CONTENTS


Letter to Stockholders.....................................................   1

Business of the Corporation................................................   2

Market Price of Stock and Related Information..............................   3

Selected Consolidated Financial and Other Data.............................   4

Management's Discussion and Analysis of Financial Condition
  and Results of Operations................................................   6

Independent Auditors' Report...............................................  22

Consolidated Statements of Financial Condition.............................  23

Consolidated Statements of Earnings........................................  24

Consolidated Statements of Comprehensive Income............................  25

Consolidated Statements of Stockholders' Equity............................  26

Consolidated Statements of Cash Flows......................................  27

Notes to Consolidated Financial Statements.................................  29

Directors and Executive Officers...........................................  57

Locations..................................................................  57

Corporate Information......................................................  58

Annual Meeting.............................................................  58



<PAGE>



Dear Shareholders,

         Enclosed is the 1998 Annual Report of Fidelity  Financial of Ohio, Inc.
This report, which covers the year ended December 31, 1998, does not reflect the
results of the merger of equals of FFOH and Glenway Financial Corporation.  As a
result of the merger,  which was just completed on March 19, 1999,  your company
looks very different than it did at the end of 1998.

         FFOH now has  consolidated  assets in excess  of $800  million  and our
savings bank  subsidiary,  Centennial Bank, has 15 branches  throughout  Greater
Cincinnati.  We have 180 total  employees  and a seasoned  management  team that
combines a long tradition of service to the thrift  industry with the commercial
banking expertise that will be so important to our future. We have a board of 12
directors,  a  blend  of  talented  people  who  will  provide   forward-looking
leadership without abandoning the heritage of the past.

         We  are  very  busy  guiding  our  combined   staff  through  the  many
transitions  that accompany a merger of this size. Our immediate goal is to make
the operational transitions  transparent to our customers,  who can now transact
their banking  business at any one of our 15 offices and 19 ATMs,  regardless of
where their  accounts  were held before the merger.  We believe we are achieving
that goal,  as a result of careful  planning and the efforts of our talented and
dedicated personnel.

         Our  longer  term goal is one we know our  customers  will  notice - an
expanded  offering  of  products  and  services  that  will  meet  more of their
financial  services  needs.  The  resources  and economies of scale that we have
achieved  through the merger position us to serve our existing  customers better
and to establish relationships with new customers.

         Our most important goal is for our  shareholders to see the benefits of
this merger.  Management  will work  diligently  to implement  the  cost-savings
opportunities  that the merger presents to ensure that our efforts achieve value
for our shareholders. A more immediate benefit is the enhanced liquidity of FFOH
stock. FFOH now has approximately 9.1 million common shares outstanding, held of
record by approximately 1,500 shareholders.

         We appreciate the confidence our shareholders demonstrated by approving
this merger.  We are very excited about the future for FFOH,  and we are pleased
to have you with us as we pursue new opportunities.




/s/ John R. Reusing                        /s/ Robert R. Sudbrook
John R. Reusing                            Robert R. Sudbrook
Chairman                                   President and Chief Executive Officer





                                       1
<PAGE>


                           BUSINESS OF THE CORPORATION


         Fidelity  Financial  of  Ohio,  Inc.  (the  "Corporation")  is an  Ohio
corporation which is the holding company for Centennial Bank ("Centennial"). The
Corporation  was  originally  organized  by Fidelity  Federal  Savings Bank (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 parent
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 Corporation is the capital
stock of the Savings Bank.

         On September  28, 1998,  the  Corporation  entered into an agreement of
merger with  Glenway  Financial  Corporation  ("Glenway")  and its  wholly-owned
subsidiary  Centennial  Savings  Bank  ("Centennial"),   which  provided  for  a
merger-of-equals  between the Corporation and Glenway,  and the Savings Bank and
Centennial. The transaction was consummated on March 19, 1999, and accounted for
using the pooling-of-interests method of accounting.

         As a result of the merger, Centennial is an Ohio chartered savings bank
which  conducts  business  through  15  full-service   offices  located  in  the
Cincinnati,   Ohio  metropolitan  area.   Centennial  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.  In addition,  Centennial
originates   loans   secured   by   existing   multi-family    residential   and
non-residential  real estate,  as well as commercial,  construction and consumer
loans. Centennial also invests in U.S. Government and federal agency obligations
and mortgage-backed securities which are insured by federal agencies.

         As a savings and loan holding  company,  the  Corporation is subject to
regulation,  supervision and examination by the Office of Thrift  Supervision of
the United States Department of the Treasury  ("OTS").  Centennial is subject to
regulation  and  examination  by the Ohio  Department  of Commerce,  Division of
Financial Institutions as its chartering authority and primary regulator, and by
the Federal Deposit Insurance Corporation  ("FDIC"),  which, through the Savings
Association  Insurance Fund ("SAIF")  administered  by it, insures  Centennial's
deposits up to  applicable  limits.  Centennial  is a member of the Federal Home
Loan Bank ("FHLB") of  Cincinnati,  which is one of the 12 banks which  comprise
the FHLB System.  Centennial is further  subject to  regulations of the Board of
Governors of the Federal  Reserve System  ("Federal  Reserve  Board")  governing
reserves to be maintained against deposits and certain other matters.






                                       2
<PAGE>


                  MARKET PRICE OF STOCK AND RELATED INFORMATION


     Shares of the Corporation's common stock are traded under the symbol "FFOH"
on the Nasdaq National Market.  At March 25, 1999, the Corporation had 9,119,707
shares of common stock outstanding and had approximately  1,472  stockholders of
record.  The number of  stockholders  does not  reflect the number of persons or
entities who may hold stock in nominee or "street" name through  brokerage firms
or others.

     The following  table sets forth the reported high and low sales prices of a
share of the Corporation's common stock as reported by Nasdaq National Market.
<TABLE>
<CAPTION>

         For the year ended December 31, 1998                 High             Low
         -----------------------------------------------------------------------------
<S>                                                           <C>               <C>
         1998 Sales Prices

         Quarter ending December 31, 1998                   $14.25           $12.38
         Quarter ending September 30, 1998                   16.38            11.88
         Quarter ending June 30, 1998                        19.88            15.19
         Quarter ending March 31, 1998                       18.25            15.50


         For the year ended December 31, 1997                 High             Low
         -----------------------------------------------------------------------------

         1997 Sales Prices

         Quarter ending December 31, 1997                   $16.25           $14.25
         Quarter ending September 30, 1997                   16.50            14.50
         Quarter ending June 30, 1997                        15.00            12.38
         Quarter ending March 31, 1997                       13.75            11.50

</TABLE>

     Distributions with respect to the Corporation's  common stock for the years
ended December 31, 1998 and 1997 are set forth below.

<TABLE>
<CAPTION>

                                                                     Cash
         For the year ended December 31, 1998                     Distributions
         ----------------------------------------------------------------------
<S>                                                                  <C>
         Quarter ending December 31, 1998                            $0.08
         Quarter ending September 30, 1998                            0.08
         Quarter ending June 30, 1998                                 0.08
         Quarter ending March 31, 1998                                0.08

                                                                     Cash
         For the year ended December 31, 1997                     Distributions
         ----------------------------------------------------------------------

         Quarter ending December 31, 1997                            $1.07
         Quarter ending September 30, 1997                            0.07
         Quarter ending June 30, 1997                                 0.07
         Quarter ending March 31, 1997                                0.07
</TABLE>





                                       3
<PAGE>


                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The  following  tables  set  forth  certain  financial  and  other  data  of the
Corporation at the date and for the periods indicated.  For additional financial
information about the Corporation, reference is made to "Management's Discussion
and  Analysis  of  Financial  Condition  and  Results  of  Operations"  and  the
Consolidated  Financial Statements of the Corporation and related notes included
elsewhere  herein.  For  information  with  respect to the merger of equals with
Glenway, see Note O of the Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>

Selected Consolidated Financial Condition Data:
                                                                                           At December 31,
                                                                      1998        1997        1996        1995        1994
                                                                                          (In thousands)
<S>                                                                  <C>         <C>         <C>          <C>         <C>
Total assets                                                      $519,219    $535,100    $499,918    $231,137     $216,168
Federal funds sold and interest-bearing deposits                    18,323      27,730      20,489       2,784        1,766
Investment securities available for sale - at market (1)               838       6,020      16,120       6,044        4,267
Mortgage-backed securities available for sale - at market (1)       25,205      25,827      30,760      29,378        6,280
Mortgage-backed securities held to maturity - at cost               29,682      13,527      10,744          -        20,792
Loans receivable - net (2)                                         419,436     436,852     396,541     185,132      175,222
Goodwill and other intangible assets                                 6,949       7,628       8,322          -            - 
Deposits                                                           412,122     432,024     408,159     180,697      173,198
FHLB advances                                                       34,735      34,233      20,186      17,653       12,089
Stockholders' equity, net                                           67,618      64,274      66,712      30,113       28,540
</TABLE>

<TABLE>
<CAPTION>

Selected Operating Data:
                                                                                Year Ended December 31,
                                                                     1998         1997        1996        1995        1994
<S>                                                                 <C>           <C>          <C>         <C>        <C>
                                                                              (In thousands, except share data)

Total interest income                                             $37,645      $38,151     $22,738     $17,001      $15,748
Total interest expense                                             22,695       22,562      12,656      10,167        8,331
                                                                   ------       ------      ------      ------       ------
     Net interest income                                           14,950       15,589      10,082       6,834        7,417
Provision for losses on loans                                         107          101         129          71           44
                                                                   ------       ------      ------      ------       ------
     Net interest income after provision for losses on loans       14,843       15,488       9,953       6,763        7,373
Other income                                                        1,474        1,415         165         355          347
General, administrative and other expense                          (9,204)      (9,369)     (7,638)     (4,385)      (4,172)
                                                                   ------       ------      ------      ------       ------
Earnings before income taxes                                        7,113        7,534       2,480       2,733        3,548
Federal income taxes                                               (2,557)      (2,658)       (872)       (919)      (1,176)
                                                                   ------       ------      ------      ------       ------

Net earnings                                                      $ 4,556      $ 4,876     $ 1,608     $ 1,814      $ 2,372
                                                                   ======       ======      ======      ======       ======
Earnings per share
  Basic                                                             $0.84        $0.90       $0.38       $0.45        $0.58
                                                                     ====         ====        ====        ====         ====

  Diluted                                                           $0.83       $0.89       $0.38        $0.44        $0.58
                                                                     ====        ====        ====         ====         ====

</TABLE>


Footnote explanations on following page.






                                       4
<PAGE>


<TABLE>
<CAPTION>

Selected Operating Ratios (3):
                                                                                At or for the year ended December 31,
                                                                     1998         1997        1996        1995         1994
<S>                                                                  <C>          <C>          <C>         <C>         <C>
Return on average assets (4)                                        0.86%        0.94%       0.53%       0.82%        1.14%
Return on average equity (4)                                        6.89%        7.22%       3.16%       6.17%        8.51%
Dividend payout ratio (4)                                          34.61%      144.38%      57.90%      29.49%       18.47%
Tangible equity to tangible assets at end of period                11.85%       10.74%      11.88%      13.03%       13.20%
Interest rate spread (5)                                            2.41%        2.58%       2.59%       2.44%        3.04%
Net interest margin (5)                                             2.92%        3.11%       3.40%       3.13%        3.63%
Non-performing loans to total loans at end of period (6)            0.42%        0.22%       0.28%       0.54%        0.47%
Non-performing assets to total assets at end of period (6)          0.35%        0.18%       0.23%       0.44%        0.43%
Allowance for loan losses to non-performing loans at
  end of period                                                    94.20%      167.81%     137.88%      81.23%       95.71%
Average interest-earning assets to average interest-bearing
  liabilities                                                     111.55%      111.88%     118.89%     114.74%      114.49%
General, administrative and other expense to average
  total assets (4)                                                  1.73%        1.80%       2.51%       1.97%        2.00%
Full service offices                                                   12           12          10           4            4

</TABLE>


(1)  The  Corporation  adopted SFAS No. 115 as of January 1, 1994. In connection
     therewith,  the  Corporation  classified  certain of its debt securities as
     available for sale. For additional information,  see Notes A-2 and B of the
     Notes to Consolidated Financial Statements.
(2)  At December  31,  1998,  1997 and 1995,  included  $236,000,  $438,000  and
     $646,000 of loans classified as held for sale, respectively.
(3)  With the exception of end of period ratios, all ratios are based on average
     monthly balances during the period.
(4)  Before  consideration of non-recurring  charges incurred in 1996, including
     the SAIF  recapitalization  assessment  and merger  related  expenses,  the
     ratios set forth above would have been as follows:
         Return on average assets                                      0.92%
         Dividend payout ratio                                        39.50%
         Return on average equity                                      5.52%
         General, administrative and other expense
          to average total assets                                      1.91%
(5)  Interest rate spread represents the difference between the weighted average
     yield  on  interest-earning   assets  and  the  weighted  average  rate  on
     interest-bearing  liabilities.  Net interest margin represents net interest
     income as a percentage of average interest-earning assets.
(6)  Non-performing  loans consist of non-accrual  loans and accruing loans that
     are  contractually  past due 90 days or  more,  and  non-performing  assets
     consist of non-performing  loans and real estate acquired by foreclosure or
     deed-in-lieu thereof.










                                       5

<PAGE>


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

         Since its formation,  the Corporation's  activities have been primarily
limited to holding the stock of the Savings  Bank. As a result,  the  discussion
that follows focuses largely on the operations of the Savings Bank.

         The operating results of the Savings Bank depend primarily upon its net
interest  income,  which is determined by the  difference  between  interest and
dividend income on interest-earning assets,  principally loans,  mortgage-backed
securities and investment  securities,  and interest expense on interest-bearing
liabilities,  which principally consist of customer deposits and borrowings. The
Savings  Bank's net  earnings is also  affected by its  provision  for losses on
loans,  as well as the level of its other income,  including gains and losses on
sales  of  loans,   investment  securities  and  real  estate  acquired  through
foreclosure,  rental income and other  miscellaneous  operating income,  and its
general,  administrative and other expenses,  such as employee  compensation and
benefits,  occupancy and equipment expense,  federal deposit insurance premiums,
franchise taxes and miscellaneous other operating  expenses,  and federal income
tax expense.

         In  addition  to  the  historical  information  contained  herein,  the
following discussion contains forward-looking  statements that involve risks and
uncertainties.  Economic circumstances,  the Corporation's operations and actual
results could differ  significantly from those discussed in the  forward-looking
statements.  Some  of the  factors  that  could  cause  or  contribute  to  such
differences  are  discussed  herein but also include  changes in the economy and
interest  rates in the nation and the  Corporation's  general  market area.  The
forward-looking  statements  contained  herein include,  but are not limited to,
those with respect to the following matters:

1.   Management's  analysis of the interest rate risk of the  Corporation as set
     forth under "Asset and Liability Management;"

2.   Management's  discussion of the liquidity of the Savings  Bank's assets and
     the  regulatory  capital of the Savings Bank as set forth under  "Liquidity
     and Capital Resources;"

3.   Management's  determination of the amount and adequacy of the allowance for
     loan  losses  as set  forth  under  "Discussion  of  Changes  in  Financial
     Condition  from  December 31, 1997 to December 31,  1998,"  "Comparison  of
     Results of  Operations  for the Fiscal  Years Ended  December  31, 1998 and
     1997" and  "Comparison  of Results of Operations for the Fiscal Years Ended
     December 31, 1997 and 1996;"

4.   Management's  determination  of  the  effects  of  the  year  2000  on  the
     Corporation's  information technology systems as set forth under "Year 2000
     Compliance Issues;" and

5.   Management's estimate as to the effects of recent accounting pronouncements
     as set forth under "Effects of Recent Accounting Pronouncements".

ASSET AND LIABILITY MANAGEMENT

         The  Corporation's  earnings  depend  primarily  upon its net  interest
income,  which is the difference between its interest income on interest-earning
assets,  such as  mortgage  loans,  investment  securities  and  mortgage-backed
securities,  and its  interest  expense  paid on  interest-bearing  liabilities,
consisting of deposits and borrowings.  As market  interest rates change,  asset
yields  and  liability  costs do not  change  simultaneously.  Due to  maturity,
repricing and timing differences between such  interest-earning  assets and such
interest-bearing  liabilities,  the  Corporation's  earnings  will  be  affected
differently under various interest rate scenarios.  Management believes that the
steps which have been taken in asset/liability management may reduce the overall
vulnerability of the Corporation to interest rate risk.



                                       6
<PAGE>

         The Savings  Bank has  established  an Asset and  Liability  Management
Committee, which generally meets at least weekly in order to structure and price
the Savings  Bank's  assets and  liabilities  so as to  maintain  an  acceptable
interest  rate spread while  reducing the effects of changes in interest  rates.
The Committee reports quarterly to the Board of Directors on interest rate risks
and trends,  as well as with respect to the Savings Bank's liquidity and capital
ratios as compared to the respective regulatory requirements.

         The Savings  Bank's Asset and  Liability  Management  Committee  has in
recent periods  implemented asset and liability  management policies designed to
better  match  the  maturities  and  repricing   terms  of  the  Savings  Bank's
interest-earning  assets and  interest-bearing  liabilities in order to minimize
the adverse  effects on the Savings Bank's results of operations of material and
prolonged increases in interest rates. The Savings Bank has undertaken a variety
of strategies to reduce its exposure to interest  rate  fluctuations,  including
(i) subject to market  conditions,  emphasizing  the origination and purchase of
adjustable-rate  mortgage loans and balloon loans (which amortize over a fifteen
to thirty-year  period but are payable at the end of five or seven years);  (ii)
continuing to invest excess cash in adjustable-rate  and medium-term  (primarily
five years or less) mortgage-backed securities; (iii) maintaining high levels of
capital and strong asset  quality;  (iv)  attempting  to attract,  to the extent
possible,  longer-term,  fixed-rate deposit accounts;  (v) utilization of longer
term FHLB advances;  and (vi) the sale of certain long-term  fixed-rate mortgage
loans in the secondary market.

         As a result of implementing these asset and liability  initiatives,  at
December 31, 1998,  $178.9  million,  or 42.6% of the Savings  Bank's total loan
portfolio  consisted  of  adjustable-rate  or balloon  loans.  In  addition,  at
December   31,  1998,   $234.5   million,   or  45.2%  of  the  Savings   Bank's
interest-earning  assets  consisted  of  adjustable  rate  loans or  securities,
balloon notes or had scheduled maturities of five years or less.

         Management  presently  monitors and evaluates  the potential  impact of
interest  rate  changes upon the market  value of the Savings  Bank's  portfolio
equity and the level of net interest  income on a quarterly  basis. As a part of
its efforts to monitor its  interest  rate risk,  the Savings  Bank  reviews the
reports of the OTS which set forth the application of the "net portfolio  value"
("NPV") methodology,  adopted by the OTS as part of its capital regulations,  to
the assets and liabilities of the Savings Bank. Although the Savings Bank is not
currently  subject to the NPV regulation,  because its  implementation  has been
delayed by the OTS, the  application of the NPV  methodology  may illustrate the
Savings Bank's level of interest rate risk.

        Generally, NPV is the discounted present value of the difference between
incoming cash flows on interest-earning and other assets and outgoing cash flows
on interest-bearing  liabilities. The application of the methodology attempts to
quantify  interest  rate risk as the change in the NPV which would result from a
theoretical  200 basis  point  (100  basis  points  equals  1%) change in market
interest  rates.  Both a 200 basis point increase in market interest rates and a
200 basis point  decrease in market  interest rates are  considered.  If the NPV
would  decrease  more than 2% of the present value of the  institution's  assets
with either an increase or a decrease in market  rates,  the  institution  would
have to deduct  50% of the  amount of the  decrease  in excess of such 2% in the
calculation of the institution's  risk-based capital, if the regulations were in
effect.  Even before the  regulation  is in effect,  the OTS could  increase the
Savings Bank's  risk-based  capital  requirement on an  individualized  basis to
address excess interest rate risk.

         At December 31,  1998,  2% of the present  value of the Savings  Bank's
assets was approximately $10.4 million.  Because the interest rate risk of a 200
basis  point  increase in market  interest  rates  (which was  greater  than the
interest rate risk of a 200 basis point  decrease) was $18.3 million at December
31, 1998,  the Savings Bank would have been required to deduct $4.0 million (50%
of the $7.9  million  difference)  from its capital in  determining  whether the
Savings Bank met its risk-based  capital  requirement.  Despite such  reduction,
however, the Savings Bank's risk-based capital at December 31, 1998, would still
have exceeded the regulatory requirement by approximately $33.8 million.

 
                                       7
<PAGE>

        The following  tables present the Savings Bank's NPV as of December 31,
1998 and 1997, as calculated by the OTS,  based on  information  provided to the
OTS by the Savings Bank.
<TABLE>
<CAPTION>

                                Net Portfolio Value
                                 December 31, 1998

                                     Estimated
  Change in                          NPV as a
interest rates      Estimated        percentage        Amount
(basis points)      NPV              of assets         of change        Percent
<S>                   <C>               <C>               <C>              <C>
   +300             $36,502              7.54%         $(29,148)          (44)%
   +200              47,336              9.52           (18,314)          (28)
   +100              57,489             11.27            (8,161)          (12)
    --               65,650             12.60                -              -
   -100              69,663             13.20             4,013             6
   -200              72,490             13.58             6,840            10
   -300              76,404             14.13            10,754            16

</TABLE>

<TABLE>
<CAPTION>
                                       Net Portfolio Value
                                        December 31, 1997

                                     Estimated
  Change in                          NPV as a
interest rates      Estimated        percentage        Amount
(basis points)      NPV              of assets         of change        Percent
<S>                   <C>                <C>             <C>              <C>
   +300             $33,170              6.68%         $(29,873)          (47)%
   +200              44,029              8.63           (19,014)          (30)
   +100              54,374             10.38            (8,669)          (14)
    --               63,043             11.76                -              -
   -100              68,407             12.56             5,364             9
   -200              70,244             12.76             7,201            11
   -300              72,449             13.02             9,406            15

</TABLE>

As  illustrated  in the  tables,  NPV is more  sensitive  to rising  rates  than
declining rates. Such difference in sensitivity occurs principally  because,  as
rates rise,  borrowers do not prepay fixed-rate loans as quickly as they do when
interest rates are declining.  Thus, in a rising interest rate environment,  the
amount of interest  the Savings Bank would  receive on its loans would  increase
relatively  slowly as loans are slowly prepaid and new loans at higher rates are
made.  Moreover,  the interest the Savings Bank would pay on its deposits  would
increase  rapidly  because the Savings  Bank's  deposits  generally have shorter
periods to repricing.  Assumptions  used in calculating the amounts in the above
tables are OTS assumptions.

As with any method of measuring  interest rate risk,  certain  shortcomings  are
inherent  in  the  NPV  approach.  For  example,  although  certain  assets  and
liabilities may have similar maturities or periods of repricing,  they may react
in different  degrees to changes in market  interest  rates.  Also, the interest
rates on certain  types of assets and  liabilities  may  fluctuate in advance of
changes in market  interest  rates,  while interest rates on other types may lag
behind  changes in market rates.  Further,  in the event of a change in interest
rates, expected rates of prepayment on loans and mortgage-backed  securities and
early  withdrawal  levels from  certificates  of deposit  would  likely  deviate
significantly from those assumed in making the risk calculations.



                                       8
<PAGE>

In the event that interest rates rise,  the Savings  Bank's net interest  income
could be expected to be negatively  affected.  Moreover,  rising  interest rates
could  negatively  affect the Savings  Bank's  earnings due to  diminished  loan
demand.


CHANGES IN FINANCIAL CONDITION FROM DECEMBER 31, 1997 TO DECEMBER 31, 1998

         The Corporation's  consolidated total assets amounted to $519.2 million
at December  31,  1998, a decrease of $15.9  million,  or 3.0%,  from the $535.1
million  total at December 31, 1997.  This decline in assets was  primarily  the
result  of a  strategy  put in  place by  management  to allow  the  outflow  of
higher-yielding  certificates  of  deposit  in order to lower the  Corporation's
funding  costs,  resulting  in a decrease  in  deposits  of $19.9  million and a
decrease in the  Corporation's  cost of funds from 5.16% at December 31, 1997 to
4.73% at December 31, 1998. The decrease in deposits was partially  offset by an
increase in stockholders' equity of $3.3 million.

         Cash  and cash  equivalents,  comprised  of cash  and due  from  banks,
federal   funds  sold  and   interest-bearing   deposits   in  other   financial
institutions, amounted to $22.2 million at December 31, 1998, a decrease of $8.3
million, or 27.2%, from the total at December 31, 1997. The decrease in cash and
cash equivalents resulted from the decrease in deposits as discussed above.

         Investment securities totaled $838,000 at December 31, 1998, a decrease
of $5.2 million,  or 86.1%, from 1997 levels.  The decrease was due primarily to
sales and maturities totaling $1.1 million and $5.0 million, respectively, which
were partially offset by purchases totaling $1.0 million. Proceeds from sales of
investment   securities  were  redeployed  into  purchases  of   mortgage-backed
securities.

         Mortgage-backed   securities   (including   securities   classified  as
available  for sale)  totaled $54.9 million at December 31, 1998, an increase of
$15.5  million,  or 39.5%,  over the total at December 31, 1997. The increase in
mortgage-backed  securities  was due  primarily to  purchases of $35.5  million,
which were partially offset by principal repayments of $19.6 million.  Purchases
of  mortgage-backed  securities  during  1998  consisted  of  $26.3  million  of
fixed-rate  securities  and $9.2 million of  adjustable-rate  securities.  These
purchases  were  funded  primarily  by loan  repayments,  excess  liquidity  and
proceeds from the maturity of investment securities.

         Loans  receivable  (including  loans held for sale)  decreased by $17.4
million, or 4.0%, to a total of $419.4 million at December 31, 1998, as compared
to $436.9  million at December 31, 1997.  The decrease  resulted  primarily from
loan  repayments of $141.2  million and sales of $18.7  million,  which exceeded
loan disbursements and purchases totaling $143.3 million.  Loan originations and
purchases during 1998 increased by $11.5 million, or 8.7%, over 1997 totals. The
Savings Bank's loan originations during 1998 were primarily comprised of one- to
four-family and multi-family  loans, which totaled $105.0 million,  or 74.3%, of
total loan originations.

         The Savings  Bank's  allowance for loan losses  totaled $1.7 million at
December 31, 1998, an increase of $45,000,  or 2.7%,  over the total at December
31, 1997. The allowance represented .40% and .37% of total loans at December 31,
1998 and 1997, respectively,  and 94.2% and 167.8% of nonperforming loans, which
totaled  $1.8  million  and  $1.0  million  at  those  respective  dates.  While
management  believes the Savings Bank's allowance for loan losses is adequate at
December 31, 1998, based upon the available facts and  circumstances,  there can
be no assurance  that additions to the allowance will not be necessary in future
periods, which could adversely affect future operating results.

         Deposits  totaled  $412.1  million at December  31, 1998, a decrease of
$19.9  million,  or 4.6%,  from  December  31, 1997.  Deposits  subject to daily
repricing  totaled  $94.5  million,  or 22.9% of total  deposits at December 31,
1998, as compared to 21.2% of total deposits at December 31, 1997.  Certificates
of deposit  totaled $317.6  million,  or 77.1% of total deposits at December 31,
1998,  as compared  to 78.8% at  December  31,  1997.  Certificates  of deposits
decreased $23.0 million, or 6.7%, as a result of management's  strategy to allow
the outflow of higher-yielding certificates in order to reduce the Corporation's
funding cost.

                                       9
<PAGE>

         Advances from the Federal Home Loan Bank ("FHLB") totaled $34.7 million
at December 31, 1998, an increase of $502,000,  or 1.5%, over December 31, 1997.
The increase  resulted  primarily from $13.0 million in borrowings  during 1998,
which were partially offset by repayments of $12.5 million.

         Stockholders'  equity  totaled  $67.6  million at December 31, 1998, an
increase of $3.3  million,  or 5.2%,  over the total at December 31,  1997.  The
increase  resulted  primarily  from  net  earnings  of $4.6  million  which  was
partially  offset by  distributions  paid on common stock  totaling $1.6 million
during the year.


























                                       10
<PAGE>



      AVERAGE BALANCE, NET INTEREST INCOME AND YIELDS EARNED AND RATES PAID

         The following table presents for the periods indicated the total dollar
amount of interest income from average interest-earning assets and the resultant
yields, as well as the interest expense on average interest-bearing liabilities,
expressed both in dollars and rates, and the net interest margin. The table does
not  reflect  any effect of income  taxes.  All  average  balances  are based on
average monthly balances during the period.
<TABLE>
<CAPTION>

                                                                           Year ended December 31,
                                                     1998  (1)                       1997                            1996           
                                           --------------------------   -----------------------------  ----------------------------
                                            Average Interest  Average       Average Interest  Average      Average Interest Average
                                           standing  earned/   yield/   outstanding  earned/   yield/  outstanding  earned/  yield/
                                            balance     paid     rate       balance     paid     rate      balance     paid    rate
                                                                              (Dollars in thousands)
<S>                                          <C>        <C>       <C>         <C>       <C>      <C>         <C>      <C>      <C>
Interest-earnings assets:
  Loans receivable (2)                     $426,420  $32,413     7.60%     $427,912  $33,433     7.81%    $234,133  $18,872    8.06%
  Mortgage-backed securities (3)             55,490    3,464     6.24        40,245    2,651     6.59       32,263    2,103    6.52
  Investment securities (3)                   3,556      250     7.03        15,082    1,006     6.67       13,087      833    6.37
  Other interest-earning assets              26,744    1,518     5.68        18,318    1,061     5.79       16,896      930    5.50
                                            -------   ------   ------       -------   ------   ------     --------   ------   -----
      Total interest-earning assets         512,210   37,645     7.35       501,557   38,151     7.61      296,379   22,738    7.67

Non-interest earning assets                  19,523                          19,902                          8,377
                                            -------                         -------                        -------

     Total assets                          $531,733                        $521,459                       $304,756
                                            =======                         =======                        =======

Interest-bearing liabilities:
  Deposits:
    NOW accounts                             28,095      270     0.96      $ 22,184  $   322     1.45     $ 14,100  $   280    1.99
    Passbook and club accounts               38,164      688     1.80        42,712      859     2.01       23,673      516    2.18
    Money market deposit accounts            25,993      769     2.96        24,839      796     3.20       13,198      415    3.14
    Certificate of deposit accounts         327,545   18,574     5.67       332,370   18,946     5.70      180,521   10,343    5.73
  Borrowings (4)                             39,378    2,394     6.08        26,208    1,639     6.25       17,794    1,102    6.19
                                            -------   ------   ------       -------   ------   ------      -------   ------   -----
     Total interest-bearing liabilities     459,175   22,695     4.94       448,313   22,562     5.03      249,286   12,656    5.08
                                                      ------                          ------                         ------

Non-interest-bearing liabilities              6,448                           5,590                          4,612
                                            -------                         -------                        -------

     Total liabilities                      465,623                         453,903                        253,898

Stockholders' equity                         66,110                          67,556                         50,858
                                            -------                         -------                        -------

     Total liabilities and stockholders'
       equity                              $531,733                        $521,459                       $304,756
                                            =======                         =======                        =======

Net interest income/interest rate spread             $14,950     2.41%               $15,589     2.58%              $10,082    2.59%
                                                      ======   ======                 ======   ======                ======   ===== 

Net interest margin (5)                                          2.92%                           3.11%                         3.40%
                                                               ======                          ======                         =====
Average interest-earning assets to average
  interest-bearing liabilities               111.55%                        111.88%                         118.89%
                                             ======                         ======                          ====== 
</TABLE>

-----------------------------------
(1)  At December  31,  1998,  the yields  earned and rates paid were as follows:
     loans receivable,  7.57%;  mortgage-backed  securities,  6.32%;  investment
     securities,    6.15%;   other   interest-earning   assets,   5.14%;   total
     interest-earning assets, 7.31%; deposits,  4.62%; borrowings,  6.02%; total
     interest-bearing liabilities, 4.73%; interest rate spread, 2.58%.
(2)  Includes loans classified as held for sale.
(3)  Includes  mortgage-backed and investment securities classified as available
     for sale.
(4)  Includes FHLB advances and a loan from a third-party  financial institution
     to the Savings  Bank's  Employee  Stock  Ownership  Plan for the year ended
     December 31, 1996.
(5)  Net   interest   margin  is  net   interest   income   divided  by  average
     interest-earning assets.


                                       11
<PAGE>



                              RATE/VOLUME ANALYSIS

         The following  table  describes the extent to which changes in interest
rates and  changes in volume of  interest-related  assets and  liabilities  have
affected  the  Corporation's  interest  income and interest  expense  during the
periods   indicated.   For  each   category  of   interest-earning   assets  and
interest-bearing liabilities, information is provided on changes attributable to
(i) changes in volume  (change in volume  multiplied  by prior year rate),  (ii)
changes in rate  (change in rate  multiplied  by prior year  volume),  and (iii)
total change in rate and volume. The combined effect of changes in both rate and
volume,   which   cannot   be   separately   identified,   has  been   allocated
proportionately to the change due to rate and the change due to volume.

<TABLE>
<CAPTION>

                                                                         Year ended December 31,
                                                          1998 vs. 1997                            1997 vs. 1996       
                                            ------------------------------------    -----------------------------------
                                                     Increase              Total            Increase              Total
                                               (decrease) due to        increase       (decrease) due to       increase
                                                 Rate     Volume      (decrease)         Rate     Volume     (decrease)
                                                                            (In thousands)
<S>                                              <C>        <C>           <C>             <C>       <C>            <C>
Interest-earning assets:
  Loans receivable                            $  (902)     $(118)       $(1,020)       $(658)   $15,219        $14,561
  Mortgage-backed and related
    securities                                   (147)       960            813           23        525            548
  Investment securities and
    interest-earning deposits and other          (111)      (188)          (299)          92        212            304
                                               ------       ----         ------         ----     ------         ------
     Total                                    $(1,019)     $ 513           (506)       $(543)   $15,956         15,413
                                               ======       ====                        ====     ======

Interest-bearing liabilities:
  Deposits                                    $  (506)     $(116)          (622)       $(185)   $ 9,554          9,369
  Borrowings                                      (47)       802            755           11        526            537
                                               ------       ----         -------        -----    ------         ------
     Total                                    $  (553)     $ 686           (133)       $(174)   $10,080          9,906
                                               ======       ====         -------        ====     ======         ------

Increase (decrease) in net interest income                              $  (639)                               $ 5,507
                                                                         =======                                ======
</TABLE>




















                                       12
<PAGE>


Comparison of Results of Operations for the Years Ended December 31, 1998 and
1997

         Net earnings  amounted to $4.6 million for the year ended  December 31,
1998,  a decrease of  $320,000,  or 6.6%,  from the $4.9 million in net earnings
recorded  in 1997.  The  decrease  in net  earnings  resulted  primarily  from a
$639,000  decrease  in net  interest  income,  which was  partially  offset by a
$59,000 increase in other income, a $165,000 decrease in general, administrative
and other expense and a $101,000  decrease in the  provision for federal  income
taxes.

         Net interest  income  totaled $15.0 million for the year ended December
31, 1998, a decrease of $639,000,  or 4.1%, as compared to 1997.  Total interest
income decreased by $506,000,  or 1.3%, for the year ended December 31, 1998, as
compared to 1997.  Interest income on loans decreased by $1.0 million,  or 3.1%,
due primarily to a 21 basis point decline in the  weighted-average  yield,  from
7.81% in 1997 to 7.60% in 1998,  coupled  with a $1.5  million  decrease  in the
average balance  outstanding  year to year.  Interest income on  mortgage-backed
securities increased by $813,000, or 30.7%, due primarily to a $15.2 million, or
37.9%,  increase  in the average  balance  outstanding  year to year,  which was
partially offset by a 35 basis point decline in the weighted-average yield, from
6.59% in 1997 to 6.24% in 1998.  Interest  income on investment  securities  and
interest-bearing  deposits  decreased  by  $299,000,  or 14.5%,  during 1998 due
primarily  to  a  $3.1  million,  or  9.3%,  decrease  in  the  average  balance
outstanding,  coupled with a 36 basis point  decrease in the average  yield,  to
5.83% during 1998. The decrease in the average balance of investments  reflected
the  Corporation's   utilization  of  the  proceeds  from  sales  of  investment
securities to fund the purchase of higher yielding mortgage-backed securities.

         Interest  expense on deposits  decreased by $622,000,  or 3.0%, for the
year ended  December  31,  1998,  as  compared  to 1997.  The  decrease  was due
primarily to a 12 basis point decline in the average cost of deposits,  to 4.84%
for the year ended  December  31, 1998,  as compared to 4.96% for 1997,  coupled
with a $2.3 million  decrease in the average  balance  outstanding  from year to
year.  The decline in the average  balance of deposits and the weighted  average
rate paid  thereon  reflected  management's  strategy  to allow the  outflow  of
higher-yielding  certificates in order to reduce the Corporation's funding cost.
Interest expense on borrowings  increased by $755,000,  or 46.1%, due to a $13.2
million increase in the average balance of outstanding  borrowings  during 1998,
which was partially offset by a 17 basis point decrease in the  weighted-average
cost of borrowings, to a rate of 6.08% for 1998.

         As a result of the  foregoing  changes in interest  income and interest
expense, net interest income decreased by $639,000,  or 4.1%, for the year ended
December  31, 1998 as compared to 1997.  The  interest  rate spread  amounted to
2.41% during 1998 and 2.58% in 1997,  while the net interest  margin declined to
2.92% from 3.11% for the years ended December 31, 1998 and 1997, respectively.

         A  provision  for losses on loans is charged to  earnings  to bring the
total allowance for loan losses to a level considered  appropriate by management
based on historical experience,  the volume and type of lending conducted by the
Savings Bank,  the status of past due principal and interest  payments,  general
economic  conditions,  particularly  as such  conditions  relate to the  Savings
Bank's  market area,  and other  factors  related to the  collectibility  of the
Savings Bank's loan portfolio. As a result of such analysis, management recorded
a $107,000  provision  for losses on loans  during the year ended  December  31,
1998, an increase of $6,000 from the amount  recorded in 1997. The provision for
1998 was predicated upon an increase in  nonperforming  loans year to year, from
$1.0 million at December 31, 1997 to $1.8 million at December 31, 1998,  coupled
with an increase in loan charge-offs during 1998 to $62,000. Nonperforming loans
and loans  charged-off  primarily relate to loans secured by one- to four-family
residential  real estate.  It is  management's  opinion that such  nonperforming
loans at December  31, 1998 was  adequately  collateralized.  In  addition,  the
largest  loan  classified  as  nonperforming  at  December  31,  1998,  totaling
$430,000, was brought current by the borrower in 1999. There can be no assurance
that the allowance for loan losses of the Savings Bank will be adequate to cover
losses on nonperforming assets in the future.


                                       13
<PAGE>
         Other income increased by $59,000,  or 4.2%, to a total of $1.5 million
for the year ended  December 31, 1998, as compared to $1.4 million in 1997.  The
increase  was due  primarily  to a  $143,000  increase  in gains on sale of real
estate and real estate  acquired  through  foreclosure,  coupled  with a $90,000
increase  on gain on sale of loans and a  $40,000  increase  in other  operating
income,  which  consisted  primarily  of service  charges  and fees,  which were
partially  offset by a $205,000  decrease in gains on sale of securities year to
year.

         General,  administrative and other expense totaled $9.2 million for the
year ended  December 31, 1998, a decrease of $165,000,  or 1.8%,  as compared to
1997.  The decrease  resulted  primarily from a $336,000,  or 8.1%,  decrease in
employee  compensation  and  benefits,  and a  $15,000,  or  2.2%,  decrease  in
amortization  of goodwill  and other  intangible  assets,  which were  partially
offset by a $77,000, or 5.2%, increase in occupancy and equipment, a $49,000, or
6.5%,  increase  in  franchise  taxes,  a  $27,000,  or 5.7%,  increase  in data
processing and a $31,000, or 1.9%, increase in other operating expense.

         The decrease in employee  compensation and benefits resulted  primarily
from an increase in deferred loan origination costs associated with the increase
in loan volume year to year.  The increase in occupancy  and  equipment  expense
resulted  primarily from a $64,000  increase in depreciation  expense due to the
purchase of new computer  equipment.  The increase in franchise  taxes  resulted
from the increase in equity. The increase in data processing  represented a cost
of living  increase  coupled  with an  increase  related to greater  transaction
volume.  The small increase in other  operating  expense  reflects  management's
continuing efforts to control such operating costs.

         The  provision  for federal  income taxes  totaled $2.6 million for the
year  ended  December  31,  1998,  a decrease  of  $101,000,  or 3.8%,  from the
provision recorded in 1997. The decrease resulted primarily from a $421,000,  or
5.6%, decrease in pretax earnings year to year. The Corporation's  effective tax
rates  were  35.9% and 35.3% for the years  ended  December  31,  1998 and 1997,
respectively.


Comparison of Results of Operations for the Years Ended December 31, 1997 and
1996

         Net earnings  amounted to $4.9 million for the year ended  December 31,
1997,  an  increase  of $3.3  million,  or 203%,  over the $1.6  million  in net
earnings recorded in 1996. The increase in net earnings resulted  primarily from
a $5.5 million  increase in net interest  income and a $1.3 million  increase in
other income, which were partially offset by a $1.7 million increase in general,
administrative  and other  expense and a $1.8 million  increase in the provision
for federal income taxes. The increases in overall income and expense components
for the year ended December 31, 1997, as compared to the year ended December 31,
1996,  generally  reflect  the  effects  of a full year of  combined  operations
following  the  merger  of Circle  Financial  Corporation  ("Circle")  which was
consummated on October 11, 1996. The merger was accounted for using the purchase
method of  accounting,  which does not provide for a restatement of prior period
results of operations to give effect to the combination.

         The  increase  in net  earnings  also  resulted  from  a  non-recurring
$749,000  after-tax  charge for the FDIC special  assessment to recapitalize the
Savings Association  Insurance Fund ("SAIF"), in accordance with the legislation
enacted into law on September  30, 1996.  In addition,  the increase in earnings
also resulted from two  non-recurring  events related to the merger of Circle: a
$196,000 after-tax loss on the sale of investment and mortgage-backed securities
incurred  as  a  result  of  restructuring   Circle's  portfolio  and  after-tax
restructuring  expenses of approximately  $450,000 incurred relating to employee
compensation and benefits, occupancy and equipment, and general,  administrative
and other expenses.  Absent the special  assessment and merger related expenses,
net earnings for the year ended December 31, 1996, would have been approximately
$3.0 million.


                                       14
<PAGE>

         Net interest  income  totaled $15.6 million for the year ended December
31, 1997,  an increase of $5.5 million,  or 54.6%,  over 1996.  Interest  income
increased by $15.4 million,  or 67.8%,  for the year ended December 31, 1997, as
compared  to 1996.  Interest  income  on loans  and  mortgage-backed  securities
increased by $15.1  million,  or 72.0%,  due primarily to a $201.8  million,  or
75.7%,  increase  in the average  balance  outstanding  year to year,  which was
partially offset by a 16 basis point decline in the weighted-average yield, from
7.87% in 1996 to 7.71% in 1997.  Interest  income on investment  securities  and
interest-bearing  deposits  increased  by  $304,000,  or 17.2%,  during 1997 due
primarily  to a  $3.4  million,  or  11.4%,  increase  in  the  average  balance
outstanding,  coupled with a 31 basis point  increase in the average  yield,  to
6.19% during 1997.

         Interest expense on deposits  increased by $9.4 million,  or 81.1%, for
the year ended  December  31,  1997,  as compared to 1996.  The increase was due
primarily  to a $190.6  million,  or  82.3%,  increase  in the  average  balance
outstanding,  which was  partially  offset  by a 3 basis  point  decline  in the
average cost of  deposits,  to 4.96% for the year ended  December  31, 1997,  as
compared  to 4.99%  for  1996.  Interest  expense  on  borrowings  increased  by
$537,000,  or 48.7%,  due to an $8.4 million  increase in the average balance of
outstanding borrowings during 1997, coupled with a 6 basis point increase in the
weighted-average cost of borrowings, to a rate of 6.25% for 1997.

         As a result of the  foregoing  changes in interest  income and interest
expense,  net interest income increased by $5.5 million,  or 54.6%, for the year
ended December 31, 1997 as compared to 1996.  The interest rate spread  amounted
to 2.58% during 1997 and 2.59% in 1996,  while the net interest  margin declined
to  3.11%  from  3.40%  for  the  years  ended   December  31,  1997  and  1996,
respectively.

         A  provision  for losses on loans is charged to  earnings  to bring the
total allowance for loan losses to a level considered  appropriate by management
based on historical experience,  the volume and type of lending conducted by the
Savings Bank,  the status of past due principal and interest  payments,  general
economic  conditions,  particularly  as such  conditions  relate to the  Savings
Bank's  market area,  and other  factors  related to the  collectibility  of the
Savings Bank's loan portfolio. As a result of such analysis, management recorded
a $101,000  provision  for losses on loans  during the year ended  December  31,
1997, a decrease of $28,000 from the amount recorded in 1996.

         Other  income  increased by $1.2 million to a total of $1.4 million for
the year ended  December 31, 1997, as compared to $165,000 in 1996. The increase
was due  primarily to a $562,000  increase in gains on sales of  investment  and
mortgage-backed securities, coupled with a $39,000, or 23.2%, increase in rental
income  and a $610,000  increase  in other  operating  income,  which  consisted
primarily  of service  charges  and fees  directly  related to the  increase  in
transaction accounts as a result of the merger with Circle.

         General,  administrative and other expense totaled $9.4 million for the
year ended  December 31, 1997, an increase of $1.7 million,  or 22.7%,  over the
1996 total.  The increase  resulted  primarily  from a $1.0  million,  or 32.1%,
increase in employee  compensation and benefits, a $624,000,  or 73.2%, increase
in occupancy and equipment, a $230,000, or 44.1%, increase in franchise taxes, a
$551,000  increase in amortization of goodwill and other  intangible  assets,  a
$208,000,  or 77.6%,  increase  in data  processing  and a  $457,000,  or 40.3%,
increase in other operating  expenses,  all of which were partially  offset by a
$1.3 million,  or 84.0%,  decrease in federal deposit  insurance  premiums.  The
decrease in federal deposit  insurance  premiums  resulted from the $1.1 million
one-time pre-tax charge recorded in 1996 to recapitalize the SAIF,  coupled with
the corresponding decline in premium rates in 1997.

         The increase in employee  compensation and benefits resulted  primarily
from an increase in staffing levels due to the merger with Circle.  The increase
in  amortization  of goodwill  and other  intangible  assets was due to goodwill
recorded as a result of the merger with Circle.

  

                                       15
<PAGE>
       Increases in occupancy and equipment,  franchise taxes, data processing
and other operating  expenses  generally resulted from the effects of the merger
with Circle, which was consummated in 1996. As previously  discussed,  operating
expenses reflect the increased size of the Corporation, as compared to the prior
year.

         The  provision  for federal  income taxes  totaled $2.7 million for the
year ended  December 31, 1997,  an increase of $1.8 million,  or 205%,  over the
provision recorded in 1996. The increase resulted primarily from a $5.1 million,
or 204%,  increase in pretax earnings year to year. The Corporation's  effective
tax rates were 35.3% and 35.2% for the years ended  December  31, 1997 and 1996,
respectively.

Liquidity and Capital Resources

         The Savings Bank is required under  applicable  federal  regulations to
maintain specified levels of "liquid"  investments in qualifying types of United
States   Government  and  government   agency   obligations  and  other  similar
investments.  Such  investments  are intended to provide a source of  relatively
liquid  funds upon which the Savings  Bank may rely if necessary to fund deposit
withdrawals and for other  short-term  funding needs. The required level of such
liquid investments is currently 4% of certain  liabilities as defined by the OTS
and is changed from time to time to reflect economic conditions.

         The  liquidity of the Savings  Bank,  as measured by the ratio of cash,
cash  equivalents,  (not  committed,  pledged or required to liquidate  specific
liabilities), investment and qualifying mortgage-backed securities to the sum of
withdrawable deposit accounts and borrowings payable on demand or with unexpired
maturities of one year or less,  was 15.9% at December 31, 1998. At December 31,
1998 the Savings Bank's  "liquid"  assets totaled  approximately  $56.4 million,
which was $42.2 million in excess of the current OTS minimum requirement.

         The Savings Bank's liquidity, represented by cash and cash equivalents,
is a product of its operating,  investing and financing activities.  The Savings
Bank's  primary  sources  of  funds  are  deposits,  borrowings,   amortization,
prepayments and maturities of outstanding loans and mortgage-backed  securities,
maturities of investment and  mortgage-backed  securities  and other  short-term
investments,  sales of loans and investment and  mortgage-backed  securities and
funds  provided  from  operations.  While  scheduled  loan  and  mortgage-backed
securities  amortization  and  maturing  investment  securities  and  short-term
investments are relatively  predictable sources of funds, deposit flows and loan
prepayments  are  greatly   influenced  by  general  interest  rates,   economic
conditions and competition. The Savings Bank manages the pricing of its deposits
to maintain a steady  deposit  balance.  In  addition,  the Savings Bank invests
excess funds in overnight deposits and other short-term  interest-earning assets
which  provides  liquidity  to  meet  lending  requirements.  The  Savings  Bank
generates  cash  through the retail  deposit  market  and, to the extent  deemed
necessary,  utilizes borrowings for liquidity purposes (primarily  consisting of
advances from the FHLB of  Cincinnati).  At December 31, 1998,  the Savings Bank
had  $34.7  million  of  outstanding  advances  from  the  FHLB  of  Cincinnati.
Furthermore,  the Savings Bank has access to the Federal  Reserve Bank  discount
window.

         Liquidity management is both a daily and long-term function of business
management.  Excess  liquidity is generally  invested in short-term  investments
such as overnight deposits. On a longer-term basis, the Savings Bank maintains a
strategy  of  investing  in  various  loans,   mortgage-backed   securities  and
investment  securities.  The Savings Bank uses its sources of funds primarily to
meet its ongoing  commitments,  to pay maturing savings certificates and savings
withdrawals,  fund loan  commitments  and maintain a portfolio of investment and
mortgage-backed  securities.  At December  31,  1998,  the total  approved  loan
commitments outstanding amounted to $14.0 million. At the same date, commitments
under unused lines of credit secured by one- to four-family residential property
amounted to $4.7 million,  commitments  under unused lines of credit  secured by
multi-family,  non-residential  real estate and  commercial  loans  totaled $7.2
million and the  unadvanced  portion of  construction  loans  approximated  $9.2
million.  The  Savings  Bank also has  outstanding  commitments  of  $196,000 to
purchase  and  $1.1  million  to sell  nonresidential  real  estate  loans as of
December 31, 1998.



                                       16
<PAGE>
         Certificates  of  deposit  scheduled  to  mature in one year or less at
December 31, 1998, totaled $254.3 million. The Savings Bank believes that it has
adequate  resources  to fund all of its  commitments  and that it can adjust the
rate of certificates of deposit in order to retain deposits in changing interest
rate environments.

         The Savings Bank is subject to minimum capital standards promulgated by
the OTS. Such capital standards  generally require the maintenance of regulatory
capital sufficient to meet each of the following three requirements:  a tangible
capital  requirement,  a  core  capital  requirement  and a  risk-based  capital
requirement.  At December 31, 1998, the Savings Bank's tangible and core capital
amounted to $58.5 million,  or 11.4%, of total adjusted  assets,  which exceeded
the minimum  requirements of 1.5% and 3.0% at that date by  approximately  $50.9
million  and  $43.2  million,  or  9.9%  and  8.4%  of  adjusted  total  assets,
respectively.  The Savings Bank's  risk-based  capital  totaled $60.3 million at
December 31, 1998, or 21.5% of risk-weighted  assets, which exceeded the current
requirement of 8% of  risk-weighted  assets by approximately  $37.8 million,  or
13.5% of risk-weighted assets.

         The OTS has amended the core  capital  requirement  and  increased  the
minimum  requirement  to 4% of  adjusted  total  assets  for all  but  the  most
highly-rated savings associations.  Management anticipates no material change to
the Savings Bank's excess regulatory capital position.


Effect of Recent Accounting Pronouncements

         In June 1996,  the Financial  Accounting  Standards  Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 125, "Accounting
for  Transfers  and  Servicing  of  Financial  Assets  and   Extinguishments  of
Liabilities",  that  provides  accounting  guidance on  transfers  of  financial
assets,  servicing of financial assets, and extinguishment of liabilities.  SFAS
No. 125 introduces an approach to accounting  for transfers of financial  assets
that  provides a means of dealing  with more complex  transactions  in which the
seller  disposes of only a partial  interest in the  assets,  retains  rights or
obligations,  makes use of  special  purpose  entities  in the  transaction,  or
otherwise  has  continuing  involvement  with the  transferred  assets.  The new
accounting method,  referred to as the financial components  approach,  provides
that the carrying  amount of the financial  assets  transferred  be allocated to
components of the transaction based on their relative fair values.  SFAS No. 125
provides   criteria  for   determining   whether  control  of  assets  has  been
relinquished  and whether a sale has occurred.  If the transfer does not qualify
as a sale, it is accounted for as a secured borrowing.  Transactions  subject to
the  provisions  of SFAS No. 125  include,  among  others,  transfers  involving
repurchase agreements, securitizations of financial assets, loan participations,
factoring arrangements, and transfers of receivables with recourse.

         An entity that  undertakes an obligation  to service  financial  assets
recognizes  either a servicing  asset or liability  for the  servicing  contract
(unless related to a securitization  of assets,  and all the securitized  assets
are retained and classified as held-to-maturity). A servicing asset or liability
that is  purchased  or  assumed  is  initially  recognized  at its  fair  value.
Servicing  assets and  liabilities  are  amortized in proportion to and over the
period of estimated net servicing  income or net servicing  loss and are subject
to subsequent assessments for impairment based on fair value.

         SFAS No. 125  provides  that a  liability  is removed  from the balance
sheet  only if the  debtor  either  pays the  creditor  and is  relieved  of its
obligation  for the  liability  or is legally  released  from being the  primary
obligor.

         SFAS No. 125 is  effective  for  transfers  and  servicing of financial
assets and extinguishment of liabilities  occurring after December 31, 1997, and
is to be  applied  prospectively.  Earlier  or  retroactive  application  is not
permitted.  Management  adopted  SFAS No. 125  effective  January  1,  1998,  as
required,  without material effect on the Corporation's  consolidated  financial
position or results of operations.


                                       17
<PAGE>
         In June 1997,  the FASB issued SFAS No. 130,  "Reporting  Comprehensive
Income."  SFAS No.  130  establishes  standards  for  reporting  and  display of
comprehensive income and its components (revenues,  expenses,  gains and losses)
in a full set of  general-purpose  financial  statements.  SFAS No. 130 requires
that all items that are required to be recognized under accounting  standards as
components of comprehensive  income be reported in a financial statement that is
displayed with the same  prominence as other financial  statements.  It does not
require a specific  format for that  financial  statement  but requires  that an
enterprise  display an amount  representing total  comprehensive  income for the
period in that financial statement.

         SFAS No. 130 requires  that an enterprise  (a) classify  items of other
comprehensive  income by their nature in a financial  statement  and (b) display
the accumulated balance of other  comprehensive  income separately from retained
earnings and additional  paid-in  capital.  SFAS No. 130 is effective for fiscal
years  beginning  after  December  15,  1997.   Reclassification   of  financial
statements for earlier periods  provided for  comparative  purposes is required.
Management adopted SFAS No. 130 effective January 1, 1998, as required,  without
material impact on the Corporation's financial statements.

         In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related  Information."  SFAS No. 131 significantly  changes
the way that public  business  enterprises  report  information  about operating
segments in annual  financial  statements  and requires  that those  enterprises
report  selected  information  about  reportable  segments in interim  financial
reports  issued to  shareholders.  It also  establishes  standards  for  related
disclosures  about products and services,  geographic areas and major customers.
SFAS No. 131 uses a "management  approach" to disclose financial and descriptive
information  about the way that  management  organizes  the segments  within the
enterprise for making operating  decisions and assessing  performance.  For many
enterprises,  the management  approach will likely result in more segments being
reported. In addition,  SFAS No. 131 requires  significantly more information to
be disclosed for each  reportable  segment than is presently  being  reported in
annual  financial  statements  and also requires that  selected  information  be
reported in interim financial  statements.  SFAS No. 131 is effective for fiscal
years  beginning  after  December  15,  1997.  Management  adopted  SFAS No. 131
effective  January  1,  1998,  as  required,  without  material  impact  on  the
Corporation's financial statements.

         In June 1998, the FASB issued SFAS No. 133,  "Accounting for Derivative
Instruments and Hedging  Activities,"  which requires  entities to recognize all
derivatives  in their  financial  statements  as either  assets  or  liabilities
measured at fair value.  SFAS No. 133 also  specifies  new methods of accounting
for hedging  transactions,  prescribes  the items and  transactions  that may be
hedged,  and  specifies  detailed  criteria  to be  met  to  qualify  for  hedge
accounting.

         The definition of a derivative  financial instrument is complex, but in
general,  it is an instrument with one or more underlyings,  such as an interest
rate or foreign exchange rate, that is applied to a notional amount,  such as an
amount of currency, to determine the settlement amount(s). It generally requires
no  significant  initial  investment and can be settled net or by delivery of an
asset that is readily  convertible to cash.  SFAS No. 133 applies to derivatives
embedded in other contracts, unless the underlying of the embedded derivative is
clearly and closely related to the host contract.

         SFAS No. 133 is  effective  for fiscal years  beginning  after June 15,
1999.  On adoption,  entities are  permitted to transfer  held-to-maturity  debt
securities to the  available-for-sale  or trading  category without calling into
question  their intent to hold other debt  securities to maturity in the future.
SFAS No.  133 is not  expected  to have a material  impact on the  Corporation's
financial position or results of operations.

         The  foregoing   discussion   of  the  effects  of  recent   accounting
pronouncements  contains  forward-looking  statements  that  involve  risks  and
uncertainties. Changes in economic circumstances,  interest rates or the balance
of loan  servicing  rights sold and retained by the Savings Bank could cause the
effects of the accounting  pronouncements to differ from management's  foregoing
assessment.


                                       18
<PAGE>

Impact of Inflation and Changing Prices

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


Year 2000 Compliance Matters

         The Year 2000 (or Y2K) issue is a serious  operational problem which is
widespread  and  complex,   affecting  all  industries.  The  Federal  Financial
Institution Examination Council (the "FFIEC"), representing the views of each of
the  primary  financial  institution  regulators,  has  focused on the risk that
programming  codes in existing  computer systems may fail to properly  recognize
the new  millennium  when it  occurs  in the year  2000.  The  Savings  Bank has
addressed  the  potential  problems  associated  with the  possibility  that the
computers which control or operate the  Corporation's  operating systems may not
be programmed to read  four-digit date codes and, upon arrival of the year 2000,
may recognize the two-digit code "00" as the year 1900,  causing systems to fail
to function or to  generate  erroneous  data.  Other  concerns  have been raised
regarding  February  29,  2000,  as well as  September  9,  1999,  which are new
calculation challenges that may result in further problems.

         During  1997,  the Savings Bank had  identified a Year 2000  compliance
committee, which has worked throughout 1998 to develop and implement a Year 2000
action plan in accordance  with the  guidelines  established  by the FFIEC.  The
committee had substantially completed all phases of the action plan during 1998,
including Year 2000 awareness,  assessment,  renovation and implementation,  and
validation and testing.

         During 1998 the Savings Bank's internal  hardware and software had been
upgraded in accordance with the Savings Bank's normal course of operations. Most
of the computer equipment replaced was fully depreciated and upgrades would have
been  necessary  in the  near  future.  To  date,  the  cost  incurred  has been
approximately  $325,000.  This cost has been  capitalized  and will be amortized
over a three year period.

         On September  28, 1998,  the  Corporation  entered into an agreement of
merger with Glenway and its wholly-owned  subsidiary Centennial,  which provided
for a merger-of-equals between the Corporation and Glenway, and the Savings Bank
and Centennial. The transaction was consummated on March 19, 1999.

         In  connection  with the merger,  the Savings  Bank was merged with and
into  Centennial.  As a  result,  the  discussion  that  follows  will  focus on
Centennial's progress on the Year 2000 issue.

         Centennial  has been working for the last several  years to resolve the
potential  impact of Year 2000 on the  ability of the  computerized  information
system to accurately process information that may be date sensitive. It may also
affect the  operations of third  parties with which  Centennial  does  business,
including the vendors, suppliers, utility companies, and customers. Centennial's
Year  2000  compliance  plan has  five  phases.  These  phases  are (1)  project



                                       19
<PAGE>

management and awareness, (2) assessment, (3) renovation and implementation, (4)
validation and testing,  and (5) development of a contingency  plan.  Centennial
has  substantially  completed  phases one through  four with respect to the core
application systems related to deposit and loan processing, although appropriate
follow-up activities continue to occur. Centennial is proceeding with additional
testing of ancillary processes,  including system interfaces, and implementation
phases of the Y2K Plan.

         Project Management and Awareness

         Centennial has assigned  primary  responsibility  for Year 2000 project
         management to its Chief Operations Officer.  Several projects have been
         designed to promote awareness of Year 2000 issues throughout Centennial
         and the customer base. These procedures  include providing  information
         brochures to deposit and loan customers,  training  internal staff, and
         responding to customer, vendor and shareholder inquiries.

         Assessment

         Assessment  is  the  process  of  identifying   all  mission   critical
         applications  that  could  potentially  be  impacted  by the Year 2000.
         Centennial's   assessment   phase  is  complete.   The  scope  of  this
         examination  included   core-processing   applications  for  loans  and
         deposits,  telecommunications  systems,  vendor supplied  software,  PC
         hardware and  firmware,  and other  software and hardware used in daily
         operations.

         Centennial's  operations  are  dependent  upon vendors of both computer
         hardware and computer  software for most  applications.  Centennial has
         identified and contacted  those vendors to receive Year 2000 compliance
         assurance from its primary mission critical vendors,  and is continuing
         to monitor the progress/status of each.

         Centennial's main core processing  application  (loans and deposits) is
         processed on Data  Communications,  Inc. ("DCI") in-house client server
         software.  Centennial converted to DCI in 1998. All screens and reports
         show 4-digit fields,  and DCI has tested internal  programming codes to
         ensure Y2K compliance.

         Validation and Testing

         Centennial  participated with DCI in testing for Y2K compliance.  DCI's
         validation  and testing was completed by December 31, 1998.  Centennial
         staff monitored DCI testing and certification progress by review of DCI
         Y2K update documentation, which has been provided to DCI users, and via
         contact with designated DCI Y2K project and executive  staff.  Internal
         testing by Centennial  staff was completed using actual databases which
         were  future-dated  to validate  FFIEC Y2K test dates  recommended.  No
         system errors were found.

         Renovation and Implementation

         This phase  involves  obtaining  and  implementing  renovated  software
         applications  provided by vendors.  As these  applications are received
         and implemented,  Centennial will test them for Year 2000 compliance as
         noted above. This phase also involves  upgrading and replacing software
         and hardware where appropriate and should be substantially  complete by
         the end of March 1999.

         Centennial's   anticipated  direct  expenses  are  less  than  $50,000,
         primarily  for Y2K upgrades to existing user PC's.  Additional  expense
         could be incurred if PC's,  ATM's,  and phone systems  require  further
         modifications.  This expense would be capitalized and depreciated  over
         differing   periods   resulting   in  an   immaterial   effect  to  the
         Corporation's financial statements.


                                       20
<PAGE>
         Contingency Plan

         Contingency  planning  will  include  assessment  of  account  off-line
         procedures, staffing requirements,  security, cash needs, etc. The plan
         will  consider the  resources  needed and  available  to resume  normal
         operations following a disaster.

         Centennial  and DCI are on schedule to meet Y2K project dates set forth
         by the FFIEC for  remediation  testing and contingency  planning.  Bank
         management  believes  that  all  other  mission  critical  systems  and
         hardware  will be Year 2000 ready by June 30, 1999.  Contingency  plans
         will be made for elements outside of management's control or ability to
         test,  such as power,  water or telephone  failure,  which could affect
         operations.



























                                       21
<PAGE>


               Report of Independent Certified Public Accountants

Board of Directors
Fidelity Financial of Ohio, Inc.

We have audited the accompanying  consolidated statements of financial condition
of Fidelity  Financial of Ohio,  Inc. as of December 31, 1998 and 1997,  and the
related consolidated statements of earnings, comprehensive income, stockholders'
equity, and cash flows for each of the three years ended December 31, 1998, 1997
and 1996. These financial statements are the responsibility of the Corporation's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the consolidated financial position of Fidelity Financial
of Ohio, Inc. as of December 31, 1998 and 1997, and the consolidated  results of
its operations and its cash flows for each of the three years ended December 31,
1998,  1997  and  1996,  in  conformity  with  generally   accepted   accounting
principles.


/s/GRANT THORNTON LLP


Cincinnati, Ohio
February 10, 1999





                                       22
<PAGE>


<TABLE>

                        Fidelity Financial of Ohio, Inc.
<CAPTION>
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                  December 31,
                        (In thousands, except share data)

         ASSETS                                                                                  1998              1997
<S>                                                                                            <C>                 <C>
Cash and due from banks                                                                      $  3,898          $  2,801
Federal funds sold                                                                             17,619            22,646
Interest-bearing deposits in other financial institutions                                         704             5,084
                                                                                              -------           -------
         Cash and cash equivalents                                                             22,221            30,531

Investment securities available for sale - at market                                              838             6,020
Mortgage-backed securities available for sale - at market                                      25,205            25,827
Mortgage-backed  securities held to maturity - at cost, approximate market value
  of $29,728 and $13,706 at December 31, 1998 and
  1997, respectively                                                                           29,682            13,527
Loans receivable - net                                                                        419,200           436,414
Loans held for sale - at lower of cost or market                                                  236               438
Office premises and equipment - at depreciated cost                                             7,186             7,462
Real estate acquired through foreclosure                                                           32                - 
Federal Home Loan Bank stock - at cost                                                          4,464             4,157
Accrued interest receivable on loans                                                            2,046             2,110
Accrued interest receivable on mortgage-backed securities                                         318               245
Accrued interest receivable on investments                                                         21               132
Prepaid expenses and other assets                                                                 483               289
Goodwill and other intangible assets, net of accumulated amortization                           6,949             7,628
Prepaid federal income taxes                                                                      338               320
                                                                                              -------           -------

         Total assets                                                                        $519,219          $535,100
                                                                                              =======           =======

         LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                                                     $412,122          $432,024
Advances from the Federal Home Loan Bank                                                       34,735            34,233
Advances by borrowers for taxes and insurance                                                   2,426             2,134
Accrued interest and other liabilities                                                          1,519             1,826
Deferred federal income taxes                                                                     799               609
                                                                                              -------           -------
         Total liabilities                                                                    451,601           470,826

Commitments                                                                                        -                 - 

Stockholders' equity
  Preferred stock - authorized, 5,000,000 shares at $.10 par value; none issued                    -                 - 
  Common stock - authorized, 15,000,000 shares at $.10 par value; 5,613,107
    and 5,593,969 issued at December 31, 1998 and 1997                                            561               559
  Additional paid-in capital                                                                   41,824            41,548
  Retained earnings - restricted                                                               27,126            24,147
  Less shares acquired by Employee Stock Ownership Plan (ESOP)                                 (1,633)           (1,785)
  Less shares of common stock held in treasury - at cost                                           -                (20)
  Less shares acquired by Management Recognition Plan (MRP)                                      (234)             (292)
  Unrealized gains (losses) on securities designated as available for sale,
    net of related tax effects                                                                    (26)              117
                                                                                              -------           -------
         Total stockholders' equity                                                            67,618            64,274
                                                                                              -------           -------

         Total liabilities and stockholders' equity                                          $519,219          $535,100
                                                                                              =======           =======
</TABLE>


The accompanying notes are an integral part of these statements.


                                       23
<PAGE>



<TABLE>
                        Fidelity Financial of Ohio, Inc.
<CAPTION>
                       CONSOLIDATED STATEMENTS OF EARNINGS

                         For the year ended December 31,
                        (In thousands, except share data)

                                                                                 1998         1997         1996
<S>                                                                             <C>           <C>          <C>
Interest income
  Loans                                                                       $32,413      $33,433      $18,872
  Mortgage-backed securities                                                    3,464        2,651        2,103
  Investment securities                                                           250        1,006          833
  Interest-bearing deposits and other                                           1,518        1,061          930
                                                                               ------       ------       ------
         Total interest income                                                 37,645       38,151       22,738

Interest expense
  Deposits                                                                     20,301       20,923       11,554
  Borrowings                                                                    2,394        1,639        1,102
                                                                               ------       ------       ------
         Total interest expense                                                22,695       22,562       12,656
                                                                               ------       ------       ------

         Net interest income                                                   14,950       15,589       10,082
Provision for losses on loans                                                     107          101          129
                                                                               ------       ------       ------
         Net interest income after provision for losses on loans               14,843       15,488        9,953

Other income
  Gain (loss) on sale of investment and mortgage-backed securities                 62          267         (295)
  Gain on sale of loans                                                           126           36            3
  Gain on sale of real estate                                                     141            6           - 
  Gain on sale of real estate acquired through foreclosure                          8           -            - 
  Rental                                                                          198          207          168
  Other operating                                                                 939          899          289
                                                                               ------       ------       ------
         Total other income                                                     1,474        1,415          165

General, administrative and other expense
  Employee compensation and benefits                                            3,789        4,125        3,122
  Occupancy and equipment                                                       1,554        1,477          853
  Federal deposit insurance premiums                                              258          256        1,598
  Franchise taxes                                                                 800          751          521
  Amortization of goodwill and other intangible assets                            679          694          143
  Data processing                                                                 503          476          268
  Other operating                                                               1,621        1,590        1,133
                                                                               ------       ------       ------
         Total general, administrative and other expense                        9,204        9,369        7,638
                                                                               ------       ------       ------

         Earnings before income taxes                                           7,113        7,534        2,480

Federal income taxes
  Current                                                                       2,292        2,177          916
  Deferred                                                                        265          481          (44)
                                                                               ------       ------       ------
         Total federal income taxes                                             2,557        2,658          872
                                                                               ------       ------       ------

         NET EARNINGS                                                         $ 4,556      $ 4,876      $ 1,608
                                                                               ======       ======       ======

         EARNINGS PER SHARE
           Basic                                                                 $.84         $.90         $.38
                                                                                  ===          ===          ===

           Diluted                                                               $.83         $.89         $.38
                                                                                  ===          ===          ===
</TABLE>



The accompanying notes are an integral part of these statements.


                                       24
<PAGE>

<TABLE>

                        Fidelity Financial of Ohio, Inc.
<CAPTION>
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                        For the years ended December 31,
                                 (In thousands)


                                                                            1998         1997          1996
<S>                                                                        <C>           <C>           <C>
Net earnings                                                              $4,556       $4,876        $1,608

Other comprehensive income, net of tax:
  Unrealized  holding gains  (losses) on securities
    designated as available for sale, net of tax of $53,
    $62 and $18 in 1998, 1997 and 1996, respectively                        (102)         121            34

  Reclassification adjustment for (gains) losses included
    in net earnings, net of tax of $21, $91 and $100 in
    1998, 1997 and 1996, respectively                                        (41)        (176)          195
                                                                           -----        -----         -----

Comprehensive income                                                      $4,413       $4,821        $1,837
                                                                           =====        =====         =====

</TABLE>


































The accompanying notes are an integral part of these statements.


                                       25
<PAGE>




<TABLE>
<CAPTION>
                        Fidelity Financial of Ohio, Inc.
                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
           EQUITY For the years ended December 31, 1998, 1997 and 1996
                        (In thousands, except share data)
                                                                                                             Unrealized
                                                                                                                gains
                                                                                                             (losses) on
                                                         Additional                          Shares   Shares  securities
                                                   Common   paid-in   Retained  Treasury   acquired  acquired  available
                                                    stock   capital   earnings     stock    by ESOP   by MRP    for sale     Total
<S>                                                  <C>       <C>       <C>        <C>       <C>       <C>        <C>         <C>
Balance at January 1, 1996                           $181   $ 4,848    $25,497      $ -     $  (336)   $ (20)    $ (57)     $30,113

Net earnings for the year ended December 31, 1996      -         -       1,608        -          -        -         -         1,608
Proceeds from issuance of common stock                226    21,893        137        -      (1,822)      -         -        20,434
Issuance of shares in connection with merger          151    14,792         -         -          -        -         -        14,943
Exercise of 6,750 stock options                         1        32         -         -          -        -         -            33
Principal payments on loans to ESOP/amortization of
 expense related to employee stock benefit plans       -         43         -         -         220       20        -           283
Unrealized gains on securities designated as
  available for sale, net of related tax effects       -         -          -         -          -        -        229          229
Cash distributions of $.24 per share                   -         -        (931)       -          -        -         -          (931)
                                                      ---    ------     ------       ---     ------      ---       ---       ------

Balance at December 31, 1996                          559    41,608     26,311        -      (1,938)      -        172       66,712

Net earnings for the year ended December 31, 1997      -         -       4,876        -          -        -         -         4,876
Purchase of treasury shares                            -         -          -       (229)        -        -         -          (229)
Stock acquired for MRP                                 -         -          -         -          -      (292)       -          (292)
Exercise of 14,350 stock options                       -       (142)        -        209         -        -         -            67
Principal payments on loans to ESOP/amortization of
  expense related to employee stock benefit plans      -         82        117        -         153       -         -           352
Unrealized losses on securities designated as
  available for sale, net of related tax effects       -         -          -         -          -        -        (55)         (55)
Cash distributions of $1.28 per share                  -         -      (7,157)       -          -        -         -        (7,157)
                                                      ---    ------     ------       ---     ------      ---       ---       ------

Balance at December 31, 1997                          559    41,548     24,147       (20)    (1,785)    (292)      117       64,274

Net earnings for the year ended December 31, 1998      -         -       4,556        -          -        -         -         4,556
Exercise of 20,442 stock options                        2       173         -         20         -        -         -           195
Principal payments on loans to ESOP/amortization of
  expense related to employee stock benefit plans      -        103        215        -         152       58        -           528
Unrealized losses on securities designated as
  available for sale, net of related tax effects       -         -          -         -          -        -       (143)        (143)
Cash distributions of $.32 per share                   -         -      (1,792)       -          -        -         -        (1,792)
                                                      ---    ------     ------       ---     ------      ---        --       ------

Balance at December 31, 1998                         $561   $41,824    $27,126      $ -     $(1,633)   $(234)    $ (26)     $67,618
                                                      ===    ======     ======       ===     ======     ====      ====       ======
</TABLE>

The accompanying notes are an integral part of these statements.

                                       26
<PAGE>


<TABLE>
<CAPTION>

                        Fidelity Financial of Ohio, Inc.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                         For the year ended December 31,
                                 (In thousands)

                                                                                         1998         1997         1996
<S>                                                                                      <C>          <C>          <C>
Cash flows from operating activities:
  Net earnings for the year                                                          $  4,556     $  4,876      $ 1,608
  Adjustments to reconcile net earnings to net cash provided by
  (used in) operating activities:
    Depreciation and amortization                                                         694          630          335
    Amortization of premiums on investments and mortgage-backed securities                178           46           47
    Amortization of deferred loan origination (fees) costs                                431          277         (117)
    Amortization expense of employee stock benefit plans                                  313          235           63
    Amortization of goodwill and other intangible assets                                  679          694          143
    Amortization of purchase accounting adjustments - net                                (191)        (755)        (480)
    (Gain) loss on sale of investment and mortgage-backed securities                      (62)        (267)         295
    (Gain) loss on sale of mortgage loans                                                  82           41           (3)
    Loans disbursed for sale in the secondary market                                  (16,461)      (4,599)         (71)
    Proceeds from sale of mortgage loans                                               16,584        4,120          550
    Gain on sale of real estate                                                          (141)          (6)          - 
    Federal Home Loan Bank stock dividends                                               (307)        (283)        (165)
    Provision for losses on loans                                                         107          101          129
    Gain on sale of real estate acquired through foreclosure                               (8)          -            - 
    Increase (decrease) in cash due to changes in:
      Accrued interest receivable on loans                                                 64         (160)        (328)
      Accrued interest receivable on mortgage-backed securities                           (73)          65          338
      Accrued interest receivable on investments                                          111          152          (65)
      Prepaid expenses and other assets                                                  (194)          82          837
      Accrued interest and other liabilities                                             (307)        (880)        (499)
      Federal income taxes
        Current                                                                           (18)         434           - 
        Deferred                                                                          265          481          (44)
                                                                                      -------      -------       ------
         Net cash provided by operating activities                                      6,302        5,284        2,573

Cash flows provided by (used in) investing activities:
  Purchase of investment securities designated as available for sale                   (1,000)     (13,506)     (13,540)
  Proceeds from sale of investment securities designated as available for sale          1,146       16,002        6,966
  Maturities of investment securities designated as available for sale                  5,040        7,651        4,079
  Purchase of mortgage-backed securities designated as available for sale             (11,323)     (14,095)      (3,173)
  Proceeds from sale of mortgage-backed securities designated as
    available for sale                                                                     -        22,664       28,943
  Principal repayments on mortgage-backed securities designated as
    available for sale                                                                 11,662        4,560        6,182
  Purchase of mortgage-backed securities designated as held to maturity               (24,156)      (5,078)          - 
  Principal repayments on mortgage-backed securities designated as held
    to maturity                                                                         7,953        2,285          344
  Loan disbursements                                                                 (124,861)    (115,855)     (59,394)
  Purchase of loan participations                                                      (1,999)     (11,368)          - 
  Sale of loan participations                                                           2,120          261           - 
  Principal repayments on loans                                                       141,217       79,023       37,106
  Purchase of Federal Home Loan Bank stock                                                 -           (93)         (28)
  Proceeds from sale of real estate                                                       213          135           - 
  Purchases and additions to office premises and equipment                               (496)        (856)      (1,284)
  Proceeds from sale of real estate acquired through foreclosure                          237           -            - 
  Additions to real estate acquired through foreclosure                                   (13)          -            - 
  Acquisition of Circle Financial Corporation common stock - net                           -            -        (5,359)
                                                                                      -------      -------       ------
         Net cash provided by (used in) investing activities                            5,740      (28,270)         842
                                                                                      -------      -------       ------

         Net cash provided by (used in) operating and investing activities
           (subtotal carried forward)                                                  12,042      (22,986)       3,415
                                                                                      -------      -------       ------
</TABLE>


                                       27
<PAGE>

<TABLE>
<CAPTION>

                        Fidelity Financial of Ohio, Inc.

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                         For the year ended December 31,
                                 (In thousands)


                                                                                         1998         1997         1996
<S>                                                                                     <C>           <C>           <C>
       Net cash provided by (used in) operating and investing activities
          (subtotal brought forward)                                                  $12,042     $(22,986)    $  3,415

Cash provided by (used in) financing activities:
  Net increase (decrease) in deposit accounts                                         (19,754)      24,234       19,880
  Proceeds from Federal Home Loan Bank advances                                        13,000       21,500       15,000
  Repayment of Federal Home Loan Bank advances                                        (12,508)      (7,462)     (39,970)
  Proceeds from issuance of common stock, net                                              -            -        20,434
  Purchase of treasury shares                                                              -          (229)          - 
  Purchase of stock for management recognition plan                                        -          (292)          - 
  Proceeds from the exercise of stock options                                             195           67           33
  Distributions on common stock                                                        (1,577)      (7,040)        (931)
  Advances by borrowers for taxes and insurance                                           292          129          263
                                                                                       ------      -------      -------
         Net cash provided by (used in) financing activities                          (20,352)      30,907       14,709
                                                                                       ------      -------      -------

Net increase (decrease) in cash and cash equivalents                                   (8,310)       7,921       18,124

Cash and cash equivalents at beginning of year                                         30,531       22,610        4,486
                                                                                       ------      -------      -------

Cash and cash equivalents at end of year                                              $22,221     $ 30,531     $ 22,610
                                                                                       ======      =======      =======


Supplemental disclosure of cash flow information:
  Cash paid during the year for:
    Federal income taxes                                                              $ 2,310     $  1,743     $    755
                                                                                       ======      =======      =======

    Interest on deposits and borrowings                                               $22,841     $ 22,886     $ 12,574
                                                                                       ======      =======      =======

Supplemental disclosure of noncash investing and financing activities:
  Securitization of loans                                                             $    -      $  8,099     $     - 
                                                                                       ======      =======      =======

  Unrealized gains (losses) on securities designated as available
    for sale, net of related tax effects                                              $  (143)    $    (55)    $    229
                                                                                       ======      =======      =======

  Nonmonetary exchange of office premises and equipment for similar assets            $    -      $     -      $     61
                                                                                       ======      =======      =======

  Recognition of mortgage servicing rights in accordance with SFAS No. 125            $   208     $     77     $     - 
                                                                                       ======      =======      =======

  Transfers from loans to real estate acquired through foreclosure                    $   261     $     -      $     - 
                                                                                       ======      =======      =======

  Liabilities assumed and stock and cash paid in acquisition
    of Circle Financial Corporation                                                   $    -      $     -      $265,904

  Less fair value of assets received                                                       -            -       258,175
                                                                                       ------      -------      -------

  Amount assigned to goodwill and other intangible assets                             $    -      $     -      $  7,729
                                                                                       ======      =======      =======

</TABLE>


The accompanying notes are an integral part of these statements.


                                       28
<PAGE>


                        Fidelity Financial of Ohio, Inc.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES

    Prior to 1996,  Fidelity Federal Savings and Loan  Association  ("Fidelity")
    had operated as a federally-chartered,  mutual holding company. Fidelity had
    capitalized   Fidelity   Federal  Savings  Bank  (the  "Savings   Bank"),  a
    federally-chartered stock savings bank, by transferring substantially all of
    its assets and  liabilities  to the Savings  Bank in exchange  for shares of
    common stock and reorganized from a  federally-chartered  mutual savings and
    loan  association to a  federally-chartered  mutual holding company known as
    Fidelity  Federal Mutual  Holding  Company (the "Mutual  Holding  Company").
    Concurrent with the  Reorganization,  the Savings Bank had issued additional
    shares of its common stock to certain members of the public.

    In 1995,  the Boards of Directors of the Savings Bank and the Mutual Holding
    Company  adopted a Plan of Conversion  (the "Plan") and in October 1995, the
    Savings  Bank   incorporated   Fidelity   Financial  of  Ohio,   Inc.   (the
    "Corporation") under Ohio law as a first-tier wholly owned subsidiary of the
    Savings Bank.  The  Corporation  completed its stock  offering in connection
    with the  Savings  Bank's  conversion  from  the  mutual  to  stock  form of
    ownership.  Pursuant to the Plan (i) 2,278,100  shares of the  Corporation's
    common  stock were sold at $10 per share;  (ii) the Mutual  Holding  Company
    converted to an interim federal stock savings institution and simultaneously
    merged with and into the Savings Bank and the outstanding  shares of Savings
    Bank common  stock held by the Mutual  Holding  Company were  canceled;  and
    (iii)  an  interim  savings  bank  ("Interim")   formed  as  a  wholly-owned
    subsidiary of the Corporation  solely for such purpose,  was merged with and
    into the Savings Bank (the "Conversion and Reorganization").  As a result of
    the merger of Interim  with and into the  Savings  Bank,  the  Savings  Bank
    became a  wholly-owned  subsidiary of the  Corporation  and the  outstanding
    public Savings  Bank's shares were converted into shares of the  Corporation
    pursuant to an exchange  ratio of 2.25 shares for one, which resulted in the
    holders  of such  shares  owning  in the  aggregate  approximately  the same
    percentage of the common stock to be outstanding  upon the completion of the
    Conversion and Reorganization as the percentage of Savings Bank common stock
    owned in the aggregate  immediately  prior to consummation of the Conversion
    and Reorganization. The costs of issuing the common stock were deducted from
    the sale  proceeds of the  offering.  The  offering  resulted in net capital
    proceeds  totaling $20.4 million.  Future  references to the  Corporation or
    Savings Bank are utilized herein as the context requires.

    In April 1996,  the  Corporation  entered  into an  Agreement of Merger with
    Circle Financial Corporation ("Circle"), a savings and loan holding company,
    pursuant to which Circle and its wholly owned  subsidiary,  Peoples  Savings
    Association  ("Peoples"),  would  merge with and into the  Corporation  (the
    "Merger").  The  transaction  was  consummated  in  October  1996,  and  was
    accounted  for using the  purchase  method of  accounting.  The  Corporation
    effected the  acquisition  through cash payments  totaling $12.2 million and
    issuance of  1,513,967  shares of its common  stock at a fair value of $9.87
    per share. The acquisition  resulted in the Savings Bank recording  goodwill
    and other intangible assets totaling $7.7 million.




                                       29
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    Presented below are pro-forma condensed consolidated  statements of earnings
    and earnings  per share which have been  prepared as if the  acquisition  of
    Circle had been  consummated  as of the beginning of the year ended December
    31, 1996.
<TABLE>
<CAPTION>

                                               (In thousands, except share data)
                                                           (Unaudited)
<S>                                                            <C>
    Total interest income                                    $35,313
    Total interest expense                                    19,924
         Net interest income                                  15,389

    Provision for losses on loans                                129
    Other income                                                 555
    General, administrative and other expense                 12,645
                                                              ------

         Earnings before income taxes                          3,170

    Federal income taxes                                       1,170

         Net earnings                                        $ 2,000
                                                              ======

         Basic earnings per share                               $.38
                                                                 ===
</TABLE>

    The Corporation is a savings and loan holding  company whose  activities are
    primarily limited to holding the stock of the Savings Bank.

    The Savings Bank conducts a general banking  business in  southwestern  Ohio
    which  consists of attracting  deposits from the general public and applying
    those  funds to the  origination  of loans  for  residential,  consumer  and
    nonresidential  purposes.  The Savings Bank's profitability is significantly
    dependent  on its net  interest  income,  which  is the  difference  between
    interest  income  generated  from  interest-earning  assets (i.e.  loans and
    investments) and the interest expense paid on  interest-bearing  liabilities
    (i.e. customer deposits and borrowed funds). Net interest income is affected
    by the  relative  amount of  interest-earning  assets  and  interest-bearing
    liabilities and the interest  received or paid on these balances.  The level
    of interest rates paid or received by the Savings Bank can be  significantly
    influenced  by a  number  of  environmental  factors,  such as  governmental
    monetary policy, that are outside of management's control.

    The financial  information  presented herein has been prepared in accordance
    with  generally  accepted   accounting   principles   ("GAAP")  and  general
    accounting  practices within the financial services  industry.  In preparing
    financial statements in accordance with GAAP, management is required to make
    estimates  and  assumptions  that affect the reported  amounts of assets and
    liabilities  and the disclosure of contingent  assets and liabilities at the
    date of the  financial  statements  and  revenues  and  expenses  during the
    reporting period. Actual results could differ from such estimates.

    The following is a summary of  significant  accounting  policies  which have
    been   consistently   applied  in  the   preparation  of  the   accompanying
    consolidated financial statements.


                                       30
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    1.  Principles of Consolidation

    The financial  statements  include the accounts of the  Corporation  and the
    Savings Bank. All significant  intercompany  balances and transactions  have
    been eliminated.

    2. Investment and Mortgage-backed Securities

    The Corporation  accounts for investment and  mortgage-backed  securities in
    accordance with Statement of Financial Accounting Standards ("SFAS") No. 115
    "Accounting for Certain Investments in Debt and Equity Securities". SFAS No.
    115 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  Corporation 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 and 1997, the Corporation's  equity accounts  reflected
    unrealized losses and gains on securities  designated as available for sale,
    net of related tax effects, of $26,000 and $117,000, respectively.

    Realized gains and losses on sales of securities  are  recognized  using the
specific identification method.

    3.  Loans Receivable

    Loans held in  portfolio  are stated at the  principal  amount  outstanding,
    adjusted for deferred loan  origination  fees, the allowance for loan losses
    and  premiums  and  discounts  on loans  purchased  and sold.  Premiums  and
    discounts  on loans  purchased  and  sold  are  amortized  and  accreted  to
    operations using the interest method over the average life of the underlying
    loans.  Interest is accrued as earned, unless the collectibility of the loan
    is in doubt. Uncollectible interest on loans that are contractually past due
    is  charged  off,  or an  allowance  is  established  based on  management's
    periodic  evaluation.  The allowance is  established by a charge to interest
    income equal to all interest previously accrued,  and income is subsequently
    recognized  only to the extent that cash  payments  are received  until,  in
    management's  judgment, the borrower's ability to make periodic interest and
    principal  payments  has  returned  to  normal,  in  which  case the loan is
    returned to accrual status. If the ultimate collectibility of the loan is in
    doubt,  in whole or in part, all payments  received on nonaccrual  loans are
    applied to reduce principal until such doubt is eliminated.

    Loans held for sale are  carried at the lower of cost or market,  determined
    in the aggregate.  In computing  cost,  deferred loan  origination  fees are
    deducted from the principal  balances of the related loans.  At December 31,
    1998 and 1997, loans held for sale were carried at cost.


                                       31
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996



NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    3.  Loans Receivable (continued)

     The Savings Bank  accounts for mortgage  servicing  rights  pursuant to the
     provisions  of SFAS No. 125,  "Accounting  for  Transfers  and Servicing of
     Financial Assets and  Extinguishments of Liabilities,"  which requires that
     the Savings Bank recognize as separate  assets,  rights to service mortgage
     loans for others, regardless of how those servicing rights are acquired. An
     institution  that acquires  mortgage  servicing  rights  through either the
     purchase  or  origination  of  mortgage  loans and sells  those  loans with
     servicing  rights  retained would allocate some of the cost of the loans to
     the mortgage servicing rights.

     SFAS No. 125 requires that  securitization  of mortgage  loans be accounted
     for  as  sales  of  mortgage  loans  and  acquisitions  of  mortgage-backed
     securities.  Additionally,  SFAS No. 125 requires that capitalized mortgage
     servicing rights and capitalized  excess servicing  receivables be assessed
     for impairment. Impairment is measured based on fair value.

     The mortgage  servicing rights recorded by the Savings Bank,  calculated in
     accordance  with the provisions of SFAS No. 125, were segregated into pools
     for valuation purposes,  using as pooling criteria the loan term and coupon
     rate.  Once pooled,  each  grouping of loans was  evaluated on a discounted
     earnings  basis to determine  the present  value of future  earnings that a
     purchaser  could  expect to  realize  from each  portfolio.  Earnings  were
     projected from a variety of sources including loan servicing fees, interest
     earned on float, net interest earned on escrows,  miscellaneous income, and
     costs to service  the loans.  The present  value of future  earnings is the
     "economic" value for the pool, i.e., the net realizable present value to an
     acquirer of the acquired servicing.

     The Savings Bank recorded amortization related to mortgage servicing rights
     totaling  approximately $39,000 and $3,000 for the years ended December 31,
     1998 and 1997, respectively.  At December 31, 1998 and 1997, the fair value
     of the Savings  Bank's  mortgage  servicing  rights  totaled  approximately
     $243,000 and $74,000, respectively.

     4.   Loan Origination and Commitment Fees

     The Savings Bank accounts for loan  origination fees in accordance with the
     provisions of SFAS No. 91,  "Accounting  for  Nonrefundable  Fees and Costs
     Associated with  Originating or Acquiring Loans and Initial Direct Costs of
     Leases".  Pursuant  to the  provisions  of SFAS No.  91,  origination  fees
     received from loans, net of certain direct  origination costs, are deferred
     and amortized to interest income using the interest  method,  giving effect
     to actual loan prepayments.  Additionally, SFAS No. 91 generally limits the
     definition of loan  origination  costs to the direct costs  attributable to
     originating a loan, i.e.  principally actual personnel costs. Fees received
     for loan  commitments  that are  expected  to be drawn  upon,  based on the
     Savings  Bank's  experience  with  similar  commitments,  are  deferred and
     amortized over the life of the loan using the level-yield  method. Fees for
     other loan  commitments are deferred and amortized over the loan commitment
     period on a straight-line basis.



                                       32
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

     5.   Allowance for Losses on Loans

     It is the  Savings  Bank's  policy  to  provide  valuation  allowances  for
     estimated  losses on loans based on past loan loss  experience,  changes in
     the  composition of the loan  portfolio,  trends in the level of delinquent
     and  problem  loans,  adverse  situations  that may affect  the  borrower's
     ability to repay,  the estimated  value of any  underlying  collateral  and
     current and  anticipated  economic  conditions in the primary lending area.
     When the collection of a loan becomes doubtful, or otherwise troubled,  the
     Savings Bank records a loan loss provision equal to the difference  between
     the fair value of the property  securing  the loan and the loan's  carrying
     value. Major loans (including development projects) and major lending areas
     are reviewed periodically to determine potential problems at an early date.
     The  allowance  for loan losses is  increased  by charges to  earnings  and
     decreased by charge-offs (net of recoveries).

     The Savings Bank accounts for impaired  loans in  accordance  with SFAS No.
     114,  "Accounting  by Creditors  for  Impairment  of a Loan".  SFAS No. 114
     requires  that impaired  loans be measured  based upon the present value of
     expected future cash flows discounted at the loan's effective interest rate
     or, as an alternative,  at the loans observable  market price or fair value
     of the collateral.

     A loan is defined  under SFAS No. 114 as  impaired  when,  based on current
     information  and events,  it is probable  that a creditor will be unable to
     collect all  amounts due  according  to the  contractual  terms of the loan
     agreement.  In applying  the  provisions  of SFAS No. 114, the Savings Bank
     considers  its  investment  in  one-to-four  family  residential  loans and
     consumer  installment  loans to be homogeneous and therefore  excluded from
     separate  identification for evaluation of impairment.  With respect to the
     Savings Bank's investment in multi-family and nonresidential loans, and its
     evaluation of any impairment thereon,  such loans are collateral  dependent
     and as a result are carried as a practical  expedient  at the lower of cost
     or fair value.

     It is the Savings Bank's policy to evaluate all unsecured  credits that are
     more than  ninety  days  delinquent  and charge off such  credits as deemed
     necessary. Similarly, collateral dependent loans which are more than ninety
     days  delinquent are considered to constitute  more than a minimum delay in
     repayment and are evaluated for impairment under SFAS No. 114 at that time.

     At December  31, 1998 and 1997,  the Savings Bank had one loan for $371,000
     and  $376,000,  respectively,  that was defined as impaired  under SFAS No.
     114.







                                       33
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    6.  Real Estate Acquired Through Foreclosure

    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.

    7.  Office Premises and Equipment

    Office  premises and equipment are carried at cost and include  expenditures
    which extend the useful lives of existing assets.  Maintenance,  repairs and
    minor   renewals  are  expensed  as  incurred.   For  financial   reporting,
    depreciation  and  amortization  are  provided  on  the   straight-line  and
    accelerated  methods  over the useful  lives of the assets,  estimated to be
    thirty to forty  years for  buildings,  five to fifteen  years for  building
    improvements,  three to ten years for furniture and equipment and five years
    for automobiles. An accelerated method is used for tax reporting purposes.

    8.  Federal Income Taxes

    The Corporation  accounts for federal income taxes pursuant to SFAS No. 109,
    "Accounting for Income Taxes". Pursuant to the provisions of SFAS No. 109, a
    deferred  tax  liability  or deferred  tax asset is computed by applying the
    current  statutory  tax  rates  to  net  taxable  or  deductible   temporary
    differences  between the tax basis of an asset or liability and its reported
    amount in the consolidated  financial statements that will result in taxable
    or deductible  amounts in future  periods.  Deferred tax assets are recorded
    only to the extent that the amount of net deductible  temporary  differences
    or carryforward  attributes may be utilized against current period earnings,
    carried back against prior years' earnings, offset against taxable temporary
    differences  reversing  in future  periods,  or  utilized  to the  extent of
    management's  estimate of future taxable  income.  A valuation  allowance is
    provided  for  deferred  tax  assets  to the  extent  that the  value of net
    deductible  temporary   differences  and  carryforward   attributes  exceeds
    management's  estimates of taxes payable on future taxable income.  Deferred
    tax   liabilities  are  provided  on  the  total  amount  of  net  temporary
    differences taxable in the future.

    The Corporation's  principal temporary  differences between pretax financial
    income and taxable  income result  primarily  from the different  methods of
    accounting for deferred loan origination fees,  Federal Home Loan Bank stock
    dividends, the general loan loss allowance,  percentage of earnings bad debt
    deductions  and  certain  components  of  retirement  expense.  A  temporary
    difference  is also  recognized  for  depreciation  expense  computed  using
    accelerated methods for federal income tax purposes.



                                       34
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    9.  Goodwill and Other Intangible Assets

    Goodwill resulting from the acquisition of Circle totaled approximately $7.7
    million,  and is being  amortized  over a  fifteen  year  period  using  the
    straight-line method.  Specifically  identifiable intangible assets totaling
    $703,000 related to core deposit  intangible  assets is being amortized over
    an  estimated  useful  life of seven and a half years  using an  accelerated
    method.  Management  periodically  evaluates  the  carrying  value  of these
    intangible  assets in relation to the continuing  earnings  capacity of such
    acquired net assets.

    10. Retirement and Incentive Plans

    The Savings Bank has several  retirement  and incentive  plans  covering the
    directors  and  substantially  all  employees.  Such  plans  are more  fully
    described as follows.

    The Savings Bank has a 401(k) profit-sharing plan whereby employees may make
    voluntary  tax  deferred  contributions  up to  15%  of  their  base  annual
    compensation.  The Savings Bank will provide,  at its  discretion,  matching
    funds of each  participant's  contribution,  subject  to a maximum  of 8% of
    compensation.  The Savings Bank's 401(k) profit-sharing plan expense for the
    years ended December 31, 1998,  1997 and 1996 amounted to $90,000,  $101,000
    and $45,000, respectively.

    The Savings  Bank  maintains  an unfunded  retirement  plan for the specific
    benefit of four retired outside  directors.  The directors'  retirement plan
    expense totaled  approximately  $18,000 for each of the years ended December
    31, 1998, 1997 and 1996, respectively.

    The Savings  Bank has an  Employee  Stock  Ownership  Plan  ("ESOP"),  which
    provides  retirement  benefits for all employees who have completed one year
    of service  and have  attained  the age of 21. The Savings  Bank  recognized
    expense totaling $258,000, $234,000 and $187,000 related to the ESOP for the
    years ended December 31, 1998, 1997 and 1996, respectively.

    Additionally,  the Savings  Bank had a Management  Recognition  Plan ("MRP")
    that commenced in 1992. The MRP purchased  50,625 shares (exchange and split
    adjusted) of the  Corporation's  common stock.  All of the shares  available
    under the MRP were granted to executive  officers of the Savings Bank during
    1992,  with such shares vesting  ratably over a five-year  period.  In April
    1997,  the   Corporation's   shareholders   approved  the  1997   Management
    Recognition  Plan and Trust (the  "Plan")  which  provided  for up to 91,124
    shares to be awarded to members of the Board of  Directors  and  officers of
    the  Corporation.  During 1997,  the  Corporation  granted  20,000 shares to
    members  of the  Board of  Directors  which  vest  ratably  over a five year
    period.  A  provision  of  $60,000,  $35,000  and $20,000 was charged to MRP
    expense for the years ended December 31, 1998, 1997 and 1996, respectively.





                                       35
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    11.  Earnings Per Share and Dividends Per Share

    Basic earnings per share is computed based upon the weighted-average  shares
    outstanding during the period,  less shares in the ESOP that are unallocated
    and  not   committed  to  be  released.   Weighted-average   common   shares
    outstanding,  which gives effect to 175,047, 191,115 and 200,810 unallocated
    ESOP shares, totaled 5,423,383,  5,395,878 and 4,207,788 for the years ended
    December 31, 1998, 1997 and 1996, respectively.

    Diluted  earnings  per share is computed  taking into  consideration  common
    shares  outstanding and dilutive  potential common shares to be issued under
    the Corporation's stock option plan.  Weighted-average  common shares deemed
    outstanding  for purposes of computing  diluted  earnings per share  totaled
    5,484,091,  5,449,727 and  4,240,638 for the years ended  December 31, 1998,
    1997  and  1996,   respectively.   There  were  60,708,  53,849  and  32,850
    incremental shares related to the assumed exercise of stock options included
    in the  computation  of  diluted  earnings  per share  for the  years  ended
    December 31, 1998, 1997 and 1996, respectively.

    During 1998, 1997 and 1996, the Corporation  declared capital  distributions
    of $.32,  $1.28 and $.24 per  common  share,  respectively.  Management  has
    obtained a Private  Letter  Ruling from the Internal  Revenue  Service which
    states that the  Corporation's  dividend  payments in excess of  accumulated
    earnings and profits are considered a tax-free return of capital for federal
    income tax purposes. As a result,  management believes that $.25 of the 1998
    distributions,  all of the 1997  distributions  and $.09 of the 1996 capital
    distributions constituted a tax-free return of capital.

    12.  Cash and Cash Equivalents

    For purposes of reporting  cash flows,  cash and cash  equivalents  includes
    cash and due from banks, federal funds sold and interest-bearing deposits in
    other financial institutions with original maturities of less than 90 days.

    13.  Fair Value of Financial Instruments

    SFAS No.  107,  "Disclosures  about  Fair Value of  Financial  Instruments",
    requires disclosure of fair value of financial instruments,  both assets and
    liabilities,  whether or not  recognized  in the  consolidated  statement of
    financial condition, for which it is practicable to estimate that value. For
    financial  instruments  where quoted market prices are not  available,  fair
    values  are based on  estimates  using  present  value  and other  valuation
    methods.

    The methods used are greatly affected by the assumptions applied,  including
    the discount  rate and estimates of future cash flows.  Therefore,  the fair
    values  presented  may not  represent  amounts  that could be realized in an
    exchange for certain financial instruments.


                                       36
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    13.  Fair Value of Financial Instruments (continued)

    The  following  methods  and  assumptions  were used by the  Corporation  in
    estimating its fair value disclosures for financial  instruments at December
    31, 1998 and 1997:

                  Cash and cash  equivalents:  The carrying amounts presented in
                  the  consolidated  statements of financial  condition for cash
                  and cash equivalents are deemed to approximate fair value.

                  Investment and mortgage-backed  securities: For investment and
                  mortgage-backed  securities, fair value is deemed to equal the
                  quoted market price.

                  Loans receivable:  The loan portfolio has been segregated into
                  categories with similar  characteristics,  such as one-to-four
                  family residential,  multi-family residential,  nonresidential
                  real estate and consumer.  These loan  categories were further
                  delineated into fixed-rate and adjustable-rate loans. The fair
                  values for the  resultant  loan  categories  were computed via
                  discounted  cash flow analysis,  using current  interest rates
                  offered for loans with  similar  terms to borrowers of similar
                  credit quality.

                  Federal Home Loan Bank stock: The carrying amount presented in
                  the consolidated  statements of financial  condition is deemed
                  to approximate fair value.

                  Deposits:  The fair value of NOW  accounts,  passbook and club
                  accounts,  and money market  deposits is deemed to approximate
                  the amount  payable on demand at  December  31, 1998 and 1997.
                  Fair values for fixed-rate  certificates  of deposit have been
                  estimated using a discounted cash flow  calculation  using the
                  interest  rates  currently  offered  for  deposits  of similar
                  remaining maturities.

                  Federal  Home Loan Bank  advances:  The fair  value of Federal
                  Home Loan Bank advances has been  estimated  using  discounted
                  cash flow  analysis,  based on the  interest  rates  currently
                  offered for advances of similar remaining maturities.

                  Commitments   to   extend    credit:    For   fixed-rate   and
                  adjustable-rate  loan  commitments,  the fair  value  estimate
                  considers the  difference  between  current levels of interest
                  rates and committed  rates. At December 31, 1998 and 1997, the
                  difference  between the fair value and notional amount of loan
                  commitments was not material.



                                       37
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    13.  Fair Value of Financial Instruments (continued)

    Based on the foregoing methods and assumptions,  the carrying value and fair
    value of the Corporation's  financial instruments are as follows at December
    31:
<TABLE>
<CAPTION>

                                                              1998                          1997
                                                  Carrying           Fair        Carrying           Fair
                                                     value          value           value          value
                                                                        (In thousands)
<S>                                                  <C>           <C>              <C>              <C>
    Financial assets
      Cash and cash equivalents                   $ 22,221       $ 22,221        $ 30,531       $ 30,531
      Investment securities                            838            838           6,020          6,020
      Mortgage-backed securities                    54,887         54,933          39,354         39,533
      Loans receivable                             419,436        424,405         436,852        440,741
      Federal Home Loan Bank stock                   4,464          4,464           4,157          4,157
                                                   -------        -------         -------        -------

                                                  $501,846       $506,861        $516,914       $520,982
                                                   =======        =======         =======        =======

    Financial liabilities
      Deposits                                    $412,122       $414,695        $432,024       $432,235
      Advances from Federal Home Loan Bank          34,735         35,054          34,233         34,359
      Advances by borrowers for taxes and
        insurance                                    2,426          2,426           2,134          2,134
                                                   -------        -------         -------        -------

                                                  $449,283       $452,175        $468,391       $468,728
                                                   =======        =======         =======        =======
</TABLE>

    14.  Comprehensive Income

    The Corporation adopted SFAS No. 130, "Reporting  Comprehensive  Income," as
    of January 1, 1998.  The Statement  established  standards for reporting and
    presentation  of  comprehensive  income and its  components in a full set of
    general-purpose  financial  statements.  It requires that all items that are
    required to be  recognized  under  accounting  standards  as  components  of
    comprehensive  income be reported in a financial statement that is presented
    with the  same  prominence  as  other  financial  statements.  SFAS No.  130
    requires that companies (i) classify items of other comprehensive  income by
    their nature in a financial  statement  and (ii) display the  components  of
    other comprehensive  income separately from retained earnings and additional
    paid-in  capital.   Financial  statements  for  earlier  periods  have  been
    reclassified for comparative purposes.

    15.  Advertising

    Advertising costs are expensed when incurred.

    16.  Reclassifications

    Certain  prior year  amounts have been  reclassified  to conform to the 1998
    consolidated financial statement presentation.


                                       38
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE B - INVESTMENT AND MORTGAGE-BACKED SECURITIES

    Amortized cost and estimated fair values of investment securities designated
    as  available  for  sale at  December  31,  1998  and  1997  consist  of the
    following:
<TABLE>
<CAPTION>

                                                      1998                              1997
                                                           Estimated                          Estimated
                                            Amortized           fair           Amortized           fair
                                                 cost          value                cost          value
                                                                     (In thousands)
<S>                                            <C>              <C>                <C>              <C>
    U. S. Government agency obligations          $835           $838              $5,869         $5,908
    Corporate equity securities                    -              -                   84            112
                                                  ---            ---               -----          -----

                                                 $835           $838              $5,953         $6,020
                                                  ===            ===               =====          =====
</TABLE>

    At  December  31,  1998 and  1997,  the  market  value  appreciation  of the
    Corporation's  investment  securities in excess of amortized cost,  totaling
    $3,000 and $67,000,  respectively,  was comprised solely of gross unrealized
    gains.

    The  amortized  cost and  estimated  fair  value of U.S.  Government  agency
    obligations by contractual  terms to maturity at December 31, 1998 and 1997,
    are shown below:
<TABLE>
<CAPTION>

                                                  1998                              1997
                                                       Estimated                          Estimated
                                        Amortized           fair           Amortized           fair
                                             cost          value                cost          value
                                                                 (In thousands)
<S>                                        <C>              <C>                 <C>             <C>
    Due within two years                     $ -            $ -               $1,000         $1,000
    Due in two to five years                   -              -                  998            999
    Due in five to ten years                  835            838               2,997          3,027
    More than ten years                        -              -                  874            882
                                              ---            ---               -----          -----

                                             $835           $838              $5,869         $5,908
                                              ===            ===               =====          =====

</TABLE>







                                       39
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE B - INVESTMENT AND MORTGAGE-BACKED SECURITIES (continued)

    The amortized cost, gross  unrealized  gains,  gross  unrealized  losses and
    estimated fair values of mortgage-backed securities at December 31, 1998 and
    1997 (including those designated as available for sale) are shown below.
<TABLE>
<CAPTION>

                                                                                         1998
                                                                               Gross            Gross         Estimated
                                                         Amortized        unrealized       unrealized              fair
                                                              cost             gains           losses             value
                                                                                   (In thousands)
<S>                                                            <C>              <C>              <C>                <C>
    Available for sale:                                                     
      Federal Home Loan Mortgage
        Corporation participation certificates            $  8,418             $  30            $  14          $  8,434
      Government National Mortgage
        Association participation certificates               8,055                 6               48             8,013
      Federal National Mortgage
        Association participation certificates               6,217                12               48             6,181
      Collateralized mortgage obligations                    2,557                20               -              2,577
                                                            ------              ----               --            ------
         Total available for sale                           25,247                68              110            25,205

    Held to maturity:
      Federal Home Loan Mortgage
        Corporation participation certificates                 451                -                 6               445
      Government National Mortgage
        Association participation certificates               7,248                20               20             7,248
      Federal National Mortgage
        Association participation certificates                 221                 9               -                230
      Collateralized mortgage obligations                   21,762                59               16            21,805
                                                            ------              ----             ----            ------
         Total held to maturity                             29,682                88               42            29,728
                                                            ------              ----             ----            ------

         Total mortgage-backed securities                  $54,929              $156             $152           $54,933
                                                            ======               ===              ===            ======
</TABLE>
<TABLE>
<CAPTION>

                                                                                         1997
                                                                               Gross            Gross         Estimated
                                                         Amortized        unrealized       unrealized              fair
                                                              cost             gains           losses             value
                                                                                   (In thousands)
<S>                                                           <C>               <C>              <C>                <C>
    Available for sale:                                                            
      Federal Home Loan Mortgage
        Corporation participation certificates             $12,610             $  77           $    4           $12,683
      Government National Mortgage
        Association participation certificates               4,707                48                3             4,752
      Federal National Mortgage
        Association participation certificates               7,160                22               36             7,146
      Collateralized mortgage obligations                    1,240                 6               -              1,246
                                                            ------              ----               --            ------
         Total available for sale                           25,717               153               43            25,827

    Held to maturity:
      Federal Home Loan Mortgage
        Corporation participation certificates                 574                 1               -                575
      Government National Mortgage
        Association participation certificates              11,632               165               -             11,797
      Federal National Mortgage
        Association participation certificates                 236                10               -                246
      Collateralized mortgage obligations                    1,085                 3               -              1,088
                                                            ------              ----               --            ------
         Total held to maturity                             13,527               179               -             13,706
                                                            ------               ---               --            ------

         Total mortgage-backed securities                  $39,244              $332            $  43           $39,533
                                                            ======               ===             ====            ======
</TABLE>


                                       40
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE B - INVESTMENT AND MORTGAGE-BACKED SECURITIES (continued)

    The amortized cost and estimated fair value of mortgage-backed securities at
    December 31, 1998 and 1997,  by  contractual  terms to  maturity,  are shown
    below.  Expected maturities will differ from contractual  maturities because
    borrowers may generally prepay obligations without prepayment penalties.
<TABLE>
<CAPTION>

                                                                            1998                        1997
                                                                               Estimated                      Estimated
                                                                Amortized           fair       Amortized           fair
                                                                     cost          value            cost          value
                                                                                    (In thousands)
<S>                                                                 <C>           <C>              <C>              <C>
    Available for sale:
      Due within one year                                        $  2,938       $  2,943        $  3,762       $  3,774
      Due after one to three years                                  6,509          6,520           8,326          8,352
      Due after three years to five years                           2,004          2,006           4,323          4,337
      Due after five years to ten years                             2,099          2,094           1,144          1,151
      Due after ten years to twenty years                           6,617          6,597           3,981          4,006
      Due after twenty years                                        5,080          5,045           4,181          4,207
                                                                   ------         ------          ------         ------
                                                                   25,247         25,205          25,717         25,827

    Held to maturity:
      Due within one year                                             927            929             209            212
      Due after one to three years                                  2,051          2,055             463            469
      Due after three years to five years                           2,345          2,349             530            536
      Due after five years to ten years                             7,435          7,448           1,682          1,703
      Due after ten years to twenty years                          14,490         14,512           5,620          5,692
      Due after twenty years                                        2,434          2,435           5,023          5,094
                                                                   ------         ------          ------         ------
                                                                   29,682         29,728          13,527         13,706
                                                                   ------         ------          ------         ------

         Total mortgage-backed securities                         $54,929        $54,933         $39,244        $39,533
                                                                   ======         ======          ======         ======
</TABLE>




                                       41
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996



NOTE C - LOANS RECEIVABLE

    The composition of the loan portfolio,  including loans held for sale, is as
follows at December 31:
<TABLE>
<CAPTION>

                                                         1998             1997
                                                             (In thousands)
<S>                                                   <C>                 <C>
    Residential real estate
      One-to-four family residential                 $325,398         $341,636
      Multi-family residential                         23,803           26,125
      Construction                                     12,722            9,016
    Nonresidential real estate and land                49,172           50,613
    Nonresidential construction                         8,605            6,248
    Consumer and other                                  9,813            9,266
                                                     --------         --------
                                                      429,513          442,904

    Undisbursed portion of loans in process            (9,233)          (5,127)
    Unamortized yield adjustments                         859              733
    Allowance for loan losses                          (1,703)          (1,658)
                                                     --------         --------

                                                     $419,436         $436,852
                                                      =======          =======

</TABLE>

    The Savings Bank's lending efforts have historically  focused on residential
    and   multi-family   residential   real  estate   loans,   which   comprised
    approximately  $352.7  million,  or 84%,  of the  total  loan  portfolio  at
    December 31, 1998,  and $371.7  million,  or 85%, of the total  portfolio at
    December 31, 1997. Generally, such loans have been underwritten on the basis
    of no more than an effective 80% loan-to-value ratio, which has historically
    provided the Savings Bank with adequate  collateral coverage in the event of
    default. Nevertheless, the Savings Bank, as with any lending institution, is
    subject to the risk that real estate values could deteriorate in its primary
    lending area of southwestern  Ohio,  thereby  impairing  collateral  values.
    However,  management is of the belief that real estate values in the Savings
    Bank's primary lending area are presently stable.

    The Savings Bank has sold participating  interests in loans in the secondary
    market,  retaining  servicing on the loans sold. Loans sold and serviced for
    others totaled approximately $27.1 million and $18.7 million at December 31,
    1998 and 1997, respectively.

    A director of the  Corporation  is a broker and  general  manager of a local
    real  estate  agency.  The agency  received  approximately  $113,000 in real
    estate  commissions during 1998 as a result of sales of real estate financed
    by the Savings Bank.








                                       42
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE D - ALLOWANCE FOR LOAN LOSSES

    The activity in the allowance for loan losses for the year ended December 31
is as follows:
<TABLE>
<CAPTION>

                                                 1998         1997         1996
                                                         (In thousands)
<S>                                              <C>          <C>          <C>
    Beginning balance                          $1,658       $1,558      $   818
    Allowance for loan losses of Circle            -            -           640
    Provision for loan losses                     107          101          129
    Charge-offs of loans                          (62)          (1)         (29)
                                                -----        -----        -----

    Ending balance                             $1,703       $1,658       $1,558
                                                =====        =====        =====
</TABLE>

    At December  31,  1998,  the Savings  Bank's  allowance  for loan losses was
    solely  general in nature,  which is includible as a component of regulatory
    risk-based capital.

    At December  31,  1998,  1997 and 1996,  the Savings  Bank had loans of $1.8
    million, $1.0 million and $1.1 million, respectively,  which had been placed
    on  nonaccrual  status  due to  concerns  as to  borrowers'  ability to pay.
    Interest  income  that  would  have been  recognized  had  nonaccrual  loans
    performed  pursuant to  contractual  terms  totaled  approximately  $57,000,
    $25,000 and $59,000 for the years ended  December 31,  1998,  1997 and 1996,
    respectively.


NOTE E - OFFICE PREMISES AND EQUIPMENT

    Office premises and equipment is comprised of the following at December 31:
<TABLE>
<CAPTION>

                                                                1998           1997
                                                                   (In thousands)
<S>                                                             <C>            <C>
    Land                                                     $ 1,786        $ 1,790
    Buildings and improvements                                 6,174          6,269
    Furniture and equipment                                    3,994          3,501
    Automobiles                                                   14             14
                                                              ------         ------
                                                              11,968         11,574
    Less accumulated depreciation and amortization             4,782          4,112
                                                              ------         ------

                                                             $ 7,186        $ 7,462
                                                              ======         ======

</TABLE>





                                       43
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE F - DEPOSITS

    Deposits consist of the following major classifications at December 31:
<TABLE>
<CAPTION>

    Deposit type and weighted average
    interest rate                                                    1998             1997
                                                                          (In thousands)
<S>                                                                <C>                <C>
    NOW accounts
      December 31, 1998 - 0.86%                                  $ 32,634
      December 31, 1997 - 1.44%                                                   $ 25,296
    Passbook and club accounts
      December 31, 1998 - 1.81%                                    36,526
      December 31, 1997 - 1.79%                                                     40,374
    Money market deposit accounts
      December 31, 1998 - 2.71%                                    25,324
      December 31, 1997 - 3.32%                                                     25,730
                                                                  -------          -------

         Total demand, transaction and passbook deposits           94,484           91,400

    Certificates of deposit
     Original maturities of:
        Less than 12 months
          December 31, 1998 - 5.00%                                87,126
          December 31, 1997 - 5.59%                                                 91,221
        12 months to 18 months
          December 31, 1998 - 5.50%                               170,082
          December 31, 1997 - 5.87%                                                151,965
        18 months to 36 months
          December 31, 1998 - 5.62%                                31,182
          December 31, 1997 - 5.94 %                                                60,819
        36 months to 48 months
          December 31, 1998 - 5.63%                                 6,274
          December 31, 1997 - 5.91%                                                  8,862
        More than 48 months
          December 31, 1998 - 6.48%                                22,974
          December 31, 1997 - 6.57%                                                 27,757
                                                                  -------          -------

         Total certificates of deposit                            317,638          340,624
                                                                  -------          -------

         Total deposits                                          $412,122         $432,024
                                                                  =======          =======
</TABLE>

    At December 31, 1998 and 1997,  the Savings Bank had  certificate of deposit
    accounts  with  balances of $100,000 or greater  totaling  $44.2 million and
    $44.1 million, respectively.



                                       44
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996



NOTE F - DEPOSITS (continued)

    Interest  expense on deposits for the years ended  December 31 is summarized
as follows:
<TABLE>
<CAPTION>

                                                           1998            1997           1996
                                                                     (In thousands)
<S>                                                      <C>               <C>             <C>
    Passbook and money market deposit accounts         $  1,457        $  1,655      $     931
    NOW accounts                                            270             322            280
    Certificates of deposit                              18,574          18,946         10,343
                                                         ------          ------         ------

                                                        $20,301         $20,923        $11,554
                                                         ======          ======         ======
</TABLE>


    Maturities  of  outstanding  certificates  of  deposit  at  December  31 are
summarized as follows:
<TABLE>
<CAPTION>

                                                        1998              1997
                                                             (In thousands)
<S>                                                    <C>                 <C>
    Less than one year                              $254,261          $251,254
    One to two years                                  53,935            70,680
    Two to three years                                 5,944            12,937
    Over three years                                   3,498             5,753
                                                   ---------         ---------

                                                    $317,638          $340,624
                                                     =======           =======

</TABLE>

NOTE G - ADVANCES FROM THE FEDERAL HOME LOAN BANK

    Advances  from the Federal  Home Loan Bank,  collateralized  at December 31,
    1998 by pledges of certain residential mortgage loans totaling $52.2 million
    and the Savings  Bank's  investment  in Federal  Home Loan Bank  stock,  are
    summarized as follows:
<TABLE>
<CAPTION>

                                                             December 31,
                                                     1998                1997
                                                       (Dollars in thousands)
<S>                                                 <C>                <C>
    Due within one year                          $  7,262             $10,495
    Due after one to three years                   20,889              14,946
    Due after three to five years                   2,241               3,647
    Due after five to ten years                     2,290               3,041
    Due after ten to twenty years                   2,053               2,104
                                                  -------             -------

                                                  $34,735             $34,233
                                                   ======              ======

    Weighted-average interest rate                   6.02%               6.21%
                                                     ====                ==== 

</TABLE>



                                       45
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE H - LOAN TO EMPLOYEE STOCK OWNERSHIP PLAN

    As  discussed  previously  in Note A-10,  the Savings  Bank  established  an
    Employee Stock Ownership Plan (the "ESOP") which initially  acquired 135,000
    shares of common  stock of the  Savings  Bank in the  initial  common  stock
    offering  in  1992.  In order to fund the  acquisition  of  stock,  the ESOP
    borrowed  $400,000 from an independent  third-party  lender,  payable over a
    seven year period.  During 1995,  the ESOP borrowed an  additional  $146,000
    from an independent third-party lender, payable over a seven year period, to
    acquire  approximately  21,950  shares  of common  stock.  During  1996,  in
    connection with the Corporation's  common stock offering,  the ESOP acquired
    182,248 shares through funding from the Corporation,  payable over a fifteen
    year period. Additionally,  the $146,000 ESOP loan was repaid by a loan from
    the  Corporation.  At December 31, 1998, the ESOP held 327,575 shares of the
    Corporation's  common stock, with approximately  160,681 shares allocated to
    participants as of that date.


NOTE I - FEDERAL INCOME TAXES

    The  provision  for federal  income taxes  differs from that computed at the
    statutory corporate tax rate for the years ended December 31 as follows:
<TABLE>
<CAPTION>

                                                                   1998            1997          1996
                                                                             (In thousands)
<S>                                                                <C>            <C>             <C>
    Federal income taxes computed at the statutory rate          $2,418          $2,562          $843
    Increase (decrease) in taxes resulting from:
      Amortization of goodwill                                      123             123            26
      Other                                                          16             (27)            3
                                                                -------         -------         -----

    Federal income tax provision per consolidated
      financial statements                                       $2,557          $2,658          $872
                                                                  =====           =====           ===
</TABLE>



                                       46
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE I - FEDERAL INCOME TAXES (continued)

    The composition of the  Corporation's net deferred tax liability at December
31 is as follows:
<TABLE>
<CAPTION>

    Taxes (payable) refundable on temporary                                                1998           1997
    differences at statutory rate:                                                            (In thousands)
<S>                                                                                       <C>              <C>
    Deferred tax assets:
      Deferred loan origination fees                                                   $     87        $   136
      Retirement expense                                                                    183            195
      General loan loss allowance                                                           579            561
      Purchase price adjustments from Circle acquisition                                     43            116
      Unrealized losses on securities designated as available for sale                       13             - 
      Other                                                                                 157            167
                                                                                         ------         ------
         Total deferred tax assets                                                        1,062          1,175

    Deferred tax liabilities:
      Federal Home Loan Bank stock dividends                                               (734)          (630)
      Percentage of earnings bad debt deduction                                            (757)          (908)
      Unrealized gains on securities designated as available for sale                        -             (60)
      Book versus tax depreciation                                                         (236)          (126)
      Mortgage servicing rights                                                             (83)            - 
      Purchase price adjustments from Circle acquisition                                    (51)           (60)
                                                                                          -----          -----
         Total deferred tax liabilities                                                  (1,861)        (1,784)
                                                                                          -----          -----

         Net deferred tax liability                                                      $ (799)        $ (609)
                                                                                          =====          ===== 
</TABLE>

    The  Savings  Bank was  allowed  a  special  bad debt  deduction  based on a
    percentage of earnings, generally limited to 8% of otherwise taxable income,
    or the amount of qualifying and nonqualifying  loans outstanding and subject
    to certain limitations based on aggregate loans and savings account balances
    at the end of the year.  This  percentage of earnings bad debt deduction had
    accumulated to  approximately  $14.2 million as of December 31, 1998. If the
    amounts that qualify as deductions  for federal  income taxes are later used
    for  purposes  other  than  bad  debt  losses,  including  distributions  in
    liquidation,  such  distributions will be subject to federal income taxes at
    the then  current  corporate  income  tax rate.  The  approximate  amount of
    unrecognized  deferred tax  liability  relating to the  cumulative  bad debt
    deduction is approximately $3.9 million at December 31, 1998. See Note L for
    additional  information  regarding  future  percentage  of earnings bad debt
    deductions.


NOTE J - COMMITMENTS

    The Savings Bank is a party to financial instruments with  off-balance-sheet
    risk in the normal  course of  business to meet the  financing  needs of its
    customers including  commitments to extend credit. Such commitments involve,
    to varying degrees,  elements of credit and interest-rate  risk in excess of
    the amount recognized in the consolidated  statement of financial condition.
    The contract or notional  amounts of the  commitments  reflect the extent of
    the Savings Bank's involvement in such financial instruments.


                                       47
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE J - COMMITMENTS (continued)

    The Savings Bank's exposure to credit loss in the event of nonperformance by
    the other party to the financial instrument for commitments to extend credit
    is represented by the contractual notional amount of those instruments.  The
    Savings  Bank  uses the same  credit  policies  in  making  commitments  and
    conditional obligations as those utilized for on-balance-sheet instruments.

    At December 31, 1998, the Savings Bank had total outstanding  commitments of
    approximately $12.1 million to originate residential one- to four-family and
    multi-family  real estate  loans on the basis of an 80% loan to value ratio,
    of which  $4.3  million  was  comprised  of  adjustable  rate loans at rates
    ranging from 6.125% to 7.75%,  and $7.8 million was  comprised of fixed rate
    loans at rates  ranging  from  6.25% to  8.25%.  The  Savings  Bank also had
    outstanding   commitments  of   approximately   $1.9  million  to  originate
    nonresidential real estate loans. Additionally,  the Savings Bank had unused
    lines of credit  under home equity loans of  approximately  $4.7 million and
    unused lines of credit under multi-family,  nonresidential real estate loans
    and commercial loans of $7.2 million.  The Savings Bank also has outstanding
    commitments of $196,000 to purchase and $1.1 million to sell non-residential
    real estate loans as of December 31, 1998. In the opinion of management, all
    loan commitments  equaled or exceeded  prevalent market interest rates as of
    December 31, 1998, and such commitments  have been  underwritten on the same
    basis as that of the existing loan portfolio.  Management  believes that all
    commitments  are able to be funded  through  cash flow from  operations  and
    excess liquidity. Fees received in connection with loan commitments have not
    been recognized in earnings.

    Commitments to extend credit are agreements to lend to a customer as long as
    there  is no  violation  of  any  condition  established  in  the  contract.
    Commitments  generally  have  fixed  expiration  dates or other  termination
    clauses and may require  payment of a fee. Since many of the commitments may
    expire  without  being  drawn  upon,  the total  commitment  amounts  do not
    necessarily  represent future cash requirements.  The Savings Bank evaluates
    each  customer's  creditworthiness  on a case-by-case  basis.  The amount of
    collateral  obtained,  if it is deemed  necessary  by the Savings  Bank upon
    extension  of credit,  is based on  management's  credit  evaluation  of the
    counterparty.  Collateral on loans may vary but the  preponderance  of loans
    granted generally include a mortgage interest in real estate as security.


NOTE K - REGULATORY CAPITAL

    The Savings Bank is subject to minimum capital  requirements  promulgated by
    the Office of Thrift  Supervision  ("OTS").  Failure to meet minimum capital
    requirements  can initiate  certain  mandatory  -- and  possibly  additional
    discretionary  -- actions by regulators  that, if  undertaken,  could have a
    direct  material effect on the  Corporation's  financial  statements.  Under
    capital  adequacy  guidelines  and  the  regulatory   framework  for  prompt
    corrective  action,  the Savings Bank must meet specific capital  guidelines
    that  involve   quantitative   measures  of  the  Savings   Bank's   assets,
    liabilities,   and  certain  off-balance-sheet  items  as  calculated  under
    regulatory  accounting  practices.  The Savings Bank's  capital  amounts and
    classification  are also subject to qualitative  judgments by the regulators
    about components,  risk weightings,  and other factors. Such minimum capital
    standards generally require the maintenance of


                                       48
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE K - REGULATORY CAPITAL (continued)

    regulatory  capital  sufficient  to meet  each of three  tests,  hereinafter
    described as the tangible capital requirement,  the core capital requirement
    and the risk-based  capital  requirement.  The tangible capital  requirement
    provides for minimum tangible capital (defined as stockholders'  equity less
    all  intangible  assets) equal to 1.5% of adjusted  total  assets.  The core
    capital requirement provides for minimum core capital (tangible capital plus
    certain  forms of  supervisory  goodwill  and  other  qualifying  intangible
    assets) equal to 3.0% of adjusted total assets. An OTS proposal,  if adopted
    in present form,  would increase the core capital  requirement to a range of
    4.0%  -  5.0%  of  adjusted  total  assets  for  substantially  all  savings
    associations.  Management  anticipates  no  material  change to the  Savings
    Bank's  excess  regulatory  capital  position  as a result of this  proposed
    change  to  the  regulatory  capital  requirement.  The  risk-based  capital
    requirement  currently  provides  for the  maintenance  of core capital plus
    general  loan loss  allowances  equal to 8.0% of  risk-weighted  assets.  In
    computing  risk-weighted  assets,  the Savings Bank  multiplies the value of
    each  asset  on  its   statement  of   financial   condition  by  a  defined
    risk-weighting  factor,  e.g.,  one-to-four family residential loans carry a
    risk-weighted factor of 50%.

    As of December 31, 1998 and 1997,  management believes that the Savings Bank
    met all capital adequacy requirements to which it was subject.
<TABLE>
<CAPTION>

    1998:                                                                                        To be "well-
                                                                                              capitalized" under
                                                                     For capital               prompt corrective
                                             Actual                adequacy purposes          action provisions
                                         Amount    Ratio           Amount    Ratio             Amount     Ratio
                                                                  (Dollars in thousands)
<S>                                      <C>        <C>            <C>         <C>              <C>         <C>
    Tangible capital                    $58,548    11.4%        =>$ 7,693    =>1.5%         =>$25,643     => 5.0%

    Core capital                        $58,548    11.4%        =>$15,386    =>3.0%         =>$30,771     => 6.0%

    Risk-based capital                  $60,251    21.5%        =>$22,402    =>8.0%         =>$28,003     =>10.0%
</TABLE>

<TABLE>
<CAPTION>

    1997:                                                                                        To be "well-
                                                                                              capitalized" under
                                                                     For capital               prompt corrective
                                             Actual                adequacy purposes          action provisions
                                         Amount    Ratio           Amount    Ratio             Amount     Ratio
                                                                  (Dollars in thousands)
<S>                                      <C>        <C>           <C>         <C>              <C>         <C>
    Tangible capital                    $53,194    10.1%        =>$ 7,887    =>1.5%         =>$26,289     => 5.0%

    Core capital                        $53,194    10.1%        =>$15,773    =>3.0%         =>$31,547     => 6.0%

    Risk-based capital                  $54,844    19.3%        =>$22,701    =>8.0%         =>$28,376     =>10.0%

</TABLE>


    At December 31, 1998, the Savings Bank met all regulatory  requirements  for
    classification as a  "well-capitalized"  institution.  A  "well-capitalized"
    institution must have risk-based capital of 10.0%, and core capital of 6.0%.
    The  Savings  Bank's  capital  exceeded  the  minimum  required  amounts for
    classification  as a  "well-capitalized"  institution  by $32.2  million and
    $27.8 million, respectively.



                                       49
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE K - REGULATORY CAPITAL (continued)

    Regulations of the Office of Thrift  Supervision  ("OTS") impose limitations
    on the  payment of  dividends  and other  capital  distributions  by savings
    associations.   Under  such   regulations,   a  savings   association  that,
    immediately  prior to, and on a pro forma  basis after  giving  effect to, a
    proposed  capital  distribution,  has  total  capital  (as  defined  by  OTS
    regulation)  that is  equal  to or  greater  than the  amount  of its  fully
    phased-in  capital  requirement is generally  permitted without OTS approval
    (but subsequent to 30 days prior notice to the OTS of the planned  dividend)
    to make  capital  distributions  during a calendar  year in an amount not to
    exceed the greater of (i) up to 100% of its net  earnings to date during the
    year  plus an  amount  equal to  one-half  of the  amount by which its total
    capital to assets ratio exceeded its fully phased-in capital to assets ratio
    at the  beginning of the year,  or (ii) 75% of its net earnings for the most
    recent four quarters. Pursuant to such OTS dividend regulations, the Savings
    Bank had the ability to pay dividends of approximately  $22.2 million to the
    Corporation at December 31, 1998.


NOTE L - LEGISLATIVE MATTERS

    The deposit  accounts of the Savings Bank and of other savings  associations
    are  insured by the FDIC  through  the Savings  Association  Insurance  Fund
    ("SAIF").  The  reserves  of the SAIF were below the level  required by law,
    because a significant portion of the assessments paid into the fund are used
    to pay the cost of prior thrift failures. The deposit accounts of commercial
    banks are  insured by the FDIC  through  the Bank  Insurance  Fund  ("BIF"),
    except to the extent such banks have acquired SAIF deposits. The reserves of
    the BIF met the  level  required  by law in May  1995.  As a  result  of the
    respective reserve levels of the funds,  deposit insurance  assessments paid
    by healthy savings  associations  exceeded those paid by healthy  commercial
    banks by  approximately  $.19 per $100 in deposits in 1995.  In 1996, no BIF
    assessments  were required for healthy  commercial banks except for a $2,000
    minimum fee.

    During 1996,  legislation was enacted to recapitalize the SAIF that provided
    for a special  assessment  of $.657 per $100 of SAIF  deposits held at March
    31, 1995. The Savings Bank had $173.1 million in deposits at March 31, 1995,
    resulting in an assessment of approximately $1.1 million,  or $749,000 after
    tax, which was recorded during 1996.

    A component of the recapitalization plan provided for the merger of the SAIF
    and BIF on January 1, 2000,  assuming the  elimination of the thrift charter
    or of the separate federal  regulation of thrifts prior to the merger of the
    deposit  insurance funds. This legislation would require the Savings Bank to
    be regulated as a bank under federal laws which would subject it to the more
    restrictive  activity  limits imposed on national  banks.  In the opinion of
    management,  such restrictions would not materially affect the Corporation's
    operations.  Under  separate  legislation,  the Savings  Bank is required to
    recapture  approximately  $2.7  million  of its bad debt  reserve as taxable
    income, which represents the post-1987 additions to the reserve, and will be
    unable to utilize the  percentage of earnings  method to compute its reserve
    in the future.  The Savings Bank has provided deferred taxes for this amount
    and will  amortize  the  recapture  of its bad debt  reserve  over six years
    commencing in 1998.




                                       50
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE M - STOCK OPTION PLANS

    In connection with Fidelity's Reorganization to mutual holding company form,
    the Savings  Bank had adopted the 1992 Stock  Option Plan that  provided for
    the issuance of 168,750 shares of authorized,  but unissued shares of common
    stock. All of the shares provided for under that Plan have been granted.

    In April  1997,  the  Corporation  adopted  the 1997 Stock  Option Plan that
    provides  for the  issuance of 227,810  shares of common  stock.  Options to
    purchase  4,000  and  171,500  shares  were  granted  during  1998 and 1997,
    respectively,  at an  exercise  price equal to the fair value at the date of
    grant.

    In 1996, the Corporation  adopted SFAS No. 123,  "Accounting for Stock-Based
    Compensation,"   which  contains  a  fair  value-based  method  for  valuing
    stock-based  compensation that entities may use, which measures compensation
    cost at the grant date based on the fair value of the award. Compensation is
    then  recognized  over the  service  period,  which is usually  the  vesting
    period. Alternatively,  SFAS No. 123 permits entities to continue to account
    for stock options and similar equity instruments under Accounting Principles
    Board ("APB")  Opinion No. 25,  "Accounting  for Stock Issued to Employees."
    Entities that continue to account for stock options using APB Opinion No. 25
    are required to make pro forma  disclosures of net earnings and earnings per
    share, as if the fair value-based  method of accounting  defined in SFAS No.
    123 had been applied.

    The Corporation  applies APB Opinion No. 25 and related  Interpretations  in
    accounting for its stock option plans. Accordingly, no compensation cost has
    been recognized for the plans. Had compensation  cost for the  Corporation's
    stock  option  plans  been  determined  based on the fair value at the grant
    dates for  awards  under the plans  consistent  with the  accounting  method
    utilized in SFAS No. 123,  the  Corporation's  net earnings and earnings per
    share would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>

                                                                         1998              1997           1996
<S>                                          <C>                         <C>              <C>              <C>
    Net earnings (In thousands)           As reported                  $4,556            $4,876         $1,608
                                                                        =====             =====          =====

                                            Pro-forma                  $4,551            $4,826         $1,608
                                                                        =====             =====          =====

    Earnings per share
      Basic                               As reported                    $.84              $.90           $.38
                                                                          ===               ===            ===

                                            Pro-forma                    $.84              $.89           $.38
                                                                          ===               ===            ===

      Diluted                             As reported                    $.83              $.89           $.38
                                                                          ===               ===            ===

                                            Pro-forma                    $.83              $.88           $.38
                                                                          ===               ===            ===
</TABLE>




                                       51
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE M - STOCK OPTION PLANS (continued)

    The fair value of each option  grant is estimated on the date of grant using
    the  modified   Black-Scholes   options-pricing  model  with  the  following
    weighted-average  assumptions  used for  grants in 1998 and  1997:  dividend
    yield of 4.0%,  expected  volatility of 20.0%, a risk-free  interest rate of
    5.5% and expected lives of ten years.

    A  summary  of the  status of the  Corporation's  stock  option  plans as of
    December 31, 1998,  1997 and 1996,  and changes during the periods ending on
    those dates is presented below:
<TABLE>
<CAPTION>

                                                     1998                          1997                       1996
                                                         Weighted-                    Weighted-                 Weighted-
                                                           average                      average                   average
                                                          exercise                     exercise                  exercise
                                               Shares        price          Shares        price       Shares        price
<S>                                            <C>           <C>              <C>          <C>          <C>          <C>
    Outstanding at beginning of year          213,349       $10.86          54,265      $  4.41       61,015        $4.46
    Granted                                     4,000        15.50         171,500        13.00           -            - 
    Adjustment for return of capital
      distribution                                 -            -            8,334         (.44)          -            - 
    Exercised                                 (20,442)        9.50         (14,350)        5.21       (6,750)        4.81
    Forfeited                                  (8,742)       12.49          (6,400)       13.00           -            - 
                                            ---------        -----       ---------        -----      -------         ----

    Outstanding at end of year                188,165       $11.03         213,349       $10.86       54,265        $4.41
                                              =======        =====         =======        =====       ======         ====

    Options exercisable at year-end            91,617                       77,314                    54,265
                                             ========                       ======                    ======
    Weighted-average fair value of
      options granted during the year                      $  3.14                      $  2.63                       N/A
                                                            ======                       ======                       ===
</TABLE>

    The following  information  applies to options  outstanding  at December 31,
1998:
<TABLE>
<CAPTION>

<S>                                                                    <C>
    Number outstanding                                                  188,165
    Range of exercise prices                                     $2.84 - $15.50
    Weighted-average exercise price                                      $11.03
    Weighted-average remaining contractual life                      8.01 years

</TABLE>

                                       52
<PAGE>



                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE N - CONDENSED FINANCIAL STATEMENTS OF FIDELITY FINANCIAL OF OHIO, INC.

    The  following  condensed  financial   statements  summarize  the  financial
    position of Fidelity  Financial  of Ohio,  Inc. as of December  31, 1998 and
    1997,  and the results of its  operations and its cash flows for the periods
    then ended.
<TABLE>
<CAPTION>
                        Fidelity Financial of Ohio, Inc.
                        STATEMENTS OF FINANCIAL CONDITION
                                  December 31,
                                 (In thousands)
    ASSETS                                                             1998           1997
<S>                                                                   <C>             <C>
    Cash and due from banks                                         $   285        $   198
    Investment securities available for sale - at market                 -           1,112
    Loan receivable from ESOP                                         1,755          1,785
    Investment in subsidiary                                         65,505         61,463
    Prepaid expenses and other                                          551            151
                                                                     ------         ------

          Total assets                                              $68,096        $64,709
                                                                     ======         ======

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Other liabilities                                               $   478        $   435

    Stockholders' equity
      Common stock and additional paid-in capital                    42,385         42,107
      Retained earnings                                              27,126         24,147
      Less shares acquired by Management Recognition Plan              (234)          (292)
      Less shares held in treasury                                       -             (20)
      Shares acquired by ESOP                                        (1,633)        (1,785)
      Unrealized gains (losses) on securities designated as
        available for sale, net                                         (26)           117
                                                                     ------         ------
          Total stockholders' equity                                 67,618         64,274
                                                                     ------         ------

          Total liabilities and stockholders' equity                $68,096        $64,709
                                                                     ======         ======
</TABLE>

<TABLE>
<CAPTION>
                        Fidelity Financial of Ohio, Inc.
                             STATEMENTS OF EARNINGS
                        For the period ended December 31,
                                 (In thousands)
                                                           1998           1997           1996
<S>                                                        <C>            <C>             <C>
    Income
      Interest income                                   $   153        $   462        $   524
      Gain on sale of investment securities                  62             -              - 
      Equity in earnings of subsidiary                    4,650          4,818          1,208
                                                          -----          -----          -----
         Total revenue                                    4,865          5,280          1,732

    General and administrative expenses                     358            390            421
                                                          -----          -----          -----

         Earnings before income taxes (credits)           4,507          4,890          1,311

    Federal income taxes (credits)                          (49)            14             35
                                                          -----          -----          -----

         NET EARNINGS                                    $4,556         $4,876         $1,276
                                                          =====          =====          =====

</TABLE>

                                       53
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE N - CONDENSED FINANCIAL STATEMENTS OF FIDELITY FINANCIAL OF
               OHIO, INC. (continued)

<TABLE>
<CAPTION>
                        Fidelity Financial of Ohio, Inc.
                            STATEMENTS OF CASH FLOWS
                        For the period ended December 31,
                                 (In thousands)

                                                                                    1998            1997           1996
<S>                                                                                 <C>            <C>              <C>
    Cash provided by (used in) operating activities:
      Net earnings for the period                                                 $4,556          $4,876        $ 1,276
      Adjustments to reconcile net earnings to net
      cash provided by (used in) operating activities
        Undistributed earnings of consolidated subsidiary                         (3,922)         (4,818)        (1,208)
        Increase (decrease) in cash due to changes in:
          (Gain) loss on sale of investment securities                               (62)              8             - 
          Prepaid expenses and other assets                                         (400)             95           (250)
          Other liabilities                                                           51            (283)           709
                                                                                   -----           -----         ------
          Net cash provided by (used in) operating activities                        223            (122)           527

    Cash flows provided by (used in) investing activities:
      Proceeds from repayment of loan to ESOP                                        100              93             10
      Proceeds from sale of investment securities                                  1,146           9,982          3,000
      Purchase of investment securities                                               -           (8,000)        (6,080)
      Issuance of loan to ESOP                                                        -               -          (1,948)
      Acquisition of Circle Financial Corporation common stock - net                  -               -          (5,359)
      Effect of corporate reorganization                                              -               -          (3,914)
                                                                                   -----           -----         ------
          Net cash provided by (used in) investing activities                      1,246           2,075        (14,291)

    Cash flows provided by (used in) financing activities:
      Proceeds from issuance of common stock                                          -               -          20,434
      Payment of dividends on common stock                                        (1,577)         (7,040)          (931)
      Purchase of treasury stock                                                      -             (229)            - 
      Purchase of stock for management recognition plan                               -             (292)            - 
      Proceeds from exercise of stock options                                        195              67             - 
                                                                                   -----           -----         ------
          Net cash provided by (used in) financing activities                     (1,382)         (7,494)        19,503
                                                                                   -----           -----         ------

    Net increase (decrease) in cash and cash equivalents                              87          (5,541)         5,739

    Cash and cash equivalents at beginning of period                                 198           5,739             - 
                                                                                   -----           -----         ------

    Cash and cash equivalents at end of period                                    $  285          $  198        $ 5,739
                                                                                   =====           =====         ======
</TABLE>




                                       54
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE O - BUSINESS COMBINATION

    On  September  28, 1998,  the  Corporation's  Board of Directors  approved a
    business combination whereby Glenway Financial Corporation ("Glenway") would
    merge  with  and into  Fidelity  Financial  of Ohio,  Inc.  The  merger  was
    completed on March 19, 1999. The business combination was accounted for as a
    pooling-of-interests and, accordingly,  the assets,  liabilities and capital
    of the  respective  combining  companies  were added  together  at  historic
    carrying  value.   Unaudited   pro-forma   condensed,   combined   financial
    information  of the  Corporation  and  Glenway  as of and for the year ended
    December 31, 1998, is as follows:
<TABLE>
<CAPTION>

                                       Fidelity                                   Pro-forma
                                      Financial               Glenway              combined
                                                           (unaudited)           (unaudited)
                                                (In thousands, except share data)
<S>                                      <C>                   <C>                   <C>
    Total assets                       $519,219              $295,467              $814,686
                                        =======               =======               =======

    Total liabilities                  $451,601              $264,785              $716,386
                                        =======               =======               =======

    Stockholders' equity               $ 67,618              $ 30,682              $ 98,300
                                        =======               =======               =======

    Total revenue                      $ 39,119              $ 23,543              $ 62,662
    Total expense                        34,563                20,624                55,187
                                        -------               -------               -------

    Net earnings                       $  4,556              $  2,919              $  7,475
                                        =======               =======               =======

    Basic earnings per share               $.84                 $1.28                  $.84
                                            ===                  ====                   ===
</TABLE>




                                       55
<PAGE>


                        Fidelity Financial of Ohio, Inc.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        December 31, 1998, 1997 and 1996


NOTE P - QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

    The following table summarizes the  Corporation's  quarterly results for the
    years ended December 31, 1998 and 1997.
<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                     March 31,     June 30,     September 30,     December 31,
    1998:                                                      (In thousands, except per share data)
<S>                                                     <C>            <C>               <C>              <C>
    Total interest income                               $9,567       $9,527            $9,427           $9,124
    Total interest expense                               5,842        5,740             5,683            5,430
                                                         -----        -----             -----            -----

    Net interest income                                  3,725        3,787             3,744            3,694
    Provision for losses on loans                           20           27                30               30
    Other income                                           505          306               355              308
    General, administrative and other expense            2,330        2,279             2,343            2,252
                                                         -----        -----             -----            -----

    Earnings before income taxes                         1,880        1,787             1,726            1,720
    Federal income taxes                                   677          653               611              616
                                                         -----        -----             -----            -----

    Net earnings                                        $1,203       $1,134            $1,115           $1,104
                                                         =====        =====             =====            =====

    Earnings per share:
      Basic                                               $.22         $.21             $.21              $.20
                                                           ===          ===              ===               ===

      Diluted                                             $.22         $.21             $.20              $.20
                                                           ===          ===              ===               ===
</TABLE>

<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                     March 31,     June 30,     September 30,     December 31,
    1997:                                                     (In thousands, except per share data)
<S>                                                       <C>          <C>               <C>             <C>
    Total interest income                               $9,286       $9,510            $9,652           $9,703
    Total interest expense                               5,365        5,577             5,765            5,855
                                                         -----        -----             -----            -----

    Net interest income                                  3,921        3,933             3,887            3,848
    Provision for losses on loans                           25           25                25               26
    Other income                                           367          286               327              435
    General, administrative and other expense            2,384        2,285             2,340            2,360
                                                         -----        -----             -----            -----

    Earnings before income taxes                         1,879        1,909             1,849            1,897
    Federal income taxes                                   671          688               633              666
                                                         -----        -----             -----            -----

    Net earnings                                        $1,208       $1,221            $1,216           $1,231
                                                         =====        =====             =====            =====

    Earnings per share:
      Basic                                               $.22         $.23             $.22              $.23
                                                           ===          ===              ===               ===

      Diluted                                             $.22         $.22             $.22              $.23
                                                           ===          ===              ===               ===
</TABLE>



                                       56
<PAGE>

<TABLE>
<CAPTION>

                                        DIRECTORS
<S>                                         <C>
JOHN R. REUSING               Chairman of the Board of Fidelity Financial of
                              Ohio, Inc. and President of Centennial Bank.

ROBERT R. SUDBROOK            President and Chief Executive Officer of Fidelity
                              Financial of Ohio, Inc. and Chairman of the Board
                              and Chief Executive Officer of Centennial Bank.

DANIEL W. GEEDING             Professor of Management and the Director of the
                              Center for International Business at Xavier
                              University.

JOSEPH D. HUGHES              Executive Vice President and Chief Lending Officer
                              of Fidelity Financial of Ohio, Inc. and Centennial
                              Bank.

MICHAEL W. JORDAN             Executive Vice President of Jordan Realtors,
                              Cincinnati, Ohio.

KENNETH C. LICHTENDAHL        President of Hudepohl-Schoenling Brewing Company.

DAVID A. LUECKE               President and Chief Executive Officer of Riemeier
                              Lumber Company, Cincinnati, Ohio.

CONSTANTINE N. PAPADAKIS      President of Drexel University, Philadelphia,
                              Pennsylvania.

EDGAR A. RUST                 Retired President and Chief Executive Officer of
                              Glenway Financial Corporation.

THOMAS N. SPAETH              Chief Financial Officer, Champion Window 
                              Manufacturing & Supply, Inc.

JOHN L. TORBECK               President of Torbeck Homes, Inc.

ROBERT W. ZUMBIEL             President of C.W. Zumbiel Company, Norwood, Ohio.

                                       OFFICERS
ROBERT R. SUDBROOK            President and Chief Executive Officer of Fidelity
                              Financial of Ohio, Inc. and Chairman of the Board
                              and Chief Executive Officer of Centennial Bank.

JOHN R. REUSING               Chairman of the Board of Fidelity Financial of
                              Ohio, Inc. and President of Centennial Bank.

JOSEPH D. HUGHES              Executive Vice President and Chief Lending Officer
                              of Fidelity Financial of Ohio, Inc. and Centennial
                              Bank.

GREGORY P. NIESEN             Senior Vice President and Treasurer of Fidelity
                              Financial of Ohio, Inc. and Centennial Bank.

THOMAS N. SCHILLER            Executive Vice President Commercial Banking of
                              Fidelity Financial of Ohio, Inc. and Centennial
                              Bank.

ELAINE M. SCHMIDT             Senior Vice President and Chief Operations Officer
                              of Fidelity Financial of Ohio, Inc. and Centennial
                              Bank.

PAUL D. STAUBACH              Senior Vice President and Chief Financial Officer
                              of Fidelity Financial of Ohio, Inc. and Centennial
                              Bank.
</TABLE>
<TABLE>
<CAPTION>
                                        LOCATIONS
<S>                                     <C>                              <C>
Main Office/Glencrossing       5535 Glenway Avenue                     922-5959
Anderson                       7944 Beechmont Avenue                   474-1141
Blue Ash                       4144 Hunt Road                          793-5196
Cheviot                        3916 Harrison Avenue                    661-5997
Delhi                          5030 Delhi Pike                         451-5353
Delhi/Rapid Run                5681 Rapid Run (at Neeb)                451-7575
Hartwell                       8434 Vine Street                        821-8880
Loveland                       10640 Loveland-Madeira Road             683-1124
Madeira                        7136 Miami Avenue                       272-4200
Northgate                      9090 Colerain Avenue                    385-8148
Norwood                        4555 Montgomery Road                    351-6666
Price Hill                     4221 Glenway Avenue                     921-5505
Ross                           3777 Hamilton Cleves Road               738-1111
Sharonville                    11100 Reading Road                      733-9300
Tri County                     11700 Princeton Road                    671-0866
</TABLE>

                                       57
<PAGE>


CORPORATE INFORMATION

CORPORATE HEADQUARTERS
Fidelity Financial of Ohio, Inc.
5535 Glenway Avenue
Cincinnati, Ohio  45238
(513) 922-5959


STOCK LISTING
The Nasdaq National Market
Symbol:  FFOH


TRANSFER AGENT AND REGISTRAR
Fifth Third Bank
Corporate Trust Services
Mail Location 1090F5
38 Fountain Square Plaza
Cincinnati, Ohio  45263
(513) 579-5320
(800) 837-2755


INDEPENDENT AUDITORS
Grant Thornton LLP
625 Eden Park Drive, Suite 900
Cincinnati, Ohio  45202-4181


SPECIAL LEGAL COUNSEL
Elias, Matz, Tiernan & Herrick LLP
734 15th Street, N.W., 12th Floor Washington,
DC 20005


ANNUAL MEETING
May 18, 1999, 2:00 P.M.
Quality Hotel Central
4747 Montgomery Road
Cincinnati, Ohio  45212



FORM 10-K
Fidelity  Financial of Ohio,  Inc. is required to file an Annual  Report on Form
10-K,  for its year ended  December 31, 1998.  Copies of this Annual  Report and
Quarterly Reports on Form 10-Q may be obtained without charge by contacting:

Paul D. Staubach
Senior Vice President
Chief Financial Officer
Fidelity Financial of Ohio, Inc.
5535 Glenway Avenue
Cincinnati, Ohio  45238


MARKET MAKERS
Ernst & Company
Friedman, Billings, Ramsey & Co., Inc.
S. J. Wolfe and Company, as a subsidiary of
  McDonald & Co. Securities
Herzog, Heine, Geduld, Inc.
Knight Securities, Inc.
Sandler, O'Neill & Partners, LP
Stifel, Nicholas & Company, Inc.
Trident Securities Inc.

                                       58