SUMMARY

This summary highlights selected information in this proxy statement/prospectus and may not contain all of the information important to you. To understand the merger more fully, you should read this entire document carefully, including the annexes and the documents referred to in this proxy statement/prospectus. A list of the documents incorporated by reference appears under the caption “Where You Can Find More Information.”

The Companies

MainSource Financial Group, Inc.
201 North Broadway
Greensburg, Indiana 47240
(812) 663-0157

MainSource Financial Group is a community-focused, multi-bank, financial services holding company with assets of $1.9 billion. Through its three current banking subsidiaries, MainSource Bank, Greensburg, Indiana, MainSource Bank of Illinois, Kankakee, Illinois, and MainSource Bank—Crawfordsville, Crawfordsville, Indiana, it operates 60 offices in 27 Indiana counties and six offices in three Illinois counties. Through its non-banking subsidiaries, MainSource Insurance LLC, MainSource Title LLC, and MainSource Mortgage LLC, it provides various related financial services through its banking affiliates. MainSource’s common stock trades on the NASDAQ National Market under the symbol “MSFG.”

Peoples Ohio Financial Corporation
635 South Market Street
Troy, Ohio 45373
(937) 339-5000

Peoples Ohio Financial Corporation is based in west-central Ohio and is the parent company of Peoples Savings Bank of Troy (“Peoples Savings Bank”). Peoples Savings Bank, a state chartered savings and loan association, operates six offices in Miami and northern Montgomery counties in Ohio. It also provides full trust services through its trust department. Peoples Ohio Financial Corporation had $204.0 million in total assets and $25.3 million in shareholders’ equity as of December 31, 2005. There are currently 7,346,864 shares of Peoples Ohio common stock outstanding which are included in the OTC Bulletin Board System under the symbol “POHF.”

Special Meeting of Shareholders; Required Vote

The special meeting of Peoples Ohio shareholders is scheduled to be held at the Peoples Savings Bank Training Center, located at 14 Weston Road, Troy, Ohio, at 3:00 p.m., Eastern time, on May 31, 2006. At the Peoples Ohio special meeting, you will be asked to vote to approve the Merger Agreement. Only Peoples Ohio shareholders of record as of the close of business on April 21, 2006 are entitled to notice of, and to vote at, the Peoples Ohio special meeting and any adjournments or postponements of the Peoples Ohio special meeting.

Approval of the Merger Agreement requires the affirmative vote of holders of a majority of the issued and outstanding shares of Peoples Ohio common stock. As of the record date, there were 7,346,864 shares of Peoples Ohio common stock outstanding. The directors and executive officers of Peoples Ohio (and their affiliates), as a group, beneficially owned 1,864,069 shares of Peoples Ohio common stock, representing approximately 24.24% of the outstanding shares of Peoples Ohio common stock as of the record date. No approval by MainSource shareholders is required.

The Merger and the Merger Agreement

MainSource’s acquisition of Peoples Ohio is governed by the Merger Agreement. The Merger Agreement provides that, if all of the conditions are satisfied or waived, Peoples Ohio will be merged with and into MainSource, with MainSource surviving, and immediately thereafter Peoples Savings Bank will be merged with and into MainSource Bank—Ohio, an interim Ohio commercial bank and wholly-owned subsidiary of MainSource, with MainSource Bank—Ohio surviving. We encourage you to read the Merger Agreement, which is included as Annex A to this proxy statement/prospectus.

What Peoples Ohio Shareholders Will Receive in the Merger

At the effective time of the merger, 75% of the shares of common stock of Peoples Ohio that are issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive shares of MainSource common stock. The number of shares of MainSource common stock that will be issued for each Peoples Ohio share converted into MainSource common stock will be determined by dividing (A) $41,057,122 (subject to adjustment based on changes in Peoples Ohio’s shareholders’ equity) by (B) the number of outstanding shares of Peoples Ohio common stock, and then by (C) the average of the per share high and low sales prices of a share of MainSource common stock as quoted on the Nasdaq Stock Market during the 10 trading days preceding the fifth calendar day before the date the merger becomes effective. The remaining 25% of the shares of common stock of Peoples Ohio are being purchased by MainSource for cash.

If the merger is completed, shares of Peoples Ohio common stock that you own immediately before the completion of the merger will be converted into the right to receive shares of MainSource common stock and/or cash. For each share of Peoples Ohio common stock that you own, you will receive 0.303 shares of MainSource common stock (based on the April 21, 2006 closing price of $18.42 and subject to adjustment based on changes in the market price of MainSource common stock) or $5.59 in cash, subject to adjustment pursuant to the Merger Agreement.

Peoples Ohio shareholders will not receive fractional shares of MainSource common stock. Instead, you will receive a cash payment for any fractional shares in an amount equal to the product of (i) the fraction of a share of MainSource common stock to which you are entitled multiplied by (ii) the average of the per share high and low sales prices of a share of MainSource common stock as quoted on the Nasdaq Stock Market during the ten trading days preceding the fifth calendar day preceding the effective time of the merger.

Election Process

The Merger Agreement provides that a number as close as possible to 75% of the outstanding shares of Peoples Ohio must be converted into MainSource common stock, with the balance of the outstanding Peoples Ohio shares converted into cash. If the number of shares elected to be converted into MainSource common stock equals 75%, then:

· all shares for which a cash election has been made will be converted into the right to receive cash consideration; and

· all shares for which an election to receive MainSource common stock has been made and all shares for which no election has been made will be converted into the right to receive shares of MainSource common stock.

If the number of shares electing to receive MainSource common stock plus all non-election shares is less than 75%, then:

· the shares for which a cash election has been made will be eliminated and converted into elections to receive MainSource common stock by first eliminating and converting the blocks of shares for which a cash election has been made which cover the largest number of shares of Peoples Ohio common stock, and then eliminating and converting the blocks of shares for which a cash election has been made which cover the next largest number of shares and continuing this process until 75% of the total number of shares of Peoples Ohio common stock outstanding at the effective time will be converted into MainSource common stock.

If the number of shares for which an election has been made to receive MainSource common stock plus all non-election shares exceeds 75%, then:

· all shares for which a cash election has been made will be converted into the right to receive cash consideration;

· the shares for which no election has been made will be eliminated and converted into cash by first eliminating and converting blocks of shares for which no election has been made which cover the smallest number of shares of Peoples Ohio common stock and then eliminating and converting the blocks of shares for which no election has been made which cover the next smallest number of shares and continuing this process until either all shares for which no election has been made are converted into cash or 75% of the total number of shares of Peoples Ohio common stock outstanding at the effective time will be converted into MainSource common stock; and

· if, following the elimination and conversion of all shares for which no election has been made to cash, the number of shares electing to receive MainSource common stock still exceeds 75%, the number of shares for which an election to receive MainSource common stock has been made will be eliminated and converted to an election to receive cash in the same manner as the shares for which no election has been made, until 75% of the total number of shares of Peoples Ohio common stock outstanding at the effective time will be converted into MainSource common stock.

Should MainSource change the number of shares of MainSource common stock issued and outstanding prior to the effective time by way of a stock split, stock dividend, recapitalization or similar transaction with respect to the outstanding MainSource common stock, and the record date is prior to the effective time, the MainSource common stock consideration will be adjusted so the shareholders will receive, in the aggregate, a number of shares of MainSource common stock representing the same percentage of outstanding shares of MainSource common stock at the effective time as would have been represented by the number of shares of MainSource common stock the shareholders of Peoples Ohio would have received if any of the foregoing actions had not occurred.

A reduction in the percentage of Peoples Ohio shares for which an election to receive the cash consideration may be made, with a corresponding increase in the percentage of Peoples Ohio shares for which an election may be made, to receive MainSource common stock if necessary to allow MainSource’s tax counsel to deliver its opinion as to the qualification of the merger as a “reorganization” under Section 368(a) of the Internal Revenue Code. The risk that you will receive a portion of the merger consideration in a form that you did not elect could result in, among other things, tax consequences that differ from those that would have resulted had you received the form of consideration you had elected, including the recognition of taxable gain to the extent cash is received. Please see the section captioned “Material Federal Income Tax Consequences.”

Recommendation of Peoples Ohio Board of Directors

The Peoples Ohio board of directors approved the Merger Agreement and the proposed merger. The Peoples Ohio board believes that the Merger Agreement, including the holding company merger and subsidiary merger contemplated by the Merger Agreement, is advisable and fair to, and in the best interests of, Peoples Ohio and its shareholders, and therefore recommends that Peoples Ohio shareholders vote “FOR” the proposal to approve the Merger Agreement. In reaching its decision, the Peoples Ohio board of directors considered a number of factors, which are described in the section captioned “The Merger—Peoples Ohio’s Reasons for the Merger.” Because of the wide variety of factors considered, the Peoples Ohio board of directors did not believe it practicable, nor did it attempt, to quantify or otherwise assign relative weight to the specific factors it considered in reaching its decision.

Opinion of Peoples Ohio’s Financial Advisor

In connection with the merger, the Peoples Ohio board of directors received an oral and a written opinion, dated September 26, 2005, from Peoples Ohio’s financial advisor, Keefe, Bruyette & Woods, Inc. (“KBW”), to the effect that, as of the date of the opinion and based on and subject to the various considerations described in the opinion, the consideration to be paid to holders of Peoples Ohio common stock pursuant to the Merger Agreement was fair, from a financial point of view, to those holders. The full text of KBW’s written opinion, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by KBW in rendering its opinion, is attached to this document as Annex B. We encourage you to read the entire opinion carefully. The opinion of KBW is directed to the Peoples Ohio board of directors and does not constitute a recommendation to any Peoples Ohio shareholder as to how to vote at the Peoples Ohio special meeting, the form of consideration to be elected or any other matter relating to the proposed merger.

Reasons for the Merger

The Peoples Ohio board of directors determined that the Merger Agreement and the merger consideration were in the best interests of Peoples Ohio and its shareholders and recommends that Peoples Ohio shareholders vote in favor of the approval of the Merger Agreement and the transactions contemplated by the Merger Agreement.

In its deliberations and in making its determination, the Peoples Ohio board of directors considered many factors including, without limitation, the following:

· the business, earnings, operations, financial condition, management, prospects, capital levels and asset quality of both Peoples Ohio and MainSource;

· MainSource’s community banking orientation and its compatibility with Peoples Ohio;

· MainSource’s access to capital and managerial resources relative to that of Peoples Ohio;

· the premium represented by the value of the merger consideration over the current book value of Peoples Ohio common stock and recent trading prices for that stock;

· its desire to provide shareholders with the prospects for greater future appreciation on their investments in Peoples Ohio common stock than Peoples Ohio could achieve independently;

· the greater liquidity of MainSource common stock, which is traded on the NASDAQ National Market;

· the opinion delivered by KBW that the merger consideration is fair, from a financial standpoint, to the shareholders of Peoples Ohio;

· Peoples Ohio’s potential to better serve its customers and enhance its competitive position in the communities in which it operates due to MainSource’s more diverse financial products and services;

· the effect of the merger on Peoples Ohio and Peoples Savings Bank employees, customers and community; and

· MainSource’s long-term growth strategy.

MainSource’s board of directors concluded that the Merger Agreement is in the best interests of MainSource and its shareholders. In deciding to approve the Merger Agreement, MainSource’s board of directors considered a number of factors, including, without limitation, the following:

· management’s view that the acquisition of Peoples Ohio provides an attractive opportunity to expand into west central Ohio, which it considers a desirable market;

· Peoples Ohio’s community banking orientation and its compatibility with MainSource and its subsidiaries;

· a review of the demographic, economic and financial characteristics of the markets in which Peoples Ohio operates, including existing and potential competition and history of the market areas with respect to financial institutions;

· management’s review of the business, operations, earnings and financial condition, including capital levels and asset quality of Peoples Ohio and Peoples Savings Bank; and

· the likelihood of regulators approving the merger without undue conditions or delay.

Regulatory Approvals

Under the terms of the Merger Agreement, the merger cannot be completed until MainSource receives the necessary regulatory approval of each of the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Ohio Division of Financial Institutions. MainSource has filed the respective applications. As of the date of this proxy statement/prospectus, MainSource has received the approval of the Federal Reserve Board and the Federal Deposit Insurance Corporation but has not yet received the approval of the Ohio Division of Financial Institutions.

New MainSource Shares Will be Eligible for Trading on NASDAQ

The shares of MainSource common stock to be issued in the merger can be traded on the NASDAQ National Market.

Conditions to the Merger

The obligation of MainSource and Peoples Ohio to consummate the merger is subject to the satisfaction or waiver, on or before completion of the merger, of a number of conditions, including:

· approval of the Merger Agreement at the special meeting by at a majority of the issued and outstanding shares of Peoples Ohio common stock;

· approval of the transaction by the appropriate regulatory authorities;

· the representations and warranties made by the parties in the Merger Agreement must be materially true and correct as of the effective date of the merger or as otherwise required in the Merger Agreement;

· the covenants made by the parties must have been fulfilled or complied with in all material respects from the date of the Merger Agreement through and as of the effective date;

· the parties must have received the respective closing deliveries of the other parties to the Merger Agreement;

· the MainSource registration statement (of which this proxy statement/prospectus is a part) relating to the issuance of MainSource shares pursuant to the Merger Agreement must have been declared effective by the SEC, no stop order can have been issued or threatened and the shares of MainSource common stock to be issued pursuant to the Merger Agreement must be eligible to be traded on the NASDAQ National Market;

· Peoples Ohio’s investment banker must have issued its fairness opinion stating that the merger consideration relating to the merger of Peoples Ohio with and into MainSource is fair to the shareholders of Peoples Ohio from a financial point of view;

· Ronald B. Scott must have entered into his employment agreement with MainSource Bank—Ohio;

· MainSource must have received the financing necessary to pay the cash portion of the total purchase price on such terms as are acceptable to MainSource and enable MainSource to satisfy the capital adequacy guidelines and requirements of the Federal Reserve and any other applicable federal or state regulator or agency as those guidelines are applied to MainSource;

· MainSource and Peoples Ohio must have received an opinion of Bose McKinney & Evans LLP, counsel to MainSource, dated the effective date, to the effect that the merger of Peoples Ohio with and into MainSource constitutes a “reorganization” within the meaning of Section 368 of the Internal Revenue Code;

· MainSource must have received an opinion of Squire Sanders & Dempsey L.L.P., counsel to Peoples Ohio, dated the effective time;

· the MainSource average stock price must be no lower than $14.00 and no higher than $24.00;

· MainSource must have received a letter of tax advice, in a form satisfactory to MainSource, from Peoples Ohio’s outside, independent registered public accounting firm to the effect that any amounts that are paid by Peoples Ohio or Peoples Savings Bank before the effective time of the merger, or required under Peoples Ohio’s employee benefit plans or the Merger Agreement to be paid at or after the effective time, to persons who are “disqualified individuals” under Section 280G of the Internal Revenue Code with respect to Peoples Ohio, Peoples Savings Bank or their successors, and that otherwise should be allowable as deductions for federal income tax purposes, should not be disallowed as deductions for such purposes by reason of Section 280G of the Internal Revenue Code; and

· payments to certain Peoples Ohio officers and employees required to comply with or terminate their employment or severance agreements, and required by the Merger Agreement to be paid, must have been made.

Termination

Subject to conditions and circumstances described in the Merger Agreement, either MainSource or Peoples Ohio may terminate the Merger Agreement, in certain circumstances, including without limitation, if the merger has not been consummated by June 30, 2006, if the Peoples Ohio shareholders do not approve the Merger Agreement at the Peoples Ohio special meeting, or the respective boards of directors of MainSource and Peoples Ohio mutually agree to terminate the Merger Agreement. In addition each of MainSource and Peoples Ohio may terminate the Merger Agreement at any time prior to the effective time upon certain conditions as described in more detail below in “The Merger Agreement—Termination.”

Termination Fee

If MainSource terminates the Merger Agreement because Peoples Ohio breaches its representations, warranties, or covenants resulting in a material adverse effect (as defined in the Merger Agreement) and MainSource is not in breach of the Merger Agreement, or because Peoples Ohio’s board of directors fails to recommend approval of the Merger Agreement to its shareholders, Peoples Ohio must pay MainSource a $1,000,000 termination fee, plus $200,000 in expenses. If Peoples Ohio terminates the Merger Agreement because MainSource breaches its representations, warranties, or covenants resulting in a material adverse effect and Peoples Ohio is not in breach of the Merger Agreement, MainSource must pay Peoples Ohio a $1,000,000 termination fee, plus $200,000 in expenses.

Treatment of Options to Acquire Shares of Peoples Ohio Common Stock

The Merger Agreement provides that each option to acquire shares of Peoples Ohio common stock held by Ronald B. Scott, whether or not vested, will be amended to be an option to acquire shares of MainSource common stock, with the exercise price and number of shares subject to the option adjusted based on the exchange ratio used in connection with the merger. Currently, Mr. Scott holds options to purchase 265,150 shares of Peoples Ohio common stock that will be so amended. All of such options will become fully vested as a result of a “change-in-control” provision contained in Peoples Ohio’s option plan.

Pursuant to the Merger Agreement, each other outstanding option to purchase the common stock of Peoples Ohio will be converted into the right to receive from MainSource at the effective time an amount equal to the excess of the cash consideration over the per share exercise price for each share of Peoples Ohio common stock. Currently, the executive officers and outside directors of Peoples Ohio (other than Mr. Scott) hold options to purchase 185,064 shares of Peoples Ohio common stock, which would be cashed out for approximately $441,000. The excess of the cash consideration over the per share exercise price for each share of common stock subject to such stock options will constitute taxable ordinary income to the option holder.

Interests of Officers and Directors in the Mergers That are Different From Yours

You should be aware that some of Peoples Ohio’s directors and officers may have interests in the merger that are different from, or in addition to, their interests as shareholders. Peoples Ohio’s board of directors was aware of these interests and took them into account in approving the merger. For example, the Merger Agreement obligates MainSource to enter into an employment agreement with Ronald B. Scott and to amend his outstanding options to make them exercisable for MainSource common stock. In addition, stock options granted to certain officers and directors of Peoples Ohio will vest in connection with the merger, and certain executive officers of Peoples Ohio will receive change-in-control or other severance payments from Peoples Ohio in connection with the merger.

MainSource is also obligated under the Merger Agreement to provide continuing indemnification to the officers and directors of Peoples Ohio and Peoples Savings Bank as provided in their respective articles of incorporation or by-laws (or comparable organization documents), and to provide such directors and officers with directors’ and officers’ liability insurance for a period of three years, subject to certain conditions set forth in the Merger Agreement.

Accounting Treatment of the Merger

The merger will be accounted for as a purchase transaction in accordance with United States generally accepted accounting principles.

Certain Differences in Shareholder Rights

When the merger is completed, Peoples Ohio shareholders, whose rights are governed by Peoples Ohio’s articles of incorporation and code of regulations and Ohio law, may become MainSource shareholders, and their rights will then be governed by MainSource’s articles of incorporation and by-laws and Indiana law.

Tax Consequences of the Merger

MainSource and Peoples Ohio expect the merger to qualify as a “reorganization” for U.S. federal income tax purposes. If the merger qualifies as a reorganization, then, in general, for U.S. federal income tax purposes:

· a Peoples Ohio shareholder exchanging all of his or her shares of Peoples Ohio common stock solely for cash in the merger will recognize gain or loss in an amount equal to the difference between the amount of cash received and the Peoples Ohio shareholder’s aggregate tax basis in the shares of Peoples Ohio common stock surrendered for cash;

· a Peoples Ohio shareholder exchanging all of his or her shares of Peoples Ohio common stock solely for MainSource common stock in the merger will not recognize any gain or loss (except with respect to cash received instead of fractional shares of MainSource common stock);

· a Peoples Ohio shareholder exchanging all of his or her shares of Peoples Ohio common stock for a combination of MainSource common stock and cash in the merger will recognize gain (but not loss) in an amount equal to the lesser of (i) the amount of cash received in the merger and (ii) the excess, if any, of (a) the sum of the amount of cash and the fair market value of the MainSource common stock received in the merger over (b) the Peoples Ohio shareholder’s aggregate tax basis in its Peoples Ohio common stock surrendered in exchange for MainSource common stock and cash; and

· Peoples Ohio shareholders will recognize gain or loss, if any, on any fractional shares of MainSource common stock for which cash is received equal to the difference between the amount of cash received and the Peoples Ohio shareholder’s allocable tax basis in the fractional shares.

To review the tax consequences of the merger to Peoples Ohio shareholders in greater detail, please see the section “Material Federal Income Tax Consequences.”

Resales of MainSource Common Stock

Shares of MainSource common stock which Peoples Ohio’s shareholders receive in the merger will be freely transferable by the holders, except for those shares held by holders who may be “affiliates” of Peoples Ohio. Affiliates generally include directors, executive officers and holders of 10% or more of Peoples Ohio common stock. Peoples Ohio has agreed to provide to MainSource the written agreement of each person who may be deemed its “affiliate” that such person will not dispose of any shares of MainSource common stock he or she receives in the merger, except in compliance with the Securities Act of 1933.

SELECTED CONSOLIDATED FINANCIAL DATA OF MAINSOURCE

The selected consolidated financial data presented below for each of the years in the five-year period ended December 31, 2005, are derived from MainSource’s audited historical financial statements. Per share amounts have been adjusted to reflect all completed stock dividends and splits. This information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the notes thereto incorporated by reference in this proxy statement/prospectus. Results for past periods are not necessarily indicative of results that may be expected for any future period.

	At and Year Ended December 31,
	2005			2004			2003			2002			2001
	(Dollar amounts in thousands except per share data)
Results of Operations:
Net interest income	$	53,648		$	50,002		$	44,232		$	45,050		$	41,768
Provision for loan losses	1,040			600			1,325			2,995			2,136
Noninterest income	17,332			19,544			19,443			14,379			11,486
Noninterest expense	48,576			45,880			40,448			35,610			34,311
Income before income tax	21,364			23,066			21,902			20,824			16,807
Income tax	5,172			6,273			6,597			6,813			5,630
Net income	16,192			16,793			15,305			14,011			11,177
Dividends paid on common stock	6,514			5,421			4,873			4,485			4,121
Per Common Share:*
Earnings per share (basic)	$	1,29		$	1.48		$	1.37		$	1.24		$	0.99
Earnings per share (diluted)	1.29			1.48			1.37			1.24			0.99
Dividends paid**	0.520			0.476			0.435			0.397			0.365
Book value—end of period	11.96			10.68			9.47			8.88			7.78
Market price—end of period	17.85			23.88			19.47			14.52			10.10
At Period End:
Total assets	$	1,645,605		$	1,549,379		$	1,442,729		$	1,251,760		$	1,178,392
Investment securities	450,814			428,686			425,542			351,143			276,304
Loans, excluding held for sale	957,995			929,005			855,471			740,167			760,785
Allowance for loan losses	10,441			11,698			11,509			9,517			8,894
Total deposits	1,352,697			1,226,367			1,191,310			1,034,307			1,014,687
Notes payable	—			9,100			12,500			2,400			4,062
Federal Home Loan Bank advances	41,547			90,981			62,751			50,235			20,346
Subordinated debentures	29,898			29,898			29,898			30,425			22,425
Shareholders’ equity	161,069			123,320			105,424			99,771			87,872
Financial Ratios:
Return on average assets	1.04		%	1.13		%	1.14		%	1.16		%	0.93		%
Return on average common shareholders’ equity	11.27			14.70			15.07			14.90			13.24
Allowance for loan losses to total loans (period end) (excluding held for sale)	1.09			1.26			1.35			1.29			1.17
Shareholders’ equity to total assets (period end)	9.79			7.96			7.31			7.97			7.46
Average equity to average total assets	9.18			7.67			7.57			7.77			7.04
Dividend payout ratio	40.23			32.28			31.84			32.01			36.87

* Adjusted for stock splits and dividends

** Dividends paid by MainSource Financial Group without restatement for pooling of interests

SELECTED FINANCIAL DATA OF PEOPLES OHIO

The selected consolidated financial data presented below as of and for the six months ended December 31, 2005 and 2004 are derived from Peoples Ohio’s unaudited financial statements, and the data for each of the years in the five-year period ended June 30, 2005, are derived from Peoples Ohio’s audited historical financial statements. This information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the notes thereto appearing elsewhere in this proxy statement/prospectus. Results for past periods are not necessarily indicative of results that may be expected for any future period.

	Six Months Ended December 31,							At and Year Ended June 30,
	2005				2004			2005			2004			2003			2002			2001
	(Unaudited)
	(Dollar amounts in thousands except per share data)
Results of Operations:
Net interest income		$	3,696		$	3,426		$	7,134		$	6,951		$	8,054		$	8,367		$	6,946
Provision for loan losses		60			60			183			330			140			138			—
Noninterest income		1,171			1,037			2,072			2,174			1,693			1,561			1,485
Noninterest expense		3,415			3,181			6,405			6,420			5,723			5,707			4,737
Income before income tax		1,452			1,281			2,618			2,375			3,884			4,083			3,695
Income tax		462			419			828			744			1,339			1,407			1,273
Net income		990			862			1,790			1,631			2,545			2,675			2,421
Dividends paid on common stock		513			472			944			880			680			484			223
Per Common Share:
Earnings per share (basic)		0.14			0.12			0.25			0.22			0.34			0.36			0.33
Earnings per share (diluted)		0.13			0.12			0.24			0.22			0.33			0.35			0.32
Dividends paid		0.07			0.065			0.13			0.12			0.09			0.065			0.03
Book value—end of period		3.45			3.37			3.42			3.34			3.27			3.11			2.82
Market price—end of period		5.35			4.08			4.10			4.16			4.20			3.35			3.00
At Period End:
Total assets		$	204,042		$	188,560		199,881			193,196			207,349			219,922			214,841
Investment securities		4,157			5,472			4,422			16,242			17,467			1,121			1,484
Loans, excluding held for sale		179,481			162,444			171,912			151,783			161,471			202,598			198,326
Allowance for loan losses		785			838			725			1,048			862			882			843
Total deposits		119,108			109,237			126,520			114,223			117,629			120,447			108,398
Federal Home Loan Bank advances		56,195			52,621			46,123			53,295			63,329			74,174			83,522
Shareholders’ equity		25,978			24,942			25,425			24,857			24,981			23,575			21,383
Financial Ratios:
Return on average assets		0.98		%	0.90		%	0.92		%	0.82		%	1.16		%	1.23		%	1.14		%
Return on average common shareholders’ equity		7.90			7.09			7.30			6.57			10.07			11.84			11.87
Allowance for loan losses to total loans (period end)		0.42			0.49			0.41			0.69			0.52			0.42			0.41
Shareholders’ equity to total assets (period end)		12.41			12.99			12.47			12.63			11.74			10.51			9.78
Average equity to average total assets		12.44			12.80			12.60			12.20			11.49			10.38			9.64
Dividend payout ratio		51.82			54.76			52.00			54.55			26.47			18.06			9.09

Unaudited Pro Forma Condensed Combined Balance Sheet
December 31, 2005
(Dollars in thousands)

													Pro Forma				Union															Pro Forma
	MainSource				Peoples Ohio				Adjustments				Combined				Community				Adjustments				HFS			Adjustments				Combined
Cash and cash equivalents		$	86,415			$	5,904			$	(11,107	)A		$	91,212			$	13,910			$	(26,967	)A	$	13,855			$	(17,484	)A		$	104,526
										10,000		D										15,000		D					15,000		D
Securities		450,814				4,157				—				454,971				3,090				—			25,936				—				483,997
Loans		960,561				179,481				(3,957		)F		1,136,085				221,521				(1,804		)F	183,957				(1,200		)F		1,538,559
Allowance for loan losses		(10,441		)		(785		)						(11,226		)		(1,140		)					(1,363		)		—				(13,729		)
Restricted stock		10,940				5,890				—				16,830				3,799				—			4,595				—				25,224
Premises and equipment		27,863				3,881				—				31,744				4,008				—			4,545				—				40,297
Goodwill		51,301				—				17,388		A		68,689				2,393				27,070		A	—				17,908		A		113,667
						—				—												(2,393		)
Purchased intangible assets		9,274				—				3,775		E		13,049				239				3,200		E	—				2,662		E		18,911
						—				—												(239		)
Cash surrender value of life insurance		24,467				4,447				—				28,914				7,186				—			2,369				—				38,469
Other assets		34,411				1,067				(75		)C		35,403				5,090				(432		)C	2,066				601		C		42,728
Total		$	1,645,605			$	204,042			$	16,024			$	1,865,671			$	260,096			$	13,435		$	235,960			$	17,487			$	2,392,649
Noninterest bearing deposits		$	161,568			$	11,675			$	—			173,243				$	3,733			$	—		$	14,366			$	—			191,342
Interest bearing deposits		1,191,129				107,433				(108		)F		1,298,454				169,099				(266		)F	129,815				(507		)F		1,596,595
Short-term borrowings		26,516				—				—				26,516				—				—			—				—				26,516
Federal Home Loan Bank advances		41,547				56,195				(260		)F		97,482				52,158				583		F	68,257				3,471		F		221,951
Subordinated debentures		29,898				—				—				29,898				—				—			—				—				29,898
Line of credit		—				—				10,000		D		10,000				—				15,000		D	—				15,000		D		40,000
Other liabilities		33,878				2,761				1,627		B		38,266				2,015				2,113		B	2,832				1,484		B		46,710
Total liabilities		1,484,536				178,064				11,259				1,673,859				227,005				17,430			215,270				19,448				2,153,012
Common stock		6,881				7,462				(7,462		)A		7,714				20,930				(20,930		)A	1,866				(1,866		)A		9,010
		—								833		A										788		A	—				508		A
Treasury stock		(4,835		)		(1,064		)		1,064		A		(4,835		)		—				—		A	—				—				(4,835		)
Additional paid in capital		105,089				78				(78		)A		134,999				—				—		A	859				(859		)A		181,528
		—								29,910		A										28,308		A	—				18,221		A
Retained earnings		57,067				18,890				(18,890		)A		57,067				13,596				(13,596		)A	18,334				(18,334		)A		57,067
Accumulated other comprehensive income		(3,133		)		(41		)		41		A		(3,133		)		(36		)		36		A	(369		)		369		A		(3,133		)
Other equity components		—				653				(653		)A		—				(1,399		)		1,399		G	—				—				—
Total shareholders' equity		161,069				25,978				4,765				191,812				33,091				(3,995		)	20,690				(1,961		)		239,637
Total liabilities & shareholders' equity		$	1,645,605			$	204,042			$	16,024			$	1,865,671			$	260,096			$	13,435		$	235,960			$	17,487			$	2,392,649

FOOTNOTES

A Represents the impact of the purchase of the outstanding stock of each entity including the elimination of the targets’ equity.

FOOTNOTES

A (Continued from previous page)

The purchase price allocation for Peoples Ohio is summarized as follows:

Common stock	30,793
Cash to holders of Peoples Ohio common stock	10,264
Cash to holders of Peoples Ohio stock options	693
Offering Costs	(50	)
Acquisition expenses	150
Total purchase price	41,850
Allocated to:
Historical book value of Peoples Ohio’s assets and liabilities	25,978
Adjustments:
Accrual of remaining professional fees	(370	)
Record additional liability related to termination of defined benefit plan	(700	)
Accrual of additional compensable vacation and sick days	(56	)
Accrual of change-in-control payments to certain Peoples Ohio employees	(1,339	)
Tax benefit on above adjustments (excluding non-deductible professional fees)	838
Adjusted book value of Peoples Ohio’s assets and liabilities	24,351
To adjust Peoples Ohio assets and liabilities to fair value:
Loans	(3,957	)
Deposits	108
Borrowings	260
Customer list intangible	500
Core deposit and customer relationship intangible	3,275
Deferred taxes	(74	)
Total allocation of purchase price	24,462
Excess of purchase price over allocation to identifiable assets and liabilities	17,388

The purchase price allocation for Union Community is summarized as follows:

Common stock	29,146
Cash to holders of Union Community common stock	23,847
Cash to holders of Union Community stock options	2,970
Acquisition expenses	150
Offering costs	(50	)
Total purchase price	56,063
Allocated to:
Historical book value of Union Community’s assets and liabilities	33,091
Adjustments:
Accrual of remaining professional fees	(485	)
Accrual of fee for termination of data processing contract	(1,842	)
Record additional liability related to termination of defined benefit plan	(23	)
Accrual of change-in-control payments to certain Union Community employees	(849	)
Write-off Union Community’s goodwill	(2,393	)
Write-off Union Community’s core deposit intangible	(239	)
Tax benefit on above adjustments (excluding non-deductible professional fees)	1,086
Adjusted book value of Union Community’s assets and liabilities	28,346
To adjust Union Community assets and liabilities to fair value:
Loans	(1,804	)
Deposits	266
Borrowings	(583	)
Core deposit and customer relationship intangible	3,200
Deferred taxes	(432	)
Total allocation of purchase price	28,993
Excess of purchase price over allocation to identifiable assets and liabilities	27,070

FOOTNOTES

A (Continued from previous page)

The purchase price allocation for HFS is summarized as follows:

Common stock	18,779
Cash to holders of HFS common stock	17,334
Offering Costs	(50	)
Acquisition expenses	150
Total purchase price	36,213
Allocated to:
Historical book value of HFS’s assets and liabilities	20,690
Adjustments:
Accrual of remaining professional fees	(316	)
Accrual of fee for termination of data processing contract	(1,200	)
Accrual of additional compensable vacation and sick days	(150	)
Accrual of change-in-control payments to certain HFS employees	(596	)
Tax benefit on above adjustments (excluding non-deductible professional fees)	778
Adjusted book value of HFS’s assets and liabilities	19,206
To adjust HFS assets and liabilities to fair value:
Loans	(1,200	)
Deposits	507
Borrowings	(3,471	)
Core deposit and customer relationship intangible	2,662
Deferred taxes	601
Total allocation of purchase price	18,305
Excess of purchase price over allocation to identifiable assets and liabilities	17,908

B Represents certain adjustments (and the related tax liability) to be made prior to the closing of each transaction per the merger agreement as detailed in Footnote A. For the Peoples Ohio transaction, these adjustments are detailed on pages 28-29 of this proxy statement/prospectus.

C To record deferred taxes on purchase accounting adjustments at an estimated tax rate of 40%.

D Represents short-term borrowings to fund the cash portion of the consideration paid to targets’ shareholders. It is anticipated that targets will have excess shareholders’ equity at the time of closing and MainSource anticipates using all or a portion of such equity to immediately reduce the borrowings on its line of credit. Therefore, for purposes of these pro forma financial statements, the interest expense related to the line of credit has been ignored as it is not deemed material.

E Represents the estimated value of the core deposit, customer relationship and/or customer list intangible recorded in each transaction. For purposes of these pro forma financial statements, these intangibles will be amortized using an accelerated method over a 10-year life.

F To adjust interest-earning assets and interest-bearing liabilities of acquisition targets to estimated fair value.

G Amount represents unearned/unvested shares held by Union Community’s ESOP and Recognition and Retention Plan. With the termination of the ESOP, the excess of the fair value over the outstanding debt will be allocated to the participants and treated as compensation expense. Also, at the time of closing of the merger, unvested RRP shares vested and expense was recognized on any unearned shares. Both of these items are non-recurring items directly attributable to the closing of the transaction and are not expected to have a continuing impact on MainSource and are therefore not included in the pro formas.

Unaudited Pro Forma Condensed Combined Statement of Income
For the Twelve Months Ended December 31, 2005
(Dollars in thousands except per share data)

								Pro Forma	Union						Pro Forma
	MainSource	Madison	Adjustments		Peoples Ohio	Adjustments		Combined	Community	Adjustments		HFS	Adjustments		Combined
Interest income	$ 80,475	$ 4,495	$ —	F	$ 11,596	$ 565	A	$ 97,131	$ 14,286	$ 479	A	$ 12,855	$ 300	A,G	$ 125,051
Interest expense	26,827	2,229	(475	)B	4,191	173	B	32,945	7,141	$ (159	)B	6,727	(988	)B	45,666
Net interest income	53,648	2,266	475		7,405	392		64,186	7,145	638		6,128	1,288		79,385
Provision for loan losses	1,040	—	—		183	—		1,223	456	—		255	—		1,934
Net interest income after provision for loan losses	52,608	2,266	475		7,222	392		62,963	6,689	638		5,873	1,288		77,451
Non-interest income	17,332	915	—		2,206	—		20,453	747	—		1,467	—		22,667
Non-interest expense	48,576	2,380	375	C	6,639	453	C	58,423	6,982	304	C	5,198	320	C	71,227
Income before income tax	21,364	801	100		2,789	(61	)	24,993	454	334		2,142	968		28,891
Income tax	5,172	320	40	D	871	(24	)D	6,379	164	134	D	796	387	D	7,860
Net income	$ 16,192	$ 481	$ 60		$ 1,918	$ (37	)	$ 18,614	$ 290	$ 200		$ 1,346	$ 581		$ 21,031
Basic earnings per share	$ 1.29							$ 1.25							$ 1.21
Diluted earnings per share	1.29							1.25							1.21
Weighted average shares outstanding(E)
Basic	12,549,964		618,545			1,666,279		14,834,788		1,577,169			1,016,167		17,428,124
Diluted	12,563,460		618,545			1,666,279		14,848,284		1,577,169			1,016,167		17,441,620

FOOTNOTES

A To record amortization/accretion of the fair value adjustment of loans using a method that approximates the effective interest method.

B To record amortization/accretion of the fair value adjustment of deposits and borrowings.

C To record amortization of the core deposit, customer relationship and/or customer list intangibles using an accelerated method over 10 years. For Union Community, the amount is net of the elimination of the $80 of core deposit intangible amortization recorded in the period.

D To record the impact of taxes at 40%.

E Share amounts include the number of shares expected to be issued for each transaction. The number of shares issued will vary depending on the stock price of MainSource at the time of closing. For purposes of this presentation, a stock price of $18.48 was used for MainSource, which represents the average of the ten days’ closing prices ending with March 10, 2006.

F Madison was acquired on August 26, 2005 and operating results in the December 31, 2005 Form 10-K include Madison from that date forward. Pro forma amounts for Madison reflect estimated amounts for the period from January 1-August 25, 2005. Prior to the merger with MainSource Bank, Madison was a subsidiary of National City Corporation. Investable assets of approximately $130 million were held in an intercompany cash account with National City which earned a minimal amount of interest income. Had this entity been merged into MainSource for the full period above, interest income would have been substantially higher as excess funds would have been invested in higher-yielding investment securities.

G Adjustment to interest income at HFS also includes the estimated accretion related to the purchase accounting adjustments for investment securities. Fair value of investment securities at Union Community and Peoples Ohio approximates book value.

RISK FACTORS

In addition to the other information included in this proxy statement/prospectus, you should consider carefully the risk factors described below in deciding how to vote. You should keep these risk factors in mind when you read forward-looking statements in this document and in the documents incorporated by reference into this document. Please refer to the section of this proxy statement/prospectus titled “Caution About Forward-Looking Statements.”

RISKS RELATED TO THE MERGER TRANSACTION

You may not receive the form of merger consideration that you elect.

The Merger Agreement provides that in the aggregate shares of MainSource common stock must be issued for a number as close as possible to 75% of the outstanding shares of Peoples Ohio common stock. Although Peoples Ohio shareholders will have the opportunity to elect the form of merger consideration they prefer to receive, the Merger Agreement provides for a proration of the merger consideration among certain Peoples Ohio shareholders in the event the Peoples Ohio shareholders collectively elect to receive MainSource common stock for more or less than 75% of the outstanding shares of Peoples Ohio common stock.

If you are a Peoples Ohio shareholder, depending on which form of merger consideration you elect to receive and which form of merger consideration other Peoples Ohio shareholders elect to receive, your election may be subject to proration and, therefore, you may not receive all or a portion of the merger consideration in the form you elect. This may result in adverse tax consequences to you. You will not know which form of merger consideration you will receive until after we complete the merger.

You will not know the closing date value of the shares of MainSource common stock at the time that you make your election.

In the merger, Peoples Ohio shareholders may receive, at their election and subject to proration and adjustment as described in this proxy statement/prospectus, shares of MainSource common stock for each share of Peoples Ohio common stock that they own. MainSource does not know the number of shares of MainSource common stock to be issued for each share of Peoples Ohio common stock or what the per share market price of its common stock will be at the time of the closing. As a result, you will not know the exact share exchange ratio or the value of the shares of MainSource common stock at the time you must make your election. The value of MainSource common stock on the closing date of the merger may be greater or less than the market price of MainSource common stock on the record date, the date of this proxy statement/prospectus, the date of the Peoples Ohio special meeting or the date you submit your form of election. Please see the section captioned “The Merger—Structure of the Merger” in this proxy statement/prospectus for further discussion of the consideration to be paid to Peoples Ohio shareholders by MainSource in the merger.

Unanticipated costs relating to the merger could reduce MainSource’s future earnings per share.

MainSource believes it has reasonably estimated the likely costs of integrating the operations of Peoples Ohio into MainSource and the incremental costs of operating Peoples Ohio as a part of the MainSource family. However, it is possible that unexpected transaction costs such as taxes, fees or professional expenses or unexpected future operating expenses, such as increased personnel costs or increased taxes, as well as other types of unanticipated adverse developments, could have a material adverse effect on the results of operations and financial condition of MainSource after the merger. If unexpected costs are incurred, the merger could have a dilutive effect on MainSource’s earnings per share. In other words, if the merger is completed and MainSource incurs such unexpected costs and expenses as a

result of the merger, MainSource believes that the earnings per share of MainSource common stock could be less than they would have been if the merger had not been completed.

MainSource may be unable to successfully integrate Peoples Savings Bank’s operations and the operations of the other banks it is acquiring and retain employees of such banks.

The merger involves the integration of Peoples Savings Bank as a MainSource subsidiary bank. MainSource is also acquiring other banks. The difficulties of integrating the operations of Peoples Savings Bank and such other banks with MainSource and its other subsidiary banks include:

· coordinating geographically separated organizations;

· integrating personnel with diverse business backgrounds;

· combining different corporate cultures; and

· retaining key employees.

The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of one or more of MainSource, its subsidiary banks and Peoples Savings Bank and the other banks MainSource is acquiring and the loss of key personnel. The integration of Peoples Savings Bank and such other banks as MainSource subsidiary banks will require the experience and expertise of certain key employees of Peoples Savings Bank and such other banks who are expected to be retained by MainSource. We cannot be sure, however, that MainSource will be successful in retaining these employees for the time period necessary to successfully integrate Peoples Savings Bank’s and such other banks’ operations as subsidiary banks of MainSource. The diversion of management’s attention and any delays or difficulties encountered in connection with these mergers, along with the integration of Peoples Savings Bank and such other banks as MainSource subsidiary banks, could have an adverse effect on the business and results of operation of MainSource.

If the merger is not completed, Peoples Ohio will have incurred substantial expenses without realizing the expected benefits.

Peoples Ohio has incurred substantial expenses in connection with the transactions described in this proxy statement/prospectus. The completion of the merger depends on the satisfaction of several conditions. We cannot guarantee that these conditions will be met. Peoples Ohio expects to incur approximately $175,000 in merger related expenses, which include legal, accounting and financial advisory expenses and which excludes the investment banker’s commission on the sale and any termination fees, if applicable. These expenses could have a material adverse impact on the financial condition of Peoples Ohio because it would not have realized the expected benefits of the merger. There can be no assurance that the merger will be completed.

The termination fee and the restrictions on solicitation contained in the Merger Agreement may discourage other companies from trying to acquire Peoples Ohio.

Until the completion of the merger, with some exceptions, Peoples Ohio is prohibited from soliciting, initiating, encouraging or participating in any discussion of or otherwise considering any inquiries or proposals that may lead to an acquisition proposal, such as a merger or other business combination transaction, with any person other than MainSource. In addition, Peoples Ohio has agreed to pay a termination fee and expenses of $1.2 million to MainSource if the Peoples Ohio board of directors does not recommend approval of the Merger Agreement to the Peoples Ohio shareholders. These provisions could discourage other companies from trying to acquire Peoples Ohio even though such other companies might be willing to offer greater value to Peoples Ohio’s shareholders than MainSource has offered in the

Merger Agreement. The payment of the termination fee also could have a material adverse effect on Peoples Ohio’s financial condition.

Certain of Peoples Ohio’s officers and directors have interests that are different from, or in addition to, interests of Peoples Ohio’s shareholders generally.

Certain of Peoples Ohio’s officers and directors have interests in the merger that are in addition to, or different from, the interests of Peoples Ohio’s shareholders. Peoples Ohio’s board was aware of these conflicts of interest when it approved the Merger Agreement. These interests include:

· the accelerated vesting of certain stock options as a result of the consummation of the merger;

· the payments payable to various officers and employees pursuant to their employment or severance agreements with Peoples Savings Bank as a result of the consummation of the merger;

· the employment agreement to be entered into with MainSource Bank - Ohio by Ronald B. Scott and the amendment of Mr. Scott’s outstanding Peoples Ohio stock options so that they are exercisable after the merger for MainSource stock; and

· the continuation of indemnification and insurance coverage for acts and omissions in their capacities as Peoples Ohio and Peoples Savings Bank officers and directors.

For a more detailed discussion of these interests, see “Interests of Certain Directors and Executive Officers of Peoples Ohio in the Merger.”

The fairness opinion obtained by Peoples Ohio will not reflect changes in the relative values of MainSource and Peoples Ohio between the time the opinion was obtained and the effective time of the merger.

The fairness opinion of KBW is dated as of September 26, 2005. Peoples Ohio does not intend to obtain any further update of the KBW fairness opinion. Changes in the operations and prospects of MainSource and Peoples Ohio, general market and economic conditions and other factors which are both within and outside of the control of MainSource and Peoples Ohio, on which the opinion of KBW is based, may alter the relative value of the companies. Therefore, the KBW opinion does not address the fairness of the merger consideration at the time the merger will be completed.

The merger may fail to qualify as a reorganization for federal tax purposes, resulting in your recognition of taxable gain or loss in respect of your Peoples Ohio shares.

Peoples Ohio intends the merger to qualify as a reorganization (or part of a reorganization) within the meaning of Section 368(a) of the Internal Revenue Code. Although the Internal Revenue Service (“IRS”) will not provide a ruling on the matter, MainSource and Peoples Ohio will, as a condition to closing, obtain an opinion from MainSource’s legal counsel that the merger will constitute a reorganization (or part of a reorganization) for federal tax purposes. This opinion does not bind the IRS or prevent the IRS from adopting a contrary position. If the merger fails to qualify as a reorganization (or part of a reorganization), you generally would recognize gain or loss on each share of Peoples Ohio common stock surrendered in an amount equal to the difference between your adjusted tax basis in that share and the sum of the amount of cash and/or the fair market value of the MainSource common stock received in exchange for that share upon completion of the merger.

RISKS RELATED TO MAINSOURCE

Unanticipated costs or difficulties in connection with other pending acquisitions could have an adverse effect on MainSource’s business.

In addition to this merger, MainSource is currently in the process of acquiring other financial institutions. Each of these acquisitions involves risks to MainSource and its future business operations similar to the risks discussed in this section related to this merger. For example, MainSource may experience difficulties in integrating the operations of these other financial institutions with those of MainSource and its existing banks, or MainSource may incur unexpected costs in completing these acquisitions. Any of these risks could have an adverse effect on MainSource’s business and future earnings per share and, thus, on you in the event you elect to receive MainSource common stock for your Peoples Ohio shares.

MainSource’s historical growth and financial performance trends may not continue if its acquisition strategy is not successful.

Growth in asset size and earnings through acquisitions is an important and continuing part of the MainSource business strategy. As consolidation of the banking industry continues, the competition for suitable acquisition candidates may increase. MainSource competes with other banking companies for acquisition opportunities, and many of these competitors have greater financial resources and acquisition experience than MainSource has. MainSource may also need additional debt or equity financing in the future to fund acquisitions. Such financing might not be available or, if it is available, may not be in amounts and on terms acceptable to MainSource. MainSource may also use its common stock as the consideration for an acquisition or it may issue additional common stock and use the proceeds for an acquisition. The issuance of additional MainSource common stock will dilute the equity interest of existing MainSource shareholders, including Peoples Ohio shareholders who have elected to receive MainSource common stock in this merger, and it may have a dilutive effect on earnings per share. If MainSource is unable to locate suitable acquisition candidates willing to sell on acceptable terms, or it is unable to obtain financing necessary to continue its acquisition strategy, MainSource would be required to find other methods to grow its business and it might not grow at the same rate it has in the past, or at all.

An economic slowdown in Indiana could hurt MainSource’s business and lower the value of your stock.

Although MainSource will focus its business in Indiana, Illinois, and Ohio following the merger, it will continue to derive most of its net income from its operations in Indiana until it acquires more banks in other states or its banks in Illinois and Ohio increase in size. Therefore, Peoples Ohio shareholders who receive MainSource common stock in connection with the merger and whose investment previously was affected mostly by the Ohio economy will be exposed to the risk that an economic slowdown in Indiana could hurt MainSource’s business and decrease the value of their MainSource stock. Such an economic slowdown could have the following consequences:

· loan delinquencies may increase;

· problem assets and foreclosures may increase;

· demand for the products and services of MainSource’s bank subsidiaries may decline; and

· collateral (including real estate) for loans made by MainSource’s bank subsidiaries may decline in value, in turn reducing customers’ borrowing power, and making existing loans less secure.

CAUTION ABOUT FORWARD-LOOKING STATEMENTS

Certain statements contained in this document, including information incorporated into this document by reference, that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Securities Exchange Act, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The sections of this document which contain forward-looking statements include, but are not limited to, “Questions and Answers About the Merger and the Special Meeting,” “Summary,” “Risk Factors,” “The Merger—Background of the Merger,” “The Merger—MainSource’s Reasons for the Merger,” and “The Merger—Peoples Ohio’s Reasons for the Merger.” You can identify these statements from our use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions. These forward-looking statements include statements relating to:

· MainSource’s goals, intentions and expectations;

· MainSource’s business plans and growth strategies; and

· estimates of MainSource’s risks and future costs and benefits.

These forward-looking statements are subject to significant risks, assumptions and uncertainties, including among other things, changes in general economic and business conditions and the risks and other factors set forth in the “Risk Factors” section of this proxy statement/prospectus.

Because of these and other uncertainties, MainSource’s actual results, performance or achievements, or industry results, may be materially different from the results indicated by these forward-looking statements. In addition, MainSource’s past results of operations do not necessarily indicate MainSource’s future results. You should not place undue reliance on any forward-looking statements, which speak only as of the dates on which they were made. MainSource is not undertaking an obligation to update these forward-looking statements, even though its situation may change in the future, except as required under federal securities law. MainSource qualifies all of its forward-looking statements by these cautionary statements.

Further information on other factors which could affect the financial results of MainSource before and after the merger is included in MainSource’s filings with the SEC, incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information.”

· MainSource’s access to capital and managerial resources relative to that of Peoples Ohio;

· the premium represented by the value of the merger consideration over the current book value of Peoples Ohio common stock;

· its desire to provide shareholders with the prospects for greater future appreciation on their investments in Peoples Ohio common stock than Peoples Ohio could achieve independently;

· the greater liquidity of MainSource common stock, which is traded on the NASDAQ National Market;

· the opinion delivered by Keefe, Bruyette & Woods, Inc. that the merger consideration is fair, from a financial standpoint, to the shareholders of Peoples Ohio;

· the effect of the mergers on Peoples Ohio and Peoples Savings Bank employees, customers and community; and

· MainSource’s long-term growth strategy.

MainSource’s Reasons For the Merger

MainSource’s board of directors concluded that the mergers are in the best interests of MainSource and its shareholders. In deciding to approve the merger, MainSource’s board of directors considered a number of factors, including, without limitation, the following:

· management’s view that the acquisition of Peoples Ohio provides an attractive opportunity to expand into new communities into west central Ohio, which it considers a desirable market;

· Peoples Ohio’s community banking orientation and its compatibility with MainSource and its subsidiaries;

· management’s review of the business, operations, earnings and financial condition, including capital levels and asset quality of Peoples Ohio and Peoples Savings Bank; and

· the likelihood of regulators approving the mergers without undue conditions or delay.

Funding of the Merger

MainSource will need cash in the amount of approximately $11.0 million to fund the cash consideration portion of the purchase price. MainSource proposes to obtain the necessary funds to acquire the common stock of Peoples Ohio through short-term borrowings under its existing line of credit with U.S. Bank and from internal cash sources. Because Peoples Ohio is anticipated to have excess shareholders’ equity of approximately $10 million at the time of closing, MainSource anticipates using all or a portion of such equity to reduce the borrowings on its U.S. Bank line of credit following closing.

Effects of the Merger

The respective boards of directors of MainSource and Peoples Ohio believe that, over the long-term, the merger will be beneficial to MainSource shareholders, including the current shareholders of Peoples Ohio who will become MainSource shareholders if the merger is completed. The MainSource board of

directors believes that one of the potential benefits of the merger is the cost savings that may be realized by combining the two companies and integrating Peoples Savings Bank as a banking subsidiary of MainSource, which savings are expected to enhance MainSource’s earnings.

MainSource expects to reduce expenses by combining accounting, data processing, retail and lending support, and other administrative functions after the merger, which will enable MainSource to achieve economies of scale in these areas. Promptly following the completion of the merger, which is expected to occur during the second quarter of 2006, MainSource plans to begin the process of eliminating redundant functions, and eliminating duplicative expenses.

The amount of any cost savings MainSource may realize in 2006 will depend upon how quickly and efficiently MainSource is able to implement the processes outlined above during the year.

MainSource believes that it will achieve cost savings based on the assumption that it will be able to:

· reduce data processing costs;

· reduce staff;

· achieve economies of scale in advertising and marketing budgets;

· reduce legal and accounting fees; and

· achieve other savings through reduction or elimination of miscellaneous items such as insurance premiums, travel and automobile expense, and investor relations expenses.

MainSource has based these assumptions on its present assessment of where savings could be realized based upon the present independent operations of the two companies. Actual savings in some or all of these areas could be higher or lower than is currently expected.

Opinion of Financial Advisor to Peoples Ohio

On November 8, 2004, KBW was retained by Peoples Ohio to evaluate Peoples Ohio’s strategic alternatives and any specific proposals that might be received regarding an acquisition of Peoples Ohio. KBW, as part of its investment banking business, is regularly engaged in the evaluation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, and distributions of listed and unlisted securities. The Peoples Ohio Board selected KBW on the basis of the firm’s reputation and its experience and expertise in transactions similar to the merger (the “Merger.”)

Pursuant to its engagement, KBW was asked to render an opinion as to the fairness, from a financial point of view, of the Merger Consideration to shareholders of Peoples Ohio. KBW delivered its opinion to the Peoples Ohio Board that, as of September 26, 2005, the Merger Consideration is fair, from a financial point of view, to the shareholders of Peoples Ohio. No limitations were imposed by the Peoples Ohio Board upon KBW with respect to the investigations made or procedures followed by it in rendering its opinion. KBW has consented to the inclusion herein of the summary of its opinion to the Peoples Ohio Board and to the reference to the entire opinion attached hereto as Annex B.

The full text of the opinion of KBW sets forth certain assumptions made, matters considered and limitations on the review undertaken by KBW, and should be read in its entirety. The summary of the opinion of KBW set forth in this proxy statement/prospectus is qualified in its entirety by reference to the opinion.

In connection with its opinion KBW reviewed certain financial and other business data supplied by Peoples Ohio, including (i) the Agreement and Plan of Merger (ii) Annual Reports for the years ended June 30, 2005, 2004 and 2003 (iii) Proxy Statement dated October 26, 2004 and (iv) other information KBW deemed relevant. KBW also discussed with senior management and directors of Peoples Ohio, the

current position and prospective outlook for Peoples Ohio. KBW reviewed financial and stock market data of comparable institutions and the financial and structural terms of several other recent transactions involving mergers and acquisitions of comparable institutions or proposed changes of control of comparably situated companies.

Analysis of Recent Comparable Acquisition Transactions

In rendering its opinion, KBW analyzed certain comparable merger and acquisition transactions of both pending and completed thrift deals, comparing the acquisition price relative to tangible book value, last twelve months earnings, and premium to core deposits. All comparative metrics were as of each respective deal’s announcement date. The analysis included a comparison of the minimum, median and maximum of the above ratios for pending and completed acquisitions announced on or after January 1, 2004, where the seller was a thrift and pricing metrics were available, based on the following three criteria:

(1) Target had total assets between $100 million and $500 million

(2) Target had a tangible equity / tangible assets ratio greater than 9.00%

(3) Target was headquartered in the Midwest region of the United States

The selected comparable transactions that the three criteria produced include the following:

Acquiror			Target
MB Financial Inc.			First SecurityFed Financial
Park National Corp.			First Clermont Bank
Main Street Trust Inc.			Citizens First Financial Corp.
WesBanco Inc.			Western Ohio Financial Corp.
Kentucky First Federal (MHC)			Frankfort First Bancorp Inc.
Peoples Community Bancorp Inc.			PFS Bancorp Inc.
MAF Bancorp Inc.			Chesterfield Financial Corp.
MainSource Financial Group			Union Community Bancorp
Northbrook Investments			North Bancshares
Oak Hill Financial Inc.			Lawrence Financial Holdings

KBW derived the minimum, median and maximum pricing metrics of the three aforementioned criteria as stated below:

	Price to					Core
	Tangible			LTM		Deposit
	Book			Earnings		Premium
Minimum		112.5	%		15.8x		2.8	%
Median		165.0	%		31.4x		21.5	%
Maximum		212.7	%		52.5x		30.3	%
Consideration: $5.60 per share		166.4	%		23.2x		14.5	%

KBW viewed the three aforementioned criteria as the most appropriate in deriving a comparable transaction value based on Peoples Ohio’s size, capital base and earnings. KBW viewed the fact that the combined criteria produced a comparable group with 10 transactions, as being significant for the purposes of comparison. KBW viewed the three resulting metrics (price to tangible book value, price to last twelve months earnings and core deposit premium) from the comparable group on a minimum, median and maximum basis, as the three key metrics used to evaluate the fairness, from a financial point of view, of the transaction.

Given that the value of the consideration to be paid in the Merger, as of the date of the opinion, is in the range of values for all three metrics and above the median on two of the three metrics, KBW believes that this analysis supports the fairness, from a financial point of view, to Peoples Ohio and its shareholders of the consideration to be paid in the merger.

Discounted Cash Flow Analysis

KBW performed four discounted cash flow analyses to estimate a range of intrinsic values per share of Peoples Ohio common stock. This range was determined by adding (1) the present value, which is a representation of the current value of a sum that is to be received some time in the future, of the estimated future cash flows that Peoples Ohio could generate over the next five years and (2) the present value of a terminal value, which is a representation of the value of an entity at a specified time in the future. The terminal value was determined by applying a range of price to earnings multiples based on similar publicly traded institutions and comparative transactions. KBW calculated the following four intrinsic valuation ranges: (1) Market Sensitivity Analysis based on a trading multiple; (2) Market Sensitivity Analysis based on a transaction multiple; (3) Budget Sensitivity Analysis based on a trading multiple (4) Budget Sensitivity Analysis based on a transaction multiple.

The Market Sensitivity Analysis based on a trading multiple applied a range of year five terminal value multiples of 16.5x to 18.5x based on a midpoint price to last twelve months earnings multiple of 17.7x. The midpoint terminal multiple was based on the median price to last twelve months earnings multiple for Midwestern publicly traded thrifts with total assets between $100 million and $500 million. The discount rate applied to the projected cash flows and calculated terminal value ranged from 10.0% to 14.0%. The Market Sensitivity Analysis based on a trading multiple resulted in a range of per share intrinsic values from $3.82 to $4.88, with a midpoint of $4.35.

The Market Sensitivity Analysis based on a transaction multiple applied a range of year five terminal value multiples of 17.0x to 24.0x based on a midpoint price to last twelve months earnings multiple of 19.7x. The midpoint terminal multiple was based on the median price to last twelve months earnings multiple paid for Midwestern thrifts with assets between $100 million and $500 million and return on average assets between 5.00% and 1.00%, announced on or after January 1, 2004. The discount rate applied to the projected cash flows and calculated terminal value ranged from 10.0% to 14.0%. The Market Sensitivity Analysis based on transaction multiples resulted in a range of per share intrinsic values from $3.90 to $5.99, with a midpoint of $4.72.

The Budget Sensitivity Analysis based on a trading multiple applied a range of 20% under/over performance of projected earnings for each of the aforementioned periods. The terminal value was calculated using a terminal multiple of 17.7x. The discount rate applied to the projected cash flows and calculated terminal value ranged from 10.0% to 14.0%. The Budget Sensitivity Analysis based on a trading multiple resulted in a range of per share intrinsic values from $3.22 to $5.66, with a midpoint of $4.44.

The Budget Sensitivity analysis based on a transaction multiple applied a range of 20% under/over performance of the projected earnings for each of the aforementioned periods. The terminal value was calculated using a terminal multiple of 19.7x. The discount rate applied to the projected cash flows and calculated terminal value ranged from 10.0% to 14.0%. The Budget Sensitivity Analysis based on a trading multiple resulted in a range of per share intrinsic values from $3.49 to $6.14, with a midpoint of $4.82.

The value of the consideration on a per share basis to be paid in the Merger, as of the date of the opinion, exceeds the midpoint of the four intrinsic value ranges derived from the discounted cash flow analyses. KBW believes that these analyses support the fairness, from a financial point of view, to Peoples Ohio and its shareholders of the consideration to be paid in the Merger.

The intrinsic values of Peoples Ohio derived using discounted cash flow analysis do not necessarily indicate actual values or actual future results and do not purport to reflect the prices at which any securities may trade at the present or at any time in the future. Discounted cash flow analysis is a widely used valuation methodology, but the results of this methodology are highly dependent upon numerous assumptions that must be made, including earnings estimates, terminal values, and discount rates.

Based on the above analyses KBW concluded that the consideration paid in the merger, was fair, from a financial point of view, to shareholders of Peoples Ohio. This summary does not purport to be a complete description of the analysis performed by KBW and should not be construed independently of the other information considered by KBW in rendering its opinion. Selecting portions of KBW’s analysis or isolating certain aspects of the comparable transactions without considering all analyses and factors, could create an incomplete or potentially misleading view of the evaluation process.

In rendering its opinion, KBW assumed and relied upon the accuracy and completeness of the financial information provided to it by Peoples Ohio and MSFG. In its review, with the consent of the Peoples Ohio Board, KBW did not undertake any independent verification of the information provided to it, nor did it make any independent appraisal or evaluation of the assets or liabilities and potential or contingent liabilities of Peoples Ohio or MSFG.

The fairness opinion of KBW is limited to the fairness as of its date, from a financial point of view, of the consideration to be paid in the Merger and does not address the underlying business decision to effect the Merger (or alternatives thereto) nor does it constitute a recommendation to any shareholder of Peoples Ohio as to how such shareholder should vote with respect to the Merger Proposal.

Furthermore, KBW expresses no opinion as to the price or trading range at which shares of the pro forma entity will trade following the consummation of the Merger.

KBW is a nationally recognized investment banking firm and is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, leveraged buyouts, negotiated underwritings, secondary distributions of listed and unlisted securities and private placements.

In preparing its analysis, KBW made numerous assumptions with respect to industry performance, business and economic conditions and other matters, many of which are beyond the control of KBW and Peoples Ohio. The analyses performed by KBW are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by such analyses and do not purport to be appraisals or reflect the prices at which a business may be sold.

KBW will receive a fee of 1.00% of the closing deal value, as set forth in the Engagement Letter dated November 8, 2004, for services rendered in connection with advising and issuing a fairness opinion regarding the Merger. As of the date of the Proxy Statement, KBW has received $50,000 of such fee, the remainder of the fee is due upon the close of the transaction.

THE MERGER AGREEMENT

Conditions to the Merger

The obligation of MainSource to complete the merger is subject to the satisfaction or waiver of a number of conditions, including:

· The representations and warranties made by Peoples Ohio in the Merger Agreement must be true and correct as of the effective date of the merger or as otherwise required in the Merger Agreement unless the inaccuracies do not and will not have a material adverse effect (as defined in the Merger Agreement) on Peoples Ohio, and officers of Peoples Ohio must have certified to this effect;

· The covenants made by Peoples Ohio must have been fulfilled or complied with in all material respects from the date of the Merger Agreement through and as of the effective time, and officers of Peoples Ohio must have certified to this effect;

· MainSource must have received the required closing deliveries of Peoples Ohio as described in the Merger Agreement;

· The MainSource registration statement (of which this proxy statement/prospectus is a part) relating to the issuance of MainSource shares pursuant to the Merger Agreement must have been declared effective by the SEC and no stop order must have been issued or threatened, and all state securities approvals, authorizations and exemptions required to offer and sell the shares must have been received by MainSource;

· The appropriate regulatory authorities must have approved the transaction without any conditions, restrictions or requirements that the MainSource board of directors reasonably determines in good faith would have a material adverse effect or reduce the benefits of the transactions described in the Merger Agreement to such a degree that MainSource would not have entered into the Merger Agreement had it known about them at the date the Merger Agreement was signed;

· The Merger Agreement must have been approved at the special meeting by at a majority of the issued and outstanding shares of Peoples Ohio common stock;

· Ronald B. Scott must have entered into his employment agreement with MainSource Bank - Ohio;

· MainSource must have received an opinion of Bose McKinney & Evans LLP, counsel to MainSource, dated the effective date, to the effect that the merger of Peoples Ohio with and into MainSource constitutes a “reorganization” within the meaning of Section 368 of the Internal Revenue Code;

· MainSource must have received an opinion of Squire Sanders & Dempsey LLP, counsel to Peoples Ohio, dated the effective time;

· The MainSource average stock price must be no lower than $14.00 and no higher than $24.00;

· MainSource must have received a letter of tax advice, in a form satisfactory to MainSource, from Peoples Ohio’s outside, independent registered accounting firm to the effect that any amounts that are paid by Peoples Ohio or Peoples Savings Bank before the effective time of the merger, or required under Peoples Ohio’s employee benefit plans or the Merger Agreement to be paid at or after the effective time, to persons who are “disqualified individuals” under Section 280G of the Internal Revenue Code with respect to Peoples Ohio, Peoples Savings Bank or their successors, and that otherwise should be allowable as deductions for federal income tax purposes, should not be disallowed as deductions for such purposes by reason of Section 280G of the Internal Revenue Code; and

· MainSource must have filed with NASDAQ any required notices to permit the common stock issued pursuant to the Merger Agreement to be eligible for quotation and trading on the NASDAQ National Market on the same basis as other MainSource common stock.

The obligation of Peoples Ohio to complete the merger is subject to the satisfaction or waiver of a number of conditions, including:

· The representations and warranties made by MainSource in the Merger Agreement must be true and correct as of the effective date of the merger or as otherwise required in the Merger Agreement unless the inaccuracies do not and will not have a material adverse effect (as defined in the Merger Agreement) on MainSource, and officers of MainSource must have certified to this effect;

· The covenants made by MainSource must have been fulfilled or complied with in all material respects from the date of the Merger Agreement through and as of the effective time, and officers of MainSource must have certified to this effect;

· Peoples Ohio must have received the required closing deliveries of MainSource as described in the Merger Agreement;

· The appropriate regulatory authorities must have approved the transaction without any conditions, restrictions or requirements that the Peoples Ohio board of directors reasonably determines in good faith would have a material adverse effect or reduce the benefits of the transactions described in the Merger Agreement to such a degree that Peoples Ohio would not have entered into the Merger Agreement had it known about them at the date the Merger Agreement was signed;

· The Merger Agreement must have been approved at the special meeting by at a majority of the issued and outstanding shares of Peoples Ohio common stock;

· Peoples Ohio must have received an opinion of Bose McKinney & Evans LLP, counsel to MainSource, dated the effective date, to the effect that the merger of Peoples Ohio with and into MainSource constitutes a “reorganization” within the meaning of Section 368 of the Internal Revenue Code;

· The payments required to comply with or terminate the employment agreements or severance agreements of certain officers and employees of Peoples Ohio, which are required by the Merger Agreement to be made, must have been made;

· Peoples Ohio must have received an opinion of Bose McKinney & Evans LLP, counsel to MainSource, dated the effective time;

· The MainSource average stock price must be no lower than $14.00 and no higher than $24.00; and

Expenses

Except as otherwise provided in the Merger Agreement, Peoples Ohio and MainSource will be responsible for their own respective expenses incidental to the merger.

Treatment of Options to Acquire Shares of Peoples Ohio Common Stock

The Merger Agreement provides that each option to acquire shares of Peoples Ohio common stock held by Ronald B. Scott, whether or not vested, will be amended to be an option to acquire shares of MainSource common stock, with the exercise price and number of shares subject to the option adjusted based on the exchange ratio used in connection with the merger. However, any incentive stock options will be adjusted in accordance with Section 424 of the Code. Currently, Mr. Scott has options for 265,150 shares of Peoples Ohio common stock that will be so amended. All of such options will become fully vested as a result of a “change-in-control” provision contained in Peoples Ohio’s option plan.

Pursuant to the Merger Agreement, each other outstanding option to purchase the common stock of Peoples Ohio will be converted into the right to receive from MainSource at the effective time an amount equal to the excess of the cash consideration over the per share exercise price for each share of Peoples Ohio common stock. MainSource will withhold required taxes from such payment, if applicable. Each such Peoples Ohio stock option will be cancelled and will cease to exist by virtue of such payment. Currently, the executive officers and outside directors of Peoples Ohio (other than Mr. Scott) hold options for 185,064 shares of Peoples Ohio common stock, which would be cashed out for approximately $441,000.

Treatment of Peoples Ohio 401(k) Plan

With respect to Peoples Ohio stock held in the accounts of each participant of the Peoples Ohio 401(k) plan, the participants will be entitled to vote on the approval and adoption of the Merger Agreement and will be entitled to select the merger consideration, similar to any other shareholder of Peoples Ohio.

After closing of the merger, MainSource will succeed Peoples Ohio as the participating employer in the Peoples Ohio 401(k) plan. MainSource will discontinue participation in the Peoples Ohio 401(k) plan and amend the MainSource 401(k) plan so that employees of Peoples Ohio who become employees of MainSource will accrue benefits pursuant to the MainSource 401(k) plan. In addition, former Peoples Ohio employees participating in the MainSource 401(k) plan will receive credit for eligibility and vesting purposes, for the service of such employees with Peoples Ohio and Peoples Savings Bank or their predecessors prior to the effective time.

Employee Benefit Matters

The Merger Agreement requires MainSource to make available to the officers and employees of Peoples Ohio and Peoples Savings Bank who continue as employees of MainSource or any subsidiary substantially the same employee benefits on substantially the same terms and conditions as MainSource offers to similarly situated officers and employees. Peoples Ohio and Peoples Savings Bank employees will receive full credit for prior service with Peoples Ohio, Peoples Savings Bank or their predecessors for purposes of the eligibility, vesting and period of service requirements after the merger. Peoples Ohio and Peoples Savings Bank employees who become employees of MainSource or its subsidiaries will become eligible to participate in MainSource’s employee benefit plans as soon as reasonably practicable after the effective time, and will not be subject to any waiting periods or pre-existing condition limitations under the medical, dental and health plans of MainSource or its subsidiaries in which they are eligible to participate at the effective time, unless otherwise required by the insurance company or other vendor offering the particular benefit.

Termination

Subject to conditions and circumstances described in the Merger Agreement, either MainSource or Peoples Ohio may terminate the Merger Agreement if, among other things, any of the following occur:

· the merger has not been consummated by June 30, 2006;

· Peoples Ohio shareholders do not approve the Merger Agreement at the Peoples Ohio special meeting; or

· the respective boards of directors of MainSource and Peoples Ohio mutually agree to terminate the Merger Agreement.

Additionally, MainSource may terminate the Merger Agreement at any time prior to the effective time if any of the following occur:

· a breach by Peoples Ohio of any representation or warranty contained in the Merger Agreement that would be reasonably likely, individually or in the aggregate with other breaches to result in a material adverse effect (as defined in the Merger Agreement) on the business or assets of Peoples Ohio, unless the breach is cured within 30 days from the giving of written notice to Peoples Ohio of such breach and the same does not result in a material adverse effect;

· a breach by Peoples Ohio of any of the covenants or agreements contained in the Merger Agreement that would be reasonably likely, individually or in the aggregate with other breaches to result in a material adverse effect on the business or assets of Peoples Ohio, unless the breach is cured within 30 days from the giving of written notice to Peoples Ohio of such breach and the same does not result in a material adverse effect;

· the board of directors of MainSource reasonably determines that the mergers contemplated by the Merger Agreement have become impracticable by reason of commencement or threat of any material claim, litigation or proceeding against MainSource, Peoples Ohio, Peoples Savings Bank, or any subsidiary of MainSource, or any director or officer of any of such entities relating to the Merger Agreement or the mergers;

· there has been a material adverse effect in the business, assets, capitalization, financial condition or results of operations of Peoples Ohio or Peoples Savings Bank as of the effective time, as compared to that in existence as of the date of the Merger Agreement;

· Peoples Ohio’s board of directors submits, or intends to submit, the Merger Agreement to the shareholders without recommending the approval of the Merger Agreement or fails to solicit proxies for approval of the Merger Agreement;

· Peoples Ohio’s board of directors submits the Merger Agreement with a recommendation of approval to the Peoples Ohio shareholders for a vote, but the shareholders of Peoples Ohio do not approve and adopt the merger and the Merger Agreement;

· Peoples Ohio fails to maintain a composite rating of at least 2 from its latest safety and soundness and compliance examination, or fails to maintain a Community Reinvestment Act rating of satisfactory or better;

· MainSource elects to exercise its right of termination pursuant to the Merger Agreement regarding certain environmental matters;

Peoples Ohio may terminate the Merger Agreement at any time prior to the effective time if any of the following occur:

· a breach by MainSource of any representation or warranty contained in the Merger Agreement that would be reasonably likely, individually or in the aggregate with other breaches to result in a material adverse effect, unless the breach is cured within 30 days from the giving of written notice to MainSource of such breach and the cure does not result in a material adverse effect on the business or assets of MainSource;

· a breach by MainSource of any of the covenants or agreements contained the Merger Agreement that would be reasonably likely, individually or in the aggregate with other breaches, to result in a material adverse effect on MainSource, unless the breach is cured within 30 days after the giving of written notice to MainSource of such breach and any such cure would not result in a material adverse effect on the business or assets of MainSource;

· there has been a change constituting a material adverse effect in the financial condition, results of operations, business, assets or capitalization of MainSource on a consolidated basis as of the effective time, as compared to that in existence on June 30, 2005;

· the board of directors of Peoples Ohio reasonably determines that the mergers contemplated by the Merger Agreement have become impracticable by reason of commencement or threat of any material claim, litigation or proceeding against MainSource, Peoples Ohio or Peoples Savings Bank or any subsidiary of MainSource or any director or officer of any such entities relating to the Merger Agreement or the merger or which is likely to have a material adverse effect on MainSource; or

Termination Fee

MainSource may demand a $1,000,000 termination fee from Peoples Ohio, plus reimbursement of expenses incurred in connection with the merger transactions, in the aggregate amount of $200,000, if the Merger Agreement is terminated by MainSource based on either of the following circumstances, and MainSource is not in breach of the Merger Agreement:

· There is a breach of the Merger Agreement by Peoples Ohio that would be reasonably likely to result in a material adverse effect that remains uncured for 30 days; or

· Peoples Ohio’s board of directors submits, or intends to submit, the Merger Agreement to the shareholders of Peoples Ohio without recommending the approval of the Merger Agreement, or fails to solicit proxies for approval of the Merger Agreement.

Peoples Ohio may demand a $1,000,000 termination fee from MainSource, plus reimbursement of expenses incurred in connection with the merger transactions, in the aggregate amount of $200,000, if the Merger Agreement is terminated by Peoples Ohio because there is a breach of the Merger Agreement by MainSource that would be reasonably likely to result in a material adverse effect that remains uncured for 30 days and Peoples Ohio is not in breach of the Merger Agreement.

Conduct of Business Prior to Completion of the Merger

Peoples Ohio Covenants. Under the Merger Agreement, Peoples Ohio has agreed to certain restrictions on its activities until the merger is completed or terminated. In general, Peoples Ohio and its subsidiary, Peoples Savings Bank, are required to conduct their business diligently, substantially in the manner as it is presently being conducted and in the ordinary course of business.

The following is a summary of the more significant restrictions imposed upon Peoples Ohio, subject to the exceptions set forth in the Merger Agreement. Specifically, without the prior consent of MainSource, Peoples Ohio may not:

· make any change in the capitalization or the number of issued and outstanding shares of Peoples Ohio or Peoples Savings Bank;

· distribute or pay any dividends on its shares of common stock, or authorize a stock split, or make any other distribution to its shareholders; except that Peoples Savings Bank may pay cash dividends to Peoples Ohio in the ordinary course of business for payment of reasonable and necessary business and operating expenses of Peoples Ohio and to provide funds for Peoples Ohio’s dividends to its shareholders, and Peoples Ohio may pay to its shareholders its usual and customary cash dividend of no greater than $.07 per share for any semi-annual period, provided that any dividend paid for the semi-annual period in which the merger is consummated must be pro rated for the period prior to the effective time of the merger and must be paid before the merger is consummated;

· redeem any of its outstanding shares of common stock;

· merge, combine, consolidate or effect a share exchange with or sell its assets or any of its securities to any other person, corporation or entity or enter into any other similar transaction not in the ordinary course of business;

· purchase any assets or securities or assume any liabilities of another bank holding company, bank, corporation or other entity, except in the ordinary course of business necessary in managing its investment portfolio;

· make any loan or committing to lend money, issue any letter of credit or accept any deposit, except in the ordinary course of business in accordance with its existing banking practices;

· except as otherwise permitted under the Merger Agreement and the acquisition or disposition in the ordinary course of business of other real estate owned, acquire or dispose of any real or personal property or fixed asset constituting a capital investment in excess of $10,000 individually or $25,000 in the aggregate;

· make any investment subject to any restrictions, whether contractual or statutory, which materially impairs the ability of Peoples Ohio or Peoples Savings Bank to dispose freely of such investment at any time, subject any of its properties or assets to a mortgage, lien, claim, charge, option, restriction,

security interest or encumbrance, except for tax and other liens which arise by operation of law and with respect to which payment is not past due or is being contested in good faith by appropriate proceedings and except for pledges or liens required to be granted in connection with acceptance by Peoples Ohio or Peoples Savings Bank of government deposits and pledges or liens in connection with Federal Home Loan Bank borrowings;

· promote to a new position or increase the rate of compensation (other than promotions and compensation increases in the ordinary course of business and in accordance with past practices), or enter into any agreement to promote to a new position or increase the rate of compensation, of any director, officer of employee of Peoples Ohio or Peoples Savings Bank, modify, amend or institute new employment policies or practices, or enter into, renew or extend any employment, indemnity, reimbursement, consulting, compensation or severance agreements with respect to any present or former directors, officers or employees of Peoples Ohio or Peoples Savings Bank;

· except as contemplated by the Merger Agreement, execute, create, institute, modify, amend or terminate any pension, retirement, savings, stock purchase, stock bonus, stock ownership, stock option, stock appreciation or depreciation right or profit sharing plans, any employment, deferred compensation, consulting, bonus or collective bargaining agreement, any group insurance or health contract or policy, or any other incentive, retirement, welfare or employee welfare benefit plan, agreement or understanding for current or former directors, officers or employees of Peoples Ohio or Peoples Savings Bank, or change the level of benefits or payments under any of the foregoing or increase or decrease any severance or termination pay benefits or any other fringe or employee benefits other than as required by law or regulatory authorities or the terms of any of the foregoing;

· amend, modify or restate Peoples Ohio’s or Peoples Savings Bank’s respective organizational documents;

· give, dispose of, sell, convey or transfer; assign, hypothecate, pledge or encumber, or grant a security interest in or option to or right to acquire any shares of common stock or substantially all of the assets of Peoples Ohio or Peoples Savings Bank, or enter into any agreement or commitment relative to the foregoing;

· fail to maintain Peoples Ohio’s reserve for loan losses at the greater of either $725,000 or 0.42% of total gross loans outstanding, unless doing so would be inconsistent with generally accepted accounting principles (as of December 31, 2005, Peoples Ohio’s reserve for loan losses was $785,338 or 0.42% of total gross loans outstanding);

· fail to accrue, pay, discharge and satisfy all debts, liabilities, obligations and expenses, including, without limitation, trade payables, incurred in the regular and ordinary course of business as such debts, liabilities, obligations and expenses become due;

· issue, or authorize the issuance of, any securities convertible into or exchangeable for any shares of the capital stock of Peoples Ohio or Peoples Savings Bank;

· except for obligations disclosed within the Merger Agreement, Federal Home Loan Bank advances, trade payables and similar liabilities and obligations incurred in the ordinary course of business and the payment, discharge or satisfaction in the ordinary course of business of liabilities reflected in the Peoples Ohio financial statements, borrow any money or incur any indebtedness including, without limitation, through the issuance of debentures, or incur any liability or obligation in an aggregate amount exceeding $10,000;

· open, close, move or, in any material respect, expand, diminish, renovate, alter or change any of its offices or branches;

· pay or commit to pay any management or consulting or other similar type of fees; or

· enter into any contract, agreement, lease, commitment, understanding, arrangement or transaction or incur any liability or obligation (other than obligations pursuant to loans, letters of credit or deposits in the ordinary course or involving certain fees related to the merger) requiring payments by Peoples Ohio or Peoples Savings Bank that exceed $10,000 individually or in the aggregate, or that is not a trade payable or incurred in the ordinary course of business.

MainSource Covenants. Without the prior consent of Peoples Ohio, MainSource may not take any action that is intended or reasonably likely to result in any of its representations and warranties set forth in the Merger Agreement being or becoming untrue in any respect at or prior to the effective time, any of the conditions to the merger not being satisfied, a material violation of any provision of the Merger Agreement or a delay in the consummation of the mergers, except, in each case, as may be required by applicable law or regulation.

MainSource has agreed to file all applications and notices to obtain the necessary regulatory approvals for the transactions contemplated by the Merger Agreement. Peoples Ohio has agreed to cooperate with MainSource in connection with obtaining the regulatory approvals. With the exception of certain Peoples Ohio officers and employees who are currently parties to change-in-control or severance agreements, those employees of Peoples Ohio or its subsidiaries as of the effective time whom MainSource or its subsidiaries elect not to employ after the effective time or who are terminated other than for cause within one year after the effective date or voluntarily resign within one year after the effective date after being notified that, as a condition of employment, they must work at a location more than 50 miles from their former location of employment or that their salary will be materially decreased, are entitled to severance benefits on substantially the same terms as Main Source offers to similarly situated officers and employees of MainSource. Subject to the limitations set forth in the Merger Agreement, MainSource will maintain a directors’ and officers’ liability insurance policy for three years after the effective time to cover the present and former officers and directors of Peoples Ohio and Peoples Savings Bank with respect to claims against such directors and officers arising from facts or events which occurred before the effective time, provided that, if MainSource is unable to obtain such an endorsement, then Peoples Ohio may purchase tail coverage under its existing director and officer liability insurance policy. In addition, for six years after the effective time, MainSource will indemnify, defend and hold harmless the present and former officers and directors of Peoples Ohio and Peoples Savings Bank against all losses, expenses, claims, damages or liabilities arising out of actions or omissions occurring on or prior to the effective time to the full extent then permitted under the Indiana Business Corporation Law and the MainSource’s Articles of Incorporation as in effect on the date of the Merger Agreement.

The Merger Agreement also contains certain covenants relating to employee benefits and other matters pertaining to officers and directors. See “The Merger Agreement—Employee Benefit Matters” and “Interests of Certain Directors and Executive Officers of Peoples Ohio in the Merger.”

Management and Operations After the Merger

The officers and directors of MainSource serving at the effective time will continue to serve as the officers and directors of MainSource until such time as their successors have been duly elected and qualified or until their earlier resignation, death or removal from office. The Articles of Incorporation and By-Laws of MainSource in existence as of the effective time will remain the Articles of Incorporation and By-Laws of MainSource following the effective time, until such Articles of Incorporation and By-Laws are further amended as provided by applicable law.

The name of the surviving bank resulting from the merger of Peoples Savings Bank into MainSource Bank—Ohio will be “MainSource Bank—Ohio.” Its principal office will be located at 635 South Market Street, Troy, Miami County, Ohio, and its branches will consist of the branch offices of Peoples Savings

Bank as of the effective time. The officers of MainSource Bank—Ohio at the effective time will continue to serve as the officers of MainSource Bank—Ohio after the effective time until such time as their successors have been duly elected and qualified or until their earlier resignation, death or removal from office. In addition, immediately after the effective time, Ronald B. Scott will be appointed the Chairman, President and Chief Executive Officer of MainSource Bank—Ohio. The directors of MainSource Bank—Ohio following the effective time will consist of Douglas Haines, William E. Lukens, William J. McGraw, III, Ronald B. Scott and Richard W. Wallace, who will serve as directors until such time as their successors have been duly elected and qualified or until their earlier resignation, death or removal as a director. The Articles of Incorporation and Code of Regulations of MainSource Bank—Ohio in existence at the effective time will remain the Articles of Incorporation and Code of Regulations of MainSource Bank—Ohio following the effective time, until such Articles of Incorporation and Code of Regulations shall be further amended as provided by applicable law.

No Solicitation

Peoples Ohio and Peoples Savings Bank will not permit or authorize their respective directors, officers, employees, agents or representatives to initiate, solicit or encourage, or provide information to, any corporation, association, partnership, person or other entity or group concerning any merger, consolidation, share exchange, combination, purchase or sale of substantial assets, sale of shares of common stock or similar transaction relating to Peoples Ohio or Peoples Savings Bank or to which Peoples Ohio or Peoples Savings Bank may become a party. Peoples Ohio will promptly communicate to MainSource the terms of any proposal or offer which Peoples Ohio or Peoples Savings Bank may receive.

Environmental Inspections

Under the Merger Agreement, MainSource initially had the right to terminate the Merger Agreement and not consummate the transaction if any of the real estate owned by Peoples Ohio or Peoples Savings Bank was determined to be contaminated and the cost to remediate such contamination would be reasonably estimated to exceed $150,000. In order for MainSource to avail itself of this termination provision, it was required to request that Phase I environmental investigations be commenced with respect to such real estate. MainSource did not elect to cause such environmental investigations to be conducted on any of Peoples Savings Bank’s properties. Accordingly, this termination right on the part of MainSource no longer exists.

Resales of MainSource Common Stock by Peoples Ohio Shareholders

All shares of MainSource common stock issued to Peoples Ohio shareholders in connection with the merger will be freely transferable, except that shares received by persons deemed to be “affiliates” of Peoples Ohio under the Securities Act at the time of the special meeting may be resold only in transactions permitted by Rule 145 under the Securities Act or otherwise permitted under the Securities Act. This proxy statement/prospectus does not cover any resales of the shares of MainSource common stock to be received by Peoples Ohio shareholders upon completion of the merger, and no person may use this proxy statement/prospectus in connection with any resale. Based on the number of shares of MainSource common stock anticipated to be received by Peoples Ohio affiliates in the merger, it is expected that Rule 145 will not limit the amount of shares that former Peoples Ohio shareholders will be able to sell into the market. Persons who may be deemed affiliates of Peoples Ohio for this purpose generally include directors, executive officers and the holders of 10% or more of the outstanding shares of Peoples Ohio common stock. Pursuant to the Merger Agreement, Peoples Ohio has agreed to use its best efforts to cause each of its affiliates to execute a written affiliate agreement to the effect that those affiliates will not offer or sell or otherwise dispose of any of the shares of MainSource common stock issued to those affiliates in the merger in violation of the Securities Act or the related SEC rules and regulations.

Accounting Treatment of the Merger

MainSource will account for the merger under the purchase method of accounting in accordance with accounting principles generally accepted in the United States. Using the purchase method of accounting, the assets and liabilities of Peoples Ohio will be recorded by MainSource at their respective fair values at the time of the completion of the merger. The excess of MainSource’s purchase price over the net fair value of the assets acquired and liabilities assumed will then be allocated to identified intangible assets, with any remaining unallocated cost recorded as goodwill.

NASDAQ National Market System Listing

MainSource common stock currently is listed on the NASDAQ National Market under the symbol “MSFG.” The shares to be issued to the Peoples Ohio shareholders as merger consideration also will be eligible for trading on the NASDAQ National Market.

DESCRIPTION OF PEOPLES OHIO

Business

Peoples Ohio is based in west central Ohio and is the parent company of Peoples Savings Bank. Peoples Ohio was formed during the year ended June 30, 2002 to provide various benefits to Peoples Savings Bank, as well as to take advantage of a more effective structure for expanded financial activities. Peoples Ohio is a savings and loan holding company and is subject to regulation by the Office of Thrift Supervision (the “OTS”) and the Securities and Exchange Commission (the “SEC”). At June 30, 2005, Peoples Ohio had total assets of $199.9 million, total deposits of $126.5 million and total stockholders’ equity and equity from ESOP shares of $25.4 million. Peoples Ohio’s principal business is conducted primarily through its subsidiary, Peoples Savings Bank. Accordingly, all references in this section to Peoples Ohio include Peoples Savings Bank, unless otherwise indicated.

Peoples Savings Bank, a state chartered savings and loan association, was originally chartered in 1890 as an Ohio mutual building and savings association and completed a successful stock conversion in December 1989. Peoples Savings Bank is primarily engaged in attracting retail deposits from Miami and northern Montgomery counties and the investment of those deposits, together with funds generated from operations and borrowings, in mortgage loans secured by one-to-four family residential real estate throughout those same areas. Peoples Savings Bank also originates loans secured by multifamily real estate (over four units) and nonresidential real estate, consumer loans, including automobile loans, home equity and home improvement loans, secured and unsecured lines-of-credit, and commercial loans. In addition to traditional banking services, Peoples Savings Bank provides full trust services through its trust department. Peoples Savings Bank also invests in U.S. government and agency obligations, interest-bearing deposits in other banks, mortgage backed securities and other investments permitted by applicable law. Peoples Savings Bank’s principal sources of income are interest on loans and fees for service charges and, to a lesser extent, interest and dividends on investments. Peoples Savings Bank obtains funds for its lending and investment activities through gathering deposits, payments received from outstanding loans, and borrowings from the Federal Home Loan Bank of Cincinnati (the “FHLB”).

As a state-chartered savings and loan association, Peoples Savings Bank is regulated by the OTS and the Ohio Division of Financial Institutions (“ODFI”).

Market Area and Competition

Peoples Ohio is a community-oriented savings institution offering a variety of financial products and services to meet the needs of the communities it serves. Peoples Ohio’s deposit gathering is concentrated in the communities surrounding its six offices located in the municipalities of Troy, Piqua and Clayton,

Ohio, which are part of Miami and Montgomery counties. Miami county has historically benefited from the presence of several regional manufacturing and distribution operations, as well as a variety of metal fabricating related businesses. Montgomery county comprises the greater Dayton metropolitan area and is adjacent to Miami county. These counties are the primary market area for Peoples Savings Bank’s lending and deposit gathering activities.

Peoples Ohio faces significant competition both in making loans and in attracting deposits. Peoples Ohio faces direct competition from a significant number of financial institutions operating in its market area, many with a state-wide or regional presence and in some cases a national presence. Many of these financial institutions are significantly larger and have greater financial resources than Peoples Ohio. Peoples Ohio’s competition for loans comes principally from commercial banks, savings and loan associations, mortgage banking companies, credit unions and insurance companies. Its most direct competition for deposits has historically come from savings and loan associations and commercial banks. In addition, Peoples Ohio faces increasing competition for deposits from non-bank institutions such as brokerage firms and insurance companies.

Lending Activities

Peoples Ohio originates residential and multi-family real estate loans for the purchase, refinance, construction, and development of real property. Mortgage loans generally are made up to thirty years in length. In addition, Peoples Ohio originates consumer loans, where more emphasis is placed upon the individual’s credit worthiness and less upon the value of the collateral. Consequently, these consumer loans are riskier than conventional mortgage loans, and carry a higher rate of interest to offset additional risk. Generally, consumer loans are written for terms not to exceed ten years.

In addition, from time to time, Peoples Ohio originates commercial loans, secured by both real estate and based on the credit worthiness of the borrower. Commercial loan originations are attempted to be done in a conservative manner and require careful loan underwriting, particularly in the areas of capacity to repay, collateral and credit terms. These principles are followed to protect Peoples Ohio against excessive risk in the loan portfolio. Management takes into account local business conditions, the economy, and future capital requirements of Peoples Ohio when originating these loans. Peoples Ohio refinances existing commercial loans if doing so will improve Peoples Ohio’s collateral position or otherwise strengthen the loan. The commercial loan portfolio, while a relatively small portion of the entire loan portfolio, has begun to grow over time as a result of more aggressively pursuing creditworthy commercial borrowers in Peoples Ohio’s lending area.

Loan Portfolio Composition. The following table presents certain information concerning of the composition of the consolidated loan portfolio at the dates indicated.

June 30,

2005

2004

2003

2002

2001

Percent of
Total

Percent of
Totals

Amount

Loans

Amount

Loans

Amount

Loans

Amount

Loans

Amount

Loans

(Dollars in Thousands)

Real Estate Loans:

1-4 family	$	111,985	63.09	%	$	100,629	64.59	%	$	115,175	69.34	%	$	149,612	71.84	%	$	150,711	73.96	%
Commercial	29,952		16.88		27,582		17.70		25,021		15.06		27,055		12.99		23,467		11.52
Total real estate	141,937		79.97		128,211		82.29		140,196		84.40		176,667		84.83		174,118		85.48
Construction	18,281		10.30		12,315		7.90		12,802		7.71		14,660		7.04		12,817		6.29
Commercial business	6,805		3.83		6,714		4.31		5,573		3.36		5,529		2.66		5,323		2.61
Consumer	1,681		0.95		2,282		1.47		2,452		1.48		5,146		2.47		4,769		2.34
Home improvement	8,598		4.84		6,016		3.86		4,772		2.87		5,774		2.77		6,065		2.98
Secured by deposit account	187		0.11		264		0.17		290		0.18		470		0.23		612		0.30
Total loans, gross	177,489		100.00	%	155,802		100.00	%	166,085		100.00	%	208,246		100.00	%	203,764		100.00	%
Less:
Net deferred fees	84				177				209				132				163
Undisbursed portion of loans	5,493				3,842				4,405				5,516				5,275
Allowance for loan losses	725				1,048				862				882				843
Total loans, net	$	171,187			$	150,735			$	160,609			$	201,716			$	197,483

Loan Portfolio Maturity Schedule. The following table sets forth certain information regarding the contractual maturity of Peoples Ohio’s loan portfolio by type of loan at June 30, 2005. Contractual principal repayments of loans do not necessarily reflect the actual term of Peoples Ohio’s loan portfolio. The average life of mortgage loans is substantially less than their contractual terms because of loan 3 prepayments and enforcement of “due on sale” clauses. The average life of mortgage loans tends to increase, however, when current mortgage loan rates substantially exceed rates on existing mortgage loans.

	Maturity Date During the Years Ending June, 30
	Within one year			One to five years			Over five years			Total
	(Dollars in Thousands)
Real Estate Loans:
1-4 family		$	3,939		$	10,873		$	97,173	$	111,985
Commercial		7,135			7,161			15,656		29,952
Total real estate		11,074			18,034			112,829		141,937
Construction		17,580			406			295		18,281
Commercial business		4,460			1,332			1,013		6,805
Consumer		1,308			373			—		1,681
Home improvement		5,415			1,082			2,101		8,598
Secured by deposit account		93			94			—		187
Total loans, gross		$	39,930		$	21,321		$	116,238	$	177,489

The following table sets forth, at June 30, 2005, the dollar amount of gross loans receivable, contractually due after June 30, 2006, and whether such loans have fixed interest rates or adjustable interest rates.

	Due after June 30, 2006
	With fixed interest rates			With adjustable interest rates			Total
	(Dollars in Thousands)
Real Estate Loans:
1-4 family		$	100,008		$	8,038	$	108,046
Commercial		18,057			4,760		22,817
Total real estate		118,065			12,798		130,863
Construction		640			61		701
Commercial business		2,345			—		2,345
Consumer		373			—		373
Home improvement		3,119			64		3,183
Secured by deposit account		94			—		94
		$	124,636		$	12,923	$	137,559

Residential Lending. The largest portion of Peoples Ohio’s loans are made for the purpose of enabling borrowers to purchase and construct real property secured primarily by first liens on such property. At June 30, 2005, the net book value of Peoples Ohio’s total loan portfolio of $171.2 million represented approximately 85.6% of total assets. Approximately 63.1% of the total gross loan portfolio, or $112.0 million, consisted of loans secured by mortgages on one-to-four family residences. In addition, Peoples Ohio maintained a loan servicing portfolio of approximately $722,000 at June 30, 2005, as a result of its secondary mortgage market activities and participations.

At June 30, 2005, 24.7% of Peoples Ohio’s total gross loan portfolio consisted of adjustable-rate loans including adjustable-rate mortgages (“ARMs”). Most ARMs adjust based on changes in US Treasury Securities Indices. ARMs generally have been retained for Peoples Ohio’s own portfolio. At June 30, 2005, there were no adjustable-rate loans held for sale.

The original contractual loan payment period for one-to-four family residential loans originated by Peoples Ohio has typically been between 10 and 30 years. Historically, however, industry statistics and Peoples Ohio’s own experience have indicated the average life of long-term loans to be substantially less than the contractual period.

Peoples Ohio generates residential mortgage loan activity from several sources. The majority of the portfolio is obtained directly by Peoples Ohio’s own loan officers and referrals from local real estate brokers and construction contractors. Customer referrals are also important sources of new residential loans.

Peoples Ohio’s underwriting standards are intended to ensure that borrowers are sufficiently creditworthy, and all of Peoples Ohio’s lending is subject to written underwriting guidelines approved by Peoples Ohio’s Board of Directors. Detailed loan applications are designed to determine the borrower’s ability to repay the loan and certain information solicited in these applications is verified through the use of credit reports, financial statements and other confirmations.

Appraised values of collateral are primarily determined through on-site inspections supported by written reports and comparables performed by qualified independent appraisers approved by the Board of Directors. Appraisals on one-to-four family residential mortgage loans are required by Peoples Ohio’s Board to meet Federal Home Loan Mortgage Corporation (“FHLMC”) and regulatory guidelines. Peoples Ohio requires title insurance for most mortgage loan transactions. Borrowers also must obtain

hazard insurance prior to closing, with Peoples Savings Bank as the primary loss payee, and, when required, flood insurance.

Under current regulations of the OTS, a real estate loan may not exceed 100% of the appraised value of the security property at the time of origination. Peoples Ohio makes fixed-rate home loans or ARMs with loan-to-value ratios of up to 95% of the appraised value of the security property. Most loans which are approved have 80% or less loan-to-value ratios. In the past, for any mortgage loan, that part of the unpaid balance which exceeded 80% of the property’s value was generally insured or guaranteed by a private mortgage insurance company. More recently, this insurance has not been required. In fiscal 2005, approximately $3,504,000 in loans were originated in which the loan-to-value ratio was over 80%. This compares to approximately $4,090,000 originated in fiscal 2004. The outstanding balance of loans with a loan-to-value ratio over 80% at June 30, 2005 and 2004 was $6,940,000 and $14,418,000, respectively. Peoples Savings Bank’s Loan Committee approves all loans over $1,500,000. Any loans over $2,000,000 must be approved by the full Board of Directors.

Commercial Real Estate Loans. Peoples Ohio has supplemented its residential real estate lending activities by the origination of commercial real estate loans secured by office buildings and other income-producing properties. At June 30, 2005, Peoples Ohio had approximately $30.0 million (or 16.9% of its total loan portfolio) in commercial real estate loans. Peoples Ohio’s policy is to make commercial real estate loans secured by a first lien on the property and generally loan up to a maximum of 80% of the appraised value of the real estate as determined by an independent appraisal. Commercial real estate loans are inherently riskier than residential loans but offer higher interest rates. The decision to originate loans of this type is based on the economy, local business conditions, required capital standards, and the level of risk involving such loans. Management, from time to time, will refinance existing commercial loans, if doing so will improve Peoples Ohio’s collateral position or otherwise strengthen the loan, thereby lowering the overall risk of the loan.

All savings associations are required to conform to requirements on investing in loans secured by nonresidential real property so that such loans may not, in the aggregate, exceed 400% of the savings association’s capital. Peoples Savings Bank’s current capital would allow it to have more than $99.6 million invested in this category of assets.

Construction Loans. Peoples Ohio makes loans for the construction of residential and non-residential real estate. These loans generally convert, upon completion of construction, to residential and non-residential mortgage loans as described above. The construction loans are secured by a mortgage on the real property and disbursements are made based on the percentage of construction completed. At June 30, 2005, Peoples Ohio had approximately $18.3 million (or 10.3% of its total loan portfolio) in construction loans.

Commercial Loans. At June 30, 2005, Peoples Ohio had approximately $6.8 million (or 3.8% of its total loan portfolio) in commercial loans. Peoples Ohio originates commercial loans in a conservative manner, based upon the creditworthiness of the borrower. Management also takes into consideration such factors as business conditions of the economy as a whole, local business conditions, required capital standards and the current level of risk found in Peoples Ohio’s commercial loan portfolio, when originating these loans.

Consumer Loans. At June 30, 2005, Peoples Ohio had approximately $1.7 million (or 1.0% of its total loan portfolio) in consumer loans. Consumer loans generally are made for terms not to exceed ten years and typically are made for five years or less at fixed rates. Peoples Ohio also offers real estate secured variable rate lines of credit for a term not to exceed one year with interest rates tied to the Prime Rate, as established by the nation’s largest companies and published in The Wall Street Journal.

Home Improvement Loans. At June 30, 2005, Peoples Ohio had approximately $8.6 million (or 4.8% of its total loan portfolio) in home improvement loans. Home improvement loans generally are made for terms not to exceed 15 years and typically are made for 5 years or less at fixed or variable rates. Similar to consumer loans, demand for residential real estate secured home improvement loans continues to be strong due to certain provisions of the U.S. Tax Code which permit the deduction of home mortgage interest to a greater extent than interest paid on other borrowings. Peoples Ohio also offers real estate secured variable rate lines of credit 5 for a term not to exceed one year with interest rates tied to the Prime Rate, as established by the nation’s largest companies and published in The Wall Street Journal.

Origination and Sale of Loans. Peoples Ohio originates residential real estate, commercial real estate, commercial and consumer loans. Peoples Ohio may purchase loans or mortgage-backed securities during periods of slackened loan demand or increased competition in local markets. As of June 30, 2005, loans secured by collateral outside of Ohio represented less than 1% of total loans.

Peoples Ohio has in the past sold loans in the secondary mortgage market. Peoples Ohio has sold primarily fixed-rate residential mortgage loans and, as of June 30, 2005, is servicing approximately $722,000 of such loans for the benefit of others.

The following table shows total loan origination and advances, repayment and sale activity, during the periods indicated.

	Year Ended June 30,
	2005			2004			2003
	(In thousands)
Loans originated:
Mortgage loans	$	44,528		$	32,788		$	31,400
Consumer loans	7,703			6,768			4,517
Commercial loans	6,960			16,530			3,591
Total loans originated	59,191			56,086			39,508
Loan principal repayments	(37,411		)	(66,517		)	(82,288		)
Other net items(1)	(1,328		)	557			1,673
Net loan increase/(decrease)	$	20,452		$	(9,874	)	$	(41,107	)

(1) Consists of loans in process, loans transferred to real estate owned, and loan loss reserves.

Delinquencies and Classified Assets

Delinquent Loans. Loans are considered delinquent and late charges are generally assessed when permitted by the loan contract if a borrower’s payment is past due beyond any applicable grace period. When a borrower fails to make a required payment on a loan, Peoples Ohio sends a written notice to the borrower. If the delinquency has not been cured by the time the loan becomes 30 days past due, Company personnel attempt to contact the borrower by telephone or mail. In most cases, delinquencies are cured promptly. Peoples Ohio may attempt to work out a repayment schedule depending upon the facts and circumstances of each case. After a real estate loan is 90 days delinquent, if management determines that collection is unlikely, Peoples Ohio’s attorneys will generally institute a foreclosure action.

Accrual of interest on potential problem loans is excluded from income when in the opinion of management this is warranted. Income is subsequently recognized only to the extent cash payments are received and the principal balance is expected to be recovered. Such loans are restored to an accrual status only if the loan is brought contractually current and the borrower has demonstrated the ability to make future payments of principal and interest.

If a foreclosure action is instituted on real estate-secured loans and the loan is not reinstated, paid in full or refinanced, the property is sold at a sheriff’s sale, at which Peoples Ohio may be the buyer. If

acquired, such acquired property is listed in Peoples Ohio’s Real Estate Owned (“REO”) account, until the property is sold. Peoples Ohio is permitted to finance sales of REO properties. Should the sheriff’s sale not produce sufficient proceeds to pay the loan balance and court costs, Peoples Ohio’s attorneys, where appropriate, may pursue the collection of a deficiency judgment against the responsible borrower.

If a collection action is instituted on a consumer or commercial loan, Peoples Ohio, in compliance with the loan documents and the law, may repossess and sell the collateral security for the loan through private, commercially reasonable sales or through judicially ordered sales when necessary. Should the sale result in a deficiency owing to Peoples Ohio, the borrowers generally are pursued where such action is deemed appropriate.

Classified Assets and Delinquencies. Current thrift regulations provide for a classification system for problem assets of insured institutions which covers all problem assets. Under this classification system, problem assets of OTS-regulated thrift institutions are classified as “substandard”, “doubtful” or “loss,” depending on the presence of certain characteristics as discussed below.

An asset is considered “substandard” if the current net worth and paying capacity of the obligor or of the collateral pledged, if any, seems inadequate. “Substandard” assets include those characterized by the “distinct possibility” that the thrift institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified “loss” are those considered “uncollectible” and of such little value that the continuance as assets without the establishment of a specific loss allowance is not warranted.

When an OTS-regulated institution classifies problem assets as either substandard or doubtful, it is required to establish general allowances for loan losses in an amount deemed prudent by management. General allowances represent loss allowances which have been established to recognize the inherent risk associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When an OTS-regulated institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of the amount of the asset so classified or to charge off such amount. An institution’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the OTS, which can order the establishment of additional general or specific loss allowances. In addition to loans that have been classified, Peoples Ohio has established a category of loans known as “special mention” loans. Such loans are closely supervised by management either because of payment history, deterioration of collateral or some other factor which has come to management’s attention. These loans may be delinquent, but are not considered substandard under OTS regulations. At June 30, 2005, Peoples Ohio had loans totaling $3,268,000 classified as “special mention.”

In connection with the filing of its periodic reports with the OTS, Peoples Ohio regularly reviews the problem loans in its portfolio to determine whether any loans require classification in accordance with applicable regulations. At June 30, 2005, Peoples Ohio had classified the following asset amounts:

	Substandard			Doubtful			Loss
	(In thousands)
Real estate loans:
1-4 family loans		$	426		$	—		$	—
Commercial		155			—			—
Total real estate		581			—			—
Consumer loans		77			—			—
Commercial loans		58			—			—
Total classified loans		716			—			—
Real estate owned (“REO”)		—			—			—
Other assets		—			—			—
Total classified assets		$	716		—			—

Management is not aware of any loans where possible credit problems of borrowers cause serious doubts as to the ability of such borrower to comply with the loan terms and where Peoples Savings Bank anticipates a loss, which are not otherwise included in the table, or narrative above.

At June 30, non-performing assets in Peoples Savings Bank’s portfolio for each of the years indicated were as follows:

	2005			2004			2003			2002			2001
	(Dollars in thousands)
Non-accrual loans(1)	$	415		$	683		$	634		$	352		$	196
Accruing loans contractually past due 90 days or more	334			565			2,559			637			293
Total	$	749		$	1,248		$	3,193		$	989		$	489
Ratio of non-performing assets and accruing loans contractually past due 90 days or more to total assets	0.38		%	0.65		%	1.54		%	0.45		%	0.23		%

(1) Loans are placed in the non-accrual category when, in the judgment of management, the collection of interest due on the loan is no longer reasonably assured. The gross interest income that would have been recorded during the fiscal year ended June 30, 2005 if the non-accrual loans had been current in accordance with their original terms and had been outstanding throughout the period was $21,000 and the amount of interest income on those loans that was included in net income for the same period was $21,000.

Real Estate Owned. Peoples Ohio had no REO property at June 30, 2005 or June 30, 2004.

Allowance for Loan Losses

Peoples Ohio utilizes the reserve method of accounting for loan losses. Under this method, provisions for loan losses are charged to operations as an allowance for loan losses, and recognized loan losses are charged to the allowance; likewise, recognized loan recoveries are credited to the allowance. Management evaluates the adequacy of the allowance taking into consideration Peoples Ohio’s past loan loss experience, known and inherent risks in the portfolio, adverse situations which may affect the borrower’s ability to repay, overall portfolio quality and current and prospective economic condition. At June 30, 2005, Peoples Ohio’s loan loss allowance reserve was $725,000.

The following table sets forth certain information on the changes in Peoples Ohio’s allowance for loan losses for the periods indicated. Also see Note 4 of Notes to Consolidated Financial Statements.

Changes in the allowance for loan losses:

	Year Ended June 30,
	2005			2004			2003			2002			2001
	(Dollars in thousands)
Beginning balance	$	1,048		$	862		$	882		$	843		$	888
Charge-offs
Mortgage	(415		)	(142		)	(96		)	(25		)	(4		)
Consumer	(40		)	(23		)	(30		)	(47		)	(42		)
Commercial	(70		)	—			(63		)	(39		)	(5		)
Total charge-offs	(525		)	(165		)	(189		)	(111		)	(51		)
Recoveries
Mortgage	11			1			0			0			0
Consumer	8			20			25			4			6
Commercial	—			—			4			8			0
Total recoveries	19			21			29			12			6
Net (charge-offs)	(506		)	(144		)	(160		)	(99		)	(45		)
Provision for loss	183			330			140			138			0
Ending balance	$	725		$	1,048		$	862		$	882		$	843
Ratio of net charge-offs during the period to average loans outstanding during the period	0.32		%	0.09		%	0.09		%	0.05		%	0.02		%

The following table sets forth an analysis of Peoples Ohio’s allowance for loan losses allocated by type of loan:

2005

2004

2003

2002

2001

Percent of

loans in

category to

Category Allocation

Amount

Total
Loans

Amount

Total
Loans

Amount

Total
Loans

Amount

Total
Loans

Amount

Total
Loans

Mortgage(1)	$	614	90.27	%	$	680	90.19	%	$	635	92.11	%	$	270	91.87	%	$	253	91.77	%
Consumer	50		5.90		66		5.50		73		4.53		221		5.47		211		5.62
Commercial	61		3.83		302		4.31		72		3.36		191		2.66		179		2.61
Unallocated	—		—		—		—		82		—		200		—		200		—
Total	$	725	100.00	%	$	1,048	100.00	%	$	862	100.00	%	$	882	100.00	%	$	843	100.00	%

(1) Includes construction loans

Investment Activities

Peoples Ohio invests in various types of liquid assets including United States Treasury obligations, securities of various federal agencies, municipal obligations, and federal funds.

In addition, as a member of the FHLB, Peoples Ohio is required to purchase and hold stock in the FHLB in an amount equal to at least 1% of the aggregate principal amount of Peoples Ohio’s unpaid residential mortgage loans, home purchase contracts and similar obligations at the beginning of each year, or 5% of its FHLB advances, whichever is greater.

The following table sets forth an analysis of Peoples Ohio’s investment portfolio at the dates indicated:

	At June 30,
	2005				2004				2003
	Book Value		Percent of Total		Book Value		Percent of Total		Book Value		Percent of Total
	(Dollars in Thousands)
Held to maturity (HTM) securities:
U.S. Government obligations	$	103	2.33	%	$	104	0.64	%	$	100	0.57	%
Municipal obligations	101		2.28		100		0.62		100		0.57
	204		4.61		204		1.26		200		1.14
	257		5.81		312		1.92		579		3.32
Mortgage-backed securities	461		10.42		516		3.18		779		4.46
Total HTM securities	1,843		41.68		11,397		70.17		6,312		36.14
Available for sale (AFS) securities:
U.S. Government agencies	—		0.00		—		0.00		8,548		48.95
Other securities	1,843		41.68		11,397		70.17		14,860		85.09
Mortgage-backed securities	2,118		47.90		4,329		26.65		1,827		10.46
Total AFS securities	3,961		89.58		15,726		96.82		16,687		95.54
Total investment securities	$	4,422	100.00	%	$	16,242	100.00	%	$	17,466	100.00	%

The composition and maturities of Peoples Ohio’s investment securities and mortgage-backed securities at June 30, 2005 are indicated in the following table:

	Book Value maturing within																Total investment securities
	Within One Year				>1-5 Years				>5-10 Years				>10 Years				Book Value		Market Value
U.S. Government obligations		$	0			$	1,946			$	0			—			$	1,946	$	1,949
Municipal obligations		—				—				—				$	101		101		104
Mortgage-backed securities		—				—				—				—			2,375		2,394
Total investment securities		$	0			$	1,946			$	0			$	101		$	4,422	$	4,447
Weighted average yield		0		%		3.17		%		0		%		6.38		%

Deposits

Peoples Ohio offers a number of different deposit accounts, including passbook, interest-bearing checking (“NOW” and “Super NOW”), money market deposit, and specialized money market accounts, such as Peoples Ohio’s Executive Fund account, Money Growth Fund and certificate accounts. The rates and minimum balances for NOW, Super NOW and money market deposit accounts (“MMDA”) are set by Peoples Ohio and are adjusted periodically to respond to market and competitive conditions. At June 30, 2005 the balance of core deposits (savings, money market and demand deposit accounts) totaled $85,850,000, or 67.9%, of total deposits. The flow of deposits is influenced significantly by general economic conditions, changes in money market rates, prevailing interest rates and competition. Peoples Ohio’s deposits are obtained predominantly from the areas in which its branch offices are located. Peoples Ohio relies primarily on customer service and long-standing relationships with customers to attract and retain these deposits; however, market interest rates and rates offered by competing financial institutions significantly affect Peoples Ohio’s ability to attract and retain deposits.

Peoples Ohio’s policy with respect to deposits is to attract deposits from local residents. Peoples Ohio does not solicit deposits from areas outside its market area nor does it accept deposits from brokers. Peoples Ohio believes that brokered deposits tend to be more volatile and hence provide a less stable

deposit base. Out-of-state deposits are generally held by former residents who have elected to maintain a relationship with Peoples Ohio. As of June 30, 2005, less than 1% of Peoples Ohio’s deposits are derived from out-of-state sources.

The following table presents the amount of Peoples Ohio’s certificates of deposit of $100,000 or more by the time remaining until maturity as of June 30, 2005, and June 30, 2004:

	June 30,
Maturity	2005		2004
	(In thousands)
Three months or less	$	474	$	863
Over 3 months to 6 months	385		769
Over 6 months to 12 months	10,811		6,564
Over twelve months	4,610		1,035
Total	$	16,280	$	9,231

The following table contains information regarding deposit account activity including interest credited, for the periods shown:

	For the Year Ended June 30,
	2005			2004			2003
	(Dollars in thousands)
Net increase (decrease) before interest	$	10,969		$	(4,648	)	$	(5,044	)
Interest credited	1,328			1,242			2,227
Deposit liabilities increase/(decrease)	$	12,297		$	(3,406	)	$	(2,818	)
Weighted average cost of deposits during the period	1.13		%	1.04		%	1.95		%
Weighted average cost of deposits at end of period	1.16		%	1.15		%	1.28		%

The following table represents certificates of deposit and other time deposits classified by weighted average rate and maturity at June 30, 2005:

	Less than 1 Year			1-2 Years		2-3 Years			Thereafter			Total
	(In Thousands)
1.00 to 3.99%		$	23,638	$	9,574		$	3,298		$	1,263	$	37,773
4.00 to 6.99%		443		1,397			108			949		2,897
7.00 to 8.99%		—		—			—			—		—
Total		$	24,081	$	10,971		$	3,406		$	2,212	$	40,670

Borrowings

Peoples Ohio can obtain advances from the FHLB of Cincinnati secured by the FHLB stock owned by Peoples Ohio, certain mortgage loans and other assets. FHLB advances are made under several programs, each of which has its own rate and range of maturities. FHLB advances are generally available to meet seasonal and other withdrawals and to expand lending. At June 30, 2005, Peoples Ohio had advances of $46,123,000 outstanding from the FHLB of Cincinnati. See Note 7 of the Consolidated Financial Statements for further detail.

The following table presents the maximum amount of Peoples Ohio’s FHLB advances outstanding at June 30, 2005, 2004 and 2003, and the average aggregate balances of FHLB advances outstanding during the years ended June 30, , 2005, 2004 and 2003:

	June 30,
	2005			2004			2003
	(In thousands)
Maximum amount of FHLB advances outstanding during period	$	53,295		$	63,329		$	74,174
Average amount of FHLB advances outstanding during period	50,093			56,636			71,889
Amount of FHLB advances outstanding at end of period	$	46,123		$	53,295		$	63,329
Weighted average interest rate during period	5.17		%	5.12		%	5.11		%
Weighted Average interest rate at end of period	4.66		%	4.41		%	5.33		%

Employees

At June 30, 2005 Peoples Ohio had a total of 51 full-time employees and 19 part-time employees, none of who were represented by a collective bargaining unit. Peoples Ohio considers its relations with its employees to be good.

Regulation and Supervision

General. The following is a summary of certain statutes and regulations affecting Peoples Ohio and Peoples Savings Bank. This summary is qualified in its entirety by reference to such statutes and regulations.

Peoples Ohio is a savings and loan holding company within the meaning of the Home Owners Loan Act, as amended (the “HOLA”). Consequently, Peoples Ohio is subject to regulation, examination and oversight by the OTS and must submit periodic reports to the OTS concerning its activities and financial condition. In addition, as a corporation organized under Ohio law, Peoples Ohio is subject to provisions of the Ohio Revised Code applicable to corporations generally.

As an Ohio savings and loan association, Peoples Savings Bank is subject to regulation, examination and oversight by the Ohio Division of Financial Institutions (the “ODFI”). Because Peoples Savings Bank’s deposits are insured by the FDIC, Peoples Savings Bank also is subject to regulatory oversight by the FDIC. Peoples Savings Bank must file periodic reports with the OTS concerning its activities and financial condition. Examinations are conducted periodically by federal and state regulators to determine whether Peoples Savings Bank is in compliance with various regulatory requirements and is operating in a safe and sound manner. Peoples Savings Bank is a member of the FHLB and is subject to certain regulations promulgated by the Board of Governors of the Federal Reserve System (the “FRB”).

Ohio Savings and Loan Regulation. The ODFI is responsible for the regulation and supervision of Ohio savings and loan associations in accordance with the laws of the State of Ohio and imposes assessments on Ohio associations based on their asset size to cover the costs of supervision and examination. Ohio law prescribes the permissible investments and activities of Ohio savings and loan associations, including the types of lending that such associations may engage in and the investments in real estate, subsidiaries and corporate or government securities that such associations may make. The ability of Ohio associations to engage in these state-authorized investments and activities is subject to oversight and approval by the FDIC, if such investments or activities are not permissible for a federally-chartered savings association. The ODFI also has approval authority over any mergers involving, or acquisitions of control of, Ohio savings and loan associations. The ODFI may initiate certain supervisory measures or formal enforcement actions against Ohio associations. Ultimately, if the grounds provided by law exist, the Superintendent may place an Ohio association in conservatorship or receivership.

In addition to being governed by the laws of Ohio specifically governing savings and loan associations, Peoples Savings Bank is also governed by Ohio corporate law, to the extent such law does not conflict with the laws specifically governing savings and loan associations.

Office of Thrift Supervision. The OTS is an office of the Department of the Treasury and is responsible for the regulation and supervision of all federally-chartered savings associations and all other savings associations the deposits of which are insured by the FDIC in the Savings Association Insurance Fund (“SAIF”). The OTS issues regulations governing the operation, asset composition and capital requirements of savings associations, transactions with insiders and affiliates, capital distributions and similar matters, and it regularly examines such associations and imposes assessments on savings associations based on their asset size to cover the costs of general supervision and examination. The OTS also may initiate enforcement actions against savings associations and certain persons affiliated with them for violations of laws or regulations or for engaging in unsafe or unsound practices. If the grounds provided by law exist, the OTS may appoint a conservator or receiver for a savings association.

Savings associations are subject to regulatory oversight under various consumer protection and fair lending laws. These laws govern, among other things, truth-in-lending disclosures, equal credit opportunity, fair credit reporting and community reinvestment. Failure to abide by federal laws and regulations governing community reinvestment could limit the ability of an association to open a new branch or engage in a merger. Community reinvestment regulations evaluate how well and to what extent an institution lends and invests in its designated service area, with particular emphasis on low- to moderate-income communities and borrowers in that area.

As a savings and loan holding company within the meaning of the HOLA, Peoples Ohio has also registered with the OTS and is subject to OTS regulations, examination, supervision and reporting requirements.

Federal Deposit Insurance Corporation. The FDIC is an independent federal agency that insures the deposits, up to prescribed statutory limits, of federally insured banks and savings and loan associations and safeguards the safety and soundness of the banking and savings and loan industries. The deposit accounts of Peoples Savings Bank are insured by the FDIC up to the prescribed limits. The FDIC has examination authority over all insured depository institutions, including Peoples Savings Bank, and has authority to initiate enforcement actions against federally-insured savings associations if the FDIC does not believe the OTS has taken appropriate action to safeguard safety and soundness and the deposit insurance fund.

Properties

Peoples Ohio conducts its business from six offices located in the Miami and Montgomery County area. The following table sets forth information regarding Peoples Ohio’s offices all of which are owned by Peoples Ohio through Peoples Savings Bank.

Location	Opened		Net Book Value			Square Footage
Main Office		1988		$	2,066,000		13,600
635 South Market, Troy
Westside Office		1978		188,000			4,400
1580 West Main, Troy
Northside Office		1982		144,000			1,320
927 North Market, Troy
Trust Department		1995		344,000			5,595
14 Weston Road, Troy
Piqua Office		1997		575,000			4,360
126 High Street, Piqua
Clayton Office		2000		738,000			2,200
Clayton, Ohio

Legal Proceedings

Peoples Ohio is not engaged in any legal proceedings of a material nature at the present time. From time-to-time, Peoples Ohio is a party to legal proceedings in the ordinary course of business wherein it enforces its security interest in loans made by it.

Market Price of and Dividends on Common Stock and Related Stockholder Matters

As of June 30, 2005, Peoples Ohio had approximately 600 shareholders of record of its common stock. Peoples Ohio’s common stock is traded on the over-the-counter stock market under the symbol “POHF.” Sweeney Cartwright & Co. and Robert W. Baird, Investments act as market makers for Peoples Ohio’s stock. Although Peoples Ohio does not have knowledge of prices paid on all transactions, according to information furnished by brokers who deal in Peoples Ohio’s common stock, the following prices represent the price ranges recorded for the periods shown.

	Market Price				Cash
Fiscal 2005	Low		High		Dividends
1st Qtr.	$	4.15	$	4.24		$	0.065
2nd Qtr.	4.08		4.45			—
3rd Qtr.	3.95		4.10			0.065
4th Qtr.	3.85		4.80			—
Fiscal 2004
1st Qtr.	$	4.15	$	4.40		$	0.060
2nd Qtr.	4.12		4.40			—
3rd Qtr.	4.15		4.20			0.060
4th Qtr.	4.16		4.20			—

The following table summarizes Peoples Ohio’s equity compensation plans as of June 30, 2005:

	Number of Securities To be Issued Upon Exercise of Options		Weighted Average Exercise Price of Outstanding Options			Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities included in first column)
Equity compensation plans approved by shareholders		615,473		$	4.15		420,500
Equity compensation plans not approved by shareholders		—					—
Total		615,473					420,500

Ownership Of Peoples Ohio Common Stock

The following table sets forth certain information regarding the beneficial ownership of the Peoples Ohio common stock as of the record date for this meeting, April 21, 2006, by (1) the directors and certain named executive officers of Peoples Ohio, (2) all directors and executive officers of Peoples Ohio as a group, and (3) each other person who is known by Peoples Ohio to own beneficially 5% or more of the common stock. Unless otherwise indicated, the named beneficial owner has sole voting and investment power with respect to the shares.

Beneficial Owner	Number of Shares Beneficially Owned			Percent of Class
E. Joseph Lowe(1)		698,052			9.50	%
Ronald B. Scott(2)		520,420	(2)		6.84
Thomas E. Robinson		355,000	(3)		4.83
William J. McGraw		300,184	(4)		4.08
Donald Cooper		275,978	(5)		3.75
Richard W. Klockner		241,756	(6)		3.28
James S. Wilcox		106,848	(7)		1.46
Richard J. Dutton		49,319	(8)		*
Linda A. Daniel		23,564	(9)		*
All directors and executive officers as a group		1,864,069	(10)		24.24

* Less than 1%.

(1) The information in this chart is based on a Schedule 13G Report filed by the above-listed person(s) with the Securities and Exchange Commission (the “SEC”) containing information concerning shares held by the shareholder. It does not reflect any changes in those shareholdings which may have occurred since the date of such filing. The address of the shareholder as disclosed in the Schedule 13G is 901 North Miami Avenue, Miami, Florida 33136.

(2) Includes 267,050 shares issuable pursuant to options exercisable currently or within 60 days of the record date. The address of the shareholder is 194 Littlejohn Road, Troy, Ohio 45373.

(3) Includes 3,000 shares issuable pursuant to options exercisable currently or within 60 days of the record date.

(4) Includes 16,500 shares issuable pursuant to options exercisable currently or within 60 days of the record date.

(5) Includes 7,500 shares issuable pursuant to options exercisable currently or within 60 days of the record date.

(6) Includes 16,500 shares issuable pursuant to options exercisable currently or within 60 days of the record date.

(7) Includes 6,000 shares issuable pursuant to options exercisable currently or within 60 days of the record date.

(8) Includes 9,000 shares issuable pursuant to options exercisable currently or within 60 days of the record date.

(9) Includes 23,264 shares issuable pursuant to options exercisable currently or within 60 days of the record date.

(10) Includes 342,814 shares issuable pursuant to options exercisable currently or within 60 days of the record date.

Management’s Discussion and Analysis of Financial Condition and Results of Operation

Peoples Ohio is based in west central Ohio and is the parent company of Peoples Savings Bank. Peoples Ohio was formed during the year ended June 30, 2002 to provide various benefits to Peoples Savings Bank, as well as to take advantage of a more effective structure for expanded financial activities. Peoples Savings Bank, a state chartered savings bank, was originally chartered in 1890. Peoples Savings Bank is primarily engaged in attracting deposits from Miami and surrounding counties and originating mortgage loans throughout those same areas. In addition to traditional banking services, Peoples Savings Bank provides full trust services through its trust department. All references to Peoples Ohio include Peoples Savings Bank unless otherwise indicated.

Forward Looking Statements

In addition to historical information, this Annual Report may include certain forward-looking statements based on current management expectations. Peoples Ohio’s actual results could differ materially from those management expectations. Factors that could cause future results to vary from current management expectations include, but are not limited to, general economic conditions, legislative and regulatory changes, monetary and fiscal policies of the federal government, changes in tax policies, rates and regulations of federal, state and local tax authorities, changes in interest rates, deposit flows, the cost of funds, demand for loan products, demand for financial services, competition, changes in the composition or quality of Peoples Savings Bank’s loan and investment portfolios, changes in accounting principles, policies or guidelines, and other economic, competitive, governmental and technological factors affecting Peoples Ohio’s operations, markets, products, services and prices. A further description of the risks and uncertainties to the business are included in detail in “Description of Peoples Ohio—Business’’. Peoples Ohio does not undertake—and specifically disclaims any obligation—to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Application of Critical Accounting Policies

Peoples Ohio’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America and reporting practices followed within the thrift industry. The application of these principles requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; as this information changes, the financial statements could reflect different estimates, assumptions, and judgments.

Allowance for Loan Losses—The allowance for loan losses provides coverage for probable losses inherent in Peoples Ohio’s loan portfolio. Management evaluates the adequacy of the allowance for credit losses based on changes, if any, in underwriting activities, the loan portfolio composition (including product mix and geographic, industry or customer-specific concentrations), trends in loan performance, regulatory guidance and economic factors.

This evaluation is inherently subjective, as it requires the use of significant management estimates. Many factors can affect management’s estimates of specific and expected losses, including volatility of default probabilities, rating migrations, loss severity and economic and political conditions. The allowance is increased through provisions charged to operating earnings and reduced by net charge-offs.

Peoples Ohio determines the amount of the allowance based on relative risk characteristics of the loan portfolio. The allowance recorded for commercial loans is based on reviews of individual credit relationships and an analysis of the migration of commercial loans and actual loss experience. The allowance recorded for homogeneous consumer loans is based on an analysis of loan mix, risk characteristics of the portfolio, fraud loss and bankruptcy experiences, and historical losses, adjusted for current trends, for each homogeneous category or group of loans. The allowance for credit losses relating to impaired loans is based on the loan’s observable market price, the collateral for certain collateral-dependent loans, or the discounted expected cash flows using the loan’s effective interest rate.

Regardless of the extent of Peoples Ohio’s analysis of customer performance, portfolio trends or risk management processes, certain inherent but undetected losses are probable within the loan portfolio. This is due to several factors including inherent delays in obtaining information regarding a customer’s financial condition or changes in their unique business conditions, the judgmental nature of individual loan evaluations, collateral assessments and the interpretation of economic trends. Volatility of economic or customer-specific conditions affecting the identification and estimation of losses for larger non-homogeneous credits and the sensitivity of assumptions utilized to establish allowances for homogenous groups of loans are among other factors. Peoples Ohio estimates a range of inherent losses related to the existence of these exposures. The estimates are based upon Peoples Ohio’s evaluation of imprecision risk associated with the commercial and consumer allowance levels and the estimated impact of the current economic environment.

Other accounting policies followed by Peoples Ohio are presented in Note 1 to the consolidated financial statements. These policies, along with the disclosures presented in the other financial statement notes and in this financial review, provide information on how significant assets and liabilities are valued in the financial statements and how those values are determined.

Comparison of Results of Operations for the Six Months Ended December 31, 2005 and 2004

Peoples Ohio reported earnings of $990,000 for the six months ended December 31, 2005, an increase of $128,000, or 14.8%, from the $862,000 reported for the same period in 2004. Basic and fully diluted earnings per share were $0.14 for the six months ended December 31, 2005, an increase of $0.01 or 8.3% in comparison to the $0.12 for both basic and fully diluted earnings per share for the same period in 2004. Peoples Ohio’s return on average assets was 0.98% for the six months ended December 31, 2005 compared to 0.90% for the same period in 2004. Return on average equity was7.90% for the six months ended December 31, 2005, compared to 7.09% for the same period in 2004.

Net Interest Income was $3,756,000 for the six months ended December 31, 2005, an increase of $270,000 or 7.7% when compared to the $3,486,000 reported for six months ended December 31, 2004. Total interest income was $5,999,000 for the six months ended December 31, 2005, an increase of $536,000, or 9.8% from the $5,463,000 reported during the six months ended December 31, 2004. This increase in interest income was partially offset by a $266,000 or 13.5% increase in interest expense from $1,977,000 for the six months ended December 31 2004, to $2,243,000 for the six months ended December 31, 2005.

Average loans outstanding increased from $155,000,000 during the six months ended December 31, 2004, to $178,000,000 during the six months ended December 31, 2005. This increase was the result of strong demand for residential construction, commercial real estate and home equity loans during the period and a continued effort by management to grow this shorter-term portion of its loan portfolio. The increase in average loans outstanding was mitigated by the continued low interest rate environment’s impact on the average yield of Peoples Ohio’s loan portfolio. Management noted that the average yield on Peoples Ohio’s loan portfolio declined 10 basis points from 6.45% during the six months ended December 31, 2004 to 6.35% during the six months ended December 31, 2005.

Interest expense was $2,243,000 for the six months ended December 31, 2005, $266,000 or 13.5%, greater than the $1,977,000 recorded for the six months ended December 31 2004. While interest expense on all types of deposits grew, this increase was primarily attributable to the increase in interest paid on certificates of deposit. Interest expense on certificates of deposit was $669,000, $338,000 or 102.1% higher than the $331,000 recorded in six months ended December 31, 2004. The average balance of certificates of deposit increased by $13,274,000 or 56.2% from $23,606,000 for the six months ended December 31, 2004, to $36,880,000 for six months ended December 31, 2005. In addition to this increase in average certificates of deposit outstanding, the average rate paid on those certificates increased 78 basis points, from 2.82% during the six months ended December 31, 2004, to 3.60% during the six months ended December 31 2005.

The increase in interest expense was partially offset by a decline in interest expense paid on FHLB advances. Interest expense paid on FHLB advances was $1,252,000, for the six months ended December 31, 2005, $159,000 or 11.3% lower than the $1,411,000 recorded in the six months ended December 31, 2004. While the average balance of FHLB advances remained fairly stable, increasing $927,000, from $55,320,000 for the six months ended December 31, 2004 to $56,247,000 for the six months ended December 31, 2005, the average rate paid on those advances declined 64 basis points, from 5.06% during the six months ended December 31 2004, to 4.42% during the same period in 2005.

The provision for loan losses was $60,000 for the six months ended December 31, 2005 and the same period in 2004. The provision for both periods reflects management’s analysis of Peoples Savings Bank’s loan portfolio based on information that is currently available to it at such time. In particular, management considers the level of non-performing loans and potential problem loans. Net charge-offs for the six months ended December 31, 2005 were $0 compared to $270,000 during the same period in 2004. While management believes that the allowance for loan losses is sufficient based on information currently available to it, no assurances can be made that future events, conditions, or regulatory directives will not result in increased provisions for loan losses which may adversely effect income.

Noninterest income was $1,171,000 for six months ended December 31, 2005, $134,000 or 12.9% greater than the $1,037,000 reported for the six months ended December 31, 2004. The increase was almost entirely attributable to a $121,000 gain on the sale of Peoples Savings Bank’s credit card portfolio during the period.

Noninterest expense was $3,415,000 for six months ended December 31, 2005, $234,000 or 7.4% higher than the $3,181,000 reported for the six months ended December 31, 2004. Increases in salaries and employee benefits were primarily responsible for the increase: salaries and employee benefits increased $245,000 or 17.3% and professional services increased $126,000 or 73.7%. These increases in noninterest expense were partially offset by a decline in data processing fees of $50,000 or 14.4%, a decline in State of Ohio franchise taxes of $36,000 or 24.0% and a decline in other noninterest expense of $49,000 or 7.4%.

The increase in salaries and employee benefits was due to the addition of a new commercial lending officer and a banking center manager late in the fourth quarter of fiscal year 2005. The balance of the increase in salary and employee benefits was due to regular annual increases. The increase in other professional services was attributable to services provided in conjunction with Peoples Ohio’s pending sale. Partially offsetting these increases were declines in data processing fees and State of Ohio franchise taxes. The decline in data processing fees were the result of fees charged by one of the trust department’s third-party service providers in the first quarter of fiscal 2005 that were not incurred in the current period. The decline in State of Ohio franchise taxes was the result of strategies implemented in the previous year to lower Peoples Ohio’s franchise tax expense. The decline in other noninterest expense, as well as, several of the other noninterest expense categories was the result of management’s continued focus on controlling Peoples Savings Bank’s noninterest expense.

Total income tax expense was $462,000 (an effective tax rate of 31.8%) for the six months ended December 31, 2005, compared to $419,000 (an effective tax rate of 32.7%) during the six months ended December 31, 2004.

Comparison of Financial Condition at December 31, 2005 and June 30, 2005

Total consolidated assets of Peoples Ohio at December 31, 2005 were $204,042,000, as compared to $199,881,000 at June 30, 2005, an increase of $4,161,000 or 2.1%.

Cash and cash equivalents declined $3,088,000 or 34.3%, from $8,992,000 at June 30, 2005 to $5,904,000 at December 31, 2005. Management uses its short-term “cash accounts” to hold funds generated from these regular banking activities as it evaluates investment (loan) alternatives.

Net loans increased $7.5 million or 4.4 %, from $171,187,000 at June 30, 2005, to $178,696,000 at December 31, 2005. The following table illustrates changes in Peoples Savings Bank’s loan portfolio by category for each period presented.

	Balance December 31, 2005 (000’s)				Balance June 30, 2005 (000’s)			Change ($000’s)			Change (%)
Residential single-family mortgages		$	120,596		$	111,985		$	8,611			7.7	%
Other residential and commercial mortgages		28,588			29,952			(1,364		)		(4.6	)
Total mortgage loans		149,184			141,937			7,247				5.1
Construction		18,344			18,281			63				0.3
Commercial business		7,655			6,805			850				12.5
Consumer		1,249			1,681			(432		)		(25.7	)
Home improvement		9,540			8,598			942				11.0
Deposit and other		174			187			(13		)		(7.0	)
Gross loans		186,146			177,489			8,657				4.9
Deferred loan fees		(49		)	(84		)	35				41.7
Undisbursed portion of loans		(6,616		)	(5,493		)	(1,123		)		(20.4	)
Allowance for loan losses		(785		)	(725		)	(60		)		(8.3	)
Total loans, net		$	178,696		$	171,187		$	7,509			4.4	%

The allowance for loan losses increased slightly to $785,000 at December 31, 2005 from $725,000 June 30, 2005. This was the result of a provision for loan losses of $60,000 during the quarter ended December 31, 2005. The ratio of Peoples Ohio’s allowance for loan losses to gross loans at December 31, 2005 increased slightly to 0.42% from 0.41% at June 30, 2005. The allowance for loan losses is maintained to absorb loan losses based on management’s continuing review and evaluation of the loan portfolio and its judgment regarding the impact of economic conditions on the portfolio.

The following table compares non-performing loans, which are loans past due 90 days or more and non-accruing loans, at December 31, 2005 and June 30, 2005.

	December 31, 2005			June 30, 2005
Past due 90+ and still accruing		$	238,000	$	334,000
Non-accrual		1,014,000		415,000
Total non-performing loans		$	1,252,000	$	748,000

Peoples Savings Bank’s overall asset quality declined during the period with non-performing loans increasing $504,000, from $748,000 at June 30, 2005 to $1,252,000 at December 31, 2005.

Loans past-due 90 days or more and still accruing decreased from $334,000 at June 30, 2005 to $238,000 at December 31, 2005. The decline was attributable to the classification of three delinquent relationships totaling $146,000, as non-accrual during the period (see further discussion below), and the sale during the period of property securing a delinquent loan ($123,000) resulting the full repayment of the

past-due loan. These declines were offset by deterioration in six other credit relationships. Five are single-family residential properties in which Peoples Savings Bank holds a first mortgage position totaling $265,000 ($57,000, $91,000, $71,000, $31,000 and $15,000). The sixth is a commercial relationship totaling $25,000 in which Peoples Savings Bank holds a first mortgage position. Note: At June 30, 2005, one loan ($276,000) was designated as “non-accrual” although it was less than 30-days past due.

Non-accrual loans increased $599,000 during the period from $415,000 at June 30, 2005, to $1,014,000 at December 31, 2005. The increase was attributable to the designation of four relationships as non-accrual. The first relationship ($52,000 and $20,000), is secured by first and second mortgages on the borrower’s personal residence, which is valued at $86,000. The second loan ($55,000), is secured by a first mortgage on the borrower’s personal residence, which is valued at $77,000. The third relationship ($31,000), is secured by a first mortgage on commercial real estate, valued at $90,000, respectively. The fourth relationship ($453,000), is secured by a first mortgage on commercial real estate, which is valued at $760,000. Management continues to work closely with these borrowers to bring these loans current.

The ratio of Peoples Ohio’s allowance for loan losses to non-performing loans was 62.7% and 96.9% at December 31, 2005 and June 30, 2005, respectively. Management believes that the problems with these loans are isolated and not indicative of the loan portfolio in total.

Deposits decreased $7,412,000, or 5.6%, from $126,520,000 at June 30, 2005 to $119,108,000 at December 31, 2005. The following table illustrates changes in the various types of deposits for each period presented.

	Balance December 31, 2005 (000’s)			Balance June 30, 2005 (000’s)		Change ($000’s)			Change (%)
Noninterest bearing accounts		$	11,675	$	14,620	$	(2,945	)		20.1	%
NOW accounts		30,440		33,510		(3,070		)		(9.2	)
Super NOW accounts		1,087		1,271		(184		)		(14.5	)
Passbook accounts		20,519		24,049		(3,530		)		(14.7	)
Money market accounts		11,011		12,400		(1,389		)		(11.2	)
Certificates of deposit		44,376		40,670		3,706				9.1
Total deposits		$	119,108	$	126,520	($7,412		)		(5.9	)%

The decrease in NOW accounts was primarily attributable to lower account balances being maintained in public fund deposits, which represent the collateralized balances of local municipalities, school boards and other government agencies. This decrease in public fund deposits was primarily the result of the timing of real estate tax receipts by the local municipalities, many of which were collected during June, 2005 and transferred out of such public fund deposit accounts subsequent to June 30, 2005. The decline in all other transaction and savings deposit accounts was attributable to customers migrating from lower yielding deposit accounts to certificates of deposit in order to take advantage of higher yields.

Total stockholders’ equity increased from $24,925,000 at June 30, 2005, to $25,325,000 at December 31, 2005. The increase was the result of $990,000 in net earnings and $110,000, in net changes related to Peoples Ohio’s option plan and the exercise of options during the period ended December 31, 2005, offset by $513,000 in dividends paid to Peoples Ohio’s stockholders, a $35,000 increase in the unrealized loss on securities available for sale and $153,000 related to the net change in equity related to Peoples Ohio’s ESOP, during the period ended December 31, 2005.

Comparison of Results of Operations for Years Ended June 30, 2005 and 2004

Peoples Ohio reported earnings of $1,790,000 for the year ended June 30, 2005, an increase of $159,000, or 9.7% from the $1,631,000 reported for the same period in 2004. Basic earnings per share increased $0.03, or 13.6% from $0.22 for the year ended June 30, 2004 to $0.25 for the year ended June 30, 2005. Diluted earnings per share increased $0.02, or 9.10% from $0.22 for the year ended June 30, 2004 to $0.24 for the year ended June 30, 2005. Peoples Ohio’s return on average assets was 0.92% for 2005 compared to 0.82% for 2004 and the return on average equity was 7.30% for 2005, compared to 6.57% for 2004.

The increase in 2005 earnings was a result of a $183,000 increase in net interest income coupled with a $147,000 decline in the provision for loan losses in comparison to those reported for the year ended June 30, 2004. These positive influences on net income were partially offset by a $102,000 decline in noninterest income for the year ended June 30, 2005, in comparison to the year ended June 30, 2005.

Net interest income was $7,134,000 for the year ended June 30, 2005, $183,000, or 2.6% greater than the $6,951,000 reported for the year ended June 30, 2004. Total interest income remained steady at $11,060,000 for the year ended June 30, 2005, compared to the $11,095,000 reported during the year ended June 30, 2004, as the increase in average loans outstanding was offset by lower average interest rates earned on those loans. While interest income remained steady, interest expense declined by a $218,000, or 5.3% during the same period, primarily due to a reduction in borrowings from the Federal Home Loan Bank.

Interest income was virtually unchanged at $11,060,000 for the year ended June 30, 2005, compared to $11,095,000 for the year ended June 30, 2004. As illustrated in the accompanying average balance sheet, this resulted from an increase in average loans outstanding which was almost entirely offset by a decline in the average rate earned on those loans. Average loans outstanding increased $6,261,000, or 4.1% from $154,499,000 for the year ended June 30, 2004 to $160,760,000 for the year ended June 30, 2005, which was the result of management’s emphasis on growing its loan portfolio, particularly in those categories of loans that tend to be shorter-term or otherwise reprice periodically. The average yield earned on loans declined 19 basis points from 6.65% for the year ended June 30, 2004 to 6.46% for the year ended June 30, 2005, and was attributable to the significant number of 1-4 family mortgage loans originated during 2005 at interest rates ranging from 5.75 to 6.00 percent and, to a lesser extent, growth in shorter-term and variable rate loans which tend to carry lower interest rates. As a result, interest income earned on loans was $10,388,000 for the year ended June 30, 2005, $117,000, or 1.1% greater than the $10,271,000 earned for the year ended June 30, 2004. In addition other interest and dividend income increased $48,000 from $283,000 for the year ended June 30, 2004 to $331,000 for the year ended June 30, 2005.

These increases in interest income were partially offset by a decline in interest income on investment securities as management used proceeds from calls and maturities of investment securities to fund growth in the loan portfolio. Accordingly, interest income on investment securities decreased $200,000, from $541,000 for the year ended June 30, 2004 to $341,000 for the year ended June 30, 2005.

Interest expense was $3,926,000 for the year ended June 30, 2005, a decrease of $218,000, or 5.3% from $4,144,000 for the year ended June 30 2004, as Peoples Ohio was able to repay or replace maturing Federal Home Loan Bank advances with lower costing advances and customer deposits. Interest expense on FHLB advances was $2,589,000, $313,000 or 10.8% lower than the $2,902,000 recorded in the year ended June 30, 2004. As illustrated in the accompanying average balance sheet, the average balance of FHLB advances declined by $6,543,000, from $56,636,000 for the year ended June 30, 2004 to $50,093,000 for the year ended June 30, 2005. The average rate paid on FHLB advances increased slightly to 5.17%. The decline in interest expense on FHLB advances was partially offset by a $95,000 increase in interest expense on interest-bearing deposits. While the average balance of Peoples Ohio’s interest-bearing deposits declined $1,114,000, from $119,454,000 for the year ended June 30, 2004, to $118,340,000 for the year ended June 30, 2005, the average interest rate paid on those deposits increased by 9 basis points from 1.04% during 2004 to 1.13% during 2005.

Average Balance Sheet. The following table presents for the periods indicated the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. No tax equivalent adjustments were made. All average balances are daily average balances.

Year Ended June 30,

2005

2004

2003

Average
Balance

Interest

Yield/
Rate

Average
Balance

Interest

Yield/
Rate

Average
Balance

Interest

Yield/
Rate

(Dollar Amounts in Thousands)

Assets:

Interest-earning assets:

Interest-earning demand deposits	$	9,758		$	82	0.84	%	$	15,406		$	78	0.51	%	$	10,985		$	128	1.17	%
Investment securities	9,152			341		3.73		18,471			541		2.93		9,392			207		2.20
Loans, including nonaccrual loans	160,760			10,388		6.46		154,499			10,271		6.65		183,363			13,397		7.31
Federal Home Loan Bank, stock	5,576			249		4.47		5,317			205		3.86		5,139			221		4.30
Total interest-earning assets	185,246			11,060		5.97		193,693			11,095		5.73		208,879			13,953		6.68
Noninterest earning assets	9,364							5,805							11,052
Total assets	$	194,610						$	199,498						$	219,931
Liabilities and stockholders’ equity:
Interest-bearing liabilities:
NOW and money market accounts	$	61,505		$	401	0.65		$	60,182		$	336	0.56		$	48,421		$	595	1.23	%
Savings accounts	21,903			101		0.46		25,262			62		0.25		28,275			268		0.95
Certificates of deposit	34,932			835		2.39		34,010			844		2.48		37,511			1,364		3.64
Total interest-bearing deposits	118,340			1,337		1.13		119,454			1,242		1.04		114,207			2,227		1.95
Federal Home Loan Bank, advances	50,093			2,589		5.17		56,636			2,902		5.12		71,889			3,673		5.11
Total interest-bearingliabilities	168,433			3,926		2.33		176,090			4,144		2.35		186,096			5,900		3.17
Other liabilities	1,651							8,559							8,559
Stockholder’s equity, including equity from ESOP shares	24,526							24,841							25,276
Total liabilities and stockholders’ equity	$	194,610						$	199,498						$	219,931
Net interest-earning assets	$	16,813						$	20,660						$	22,783
Net interest rate spread(1)				$	7,134	3.64	%				$	6,951	3.37	%				$	8,053	3.51	%
Net interest margin(2)						3.85	%						3.59	%						3.86	%
Ratio of average interest-earning assets to average interest-bearing liabilities	109.98		%					111.94		%					112.24		%

(1) Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of interest-bearing liabilities.

(2) Net interest margin represents net interest income divided by average interest-earning assets.

Rate/Volume Analysis. The following table presents the dollar amount of changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. For each category of interest-earning assets and interest-bearing liabilities, information is provided on changes attributable to (1) changes in volume, which are changes in volume multiplied by the prior year rate, and (2) changes in rate, which are changes in rate multiplied by the prior year volume. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

	Year Ended June 30
	2005 vs. 2004											2004 vs. 2003
	Increase (Decrease) Due to											Increase (Decrease) Due to
	Volume				Rate			Increase (Decrease)				Volume			Rate			Increase (Decrease)
	(Dollar Amounts in Thousands)
Interest-earning assets:
Demand deposits		$	(35	)	$	39			$	4		$	39		$	(89	)		$	(50	)
Investment securities		(321		)	121				(200		)	249			85				334
Loans		409			(292		)		117			(1,988		)	(1,138		)		(3,126		)
FHLB, stock		10			34				44			7			(23		)		(16		)
Total interest-earning assets		63			(98		)		(35		)	(1,692		)	(1,166		)		(2,858		)
Interest-bearing liabilities:
NOW and money market accounts		8			57				65			120			(379		)		(259		)
Savings		(9		)	48				39			(26		)	(180		)		(206		)
Certificates of deposit		23			(32		)		(9		)	(118		)	(402		)		(520		)
FHLB advances		(339		)	26				(313		)	(782		)	11				(771		)
Total interest-bearing liabilities		(317		)	99				(218		)	(805		)	(951		)		(1,756		)
Increase (decrease) in net interest income		$	380		$	(197	)		$	183		$	(887	)	$	(215	)		$	(1,102	)

The provision for loan losses was $183,000 for the year ended June 30, 2005 compared to $330,000 for the same period in 2004. The provision for both periods reflects management’s analysis of Peoples Ohio’s loan portfolio based on information that is currently available to it at such time. In particular, management considers the level of non-performing loans and potential problem loans. Total charge-offs for 2005 were $525,000, compared to $165,000 during 2004. While the charge-offs recorded during 2004 related to several loans, the charge-offs during 2005 were primarily attributable to one residential loan and one commercial real estate loan that had been provided for during 2004. While Peoples Ohio’s management believes that the allowance for loan losses is sufficient based upon information currently available to it, no assurances can be made that future events, conditions, or regulatory directives will not result in increased provisions for loan losses which may adversely affect income.

Noninterest income totaled $2,072,000 for the year ended June 30, 2005, $102,000, or 4.7%, less than the $2,174,000 recorded for the year ended June 30, 2004. This decline was primarily attributable to a decline in revenue generated by Peoples Savings Bank’s trust department of $88,000, from $559,000 for the year ended June 30, 2004 to $471,000 for the year ended June 30, 2005. While the average trust assets under management increased slightly ($134.0 million during 2005 compared to $130.1 during 2004), a larger portion of those assets were held in custody and agency accounts which generate lower fees than traditional trust accounts. In addition, Peoples Savings Bank recognized a $68,000 gain on the sale of available-for-sale securities during the year ended June 30, 2004. There were no sales of securities during the year ended June 30, 2005.

Noninterest expense was $6,405,000 for the year ended June 30, 2005, $15,000 less than the $6,420,000 reported for the year ended June 30, 2004, as slight increases in salary and employee benefits and data processing fees were more than offset by declines in all other categories of noninterest expense.

Salaries and employee benefits totaled $2,972,000 for 2005 and $2,915,000 for 2004, an increase of $57,000 or 2.0% and were the result of normal salary increases.

Net occupancy expense totaled $435,000 for 2005 and $450,000 for 2004, a decrease of $15,000 or 3.3%. This decline was primarily attributable to expenses incurred during fiscal year 2004 related to the remodeling Peoples Savings Bank’s main office and Piqua locations which were completed early in fiscal 2004.

Data processing fees totaled $678,000 for 2005 and $637,000 for 2004, an increase of $41,000 or 6.4%. This increase was primarily attributable to periodic maintenance of Peoples Savings Bank’s processing hardware.

Professional fees expenses were $338,000 for the year ended June 30, 2005, $67,000 or 16.5% less than the $405,000 reported for the year ended June 30, 2004. This decline was attributable to $65,000 in fees associated with trust specific consulting services which were incurred during fiscal 2004, that were not incurred during fiscal 2005.

Advertising totaled $149,000 for 2005 and $156,000 for 2004, a decline of $7,000 or 4.5%. This decrease was attributable to a timing difference. Peoples Savings Bank takes great pride in being the primary sponsor of the Miami County Homebuilder’s Association “Homarama.” Prior to 2004, this event was held during September, however, during calendar year 2004, the event was held during May. Accordingly, Peoples Savings Bank incurred approximately $50,000 of expense related to sponsoring this event twice during fiscal 2004, compared to approximately $25,000 of advertising expense related to sponsoring the event during fiscal 2005. The decline was partially offset by an increase in newspaper advertising which increased $10,000, from $31,000 during fiscal 2004 to $41,000 for fiscal 2005. The increase in newspaper advertising was primarily attributable to recruiting advertisements placed in several local newspapers during the year.

Other expenses were $1,400,000 for the year ended June 30, 2005, $22,000 or 1.5% less than the $1,422,000 reported for the year ended June 30, 2004. This decline was attributable to $103,000 in fees related to developing new products and services during fiscal 2004, that were not incurred during fiscal 2005. This decline was partially offset by an increase in the charges associated with providing credit card services to local merchants and fees paid to an executive recruiter during fiscal 2005. Charges associated with providing overdraft privilege services to deposit customers increased $23,000, from $49,000 during fiscal 2004 to $72,000 during fiscal 2005. Fees paid to an executive recruiter were $ 22,000 during fiscal 2005. No such fees were incurred during fiscal 2004. The balance of increases were due to overall increases in other expense items.

Total income tax expense was $828,000 (an effective tax rate of 31.6%) for the year ended June 30, 2005, compared to $744,000 (an effective tax rate of 31.3%) during the year ended June 30, 2004.

Comparison of Financial Condition at June 30, 2005 and 2004

Total consolidated assets of Peoples Ohio at June 30, 2005 were $199,881,000, compared to $193,196,000 at June 30, 2004, an increase of $6,685,000 or 3.5%.

Net loans increased $20,452,000 or 13.6%, from $150,735,000 at June 30, 2004, to $171,187,000 at June 30, 2005. The following table illustrates changes in Peoples Savings Bank’s loan portfolio by category at June 30 of each year presented.

	Balance June 30, 2005				Balance June 30, 2004				Change ($’s)			Change (%)
Residential single family mortgages		$	111,985			$	100,629		$	11,356			11.3	%
Other residential and commercial mortgages		29,952				27,582			2,370				8.6
		141,937				128,211			13,726				10.7
Construction		18,281				12,315			5,966				48.4
Commercial business		6,805				6,714			91				1.4
Consumer		1,681				2,282			(601		)		(26.3	)
Home improvement		8,598				6,016			2,582				42.9
Deposit and other		187				264			(77		)		(29.2	)
		177,489				155,802			21,687				13.9
Deferred fees		(84		)		(177		)	93				(52.5	)
Undisbursed portion of loans		(5,493		)		(3,842		)	(1,651		)		43.0
Allowance for loan losses		(725		)		(1,048		)	323				(30.8	)
Total loans, net		$	171,187			$	150,735		$	20,452			13.6

As previously noted, management emphasized growth of the loan portfolio during fiscal 2005, particularly in those categories that tend to be shorter-term or otherwise reprice periodically. The result, as outlined above, was that loans grew in nearly every category from June 30, 2004 to June 30, 2005.

The allowance for loan losses decreased from $1,048,000 at June 30, 2004 to $725,000 at June 30, 2005 as a result of a provision for loan losses of $183,000, which was offset by net charge offs of $506,000. Charge-offs during 2005 were primarily attributable to one residential loan and one commercial real estate loan. The allowance for loan losses is maintained to absorb loan losses based on management’s continuing review and evaluation of the loan portfolio and its judgment regarding the impact of economic conditions on the portfolio.

The following table compares non-performing loans, which are loans past due 90 days or more and non-accruing loans, at June 30, 2005 and 2004, respectively

	June 30, 2005		June 30, 2004
Non-accrual	$	415,000	$	683,000
Past due 90+ and still accruing	333,000		565,000
Total non-performing loans	$	748,000	$	1,248,000

Non-performing loans decreased $500,000, from $1,248,000 at June 30, 2004, to $748,000 at June 30, 2005. This decrease is primarily attributable to a $549,000 decline in non-performing loans in the commercial loan portfolio. The decrease in non-performing commercial loans is attributable to three relationships, two of which were charged-off and one of which was repossessed and disposed of during 2005. There was one non-performing commercial business loan ($4,000) at June 30, 2005. Management continues to work closely with all delinquent borrowers to bring their loans current.

The ratio of Peoples Ohio’s allowance for loan losses to non-performing loans was 96.9% and 84.0% at June 30, 2005 and 2004, respectively.

Federal Home Loan Bank stock increased $249,000 or 4.54%, from $5.49 million at June 30, 2004, to $5.74 million at June 30, 2005. This increase was entirely the result of stock dividends received during 2005.

Interest receivable was $733,000 at June 30, 2005 compared to $731,000 at June 30, 2004. The majority of Peoples Ohio’s interest earning assets are scheduled to pay interest monthly, on the first. Accordingly, while growth in interest earning assets can impact the balance of interest receivable, the balance of interest receivable is primarily dependent upon when interest payments are actually received, and to a lesser extent, the rate being earned on those assets. Note, the average rate earned on interest earning assets increased 24 basis points from 5.73% for the year ended June 30, 2004 to 5.97% for the year ended June 30, 2005.

Cash surrender value of life insurance increased from $4,196,000 at June 30, 2004, to $4,362,000 at June 30, 2005. This increase was solely attributable to net earnings credited to the policies during 2005. In June 2003, Peoples Ohio purchased life insurance on several key executives in order to protect Peoples Savings Bank against increases in employee benefit costs and to mitigate the costs associated with replacing key members of management in the event of their untimely death. It should be noted that no benefits were provided by Peoples Ohio or Peoples Savings Bank to these executives as a result of this transaction.

Deposits increased $12,297,000 or 10.8%, from $114,223,000 at June 30, 2004 to $126,520,000 at June 30, 2005. The following table illustrates changes in the various types of deposits at June 30 of each year presented.

	June 30, 2005		June 30, 2004		Change ($’s)			Change (%)
Noninterest bearing accounts	$	14,620	$	12,672	$	1,948			15.4	%
NOW accounts	19,752		19,964		(212		)		(1.1	)
Super NOW accounts	1,271		1,463		(192		)		(13.1	)
Passbook accounts	24,049		23,850		199				0.8
Moneymarket accounts	26,158		26,346		(188		)		(0.7	)
Certificates of deposit	40,670		29,928		10,742				35.9
Total deposits	$	126,520	$	114,223	$	12,297			10.8

With the exception of noninterest bearing accounts and certificates of deposit (CD’s), Peoples Ohio’s deposit accounts were stable. The increase in noninterest bearing accounts was attributable to a $1,074,000 increase in “Totally Free Checking” accounts. The number of accounts increased by 186, from 1,102 at June 30, 2004 to 1,288 at June 30, 2005, and the average balance per account increased from $1,934 to $2,488. Management introduced several “CD specials” during fiscal 2005, which resulted in growth in both regular and jumbo CD’s during the year.

FHLB advances declined by $7,172,000 or 13.5%, from $53,295,000 at June 30, 2004, to $46,123,000 at June 30, 2005. During fiscal 2005, Peoples Savings Bank used growth in customer deposits to fund maturing advances.

Other liabilities increased by $899,000, from $757,000 at June 30, 2004, to $1,656,000 at June 30, 2005. This increase was primarily attributable to increases in four other liability accounts. Accrued income taxes payable increased $412,000 from June 30, 2004 to June 30, 2005 as Peoples Ohio earned substantially more income during the fourth quarter of fiscal 2005 in comparison to the fourth quarter of fiscal 2004. The balance in construction loan borrower’s escrow accounts increased $344,000 which is the direct result of the increase in Peoples Ohio’s construction loan portfolio, a $54,000 increase in the treasury tax and loan account and a $63,000 increase in miscellaneous accounts payable from June 30, 2004 to June 30, 2005.

Total stockholders’ equity was virtually unchanged at $24.93 million at June 30, 2005. The following table illustrates the changes in stockholders’ equity from June 30, 2004 to June 30, 2005. (Dollar Amounts in Thousands)

Total stockholders’ equity, June 30, 2004	$	24,391
Net income	1,790
Change in the unrealized gain on securities AFS	(8		)
Cash dividends ($0.13 per share)	(944		)
Exercise of stock options	205
Tax benefit related to exercise of options	27
Purchase of treasury shares	(502		)
Net change in equity from ESOP shares	(34		)
Total stockholders’ equity, June 30, 2005	$	24,925

As the table indicates, Peoples Ohio earned $1,790,000 in net income for the year ended June 30, 2005 and raised an additional $205,000 through the exercise of stock options. These increases were partially offset by $944,000 in dividends paid to Peoples Ohio’s stockholders and $502,000 in purchases of treasury stock.

Comparison of Results of Operations for Years Ended June 30, 2004 and 2003

Peoples Ohio reported earnings of $1,631,000 for the year ended June 30, 2004, a decline of $914,000, or 35.9% from the $2,545,000 reported for the same period in 2003. Basic earnings per share decreased $0.12, or 35.3% from $0.34 for the year ended June 30, 2003 to $0.22 for the year ended June 30, 2004. Diluted earnings per share decreased $0.11, or 33.3% from $0.33 for the year ended June 30, 2003 to $0.22 for the year ended June 30, 2004. Peoples Ohio’s return on average assets was 0.82% for 2004 compared to 1.16% for 2003 and the return on average equity was 6.57% for 2004, compared to 10.07% for 2003.

The decline in earnings during 2004 was a result of a decline in net interest income of $1,103,000, or 13.7% from $8,054,000 reported for the year ended June 30, 2003 to $6,951,000 for the year ended June 30, 2004. This decrease was partially offset by an increase in noninterest income of $481,000 or 28.4%, from $1,693,000 reported for the year ended June 30, 2003 to $2,174,000 for the year ended June 30, 2004.

Net interest income was $6,951,000 for the year ended June 30, 2004, $1,103,000, or 13.7% lower than the $8,054,000 reported for the year ended June 30, 2003. This decline was the result of lower average net interest bearing assets outstanding during 2004 ($20,661,000) in comparison to average net interest bearing assets outstanding during 2003 ($22,783,000), coupled with the continued low interest rate environment and the pressure it has placed on net interest margins throughout the banking industry. Total interest income was $11,095,000 for the year ended June 30, 2004, a decline of $2,858,000, or 20.5% from the $13,953,000 reported during the year ended June 30, 2003, due to lower average loans outstanding coupled with lower interest rates. The decline in interest income was partially offset by a $1,756,000, or 29.8% decline in interest expense during the same period, primarily due to depositors shifting their deposits from higher rate certificates of deposit to lower rate demand deposit accounts.

Interest income was $11,095,000 for the year ended June 30, 2004, a decrease of $2,858,000, or 20.5% from $13,953,000 for the year ended June 30 2003. As illustrated in the accompanying average balance sheet, this decline was almost entirely attributable to a decline in interest income earned on loans. Interest income earned on loans was $10,271,000 for the year ended June 30, 2004, $3,126,000, or 23.3% less than the $13,397,000 earned for the year ended June 30, 2003. With long-term interest rates at or near record low levels throughout the year, management chose to curtail Peoples Savings Bank’s mortgage originations rather than expose Peoples Savings Bank to what it believed to be unacceptable levels of interest rate risk.

As a result, average loans outstanding during the year decreased $28,864,000, or 15.7% from $183,363,000 for the year ended June 30, 2003 to $154,499,000 for the year ended June 30, 2004. The average yield earned on those loans declined 66 basis points from 7.31% for the year ended June 30, 2003 to 6.65% for the year ended June 30, 2004. This decline in yield was attributable to the local market’s reaction to the Federal Reserve Bank’s (the Fed) reductions in short-term interest rates throughout fiscal 2003 and fiscal 2004 and their effect on interest rates in general. Note, the interest rates Peoples Ohio charges its borrowers and pays its depositors are significantly influenced by these rates. In addition other interest and dividend income decreased $67,000 from $350,000 for the year ended June 30, 2003 to $283,000 for the year ended June 30, 2004.

These declines in interest income were partially offset by an increase in interest income on investment securities as management invested a portion of the proceeds from loan repayments in short-term investments and interest bearing accounts at other financial institutions. Accordingly, interest income on investment securities increased $334,000, from $207,000 for the year ended June 30, 2003 to $541,000 for the year ended June 30, 2004.

Interest expense was $4,144,000 for the year ended June 30, 2004, a decrease of $1,756,000, or 29.8% from $5,900,000 for the year ended June 30 2003, as interest expense paid on all interest bearing liabilities declined fairly significantly in comparison to the previous year. As in the prior year, depositors chose to invest proceeds from maturing certificates into short-term accounts. Accordingly, the average balance of Peoples Ohio’s interest-bearing NOW and money market accounts increased $11,761,000, from $48,421,000 for the year ended June 30, 2003, to $60,182,000 for the year ended June 30, 2004. However, the increase in average balance was more than offset by a 67 basis point decline in the rate paid on interest-bearing NOW and money market accounts from 1.23% during 2003 to 0.56% during 2004. Interest expense on savings accounts was $62,000, $206,000 or 76.9% lower than the $268,000 recorded in the year ended June 30, 2003. As illustrated in the accompanying average balance sheet, the average balance of savings accounts decreased by $3,013,000, from $28,275,000 for the year ending June 30, 2003 to $25,262,000 for the year ending June 30, 2004. In addition, the average rate paid on savings accounts decreased by 70 basis points, from 0.95% during 2003 to 0.25% during 2004. Interest expense on certificates of deposit was $844,000, $520,000, or 38.1% lower than the $1,364,000 recorded in the year ended June 30, 2003. As illustrated in the accompanying average balance sheet, the average balance of certificates of deposit declined by $3,501,000, from $37,511,000 for the year ending June 30, 2003 to $34,010,000 for the year ending June 30, 2004. In addition, the average rate paid on those certificates of deposit decreased by 116 basis points, from 3.64% during 2003 to 2.48% during 2004. Interest expense on FHLB advances was $2,902,000, $771,000 or 21.0% lower than the $3,673,000 recorded in the year ended June 30, 2003. Also illustrated in the accompanying average balance sheet, the average balance of FHLB advances declined by $15,253,000, from $71,889,000 for the year ended June 30, 2003 to $56,636,000 for the year ended June 30, 2004. The average rate paid on those FHLB advances remained stable at 5.12%.

The provision for loan losses was $330,000 for the year ended June 30, 2004 compared to $140,000 for the same period in 2003. The provision for both periods reflects management’s analysis of Peoples Ohio’s loan portfolio based on information that is currently available to it at such time. In particular, management considers the level of non-performing loans and potential problem loans. Total charge-offs for 2004 were $165,000, compared to $189,000 during 2003. The charge-offs recorded in both periods related to several loans. While Peoples Ohio’s management believes that the allowance for loan losses is sufficient based upon information currently available to it, no assurances can be made that future events, conditions, or regulatory directives will not result in increased provisions for loan losses which may adversely effect income.

Noninterest income totaled $2,174,000 for the year ended June 30, 2004, $481,000, or 28.4%, higher than the $1,693,000 recorded for the year ended June 30, 2003. This increase was primarily attributable to fees related to services provided to deposit customers which increased $324,000, from $802,000 for the year ended June 30, 2003 to $1,126,000 for the year ended June 30, 2004 which was largely attributable to an increase in the number and average balances of transaction accounts from 2003 to 2004 as depositors shifted deposits from certificates of deposit to shorter-term demand accounts. In addition, the cash surrender value of life insurance generated $199,000 in noninterest income during the year ended June 30, 2004. Peoples Savings Bank did not own any life insurance prior to fiscal 2004. These increases were partially offset by a decline in revenue generated by Peoples Savings Bank’s trust department of $114,000 from $673,000 for the year ended June 30, 2003 to $559,000 for the year ended June 30, 2004. While the average trust assets remained stable ( $130.1 million during 2004 compared to $129.0 during 2003), a larger portion of those assets were held in custody and agency accounts which typically generate lower fees than traditional trust accounts.

Noninterest expense was $6,420,000 for the year ended June 30, 2004, $697,000 or 12.2% higher than the $5,723,000 reported for the year ended June 30, 2003, as Peoples Ohio experienced increases in salary and employee benefits, net occupancy expense, data processing fees, professional fees and advertising expense during fiscal 2004.

Salaries and employee benefits totaled $2,915,000 for 2004 and $2,762,000 for 2003, an increase of $153,000 or 5.5% and were the result of normal salary increases.

Net occupancy expense totaled $450,000 for 2004 and $408,000 for 2003, an increase of $42,000 or 10.3%. This increase was primarily attributable to remodeling of Peoples Savings Bank’s main office and Piqua locations, which were completed early in fiscal 2004.

Data processing fees totaled $637,000 for 2004 and $533,000 for 2003, an increase of $104,000 or 19.5%. This increase was primarily attributable to periodic maintenance of Peoples Savings Bank’s processing hardware.

Professional fees expenses were $405,000 for the year ended June 30, 2004, $180,000 or 80.0% greater than the $225,000 reported for the year ended June 30, 2003. This increase was attributable to $147,000 in fees associated with trust specific audit and consulting services and $21,000 in other consulting services neither of which were incurred during fiscal 2003. The balance of the increase was due to overall increases in professional fees.

Advertising totaled $156,000 for 2004 and $111,000 for 2003, an increase of $45,000 or 40.5%. This increase was primarily attributable to a timing difference. Peoples Savings Bank takes great pride in being the primary sponsor of the Miami County Homebuilder’s Association “Homarama.” In previous years, this event took place during September, however, during calendar year 2004, the event was held during May. Accordingly, Peoples Savings Bank incurred approximately $30,000 of expense related to sponsoring this event twice during fiscal 2004. The balance of the increase was due to overall increases in advertising costs.

Other expenses were $1,422,000 for the year ended June 30, 2004, $161,000 or 12.8% more than the $1,261,000 reported for the year ended June 30, 2003. This increase was attributable to $103,000 in fees related to developing new products and services not incurred during fiscal 2003, and a $35,000 increase in fees related to collection activities. The balance of the increase was due to overall increases in other expense items.

Total income tax expense was $744,000 (an effective tax rate of 31.3%) for the year ended June 30, 2004, compared to $1,339,000 (an effective tax rate of 34.5%) during the year ended June 30, 2003.

Management of Interest Rate Risk

The principal objective of Peoples Ohio’s interest rate risk management function is to evaluate the interest rate risk included in certain balance sheet accounts, determine the level of risk appropriate given Peoples Ohio’s business focus, operating environment, capital and liquidity requirements and performance objectives, establish asset concentration guidelines and manage the risk consistent with Board-approved guidelines. Through such management, Peoples Ohio seeks to reduce the vulnerability of its operations to changes in interest rates and to manage the ratio of interest rate sensitive assets to interest rate sensitive liabilities within specified maturities or repricing dates. Peoples Savings Bank’s Board of Directors has established an Asset/Liability Committee consisting of management officers, which is responsible for reviewing Peoples Ohio’s asset/liability policies and interest rate risk position. Such committee generally meets on a quarterly basis, and at other times as dictated by market conditions, and reports to the Board of Directors after each such meeting.

Peoples Ohio’s interest rate risk strategy primarily consists of: (i) emphasizing the attraction and retention of core deposits, which tend to be a more stable source of funding, (ii) emphasizing the organization of adjustable rate mortgage loan products and short-term commercial loans, the origination of which is largely dependent on the market demand for such loans, (iii) when market conditions are favorable and in consideration of the regulatory requirements relating to required levels of residential loans which must be maintained by Peoples Savings Bank, selling fixed-rate one-to-four-family mortgage loans, (iv) investing primarily in short-term U.S. Government securities and mortgage-backed securities, and (v) using FHLB advances as a funding source when rates on FHLB advances compare favorably to local competitive deposit rates. As a traditional thrift lender, Peoples Ohio has a significant amount of its earning assets invested in fixed-rate mortgages with contractual maturities greater than one year. At June 30, 2005 an aggregate of $124.64 million, or 62.4% of total assets, were invested in such assets.

The following table sets forth the change in net portfolio values of Peoples Savings Bank’s interest earning assets and interest bearing liabilities at June 30, 2005, assuming changes in interest rates. The assumptions used to prepare this table are the latest available by the OTS in assessing the interest rate sensitivity of thrift institutions.

Change in Interest Rate (Basis Points)	Change in Net Portfolio Value—Dollars (000’s)				Change in Net Portfolio Value—Percent
+300		$	(3,222	)		(10	)%
+200		(1,561		)		(5	)
+100		(255		)		(1	)
0		—				—
-100		(2,103		)		(7	)
-200		(5,732		)		(18	)

Certain shortcomings are inherent in the method of analysis presented in the foregoing table. For example, although certain assets and liabilities may have similar maturities or periods to repricing they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Additionally, certain assets, such as adjustable rate mortgage loans, have features that restrict changes in interest rates on a short term basis and over the life of the asset. Further, in the event of a change in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the table. Finally, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase.

Liquidity and Capital Resources of Peoples Ohio and Peoples Savings Bank

Banking regulations require Peoples Savings Bank to maintain sufficient liquidity to ensure its safe and sound operation. Peoples Savings Bank’s regulatory liquidity was 11.59% and 14.28% at December 31, 2005 and 2004, respectively. The primary source of funding for Peoples Ohio is dividend payments from Peoples Savings Bank. Dividend payments by Peoples Savings Bank have been used primarily by Peoples Ohio to pay dividends to its stockholders.

Peoples Savings Bank’s liquidity is a product of its operating, investing and financing activities. The primary investment activity of Peoples Savings Bank is the origination of mortgage loans and, to a lesser extent, commercial and consumer loans. The primary sources of funds are deposits, FHLB borrowings, prepayments and maturities of outstanding loans, mortgage-backed securities, and investments. While scheduled payments of loans and mortgage-backed securities and maturing investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by interest rates, economic conditions and competition. Peoples Savings Bank utilizes FHLB borrowings to leverage its capital base and provide funds for lending and to better manage its interest rate risk. The sole investment of Peoples Ohio is its investment in Peoples Savings Bank’s stock.

At December 31, 2005, Peoples Savings Bank had outstanding commitments to fund existing construction loans of $6,616,000, originate loans of $4,446,000, open-end consumer lines of credit of $6,856,000, unused commercial lines of credit of $4,685,000 and standby letters of credit of $2,988,000. As of December 31, 2005, certificates of deposit scheduled to mature in one year or less totaled $31,130,000. Based on historical experience, management believes that a significant portion of maturing deposits will remain with Peoples Savings Bank. Management anticipates that Peoples Savings Bank will continue to have sufficient funds, through deposits, borrowings, and normal operations to meet its commitments.

Peoples Savings Bank is required by Office of Thrift Supervision (“OTS”) regulations to meet certain minimum capital requirements. At December 31, 2005, Peoples Savings Bank exceeded all of its regulatory capital requirements with tangible and tier 1 capital both at $23,456,000 or 11.55% of adjusted total assets, and risk-based capital at $ 24,282,000 or 17.78% of risk-weighted assets. The minimum ratios required by the OTS are 1.5% for tangible capital to adjusted total assets, 4.0% for tier 1 capital to adjusted total assets and 8.0% for risk-based capital to risk-weighted assets.

Peoples Savings Bank’s most liquid assets are cash and cash equivalents. The level of cash and cash equivalents is dependent on Peoples Savings Bank’s operating, financing lending and investing activities during any given period. At December 31, 2005, Peoples Savings Bank’s cash and cash equivalents totaled $5,904,000. Peoples Ohio’s and Peoples Savings Bank’s future short–term requirements for cash are not expected to significantly change. However, in the event that Peoples Savings Bank should require funds in excess of its ability to generate them internally, additional sources of funds are available, including additional FHLB advances. With no parent company debt and sound capital levels, Peoples Ohio should have many options available for satisfying its longer-term cash needs such as borrowing funds, raising equity capital and issuing trust preferred securities.

Management is not aware of any current recommendations or government proposals which, if implemented would have a material effect on Peoples Ohio’s liquidity, capital resources or operations.

Impact of Inflation and Changing Prices

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

The primary assets and liabilities of financial institutions such as Peoples Savings Bank are monetary in nature. As a result, interest rates have a more significant impact on Peoples Savings Bank’s performance than the effects of general levels of inflation. Interest rates, however, do not necessarily move in the same direction or with the same magnitude as the price of goods and services, since such prices are affected by inflation. In a period of rapidly rising interest rates, the liquidity and maturity structure of Peoples Savings Bank’s assets and liabilities are critical to the maintenance of acceptable performance levels.

The principal effect of inflation, as distinct from levels of interest rates, on earnings is in the area of noninterest expense. Such expense items as compensation and benefits and occupancy and equipment costs may be subject to increases as a result of inflation. An additional effect of inflation is the possible increase in the dollar value of the collateral securing loans made by Peoples Savings Bank. Peoples Savings Bank is unable to determine the extent, if any, to which properties securing Peoples Savings Bank’s loans have appreciated in dollar value due to inflation.

Impact of Current Accounting Issues

In December 2004, the FASB issued SFAS No. 123R, Share-Based Payment, which sets accounting requirements for “share-based” compensation to employees, including employee-stock-purchase-plans (ESPPs) and provides guidance on accounting for awards to non-employees. This Statement will require Peoples Ohio to recognize in the income statement the grant-date fair value of stock options and other equity-based compensation issued to employees, but expresses no preference for a type of valuation model. This Statement is effective for Peoples Ohio on July 1, 2006. While Peoples Ohio has been unable to determine its impact, the implementation of SFAS No. 123R is not expected to be significant on Peoples Ohio’s consolidated financial position or results of operations.

INTERESTS OF CERTAIN DIRECTORS AND EXECUTIVE OFFICERS
OF PEOPLES OHIO IN THE MERGER

When considering the recommendations of the Peoples Ohio board of directors, you should be aware that some of the employees and directors of Peoples Ohio and Peoples Savings Bank have interests that are different from, or in conflict with, your interests. The board of directors was aware of these interests when it approved the Merger Agreement. Except as described below, to the knowledge of Peoples Ohio, the executive officers and directors of Peoples Ohio do not have any material interest in the merger apart from their interests as shareholders of Peoples Ohio.

Treatment of Stock Options

The Merger Agreement provides that each option to acquire shares of Peoples Ohio common stock held by Ronald B. Scott, whether or not vested, will be amended to be an option to acquire shares of MainSource common stock, with the exercise price and number of shares subject to the option adjusted based on the exchange ratio used in connection with the merger. However, any incentive stock options will be adjusted in accordance with Section 424 of the Code. Currently, Mr. Scott has options for 265,150 shares of Peoples Ohio common stock that will be so amended. All of such options will become fully vested as a result of a “change-in-control” provision contained in Peoples Ohio’s option plan.

The Merger Agreement provides that each other option to acquire shares of Peoples Ohio common stock outstanding on the effective date of the merger will be converted into the right to receive from MainSource, at the effective time of the merger, an amount in cash equal to the Cash Consideration minus the per share exercise price for each share subject to a Peoples Ohio stock option. The executive officers and outside directors of Peoples Ohio (other than Mr. Scott) hold options to purchase 185,064 shares of Peoples Ohio common stock, so those options will be fully vested at the closing of the merger and cashed out for approximately $441,000.

Employment Agreement

The Merger Agreement provides that, upon the consummation of the merger, Ronald B. Scott will be appointed as the Chairman of the Board of Directors, President, and Chief Executive Officer of MainSource Bank—Ohio. Mr. Scott will receive an employment contract for his services through December 31, 2006, with provisions comparable to those in existing employment agreements entered into by other MainSource subsidiary banks with their executives.

Under Mr. Scott’s employment agreement with MainSource Bank—Ohio, he will receive an annualized base salary of $140,000, along with a lump sum incentive payment of $35,000 within 60 days following the effective date of the employment agreement. Mr. Scott also is entitled to participate in the employee benefit and welfare plans, retirement plans, and insurance programs offered by MainSource Bank—Ohio, but he is not eligible to participate in the MainSource Bank—Ohio Executive Performance Bonus Plan for calendar year 2006. Mr. Scott is entitled to paid time-off in accordance with the bank’s policies, and MainSource Bank—Ohio will furnish Mr. Scott with a non-luxury automobile made by an American manufacturer suitable to the nature of his position and adequate for the performance of his employment. MainSource Bank—Ohio also will pay for Mr. Scott’s membership in a local country club. Additionally, as long as MainSource Bank—Ohio exists as a separate entity and is not merged or consolidated into another entity, and so long as Mr. Scott remains employed by MainSource Bank—Ohio under his employment agreement, MainSource will cause Mr. Scott to be elected to the MainSource Bank—Ohio board of directors.

Severance Payments

Under the Merger Agreement and in connection with the consummation of the merger, Ronald B. Scott and Richard J. Dutton each will terminate their existing employment agreements with Peoples Savings Bank in exchange for lump sum cash payments equal to approximately $630,000 and $453,000, respectively, subject to reduction to the extent such payments are not deductible under Section 280G of the Code. Peoples Savings Bank has obtained from Mr. Scott and Mr. Dutton binding written commitments to accept these lump sum cash payments payable as a result of the merger in lieu of any amounts that otherwise would be payable, and any benefits to which they would be entitled, under their respective employment agreements.

Peoples Savings Bank is also a party to an employment agreement with another of its officers, John Wannemacher. The Merger Agreement requires Peoples Savings Bank to terminate this agreement prior to the closing of the merger; however, MainSource has agreed that if Peoples Savings Bank and Mr. Wannemacher have not agreed on the terms for the termination of the agreement prior to the closing of the merger, MainSource Bank—Ohio will become Peoples Savings Bank’s successor under the employment agreement subject to the accrual on Peoples Ohio’s books of an amount agreed to by MainSource and Peoples Ohio in connection with any payments to be made to Mr. Wannemacher pursuant to the employment agreement and related expenses following the merger. Any payment required to be made to Mr. Wannemacher in connection with the termination of the employment agreement, or any such accrual if the employment agreement is not terminated, will be considered in the calculation of Peoples Ohio’s closing shareholders’ equity and could affect the Exchange Ratio as well as the cash consideration Peoples Ohio shareholders can elect to receive in connection with the merger.

In addition, certain other officers and key employees are parties to severance agreements with Peoples Savings Bank. Under the Merger Agreement and in connection with the consummation of the merger, Peoples Savings Bank will make payments totaling approximately $250,000 to these persons in satisfaction of its obligations under the severance agreements.

Indemnification and Insurance

MainSource has agreed to indemnify and hold harmless each director and officer of Peoples Ohio for six years after the effective time of the merger in connection with any threatened or actual claim, action, or investigation arising out of the fact that any such person is or was a director or officer of Peoples Ohio or Peoples Savings Bank at or prior to the effective time regardless of whether such claim is asserted or claimed after the effective time, including all indemnified liabilities based on, or arising out of, or pertaining to the Merger Agreement, the merger, or the transactions contemplated by the Merger Agreement, to the full extent permitted under Indiana law and by MainSource’s Articles of Incorporation.

In addition, MainSource has agreed to use its reasonable best efforts to include Peoples Ohio’s directors and officers on its existing insurance, or to obtain directors’ and officers’ liability insurance “tail” policy coverage for Peoples Ohio’s directors and executive officers, for a period of three years after the effective time of the merger, which will provide the directors and officers with coverage on substantially similar terms as currently provided by Peoples Ohio to such directors and officers for claims based on activity prior to the effective time. However, MainSource has no obligation during such three-year period to pay an aggregate amount in premiums, with respect to the former Peoples Ohio directors and officers, which is more than three times the current annual amount spent by Peoples Ohio to maintain its current directors’ and officers’ insurance coverage.

DISSENTERS’ RIGHTS OF PEOPLES OHIO SHAREHOLDERS

The Ohio General Corporation Law, as amended (“OGCL”), provides shareholders of merging corporations with certain dissenters’ rights. The dissenters’ rights of shareholders of Peoples Ohio are set forth in Sections 1701.84 and 1701.85 of the OGCL, a copy of which is attached to this Proxy Statement/Prospectus as Annex B. Shareholders will not be entitled to assert dissenters’ rights absent strict compliance with the procedures of Ohio law.

Section 1701.85 of the OGCL provides that shareholders of Peoples Ohio have the right to demand payment for the “fair cash value” of their shares of Peoples Ohio common stock immediately before the merger becomes effective. To claim this right, the shareholder must:

· not have voted in favor of the merger in person or by proxy;

· deliver to Peoples Ohio not later than 10 days after the vote is taken at the special meeting a written demand for payment for the shareholder’s shares if the merger is consummated; and

· submit his or her stock certificates to Peoples Ohio within 15 days after Peoples Ohio sends its request for endorsement on the certificates of a legend that a demand for fair cash value has been made.

Dissenting shareholders may send their written notice to Peoples Savings Bank of Troy, 635 South Market Street, Troy, Ohio 45373, Attention: Ronald B. Scott, Chief Executive Officer.

If MainSource and the dissenting shareholder have not agreed upon the fair cash value of the shares within three months after the shareholder delivered the written demand for payment, MainSource or the dissenting shareholder may file a complaint in the Miami County, Ohio court of common pleas. The court will determine whether the dissenting shareholder is entitled to be paid the fair cash value of any shares and, if so, it will appoint an appraiser to recommend a decision on the amount of the fair cash value. MainSource must pay the fair cash value of the shares that is agreed upon by the parties or fixed by a court within 30 days after the final determination of the value.

THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING SHAREHOLDERS ADDRESSES ALL MATERIAL FEATURES OF THE APPLICABLE DISSENTERS’ RIGHTS STATUTES UNDER THE LAWS OF THE STATE OF OHIO BUT DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE STATUTORY PROVISIONS ATTACHED HERETO AS ANNEX C.

A SHAREHOLDER’S FAILURE TO COMPLY WITH THE STATUTORY REQUIREMENTS FOR EXERCISING DISSENTERS’ RIGHTS WILL RESULT IN A LOSS OF SUCH RIGHTS, AND SHAREHOLDERS WHO MAY WISH TO EXERCISE DISSENTERS’ RIGHTS SHOULD CONSIDER SEEKING LEGAL COUNSEL.

MATERIAL FEDERAL INCOME TAX CONSEQUENCES

General

The following summary discusses the material anticipated U.S. federal income tax consequences of the merger applicable to a holder of shares of Peoples Ohio common stock that surrenders all of its common stock for shares of MainSource common stock and/or cash in the merger. This discussion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, judicial authorities, published positions of the Internal Revenue Service (“IRS”), and other applicable authorities, all as in effect as of the date of this document and all of which are subject to change or differing interpretations (possibly with retroactive effect). This discussion is limited to U.S. residents and citizens that hold their shares as capital assets for U.S. federal income tax purposes (generally, assets held for investment). No attempt has been made to comment on all U.S. federal income tax consequences of the merger and related transactions that may be relevant to holders of shares of Peoples Ohio common stock. This discussion also does not address all of the tax consequences that may be relevant to a particular person or the tax consequences that may be relevant to persons subject to special treatment under U.S. federal income tax laws (including, among others, tax-exempt organizations, dealers in securities or foreign currencies, banks, insurance companies, financial institutions or persons that hold their Peoples Ohio common stock as part of a hedge, straddle, constructive sale or conversion transaction, persons whose functional currency is not the U.S. dollar, holders that exercise appraisal rights, persons that are, or hold their Peoples Ohio common stock through, partnerships or other pass-through entities, or persons who acquired their Peoples Ohio common stock through the exercise of an employee stock option or otherwise as compensation). In addition, this discussion does not address any aspects of state, local, non-U.S. taxation or U.S. federal taxation other than income taxation. No ruling has been requested from the IRS regarding the U.S. federal income tax consequences of the merger. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences set forth below.

Peoples Ohio shareholders are urged to consult their own tax advisors as to the U.S. federal income tax consequences of the merger, as well as the effects of state, local, non-U.S. tax laws and U.S. tax laws other than income tax laws.

Opinion Conditions

The completion of the merger is conditioned upon the delivery of an opinion by Bose McKinney & Evans LLP, tax counsel to MainSource, that the merger will constitute a “reorganization” for U.S. federal income tax purposes within the meaning of Section 368(a)(1)(A) of the Code. MainSource expects to be able to obtain the tax opinion if, as expected:

· MainSource, Peoples Ohio and Peoples Savings Bank are able to deliver customary representations to MainSource’s tax counsel;

· there is no adverse change in U.S. federal income tax law; and

· the aggregate fair market value of the MainSource common stock delivered as consideration in the merger is equal to or greater than 50% of the sum of (i) the aggregate fair market value of such MainSource common stock; and (ii) the aggregate amount of cash that is considered to be merger consideration.

If any of the representations or assumptions upon which the opinions are based are inconsistent with the actual facts, the tax consequences of the merger could be adversely affected. The determination by tax counsel as to whether the proposed merger will be treated as a “reorganization” within the meaning of Section 368(a)(1)(A) of the Code will depend upon the facts and law existing at the time that the Merger Agreement was signed in accordance with Treas. Reg. § 1.368-1(e)(2). The following discussion assumes

that the merger will constitute a “reorganization” for U.S. federal income tax purposes within the meaning of Section 368(a)(1)(A) of the Code.

Exchanges of Peoples Ohio Common Stock

Exchange of Peoples Ohio Common Stock Solely for MainSource Common Stock. A Peoples Ohio shareholder that exchanges all of its Peoples Ohio common stock solely for MainSource common stock in the merger will not recognize any gain or loss (except with respect to cash received instead of a fractional share of MainSource common stock, as discussed below). The aggregate tax basis of shares of MainSource common stock received in the merger will be equal to the aggregate tax basis of the shares of Peoples Ohio common stock surrendered in exchange therefor, and an exchanging Peoples Ohio shareholder’s holding period in the MainSource common stock received in the merger will include the holding period of the Peoples Ohio common stock surrendered in exchange therefor.

Exchange of Peoples Ohio Common Stock Solely for Cash. A Peoples Ohio shareholder that exchanges all of its shares of Peoples Ohio common stock solely for cash in the merger will (unless treated as a dividend under Section 3.02(d) of the Code as discussed below) recognize capital gain or loss on the exchange in an amount equal to the difference, if any, between the amount of cash received and the Peoples Ohio shareholder’s aggregate tax basis in the shares surrendered in exchange therefor. The gain or loss will be long-term capital gain or loss if the Peoples Ohio shareholder’s holding period for its Peoples Ohio common stock is more than one year as of the date of the exchange. Any gain recognized by a Peoples Ohio shareholder and classified as a dividend under Section 302 of the Code will be treated as either ordinary income or qualified dividend income. Any gain treated as qualified dividend income will be taxable to individual Peoples Ohio shareholders at the long-term capital gains rate, provided that the shareholder held the shares giving rise to such income for more than 61 days during the 121 day period beginning 60 days before the closing date. Gain treated as ordinary income will be taxed at ordinary income rates. Each Peoples Ohio shareholder is urged to consult its tax advisor to determine whether a dividend, if any, would be treated as qualified dividend income.

Exchange of Peoples Ohio Common Stock for Cash and MainSource Common Stock. A Peoples Ohio shareholder that exchanges all of its Peoples Ohio common stock for a combination of MainSource common stock and cash in the merger will recognize gain (but not loss) in an amount equal to the lesser of (i) the amount of cash received in the merger; and (ii) the excess, if any, of (a) the sum of the amount of cash and the fair market value of the MainSource common stock received in the merger over (b) the Peoples Ohio shareholder’s aggregate tax basis in its Peoples Ohio common stock surrendered in exchange therefor.

The gain recognized upon receipt of a combination of stock and cash will be capital gain unless the Peoples Ohio shareholder’s receipt of cash has the effect of a distribution of a dividend, in which case the gain will be treated as ordinary income to the extent of the holder’s ratable share of accumulated earnings and profits, as calculated for U.S. federal income tax purposes. For purposes of determining whether a Peoples Ohio shareholder’s receipt of cash has the effect of a distribution of a dividend, the Peoples Ohio shareholder will be treated as if it first exchanged all of its Peoples Ohio common stock solely in exchange for MainSource common stock and then MainSource immediately redeemed a portion of that stock for the cash that the holder actually received in the merger (referred to herein as the “deemed redemption”). Receipt of cash will generally not have the effect of a dividend to the Peoples Ohio shareholder if such receipt is, with respect to the Peoples Ohio shareholder, “not essentially equivalent to a dividend” or “substantially disproportionate,” each within the meaning of Section 302(b) of the Code. In order for the deemed redemption to be “not essentially equivalent to a dividend”, the deemed redemption must result in a “meaningful reduction” in the shareholder’s deemed percentage stock ownership of MainSource following the merger. The determination generally requires a comparison of the percentage of the outstanding stock of MainSource the shareholder is considered to have owned immediately before the

deemed redemption to the percentage of the outstanding stock of MainSource the shareholder owns immediately after the deemed redemption. The IRS has indicated in rulings that any reduction in the interest of a minority shareholder that owns a small number of shares in a publicly and widely held corporation and that exercises no control over corporate affairs would result in capital gain (as opposed to dividend) treatment. For purposes of applying the foregoing tests, a shareholder will be deemed to own the stock it actually owns and the stock it constructively owns under the attribution rules of Section 318 of the Code. Under Section 318 of the Code, a shareholder will be deemed to own the shares of stock owned by certain family members, by certain estates and trusts of which the shareholder is a beneficiary and by certain affiliated entities, as well as shares of stock subject to an option actually or constructively owned by the shareholder or such other persons. If, after applying these tests, the deemed redemption results in a capital gain, the capital gain will be long-term if the Peoples Ohio shareholder’s holding period for its Peoples Ohio common stock is more than one year as of the date of the exchange. If, after applying these tests, the deemed redemption results in the gain recognized by a Peoples Ohio shareholder being classified as a dividend, such dividend will be treated as either ordinary income or qualified dividend income. Any gain treated as qualified dividend income will be taxable to individual Peoples Ohio shareholders at the long-term capital gains rate, provided that the shareholder held the shares giving rise to such income for more than 61 days during the 121 day period beginning 60 days before the closing date. The determination as to whether a Peoples Ohio shareholder will recognize a capital gain or dividend income as a result of its exchange of Peoples Ohio common stock for a combination of MainSource common stock and cash in the merger is complex and is determined on a shareholder-by-shareholder basis. Accordingly, each Peoples Ohio shareholder is urged to consult its own tax advisor with respect to this determination.

The same analysis concerning dividend treatment will apply to gain recognized upon the receipt of all cash except that the deemed redemption may be treated as if it occurred from Peoples Ohio and not from MainSource. The tax result should be the same except in cases in which the attribution rules may cause differing constructive ownership results. Accordingly, each Peoples Ohio shareholder is urged to consult its own tax advisor with respect to this determination.

A Peoples Ohio shareholder’s aggregate tax basis in the MainSource common stock received in the merger will be equal to the shareholder’s aggregate tax basis in its Peoples Ohio common stock surrendered, decreased by the amount of any cash received and increased by the amount of any gain recognized. A Peoples Ohio shareholder’s holding period for MainSource common stock received in the merger will include the holding period of the Peoples Ohio common stock surrendered in the merger.

Cash Received Instead of a Fractional Share of MainSource Common Stock. Subject to the discussion above regarding possible dividend treatment, a Peoples Ohio shareholder that receives cash instead of a fractional share of MainSource common stock in the merger will recognize capital gain or loss with respect to the fractional share in an amount equal to the difference, if any, between the amount of cash received instead of the fractional share and the portion of the shareholder’s tax basis in its Peoples Ohio common stock that is allocable to the fractional share. The capital gain or loss will be long-term if the holding period for such Peoples Ohio common stock is more than one year as of the date of the exchange.

Tax Treatment of Options

A Peoples Ohio employee whose options to acquire Peoples Ohio common stock are amended in connection with the merger to provide for the acquisition of MainSource common stock will recognize no gain or loss on the amendment to the extent that the options constitute securities. With respect to the payment of cash in the merger for other outstanding options to acquire Peoples Ohio common stock, the excess of the Cash Consideration over the per share exercise price for each share of common stock subject to such stock options will constitute taxable ordinary income to the optionholder.

Tax Treatment of the Entities

No gain or loss will be recognized by MainSource, Peoples Ohio or Peoples Savings Bank as a result of the merger.

Information Reporting and Backup Withholding

In general, a Peoples Ohio shareholder receiving cash in the merger will be subject to information reporting to the IRS. In addition, backup withholding at the applicable rate (currently 28%) will generally apply if the exchanging Peoples Ohio shareholder fails to provide an accurate taxpayer identification number or fails to properly certify that it is not subject to backup withholding (generally on a substitute IRS Form W-9). Certain holders (including, among others, U.S. corporations) are not subject to information reporting or backup withholding, but they may still need to furnish a substitute IRS Form W-9 or otherwise establish an exemption. Any amount withheld as backup withholding from payments to an exchanging Peoples Ohio shareholder will be creditable against the Peoples Ohio shareholder’s federal income tax liability, provided that it timely furnishes the required information to the IRS. Peoples Ohio shareholders should consult their tax advisors as to their qualifications for exemption from backup withholding and the procedure for obtaining an exemption.

COMPARISON OF THE RIGHTS OF SHAREHOLDERS

At present, the rights of shareholders of Peoples Ohio are governed by Peoples Ohio’s articles of incorporation and code of regulations as well as the law of Ohio, the state in which Peoples Ohio is incorporated. Upon completion of the merger, the rights of Peoples Ohio shareholders who receive shares of MainSource common stock in exchange for their shares of Peoples Ohio common stock and become shareholders of MainSource will be governed by the articles of incorporation and by-laws of MainSource and the law of Indiana, the state in which MainSource is incorporated. The following discussion summarizes material differences between the rights of Peoples Ohio’s shareholders and MainSource’s shareholders and is not a complete description of all differences. This discussion is qualified in its entirety by reference to MainSource’s articles of incorporation and by-laws, Peoples Ohio’s articles of incorporation and code of regulations and the applicable provisions of Indiana and Ohio law.

Authorized Capital Stock

MainSource. MainSource currently is authorized to issue up to 25,000,000 shares of common stock, no par value, of which 15,049,838 shares were outstanding as of March 31, 2006. MainSource is also authorized to issue up to 400,000 shares of preferred stock, no par value. Currently, there are no shares of MainSource preferred stock outstanding. If any series of preferred stock is issued, the MainSource board of directors may fix the designation, relative rights, preferences and limitations, and any other powers, preferences and relative, participating, optional and special rights, and any qualifications, limitations and restrictions, of the shares of that series of preferred stock.

As of March 31, 2006, options to purchase approximately 208,407 shares of MainSource common stock were outstanding.

Peoples Ohio. Peoples Ohio currently is authorized to issue up to 15,000,000 shares of common stock, no par value, of which 7,346,864 shares were outstanding as of March 31, 2006. Peoples Ohio also is authorized to issue up to 1,000,000 shares of preferred stock, no par value. Currently, there are no shares of Peoples Ohio preferred stock outstanding.

Advance Notice Requirements

MainSource. MainSource’s by-laws provide that nominations for the election of directors may be made by its board of directors or by any shareholder entitled to vote for the election of directors, subject to the nomination having been made in compliance with certain notice and informational requirements. In addition, MainSource’s by-laws provide that any business to be presented at the annual meeting of shareholders is subject to certain advance notice and informational requirements. MainSource’s by-laws provide that the Secretary of MainSource must receive written notice of any shareholder director nomination or proposal for business at an annual meeting of shareholders no less than 60 nor more than 90 days prior to the meeting, provided, however, that in the event that less than 70 days’ notice of the date of the meeting is given to shareholders or prior to public disclosure of the date of the meeting to shareholders, notice of the nomination or proposal must be received no later than the tenth day following the day on which notice of the date of the annual meeting was mailed or public disclosure was made.

Peoples Ohio. Peoples Ohio’s code of regulations provides that nominations for the election of directors may be made by its board of directors or by any shareholder entitled to vote for the election of directors, subject to the nomination having been made in compliance with certain notice and informational requirements. Peoples Ohio’s code of regulations provides that the Secretary of Peoples Ohio must receive written notice of any shareholder director nomination on or before the sixtieth day before the first anniversary of the most recent annual meeting of Peoples Ohio shareholders held for the election of directors, except that if the annual meeting for the election of directors in any year is not held on or before the thirty-first day next following such anniversary, then the written notice must be received by the Peoples Ohio Secretary within a reasonable time before the date of the annual meeting. In the case of a special meeting of shareholders at which directors are to be elected, the written notice must be received by the Peoples Ohio Secretary no later than the close of business on the seventh day following the day on which notice of the special meeting was mailed to shareholders.

Composition of Board of Directors

MainSource. MainSource’s by-laws state that the number of directors will not be less than five and no more than fifteen, as fixed by resolution of the board of directors from time to time. Each director holds office for the term for which he was elected and until his successor shall be elected and qualified, whichever period is longer, or until his death or until he resigns or has been removed. The number of directors currently designated by MainSource is eight.

Peoples Ohio. Peoples Ohio’s code of regulations states that the number of directors will be six until changed by resolution of the board of directors or at a meeting of shareholders called for the purpose of electing directors. The directors are divided into two classes of three directors each and are elected on a staggered basis for a term of two years and until his successor shall be elected and qualified, whichever period is longer, or until his death or until he resigns or has been removed. The number of directors is currently set at six.

Special Meetings of Shareholders

MainSource. MainSource’s by-laws state that special meetings may be called by the chairman of the board of directors or the chief executive officer, and shall be called by the chairman of the board at the written request of a majority of the members of the board of directors or upon delivery to MainSource’s secretary of a signed and dated written demand for a special meeting from the holders of at least 25% of all the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting.

Peoples Ohio. Peoples Ohio’s code of regulations states that a special meeting may be called only by Peoples Ohio’s chairman of the board of directors, the president (or, in the case of the president’s absence, death or disability, the vice president authorized to exercise the authority of the president), the secretary,

the directors by action at a meeting or by majority consent without a meeting, or by the holders of at least 50% of the shares outstanding and entitled to vote at the meeting.

Notice of Meetings of Shareholders

MainSource. MainSource’s by-laws require that notice of a meeting of shareholders must be given to shareholders of record not less than 10 and not more than 60 days before the date of the meeting.

Peoples Ohio. Peoples Ohio’s code of regulations require that notice of a meeting of shareholders must be given to shareholders of record not less than seven and not more than 60 days before the meeting.

Voting by Shareholders

MainSource. The holders of MainSource common stock are entitled to one vote per share on all matters presented for shareholder vote. In accordance with Indiana law, MainSource’s articles of incorporation and by-laws provide that shareholder action is taken by the affirmative vote of the holders of a majority of the shares present at a meeting at which a quorum is present (and in certain cases, a majority of all shares held by each voting group entitled to vote on the issue). Indiana law generally requires that mergers, consolidations, sales, leases, exchanges or other dispositions of all or substantially all of the assets of a corporation be approved by the affirmative vote of a majority of the issued and outstanding shares entitled to vote at the shareholders’ meeting, subject in each case to provisions in the corporation’s articles of incorporation requiring a higher percentage vote for certain transactions.

Peoples Ohio. The holders of Peoples Ohio common stock are entitled to one vote per share on all matters presented for shareholder vote. Ohio law generally requires that an agreement of merger or consolidation be approved by a shareholder vote of two-thirds of the votes entitled to be cast at the shareholders meeting, subject to provisions in the corporation’s articles of incorporation requiring a lower or higher percentage vote requirement not less than a majority of the outstanding shares entitled to vote. The Peoples Ohio articles of incorporation state that any action (unless expressly provided otherwise by statute) may be taken by the vote, consent, waiver or release of the holders of shares entitling them to exercise not less than a majority of the voting power of the corporation (or the applicable class or classes of shares), except that if the board of directors recommends against the approval of any of the following matters, the affirmative vote of the holders of shares entitling them to exercise not less than 75% of the voting power of any class or classes of shares which entitle the holders to vote on the matter as a class are required to approve:

· a proposed amendment to the articles of incorporation;

· a proposed amendment to the code of regulations;

· a proposal to change the number of directors by action of the shareholders;

· an agreement of merger or consolidation providing for the proposed merger or consolidation of the corporation with or into one or more other corporations;

· a proposed combination or majority share acquisition involving the issuance of shares of the corporation and requiring shareholder approval;

· a proposal to sell, exchange, transfer or otherwise dispose of all, or substantially all, of the assets, with or without the goodwill, of the corporation; or

· a proposed dissolution of the corporation.

Dividends

MainSource. The holders of MainSource common stock are entitled to dividends and other distributions when, as and if declared by the MainSource board of directors out of funds legally available therefor. Under Indiana law, a dividend may not be paid if, after giving it effect, (1) MainSource would not be able to pay its debts as they become due in the usual course of business, or (2) MainSource’s total assets would be less than the sum of its total liabilities plus, unless MainSource’s articles of incorporation permitted otherwise, the amount that would be needed to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the dividend if MainSource were to be dissolved at the time of the dividend.

The amount of dividends, if any, that may be declared by MainSource in the future will necessarily depend upon many factors, including, without limitation, future earnings, capital requirements, business conditions and capital levels of subsidiaries (since MainSource is dependent upon dividends paid by its subsidiaries for its revenues), the discretion of MainSource’s board of directors and other factors that may be appropriate in determining dividend policies.

Peoples Ohio. The holders of Peoples Ohio common stock are entitled to dividends and other distributions when, as and if declared by the Peoples Ohio board of directors out of funds legally available therefor. Under Ohio law, dividends may not exceed the surplus of a corporation and may not be declared if the corporation is insolvent or would be made insolvent by declaration of the proposed dividend.

Removal of Directors

MainSource. Directors may be removed at a meeting called expressly for the purpose of removing one or more directors, with or without cause, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors.

Peoples Ohio. Shareholders may remove one or more directors only for cause and only by the affirmative vote of at least 75% of the voting power of all of the shares of Peoples Ohio entitled to vote generally in the election of directors, voting as a single class.

Appraisal Rights of Dissenting Shareholders

MainSource. Indiana law provides shareholders of an Indiana corporation that is involved in certain mergers, share exchanges or sales or exchanges of all or substantially all of its property the right to dissent from that action and obtain payment of the fair value of their shares. However, dissenters’ rights are not available to holders of shares listed on a national securities exchange, such as the New York Stock Exchange, or traded on the NASDAQ National Market or a similar market. Accordingly, since the shares of MainSource are currently traded on the NASDAQ National Market, no dissenters’ rights are presently available to MainSource shareholders.

Peoples Ohio. Ohio law provides shareholders of an Ohio corporation that is involved in certain mergers, share exchanges or sales or exchanges of all or substantially all of its property the right to dissent from that action and obtain payment of the fair value of their shares. Such rights are generally available to Peoples Ohio shareholders in connection with such transactions. See “The Merger Agreement—Dissenters’ Rights of Peoples Ohio Shareholders” for a description of such rights as they apply to this merger.

Anti-Takeover Provisions

The anti-takeover measures applicable to MainSource and Peoples Ohio, as described below, may have the effect of discouraging or rendering it more difficult for a person or other entity to acquire control of MainSource or Peoples Ohio. These measures may have the effect of discouraging certain tender offers

for shares of MainSource common stock or Peoples Ohio common stock which might otherwise be made at premium prices or certain other acquisition transactions which might be viewed favorably by a significant number of shareholders.

MainSource. Under the business combinations provision of Indiana law, any 10% shareholder of an Indiana corporation, with a class of voting shares registered under Section 12 of the Exchange Act or which has specifically adopted this provision in the corporation’s articles of incorporation, is prohibited for a period of five years from completing a business combination with the corporation unless, prior to the acquisition of such 10% interest, the board of directors of the corporation approved either the acquisition of such interest or the proposed business combination. Further, the corporation and a 10% shareholder may not consummate a business combination unless all provisions of the articles of incorporation of the corporation are complied with and a majority of disinterested shareholders approve the transaction or all shareholders receive a price per share determined in accordance with the business combinations provision of Indiana law.

An Indiana corporation may elect to remove itself from the protection provided by the Indiana business combinations provision, but such an election remains ineffective for 18 months and does not apply to a combination with a shareholder who acquired a 10% ownership position prior to the effective time of the election. MainSource is covered by the business combinations provision of Indiana law. The constitutional validity of the business combinations provision of Indiana law has in the past been challenged and has been upheld by the United States Supreme Court.

In addition to the business combinations provision, Indiana law also contains a “control share acquisition” provision which, although different in structure from the business combinations provision, may have a similar effect of discouraging or making more difficult a hostile takeover of an Indiana corporation. This provision also may have the effect of discouraging premium bids for outstanding shares. Indiana law provides that, unless otherwise provided in an Indiana corporation’s articles of incorporation or by-laws, certain acquisitions of shares of the corporation’s common stock will be accorded voting rights only if a majority of the disinterested shareholders approves a resolution granting the potential acquiror the ability to vote such shares. Upon disapproval of the resolution, the shares held by the acquiror shall be redeemed by the corporation at the fair value of the shares as determined by the control share acquisition provision. This provision does not apply to a plan of merger and merger, if the corporation complies with the applicable merger provisions and is a party to the agreement of merger or plan of share exchange. MainSource is subject to the control share acquisition provision.

Peoples Ohio. Chapter 1704 of the Ohio Revised Code prohibits specified business combinations and transactions between an “issuing public corporation” and a beneficial owner of 10% or more of the shares of the corporation, an “interested shareholder,” for at least three years after the interested shareholder attains 10% ownership (unless the Board of Directors of the issuing public corporation approves the transaction before the interested shareholders attains 10% ownership). An “issuing public corporation” is defined as an Ohio corporation with 50 or more stockholders that has its principal place of business, principal executive offices, or substantial assets within the State of Ohio, and as to which no close corporation agreement exists. Examples of transactions regulated by the merger moratorium provisions include the disposition of assets, mergers, consolidations, voluntary dissolutions, and the transfer of shares. Subsequent to the three-year period, a moratorium transaction may take place provided that certain conditions are satisfied, including that (a) the Board of Directors approves the transaction, (b) the transaction is approved by the holders of shares with at least two-thirds of the voting power of the corporation (or a different proportion set forth in the articles of incorporation), including at least a majority of the outstanding shares after excluding shares controlled by the interested shareholder, or (c) the business combination results in shareholders, other than the interested shareholder, receiving a fair price plus interest for their shares. Although the merger moratorium provisions may apply, a corporation may elect not to be covered by the merger moratorium provisions, or subsequently elect to be covered,

with an appropriate amendment to its articles of incorporation. The merger moratorium provisions apply to Peoples Ohio.

The Ohio Control Share Acquisition Act provides that specified notice and informational filings and special shareholder meetings and voting procedures must occur before consummation of a proposed “control share acquisition,” which is defined as any acquisition of an issuer’s shares that would entitle the acquirer to exercise or direct the voting power of the issuer in the election of Directors within any of the following ranges: (a) one-fifth or more but less than one-third of the voting power; (b) one-third or more but less than a majority of the voting power; or (c) a majority or more of such voting power. Assuming compliance with the notice and information filing requirements prescribed by the statute, the proposed control share acquisition may take place only if, at a duly convened special meeting of shareholders, the acquisition is approved by both a majority of the voting power of the issuer represented at the meeting and a majority of the voting power remaining after excluding the combined voting power of the intended acquirer and the directors and officers of the issuer. The Control Share Acquisition Act does not apply to a corporation whose articles of incorporation or regulations so provide. Peoples Ohio has not opted out of the application of The Control Share Acquisition Act.

Ohio law provides that an offeror may not make a tender offer or request or invitation for tenders that would result in the offeror beneficially owning more than ten percent of any class of the target company’s equity securities, unless such offeror files certain information with the Ohio Division of Securities and provides such information to the target company and the offerees within Ohio. The Securities Division may suspend the continuation of the control bid if the Securities Division determines that the offeror’s filed information does not provide full disclosure to the offerees of all material information concerning the control bid. The statute also provides that an offeror may not acquire any equity security of a target company within two years of the offeror’s previous acquisition of any equity security of the same target company pursuant to a control bid, unless the Ohio offerees may sell such security to the offeror on substantially the same terms as provided by the previous control bid. The statute does not apply to a transaction if either the offeror or the target company is a savings and loan holding company and the proposed transaction requires federal regulatory approval.

In addition to the protections provided by Ohio law, Peoples Ohio’s articles of incorporation include provisions which provide that if the board of directors recommends against the approval of certain matters including mergers, consolidations, combinations, majority share acquisitions or the sale, exchange, transfer or other disposition of all, or substantially all, of the assets of Peoples Ohio, the affirmative vote of the holders of shares entitling them to exercise not less that 75% of the voting power of the any class or classes which entitle the holders to vote on such matters as a class are required to approve them. See “Comparison of the Rights of Shareholders—Voting by Shareholders.”

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS AND EXPERTS

The consolidated financial statements of MainSource as of December 31, 2005 and 2004, and for each of the three years in the period ended December 31, 2005, have been audited by Crowe Chizek and Company LLC, independent registered public accounting firm, as set forth in its report thereon incorporated by reference in this proxy statement/prospectus in reliance upon such report given on the authority of Crowe Chizek and Company LLC as experts in accounting and auditing.

The consolidated financial statements of Peoples Ohio as of June 30, 2005 and 2004, and for each of the three years in the period ended June 30, 2005, have been audited by BKD, LLP, independent registered public accounting firm, as set forth in its report thereon incorporated by reference in this proxy statement/prospectus in reliance upon such report given on the authority of BKD, LLP as experts in accounting and auditing.

The consolidated financial statements of Union Community Bancorp as of December 31, 2004, and for the year then ended, have been audited by BKD, LLP, independent registered public accounting firm, as set forth in its report thereon incorporated by reference in this proxy statement/prospectus in reliance upon such report given on the authority of BKD, LLP as experts in accounting and auditing.

The consolidated financial statements of HFS Bank, F.S.B. as of March 31, 2005, and for the year then ended, have been audited by BKD, LLP, independent registered public accounting firm, as set forth in its report thereon incorporated by reference in this proxy statement/prospectus in reliance upon such report given on the authority of BKD, LLP as experts in accounting and auditing.

LEGAL MATTERS

Certain matters pertaining to the validity of the authorization and issuance of the MainSource common stock to be issued in the proposed merger and certain matters pertaining to the federal income tax consequences of the proposed mergers will be passed upon by Bose McKinney & Evans LLP, Indianapolis, Indiana.

WHERE YOU CAN FIND MORE INFORMATION

MainSource and Peoples Ohio file annual, quarterly, and current reports, proxy statements, and other information with the Securities and Exchange Commission. You may read and copy any reports, statements, or other information that the companies file at the Securities and Exchange Commission’s public reference room at Station Place, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of the public reference room. MainSource’s and Peoples Ohio’s public filings also are available to the public from commercial document retrieval services and on the World Wide Web site maintained by the Securities and Exchange Commission at “http://www.sec.gov.” Shares of MainSource common stock are traded on the NASDAQ National Market System under the symbol “MSFG,” and shares of Peoples Ohio common stock are included in the OTC Bulletin Board System under the symbol “POHF.”

MainSource has filed with the Securities and Exchange Commission a registration statement on Form S-4 under the Securities Act of 1933 with respect to the common stock of MainSource being offered pursuant to the Merger Agreement. This proxy statement/prospectus, which constitutes part of the registration statement, does not contain all of the information set forth in the registration statement. Parts of the registration statement are omitted from the proxy statement/prospectus in accordance with the rules and regulations of the Securities and Exchange Commission. For further information, your attention is directed to the registration statement. Statements made in this proxy statement/prospectus concerning the contents of any documents are not necessarily complete, and in each case are qualified in all respects by reference to the copy of the document filed with the Securities and Exchange Commission.

The Securities and Exchange Commission allows MainSource to “incorporate by reference” certain information filed by MainSource and others with the Securities and Exchange Commission, which means that MainSource can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this proxy statement/prospectus.

MainSource incorporates by reference the documents and information listed below (file no. 0-12422, except as noted):

(1) MainSource’s Annual Report on Form 10-K for the year ended December 31, 2005;

(2) The information described below under the following captions in MainSource’s Form 10-K for the fiscal year ended December 31, 2005: (a) the information concerning share ownership of principal shareholders and concerning directors and executive officers of MainSource under the caption “Security Ownership of Certain Beneficial Owners and Management;” (b) “Executive

Compensation;” (c) “Certain Relationships and Related Transactions;” and (d) information concerning directors and executive officers of MainSource under the caption “Directors and Executive Officers of Registrant;”

(3) MainSource’s Current Reports on Form 8-K filed January 3, 2006, January 4, 2006 and March 31, 2006;

(4) The description of MainSource’s common stock set forth in the Current Report on Form 8-K filed May 19, 2005;

(5) The Annual Report on Form 10-K for the year ended December 31, 2004, of Union Community Bancorp (file no. 0-23543);

(6) The Quarterly Reports on Form 10-Q for the quarters ended March 31, 2005, June 30, 2005 and September 30, 2005 of Union Community Bancorp (file no. 0-23543); and

(7) The audited financial statements for the fiscal year ended March 31, 2005, and the unaudited financial statements for the quarters ended June 30, 2005 and September 30, 2005, of HFS Bank, F.S.B. set forth in the Current Report on Form 8-K filed by MainSource on December 28, 2005, and the unaudited financial statements for the quarter ended December 31, 2005, of HFS Bank, F.S.B. set forth in the Current Report on Form 8-K filed by MainSource on April 10, 2006.

MainSource also incorporates by reference any filings it makes with the Securities and Exchange Commission under Sections 13(a), 13(c), 14, and 15(d) of the Securities Exchange Act of 1934 between the date hereof and the date of the Peoples Ohio special shareholder meeting.

Any statement contained in a document incorporated or deemed to be incorporated herein shall be deemed modified or superseded for purposes of this proxy statement/prospectus to the extent that a statement contained herein or in any other subsequently filed document that is deemed to be incorporated herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this proxy statement/prospectus.

You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to provide you with information that is inconsistent with information contained in this document or any document incorporated by reference. This proxy statement/prospectus is not an offer to sell these securities in any state where the offer and sale of these securities is not permitted. The information in this proxy statement/prospectus is current as of the date it is mailed to security holders, and not necessarily as of any later date. If any material change occurs during the period that this proxy statement/prospectus is required to be delivered, this proxy statement/prospectus will be supplemented or amended.

All information regarding MainSource in this proxy statement/prospectus has been provided by MainSource, and all information regarding Peoples Ohio in this proxy statement/prospectus has been provided by Peoples Ohio.

Peoples Ohio Financial Corporation
Consolidated Statements of Income
Years Ended June 30, 2005, 2004 and 2003

	2005		2004		2003
Interest Income
Loans receivable	$	10,388,190	$	10,271,265	$	13,396,877
Investment securities	340,576		540,678		206,722
Other interest and dividend income	331,173		282,593		349,588
Total interest income	11,059,939		11,094,536		13,953,187
Interest Expense
Deposits	1,336,751		1,241,664		2,226,509
Borrowings	2,589,122		2,902,008		3,673,164
Total interest expense	3,925,873		4,143,672		5,899,673
Net Interest Income	7,134,066		6,950,864		8,053,514
Provision for loan losses	183,065		329,901		140,000
Net Interest Income After Provision for Loan Losses	6,951,001		6,620,963		7,913,514
Noninterest Income
Fiduciary activities	470,906		559,441		673,019
Service charges on deposit accounts and other	1,138,395		1,126,369		802,451
Service charges derived from automatic teller machines	190,793		165,255		163,457
Net realized gain (loss) on sale of available-for-sale securities	0		67,738		(6,597		)
Increase in cash surrender value of life insurance	183,876		198,628		8,768
Other income	88,397		56,703		51,999
Total noninterest income	2,072,367		2,174,134		1,693,097
Noninterest Expenses
Salaries and employee benefits	2,971,687		2,915,187		2,761,617
Net occupancy expenses	435,067		449,861		408,020
Director fees	189,260		150,500		150,000
Equipment expenses	134,898		153,627		170,332
Data processing fees	677,532		636,512		532,802
Professional fees	337,716		404,837		224,644
Advertising expenses	148,972		155,857		111,217
State of Ohio franchise taxes	300,000		282,380		252,880
Other expenses	1,210,300		1,271,492		1,111,238
Total noninterest expenses	6,405,432		6,420,253		5,722,750
Income Before Income Tax	2,617,936		2,374,844		3,883,861
Income tax expense	827,628		744,038		1,338,819
Net Income	$	1,790,308	$	1,630,806	$	2,545,042
Basic Earnings per Share	$	0.25	$	0.22	$	0.34
Diluted Earnings per Share	$	0.24	$	0.22	$	0.33

See Notes to Consolidated Financial Statements

F-4

Peoples Ohio Financial Corporation
Consolidated Statements of Stockholders’ Equity
Years Ended June 30, 2005, 2004 and 2003

	Common Stock Amount			Additional Paid-in Capital				Retained Earnings			Accumulated Other Comprehensive Income (Loss)				Treasury Stock			Total
Balances, July 1, 2002	$	7,299,734			$	203,084		$	15,603,443									$	23,106,261
Net income								2,545,042										2,545,042
Change in unrealized gain (loss) on securities available for sale, net of reclassification adjustment and tax effect												$	56,616					56,616
Total comprehensive income																		2,601,658
Cash dividends ($.09 per share)								(679,664		)								(679,664		)
Exercise of stock options	144,002				(30,284		)								$	133,974		247,692
Purchase of treasury shares															(777,235		)	(777,235		)
Tax benefit of stock options					13,800													13,800
Net change in equity from ESOP shares	(10,150		)					(151,410		)								(161,560		)
Balances, June 30, 2003	7,433,586				186,600			17,317,411				56,616			(643,261		)	24,350,952
Net income								1,630,806										1,630,806
Change in unrealized gain (loss) on securities available for sale, net of reclassification adjustment and tax effect												(55,142		)				(55,142		)
Total comprehensive income																		1,575,664
Cash dividends ($.12 per share)								(880,419		)								(880,419		)
Exercise of stock options					(186,600		)	(99,822		)					547,544			261,122
Purchase of treasury shares															(1,105,190		)	(1,105,190		)
Tax benefit of stock options					24,424													24,424
Net change in equity from ESOP shares	38,047							126,233										164,280
Balances, June 30, 2004	7,471,633				24,424			18,094,209				1,474			(1,200,907		)	24,390,833
Net income								1,790,308										1,790,308
Change in unrealized gain (loss) on securities available for sale, net of tax effect												(7,929		)				(7,929		)
Total comprehensive income																		1,782,379
Cash dividends ($.13 per share)								(944,134		)								(944,134		)
Exercise of stock options								(231,700		)					437,137			205,437
Purchase of treasury shares															(502,152		)	(502,152		)
Tax benefit of stock options					27,124													27,124
Net change in equity from ESOP shares	(10,000		)					(24,279		)								(34,279		)
Balances, June 30, 2005	$	7,461,633			$	51,548		$	18,684,404			$	(6,455	)	$	(1,265,922	)	$	24,925,208

See Notes to Consolidated Financial Statements

F-5

Peoples Ohio Financial Corporation
Consolidated Statements of Cash Flows
Years Ended June 30, 2005, 2004 and 2003

	2005			2004			2003
Operating Activities
Net income	$	1,790,308		$	1,630,806		$	2,545,042
Items not requiring (providing) cash
Provision for loan losses	183,065			329,901			140,000
Depreciation and amortization	372,613			389,845			393,970
Amortization of deferred loan fees	(219,933		)	(184,836		)	(120,146		)
Deferred income tax	171,000			106,000			74,000
Investment securities amortization, net	36,609			126,050			44,885
Federal Home Loan Bank (FHLB) stock dividends	(248,700		)	(214,200		)	(221,200		)
Net realized (gain) loss on available-for-sale securities	0			(67,738		)	6,597
Increase in cash surrender value of life insurance	(166,125		)	(196,239		)	—
Net change in
Interest receivable	(2,060		)	136,210			192,400
Interest payable	93,309			(71,484		)	(96,811		)
Other assets	436,223			2,137,364			(1,985,529		)
Other liabilities	731,757			(595,728		)	(323,756		)
Net cash provided by operating activities	3,178,066			3,525,951			649,452
Investing Activities
Purchases of available for sale securities	0			(19,373,945		)	(22,020,584		)
Proceeds from calls and maturities of available-for-sale securities	11,717,133			953,476			210,000
Proceeds from sale of available-for-sale securities	0			19,240,005			5,158,116
Proceeds from maturities of securities held to maturity	54,752			263,192			341,910
Net change in loans	(20,689,752		)	9,729,187			41,087,266
Purchases of premises and equipment	(27,189		)	(134,343		)	(399,173		)
Purchase of life insurance contracts	0			(4,000,000		)	—
Net cash provided (used) by investing activities	(8,945,056		)	6,677,572			24,377,535
Financing Activities
Net change in
Interest-bearing demand and savings deposits	1,555,467			8,098,991			4,522,222
Certificates of deposit	10,741,588			(11,505,000		)	(7,339,420		)
Proceeds of FHLB advances	68,232,000			62,500,000			—
Repayment of FHLB advances	(75,404,360		)	(72,533,356		)	(10,845,663		)
Cash dividends	(944,134		)	(880,419		)	(679,664		)
Purchase of treasury stock	(502,152		)	(1,105,190		)	(777,235		)
Proceeds from exercise of stock options	205,437			261,122			247,692
Net cash provided (used) by financing activities	3,883,846			(15,163,852		)	(14,872,068		)
Net Change in Cash and Cash Equivalents	(1,883,144		)	(4,960,329		)	10,154,919
Cash and Cash Equivalents, Beginning of Year	10,875,107			15,835,436			5,680,517
Cash and Cash Equivalents, End of Year	$	8,991,963		$	10,875,107		$	15,835,436
Additional Cash Flows Information
Interest paid	$	3,832,564		$	4,215,156		$	5,996,484
Income tax paid	$	455,000		$	744,279		$	1,164,014
Transfers from loans to other real estate owned	$	274,255		$	—		$	—

See Notes to Consolidated Financial Statements

F-6

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

Note 3: Investments

The amortized cost and approximate fair values of securities are as follows:

	Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses				Approximate Fair Value
Available-for-Sale Securities:
June 30, 2005:
U.S. government agencies		$	1,850		$			$	(7	)		$	1,843
Mortgage-backed securities		2,121			—			(3		)		2,118
		$	3,971		$			$	(10	)		$	3,961
June 30, 2004:
U.S. government agencies		$	11,361		$	41		$	(5	)		$	11,397
Mortgage-backed securities		4,363			—			(34		)		4,329
		$	15,724		$	41		$	(39	)		$	15,726

	Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Approximate Fair Value
Held to Maturity Securities:
June 30, 2005:
U.S. government agencies		$	103		$	3		$	—		$	106
Mortgage-backed securities		257			19			—			276
State and political subdivisions		101			3			—			104
		$	461		$	25		$	—		$	486
June 30, 2004:
U.S. Treasury		$	104		$	1		$	—		$	105
Mortgage-backed securities		312			24			—			336
State and political subdivisions		100			2			—			102
		$	516		$	27		$	—		$	543

The amortized cost and fair value of securities available for sale and held to maturity at June 30, 2005, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available for Sale					Held to Maturity
	Amortized Cost			Fair Value		Amortized Cost			Fair Value
One to five years		$	1,850	$	1,843		$	103	$	106
After ten years		—		—			101		104
		1,850		1,843			204		210
Mortgage-backed securities		2,121		2,118			257		276
Totals		$	3,971	$	3,961		$	461	$	486

F-11

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, amounted to $3,959,000 at June 30, 2005 and $11,863,000 at June 30, 2004.

There were no sales of securities during 2005. Gross gains and losses of $67,738 and $(6,597) resulting from sales of available-for-sale securities were realized for 2004 and 2003. The tax expense (benefit) for net gains and losses on securities for 2004 and 2003 was $23,000 and $(2,000), respectively.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at June 30, 2005, was $3,961,000, which is approximately 89% of the fair value of the Company’s investment portfolio. These declines primarily resulted from recent increases in market interest rates.

Based on evaluation of available evidence, including recent changes in market interest rates, management believes the declines in fair value for these securities are temporary.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

Securities with unrealized losses at June 30, were as follows:

	Less than 12 Months							12 Months or Longer							Total
June 30, 2005	Fair Value			Unrealized Losses				Fair Value			Unrealized Losses				Fair Value			Unrealized Losses
Available for Sale Securities:
U.S. government agencies		$	—		$	—			$	1,843		$	(7	)		$	1,843		$	(7	)
Mortgage-backed securities		2,118			(3		)		—			—				2,118			(3		)
		$	2,118		$	(3	)		$	1,843		$	(7	)		$	3,961		$	(10	)

	Less than 12 Months							12 Months or Longer						Total
June 30, 2004	Fair Value			Unrealized Losses				Fair Value			Unrealized Losses			Fair Value			Unrealized Losses
Available for Sale Securities:
U.S. government agencies		$	1,845		$	(5	)		$	—		$	—		$	1,845		$	(5	)
Mortgage-backed securities		4,328			(34		)		—			—			4,328			(34		)
		$	6,173		$	(39	)		$	—		$	—		$	6,173		$	(39	)

F-12

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

Note 4: Loans and Allowance for Loan Losses

	2005			2004
Mortgage loans on existing real estate
Residential single family units	$	111,985		$	100,629
Other residential and commercial	29,952			27,582
Total real estate loans	141,937			128,211
Construction loans	18,281			12,315
Commercial business	6,805			6,714
Consumer	1,681			2,282
Home improvement	8,598			6,016
Deposit and other loans	187			264
	177,489			155,802
Deferred loan fees	(84		)	(177		)
Undisbursed portion of loans	(5,493		)	(3,842		)
Allowance for loan losses	(725		)	(1,048		)
Total loans	$	171,187		$	150,735

	2005			2004			2003
Allowance for loan losses
Balances, July 1	$	1,048		$	862		$	882
Provision for losses	183			330			140
Recoveries on loans	19			21			29
Loans charged off	(525		)	(165		)	(189		)
Balances, June 30	$	725		$	1,048		$	862

At June 30, 2005, impaired loans were $227,000 and had no related allowance for loan losses. At June 30, 2004, impaired loans were $899,000 and had a related allowance for loan losses of $438,000.

Interest of $5,534 and $18,576 was recognized on average impaired loans of $577,000 and $1,087,000 for 2005 and 2004, respectively. Interest of $4,844 and $1,076 was recognized on impaired loans on a cash basis during 2005 and 2004, respectively.

At June 30, 2005 and 2004, accruing loans delinquent 90 days or more totaled $334,000 and $565,000, respectively. Non-accruing loans at June 30, 2005 and 2004 were $415,000 and $683,000, respectively.

Note 5: Premises and Equipment

	2005			2004
Land	$	955		$	955
Buildings	4,864			4,864
Equipment	3,819			3,792
Total cost	9,638			9,611
Accumulated depreciation	(5,584		)	(5,212		)
Net premises and equipment	$	4,054		$	4,399

F-13

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

Note 6: Deposits

	2005		2004
Noninterest bearing accounts	$	14,620	$	12,672
NOW accounts	19,752		19,964
Super NOW accounts	1,271		1,463
Passbook accounts	24,049		23,850
Money market accounts	26,158		26,346
Certificates and other time deposits of $100,000 or more	16,280		9,231
Other certificates and time deposits	24,390		20,697
Total deposits	$	126,520	$	114,223
Certificates and other time deposits maturing in years ending June 30
2006	$	24,081
2007	10,971
2008	3,406
2009	841
2010	1,341
Thereafter	30
	$	40,670

Note 7: Long-Term Debt

	2005		2004
Federal Home Loan Bank advances, fixed and variable rates, due at various dates through May 1, 2022	$	46,123	$	53,295

The Federal Home Loan Bank advances are secured by substantially all first-mortgage loans and FHLB stock. Advances are subject to restrictions or penalties in the event of prepayment.

Maturities in years ending June 30
2006	$	4,996
2007	3,649
2008	5,166
2009	8,888
2010	11,706
Thereafter	11,718
	$	46,123

The Bank has unused letters of credit with the Federal Home Loan Bank aggregating $31,050,000 at June 30, 2005, and expiring at various dates from July 2005 through March 2010.

F-14

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

Note 8: Income Tax

	2005			2004			2003
Income tax expense
Currently payable	$	657		$	638		$	1,265
Deferred income taxes	171			106			74
Income tax expense	$	828		$	744		$	1,339
Reconciliation of federal statutory to actual tax expense
Federal statutory income tax at 34%	$	890		$	807		$	1,321
Life insurance	(63		)	(67		)	—
Other	1			4			18
Actual tax expense	$	828		$	744		$	1,339

A cumulative net deferred tax liability is included in other liabilities. The components of the liability are as follows:

	2005			2004
Deferred Tax Assets
Allowance for loan losses	$	247		$	356
Organizational costs	8			13
Unrealized loss on available for sale securities	3			—
Other	7			11
Total assets	265			380
Deferred Tax Liabilities
FHLB stock	(810		)	(725		)
Depreciation	(147		)	(174		)
Prepaid expenses	(98		)	(101		)
Unrealized gain on available for sale securities	—			(1		)
Total liabilities	(1,055		)	(1,001		)
	$	(790	)	$	(621	)

Retained earnings include approximately $2,390,000 for which no deferred income tax liability has been recognized. This amount represents an allocation of income to bad debt deductions as of December 31, 1987 for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which income would be subject to the then-current corporate income tax rate. The unrecorded deferred income tax liability on the above amounts was approximately $812,600.

F-15

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

Note 9: Other Comprehensive Income (Loss)

Other comprehensive income components and related taxes were as follows:

	2005			2004			2003
Unrealized gains (losses) on securities available for sale	$	(12	)	$	(16	)		$	79
Reclassification for realized amount included in income	—			67				(7		)
Other comprehensive income (loss), before tax effect	(12		)	(83		)		86
Tax expense (credit)	(4		)	(28		)		29
Other comprehensive income (loss)	$	(8	)	$	(55	)		$	57

Note 10: Regulatory Matters

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct and material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of June 30, 2005 and 2004, that the Bank meets all capital adequacy requirements to which it is subject.

F-16

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

As of June 30, 2005, the most recent notification from Office of Thrift Supervision categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

	Actual						For Capital Adequacy Purposes						To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount			Ratio			Amount			Ratio			Amount			Ratio
As of June 30, 2005
Total Risk-Based Capital (to Risk-Weighted Assets)		$	24,353		18.1	%		$	10,773		8.0	%		$	13,466		10.0	%
Tier I Capital (to Risk-Weighted Assets)		23,628			17.5	%		5,386			4.0	%		8,079			6.0	%
Core Capital (to Adjusted Total Assets)		23,628			11.9	%		7,958			4.0	%		9,948			5.0	%
Tangible Capital (to Adjusted Total Assets)		23,628			11.9	%		2,984			1.5	%
As of June 30, 2004
Total Risk-Based Capital (to Risk-Weighted Assets)		$	23,085		18.9	%		$	9,776		8.0	%		$	12,220		10.0	%
Tier I Capital (to Risk-Weighted Assets)		22,037			18.0	%		4,888			4.0	%		7,332			6.0	%
Core Capital (to Adjusted Total Assets)		22,037			11.6	%		7,625			4.0	%		9,531			5.0	%
Tangible Capital (to Adjusted Total Assets)		22,037			11.6	%		2,859			1.5	%

Without prior approval, current regulations allow the Bank to pay dividends not exceeding net profits (as defined) for the current year plus retained net income for the previous two calendar years. The Bank normally restricts dividends to a lesser amount because of the need to maintain an adequate capital structure. At June 30, 2005, total regulatory capital of the Bank was $23,653,000, none of which was available for distribution to the Company without prior regulatory approval.

Note 11: Employee Benefit Plans

The Bank has a noncontributory defined benefit pension plan covering all employees who meet the eligibility requirements. The Bank’s funding policy is to make the minimum annual contribution that is required by applicable regulations, plus such amounts as the Bank may determine to be appropriate from time to time. The Bank expects to contribute $152,000 to the plan next year.

F-17

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

The Bank uses a June 30 measurement date for the plan. Information about the plan’s funded status and pension cost follows:

	Pension Benefits
	2005			2004
Change in benefit obligation
Beginning of year	$	1,182		$	1,087
Service cost	97			95
Interest cost	84			77
Actuarial loss	29			23
Benefits paid	(50		)	(100		)
End of year	1,342			1,182
Change in fair value of plan assets
Beginning of year	753			658
Actuarial return on plan assets	55			41
Employer contribution	174			154
Benefits paid	(50		)	(100		)
End of year	932			753
Funded status	(410		)	(429		)
Unrecognized net actuarial loss	415			402
Unrecognized prior service cost	(7		)	(11		)
Accrued benefit cost	$	(2	)	$	(38	)
Accumulated benefit obligation	$	1,026		$	879
Intangible asset	$	—		$	—
Accumulated other comprehensive income	$	—		$	—
Weighted-average assumptions used to determine benefit obligation
Discount rate	7		%	7		%
Rate of compensation increase	4		%	4		%

F-18

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

	2005			2004			2003
Weighted-average assumptions used to determine benefit cost
Discount rate	7		%	7		%	7		%
Expected return on plan assets	8		%	8		%	8		%
Rate of compensation increase	4		%	4		%	4		%
Components of net periodic benefit cost
Service cost	$	97		$	95		$	93
Interest cost	84			77			68
Expected return on plan assets	(55		)	(44		)	(30		)
Amortization of prior service cost	(4		)	(4		)	(4		)
Recognized net actuarial loss	17			13			10
Net periodic benefit cost	$	139		$	137		$	137

The Bank has estimated the long-term rate of return on plan assets based primarily on historical returns on plan assets, adjusted for changes in target portfolio allocations and recent changes in long-term interest rates based on publicly available information.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as of June 30, 2005:

	Pension Benefits
2006		$	15
2007		19
2008		21
2009		26
2010		35
2011-2015		564

Plan assets are held by a bank-administered trust fund, which invests the plan assets in accordance with the provisions of the plan agreement. The plan agreement permits investment of up to 100% of the plan assets in common stocks, corporate bonds and debentures, U.S. Government securities, and other specified investments. The plan may invest in certain derivative securities.

Asset allocation is primarily based on a strategy to provide a combination of long-term growth and current income.

F-19

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

Plan assets are re-balanced quarterly. At June 30, 2005 and 2004, plan assets by category are as follows:

	2005		2004
Cash	12.6	%	1.6	%
Corporate debt securities	—		7.9
Mutual funds	87.3		90.4
Other	0.1		0.1
	100.0	%	100.0	%

The Bank has a retirement savings 401(k) plan in which substantially all employees may participate. The Bank matches employees’ contributions at the rate of 3 percent of base salary contributed by participants. The Bank’s expense for the plan was $51,214 for 2005, $55,519 for 2004 and $49,749 for 2003.

The Bank also has an employee stock ownership plan covering substantially all of its employees. The cost of the plan is borne by the Bank through contributions to an employee stock ownership trust in amounts determined by the Board of Directors. The Company records compensation expense equal to the cash contributions to the Plan. Dividends on ESOP shares (all allocated) are recorded as a reduction of retained earnings. The cash contributions to the plan in 2005, 2004 and 2003 were $40,000, $29,000 and $51,000, respectively.

In addition to the contributions made to participants’ accounts, the accounts are credited annually with the participants’ share of investment earnings, and losses or expenses of the trust fund. Benefits under the Plan become 100% vested over periods up to 7 years or in the event of death, disability, or attaining age 65 (normal retirement age under the Plan) or termination of the Plan. The total number of shares held by the plan, all of which have been allocated to participant accounts, was 122,019 and 112,019 at June 30, 2005 and 2004. Under certain circumstances, the ESOP may be obligated to repurchase allocated ESOP shares. The Company is obligated at the option of each beneficiary to repurchase ESOP shares upon the beneficiary’s termination or after retirement. At June 30, 2005, the fair value of all shares subject to the repurchase obligation is $500,278. All ESOP shares are included as outstanding in the calculation of earnings per share information.

Below are the transactions affecting the ESOP equity accounts:

	Common Stock				Retained Earnings				Total
Balances, July 1, 2002		$	140			$	329		$	469
Net change in equity from ESOP shares		10				151			161
Balances, June 30, 2003		150				480			630
Net change in equity from ESOP shares		(38		)		(126		)	(164		)
Balances, June 30, 2004		112				354			466
Net change in equity from ESOP shares		10				24			34
Balances, June 30, 2005		$	122			$	378		$	500

F-20

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

Note 12: Related Party Transactions

The Bank has entered into transactions with certain directors, executive officers, significant stockholders and their affiliates or associates (related parties). Such transactions were made in the ordinary course of business and did not, in the opinion of management, involve more than normal credit risk or present other unfavorable features. The aggregate amount of loans, as defined, to such related parties were as follows:

Balances, July 1, 2004	$	3,235
New loans, including renewals	1,070
Payments, etc., including renewals	(942		)
Balances, June 30, 2005	$	3,363

Note 13: Stock Option Plans

Under the Bank’s incentive stock option plan, the Bank grants selected executives and other key employees stock option awards which vest and become exercisable ratably over three years (prior to 2003, options granted were fully exercisable at the date of grant). Under the Bank’s stock option plan for nonemployee directors, at each year’s annual meeting of shareholders, there shall be granted automatically to each outside director, the option to purchase 1,500 shares of common stock. Both plans are accounted for in accordance with Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees and related interpretations. During 2005, the Bank granted options for 58,500 shares of the Company’s common stock. The exercise price of each option, which has a ten-year life, was equal to the market price of the Company’s stock on the date of grant; therefore, no compensation expense was recognized.

Although the Bank has elected to follow APB No. 25, SFAS No. 123 requires pro forma disclosures of net income and earnings per share as if the Bank had accounted for its employee stock options under that Statement. The fair value of each option grant was estimated on the grant date using an option-pricing model with the following assumptions:

	2005		2004		2003
Risk-free interest rates	5.0	%	5.0	%	5.0	%
Dividend yields	3.10	%	2.20	%	2.20	%
Volatility factors of expected market price of common stock	7	%	17	%	25	%
Weighted-average expected life of the options	10 years		10 years		10 years

F-21

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

The following is a summary of the status of the Bank’s stock option plans and changes in those plans as of and for the years ended June 30, 2005, 2004 and 2003.

Employees:

	2005					2004					2003
Options	Shares		Weighted- Average Exercise Price			Shares		Weighted- Average Exercise Price			Shares		Weighted- Average Exercise Price
Outstanding, beginning of year	494,833			$	3.79	559,523			$	3.63	756,802			$	3.39
Granted	45,000			4.20		61,500			4.15		29,500			3.43
Exercised	(59,900	)		1.67		(97,120	)		1.91		(150,481	)		1.30
Forfeited/expired	(280	)		5.07		(29,070	)		7.10		(76,298	)		5.88
Outstanding, end of year	479,653			4.11		494,833			3.80		559,523			3.62
Options exercisable at year end	344,053			4.15		404,133			3.79		530,023			3.63
Weighted-average fair value of options granted during the year				0.60					1.11					1.13

As of June 30, 2005, the employee options outstanding and exercisable are as follows:

			Options Outstanding					Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted-Average Remaining Contractual Life (months)		Weighted-Average Exercise Price			Number Exercisable		Weighted-Average Exercise Price
$1.01 to $2.50		96,100		8.0		$	1.85		96,100		$	1.85
$2.51 to $5.00		287,183		75.3		3.73			151,583		3.50
$5.01 to $7.50		47,280		37.0		6.81			47,280		6.81
$7.50 to $10.00		49,090		50.0		8.13			49,090		8.13
		479,653				4.11			344,053		4.15

Directors:

	2005					2004					2003
Options	Shares		Weighted- Average Exercise Price			Shares		Weighted- Average Exercise Price			Shares		Weighted- Average Exercise Price
Outstanding, beginning of year	174,304			$	3.92	193,804			$	3.59	205,884			$	3.38
Granted	13,500			4.20		15,000			4.15		15,000			3.43
Exercised	(44,484	)		2.37		(34,500	)		2.17		(27,080	)		1.90
Forfeited/expired	(7,500	)		6.58		—			—		—			—
Outstanding, end of year	135,820			4.31		174,304			3.92		193,804			3.59
Options exercisable at year end	95,320			4.47		144,304			3.96		178,804			3.61
Weighted-average fair value of options granted during the year				0.60					1.11					1.13

F-22

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

As of June 30, 2005, the directors options outstanding and exercisable are as follows:

			Options Outstanding					Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted-Average Remaining Contractual Life (months)		Weighted-Average Exercise Price			Number Exercisable		Weighted-Average Exercise Price
$1.01 to $2.50		29,320		8.7		$	1.94		29,320		$	1.94
$2.51 to $5.00		67,500		82.6		3.68			27,000		3.31
$5.01 to $7.50		39,000		46.5		7.19			39,000		7.19
		135,820				4.31			95,320		4.47

Note 14: Earnings Per Share

Earnings per share (EPS) were computed as follows:

	Year Ended June 30, 2005
	Income		Weighted- Average Shares	Per-Share Amount
Basic Earnings Per Share
Income available to common stockholders	$	1,790	7,271,874		$	0.25
Effect of Dilutive Securities
Stock options			98,826
Diluted Earnings Per Share
Income available to common stockholders and assumed conversions	$	1,790	7,370,700		$	0.24

Options to purchase 265,470 shares of common stock at $4.15 to $8.13 per share were outstanding at June 30, 2005, but were not included in the computation of diluted EPS because the options’ exercise price was greater than the average market price of the common shares.

	Year Ended June 30, 2004
	Income		Weighted- Average Shares	Per-Share Amount
Basic Earnings Per Share
Income available to common stockholders	$	1,631	7,356,046		$	0.22
Effect of Dilutive Securities
Stock options			156,849
Diluted Earnings Per Share
Income available to common stockholders and assumed conversions	$	1,631	7,512,895		$	0.22

F-23

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

Options to purchase 141,465 shares of common stock at $6.81 to $8.13 per share were outstanding at June 30, 2004, but were not included in the computation of diluted EPS because the options’ exercise price was greater than the average market price of the common shares.

	Year Ended June 30, 2003
	Income		Weighted- Average Shares	Per-Share Amount
Basic Earnings Per Share
Income available to common stockholders	$	2,545	7,538,334		$	0.34
Effect of Dilutive Securities
Stock options			180,865
Diluted Earnings Per Share
Income available to common stockholders and assumed conversions	$	2,545	7,719,199		$	0.33

Options to purchase 252,246 shares of common stock at $3.88 to $8.13 per share were outstanding at June 30, 2003, but were not included in the computation of diluted EPS because the options’ exercise price was greater than the average market price of the common shares..

Note 15: Disclosures about Fair Value of Financial Instruments

The following table presents estimated fair values of the Bank’s financial instruments. The fair values of certain of these instruments were calculated by discounting expected cash flows, which method involves significant judgments by management and uncertainties. Fair value is the estimated amount at which financial assets or liabilities could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Because no market exists for certain of these financial instruments and because management does not intend to sell these financial instruments, the Bank does not know whether the fair values shown below represent values at which the respective financial instruments could be sold individually or in the aggregate.

	June 30, 2005				June 30, 2004
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Cash and cash equivalents	$	8,992	$	8,992	$	10,875	$	10,875
Available for sale securities	3,961		3,961		15,726		15,726
Held-to-maturity securities	461		486		516		543
Loans, net of allowance for loan losses	171,187		188,666		150,735		155,568
Stock in FHLB	5,736		5,736		5,487		5,487
Interest receivable	733		733		731		731
Financial liabilities
Deposits	126,520		128,877		114,223		116,936
FHLB advances	46,123		46,857		53,295		54,721
Interest payable	156		156		63		63
Commitments to extend credit, letters of credit and lines of credit	—		—		—		—

F-24

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

The following methods and assumptions were used to estimate the fair value of each class of financial instruments.

Cash and Cash Equivalents and Stock in FHLB

The carrying amount approximates fair value.

Investment Securities

Fair values for investment securities equal quoted market prices, if available. If quoted market prices are not available, fair value is estimated based on quoted market prices of similar securities.

Loans and Interest Receivable

The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Loans with similar characteristics were aggregated for purposes of the calculations. The carrying amount of interest receivable approximates its fair value.

Deposits and Interest Payable

The fair value of demand deposits, savings accounts, NOW accounts, and certain money market deposits is the amount payable on demand at the reporting date, i.e., their carrying amount. The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities. The carrying amount of interest payable approximates its fair value.

FHLB Advances

Rates currently available to the Bank for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.

Commitments to Extend Credit, Letters of Credit and Lines of Credit

The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The fair value of letters of credit and lines of credit is based on fees currently charged for similar agreements or on the estimated cost to terminate or otherwise settle the obligations with the counterparties at the reporting date.

Note 16: Commitments and Credit Risk

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash

F-25

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.

At June 30, 2005 and 2004, the Bank had outstanding fixed-rate commitments to originate loans aggregating approximately $16,014,000 and $4,524,000, respectively. The commitments extended over varying periods of time with the majority being disbursed within a one-year period.

Letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

The Bank had total outstanding letters of credit amounting to $3,300,000 and $2,449,000, at June 30, 2005 and 2004, respectively, with terms ranging from 4 months to 2 years.

Lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Lines of credit generally have fixed expiration dates. Since a portion of the line may expire without being drawn upon, the total unused lines do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate. Management uses the same credit policies in granting lines of credit as it does for on-balance-sheet instruments.

At June 30, 2005, the Bank had granted unused lines of credit to borrowers aggregating approximately $4,612,000 and $8,826,000 for commercial lines and open-end consumers lines, respectively. At June 30, 2004, unused lines of credit to borrowers aggregated approximately $4,384,000 for commercial lines and $7,811,000 for open-end consumer lines.

From time to time certain due from bank accounts are in excess of federally insured limits.

F-26

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

Note 17: Condensed Financial Information (Parent Company Only)

Presented below is condensed financial information as to financial position, results of operations and cash flows of the Company:

Condensed Balance Sheets

	2005		2004
Assets
Cash	$	313	$	196
Loans	929		2,070
Investment in common stock of Bank subsidiary	23,622		22,038
Advances to Bank subsidiary	463		506
Other assets	98		47
Total assets	$	25,425	$	24,857
Equity from ESOP Shares	$	500	$	466
Stockholders’ Equity	24,925		24,391
Total liabilities and stockholders’ equity	$	25,425	$	24,857

Condensed Statements of Income

	2005			2004			2003
Income
Dividends from Bank subsidiary	$	250		$	3,457		$	2,543
Interest income	82			108			—
	332			3,565			2,543
Expenses—other	159			119			21
Income Before Income Tax and Equity in Undistributed Income of Subsidiary	173			3,446			2,522
Income Tax Benefit	(26		)	—			(7		)
Income Before Equity in Undistributed Income of Subsidiary	199			3,446			2,529
Equity in Undistributed Income of Subsidiary	1,591			(1,815		)	16
Net Income	$	1,790		$	1,631		$	2,545

F-27

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

Condensed Statements of Cash Flows

	2005			2004			2003
Operating Activities
Net income	$	1,790		$	1,631		$	2,545
Items not requiring (providing) cash	(1,616		)	1,813			(24		)
Net cash provided by operating activities	174			3,444			2,521
Investing Activities—net change in loans	1,141			(1,059		)	(1,011		)
Financing Activities
Advances from (to) Bank subsidiary	—			(506		)	2,283
Repayment of advances (from) to Bank subsidiary	43			—			(2,543		)
Purchase of stock	(502		)	(1,105		)	(777		)
Proceeds from exercise of stock options	205			261			248
Cash dividends	(944		)	(880		)	(680		)
Net cash used in financing activities	(1,198		)	(2,230		)	(1,469		)
Net Change in Cash	117			155			41
Cash at Beginning of Year	196			41			—
Cash at End of Year	$	313		$	196		$	41

F-28

Peoples Ohio Financial Corporation
Notes to Consolidated Financial Statements (Continued)
(Table Dollar Amounts in Thousands)
June 30, 2005, 2004 and 2003

Note 18: Selected Quarterly Data (Unaudited)

The following tables summarize selected quarterly results of operations for 2005 and 2004.

June 30, 2005	September			December			March		June
Interest and dividend income		$	2,708		$	2,755	$	2,760	$	2,838
Interest expense		990			988		970		979
Net interest income		1,718			1,767		1,790		1,859
Provision for loan losses		30			30		30		93
Net interest income after provision for loan losses		1,688			1,737		1,760		1,766
Noninterest income		543			494		475		560
Noninterest expense		1,610			1,571		1,584		1,640
Income before income tax		621			660		651		686
Income tax expense		199			219		211		199
Net income		$	422		$	441	$	440	$	487
Earnings per share
Basic		$	0.06		$	0.06	$	0.06	$	0.07
Diluted		0.06			0.06		0.06		0.07
Dividends per share		0.065							0.065

June 30, 2004	September			December			March		June
Interest and dividend income		$	2,911		$	2,760	$	2,751	$	2,673
Interest expense		1,138			1,043		1,008		955
Net interest income		1,773			1,717		1,743		1,718
Provision for loan losses		30			30		40		230
Net interest income after provision for loan losses		1,743			1,687		1,703		1,488
Noninterest income		524			525		534		591
Noninterest expense		1,510			1,623		1,664		1,623
Income before income tax		757			589		573		456
Income tax expense		243			198		169		134
Net income		$	514		$	391	$	404	$	322
Earnings per share
Basic		$	0.07		$	0.05	$	0.06	$	0.04
Diluted		0.07			0.05		0.05		0.04
Dividends per share		0.060					0.060

Additional provision for loan losses in the fourth quarter of 2004 resulted from management’s normal review of loan quality.

F-29

ARTICLE I

THE COMPANY MERGER

1.01. The Company Merger.

(a) General Description. Upon the terms and subject to the conditions of this Agreement, at the Effective Time (as defined in Article X hereof), POHF shall merge with and into and under the Articles of Incorporation of MainSource (the “Company Merger”). The Company Merger is subject to the Subsidiary Merger (as defined in Section 2.01 hereof) occurring immediately after the Company Merger, and if the Subsidiary Merger will not close immediately thereafter, the Company Merger shall not occur. MainSource shall survive the Company Merger (sometimes hereinafter referred to as the “Surviving Corporation”) and shall continue its corporate existence under the laws of the State of Indiana pursuant to the provisions of and with the effect provided in the Indiana Business Corporation Law, as amended (the “IBCL”).

(b) Name, Officers and Directors. The name of the Surviving Corporation shall be “MainSource Financial Group, Inc.” Its principal office shall be located at 201 North Broadway, Greensburg, Decatur County, Indiana. The officers of MainSource serving at the Effective Time shall continue to serve as the officers of the Surviving Corporation, until such time as their successors shall have been duly elected and have qualified or until their earlier resignation, death or removal from office. The directors of the Surviving Corporation following the Effective Time shall be those individuals of MainSource serving as directors at the Effective Time until such time as their successors have been duly elected and have qualified or until their earlier resignation, death, or removal as a director.

(c) Articles of Incorporation and By-Laws. The Articles of Incorporation and By-Laws of MainSource in existence at the Effective Time shall remain the Articles of Incorporation and By-Laws of the Surviving Corporation following the Effective Time, until such Articles of Incorporation and By-Laws shall be further amended as provided by applicable law.

(d) Effect of the Company Merger. At the Effective Time, the title to all assets, real estate and other property owned by POHF shall vest in Surviving Corporation as set forth in Indiana Code Section 23-1-40-6, as amended, and Ohio Revised Code § 1701.82, as amended, without reversion or impairment. At the Effective Time, all liabilities of POHF shall be assumed by Surviving Corporation.

(e) Integration. At the Effective Time and subject to and upon the terms and conditions set forth in this Agreement, the parties hereto currently intend to effectuate, or cause to be effectuated, the Company Merger, pursuant to the Indiana Articles of Merger, substantially in the form attached hereto as Exhibit 1.01(e)(i), a Plan of Merger substantially in the form attached hereto as Exhibit 1.01(e)(ii), an Ohio Certificate of Merger, substantially in the form attached hereto as Exhibit 1.01(e)(iii), and the applicable provisions of the IBCL and the Ohio General Corporation Law (the “OGCL”). The parties agree to cooperate and to take all reasonable actions prior to or following the Effective Time, including executing all requisite documentation, as may be reasonably necessary to effect the Company Merger.

1.02. Reservation of Right to Revise Structure. At MainSource’s election, the Company Merger may alternatively be structured so that (a) POHF is merged with and into any other direct or indirect wholly owned subsidiary of MainSource or (b) any direct or indirect wholly owned subsidiary of MainSource is merged with and into POHF; provided, however, that no such change shall (x) alter or change the amount or kind of the Merger Consideration (as hereinafter defined) or the treatment of the holders of common stock, without par value, of POHF (“POHF Common Stock”) or options for POHF Common Stock (“POHF Stock Options”), (y) prevent the parties from obtaining the opinion of Bose McKinney & Evans LLP referred to in Sections 8.01 and 8.02, or (z) materially impede or delay consummation of the transactions contemplated by this Agreement. In the event of such an election, the parties agree to execute an appropriate amendment to this Agreement in order to reflect such election.

A-2

ARTICLE II

THE SUBSIDIARY MERGER

2.01. The Subsidiary Merger.

(a) General Description. Upon the terms and subject to the conditions of this Agreement, at the Effective Time, Peoples Savings shall merge with and into and under the Articles of Incorporation of Merger Corp (the “Subsidiary Merger”). Merger Corp shall survive the Subsidiary Merger (the “Surviving Bank”) and shall continue its corporate existence under the laws of the State of Ohio pursuant to the provisions of and with the effect provided in Chapters 11 and 17 of the Ohio Revised Code.

(b) Name, Offices, Officers and Directors. The name of the Surviving Bank shall be “MainSource Bank—Ohio”. Its principal office shall be located at 635 South Market Street, Troy, Miami County, Ohio, and its branches shall consist of the branch offices of Peoples Savings as of the Effective Time. The officers of Merger Corp at the Effective Time shall continue to serve as the officers of the Surviving Bank until such time as their successors shall have been duly elected and have qualified or until their earlier resignation, death or removal from office. In addition, immediately following the Effective Time, Ronald B. Scott shall be appointed the Chairman, President and Chief Executive Officer of the Surviving Bank. The directors of the Surviving Bank following the Effective Time shall consist of Ronald B. Scott and four (4) other individuals mutually acceptable to MainSource and POHF, until such time as their successors have been duly elected and have qualified or until their earlier resignation, death, or removal as a director.

(c) Articles of Incorporation and Regulations. The Articles of Incorporation and Code of Regulations of Merger Corp in existence at the Effective Time shall remain the Articles of Incorporation and Code of Regulations of the Surviving Bank following the Effective Time, until such Articles of Incorporation and Code of Regulations shall be further amended as provided by applicable law.

(d) Effect of the Subsidiary Merger. At the Effective Time, the title to all assets, real estate and other property owned by Peoples Savings shall vest in Surviving Bank as set forth in Ohio Revised Code §§ 1115.11 and 1701.82, as amended, without reversion or impairment. At the Effective Time, all liabilities of Peoples Savings shall be assumed by Surviving Bank.

(e) Integration. At the Effective Time, the parties hereto currently intend to effectuate, or cause to be effectuated, the Subsidiary Merger, pursuant to an Ohio Certificate of Merger, substantially in the form attached hereto as Exhibit 2.01(e); and the applicable provisions of the IBCL, the OGCL and the Ohio statutes applicable to mergers of financial institutions. The parties agree to cooperate and to take all reasonable actions prior to or following the Effective Time, including executing all requisite documentation, as may be reasonably necessary to effect the Subsidiary Merger. POHF and Peoples Savings also agree to cooperate with MainSource and to take all reasonable restructuring steps for regulatory purposes, as may be reasonably requested by MainSource to effect the Company Merger and the Subsidiary Merger (collectively, the “Mergers”), or otherwise consolidate such legal entities to the extent desirable for regulatory or other reasons.

2.02. Reservation of Right to Revise Structure. At MainSource’s election, the Subsidiary Merger may alternatively be structured so that (a) Peoples Savings is merged with and into any other direct or indirect wholly owned subsidiary of MainSource or (b) any direct or indirect wholly owned subsidiary of MainSource is merged with and into Peoples Savings; provided, however, that no such change shall (x) alter or change the amount or kind of the Merger Consideration or the treatment of the holders of POHF Common Stock or POHF Stock Options, (y) prevent the parties from obtaining the opinion of Bose McKinney & Evans LLP referred to in Sections 8.01 and 8.02, or (z) materially impede or delay consummation of the transactions contemplated by this Agreement. In the event of such an election, the parties agree to execute an appropriate amendment to this Agreement in order to reflect such election.

A-3

ARTICLE III

MANNER AND BASIS OF EXCHANGE OF STOCK

3.01. Consideration. (a) Subject to the terms and conditions of this Agreement, at the Effective Time, each share of POHF Common Stock issued and outstanding immediately prior to the Effective Time (other than shares held as treasury stock of POHF and shares held directly or indirectly by MainSource, except shares held in a fiduciary capacity or in satisfaction of a debt previously contracted, if any) shall become and be converted into the right to receive in accordance with this Article:

(i) An amount of cash equal to the Purchase Price (as such amount is determined and adjusted in accordance with Section 3.02 below) divided by the number of shares of POHF Common Stock outstanding as of the Effective Time (such amount is the “Cash Consideration”), or

(ii) Such number of shares of common stock, without par value but $0.50 stated value, of MainSource (“MainSource Common Stock”) equal to the quotient (the “Exchange Ratio”) arrived at by dividing:

A. the Cash Consideration, by

B. the average of the daily high and low sales prices of a share of MainSource Common Stock as quoted on the Nasdaq Stock Market during the ten trading days preceding the fifth (5th) calendar day preceding the Effective Time (the “MainSource Average Stock Price”), subject to adjustment, if any, pursuant to Sections 3.02 and 3.06 hereof (the “Stock Consideration”).

The Cash Consideration and the Stock Consideration are sometimes referred to herein collectively as the “Merger Consideration.”

(b) Subject to any consents required by law and Section 6.15 hereof, at the Effective Time, outstanding POHF Stock Options will be treated as follows:

(i) With respect to a POHF Stock Option held by any person other than Ronald B. Scott, such POHF Stock Option, without any action on the part of any holder thereof, shall be converted into the right to receive from MainSource, at the Effective Time, an amount in cash equal to the excess of the Cash Consideration over the per share exercise price for each share of POHF Common Stock subject to such POHF Stock Option; provided, however, that the payer shall withhold from such cash payment those taxes required to be withheld by applicable law, if any. Each POHF Stock Option to which this paragraph applies will be cancelled and shall cease to exist by virtue of such payment.

(ii) Each POHF Stock Option held by Ronald B. Scott, whether or not vested, shall be amended (thereafter, an “Amended Option” so that it will provide for the acquisition of, on the same terms and conditions as were applicable under such POHF Stock Option (substituting MainSource, where applicable), a specified number of shares of MainSource Common Stock, at a specified exercise price per share. In respect of each option outstanding to Ronald B. Scott, such number shall be determined by multiplying the number of shares of POHF Common Stock subject to such POHF Stock Option by the Exchange Ratio and rounding such product to the nearest whole number, and such exercise price per share shall be determined by dividing the per share exercise price under such POHF Stock Option by the Exchange Ratio and rounding such quotient to the nearest whole cent. Notwithstanding the foregoing, each POHF Stock Option which is intended to be an “incentive stock option” (as defined in Section 422 of the Code) shall be adjusted in accordance with the requirements of Section 424 of the Code. Accordingly, with respect to “incentive stock options,” fractional shares will be rounded down to the nearest whole number of shares and where necessary the per share exercise price will be rounded up to the nearest cent. At the Effective Time, MainSource shall assume all POHF stock option plans pursuant to which any POHF Stock Options held by Ronald B. Scott were issued. At all times after the Effective Time, MainSource shall reserve for issuance such number of shares of MainSource Common Stock as are needed to permit the Amended Options to be exercised in the

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manner contemplated by this Agreement and the instruments pursuant to which such options were granted. MainSource shall file with the SEC a registration statement on an appropriate form under the Securities Act with respect to the shares of MainSource Common Stock subject to the Amended Options (or, if such shares have been included on the registration statement for the Stock Consideration, shall file a post-effective amendment to such registration statement to maintain its effectiveness with respect to such shares) and shall use its reasonable best efforts to maintain the current status of the prospectus contained therein, as well as comply with any applicable state securities or “blue sky” laws, for so long as such Amended Options remain outstanding.

(c) Each share of POHF Common Stock that, immediately prior to the Effective Time, is held as treasury stock of POHF or held directly or indirectly by MainSource (other than shares held in a fiduciary capacity or in satisfaction of a debt previously contracted) shall by virtue of the Company Merger be canceled and retired and shall cease to exist, and no exchange or payment shall be made therefor.

3.02. Purchase Price; Adjustments to Purchase Price.

(a) Purchase Price. Subject to the adjustments in this Section 3.02, the Purchase Price shall be equal to $41,057,122.

(b) Adjustment Based Upon POHF’s Consolidated Shareholders’ Equity.

(i) Unless waived by MainSource pursuant to Section 12.02 of this Agreement, if as of the last business day of the month preceding the month in which the Effective Time occurs (the “Computation Date”) the POHF Consolidated Shareholders’ Equity, as determined by POHF’s independent registered public accounting firm in accordance with Section 3.02(b)(ii), is less than $23,250,000, the Purchase Price shall be reduced on a dollar-for-dollar basis by an amount equal to the difference between $23,250,000 and the actual POHF Consolidated Shareholders’ Equity as of the Computation Date determined in accordance with Section 3.02(b)(ii). If at the Computation Date POHF’s Consolidated Shareholders’ Equity is greater than $23,750,000, the Purchase Price shall be increased on a dollar-for-dollar basis by an amount equal to the difference between $23,750,000 and the actual POHF Consolidated Shareholders’ Equity as of the Computation Date determined in accordance with Section 3.02(b)(ii).

(ii) The POHF Consolidated Shareholders’ Equity shall be determined, for purposes of this Agreement, based upon the balance sheet of POHF as of the Computation Date, prepared in accordance with generally accepted accounting principles consistently applied, adjusted (unless such adjustments were already made in preparing such balance sheet) for the following items and tax effecting those adjustments, using a 34% tax rate, where appropriate:

(A) the accrual of any dividends scheduled to be declared after the Computation Date (including but not limited to a prorated dividend declared in accordance with Section 6.03(a)(iii);

(B) the accrual of any fees payable to a broker or investment advisor by POHF as a result of the consummation of the transactions contemplated herein;

(D) the funding in full of the POHF defined benefit pension plan upon its termination;

(E) the accrual of all compensable vacation and sick days for employees of POHF as of the Computation Date;

(F) write off of the net book value of POHF’s imaging hardware and software;

(G) the accrual of an additional $750,000 balance in the allowance for loan loss above the amount calculated in accordance with Section 6.03(xiv); and

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(H) any change arising from the purchase, or anticipated purchase, of POHF Common Stock from the portion of the Peoples Savings Bank of Troy Ohio 401(k) Plan (the “401(k) Plan”) that consists of the assets and liabilities (as adjusted) of the Peoples Savings Bank of Troy Ohio Employee Stock Ownership Plan that were merged with and into the 401(k) Plan as of July 1, 2003 (the “POHF ESOP”) will be disregarded or reversed.

The application of the adjustments to the POHF Consolidated Shareholders’ Equity as contemplated in subsections (A) through (H) above is illustrated by way of the example attached hereto as Exhibit 3.02(b)(ii), which shall be used only to demonstrate the method for applying such adjustments.

(i) If the MainSource Average Stock Price is less than $16.50 per share, the Exchange Ratio shall be equal to the Cash Consideration divided by $16.50 (as further adjusted pursuant to Section 3.06, as necessary).

(ii) If the MainSource Average Stock Price is greater than $21.50 per share, the Exchange Ratio shall be equal to the Cash Consideration divided by $21.50 (as further adjusted pursuant to Section 3.06, as necessary).

3.03. Fractional Shares. Notwithstanding any other provision in this Agreement, no fractional shares of MainSource Common Stock and no certificates or scrip therefor, or other evidence of ownership thereof, will be issued in the Company Merger; instead, MainSource shall pay to each holder of POHF Common Stock who otherwise would be entitled to a fractional share of MainSource Common Stock an amount in cash (without interest) determined by multiplying such fraction by the MainSource Average Stock Price.

3.04. Election and Proration Procedures.

(a) An election form and letter of transmittal (the “Election Form”) shall be mailed to each record holder of POHF Common Stock along with the proxy materials for the special shareholders’ meeting at which the Company Merger will be submitted to a vote of POHF’s shareholders. The shareholders of POHF entitled to receive the Election Form shall be those shareholders of record as of the record date fixed for the special shareholders’ meeting at which the Company Merger will be submitted to a vote of POHF’s shareholders (the “Special Record Date”). POHF and MainSource shall also establish a deadline for receipt of such Election Forms (the “Election Deadline”), which deadline shall be the close of business on the date of the special meeting at which the Company Merger will be submitted to a vote of POHF’s shareholders, unless MainSource elects to establish a later Election Deadline not later than the close of business on the last date that POHF shareholders are permitted to give notice of their exercise of statutory dissenter’s rights. MainSource shall also use commercially reasonable efforts to provide the Election Form to shareholders of record who become such after the record date and before the Election Deadline. The Election Forms POHF shall provide to MainSource shall include all information reasonably necessary for POHF to perform its obligations as specified herein.

(b) Each Election Form shall entitle the holder of shares of POHF Common Stock to:

(i) elect to receive the Cash Consideration for all of such holder’s shares (a “Cash Election”);

(ii) elect to receive the Stock Consideration for all of such holder’s shares (a “Stock Election”);

(iii) elect to receive the Cash Consideration with respect to some of such holder’s shares and the Stock Consideration with respect to such holder’s remaining shares (a “Mixed Election”); or

(iv) make no election or to indicate that such holder has no preference as to the receipt of the Cash Consideration or the Stock Consideration (a “Non-Election”).

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Shares of POHF Common Stock as to which a Cash Election has been made (including pursuant to a Mixed Election) are referred to herein as “Cash Election Shares.” Shares of POHF Common Stock as to which a Stock Election has been made (including pursuant to a Mixed Election) are referred to herein as “Stock Election Shares.” Shares of POHF Common Stock as to which no election has been made (other than shares as to which the holder has given notice of exercise of dissenter’s rights) are referred to herein as “Non-Election Shares.” The aggregate number of Stock Election Shares and Non-Election Shares are referred to herein as the “Stock Election Number.”

(c) An election shall be duly made by completing the Election Form and any other required documents in accordance with the instructions set forth therein and delivering them to MainSource (or, at the election of MainSource, the Exchange Agent, as defined below) before 5:00 p.m., E.S.T., on the Election Deadline. An election shall have been properly made only if MainSource shall have actually received a properly completed Election Form by the Election Deadline. An Election Form shall be deemed properly completed only if accompanied by one or more certificates therefor representing POHF Common Stock (“Certificates”) (or customary affidavits and, if required by MainSource pursuant to Section 3.05(g), a bond or other indemnity satisfactory to MainSource against any claim that may be made with respect to such Certificates or the guaranteed delivery of such Certificates) representing all shares of POHF Common Stock covered by such Election Form, together with duly executed transmittal materials included with the Election Form. Subject to the terms of this Agreement and of the Election Form, MainSource shall have reasonable discretion to determine whether any election, revocation, or change has been properly or timely made and to disregard immaterial defects in any Election Form, and any good faith decisions of MainSource regarding such matters shall be binding and conclusive.

(d) Notwithstanding any other provision contained in this Agreement, seventy-five percent (75%) of the total number of shares of POHF Common Stock outstanding at the Effective Time (the “Stock Conversion Number”) shall be converted into the Stock Consideration and the remaining outstanding shares of POHF Common Stock shall be converted into the Cash Consideration; provided, however, that for federal income tax purposes, it is intended that the Mergers will qualify as an integrated plan of reorganization under the provisions of Section 368(a)(1)(A) and/or (F) of the Code and, notwithstanding anything to the contrary contained herein, in order that the aforementioned integrated plan of reorganization will not fail to satisfy continuity of interest requirements under applicable federal income tax principles relating to reorganizations under Section 368(a)(1)(A) and/or (F) of the Code, MainSource reserves the right to increase the number of shares of POHF Common Stock that will be converted into Stock Consideration and reduce the number of shares of POHF Common Stock that will be converted into the right to receive the Cash Consideration to ensure that the Stock Consideration will represent at least fifty percent (50%) of the value of the total of the aggregate Merger Consideration plus any amount treated as merger consideration for federal income tax purposes.

(e) Within five (5) business days after the Effective Time, MainSource shall effect the allocation among holders of POHF Common Stock of rights to receive the Cash Consideration and the Stock Consideration and to distribute such consideration as follows:

(i) if the Stock Election Number equals the Stock Conversion Number, then (A) all Cash Election Shares shall be converted into the right to receive the Cash Consideration, and (B) all Stock Election Shares and Non-Election Shares shall be converted into the right to receive the Stock Consideration;

(ii) if the Stock Election Number is less than the Stock Conversion Number, the Cash Elections shall be eliminated (each in its entirety) and converted to Stock Elections (each in its entirety) by first eliminating and converting the Cash Election which covers the largest number of shares of POHF Common Stock, and then eliminating and converting the Cash Election which covers the next largest number of shares and continuing this process until the total remaining number of outstanding POHF shares covered by Cash Elections is such that seventy-five percent (75%) of the total number of shares

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of POHF Common Stock outstanding at the Effective Time shall be converted into the Stock Consideration, subject to MainSource’s reserved right in Section 3.04(d) to increase the number of shares of POHF Common Stock that will be converted into Stock Consideration to ensure that the Company Merger is a tax-free reorganization; and

(iii) if the Stock Election Number exceeds the Stock Conversion Number, the Non-Elections shall be eliminated (each in its entirety) and converted to Cash Elections (each in its entirety) by first eliminating and converting the Non-Election which covers the smallest number of shares of POHF Common Stock, and then eliminating and converting the Non-Election which covers the next smallest number of shares and continuing this process until either all Non-Elections are converted into the Cash Consideration or the total remaining number of outstanding POHF shares covered by Non-Elections (when added to all Stock Elections) is such that 75% of the total number of shares of POHF Common Stock outstanding at the Effective Time shall be converted into the Stock Consideration, subject to MainSource’s reserved right in Section 3.04(d) to increase the number of shares of POHF Common Stock that will be converted into Stock Consideration to ensure that the Company Merger is a tax-free reorganization. In the event that, following the elimination and conversion of all Non-Elections to Cash Elections, the Stock Election Number still exceeds the Stock Conversion Number, the Stock Elections will be eliminated (each in its entirety) and converted to Cash Elections (each in its entirety) in the same manner as the Non-Elections in this Section 3.04(e)(iii), until such time as the total remaining number of POHF Common Shares covered by Stock Elections is such that 75% of the total number of shares of POHF Common Stock outstanding at the Effective Time shall be converted into the Stock Consideration, subject to MainSource’s reserved right in Section 3.04(d), as provided herein.

For purposes of this Section 3.04(e), if MainSource is obligated to increase the number of shares of POHF Common Stock to be converted into shares of MainSource Common Stock as a result of the application of the last clause of Section 3.04(d) hereof, then the higher number shall be substituted for the Stock Conversion Number in the calculations set forth in this Section 3.04(e).

(f) A holder of POHF’s shares that is a bank, trust company, security broker-dealer or other recognized nominee, may submit one or more Election Forms for the persons for whom it holds shares as nominee provided that such bank, trust company, security broker-dealer or nominee certifies to the satisfaction of POHF and MainSource the names of the persons for whom it is so holding shares (the “Beneficial Owners”). In such case, each Beneficial Owner for whom an Election Form is submitted shall be treated as a separate owner for purposes of the election procedure and allocation of shares set forth herein.

3.05. Exchange Procedures.

(a) Distributions by MainSource of the Merger Consideration shall be made in accordance with Section 3.04. At and after the Effective Time, each certificate representing shares of POHF Common Stock shall represent only the right to receive the Merger Consideration in accordance with the terms of this Agreement.

(b) At or prior to the Effective Time, MainSource shall reserve a sufficient number of shares of MainSource Common Stock to be issued as part of the Merger Consideration and shall deposit with MainSource Bank an estimated amount of cash to be issued as part of the Merger Consideration.

(c) MainSource shall cause a certificate representing that number of whole shares of MainSource Common Stock that each holder of POHF Common Stock has the right to receive pursuant to Section 3.04, if any, and a check in the amount of any cash that such holder has the right to receive pursuant to Section 3.04, if any, including any cash in lieu of fractional shares, or dividends or distributions which such person shall be entitled to receive, to be delivered to such shareholder upon delivery (if not previously delivered) to MainSource of certificates representing such shares of POHF Common Stock

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(“Old Certificates”) (or bond or other indemnity satisfactory to MainSource if any of such certificates are lost, stolen or destroyed) owned by such shareholder. No interest will be paid on any Merger Consideration that any such person shall be entitled to receive pursuant to this Article III upon such delivery.

(d) No dividends or other distributions on MainSource Common Stock with a record date occurring after the Effective Time shall be paid to the holder of any unsurrendered Old Certificate representing shares of POHF Common Stock converted in the Company Merger into the right to receive shares of such MainSource Common Stock until the holder thereof surrenders such Old Certificates in accordance with this Section 3.05. After becoming so entitled in accordance with this Section 3.05, the record holder thereof also shall be entitled to receive any such dividends or other distributions, without any interest thereon, which theretofore had become payable with respect to shares of MainSource Common Stock such holder had the right to receive upon surrender of the Old Certificate.

(e) The stock transfer books of POHF shall be closed immediately upon the Effective Time and from and after the Effective Time there shall be no transfers on the stock transfer records of POHF of any shares of POHF Common Stock. If, after the Effective Time, Old Certificates are presented to MainSource, they shall be canceled and exchanged for the Merger Consideration deliverable in respect thereof pursuant to this Agreement in accordance with the procedures set forth in this Section 3.05.

(f) MainSource shall be entitled to rely upon POHF’s stock transfer books to establish the identity of those persons entitled to receive the Merger Consideration, which books shall be conclusive with respect thereto. In the event of a dispute with respect to ownership of stock represented by any Certificate, MainSource shall be entitled to deposit any Merger Consideration represented thereby in escrow with an independent third party and thereafter be relieved with respect to any claims thereto.

(g) If any Old Certificate shall have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming such Old Certificate to be lost, stolen, or destroyed and, if required by MainSource, the posting by such person of a bond or other indemnity satisfactory to MainSource in such amount as MainSource may reasonably direct as indemnity against any claim that may be made against it with respect to such Old Certificate, MainSource will issue in exchange for such lost, stolen, or destroyed Old Certificate the Merger Consideration deliverable in respect thereof pursuant to Section 3.04 hereof.

(h) Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto shall be liable to any former holder of POHF Common Stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws.

3.06. Anti-Dilution Adjustments. Should MainSource change (or establish a record date for changing) the number of shares of MainSource Common Stock issued and outstanding prior to the Effective Time by way of a stock split, stock dividend, recapitalization or similar transaction with respect to the outstanding MainSource Common Stock, and the record date therefor shall be prior to the Effective Time, the Stock Consideration shall be adjusted so the shareholders shall receive, in the aggregate, such number of shares of MainSource Common Stock representing the same percentage of outstanding shares of MainSource Common Stock at the Effective Time as would have been represented by the number of shares of MainSource Common Stock the shareholders of POHF would have received if any of the foregoing actions had not occurred.

3.07. Exchange Agent. On or before the date that the registration statement contemplated by Section 7.02 is declared effective, MainSource shall either appoint an agent (the “Exchange Agent”) for purposes of mailing and receiving the Election Forms, tabulating the results and distributing the Merger Consideration pursuant to the terms and conditions of this Agreement or elect to perform such functions itself.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF POHF

On or prior to the date hereof, POHF has delivered to MainSource a schedule (the “POHF Disclosure Schedule”) setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in this Article IV or to one or more of its covenants contained in Article VI; provided that the mere inclusion of an item in the POHF Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by POHF that such item represents a material exception or fact, event or circumstance or that such item is reasonably likely to result in a Material Adverse Effect (as defined below).

For the purpose of this Agreement, and in relation to POHF, a “Material Adverse Effect” means any effect that (i) is material and adverse to the financial position, results of operations or business of POHF and its subsidiaries taken as a whole, or (ii) would materially impair the ability of POHF to perform its obligations under this Agreement or otherwise materially threaten or materially impede the consummation of the Mergers and the other transactions contemplated by this Agreement; provided, however, that Material Adverse Effect shall not be deemed to include the impact of (a) changes in banking and similar laws of general applicability to banks or savings associations or their holding companies or interpretations thereof by courts or governmental authorities, (b) changes in generally accepted accounting principles or regulatory accounting requirements applicable to banks, savings associations, or their holding companies generally, (c) any modifications or changes to valuation policies and practices in connection with the Mergers or restructuring charges taken in connection with the Mergers, in each case in accordance with generally accepted accounting principles, (d) effects of any action taken with the prior written consent of MainSource, (e) changes in the general level of interest rates (including the impact on POHF’s or Peoples Savings’ securities portfolios) or conditions or circumstances relating to or that affect the United States economy, financial or securities markets or the banking industry, generally, (f) reasonable and customary expenses incurred in connection with the Mergers and all expenses related to any employment or severance contract as provided in Section 6.18 and 7.05 of this Agreement and any benefit or retirement plan disclosed on the POHF Disclosure Schedule, (g) the impact of the announcement of this Agreement and the transactions contemplated hereby, and compliance with this Agreement on the business, financial condition or results of operations of POHF or Peoples Savings, and (h) the occurrence of any military or terrorist attack within the United States or any of its possessions or offices.

For the purpose of this Agreement, and in relation to POHF, “knowledge” means the actual knowledge of Ronald B. Scott, Richard J. Dutton, Anne Mercer, John Wannemacher, Linda Daniel or Richard K. Bender of a particular fact.

Accordingly, POHF and Peoples Savings hereby represent and warrant to MainSource as follows:

4.01. Organization and Authority. (a) POHF is a corporation duly organized and validly existing under the laws of the State of Ohio and is a registered savings and loan holding company under the HOLA. POHF has full power and authority (corporate and otherwise) to own and lease its properties as presently owned and leased and to conduct its business in the manner and by the means utilized as of the date hereof. Except as set forth in the POHF Disclosure Schedule, Peoples Savings is POHF’s only direct or indirect subsidiary and POHF owns no voting stock or equity securities of any corporation, partnership, association or other entity.

(b) Peoples Savings is an Ohio savings and loan association duly incorporated and organized and existing pursuant to the laws of the State of Ohio. Peoples Savings has full power and authority (corporate and otherwise) to own and lease its properties as presently owned and leased and to conduct its business in the manner and by the means utilized as of the date hereof. Except as set forth in the POHF Disclosure

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Schedule, Peoples Savings has no subsidiaries and owns no voting stock or equity securities of any corporation, partnership, association or other entity.

(c) Each subsidiary listed in the POHF Disclosure Schedule pursuant to Section 4.01(a) or (b) is a corporation duly organized and validly existing under the laws of the jurisdiction of its incorporation as listed in the POHF Disclosure Schedule, with full power and authority (corporate and otherwise) to own and lease its properties as presently owned and leased and to conduct its business in the manner and by the means utilized as of the date hereof.

4.02. Authorization. (a) POHF has the requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder, subject to the fulfillment of the conditions precedent set forth in Sections 8.02(d), (e) and (f) hereof. As of the date hereof, POHF is not aware of any reason why the approvals set forth in Section 8.02(e) will not be received in a timely manner and without the imposition of a condition, restriction or requirement of the type described in Section 8.02(e). This Agreement and its execution and delivery by POHF have been duly authorized and approved by the Board of Directors of POHF and, assuming due execution and delivery by MainSource, constitutes a valid and binding obligation of POHF, subject to the fulfillment of the conditions precedent set forth in Section 8.02 hereof, and is enforceable in accordance with its terms, except to the extent limited by general principles of equity and public policy and by bankruptcy, insolvency, fraudulent transfer, reorganization, liquidation, moratorium, readjustment of debt or other laws of general application relating to or affecting the enforcement of creditors’ rights.

(b) Neither the execution of this Agreement nor consummation of the Mergers contemplated hereby: (i) conflicts with or violates the Articles of Incorporation or Code of Regulations of POHF or the Articles of Incorporation or Code of Regulations of Peoples Savings; (ii) conflicts with or violates in any material respect any local, state, federal or foreign law, statute, ordinance, rule or regulation (provided that the approvals of or filings with applicable government regulatory agencies or authorities required for consummation of the Mergers are obtained) or any court or administrative judgment, order, injunction, writ or decree; (iii) conflicts with, results in a breach of or constitutes a default under any note, bond, indenture, mortgage, deed of trust, license, lease, contract, agreement, arrangement, commitment or other instrument to which POHF or Peoples Savings is a party or by which POHF or Peoples Savings is subject or bound; (iv) results in the creation of or gives any person, corporation or entity the right to create any lien, charge, claim, encumbrance or security interest, or results in the creation of any other rights or claims of any other party (other than MainSource) or any other adverse interest, upon any right, property or asset of POHF or Peoples Savings which would be material to POHF; or (v) terminates or gives any person, corporation or entity the right to terminate, accelerate, amend, modify or refuse to perform under any note, bond, indenture, mortgage, agreement, contract, lease, license, arrangement, deed of trust, commitment or other instrument to which POHF or Peoples Savings is bound or with respect to which POHF or Peoples Savings is to perform any duties or obligations or receive any rights or benefits.

(c) Other than in connection or in compliance with the provisions of the applicable federal and state banking, securities, antitrust and corporation statutes, all as amended, and the rules and regulations promulgated thereunder, no notice to, filing with, exemption by or consent, authorization or approval of any governmental agency or body is necessary for consummation of the Mergers by POHF or Peoples Savings.

4.03. Capitalization. (a) The authorized capital stock of POHF as of the date hereof consists, and at the Effective Time will consist, of 15,000,000 shares of POHF Common Stock, 7,331,629 of which shares are issued and outstanding, and 1,000,000 shares of preferred stock, no par value, none of which preferred shares are issued and outstanding. Such issued and outstanding shares of POHF Common Stock have been duly and validly authorized by all necessary corporate action of POHF, are validly issued, fully paid and nonassessable and have not been issued in violation of any pre-emptive rights of any present or former POHF shareholder. Except as set forth in the POHF Disclosure Schedule, POHF has no capital stock

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authorized, issued or outstanding other than as described in this Section 4.03(a) and has no intention or obligation to authorize or issue any other capital stock or any additional shares of POHF Common Stock. Each share of POHF Common Stock is entitled to one vote per share. A description of the POHF Common Stock is contained in the Articles of Incorporation of POHF, as set forth in the POHF Disclosure Schedule pursuant to Section 4.04 hereof.

(b) The authorized capital stock of Peoples Savings as of the date hereof consists, and at the Effective Time will consist, of 90,000,000 shares of common stock, $1.00 par value per share, 7,439,650 of which shares are validly issued and outstanding (such issued and outstanding shares are referred to herein as “Peoples Savings Common Stock”) and 10,000,000 shares of preferred stock, $1.00 par value per share, none of which preferred shares are issued and outstanding. Such validly issued and outstanding shares of Peoples Savings Common Stock have been duly and validly authorized by all necessary corporate action of Peoples Savings, are validly issued, fully paid and nonassessable, and have not been issued in violation of any pre-emptive rights of any present or former Peoples Savings stockholder. All of the issued and outstanding shares of Peoples Savings Common Stock are owned by POHF free and clear of all liens, pledges, charges, claims, encumbrances, restrictions, security interests, options and pre-emptive rights and of all other rights or claims of any other person, corporation or entity with respect thereto. Peoples Savings has no capital stock authorized, issued or outstanding other than as described in this Section 4.03(b) and has no intention or obligation to authorize or issue any other capital stock or any additional shares of Peoples Savings Common Stock.

(c) Except as set forth in the POHF Disclosure Schedule, there are no options, warrants, commitments, calls, puts, agreements, understandings, arrangements or subscription rights relating to any shares of POHF Common Stock or Peoples Savings Common Stock, or any securities convertible into or representing the right to purchase or otherwise acquire any common stock or debt securities of POHF or Peoples Savings, by which POHF is or may become bound. POHF does not have any outstanding contractual or other obligation to repurchase, redeem or otherwise acquire any of the issued and outstanding shares of POHF Common Stock. To the knowledge of POHF and Peoples Savings, there are no voting trusts, voting arrangements, buy-sell agreements or similar arrangements affecting the capital stock of either POHF or Peoples Savings.

(d) Except as set forth in the statements on Schedules 13D and 13G that have been filed by certain persons with the Securities and Exchange Commission (the “SEC”), POHF has no knowledge of any person or entity which beneficially owns 5% or more of its outstanding shares of common stock within the meaning of the rules of the SEC promulgated under Section 13(d) of the Securities Exchange Act of 1934, as amended.

4.04. Organizational Documents. The Articles of Incorporation and Code of Regulations of POHF and of Peoples Savings, representing true, accurate and complete copies of such corporate documents in effect as of the date of this Agreement, have been delivered to MainSource and are included in the POHF Disclosure Schedule.

4.05. Compliance with Law. (a) Neither POHF nor Peoples Savings has engaged in any activity or taken or omitted to take any action which has resulted in the violation of any local, state, federal or foreign law, statute, regulation, rule, ordinance, order, restriction or requirement, and neither is in violation of any order, injunction, judgment, writ or decree of any court or government agency or body, except where such activity, omission to act or violation would not have a Material Adverse Effect. POHF and Peoples Savings possess and hold all licenses, franchises, permits, certificates and other authorizations necessary for the continued conduct of their business without interference or interruption, and such licenses, franchises, permits, certificates and authorizations are transferable (to the extent required) to MainSource or to Merger Corp at the Effective Time without any restrictions or limitations thereon or the need to obtain any consents of government agencies or other third parties other than as set forth in this Agreement.

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(b) POHF has provided MainSource with, or given MainSource access to, all agreements, understandings and commitments with, and all orders and directives of, all government regulatory agencies or authorities with respect to the financial condition, results of operations, business, assets or capital of POHF or Peoples Savings which presently are binding upon or require action by, or at any time during the last three (3) years have been binding upon or have required action by, POHF or Peoples Savings, including, without limitation, all correspondence, written communications and written commitments related thereto. All such agreements, understandings, commitments, orders, directives, correspondence and written communications which presently are binding upon or require action by, or at any time during the last five (5) years have been binding upon or have required action by, POHF or Peoples Savings are set forth in the POHF Disclosure Schedule. There are no refunds or restitutions required to be paid as a result of any criticism of any regulatory agency or body cited in any examination report of POHF or Peoples Savings as a result of an examination by any regulatory agency or body, or set forth in any accountant’s or auditor’s report to POHF or Peoples Savings.

(c) All of the existing offices and branches of Peoples Savings have been legally authorized and established in accordance with all applicable federal, state and local laws, statutes, regulations, rules, ordinances, orders, restrictions and requirements, except such as would not have a Material Adverse Effect. Peoples Savings has no approved but unopened offices or branches.

4.06. Accuracy of Statements Made and Materials Provided to MainSource. No representation, warranty or other statement made, or any information provided, by POHF or Peoples Savings in this Agreement or the POHF Disclosure Schedule (and any update thereto) and no written information which has been or shall be supplied by POHF or Peoples Savings with respect to its financial condition, results of operations, business, assets, capital or directors and officers for inclusion in the proxy statement-prospectus relating to the Mergers, contains or shall contain (in the case of information relating to the proxy statement-prospectus at the time it is first mailed to POHF’s shareholders) any untrue statement of material fact or omits or shall omit to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances in which they are made, not false or misleading, except that no representation or warranty has been made by POHF or Peoples Savings with respect to statements made or incorporated by reference in the Form S-4 or the proxy statement-prospectus therein based on information supplied by MainSource specifically for inclusion or incorporation by reference in the Form S-4 or the proxy statement-prospectus therein.

4.07. Litigation and Pending Proceedings. Except as set forth in the POHF Disclosure Schedule and except for any lawsuits involving collection by POHF or Peoples Savings of delinquent accounts as to which no counterclaims are asserted against POHF or Peoples Savings:

(a) There are no claims, actions, suits, proceedings, mediations, arbitrations or investigations pending or, to the knowledge of POHF, threatened in any court or before any government agency or authority, arbitration panel or otherwise (nor does POHF have any knowledge of a basis for any such claim, action, suit, proceeding, litigation, arbitration or investigation) against POHF. There are no claims, actions, suits, proceedings, mediations, arbitrations or investigations pending or, to the knowledge of POHF, threatened in any court or before any government agency or authority, arbitration panel or otherwise (nor does POHF have any knowledge of a basis for any such claim, action, suit, proceeding, litigation, arbitration or investigation) against Peoples Savings that would result in a Material Adverse Effect.

(b) Neither POHF nor Peoples Savings is: (i) subject to any outstanding judgment, order, writ, injunction or decree of any court, arbitration panel or governmental agency or authority; (ii) presently charged with or, to the knowledge of POHF, under governmental investigation with respect to any actual or alleged violations of any law, statute, rule, regulation or ordinance; or (iii) the subject of any pending or, to the knowledge of POHF, threatened proceeding by any government regulatory agency or authority having jurisdiction over their respective business, assets, capital, properties or operations.

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4.08. Financial Statements and Reports. (a) POHF has previously delivered to MainSource copies of the following financial statements and reports of POHF and Peoples Savings, including the notes thereto (collectively, the “POHF Financial Statements”):

(i) Consolidated Balance Sheets and the related Consolidated Statements of Income and Consolidated Statements of Changes in Shareholders’ Equity of POHF as of and for the fiscal years ended June 30, 2005 and 2004;

(ii) Consolidated Statements of Cash Flows of POHF for the fiscal years ended June 30, 2005 and 2004;

(iii) Thrift financial Reports (“TFRs”) for Peoples Savings as of and for the fiscal years ended the close of business on June 30, 2005 and 2004;

(b) The POHF Financial Statements present fairly the consolidated financial position of POHF as of and at the dates shown and the consolidated results of operations for the periods covered thereby and to the knowledge of POHF and Peoples Savings are complete, correct, represent bona fide transactions, and have been prepared from the books and records of POHF and its subsidiaries. The POHF Financial Statements described in clauses (i) and (ii) above for completed fiscal years are audited financial statements and have been prepared in conformance with generally accepted accounting principles applied on a consistent basis, except as may otherwise be indicated in any accountants’ notes or reports with respect to such financial statements.

(c) Since June 30, 2005 on a consolidated basis POHF and its subsidiaries have not incurred any material liability other than in the ordinary course of business consistent with past practice.

4.09. Properties, Contracts, Employees and Other Agreements. (a) Set forth in the POHF Disclosure Schedule are true, accurate and complete copies of the following:

(i) A brief description and the location of all real property owned by POHF or Peoples Savings (other than Other Real Estate Owned (“OREO”)) and the principal buildings and structures located thereon, together with a legal description of such real property and, within forty-five (45) days of the date of this Agreement, a commitment for a title insurance policy (obtained at the expense of MainSource) insuring the same and a survey drawing (obtained at the expense of MainSource) of each parcel of real property owned by POHF or Peoples Savings, and each lease of real property to which POHF or Peoples Savings is a party, identifying the parties thereto, the annual rental payable, the expiration date of the lease and a brief description of the property covered;

(ii) All conditional sales contracts or other title retention agreements relating to POHF or Peoples Savings and agreements for the purchase of federal funds;

(iii) All agreements, contracts, leases, licenses, lines of credit, understandings, commitments or obligations of POHF or Peoples Savings which individually or in the aggregate:

(A) involve payment or receipt by POHF or Peoples Savings (other than as disbursements of loan proceeds to customers, loan payments by customers or customer deposits) of more than $25,000;

(B) involve payments based on profits of POHF or Peoples Savings;

(D) were not made in the ordinary course of business;

(E) may not be terminated without penalty at will or upon notice of ninety (90) days or less; or

(F) involve the employment of, or payment to, any present or former directors, officers, employees or consultants relating to their services as such with POHF; and

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(iv) The name and current annual salary of each director, officer and employee of POHF or Peoples Savings whose current annual salary is in excess of $50,000, and the profit sharing, bonus or other form of compensation (other than salary) paid or payable by POHF or Peoples Savings to or for the benefit of each such person for the fiscal year ended June 30, 2005, and any employment, severance or deferred compensation agreement or arrangement with respect to each such person.

(b) POHF has, prior to the date of this Agreement, provided or given access to MainSource to the files and documentation of all borrowers of Peoples Savings, or persons or entities that are or may become obligated to Peoples Savings under an existing letter of credit, line of credit, loan transaction, loan agreement, promissory note or other commitment of Peoples Savings, in excess of $15,000 individually or in the aggregate, whether in principal, interest or otherwise, and including all guarantors of such indebtedness.

(c) Each of the agreements, contracts, commitments, leases, instruments and documents set forth in the POHF Disclosure Schedule relating to this Section 4.09 is valid and enforceable in accordance with its terms, except to the extent limited by general principles of equity and public policy or by bankruptcy, insolvency, fraudulent transfer, readjustment of debt or other laws of general application relative to or affecting the enforcement of creditor’s rights. POHF and Peoples Savings are, and to the knowledge of POHF, all other parties thereto are, in material compliance with the provisions thereof, and neither POHF nor Peoples Savings is, and to the knowledge of POHF, no other party thereto is, in default in the performance, observance or fulfillment of any material obligation, covenant or provision contained therein. Except as set forth in the POHF Disclosure Schedule, none of the foregoing requires the consent of any party to its assignment in connection with the Mergers contemplated by this Agreement. Other than as disclosed pursuant to this Section 4.09, to the knowledge of POHF, no circumstances exist resulting from transactions effected or to be effected, from events which have occurred or may occur or from any action taken or omitted to be taken which could reasonably be expected to result in the creation of any agreement, contract, obligation, commitment, arrangement, lease or document described in or contemplated by this Section 4.09.

(d) Neither POHF nor Peoples Savings is in material default under or in material breach of or, to the knowledge of POHF or Peoples Savings, alleged to be in material default under or in material breach of, any loan or credit agreement, conditional sales contract or other title retention agreement, security agreement, bond, indenture, mortgage, license, contract, lease, commitment or any other instrument or obligation.

4.10. Absence of Undisclosed Liabilities. Except as provided in the POHF Financial Statements and in the POHF Disclosure Schedule, except for unfunded loan commitments and obligations on letters of credit to customers of Peoples Savings made in the ordinary course of business, except for trade payables incurred in the ordinary course of Peoples Savings’ business, except for the transactions contemplated by this Agreement and obligations for services rendered pursuant thereto, and except for liabilities which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect upon POHF or Peoples Savings, neither POHF nor Peoples Savings has, nor will have at the Effective Time, any obligation, agreement, contract, commitment, liability, lease or license which exceeds $10,000 individually, or any obligation, agreement, contract, commitment, liability, lease or license made outside of the ordinary course of business, nor does there exist any circumstances resulting from transactions effected or events occurring on or prior to the date of this Agreement or from any action omitted to be taken during such period which could reasonably be expected to result in any such obligation, agreement, contract, commitment, liability, lease or license. Neither POHF nor Peoples Savings is delinquent in the payment of any amount due pursuant to any trade payable, and each has properly accrued for such payables in accordance with generally accepted accounting principles.

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4.11. Title to Assets. Except as described in this Section 4.11 or the POHF Disclosure Schedule:

(a) POHF or Peoples Savings, as the case may be, has good and marketable title in fee simple absolute to all real property (including, without limitation, all real property used as bank premises and all other real estate owned) which is reflected in the POHF Financial Statements as of June 30, 2005; good and marketable title to all personal property reflected in the POHF Financial Statements as of June 30, 2005, other than personal property disposed of in the ordinary course of business since June 30, 2005; good and marketable title to or right to use by valid and enforceable lease or contract all other properties and assets (whether real or personal, tangible or intangible) which POHF or Peoples Savings purports to own or which POHF or Peoples Savings uses in its respective business; good and marketable title to, or right to use by terms of a valid and enforceable lease or contract, all other property used in its respective business; and good and marketable title to all property and assets acquired and not disposed of or leased since June 30, 2005. All of such properties and assets are owned by POHF or Peoples Savings free and clear of all land or conditional sales contracts, mortgages, liens, pledges, restrictions, security interests, charges, claims, rights of third parties or encumbrances of any nature except: (i) as set forth in the POHF Disclosure Schedule; (ii) as specifically noted in reasonable detail in the POHF Financial Statements; (iii) statutory liens for taxes not yet delinquent or being contested in good faith by appropriate proceedings; (iv) pledges or liens required to be granted in connection with the acceptance of government deposits or granted in connection with repurchase or reverse repurchase agreements; and (v) easements, encumbrances and liens of record, imperfections of title and other limitations which are not material in amounts to POHF on a consolidated basis and which do not materially detract from the value or materially interfere with the present or contemplated use of any of the properties subject thereto or otherwise materially impair the use thereof for the purposes for which they are held or used. All real property owned or leased by POHF or Peoples Savings is in compliance with all applicable zoning and land use laws. All real property, machinery, equipment, furniture and fixtures owned or leased by POHF or Peoples Savings is structurally sound, in good operating condition, ordinary wear and tear excepted, and has been and is being maintained and repaired in the ordinary condition of business in all material respects.

(b) With respect to all real property presently or formerly owned, leased or used by POHF or Peoples Savings, POHF and Peoples Savings and to POHF’s knowledge each of the prior owners, have conducted their respective business in material compliance with all federal, state, county and municipal laws, statutes, regulations, rules, ordinances, orders, directives, restrictions and requirements relating to, without limitation, responsible property transfer, underground storage tanks, petroleum products, air pollutants, water pollutants or storm water or process waste water or otherwise relating to the environment, air, water, soil or toxic or hazardous substances or to the manufacturing, recycling, handling, processing, distribution, use, generation, treatment, storage, disposal or transport of any hazardous or toxic substances or petroleum products (including polychlorinated biphenyls, whether contained or uncontained, and asbestos-containing materials, whether friable or not), including, without limitation, the Federal Solid Waste Disposal Act, the Hazardous and Solid Waste Amendments, the Federal Clean Air Act, the Federal Clean Water Act, the Occupational Health and Safety Act, the Federal Resource Conservation and Recovery Act, the Toxic Substances Control Act, the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 and the Superfund Amendments and Reauthorization Act of 1986, all as amended, and regulations of the Environmental Protection Agency, the Nuclear Regulatory Agency, the Army Corp of Engineers, the Department of Interior, the United States Fish and Wildlife Service and any state department of natural resources or state environmental protection agency now or at any time thereafter in effect (collectively, “Environmental Laws”). There are no pending or, to the knowledge of POHF or Peoples Savings, threatened, claims, actions or proceedings by any local municipality, sewage district or other governmental entity against POHF or Peoples Savings with respect to the Environmental Laws, and to POHF’s knowledge there is no reasonable basis or grounds for any such claim, action or proceeding. No environmental clearances or other governmental approvals related to Environmental Laws are required for the conduct of the business of POHF or Peoples Savings or the

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consummation of the Mergers contemplated hereby. To POHF’s knowledge, neither POHF nor Peoples Savings is the owner, or has been in the chain of title or the operator or lessee, of any property on which any substances regulated by Environmental Laws have been used, stored, deposited, treated, recycled or disposed of in violation of Environmental Laws. To POHF’s knowledge, neither POHF nor Peoples Savings has any liability for any clean-up or remediation under any of the Environmental Laws with respect to any real property.

4.12. Loans and Investments.

(a) Except as set forth in the POHF Disclosure Schedule, there is no loan by Peoples Savings in excess of $10,000 that has been classified by regulatory examiners or management as “Other Loans Specially Mentioned,” “Substandard,” “Doubtful” or “Loss” or in excess of $10,000 that has been identified by accountants or auditors (internal or external) as having a significant risk of uncollectability. The most recent loan watch list of Peoples Savings and a list of all loans in excess of $10,000 which Peoples Savings has determined to be thirty (30) days or more past due with respect to principal or interest payments or has placed on nonaccrual status are set forth in the POHF Disclosure Schedule.

(b) All loans reflected in the POHF Financial Statements as of June 30, 2005, and which have been made, extended, renewed, restructured, approved, amended or acquired since June 30, 2005: (i) have been made for good, valuable and adequate consideration in the ordinary course of business; (ii) constitute the legal, valid and binding obligation of the obligor and any guarantor named therein, except to the extent limited by general principles of equity and public policy or by bankruptcy, insolvency, fraudulent transfer, reorganization, liquidation, moratorium, readjustment of debt or other laws of general application relative to or affecting the enforcement of creditors’ rights; (iii) are evidenced by notes, instruments or other evidences of indebtedness which are true, genuine and what they purport to be; and (iv) are secured, to the extent that Peoples Savings has a security interest in collateral or a mortgage securing such loans, by perfected security interests or recorded mortgages naming Peoples Savings as the secured party or mortgagee (unless by written agreement to the contrary).

(c) The reserves, the allowance for possible loan and lease losses and the carrying value for real estate owned which are shown on the POHF Financial Statements are, in the judgment of management of POHF and Peoples Savings, adequate in all material respects under the requirements of generally accepted accounting principles applied on a consistent basis to provide for possible losses on items for which reserves were made, on loans and leases outstanding and real estate owned as of the respective dates.

(d) Except as set forth in the POHF Disclosure Schedule, none of the investments reflected in the POHF Financial Statements as of and for the period ended June 30, 2005, and none of the investments made by Peoples Savings since June 30, 2005 are subject to any restriction, whether contractual or statutory, which materially impairs the ability of Peoples Savings to dispose freely of such investment at any time. Peoples Savings is not a party to any repurchase agreements with respect to securities.

(e) Set forth in the POHF Disclosure Schedule is a true, accurate and complete list of all loans in which Peoples Savings has any participation interest or which have been made with or through another financial institution on a recourse basis against Peoples Savings.

(f) Except as set forth in the POHF Disclosure Schedule, and except for customer deposits and ordinary trade payables, Peoples Savings has not, nor will it have at the Effective Time, any indebtedness for borrowed money.

4.13. State Takeover Laws. The Board of Directors of POHF has approved this Agreement and the transactions contemplated hereby as required to render inapplicable to such agreements and transactions the provisions of Chapter 1704 and Section 1707.43 of the OGCL, and all other similar “takeover” or “interested shareholder” laws.

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4.14. Employee Benefit Plans.

(a) With respect to the employee benefit plans, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), sponsored or otherwise maintained by POHF or Peoples Savings, whether written or oral, in which POHF or Peoples Savings participates as a participating employer, to which POHF or Peoples Savings contributes, with respect to which POHF or Peoples Savings acts as administrator, trustee or fiduciary, or any nonqualified employee benefit plans or deferred compensation, bonus, stock or incentive plans, or other employee benefit or fringe benefit programs for the benefit of former or current employees or directors (or their beneficiaries or dependents) of POHF or Peoples Savings, and including any such plans, to POHF’s knowledge, which have been terminated, merged into another plan, frozen or discontinued since January 1, 2000 (collectively, “POHF Plans”), except as set forth in the POHF Disclosure Schedule:

(i) all such POHF Plans have, on a continuous basis since their adoption, been, in all material respects, maintained and administered in compliance with applicable POHF Plan documents and with the requirements prescribed by all applicable statutes, orders and governmental rules or regulations, including, without limitation, ERISA, the Code, and the Department of Labor (the “Department”) and Treasury Regulations promulgated thereunder;

(ii) all POHF Plans intended to constitute tax-qualified plans under Section 401(a) of the Code that have not received a “GUST” (as defined in Section 2 of Rev. Proc. 2002-6) determination letter have received an opinion letter from the Internal Revenue Service (the “Service”) covering the qualified status of each such POHF Plan in its current form;

(iii) all POHF Plans intended to constitute tax qualified plans under Section 401(a) of the Code have received a favorable determination letter required from the Service with respect to “GUST” (as defined in Section 2 of Rev. Proc. 2002-6), and the document has been amended by the adoption of a “good faith EGTRRA amendment” as that phrase is defined in IRS Notice 2001-42, as well as amendments incorporating the final Treasury Regulations to Code Section 401(a)(9) and the mandatory distribution provisions of Code Section 401(a)(31), and POHF is not aware of any circumstances likely to result in revocation of any such favorable determination letter;

(iv) except for the POHF ESOP, no POHF Plan (or its related trust) holds any stock or other securities of POHF or any related or affiliated person or entity;

(v) Neither POHF nor Peoples Savings has any liability to the Department or the Service with respect to any POHF Plan;

(vi) Neither POHF nor Peoples Savings has engaged in any transaction that may subject POHF or Peoples Savings, or any POHF Plan, to a civil penalty imposed by Section 502 or any other provision of ERISA or excise taxes under Sections 4971, 4975, 4976, 4977, 4979 or 4980B of the Code or for a fine under Section 502 of ERISA with respect to any POHF Plan;

(vii) no prohibited transaction (as defined in Section 406 of ERISA or as defined in Section 4975(c) of the Code) has occurred with respect to any POHF Plan;

(viii) each POHF Plan subject to ERISA or intended to be qualified under Section 401(a) of the Code has been and, if applicable, is being operated in all material respects in accordance with the applicable provisions of ERISA and the Code and the Department and Treasury Regulations promulgated thereunder;

(ix) no participant or beneficiary or non-participating employee has been denied (in violation of ERISA, the Code, other applicable law or the applicable POHF Plan document) any benefit due or to become due under any POHF Plan or has been misled as to his or her rights under any POHF Plan;

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(x) all obligations required to be performed by POHF or Peoples Savings under any provision of any POHF Plan have been performed by it in all material respects and it is not in default under or in violation of any provision of any POHF Plan;

(xi) no event has occurred which would constitute grounds for an enforcement action by any party under Part 5 of Title I of ERISA under any POHF Plan;

(xii) there are no actions, suits, proceedings or claims pending (other than routine claims for benefits) or, to the knowledge of POHF or Peoples Savings, threatened, against POHF or Peoples Savings, any POHF Plan or the assets of any POHF Plan;

(xiii) with respect to any POHF Plan sponsored, participated in or contributed to by POHF or Peoples Savings, or with respect to which POHF or Peoples Savings is responsible for complying with the reporting and disclosure requirements of ERISA or the Code, there has been no violation of the reporting and disclosure requirements imposed either under ERISA or the Code for which a penalty has been or may be imposed;

(xiv) with respect to any POHF Plan there has been no breach of the fiduciary provisions of ERISA or other applicable federal or state law and there is no known outstanding fiduciary liability; and

(xv) any POHF Plan may be terminated at any time in accordance the provisions of ERISA or the Code, and the transactions contemplated by this Agreement do not eliminate the right of termination except as otherwise specifically provided herein.

(b) With regard to any POHF Plan intended to be qualified under Section 401(a) of the Code, no director, officer, employee or agent of POHF or Peoples Savings has engaged in any action or failed to act in such a manner that, as a result of such action or failure to act, the Service could revoke or deny that plan’s qualification under Section 401(a) of the Code or the exemption under Section 501(a) of the Code for any trust related to such Plan.

(c) POHF has provided to MainSource true, accurate and complete copies and, in the case of any POHF Plan which has not been reduced to writing, a materially complete summary, of all of the following, as applicable:

(i) all POHF Plans, including amendments thereto, and, if subject to the reporting and disclosure requirements of ERISA, all summary plan descriptions thereof (including any modifications thereto);

(ii) all employment, salary continuation, consulting, severance and collective bargaining agreements, arrangements or understandings;

(iii) all group insurance and health insurance contracts and policies;

(iv) all reports filed with the Service or Department of Labor within the preceding three years by POHF or Peoples Savings with respect to any POHF Plan;

(v) descriptions of all current participants in POHF Plans and all participants with benefit entitlements under such POHF Plans; and

(vi) valuations and testings for any POHF Plan that is a defined benefit plan or defined contribution plan, including the POHF ESOP, as of the most recent valuation date for that plan.

(d) Except as set forth on the POHF Disclosure Schedule, no current or former director, officer or employee of POHF or Peoples Savings (i) is entitled to or may become entitled to any benefit under any POHF Plan that is a welfare benefit plan (as defined in Section 3(1) of ERISA) after termination of employment with POHF or Peoples Savings, except that such individuals may be entitled to continue their

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group health care coverage pursuant to Section 4980B of the Code under the applicable POHF Plan if they pay the cost of such coverage pursuant to the applicable requirements of that plan or of the Code with respect thereto, or (ii) is currently receiving, or entitled to receive, a disability benefit under a POHF Plan that is a long term or short term disability plan.

(e) The Peoples Savings Bank of Troy Defined Benefit Pension Plan (“Benefit Plan”) is the only defined benefit pension plan maintained by POHF or Peoples Savings which is subject to Title IV of ERISA, and such Defined Benefit Plan is not a multiemployer plan (as that term is defined in Sections 4001(a)(3) and 3(37) of ERISA). Other than the Benefit Plan, no POHF Plan is, and neither POHF nor Peoples Savings has any liability with respect to any plan that is (i) a defined benefit pension plan subject to Title IV of ERISA, (ii) a pension plan subject to Section 302 of ERISA or Section 412 of the Code, or (iii) a multiemployer pension plan (as that term is defined in Sections 4001(a)(3) and 3(37) of ERISA).

(f) With respect to all POHF Plans that include a group health plan (as defined in Section 607(1) of ERISA) all applicable provisions of Section 4980B of the Code and Section 601 of ERISA have been complied with in all material respects by POHF or Peoples Savings.

(g) Except as otherwise provided in the POHF Disclosure Schedule, there are no collective bargaining, employment, management, consulting, deferred compensation, reimbursement, indemnity, retirement, early retirement, severance or similar plans or agreements, commitments or understandings, or any employee benefit or retirement plan or agreement, binding upon POHF or Peoples Savings and no such agreement, commitment, understanding or plan is under discussion or negotiation by management with any employee or group of employees, any member of management or any other person.

(h) Except as otherwise provided in the POHF Disclosure Schedule, no Voluntary Employees’ Beneficiary Association (“VEBA”) as defined in Code Section 501(c)(9) is sponsored or maintained by POHF or Peoples Savings.

(i) Except as otherwise provided in the POHF Disclosure Schedule, there are no benefits or liabilities under any employee benefit plan or program that will be accelerated as a result of the transactions contemplated by the terms of this Agreement.

(j) Except as may be disclosed in the POHF Disclosure Schedule, POHF and Peoples Savings are and have been in material compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including, without limitation, any such laws respecting employment discrimination and occupational safety and health requirements.

(k) All liabilities of the POHF Plans have been funded in accordance with sound actuarial assumptions and practices, and no POHF Plan subject to the funding requirements of part 3 of ERISA had or has had an accumulated funding deficiency as of the end of any plan year ending on or after December 31, 2002, other than as set forth in the POHF Disclosure Schedule. No actuarial assumptions have been changed since the last written report of actuaries on such POHF Plans. All insurance premiums (including premiums to the Pension Benefit Guaranty Corporation) have been paid in full, subject only to normal retrospective adjustments in the ordinary course. POHF and Peoples Savings have no contingent or actual liabilities under Title IV of ERISA. No accumulated funding deficiency (within the meaning of Section 302 of ERISA or Section 412 of the Code) has been incurred within the past three years with respect to any of the POHF Plans subject to Section 302 of ERISA or Section 412 of the Code, whether or not waived, nor does POHF or any of its affiliates have any liability or potential liability as a result of the underfunding of, or termination of, or withdrawal from, any plan by POHF or by any person which may be aggregated with POHF for purposes of Section 412 of the Code. No reportable event (as defined in Section 4043 of ERISA) has occurred with respect to any of the POHF Plans as to which a notice would be required to be filed with the Pension Benefit Guaranty Corporation. No claim is pending, or to the knowledge of POHF threatened or imminent with respect to any POHF Plan (other than a routine claim

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for benefits for which plan administrative review procedures have not been exhausted) for which POHF or Peoples Savings would be liable after June 30, 2005, except as is reflected on the POHF Financial Statements.

(l) As a result, directly or indirectly, of the transactions contemplated by this Agreement (including, without limitation, any termination of employment relating thereto and occurring prior to, at or following the Effective Time), POHF, Peoples Savings, and their respective successors will not be obligated to make a payment that would be characterized as an “excess parachute payment” to an individual who is a “disqualified individual” (as such terms are defined in Section 280G of the Code). Among the nonexclusive list of payments to be considered are, to the extent required by Section 280G of the Code, those payments referred to under Sections 3.01(b), 6.14, 6.15, 6.17, 6.18, 7.03(b), 7.05, and 8.01(i) of the Agreement, as well as any other payments made under the POHF Plans because of the transactions contemplated herein.

4.15. Obligations to Employees. All accrued obligations and liabilities of and all payments by POHF or Peoples Savings, whether arising by operation of law, by contract or by past custom, for payments to trusts or other funds, to any government agency or authority or to any present or former director, officer, employee or agent (or his or her heirs, legatees or legal representatives) have been and are being paid to the extent required by applicable law or by the plan, trust, contract or past custom or practice, and adequate actuarial accruals and reserves for such payments have been and are being made by POHF or Peoples Savings in accordance with generally accepted accounting principles and applicable law applied on a consistent basis and actuarial methods with respect to the following: (a) withholding taxes, unemployment compensation or social security benefits; and (b) all POHF Plans for its current or former directors, officers, employees and agents, including, without limitation, all liabilities and obligations to the POHF Plans (as defined in Section 4.14(a) hereof). All obligations and liabilities of POHF or Peoples Savings, whether arising by operation of law, by contract or by past custom or practice, for all other forms of compensation which are or may be payable to its current or former directors, officers, employees or agents or to any POHF Plan have been and are being paid to the extent required by applicable law or by the plan or contract, and adequate actuarial accruals and reserves for payment therefor have been and are being made by POHF or Peoples Savings in accordance with generally accepted accounting and actuarial principles applied on a consistent basis. All accruals and reserves referred to in this Section 4.15 are correctly and accurately reflected and accounted for in all material respects in the POHF Financial Statements and the books, statements and records of POHF.

4.16. Taxes, Returns and Reports. Except as set forth in the POHF Disclosure Schedule, each of POHF and Peoples Savings has since January 1, 2000 (a) duly and timely filed all federal, state, local and foreign tax returns of every type and kind required to be filed, and each such return is true, accurate and complete in all material respects; (b) paid or otherwise adequately reserved in accordance with generally accepted accounting principles for all taxes, assessments and other governmental charges due or claimed to be due upon it or any of its income, properties or assets; and (c) not requested an extension of time for any such payments (which extension is still in force). POHF has established, and shall establish in the Subsequent POHF Financial Statements (as hereinafter defined), in accordance with generally accepted accounting principles, a reserve for taxes in the POHF Financial Statements adequate to cover all of POHF’s and Peoples Savings’ tax liabilities (including, without limitation, income taxes, payroll taxes and withholding, and franchise fees) for the periods then ending. Neither POHF nor Peoples Savings has, nor will either have, any liability for taxes of any nature for or with respect to the operation of its business, from the date hereof up to and including the Effective Time, except to the extent set forth in the Subsequent POHF Financial Statements (as hereinafter defined) or as accrued or reserved for on the books and records of POHF or Peoples Savings. Neither POHF nor Peoples Savings is currently under audit by any state or federal taxing authority. No federal, state or local tax returns of POHF or Peoples Savings have been audited by any taxing authority during the past five (5) years.

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4.17. Deposit Insurance. The deposits of Peoples Savings are insured by the Federal Deposit Insurance Corporation in accordance with the Federal Deposit Insurance Act, as amended, to the fullest extent provided by applicable law, and POHF or Peoples Savings has paid or properly reserved or accrued for all current premiums and assessments with respect to such deposit insurance.

4.18. Insurance. Set forth in the POHF Disclosure Schedule is a list and brief description of all policies of insurance (including, without limitation, bankers’ blanket bond, directors’ and officers’ liability insurance, property and casualty insurance, group health or hospitalization insurance and insurance providing benefits for employees) owned or held by POHF or Peoples Savings on the date hereof or with respect to which POHF or Peoples Savings pays any premiums. Each such policy is in full force and effect and all premiums due thereon have been paid when due, and a true, accurate and complete copy thereof has been made available to MainSource prior to the date hereof.

4.19. Books and Records. The books and records of POHF are complete and correct and accurately reflect the basis for the financial condition, results of operations, business, assets and capital of POHF on a consolidated basis set forth in the POHF Financial Statements.

4.20. Broker’s, Finder’s or Other Fees. Except for reasonable fees and expenses of POHF’s attorneys, accountants and investment bankers, all of which shall be paid by POHF prior to the Effective Time, except as set forth in the POHF Disclosure Schedule, no agent, broker or other person acting on behalf of POHF or Peoples Savings or under any authority of POHF or Peoples Savings is or shall be entitled to any commission, broker’s or finder’s fee or any other form of compensation or payment from any of the parties hereto relating to this Agreement and the Mergers contemplated hereby.

4.21. POHF Disclosure Schedule and Documents. All written data, documents, materials and information referred to in this Agreement and delivered by POHF or Peoples Savings pursuant to or in connection with the POHF Disclosure Schedule are true, accurate and complete in all material respects as of the date hereof and with respect to such items delivered subsequent to the date hereof with any update to the POHF Disclosure Schedule, will be true, accurate and complete in all material respects on the date of delivery thereof.

4.22. Interim Events. Except as otherwise permitted hereunder, since June 30, 2005, or as set forth in the POHF Disclosure Schedule, neither POHF nor Peoples Savings has:

(a) Suffered any changes having an adverse impact on the financial condition, results of operations, business, assets or capital of POHF on a consolidated basis in excess of $5,000 individually or in the aggregate;

(b) Suffered any damage, destruction or loss to any of its properties, not fully paid by insurance proceeds, in excess of $5,000 individually or in the aggregate;

(c) Declared, distributed or paid any dividend or other distribution to its shareholders, except for payment of dividends as permitted by Section 6.03(a)(iii) hereof;

(d) Repurchased, redeemed or otherwise acquired shares of its common stock, issued any shares of its common stock or stock appreciation rights or sold or agreed to issue or sell any shares of its common stock or any right to purchase or acquire any such stock or any security convertible into such stock or taken any action to reclassify, recapitalize or split its stock;

(e) Granted or agreed to grant any increase in benefits payable or to become payable under any pension, retirement, profit sharing, health, bonus, insurance or other welfare benefit plan or agreement to employees, officers or directors of POHF or Peoples Savings except pursuant to the express terms thereof and except in the ordinary course of business, provided, however, that POHF shall provide prompt notice to MainSource of any such increase granted or agreed to be granted on the basis that it is in the ordinary course of business;

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(f) Increased the salary of any director, officer or employee, except for normal increases in the ordinary course of business and in accordance with past practices, or entered into any employment contract, indemnity agreement or understanding with any officer or employee or installed any employee welfare, pension, retirement, stock option, stock appreciation, stock dividend, profit sharing or other similar plan or arrangement;

(g) Leased, sold or otherwise disposed of any of its assets except in the ordinary course of business or leased, purchased or otherwise acquired from third parties any assets except in the ordinary course of business;

(h) Except for the Mergers contemplated by this Agreement, merged, consolidated or sold shares of its common stock, agreed to merge or consolidate with or into any third party, agreed to sell any shares of its common stock or acquired or agreed to acquire any stock, equity interest, assets or business of any third party;

(i) Incurred, assumed or guaranteed any obligation or liability (fixed or contingent) other than obligations and liabilities incurred in the ordinary course of business;

(j) Mortgaged, pledged or subjected to a lien, security interest, option or other encumbrance any of its assets except for tax and other liens which arise by operation of law and with respect to which payment is not past due and except for pledges or liens: (i) required to be granted in connection with acceptance by Peoples Savings of government deposits; or (ii) granted in connection with repurchase or reverse repurchase agreements;

(k) Except as set forth in the POHF Disclosure Schedule, canceled, released or compromised any loan, debt, obligation, claim or receivable other than in the ordinary course of business;

(l) Entered into any transaction, contract or commitment other than in the ordinary course of business;

(m) Agreed to enter into any transaction for the borrowing or loaning of monies, other than in the ordinary course of its lending business; or

(n) Conducted its business in any manner other than substantially as it was being conducted through June 30, 2005.

4.23. POHF Securities and Exchange Commission Filings. Since June 30, 2003, POHF has filed all reports and other documents required to be filed by it under the Securities Exchange Act of 1934 and the Securities Act of 1933, including but not limited to POHF’s Annual Report on Form 10-K for the year ended June 30, 2005. All such Securities and Exchange Commission filings were true, accurate and complete in all material respects as of the dates of the filings, and no such filings contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements, at the time and in the light of the circumstances under which they were made, not false or misleading.

4.24. No Third Party Options. Except as set forth in the POHF Disclosure Schedule, there are no agreements, options, commitments or rights with, of or to any third party to acquire any shares of capital stock or assets of POHF or Peoples Savings.

4.25. Indemnification Agreements.

(a) Other than as set forth in the POHF Disclosure Schedule, neither POHF nor Peoples Savings is a party to any indemnification, indemnity or reimbursement agreement, contract, commitment or understanding to indemnify any present or former director, officer, employee, shareholder or agent against liability or hold the same harmless from liability other than as expressly provided in the Articles of Incorporation or Code of Regulations of POHF or of Peoples Savings.

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(b) No claims have been made against or filed with POHF or Peoples Savings nor have, to the knowledge of POHF, any claims been threatened against POHF or Peoples Savings, for indemnification against liability or for reimbursement of any costs or expenses incurred in connection with any legal or regulatory proceeding by any present or former director, officer, shareholder, employee or agent of POHF or Peoples Savings.

4.26. Shareholder Approval. The affirmative vote of the holders of a majority of the shares of POHF Common Stock (which are issued and outstanding on the record date relating to the meeting of shareholders) is required for shareholder approval of this Agreement and the Company Merger.

4.27. Opinion of Financial Advisor. The Board of Directors of POHF, at a duly constituted and held meeting at which a quorum was present throughout, has been informed orally by a reputable financial advisor that the terms of the Company Merger are fair to the shareholders of POHF from a financial point of view.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF MAINSOURCE

On or prior to the date hereof, MainSource has delivered to POHF a schedule (the “MainSource Disclosure Schedule”) setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in this Article V or to one or more of its covenants contained in Article VII; provided that the mere inclusion of an item in the MainSource Disclosure Schedule as an exception to a representation or warranty shall not be deemed an admission by MainSource that such item represents a material exception or fact, event or circumstance or that such item is reasonably likely to result in a Material Adverse Effect (as defined below).

For the purpose of this Agreement, and in relation to MainSource and its subsidiaries, a “Material Adverse Effect” on MainSource means any effect that (i) is material and adverse to the financial position, results of operations or business of MainSource and its subsidiaries taken as a whole, or (ii) would materially impair the ability of MainSource to perform its obligations under this Agreement or otherwise materially threaten or materially impede the consummation of the Mergers and the other transactions contemplated by this Agreement; provided, however, that Material Adverse Effect on MainSource shall not be deemed to include the impact of (a) changes in banking and similar laws of general applicability to banks or savings associations or their holding companies or interpretations thereof by courts or governmental authorities, (b) changes in generally accepted accounting principles or regulatory accounting requirements applicable to banks, savings associations, or their holding companies generally, (c) any modifications or changes to valuation policies and practices in connection with the Mergers or restructuring charges taken in connection with the Mergers, in each case in accordance with generally accepted accounting principles, (d) changes in general level of interest rate (including the impact on the securities portfolios of MainSource or its subsidiaries) or conditions or circumstances that affect the banking industry generally, (f) reasonable and customary expenses incurred in connection with the Mergers, (g) the impact of the announcement of this Agreement and the transactions contemplated hereby, and compliance with this Agreement or the business, financial condition or results of operations of MainSource and its subsidiaries, and (h) the occurrence of any military or terrorist attack within the United States or any of its possessions or offices.

For the purpose of this Agreement, and in relation to MainSource, “knowledge” means (i) the actual knowledge of any officer or director of MainSource or any of its subsidiaries and any other person having supervisory or management responsibilities with respect to material aspects of the operation of the business of MainSource or its subsidiaries of a particular fact.

Accordingly, MainSource represents and warrants to POHF as follows:

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5.01. Organization and Authority. Each of MainSource and its subsidiaries is an entity duly organized and validly existing under the laws of its applicable state or country. MainSource and its subsidiaries have full power and authority (corporate and otherwise) to own and lease its properties as presently owned and leased and to conduct its business in the manner and by the means utilized as of the date hereof. Each of MainSource and its subsidiaries is duly qualified to do business in each jurisdiction in which the nature of the business conducted or the properties or assets owned or leased by it make such qualification necessary except where the failure to so qualify would not have a Material Adverse Effect.

5.02. Authorization.

(a) MainSource has the requisite corporate power and authority to enter into this Agreement and to carry out its obligations hereunder, and following its formation Merger Corp will have the requisite corporate power and authority to carry out its obligations hereunder, subject to the fulfillment of the conditions precedent set forth in Section 8.01(d), (e) and (f) hereof. As of the date hereof, MainSource is not aware of any reason why the approvals set forth in Section 8.02(e) will not be received in a timely manner and without the imposition of a condition, restriction or requirement of the type described in Section 8.02(e). This Agreement and its execution and delivery by MainSource has been duly authorized by the Board of Directors of MainSource. Assuming due execution and delivery of POHF, this Agreement constitutes a valid and binding obligation of MainSource and, upon its formation, will constitute a valid and binding obligation of Merger Corp, subject in both cases to the conditions precedent set forth in Section 8.01 hereof, and is enforceable in accordance with its terms, except to the extent limited by general principles of equity and public policy and by bankruptcy, insolvency, reorganization, liquidation, moratorium, readjustment of debt or other laws of general application relating to or affecting the enforcement of creditors’ rights.

(b) Neither the execution of this Agreement nor consummation of the Merger contemplated hereby: (i) conflicts with or violates the Articles of Incorporation or By-Laws of MainSource or any of its subsidiaries; (ii) conflicts with or violates in any material respect any local, state, federal or foreign law, statute, ordinance, rule or regulation (provided that the approvals of or filings with applicable government regulatory agencies or authorities required for consummation of the Merger are obtained) or any court or administrative judgment, order, injunction, writ or decree; or (iii) conflicts with, results in a breach of or constitutes a material default under any note, bond, indenture, mortgage, deed of trust, license, contract, lease, agreement, arrangement, commitment or other instrument to which MainSource is subject or bound and which is material to MainSource on a consolidated basis.

(c) Other than in connection or in compliance with applicable federal and state banking, securities, antitrust and corporation statutes, all as amended, and the rules and regulations promulgated thereunder, no notice to, filing with, exemption by or consent, authorization or approval of any governmental agency or body is necessary for the consummation by MainSource of the Merger contemplated by this Agreement.

5.03. Capitalization. (a) The authorized capital stock of MainSource as of the date hereof consists, and at the Effective Time will consist, of 25,000,000 shares of MainSource Common Stock, 13,471,121 of which shares are outstanding and 400,000 shares of preferred stock, none of which are outstanding. Such issued and outstanding shares of MainSource Common Stock have been duly and validly authorized by all necessary corporate action of MainSource, are validly issued, fully paid and nonassessable and have not been issued in violation of any pre-emptive rights of any present or former MainSource shareholder. MainSource has no capital stock authorized, issued or outstanding other than as described in this Section 5.03(a) and has no intention or obligation to authorize or issue any other capital stock or any additional shares of MainSource Common Stock other than in connection with employee and director stock options under its existing stock option plans or as described in the MainSource Disclosure Schedule. Each share of MainSource Common Stock is entitled to one vote per share. MainSource wholly owns the subsidiaries listed in the MainSource Disclosure Schedule which includes their names and jurisdictions of

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organization. The shares of MainSource Common Stock to be issued pursuant to the Company Merger will be duly authorized and validly issued and, at the Effective Time, all such shares will be fully paid and nonassessable and not have been issued in violation of any pre-emptive rights.

(b) Except as set forth on the MainSource Disclosure Schedule, there are no options, warrants, commitments, calls, puts, agreements, understandings, arrangements or subscription rights relating to any shares of MainSource Common Stock, or any securities convertible into or representing the right to purchase or otherwise acquire any common stock or debt securities of MainSource, by which MainSource is or may become bound. MainSource does not have any outstanding contractual or other obligation to repurchase, redeem or otherwise acquire any of the issued and outstanding shares of MainSource Common Stock.

5.04. Litigation and Pending Proceedings. There are no claims, actions, suits, proceedings, investigations, mediations or arbitrations pending or, to the knowledge of MainSource by the officers of MainSource, threatened in any court or before any government agency or authority, arbitration panel or otherwise (nor does MainSource have any knowledge of a basis for any claim, action, suit, proceeding, litigation, investigation or arbitration) against, by or affecting MainSource which would reasonably be expected to prevent the performance of this Agreement, declare the same unlawful or cause the rescission hereof.

5.05. Organizational Documents. The Articles of Incorporation and By-Laws of MainSource, representing true, accurate and complete copies of such corporate documents in effect as of the date of this Agreement, have been delivered to POHF and are included in the MainSource Disclosure Schedule.

5.06. Accuracy of Statements Made and Materials Provided to POHF. No representation, warranty or other statement made, or any information provided, by MainSource in this Agreement, and no written report, statement, list, certificate, materials or other information furnished or to be furnished by MainSource to POHF through and including the Effective Time in connection with this Agreement or the Merger contemplated hereby, contains or shall contain (in the case of information relating to the proxy statement at the time it is mailed to POHF’s shareholders) any untrue or misleading statement of material fact or omits or shall omit to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances in which they are made, not false or misleading, except that no representation or warranty has been made by MainSource with respect to statements made or incorporated by reference in the proxy statement based on information supplied by POHF or Peoples Savings specifically for inclusion or incorporation by reference in such proxy statement.

5.07. Financial Statements and Reports. (a) MainSource has delivered to POHF copies of the following financial statements and reports of MainSource, including the notes thereto (collectively, the “MainSource Financial Statements”):

(i) Consolidated Balance Sheets and the related Consolidated Statements of Income and Consolidated Statements of Changes in Shareholders’ Equity of MainSource as of and for the fiscal years ended December 31, 2004 and 2003 and as of and for the six months ended June 30, 2005; and

(ii) Consolidated Statements of Cash Flows of MainSource for the fiscal years ended December 31, 2004 and 2003 and for the six months ended June 30, 2005;

(b) The MainSource Financial Statements present fairly the consolidated financial position of MainSource as of and at the dates shown and the consolidated results of operations for the periods covered thereby and to the knowledge of MainSource are complete, correct, represent bona fide transactions, and have been prepared from the books and records of MainSource and its subsidiaries. The MainSource Financial Statements described in clauses (i) and (ii) above for completed fiscal years are audited financial statements and have been prepared in conformance with generally accepted accounting

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principles applied on a consistent basis, except as may otherwise be indicated in any accountants’ notes or reports with respect to such financial statements.

5.08. MainSource Securities and Exchange Commission Filings. Since December 31, 2003, MainSource has filed all reports and other documents required to be filed by it under the Securities Exchange Act of 1934 and the Securities Act of 1933, including but not limited to MainSource’s Annual Report on Form 10-K for the year ended December 31, 2004 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2005. All such Securities and Exchange Commission filings were true, accurate and complete in all material respects as of the dates of the filings, and no such filings contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements, at the time and in the light of the circumstances under which they were made, not false or misleading.

5.09. Shareholder Approval. Approval by MainSource’s shareholders of the Merger or any other actions contemplated by this Agreement is not required.

5.10. Compliance with Law. (a) Neither MainSource nor any of its subsidiaries has engaged in any activity nor taken or omitted to take any action which has resulted in the violation of any local, state, federal or foreign law, statute, regulation, rule, ordinance, order, restriction or requirement, nor are they in violation of any order, injunction, judgment, writ or decree of any court or government agency or body, except where such activity, omission to act or violation would not have a Material Adverse Effect.

(b) All agreements, understandings and commitments with, and all orders and directives of, all government regulatory agencies or authorities with respect to the financial condition, results of operations, business, assets or capital of MainSource or its subsidiaries which presently are binding upon or require action by, or at any time during the last five (5) years have been binding upon or have required action by, MainSource or its subsidiaries, including, without limitation, all correspondence, communications and commitments related thereto, are set forth in the MainSource Disclosure Schedule. There are no refunds or restitutions required to be paid as a result of any criticism of any regulatory agency or body, cited in any examination report of MainSource or its subsidiaries as a result of an examination by any regulatory agency or body, or set forth in any accountant’s or auditor’s report to MainSource or its subsidiaries.

(c) All of the existing offices and branches of MainSource or its subsidiaries have been legally authorized and established in accordance with all applicable federal, state and local laws, statutes, regulations, rules, ordinances, orders, restrictions and requirements, except such as would not have a Material Adverse Effect.

5.11. Absence of Changes. Since June 30, 2005, there has not been any material change in the financial condition, the results of operations or the business of MainSource or its subsidiaries.

5.12. Broker’s, Finder’s or Other Fees. Except for reasonable fees and expenses of MainSource’s attorneys, accountants and investment bankers, all of which shall be paid by MainSource prior to the Effective Time, and except as set forth on the MainSource Disclosure Schedule, no agent, broker or other person acting on behalf of MainSource or its subsidiaries or under any authority of MainSource or its subsidiaries is or shall be entitled to any commission, broker’s or finder’s fee or any other form of compensation or payment from any of the parties hereto relating to this Agreement and the Merger contemplated hereby.

5.13. Absence of Undisclosed Liabilities. Except as provided in the MainSource Financial Statements and in the MainSource Disclosure Schedule, except for trade payables incurred in the ordinary course of business, except for the transactions contemplated by this Agreement and obligations for services rendered pursuant thereto, except for obligations under merger or other acquisition agreements and except for liabilities which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect upon MainSource or its subsidiaries, neither MainSource nor any of its subsidiaries have, nor will have at the Effective Time, any obligation, agreement, contract, commitment,

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liability, lease or license which exceeds $250,000 individually, or any obligation, agreement, contract, commitment, liability, lease or license made outside of the ordinary course of business, nor does there exist any circumstances resulting from transactions effected or events occurring on or prior to the date of this Agreement or from any action omitted to be taken during such period which could reasonably be expected to result in any such obligation, agreement, contract, commitment, liability, lease or license. Neither MainSource or any of its subsidiaries is delinquent in the payment of any amount due pursuant to any trade payable, and each has properly accrued for such payables in accordance with generally accepted accounting principles.

5.14. Internal Controls. MainSource and its subsidiaries have devised and maintain a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with SEC rules and generally accepted accounting principles.

ARTICLE VI

COVENANTS OF POHF

POHF covenants and agrees with MainSource and covenants and agrees to cause Peoples Savings to act as follows:

6.01. Shareholder Approval. (a) POHF will submit this Agreement to its shareholders for approval and adoption at a meeting to be called and held in accordance with applicable law and the Articles of Incorporation and Code of Regulations of POHF at the earliest possible reasonable date. Subject to Section 6.06 hereof, the Board of Directors of POHF shall recommend to POHF’s shareholders that such shareholders approve and adopt this Agreement and the Company Merger contemplated hereby and will solicit proxies voting in favor of this Agreement from POHF’s shareholders.

(b) Subject to Section 6.06 hereof, Peoples Savings shall submit this Agreement to POHF, as its sole shareholder, for approval by unanimous written consent without a meeting in accordance with applicable law and the Articles of Incorporation and Code of Regulations of Peoples Savings at a date reasonably in advance of the Effective Time. The Board of Directors of Peoples Savings shall recommend approval of this Agreement and the Subsidiary Merger to POHF, as the sole shareholder of Peoples Savings, and POHF as sole shareholder of Peoples Savings, shall approve this Agreement and the Subsidiary Merger.

6.02. Other Approvals. (a) POHF and Peoples Savings shall proceed expeditiously, cooperate fully and use their best efforts to assist MainSource in procuring upon reasonable terms and conditions all consents, authorizations, approvals, registrations and certificates, in completing all filings and applications and in satisfying all other requirements prescribed by law which are necessary for consummation of the Mergers on the terms and conditions provided in this Agreement at the earliest possible reasonable date.

(b) POHF and Peoples Savings will use commercially reasonable efforts to obtain any required third party consents to agreements, contracts, commitments, leases, instruments and documents described in the POHF Disclosure Schedule and designated therein as material.

(c) Any materials or information provided by POHF or Peoples Savings to MainSource for use by MainSource in any filing with any state or federal regulatory agency or authority shall not contain any untrue or misleading statement of material fact or shall omit to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not false or misleading.

6.03. Conduct of Business. (a) On and after the date of this Agreement and until the Effective Time or until this Agreement is terminated as herein provided, neither POHF nor Peoples Savings will, without the prior written consent of MainSource:

(i) make any changes in its capital stock accounts (including, without limitation, any stock issuance, stock split, stock dividend, recapitalization or reclassification);

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(ii) authorize a class of stock or issue, or authorize the issuance of, securities other than or in addition to the issued and outstanding common stock as set forth in Section 4.03 hereof;

(iii) distribute or pay any dividends on its shares of common stock, or authorize a stock split, or make any other distribution to its shareholders, except that (A) Peoples Savings may pay cash dividends to POHF in the ordinary course of business for payment of reasonable and necessary business and operating expenses of POHF and to provide funds for POHF’s dividends to its shareholders in accordance with this Agreement, and (B) POHF may pay to its shareholders its usual and customary cash dividend of no greater than $.07 per share for any semi-annual period, provided that any dividend paid for the semi-annual period in which the Mergers are scheduled to be consummated or consummated must be prorated for the portion of such period prior to the Effective Time and must be paid prior to the Effective Time;

(iv) redeem any of its outstanding shares of common stock;

(v) merge, combine or consolidate or effect a share exchange with or sell its assets or any of its securities to any other person, corporation or entity or enter into any other similar transaction not in the ordinary course of business;

(vi) purchase any assets or securities or assume any liabilities of a bank holding company, bank, corporation or other entity, except in the ordinary course of business necessary to manage its investment portfolio;

(vii) make any loan or commitment to lend money, issue any letter of credit or accept any deposit, except in the ordinary course of business in accordance with its existing banking practices;

(viii) except as provided in the POHF Disclosure Schedule and for the acquisition or disposition in the ordinary course of business of other real estate owned, acquire or dispose of any real or personal property or fixed asset constituting a capital investment in excess of $10,000 individually or $25,000 in the aggregate;

(ix) make any investment subject to any restrictions, whether contractual or statutory, which materially impairs the ability of POHF or Peoples Savings to dispose freely of such investment at any time; subject any of their properties or assets to a mortgage, lien, claim, charge, option, restriction, security interest or encumbrance, except for tax and other liens which arise by operation of law and with respect to which payment is not past due or is being contested in good faith by appropriate proceedings, pledges or liens required to be granted in connection with acceptance by POHF or Peoples Savings of government deposits and pledges or liens in connection with FHLB borrowings;

(x) promote to a new position or increase the rate of compensation (except for promotions and compensation increases in the ordinary course of business and in accordance with past practices), or enter into any agreement to promote to a new position or increase the rate of compensation, of any director, officer or employee of POHF or Peoples Savings, modify, amend or institute new employment policies or practices, or enter into, renew or extend any employment, indemnity, reimbursement, consulting, compensation or severance agreements with respect to any present or former directors, officers or employees of POHF or Peoples Savings;

(xi) except as contemplated by this Agreement, execute, create, institute, modify, amend or terminate any pension, retirement, savings, stock purchase, stock bonus, stock ownership, stock option, stock appreciation or depreciation right or profit sharing plans; any employment, deferred compensation, consulting, bonus or collective bargaining agreement; any group insurance or health contract or policy; or any other incentive, retirement, welfare or employee welfare benefit plan, agreement or understanding for current or former directors, officers or employees of POHF or Peoples Savings; or change the level of benefits or payments under any of the foregoing or increase or decrease any severance or termination of pay benefits or any other fringe or employee benefits other than as required by law or regulatory authorities or the terms of any of the foregoing.

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(xii) amend, modify or restate POHF’s or Peoples Savings’ organizational documents from those in effect on the date of this Agreement and as delivered to MainSource hereunder;

(xii) give, dispose of, sell, convey or transfer; assign, hypothecate, pledge or encumber, or grant a security interest in or option to or right to acquire any shares of common stock or substantially all of the assets of POHF or Peoples Savings, or enter into any agreement or commitment relative to the foregoing;

(xiv) fail to maintain POHF’s reserve for loan losses at the greater of either $725,090 or 0.42% of total gross loans outstanding unless doing so would be inconsistent with generally accepted accounting principles;

(xv) fail to accrue, pay, discharge and satisfy all debts, liabilities, obligations and expenses, including, but not limited to, trade payables, incurred in the regular and ordinary course of business as such debts, liabilities, obligations and expenses become due;

(xvi) issue, or authorize the issuance of, any securities convertible into or exchangeable for any shares of the capital stock of POHF or Peoples Savings;

(xvii) except for obligations disclosed within this Agreement or the Disclosure Statement, FHLB advances, trade payables and similar liabilities and obligations incurred in the ordinary course of business and the payment, discharge or satisfaction in the ordinary course of business of liabilities reflected in the POHF Financial Statements or the Subsequent POHF Financial Statements, borrow any money or incur any indebtedness including, without limitation, through the issuance of debentures, or incur any liability or obligation (whether absolute, accrued, contingent or otherwise), in an aggregate amount exceeding $10,000;

(xiii) open, close, move or, in any material respect, expand, diminish, renovate, alter or change any of its offices or branches;

(xix) pay or commit to pay any management or consulting or other similar type of fees; or

(xx) enter into any contract, agreement, lease, commitment, understanding, arrangement or transaction or incur any liability or obligation (other than as contemplated by Section 6.03(a)(vii) hereof and legal, accounting and fees related to the Mergers) requiring payments by POHF or Peoples Savings which exceed $10,000, whether individually or in the aggregate, or that is not a trade payable or incurred in the ordinary course of business.

(b) On and after the date of this Agreement and until the Effective Time or until this Agreement is terminated as herein provided, each of POHF and Peoples Savings shall: (i) carry on its business diligently, substantially in the manner as is presently being conducted and in the ordinary course of business; (ii) use commercially reasonable best efforts to preserve its business organization intact, keep available the services of the present officers and employees and preserve its present relationships with customers and persons having business dealings with it; (iii) maintain all of the properties and assets that it owns or utilizes in the operation of its business as currently conducted in good operating condition and repair, reasonable wear and tear excepted; (iv) maintain its books, records and accounts in the usual, regular and ordinary manner, on a basis consistent with prior years and in compliance in all material respects with all statutes, laws, rules and regulations applicable to them and to the conduct of its business; (v) maintain a rating of at least two (2) from its latest safety and soundness and compliance examination; (vi) maintain a CRA rating of satisfactory; (vii) timely file all documents and reports required to be filed pursuant to the Securities Exchange Act of 1934, as amended; and (viii) not knowingly do or fail to do anything which will cause a breach of, or default in, any contract, agreement, commitment, obligation, understanding, arrangement, lease or license to which it is a party or by which it is or may be subject or bound which would reasonably be expected to have a Material Adverse Effect on the financial condition, results of operations, business, assets, or capital of POHF or Peoples Savings.

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6.04. Insurance. POHF and Peoples Savings shall maintain, or cause to be maintained, in full force and effect, insurance on its assets, properties and operations, fidelity coverage and directors’ and officers’ liability insurance in such amounts and with regard to such liabilities and hazards as are currently insured by POHF or Peoples Savings as of the date of this Agreement.

6.05. Affiliate Agreements. Within thirty (30) days after the date of this Agreement and promptly thereafter until the Effective Time to reflect any changes, POHF will provide MainSource with a list identifying each person who may be deemed to be an affiliate of POHF for purposes of Rule 145 under the Securities Act of 1933 (the “1933 Act”). On or before the date on which such initial list of affiliates is provided to MainSource, and thereafter as may be required for a person who may be deemed an affiliate of POHF following such date, POHF shall use its best efforts to obtain from each director, executive officer and other person who may be deemed to be such an affiliate of POHF to deliver to MainSource on or prior to the Effective Time a written agreement, substantially in the form as attached hereto as Exhibit 6.05.

6.06. Acquisition Proposals. (a) On and after the date of this Agreement and until the Effective Time or until this Agreement is terminated as herein provided, except with the prior written approval of MainSource, neither POHF nor Peoples Savings shall permit or authorize its directors, officers, employees, agents or representatives to, directly or indirectly, initiate, solicit or encourage, or provide information to, any corporation, association, partnership, person or other entity or group concerning any merger, consolidation, share exchange, combination, purchase or sale of substantial assets, sale of shares of common stock (or securities convertible or exchangeable into or otherwise evidencing, or any agreement or instrument evidencing the right to acquire, capital stock) or similar transaction relating to POHF or Peoples Savings or to which POHF or Peoples Savings may become a party (all such transactions are hereinafter referred to as “Acquisition Transactions”).

(b) POHF shall promptly communicate to MainSource the terms of any proposal or offer which POHF or Peoples Savings may receive with respect to an Acquisition Transaction. Notwithstanding anything to the contrary elsewhere in this Agreement, POHF may, in response to an unsolicited written proposal with respect to an Acquisition Transaction from a third party, furnish information to, and negotiate, explore or otherwise engage in substantive discussions with such third party, and enter into any such agreement, arrangement or understandings, in each case, only if POHF’s Board of Directors determines in good faith by majority vote, after consultation with its financial advisors and outside legal counsel, that failing to take such action would be a breach of the fiduciary duties of POHF’s Board of Directors in connection with seeking an Acquisition Transaction.

(c) In the event POHF’s Board of Directors, after consultation with its financial advisors and outside legal counsel, determines in good faith that it would result in a violation of its fiduciary duties under applicable law to recommend this Agreement and the Company Merger to POHF’s shareholders for their approval, then in submitting this Agreement to the shareholders at the meeting of shareholders, POHF may submit this Agreement without recommendation of approval, in which case the Board of Directors may communicate the basis for its lack of a recommendation of approval to the shareholders in the proxy statement or an appropriate amendment or supplement thereto to the extent required by law.

(d) This Section 6.06 shall not authorize POHF or Peoples Savings, or any of their directors, officers, employees, agents or representatives, to initiate any discussions or negotiations with respect to an Acquisition Transaction with a third party.

6.07. Press Releases. Neither POHF nor Peoples Savings will issue any press or news releases or make any other public announcements or disclosures relating to the Mergers without first providing a final copy of such press or news release to MainSource and providing MainSource with a reasonable opportunity to comment on such press or news release.

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6.08. Material Changes to Disclosure Schedules. POHF and Peoples Savings shall promptly submit to MainSource supplements, amendments and updates, upon the occurrence of any change prior to the Effective Time, and as of the Effective Time, to the POHF Disclosure Schedule with respect to any matters or events hereafter arising which, if in existence or having occurred as of the date of this Agreement, would have been required to be set forth or described in the Disclosure Schedule or this Agreement and including, without limitation, any fact which, if existing or known as of the date hereof, would have made any of the representations or warranties of POHF or Peoples Savings contained herein materially incorrect, untrue or misleading. No such supplement, amendment or update shall become part of the Disclosure Schedule unless MainSource shall have first consented in writing with respect thereto.

6.09. Access; Information. (a) MainSource and its representatives and agents, shall, at all times during normal business hours prior to the Effective Time, have full and continuing access to the properties, facilities, operations, books and records of POHF and Peoples Savings. MainSource, and its representatives and agents may, prior to the Effective Time, make or cause to be made such reasonable investigation of the operations, books, records and properties of POHF and Peoples Savings and their subsidiaries and of their financial and legal condition as deemed necessary or advisable to familiarize themselves with such operations, books, records, properties and other matters; provided, however, that such access or investigation shall not interfere unnecessarily with the normal business operations of POHF or Peoples Savings. Upon request, POHF will furnish MainSource or its representatives or agents, its attorneys’ responses to external auditors requests for information, management letters received from its external auditors and such financial, loan and operating data and other information reasonably requested by MainSource which has been or is developed by POHF, its auditors, accountants or attorneys (provided with respect to attorneys, such disclosure would not result in the waiver by POHF of any claim of attorney-client privilege), and will permit MainSource or its representatives or agents to discuss such information directly with any individual or firm performing auditing or accounting functions for POHF or Peoples Savings, as applicable, and such auditors and accountants will be directed to furnish copies of any reports or financial information as developed to MainSource or its representatives or agents, as applicable. No investigation by MainSource shall affect the representations and warranties made by POHF or Peoples Savings herein. Any confidential information or trade secrets received by MainSource or its representatives or agents in the course of such examination will be treated confidentially, and any correspondence, memoranda, records, copies, documents and electronic or other media of any kind containing such confidential information or trade secrets or both shall be destroyed by MainSource, or at POHF’s request, returned to POHF in the event this Agreement is terminated as provided in Article IX hereof. This Section 6.09 will not require the disclosure of any information to MainSource which would be prohibited by law. The ability of MainSource to consult with any tax advisor (including a tax advisor independent from all other entities involved in the transactions contemplated hereby) shall not be limited by this Agreement in any way, provided that any such tax advisor is otherwise subject to and is bound by this Section 6.09. Notwithstanding anything herein to the contrary (other than the preceding sentence), except as reasonably necessary to comply with applicable securities laws, MainSource (and each employee, representative or agent of MainSource) may disclose to any and all persons, without limitation of any kind, the tax treatment (as defined in Treas. Reg. § 1.6011-4) of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are or have been provided to MainSource relating to such tax structure, provided that, in the case of any materials that contain information other than the tax treatment or tax structure of the transactions contemplated hereby (including, but not limited to, any information relating to the pricing or any cost of the transactions contemplated hereby or the identity of any party to the transactions contemplated hereby), this sentence shall apply to such materials only to the extent that such materials contain the tax treatment or tax structure of the transactions contemplated hereby and MainSource shall take all action necessary to prevent the disclosure of such other information as otherwise provided herein. The immediately preceding sentence shall not be effective until the earliest of (a) the date of the public announcement of discussions relating to any of the transactions contemplated

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hereby, (b) the date of the public announcement of any of the transactions contemplated hereby or (c) the date of the execution of an agreement, with or without conditions, to enter into any of the transactions contemplated hereby.

(b) Beginning on the date of this Agreement, James L. Saner, President of MainSource, or his designees, shall be entitled to receive notice of and to attend all regular and special meetings of the board of directors and all committees of POHF and Peoples Savings, including, without limitation, the loan committee, investment committee, the executive committee, the personnel committee, and any other committee of POHF and Peoples Savings, except that any such person shall be excluded from the portion of any meeting where this Agreement or the transactions contemplated by this Agreement are being discussed.

6.10. Financial Statements. As soon as reasonably available after the date of this Agreement, POHF will deliver to MainSource any additional audited consolidated financial statements which have been prepared on its behalf or at its direction, the monthly consolidated unaudited balance sheets and profit and loss statements of POHF prepared for its internal use, Peoples Savings’s TFRs for each quarterly period completed prior to the Effective Time, and all other financial reports or statements submitted to regulatory authorities after the date hereof, to the extent permitted by law (collectively, “Subsequent POHF Financial Statements”). The Subsequent POHF Financial Statements will be prepared on a basis consistent with past accounting practices and generally accepted accounting principles applied on a consistent basis to the extent applicable and shall present fairly the financial condition and results of operations as of the dates and for the periods presented. The Subsequent POHF Financial Statements, including the notes thereto, will not include any assets, liabilities or obligations or omit to state any assets, liabilities or obligations, absolute or contingent, or any other facts, which inclusion or omission would render such financial statements inaccurate, incomplete or misleading in any material respect.

6.11. Environmental. If requested by MainSource, POHF and Peoples Savings will provide reasonable access to an environmental consulting firm designated by MainSource in connection with the conduct by such firm of a phase one environmental site assessment (a “Phase I”) on all real property owned or leased by POHF or Peoples Savings as of the date of this Agreement, and any real property acquired or leased by POHF or Peoples Savings after the date of this Agreement, and POHF and Peoples Savings will reasonably respond to inquiries made by such environmental consulting firm necessary to complete the Phase I’s. In the event MainSource requests a phase two environmental site assessment (a “Phase II”) on any real property owned or leased by POHF or Peoples Savings as of the date of this Agreement or acquired or leased by POHF or Peoples Savings after the date of this Agreement, POHF and Peoples Savings will provide reasonable access to the environmental firm designated by MainSource in connection with the conduct by such firm of the Phase II. MainSource shall promptly provide to POHF and Peoples Savings, upon request, copies of any such Phase I and Phase II prepared at MainSource’s request and all data related thereto. MainSource agrees to protect, defend, indemnify and hold harmless POHF and Peoples Savings with respect to any loss, cost, damage or liability arising out of or related to the Phase I and/or Phase II activities. MainSource agrees to repair any property damage caused by the Phase I and/or Phase II and properly remove any groundwater wells or other investigation or monitoring devices upon completion of the Phase I and Phase II activities. MainSource agrees to keep all reports, data and findings related to the Phase I and Phase II confidential and shall not disclose such information to any third person other than MainSource’s attorneys and agents, without the prior written consent of POHF or Peoples Savings. MainSource also agrees to not unreasonably interfere with the business conducted by POHF or Peoples Savings as part of the Phase I and Phase II activities. Further, any Phase II activities shall be conducted, to the extent possible, outside the business hours of the location on which the Phase II is being conducted.

In the event that the cost of taking all remedial or other corrective actions and measures (i) required by applicable law, or (ii) reasonably recommended or suggested by such report or reports or

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(iii) reasonably considered by MainSource to be prudent in light of serious life, health or safety concerns, exceed the sum of $150,000, in the aggregate, as reasonably estimated by such environmental firm, or if the cost of such actions and measures cannot be so reasonably estimated by such environmental firm to be such amount or less with any reasonable degree of certainty, then MainSource shall have the right pursuant to Section 9.01(b) hereof, for a period of 15 business days following receipt of such estimate or indication that the cost of such actions and measures cannot be so reasonably estimated, to terminate this Agreement, which shall be MainSource’s sole remedy in such event. MainSource agrees to pay the costs of any Phase I or Phase II investigation prepared or conducted at MainSource’s request pursuant to this Section 6.11.

6.12. Governmental Reports. Promptly upon its becoming available, POHF shall furnish to MainSource one (1) copy of each financial statement, report, notice, or proxy statement sent by POHF or Peoples Savings to any Governmental Authority or to POHF’s shareholders generally and of each regular or periodic report, registration statement or prospectus filed by POHF with the SEC or any successor agency, and of any order issued by any Governmental Authority in any proceeding to which POHF or Peoples Savings is a party. For purposes of this provision and Section 7.11, “Governmental Authority” means any government (or any political subdivision or jurisdiction thereof), court, bureau, agency or other governmental entity having or asserting jurisdiction over the applicable party or its business, operations or properties.

6.13. Adverse Actions. Neither POHF nor Peoples Savings shall knowingly take any action that is intended or is reasonably likely to result in (w) any of their representations and warranties set forth in this Agreement being or becoming untrue in any respect at any time at or prior to the Effective Time, (x) any of the conditions to the Mergers set forth in Article VIII not being satisfied, (y) a material violation of any provision of this Agreement or (z) a delay in the consummation of the Mergers except, in each case, as may be required by applicable law or regulation.

6.14. ESOP Component of 401(k) Plan. POHF shall take any such actions as are necessary to ensure that (i) all POHF employees who are participants in the POHF ESOP portion of the 401(k) Plan, to the extent POHF Common Stock is held in their accounts, have the opportunity to complete an Election Form and to vote with respect to the Company Merger, (ii) the 401(k) Plan trustee has the authority necessary to sell or exchange the POHF stock held by the 401(k) Plan and to otherwise participate in the transactions contemplated by this Agreement, and (iii) no violation of ERISA or the Code occurs in the POHF ESOP’s sale or exchange of the POHF stock held by the 401(k) Plan, or the transactions contemplated by this Agreement. Additionally, POHF shall take any such actions as are necessary to ensure that, as of the Effective Time or as soon as practicable thereafter, all shares of POHF Common Stock held by the 401(k) Plan shall be converted into rights to receive the Merger Consideration in respect thereof, to the extent consistent with the applicable provisions governing the 401(k) Plan, all outstanding indebtedness of the POHF ESOP shall be repaid using: (i) unallocated POHF shares held by the 401(k) Plan or the Cash Consideration received for such unallocated shares, to the extent allowed by applicable law, (ii) all amounts held in the suspense account, and (iii) finally with such other payments as determined appropriate by POHF and MainSource, any assets remaining in the suspense fund under the 401(k) Plan after payment of all outstanding indebtedness and other liabilities of the 401(k) Plan shall be allocated to the accounts of the POHF employees who are participants in the 401(k) Plan, as provided by the 401(k) Plan and applicable laws. POHF shall make no contributions to the POHF ESOP portion of the 401(k) Plan between the date hereof and the Effective Time other than such as may be required to maintain the tax-qualified status of the 401(k) Plan or to enable the 401(k) Plan to make required payments on the exempt loans currently outstanding to it.

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With respect to POHF stock allocated to the accounts of each 401(k) Plan participant, said participants shall be entitled to vote on the approval and adoption of this Agreement and shall be entitled to select the Merger Consideration, similar to any other shareholder of POHF. Unallocated POHF stock held by the 401(k) Plan shall be voted as provided in the provisions governing the POHF ESOP portion of the 401(k) Plan; however, only Cash Consideration shall be paid for the unallocated POHF stock held by the 401(k) Plan.

Before the adoption of any amendment to the 401(k) Plan, POHF shall first submit the amendment to MainSource for its review and approval. Subsequent to the Effective Time, MainSource shall be the successor of POHF with respect to the POHF ESOP to the extent it is a successor of POHF with respect to the 401(k) Plan, and MainSource shall hold all authority necessary to terminate or otherwise dispose of the POHF ESOP as otherwise provided herein.

6.15. POHF Stock Option Plans. Within forty-five (45) days of the date of this Agreement, POHF shall use its best efforts to obtain written consents from each holder to whom a POHF Stock Option is outstanding consenting to the disposition of such option in accordance with the provisions of Section 3.01 above, and agreeing not to exercise such option on or before the Effective Date unless (A) this Agreement is terminated and the Company Merger is abandoned pursuant to Article IX or (B) such exercise is made not more than one week before the date on which the option otherwise would cease to be exercisable; provided, however, that POHF shall obtain such consents from the members of the Board of Directors of POHF who hold such POHF Stock Options.

6.16. Defined Contribution Plan. On and after the date of this Agreement, and until the plan is merged or disposed of in a legal manner, or participation in the plan is otherwise discontinued, and at a time to be determined by MainSource or until this Agreement shall be terminated as herein provided:

(i) POHF shall continue to sponsor, maintain and administer the 401(k) Plan in accordance with its terms and conditions, as set forth in its plan and trust document as of the date of this Agreement, and in accordance with applicable law;

(ii) POHF or Peoples Savings shall continue to fund all employee and employer contributions to the 401(k) Plan which are required during this time period. However, POHF and Peoples Savings may only make discretionary employer contributions after receipt of written approval from MainSource, which approval shall not be unreasonably withheld if the amount of any discretionary employer contributions are not in excess of the discretionary employer contributions made by POHF or Peoples Savings to the 401(k) Plan during the last Plan Year; and

(iii) neither POHF nor Peoples Savings shall amend, or cause an amendment of, the 401(k) Plan without the prior written consent of MainSource, except for any amendment which is necessary to maintain the qualification of the 401(k) Plan and its related employee benefit trust for favorable income tax treatment under Sections 401(a) and 501(a) of the Code, respectively, or as otherwise required by law, regulations, the Service or the Department of Labor, or as permitted under Section 6.14 above.

(iv) POHF and Peoples Savings shall not terminate or agree to the termination of the appointment of any fiduciary as defined in ERISA with respect to the 401(k) Plan without the prior written consent of MainSource, which consent shall not be unreasonably withheld, except for any termination attributable to a breach by such fiduciary of any fiduciary duty imposed on the fiduciary under ERISA; and

(v) neither POHF nor Peoples Savings shall terminate, agree to the termination of, or cause the termination of any agreement with any service provider providing services to the 401(k) Plan as of the date of this Agreement without the prior written consent of MainSource, which consent shall not be unreasonably withheld, except for any termination attributable to a breach by such service provider of its service agreement.

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6.17. Defined Benefit Plan. Prior to the Effective Time, the Board of Directors of POHF shall take the following actions with respect to the Defined Benefit Plan: (a) amend the Defined Benefit Plan to (i) discontinue any further accrual of benefit under the Defined Benefit Plan by a POHF director or employee participating in the Defined Benefit Plan (“POHF Participant”) as of the date of execution of this Agreement and (ii) terminate and otherwise discontinue the Defined Benefit Plan on or before the Effective Time; (b) deposit funds sufficient to pay from the Defined Benefit Plan to each POHF Participant the present value of his accrued benefit; (c) calculate the present value of each POHF Participant’s accrued benefit based on the mortality tables contained in the Defined Benefit Plan and using the highest applicable interest rate provided by the Defined Benefit Plan and as permitted by applicable law and the Pension Benefit Guaranty Corporation and as otherwise determined by the actuary for the Defined Benefit Plan; and (d) pay from the Defined Benefit Plan the amount referred to in (c) to each POHF Participant, in a single sum in cash or, if elected by the payee, a paid up annuity contract, on or before the Effective Time. POHF shall take any actions necessary to effectuate the foregoing, including filing appropriate applications with the Service necessary to comply with the provisions of this Section 6.17, but otherwise subject to MainSource’s prior review and approval of such actions and applications. In addition, prior to the adoption of any amendment to the Defined Benefit Plan, MainSource shall be allowed to first review and approve such amendment, and MainSource shall be promptly copied on any correspondence between the Benefit Plan and POHF or POHF’s counsel. Subsequent to the Effective Time, MainSource shall be the successor of POHF with respect to the Defined Benefit Plan and MainSource shall hold all authority necessary to comply with the provisions of this Section 6.17.

6.18. Employment, Change of Control and Severance Agreements.

(a) Prior to the Effective Time, Ronald B. Scott will continue to be paid the compensation provided for in his employment agreement with POHF and Peoples Savings dated as of November 1, 2004, and will continue participating in the employee benefit, retirement, and compensation plans and other perquisites provided for in such Agreement. Any benefits payable under insurance, health, retirement and bonus plans through the Effective Date will be paid when due under those plans. At the Effective Time, Mr. Scott’s employment agreement with POHF and Peoples Savings shall terminate, and POHF shall pay to Mr. Scott, in consideration of such termination, a cash sum equal to the amount payable to Mr. Scott under such agreement as a result of the Mergers. POHF shall obtain from Mr. Scott, within thirty (30) days after the date as of which this Agreement is dated, a binding written commitment, in the event the Company Merger is consummated, to accept the amounts payable under this Section 6.18(a) in lieu of (i) any amounts that otherwise would be payable, and benefits to which he would be entitled, under his employment agreement with POHF and (ii) any right to receive payments under the MainSource severance policy if his employment is terminated during the one-year period after the Effective Time.

(b) Prior to the Effective Time, Richard J. Dutton will continue to be paid the compensation provided for in his employment agreement with POHF and Peoples Savings dated as of November 1, 2004, and will continue participating in the employee benefit, retirement, and compensation plans and other perquisites provided for in such Agreement. Any benefits payable under insurance, health, retirement and bonus plans through the Effective Date will be paid when due under those plans. At the Effective Time, Mr. Dutton’s employment agreement with POHF and Peoples Savings shall terminate, and Peoples Savings shall pay to Mr. Dutton, in consideration of such termination, a cash sum equal to the amount payable to Mr. Dutton under such agreement as a result of the Mergers. POHF shall obtain from Mr. Dutton, within thirty (30) days after the date as of which this Agreement is dated, a binding written commitment, in the event the Company Merger is consummated, to accept the amounts payable under this Section 6.18(b) in lieu of (i) any amounts that otherwise would be payable, and benefits to which he would be entitled, under his employment agreement and (ii) any right to receive payments under the MainSource severance policy if his employment is terminated during the one-year period after the Effective Time.

(c) Prior to the Effective Time, John Wannemacher will continue to be paid the compensation provided for in his employment agreement with Peoples Savings dated as of September 28, 2005, and will

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continue participating in the employee benefit, retirement, and compensation plans and other perquisites provided for in such Agreement. Any benefits payable under insurance, health, retirement and bonus plans through the Effective Date will be paid when due under those plans. At the Effective Time, Mr. Wannemacher’s employment agreement with Peoples Savings shall terminate, and Peoples Savings shall pay to Mr. Wannemacher, in consideration of such termination, a cash sum equal to the amount payable to Mr. Wannemacher under such agreement as a result of the Mergers. Peoples Savings shall obtain from Mr. Wannemacher, within thirty (30) days after the date as of which this Agreement is dated, a binding written commitment, in the event the Company Merger is consummated, to accept the amounts payable under this Section 6.18(c) in lieu of (i) any amounts that otherwise would be payable, and benefits to which he would be entitled, under his employment agreement and (ii) any right to receive payments under the MainSource severance policy if his employment is terminated during the one-year period after the Effective Time.

(d) Prior to the Effective Time, the change in control agreements and severance agreements between POHF or Peoples Savings, as applicable, and the employees listed in the POHF Disclosure Schedule as being party to such agreements shall terminate, and POHF or Peoples Savings, as applicable, shall pay to such employees, in consideration of such termination, such amounts as may be required by such agreements to be paid or as may be acceptable to such employees to permit the termination of such agreements. POHF shall obtain from each of such employees, within thirty (30) days after the date as of which this Agreement is dated, a binding written commitment, in the event the Company Merger is consummated, to accept the amounts so payable in lieu of (i) any amounts that otherwise would be payable, and benefits to which he or she would be entitled, under such change in control agreements or severance agreements and (ii) any right to receive payments under the MainSource severance policy if his employment is terminated during the one-year period after the Effective Time.

6.19. Short-Swing Trading Exception. POHF’s board of directors shall adopt such resolutions as are necessary to cause any shares of POHF Common Stock or POHF Stock Options owned by executive officers and directors of POHF and canceled in the Company Merger to qualify for the exemptions provided in Rule 16b-3(d) under the Securities Exchange Act of 1934, as amended.

ARTICLE VII

COVENANTS OF MAINSOURCE

MainSource covenants and agrees with POHF and Peoples Savings as follows:

7.01. Approvals. MainSource shall have primary responsibility for the preparation, filing and costs of all bank holding company and bank regulatory applications required for consummation of the Mergers, and shall file such applications as promptly as practicable and in the most expeditious manner practicable, and in any event, within thirty (30) days after the execution of this Agreement. MainSource shall provide to POHF’s counsel copies of all applications filed and copies of all material written communications with all state and federal bank regulatory agencies relating to such applications. MainSource shall proceed expeditiously, cooperate fully and use its best efforts to procure, upon terms and conditions reasonably acceptable to MainSource, all consents, authorizations, approvals, registrations and certificates, to complete all filings and applications and to satisfy all other requirements prescribed by law which are necessary for consummation of the Mergers on the terms and conditions provided in this Agreement at the earliest possible reasonable date.

7.02. SEC Registration. (a) MainSource shall file with the SEC as promptly as practicable and in the most expeditious manner practicable, and in any event, within forty-five (45) days after the execution of this Agreement, a Registration Statement on an appropriate form under the 1933 Act covering the shares of MainSource Common Stock to be issued pursuant to this Agreement and shall use its best efforts to cause the same to become effective and thereafter, until the Effective Time or termination of this Agreement, to keep the same effective and, if necessary, amend and supplement the same. Such Registration Statement and any amendments and supplements thereto are referred to in this Agreement as

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the “Registration Statement”. The Registration Statement shall include a proxy statement-prospectus reasonably acceptable to MainSource and POHF, prepared for use in connection with the meeting of shareholders of POHF referred to in Section 6.01 hereof, all in accordance with the rules and regulations of the SEC. MainSource shall, as soon as practicable after filing the Registration Statement, make all filings required to obtain all blue sky exemptions, authorizations, consents or approvals required for the issuance of MainSource common stock. MainSource shall bear all expenses involved in the printing and mailing of the proxy statement-prospectus to the shareholders of POHF in accordance with the rules and regulations of the SEC and the election and proration procedures set forth in Section 3.04.

7.03. Employee Benefit Plans.

(a) As soon as practicable following the Effective Time (subject to the terms and conditions of the applicable benefit plan), MainSource will make available to the officers and employees of POHF and Peoples Savings who continue as employees of Merger Corp or any subsidiary of MainSource after the Effective Time, subject to Section 7.03(c) hereof, substantially the same employee benefits on substantially the same terms and conditions as MainSource offers to similarly situated officers and employees. POHF’s and Peoples Savings’s employees will receive full credit for prior service with POHF or Peoples Savings or their predecessors, for purposes of eligibility, vesting and period of service requirements under these employee benefit plans of MainSource and its subsidiaries. Those employees of POHF or Peoples Savings who become employees of MainSource or its subsidiaries at the Effective Time (“Former POHF Employees”) shall become eligible to participate in MainSource’s employee benefit plans as soon as reasonably practicable after the Effective Time, and shall not be subject to any waiting periods or pre-existing condition limitations under the medical, dental and health plans of MainSource or its subsidiaries in which they are eligible to participate at the Effective Time, unless otherwise required by the insurance company or other vendor offering the particular benefit.

(b) As soon as reasonably practicable following the Effective Time, subject to applicable law and the requirements of the MainSource Financial Group, Inc. 401(k) Plan (“MainSource 401(k) Plan”), MainSource shall succeed POHF as the participating employer in the POHF 401(k) Plan, thereafter discontinue participation in the POHF 401(k) Plan, as otherwise provided in the POHF 401(k) Plan document, and amend as necessary the MainSource 401(k) Plan so that, (i) from and after the Effective Time, employees of POHF who become employees of the Surviving Corporation will accrue benefits pursuant to the MainSource 401(k) Plan, and (ii) from and after the merger of those plans, former POHF employees participating in the MainSource 401(k) Plan shall receive credit for eligibility and vesting purposes, for the service of such employees with POHF and Peoples Savings or their predecessors prior to the Effective Time as if such service were with MainSource or its subsidiaries; provided, however, that the benefit of any such former POHF employee in respect of service prior to the Effective Time shall be determined under the contribution formulae under the POHF 401(k) Plan as in effect from time to time prior to the Effective Time and the benefit of any such former POHF employee in respect of service from and after the Effective Time shall be determined under the contribution formulae under the MainSource 401(k) Plan as in effect from time to time from and after the Effective Time.

(c) Neither the terms of this Section 7.03 nor the provision of any employee benefits by MainSource or any of its subsidiaries to employees of POHF or Peoples Savings shall:

(i) create any employment contract, agreement or understanding with or employment rights for, or constitute a commitment or obligation of employment to, any of the officers or employees of POHF or Peoples Savings; or

(ii) prohibit or restrict MainSource, whether before or after the Effective Time, from changing, amending or terminating any employee benefits provided to its employees from time to time, provided such change, amendment or termination does not affect the qualified status of such employee benefits or violate applicable law or regulations.

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7.04. Adverse Actions. MainSource shall not knowingly take any action that is intended or is reasonably likely to result in (i) any of its representations and warranties set forth in this Agreement being or becoming untrue in any respect at any time at or prior to the Effective Time, (ii) any of the conditions to the Merger set forth in Article VIII not being satisfied, (iii) a material violation of any provision of this Agreement or (iv) a delay in the consummation of the Mergers except, in each case, as may be required by applicable law or regulation.

7.05. Severance. With the exception of Ronald B. Scott, Richard J. Dutton, John Wannemacher and the employees listed in the POHF Disclosure Schedule as being party to change in control agreements or severance agreements, those employees of POHF or its subsidiaries as of the Effective Time whom MainSource or its subsidiaries elect not to employ after the Effective Time or who are terminated other than for cause within one year after the Effective Time or voluntarily resign within one year after the Effective Time after being notified that, as a condition of employment, they must work at a location more than 50 miles from their former location of employment or that their salary will be materially decreased, shall be entitled to severance benefits on substantially the same terms and conditions as MainSource offers to similarly situated officers and employees. Nothing in this Section 7.05 shall be deemed to limit or modify MainSource’s at will employment policy.

7.06. D & O Insurance/Indemnification.

(a) For a period of three (3) years from the Effective Time, MainSource shall use its reasonable best efforts to obtain an endorsement to its director’s and officer’s liability insurance policy to cover the present and former officers and directors of POHF and Peoples Savings (determined as of the Effective Time) with respect to claims against such directors and officers arising from facts or events which occurred before the Effective Time, which insurance shall contain at least the same coverage and amounts, and contain terms and conditions no less advantageous, as that coverage currently provided by POHF; provided, however, that if MainSource is unable to obtain such endorsement, then POHF may purchase tail coverage under its existing director and officer liability insurance policy for such claims; provided, further, that in no event shall MainSource be required to expend in the aggregate during such three-year period more than three (3) times the current annual amount spent by POHF (the “Insurance Amount”) to maintain or procure its current directors’ and officers’ insurance coverage; provided, further, that if MainSource is unable to maintain or obtain the insurance called for by this Section 7.06, MainSource shall use its reasonable best efforts to obtain as much comparable insurance as is available for the Insurance Amount; provided, further, that officers and directors of POHF or Peoples Savings may be required to make application and provide customary representations and warranties to MainSource’s insurance carrier for the purpose of obtaining such insurance.

(b) For six (6) years after the Effective Time, MainSource shall indemnify, defend and hold harmless the present and former officers and directors of POHF and Peoples Savings against all losses, expenses (including attorneys’ fees), claims, damages or liabilities arising out of actions or omission occurring on or prior to the Effective Time (including, without limitation, the transactions contemplated by this Agreement) to the full extent then permitted under the IBCL and by MainSource’s Articles of Incorporation as in effect on the date hereto, including provisions relating to advances of expenses incurred in the defense of any action or suit. Such indemnification shall be limited to the excess of such losses, expenses, claims, damages or liabilities over the amount paid by any insurance in force pursuant to Section 7.06(a).

(c) If MainSource shall consolidate with or merge into any other entity and shall not be the continuing or surviving entity of such consolidation or merger or shall transfer all or substantially all of its assets to any entity, then and in each case, proper provision shall be made so that the successors and assigns of MainSource shall assume the obligations set forth in this Section 7.06.

7.07. Short-Swing Trading Exemption. Prior to the Effective Date, the board of directors of MainSource shall adopt such resolutions as necessary to cause any shares of MainSource Common Stock

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to be received by executive officers and directors of POHF as part of the Merger Consideration to qualify for the exemptions provided in Rule 16b-3(d) under the Securities Exchange Act of 1934, as amended.

7.08. Formation of MergerCorp and Execution of Agreement and Plan of Merger. MainSource agrees to file the necessary regulatory applications to organize MergerCorp promptly after the execution of this Agreement. MainSource shall cause MergerCorp to execute the Agreement for Subsidiary Merger attached as Exhibit 2.01(e)(ii) as soon as practicable after it has been organized.

7.09. Access; Information. (a) POHF, and its representatives and agents, shall, at all times during normal business hours prior to the Effective Time, have full and continuing access to the properties, facilities, operations, books and records of MainSource. POHF, and its representatives and agents may, prior to the Effective Time, make or cause to be made such reasonable investigation of the operations, books, records and properties of the other party and its subsidiaries and of its financial and legal condition as deemed necessary or advisable to familiarize themselves with such operations, books, records, properties and other matters; provided, however, that such access or investigation shall not interfere unnecessarily with the normal business operations of MainSource or its subsidiaries. Upon request, MainSource will furnish POHF, or its representatives or agents, its attorneys’ responses to external auditors’ requests for information, management letters received from its external auditors and such financial, loan and operating data and other information reasonably requested by POHF which has been or is developed by MainSource, its auditors, accountants or attorneys (provided with respect to attorneys, such disclosure would not result in the waiver by MainSource of any claim of attorney-client privilege), and will permit POHF or its representatives or agents to discuss such information directly with any individual or firm performing auditing or accounting functions for MainSource, and such auditors and accountants will be directed to furnish copies of any reports or financial information as developed to POHF or its representatives or agents, as applicable. No investigation by POHF shall affect the representations and warranties made by MainSource herein. Any confidential information or trade secrets received by POHF or its representatives or agents in the course of such examination will be treated confidentially, and any correspondence, memoranda, records, copies, documents and electronic or other media of any kind containing such confidential information or trade secrets or both shall be destroyed by POHF, or at MainSource’s request, returned to MainSource in the event this Agreement is terminated as provided in Article IX hereof. This Section 7.09 will not require the disclosure of any information to POHF which would be prohibited by law. The ability of POHF to consult with any tax advisor (including a tax advisor independent from all other entities involved in the transactions contemplated hereby) shall not be limited by this Agreement in any way, provided that any such tax advisor is otherwise subject to and is bound by this Section 7.09. Notwithstanding anything herein to the contrary (other than the preceding sentence), except as reasonably necessary to comply with applicable securities laws, POHF (and each employee, representative or agent of POHF) may disclose to any and all persons, without limitation of any kind, the tax treatment (as defined in Treas. Reg. § 1.6011-4) of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are or have been provided to POHF relating to such tax structure, provided that, in the case of any materials that contain information other than the tax treatment or tax structure of the transactions contemplated hereby (including, but not limited to, any information relating to the pricing or any cost of the transactions contemplated hereby or the identity of any party to the transactions contemplated hereby), this sentence shall apply to such materials only to the extent that such materials contain the tax treatment or tax structure of the transactions contemplated hereby and POHF shall take all action necessary to prevent the disclosure of such other information as otherwise provided herein. The immediately preceding sentence shall not be effective until the earliest of (a) the date of the public announcement of discussions relating to any of the transactions contemplated hereby, (b) the date of the public announcement of any of the transactions contemplated hereby or (c) the date of the execution of an agreement, with or without conditions, to enter into any of the transactions contemplated hereby.

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7.10. Financial Statements. As soon as internally available after the date of this Agreement, MainSource will deliver to POHF any additional audited consolidated financial statements which have been prepared on its behalf or at its direction and the quarterly consolidated unaudited balance sheets and profit and loss statements of MainSource (collectively, “Subsequent MainSource Financial Statements”). The Subsequent MainSource Financial Statements will be prepared on a basis consistent with past accounting practices and generally accepted accounting principles applied on a consistent basis to the extent applicable and shall present fairly the financial condition and results of operations as of the dates and for the periods presented. The Subsequent MainSource Financial Statements, including the notes thereto, will not include any assets, liabilities or obligations or omit to state any assets, liabilities or obligations, absolute or contingent, or any other facts, which inclusion or omission would render such financial statements inaccurate, incomplete or misleading in any material respect.

7.11. Governmental Reports. Promptly upon its becoming publicly available, MainSource shall furnish to POHF one (1) copy of each financial statement, report, notice, or proxy statement sent by MainSource to any Governmental Authority or to MainSource’s shareholders generally and of each regular or periodic report, registration statement or prospectus filed by MainSource with the SEC or any successor agency, and of any order issued by any Governmental Authority in any proceeding to which MainSource is a party.

ARTICLE VIII

CONDITIONS PRECEDENT TO THE MERGERS

8.01. MainSource. The obligation of MainSource to consummate the Mergers is subject to the satisfaction and fulfillment of each of the following conditions on or prior to the Effective Time, unless waived in writing by MainSource:

(a) Representations and Warranties at Effective Time. Each of the representations and warranties of POHF and Peoples Savings contained in this Agreement shall be true, accurate and correct in all material respects at and as of the Effective Time as though such representations and warranties had been made or given on and as of the Effective Time (except that representations and warranties that by their express terms speak as of the date of this Agreement or some other date shall be true and correct only as of such date); provided that no representation or warranty of POHF or Peoples Savings shall be deemed untrue, inaccurate or incorrect for purposes hereunder as a consequence of the existence of any fact, event or circumstance inconsistent with such representation or warranty, unless such fact, event or circumstance, individually or taken together with all other facts, events or circumstances inconsistent with any representations or warranty of POHF or Peoples Savings, has had or would result in a Material Adverse Effect on POHF.

(b) Covenants. Each of the covenants and agreements of POHF and Peoples Savings shall have been fulfilled or complied with in all material respects from the date of this Agreement through and as of the Effective Time.

(c) Deliveries at Closing. MainSource shall have received from POHF at the Closing the items and documents, in form and content reasonably satisfactory to MainSource, set forth in Section 11.02(b) hereof.

(d) Registration Statement Effective. MainSource shall have registered its shares of MainSource Common Stock to be issued to shareholders of POHF in accordance with this Agreement with the SEC pursuant to the 1933 Act, and all state securities and blue sky approvals, authorizations and exemptions required to offer and sell such shares shall have been received by MainSource. The Registration Statement with respect thereto shall have been declared effective by the SEC and no stop order shall have been issued or threatened.

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(e) Regulatory Approvals. All regulatory approvals required to consummate the transactions contemplated hereby, shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired and no such approvals shall contain any conditions, restrictions or requirements which the Board of Directors of MainSource reasonably determines in good faith would (i) following the Effective Time, have a Material Adverse Effect on MainSource or (ii) reduce the benefits of the transactions contemplated hereby to such a degree that MainSource would not have entered into this Agreement had such conditions, restrictions or requirements been known at the date hereof.

(f) Shareholder Approval. The shareholders of POHF shall have approved and adopted this Agreement as required by applicable law and its Articles of Incorporation.

(g) Officers’ Certificate. POHF shall have delivered to MainSource a certificate signed by its President and its Secretary, dated as of the Effective Time, certifying that: (i) to the effect set out in Section 8.01(a), the representations and warranties of POHF and Peoples Savings contained in Article IV are true, accurate and correct in all material respects on and as of the Effective Time; (ii) all the covenants of POHF and Peoples Savings have been complied with in all material respects from the date of this Agreement through and as of the Effective Time; and (iii) POHF and Peoples Savings have satisfied and fully complied with all conditions necessary to make this Agreement effective as to it.

(h) Fairness Opinion. POHF’s investment banker shall have issued (as of a date not later than the mailing date of the proxy statement-prospectus relating to the Merger to be mailed to the shareholders of POHF) its fairness opinion stating that the Merger Consideration relating to the Company Merger is fair to the shareholders of POHF from a financial point of view.

(i) Employment Agreements. Ronald B. Scott shall have entered into an employment agreement with the Surviving Corporation, effective as of the Effective Time, in substantially the form attached hereto as Exhibit 8.01(i)(1).

(j) Financing. MainSource shall have obtained financing sufficient to pay the cash portion of the Total Purchase Price on such terms as are acceptable to MainSource and enable MainSource to satisfy the capital adequacy guidelines and requirements of the Federal Reserve and any other applicable federal or state regulator or agency as those guidelines are applied to MainSource.

(k) Tax Opinion of MainSource’s Counsel. MainSource shall have received an opinion of Bose McKinney & Evans LLP, counsel to MainSource, dated the Closing Date, to the effect that the Company Merger constitutes a “reorganization” within the meaning of Section 368 of the Code.

(l) Opinion of POHF’s Counsel. MainSource shall have received an opinion of Squire Sanders & Dempsey L.L.P., counsel to POHF, dated the Closing Date, in substantially the form of the opinion attached hereto as Exhibit 8.01(l).

(m) MainSource Average Stock Price. The MainSource Average Stock Price is no lower than $14.00 and no higher than $24.00.

(n) 280G Opinion. MainSource shall have received a letter of tax advice, in a form satisfactory to MainSource, from POHF’s outside, independent certified public accountants to the effect that any amounts that are paid by POHF or Peoples Savings before the Effective Time, or required under POHF’s Plans or this Agreement to be paid at or after the Effective Time, to persons who are disqualified individuals in respect of POHF, Peoples Savings or their successors, and that otherwise should be allowable as deductions for federal income tax purposes, should not be disallowed as deductions for such purposes by reason of Section 280G of the Code. Among the nonexclusive list of payments to be considered are those payments referred to under Sections 3.01(b), 6.14, 6.15, 6.17, 6.18, 7.03(b), 7.05, and 8.01(i) of the Agreement, as well as any other payments made under the POHF Plans because of the

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transactions contemplated herein. For purposes of this letter, the basic compensation payable to Mr. Scott under the employment agreement referred to in Section 8.01(i) may be deemed to be reasonable compensation for services rendered by those individuals after the Effective Time; however, such payments shall still be considered for purposes of the excess parachute payment determination defined in Section 280G of the Code.

(o) Nasdaq Trading. MainSource shall have filed with Nasdaq any required notices to permit the MainSource Common Stock issued as the Stock Consideration to be eligible for quotation and trading on the Nasdaq National Market on the same basis as other outstanding shares of MainSource Common Stock.

8.02. POHF. The obligation of POHF to consummate the Mergers is subject to the satisfaction and fulfillment of each of the following conditions on or prior to the Effective Time, unless waived in writing by POHF:

(a) Representations and Warranties at Effective Time. Each of the representations and warranties of MainSource contained in this Agreement shall be true, accurate and correct in all material respects on and as of the Effective Time as though the representations and warranties had been made or given at and as of the Effective Time (except that representations and warranties that by their express terms speak as of the date of this Agreement or some other date shall be true and correct only as of such date); provided that no representation or warranty of MainSource shall be deemed untrue, inaccurate or incorrect for purposes hereunder as a consequence of the existence of any fact, event or circumstance inconsistent with such representation or warranty, unless such fact, event or circumstance, individually or taken together with all other facts, events or circumstances inconsistent with any representations or warranty of MainSource, has had or would result in a Material Adverse Effect on MainSource.

(b) Covenants. Each of the covenants and agreements of MainSource shall have been fulfilled or complied with in all material respects from the date of this Agreement through and as of the Effective Time.

(c) Deliveries at Closing. POHF shall have received from MainSource at the Closing the items and documents, in form and content reasonably satisfactory to POHF, listed in Section 11.02(a) hereof.

(d) Registration Statement Effective. MainSource shall have registered its shares of MainSource Common Stock to be issued to shareholders of POHF in accordance with this Agreement with the SEC pursuant to the 1933 Act, and all state securities and Blue Sky approvals, authorizations and exemptions required to offer and sell such shares shall have been received by MainSource. The Registration Statement with respect thereto shall have been declared effective by the MainSource and no stop order shall have been issued or threatened.

(e) Regulatory Approvals. All regulatory approvals required to consummate the transactions contemplated hereby, shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired and no such approvals shall contain any conditions, restrictions or requirements which the Board of Directors of POHF reasonably determines in good faith would (i) following the Effective Time, have a Material Adverse Effect or (ii) reduce the benefits of the transactions contemplated hereby to such a degree that POHF would not have entered into this Agreement had such conditions, restrictions or requirements been known at the date hereof.

(f) Shareholder Approval. The shareholders of POHF shall have approved and adopted this Agreement as required by applicable law and POHF’s Articles of Incorporation.

(g) Officers’ Certificate. MainSource shall have delivered to POHF a certificate signed by its Chairman or President and its Secretary, dated as of the Effective Time, certifying that: (i) to the effect set out in Section 8.02(a) that the representations and warranties of MainSource contained in Article V are true, accurate and correct in all material respects on and as of the Effective Time; (ii) all the covenants of

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MainSource have been complied with in all material respects from the date of this Agreement through and as of the Effective Time; and (iii) MainSource has satisfied and fully complied with all conditions necessary to make this Agreement effective as to it.

(h) Fairness Opinion. POHF’s investment banker shall have issued (as of a date not later than the mailing date of the proxy statement-prospectus relating to the Company Merger to be mailed to the shareholders of POHF) its fairness opinion stating that the Merger Consideration relating to the Merger is fair to the shareholders of POHF from a financial point of view.

(i) Tax Opinion of MainSource’s Counsel. POHF shall have received an opinion of Bose McKinney & Evans LLP, counsel to MainSource, to the effect that (1) the Company Merger constitutes a “reorganization” within the meaning of Section 368 of the Code and (2) no gain or loss will be recognized by shareholders of POHF to the extent they receive shares of MainSource Common Stock as part of the Merger Consideration.

(j) Payments Required by Section 6.18. The payments required by Section 6.18shall have been made.

(k) Opinion of MainSource’s Counsel. POHF shall have received an opinion of Bose McKinney & Evans LLP, counsel to MainSource, dated the Closing Date, in substantially the form of the opinion attached hereto as Exhibit 8.02(l).

(l) MainSource Average Stock Price. The MainSource Average Stock Price is no lower than $14.00 and no higher than $24.00.

(m) Nasdaq Trading. MainSource shall have filed with Nasdaq any required notices to permit the MainSource Common Stock issued as the Stock Consideration to be eligible for quotation and trading on the Nasdaq National Market on the same basis as other outstanding shares of MainSource Common Stock.

ARTICLE IX

TERMINATION OF MERGERS

9.01. Manner of Termination. This Agreement and the Mergers may be terminated at any time prior to the Effective Time by written notice delivered by MainSource to POHF, or by POHF to MainSource, as follows:

(a) By MainSource or POHF, if:

(i) the Mergers contemplated by this Agreement have not been consummated by June 30, 2006; provided, however, that a party hereto in willful breach of or willful default hereunder shall have no right to terminate this Agreement pursuant to this Section 9.01(a)(i); or

(ii) the Agreement and the Company Merger are not approved by the requisite vote of the shareholders of POHF at the Special Meeting of Shareholders of POHF; or

(iii) the respective Boards of Directors of MainSource and POHF mutually agree to terminate this Agreement.

(b) By MainSource if:

(i) at any time prior to the Effective Time, MainSource’s Board of Directors so determines, in the event of either:

(A) a breach by POHF of any representation or warranty contained herein that would be reasonably likely, individually or in the aggregate with other breaches to result in a Material

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Adverse Effect, unless the breach is cured within thirty (30) days from the giving of written notice to POHF of such breach and the same does not result in a Material Adverse Effect; or

(B) a breach by POHF of any of the covenants or agreements contained herein that would be reasonably likely, individually or in the aggregate with other breaches to result in a Material Adverse Effect, unless the breach is cured within thirty (30) days from the giving of written notice to POHF of such breach and the same does not result in a Material Adverse Effect; or

(ii) it shall reasonably determine that the Mergers contemplated by this Agreement have become impracticable by reason of commencement or threat of any claim, litigation or proceeding against MainSource, POHF, Peoples Savings, or any subsidiary of MainSource, or any director or officer of any of such entities relating to this Agreement or the Mergers; or

(iii) there has been a Material Adverse Effect in the business, assets, capitalization, financial condition or results of operations of POHF or Peoples Savings as of the Effective Time, as compared to that in existence as of the date of this Agreement; or

(iv) POHF’s Board of Directors submits, or intends to submit, this Agreement to the shareholders without recommending the approval of this Agreement or fails to solicit proxies for approval of this Agreement; or

(v) POHF fulfills the requirements of Section 6.01 hereof but the shareholders of POHF do not approve and adopt the Company Merger and this Agreement; or

(vi) in the event that POHF fails to maintain a composite rating of at least two (2) from its latest safety and soundness and compliance examination, or fails to maintain a CRA rating of satisfactory or better; or

(vii) MainSource elects to exercise its right of termination pursuant to Section 6.11 hereof;

(i) at any time prior to the Effective Time, POHF’s Board of Directors so determines, in the event of either:

(A) a breach by MainSource of any representation or warranty contained herein that would be reasonably likely, individually or in the aggregate with other breaches to result in a Material Adverse Effect, unless the breach is cured within thirty (30) days from the giving of written notice to POHF of such breach and the cure does not result in a Material Adverse Effect; or

(B) a breach by MainSource of any of the covenants or agreements contained herein that would be reasonably likely, individually or in the aggregate with other breaches, to result in a Material Adverse Effect on MainSource, unless the breach is cured within thirty (30) days after the giving of written notice to MainSource of such breach and any such cure would not result in a Material Adverse Effect; or

(ii) there has been a change constituting a Material Adverse Effect in the financial condition, results of operations, business, assets or capitalization of MainSource on a consolidated basis as of the Effective Time, as compared to that in existence on June 30, 2005; or

(iii) it shall reasonably determine that the Mergers contemplated by this Agreement have become impracticable by reason of commencement or threat of any claim, litigation or proceeding against MainSource, POHF or Peoples Savings or any subsidiary of MainSource or any director or

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officer of any such entities (A) relating to this Agreement or the Mergers or (B) which is likely to have a Material Adverse Effect on MainSource; or

(iv) POHF fulfills the requirements of Section 6.01 hereof but the shareholders of POHF do not approve and adopt the Company Merger and this Agreement.

9.02. Effect of Termination. Upon termination by written notice, this Agreement shall be of no further force or effect, and there shall be no further obligations or restrictions on future activities on the part of MainSource or POHF and their respective directors, officers, employees, agents and shareholders, except as provided in compliance with: (i) the confidentiality provisions of this Agreement set forth in Sections 6.09 and 7.09 hereof; and (ii) the payment of expenses set forth in Section 12.11 hereof, provided, however, that termination will not in any way release a breaching party from liability for any willful breach of this Agreement giving rise to such termination; and (iii) the payment of the Termination Fee as provided by Section 9.03 hereof. The obligation to pay the Termination Fee in accordance with Section 9.03 hereof will survive any termination of this Agreement.

9.03. Termination Fee. In recognition of the efforts, expenses and other opportunities foregone by MainSource and POHF while structuring and pursuing the Mergers, the parties agree that a termination fee of $1,000,000 plus out-of-pocket expenses in the aggregate amount of $200,000 (collectively, the “Termination Fee”) shall be paid by the applicable party if this Agreement is terminated:

(i) by MainSource pursuant to Section 9.01 (b)(i) or (iv) above and MainSource is not in breach of this Agreement, in which case POHF shall pay the Termination Fee to MainSource.

(ii) by POHF pursuant to Section 9.01 (c)(i) above and POHF is not in breach of this Agreement, in which case MainSource shall pay the Termination Fee to POHF.

Each party acknowledges that the agreements contained in this Section 9.03 are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, each party would not have entered into this Agreement; accordingly, if a party fails promptly to pay the amount due pursuant to this Section 9.03, and, in order to obtain such payment, the other party commences an action which results in a judgment against the other party for the Termination Fee, the payor party shall pay to the payee party its costs and expenses (including attorneys’ fees and expenses) in connection with such action, together with interest on the amount of the Termination Fee at the rate of six percent (6%) per annum.

ARTICLE X

EFFECTIVE TIME OF THE MERGERS

Upon the terms and subject to the conditions specified in this Agreement, the Mergers will become effective on the day and at the time (the “Closing Date”) specified in the Certificate of Merger of Merger Corp and Peoples Savings filed with the Ohio Division of Financial Institutions, and the Articles of Merger of MainSource and POHF as filed with the Indiana Secretary of State and Ohio Secretary of State (the “Effective Time”). Unless otherwise mutually agreed to by the parties hereto, the Effective Time will occur on the tenth full Nasdaq trading day immediately following the date on which the last of the conditions set forth in Article VIII (other than the delivery of certificates, opinions and other instruments and documents to be delivered at the Closing, but subject to the delivery at the Closing of such certificates, opinions and other instruments and documents) is fulfilled or waived following (a) the fulfillment of all conditions precedent to the Mergers set forth in Article VIII of this Agreement and (b) the expiration of all waiting periods in connection with the bank regulatory applications filed for the approval of the Mergers, and in no event will the Effective Time occur later than June 30, 2006.

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ARTICLE XI

CLOSING

11.01. Closing Date and Place. So long as all conditions precedent set forth in Article VIII hereof have been satisfied and fulfilled, the closing of the Mergers (the “Closing”) will take place at the Effective Time at a location to be reasonably determined by MainSource.

11.02. Deliveries. (a) At the Closing, MainSource will deliver to POHF the following:

(i) the officers’ certificate contemplated by Section 8.02(g) hereof;

(ii) copies of all approvals by government regulatory agencies necessary to consummate the Mergers;

(iii) copies of (A) the resolutions adopted by the Board of Directors of MainSource certified by the Secretary of MainSource relative to the approval of this Agreement and the Company Merger; and (b) the resolution adopted by the Board of Directors and sole shareholder of Merger Corp certified by the Secretary of Merger Corp relative to the approval of this Agreement and the Subsidiary Merger;

(iv) the tax opinion required by Section 8.01(k) hereof;

(v) the opinion required by Section 8.02(k) hereof ; and

(iv) such other documents as POHF or its legal counsel may reasonably request.

(b) At the Closing, POHF will deliver to MainSource the following:

(i) the officers’ certificate contemplated by Section 8.01(g) hereof;

(ii) copies of (A) the resolutions adopted by the Board of Directors and shareholders of POHF certified by the Secretary of POHF relative to the approval of this Agreement and the Company Merger; and (B) the resolutions adopted by the Board of Directors and sole shareholder of Peoples Savings certified by the Secretary of Peoples Savings relative to the adoption of this Agreement and Subsidiary Merger;

(iii) such other documents as MainSource or its legal counsel may reasonably request;

(iv) the fairness opinion required by Sections 8.01(h) and 8.02(h) hereof;

(v) the affiliate agreements required by Section 6.05 hereof;

(vi) the opinion required by Section 8.01(l) hereof; and

(vii) the employment agreements required by Section 8.01(i) hereof.

(c) As soon as possible after the Closing, POHF will deliver to MainSource a list of POHF’s shareholders as of the Effective Time certified by the President and Secretary of POHF.

ARTICLE XII

MISCELLANEOUS

12.01. Effective Agreement. This Agreement and the recitals hereof shall be binding upon and inure to the benefit of and be enforceable by the respective parties hereto and their respective successors and assigns; provided, however, that neither this Agreement nor any of the rights, interests or obligations of the respective parties hereto under this Agreement may not be assigned by any party hereto without the prior written consent of the other parties hereto. The representations, warranties, covenants and agreements contained in this Agreement, as well as the documents and instruments referred to herein, are for the sole

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benefit of the parties hereto and their successors and assigns, and they will not be construed as conferring any rights on any other persons, except for Sections 6.14, 6.17, 7.03, 7.05 and 7.06 hereof (which are intended for the benefit of those present and former officers and directors of POHF and Peoples Savings affected thereby and may be enforced by such persons).

12.02. Waiver; Amendment. (a) The parties hereto may by an instrument in writing: (i) extend the time for the performance of or otherwise amend any of the covenants, conditions or agreements of the other parties under this Agreement; (ii) waive any inaccuracies in the representations or warranties of the other parties contained in this Agreement or in any document delivered pursuant hereto or thereto; (iii) waive the performance by the other parties of any of the covenants or agreements to be performed by it or them under this Agreement; or (iv) waive the satisfaction or fulfillment of any condition, the nonsatisfaction or nonfulfillment of which is a condition to the right of the party so waiving to consummate the Mergers. The waiver by any party hereto of a breach of or noncompliance with any provision of this Agreement will not operate or be construed as a continuing waiver or a waiver of any other or subsequent breach or noncompliance hereunder.

(b) This Agreement may be amended, modified or supplemented only by a written agreement executed by the parties hereto.

12.03. Notices. All notices, requests and other communications hereunder will be in writing (which will include telecopier communication) and will be deemed to have been duly given if delivered by hand and receipted for, sent by certified United States Mail, return receipt requested, first class postage pre-paid, delivered by overnight express receipted delivery service or telecopied if confirmed immediately thereafter by also mailing a copy of such notice, request or other communication by certified United States Mail, return receipt requested, with first class postage pre-paid as follows:

If to MainSource or Merger Corp:		with a copy to (which will not constitute notice):
MainSource Financial Group, Inc. 201 North Broadway Greensburg, Indiana 47240 ATTN: James L. Saner, Sr., President and Chief Executive Officer Telephone: (812) 663-0157 Fax: (812) 663-4812		Bose McKinney & Evans LLP 2700 First Indiana Plaza 135 North Pennsylvania Street Indianapolis, Indiana 46204 ATTN: Karen Ball Woods Telephone: (317) 684-5376 Fax: (317) 223-0376
If to POHF:		with copies to (which will not constitute notice):
Peoples Ohio Financial Corporation 635 South Market Street Troy, Ohio 45373 ATTN: Ronald B. Scott Chief Executive Officer Telephone: (937) 339-5000 Fax: (937) 339-3297		Squire Sanders & Dempsey, L.L.P. 1300 Huntington Center 41 South High Street Columbus, Ohio 43215 ATTN: Fred A. Summer Telephone: (614) 365-2743 Fax: (614) 365-2499
		and
		Dungan & LeFevre Co., L.P.A. 210 West Main Street Troy, Ohio 45373 ATTN: William J. McGraw, III Telephone: (937) 339-0511 Fax: (937) 335-5802

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or such substituted address or person as any of them have given to the other in writing. All such notices, requests or other communications will be effective: (a) if delivered by hand, when delivered; (b) if mailed in the manner provided herein, five (5) business days after deposit with the United States Postal Service; (c) if delivered by overnight express delivery service, on the next business day after deposit with such service; and (d) if by telecopier, on the next business day if also confirmed by mail in the manner provided herein.

12.04. Headings. The headings in this Agreement have been inserted solely for ease of reference and should not be considered in the interpretation or construction of this Agreement.

12.05. Severability. In case any one or more of the provisions contained herein will, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other provision of this Agreement, but this Agreement will be construed as if such invalid, illegal or unenforceable provision or provisions had never been contained herein.

12.06. Counterparts. This Agreement may be executed in any number of counterparts, each of which will be an original, but such counterparts will together constitute one and the same instrument, and facsimile signatures to this Agreement shall be considered the same as an original.

12.07. Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Indiana and applicable federal laws, without regard to principles of conflicts of law. Subject to Section 12.13, the parties hereto hereby agree that all claims, actions, suits and proceedings between the parties hereto relating to this Agreement shall be filed, tried and litigated only in the Circuit or Superior Courts of Decatur County, Indiana or the United States District Court for the Southern District of Indiana—Indianapolis Division. In connection with the foregoing, the parties hereto consent to the jurisdiction and venue of such courts and expressly waive any claims or defenses of lack of personal jurisdiction of or proper venue by such courts.

12.08. Indemnification. (a) All rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time now existing in favor of the current or former directors or officers of POHF or Peoples Savings as provided in either of their charters or by-laws (or comparable organizational documents) and any existing indemnification agreements or arrangements of POHF or Peoples Savings, all of which indemnification agreements or arrangements are described in the Disclosure Schedule, shall survive the Merger and shall continue in full force and effect in accordance with their terms to the extent permitted by law, and shall not be amended, repealed or otherwise modified for a period of three (3) years after the Effective Time in any manner that would adversely affect the rights thereunder of such individuals for acts or omissions occurring at or prior to the Effective Time.

(b) In the event of any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal or administrative, including, without limitation, any such claim, action suit, proceeding or investigation in which any individual who is now, or has been at any time prior to the date of this Agreement, or who becomes prior to the Effective Time, a director or officer of POHF or Peoples Savings (the “Indemnified Parties”), is, or is threatened to be, made a party based in whole or in part on, or arising in whole or in part out of, or pertaining to (i) the fact that he is or was a director, officer or employee of POHF or Peoples Savings or its predecessors or (ii) this Agreement or any of the transactions contemplated hereby, whether in any case asserted or arising before or after the Effective Time, the parties hereto agree to cooperate and use their best efforts to defend against and respond thereto.

(c) MainSource shall cause any successor, whether by consolidation, merger or transfer of substantially all of its properties or assets, to comply with its obligations under this Article. The provisions of this Article shall survive the Effective Time and are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and other person named herein and his or her heirs and representatives.

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12.09. Entire Agreement. This Agreement and the Exhibits hereto supersede all other prior or contemporaneous understandings, commitments, representations, negotiations or agreements, whether oral or written, among the parties hereto relating to the Merger or matters contemplated herein and constitute the entire agreement between the parties hereto, except as otherwise provided herein. Upon the execution of this Agreement by all the parties hereto, any and all other prior writings of either party relating to the Mergers, will terminate and will be rendered of no further force or effect. The parties hereto agree that each party and its counsel reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party will not be employed in the interpretation of this Agreement or any amendments or exhibits hereto.

12.10. Survival of Representations, Warranties or Covenants. Except as set forth in the following sentence, none of the representations, warranties or covenants of the parties will survive the Effective Time or the earlier termination of this Agreement, and thereafter MainSource, Merger Corp, POHF, Peoples Savings, and all the respective directors, officers and employees of MainSource, Merger Corp, POHF and Peoples Savings will have no further liability with respect thereto. The covenants contained in Sections 6.09 and 7.09 (regarding confidentiality), 9.02, 9.03, 12.07, 12.09, 12.10 and 12.11 shall survive termination of this Agreement. The covenants contained in Sections 6.09 and 7.09 (regarding confidentiality), 6.14, 6.17, 7.03, 7.05, 7.06, 12.07, 12.08, 12.09, 12.10 and 12.11 shall survive the Effective Time.

12.11. Expenses. Except as provided in Sections 7.02 and 9.03 hereof, each party to this Agreement shall pay its own expenses incidental to the Mergers contemplated hereby.

12.12. Certain References. Whenever in this Agreement a singular word is used, it also will include the plural wherever required by the context and vice-versa, and the masculine or neuter gender shall include the masculine, feminine and neuter genders. Except expressly stated otherwise, all references in this Agreement to periods of days shall be construed to refer to calendar, not business, days. The term “business day” means any day except Saturday and Sunday when MainSource Bank, in Greensburg, Indiana, a wholly-owned subsidiary of MainSource, is open for the transaction of business.

12.13. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by the parties by means of arbitration in Greensburg, Indiana (or such other location as the parties mutually agree) in accordance with the then prevailing Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s) shall be final and binding upon the parties and may be entered and enforced as a judgment in any court having jurisdiction thereof. Any party may demand that a disputed matter be submitted to arbitration by giving written notice to the other parties specifying the nature of the dispute and demanding arbitration. An arbitrator shall be chosen in accordance with the prevailing Commercial Arbitration Rules of the AAA. The arbitrator shall permit or prohibit discovery in his sole discretion and may admit or exclude evidence in his sole discretion. The expense of any arbitration or any related court proceedings shall be allocated to and borne by the parties as determined by the arbitrator in his sole discretion; provided, however, that each party shall bear and pay for the cost of its own experts, witnesses, evidence and counsel and any other cost in connection with the arbitration and presentation of its case.

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Annex D

EMPLOYMENT AGREEMENT

This Employment Agreement, effective as of _________________, 20___ (the “Effective Date”), among MainSource Bank-Ohio, an Ohio commercial bank (the “Bank”), Ronald B. Scott (“Employee”) and MainSource Financial Group, Inc., an Indiana corporation (“Parent”).

RECITALS

A. The Bank is engaged in the business of commercial banking, including but not limited to the promotion of savings through the solicitation of deposits from the general public, the promotion of home ownership through the origination of mortgage loans primarily to finance the purchase, construction or improvement of residential real estate and the origination of loans for automobile purchases, commercial and personal purposes (the “Business”).

B. The Bank desires to retain, by contract, a qualified individual to serve as President and Chief Executive Officer of the Bank (“Management Position”).

C. Employee has knowledge and experience to serve in such capacity and the parties wish to confirm their employment relationship pursuant to the terms and conditions of this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein, and other good and valuable consideration, the parties agree as follows:

1. Employment. The Bank hereby employs Employee in a Management Position and Employee hereby accepts employment, upon the terms and conditions hereinafter set forth.

2. Term. Subject to the provisions for termination as provided in paragraphs 10 and 12 hereof, the term of this Agreement shall commence on the Effective Date hereof and continue until December 31, 2006. The term of the Agreement may not be extended by election of Employee.

3. Duties. During the term hereof, Employee shall serve in a Management Position of the Bank and shall to the best of his efforts manage, direct and administer the operations of the Bank including, but not limited to, such matters as budgeted net income, asset quality, employee involvement in the community, growth of loans and deposits, and various other functions as assigned from time to time. Employee shall report to the President of Parent. The precise services, duties and authority of Employee may be further defined, extended or curtailed from time to time at the discretion of the President of Parent; provided, however, that such services, duties and authority shall always be consistent with those which are customary for his position with the Bank. The Employee shall exercise his duties of employment in a manner consistent with and in compliance with the requirements of all applicable statutes of the United States of America and the State of Ohio and of the administrative rules and regulations issued thereunder and of the procedures, rules and regulations of the applicable regulatory agencies of the United States of America and the State of Ohio. Similarly, Employee shall exercise his supervision and control over the employees of the Bank that report to him in such a manner as to encourage them to exercise their duties of employment so as to meet the standards provided by the previous sentence of this paragraph.

4. Extent of Services. Employee, subject to the control of the President of Parent, shall have the power and authority commensurate and necessary to his position with the Bank. Employee shall devote his entire employable time, attention and best efforts to the Business of the Bank and shall not, without the consent of the President of Parent, during the term of this Agreement, be actively engaged in any other business activity, whether or not such business activity is pursued for gain, profit or other pecuniary advantage; but this shall not be construed as preventing Employee from investing his personal assets in such form or

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manner as will not require any services on the part of Employee in the operation of the affairs of the enterprise in which such investments are made. Employee shall be a full-time employee of the Bank and shall devote at least forty (40) hours per week (excused absences and vacation periods counted as hours worked for this purpose) to the affairs of the Bank, unless the President of Parent consents to a shorter work period. During the term of his employment hereunder, the Employee shall not provide any banking or bank-related services or solicit or engage in any banking or bank-related business otherwise than on behalf of the Bank or an affiliate of the Bank.

5. Board Member. So long as the Bank exists as a separate entity and is not merged or consolidated into another entity, and so long as Employee remains employed by the Bank pursuant to the terms of this Agreement, including any extensions hereof, Parent shall cause Employee to be elected as a member of the Bank’s Board of Directors and in accordance with the Code of Regulations of the Bank. While serving as a director of the Bank, Employee shall be entitled to receive director fees at any time that it is the policy of the Parent or any of its subsidiaries to pay directors who are also employees such fees. Upon the termination of this Agreement, unless the Parent otherwise consents to his retention on the Board, Employee shall take any actions necessary to remove himself from the Board of Directors of the Bank.

6. Compensation. Employee shall be compensated for services rendered hereinunder during the term hereof as follows:

(a) As an incentive for Employee to enter into this Agreement for the term hereof, the Bank, within sixty (60) days following the execution of this Agreement, shall pay Employee, in a lump sum, Thirty-Five Thousand Dollars ($35,000.00), subject to withholding of taxes and other customary amounts.

(b) Employee shall receive an annualized base salary of One Hundred Forty Thousand Dollars ($140,000.00). Base salary hereunder shall be payable in equal periodic installments consistent with the Bank’s payroll practices and subject to withholding of taxes and other customary amounts.

(c) Employee shall not be eligible to participate in the Bank’s Executive Performance Bonus Plan for calendar year 2006 (payable in 2007).

7. Fringe Benefits.

(a) Subject to Employee’s payment of the employee portion of the costs of coverage, Employee shall be entitled to participate in the employee benefit and welfare plans, retirement plans and insurance programs offered by the Bank, or which it may adopt from time to time, in accordance with the terms and conditions of any such plans and programs, for its management or supervisory personnel generally. Nothing herein shall be construed so as to prevent the Bank from modifying or terminating any employee benefit or welfare plans or programs or employee fringe benefits it may adopt from time to time.

(b) Employee shall be entitled to paid time off during the term hereof in accordance with the Bank’s policies.

(c) The Bank shall reimburse Employee for all reasonable expenses he may incur for promoting the Business, including expenses for entertainment, travel, and similar items, subject to such limits and conditions as the Bank or Parent may reasonably establish. The Bank shall also pay for Employee’s membership in a local country club during the term of this Agreement.

(d) During the term of this Agreement, the Bank shall furnish Employee a non-luxury automobile made by an American manufacturer suitable to the nature of his position and adequate for the performance of his employment. The Bank will maintain, insure and provide fuel for operation of such automobile in accordance with policies or practice established from time to time by Parent.

8. Disability. If Employee shall become physically or mentally disabled during the term of this Agreement to the extent that he shall be unable to perform his duties and services for and on behalf of the

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Bank, the Bank shall continue to make payment of a portion of Employee’s base salary in the amount and for the duration as set forth in Parent’s policies or practices established from time to time by Parent for executive managers of its bank subsidiaries. A copy of Parent’s disability policy has been provided to Employee.

9. Confidentiality.

(a) The Bank possesses and will continue to possess information which has been created, discovered, developed by or otherwise become known to the Bank (including information discovered or made available by subsidiaries, affiliates or joint ventures of the Bank or in which property rights have been assigned or otherwise conveyed to the Bank) which information (whether in print or electronic format) has commercial value to the Bank, including but not limited to trade secrets, innovations, processes, computer codes, data, know how, improvements, discoveries, developments, techniques, marketing plans, strategies, costs, customers, and client lists, or any information Employee has reason to know the Bank would like to treat as confidential for any purpose, such as maintaining a competitive advantage or avoiding undesired publicity, whether or not developed by Employee (“Confidential Information”). Unless previously authorized in writing or instructed in writing by the Bank, Employee will not, at any time, disclose to others, or use, or allow anyone else to disclose or use any Confidential Information (except as may be necessary in the performance of Employee’s employment with the Bank), unless and until and then only to the extent that, such Confidential Information has become ascertainable or obtained from public or published sources or was available to the Bank on a non-confidential basis prior to any disclosure, provided that the source of such material is or was not bound by any obligation of confidentiality to the Bank.

(b) Upon termination of employment to the extent he has not already done so, the Employee will deliver to the Bank any and all Information and Property (as herein defined) then in his possession or subject to his control. For purposes of this sub-section, the term “Information and Property” means and includes (i) all files, records, reports, memoranda and other documents, whether written or electronic, that the Employee received, prepared, helped prepare, directed the preparation of, maintained or kept in connection with his services as a director, officer or employee of the Bank or any of its affiliates; (ii) all door and file keys, identification cards or badges, credit cards, computer hardware, computer software, computer printers, computer access codes and similar items issued or made available to the Employee in connection with his service as a director, officer or employee of the Bank or any of its affiliates; (iii) all documents, whether written or electronic, containing any trade secrets (as defined below) of the Bank or any of its affiliates; and (iv) all documents, whether written or electronic, containing non-public information regarding the Bank or any of its affiliates or its customers or employees, the use or disclosure of which might be adverse to the best interests of such entity or its business. The Employee expressly agrees and promises that he will not retain any copies, duplicates, reproductions, or excerpts of any Information and Property. The Employee acknowledges that this obligation is continuing and agrees promptly to deliver to the Bank any subsequently discovered Information and Property and any subsequently discovered copies, duplicates or reproductions of, or excerpts from, Information and Property. In the case of electronic data contained in files residing on the Employee’s personally-owned computers, the Employee shall permit access to such computers to Bank representatives to delete all such files (including any drives or disks associated therewith) that can be located easily and delete all other such files (including any drives or disks associated therewith) as and when they are discovered. Notwithstanding anything else in this subparagraph (i), the Employee may retain documents concerning any benefit plans or employment policies from which he may be or become entitled to benefits and documents concerning his rights under this Agreement. As used herein, “trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that (A) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

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10. Termination.

(a) The Bank may terminate this Agreement during the term hereof for just cause upon written notice to Employee.

(b) This Agreement may also be terminated (i) whenever the Bank and Employee shall mutually agree to a termination in writing, (ii) upon the resignation or death of Employee, (iii) pursuant to paragraph 12, or (iv) upon expiration of the term hereof.

(c) Upon the termination of this Agreement by the Bank for just cause as defined in subparagraph (d), or pursuant to paragraph 12, or upon the resignation or death of Employee, Employee or his personal representative shall be entitled to receive only the compensation accrued but unpaid as of the date of the termination hereof and shall not be entitled to any compensation following the termination date or additional compensation except as expressly provided in this Agreement.

(d) Just cause shall include, but not be limited to:

(i) Employee’s misuse or conviction of embezzlement of funds belonging to the Bank, conviction of, or plea by Employee of nolo contendre to, any felony or crime involving fraud or moral turpitude, or use of alcohol or drugs or other conduct in such a manner as will injure or adversely effect the Bank or its employees, customers, agents, officers or directors;

(ii) Employee’s absence from his employment for a period in excess of paid time off as provided in paragraph 7(b) for any reasons other than family and medical leave under the Bank’s policies;

(iii) Employee’s absence from employment or inability to perform his duties hereunder as a result of physical or mental disability for a period in excess of the period for which salary is continued pursuant to paragraph 8 or in excess of family and medical leave under the Bank’s policies;

(iv) Employee’s failure to perform substantially his duties with the Bank, his intentional breach of the provisions of this Agreement, his gross negligence or willful malfeasance in discharging his obligations hereunder and such acts and their consequences are not remedied within ten (10) days (or such longer reasonable period of time designated by the Bank) after written notice hereof has been given to Employee.

11. Non-Competition. Employee acknowledges that the services he will render to the Bank under this Agreement will be of a special and unusual character, with a unique value to the Bank. Employee has served in an executive management position with and was a shareholder of the holding company for the banking entity merged into the Bank and has acquired unique and invaluable information about and developed relationships with customers who will continue to use the services of the Bank and for which he will continue to receive benefit. Employee further acknowledges the scope of the Bank’s Business and that any limitations on his post-employment activities are necessary to protect the Bank’s Business because of its scope. In view of the unique value to the Bank of the services of Employee, his prior relationship with the predecessor of the Bank, because of the confidential information of the Bank obtained by or disclosed to Employee, and as a material inducement to the Bank to enter into this Agreement and to provide Employee the compensation and benefits stated herein, including the signing bonus, and other good and valuable consideration, Employee covenants and agrees that for the period of two (2) years following the date of termination of employment with the Bank for any reason, Employee will not, directly or indirectly, either as a principal, agent, manager, partner, director, officer, consultant or shareholder, on his behalf or on behalf of any other entity:

(a) in Miami County Ohio, or the counties in the State of Ohio which are contiguous to Miami County, Ohio, own, manage, operate, control, be employed by, participate in, render assistance to or be connected in any manner with the ownership, management, representation, operation or control of any

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entity which competes with the Business of the Bank at the time of termination of employment with the Bank;

(b) solicit, entice or encourage any employee of the Bank to leave employment with the Bank and to not hire or employ (or cause and/or assist, whether directly or indirectly any third party to hire or employ) any such employee; and

(c) contact, solicit, encourage or induce any customers of the Bank to obtain business and/or services from any entity (other than the Bank) which is engaged in any activity competitive with the Business of the Bank.

The term “customer” shall mean any person or entity to which the Bank has provided services during the one (1) year period prior to the date of termination or persons or entities targeted by the Bank or contacted for the purpose of selling such goods or services during such one (1) year period.

12. Regulatory Provisions.

(a) If the Employee is suspended and/or temporarily prohibited from participating in the conduct of the Bank’s affairs by a notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1818(e)(3) and (g)(1)), the Bank’s obligations under this Agreement shall be suspended as of the date of service unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank shall (i) pay the Employee all or part of the compensation withheld while its contract obligations were suspended, and (ii) reinstate (in whole or in part) any of its obligations which were suspended.

(b) If the Employee is removed and/or permanently prohibited from participation in the conduct of the Bank’s affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1818(e)(4) or (g)(1)), the employment of Employee and all obligations of the Bank under this Agreement shall terminate as of the effective date of the order.

(c) If the Bank is in default (as defined in Section 3(x)(1) of the Federal Deposit Insurance Act), the employment of Employee and all obligations of the Bank under this Agreement shall terminate as of the date of default.

(d) The employment of Employee and all obligations of the Bank under this Agreement may be terminated, except to the extent it is determined that continuation of this Agreement is necessary for the continued operation of the Bank: (i) by the Director of the Federal Deposit Insurance Corporation (the “Director”) or his or her designee, at the time the Federal Deposit Insurance Corporation enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the Federal Deposit Insurance Act; or (ii) by the Director or his or her designee at the time the Director or his or her designee approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Director to be in an unsafe or unsound condition.

13. Remedies. Given the important nature of the services Employee will provide to the Bank, the scope and nature of the Bank’s business and the sensitive nature of the information and functions Employee will have with the Bank, Employee acknowledges that the limitations contained herein in paragraphs 9 and 11 are reasonable. In the event of an actual or threatened breach by Employee of the provisions of paragraphs 9 and 11, the Bank shall be entitled to an injunction restraining Employee from such breach in addition to recovery of monetary damages together with the costs and expenses and reasonable attorney’s fees and expenses incurred by Bank in seeking and enforcement such provisions in paragraphs 9 and 11. If Employee violates any covenants contained in paragraphs 9 and 11, the terms and the covenants violated shall be automatically extended to a like period of time from the date on which Employee ceases such violation or from the date of entry by a court of competent jurisdiction of any order or judgment enforcing such covenant, whichever period is later.

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14. Tax Liability. It is the intention of Bank and Employee that any and all payments Employee receives pursuant to this Agreement are reasonable compensation for services provided by Employee to Bank during the term hereof, and together with any other payments due to Employee from Bank or its successor (“other payments”), shall not constitute “excess parachute payments” within the meaning of Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended. If the Internal Revenue Service or the independent accountants acting as auditors for Bank or its successor determine that the compensation by itself or together with other payments constitute “excess parachute payments,” the payments hereunder shall be reduced to the maximum amount which may be paid without constituting the payments as “excess parachute payments.” If, regardless of the aforesaid adjustment, the Internal Revenue Service determines that the payments constitute “excess parachute payments” under Sections 280G and 4999 of the Code, the Bank shall assume responsibility for the loss of any tax deductions, and Employee shall assume responsibility for payment of any income and excise taxes attributable to the excess parachute payment.

15. Successors and Assigns. The Bank may assign this Agreement or any part hereof; but Employee shall not assign this Agreement or any part hereof. This Agreement shall be binding upon and inure to the benefit of any successor, assign, heir or personal representative of either party hereto.

16. Covenants and Promises Survive Termination of Employment. Employee agrees that the obligations, duties and covenants contained in paragraphs 9, 11 and 14 shall survive termination of this Agreement and employment.

17. Severability. The parties agree that each and every paragraph, sentence, clause, term, word and provisions of this Agreement is severable and that, in the event any portion of this Agreement is adjudged to be invalid or unenforceable, the remaining portions thereof shall remain in full force and effect to the fullest extent permitted by law. If any part of paragraph 11 of this Agreement is for any reason excessively broad as to time duration or geographic scope, activity or subject, it will be construed by a court by limiting or reducing it so as to be enforceable to the extent compatible with applicable law as it then exists.

18. Miscellaneous. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all of such together shall constitute one and the same instrument. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

19. Governing Law. This Agreement shall be interpreted in accordance with and be governed exclusively by the laws of the State of Ohio. The parties expressly agree that any and all actions concerning any dispute arising from this Agreement shall be filed and maintained only in a state court of competent jurisdiction sitting in Miami County, State of Ohio or the federal U.S. District Court, Southern District of Ohio, Western Division of Dayton, and each party consents to such jurisdiction.

20. Waiver. No waiver by the Bank, of any breach hereunder by Employee shall be deemed or construed as a waiver of any other breach or of any subsequent breach. Employee acknowledges that the Bank for business reasons or otherwise, may waive a breach by another individual of provisions similar to the provisions agreed to by Employee in this Agreement. Employee acknowledges that no waiver by the Bank, of any other individuals’ breach of provisions similar to the provisions in this Agreement shall be construed as a waiver of any breach by the Employee of this Agreement.

21. Notices. All notices required to be given under the terms of this Agreement shall be in writing and shall be deemed to be given when delivered personally or sent by registered or certified mail, facsimile transmission, or electronic mail to the last known residence address Employee has on file with the Bank, or in case of Bank, to the business address of the Bank.

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22. Entire Agreement. This Agreement constitutes the complete agreement between the parties with regard to the subject matter addressed herein, shall supersede any and all previous agreements and/or commitments, whether oral or written, between the parties and shall not be amended or modified absent an agreement signed by both parties. The parties further agree that no verbal or other statements, discussions, or impressions, other than those provisions contained in this Agreement, have been relied upon by either party in executing this Agreement.

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Indiana	6712	35-1562245
(State or other jurisdiction of	(Primary standard industrial	(I.R.S. Employer
incorporation or organization)	classification code number)	Identification No.)

Alan W. Becker, Esq.		Fred A. Summer, Esq.
Bose McKinney & Evans LLP		Squire Sanders & Dempsey, L.L.P.
135 North Pennsylvania Street, Suite 2700		1300 Huntington Center, 41 South High Street
Indianapolis, Indiana 46204		Columbus, Ohio 43215
(317) 684-5000		(614) 365-2743

Title of Each Class of Securities to be Registered	Amount to be Registered (1)		Proposed Maximum Offering Price Per Share (2)			Proposed Maximum Aggregate Offering Price (2)			Amount of Registration Fee(2)
Common Stock, no par value		1,866,233		$	15.71		$	29,326,515.60		$	3,137.94
Common Stock, no par value		89,991		$	13.24		$	1,191,593.34		$	127.50
Total		1,956,224					$	30,518,108.84		$	3,265.44

	MainSource Historical			Peoples Ohio Historical			Pro Forma Combined		Per Equivalent Peoples Ohio Share
Book Value per share: At December 31, 2005		$	11.96		$	3.45		$12.67		$3.84
Cash dividends per share:
Year ended December 31, 2005		0.520			0.135			0.520		0.158
Diluted earnings per share:
Year ended December 31, 2005		1.29			0.26			1.25		0.38

	MainSource Common Stock						Peoples Ohio Common Stock
	High		Low		Close		High		Low		Close
	(Dollars per share)
September 28, 2005	$	18.16	$	17.58	$	17.80	$	3.85	$	3.85	$	3.85
April 21, 2006	18.42		18.21		18.67		5.36		5.36		5.36

	Page
Questions and Answers About the Merger and the Special Meeting		1
Summary		4
Comparative Market and Per Share Data		12
Selected Consolidated Financial Data of MainSource		14
Selected Financial Data of Peoples Ohio		15
Recent Developments Affecting MainSource		16
Unaudited Pro Forma Condensed Combined Financial Information		17
Risk Factors		22
Caution about Forward-Looking Statements		26
Special Meeting of Peoples Ohio’s Shareholders		27
The Merger		28
Structure of the Merger		28
Background of the Merger		29
Peoples Ohio’s Reasons for the Merger		30
MainSource’s Reasons for the Merger		31
Funding of the Merger		31
Effects of the Merger		31
Opinion of Financial Advisor to Peoples Ohio		32
The Merger Agreement		36
Conditions to the Merger		36
Expenses		38
Treatment of Options to Acquire Shares of Peoples Ohio Common Stock		38
Treatment of Peoples Ohio 401(k) Plan		38
Employee Benefit Matters		39
Termination		39
Termination Fee		40
Conduct of Business Prior to Completion of the Merger		41
Management and Operations After the Merger		43
No Solicitation		44
Environmental Inspections		44
Resales of MainSource Common Stock by Peoples Ohio Shareholders		44
Effective Time of Merger		45
Election and Allocation Procedures		45
Exchange and Payment Procedures		47
Fractional Shares		47
Regulatory Approvals for the Merger		47
Accounting Treatment of the Merger		48
NASDAQ National Market System Listing		48
Description of Peoples Ohio		48
Business		48
Properties		61

Legal Proceedings			61
Market Price of and Dividends on Common Stock and Related Stockholder Matters			61
Ownership of Peoples Ohio Common Stock			62
Management’s Discussion and Analysis of Financial Condition and Results of Operation			63
Interests of Certain Directors and Executive Officers of Peoples Ohio in the Merger			80
Treatment of Stock Options			80
Employment Agreement			80
Severance Payments			81
Indemnification and Insurance			81
Dissenters’ Rights of Peoples Ohio Shareholders			82
Material Federal Income Tax Consequences			83
General			83
Opinion Conditions			83
Exchanges of Peoples Ohio Common Stock			84
Tax Treatment of Options			85
Tax Treatment of the Entities			86
Information Reporting and Backup Withholding			86
Comparison of the Rights of Shareholders			86
Authorized Capital Stock			86
Advance Notice Requirements			87
Composition of Board of Directors			87
Special Meetings of Shareholders			87
Notice of Meetings of Shareholders			88
Voting by Shareholders			88
Dividends			89
Removal of Directors			89
Appraisal Rights of Dissenting Shareholders			89
Anti-Takeover Provisions			89
Independent Registered Public Accounting Firms and Experts			91
Legal Matters			92
Where You Can Find More Information			92
Index to Peoples Ohio Financial Statements			F-1
Annexes
Annex A—Agreement and Plan of Merger
Annex B—Opinion of Keefe, Bruyette & Woods, Inc.
Annex C—Sections 1701.84 and 1701.85 of the Ohio General Corporations Law (Dissenting Shareholders)
Annex D—Form of Employment Agreement of Ronald B. Scott

You may also contact:
Computershare Trust Company		Peoples Ohio Financial Corporation
of New York (Exchange Agent)		635 South Market Street
Wall Street Plaza	or	Troy, Ohio 45373
88 Pine Street, 19th Floor		Attention: Ronald B. Scott
New York, New York 10005		Chief Executive Officer
(800) 245-7630		(937) 339-5000

	Closing Price of MainSource Common Stock			Exchange Ratio		Equivalent Price Per Share of Peoples Ohio Common Stock
September 28, 2005		$	17.80		0.315		$	5.60
April 21, 2006		$	18.42		0.303		$	5.58

		Page
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of June 30, 2005 and 2004		F-3
Consolidated Statements of Income for the Three-Year Period Ended June 30, 2005		F-4
Consolidated Statements of Stockholders’ Equity for the Three-Year Period Ended June 30, 2005		F-5
Consolidated Statements of Cash Flows for the Three-Year Period Ended June 30, 2005		F-6
Notes to Consolidated Financial Statements		F-7
Consolidated Balance Sheets as of June 30, 2005 and as of December 31, 2005 (unaudited)		F-30
Consolidated Statements of Income for the Six Months Ended December 31, 2005 and 2004 (unaudited)		F-31
Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2005 and 2004 (unaudited)		F-32
Consolidated Statements of Stockholders’ Equity for the Six Months Ended December 31, 2005 and 2004 (unaudited)		F-33
Notes to Consolidated Financial Statements		F-34

	December 31,			June 30,
	2005			2005
	(Unaudited)
ASSETS
Cash and cash equivalents	$	5,904,228		$	8,991,963
Held-to -maturity securities (fair value $458,000 and $486,000)	456,366			460,690
Available-for-sale securities	3,700,713			3,960,867
Loans, net of allowance for loan losses of $785,338 and $725,090	178,695,875			171,187,044
Premises and equipment	3,880,729			4,053,989
Federal Home Loan Bank stock	5,890,200			5,735,700
Interest receivable	777,798			733,000
Bank-owned life insurance	4,447,004			4,362,364
Other assets	289,325			395,252
Total assets	$	204,042,238		$	199,880,869
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits	$	119,108,217		$	126,520,450
Federal Home Loan Bank (FHLB) advances	56,194,640			46,123,030
Interest payable	394,919			156,400
Other liabilities	2,366,550			1,655,503
Total liabilities	178,064,326			174,455,383
Commitments and Contingent Liabilities	—			—
Equity from ESOP Shares	652,802			500,278
Shareholders’ equity:
Preferred stock, no par value, 1,000,000 shares authorized; none issued or outstanding	—			—
Common stock, no par value, 15,000,000 shares authorized; 7,583,652 and 7,583,652 shares issued less ESOP shares of 112,019 and 112,019	7,461,633			7,461,633
Additional paid-in capital	78,348			51,548
Treasury stock, at cost, 252,023 and 301,843 shares	(1,064,525		)	(1,265,922		)
Accumulated other comprehensive income	(41,144		)	(6,455		)
Retained earnings	18,890,798			18,684,404
Total shareholders’ equity	25,325,110			24,925,208
Total liabilities and shareholders’ equity	$	204,042,238		$	199,880,869

	Six Months Ended
	December 31,
	2005		2004
INTEREST INCOME
Interest and fees on loans	$	5,694,740	$	5,056,887
Interest on mortgage-backed securities and other securities	88,857		249,033
Other interest and dividend income	215,175		157,007
Total interest income	5,998,772		5,462,927
INTEREST EXPENSE
Deposits	991,095		566,537
Borrowings	1,251,965		1,410,870
Total interest expense	2,243,060		1,977,407
Net interest income	3,755,712		3,485,520
PROVISION FOR LOAN LOSSES	60,000		60,000
Net interest income after provision for loan losses	3,695,712		3,425,520
OTHER INCOME
Service charges on deposit accounts and other	141,315		149,520
Service charges derived from ATM	103,503		93,038
Overdraft / NSF fees	452,278		458,805
Fiduciary activities	246,961		230,559
Increase in cash value of bank owned life insurance	93,884		92,536
Gain on sale of credit card portfolio	121,420		—
Other income	11,763		12,398
Total other income	1,171,124		1,036,856
OTHER EXPENSES
Salaries and employee benefits	1,662,346		1,417,172
Director fees	77,975		78,000
Net occupancy expenses	225,629		214,696
Equipment expenses	59,220		69,455
Professional services	297,424		171,490
Advertising	69,240		71,414
Data processing fees	297,439		347,446
State of Ohio franchise taxes	113,753		150,000
Other expenses	611,676		661,420
Total other expenses	3,414,702		3,181,093
INCOME BEFORE FEDERAL INCOME TAX	1,452,134		1,281,283
FEDERAL INCOME TAX EXPENSE	461,804		418,906
NET INCOME	$	990,330	$	862,377
PER SHARE DATA:
BASIC EARNINGS PER SHARE	$	0.14	$	0.12
DILUTED EARNINGS PER SHARE	$	0.13	$	0.12
DIVIDENDS PER SHARE	$	0.07	$	0.065

												Accumulated
			Additional									other				Total
	Common		paid-in			Retained			Treasury			comprehensive				shareholders’
	stock		capital			earnings			stock			income				equity
BALANCE AT JUNE 30, 2005	$	7,461,633		$	51,548	$	18,684,404		$	(1,265,922	)		$	(6,455	)		$	24,925,208
Net income	—			—		990,330											990,330
Net change in Unrealized Gain/Loss on AFS Securities													(34,689		)		(34,689		)
Total comprehensive income																	955,641
Cash dividends declared on common stock ($.07 per share)				—		(513,214		)									(513,214		)
Exercise of stock options						(118,198		)	201,397								83,199
Tax benefit from exercise of stock options	—			4,269		0											4,269
Compensation expense related to vested stock options				22,531													22,531
Net change in equity from ESOP shares	—					(152,524		)									(152,524		)
BALANCE AT DECEMBER 31, 2005	$	7,461,633		$	78,348	$	18,890,798		$	(1,064,525	)		$	(41,144	)		$	25,325,110

	Six Months Ended December 31,
	2004
	(amounts in thousands except per share data)
Net income, as reported		$	862
Less: Total stock-based employee compensation cost determined under the fair value based method, net of income taxes		(24		)
Pro forma net income		$	838
Earnings per share:
Basic—as reported		$	0.12
Basic—pro forma		$	0.12
Diluted—as reported		$	0.12
Diluted—pro forma		$	0.11

	MAINSOURCE FINANCIAL GROUP, INC.
	By:	/s/ JAMES L. SANER, SR.
		James L. Saner, Sr., President and CEO
	PEOPLES OHIO FINANCIAL CORPORATION
	By:	/s/ RONALD B. SCOTT
		Ronald B. Scott, President, Chief Executive Officer
	PEOPLES SAVINGS BANK OF TROY
	By:	/s/ RONALD B. SCOTT
		Ronald B. Scott, President, Chief Executive Officer

Exhibit 1.01(e)(i)	Indiana Articles of Merger (Company Merger)
Exhibit 1.01(e)(ii)	Plan of Merger (Company Merger)
Exhibit 1.01(e)(iii)	Ohio Certificate of Merger (Company Merger)
Exhibit 2.01(e)	Ohio Certificate of Merger (Subsidiary Merger)
Exhibit 3.02(b)(ii)	POHF Consolidated Shareholders’ Equity Adjustment Example
Exhibit 6.05	Form of Affiliate Agreement
Exhibit 8.01(i)(1)	Employment Agreement with Ronald B. Scott
Exhibit 8.01(l)	Form of Opinion of Counsel to POHF
Exhibit 8.02(l)	Form of Opinion of Counsel to MainSource

		MAINSOURCE BANK-OHIO
By:		By:
	Ronald B. Scott	Name:
		Title:
Date:		Date:
“Employee”		“Bank”
		MAINSOURCE FINANCIAL GROUP, INC.
		By:
			James L. Saner, Sr., President
		Date:
		“Parent”

2	Agreement and Plan of Merger among MainSource Financial Group, Inc., Peoples Ohio Financial Corporation and Peoples Savings Bank (appears as Annex A to the prospectus)
5	Opinion and consent of Bose McKinney & Evans LLP regarding legality of the securities being registered.*
8	Opinion and consent of Bose McKinney & Evans LLP regarding tax matters.
23.1	Consent of Crowe Chizek and Company LLC.
23.2	Consent of BKD, LLP regarding Peoples Ohio Financial Corporation’s financial statements.
23.3	Consent of BKD, LLP regarding Union Community Bancorp’s financial statements.
23.4	Consent of BKD, LLP regarding HFS Bank, F.S.B.’s financial statements.
23.5	Consent of Keefe, Bruyette & Woods, Inc.
24	Powers of Attorney.*
99.1	Peoples Ohio Financial Corporation proxy card.
99.2	Election Form and Letter of Transmittal and instructions to shareholders of Peoples Ohio Financial Corporation.

				MAINSOURCE FINANCIAL GROUP, INC.
		By:		/s/ JAMES L. SANER, SR.
				James L. Saner, Sr.
				President and Chief Executive Officer

	SIGNATURE		TITLE
/s/ JAMES L. SANER, SR.
James L. Saner, Sr.		Director, President and Chief Executive Officer (Principal Executive Officer)
JAMES M. ANDERSON*
James M. Anderson		Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
ROBERT E. HOPTRY*
Robert E. Hoptry		Director and Chairman of the Board
WILLIAM G. BARRON*
William G. Barron		Director
D.J. HINES*
D.J. Hines		Director
DOUGLAS I. KUNKEL*
Douglas I. Kunkel		Director
PHILIP A. FRANTZ*
Philip A. Frantz		Director
RICK S. HARTMAN*
Rick S. Hartman		Director
BRIAN CRALL*
Brian Crall		Director

*By:		/s/ JAMES L. SANER, SR.
		James L. Saner, Sr.
		Attorney-in-Fact