares in 1997. As many of our long-time  shareholders  are aware, our
stock was very  difficult  to  purchase  in the past.  Although  it is still not
traded  on a daily  basis,  trading  has been  more  active in 1997 than in past
years.  We were able to see trades in each  quarter of 1997,  and as of year end
our stock price  stood at $17.00 per share.  We continue to pursue a more active
market of our  stock and we were able to  increase  the  shares  outstanding  by
paying a 5% stock dividend in December.  Shareholders  remain a driving force of
the decisions of management and the Board of Directors.

During the final quarter of 1997, we revisited our strategic  plan and developed
the  direction  for our bank over the next five years.  We believe that customer
service and offering the right type of products are  instrumental to our success
in the future.  We also feel our  employees  are key to making our Bank succeed.
All  employees  are to be  commended  on the goals we have reached over the past
year in loan and income growth.  Looking towards the future, we also realize how
important the problem of year 2000 becomes to our  institution.  We have started
an aggressive  program of addressing  this problem and continue to proceed on an
ongoing  basis.  The  reputation and well being of our bank is at risk if we are
not prepared  for the change of the  century,  and we do not have the ability to
push  back the dead line of  December  31,  1999.  The  Board of  Directors  and
management  are committed to have all systems  performing  before,  during,  and
after January 1, 2000.

This  year  our  annual  meeting  will be held  May 20,  1998,  at our new  data
processing  center,  beside the post office, in Emlenton.  I would encourage all
shareholders to attend,  not only to express their views,  but also to tour this
new  facility.  We are holding  the meeting at 7:00 p.m.,  and it affords you as
shareholders  the  opportunity to meet and share in discussion with the Board of
Directors, officers, and employees of your company.

Sincerely,


/s/David L. Cox
---------------
David L. Cox
President and Chief Executive Officer
<PAGE>

EMCLAIRE FINANCIAL CORP.
Selected Financial Data
<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
                                                   ------------------------------------------------------------------------------
                                                       1997            1996            1995             1994            1993
                                                   -------------   -------------   --------------   -------------   -------------
<S>                                                <C>             <C>             <C>              <C>             <C>
SUMMARY OF EARNINGS
Interest income                                    $      9,523    $      8,098    $       7,437    $      6,751    $      6,772
Interest expense                                          3,727           3,352            2,986           2,573           2,651
                                                   -------------   -------------   --------------   -------------   -------------
Net interest income                                       5,796           4,746            4,451           4,178           4,121
Provision for loan losses                                   220             120              143             132             180
                                                   -------------   -------------   --------------   -------------   -------------
Net interest income after
   provision for loan losses                              5,576           4,626            4,308           4,046           3,941
Other income                                                596             427              389             384             301
Other expense                                             4,382           3,636            3,005           2,899           2,780
                                                   -------------   -------------   --------------   -------------   -------------
Income before income taxes and
  cumulative effect adjustment                            1,790           1,417            1,692           1,531           1,462
Applicable income tax expense                               546             436              520             454             450
                                                   -------------   -------------   --------------   -------------   -------------
Net income before cumulative effect adjustment            1,244             981            1,172           1,077           1,012
Cumulative effect adjustment                                  -               -                -               -              31
                                                   -------------   -------------   --------------   -------------   -------------
NET INCOME                                         $      1,244    $        981    $       1,172    $      1,077    $      1,043
                                                   =============   =============   ==============   =============   =============

 PER SHARE DATA (1) Earnings per share:
Prior to cumulative effect adjustment              $        1.15   $        1.15   $         1.40   $        1.28   $        1.20
Cumulative effect adjustment
                                                              -               -                -               -             .04
                                                   =============   =============   ==============   =============   =============
Earnings per share                                 $       1.15    $       1.15    $        1.40    $       1.28    $       1.24
                                                   =============   =============   ==============   =============   =============

Dividends paid (1)                                 $        .44    $        .41    $         .43    $        .38    $        .36
Book value per share at period end (1)             $      12.48    $      11.68    $       10.76    $       9.72    $       8.81
Average number of shares outstanding (1)              1,081,453         852,403          839,160         839,160         839,160

STATEMENT OF CONDITION STATISTICS
(At end of period)
Assets                                             $    133,956    $    128,002    $      98,599    $     96,714    $     94,774
Deposits                                                117,655         114,725           88,944          87,986          86,996
Loans                                                    86,144          68,428           64,322          64,086          61,378
Allowance for loan losses                                   874             733              687             688             639
Federal funds sold
                                                              -           3,500            2,500             900           3,350
Investment securities
                                                         38,034          46,483           26,361          25,436          23,180
Stockholders' equity                                     13,498          12,631            9,032           8,155           7,397

SIGNIFICANT RATIOS
Return on average equity                                   9.57 %         10.33 %          13.56 %         13.80 %         14.69 %
Return on average assets                                    .96             .89             1.20            1.12            1.11
Net yield on earning assets                                4.87            4.68             4.97            4.81            4.80
Net loans as a percent of deposits                        72.47           59.01            71.55           72.05           69.82
Equity to assets at period end                            10.08            9.87             9.16            8.43            7.80
Earning average assets to total assets                    93.10           93.63            94.11           92.84           92.62
Average interest bearing liabilities to assets            74.71           77.02            77.26           78.36           79.84
Dividends as a percent of net income                      38.26           35.65            30.71           29.69           29.03
Allowance for loan losses to total loans                   1.01            1.07             1.07            1.07            1.04
Full time equivalent employees                            75              74               52              47              47
Banking offices                                            7               7                4               4               4
</TABLE>

(1) - Adjusted for a 5% stock dividend in 1997 and a 4-for1 stock split in 1996.

                                        2
<PAGE>

                            EMCLAIRE FINANCIAL CORP.
                           CONSOLIDATED BALANCE SHEET
                             (Dollars in Thousands)
<TABLE>
<CAPTION>
                                                                                 December 31,
                                                                               1997         1996
                                                                           -----------   -----------
<S>                                                                        <C>           <C>
ASSETS
     Cash and due from banks                                               $     4,975   $     4,742
     Federal funds sold                                                           --           3,500
     Investment securities (Note 4):
        Available for sale                                                      31,977        36,208
        Held to maturity (estimated market value
            of  $6,053 and $10,246)                                              6,057        10,275
     Loans (Note 5)                                                             86,144        68,428
     Less allowance for loan losses (Note 6)                                       874           733
                                                                           -----------   -----------
        Net loans                                                               85,270        67,695
     Premises and equipment (Note 7)                                             2,619         2,308
     Accrued interest and other assets                                           3,058         3,274
                                                                           -----------   -----------
            TOTAL ASSETS                                                   $   133,956   $   128,002
                                                                           ===========   ===========

LIABILITIES
     Deposits
        Non-interest bearing demand                                        $    19,765   $    17,650
        Interest bearing demand                                                 17,276        15,784
        Savings                                                                 16,261        15,347
        Money market                                                            18,077        19,059
        Time (Note 8)                                                           46,276        46,885
                                                                           -----------   -----------
            Total deposits                                                     117,655       114,725
     Obligation under capital lease                                                 63           104
     Borrowed funds (Note 12)                                                    2,200          --
     Accrued interest and other liabilities                                        540           542
                                                                           -----------   -----------
            TOTAL LIABILITIES                                                  120,458       115,371
                                                                           -----------   -----------

STOCKHOLDERS' EQUITY
     Preferred stock, par value $1.00, 3,000,000 shares
        authorized; none issued                                                   --            --
     Common stock,  par value  $1.25 per  share; 12,000,000
        shares authorized 1,081,453 and 1,030,000 shares
        isssued in 1997 and 1996 (Note 15)                                       1,352         1,288
     Additional paid in capital                                                  4,432         3,622
     Retained earnings                                                           7,492         7,597
     Net unrealized gain on securities                                             222           124
                                                                           -----------   -----------
            TOTAL STOCKHOLDERS' EQUITY                                          13,498        12,631
                                                                           -----------   -----------
            TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                     $   133,956   $   128,002
                                                                           ===========   ===========
</TABLE>

See accompanying notes to the consolidated financial statements.

                                       3
<PAGE>
                            EMCLAIRE FINANCIAL CORP.
                        CONSOLIDATED STATEMENT OF INCOME
                (Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
                                                          Year Ended December 31,
                                                            1997          1996
                                                         ------------ --------------
INTEREST INCOME
<S>                                                      <C>          <C>
     Loans, including fees                               $      6,969 $      5,839
     Interest bearing deposits in other banks                       1            2
     Federal funds sold                                            89          236
     Investment securities:
        Taxable
                                                                2,279        1,879
        Exempt from federal income tax                            185          141
                                                           ----------   ----------
            Total interest income                               9,523        8,097
                                                           ----------   ----------

INTEREST EXPENSE
     Deposits                                                  3,655        3,282
     Borrowed funds                                               67           63
     Lease obligation                                              5            7
                                                          ----------   ----------
            Total interest expense                             3,727        3,352
                                                          ----------   ----------

NET INTEREST INCOME                                            5,796        4,745

Provision for loan losses                                        220          120
                                                          ----------   ----------

NET INTEREST INCOME AFTER
     PROVISION FOR LOAN LOSSES                                 5,576        4,625
                                                          ----------   ----------

OTHER OPERATING INCOME
     Service fees on deposit accounts                            476          344

    Other                                                        120           84
                                                          ----------   ----------
            Total other operating income                         596          428
                                                          ----------   ----------

OTHER OPERATING EXPENSE
     Salaries and employee benefits                            2,240        1,903
     Occupancy, furniture and equipment                          688          524
     Other (Note 9)                                            1,454        1,209
                                                          ----------   ----------
            Total other operating expense                      4,382        3,636
                                                          ----------   ----------

Income before income taxes                                     1,790        1,417
Income taxes (Note 10)                                           546          436
                                                          ----------   ----------

NET INCOME                                                $    1,244   $      981
                                                          ==========   ==========

EARNINGS PER SHARE                                        $     1.15   $     1.15

AVERAGE SHARES OUTSTANDING                                 1,081,453      852,403
</TABLE>

See accompanying notes to the consolidated financial statements.

                                      -4-

<PAGE>
                            EMCLAIRE FINANCIAL CORP.
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                 (Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
                                                                                         Net
                                                        Additional                    Unrealized
                                            Common        Paid in        Retained       Gain on       Treasury
                                            Stock         Capital        Earnings      Securities       Stock          Total
                                        -------------- -------------- -------------- -------------- ------------- ---------------

<S>                                     <C>             <C>            <C>           <C>            <C>           <C>
 Balance December 31, 1995              $        1,000  $       1,013  $      6,960  $          66  $         (6) $          9,033

 Net income                                                                     981                                            981
 Dividends declared
      ($.41 per share)                                                         (344)                                          (344)
 Net proceeds from sale of
      230,800 shares of common
      stock (Note 15)                              288          2,609                                          6             2,903
 Net unrealized gain on securities                                                              58                              58
                                        -------------- -------------- -------------- -------------- ------------- -----------------

 Balance December 31, 1996                       1,288          3,622         7,597            124             -            12,631

 Net income                                                                   1,244                                          1,244
 Dividends declared
      ($.44 per share)                                                         (474)                                          (474)
 Five percent stock dividend
      including fractional shares
         cash paid (Note 15)                        64            810          (875)                                            (1)
 Net unrealized gain on securities                                                              98                              98
                                        -------------- -------------- -------------- -------------- ------------- ----------------

 Balance December 31, 1997              $        1,352 $        4,432 $       7,492  $         222  $          -  $         13,498
                                        ============== ============== ============== ============== ============= ================
</TABLE>

                                      -5-

See accompanying notes to the consolidated financial statements.
<PAGE>
                            EMCLAIRE FINANCIAL CORP.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                  Year Ended December 31,
                                                                                      1997        1996
                                                                                   ---------   ---------
<S>                                                                                <C>         <C>
OPERATING ACTIVITIES
     Net income                                                                    $  1,244    $    981
     Adjustments  to  reconcile  net income to net cash  provided  by  operating
        activities:
            Depreciation and amortization                                               598         365
            Net amortization of investment security
                discounts and premiums                                                  198         220
            Provision for loan losses                                                   220         120
            Deferred income taxes                                                        (3)        (60)
            (Increase) decrease in accrued interest receivable                          102        (358)
            Increase in accrued interest payable                                          2          61
            Other, net                                                                 (250)       (370)
                                                                                   --------    --------
                Net cash provided by operating activities                             2,111         959
                                                                                   --------    --------

INVESTING ACTIVITIES
     Proceeds from maturities and repayments of investment securities:
            Available for sale                                                        5,000        --
            Held to maturity                                                          4,157       8,961
     Proceeds from sales of investment securities:
            Available for sale                                                        1,990          90
     Purchases of investment securities:
            Available for sale                                                       (2,748)    (26,168)
            Held to maturity                                                           --        (3,136)
     Net loan originations                                                          (17,813)     (4,218)
     Purchases of premises and equipment                                               (588)       (779)
     Proceeds from sales of foreclosed or other bank property                            10          50
     Net proceeds from branch acquisition (Note 2)                                     --        12,683
                                                                                   --------    --------
                Net cash used for investing activities                               (9,992)    (12,517)
                                                                                   --------    --------

FINANCING ACTIVITIES
     Net increase in deposits                                                         2,930      11,605
     Net increase in short-term borrowings                                              200        --
     Proceeds from Federal Home Loan Bank advance                                     2,000        --
     Payments for obligation under capital lease                                        (41)        (39)
     Proceeds from sale of common stock, net of cost                                   --         2,903
     Cash dividends paid                                                               (475)       (344)
                                                                                   --------    --------
                Net cash provided by financing activities                             4,614      14,125
                                                                                   --------    --------

                Increase (decrease) in cash and cash equivalents                     (3,267)      2,567

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                        8,242       5,675
                                                                                   --------    --------

CASH AND CASH EQUIVALENTS AT END OF YEAR                                           $  4,975    $  8,242
                                                                                   ========    ========
</TABLE>

See accompanying notes to the consolidated financial statements.

                                       6
<PAGE>

EMCLAIRE FINANCIAL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization
------------

Emclaire Financial Corp.  (Company) is a Pennsylvania  corporation  organized as
the holding company of The Farmers National Bank of Emlenton (Bank). The Bank is
a national association  headquartered in Emlenton,  Pennsylvania.  The Company's
principal sources of revenue emanate from its investment  securities  portfolio,
its portfolio of residential real estate,  commercial  mortgage,  commercial and
consumer  loans,  as  well as a  variety  of  deposit  services  offered  to its
customers  through  seven  offices.  The Company is  supervised  by the Board of
Governors of the Federal Reserve System, while the Bank is subject to regulation
and supervision by the Office of the Comptroller of the Currency.

Basis of Presentation
---------------------

The  consolidated  financial  statements of the Company include its wholly-owned
subsidiary,  the Bank. All  intercompany  transactions  have been  eliminated in
consolidation.  The  investment in subsidiary,  on the parent company  financial
statements, is carried at the parent company's equity position in the underlying
net assets.

The  financial  statements  have been  prepared  in  conformity  with  generally
accepted  accounting   principles.   In  preparing  the  financial   statements,
management  is  required  to make  estimates  and  assumptions  that  affect the
reported  amounts of assets and  liabilities as of the date of the balance sheet
and revenues and expenses for the period.
Actual results could differ significantly from those estimates.

Investment Securities
---------------------

Investment securities have been classified into two categories: Held to Maturity
and Available for Sale. Debt securities  acquired with the ability and intent 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.  All other debt  securities  have
been  classified  as  available  for sale to  serve  principally  for  liquidity
purposes.  Unrealized holding gains and losses for available for sale securities
are reported as a separate component of stockholders'  equity, net of tax, until
realized.  Realized  securities gains and losses are computed using the specific
identification  method.  Interest and dividends on securities  are recognized as
income when earned.

Common stock of the Federal Home Loan Bank and Federal  Reserve Bank  represents
ownership  in   institutions   which  are   wholly-owned   by  other   financial
institutions.  These equity  securities are accounted for at cost and classified
as available for sale.

Loans
-----

Loans are  reported  at their  principal  amount net of the  allowance  for loan
losses. Interest on all loans is recognized as income when earned on the accrual
method.  The  accrual of  interest  is  discontinued  on a loan when  management
believes,   after  considering  economic  and  business  conditions,   that  the
borrower's  financial condition is such that collection of interest is doubtful.
Interest payments received on nonaccrual loans are recorded as income or applied
against principal according to management's judgment as to the collectibility of
such principal.

Loan  origination  fees and  certain  direct  loan  origination  costs are being
deferred  and the net amount  amortized  as an  adjustment  of the related  loan
yield. The Company is amortizing these amounts over the contractual lives of the
related loans.

Allowance for Loan Losses
-------------------------

The allowance for loan losses  represents the amount which management  estimates
is adequate to provide for potential losses in its loan portfolio. The allowance
method is used in providing  for loan losses.  Accordingly,  all loan losses are
charged to the  allowance,  and all recoveries are credited to it. The allowance
for loan  losses is  established  through a provision  for loan losses  which is
charged  to  operations.  The  provision  is based  upon  management's  periodic
evaluation of individual loans, the overall risk  characteristics of the various
portfolio  segments,  past  experience  with  losses,  the  impact  of  economic
conditions on  borrowers,  and other  relevant  factors.  The estimates  used in
determining  the  adequacy of the  allowance  for loan  losses are  particularly
susceptible to significant change in the near term.

The Company considers a commercial or commercial real estate loan to be impaired
when, based on current  information and events,  it is probable that the Company
will be unable to collect principal or interest due according to the contractual
terms of the loan.  Loan  impairment  is measured  based on the present value of
expected cash flows discounted at the loan's effective

                                       7
<PAGE>
interest  rate or, as a practical  expedient,  at the loan's  observable  market
price or the fair value of the collateral if the loan is collateral dependent.

Payments received on impaired loans are applied against the recorded  investment
in the loan.  For loans  other  than those that the  Company  expects  repayment
through liquidation of the collateral, when the remaining recorded investment in
the  impaired  loans is less than or equal to the present  value of the expected
cash flows, income is recorded on a cash basis.

Premises and Equipment
----------------------

Premises  and  equipment  are  stated  at cost  less  accumulated  depreciation.
Depreciation is computed on the  straight-line  method over the estimated useful
lives of the  assets.  Expenditures  for  maintenance  and  repairs  are charged
against  income as  incurred.  Costs of major  additions  and  improvements  are
capitalized.

Other Real Estate
-----------------

Other real estate owned acquired in settlement of foreclosed loans is carried as
a component of other assets at the lower of cost or fair value minus the cost to
sell.  Valuation  allowances for estimated losses are provided when the carrying
value of the real estate acquired exceeds the fair value.  Direct costs incurred
in the  foreclosure  process  and  subsequent  holding  costs  incurred  on such
properties are recorded as expenses of current operations.

Intangible Assets
-----------------

The excess cost over net tangible  assets and  identified  intangible  assets of
acquired  branch  offices is  amortized  using the  straight-line  method over a
period  not to exceed  fifteen  years.  Core  deposit  intangible  premiums  are
amortized  on a  straight-line  basis over the  average  remaining  lives of the
acquired deposits,  not to exceed ten years. Other identified  intangible assets
are amortized over the estimated benefited period, not to exceed ten years.

Pension Plan
------------

The Bank  maintains a  non-contributory  defined  benefit  pension plan covering
substantially all employees and officers. The plan calls for benefits to be paid
to eligible  employees at retirement  based primarily upon years of service with
the Bank and compensation rates near retirement.

Income Taxes
------------

The Company and the Bank file a consolidated federal income tax return. Deferred
tax assets and liabilities  are reflected at currently  enacted income tax rates
applicable  to the period in which the  deferred tax assets or  liabilities  are
expected to be realized or settled. As changes in tax laws or rates are enacted,
deferred tax assets and  liabilities  are  adjusted  through the  provision  for
income taxes.

Earnings Per Share
------------------

In February 1997, the Financial  Accounting Standards Board issued Statement No.
128, "Earnings per Share." Statement 128 replaced the calculation of primary and
fully  diluted  earnings  per share with basic and diluted  earnings  per share.
Unlike  primary  earnings  per share,  basic  earnings  per share  excludes  any
dilutive  effects of  options,  warrants  and  convertible  securities.  Diluted
earnings per share is very  similar to fully  diluted  earnings  per share.  The
Company  maintains a simple capital structure  therefore,  there are no dilutive
effects on earnings per share.

Cash Flow Information
---------------------

The Company has defined cash  equivalents as those amounts  included in due from
banks and federal funds sold.

Cash  payments for  interest in 1997 and 1996 were  $3,725,000  and  $3,292,000,
respectively.  Cash payments for income taxes in 1997 and 1996 were $625,000 and
$501,000, respectively.

Reclassification
----------------

Certain  comparative  amounts for 1996 have been  reclassified to conform to the
current year presentation. Such reclassification had no effect on net income.

2.       RECENT ACCOUNTING PRONOUNCEMENTS

Accounting for Transfers and Servicing of Financial  Assets and  Extinguishments
--------------------------------------------------------------------------------
of Liabilities
--------------

In June 1996, the Financial Accounting Standards board issued Statement No. 125,
"Accounting   for  Transfers  of  Financial   Assets  and   Extinguishments   of
Liabilities." This statement,  which became effective January 1, 1997,  provides
standards for  distinguishing  transfers of financial assets that are sales from
transfers that are secured borrowings. This statement also extends the treatment
of mortgage servicing rights to all servicing assets.

                                       8
<PAGE>

Certain  provisions  of Statement  125,  were deferred for one year by Statement
127.  The deferral  affected  repurchase  agreements,  securities  lending,  and
pledged  collateral.  The adoption of these  statements  did not have a material
impact on the Company's financial position or results of operations.

Reporting Comprehensive Income
------------------------------

In June 1997, the Financial  Accounting Standards Board issued Statement No. 130
"Reporting  Comprehensive  Income." This  standard  which is effective for years
beginning  after  December 15, 1997,  establishes  standards  for  reporting the
components of comprehensive income by requiring that all items that are required
to be recognized  under  accounting  standards as  components  of  comprehensive
income be reported  in a financial  statement  that is  displayed  with the same
prominence as other  financial  statements.  Comprehensive  income  includes net
income,  as well as, certain items that are reported  directly  within  separate
components of stockholders'  equity, and thus bypass net income. This disclosure
will  have  no  impact  on  the  Company's  financial  position  or  results  of
operations.

Disclosures About Segments of an Enterprise and Related Information
-------------------------------------------------------------------

In June 1997, the Financial  Accounting Standards Board issued Statement No. 131
"Disclosures  about  Segments of an Enterprise  and Related  Information."  This
statement  establishes standards for the way public companies report information
about operating segments in annual financial  statements and requires that those
enterprises  report selected  information  about  operating  segments in interim
financial  reports issued to  shareholders.  It also  establishes  standards for
related  disclosures  about products and services,  geographic  areas, and major
customers.  The  statement  defines an  operating  segment as a component  of an
enterprise that generates  revenue and incurs expense,  whose operating  results
are  reviewed by the chief  operating  decision  maker in the  determination  of
resource   allocation  and  performance,   and  for  which  discrete   financial
information is available. This Statement is effective for fiscal years beginning
after  December 15, 1997,  however,  it does not require  disclosure  in interim
reporting in the year of initial application.

3.       BRANCH ACQUISITION

On September 20, 1996,  the Bank acquired  certain  deposit  liabilities  of the
Knox,  Pennsylvania  office of Mellon Bank, N.A. in a transaction  recorded as a
branch purchase.  The Bank assumed deposit  liabilities of  approximately  $14.1
million and acquired the land,  building and equipment.  The difference  between
the  liabilities  assumed and the assets  acquired was received in cash totaling
approximately  $12.6 million.  The amount by which the acquisition cost exceeded
the value of the assets  purchased,  totaling  approximately  $1.4 million,  was
recorded as an intangible asset.

4.       INVESTMENT SECURITIES

The amortized  cost and estimated  market  values of investment  securities  are
summarized as follows (in thousands):

                                       9
<PAGE>
<TABLE>
<CAPTION>

Available for Sale                                                1997
                                                                  ----
                                                             Gross       Gross    Estimated
                                                  Amortized           Unrealized  Market
                                                    Cost      Gains     Losses    Value
                                                    ----      -----     ------    -----
<S>                                                <C>       <C>       <C>        <C>
U. S. Treasury securities and
     obligations of U. S. Government
     corporations and agencies                     $17,510   $   163   $    (1)   $17,672
Obligations of states and political
     subdivisions                                    3,617        43      --        3,660
Corporate notes                                     10,067       134        (3)    10,198
                                                   -------   -------    -------   -------
            Total debt securities                   31,194       340        (4)    31,530
Equity investment in Federal Reserve
     and Federal Home Loan Banks                       447      --        --          447
                                                   -------   -------    -------   -------

            Total                                  $31,641   $   340   $    (4)   $31,977
                                                   =======   =======   =======    =======
</TABLE>

<TABLE>
<CAPTION>

Held to Maturity                                           1997
                                                           ----
                                                    Gross     Gross          Estimated
                                     Amortized    Unrealized Unrealized      Market
                                        Cost        Gains     Losses         Value
<S>                                    <C>         <C>         <C>          <C>
U. S. Treasury securities and
     obligations of U. S. Government
     corporations and agencies         $1,006      $    7      $ --         $1,013
Obligations of states and political
     subdivisions                       1,390           1        --          1,391
Corporate notes                         2,978          10          (3)       2,985
Mortgage-backed securities                683        --           (19)         664
                                       ------      ------      ------       ------
            Total                      $6,057      $   18      $  (22)      $6,053
                                       ======      ======      ======       ======
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

Available for Sale                                      1996
                                                        ----
                                                  Gross      Gross   Estimated
                                     Amortized  Unrealized Unrealized  Market
                                        Cost      Gains      Losses    Value
<S>                                    <C>       <C>       <C>        <C>
U. S. Treasury securities and
     obligations of U. S. Government
     corporations and agencies         $23,539   $   166   $   (43)   $23,662
Obligations of states and political
     subdivisions                        1,920         1        (3)     1,918
Corporate notes                         10,157        94       (27)    10,224
                                       -------   -------   -------    -------
            Total debt securities       35,616       261       (73)    35,804
Equity investment in Federal Reserve
     and Federal Home Loan Banks           404      --        --          404
                                       -------   -------   -------    -------

            Total                      $36,020   $   261   $   (73)   $36,208
                                       =======   =======   =======    =======
</TABLE>


                                       10
<PAGE>



Held to Maturity                                       1996
                                                       ----
                                                  Gross      Gross    Estimated
                                      Amortized Unrealized Unrealized   Market
                                         Cost     Gains     Losses      Value
                                         ----     -----     ------      -----
U. S. Treasury securities and
     obligations of U. S. Government
     corporations and agencies         $ 2,012   $  --     $    (1)   $ 2,011
Obligations of states and political
     subdivisions                        3,130         5        (1)     3,134
Corporate notes                          3,528         9        (6)     3,531
Mortgage-backed securities               1,605      --         (35)     1,570
                                       -------   -------   -------    -------
            Total                      $10,275   $    14   $   (43)   $10,246
                                       =======   =======   =======    =======



Proceeds from the sale of investment securities classified as available for sale
totaled  $1,990,000  and  $90,000 for 1997 and 1996,  respectively.  No gains or
losses resulted from these sales.

Investment  securities  with a carrying  value of  approximately  $5,738,000 and
$5,363,000 at December 31, 1997 and 1996,  respectively,  were pledged to secure
deposits  and for  other  purposes  as  required  by  law.  The  carrying  value
approximated  the estimated  market value of the investment  securities for both
years.

The amortized cost and estimated market value of debt securities at December 31,
1997,  by  contractual  maturity,  are  shown  below  (in  thousands).  Expected
maturities will differ from contractual  maturities  because  borrowers may have
the right to call or  prepay  obligations  with or  without  call or  prepayment
penalties.


                                    Available for Sale   Held to Maturity
                                    ------------------   ----------------
                                               Estimated          Estimated
                                    Amortized   Market  Amortized  Market
                                       Cost     Value     Cost     Value
                                       ----     -----     ----     -----

Due in one year or less              $ 5,502   $ 5,513   $ 2,566   $ 2,563
Due after 1 year through 5 years
                                      23,995    24,299     3,080     3,093
Due after 5 years through 10 years
                                       1,697     1,718      --        --
After 10 years
                                        --        --         411       397
                                     -------   -------   -------   -------

            Total                    $31,194   $31,530   $ 6,057   $ 6,053
                                     =======   =======   =======   =======


                                       11
<PAGE>
5.       LOANS

Major classifications of loans are summarized as follows (in thousands):

                                   1997      1996
                                   ----      ----

Commercial and industrial        $11,147   $10,390
Real estate mortgages
     Residential                  45,709    34,251
     Commercial and other         15,188    11,400
Consumer                          14,100    12,387
                                 -------   -------

                                  86,144    68,428
Less allowance for loan losses       874       733
                                 -------   -------

            Total                $85,270   $67,695
                                 =======   =======


In the normal  course of business,  loans are extended to  directors,  executive
officers, and their associates.  In management's opinion, all of these loans are
on substantially the same terms and conditions as loans to other individuals and
businesses  of comparable  creditworthiness,  with the exception of consumer and
residential mortgage loans granted to executive officers which carry an interest
rate one percent below that quoted non-employees. Such loans, which are included
in the  following  schedule,  totaled  $197,000 and $ - at December 31, 1997 and
1996,  respectively.  A summary of loan activity for those directors,  executive
officers, and their associates with aggregate loan balances in excess of $60,000
for the year ended December 31, 1997, is as follows (in thousands):


      Balance                                                       Balance
   December 31,                                                  December 31,
       1996              New Loans           Repayments              1997
       ----              ----------          -----------             ----

      $1,253                664                  749                $1,168


The Bank's primary business  activity is with customers  located within Venango,
Clarion,   and  Butler  Counties.   Commercial,   residential,   personal,   and
agricultural  loans  are  granted.  Although  the  Bank has a  diversified  loan
portfolio at December 31, 1997 and 1996,  loans  outstanding to individuals  and
businesses are dependent upon the local economic conditions within the immediate
trade area.

                                       12


<PAGE>

6.       ALLOWANCE FOR LOAN LOSSES

Changes  in the  allowance  for  loan  losses  are  summarized  as  follows  (in
thousands):

                                       1997   1996
                                       ----   ----

Balance, January 1                     $733   $687

     Provision charged to operations    220    120
     Recoveries                          29     47

Less loans charged off                  108    121
                                       ----   ----

Balance, December 31                  $ 874  $ 733
                                       ====   ====

At  December  31,  1997 and 1996,  the  recorded  investment  in loans which are
considered to be impaired was $685,000 and $743,000,  respectively, all of which
was placed in nonaccrual status. In addition, $70,000 and $80,000 of the related
allowance  for loan  losses  has been  allocated  for  these  impaired  loans at
December 31, 1997 and 1996,  respectively.  At December 31, 1997 and 1996, There
were commitments for unfunded  letters of credit totaling $7,500,  to a borrower
with outstanding loans considered to be impaired.

The  average  recorded  investment  in  impaired  loans  during the years  ended
December  31,  1997  and  1996,   was   approximately   $719,000  and  $820,000,
respectively.  Interest  income  totaling  $14,000 and $13,000 was recognized on
impaired loans in 1997 and 1996, respectively, all of which was recognized using
the cash basis method of income recognition.

7.       PREMISES AND EQUIPMENT

Major  classifications  of premises and equipment are  summarized as follows (in
thousands):

                                  1997     1996
                                  ----     ----

Land and improvements           $  256   $  221
Buildings                        1,431    1,430
Construction in process            489     --
Leasehold improvements             148      129
Furniture and fixtures           1,695    1,656
                                ------   ------

                                 4,019    3,436
Less accumulated depreciation
                                 1,400    1,128
                                ------   ------

            Total               $2,619   $2,308
                                ======   ======


Depreciation  and  amortization  charged to operations  was $272,000 in 1997 and
$201,000 in 1996.

Included  in  construction  in  process  are  the  costs   associated  with  the
construction of a data processing  center by the Bank.  Construction,  equipment
and  furnishing  costs are  estimated  to total $1.2  million.  Construction  is
expected to be completed during the second quarter of 1998.

                                       13
<PAGE>

8.       TIME DEPOSITS

Time deposits  include  certificates of deposit in  denominations of $100,000 or
more.  Such deposits  aggregated  $4,328,000 and $4,583,000 at December 31, 1997
and  1996,  respectively.   The  following  schedule  presents  the  contractual
maturities  for time  deposits in excess of  $100,000  at December  31, 1997 (in
thousands):


Within three months                     $  548
After three months through six months      362
After six months through one year          986
After one year                           2,432

Total                                   $4,328

9.       OTHER EXPENSES

The following is an analysis of other expense (in thousands:

                                    1997   1996
                                    ----   ----

Telephone                         $  105 $   91
Printing forms and supplies
                                     138    183
Postage
                                     140     97
Amortization of intangible assets
                                     243    129
Other
                                     828    709
                                    ----   ----
                                  $1,454 $1,209
                                  ======  =====

10.      INCOME TAXES

The provision for income taxes is summarized as follows:

                     1997     1996
                    -----    -----

Currently payable   $ 549    $ 496
Deferred               (3)     (60)
                    -----    -----
                      546    $ 436
                    =====    =====

The  reconciliation  between  the  federal  statutory  rate  and  the  Company's
effective income tax rate is as follows (dollars in thousands):

                                       14
<PAGE>

                                    1997               1996
                                    ----               ----

                                     % of Pre-Tax        % of Pre-Tax
                              Amount     Income  Amount     Income
                              ------     ------  ------     ------

Provision at statutory rate   $ 609       34.0%  $ 482       34.0%
Effect of tax exempt income     (76)      (4.2)    (57)      (4.0
Other                            13        0.7      11        0.8
                              -----       ----   -----       -----

            Total             $ 546       30.5%  $ 436       30.8%
                              =====       ====   =====       ====


The tax effects of deductible and taxable  temporary  differences that give rise
to significant portions of the deferred tax assets and deferred tax liabilities,
respectively, at December 31 are as follows (in thousands):



                                         1997   1996
                                         ----   ----
Deferred tax assets
     Provision for loan losses           $244   $196
     Intangible asset amortization         83     51
     Capital lease obligation              21     35
     Pension expense                       35     16
                                         ----   ----
        Gross deferred tax assets         383    298
                                         ----   ----

Deferred tax liabilities
     Net unrealized gain on securities    114     64
     Depreciation                         215    143
     Net loan origination costs            17      7
                                         ----   ----
        Gross deferred tax liabilities    346    214
                                         ----   ----
            Net deferred tax asset       $ 37   $ 84
                                         ====   ====



No valuation  allowance  was  established,  for the net  deferred tax asset,  at
December 31, 1997 and 1996,  in view of the  Company's  ability to carry-back to
taxes paid in previous  years and future  anticipated  taxable  income  which is
evidenced by the Company's earnings potential.


11.      PENSION PLAN

The following  presents the components of the pension  expense for each year (in
thousands):

                                                     1997     1996
                                                    -----    -----

Service cost of benefits earned during the period   $  95    $  66
Interest cost on projected benefit obligation          99       75
Return on plan assets                                (128)    (177)
Net amortization and deferral                          (8)      50
                                                    -----    -----

Net periodic pension cost                           $  58    $  14
                                                    =====    =====

                                       15
<PAGE>

The actuarial present value of accumulated  benefit  obligations at December 31,
1997 and 1996, was $997,000 and $738,000 including vested benefit obligations of
$964,000 and  $715,000.  The  following  table sets forth the funded  status and
amounts recognized in the balance sheets at December 31, (in thousands):


                                                1997       1996
                                             -------    -------

Plan assets at fair value                    $ 1,802    $ 1,510
Projected benefit obligation                   1,586      1,319
                                             -------    -------

Funded status                                    216        191
Unrecognized net gain from past experience
     different from assumed                     (208)      (117)
Unamortized prior service cost                     1          1
Unrecognized net transition asset               (113)      (121)
                                             -------    -------

Accrued pension cost                         $  (104    $   (46)
                                             =======    =======


Plan assets are primarily  comprised of debt and equity mutual funds at December
31, 1997 and 1996.

In preparing the above information the following  actuarially assumed rates were
used.

                                                      1997               1996
                                                      ----               ----

Discount rate                                         7.25%              7.50%
Rate of increase in future compensatin levels         5.00               5.00
Rate of return on plan assets                         8.50               8.50

12.      BORROWED FUNDS

Short-term Borrowings and Available Lines of Credit

The Bank maintains two credit  arrangements as sources of additional  liquidity.
One of these  arrangements,  with a borrowing  limit at December  31,  1997,  of
approximately  $3.4  million,  is with the Federal Home Loan Bank of  Pittsburgh
(FHLB).  This  credit  line is  subject  to annual  renewal,  incurs no  service
charges,  and  is  secured  by  a  blanket  security  agreement  on  outstanding
residential mortgage loans and the FHLB stock owned by the Bank.

The second arrangement is an unsecured federal funds line of credit,  subject to
annual  renewal,  with a borrowing  limit at December 31, 1997 of $3.1  million,
maintained with a correspondent bank.

The  following  table  presents  information  related to short- term  borrowings
during 1997 and 1996 (dollars in thousands):

                                                   1997         1996
                                              ---------    ---------

Outstanding balance at December 31,         $       200    $    --
Average balance outstanding
                                                    117        1,128
Maximum month-end balance
                                                  1,250        5,000

Weighted average interest rate for the year        5.71%        5.60%
Weighted average interest rate at year-end         6.75          N/A

Long-term borrowings

Included in borrowed  funds is an advance from the FHLB  totaling  $2,000,000 at
December  31, 1997,  maturing  July 11, 2002,  with a current  interest  rate of
5.60%.  This  borrowing has a fixed  interest rate for the first six months,  at
which time it may convert to a variable  rate  instrument  should the  benchmark
interest rate reach 6.50%. The


                                       16
<PAGE>

Bank as the option to repay the  borrowing  without  penalty  at the  conversion
date,  or at any  subsequent  repricing  date.  This  borrowing  is secured by a
blanket  security  agreement on outstanding  residential  mortgage loans and the
FHLB stock owned by the Bank

13.      COMMITMENTS AND CONTINGENT LIABILITIES

Loans and Letters of Credit
---------------------------

In the normal course of business,  the Bank makes various  commitments which are
not reflected in the  accompanying  financial  statements.  The Bank offers such
products  to enable its  customers  to meet their  financing  objectives.  These
instruments  involve,  to varying degrees,  elements of credit and interest rate
risk in excess  of the  amount  recognized  in the  balance  sheet.  The  Bank's
exposure to credit loss in the event of  nonperformance  by the other parties to
the  financial   instruments  is  represented  by  the  contractual  amounts  as
disclosed.  Losses,  if any, are charged to the allowance  for loan losses.  The
Bank minimizes its exposure to credit loss under these commitments by subjecting
them to credit  approval and review  procedures and collateral  requirements  as
deemed necessary.

The off-balance  sheet  commitments  were comprised of the following at December
31, (in thousands):

                                                           1997          1996
                                                           ----          ----

Commitments to extend credit                              $8,122        $6,810
Standby letters of credit
                                                           1,225         1,112

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the loan agreement.  These
commitments are comprised  primarily of available  commercial and personal lines
of credit and loans  approved but not yet funded.  The Bank uses the same credit
policies in making loan  commitments and conditional  obligations as it does for
on-balance  sheet  instruments.  Since many of the credit line  commitments  are
expected to expire without being fully drawn upon, the total contractual amounts
do not necessarily represent future funding requirements.

Standby  letters of credit  obligate the Bank to disburse funds to a third party
if the Bank's  customer  fails to perform under the terms of the agreement  with
the  beneficiary.  These  instruments  are issued  primarily  to support  bid or
performance-related  contracts.  The coverage  period for these  instruments  is
typically  a one year  period  with an annual  renewal  option  subject to prior
approval  by  management.   The  Bank  generally  holds   collateral  for  these
instruments, as deemed necessary.

Operating Leases
----------------

Certain office  facilities  are leased under various  operating  leases.  Rental
expense was $45,000 and $23,000 in 1997 and 1996,  respectively.  Future minimum
rental commitments under noncancellable leases are (in thousands):

                                                     Future Minimum
                                                       Lease Payments

             1998                                                   $45
             1999
                                                                     48
             2000                                                    48
             2001                                                    10
             2002                                                     -

                                       17
<PAGE>

14.      REGULATORY MATTERS

Cash and Due from Banks
-----------------------

The district  Federal Reserve Bank requires the Bank to maintain certain reserve
balances.  As of December 31, 1997 and 1996,  the Bank had required  reserves of
$899,000 and $880,000 comprised of vault cash, and a depository amount held with
the Federal Reserve Bank.

Loans
-----

The Federal  Reserve Act limits  extensions of credit by the Bank to the Company
and requires such credits to be  collateralized.  Further such secured loans are
limited in amount to 10% of the Bank's capital and surplus.  There were no loans
between the Bank and the Company during 1997 and 1996.

Dividends
---------

The Bank is subject to a dividend  restriction which generally limits the amount
of  dividends  that  can be paid  by a  national  bank.  Prior  approval  of the
Comptroller  of the Currency is required if the total of all dividends  declared
by a national  bank in any calendar  year exceeds net profits as defined for the
year combined with its retained net profits for the two preceding calendar years
less any required transfer to surplus.  Using this formula, the amount available
for payment of dividends by the Bank to the Company in 1998, without approval of
the  comptroller,  will be limited to $1,514,000 plus net profits retained up to
the date of the dividend declaration.

Regulatory Capital Requirements
-------------------------------

The  Company  is subject to various  capital  requirements  administered  by the
federal banking agencies.  Under capital adequacy  guidelines and the regulatory
framework  for  prompt  corrective   action,  the  Company  must  meet  specific
guidelines  that  involve   quantitative   measures  of  the  Company's  assets,
liabilities,  and certain off-balance sheet items as calculated under regulatory
accounting practices.  The Company's capital amounts and classification are also
subject  to  qualitative   judgments  by  regulators  about   components,   risk
weightings,  and other factors. 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
Company's financial position and results of operations.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Company to maintain minimum amounts and ratios,  as set forth in the
table below, of total capital and Tier 1 capital to risk-weighted assets, and of
Tier 1 capital to average  assets.  Management  believes that as of December 31,
1997.  the  Company  meets  all  capital  adequacy  requirements  to which it is
subject.

As of December  31, 1997 and 1996,  the  Company has been  categorized  as "Well
Capitalized" under the regulatory  framework for prompt corrective action. To be
categorized  as well  capitalized,  the  Company  must  maintain  minimum  total
risk-based,  Tier 1, and Tier 1  leverage  ratios as set forth in the  following
table. There are no conditions or events since that notification that management
believes have changed the Company's classification category.
<TABLE>
<CAPTION>

                                                                                Regulatory Capitalization Requirement
                                                                                -------------------------------------
                                                          Actual                   Adequate                     Well
                                                          ------                   --------                     ----
                                                 Amount           Ratio      Amount        Ratio        Amount         Ratio
                                                 ------           -----      ------        -----        ------         -----

<S>                                             <C>               <C>      <C>               <C>      <C>                <C>
December 31, 1997

Total capital to risk weighted assets           $  12,795         15.0%    $  6,824          8.0%     $   8,530          10.0%
Tier 1 capital to risk weighted assets             11,921         14.0        3,412          4.0          5,118           6.0
Tier 1 capital to average assets                   11,921          9.1        5,260          4.0          6,576           5.0

December 31, 1996

Total capital to risk weighted assets           $  11,558         15.7%    $  5,896          8.0%     $   7,371          10.0%
Tier 1 capital to risk weighted assets             10,824         14.7        2,948          4.0          4,422           6.0
Tier 1 capital to average assets                   10,824          8.7        4,990          4.0          6,238           5.0
</TABLE>

                                       18
<PAGE>

15.      COMMON STOCK

Stock Dividend
--------------

On December 18, 1997, the Company  distributed  51,453 shares of common stock in
connection with a 5% stock dividend.  As a result of the stock dividend,  common
stock was  increased by $64,000,  additional  paid-in  capital was  increased by
$810,000,  and retained  earnings was decreased by $875,000.  Fractional  shares
were paid in cash.  All  references  to per share  amounts  in the  accompanying
financial statements for 1996 have been restated to reflect the stock dividend.

Stock Sale
----------

On December 12, 1996, the Company completed the sale of 230,800 shares of common
stock,  par value $1.25.  These shares were sold at a price of $13.50 per share,
resulting in net proceeds to the Company of  $2,903,000.  Included in the shares
offered  were 800 shares of stock  which had been  previously  held as  treasury
shares.  Upon  completion  of the stock sale the  Company  directly  contributed
$2,800,000 to the Bank in the form of additional paid-in capital.

16.      FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS

Financial  instruments are defined as cash, evidence of an ownership interest in
an entity,  or a contract  which  creates an  obligation  or right to receive or
deliver  cash or  another  financial  instrument  from/to  a  second  entity  on
potentially  favorable or unfavorable terms. Fair value is defined as the amount
at which a financial  instrument  could be  exchanged  in a current  transaction
between willing parties other than in a forced or liquidation  sale. If a quoted
market price is available for a financial  instrument,  the estimated fair value
would be  calculated  based  upon  the  market  price  per  trading  unit of the
instrument.

If no readily  available  market exists,  the fair value estimates for financial
instruments would be based upon management's judgment regarding current economic
conditions,  interest rate risk,  expected cash flows,  future estimated losses,
and other factors as  determined  through  various  option  pricing  formulas or
simulation modeling.  As many of these assumptions result from judgments made by
management  based upon estimates which are inherently  uncertain,  the resulting
estimated fair values
 may not be  indicative  of the amount  realizable  in the sale of a  particular
financial  instrument.  In  addition,  changes in the  assumptions  on which the
estimated  fair values are based may have a significant  impact on the resulting
estimated fair values.

As certain assets and liabilities,  such as deferred tax assets and premises and
equipment, are not considered financial instruments, the estimated fair value of
financial instruments would not represent the full value of the Company.

The  estimated  fair values at  December  31,  1997 and 1996,  of the  Company's
financial instruments are as follows (in thousands):


                                       19
<PAGE>
<TABLE>
<CAPTION>
                                             1997                   1996
                                             ----                   ----
                                            Carrying              Carrying    Fair
                                             Value       Value      Value     Value
                                             -----       -----      -----     -----
<S>                                        <C>        <C>        <C>        <C>
Financial assets

     Cash and due from banks and federal
        funds sold                         $  4,975   $  4,975   $  8,242   $  8,242
     Investment securities:
        Available for sale                   31,977     31,977     36,208     36,208
        Held to maturity                      6,057      6,053     10,275     10,246
     Net loans                               85,270     86,811     67,695     68,583
     Accrued interest receivable              1,009      1,009      1,111      1,111
                                           --------   --------   --------   --------
                                           $129,288   $130,825   $123,531   $124,390
                                           ========   ========   ========   ========

Financial liabilities

     Deposits                              $117,655   $117,986   $114,725   $114,423
     Borrowed funds
                                              2,200      2,200       --         --
     Accrued interest payable
                                                322        322        320        320
                                           --------   --------   --------   --------
                                           $120,177   $120,508   $115,045   $114,743
                                           ========   ========   ========   ========
</TABLE>

The Company employed simulation modeling in determining the estimated fair value
of financial instruments for which quoted market prices were not available based
upon the following assumptions:

Cash and Due From Banks,  Federal Funds Sold, Accrued Interest  Receivable,  and
Accrued Interest Payable
--------------------------------------------------------------------------------

The fair value is equal to the current carrying value.

Investment Securities
---------------------

The fair value of securities  held to maturity is equal to the available  quoted
market price. If no quoted market price is available,  fair values are estimated
using the quoted market price for similar securities.

The fair value of securities available for sale is equal to the current carrying
value.

Loans  Deposits and Borrowed Funds
----------------------------------

The fair value of loans is estimated by discounting  the future cash flows using
a simulation  model which  estimates  future cash flows and constructs  discount
rates that consider reinvestment opportunities, operating expenses, non-interest
income,  credit quality, and prepayment risk. Demand,  savings, and money market
deposit accounts are valued at the amount payable on demand as of year end. Fair
value for time deposits and borrowed funds are estimated using a discounted cash
flow calculation that applies  contractual  costs currently being offered in the
existing  portfolio  to current  market  rates being  offered for  deposits  and
borrowed funds of similar remaining maturities.

Commitments to Extend Credit and Standby Letters of Credit
----------------------------------------------------------

These financial instruments are generally not subject to sale and estimated fair
values are not readily  available.  The carrying  value,  represented by the net
deferred fee arising from the unrecognized  commitment or letter of credit,  and
the fair value, determined by discounting the remaining contractual fee over the
term of the  commitment  using fees  currently  charged  to enter  into  similar
agreements with similar credit risk, are not considered material for disclosure.
The  contractual  amounts  of  unfunded  commitments  and  letters of credit are
presented in Note 13.


                                       20
<PAGE>

16.      PARENT COMPANY


                             CONDENSED BALANCE SHEET
                             (Dollars in Thousands)
<TABLE>
<CAPTION>


                                                             December 31,
                                                            1997      1996
                                                            ----      ----
ASSETS
<S>                                                      <C>       <C>
     Cash on deposit in subsidiary bank                  $     6   $   166
     Investment in bank subsidiary                        13,490    12,539
     Other assets                                              8         3
                                                         -------   -------

            TOTAL ASSETS                                 $13,504   $12,708
                                                         =======   =======

LIABILITIES AND STOCKHOLDERS' EQUITY
     Accounts payable                                    $     6   $    77
     Stockholders' equity                                 13,498    12,631
                                                         -------   -------

            TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $13,504   $12,708
                                                         =======   =======
</TABLE>



                          CONDENSED STATEMENT OF INCOME
                             (Dollars in Thousands)
<TABLE>
<CAPTION>
                                                                                  Year Ended December 31,
                                                                                       1997       1996
                                                                                       ----       ----
<S>                                                                                 <C>        <C>

NCOME
     Dividends from subsidiary                                                      $   403    $   325

EXPENSES                                                                                 18          8
                                                                                    -------    -------
Income before income taxes and equity in undistributed
     earnings of subsidiary                                                             385        317
Income tax benefit                                                                       (6)        (3)
                                                                                    -------    -------

Income before equity in undistributed earnings in subsidiary                            391        320
Equity in undistributed earnings in subsidiary                                          853        661
                                                                                    -------    -------

NET INCOME                                                                          $ 1,244    $   981
                                                                                    =======    =======
</TABLE>



                                       21
<PAGE>

                        CONDENSED STATEMENT OF CASH FLOWS
                             (Dollars in Thousands)
<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                                                    1997       1996
                                                                                    ----       ----

OPERATING ACTIVITIES
<S>                                                                               <C>        <C>
     Net income                                                                   $ 1,244    $   981
     Adjustments to  reconcile  net income to net cash  provided  by  operating
        activities:
            Equity in undistributed earnings of subsidiary                           (853)      (661)
            Other, net                                                                (76)        77
                                                                                  -------    -------
                Net cash provided by operating activities                             315        397
                                                                                  -------    -------
INVESTING ACTIVITIES
     Investment in subsidiary                                                        --       (2,800)
                                                                                  -------    -------
                Net cash used for investing activities                               --       (2,800)
                                                                                  -------    -------
FINANCING ACTIVITIES
     Proceeds from sale of common stock, net of cost                                 --        2,903
     Cash dividends paid                                                             (475)      (344)
                                                                                  -------    -------
                Net cash provided by (used for) financing activities                 (475)     2,559
                                                                                  -------    -------
                Increase (decrease) in cash                                          (160)       156

CASH AT BEGINNING OF YEAR                                                             166         10
                                                                                  -------    -------
CASH AT END OF YEAR                                                               $     6    $   166
                                                                                  =======    =======
</TABLE>



                                       22
<PAGE>


REPORT OF INDEPENDENT AUDITORS
------------------------------





Board of Directors and Stockholders
Emclaire Financial Corp.

We have audited the consolidated  balance sheet of Emclaire  Financial Corp. and
Subsidiary  as of  December  31,  1997 and 1996,  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
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. 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.  and Subsidiary as of December 31, 1997 and 1996, and the results of their
operations  and their cash flows for the years  then  ended in  conformity  with
generally accepted accounting principles.



/s/S.R. Snodgrass
-----------------
S. R. Snodgrass, A.C.
Wexford, PA
February  6, 1998

<PAGE>

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

Emclaire  Financial  Corp.  ("Emclaire or the  "Company") is the parent  holding
company for the Farmers National Bank of Emlenton ("Farmers" or the "Bank"). The
following  discussion and analysis is intended to provide  information about the
financial  condition  and results of operation of the Company and should be read
in conjunction with the Consolidated  Financial Statements and the related notes
thereto appearing elsewhere in this annual report.

Certain  information  presented  in  this  discussion  and  analysis  and  other
statements   concerning  future   performance,   developments  or  events,   and
expectations  for  growth  and  market  forecasts   constitute   forward-looking
statements which are subject to a number of risks and  uncertainties,  including
interest rate  fluctuations,  changes in local or national economic  conditions,
and government and regulatory actions which might cause actual results to differ
materially from stated expectations or estimates.

--------------------------------------------------------------------------------
Graphic Omitted
--------------------------------------------------------------------------------
OVERVIEW

During 1997 Emlcaire Financial Corp. focused on maximizing the returns resulting
from the growth and  expansion  undertaken in 1996.  The Company  sought to take
advantage  of its new and  expanded  markets  to  establish  or  expand  banking
relationships  with new and  existing  customers.  This  resulted in total loans
increasing 26% to $86.1 million and total deposits rising 3% to $117.7 million.

Due largely to the increase in the loan portfolio, net interest income, on a tax
equivalent basis,  increased 22%, resulting in an increase in net income of 27%.
Due to the effect of the issuance of 230,800 additional shares in December 1996,
earnings per share for 1997 of $1.15, remained unchanged from 1996.

In August 1997, ground was broken for the Bank's new data center. When completed
this facility,  located in downtown Emlenton, will house the data processing and
bookkeeping operations. Construction is scheduled to be completed in April 1998.

As 1998 began,  the Bank made plans to open its eighth  office at Clarion  Mall.
The full service office will be located in a site previously occupied by another
financial  institution.  This new  location  will  allow us to better  serve our
existing Clarion customers, by providing them an alternate site to conduct their
banking  business,  while  allowing  Emclaire  the  opportunity  to attract  new
customers  from the western  side of Clarion.  This office is  scheduled to open
late in March.

RESULTS OF OPERATIONS

Summary

For 1997, Emclaire posted net income of $1.2 million, an increase of $263,000 or
27% from 1996. This increase was largely due to the 22% increase in net interest
income, on a tax equivalent basis, which rose $1.1 million, to $5.9 million. The
$14.2  million or 22% increase in loan volume was the  principal  factor for the
increase in net interest income.

Other  operating  income of $596,000 rose $168,000 or 39% from 1996,  due to the
restructuring  of fees for overdrafts and returned  items, as well as fee income
associated with ATM convenience charges and debit card transactions.

Total other operating  expenses for the Company increased 21% to $4.4 million in
1997 as compared to $3.6 million in 1996. This increase in other operating costs
was due principally to the overhead associated with a full year of operating the
branch locations opened or purchased in 1996.

Earnings  per  share for 1997  equaled  the  $1.15  earned  in 1996,  due to the
additional weighted shares outstanding resulting from the sale of 230,800 shares
of common  stock in  December  1996,  combined  with the  effect of the 5% stock
dividend paid in December 1997.

--------------------------------------------------------------------------------
Graphic Omitted
--------------------------------------------------------------------------------

                                       24


<PAGE>

Net interest income

The Company's  net interest  income on a tax  equivalent  basis  increased  $1.1
million or 22% to $5.9 million in 1997,  due to an increase of $1.45  million or
18% in interest income on a tax equivalent basis, which totaled $9.6 million for
1997 as compared to $8.2 million in 1996.  This increase in interest income more
than offset the $375,000 or 11% increase in interest expense.

The increase in interest income in 1997,  resulted primarily from an increase of
$1.1  million or 19% in  interest  income on loans,  due to an  increase  in the
average outstanding balance of the portfolio,  which rose $14.2 million to $78.6
million  for the year.  The 22%  increase  in loan  volume  served to offset the
reduction in the overall yield on the portfolio  which  declined 20 basis points
to 8.89%. The decline in yield is due to a general decline in long-term interest
rates during the second half of 1997,  combined with increased  competition  for
loan customers.  Should the current  interest rate  environment  prevail and the
level of  competition  continue,  it is likely  the  overall  return on the loan
portfolio will decline further.

Interest income on investment securities increased $466,000, on a tax equivalent
basis, to $2.6 million.  This  improvement was the result of the increase in the
average  volume of  investment  securities  which  rose $5.7  million or 19% for
taxable securities, and $851,000 or 23% for tax-exempt investments. In addition,
the yields on the investment portfolio increased to 6.24% from 6.10% for taxable
securities,  and to 6.23% from 5.87%, on a tax equivalent  basis, for tax-exempt
investments.  The improved yield on the taxable securities  portfolio was due to
having the full year  effect in 1997,  of  purchases  made during the second and
third quarters of 1996.

For 1997 the yield on earning  assets,  on a tax equivalent  basis,  increased 2
basis  points  to 7.95%.  This very  modest  improvement  was the  result of the
significant  increase in loan volume  combined  with the  increase in volume and
yield on the investment portfolio.

Interest expense  increased  $375,000 or 11% to $3.7 million for 1997, from $3.4
million in 1996, due to the increase in the average  volume of  interest-bearing
liabilities which rose $12.3 million during 1997, to $97.3 million.  The average
volume of time deposits increased $6.3 million or 16% during 1997,  resulting in
an increase in the related interest expense of $294,000 or 14%. In addition,  in
July 1997,  the  Company  obtained a $2.0  million  five year  advance  from the
Federal Home Loan Bank.

Due the  general  decline  in  interest  rates,  the  cost of  interest  bearing
liabilities  decreased to 3.83% for 1997 as compared to 3.95% for 1996.  Despite
the  reduction  in the cost of funds  during 1997,  continuing  competition  for
deposits and a flattening of the yield curve,  as the spread  between short- and
long-term  interest rates narrows,  caused  interest rates to either increase or
not fall in proportion to the reduction in longer term rates.  As a result,  the
Company's cost of funds rose during the fourth quarter of 1997 rose to 3.94%.

As a result of the  slight  improvement  in the yield on total  earning  assets,
combined with the decline in the cost of interest-bearing  liabilities,  the net
yield on earning  assets  increased  to 4.87% for 1997 as  compared  to 4.68% in
1996.

The following tables set forth for the periods indicated  information  regarding
the total dollar amounts of interest income from interest-earning assets and the
resulting  average  yields,  the total  dollar  amount of  interest  expense  on
interest-bearing  liabilities and the resulting  average rate paid, net interest
income and the net yield on interest-earning assets (dollars in thousands):

                                       25
<PAGE>

                AVERAGE BALANCE SHEETS AND NET INTEREST ANALYSIS
<TABLE>
<CAPTION>

                                                                1997                                       1996
                                                                ----                                       ----
                                                Average                         Yield/     Average                        Yield/
                                                Volume      Interest (2)        Rate (2)   Volume      Interest (2)       Rate (2)
                                                ------      ------------        --------   ------      ------------       --------
<S>                                            <C>          <C>                 <C>        <C>         <C>                <C>
ASSETS
Interest-earning assets
     Investment securities
        Taxable                                $  36,525    $   2,279           6.24%      $ 30,810    $   1,879          6.10%
        Exempt from federal income
         tax                                       4,495          280           6.23          3,644          214          5.87
     Interest bearing deposits                        24            1           4.17             37            2          5.41
     in other banks                                   37            2
     Loans (1) (3)                                78,610        6,989           8.89         64,414        5,853          9.09
     Federal funds sold                            1,610           89           5.53          4,348          236          5.43
                                                            ---------                       --------    ---------

     Total interest-earning                      121,264        9,638           7.95        103,253        8,184          7.93
                                                             --------                                 ----------
     assets

Noninterest-earning assets
     Cash and due from banks                       4,281                                      3,638
     Allowance for loan losses                      (795                                       (714)
     Other assets                                  5,501                                      4,101
                                                --------                                   --------
        Total assets                           $ 130,251                                   $110,278
                                               =========                                   ========

LIABILITIES AND STOCKHOLDERS'
EQUITY
Interest-bearing liabilities
     NOW accounts                              $  16,481          295           1.79%      $ 12,966          267          2.06%
     Money market accounts                        18,134          579           3.19         16,921          544          3.21
     Savings deposits                             15,903          443           2.79         14,558          427          2.93
     Time deposits                                45,515        2,338           5.14         39,251        2,044          5.21
     Obligation under capital lease                   85            5           5.88            124            7          5.65
     Borrowed funds                                1,196           67           5.60          1,128           63          5.59
                                               ---------    ---------                      --------    ---------

     Total interest-bearing                       97,314        3,727           3.83         84,948        3,352          3.95
                                                             --------                                  ---------
     liabilities

Noninterest-bearing liabilities
     Demand deposits                              19,417                                     15,257
     Other liabilities                               517                                        584
     Capital                                      13,003                                      9,499
                                               ---------                                   --------

        Total liabilities and                  $ 130,251                                   $110,288
                                               =========                                   ========
        stockholders' equity

        Net interest income
          and net yield on
          interest-earning assets                           $   5,911           4.87%                    $  4,832         4.68%
                                                            =========         ======                     ========       =======
</TABLE>

(1)  - Interest on loans includes fee income
(2)  - Tax exempt  income on loans and  investment  securities  and the  related
       yields are computed on a tax  equivalent basis computed using the federal
       statutory rate of 34%.
(3)  - Nonaccrual loans included.

                                       26

<PAGE>


Changes in net interest income are attributable to three factors: 1) a change in
the volume of an  interest-earning  asset or  interest-bearing  liability,  2) a
change in  interest  rates,  or 3) a change  attributable  to a  combination  of
changes in volume and rate. The following  table sets forth certain  information
regarding  changes in interest income,  on a tax-equivalent  basis, and interest
expense  of the  Company  for  the  periods  indicated.  For  each  category  of
interest-earning asset and interest-bearing  liability,  information is provided
on changes attributable to 1) changes in volume (changes in volume multiplied by
the old  interest  rate);  and 2) changes in rates  (changes in  interest  rates
multiplied by the old average volume).  Changes attributable to a combination of
changes in volume and rate are  proportionately  allocated  to changes in volume
and changes in rate. (dollars in thousands)


                   ANALYSIS OF CHANGES IN NET INTEREST INCOME
<TABLE>
<CAPTION>
                                              1997 Change From 1996           1996 Change From 1995
                                             Total     Change Due To        Total      Change Due To
                                            Change    Volume      Rate      Change    Volume      Rate
                                            ------    ------      ----      ------    ------      ----
<S>                                       <C>        <C>        <C>        <C>        <C>        <C>
INTEREST INCOME ON:
     Taxable investment securities        $   400    $   356    $    44    $   845    $   712    $   133
                                                                                                      44
     Non-taxable investments                   66         52         14        (41)       (54)        13
     Interest bearing deposits in other
        banks                                  (1)        (1)      --         --         --         --
     Loans                                  1,136      1,268       (132)      (198)       (31)      (167)
     Federal funds sold                      (147)      (151)         4         38         52        (14)
                                          -------    -------    -------    -------    -------    -------

        Total interest income               1,454      1,524        (70)       644        679        (35)
                                          -------    -------    -------    -------    -------    -------

INTEREST EXPENSE ON:
     NOW accounts                              28         66        (38)        (5)        17        (22)
     Money market accounts                     35         38         (3)       (10)         5        (15)
     Savings deposits                          16         37        (21)         1         38        (37)
     Time deposits                            294        321        (27)       320        336        (16)
     Obligation under capital lease            (2)        (2)      --           (3)        (2)        (1)
     Borrowed funds                             4          4       --           63         63       --
                                          -------    -------    -------    -------    -------    -------

        Total interest expense                375        464        (89)       366        457        (91)
                                          -------    -------    -------    -------    -------    -------

NET INTEREST INCOME                       $ 1,079    $ 1,060    $    19    $   278    $   222    $    56
                                          =======    =======    =======    =======    =======    =======
</TABLE>

Provision for loan losses

The provision  for loan losses of $220,000 for the year ended  December 31, 1997
represented an 83% increase from the $120,000 provided in 1996. Management makes
periodic  provisions  to the allowance for loan losses to maintain the allowance
at an acceptable  level  commensurate  with the credit risk inherent in the loan
portfolio.  See "Loan  Quality" for  additional  discussion of the allowance for
loan  losses.  The level at which funds were  provided to the  allowance  during
1997, is a reflection  of the overall  growth of the loan  portfolio  during the
year, and is not an indication of any overall decline in the quality of the loan
portfolio.  The following  table  presents a summary of loan losses by loan type
and changes in the  allowance  for loan losses for the two years ended  December
31, 1997 (dollars in thousands):

                                       27
<PAGE>

<TABLE>
<CAPTION>

                                                       Year Ended December 31,
                                                           1997       1996
                                                           ----       ----

<S>                                                     <C>        <C>
Total loans outstanding                                 $86,144    $68,428
                                                        =======    =======
Average loans outstanding                                78,610     64,414
                                                        =======    =======

Allowance for loan losses at beginning of year          $   733    $   687
Provision charged to expense                                220        120
Charge-offs:
     Commercial and industrial                                1         11
     Real estate                                             33          1
     Consumer                                                74        109

        Total                                               108        121
                                                        -------    -------
Recoveries:
     Commercial and industrial                                2          1
     Real estate                                             19          1
     Consumer                                                 8         45
                                                        -------    -------
        Total                                                29         47
                                                        -------    -------
     Net charge-offs                                         79         74
                                                        -------    -------

Allowance for loan losses at end of period              $   874    $   733
                                                        =======    =======

Allowance for loan losses as a percent of total loans      1.01%      1.07%
Net charge-offs as a percent of average loans               .10        .11
</TABLE>

Other operating income

Other  operating  income which is comprised  principally  of fees and charges on
customer  deposit  accounts  increased  $168,000 or 39% to $596,000 in 1997 from
$428,000 in 1996.  Service charges on customer  accounts  increased  $132,000 or
38%, due to the restructuring of overdraft  charges,  combined with the increase
in  volume   resulting  from  the   additional   branch   operations,   and  the
implementation  of a charge on returned  deposit items.  Other income  increased
$36,000  or  43%  during  the  same  period  due  primarily  to  fees  from  the
MasterMoney(TM)  debit card product  introduced in August, and the imposition of
an ATM convenience charge for non-customers using a Farmers ATM.

Other operating expense

Other  operating  expense  increased  $746,000 or 21% to $4.4 million in 1997 as
compared to $3.6 million in 1996.  This  increase is largely  attributed  to the
overhead costs  associated with the impact of the full year of operations of the
branch  offices  established  in  1996.  The  new  branch  operations  generated
approximately   $690,000  in  additional   overhead  expenses  during  1997,  in
comparison  to the expenses  related to part-year  operation of these offices in
1996.

Salaries and employee  benefits  for 1997 totaled $2.2  million,  an increase of
$337,000  or 18% from $1.9  million  reported in 1996.  Of this total  increase,
approximately $175,000 represents the effect of a full year's expense associated
with new employees added during 1996, including those at the new branch offices.
Normal  recurring  employee  cost  increases  for such  things as  salaries  and
hospitalization insurance and pension benefits represents approximately $150,000
of the increase.  For 1998, in addition to normal recurring salary  adjustments,
it is expected  certain  employee  benefit costs will increase,  such as medical
benefits which will rise approximately 14% or $36,000.

Occupancy  and  equipment  expense  increased  $164,000 or 31% in 1997.  Of this
increase, $90,000 is due to additional costs related to the operation of the new
branch offices.  Depreciation  costs associated with capital  expenditures  made
during the fourth quarter of 1996,  for a wide area network and teller  terminal
platform accounted for approximately $68,000 of the increase.

                                       28
<PAGE>

Other  expenses for 1997 totaled $1.5  million,  a $245,000 or 20% increase from
the $1.2 million reported in 1996.  Costs associated with the additional  branch
offices  primarily  accounted for this increase.  Specifically,  amortization of
intangible  assets increased  approximately  $114,000 due to the purchase of the
Knox branch office in 1996. The remaining increase is principally  attributed to
the full year of operations of the branch offices.

In  1997,  management  began  an  assessment  of  the  current  data  processing
operation,  including the space occupied by the data  processing and bookkeeping
departments  located  at the  Emlenton  office,  and the  impact  of the  branch
expansion  in 1996 on the  available  data  processing  capacity.  This  project
resulted in the construction of the previously mentioned data processing center.
While this facility will improve the  efficiency  with which daily  transactions
are processed, as well as, increasing the capacity to process transactions,  the
overhead   associated  with  this  facility  will  increase  operating  expenses
approximately $65,000, annually.

In  addition to the  construction  of the data  center,  the  assessment  of the
Company's data processing system, indicated that based on growth projections, an
upgrade or replacement of the existing  equipment was needed.  The assessment of
hardware and  software  vendors  began during the fourth  quarter of 1997 and is
expected  to be  completed  early  in the  second  quarter  of  1998.  Based  on
preliminary cost estimates,  a complete upgrade of the data processing equipment
and  software  could  require a capital  investment  ranging  from  $250,000  to
$500,000.  The time frame for having this upgrade completed is the first quarter
of  1999,  so as to allow  sufficient  time to  perform  testing  for year  2000
compliance.

Income Tax Expense

Income tax expense increased  $110,000 or 25% during 1997 when compared to 1996,
due to the 26% increase in income before income taxes.

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1997 AND DECEMBER 31, 1996

Total assets at December 31, 1997,  amounted to $133.9  million,  an increase of
$5.9 million or 5%, over total  assets at December  31,  1996.  The increase was
funded by a $2.9  million or 3% increase in deposits,  and a $2 million  Federal
Home Loan Bank Advance.

Investment Securities

Total  investment  securities  decreased  $8.5  million  during  1997,  to $38.0
million, as the proceeds from investment security sales and maturities were used
to fund loan demand.

Information  detailing  the book value of the  investment  portfolio by security
type and  classification  is presented in Note 4 to the  consolidated  financial
statements.

--------------------------------------------------------------------------------
Graphic Omitted
--------------------------------------------------------------------------------

Loans

Loans  receivable  at December 31, 1997 totaled  $86.1  million,  an increase of
$17.7  million  or 26% from  1996.  The  establishment  of the three  additional
offices during 1996, expanded Emclaire's market area and served to increase loan
demand.  The two newest  markets  accounted for  approximately  53% of the total
increase in loans.

--------------------------------------------------------------------------------
Graphic Omitted
--------------------------------------------------------------------------------

The loan growth  generated  during  1997,  was largely  from  increases in loans
secured  by  residential  or  commercial  real  estate.  These  segments  of the
portfolio increased $11.5 million or 33%, and $3.8 million or 33%, respectively.
Of  the  residential   mortgage  loan  increase,   $2.5  million   consisted  of
construction  and purchase money  mortgages  originated with the assistance of a
mortgage  broker.  Commercial  loans grew $757,000 or 7%, while  consumer  loans
increased  $1.7  million or 14% during 1997.  The increase in consumer  loans is
attributed  to two direct  mail  solicitations  during  the year that  generated
approximately $1.2 million in new loans.

                                       29
<PAGE>

The  following  table  presents the  composition  of the loan  portfolio and the
percentage of loans by type at December 31, 1997 an d1996 (dollars in thousands)
<TABLE>
<CAPTION>
                                                               December 31,
                                                               ------------
                                                   1997                                 1996
                                                  ----                                  ----
                                                       % of loans                    % of loans
                                                            to                           to
                                           Amount      Total Loans      Amount       Total Loans
                                           ------      -----------      ------       -----------
<S>                                       <C>            <C>          <C>             <C>
Commercial and industrial                 $11,147          12.9%       $10,390           15.2%
Commercial and multi-family real estate    15,188          17.6         11,400           16.6
1 - 4 Family real estate                   45,709          53.1         34,251           50.1
Consumer                                   14,100          16.4         12,387           18.1
                                          -------         -----        -------          -----

        Total loans                        86,144         100.0%        68,428          100.0%
                                                          =====                         =====
Less: allowance for loan losses               874                          733
                                          -------                      -------

        Net loans                         $85,270                      $67,695
                                          =======                      =======
</TABLE>

Loan Quality

Loans are subject to ongoing periodic  monitoring by management and the Board of
Directors.  Loans are  placed on  nonaccrual  status  when,  in the  opinion  of
management,  the collection of additional  interest is doubtful;  but not longer
than 90 days past due for non-real  estate loans and 120 days past due for loans
secured by real estate.  Interest  accrued and unpaid at the time the account is
placed on  nonaccrual  status is  generally  charged  against  interest  income.
Subsequent  payments are either applied to the outstanding  principal balance or
recorded  as  interest  income  based  upon   management's   assessment  of  the
collectibility of the account.

At December 31, 1997,  the Bank had $171,000 in loans  greater than 90 days past
due and still accruing interest, and $820,000 in loans on nonaccrual status.

Of the total non-performing  loans,  $685,000 in principal amounts of loans to a
single  customer were  classified as impaired  loans. A loan is considered to be
impaired when, based on current information,  it is probable the Company will be
unable  to  collect  all  principal  and  interest  due in  accordance  with the
contractual  terms of the loan  agreement.  These impaired loans consist of four
commercial  real  estate  loans to one  borrower.  The loans are secured by real
estate. During 1996, the borrower sought bankruptcy protection under Chapter 11,
and continues to operate. During 1997, $82,000 in payments were received on this
account,  resulting from the  liquidation of collateral.  Of the funds received,
$68,000 was applied to principal and $14,000 was recognized as interest  income.
As part of management's ongoing assessment of its loan portfolio, $70,000 of the
allowance  for loan losses at December 31, 1997,  has been  allocated  for these
loans.  Management  believes the Company is adequately secured by the underlying
collateral.

The  following  table sets forth  non-performing  loans at December 31, 1997 and
1996, along with nonaccrual loan interest data for 1997 (dollars in thousands):

                                       30
<PAGE>
<TABLE>
<CAPTION>

                                                 December 31,
                                                 ------------
                                            1997             1996
                                            ----             ----
<S>                                      <C>             <C>

Loans past due 90 days or more and
     accruing                            $   171              111
Nonaccrual loans                             820              778
                                            ----         --------

     Non performing loans                   $991         $    889
                                            ====         ========

Non-performing loans to total loans         1.15%            1.30%
Allowance for loan losses to non-
     performing loans                      88.19            82.45
Non-performing loans to total assets         .74              .69

Nonaccrual loan interest data:
     Interest computed on original       $    81
                                         =======
     terms

     Interest recognized in income       $    15
                                         =======
</TABLE>

At December 31, 1997,  no real estate or other assets were held as foreclosed or
repossessed property.  In addition,  based upon the ongoing quarterly review and
assessment  of  credit  quality  management  is  not  aware  of  any  trends  or
uncertainties related to any accounts which might have a material adverse effect
on future earnings, liquidity, or capital resources.

Based upon the  results of the  quarterly  internal  loan  review  process,  and
considering  the trend of past  loan  losses  and  recoveries,  as well as,  the
current risk elements in the loan portfolio,  management  believes the allowance
for loan losses at December 31, 1997 is adequate.  The following  table presents
management's  estimate of the  allocation of the allowance for loan losses among
the loan  categories,  along with the  percentage  of loans in each  category to
total loans (dollars in thousands):

<TABLE>
<CAPTION>

                                         December 31,          December 31,
                                             1997                  1996
                                             ----                  ----
                                                 % of Loans           % of Loans
                                                    to                     to
                                       Amount    Total Loans  Amount    Total Loans
                                        ----       ------     -----       ------

<S>                                    <C>         <C>        <C>         <C>
Commercial and industrial               $ 49        12.9%      $106         15.2%
Commercial & multi-family real estate    205        17.6        158         16.6
1-4 family real estate                    19        53.1         13         50.1
Consumer                                 101        16.4        106         18.1
 Unallocated                             500          --        350           --
                                        ----       -----       ----       ------

                                        $874       100.0%      $733        100.0%
                                        ====       =====       ====        =====
</TABLE>


                                       31
<PAGE>
Deposits

Total deposits of $117.7  million at December 31, 1997,  represented an increase
of $3.0  million or 3% from  December  31,  1996.  The  increase  in deposits is
princiaplly attributed to growth at the newest office locations.

See also,  "Average  Balance Sheets and Net Interest  Analysis" for  information
related to the average amount and average interest rate paid on deposit accounts
during 1997 and 1996.  Information  related to the maturity of time  deposits of
$100,000  and  over  at  December  31,  1997  is  presented  in  Note  8 of  the
accompanying consolidated financial statements.


--------------------------------------------------------------------------------
Graph Omitted
--------------------------------------------------------------------------------

Stockholders' Equity

Stockholders' equity increased $867,000 or 7% during 1997 to $13.5 million. This
increase was the result of $769,000 of net retained earnings during the year.

In December 1997, the Company paid a 5% stock dividend resulting in the issuance
of 51,453 shares of common stock.

--------------------------------------------------------------------------------
Graph Omitted
--------------------------------------------------------------------------------

Market Risk Management

Market risk is the risk of loss arising  from adverse  changes in the fair value
of financial  instruments due to changes in interest  rates,  exchange rates and
equity prices.  The Company's  market risk is comprised  principally of interest
rate risk. The Company's  Asset/Liability committee is responsible for reviewing
the interest rate sensitivity position of the Company and establishing  policies
to monitor and limit exposure to interest rate risk. The guidelines  established
by the Asset/Liability committee are subject to review by the Company's Board of
Directors.

Asset/Liability Management

One of the  principal  functions  of the  Company's  asset/liability  management
program  is to  monitor  the  level to which the  balance  sheet is  subject  to
interest  rate risk.  The goal of this  program  is to manage  the  relationship
between interest-earning assets and interest-bearing liabilities to minimize the
fluctuations  in the net interest  spread and achieve  consistent  growth in net
interest income during periods of changing interest rates.

Interest rate  sensitivity is the relationship of differences in the amounts and
repricing dates of interest-earning assets and interest-bearing  liabilities. In
order to measure the impact on net interest  income and pre-tax  income,  and to
limit the adverse  effect on earnings  due to interest  rate  changes,  Emclaire
monitors  interest rate  sensitivity  through gap and simulation  analyses.  The
Company's gap model includes  certain  assumptions  based on past experience and
expected  customer  behavior during periods of rising or falling interest rates.
These  assumptions  deal  primarily  with the interest  rate changes for deposit
accounts with no fixed maturity, such as savings, NOW and money market accounts.
These  assumptions  have been  developed  through  consideration  of past events
combined with estimates of future pricing practices.

The Company's  policy is to limit the adverse change in annual pre-tax income to
5% based on an  immediate  change  in  interest  rates of 200 basis  points.  At
December 31, 1997, pre-tax income would be impacted by such a change in interest
rates as follows:

Cuumulative gap at 1 year                              (7.4%)
Impact on pre-tax earnings
+ 200 basis points                                     (1.4 )
- 200 basis points
                                                       10.9

Liquidity

Liquidity represents the Company's ability to meet normal cash flow requirements
of its customers  for the funding of loans and repayment of deposits.  Liquidity
is generally  derived from the repayments and maturities of loans and investment
securities,  and the receipt of deposits.  Management  monitors liquidity daily,
and  on  a   monthly   basis   incorporates   liquidity   management   into  its
asset/liability program.


                                       32
<PAGE>
Operating  activities,  as  presented  in the  statement  of cash  flows  in the
accompanying  consolidated  financial statements,  provided $2.1 million in cash
during  1997,  generated  principally  from net  income,  and  depreciation  and
amortization,  as compared to the $959,000  provided  during  1996.  The primary
reasons  for the  increase  during  1997 was the  increase in net income and the
increased depreciation  associated with capital expenditures made by the Company
during the fourth quarter of 1996.

Investing activities consist primarily of loan originations and repayments,  and
investment  purchases and  maturities.  These  activities  used $10.0 million in
funds during 1997,  principally for the net funding of loans which totaled $17.8
million for the year.  This cash outlay  exceeded funds received from investment
repayments  and  maturities,  totaling  $9.2  million,  and  $2.0  million  from
securities sales. For 1996, investing  activities used $12.5 million,  resulting
from $26.2 million in investment  securities  purchases,  which were principally
funded by $12.7  million  received in the  purchase  of the Knox  branch  office
operation.

Financing  activities  consisted of the  solicitation  and repayment of customer
deposits,  borrowings  and  repayments  and the payment of dividends.  For 1997,
financing activities provided $4.6 million comprised on net deposit increases of
$2.9 million and borrowings of $2.2 million.  For 1996, the sale of common stock
provided $2.9 million, while net deposits increased $11.6 million,  exclusive of
the funds acquired in the branch purchase.

In addition to using the loan,  investment and deposit  portfolios as sources of
liquidity,  the  Company  has access to funds  from other  sources if a need for
additional  funds would arise.  There are available  lines of credit through the
FHLB,  along with a federal  funds line of credit  available  through the Bank's
primary  correspondent  bank. In addition,  the Bank has access to funds through
the discount  window at the Federal  Reserve Bank.  The Company also has a ready
source of funds  through  the  available-for-sale  component  of the  investment
securities  portfolio.  The following  table  presents the amortized cost of the
investment  portfolio,  the weighted average, tax equvalent yield and maturities
at December 31, 1997 (dollars in thousands):

<TABLE>
<CAPTION>
Available for Sale                                After 1 Year  After 5 Years
                                        Within        Within       Within         After
                                        1 Year       5 Years       10 Years       10 Years    Total
                                        ------       -------       --------       --------    -----

<S>                                    <C>           <C>           <C>            <C>        <C>
U. S. Treasury                         $ 4,503       $ 6,998       $    --        $  --      $11,501
U. S. Government Agency                    999         5,010            --           --        6,009
Obligations of states and
polictical subdivisions                   --           1,920           1,697         --        3,617
Corporate                                 --          10,067            --           --       10,067
                                       -------       -------       ---------      -------    -------
        Total                          $ 5,502       $23,995       $   1,697      $  --      $31,194
                                       =======       =======       =========      =======    =======

        Yield                             6.08%         6.55%           6.86%         - %       6.48%

Held to Maturity

U. S. Treasury                         $  --         $ 1,006       $    --        $  --      $ 1,006
Obligations of states and polictical
     subdivisions                        1,390          --              --           --        1,390
Corporate                                  904         2,074            --           --        2,978
Mortgage-backed securities                 272          --              --            411        683
                                       -------       -------       ---------      -------    -------

        Total                          $ 2,566       $ 3,080       $    --        $   411    $ 6,057
                                       =======       =======       =========      =======    =======

        Yield                             5.99%         6.19%           --  %        6.46%      6.12%
</TABLE>

The  following  table  presents the  maturity  distribution  and  interest  rate
sensitivity of commercial and industrial  loans, and commercial and multi-family
real estate loans at December 31, 1997 (dollars in thousands):

                                       33

<PAGE>


<TABLE>
<CAPTION>
                                                       After 1 Year
                                                          Within    Within
                                                          1 Year    5 Years       After 5 Years    Total
                                                          ------    -------       -------------    -----

<S>                                                       <C>       <C>            <C>            <C>
Commercial and industrial                                 $ 6,316   $ 4,414        $   417        $11,147
Commercial and multi-family real estate                     3,002     5,346          6,840         15,188
                                                          -------   -------        -------        -------

                                                          $ 9,318   $ 9,760        $ 7,257        $26,335
                                                          =======   =======        =======        =======

Predetermined interest rates                              $ 3,189   $ 6,654        $ 4,237        $14,080
Floating interest rates                                     6,129     3,106          3,020         12,255
                                                          -------   -------        -------        -------

                                                          $ 9,318   $ 9,760        $ 7,257        $26,335
                                                          =======   =======        =======        =======

</TABLE>

Generally, commercial loans with maturities of one year or less consist of funds
drawn on commercial lines of credit, short-term notes written with maturities of
ninety days to six months, and demand notes written without alternative maturity
schedules.  All lines of credit and demand  loans are  subject to annual  review
where the  account  may be  approved  for up to one year.  Short-term  notes are
generally  permitted  two renewals,  prior to being placed on a fixed  repayment
schedule.

The Company  anticipates  it will have  sufficient  funds  available to meet the
needs of its customers for deposit repayments and loan fundings. At December 31,
1997, loan and letter of credit commitments totaled $9.3 million.  Many of these
commitments  are in the form of lines of credit and letters of credit  which are
available for use by the borrower,  but are generally not drawn on. Certificates
of deposit  scheduled  to mature in one year or less  totaled  $25.6  million at
December 31, 1997.

Capital Resources

Capital  adequacy  is the  ability  of  the  Company  to  support  growth  while
protecting  the  interests  of  shareholders  and  depositors.  Bank  regulatory
agencies have developed  certain capital ratio  requirements,  which are used to
assist them in monitoring  the safety and  soundness of financial  institutions.
Management  continually  monitors  these capital  requirements  and believes the
Company to be in compliance with these regulations at December 31, 1997.

The Bank's regulatory  capital position at December 31, 1997, as compared to the
minimum  regulatory  capital   requirements  imposed  on  the  Bank  by  banking
regulators  at that date is presented in Note 14 of the  accompanying  financial
statements.  Management  is not aware of any  actions  contemplated  by  banking
regulators  which would result in the Bank being in  non-compliance  with any of
the above requirements.

Impact of Inflation and Changing Prices

The  financial  statements  of the  Company  and the  notes  thereto,  presented
elsewhere  herein,  have been prepared in  accordance  with  generally  accepted
accounting  standards,  which require the measurement of financial  position and
operating results in terms of historical dollars without  considering the change
in the relative purchasing power of money over time due to inflation. The impact
of inflation is reflected in the  increased  cost of the  Company's  operations.
Unlike  most  industrial  companies,  nearly  all of the  Company's  assets  and
liabilities are monetary.  As a result,  interest rates have a greater impact on
the Company's  performance  than do the effects of general  levels of inflation.
Interest  rates do not  necessarily  move in the same  direction  or to the same
extent as the price of goods and services.

YEAR 2000

The Company  formed a committee in September  1997,  to implement an action plan
designed to ensure the Company's  computer  systems,  software  applications and
other date reliant  equipment  would function  properly after December 31, 1999.
This  process  involves  identifying  all  equipment,  software  and third party
providers,  deemed  to be  critical  to  the  Company's  daily  operations,  and
ascertaining if these products or product providers are Year 2000 compliant.

For items or vendors that are not  compliant  and have not achieved  significant
progress  toward  compliance by October 1, 1998,  the committee  will  implement
contingency  plans to either  replace the  product or vendor,  or  implement  an
alternative  procedure to mitigate the affected area.

                                       34
<PAGE>

All software  programs used by the Company are purchased  directly from vendors,
and are not modified internally by the Company. This eliminates the need for the
direct hiring of programmers to rewrite or modify computer software.

The  total  cost of this  project  has not yet  been  determined,  but it is not
expected  to have a material  impact on the  financial  condition  or results of
operations of the Company. Personnel and other costs resulting from this project
will be expensed as incurred.  Expenditures for hardware and software  purchases
will be capitalized in accordance with policy.

Management  believes that  substantially all date reliant equipment and software
will be tested and, if needed,  upgraded or replaced by December  31,  1998.  In
addition,  assessments of significant  vendors,  service providers and customers
will also be  completed.  Despite the best efforts of management to address this
issue,  the vast  number of  external  entities  that have  direct and  indirect
business  relationships with the Company,  such as customers,  vendors,  payment
system providers and other financial institutions, makes it impossible to assure
that a failure to achieve  compliance by one or more of these entities would not
have a material adverse impact on the operations of the Company.

COMMON STOCK INFORMATION

Prior to December 1996,  there was no established  public trading market for the
Company's common stock. In December 1996, the Company began trading its stock in
the local over-the-counter market through the National Association of Securities
Dealers OTC Electronic  Bulletin Board. Price quotations from the fourth quarter
of 1996 forward, reflect inter-dealer prices, without retail mark-up,  mark-down
or commission and may not represent  actual  transactions.  The following  table
summarizes  the high and low prices and dividend  information  since  January 1,
1996,  after  adjustment  for a 5% stock  dividend paid in December  1997, and a
4-for-1 stock split  effected June 20, 1996.  Prices are based upon  information
made available to the Company. Cash dividends are declared on a quarterly basis.

<TABLE>
<CAPTION>
                               1997                          1996
                               ----                          ----
                                        Dividend                   Dividend
                     High       Low     Declared   High      Low   Declared

<S>                 <C>       <C>         <C>    <C>       <C>       <C>
First Quarter       $14.75    $13.25      $.105  $   --    $   --    $.095
Second Quarter       15.00     13.25       .105   11.25     11.25     .105
Third Quarter        16.67     14.28       .114      --        -      .105
Fourth Quarter       17.00     16.25       .114   13.50     13.00     .105

</TABLE>

At December 31, 1997, the Company had approximately 590 shareholders of record.


                                       35
<PAGE>
<TABLE>
<CAPTION>
<S>                                            <C>
BOARD OF DIRECTORS

Ronald L. Ashbaugh                             J. Michael King
Retired President                              Senior Partner
Emclaire Financial Corp. and                   Lynn, King & Schreffler
Farmers National Bank                          Attorneys at Law

David L. Cox                                   John B. Mason
President, Emclaire Financial Corp.            H.B. Beels & Sons, Inc.
President, Farmers National Bank
                                               Brian C. McCarrier
Bernadette H. Crooks                           President - Interstate Pipe and Supply
Retired Retailer
Crooks Clothing                                Elizabeth C. Smith
                                               Retired
George W. Freeman                              Former Owner-The Inn at Oakmont
Freeman's Tree Farm
                                               Director Emeritus
Rodney C. Heeter
Heeter Lumber, Co.                             Dr. Clinton R. Coulter
                                               Retired Medical Doctor
Robert L. Hunter
Hunter Truck Sales and Service                 The above listed persons are members of the Boards
Hunter Leasing                                 of Directors of both the Company and the Bank.


EXECUTIVE OFFICERS

Emclaire Financial Corp.                       Farmers National Bank

David L. Cox                                   David L. Cox
President and Chief Executive Officer          President and Chief Executive Officer

Ronald L. Larimore                             Ronald L. Larimore
Secretary                                      Vice President/Cashier and
                                               Chief Operations Officer
John J. Boczar, CPA
Treasurer                                      John J. Boczar, CPA
                                               Vice President and Chief Financial Officer

                                               Robert W. Foust
                                               Vice President and Branch Administrator
</TABLE>
<TABLE>
<CAPTION>
<S>                                <C>                                <C>
OTHER OFFICERS

Edith M. Beckwith                  Allan I. Johnson                   Fred S. Port
Manager - Eau Claire               Manager - Knox                     Manager - Clarion

Scott B. Daum                      James W. LeVier                    Joseph M. Sporer
Manager - Human Resources          Assistant Vice President           Assistant Vice President
                                   Compliance Officer                 Manager - Consumer Loans
Janice F. Dittman
Manager - Data Processing          Thomas E. McFadden                 Robert A. Vernick
                                   Assistant Vice President           Assistant Vice President
Cindy L. Elder                     Assistant Cashier                  Manager - Bon Aire
Assistant Vice President
Manager - Emlenton                 Troy J. Moore
                                   Acting Manager - East Brady

</TABLE>

<PAGE>


ANNUAL MEETING

The Annual Meeting of Shareholders  of Emclaire  Financial Corp. will be held at
the Farmers  National Bank Data Processing  Center,  708 Main Street,  Emlenton,
Pennsylvania, on Wednesday, May 20, 1998 at 7:00 p.m.

ADDITIONAL FINANCIAL INFORMATION

A copy of Emclaire Financial Corp.'s Annual Report on Form 10-KSB, as filed with
the Securities and Exchange Commission,  will be furnished, free of charge, upon
written  request  to  John  J.  Boczar,  Treasurer,   Drawer  D,  Emlenton,  PA,
16373-0046.

The  Annual  Report and other  Company  reports  are also  filed  electronically
through the Electronic Data Gathering,  Analysis, and Retrieval System ("EDGAR")
which performs  automated  collection,  validation,  indexing,  acceptance,  and
forwarding of  submissions  to the  Securities  and Exchange  Commission  and is
accessible     to    the     public     by     using     the     Internet     at
http://www.sec.gov/edgarhp.htm.

TRANSFER AGENT

Emclaire Financial Corp.
612 Main Street
P.O. Drawer D
Emlenton, PA 16373
(724) 867-2311

Emclaire  Financial Corp. common stock is quoted on the OTC Electronic  Bulletin
Board under the symbol "EMCF". The following companies act as market makers:

                           Hopper Soliday & Co., Inc.
                                1703 Oregon Pike
                               Lancaster, PA 17601
                                 (800) 646-8647

                            E. E. Powell & Co., Inc.
                                 1100 Gulf Tower
                              Pittsburgh, PA 15219
                                 (412) 391-4594

                           F. J. Morrissey & Co., Inc.
                         1700 Market Street - Suite 1420
                             Philadelphia, PA 19103
                                 (215) 563-8500

                                 Ryan Beck & Co.
                                 80 Main Street
                              West Orange, NJ 07052
                                 (201) 325-3200

                            BRANCH OFFICE LOCATIONS
<TABLE>
<CAPTION>
  <S>                         <C>                            <C>                        <C>
         Emlenton                     Eau Claire              Clarion - 2 Locations       Knox - 2 Locations
      612 Main Street          207 S. Washington Street       Sixth & Wood Streets          Rt. 338 South
    Emlenton, PA 16373           Eau Claire, PA 16030           Clarion, PA 16214           Knox, PA 16232
      (724) 867-2311                (724) 791-2591               (814) 226-7523             (814) 797-2200

                                                                     and                       and
        East Brady                      Butler
     323 Broad Street               Bon Aire Plaza                Clarion Mall           Main & State Streets
   East Brady, PA 16028         1101 North Main Street           I-80 and Rt. 68            Knox, PA 16232
      (724) 526-5793               Butler, PA 16003                Clarion, PA              (814) 797-1136
                                    (724) 283-4666               (814) 226-7488

</TABLE>