Balance Sheet

Presidents Message

TO OUR SHAREHOLDERS:

I am pleased to inform you that ES&L Bancorp, Inc. posted another year of record earnings during the fiscal year ending June 30, 2003. Your Company's net income amounted to $2,468,640, representing a 1.12% return on average assets and a 14.14% return on average equity.

ES&L, and our mortgage banking subsidiaries, experienced unprecedented loan origination volumes this past year, which contributed significantly to our profitability. Combined loan closings, across all product lines and subsidiaries, totaled $161 million - leading to a 6.8% increase in total assets and 16.5% increase in our loan servicing portfolio. Attaining this level of growth would not have been possible without the dedication, flexibility, and creativity exhibited by all of our staff members.

Last year, at this time, I highlighted some major challenges facing our institution. Our primary concern - the struggling local economy - brought fears of rising delinquencies and loan losses. By dedicating resources to work with troubled borrowers, we have minimized the impact on our delinquency ratio and non-performing loans. We must continue to be diligent in monitoring our asset quality, as unemployment and a sluggish economy continue to trouble our region. However, we feel our Bank is in a strong position to weather the storm, as we continue to provide for the financial needs of our community.

Funding our growth was an additional challenge facing our Bank during the past year. Our desire to limit our Federal Home Loan Bank borrowings prompted us to develop and utilize alternative funding sources. Our growth in this fiscal year was achieved through retail and wholesale deposits, as total borrowings declined during the period.

Record profits, strong growth, and our success in overcoming the sizable challenges mentioned above, are reflective of our solid performance this past year. These results are even more satisfying considering two additional unexpected obstacles faced during our 2003 fiscal year:

	Declining interest rates during the year led to a decreasing valuation of our mortgage servicing rights - the value placed on retaining the servicing component of loans sold in the secondary market. To account for the lower mortgage servicing values, we set aside $953,000 in additional impairment reserves during the year.
	During the 4th quarter of our fiscal year, we identified a problem commercial real estate loan that resulted in a charge against our allowance for possible loan losses of $1.0 million. Despite this charge, the year end balance of our allowance for possible loan losses was $2,537,380, more than $480,000 greater than the beginning of the fiscal year.

Having ended a difficult - but successful - year, we now look to the future. Although our Corporation will continue to be aggressive and agile, we also plan on dedicating the time necessary to ensure that we are well positioned for the long-term. The following initiatives have been, or will be, explored in order to regroup, focus, and prepare for the future:

	Our current staff has been stretched to full capacity due to the significant growth that has occurred at our institution. We must now expand our infrastructure, which will allow us to sustain our future growth and profitability.
	Over the years we have entered into a variety of business lines, both at the Bank and subsidiary level. We will dedicate the time necessary to ensure that all product offerings contribute to our bottom line. We have recently signed an agreement to provide merchant services to our retail business customers. This agreement will allow us to increase our revenues without the costs associated with running the program in house.
	Where necessary, we will reposition and market our products and services to make them more attractive to the communities we serve.
	The risks in our industry are substantial. By centralizing the risk management function, we will take an enterprise-wide view of all risks facing the Bank, in order to mitigate any potential impact on our institution.

Of course, our commitment to increasing customer satisfaction and shareholder value will continue to drive our actions. I'm proud to report the accomplishments detailed in this report and am confident that our employees and Directors will continue to meet the complex challenges of the future.

Thank you for your support.

William A. McKenzie President & CEO

	Consolidated Balance Sheet

For more detailed financial information, please visit the FDIC website at www.fdic.gov or the Office of Thrift Supervision website at www.ots.treas.gov.