U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

        X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1998

                                       OR

            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

          For the transition period from __________ to _______________

                          Commission File No.: 0-27868


                        FIDELITY FINANCIAL OF OHIO, INC.
             (Exact name of registrant as specified in its charter)

            Ohio                                                 31-1455721
  (State or other jurisdiction                               (I.R.S. Employer
of incorporation or organization)                         Identification Number)

       5535 Glenway Avenue
         Cincinnati, Ohio                                         45238         
            (Address)                                           (Zip Code)

       Registrant's telephone number, including area code: (513) 922-5959

           Securities registered pursuant to Section 12(b) of the Act:
                                 Not Applicable

           Securities registered pursuant to Section 12(g) of the Act

                     Common Stock (par value $.10 per share)
                                 Title of Class

Indicate by check mark whether the Registrant (1) has filed all reports required
by  Section  13 or 15(d)  of the  Securities  Exchange  Act of 1934  during  the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days. Yes  X    No
                     -----    -----

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  
            -----

As of March 25, 1999,  the  aggregate  value of the  7,752,509  shares of Common
Stock of the  Registrant  issued and  outstanding  on such date,  which excludes
1,366,598  shares held by all  directors  and  officers of the  Registrant,  the
Registrant's  Employee Stock Ownership Plan ("ESOP") and the Registrant's 401(k)
Plan as a group, was  approximately  $99.8 million.  This figure is based on the
last known trade price of $12.88 per share of the  Registrant's  Common Stock on
March 25, 1999.  Although  directors and officers,  the ESOP and the 401(k) Plan
were  assumed  to be  "affiliates"  of  the  Registrant  for  purposes  of  this
calculation, the classification is not to be interpreted as an admission of such
status.

Number of shares of Common Stock outstanding as of March 25, 1999: 9,119,107.

                       DOCUMENTS INCORPORATED BY REFERENCE

         List hereunder the following  documents  incorporated  by reference and
the Part of the Form 10-K into which the document is incorporated.

(1) Portions of the Annual Report to  Stockholders  for the year ended  December
31, 1998 are incorporated into Part II, Items 5 through 8 of this Form 10-K.

(2) Portions of the  definitive  proxy  statement for the 1999 Annual Meeting of
Stockholders  are  incorporated  into Part III, Items 10 through 13 of this Form
10-K.

            
<PAGE>


PART I

Item 1.  Business.


         Fidelity Financial of Ohio, Inc. (the "Company") is an Ohio corporation
which is the holding company for Fidelity  Federal  Savings Bank  ("Fidelity" or
the  "Savings  Bank").  The Company was  organized  by the Savings  Bank for the
purpose of acquiring  all of the capital stock of the Savings Bank in connection
with the  conversion of Fidelity  Federal  Mutual  Holding  Company,  the former
federally  chartered,  mutual  holding  company  of the  Savings  Bank,  and the
reorganization  of the Savings Bank to the stock holding company form, which was
completed  on March 4,  1996 (the  "Conversion  and  Reorganization").  The only
significant asset of the Company is the capital stock of the Savings Bank.

         On  October  11,  1996,   following   receipt  of  all  regulatory  and
stockholder approvals, the Company completed the acquisition of Circle Financial
Corporation  ("CFC") pursuant to the merger of CFC with and into a subsidiary of
the Company,  and the subsequent  merger of People's  Savings  Association  (the
"Association"),  an  Ohio-chartered  savings  association  and  a  wholly  owned
subsidiary of CFC,  with and into Fidelity  (collectively,  the  "Merger").  The
Merger was accounted for under the purchase method of accounting.  Consequently,
the  financial  information  and  data  presented  herein  excludes  CFC and the
Association for all periods prior to 1996.

         Fidelity is a federally  chartered savings bank which conducts business
through ten full-service  offices located in the Cincinnati,  Ohio  metropolitan
area.  Fidelity is primarily  engaged in  attracting  deposits  from the general
public through its offices and using those and other available  sources of funds
to originate  loans secured by  single-family  residences  located  primarily in
southwestern  Ohio. Such loans amounted to $325.4 million or 75.8% of Fidelity's
total loan portfolio  (including loans held for sale) at December 31, 1998. To a
lesser  extent,  Fidelity  originates  loans  secured by  existing  multi-family
residential and nonresidential  real estate,  which amounted to $23.8 million or
5.5% and $49.2  million  or 11.4%,  respectively,  of the total  loan  portfolio
(including  loans held for sale) at December 31, 1998,  as well as  construction
loans and consumer loans, which  respectively  amounted to $21.3 million or 5.0%
and $9.8 million or 2.3% of the total loan portfolio  (including  loans held for
sale) at such date.  Fidelity also invests in U.S. Government and federal agency
obligations  and  mortgage-backed   securities  which  are  insured  by  federal
agencies.



<PAGE>


         Fidelity  is  subject  to   extensive   regulation,   supervision   and
examination by the Office of Thrift  Supervision  ("OTS"),  its primary  federal
regulator,  and by the Federal Deposit  Insurance  Corporation  ("FDIC"),  which
insures its deposits up to applicable  limits.  Such  regulation and supervision
establishes a comprehensive  framework of activities in which an association may
engage and is  intended  primarily  for the  protection  of  depositors  and the
Savings Association  Insurance Fund ("SAIF")  administered by the FDIC. Fidelity
is also a member of the Federal Home Loan Bank ("FHLB") of Cincinnati,  which is
one of the 12 banks which comprise the FHLB System.  Fidelity is further subject
to regulations of the Board of Governors of the Federal Reserve System ("Federal
Reserve Board") governing  reserves  required to be maintained  against deposits
and certain other matters.

         The Company,  as a  registered  savings and loan  holding  company,  is
subject to the  examination  and regulation by the OTS and is subject to various
reporting  and other  requirements  of the  Securities  and Exchange  Commission
("SEC").  At  December  31,  1998,  the  Company  had  $519.2  million  of total
consolidated assets, $451.6 million of total consolidated liabilities, including
$412.1   million  of  deposits,   and  $67.6   million  of  total   consolidated
stockholders' equity.

Lending Activities

         General. At December 31, 1998, Fidelity's net loan portfolio (including
loans held for sale) totaled $419.4 million, representing approximately 80.8% of
Fidelity's  $519.2 million of total assets at that date.  The principal  lending
activity of Fidelity is the origination of single-family  residential loans and,
to a lesser extent,  multi-family  residential  and  nonresidential  real estate
loans,  construction loans and limited amounts of consumer loans.  Substantially
all of Fidelity's loan portfolio consists of conventional loans, which are loans
that are neither  insured by the Federal  Housing  Administration  nor partially
guaranteed by the Department of Veterans Affairs.

         As a federally  chartered  savings  institution,  Fidelity  has general
authority  to  originate  and  purchase  loans  secured by real  estate  located
throughout the United States. Notwithstanding this nationwide lending authority,
substantially  all of the mortgage loans in Fidelity's  portfolio are secured by
properties located in Ohio, with the substantial  majority of the mortgage loans
in Fidelity's portfolio secured by property located in Fidelity's market area in
southwestern Ohio.

         Federal  regulations  permit  Fidelity to invest without  limitation in
residential  mortgage loans and up to four times its capital in loans secured by
nonresidential  or commercial real estate.  Fidelity is also permitted to invest
in  secured  and  unsecured  consumer  loans in an amount not  exceeding  30% of
Fidelity's  total  assets;  however,  such 30% limit may be exceeded for certain
types of consumer loans, such as home equity, property improvement and education
loans.  In  addition,  Fidelity  is  permitted  to invest up to 10% of its total
assets in secured and unsecured  loans for  commercial,  corporate,  business or
agricultural  purposes.  To date,  Fidelity's lending activities have focused on
residential  real estate and, to a lesser extent,  multi-family  residential and
nonresidential real estate and consumer lending.


                                       2
<PAGE>


         Although  Fidelity  historically  originated  loans with lesser  dollar
balances  than were  permitted  by  federal  regulations,  current  loans-to-one
borrower  limitations  may  restrict  its  ability to do business  with  certain
customers.  Since the enactment of the Financial Institutions Reform,  Recovery,
and Enforcement Act of 1989 ("FIRREA"),  a savings association generally may not
make loans to one borrower and related  entities in an amount which  exceeds 15%
of its unimpaired  capital and surplus,  although loans in an amount equal to an
additional  10% of  unimpaired  capital and surplus may be made to a borrower if
the loans are fully secured by readily  marketable  securities.  At December 31,
1998,  Fidelity's  limit on loans-to-one  borrower was $9.0 million and its five
largest loans or groups of loans-to-one  borrower,  including  related entities,
aggregated  $6.9  million,  $5.2 million,  $4.3  million,  $4.0 million and $3.7
million.  All five of  Fidelity's  largest  loans or groups of loans are secured
primarily by multi-family  residential and nonresidential real estate located in
Fidelity's  primary  lending area and were  performing in accordance  with their
terms at December 31, 1998.





























                                       3
<PAGE>


     Loan Portfolio Composition.  The following table sets forth the composition
of Fidelity's loan portfolio by type of loan at the dates indicated.
<TABLE>
<CAPTION>
                                                                    December 31,

                                 -------------------------------------------------------------------------------------
                                            1998                        1997                       1996(1)            
                                 --------------------------- ---------------------------- --------------------------- 
                                    Amount        Percent       Amount        Percent        Amount       Percent     
                                 -----------   ------------  ------------   ------------  -----------   -----------   
                                                                                            (Dollars in Thousands)
<S>                                  <C>           <C>            <C>          <C>            <C>            <C>      
Single-family residential(2)      $325,398         75.8%     $ 341,636         77.1%       $321,701         80.0%     
Multi-family residential            23,803          5.5         26,125          5.9          25,580          6.4      
Nonresidential real estate          49,172         11.4         50,613         11.4          33,055          8.2      
Construction                        21,327          5.0         15,264          3.5          13,839          3.4      
                                   -------        -----        -------        -----         -------        -----      
    Total real estate loans        419,700         97.7        433,638         97.9         394,175         98.0      
Consumer loans:
  Auto loans                         1,983          0.5          1,427          0.3           1,149          0.3      
  Home improvement/equity            7,535          1.7          7,142          1.6           6,135          1.5      
  Other                                295          0.1            697          0.2             566          0.2      
                                   -------        -----        -------        -----         -------        -----      
    Total consumer loans             9,813          2.3          9,266          2.1           7,850          2.0      
                                   -------        -----        -------        -----         -------        -----      
      Total loans                  429,513        100.0%       442,904        100.0%        402,025        100.0%     
                                   -------        =====        -------        =====         -------        =====      

  Loans in process                  (9,233)                     (5,127)                      (4,055)                  
  Unamortized yield adjustments        859                         733                          129                   
  Allowance for loan losses         (1,703)                     (1,658)                      (1,558)                  
                                   -------                     -------                      -------                   
    Net loans                     $419,436                    $436,852                     $396,541                   
                                   =======                     =======                      =======                   

</TABLE>

<TABLE>
<CAPTION>
                                                         December 31,

                                 --------------------------------------------------------
                                            1995                         1994
                                 ---------------------------- ---------------------------
                                    Amount        Percent        Amount       Percent
                                 -----------   ------------   -----------   -------------
                                 
<S>                                  <C>             <C>          <C>           <C>
Single-family residential(2)      $142,246          75.7%      $134,508         74.6%
Multi-family residential            18,833          10.0         15,443          8.6
Nonresidential real estate          20,773          11.1         23,685         13.1
Construction                         4,791           2.6          6,332          3.5
                                   -------         -----        -------        ----- 
    Total real estate loans        186,643          99.4        179,968         99.8
Consumer loans:
  Auto loans                            --            --             --           --
  Home improvement/equity              952           0.5             41           --
  Other                                251           0.1            300          0.2
                                   -------         -----        -------        ----- 
    Total consumer loans             1,203           0.6            341          0.2
                                   -------         -----        -------        ----- 
      Total loans                  187,846         100.0%       180,309        100.0%
                                   -------         =====        -------        =====

  Loans in process                  (1,305)                      (3,424)
  Unamortized yield adjustments       (591)                        (880)
  Allowance for loan losses           (818)                        (783)
                                   -------                      -------
    Net loans                     $185,132                     $175,222
                                   =======                      =======

</TABLE>


(1)  The  substantial  increase  in loans at  December  31,  1996 as compared to
     December  31, 1995  reflects  the $189.4  million of net loans  acquired by
     Fidelity as a result of the Merger.

(2)  At December  31,  1998,  1997 and 1995,  included  $236,000,  $438,000  and
     $646,000 of loans classified as held for sale,  respectively.  Fidelity did
     not have any loans  classified  as held for sale at any of the other  dates
     presented.


                                       4

<PAGE>


         Contractual  Principal  Repayments  and Interest  Rates.  The following
table sets forth certain  information  at December 31, 1998 regarding the dollar
amount of loans maturing in Fidelity's portfolio, based on the contractual terms
to maturity,  before giving effect to net items.  Demand loans,  loans having no
stated schedule of repayments and no stated maturity and overdrafts are reported
as due in one year or less.

<TABLE>
<CAPTION>
                                                                                                              Due more 
                                                                    Due 3-5     Due 5-10       Due 10-15      than 15
                                                                  years after  years after    years after   years after
                                    1999      2000       2001      12/31/98     12/31/98        12/31/98      12/31/98      Total
                                    ----      ----       ----      ---------    ---------     ----------     ----------     -----
                                                           (In Thousands)
<S>                                <C>        <C>        <C>           <C>          <C>            <C>            <C>         <C>
Single-family residential        $12,187   $13,101    $14,084       $31,419     $ 76,460        $57,370       $120,777    $325,398
Multi-family residential and                                    
 nonresidential real estate        2,366     2,574      2,801         6,362       31,847         23,172          3,853      72,975
Construction                       2,862     1,812        326           733        2,422          3,580          9,592      21,327
Consumer and other                 1,871     1,777      1,946         2,978        1,241             --             --       9,813
                                  ------    ------     ------        ------      -------         ------        -------     -------
     Total                       $19,286   $19,264    $19,157       $41,492     $111,970        $84,122       $134,222    $429,513
                                  ======    ======     ======        ======      =======         ======        =======     =======
</TABLE>


         The following  table sets forth the dollar amount of all loans,  before
net items,  due after one year from December 31, 1998 which have fixed  interest
rates or which have floating or adjustable interest rates.
<TABLE>
<CAPTION>

                                                                     Floating or
                                           Fixed Rates             Adjustable-Rates          Total

                                                                    (In Thousands)
<S>                                             <C>                        <C>                <C>
  Single-family residential                   $235,294                  $ 77,917           $313,211
  Multi-family residential and
   nonresidential real estate                   25,742                    44,867             70,609
  Construction                                   8,319                    10,146             18,465
  Consumer                                       5,202                     2,740              7,942
                                               -------                  --------           --------
     Total                                    $274,557                  $135,670           $410,227
                                               =======                   =======            =======
 
</TABLE>



                                       5
<PAGE>


         Scheduled contractual amortization of loans does not reflect the actual
term of Fidelity's  loan portfolio.  The average life of loans is  substantially
less than  their  contractual  terms  because  of  prepayments  and  due-on-sale
clauses,   which  give  Fidelity  the  right  to  declare  a  conventional  loan
immediately due and payable in the event, among other things,  that the borrower
sells the real property subject to the mortgage and the loan is not repaid.  The
average  life of mortgage  loans tends to increase  when current  mortgage  loan
rates are  substantially  higher  than  rates on  existing  mortgage  loans and,
conversely,  decrease when current mortgage loan rates are  substantially  lower
than rates on existing  mortgage loans (due to refinancings  of  adjustable-rate
and  fixed-rate  loans at lower  rates).  Under the  latter  circumstances,  the
weighted average yield on loans decreases as higher yielding loans are repaid or
refinanced at lower rates.

         Originations,  Purchases and Sales of Loans. The lending  activities of
Fidelity are subject to the written, non-discriminatory,  underwriting standards
and loan origination procedures established by Fidelity's Board of Directors and
management.  Loan  originations are obtained by a variety of sources,  including
referrals from real estate brokers,  developers,  builders,  existing customers,
newspaper,   radio,   periodical   advertising  and  walk-in   customers.   Loan
applications are taken by lending personnel,  and the loan department supervises
the obtainment of credit reports,  appraisals and other  documentation  involved
with a loan.  Property valuations are generally performed by independent outside
appraisers approved by Fidelity's Chief Lending Officer.
An attorney's opinion of title and hazard insurance are required on all security
property.

         Fidelity's  loan approval  process is intended to assess the borrower's
ability to repay the loan,  the  viability  of the loan and the  adequacy of the
value of the property that will secure the loan. Certain officers of the Savings
Bank have been  authorized  by the Board of  Directors  to  approve  loans up to
certain  designated  amounts.  All  nonresidential  real estate and multi-family
residential  loans exceeding $1.5 million are reported to the Board of Directors
on a monthly basis.

         Traditionally, the Savings Bank has originated substantially all of the
loans in its portfolio and has held them until  maturity.  During 1998 and 1997,
the Savings Bank purchased $2.0 million and $11.4 million, respectively, in loan
participations from other financial institutions.  Such loan purchases consisted
of  multi-family  and  nonresidential  real estate loans  secured by  properties
located within the Savings Bank's primary market area.  During 1996, the Savings
Bank  purchased  no  loan  participations,  while  acquiring  $17.5  million  in
participations  through the merger with Circle  Financial  Corp. At December 31,
1998,  loans  purchased  and  serviced  by others  totaled  approximately  $15.4
million.

         As a result of the Merger,  Fidelity  acquired  $194.3 million of gross
loans  ($189.4  million,   net)  of  which   single-family   residential  loans,
multi-family  residential  loans,  nonresidential  real  estate and land  loans,
construction  loans and consumer loans were $159.9 million,  $8.4 million,  $8.2
million, $12.6 million, and $5.2 million, respectively.



                                       6
<PAGE>


         The following table shows total loans originated,  purchased,  sold and
repaid during the periods indicated.
<TABLE>
<CAPTION>

                                                                   Year Ended December 31,
                                                       1998                 1997                 1996
                                                   ------------        ------------          ------------
                                                                   (Dollars in Thousands)
<S>                                                     <C>                 <C>                    <C>
Loan originations:
  Single-family residential                          $102,195             $ 83,169             $ 45,800
  Multi-family residential                              2,804                2,796                3,030
  Nonresidential real estate                            2,588                8,186                  869
  Construction                                         25,907               19,504                6,372
  Consumer and other                                    7,828                6,799                3,394
                                                     --------              -------              -------
    Total loans originated                            141,322              120,454               59,465
Purchases                                               1,999               11,368                   --
                                                     --------              -------              -------
    Total loans originated and
      purchased                                       143,321              131,822               59,465
Sales, securitizations and loan 
  principal reductions:
  Loans sold                                           18,786                4,422                  547
  Loans securitized                                        --                8,099                   --
  Loan principal reductions                           141,217               79,023               37,106
                                                     --------              -------              -------
    Total loans sold, securitized and
      principal reductions                            160,003               91,544               37,653
Net loans acquired through Merger                          --                   --              189,405
Increase (decrease) due to other
  items, net                                            (734)                   33                  838
                                                    --------               -------              -------
Net increase (decrease) in
   loan portfolio                                   $(17,416)             $ 40,311             $212,055
                                                     =======               =======              =======
</TABLE>


         Single-Family  Residential  Loans.  The  primary  lending  activity  of
Fidelity  is the  origination  of  loans  secured  by  first  mortgage  liens on
single-family  residences.  At December  31,  1998,  $325.4  million or 75.8% of
Fidelity's  total loan  portfolio  (including  loans held for sale),  before net
items, consisted of single-family residential loans.

         The  loan-to-value  ratio,  maturity and other  provisions of the loans
made by Fidelity  generally  have  reflected  the policy of making less than the
maximum loan permissible under applicable regulations,  in accordance with sound
lending practices,  market conditions and underwriting  standards established by
Fidelity.  Fidelity's  lending  policies on single-family  residential  mortgage
loans generally limits the maximum  loan-to-value  ratio to 95% of the lesser of
the  appraised  value  or  purchase  price of the  property  and  generally  all
single-family  residential loans in excess of an 80% loan-to-value ratio require
private mortgage insurance.



                                       7
<PAGE>


         Fidelity offers fixed-rate  single-family  residential loans with terms
of 10 to 30 years.  In addition,  Fidelity  also offers loans that are fixed for
either  five or seven  years then become one year  adjustable  rate loans.  Such
loans are  amortized  on a monthly  basis with  principal  and interest due each
month and customarily include "due-on-sale" clauses, which are provisions giving
Fidelity  the right to declare a loan  immediately  due and payable in the event
the borrower  sells or otherwise  disposes of the real  property  subject to the
mortgage and the loan is not repaid.  Fidelity enforces  due-on-sale  clauses to
the extent permitted under applicable laws.

         Since the early 1980s, Fidelity has been offering adjustable-rate loans
in order to decrease the  vulnerability of its operations to changes in interest
rates.  At  December  31,  1998,  $79.1  million  or 24.3% of the  single-family
residential loans in Fidelity's loan portfolio,  before net items,  consisted of
adjustable-rate loans.

         Fidelity's  single-family  residential  adjustable-rate loans are fully
amortizing loans with contractual maturities of up to 30 years. These loans have
interest  rates  which  are  scheduled  to adjust  every  one or three  years in
accordance  with a designated  index (The  National  Average  Mortgage  Contract
Interest  Rate for the  Purchase  of  Previously-Occupied  Homes  or the  weekly
average  yield on U.S.  Treasury  securities  adjusted to a constant  comparable
maturity).  There is a 2% cap on the rate  adjustment per period and either a 5%
or 6% cap on  the  rate  adjustment  over  the  life  of  the  loan.  Fidelity's
adjustable-rate  loans  are  not  convertible  into  fixed-rate  loans,  are not
assumable,  do not contain  prepayment  penalties  and do not  produce  negative
amortization.

         The demand for adjustable-rate  loans in Fidelity's primary market area
has been a function of several  factors,  including the level of interest rates,
the  expectations  of changes in the level of interest  rates and the difference
between  the  interest  rates and loan fees  offered  for  fixed-rate  loans and
adjustable-rate  loans.  The relative  amount of fixed-rate and  adjustable-rate
residential  loans that can be originated  at any time is largely  determined by
the demand for each in a competitive environment.

         Adjustable-rate  loans  decrease the risks  associated  with changes in
interest  rates but involve  other risks,  primarily  because as interest  rates
rise, the payment by the borrower rises to the extent  permitted by the terms of
the loan,  thereby  increasing the potential for default.  At the same time, the
marketability  of the  underlying  property may be adversely  affected by higher
interest  rates.  Fidelity  believes  that  these  risks,  which  have not had a
material  adverse effect on Fidelity to date,  generally are less than the risks
associated  with  holding  fixed-rate  loans  in  an  increasing  interest  rate
environment.


                                       8
<PAGE>


         Multi-Family  Residential,  Nonresidential Real Estate and Construction
Loans. At December 31, 1998, $23.8 million or 5.5% and $49.2 million or 11.4% of
Fidelity's  total loan  portfolio  (including  loans held for sale),  before net
items,  consisted  of loans  secured by existing  multi-family  residential  and
nonresidential real estate,  respectively.  Fidelity's multi-family  residential
and nonresidential real estate loan portfolio  includes,  for the most part, 218
loans  secured  by  apartment   buildings,   small  office   buildings,   retail
establishments,  nursing  homes and other  special  purpose  properties  located
within  Fidelity's  primary  lending  area.  The  average  amount of  Fidelity's
multi-family  residential and nonresidential real estate loans was approximately
$335,000 at December 31, 1998.

         Multi-family  residential  and  nonresidential  real estate  loans have
terms  which  range up to 30 years.  Fidelity  offers  both ten year and 15 year
fixed-rate  loans and  adjustable-rate  loans which generally adjust at either a
one,  three or  five-year  interval in  accordance  with changes in a designated
index  (generally  a prime rate or the  weekly  average  yield on U.S.  Treasury
securities adjusted to a constant comparable  maturity).  The maximum adjustment
in any one period is 2% with either a 5% or 6% cap over the life of the loan. In
addition,   Fidelity   originates   fixed-rate   multi-family   residential  and
nonresidential  real estate  loans with either  five,  seven or ten year balloon
terms.  At  December  31,  1998,  $46.3  million  or 63.5%  of the  multi-family
residential and  nonresidential  real estate loan  portfolio,  before net items,
consisted of adjustable-rate loans.

         Multi-family  residential  and  nonresidential  real  estate  loans are
generally  made in  amounts  up to 75% of the  appraised  value of the  security
property.  All  appraisals are generally  performed by an independent  appraiser
designated  by  Fidelity  and  are  reviewed  by   management.   In  originating
multi-family   residential  and  nonresidential  real  estate  loans,   Fidelity
considers the quality of the property, the credit of the borrower,  cash flow of
the project,  location of the real estate and the quality of management involved
with the property.

         Fidelity makes  construction  loans to individuals for the construction
of their  residences  and to  builders  for the  construction  of single  family
residences   on  a   speculative   (unsold)   basis,   based  on  the  builders'
creditworthiness.  Fidelity also makes  construction  loans to borrowers for the
construction of  multi-family  residential and  nonresidential  real estate.  At
December  31,  1998,  construction  loans  amounted to $21.3  million or 5.0% of
Fidelity's  total loan  portfolio  (including  loans held for sale),  before net
items. Of this amount,  $9.9 million  consists of loans for the  construction of
single-family   residences   and  $11.4  million   consists  of  loans  for  the
construction of multi-family residential and nonresidential real estate.

         Construction lending is generally limited to Fidelity's primary lending
area.  Construction  loans are structured to be converted to permanent  loans at
the end of the construction  phase,  which typically is 12 months.  Construction
loans have rates and terms which generally match the non-construction loans then
offered by Fidelity, except that during the construction phase the borrower only
pays interest on the loan.  Construction loans are underwritten  pursuant to the
same general guidelines used for originating permanent loans.


                                       9
<PAGE>


         Multi-family  residential  and  nonresidential  real estate  lending is
generally  considered  to  involve a higher  degree  of risk than  single-family
residential  lending.  Such  lending  typically  involves  large  loan  balances
concentrated in a single borrower or groups of related  borrowers.  In addition,
the  payment  experience  on loans  secured by  income-producing  properties  is
typically  dependent  on the  successful  operation  of the related  real estate
project and thus may be subject to a greater extent to adverse conditions in the
real estate market or in the general  economy.  Construction  financing  also is
generally  considered  to involve a higher degree of risk of loss than long term
financing on improved,  owner-occupied  real estate because of the uncertainties
of  construction,  including  the  possibility  of costs  exceeding  the initial
estimates  and the need to obtain a tenant or purchaser if the property will not
be owner-occupied.  Fidelity generally attempts to mitigate the risks associated
with  multi-family  residential,  nonresidential  real  estate and  construction
lending by, among other things,  lending  primarily in its market area and using
low loan-to-value ratios in the underwriting process.

         Consumer  Loans.  At December 31,  1998,  consumer  loans  totaled $9.8
million or 2.3% of the total  loan  portfolio  (including  loans held for sale),
before net items, and consisted primarily of home equity loans, automobile loans
and loans secured by deposit accounts.

         Loan  Origination  and Other Fees.  In  addition to interest  earned on
loans,  Fidelity  receives  loan  origination  fees or "points" for  originating
loans. Loan points are a percentage of the principal amount of the mortgage loan
and are charged to the borrower in connection with the origination of the loan.

         In accordance with Statement of Financial  Accounting Standards No. 91,
which deals with the accounting  for  non-refundable  fees and costs  associated
with  originating  or acquiring  loans,  Fidelity's  loan  origination  fees and
certain related direct loan origination costs are offset,  and the resulting net
amount is deferred and amortized as interest income over the contractual life of
the related loans as an  adjustment to the yield of such loans.  At December 31,
1998,  Fidelity had  $579,000 of net loan costs which had been  deferred and are
being recognized as an adjustment to income over the estimated maturities of the
related loans.

Asset Quality

         Loan Delinquencies. When a borrower fails to make a required payment on
a loan,  Fidelity attempts to cure the deficiency by contacting the borrower and
seeking payment. Contacts are generally made following the fifteenth day after a
payment  is due,  at which  time a late  payment  is  assessed.  In most  cases,
deficiencies  are cured promptly.  If a delinquency  extends beyond 15 days, the
loan and payment  history is reviewed  and efforts are made to collect the loan.
While  Fidelity  generally  prefers  to work  with  borrowers  to  resolve  such
problems,  when the account becomes 90 days delinquent,  Fidelity does institute
foreclosure or other proceedings, as necessary, to minimize any potential loss.



                                       10
<PAGE>


         The following table sets forth information  concerning delinquent loans
at December 31, 1998, in dollar  amount and as a percentage of Fidelity's  total
loan portfolio  (before net items).  The amounts  presented  represent the total
outstanding  principal  balances  of the related  loans,  rather than the actual
payment amounts which are past due.

<TABLE>
<CAPTION>



                                      Single-family              Multi-family              Nonresidential
                                       Residential               Residential                Real Estate           

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

                                  Amount     Percentage     Amount     Percentage     Amount      Percentage     
                                  ------     ----------     ------     ----------     ------      ----------     

                                                                       (Dollars in Thousands)
<S>                                   <C>         <C>        <C>          <C>           <C>          <C>                          
Loans delinquent for:
  30 - 59 days                      $2,811        .7%        $--           --%         $234           .1%        
  60 - 89 days                         452        .1          74           --            --           --         
  90 days and over                   1,770        .4          --           --            --           --         
                                     -----       ---          --           --           ---           --         
    Total delinquent loans          $5,033       1.2%        $74           --%         $234           .1%        
                                     =====       ===          ==           ==           ===           ==         

</TABLE>

<TABLE>
<CAPTION>

                               
                                     Construction               Consumer                   Total

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

                                 Amount     Percentage    Amount    Percentage      Amount     Percentage
                                 ------     ----------    ------    ----------      ------     ----------

                                                        (Dollars in Thousands)
<S>                              <C>            <C>         <C>         <C>          <C>          <C>
Loans delinquent for:
  30 - 59 days                    $--            --%      $ 76          --%        $3,121          .8%
  60 - 89 days                     --            --         30          --            556          .1
  90 days and over                 --            --         38          --          1,808          .4
                                   --            --        ---          --          -----         ---
    Total delinquent loans        $--            --%      $144          --%        $5,485         1.3%
                                   ==            ==        ===          ==          =====         ===


</TABLE>

                                       11
<PAGE>


         Non-Performing  Assets.  All loans are reviewed on a regular  basis and
are  placed on  non-accrual  status  when,  in the  opinion of  management,  the
collection  of additional  interest is deemed  insufficient  to warrant  further
accrual. As a matter of policy,  Fidelity does not accrue interest on loans past
due 90 days or more  except  when  the  estimated  value of the  collateral  and
collection efforts are deemed sufficient to ensure full recovery. Consumer loans
generally  are  charged-off  when the  loan  becomes  over 120 days  delinquent.
Interest  accrued and unpaid at the time a loan is placed on non-accrual  status
is charged against  interest income.  Subsequent  payments are either applied to
the outstanding  principal balance or recorded as interest income,  depending on
the assessment of the ultimate collectibility of the loan.

         Real estate acquired through foreclosure is carried at the lower of the
loan's unpaid  principal  balance  (cost) or fair value less  estimated  selling
expenses at the date of  acquisition.  A loan  charge-off  is  recorded  for any
writedown in the loan's carrying value to fair value at the date of acquisition.
Real  estate  loss  provisions  are  recorded  if  the  properties'  fair  value
subsequently  declines  below the value  determined  at the  recording  date. In
determining  the lower of cost or fair value at  acquisition,  costs relating to
development  and  improvement  of property  are  considered.  Costs  relating to
holding real estate  acquired  through  foreclosure,  net of rental income,  are
charged against earnings as incurred.

         The following table sets forth the amounts and categories of Fidelity's
non-performing assets at the dates indicated. Fidelity did not have any accruing
loans 90 days or more delinquent or troubled debt  restructurings  at any of the
dates presented.

<TABLE>
<CAPTION>

                                                                             December 31,

                                                     -------------------------------------------------------------
                                                       1998         1997        1996          1995          1994
                                                     --------     --------    --------      --------      --------

                                                                        (Dollars in Thousands)
<S>                                                    <C>          <C>          <C>           <C>           <C>                  
Non-accruing loans:
  Single-family residential                           $1,770        $957       $  924         $  949         $652
  Multi-family residential and
    nonresidential real estate                            --          --          206             58          187
  Consumer and other                                      38          --           --             --           --
                                                       -----         ---        -----          -----          ---

     Total non-performing loans                        1,808         957        1,130          1,007          839

Real estate owned:
  Single-family residential real estate                   32          --           --             --           85
  Multi-family residential and
    nonresidential real estate                            --          --           --             --           --
                                                       -----         ---        -----          -----          ---

     Total real estate owned                              32          --           --             --           85
                                                       -----         ---        -----          -----          ---
     Total non-performing assets                      $1,840        $957       $1,130         $1,007         $924
                                                       =====         ===        =====          =====          ===
     Total non-performing loans
       as a percentage of total loans                    .42%        .22%         .28%           .54%         .47%
                                                         ===         ===          ===            ===          ===
     Total non-performing assets as
       a percentage of total assets                      .35%        .18%         .23%           .44%         .43%
                                                         ===         ===          ===            ===          ===
</TABLE>


                                       12
<PAGE>


         The  interest  income  that would have been  recorded  during the years
ended December 31, 1998, 1997, 1996, 1995 and 1994 if Fidelity's  non-performing
loans at the end of such periods had been current in accordance with their terms
during  such  periods  was  $57,000,  $25,000,  $59,000,  $12,000  and  $51,000,
respectively.  The amount of interest  income that was actually  received during
the years ended  December 31, 1998,  1997,  1996,  1995 and 1994 with respect to
such non-performing loans amounted to approximately $14,000,  $57,000,  $74,000,
$65,000 and $42,000, respectively.

         Classified  Assets.  Federal  regulations  require  that  each  insured
savings  association  classify its assets on a regular  basis.  In addition,  in
connection with  examinations of insured  institutions,  federal  examiners have
authority to identify  problem assets and, if appropriate,  classify them. There
are three  classifications  for problem  assets:  "substandard,"  "doubtful" and
"loss."  Substandard  assets  have  one  or  more  defined  weaknesses  and  are
characterized  by the distinct  possibility  that the insured  institution  will
sustain some loss if the  deficiencies  are not corrected.  Doubtful assets have
the weaknesses of substandard assets with the additional characteristic that the
weaknesses  make  collection  or  liquidation  in full on the basis of currently
existing  facts,  conditions  and  values  questionable,  and  there  is a  high
possibility of loss. An asset classified loss is considered uncollectible and of
such  little  value  that  continuance  as an  asset of the  institution  is not
warranted.   Another  category   designated   "special  mention"  also  must  be
established  and maintained for assets which do not currently  expose an insured
institution  to a  sufficient  degree  of  risk  to  warrant  classification  as
substandard,  doubtful or loss.  Assets  classified as  substandard  or doubtful
require the institution to establish  general  allowances for loan losses. If an
asset or portion thereof is classified loss, the insured institution must either
establish  specific  allowances  for loan  losses  in the  amount of 100% of the
portion of the asset  classified  loss, or charge-off such amount.  General loss
allowances  established  to cover possible  losses related to assets  classified
substandard  or  doubtful  may  be  included  in  determining  an  institution's
regulatory capital,  while specific valuation  allowances for loan losses do not
qualify as regulatory  capital.  Federal  examiners may disagree with an insured
institution's classifications and amounts reserved.

         Exclusive of assets  classified loss and which have been fully reserved
or charged-off,  Fidelity's  classified assets at December 31, 1998 consisted of
$1.4  million of loans  classified  as special  mention,  $2.2  million of loans
classified as substandard and $406,000 of loans classified as doubtful.

         Allowance  for Loan Losses.  It is  management's  policy to maintain an
allowance for  estimated  losses on loans based upon an assessment of prior loss
experience,  the volume  and type of lending  conducted  by  Fidelity,  industry
standards, past due loans, general economic conditions and other factors related
to the collectibility of the loan portfolio.  Although  management believes that
it uses the best  information  available  to make  such  determinations,  future
adjustments  to  allowances  may  be  necessary,   and  net  earnings  could  be
significantly   affected,   if  circumstances   differ  substantially  from  the
assumptions used in making the initial determinations.



                                       13
<PAGE>


         Effective December 21, 1993, the OTS, in conjunction with the Office of
the Comptroller of the Currency,  the FDIC and the Federal Reserve Board, issued
an  Interagency  Policy  Statement  on the  Allowance  for Loan and Lease Losses
("Policy  Statement").  The  Policy  Statement  includes  guidance  (i)  on  the
responsibilities  of  management  for the  assessment  and  establishment  of an
adequate allowance and (ii) for the agencies' examiners to use in evaluating the
adequacy  of  such  allowance  and  the  policies  utilized  to  determine  such
allowance.  The Policy Statement also sets forth  quantitative  measures for the
allowance with respect to assets  classified  substandard  and doubtful and with
respect  to  the  remaining   portion  of  an   institution's   loan  portfolio.
Specifically,  the  Policy  Statement  sets  forth  the  following  quantitative
measures  which  examiners  may  use  to  determine  the  reasonableness  of  an
allowance: (i) 50% of the portfolio that is classified doubtful; (ii) 15% of the
portfolio  that is  classified  substandard  and (iii) for the  portions  of the
portfolio that have not been  classified  (including  loans  designated  special
mention), estimated credit losses over the upcoming twelve months based on facts
and  circumstances  available on the evaluation date. While the Policy Statement
sets forth this quantitative measure, such guidance is not intended as a "floor"
or "ceiling".

         At December 31, 1998,  Fidelity's allowance for loan losses amounted to
$1.7 million, which was general in nature.

         The following table sets forth an analysis of Fidelity's  allowance for
loan losses during the periods indicated.
<TABLE>
<CAPTION>


                                                                          Year Ended December 31,

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

                                                  1998          1997             1996             1995            1994
                                                  ----          ----             ----             ----            ----
                                                                       (Dollars in Thousands)
<S>                                               <C>            <C>             <C>              <C>              <C>

Total loans outstanding                        $429,513      $442,904         $402,025        $187,846         $180,309
                                                =======       =======          =======         =======          =======

Average loans outstanding, net                 $426,420      $427,912         $234,133        $180,935         $170,340
                                                =======       =======          =======         =======          =======

Balance at beginning of period                 $  1,658      $  1,558         $    818        $    783         $    803

Charge-offs:
  Single-family residential                          59             1               29              36               23
  Non-residential                                     3            --               --              --               41
                                                -------       -------          -------         -------          -------

    Total charge-offs                                62             1               29              36               64

Recoveries                                           --            --               --              --               --
                                                -------       -------          -------         -------          -------

Net charge-offs                                      62             1               29              36               64
Provision for losses on loans                       107           101              129              71               44
Increase attributable to Merger                      --            --              640              --               --
                                                -------       -------          -------         -------          -------

Balance at end of period                         $1,703      $  1,658        $   1,558        $    818         $    783
                                                  =====       =======          =======         =======          =======

Allowance for loan losses as a
  percent of total loans outstanding               .40%          .37%             .39%            .44%             .43%
                                                   ===           ===              ===             ===

Ratio of net charge-offs to
  average loans outstanding                        .01%           --              .01%            .02%             .04%
                                                   ===            ==              ===             ===              ===


</TABLE>



                                       14
<PAGE>


         The following table sets forth information concerning the allocation of
Fidelity's allowance for loan losses by loan categories at the dates indicated.
<TABLE>
<CAPTION>

                                                               December 31,

                                          1998                      1997                     1996      
                                            Percent of            Percent of             Percent of    
                                               Total                 Total                  Total      
                                             Loans by              Loans by               Loans by     
                                   Amount    Category     Amount   Category      Amount   Category     

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

                                                            (Dollars in Thousands)
<S>                                  <C>        <C>          <C>      <C>         <C>        <C>
Single-family residential           $ 614     75.8%       $  530     77.1%      $1,246      80.0%      
loans
Multi-family residential loans        137       5.5          153      5.9          100       6.4       
Nonresidential real estate            724      11.4          709     11.4          128       8.2       
loans
Construction loans                    111       5.0           79      3.5           53       3.4       
Consumer loans                        117       2.3          187      2.1           31       2.0       
                                    -----     -----        -----    -----        -----     -----
     Total                         $1,703     100.0%      $1,658    100.0%      $1,558     100.0%      
                                    =====     =====        =====    =====        =====     =====       

</TABLE>



<TABLE>
<CAPTION>
                                                       December 31,
                                           1995                     1994
                                               Percent                  Percent of
                                               of Total                    Total
                                                Loans by                 Loans by
                                    Amount      Category     Amount      Category

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

                                                  (Dollars in Thousands)
<S>                                  <C>          <C>         <C>           <C>
Single-family residential            $525        75.7%        $346         74.6%
loans
Multi-family residential loans        106        10.0          133          8.6
Nonresidential real estate            162        11.1          272         13.1
loans
Construction loans                     22         2.6           32          3.5
Consumer loans                          3         0.6           --          0.2
                                      ---       -----          ---        -----
     Total                           $818       100.0%        $783        100.0%
                                      ===       =====          ===        =====
</TABLE>


                                       15

<PAGE>


         Management of Fidelity  believes  that the reserves it has  established
are  adequate  to cover any  potential  losses  in  Fidelity's  loan  portfolio.
However,  future adjustments to these reserves may be necessary,  and Fidelity's
results of  operations  could be  adversely  affected  if  circumstances  differ
substantially   from  the   assumptions   used  by   management  in  making  its
determinations in this regard.

Investment Activities

         General. Fidelity's mortgage-backed and investment securities portfolio
is managed in accordance with a written  investment  policy adopted by the Board
of Directors and administered by the Savings Bank's  Asset/Liability  Committee.
All transactions must be approved by the Asset/Liability  Committee and reported
to the Board of Directors.

         Fidelity  accounts for  investment  and  mortgage-backed  securities in
accordance  with SFAS No. 115  "Accounting  for Certain  Investments in Debt and
Equity Securities" (the "Statement"). The Statement requires that investments be
categorized  as  held-to-maturity,  trading or  available  for sale.  Securities
classified  as held to maturity are carried at cost only if the Savings Bank has
the positive  intent and ability to hold these  securities to maturity.  Trading
securities  and  securities  available  for sale are  carried at fair value with
resulting  unrealized  gains or losses  charged to operations  or  stockholders'
equity,  respectively.  At December  31, 1998,  the  Company's  equity  accounts
reflected a net unrealized loss of $26,000 with respect to securities classified
as available for sale.

         Mortgage-Backed  Securities.  Mortgage-backed  securities  represent  a
participation  interest  in a pool of  single-family  or  multi-family  mortgage
loans, the principle and interest payments on which, in general, are passed from
the mortgage  originators,  through  intermediaries  that pool and repackage the
participation  interests in the form of  securities,  to  investors  such as the
Savings Bank. Such  intermediaries may be private issuers, or agencies including
the Federal Home Loan Mortgage Corporation ("FHLMC"),  Federal National Mortgage
Association  ("FNMA") and the Government National Mortgage  Association ("GNMA")
that guarantee the payment of principal and interest to investors.

         Mortgage-backed  securities  typically are issued with stated principal
amounts,  and the  securities  are backed by pools of mortgages  that have loans
with  interest  rates that are within a range and have varying  maturities.  The
underlying pool of mortgages can be composed of either fixed- or adjustable-rate
mortgage loans. Mortgage-backed securities are generally referred to as mortgage
participation  certificates  or  pass-through  certificates.  As a  result,  the
interest rate risk  characteristics  of the underlying pool of mortgages  (e.g.,
fixed-rate or  adjustable-rate)  as well as prepayment,  default and other risks
associated  with the  underlying  mortgages  are  passed  on to the  certificate
holder. The life of a mortgage-backed pass-through security is equal to the life
of the underlying mortgages.



                                       16
<PAGE>


         Fidelity  has  invested in a portfolio  of  mortgage-backed  securities
which are insured or guaranteed by the FHLMC, the GNMA or FNMA.  Mortgage-backed
securities increase the quality of Fidelity's assets by virtue of the guarantees
that back them, are more liquid than  individual  mortgage loans and may be used
to collateralize borrowings or other obligations of Fidelity.

         The following  table sets forth  information  relating to the amortized
cost and market value of Fidelity's  mortgage-backed  securities at December 31,
1998, 1997 and 1996 (including those designated as available for sale):

<TABLE>
<CAPTION>

                                                                      At December 31,
                                                  1998                      1997                      1996

                                          Amortized     Market      Amortized     Market     Amortized      Market
                                             Cost        Value        Cost         Value        Cost        Value
                                                                        (In Thousands)
<S>                                         <C>          <C>           <C>        <C>           <C>           <C>
         Held to maturity:
   FHLMC participation certificates        $   451    $   445        $   574    $   575       $   696     $   689

    GNMA participation certificates          7,248      7,248         11,632     11,797         8,354       8,434

    FNMA participation certificates            221        230            236        246           306         319

        Collateralized mortgage         
            obligations                     21,762     21,805          1,085      1,088         1,388       1,389
                                            ------     ------         ------     ------        ------      ------
          Total mortgage-backed
            securities held to               
            maturity                        29,682     29,728         13,527     13,706        10,744      10,831

        Available for sale:
   FHLMC Participation Certificates          8,418      8,434         12,610     12,683        19,767      19,926

    GNMA Participation Certificates          8,055      8,013          4,707      4,752         6,028       6,062

    FNMA Participation Certificates          6,217      6,181          7,160      7,146         4,776       4,772

        Collateralized mortgage
           obligations                       2,557      2,577          1,240      1,246            --          --
                                            ------     ------         ------     ------        ------      ------
         
          Total mortgage-backed
            securities designated
            as available for sale           25,247     25,205         25,717     25,827        30,571      30,760
                                            ------     ------         ------     ------        ------      ------
        
  Total mortgage-backed securities         $54,929    $54,933        $39,244    $39,533       $41,315     $41,591
                                            ======     ======         ======     ======        ======      ======
</TABLE>



                                       17
<PAGE>


         The   following   table  sets   forth  the   activity   in   Fidelity's
mortgage-backed  securities  portfolio during the periods  indicated  (including
those designated as available for sale):

<TABLE>
<CAPTION>

                                                                    At or For the Year Ended December 31,
                                                                1998                 1997                  1996
                                                                ----                 ----                  ----
                                                                          (Dollars in Thousands)
<S>                                                              <C>                <C>                   <C>
Mortgage-backed securities at
  beginning of period                                         $39,354              $41,504               $29,378
Purchases                                                      35,479               19,173                 3,173
Mortgage-backed securities received through loan
  securitization                                                   --                8,099                    --
Acquisition of mortgage-backed securities
  through Merger                                                   --                   --                44,435
Sales of mortgage-backed securities                                --              (22,434)              (29,232)
Unrealized gain (loss) on securities designated
  as available for sale                                          (152)                 (79)                  334
Repayments                                                    (19,615)              (6,845)               (6,526)
Premium amortization                                             (179)                 (64)                  (58)
                                                               ------               ------                ------     
Mortgage-backed securities at end
  of period                                                   $54,887              $39,354               $41,504
                                                               ======               ======                ======
Weighted average yield at end of
  period                                                        6.32%                6.83%                 7.29%

</TABLE>

         At December 31, 1998, of the $54.9 million portfolio,  $3.9 million was
scheduled to mature in one year or less,  $12.9  million was scheduled to mature
in between one and five years,  $9.5 million was  scheduled to mature in between
five and ten years,  and $28.6  million was scheduled to mature after ten years.
Due  to  repayments  of  the  underlying   loans,   the  actual   maturities  of
mortgage-backed  securities  generally are substantially less than the scheduled
maturities.

         Of the $54.9  million of  mortgage-backed  securities  at December  31,
1998,  $32.1 million had fixed  interest  rates and $22.8  million  consisted of
adjustable-rate  securities.  Of Fidelity's total investment in  mortgage-backed
securities at December 31, 1998, $15.3 million  consisted of GNMA  certificates,
$6.4 million  consisted of FNMA  certificates,  $8.9 million  consisted of FHLMC
certificates,  and $24.3  million  consisted  of other  collateralized  mortgage
obligations ("CMOs").

         Investment  Securities.  The Savings Bank  invests in various  types of
liquid assets that are permissible  investments for federally  chartered savings
banks,  including  United  States  Treasury and  securities  of various  federal
agencies. The Savings Bank's current investment policy only permits purchases of
securities in one of the three highest grades by a nationally  recognized rating
agency  and does not permit  purchases  of  securities  of  noninvestment  grade
quality.




                                       18
<PAGE>


         The following  table sets forth  information  relating to the amortized
cost  and  market  value  of  Fidelity's  investment  securities  designated  as
available for sale at the dates indicated:

<TABLE>
<CAPTION>

                                                                 December 31,
                                       1998                         1997                        1996


                               Amortized     Market      Amortized       Market       Amortized       Market
                                  Cost        Value         Cost          Value         Cost           Value

                                                            (Dollars in Thousands)
<S>                                <C>          <C>          <C>            <C>            <C>           <C>
U.S. Government
  agency obligations              $835        $838         $5,869        $5,908        $ 8,502        $ 8,530
U.S. Treasury notes                 --          --             --            --          7,482          7,500
Corporate equity
  securities                        --          --             84           112             64             90
                                   ---         ---          -----         -----         ------         ------
                                  $835        $838         $5,953        $6,020        $16,048        $16,120
                                   ===         ===          =====         =====         ======         ======
Weighted average yield
  at end of period                6.15%                      6.92%                        6.50%
                                  ====                       ====                         ====


</TABLE>















                                       19
<PAGE>


         The  following  table sets  forth  amortized  cost and market  value of
investment securities by contractual terms to maturity at December 31, 1998:

<TABLE>
<CAPTION>

                             Less Than            One to                Five to              More Than
                             One Year           Five Years             Ten Years             Ten Years                 Total
                        Amortized   Market   Amortized   Market    Amortized   Market   Amortized    Market    Amortized     Market
                           Cost      Value      Cost      Value      Cost       Value      Cost       Value       Cost        Value
<S>                        <C>        <C>        <C>        <C>       <C>       <C>        <C>         <C>         <C>         <C>
 U.S. Government
  agency obligations     $  --      $  --     $  --      $  --       $835      $838      $  --       $  --        $835        $838
                          ====       ====      ====       ====        ===       ===       ====        ====         ===         ===

</TABLE>




















                                       20
<PAGE>


Sources of Funds

         General.  Deposits  are the  primary  source  of  Fidelity's  funds for
lending and other investment purposes. In addition to deposits, Fidelity derives
funds from loan  principal  repayments and advances from the FHLB of Cincinnati.
Loan repayments are a relatively  stable source of funds,  while deposit inflows
and outflows are  significantly  influenced by general  interest rates and money
market  conditions.  Borrowings may be used on a short-term  basis to compensate
for reductions in the availability of funds from other sources. They may also be
used on a longer term basis for general business purposes.

         Deposits.  Fidelity's  deposits are attracted  principally  from within
Fidelity's  primary  market area  through the  offering of a broad  selection of
deposit  instruments,  including NOW accounts,  money market  accounts,  regular
savings accounts,  and term certificate  accounts.  Included among these deposit
products are individual  retirement account  certificates of approximately $57.7
million at December 31, 1998.  Deposit  account  terms vary,  with the principal
differences being the minimum balance required,  the time periods the funds must
remain on deposit and the interest rate.

         Interest  rates  paid,  maturity  terms,  service  fees and  withdrawal
penalties are  established  by Fidelity on a periodic  basis.  Determination  of
rates and terms are predicated on funds acquisition and liquidity  requirements,
rates paid by competitors, growth goals and federal regulations.

         Fidelity does not advertise for deposits  outside its local market area
or utilize the services of deposit brokers.

         The  following  table sets forth the dollar  amount of  deposits in the
various types of deposit programs offered by Fidelity at the dates indicated.

<TABLE>
<CAPTION>

                                                                      December 31,
                                                1998                      1997                      1996
                                         Amount      Percent      Amount       Percent      Amount       Percent

                                                                 (Dollars in Thousands)
<S>                                        <C>           <C>         <C>           <C>         <C>           <C>
Certificate accounts:

  3.00 - 4.00%                           $  4,786      1.16%    $  2,067         0.48%    $     --           --%
  4.01 - 6.00%                            258,514     62.73      176,776        40.92      234,757        57.52
  6.01 - 8.00%                             52,255     12.68      157,898        36.55       77,835        19.07
  8.01 - 10.00%                             2,083      0.51        3,883         0.89        3,177         0.78
                                          -------    ------      -------       -------     -------       ------

     Total certificate accounts           317,638     77.08      340,624        78.84      315,769        77.37
                                          -------    ------      -------       ------      -------       ------

Transaction accounts:

  Passbook accounts                        36,526      8.86       40,374         9.34       44,798        10.97

  Money market accounts                    25,324      6.14       25,730         5.96       24,721         6.06

  NOW accounts                             32,634      7.92       25,296         5.86       22,871         5.60
                                          -------    ------      -------       ------      -------       ------

     Total transaction accounts            94,484     22.92       91,400        21.16       92,390        22.63
                                          -------    ------      -------       ------      -------       ------

     Total deposits                      $412,122    100.00%    $432,024       100.00%    $408,159       100.00%
                                          =======    ======      =======       ======      =======       ======
</TABLE>



                                       21
<PAGE>


         The  following  table sets forth the  savings  activities  of  Fidelity
during the periods indicated.
<TABLE>
<CAPTION>

                                                                 Year Ended December 31,
                                                     1998                 1997                 1996
                                                     ----                 ----                 ----
                                                                     (In Thousands)
<S>                                                  <C>                 <C>                   <C>
Deposits(1)                                       $1,090,881            $982,826             $684,220
Withdrawals                                       (1,130,696)           (979,976)            (467,465)
                                                   ---------             -------              -------

  Net increase (decrease) before interest
    credited and other                               (39,815)              2,850              216,755

Interest credited and other                           19,913              21,015               10,707
                                                   ---------             -------              -------

  Net increase (decrease) in deposits             $  (19,902)           $ 23,865             $227,462
                                                     ======              =======              =======
</TABLE>

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

(1)  The deposits at December  31, 1996  reflect the $207.8  million of deposits
     acquired  by  Fidelity  as a result of the  Merger  with  Circle  Financial
     Corporation.

         The following  table shows the interest  rate and maturity  information
for Fidelity's certificates of deposit at December 31, 1998.

<TABLE>
<CAPTION>

                                                              Maturity Date
   Interest Rate      One Year or Less    Over 1-2 Years     Over 2-3 Years      Over 3 Years           Total
                                                             (In Thousands)
<S>                         <C>                 <C>                 <C>                <C>               <C>
3.00 - 4.00%              $  4,786            $    --             $   --             $   --           $  4,786
4.01 - 6.00%               207,910             43,866              4,508              2,230            258,514
6.01 - 8.00%                40,724              9,005              1,258              1,268             52,255
8.01 - 10.00%                  841              1,064                178                 --              2,083
                           -------             ------              -----              -----            -------

  Total                   $254,261            $53,935             $5,944             $3,498           $317,638
                           =======             ======              =====              =====            =======
</TABLE>

     The following table sets forth the maturities of Fidelity's certificates of
deposit having principal amounts of $100,000 or more at December 31, 1998.

<TABLE>
<CAPTION>

               Certificates of deposit maturing in quarter ending:
-----------------------------------------------------------------------------


                                                             (In Thousands)
<S>                                                                <C>

March 31, 1999                                                   $ 9,632
June 30, 1999                                                      8,579
September 30, 1999                                                 9,218
December 31, 1999                                                  6,214
After December 31, 1999                                           10,584
                                                                  ------
  Total certificates of deposit with
   balances of $100,000 or more                                  $44,227
                                                                  ======

</TABLE>


                                       22
<PAGE>


         Borrowings.  Fidelity may obtain  advances  from the FHLB of Cincinnati
upon the  security  of the common  stock it owns in that bank and certain of its
residential   mortgage   loans,    provided   certain   standards   related   to
creditworthiness  have been met.  Such  advances  are made  pursuant  to several
credit  programs,  each  of  which  has its  own  interest  rate  and  range  of
maturities.  Such  advances are  generally  available to meet seasonal and other
withdrawals  of  deposit   accounts  and  to  permit  increased   lending.   See
"Regulation-Federal  Home Loan Bank System." At December 31, 1998,  Fidelity had
$34.7 million of advances from the FHLB of Cincinnati.

         The  following  table  sets forth the  maximum  month-end  balance  and
average balance of Fidelity's FHLB advances during the periods indicated.

<TABLE>
<CAPTION>

                                                           Year Ended December 31,
                                                 1998                1997               1996
                                                           (Dollars In Thousands)

<S>                                               <C>                 <C>                 <C>
Maximum Balance                                $46,234             $34,478            $29,672

Average Balance                                 39,378              26,208             17,794

Weighted average interest rate of
  FHLB advances                                  6.08%               6.25%              6.19%

</TABLE>

         The  following  table sets forth certain  information  as to Fidelity's
FHLB advances at the dates indicated.

<TABLE>
<CAPTION>
                                                            December 31,
                                             1998               1997               1996
                                                       (Dollars In Thousands)
<S>                                          <C>                 <C>               <C>
FHLB advances(1)                           $34,735            $34,233           $20,186

Weighted average interest rate
  of FHLB advances                           6.02%              6.21%             6.22%


</TABLE>

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

(1)  Fidelity acquired $27.4 million of FHLB advances as a result of the Merger,
     of which $2.5 million remained at December 31, 1996.

         Employees.  Fidelity  had  97  full-time  employees  and  12  part-time
employees at December  31, 1998.  None of these  employees is  represented  by a
collective  bargaining  agreement,  and  Fidelity  believes  that it enjoys good
relations with its personnel.


                                       23
<PAGE>


Competition

         Fidelity  faces  strong  competition  both in  attracting  deposits and
making  real  estate  loans.  Its  most  direct  competition  for  deposits  has
historically come from other savings associations,  credit unions and commercial
banks located in the greater  Cincinnati  area,  including many large  financial
institutions which have greater financial and marketing  resources  available to
them.  In addition,  during  times of high  interest  rates,  Fidelity has faced
additional  significant  competition for investors'  funds from short-term money
market securities and other corporate and government securities.  The ability of
Fidelity  to  attract  and retain  savings  deposits  depends on its  ability to
generally  provide  a rate of  return,  liquidity  and risk  comparable  to that
offered by competing investment opportunities.

         Fidelity   experiences   strong   competition  for  real  estate  loans
principally  from other savings  associations,  commercial  banks,  and mortgage
banking companies.  Fidelity competes for loans principally through the interest
rates and loan fees it charges  and the  efficiency  and  quality of services it
provides  borrowers.  Competition  may  increase  as a result of the  continuing
reduction  of   restrictions   on  the   interstate   operations   of  financial
institutions.


                                   REGULATION

         Set forth below is a brief  description of certain laws and regulations
which  currently  relate to the  regulation  of the  Company and  Fidelity.  The
description of these laws and  regulations,  as well as descriptions of laws and
regulations  contained  elsewhere herein, does not purport to be complete and is
qualified in its entirety by reference to applicable laws and regulations.

The Company

         General.  The Company, as a savings and loan holding company within the
meaning of the Home Owners' Loan Act ("HOLA"),  has registered  with the OTS and
is  subject  to  OTS  regulations,   examinations,   supervision  and  reporting
requirements. As a subsidiary of a savings and loan holding company, the Savings
Bank is subject to certain  restrictions  in its  dealings  with the Company and
affiliates thereof.


                                       24
<PAGE>


         Activities  Restrictions.  There are generally no  restrictions  on the
activities of a savings and loan holding company which holds only one subsidiary
savings  institution.  However, if the Director of the OTS determines that there
is  reasonable  cause to believe  that the  continuation  by a savings  and loan
holding  company of an  activity  constitutes  a serious  risk to the  financial
safety,  soundness or  stability  of its  subsidiary  savings  institution,  the
Director may impose such  restrictions as deemed necessary to address such risk,
including  limiting (i) payment of dividends  by the savings  institution;  (ii)
transactions  between the savings institution and its affiliates;  and (iii) any
activities of the savings  institution that might create a serious risk that the
liabilities  of the  holding  company and its  affiliates  may be imposed on the
savings institution.  Notwithstanding the above rules as to permissible business
activities  of  unitary  savings  and loan  holding  companies,  if the  savings
institution  subsidiary  of such a  holding  company  fails to meet a  qualified
thrift lender ("QTL") test,  then such unitary holding company also shall become
subject to the activities  restrictions  applicable to multiple savings and loan
holding  companies  and,  unless the savings  institution  requalifies  as a QTL
within  one year  thereafter,  shall  register  as,  and  become  subject to the
restrictions  applicable to, a bank holding  company.  See "- The Savings Bank -
Qualified Thrift Lender Test."

         If the Company were to acquire control of another savings  institution,
other than through merger or other business  combination  with the Savings Bank,
the Company would thereupon  become a multiple savings and loan holding company.
Except where such acquisition is pursuant to the authority to approve  emergency
thrift  acquisitions and where each subsidiary savings institution meets the QTL
test,  as set  forth  below,  the  activities  of  the  Company  and  any of its
subsidiaries   (other  than  the  Savings  Bank  or  other  subsidiary   savings
institutions) would thereafter be subject to further  restrictions.  Among other
things, no multiple savings and loan holding company or subsidiary thereof which
is not a savings  institution shall commence or continue for a limited period of
time after  becoming a multiple  savings and loan holding  company or subsidiary
thereof any  business  activity,  upon prior  notice to, and no objection by the
OTS,  other  than:  (i)  furnishing  or  performing  management  services  for a
subsidiary  savings  institution;  (ii) conducting an insurance agency or escrow
business;  (iii) holding,  managing,  or liquidating assets owned by or acquired
from a subsidiary savings institution;  (iv) holding or managing properties used
or occupied by a subsidiary  savings  institution;  (v) acting as trustee  under
deeds of trust;  (vi) those  activities  authorized by regulation as of March 5,
1987 to be engaged in by multiple savings and loan holding  companies;  or (vii)
unless the Director of the OTS by regulation prohibits or limits such activities
for savings and loan  holding  companies,  those  activities  authorized  by the
Federal  Reserve  Board  as  permissible  for  bank  holding  companies.   Those
activities described in (vii) above also must be approved by the Director of the
OTS prior to being engaged in by a multiple savings and loan holding company.



                                       25
<PAGE>


         Limitations  on  Transactions  with  Affiliates.  Transactions  between
savings  institutions  and any affiliate are governed by Sections 23A and 23B of
the Federal Reserve Act. An affiliate of a savings institution is any company or
entity which  controls,  is  controlled  by or is under common  control with the
savings institution. In a holding company context, the parent holding company of
a  savings  institution  (such  as the  Company)  and any  companies  which  are
controlled  by  such  parent  holding  company  are  affiliates  of the  savings
institution.  Generally,  Sections 23A and 23B (i) limit the extent to which the
savings  institution or its  subsidiaries  may engage in "covered  transactions"
with any one affiliate to an amount equal to 10% of such  institution's  capital
stock and surplus,  and contain an aggregate limit on all such transactions with
all  affiliates  to an amount equal to 20% of such capital stock and surplus and
(ii) require that all such  transactions be on terms  substantially the same, or
at least as favorable,  to the  institution or subsidiary as those provided to a
non-affiliate.  The term  "covered  transaction"  includes  the making of loans,
purchase  of  assets,  issuance  of a  guarantee  and  similar  other  types  of
transactions.  In addition to the restrictions  imposed by Sections 23A and 23B,
no savings  institution may (i) loan or otherwise extend credit to an affiliate,
except for any affiliate which engages only in activities  which are permissible
for bank holding  companies,  or (ii)  purchase or invest in any stocks,  bonds,
debentures, notes or similar obligations of any affiliate, except for affiliates
which are subsidiaries of the savings institution.

         In addition,  Sections 22(h) and (g) of the Federal  Reserve Act places
restrictions   on  loans  to  executive   officers,   directors   and  principal
stockholders. Under Section 22(h), loans to a director, an executive officer and
to a  greater  than  10%  stockholder  of a  savings  institution,  and  certain
affiliated  interests  of  either,  may not  exceed,  together  with  all  other
outstanding  loans to such person and affiliated  interests,  the  institution's
loans  to one  borrower  limit  (generally  equal  to  15% of the  institution's
unimpaired  capital and  surplus).  Section  22(h) also  requires  that loans to
directors,  executive  officers  and  principal  stockholders  be made on  terms
substantially  the same as offered in comparable  transactions  to other persons
unless the loans are made pursuant to a benefit or compensation program that (i)
is widely  available  to  employees  of the  institution  and (ii) does not give
preference  to any  director,  executive  officer or principal  stockholder,  or
certain  affiliated  interests  of either,  over other  employees of the savings
institution. Section 22(h) also requires prior board approval for certain loans.
In  addition,  the  aggregate  amount  of  extensions  of  credit  by a  savings
institution to all insiders cannot exceed the institution's  unimpaired  capital
and surplus. Furthermore,  Section 22(g) places additional restrictions on loans
to executive officers.  At December 31, 1998, the Savings Bank was in compliance
with the above restrictions.

         Restrictions  on  Acquisitions.  Except  under  limited  circumstances,
savings and loan holding companies are prohibited from acquiring,  without prior
approval  of  the  Director  of the  OTS,  (i)  control  of  any  other  savings
institution or savings and loan holding company or substantially  all the assets
thereof or (ii) more than 5% of the voting  shares of a savings  institution  or
holding  company  thereof  which is not a  subsidiary.  Except  with  the  prior
approval  of the  Director  of the OTS,  no director or officer of a savings and
loan holding  company or person owning or controlling by proxy or otherwise more
than  25%  of  such  company's   stock,  may  acquire  control  of  any  savings
institution,  other  than a  subsidiary  savings  institution,  or of any  other
savings and loan holding company.

         The Director of the OTS may only approve acquisitions  resulting in the
formation of a multiple  savings and loan holding company which controls savings
institutions in more than one state if (i) the multiple savings and loan holding
company involved controls a savings  institution which operated a home or branch
office  located in the state of the  institution  to be  acquired as of March 5,
1987;  (ii) the  acquiror  is  authorized  to  acquire  control  of the  savings
institution  pursuant to the  emergency  acquisition  provisions  of the Federal
Deposit Insurance Act ("FDIA");  or (iii) the statutes of the state in which the
institution to be acquired is located  specifically  permit  institutions  to be
acquired  by the  state-chartered  institutions  or  savings  and  loan  holding
companies  located in the state where the  acquiring  entity is located (or by a
holding company that controls such state-chartered savings institutions).


                                       26
<PAGE>


         FIRREA  amended  provisions of the Bank Holding  Company Act of 1956 to
specifically  authorize the Federal Reserve Board to approve an application by a
bank holding  company to acquire control of a savings  institution.  FIRREA also
authorized a bank holding  company that controls a savings  institution to merge
or consolidate  the assets and liabilities of the savings  institution  with, or
transfer assets and liabilities to, any subsidiary bank which is a member of the
BIF with the approval of the appropriate  federal banking agency and the Federal
Reserve  Board.  As a result of these  provisions,  there  have been a number of
acquisitions of savings institutions by bank holding companies in recent years.

The Savings Bank

         General.  The  OTS has  extensive  authority  over  the  operations  of
federally  chartered savings  institutions.  As part of this authority,  savings
institutions  are required to file periodic reports with the OTS and are subject
to periodic  examinations  by the OTS and the FDIC.  The  investment and lending
authority  of  savings   institutions   are   prescribed  by  federal  laws  and
regulations,   and  such  institutions  are  prohibited  from  engaging  in  any
activities  not  permitted  by  such  laws  and  regulations.   Those  laws  and
regulations   generally  are  applicable  to  all  federally  chartered  savings
institutions and may also apply to state-chartered  savings  institutions.  Such
regulation  and  supervision  is  primarily   intended  for  the  protection  of
depositors.

         The OTS'  enforcement  authority  over  all  savings  institutions  was
substantially  enhanced by FIRREA. This enforcement  authority  includes,  among
other things,  the ability to assess civil money  penalties,  to issue cease and
desist or removal orders and to initiate injunctive  actions. In general,  these
enforcement  actions may be initiated for violations of laws and regulations and
unsafe or unsound  practices.  Other  actions or inactions may provide the basis
for enforcement action,  including misleading or untimely reports filed with the
OTS.  FIRREA  significantly  increased the amount of and grounds for civil money
penalties.

         On  December  19,  1991,  the  Federal  Deposit  Insurance  Corporation
Improvement  Act of 1991  ("FDICIA")  was enacted into law. The FDICIA  provides
for, among other things, the  recapitalization  of the BIF; the authorization of
the FDIC to make  emergency  special  assessments  under  certain  circumstances
against BIF members and members of the SAIF;  the  establishment  of  risk-based
deposit   insurance   premiums;   and  improved   examinations   and   reporting
requirements.  The FDICIA also  provides for  enhanced  federal  supervision  of
depository  institutions based on, among other things, an institution's  capital
level. See " - Prompt Corrective Action."

         Insurance of Accounts.  The deposits of the Savings Bank are  currently
insured  by the SAIF of the  FDIC.  Both the  SAIF and the Bank  Insurance  Fund
("BIF"),  the  federal  deposit  insurance  fund  that  covers  commercial  bank
deposits,  are required by law to attain and thereafter maintain a reserve ratio
of 1.25% of insured deposits.


                                       27
<PAGE>


         The BIF fund met its target  reserve level in September  1995,  but the
SAIF was not  expected  to meet its target  reserve  level  until at least 2002.
Consequently,  in late 1995,  the FDIC approved a final rule  regarding  deposit
insurance  premiums  which,  effective  with respect to the  semiannual  premium
assessment beginning January 1, 1996, reduced deposit insurance premiums for BIF
member  institutions  to zero  basis  points  (subject  to an annual  minimum of
$2,000) for institutions in the lowest risk category. Deposit insurance premiums
for SAIF members were  maintained at their existing  levels (23 basis points for
institutions in the lowest risk category).

         On September 30, 1996,  President  Clinton signed into law  legislation
which eliminated the premium differential between SAIF-insured  institutions and
BIF-insured  institutions by recapitalizing  the SAIF's reserves to the required
ratio. The legislation  required all SAIF member  institutions to pay a one-time
special  assessment to recapitalize  the SAIF,  with the aggregate  amount to be
sufficient to bring the reserve ratio in the SAIF to 1.25% of insured  deposits.
The legislation  also provides for the merger of the BIF and the SAIF, with such
merger being conditioned upon the prior elimination of the thrift charter.

         Implementing  FDIC regulations  imposed a one-time  special  assessment
equal to 65.7 basis  points  for all  SAIF-assessable  deposits  as of March 31,
1995,  which was accrued as an expense on September 30, 1996. The Savings Bank's
one-time  special  assessment  amounted  to $1.1  million.  Net of  related  tax
benefits,  the one-time special assessment amounted to $749,000.  The payment of
such  special  assessment  had the effect of  immediately  reducing  the Savings
Bank's capital by such amount.

         In the fourth quarter of 1996,  the FDIC lowered the  assessment  rates
for SAIF members to reduce the disparity in the assessment rates paid by BIF and
SAIF members.  Beginning  October 1, 1996,  effective SAIF rates generally range
from zero basis points to 27 basis points, except that during the fourth quarter
of 1996,  the rates for SAIF  members  ranged  from 18 basis  points to 27 basis
points  in  order  to  include  assessments  paid to the  Financing  Corporation
("FICO"). From 1997 through 1999, SAIF members will pay 6.4 basis points to fund
the FICO, while BIF member institutions will pay approximately 1.3 basis points.
The Savings Bank's  insurance  premiums,  which had amounted to 23 basis points,
were thus reduced to 6.4 basis points effective January 1, 1997.

         The FDIC may terminate the deposit insurance of any insured  depository
institution,  including the Savings Bank, if it determines  after a hearing that
the institution has engaged or is engaging in unsafe or unsound practices, is in
an unsafe or unsound  condition  to continue  operations,  or has  violated  any
applicable law, regulation,  order or any condition imposed by an agreement with
the FDIC. It also may suspend deposit insurance  temporarily  during the hearing
process for the permanent  termination of insurance,  if the  institution has no
tangible  capital.  If insurance of accounts is terminated,  the accounts at the
institution at the time of the termination,  less subsequent withdrawals,  shall
continue to be insured for a period of six months to two years, as determined by
the FDIC. There are no pending proceedings to terminate the deposit insurance of
the Savings Bank.

         Regulatory  Capital  Requirements.   OTS  capital  regulations  require
savings  institutions to satisfy minimum capital  standards:  risk-based capital
requirements, a leverage requirement and a tangible capital requirement. Savings
institutions  must  meet  each of  these  standards  in order  to be  deemed  in
compliance  with OTS capital  requirements.  In addition,  the OTS may require a
savings institution to maintain capital above the minimum capital levels.


                                       28
<PAGE>


         All savings  institutions  are  required  to meet a minimum  risk-based
capital  requirement of total capital (core capital plus supplementary  capital)
equal to 8% of risk-weighted  assets (which includes the credit risk equivalents
of certain  off-balance  sheet items). In calculating total capital for purposes
of the risk-based requirement, supplementary capital may not exceed 100% of core
capital.  Under the leverage  requirement,  a savings institution is required to
maintain  core capital equal to a minimum of 3% of adjusted  total  assets.  (In
addition,  under the prompt corrective action provisions of the OTS regulations,
all but the most  highly-rated  institutions  must  maintain a minimum  leverage
ratio of 4% in order to be  adequately  capitalized.  See  "--Prompt  Corrective
Action.") A savings institution is also required to maintain tangible capital in
an amount at least equal to 1.5% of its adjusted total assets.

         The following table sets forth  Fidelity's  compliance with each of the
above-described capital requirements at December 31, 1998:

<TABLE>
<CAPTION>
                                               Tangible                Core              Risk-Based
                                                Capital             Capital(1)           Capital(2)
                                                              (Dollars in Thousands)
<S>                                               <C>                   <C>                 <C>
Regulatory capital                             $58,548               $58,548              $60,251
Minimum required regulatory capital              7,693                15,386               22,402
                                                 -----                ------               ------
Regulatory capital excess                      $50,855               $43,162              $37,849
                                                ======                ======               ======
Regulatory capital as a
  percentage(3)                                   11.4%                 11.4%                21.5%
Minimum capital required as a
  percentage                                       1.5                   3.0                  8.0
                                                  ----                  ----                 ----
Regulatory capital as a percentage
 in excess of requirements                         9.9%                  8.4%                13.5%
                                                  ====                  ====                 ====
</TABLE>

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

(1)  Does not reflect  proposed  amendments or the 4%  requirement  to be met in
     order for an institution to be "adequately  capitalized"  under  applicable
     laws and regulations, as discussed below.

(2)  Does not reflect  amendments to the risk-based  capital  requirement  which
     were adopted by the OTS in August  1993,  the  effective  date of which has
     been postponed, as discussed below.

(3)  Tangible and core capital are  computed as a percentage  of adjusted  total
     assets of $512.9 million. Risk-based capital is computed as a percentage of
     total risk-weighted assets of $280.0 million.


                                       29
<PAGE>


         The foregoing  capital  requirements are viewed as minimum standards by
the OTS,  and most  institutions  are expected to maintain  capital  levels well
above the minimum. In addition, the OTS regulations provide that minimum capital
levels higher than those provided in the  regulations  may be established by the
OTS for individual savings  institutions,  upon a determination that the savings
institution's  capital is or may become inadequate in view of its circumstances.
The OTS regulations  provide that higher individual  minimum  regulatory capital
requirements  may be appropriate in  circumstances  where,  among others:  (1) a
savings  institution  has a high  degree of  exposure  to  interest  rate  risk,
prepayment  risk,  credit  risk,  concentration  of credit risk,  certain  risks
arising from nontraditional activities, or similar risks or a high proportion of
off-balance sheet risk; (2) a savings institution is growing,  either internally
or through acquisitions,  at such a rate that supervisory problems are presented
that  are not  dealt  with  adequately  by OTS  regulations;  and (3) a  savings
institution may be adversely  affected by activities or condition of its holding
company, affiliates,  subsidiaries or other persons or savings institutions with
which it has significant business relationships. The Savings Bank is not subject
to any such individual minimum regulatory capital requirement.

         In March 1999, the federal banking  agencies  amended their  risk-based
and leverage capital standards to make uniform their regulations. In particular,
the agencies  made  risk-based  capital  treatments  for  construction  loans on
presold  residential  properties,  real estate loans  secured by junior liens on
1-to 4-family residential properties, and investments in mutual funds consistent
among the  agencies,  and  simplified  and made  uniform  the  agencies'  Tier 1
leverage capital standards.  The most highly-rated  institutions must maintain a
minimum  Tier 1  leverage  ratio of 3.0  percent,  with all  other  institutions
required  to  maintain  a  minimum  leverage  ratio  of  4.0  percent.  The  OTS
regulations now state that higher-than-minimum capital levels may be required if
warranted,  and that institutions should maintain capital levels consistent with
their risk exposures.










                                       30
<PAGE>


         Prompt Corrective Action. Under Section 38 of the FDIA, as added by the
FDICIA, each federal banking agency was required to implement a system of prompt
corrective  action for  institutions  which it  regulates.  The federal  banking
agencies,  including  the OTS,  adopted  substantially  similar  regulations  to
implement  Section 38 of the FDIA,  effective as of December 19, 1992. Under the
regulations,  an  institution is deemed to be (i) "well  capitalized"  if it has
total risk-based capital of 10.0% or more, has a Tier 1 risk-based capital ratio
of 6.0% or more, has a Tier 1 leverage  capital ratio of 5.0% or more and is not
subject to any order or final capital  directive to meet and maintain a specific
capital level for any capital measure, (ii) "adequately capitalized" if it has a
total  risk-based  capital  ratio of 8.0% or more, a Tier 1  risk-based  capital
ratio of 4.0% or more and a Tier 1 leverage  capital ratio of 4.0% or more (3.0%
under  certain  circumstances)  and  does  not  meet  the  definition  of  "well
capitalized,"  (iii)  "undercapitalized"  if it has a total  risk-based  capital
ratio that is less than 8.0%,  a Tier 1  risk-based  capital  ratio that is less
than 4.0% or a Tier 1 leverage  capital ratio that is less than 4.0% (3.0% under
certain circumstances),  (iv) "significantly undercapitalized" if it has a total
risk-based  capital  ratio that is less than 6.0%, a Tier 1  risk-based  capital
ratio  that is less than 3.0% or a Tier 1  leverage  capital  ratio that is less
than 3.0%, and (v) "critically  undercapitalized"  if it has a ratio of tangible
equity to total  assets  that is equal to or less than  2.0%.  Section 38 of the
FDIA and the regulations promulgated thereunder also specify circumstances under
which a federal banking agency may reclassify a well capitalized  institution as
adequately capitalized and may require an adequately capitalized  institution or
an undercapitalized institution to comply with supervisory actions as if it were
in the  next  lower  category  (except  that  the  FDIC  may  not  reclassify  a
significantly undercapitalized institution as critically undercapitalized).

         An institution  generally must file a written capital  restoration plan
which meets specified  requirements  with an appropriate  federal banking agency
within 45 days of the date that the institution  receives notice or is deemed to
have  notice  that it is  undercapitalized,  significantly  undercapitalized  or
critically   undercapitalized.   A  federal  banking  agency  must  provide  the
institution with written notice of approval or disapproval  within 60 days after
receiving a capital restoration plan, subject to extensions by the agency.

         An institution  which is required to submit a capital  restoration plan
must  concurrently  submit a performance  guaranty by each company that controls
the  institution.  Such guaranty shall be limited to the lesser of (i) an amount
equal to 5.0% of the institution's  total assets at the time the institution was
notified  or  deemed to have  notice  that it was  undercapitalized  or (ii) the
amount  necessary to restore the relevant capital measures of the institution to
the  levels  required  for  the  institution  to  be  classified  as  adequately
capitalized.  Such a guarantee  shall  expire after the federal  banking  agency
notifies the institution that it has remained adequately capitalized for each of
four  consecutive  calendar  quarters.  An  institution  which fails to submit a
written  capital  restoration  plan within the requisite  period,  including any
required performance guarantee(s), or fails in any material respect to implement
a capital  restoration  plan, shall be subject to the restrictions in Section 38
of the FDIA which are applicable to significantly undercapitalized institutions.

         Immediately upon becoming undercapitalized, an institution shall become
subject to the provisions of Section 38 of the FDIA (i)  restricting  payment of
capital  distributions  and management fees, (ii) requiring that the appropriate
federal  banking agency monitor the condition of the institution and its efforts
to restore its capital,  (iii)  requiring  submission  of a capital  restoration
plan, (iv) restricting the growth of the institution's  assets and (v) requiring
prior approval of certain expansion  proposals.  The appropriate federal banking
agency  for  an  undercapitalized  institution  also  may  take  any  number  of
discretionary  supervisory  actions if the agency  determines  that any of these
actions is  necessary to resolve the  problems of the  institution  at the least
possible  long-term cost to the deposit insurance fund, subject in certain cases
to  specified  procedures.   These  discretionary  supervisory  actions  include
requiring the institution to raise additional capital;  restricting transactions
with affiliates; restricting interest rates paid by the institution on deposits;
requiring  replacement of senior executive  officers and directors;  restricting
the activities of the institution and its affiliates;  requiring  divestiture of
the institution or the sale of the institution to a willing  purchaser;  and any
other supervisory action that the agency deems appropriate. These and additional
mandatory  and  permissive  supervisory  actions  may be taken  with  respect to
significantly undercapitalized and critically undercapitalized institutions.

         At December 31, 1998, the Savings Bank was deemed a "well  capitalized"
institution for purposes of the above regulations and as such was not subject to
the above mentioned restrictions.


                                       31
<PAGE>


         Safety and Soundness.  FDICIA requires each federal banking  regulatory
agency to  prescribe,  by  regulation  or  guideline,  standards for all insured
depository institutions and depository institution holding companies relating to
(i)  internal  controls,  information  systems  and  audit  systems;  (ii)  loan
documentation;  (iii) credit underwriting; (iv) interest rate risk exposure; (v)
asset  growth;  (vi)  compensation,  fees and  benefits;  and (vii)  such  other
operational and managerial standards as the agency determines to be appropriate.
The  compensation   standards  would  prohibit  employment  contracts  or  other
compensatory arrangements that provide excess compensation,  fees or benefits or
could lead to  material  financial  loss.  In  addition,  each  federal  banking
regulatory agency must prescribe, by regulation or guideline, standards relating
to asset quality,  earnings and stock  valuation as the agency  determines to be
appropriate.  Effective August 9, 1995, the federal banking agencies,  including
the OTS, implemented final rules and guidelines  concerning standards for safety
and soundness required to be prescribed by regulation  pursuant to Section 39 of
the FDIA. In general,  the standards  relate to (1)  operational  and managerial
matters; (2) asset quality and earnings;  and (3) compensation.  The operational
and managerial  standards cover (a) internal  controls and information  systems,
(b) internal audit systems, (c) loan documentation, (d) credit underwriting, (e)
interest  rate  exposure,  (f)  asset  growth,  and (g)  compensation,  fees and
benefits. Under the asset quality and earnings standards, the Savings Bank would
be required to establish and maintain systems to (i) identify problem assets and
prevent  deterioration  in those assets,  and (ii) evaluate and monitor earnings
and ensure that earnings are sufficient to maintain  adequate capital  reserves.
Finally,  the compensation  standard states that compensation will be considered
excessive if it is unreasonable  or  disproportionate  to the services  actually
performed by the individual being  compensated.  Effective  October 1, 1996, the
federal banking agencies also adopted asset quality and earnings standards. If a
savings  institution  fails  to  meet  any  of  the  standards   promulgated  by
regulation,  then such  institution  will be required to submit a plan within 30
days to the OTS specifying the steps it will take to correct the deficiency.  In
the event that a savings  institution  fails to submit or fails in any  material
respect to  implement a  compliance  plan within the time allowed by the federal
banking  agency,  Section  39 of the FDIA  provides  that the OTS must order the
institution to correct the  deficiency  and may (1) restrict  asset growth;  (2)
require the savings  institution  to  increase  its ratio of tangible  equity to
assets; (3) restrict the rates of interest that the savings institution may pay;
or (4) take any other  action that would  better carry out the purpose of prompt
corrective  action. The Savings Bank believes that it has been and will continue
to be in compliance  with each of the standards as they have been adopted by the
OTS.

         Liquidity  Requirements.  All  savings  institutions  are  required  to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity  requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings  institutions.  At the present time,  the required  minimum
liquid  asset ratio is 4%. At December 31, 1998,  the Savings  Bank's  liquidity
ratio was 15.89%.


                                       32
<PAGE>


         Capital Distributions.  OTS regulations govern capital distributions by
savings  institutions,  which  include  cash  dividends,  stock  redemptions  or
repurchases, cash-out mergers, interest payments on certain convertible debt and
other  transactions  charged to the capital account of a savings  institution to
make capital distributions.

         In January 1999, the OTS amended its capital distribution regulation to
bring such  regulations  into greater  conformity with the other bank regulatory
agencies.  Under  the  regulation,  certain  savings  associations  would not be
required to file with the OTS. Specifically,  savings associations that would be
well capitalized  following a capital  distribution  would not be subject to any
requirement  for notice or  application  unless the total  amount of all capital
distributions,  including any proposed capital distribution,  for the applicable
calendar  year would  exceed an amount  equal to the savings  association's  net
income for that year to date plus the savings association's  retained net income
for the  preceding  two years.  Because the Savings Bank is a subsidiary  of the
Company,  the  regulation,  however,  would  require the Savings Bank to provide
notice  to the OTS of its  intent  to make a  capital  distribution,  unless  an
application  is otherwise  required.  The Savings Bank does not believe that the
regulation will adversely affect its ability to make capital distributions.

         Loans to One  Borrower.  FIRREA  imposed  limitations  on the aggregate
amount  of loans  that a savings  institution  could  make to any one  borrower,
including related entities. Under FIRREA, the permissible amount of loans-to-one
borrower  now follows the national  bank  standard for all loans made by savings
institutions, as compared to the pre-FIRREA rule that applied that standard only
to  commercial  loans made by  federally  chartered  savings  institutions.  The
regulations  promulgated pursuant to FIRREA generally do not permit loans-to-one
borrower  to exceed the greater of  $500,000  or 15% of  unimpaired  capital and
surplus. Loans in an amount equal to an additional 10% of unimpaired capital and
surplus also may be made to a borrower if the loans are fully secured by readily
marketable securities.

         Branching by Federal Savings Institutions.  Effective May 11, 1992, the
OTS amended its Policy Statement on Branching by Federal Savings Institutions to
permit  interstate  branching to the full extent  permitted by statute (which is
essentially unlimited).  Prior policy permitted interstate branching for federal
savings institutions only to the extent allowed for state-chartered institutions
in the states  where the  institution's  home  office is  located  and where the
branch is sought.  Prior  policy also  permitted  healthy  out-of-state  federal
institutions to branch into another state,  regardless of the law in that state,
provided the branch office was the result of a purchase of an  institution  that
was in danger of default.




                                       33
<PAGE>


          Generally,  federal law prohibits  federal savings  institutions  from
establishing,  retaining  or  operating a branch  outside the state in which the
federal  institution has its home office unless the institution  meets the IRS's
domestic  building and loan test  (generally,  60% of a thrift's  assets must be
housing-related)  ("IRS Test").  The IRS Test requirement does not apply if: (i)
the  branch(es)  result(s) from an emergency  acquisition of a troubled  savings
institution  (however, if the troubled savings institution is acquired by a bank
holding company,  does not have its home office in the state of the bank holding
company bank  subsidiary  and does not qualify under the IRS Test, its branching
is limited to the branching  laws for  state-chartered  banks in the state where
the savings institution is located);  (ii) the law of the state where the branch
would be  located  would  permit  the branch to be  established  if the  federal
savings  institution  were  chartered  by the state in which its home  office is
located;  or (iii) the branch was operated  lawfully as a branch under state law
prior to the savings institution's conversion to a federal charter.

         Furthermore,  the OTS will evaluate a branching  applicant's  record of
compliance   with  the  Community   Reinvestment   Act  of  1977   ("CRA").   An
unsatisfactory   CRA  record  may  be  the  basis  for  denial  of  a  branching
application.

         Qualified Thrift Lender Test. Under Section 2303 of the Economic Growth
and Regulatory Paperwork Reduction Act of 1996, a savings association can comply
with  the QTL test by  either  meeting  the QTL  test set  forth in the HOLA and
implementing   regulations  or  qualifying  as  a  domestic  building  and  loan
association as defined in Section  7701(a)(19)  of the Internal  Revenue Code of
1986, as amended ("Code").  The QTL test set forth in the HOLA requires a thrift
institution to maintain 65% of portfolio assets in Qualified Thrift  Investments
("QTIs").  Portfolio  assets  are  defined  as total  assets  less  intangibles,
property used by a savings institution in its business and liquidity investments
in an amount  not  exceeding  20% of  assets.  Generally,  QTIs are  residential
housing related  assets.  At December 31, 1998, the amount of the Savings Bank's
assets which were  invested in QTIs was 96.43%,  which  exceeded the  percentage
required to qualify the Savings Bank under the QTL test.  A savings  institution
that does not meet the QTL test must either  convert to a bank charter or comply
with the following  restrictions on its operations:  (i) the institution may not
engage in any new activity or make any new  investment,  directly or indirectly,
unless such activity or investment is permissible  for a national bank; (ii) the
branching  powers of the institution  shall be restricted to those of a national
bank;  (iii) the  institution  shall not be eligible to obtain any advances from
its FHLB; and (iv) payment of dividends by the  institution  shall be subject to
the rules regarding payment of dividends by a national bank. Upon the expiration
of three years from the date the  institution  ceases to be a QTL, it must cease
any activity and not retain any investment not  permissible  for a national bank
and  immediately  repay any  outstanding  FHLB  advances  (subject to safety and
soundness considerations).

         Federal Home Loan Bank System. The Savings Bank is a member of the FHLB
of  Cincinnati,  which is one of 12  regional  FHLBs that  administers  the home
financing credit function of savings institutions. Each FHLB serves as a reserve
or  central  bank for its  members  within  its  assigned  region.  It is funded
primarily from proceeds derived from the sale of consolidated obligations of the
FHLB  System.  It makes loans to members  (i.e.,  advances) in  accordance  with
policies and procedures established by the Board of Directors of the FHLB.

         As a member,  the Savings  Bank is required  to purchase  and  maintain
stock  in the  FHLB of  Cincinnati  in an  amount  equal  to at  least 1% of its
aggregate unpaid residential  mortgage loans, home purchase contracts or similar
obligations  at the  beginning of each year.  At December 31, 1998,  the Savings
Bank  had  $4.5  million  in FHLB  stock,  which  was in  compliance  with  this
requirement.


                                       34
<PAGE>


     As a result of FIRREA,  the FHLBs are  required  to  provide  funds for the
resolution  of troubled  savings  institutions  and to  contribute to affordable
housing programs through direct loans or interest subsidies on advances targeted
for community  investment and low- and moderate-income  housing projects.  These
contributions have adversely affected the level of FHLB dividends paid and could
continue to do so in the future.  These contributions also could have an adverse
effect on the value of FHLB stock in the future.  For the years  ended  December
31, 1998, 1997 and 1996, dividends paid by the FHLB of Cincinnati to the Savings
Bank amounted to $307,000, $283,000 and $165,000, respectively.

     Federal Reserve  System.  The Federal Reserve Board requires all depository
institutions to maintain reserves against their transaction  accounts (primarily
NOW and Super NOW checking accounts).  As of December 31, 1998, no reserves were
required to be  maintained  on the first $4.4 million of  transaction  accounts,
reserves of 3% were required to be maintained  against the next $44.9 million of
net transaction  accounts (with such dollar amounts subject to adjustment by the
Federal  Reserve  Board),  and a  reserve  of  10%  against  all  remaining  net
transaction  accounts.  Because required reserves must be maintained in the form
of vault cash or a  noninterest-bearing  account at a Federal  Reserve Bank, the
effect of this reserve requirement is to reduce an institution's earning assets.

                                    TAXATION

Federal Taxation

     General.  The  Company and the  Savings  Bank are subject to the  generally
applicable corporate tax provisions of the Code, and the Savings Bank is subject
to certain  additional  provisions  of the Code which apply to thrifts and other
types of financial institutions. The following discussion of federal taxation is
intended only to summarize  certain  pertinent federal income tax matters and is
not a comprehensive discussion of the tax rules applicable to the Savings Bank.

     Fiscal  Year.  The  Company and the Savings  Bank file  federal  income tax
returns on the basis of a calendar year ending on December 31.

     Bad Debt Reserves. Prior to the enactment, on August 20, 1996, of the Small
Business Job  Protection  Act of 1996 (the "Small  Business  Act"),  for federal
income tax purposes,  thrift  institutions  such as the Savings Bank,  which met
certain  definitional tests primarily relating to their assets and the nature of
their  business,  were  permitted to establish tax reserves for bad debts and to
make  annual  additions  thereto,   which  additions  could,   within  specified
limitations, be deducted in arriving at their taxable income. The Savings Bank's
deduction with respect to "qualifying  loans," which are generally loans secured
by certain  interests in real property,  could be computed using an amount based
on a six-year  moving average of the Savings Bank's actual loss  experience (the
"Experience  Method"),  or a  percentage  equal  to 8.0% of the  Savings  Bank's
taxable income (the "PTI Method"), computed without regard to this deduction and
with  additional  modifications  and  reduced  by the  amount  of any  permitted
addition to the non-qualifying reserve.


                                       35
<PAGE>


         Under the Small  Business  Act,  the PTI  Method was  repealed  and the
Savings  Bank  will  be  required  to use the  Experience  Method  of  computing
additions to its bad debt reserve for taxable years  beginning  with the Savings
Bank's  taxable year  beginning  January 1, 1996. In addition,  the Savings Bank
will be required to recapture  (i.e.,  take into taxable income) over a six-year
period,  beginning with the Savings  Bank's  taxable year  beginning  January 1,
1996,  the  excess  of the  balance  of its bad debt  reserves  (other  than the
supplemental  reserve)  as of  December  31,  1995 over (a) the  greater  of the
balance of such  reserves  as of  December  31, 1987 or (b) an amount that would
have been the balance of such  reserves as of December  31, 1995 had the Savings
Bank always computed the additions to its reserves using the Experience  Method.
However,  under the  Small  Business  Act such  recapture  requirements  will be
suspended for each of the two successive taxable years beginning January 1, 1996
in which the Savings  Bank  originates a minimum  amount of certain  residential
loans  during  such  years that is not less than the  average  of the  principal
amounts of such loans made by the  Savings  Bank  during its six  taxable  years
preceding January 1, 1996.

         At December  31, 1998,  the federal  income tax reserves of the Savings
Bank included  $14.2 million for which no federal  income tax has been provided,
of this amount,  $11.5 million and $2.7 million are attributable to pre-1987 and
post-1987 bad debt reserves,  respectively. The Savings Bank will recapture into
income  approximately  $450,000  per year  over the six  year  period  beginning
January  1,  1996,  subject  to  suspension  for  two  years  in the  event  the
residential  loan  exemption  is met as  discussed  above.  The Savings Bank has
previously  accounted  for this tax  liability  under  FASB 109 and,  therefore,
recognition  of these amounts will not impact the Savings Bank's profit and loss
statement.

         Distributions.  If the Savings Bank distributes cash or property to its
stockholders,  and the  distribution  is treated as being from its  pre-1987 bad
debt reserves,  the distribution  will cause the Savings Bank to have additional
taxable  income.  A  distribution  is deemed to have been made from pre-1987 bad
debt  reserves to the extent that (a) the reserves  exceed the amount that would
have  been  accumulated  on the  basis of actual  loss  experience,  and (b) the
distribution is a "non-qualified  distribution." A distribution  with respect to
stock is a non-dividend  distribution to the extent that, for federal income tax
purposes,  (i)  it is  in  redemption  of  shares,  (ii)  it  is  pursuant  to a
liquidation of the institution,  or (iii) in the case of a current distribution,
together with all other such  distributions  during the taxable year, it exceeds
the institution's  current and post-1951  accumulated  earnings and profits. The
amount of additional taxable income created by a non-dividend distribution is an
amount that when reduced by the tax attributable to it is equal to the amount of
the distribution.




                                       36
<PAGE>


         Minimum Tax. The Code imposes an  alternative  minimum tax at a rate of
20%. The alternative  minimum tax generally applies to a base of regular taxable
income plus certain tax  preferences  ("alternative  minimum  taxable income" or
"AMTI")  and is  payable to the  extent  such AMTI is in excess of an  exemption
amount.  The Code provides  that an item of tax  preference is the excess of the
bad debt  deduction  allowable for a taxable year pursuant to the  percentage of
taxable income method over the amount  allowable  under the  experience  method.
Other items of tax  preference  that  constitute  AMTI  include  (a)  tax-exempt
interest on newly issued (generally,  issued on or after August 8, 1986) private
activity bonds other than certain  qualified bonds and (b) 75% of the excess (if
any) of (i)  adjusted  current  earnings as defined in the Code,  over (ii) AMTI
(determined  without  regard to this  preference  and prior to  reduction by net
operating losses).

         Net Operating Loss Carryovers.  A financial  institution may carry back
net operating  losses ("NOLs") to the preceding two taxable years and forward to
the succeeding 20 taxable years.  This provision  applies to losses  incurred in
taxable years  beginning after August 5, 1997. At December 31, 1998, the Company
had no NOL carryforwards for federal income tax purposes.

         Capital Gains and Corporate Dividends-Received Deduction. Corporate net
capital   gains   are   taxed  at  a  maximum   rate  of  34%.   The   corporate
dividends-received  deduction  is 80% in the  case of  dividends  received  from
corporations  with which a corporate  recipient does not file a consolidated tax
return,  and corporations  which own less than 20% of the stock of a corporation
distributing a dividend may deduct only 70% of dividends  received or accrued on
their behalf.  However, a corporation may deduct 100% of dividends from a member
of the same affiliated group of corporations.

         Other Matters. Federal legislation is introduced from time to time that
would  limit the  ability of  individuals  to deduct  interest  paid on mortgage
loans.  Individuals  are currently not permitted to deduct  interest on consumer
loans.  Significant  increases  in tax  rates  or  further  restrictions  on the
deductibility of mortgage interest could adversely affect the Savings Bank.

         The Savings  Bank's federal income tax returns have not been audited by
the IRS in recent  years and its  federal  income tax  returns for the tax years
ended December 31, 1997, 1996 and 1995 are open under the statute of limitations
and are subject to review by the IRS.

State Taxation

         The  Company is subject to an Ohio tax based on the  greater of its tax
liability as determined  under  separate net worth and net income  computations.
The Company  will  exclude its  investment  in Fidelity in  determining  its tax
liability under the net worth computation. The tax liability under the net worth
computation  will be computed at .596% of the Company's net taxable  value.  The
tax liability  under the net income method will be computed at a graduated  rate
not exceeding 9.12% of the Company's Ohio taxable income.

         The  Savings  Bank is  subject  to an Ohio  franchise  tax based on its
equity capital plus certain reserve  amounts.  Total capital for this purpose is
reduced by certain exempted assets. The resultant net taxable value was taxed at
a rate of 1.5% for 1998.


                                       37
<PAGE>


Item 2.  Properties.

         At December 31, 1998, the Company  conducted its business from its main
office at 4555 Montgomery Road, Cincinnati, Ohio and other full service branches
in Cincinnati, Ohio.

         The following table sets forth certain  information with respect to the
offices and other properties at December 31, 1998:

<TABLE>
<CAPTION>

                                                               Net Book Value of
     Description/Address                   Leased/Owned             Property                Deposits
                                                                             (In Thousands)

<S>                                           <C>                     <C>                     <C>
Main Office                                   Owned                 $  986                 $117,140
4555 Montgomery Road
Cincinnati, Ohio  45212 (1)

Branch Office                                 Owned                    370                   40,109
8434 Vine Street
Cincinnati, Ohio  45216 (1)

Branch Office                                 Owned                    617                   28,201
7136 Miami Avenue
Cincinnati, Ohio  45243

Branch Office                                 Owned                  1,249                   52,487
11100 Reading Road
Cincinnati, Ohio  45241

Branch Office                                 Leased                    45                   27,314
11700 Princeton Pike
Cincinnati, Ohio  45248 (2)

Branch Office                                 Owned                    455                   24,934
4144 Hunt Road
Cincinnati, Ohio  45238

Branch Office                                 Owned                    497                   31,295
5030 Delhi Avenue
Cincinnati, Ohio  45238

Branch Office                                 Owned                    325                   41,913
3316 Glenmore Avenue
Cincinnati, Ohio  45211
</TABLE>


                                       38
<PAGE>
<TABLE>
<CAPTION>
                                                             Net Book Value of
     Description/Address                   Leased/Owned             Property                Deposits
                                                                             (In Thousands)

<S>                                          <C>                      <C>                      <C>
Branch Office                                 Owned                 $  214                  $20,240
3777 Hamilton Cleves Road
Ross, Ohio  45013

Branch Office                                 Owned                    204                   13,198
8045 Colerain Avenue
Cincinnati, Ohio  45239

Branch Office                                 Owned                    357                    8,089
10640 Loveland -
Madeira Road
Loveland, Ohio  45140

Branch Office                                 Leased                     2                    7,202
7944 Beechmont Avenue
Cincinnati, Ohio  45255 (3)

Other property                                Owned                     85                       --
4541 Montgomery Road
Cincinnati, Ohio  45212 (4)

Other property                                Owned                      7                       --
17 Hillsdale
Cincinnati, Ohio 45216 (5)

Other property                                Owned                     78                       --
16 Hereford Avenue
Cincinnati, Ohio  45216 (6)

</TABLE>


 _________                       

(1)  Fidelity  leases a portion  of its  premises  at these  offices  to various
     commercial tenants.

(2)  Lease expiration date is September 30, 2000.

(3)  Lease expiration date is September 30, 2002.

(4)  Fidelity  leases  substantially  all of its  premises  at this  property to
     various commercial tenants.

(5)  Consists  of a  single-family  home which is  currently  being  leased on a
     month-to-month basis.

(6)  Consists  of a  multi-family  home  which is  currently  being  leased on a
     month-to-month basis.

                                       39
<PAGE>


Item 3.  Legal Proceedings.

         The Company is involved in routine legal  proceedings  occurring in the
ordinary course of business which, in the aggregate,  are believed by management
to be immaterial to the financial condition of the Company.

Item 4.  Submission of Matters to a Vote of Security Holders.

         Not applicable.

PART II.

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

     The information required herein is incorporated by reference from page 3 of
the Company's 1998 Annual Report to  Stockholders,  which is included  herein as
Exhibit 13 ("Annual Report").

Item 6.  Selected Financial Data.

     The  information  required herein is incorporated by reference from pages 4
and 5 of the Annual Report.

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

     The  information  required herein is incorporated by reference from pages 6
to 21 of the Annual Report.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

         The information required herein is incorporated by reference from pages
6 to 9 of the Annual Report.

Item 8.  Financial Statements and Supplementary Data.

     The information  required herein is incorporated by reference from pages 22
to 56 of the Annual Report.

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure.

         Not applicable.



                                       40
<PAGE>


PART III.

Item 10. Directors and Executive Officers of the Registrant.

         The  information  required herein is incorporated by reference from the
definitive proxy statement of the Company for the Annual Meeting of Stockholders
to be filed  within 120 days after the  Company's  fiscal year end  ("Definitive
Proxy Statement").

Item 11. Executive Compensation.

         The  information  required herein is incorporated by reference from the
Definitive Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

         The  information  required herein is incorporated by reference from the
Definitive Proxy Statement.

Item 13. Certain Relationships and Related Transactions.

         The  information  required herein is incorporated by reference from the
Definitive Proxy Statement.

PART IV.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

          (a)  Documents filed as part of this Report

               (1)  The  following  financial  statements  are  incorporated  by
                    reference  from  Item 8  hereof  (see  Exhibit  13  attached
                    hereto):

               Report of Independent Certified Public Accountants

               Consolidated  Statements  of Financial  Condition at December 31,
               1998 and 1997

               Consolidated  Statements of Earnings for the Years Ended December
               31, 1998, 1997 and 1996

               Consolidated  Statements  of  Comprehensive  Income for the Years
               Ended December 31, 1998, 1997 and 1996

               Consolidated  Statements of Changes in  Stockholders'  Equity for
               the Years Ended December 31, 1998, 1997 and 1996


                                       41
<PAGE>


               Consolidated  Statements  of  Cash  Flows  for  the  Years  Ended
               December 31, 1998, 1997 and 1996

               Notes to Consolidated Financial Statements

               (2)  All schedules for which  provision is made in the applicable
                    accounting regulations of the SEC are omitted because of the
                    absence  of  conditions  under  which they are  required  or
                    because  the  required   information   is  included  in  the
                    financial statements and related notes thereto.

               (3)  The  following  exhibits are filed as part of this Form 10-K
                    and this list includes the Exhibit Index.
<TABLE>
<CAPTION>

   No.                                    Exhibits
<S>                                         <C>
   2.1          Plan of Conversion and Agreement and Plan of Reorganization*
 
   3.1          Articles of Incorporation  of Fidelity  Financial of
                Ohio, Inc.*
 
   3.2          Code of Regulations of Fidelity Financial of Ohio, Inc.*
 
   3.3          Bylaws of Fidelity Financial of Ohio, Inc.*
 
   4.1          Specimen Stock Certificate of Fidelity Financial of Ohio, Inc.**
 
  10.1          1992 Stock Incentive Plan*1/
 
  10.2          1992 Directors' Stock Option Plan*1/
 
  10.3          Management Recognition Plan*1/
 
  10.4          Employee Stock Ownership Plan*1/
 
  10.5          Employment Agreements between Fidelity Financial of Ohio, Inc.,
                Fidelity Federal Savings Bank and John R. Reusing and Paul D.
                Staubach**1/
 
  10.6          Employment Agreement between Fidelity Financial of Ohio, Inc.,
                Fidelity Federal Savings Bank and Joseph D. Hughes***1/
 
  10.7          Form of Severance Agreement between Fidelity Financial of Ohio,
                Inc., Fidelity Federal Savings Bank and certain officers of
                Fidelity Financial of Ohio, Inc. and Fidelity Federal Savings
                Bank**1/
 
  10.8          1997 Stock Option Plan****1/
 
  10.9          1997 Management Recognition Plan and Trust****1/
 
  13.0          1998 Annual Report to Stockholders
 
  23.0          Consent of Grant Thornton LLP
 
  27.0          Financial Data Schedule
</TABLE>

                                               (Footnotes on following page)



                                       42
<PAGE>





* Incorporated herein by reference from the Company's  Registration Statement on
Form S-1 filed with the SEC on November 14, 1995.

** Incorporated  herein by reference from the Company's Form 10-K filed with the
SEC on April 1, 1996.

*** Incorporated herein by reference from the Company's Form 10-K filed with the
SEC on March 28, 1997.

****  Incorporated  herein by reference  from the Company's Form 10-K filed with
the SEC on March 30, 1998.

1/ Management contract or compensatory plan or arrangement.

     (b) On October 1, 1998,  the  Company  filed an  amendment  to the Form 8-K
filed with the SEC on September 29, 1998 reporting under Item 5 its execution of
an Agreement of Merger with Glenway Financial Corporation ("Glenway"),  dated as
of September  28, 1998 (the  "Agreement"),  pursuant to which Glenway will merge
into a wholly-owned  subsidiary of the Company. The purpose of the amendment was
to file the Agreement and exhibits thereto.

     (c) See (a)(3) above for all exhibits filed herewith and the Exhibit Index.

     (d)  There  are no  other  financial  statements  and  financial  statement
schedules  which were  excluded  from Item 8 which are  required  to be included
herein.











                                       43
<PAGE>


                                   SIGNATURES


         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                  FIDELITY FINANCIAL OF OHIO, INC.



March 29, 1999                    By:/s/ Robert R. Sudbrook
                                     --------------------------------------
                                      Robert R. Sudbrook
                                      President and Chief Executive Officer


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.


/s/ John R. Reusing                                     March 29, 1999
--------------------------------------
John R. Reusing, Chairman of the Board


/s/ Robert R. Sudbrook                                  March 29, 1999
--------------------------------------
Robert R. Sudbrook, President,
Chief Executive Officer and Director
 (Principal Executive Officer)


/s/ Michael W. Jordan                                   March 29, 1999
--------------------------------------
Michael W. Jordan, Director


/s/ David A. Luecke                                     March 29, 1999
--------------------------------------
David A. Luecke, Director








                                       44
<PAGE>




/s/ Constantine N. Papadakis                              March 29, 1999
------------------------------------------
Constantine N. Papadakis, Director


/s/ Paul D. Staubach                                      March 29, 1999
------------------------------------------
Paul D. Staubach, Senior Vice President
and Chief Financial Officer
 (Principal Financial Officer)


                                                          March __, 1999
------------------------------------------                              
Robert W. Zumbiel, Director


/s/ Joseph D. Hughes                                      March 29, 1999
------------------------------------------
Joseph D. Hughes, Executive Vice
  President and Director


/s/ Thomas N. Spaeth                                      March 29, 1999
------------------------------------------
Thomas N. Spaeth, Director


/s/ Edgar A. Rust                                         March 29, 1999
------------------------------------------
Edgar A. Rust, Director


/s/ Daniel W. Geeding                                     March 29, 1999
------------------------------------------
Daniel W. Geeding, Director


/s/ Kenneth C. Lichtendahl                                March 29, 1999
------------------------------------------
Kenneth C. Lichtendahl, Director


/s/ John L. Torbeck                                       March 29, 1999
------------------------------------------
John L. Torbeck, Director



                                       45