<PAGE>   1
                                                                      Exhibit 13

LONDON FINANCIAL CORPORATION
--------------------------------------------------------------------------------
2 East High Street London, Ohio 43140 Telephone (740)852-0787  Fax (740)852-4699


Dear Shareholder:

     It is with a great deal of pleasure that I present to you the Annual Report
to Shareholders of London Financial Corporation covering the fiscal year ended
September 30, 1999.

     Fiscal 1999 marked a record year of growth for your Company. Assets
increased $5.2 million, or 13.6%, to $43.3 million. Loans receivable stood at
$36.7 million at September 30, 1999, an increase of $4.1 million, or 12.6%.
Deposits increased 18.6% during this period to a total of $37.1 million.
Finally, shareholders' equity increased by $347,000, or 7.1%, to a total of $5.2
million.

     During the past year your Company also expanded the services it offers to
the public. In January 1999, we completed our charter change, commencing
operations as Citizens Bank of London, a state-chartered commercial bank.
Expanded commercial and agricultural product lines were developed and
implemented, two new drive-thru lanes were added, and a new ATM was introduced.
Now customers can access their checking and savings accounts twenty-four hours a
day at our ATM and can also use newly issued Citizens VISA Check Cards instead
of a check wherever VISA cards are accepted. In the year ahead, even more
services will be offered to make your Bank more attractive to present and future
customers.

     As we enter the new millennium, please be assured that we are totally
committed to enhancing the value of your investment in London Financial
Corporation. We wish to thank you for your support during the past year and look
forward to your continued support in the future.

Sincerely,

LONDON FINANCIAL CORPORATION


/s/ John J. Bodle

John J. Bodle
President



<PAGE>   2




                    BUSINESS OF LONDON FINANCIAL CORPORATION
================================================================================

London Financial Corporation ("LFC" or the "Company"), a bank holding company
incorporated under the laws of the State of Ohio, owns all of the issued and
outstanding common shares of The Citizens Bank of London ("Citizens"), a bank
incorporated under the laws of the State of Ohio. In March 1996, LFC acquired
all of the common shares issued by Citizens upon its conversion from a mutual
savings and loan association to a stock savings and loan association (the
"Conversion"). Since its formation, LFC's activities have been limited primarily
to holding the common shares of Citizens.

As a bank holding company, LFC is subject to regulation, supervision and
examination by the Board of Governors of the Federal Reserve System. As a state
chartered commercial bank incorporated under the laws of Ohio, Citizens is
subject to regulation, supervision and examination by the Federal Deposit
Insurance Corporation (the "FDIC") and the Ohio Department of Commerce, Division
of Financial Institutions (the "Division"). Citizens is also a member of the
Federal Home Loan Bank (the "FHLB") of Cincinnati.

On January 4, 1999, Citizens' completed a charter conversion of Citizens from a
state-chartered savings and loan association to a state-chartered commercial
bank (the "Charter Conversion"). As a result of the Charter Conversion, Citizens
is permitted to increase its commercial lending activities to small businesses
and to agricultural concerns and to increase its commercial checking activity.

Also in connection with the Charter Conversion, LFC converted to a bank holding
company regulated by the Federal Reserve Board and is no longer a unitary
savings and loan holding company regulated by the OTS.


                              MARKET PRICE OF LFC'S
                  COMMON SHARES AND RELATED SHAREHOLDER MATTERS
================================================================================

There were 479,450 of LFC's common shares outstanding on December 10, 1999, and
held of record by approximately 418 shareholders. Price information with respect
to LFC's common shares was quoted on The Nasdaq SmallCap Market ("Nasdaq") under
the symbol "LONF" from March 1996 through April 1998. Thereafter, LFC's shares
began trading through the OTC Bulletin Board. The table below sets forth the
high and low prices for the common shares of LFC together with the respective
dividends declared per share, for each quarter of fiscal 1999 and 1998. Price
information was obtained from Nasdaq for the periods through April 1998. Price
information subsequent to April 1998 represents actual trade prices during the
respective quarters.




                                       2
<PAGE>   3



                              MARKET PRICE OF LFC'S
            COMMON SHARES AND RELATED SHAREHOLDER MATTERS (CONTINUED)
================================================================================
<TABLE>
<CAPTION>
                                                                                                CASH DIVIDENDS
                                                 HIGH                          LOW                    DECLARED
<S>                                           <C>                          <C>                 <C>
FISCAL 1998
  Quarter ended:
    December 31, 1997                          $21.00                       $14.00                       $5.06
    March 31, 1998                              16.50                        14.50                         .06
    June 30, 1998                               16.50                        14.50                         .06
    September 30, 1998                          17.25                        14.50                         .06

FISCAL 1999
  Quarter ended:
    December 31, 1998                          $15.50                       $13.75                       $ .06
    March 31, 1999                              14.75                        14.00                         .06
    June 30, 1999                               15.00                        12.50                         .06
    September 30, 1999                          13.25                        11.13                         .06
</TABLE>

Dividends are subject to determination and declaration by the Board of Directors
of LFC, which takes into account LFC's financial condition, results of
operations, tax considerations, industry standards, economic conditions,
regulatory restrictions and other factors which affect the payment of dividends.

The income of LFC consists primarily of interest and dividends on investments
and dividends which may periodically be declared and paid by the Board of
Directors of Citizens on the common shares of Citizens held by LFC.





                                       3
<PAGE>   4



                              SELECTED CONSOLIDATED
                      FINANCIAL INFORMATION AND OTHER DATA
================================================================================

The following table sets forth certain information concerning the consolidated
financial condition, earnings and other data regarding LFC at the dates and for
the periods indicated. This selected financial data should be read in
conjunction with the consolidated financial statements appearing elsewhere in
this report

<TABLE>
<CAPTION>
                                                                          AT SEPTEMBER 30,
SELECTED FINANCIAL CONDITION                          1999         1998         1997         1996         1995
  AND OTHER DATA:                                                      (Dollars in thousands)
<S>                                                <C>          <C>          <C>          <C>          <C>
Total amount of:
Assets                                             $43,323      $38,144      $38,210      $36,817      $34,152
Cash and due from banks                                709          507          322          319          835
Interest-bearing deposits in other
  financial institutions                             2,748        1,271        3,342        2,324        2,009
Investment securities (1)                              127          121          655        2,220          500
Mortgage-backed securities                           1,829        2,703        3,586        4,032        2,009
Loans receivable - net                              36,700       32,588       29,465       27,031       27,972
Deposits                                            37,112       31,300       29,951       28,195       30,594
FHLB advances                                          800        1,800          300          300          300
Shareholders' equity (2)                             5,210        4,863        7,604        7,907        3,224
</TABLE>


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

(1)      Includes securities designated as available for sale.

(2) Consisted solely of retained earnings at September 30, 1995.

<TABLE>
<CAPTION>
                                                                     YEAR ENDED SEPTEMBER 30,
SUMMARY OF EARNINGS:                                  1999         1998         1997         1996         1995
                                                               (In thousands, except per share data)
<S>                                                <C>          <C>          <C>          <C>          <C>
Interest income                                     $3,177       $2,956       $2,832       $2,769       $2,334
Interest expense                                     1,600        1,557        1,468        1,505        1,396
                                                    ------       ------       ------       ------       ------
Net interest income                                  1,577        1,399        1,364        1,264          938
Provision for losses on loans                           38           22           -            -            -
                                                    ------       ------       ------       ------       ------

Net interest income after
 provision for losses on loans                       1,539        1,377        1,364        1,264          938
Other income                                            85          143          107           71           74
General, administrative and other
  expense                                            1,134          942          887        1,014          792
                                                    ------       ------       ------       ------       ------
Earnings before income taxes                           490          578          584          321          220
Federal income taxes                                   165          192          199           97           77
                                                    ------       ------       ------       ------       ------

Net earnings                                        $  325       $  386       $  385       $  224       $  143
                                                    ======       ======       ======       ======       ======

Earnings per share
  Basic                                               $.72         $.84         $.81          N/A          N/A
                                                      ====         ====         ====          ===          ===

  Diluted                                             $.70         $.80         $.81          N/A          N/A
                                                      ====         ====         ====          ===          ===
</TABLE>




                                       4
<PAGE>   5



                              SELECTED CONSOLIDATED
                FINANCIAL INFORMATION AND OTHER DATA (CONTINUED)
================================================================================


<TABLE>
<CAPTION>
SELECTED FINANCIAL RATIOS:                                     AT OR FOR THE YEAR ENDED SEPTEMBER 30,
                                                      1999         1998         1997         1996         1995
Performance ratios:
<S>                                                 <C>          <C>          <C>          <C>          <C>
  Return on average assets                            0.80%        1.03%        1.01%        0.62%        0.44%
  Return on average equity                            6.47         7.14         5.15         4.36         4.51
  Interest rate spread                                3.55         3.07         2.90         3.06         2.62
  Net interest margin                                 4.01         3.76         3.77         3.67         2.95
  General, administrative and
    other expense to average assets                   2.79         2.51         2.33         2.80         2.42
  Average equity to average assets                   12.34        14.38        19.67        14.21         9.68

Asset quality ratios:
  Nonperforming assets to total assets                  --           --         0.70         0.71         0.13
  Nonperforming loans to total loans                    --           --         0.87         0.90         0.15
  Allowance for loan losses to total
    loans                                             0.63         0.59         0.60         0.65         0.65
  Allowance for loan losses to
    nonperforming loans                                 --           --        69.78        71.65       422.22
  Net charge-offs to average loans                    0.01         0.03           --         0.01           --

Average interest-earning assets to
  average interest-bearing liabilities              111.19       116.10       121.39       113.83       107.52
</TABLE>



                                       5
<PAGE>   6


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


                                     GENERAL
--------------------------------------------------------------------------------

The following discussion and analysis of the financial condition and results of
operations of LFC and Citizens should be read in conjunction with and with
reference to the consolidated financial statements, and the notes thereto,
presented in this Annual Report.

LFC was incorporated for the purpose of owning all of the outstanding common
shares of Citizens following the Conversion. As a result, the discussion and
analysis that follows pertains primarily to the financial condition of LFC on a
consolidated basis and to the results of operations of Citizens.

In addition to the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Economic circumstances, the operations of Citizens, and LFC's
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 changes in interest rates in the nation and LFC's primary market
area.

Without limiting the generality of the foregoing, some of the statements in the
following referenced sections of this discussion and analysis are
forward-looking and are, therefore, subject to such risks and uncertainties:

         1.       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 September 30, 1998 to
                  September 30, 1999," "Comparison of Results of Operation for
                  the Years Ended September 30, 1999 and 1998" and "Comparison
                  of Results of Operations for the Years Ended September 30,
                  1998 and 1997;"

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

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

         4.       The discussion of legislation enacted under the
                  "Gramm-Leach-Bliley Act," as set forth under "Potential Impact
                  of Current Legislation on Future Results of Operations;"

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

         6.       Management's determination of the effect of the year 2000 on
                  LFC's information technology systems as set forth under "Year
                  2000 Compliance Matters."





                                       6
<PAGE>   7



                  DISCUSSION OF CHANGES IN FINANCIAL CONDITION
                  FROM SEPTEMBER 30, 1998 TO SEPTEMBER 30, 1999
--------------------------------------------------------------------------------

The Company's consolidated total assets amounted to $43.3 million at September
30, 1999, an increase of $5.2 million, or 13.6%, over the $38.1 million in total
assets at September 30, 1998. The increase in assets was funded primarily by a
$5.8 million growth in deposits and a $347,000 increase in shareholders' equity,
which were partially offset by a $1.0 million decrease in FHLB advances.

Cash and cash equivalents and investment securities totaled $3.6 million at
September 30, 1999, an increase of $1.7 million, or 88.7%, over September 30,
1998 levels. This increase was the result of cash received through the growth in
deposits during the fiscal year.

Mortgage-backed securities totaled $1.8 million at September 30, 1999, a
decrease of $874,000, or 32.3%, from September 30, 1998, levels, due primarily
to principal repayments. The Company's mortgage-backed securities portfolio
consists of adjustable-rate mortgage-backed securities bearing interest at rates
ranging from 6.0% to 6.6% at September 30, 1999. Proceeds from principal
repayments on mortgage-backed securities were redeployed to fund growth in the
loan portfolio.

Loans receivable totaled $36.7 million at September 30, 1999, an increase of
$4.1 million, or 12.6%, over the $32.6 million total at September 30, 1998.
During fiscal 1999, loan disbursements amounted to $20.1 million, which were
partially offset by principal repayments of $16.1 million. Loan origination
volume during fiscal 1999 exceeded that of fiscal 1998 by $7.5 million, or
59.2%. Growth in the loan portfolio during fiscal 1999 occurred primarily in
commercial loans, generally secured by real estate and agricultural equipment,
which increased by $6.8 million.

Citizens' allowance for loan losses totaled $238,000 and $201,000 at September
30, 1999 and 1998, which represented .63% and .59% of total loans, respectively.
Citizens had no nonperforming loans at September 30, 1999 and 1998. Although
management believes that its allowance for loan losses at September 30, 1999 was
adequate based on the available facts and circumstances, there can be no
assurance that additions to such allowance will not be necessary in future
periods, which could adversely affect the Company's results of operations.

Deposits totaled $37.1 million at September 30, 1999, an increase of $5.8
million, or 18.6%, over the $31.3 million total at September 30, 1998. The
increase in deposits consisted of a $4.1 million, or 34.4%, increase in
transaction accounts, and a $1.7 million, or 8.9%, increase in certificates of
deposit. The increase resulted primarily from management's continuing efforts to
maintain growth in deposits through marketing and pricing strategies.

Shareholders' equity totaled $5.2 million at September 30, 1999, a $347,000, or
7.1%, increase from 1998 levels. The increase resulted primarily from net
earnings of $325,000 and amortization related to stock benefit plans totaling
$126,000 during 1999, which were partially offset by cash dividends of $108,000.




                                       7
<PAGE>   8



                       COMPARISON OF RESULTS OF OPERATIONS
                 FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998
-------------------------------------------------------------------------------

GENERAL. Net earnings for the fiscal year ended September 30, 1999, amounted to
$325,000, a decrease of $61,000, or 15.8%, from the $386,000 in net earnings
recorded in fiscal 1998. The decrease in net earnings resulted primarily from a
$192,000 increase in general, administrative and other expense, a $58,000
decrease in other income, and a $16,000 increase in the provision for losses on
loans, which were partially offset by a $178,000 increase in net interest income
and a $27,000 decrease in the provision for federal income taxes.

NET INTEREST INCOME. Net interest income totaled $1.6 million for the fiscal
year ended September 30, 1999, an increase of $178,000, or 12.7%, over the total
recorded in fiscal 1998. Interest income on loans during fiscal 1999 increased
by $335,000, or 12.9%, over fiscal 1998 levels, resulting from the combination
of a $3.1 million increase in the weighted-average balance of loans outstanding
and an increase of 23 basis points (100 basis points equals one percent) in the
average yield, to 8.57%. Interest income on mortgage-backed securities decreased
by $66,000, or 33.0%, due primarily to an $865,000, or 27.8%, decrease in the
weighted-average balance of mortgage-backed securities outstanding, coupled with
a decrease in the weighted-average yield year to year, from 6.43% in fiscal 1998
to 5.97% in fiscal 1999. Interest income on investment securities and
interest-bearing deposits decreased by $48,000, or 31.2%, for the fiscal year
ended September 30, 1999, compared to fiscal 1998, as the weighted-average yield
decreased by 273 basis points, to 3.73% in fiscal 1999, while the
weighted-average balance increased by $457,000 year to year.

Interest expense on deposits increased by $45,000, or 3.0%, during fiscal 1999,
compared to fiscal 1998, due primarily to a $3.8 million increase in the
weighted-average balance of deposits outstanding year to year, which was
partially offset by a decline of 40 basis points in the weighted-average cost of
deposits, from 4.86% in fiscal 1998 to 4.46% in fiscal 1999.

As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $178,000, or 12.7%, during fiscal 1999, as
compared to fiscal 1998. The interest rate spread increased by 42 basis points,
to 3.55% for fiscal 1999, as compared to 3.13% for fiscal 1998, while the net
interest margin amounted to 4.01% and 3.81% for the fiscal years ended September
30, 1999 and 1998, respectively.

PROVISION FOR LOSSES ON LOANS. A provision for losses on loans is charged to
earnings to bring the total allowance for loan losses to a level which is
considered adequate to absorb losses inherent in the loan portfolio in
accordance with generally accepted accounting principles ("GAAP"). The amount of
the provision is based on management's regular review of the loan portfolio and
consideration of such factors as historical loss experience, generally
prevailing economic conditions, changes in the size and composition of the loan
portfolio and considerations relating to specific loans, including the ability
of the borrower to repay the loan and the estimated value of the underlying
collateral. Although management utilizes its best judgment and information
available, the ultimate adequacy of the allowance is dependent upon a variety of
factors, including the performance of Citizens' loan portfolio, the economy,
changes in real estate values and interest rates and regulatory requirements
regarding asset classifications. As a result of its analysis, management elected
to record a $38,000 provision for losses on loans during the fiscal year ended
September 30, 1999, an increase of $16,000, or 72.7%, over fiscal 1998. The
fiscal 1999 provision was predicated on the growth in the nonresidential
property loan portfolio. There can be no assurance that the allowance will be
adequate to cover losses on nonperforming assets in the future.




                                       8
<PAGE>   9



OTHER INCOME. Other income totaled $85,000 for the fiscal year ended September
30, 1999, a decrease of $58,000, or 40.6%, from the $143,000 recorded in fiscal
1998. The decrease resulted primarily from the absence of $71,000 in gains on
the sale of investment securities designated as available for sale during 1998,
partially offset by a $13,000, or 18.1%, increase in other operating income.
This increase resulted from increased fees on checking accounts, late charges
and new fee income resulting from the addition of an ATM during the year.

GENERAL, ADMINISTRATIVE AND OTHER EXPENSE. General, administrative and other
expense increased by $192,000, or 20.4%, to a total of $1.1 million for the
fiscal year ended September 30, 1999 compared to fiscal 1998. The increase was
due primarily to a $126,000, or 24.9%, increase in employee compensation and
benefits, a $68,000, or 31.9%, increase in other operating expenses and a
$22,000, or 37.3%, increase in occupancy and equipment expense, which were
partially offset by a $35,000, or 40.2%, decrease in franchise taxes. The
increase in employee compensation and benefits resulted primarily from costs
associated with the stock benefit plans of LFC, an increase in staffing levels
and normal merit increases. The increase in other operating expense was due
primarily to costs associated with new deposit products, the establishment of
the Bank's ATM, and costs associated with the change in corporate charter.
Occupancy and equipment expense increased as a result of an increase in
depreciation expense, resulting from fixed asset additions during 1998 and 1999.
These expenses were offset by a reduction in franchise tax during 1999 as a
result of the decrease in stockholders' equity following the Corporation's
return of capital distribution paid in fiscal 1998.

FEDERAL INCOME TAXES. The provision for federal income taxes totaled $165,000
for the fiscal year ended September 30, 1999, a decrease of $27,000, or 14.1%,
from the $192,000 provision recorded in fiscal 1998. The decrease resulted
primarily from a decrease of $88,000, or 15.2%, in pretax earnings year to year.
LFC's effective tax rates were 33.7% and 33.2% for the fiscal years ended
September 30, 1999 and 1998, respectively.


                       COMPARISON OF RESULTS OF OPERATIONS
                 FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
-------------------------------------------------------------------------------

GENERAL. Net earnings for the fiscal year ended September 30, 1998, amounted to
$386,000, an increase of $1,000, or .3%, over the $385,000 in net earnings
recorded in fiscal 1997. The increase in net earnings resulted primarily from a
$35,000 increase in net interest income, a $36,000 increase in other income, and
a $7,000 decrease in the provision for federal income taxes, which were
partially offset by a $22,000 increase in the provision for losses on loans and
a $55,000 increase in general administrative and other expense.

NET INTEREST INCOME. Net interest income totaled $1.4 million for the fiscal
year ended September 30, 1998, an increase of $35,000, or 2.6%, over the total
recorded in fiscal 1997. Interest income on loans during fiscal 1998 increased
by $221,000, or 9.3%, over fiscal 1997 levels, resulting from the combination of
a $2.6 million increase in the weighted-average balance of loans outstanding and
an increase of 2 basis points in the average yield, to 8.34%. Interest income on
mortgage-backed securities decreased by $32,000, or 13.8%, due primarily to a
$672,000, or 17.8%, decrease in the weighted-average balance of mortgage-backed
securities outstanding, which was partially offset by an increase in the
weighted-average yield year to year, from 6.13% in fiscal 1997 to 6.43% in
fiscal 1998. Interest income on investment securities and interest-bearing
deposits decreased by $65,000, or 29.7%, for the fiscal year ended September 30,
1998, compared to fiscal 1997, as the weighted-average balance decreased by $1.4
million year to year, due to maturities and sales, while the related yield
increased by 62 basis points, to 6.46% in fiscal 1998.





                                       9
<PAGE>   10



Interest expense on deposits increased by $70,000, or 4.9%, during fiscal 1998,
compared to fiscal 1997, due primarily to a $1.5 million increase in the
weighted-average balance of deposits outstanding year to year, which was
partially offset by a decline of 2 basis points in the weighted-average cost of
deposits, from 4.88% in fiscal 1997 to 4.86% in fiscal 1998.

As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $35,000, or 2.6%, during fiscal 1998, compared
to fiscal 1997. The interest rate spread increased by 23 basis points, to 3.13%
for fiscal 1998, compared to 2.90% for fiscal 1997, while the net interest
margin amounted to 3.81% and 3.77% for the fiscal years ended September 30, 1998
and 1997, respectively.

PROVISION FOR LOSSES ON LOANS. Based on management's regular review of the loan
portfolio and consideration of such factors as historical loss experience,
generally prevailing economic conditions, changes in the size and composition of
the loan portfolio and considerations relating to specific loans, including the
ability of the borrower to repay the loan and the estimated value of the
underlying collateral, management elected to record a $22,000 provision for
losses on loans during the fiscal year ended September 30, 1998. The provision
was predicated on the growth in the loan portfolio comprised primarily of loans
secured by nonresidential property.

OTHER INCOME. Other income totaled $143,000 for the fiscal year ended September
30, 1998, an increase of $36,000, or 33.6%, over the $107,000 recorded in fiscal
1997. The increase resulted primarily from an increase of $31,000, or 77.5%, in
gain on sale of investment securities designated as available for sale.

GENERAL, ADMINISTRATIVE AND OTHER EXPENSE. General, administrative and other
expense increased by $55,000, or 6.2%, to a total of $942,000 for the fiscal
year ended September 30, 1998, compared to fiscal 1997. The increase was due
primarily to a $61,000, or 13.7%, increase in employee compensation and benefits
and a $7,000, or 13.5%, increase in occupancy and equipment, which were
partially offset by a $13,000, or 40.6%, decrease in federal deposit insurance
premiums. The increase in employee compensation and benefits resulted primarily
from costs associated with the stock benefit plans of LFC, an increase in
staffing levels and normal merit increases.

FEDERAL INCOME TAXES. The provision for federal income taxes totaled $192,000
for the fiscal year ended September 30, 1998, a decrease of $7,000, or 3.5%,
from the $199,000 provision recorded in fiscal 1997. The decrease resulted
primarily from a decrease of $6,000, or 1.0%, in pretax earnings year to year
coupled with an increase in nontaxable dividend income. LFC's effective tax
rates were 33.2% and 34.1% for the fiscal years ended September 30, 1998 and
1997, respectively.




                                       10
<PAGE>   11



The following table sets forth certain average balance sheet information,
including the average yield on interest-earning assets and the average cost of
interest-bearing liabilities for the years indicated. Such yields and costs are
derived by dividing income or expense by the average monthly balance of
interest-earning assets or interest-bearing liabilities, respectively, for the
years presented. Average balances are derived from monthly balances, which
include nonaccruing loans in the loan portfolio. Management does not believe
that the use of month end balances instead of daily balances has caused any
material differences in the information presented.


<TABLE>
<CAPTION>
                                                                                                 YEAR ENDED SEPTEMBER 30,
                                                                     1999                                  1998
                                                       ---------------------------------     ---------------------------------
                                         WEIGHTED          AVERAGE   INTEREST    AVERAGE         AVERAGE   INTEREST    AVERAGE
                                     AVERAGE YIELD AT  OUTSTANDING    EARNED/     YIELD/     OUTSTANDING    EARNED/     YIELD/
                                    SEPTEMBER 30, 1999     BALANCE       PAID       RATE         BALANCE       PAID       RATE
       (Dollars in thousands)
<S>                                <C>                <C>           <C>          <C>        <C>           <C>          <C>
Interest-earning assets:
Interest-bearing deposits in other
  financial institutions                    3.16%          $ 2,723     $  100         3.67%      $ 2,245     $  149        6.64%
Investment securities                       4.72               117          6         5.12           138          5        3.62
Mortgage-backed securities                  6.13             2,245        134         5.97         3,110        200        6.43
Loans receivable(1)                         7.91            34,289      2,937         8.57        31,198      2,602        8.34
                                                           -------     ------       ------       -------     ------      ------
     Total interest-earning assets                          39,374      3,177         8.07        36,691      2,956        8.06

Non-interest-earning assets                                  1,335                                   891
                                                           -------                               -------

     Total assets                                          $40,709                               $37,582
                                                           =======                               =======

Interest-bearing liabilities:
NOW accounts                                1.56           $ 5,191         72         1.39       $ 3,859         76        1.97
Money market accounts                       4.44             3,205        144         4.49           932         41        4.40
Passbook savings accounts                   3.00             6,083        185         3.04         5,919        180        3.04
Certificates of deposit                     5.55            20,057      1,140         5.68        20,067      1,199        5.98
                                                           -------     ------       ------       -------     ------      ------
     Total deposits                                         34,536      1,541         4.46        30,777      1,496        4.86
FHLB advances and other borrowings          6.91               878         59         6.72           825         61        7.39
                                                           -------     ------       ------       -------     ------      ------
     Total interest-bearing liabilities                     35,414      1,600         4.52        31,602      1,557        4.93
                                                                       ------       ------                   ------      ------


Non-interest-bearing liabilities                               270                                   574
                                                           -------                               -------

     Total liabilities                                      35,684                                32,176

Shareholders' equity                                         5,025                                 5,406
                                                           -------                               -------
     Total liabilities and
       shareholders' equity                                $40,709                               $37,582
                                                           =======                               =======

Net interest income                                                    $1,577                                $1,399
                                                                       ======                                ======
Interest rate spread                                                                  3.55%                                3.13%
                                                                                    ======                               ======
Net interest margin (net interest
  income as a percentage of average
  interest-earning assets)                                                            4.01%                                3.81%
                                                                                    ======                               ======
Average interest-earning assets to
  average interest-bearing liabilities                                              111.19%                              116.10%
                                                                                    ======                               ======
</TABLE>


<TABLE>
<CAPTION>
                                                        1997
                                        ---------------------------------
                                            AVERAGE   INTEREST    AVERAGE
                                        OUTSTANDING    EARNED/     YIELD/
                                            BALANCE       PAID       RATE
       (Dollars in thousands)
<S>                                    <C>           <C>         <C>
Interest-earning assets:
Interest-bearing deposits in other
  financial institutions                    $ 2,562     $  161       6.28%
Investment securities                         1,188         58       4.88
Mortgage-backed securities                    3,782        232       6.13
Loans receivable(1)                          28,618      2,381       8.32
                                            -------     ------     ------

     Total interest-earning assets           36,150      2,832       7.83

Non-interest-earning assets                   1,870
                                            -------

     Total assets                           $38,020
                                            =======

Interest-bearing liabilities:
NOW accounts                                $ 3,450         65       1.88
Money market accounts                           233          6       2.58
Passbook savings accounts                     5,843        177       3.03
Certificates of deposit                      19,724      1,178       5.97
                                            -------     ------     ------
     Total deposits                          29,250      1,426       4.88
FHLB advances and other borrowings              531         42       7.91
                                            -------     ------     ------
     Total interest-bearing liabilities      29,781      1,468       4.93
                                                        ------     ------
Non-interest-bearing liabilities                761
                                            -------

     Total liabilities                       30,542

Shareholders' equity                          7,478
                                            -------
     Total liabilities and
       shareholders' equity                 $38,020
                                            =======

Net interest income                                     $1,364
                                                        ======
Interest rate spread                                                 2.90%
                                                                   ======
Net interest margin (net interest
  income as a percentage of average
  interest-earning assets)                                           3.77%
                                                                   ======
Average interest-earning assets to
  average interest-bearing liabilities                             121.39%
                                                                   ======
</TABLE>


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

(1)      Net of deferred loan fees, loan discounts, the allowance for loan
         losses and loans in process. Loan fees included in interest income
         totaled $132,000, $124,000, and $81,000 for the fiscal years ended
         September 30, 1999, 1998 and 1997, respectively.




                                       11
<PAGE>   12



The table below describes the extent to which changes in interest rates and
changes in volume of interest-earning assets and interest-bearing liabilities
have affected the interest income and interest expense of LFC during the years
indicated. For each category of interest-earning assets and interest-bearing
liabilities, information is provided for changes attributable to (i) increases
and decreases in volume (change in volume multiplied by prior year rate), (ii)
increases and decreases in rate (change in rate multiplied by prior year volume)
and (iii) total increases and decreases in rate and volume. The combined effects
of changes in both volume and rate, which cannot be separately identified, have
been allocated proportionately to the change due to volume and the change due to
rate.

<TABLE>
<CAPTION>
                                                                      YEAR ENDED SEPTEMBER 30,
                                                          1999 VS. 1998                            1998 VS. 1997
                                            ------------------------------------    -----------------------------------
                                                   INCREASE                               INCREASE
                                               (DECREASE) DUE TO            TOTAL     (DECREASE) DUE TO           TOTAL
                                              ------------------         INCREASE     ------------------       INCREASE
                                              VOLUME       RATE        (DECREASE)     VOLUME       RATE      (DECREASE)
                                                                           (In thousands)
<S>                                           <C>         <C>          <C>            <C>        <C>         <C>
Interest income attributable to:
  Interest-bearing deposits                      $ 28       $(77)           $(49)        $(21)      $  9           $(12)
  Investment securities                            (1)         2               1          (41)       (12)           (53)
  Mortgage-backed securities                      (52)       (14)            (66)         (42)        10            (32)
  Loans receivable                                261         74             335          215          6            221
                                                 ----       ----             ---         ----       ----           ----
     Total interest income                        236        (15)            221          111         13            124

Interest expense attributable to:
  NOW accounts                                     20        (24)             (4)           8          3             11
  Money market accounts                           102          1             103           26          9             35
  Passbook savings accounts                         5         -                5            2          1              3
  Certificates of deposit                          (1)       (58)            (59)          19          2             21
                                                 ----       ----            ----         ----       ----           ----
     Total deposits                               126        (81)             45           55         15             70

  Advances from FHLB                                6         (8)             (2)          22         (3)            19
                                                 ----       ----            ----         ----       ----           ----

     Total interest expense                       132        (89)             43           77         12             89
                                                 ----       ----            ----         ----       ----           ----

Increase in net interest income                                             $178                                   $ 35
                                                                            ====                                   ====
</TABLE>


                         ASSET AND LIABILITY MANAGEMENT
--------------------------------------------------------------------------------

Citizens' interest rate spread is the principal determinant of Citizens' income.
The interest rate spread, and therefore net interest income, can vary
considerably over time because asset and liability repricing do not coincide.
Moreover, the long-term and cumulative effect of interest rate changes can be
substantial. Interest rate risk is defined as the sensitivity of an
institution's earnings and net asset values to changes in interest rates. The
management and Board of Directors attempt to manage Citizens' exposure to
interest rate risk in a manner to maintain the projected four-quarter percentage
change in net interest income and the projected change in the market value of
portfolio equity within limits established by the Board of Directors, assuming a
permanent and instantaneous parallel shift in interest rates.

In managing its interest rate risk, Citizens begins with an objective to
increase the interest rate sensitivity of its assets by originating loans with
interest rates subject to periodic adjustment and market conditions and/or
shorter maturities. Citizens has historically had to rely primarily upon retail
deposit accounts as a source of funds and intends to continue to do so.
Management believes that reliance on retail deposit accounts as a source of
funds compared to brokered deposits and long-term borrowings may reduce the
effects of interest rate fluctuations because these deposits generally represent
a more stable source of funds. However, in fiscal 1999 and 1998, Citizens has
utilized FHLB advances as a source of financing to fund loan demand and
liquidity needs.




                                       12
<PAGE>   13
Banks have historically presented a gap analysis as a measure of interest rate
risk. The gap analysis presents the projected maturities and periods to
repricing of a bank's rate sensitive assets and liabilities. Citizens'
cumulative one-year gap, which represents the difference between the amount of
interest sensitive assets maturing or repricing in one year and the amount of
interest sensitive liabilities maturing or repricing in the same period, was a
positive 53.8% of total assets at September 30, 1999. A positive cumulative gap
indicates that interest sensitive assets exceed interest sensitive liabilities
at a specific date. In a rising interest rate environment, institutions with
positive repricing or maturity gaps generally experience a more rapid increase
in interest income earned on assets than the interest expense paid on
liabilities. Conversely, in an environment of falling interest rates, interest
income earned on assets will generally decrease more rapidly than the interest
expense paid on liabilities. A negative gap will have the opposite effect.
Citizens' one to three year gap reflected a negative gap totaling 19.9% of total
assets while the cumulative gap totaled 33.8% of total assets. Citizens' other
maturities greater than three years reflected a negative gap of 22.8% of total
assets. The foregoing totals have been based on certain prepayment and repricing
data that may not reflect actual performance in a rapidly rising or declining
interest rate environment.

The following table presents Citizens' interest rate sensitivity gap, or the
difference between repricing periods of interest earning assets and interest
bearing liabilities at September 30, 1999:

<TABLE>
<CAPTION>
                                            MORE THAN    MORE THAN     MORE THAN    MORE THAN
                                   THREE     3 MONTHS       1 YEAR       3 YEARS      5 YEARS
                                  MONTHS           TO           TO            TO           TO    MORE THAN
                                 OR LESS       1 YEAR      3 YEARS       5 YEARS     15 YEARS     15 YEARS        TOTAL
                                                               (Dollars in thousands)
<S>                             <C>           <C>       <C>             <C>         <C>             <C>         <C>
Interest-earning assets:
  First mortgage loans (1)       $    --      $20,187      $    74       $   135      $    18       $   --      $20,414
  Other loans (1)                  9,884        5,000          430           802          408           --       16,524
  Marketable securities               --        1,830           --            --           --           --        1,830
  Federal funds sold and other
    interest-earning assets        2,710           --           --            --           --           --        2,710
  FHLB stock                         262           --           --            --           --           --          262
                                 -------      -------      -------       -------      -------       ------      -------
     Total                        12,856       27,017          504           937          426           --       41,740

Interest-bearing liabilities:
  Money market deposits (2)          564          484        1,292           726          726          240        4,032
  Passbook deposits (2)              887          760        2,089         1,044        1,044          506        6,330
  NOW and other demand
    deposits (2)                     600          517        1,421           776          776          214        4,304
  Certificate accounts             2,944        9,319        4,342         4,606           --           --       21,211
  Borrowed funds                      --          500           --           596           --           --        1,096
                                 -------      -------      -------       -------      -------       ------      -------
     Total                         4,995       11,580        9,144         7,748        2,546          960       36,973
                                 -------      -------      -------       -------      -------       ------      -------

Interest rate sensitivity
  gap (3)                        $ 7,861      $15,437      $(8,640)      $(6,811)     $(2,120)      $ (960)     $ 4,767
                                 =======      =======      =======       =======      =======       ======      =======

Cumulative interest rate
  sensitivity gap                $ 7,861      $23,298      $14,658       $ 7,847      $ 5,727       $4,767      $    --
                                 =======      =======      =======       =======      =======       ======      =======

Cumulative interest rate
  sensitivity gap as a
  percentage of total
  interest-earning assets          18.83%       55.82%       35.12%        18.80%       13.72%       11.42%
                                   =====        =====        =====        ======        =====        =====

Interest rate sensitive
  assets/interest rate
  sensitive liabilities                                                   112.89%
                                                                          ======
</TABLE>

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


(1)  For purposes of the gap analysis, mortgage and other loans are not reduced
     for non-performing loans or for the provision for credit losses.

(2)  Repricing based on actual decay rates rather than assumptions.

(3)  Interest sensitivity gap represents the difference between net
     interest-earning assets and interest-bearing liabilities.



                                       13
<PAGE>   14



A decrease or a significant increase in interest rates from current levels could
be expected to affect negatively the net interest income of Citizens. Moreover,
rising interest rates could negatively affect the earnings of Citizens due to
diminished loan demand. Citizens attempts to mitigate interest rate risk by
originating adjustable-rate loans.


                         LIQUIDITY AND CAPITAL RESOURCES
-------------------------------------------------------------------------------

The liquidity of Citizens, primarily represented by cash and cash equivalents,
is a result of its operating, investing and financing activities. These
activities are summarized in the following table for the years ended September
30, 1999, 1998 and 1997.

<TABLE>
<CAPTION>
                                                          FOR THE YEAR ENDED SEPTEMBER 30,
                                                        1999            1998           1997
                                                                   (In thousands)

<S>                                                  <C>             <C>             <C>
Net earnings                                          $   325         $   386         $   385

Adjustments to reconcile net earnings
  to net cash from operating activities                   (67)           (296)           (110)
                                                      -------         -------         -------

Net cash from operating activities                        258              90             275

Net cash from investing activities                     (3,283)         (1,648)           (295)

Net cash from financing activities                      4,704            (328)          1,041
                                                      -------         -------         -------

Net change in cash and cash equivalents                 1,679          (1,886)          1,021

Cash and cash equivalents at beginning of year          1,778           3,664           2,643
                                                      -------         -------         -------

Cash and cash equivalents at end of year              $ 3,457         $ 1,778         $ 3,664
                                                      =======         =======         =======
</TABLE>

The principal sources of funds for Citizens are deposits, loan and
mortgage-backed security repayments, maturities of investment securities and
funds generated through operations. Citizens also has the ability to borrow from
the FHLB of Cincinnati. While scheduled loan repayments and maturing investments
are relatively predictable, deposit flows and loan prepayments are heavily
influenced by interest rates, general economic conditions and competition.
Citizens maintains a level of investment in liquid assets which is based upon
management's assessment of (i) the need for funds, (ii) expected deposit flows,
(iii) the yields available on short-term liquid assets and (iv) the objectives
of the asset and liability management program of Citizens.




                                       14
<PAGE>   15



The FDIC requires banks to maintain a level of investments in specified types of
liquid assets sufficient to protect and ensure the safety and soundness of the
Bank. The FDIC has no specific minimum guideline for liquidity.

The primary investing activities of Citizens include investing in loans,
mortgage-backed securities and investment securities. Such investments are
funded primarily from loans and mortgage-backed securities repayments, increases
in customer deposit liabilities and borrowings from the FHLB. During the fiscal
year ended September 30, 1999, loan originations totaled $20.1 million,
representing the deployment of funds from deposit growth and FHLB advances.
Customer deposits increased during the fiscal year ended September 30, 1999, by
$5.8 million and increased during the fiscal year ended September 30, 1998 by
$1.3 million.

The FDIC has adopted risk-based capital ratio guidelines to which Citizens is
subject. The guidelines establish a systematic analytical framework that makes
regulatory capital requirements more sensitive to differences in risk profiles
among banking organizations. Risk-based capital ratios are determined by
allocating assets and specified off-balance sheet commitments to four risk
weighted categories, with higher levels of capital being required for the
categories perceived as representing greater risk.

These guidelines divide the capital into two tiers. The first tier ("Tier I")
includes common equity, certain non-cumulative perpetual preferred stock
(excluding auction rate issues) and minority interests in equity accounts of
consolidated subsidiaries, less goodwill and certain other intangible assets
(except mortgage servicing rights and purchased credit card relationships,
subject to certain limitations). Supplementary ("Tier II") capital includes,
among other items, cumulative perpetual and long-term limited-life preferred
stock, mandatory convertible securities, certain hybrid capital instruments,
term subordinated debts and the allowance for loan and lease losses, subject to
certain limitations, less required deductions. Banks are required to maintain a
total risk-based capital (the sum of Tier 1 and Tier 2 capital) ratio of 8%, of
which 4% must be Tier I capital. The FDIC may, however, set higher capital
requirements when a bank's particular circumstances warrant. Banks experiencing
or anticipating significant growth are expected to maintain a Tier I leverage
ratio, including tangible capital positions, well above the minimum levels.

In addition, the FDIC established guidelines prescribing a minimum Tier I
leverage ratio (Tier I capital to adjusted total assets as specified in the
guidelines). These guidelines provide for a minimum Tier I leverage ratio of 3%
for banks that meet certain specified criteria, including that they have the
highest regulatory rating and are not experiencing or anticipating significant
growth. All other banks are required to maintain a Tier I leverage ratio of 3%
plus an additional cushion of at least 100 to 200 basis points.

The following table sets forth the regulatory capital of Citizens at September
30, 1999:

         Total Capital to Risk-Weighted Assets                          17.9%
         Tier I Capital to Risk-Weighted Assets                         16.8%
         Tier I Leverage Ratio                                          10.9%




                                       15
<PAGE>   16



                     POTENTIAL IMPACT OF CURRENT LEGISLATION
                         ON FUTURE RESULTS OF OPERATIONS
-------------------------------------------------------------------------------

On November 12, 1999, the Gramm-Leach-Bliley Act (the "GLB Act") was enacted
into law. The GLB Act makes sweeping changes in the financial services in which
various types of financial institutions may engage. The Glass-Steagall Act,
which had generally prevented banks from affiliating with securities and
insurance firms, was repealed. A new "financial holding company," which owns
only well capitalized and well managed depository institutions, will be
permitted to engage in a variety of financial activities, including insurance
and securities underwriting and agency activities.

Banks' broad exemptions from broker-dealer registration have been replaced with
limited exemptions that are functionally regulated by the Securities and
Exchange Commission (the "SEC"). The exemptions include: trust, safekeeping,
custodian, shareholder and employee benefit plans, sweep accounts, certain
private placements and third-party providers of brokerage services to bank
customers. The regulation of the new hybrid products will be decided by the
Federal Reserve Board and the SEC. The GLB Act also established which insurance
products a bank and its subsidiaries may provide as principal, though the bill
provides for state regulation of insurance, subject to a standard that no state
may discriminate against persons affiliated with a bank.

The GLB Act has expanded the activities in which LFC and the Bank may engage.
The foregoing discussion is not a complete description of the changes provided
by the GLB Act. At this time, management and the Board are considering the
impact of the GLB Act and have not yet determined how it may alter the
activities engaged in by LFC and the Bank.


                   EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
-------------------------------------------------------------------------------

In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS No. 130 established 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 October 1, 1998, as required, without
material impact on LFC's financial statements.



                                       16
<PAGE>   17



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 October 1, 1998, as
required, without material impact on LFC'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, as amended by SFAS No. 137, is effective for fiscal years
beginning after June 15, 2000. 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 LFC's financial position or results of operations.


                          YEAR 2000 COMPLIANCE MATTERS
-------------------------------------------------------------------------------

As with most providers of financial services, Citizens' operations are heavily
dependent on information technology systems. Citizens is addressing the
potential problems associated with the possibility that the computers that
control or operate Citizens' information technology system and infrastructure
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.



                                       17
<PAGE>   18



Citizens' primary data processing applications are handled by a third-party
service bureau, Fiserv. Fiserv has advised Citizens that it has migrated to a
fully Year 2000 compliant processing system that was fully tested as of May 1,
1999. Management has also reviewed Citizens' ancillary equipment and has
completed the appropriate remedial measures, including requesting service
providers to assure Citizens that their systems and products are fully year 2000
compliant. Citizens upgraded its existing teller operating system with a capital
expense budget of $65,000. No assurance can be given, however, that significant
expense will not be incurred in future periods. In the unlikely event that
Citizens is ultimately required to purchase replacement computer systems,
programs and equipment, or incur substantial expense to make Citizens' current
systems, programs and equipment year 2000 compliant, LFC's net earnings and
financial condition could be adversely affected.

Citizens has developed a contingency plan in case mission-critical systems are
not successfully renovated in a timely manner or if they actually fail at Year
2000 critical dates. The contingency plan states that Citizens deems the
likelihood of failure of the service provider's efforts to implement Year 2000
changes to the on-line core account processing system to be remote. The plan,
therefore, primarily addresses action to deal with the possibility that the
service provider's system will be down for several days or weeks upon arrival of
Year 2000. Citizens' can process transactions manually over a short-term period,
if necessary, upon arrival of the year 2000.

In addition to possible expense related to its own systems, Citizens could incur
losses if loan payments are delayed due to year 2000 problems affecting any
major borrowers in Citizens' primary market area. Because Citizens' loan
portfolio is highly diversified with regard to individual borrowers and types of
businesses and Citizens' primary market area is not significantly dependent upon
one employer or industry, Citizens does not expect any significant or prolonged
difficulties that will affect net earnings or cash flow.

In addition, financial institutions may experience increases in problem loans
and credit losses in the event that borrowers fail to prepare properly for Year
2000, and higher funding costs could result if consumers react to publicity
about the issue by withdrawing deposits. Citizens is assessing such risks among
its customers. LFC could also be materially adversely affected if other third
parties, such as governmental agencies, clearing houses, telephone companies,
utilities and other service providers fail to prepare properly. Citizens is
therefore attempting to assess these risks and take action to minimize their
effect.





                                       18
<PAGE>   19
Accountants and                                            [GRANT THORNTON LOGO]
Management Consultants
Grant Thornton LLP
The US Member Firm of
Grant Thornton International


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
London Financial Corporation

We have audited the accompanying consolidated statements of financial condition
of London Financial Corporation as of September 30, 1999 and 1998, and the
related consolidated statements of earnings, comprehensive income, shareholders'
equity and cash flows for each of the years ended September 30, 1999, 1998 and
1997. These consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
consolidated 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 London Financial
Corporation as of September 30, 1999 and 1998, and the consolidated results of
its operations and its cash flows for each of the years ended September 30,
1999, 1998 and 1997, in conformity with generally accepted accounting
principles.




/s/ Grant Thornton LLP

Cincinnati, Ohio
November 15, 1999



                                       19



<PAGE>   20




                          LONDON FINANCIAL CORPORATION

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                  September 30,
                        (In thousands, except share data)

<TABLE>
<CAPTION>

         ASSETS                                                                    1999             1998

<S>                                                                              <C>              <C>
Cash and due from banks                                                           $   709          $   507
Interest-bearing deposits in other financial institutions                           2,748            1,271
                                                                                  -------          -------
         Cash and cash equivalents                                                  3,457            1,778

Investment securities designated as available
  for sale - at market                                                                127              121
Mortgage-backed securities held to maturity - at amortized
  cost, approximate market value of $1,822 and
  $2,733 as of September 30, 1999 and 1998                                          1,829            2,703
Loans receivable - net                                                             36,700           32,588
Office premises and equipment - at depreciated cost                                   511              374
Stock in Federal Home Loan Bank - at cost                                             262              288
Accrued interest receivable                                                           403              216
Prepaid expenses and other assets                                                      31               60
Prepaid federal income taxes                                                            3               16
                                                                                  -------          -------

         Total assets                                                             $43,323          $38,144
                                                                                  =======          =======

         LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits                                                                          $37,112         $ 31,300
Advances from the Federal Home Loan Bank                                              800            1,800
Other liabilities                                                                     106              155
Deferred federal income taxes                                                          95               26
                                                                                  -------          -------
         Total liabilities                                                         38,113           33,281

Commitments                                                                            --               --

Shareholders' equity
  Common stock - authorized 5,000,000 shares without par
    value; 529,000 shares issued                                                       --               --
  Additional paid-in capital                                                        2,413            2,391
  Retained earnings - substantially restricted                                      4,163            3,946
  Accumulated other comprehensive income, unrealized losses on securities
    designated as available for sale, net of related tax effects                      (22)             (26)
  Shares acquired by Employee Stock Ownership Plan                                   (327)            (381)
  Shares acquired by Management Recognition Plan                                     (214)            (264)
  Less 49,550 treasury shares - at cost                                              (803)            (803)
                                                                                  -------          -------
         Total shareholders' equity                                                 5,210            4,863
                                                                                  -------          -------

         Total liabilities and shareholders' equity                               $43,323          $38,144
                                                                                  =======          =======
</TABLE>





The accompanying notes are an integral part of these statements.




                                       20
<PAGE>   21



                          LONDON FINANCIAL CORPORATION

                       CONSOLIDATED STATEMENTS OF EARNINGS

                            Year ended September 30,
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                 1999         1998          1997
<S>                                                            <C>           <C>           <C>
Interest income
  Loans                                                         $2,937        $2,602        $2,381
  Mortgage-backed securities                                       134           200           232
  Investment securities                                              6             5            58
  Interest-bearing deposits and other                              100           149           161
                                                                ------        ------        ------
         Total interest income                                   3,177         2,956         2,832

Interest expense
  Deposits                                                       1,541         1,496         1,426
  Borrowings                                                        59            61            42
                                                                ------        ------        ------
         Total interest expense                                  1,600         1,557         1,468
                                                                ------        ------        ------

         Net interest income before provision
           for losses on loans                                   1,577         1,399         1,364

Provision for losses on loans                                       38            22            --
                                                                ------        ------        ------

         Net interest income after provision for
           losses on loans                                       1,539         1,377         1,364

Other income
  Gain on investment securities transactions                        --            71            40
  Other operating                                                   85            72            67
                                                                ------        ------        ------
         Total other income                                         85           143           107


General, administrative and other expense
  Employee compensation and benefits                               632           506           445
  Occupancy and equipment                                           81            59            52
  Franchise taxes                                                   52            87            88
  Federal deposit insurance premiums                                19            19            32
  Data processing                                                   69            58            56
  Other operating                                                  281           213           214
                                                                ------        ------        ------
         Total general, administrative and other expense         1,134           942           887
                                                                ------        ------        ------

         Earnings before income taxes                              490           578           584

Federal income taxes
  Current                                                           98           190            83
  Deferred                                                          67             2           116
                                                                ------        ------        ------
         Total federal income taxes                                165           192           199
                                                                ------        ------        ------

         NET EARNINGS                                           $  325        $  386        $  385
                                                                ======        ======        ======

         EARNINGS PER SHARE
           Basic                                                  $.72          $.84          $.81
                                                                  ====          ====          ====

           Diluted                                                $.70          $.80          $.81
                                                                  ====          ====          ====
</TABLE>


The accompanying notes are an integral part of these statements.




                                       21
<PAGE>   22



                          LONDON FINANCIAL CORPORATION

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                            Year ended September 30,
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                 1999         1998           1997

<S>                                                            <C>           <C>           <C>
Net earnings                                                    $ 325         $ 386         $ 385

Other comprehensive income, net of tax:
  Unrealized holding gains (losses) on securities during
    the period, net of tax (benefit) of $2, $(5) and $27
    in fiscal 1999, 1998 and 1997, respectively                     4           (10)           53

Reclassification adjustment for realized gains
  included in earnings, net of tax of $24 and
  $14 in 1998 and 1997, respectively                               --           (47)          (26)
                                                                -----         -----         -----

Comprehensive income                                            $ 329         $ 329         $ 412
                                                                =====         =====         =====

Accumulated comprehensive income (loss)                         $ (22)        $ (26)        $  31
                                                                =====         =====         =====
</TABLE>


The accompanying notes are an integral part of these statements.




                                       22
<PAGE>   23



                          LONDON FINANCIAL CORPORATION

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

             For the years ended September 30, 1999, 1998 and 1997
                       (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                         UNREALIZED
                                                                                              GAINS
                                                                               SHARES   (LOSSES) ON
                                                                          ACQUIRED BY    SECURITIES
                                                               ADDITIONAL       STOCK    DESIGNATED
                                                       COMMON     PAID-IN     BENEFIT  AS AVAILABLE   RETAINED  TREASURY
                                                        STOCK     CAPITAL       PLANS      FOR SALE   EARNINGS     STOCK     TOTAL

<S>                                                   <C>      <C>         <C>        <C>             <C>       <C>        <C>
Balance at October 1, 1996                                $--     $ 4,910       $(423)         $  4    $ 3,416     $  --   $ 7,907

Net earnings for the year ended September 30, 1997         --          --          --            --        385        --       385
Dividends of $.24 per share                                --          --          --            --       (118)       --      (118)
Purchase of treasury shares at cost                        --          --          --            --         --      (282)     (282)
Purchase of shares for Management Recognition Plan         --          --        (315)           --         --        --      (315)
Unrealized gains on securities designated as available
  for sale, net of related tax effects                     --          --          --            27         --        --        27
                                                          ---     -------       -----          ----    -------     -----   -------

Balance at September 30, 1997                              --       4,910        (738)           31      3,683      (282)    7,604

Net earnings for the year ended September 30, 1998         --          --          --            --        386        --       386
Cash distributions of $5.24 per share                      --      (2,533)         --            --       (123)       --    (2,656)
Amortization expense of stock benefit plans                --          14          93            --         --        --       107
Purchase of treasury shares at cost                        --          --          --            --         --      (521)     (521)
Unrealized losses on securities designated as available
  for sale, net of related tax effects                     --          --          --           (57)        --        --       (57)
                                                          ---     -------       -----          ----    -------     -----   -------

Balance at September 30, 1998                              --       2,391        (645)          (26)     3,946      (803)    4,863

Net earnings for the year ended September 30, 1999         --          --          --            --        325        --       325
Cash distributions of $.24 per share                       --          --          --            --       (108)       --      (108)
Amortization expense of stock benefit plans                --          22         104            --         --        --       126
Unrealized gains on securities designated as available
  for sale, net of related tax effects                     --          --          --             4         --        --         4
                                                          ---     -------       -----          ----    -------     -----   -------

Balance at September 30, 1999                             $--     $ 2,413       $(541)         $(22)   $ 4,163     $(803)  $ 5,210
                                                          ===     =======       =====          ====    =======     =====   =======
</TABLE>


The accompanying notes are an integral part of these statements.



                                       23
<PAGE>   24



                          LONDON FINANCIAL CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                            Year ended September 30,
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                      1999             1998            1997
<S>                                                                <C>              <C>              <C>
Cash flows from operating activities:
  Net earnings for the year                                        $    325         $    386         $   385
  Adjustments to reconcile net earnings to net cash
  provided by (used in) operating activities:
    Amortization of premiums and discounts
      on investments and mortgage-backed securities - net                 7                6               7
    Amortization of deferred loan origination fees                     (132)            (124)            (81)
    Gain on investment securities transactions                           --              (71)            (40)
    Depreciation and amortization                                        40               22              20
    Provision for losses on loans                                        38               22              --
    Federal Home Loan Bank stock dividends                              (19)             (20)            (19)
    Amortization expense of stock benefit plans                         126              107              --
    Increase (decrease) in cash due to changes in:
      Accrued interest receivable                                      (187)             (47)              9
      Prepaid expenses and other assets                                  29              (45)            (10)
      Other liabilities                                                 (49)              (7)           (117)
      Federal income taxes
        Current                                                          13             (141)              5
        Deferred                                                         67                2             116
                                                                   --------         --------         -------
         Net cash provided by operating activities                      258               90             275

Cash flows provided by (used in) investing activities:
  Principal repayments on mortgage-backed securities                    867              878             439
  Purchase of investment securities designated as available
    for sale                                                             --             (248)             --
  Proceeds from sale of investment securities designated
    as available for sale                                                --              265             145
  Proceeds from maturity of investment securities                        --              502           1,500
  Loan principal repayments                                          16,071            9,600           5,438
  Loan disbursements                                                (20,089)         (12,621)         (7,791)
  Purchase of office premises and equipment                            (177)             (36)            (26)
  Federal Home Loan Bank stock redemption                                45               12              --
                                                                   --------         --------         -------
         Net cash used in investing activities                       (3,283)          (1,648)           (295)
                                                                   --------         --------         -------

         Net cash used in operating and investing
           activities (balance carried forward)                      (3,025)          (1,558)            (20)
                                                                   --------         --------         -------
</TABLE>






                                       24
<PAGE>   25



                          LONDON FINANCIAL CORPORATION

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                            Year ended September 30,
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                      1999            1998            1997
<S>                                                                <C>             <C>             <C>
         Net cash used in operating and investing
           activities (balance brought forward)                     $(3,025)        $(1,558)        $   (20)

Cash flows provided by (used in) financing activities:
  Net increase in deposits                                            5,812           1,349           1,756
  Proceeds from Federal Home Loan Bank advances                          --           1,500             500
  Repayment of Federal Home Loan Bank advances                       (1,000)             --            (500)
  Proceeds from other borrowings                                         --           1,400              --
  Repayment of other borrowings                                          --          (1,400)             --
  Purchase of shares for Management Recognition Plan                     --              --            (315)
  Distributions paid on common shares                                  (108)         (2,656)           (118)
  Purchase of treasury shares                                            --            (521)           (282)
                                                                    -------         -------         -------
         Net cash provided by (used in) financing activities          4,704            (328)          1,041
                                                                    -------         -------         -------

Net increase (decrease) in cash and cash equivalents                  1,679          (1,886)          1,021

Cash and cash equivalents at beginning of year                        1,778           3,664           2,643
                                                                    -------         -------         -------

Cash and cash equivalents at end of year                            $ 3,457         $ 1,778         $ 3,664
                                                                    =======         =======         =======


Supplemental disclosure of cash flow information:
  Cash paid during the year for:
    Federal income taxes                                            $   233         $   226         $    85
                                                                    =======         =======         =======

    Interest paid on deposits and borrowings                        $ 1,605         $ 1,550         $ 1,463
                                                                    =======         =======         =======

Supplemental disclosure of noncash investing activities:
  Unrealized gains (losses) on securities designated as
    available for sale, net of applicable tax effects               $     4         $   (57)        $    27
                                                                    =======         =======         =======
</TABLE>




The accompanying notes are an integral part of these statements.




                                       25
<PAGE>   26



                          LONDON FINANCIAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        September 30, 1999, 1998 and 1997


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    London Financial Corporation (the "Corporation") is a savings and loan
    holding company whose activities are primarily limited to holding the stock
    of The Citizens Bank of London (the "Bank"). The Bank conducts a general
    banking business in central 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 Bank's profitability
    is significantly dependent on 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 Bank can be
    significantly influenced by a number of environmental factors, such as
    governmental monetary policy, that are outside of management's control.

    The consolidated 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 consolidated 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.

    A summary of significant accounting policies which have been consistently
    applied in the preparation of the accompanying consolidated financial
    statements follows:

    1.  Principles of Consolidation

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

    2.  Investment Securities 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 in debt and equity securities 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 designated as available for sale are carried at
    fair value with resulting unrealized gains or losses recorded to operations
    or shareholders' equity, respectively. At September 30, 1999 and 1998, the
    Corporation's shareholders' equity reflected a net unrealized loss on
    securities designated as available for sale of $22,000 and $26,000,
    respectively.




                                       26
<PAGE>   27



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    2.  Investment Securities and Mortgage-Backed Securities (continued)

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

    3.  Loans Receivable

    Loans receivable are stated at the principal balance outstanding, reduced by
    deferred loan origination fees and the allowance for loan losses. Interest
    is accrued as earned unless the collectibility of the loan is in doubt.
    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.

    4.  Loan Origination Fees

    The Bank accounts for loan origination fees in accordance with 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 level-yield 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 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.

    5.  Allowance for Loan Losses

    It is the 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 Bank's primary lending area. When the collection
    of a loan becomes doubtful, or otherwise troubled, the Bank records a
    charge-off equal to the difference between the fair value of the property
    securing the loan and the loan's carrying value. Major loans 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).




                                       27
<PAGE>   28



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    5.  Allowance for Loan Losses (continued)

    The Bank accounts for impaired loans in accordance with SFAS No. 114,
    "Accounting by Creditors for Impairment of a Loan," which 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 loan's 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 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 Bank's
    investment in nonresidential, commercial and multi-family residential real
    estate loans, and its evaluation of impairment thereof, such loans are
    generally collateral dependent and, as a result, are carried as a practical
    expedient at the lower of cost or fair value.

    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 September 30, 1999 and 1998, the Bank had no loans that would be defined
    as impaired under SFAS No. 114.

    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. 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 capitalized. 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 method over
    the useful lives of the assets, estimated to be thirty years for the
    building, ten to thirty years for building improvements and five to ten
    years for furniture and equipment. An accelerated method is used for tax
    reporting purposes.




                                       28
<PAGE>   29



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    8.  Income Taxes

    The Corporation accounts for federal income taxes in accordance with the
    provisions of 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 net 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 cash method of
    accounting used to prepare the federal income tax return and from the
    different methods of accounting for deferred loan origination fees, Federal
    Home Loan Bank stock dividends, general loan loss allowances and percentage
    of earnings bad debt deductions. Additional temporary differences result
    from depreciation computed using accelerated methods for federal income tax
    purposes.

    9.  Benefit Plans

    The Bank has a defined contribution simplified employee plan ("SEP")
    covering substantially all employees who have attained 21 years of age and
    have completed one full year of service. Annual contributions are made to
    the SEP at the discretion of the Board of Directors. No contributions were
    made to the plan during the fiscal years ended September 30, 1999 and 1998.
    The Bank's provision for expense under the SEP totaled $9,000 for the fiscal
    year ended September 30, 1997.

    The Corporation has an Employee Stock Ownership Plan ("ESOP") which provides
    retirement benefits for substantially all employees who have completed one
    year of service and have attained the age of 21. The Corporation accounts
    for the ESOP in accordance with Statement of Position ("SOP") 93-6,
    "Employers' Accounting for Employee Stock Ownership Plans". SOP 93-6
    requires the measure of compensation expense recorded by employers to equal
    the fair value of ESOP shares allocated to participants during a fiscal
    year. Expense recognized related to the ESOP totaled approximately $66,000,
    $42,000 and $42,000 for the fiscal years ended September 30, 1999, 1998 and
    1997, respectively.




                                       29
<PAGE>   30



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    9.  Benefit Plans (continued)

    The Corporation also has a Management Retention Plan ("MRP"). The MRP
    purchased 21,160 shares of the Corporation's common stock in the open
    market. At September 30, 1999, a total of 20,307 shares available under the
    MRP had been awarded to executive officers and members of the Board of
    Directors of the Corporation. Common stock awarded under the MRP vests
    ratably over a five year period, commencing with the date of the award. A
    provision of $42,000, $52,000 and $35,000 related to the MRP was charged to
    expense for the fiscal years ended September 30, 1999, 1998 and 1997,
    respectively.

    10.  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 27,919, 37,309 and 42,320 unallocated
    ESOP shares, totaled 450,320, 463,016 and 476,337 for the fiscal years ended
    September 30, 1999, 1998 and 1997, 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
    462,915, 481,498 and 476,337 for the fiscal years ended September 30, 1999,
    1998 and 1997, respectively. Incremental shares related to the assumed
    exercise of stock options included in the calculation of diluted earnings
    per share totaled 12,595 and 18,482 for the fiscal years ended September 30,
    1999 and 1998, respectively.

    During fiscal 1997, the Corporation received a Private Letter Ruling from
    the Internal Revenue Service which stated that the Corporation's
    distributions on common shares are deemed a tax-free return of capital to
    the extent that such capital distributions exceed the Corporation's
    accumulated earnings and profits. The Corporation paid $.24 in dividends
    during the year ended September 30, 1997, and declared an additional $5.00
    cash distribution on October 10, 1997, payable on November 6, 1997. Of these
    amounts, $5.00 of the $5.24 in distributions were considered a tax-free
    return of capital.

    11.  Comprehensive Income

    The Corporation adopted SFAS No. 130, "Reporting Comprehensive Income," as
    of October 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





                                       30
<PAGE>   31



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    11.  Comprehensive Income (continued)

    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 accumulated balance of other
    comprehensive income separately from retained earnings and additional
    paid-in capital. Financial statements for earlier periods were restated for
    comparative purposes. The Corporation's accumulated comprehensive income
    consists solely of the change in unrealized gains and losses on securities
    designated as available for sale in accordance with SFAS No. 115.

    12.  Cash and Cash Equivalents

    For purposes of reporting cash flows, cash and cash equivalents include cash
    and due from banks and interest-bearing deposits in other financial
    institutions with original terms to maturity of less than ninety 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.

    The following methods and assumptions were used by the Corporation in
    estimating its fair value disclosures for financial instruments at September
    30, 1999 and 1998:

                  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.




                                       31
<PAGE>   32



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    13.  Fair Value of Financial Instruments (continued)

                  Loans receivable: The loan portfolio has been segregated into
                  categories with similar characteristics, such as one- to
                  four-family residential, multi-family residential and
                  nonresidential real estate and other. 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. For loans on deposit
                  accounts and consumer and other loans, fair values were deemed
                  to equal the historic carrying values. The historical carrying
                  amount of accrued interest on loans is deemed to approximate
                  fair value.

                  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 accounts,
                  and money market deposits is deemed to approximate the amount
                  payable on demand. 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.

                  Advances from the Federal Home Loan Bank: The fair value of
                  these advances is estimated using the rates currently offered
                  for similar advances of similar remaining maturities or, when
                  available, quoted market prices.

                  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. The difference between the fair
                  value and notional amount of outstanding loan commitments at
                  September 30, 1999 and 1998 was not material.




                                       32
<PAGE>   33



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE A - SUMMARY OF SIGNIFICANT 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 at September 30 are as
    follows:

<TABLE>
<CAPTION>
                                                                1999                              1998
                                                    CARRYING           FAIR            CARRYING           FAIR
                                                       VALUE          VALUE               VALUE          VALUE
                                                                            (In thousands)
<S>                                                <C>             <C>                 <C>            <C>
    Financial assets
      Cash and cash equivalents                      $ 3,457        $ 3,457             $ 1,778        $ 1,778
      Investment securities                              127            127                 121            121
      Mortgage-backed securities                       1,829          1,822               2,703          2,733
      Loans receivable                                36,700         36,612              32,588         34,747
      Federal Home Loan Bank stock                       262            262                 288            288
                                                     -------        -------             -------        -------

                                                     $42,375        $42,280             $37,478        $39,667
                                                     =======        =======             =======        =======

    Financial liabilities
      Deposits                                       $37,112        $36,822             $31,300        $31,591
      Advances from the Federal Home
        Loan Bank                                        800            801               1,800          1,803
                                                     -------        -------             -------        -------

                                                     $37,912        $37,623             $33,100        $33,394
                                                     =======        =======             =======        =======
</TABLE>

    14.  Reclassifications

    Certain prior year amounts have been reclassified to conform to the 1999
    consolidated financial statement presentation.


NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES

    The amortized cost, gross unrealized gains, gross unrealized losses, and
    estimated fair values of investment securities at September 30, 1999 and
    1998, are as follows:

<TABLE>
<CAPTION>
                                                                              1999
                                                                      GROSS               GROSS      ESTIMATED
                                                   AMORTIZED     UNREALIZED          UNREALIZED           FAIR
                                                        COST          GAINS              LOSSES          VALUE
                                                                          (In thousands)
<S>                                              <C>             <C>                 <C>           <C>
    AVAILABLE FOR SALE:
      Corporate equity securities                       $160            $--                 $33           $127
                                                        ====            ===                 ===           ====
</TABLE>




                                       33
<PAGE>   34



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


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

<TABLE>
<CAPTION>
                                                                                      1998
                                                                               GROSS               GROSS      ESTIMATED
                                                            AMORTIZED     UNREALIZED          UNREALIZED           FAIR
                                                                 COST          GAINS              LOSSES          VALUE
                                                                                   (In thousands)
<S>                                                        <C>             <C>                 <C>           <C>
    AVAILABLE FOR SALE:
      Corporate equity securities                                $160            $--                 $39           $121
                                                                 ====            ===                 ===           ====
</TABLE>

    The amortized cost, gross unrealized gains, gross unrealized losses and
    estimated fair value of mortgage-backed securities at September 30, 1999 and
    1998, are shown below:

<TABLE>
<CAPTION>
                                                                                        1999
                                                                                 GROSS             GROSS      ESTIMATED
                                                            AMORTIZED       UNREALIZED        UNREALIZED           FAIR
                                                                 COST            GAINS            LOSSES          VALUE
                                                                                      (In thousands)
<S>                                                        <C>               <C>              <C>            <C>
    HELD TO MATURITY:
      Federal Home Loan Mortgage Corporation
        participation certificates                             $  747              $ 8               $ 8         $  747
      Government National Mortgage Association
        participation certificates                                631               11                --            642
      Federal National Mortgage Association
        participation certificates                                451               --                18            433
                                                               ------               --               ---         ------

         Total mortgage-backed securities                      $1,829              $19               $26         $1,822
                                                               ======              ===               ===         ======
</TABLE>

<TABLE>
<CAPTION>
                                                                                        1998
                                                                                 GROSS             GROSS      ESTIMATED
                                                            AMORTIZED       UNREALIZED        UNREALIZED           FAIR
                                                                 COST            GAINS            LOSSES          VALUE
                                                                                    (In thousands)
<S>                                                        <C>             <C>                <C>            <C>
    HELD TO MATURITY:
      Federal Home Loan Mortgage Corporation
        participation certificates                             $1,262              $13               $--         $1,275
      Government National Mortgage Association
        participation certificates                                877               18                --            895
      Federal National Mortgage Association
        participation certificates                                564                4                 5            563
                                                               ------              ---               ---         ------

         Total mortgage-backed securities                      $2,703              $35               $ 5         $2,733
                                                               ======              ===               ===         ======
</TABLE>




                                       34
<PAGE>   35



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


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

    At September 30, 1999 and 1998, all mortgage-backed securities maintained by
    the Bank are contractually due on a ratable basis over twenty years.
    Expected maturities will differ from contractual maturities because
    borrowers may generally prepay obligations without prepayment penalties.


NOTE C - LOANS RECEIVABLE

    The composition of the loan portfolio at September 30 is as follows:

<TABLE>
<CAPTION>
                                                         1999           1998
                                                            (In thousands)
<S>                                                    <C>            <C>
    Residential real estate
      One- to four-family                               $21,138        $22,648
      Multi-family                                          642            665
      Construction                                        1,165          1,224
    Nonresidential real estate                            3,753          5,174
    Commercial                                           10,316          3,473
    Consumer and other loans                                884            749
                                                        -------        -------
                                                         37,898         33,933
    Less:
      Undisbursed portion of loans in process               601            745
      Deferred loan origination fees                        359            399
      Allowance for losses on loans                         238            201
                                                        -------        -------

                                                        $36,700        $32,588
                                                        =======        =======
</TABLE>

    The Bank's lending efforts have historically focused on one- to four-family
    and multi-family residential real estate loans, which comprise approximately
    $22.3 million, or 61%, of the total loan portfolio at September 30, 1999,
    and approximately $23.8 million, or 73%, of the total loan portfolio at
    September 30, 1998. Generally, such loans have been underwritten on the
    basis of no more than an 80% loan-to-value ratio, which has historically
    provided the Bank with adequate collateral coverage in the event of default.
    Nevertheless, the Bank, as with any lending institution, is subject to the
    risk that real estate values could deteriorate in its primary lending area
    of central Ohio, thereby impairing collateral values. However, management is
    of the belief that real estate values in the Bank's primary lending area are
    presently stable.

    In the ordinary course of business, the Bank has made loans to some of its
    directors, officers and their related business interests. In the opinion of
    management, such loans are consistent with sound lending practices and are
    within applicable regulatory lending limitations. The balance of such loans
    totaled approximately $295,000 and $193,000 at September 30, 1999 and 1998,
    respectively.




                                       35
<PAGE>   36



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE D - ALLOWANCE FOR LOAN LOSSES

    The activity in the allowance for loan losses is summarized as follows for
    the years ended September 30:

<TABLE>
<CAPTION>
                                                    1999           1998           1997
                                                           (In thousands)
<S>                                                <C>            <C>            <C>
    Beginning balance                               $201           $187           $187
    Provision for losses on loans                     38             22             --
    Loan charge-offs                                  (1)            (8)            --
                                                    ----           ----             --

    Ending balance                                  $238           $201           $187
                                                    ====           ====           ====
</TABLE>

    As of September 30, 1999, the Bank's allowance for loan losses was comprised
    solely of a general loan loss allowance, which is includible as a component
    of regulatory risk-based capital.

    The Bank had no nonperforming and nonaccrual loans at September 30, 1999 and
    1998. Nonperforming and nonaccrual loans at September 30, 1997, totaled
    $268,000. Interest income that would have been recognized had nonaccrual
    loans performed pursuant to contractual terms totaled approximately $20,000
    for the year ended September 30, 1997.


NOTE E - OFFICE PREMISES AND EQUIPMENT

    Office premises and equipment at September 30 is comprised of the following:

<TABLE>
<CAPTION>
                                                      1999           1998
                                                         (In thousands)
<S>                                                  <C>            <C>
    Land and improvements                             $136           $ 85
    Building                                           471            471
    Furniture and equipment                            374            248
                                                      ----           ----
                                                       981            804
      Less accumulated depreciation and
        amortization                                   470            430
                                                      ----           ----

                                                      $511           $374
                                                      ====           ====
</TABLE>




                                       36
<PAGE>   37



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE F - DEPOSITS

    Deposits consist of the following major classifications at September 30:

<TABLE>
<CAPTION>
    DEPOSIT TYPE AND WEIGHTED-
    AVERAGE INTEREST RATE                                            1999                           1998
                                                              AMOUNT          %                  AMOUNT         %
                                                                             (Dollars in thousands)
<S>                                                           <C>          <C>                  <C>           <C>
    NOW accounts
      1999 - 1.56%                                            $ 5,540      14.9
      1998 - 2.27%                                                                               $ 3,905        12.5
    Passbook
      1999 - 3.00%                                              6,330      17.0
      1998 - 3.00%                                                                                 5,951        19.0
    Money market investment accounts
      1999 - 4.44%                                              4,032      10.9
      1998 - 4.68%                                                                                 1,976         6.3
                                                              -------     -----                  -------       -----
    Total demand, transaction and
      passbook deposits                                        15,902      42.8                   11,832        37.8

    Certificates of deposit
      Original maturities of:
        One year or less
          1999 - 5.16%                                          7,166      19.3
          1998 - 5.22%                                                                             5,429        17.4
        12 months to 36 months
          1999 - 5.61%                                          7,446      20.1
          1998 - 5.89%                                                                             8,085        25.8
        Greater than 36 months
          1999 - 6.52%                                          6,598      17.8
          1998 - 6.57%                                                                             5,954        19.0
                                                              -------     -----                  -------       -----

    Total certificates of deposit                              21,210      57.2                   19,468        62.2
                                                              -------     -----                  -------       -----

    Total deposits                                            $37,112     100.0%                 $31,300       100.0%
                                                              =======     =====                  =======       ====
</TABLE>

     At September 30, 1999 and 1998, the Bank had certificate of deposit
     accounts with balances greater than $100,000 totaling $1.6 million and
     $807,000, respectively.

     Interest expense on deposits for the fiscal year ended September 30 is
     summarized as follows:

<TABLE>
<CAPTION>
                                                1999            1998           1997
                                                          (In thousands)
<S>                                           <C>             <C>            <C>
     Passbook                                 $  185          $  180         $  177
     NOW accounts                                 72              76             65
     Money market investment accounts            144              41              6
     Certificates of deposit                   1,140           1,199          1,178
                                              ------          ------         ------

                                              $1,541          $1,496         $1,426
                                              ======          ======         ======
</TABLE>




                                       37
<PAGE>   38



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE F - DEPOSITS (continued)

     Maturities of outstanding certificates of deposit at September 30 are
     summarized as follows:

<TABLE>
<CAPTION>
                                                 1999                1998
                                                       (In thousands)
<S>                                            <C>                 <C>
     Less than one year                        $12,263             $ 9,518
     One year to three years                     4,342               5,068
     More than three years                       4,605               4,882
                                               -------             -------

                                               $21,210             $19,468
                                               =======             =======
</TABLE>


NOTE G - ADVANCES FROM THE FEDERAL HOME LOAN BANK

     Advances from the Federal Home Loan Bank, collateralized at September 30,
     1999 by a pledge of certain residential mortgage loans totaling $1.2
     million and the Bank's investment in Federal Home Loan Bank stock, are
     summarized as follows:


<TABLE>
<CAPTION>
     INTEREST                     MATURING IN YEAR
     RATE                         ENDING SEPTEMBER 30,              1999                1998
                                                                       (Dollars in thousands)
<S>                              <C>                               <C>               <C>
     5.64% - 5.69%                         1999                     $ --              $1,500
     5.51%                                 2000                      500                  --
     9.25%                                 2001                      300                 300
                                                                    ----              ------

                                                                    $800              $1,800
                                                                    ====              ======

     Weighted-average interest rate                                 6.91%               6.27%
                                                                    ====                ====
</TABLE>


NOTE H - FEDERAL INCOME TAXES

     Federal income taxes do not differ materially from the amounts computed at
     the statutory corporate tax rate for the fiscal years ended September 30,
     1999, 1998 and 1997.




                                       38
<PAGE>   39



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE H - FEDERAL INCOME TAXES (continued)

    The composition of the Corporation's net deferred tax liability at
    September 30 is as follows:

<TABLE>
<CAPTION>
    Taxes (payable) refundable on temporary                     1999         1998
    differences at statutory rate:                                (In thousands)
<S>                                                           <C>           <C>
    Deferred tax assets:
      Deferred loan origination fees                           $   6         $ 50
      Difference between book and tax depreciation                --            3
      General loan loss allowance                                 81           71
      Retirement plans                                            18           16
      Unrealized losses on securities designated as
        available for sale                                        11           13
                                                               -----        -----
         Deferred tax assets                                     116          153

    Deferred tax liabilities:
      Federal Home Loan Bank stock dividends                     (53)         (55)
      Difference between book and tax depreciation                (2)          -
      Percentage of earnings bad debt deduction                  (43)         (53)
      Accrual vs. cash basis of accounting                      (113)         (71)
                                                               -----        -----
         Deferred tax liabilities                               (211)        (179)
                                                               -----        -----

         Net deferred tax liability                            $ (95)       $ (26)
                                                               =====        =====
</TABLE>

    The Bank was allowed a special bad debt deduction generally limited to 8% of
    otherwise taxable income and subject to certain limitations based on
    aggregate loans and deposit account balances at the end of the year. 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. Retained earnings at September
    30, 1999, include approximately $461,000 for which federal income taxes have
    not been provided. The amount of unrecognized deferred tax liability
    relating to the cumulative bad debt deduction was approximately $115,000 at
    September 30, 1999. The Bank is required to recapture as taxable income
    approximately $190,000 of its bad debt reserve, 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 Bank
    has provided deferred taxes for this amount and will amortize the recapture
    of its bad debt reserve over a six year period, which commenced in fiscal
    1998.




                                       39
<PAGE>   40



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE I - LOAN COMMITMENTS

    The 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
    Bank's involvement in such financial instruments.

    The 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
    Bank uses the same credit policies in making commitments and conditional
    obligations as those utilized for on-balance-sheet instruments.

    At September 30, 1999, the Bank had unused lines of credit totaling
    approximately $1.0 million. Additionally, the Bank had approximately $1.5
    million of outstanding loan commitments under commercial lines of credit. In
    the opinion of management, all loan commitments equaled or exceeded
    prevalent market interest rates as of September 30, 1999, and will be funded
    from normal cash flow from operations.


NOTE J - REGULATORY CAPITAL

    The Bank is subject to the regulatory capital requirements of the Federal
    Deposit Insurance Corporation (the "FDIC"). 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 Bank's financial statements. Under capital
    adequacy guidelines and the regulatory framework for prompt corrective
    action, the Bank must meet specific capital guidelines that involve
    quantitative measures of the Bank's assets, liabilities, and certain
    off-balance-sheet items as calculated under regulatory accounting practices.
    The Bank's capital amounts and classification are also subject to
    qualitative judgments by the regulators about components, risk weightings,
    and other factors.

    During the calendar year, the Bank was notified by its primary regulator
    that it was categorized as "well-capitalized" under the regulatory framework
    for prompt corrective action. To be categorized as "well-capitalized" the
    Bank must maintain minimum capital ratios as set forth in the table that
    follows.

    The FDIC has adopted risk-based capital ratio guidelines to which the Bank
    is subject. The guidelines establish a systematic analytical framework that
    makes regulatory capital requirements more sensitive to differences in risk
    profiles among banking organizations. Risk-based capital ratios are
    determined by allocating assets and specified off-balance sheet commitments
    to four risk-weighting categories, with higher levels of capital being
    required for the categories perceived as representing greater risk.




                                       40
<PAGE>   41



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE J - REGULATORY CAPITAL (continued)

    These guidelines divide the capital into two tiers. The first tier ("Tier
    1") includes common equity, certain non-cumulative perpetual preferred stock
    (excluding auction rate issues) and minority interests in equity accounts of
    consolidated subsidiaries, less goodwill and certain other intangible assets
    (except mortgage servicing rights and purchased credit card relationships,
    subject to certain limitations). Supplementary ("Tier 2") capital includes,
    among other items, cumulative perpetual and long-term limited-life preferred
    stock, mandatory convertible securities, certain hybrid capital instruments,
    term subordinated debt and the allowance for loan losses, subject to certain
    limitations, less required deductions. Banks are required to maintain a
    total risk-based capital (the sum of Tier 1 and Tier 2 capital) ratio of 8%,
    of which 4% must be Tier 1 capital. The FDIC may, however, set higher
    capital requirements when particular circumstances warrant. Banks
    experiencing or anticipating significant growth are expected to maintain
    capital ratios, including tangible capital positions, well above the minimum
    levels.

    In addition, the FDIC established guidelines prescribing a minimum Tier 1
    leverage ratio (Tier 1 capital to adjusted total assets as specified in the
    guidelines). These guidelines provide for a minimum Tier 1 leverage ratio of
    3% for banks that meet certain specified criteria, including that they have
    the highest regulatory rating and are not experiencing or anticipating
    significant growth. All other banks are required to maintain a Tier 1
    leverage ratio of 3% plus an additional cushion of at least 100 to 200 basis
    points.

    As of September 30, 1999 and 1998, management believes that the Bank met all
    capital adequacy requirements to which it was subject.

<TABLE>
<CAPTION>
                                                          AS OF SEPTEMBER 30, 1999
                                                                                                  TO BE "WELL-CAPITALIZED"
                                                                FOR CAPITAL                       UNDER PROMPT CORRECTIVE
                                    ACTUAL                   ADEQUACY PURPOSES                       ACTION PROVISIONS
                                ---------------          --------------------------              --------------------------
                                AMOUNT    RATIO          AMOUNT               RATIO              AMOUNT               RATIO
                                                                  (Dollars in thousands)
<S>                            <C>       <C>       <C>                  <C>                 <C>                  <C>
    Total capital
    (to risk-weighted assets)   $4,947    17.9%    Greater than $2,245  Greater than 8.0%   Greater than $2,806  Greater than 10.0%

    Tier I capital
    (to risk-weighted assets)   $4,709    16.8%    Greater than $1,122  Greater than 4.0%   Greater than $1,683  Greater than  6.0%

    Tier I leverage             $4,709    10.9%    Greater than $1,733  Greater than 4.0%   Greater than $2,166  Greater than  5.0%
</TABLE>




                                       41
<PAGE>   42



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE J - REGULATORY CAPITAL (continued)

<TABLE>
<CAPTION>
                                                         AS OF SEPTEMBER 30, 1999
                                                                                               TO BE "WELL-CAPITALIZED"
                                                               FOR CAPITAL                     UNDER PROMPT CORRECTIVE
                                     ACTUAL                 ADEQUACY PURPOSES                     ACTION PROVISIONS
                                 ---------------        --------------------------            --------------------------
                                 AMOUNT    RATIO        AMOUNT               RATIO            AMOUNT               RATIO
                                                                 (Dollars in thousands)
<S>                             <C>       <C>      <C>                  <C>                  <C>                  <C>
    Total capital
    (to risk-weighted assets)    $4,474    19.8%   Greater than $1,808  Greater than 8.0%    Greater than $2,260  Greater than 10.0%

    Tier I capital
    (to risk-weighted assets)    $4,273    18.9%   Greater than $  904  Greater than 4.0%    Greater than $1,356  Greater than  6.0%

    Tier I leverage              $4,273    11.3%   Greater than $1,526  Greater than 4.0%    Greater than $1,907  Greater than  5.0%
</TABLE>

    The Bank's management believes that, under the current regulatory capital
    regulations, the Bank will continue to meet its minimum capital requirements
    in the foreseeable future. However, events beyond the control of the Bank,
    such as increased interest rates or a downturn in the economy in the Bank's
    market area, could adversely affect future earnings and, consequently, the
    ability to meet future minimum regulatory capital requirements.


NOTE K - STOCK OPTION PLAN

    The Board of Directors adopted a Stock Option Plan during fiscal 1997 that
    provided for the issuance of 52,900 shares of authorized, but unissued
    shares of common stock at fair value at the date of grant. The Plan provides
    for one-fifth of the shares granted to be exercisable on each of the Plan's
    first five anniversaries commencing in January 1997.

    The Corporation accounts for its stock option plan in accordance with 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.




                                       42
<PAGE>   43



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE K - STOCK OPTION PLAN (continued)

    The Corporation applies APB Opinion No. 25 and related Interpretations in
    accounting for its stock option plan. Accordingly, no compensation cost has
    been recognized for the plan. Had compensation cost for the Corporation's
    stock option plan been determined based on the fair value at the grant dates
    for awards under the plan consistent with the accounting method utilized in
    SFAS No. 123, the Corporation's net earnings and earnings per share would
    have been reported at the pro forma amounts indicated below for the years
    ended September 30:

<TABLE>
<CAPTION>
                                                               1999         1998        1997
<S>                                                           <C>          <C>         <C>
    Net earnings (In thousands)         As reported            $325         $386        $385
                                                               ====         ====        ====

                                          Pro-forma            $325         $386        $377
                                                               ====         ====        ====

    Earnings per share
      Basic                             As reported            $.72         $.84        $.81
                                                               ====         ====        ====

                                          Pro-forma            $.72         $.84        $.79
                                                               ====         ====        ====

      Diluted                           As reported            $.70         $.80        $.81
                                                               ====         ====        ====

                                          Pro-forma            $.70         $.80        $.79
                                                               ====         ====        ====
</TABLE>

    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 fiscal 1997: dividend yield
    of 7.0%, expected volatility of 20.0%, a risk-free interest rate of 6.5% and
    expected lives of ten years.




                                       43
<PAGE>   44



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE K - STOCK OPTION PLAN (continued)

    A summary of the status of the Corporation's stock option plan as of
    September 30, 1999, 1998 and 1997, and changes during the periods ending on
    those dates is presented below:

<TABLE>
<CAPTION>
                                              1999                        1998                       1997
                                                  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        52,900        $10.00        52,900        $15.00             --        $   --
Adjustment for return of capital
  distribution                              --            --            --         (5.00)            --            --
Granted                                     --            --            --            --         52,900         15.00
Exercised                                   --            --            --            --             --            --
Forfeited                                   --            --            --            --             --            --
                                        ------        ------        ------        ------         ------        ------

Outstanding at end of year              52,900        $10.00        52,900        $10.00         52,900        $15.00
                                        ======        ======        ======        ======         ======        ======

Options exercisable at year-end         21,160        $10.00        10,580        $10.00             --        $   --
                                        ======        ======        ======        ======         ======        ======
Weighted-average fair value of
  options granted during the year                        N/A                         N/A                       $ 1.68
                                                         ===                         ===                       ======
</TABLE>



    The following information applies to options outstanding at September 30,
1999:

    Number outstanding                                               52,900
    Range of exercise prices                                         $10.00
    Weighted-average exercise price                                  $10.00
    Weighted-average remaining contractual life                   7.3 years




                                       44
<PAGE>   45



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE L - CONDENSED FINANCIAL STATEMENTS OF LONDON FINANCIAL CORPORATION

    The following condensed financial statements summarize the financial
    position of London Financial Corporation as of September 30, 1999 and 1998,
    and the results of its operations and its cash flows for the years ended
    September 30, 1999, 1998 and 1997.

                          LONDON FINANCIAL CORPORATION
                        STATEMENTS OF FINANCIAL CONDITION
                                  September 30,
                                 (In thousands)

<TABLE>
<CAPTION>
         ASSETS                                                                  1999           1998

<S>                                                                            <C>             <C>
     Cash and due from banks                                                   $    91         $   138
     Investment securities designated as available for sale - at market            127             121
     Loan receivable from ESOP                                                     296             339
     Investment in The Citizens Bank of London                                   4,709           4,273
     Accrued interest receivable                                                    17              16
     Prepaid expenses and other assets                                              25              40
                                                                               -------         -------

          Total assets                                                         $ 5,265         $ 4,927
                                                                               =======         =======

          LIABILITIES AND SHAREHOLDERS' EQUITY

     Other liabilities                                                         $    55         $    64

     Shareholders' equity
       Common stock                                                                 --              --
       Additional paid-in capital                                                2,086           2,010
       Retained earnings                                                         4,163           3,946
       Shares acquired by Management Recognition Plan                             (214)           (264)
       Treasury shares - at cost                                                  (803)           (803)
       Unrealized losses on securities designated as available
         for sale, net of related tax effects                                      (22)            (26)
                                                                               -------         -------
          Total shareholders' equity                                             5,210           4,863
                                                                               -------         -------

          Total liabilities and shareholders' equity                           $ 5,265         $ 4,927
                                                                               =======         =======
</TABLE>



                                       45
<PAGE>   46



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE L - CONDENSED FINANCIAL STATEMENTS OF LONDON FINANCIAL CORPORATION
         (continued)

                          LONDON FINANCIAL CORPORATION
                             STATEMENTS OF EARNINGS
                            Years ended September 30,
                                 (In thousands)

<TABLE>
<CAPTION>
                                                          1999         1998          1997
<S>                                                      <C>           <C>           <C>
     Revenue
       Interest income                                   $  30         $  48         $ 108
       Equity in earnings of subsidiary                    360           396           387
       Gain on investment securities transactions           --            71            40
                                                         -----         -----         -----
          Total revenue                                    390           515           535

     Expenses
       Interest expense on borrowings                       --            20            --
       General and administrative expenses                  85           115           151
                                                         -----         -----         -----
          Total expenses                                    85           135           151
                                                         -----         -----         -----

          Earnings before income tax credits               305           380           384

     Federal income tax credits                            (20)           (6)           (1)
                                                         -----         -----         -----

          NET EARNINGS                                   $ 325         $ 386         $ 385
                                                         =====         =====         =====
</TABLE>



                                       46
<PAGE>   47



                          LONDON FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1999, 1998 and 1997


NOTE L - CONDENSED FINANCIAL STATEMENTS OF LONDON FINANCIAL CORPORATION
         (continued)

                          LONDON FINANCIAL CORPORATION
                            STATEMENTS OF CASH FLOWS
                            Years ended September 30,
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                         1999           1998           1997
<S>                                                                    <C>           <C>             <C>
     Cash provided by (used in) operating activities:
       Net earnings for the year                                        $ 325         $   386         $   385
       Adjustments to reconcile net earnings to net
       cash provided by (used in) operating activities
         Undistributed earnings of consolidated subsidiary               (360)             --            (387)
         Distributions from subsidiary in excess of earnings               --           1,551              --
         Gain on investment securities transactions                        --             (71)            (40)
         Amortization expense of stock benefit plans                       50             107              --
         Increase (decrease) in cash due to changes in:
           Prepaid expenses and other assets                               13             (27)            (13)
           Accrued interest receivable                                     (1)             (3)             18
           Other liabilities                                               (9)              9              21
                                                                        -----         -------         -------
             Net cash provided by (used in) operating activities           18           1,952             (16)

     Cash flows from investing activities:
       Purchase of investment securities designated as available
         for sale                                                          --            (248)             --
       Proceeds from repayment of loan to ESOP                             43              42              42
       Proceeds from maturities of investment securities                   --             502           1,000
       Proceeds from sale of investment securities                         --             266             145
                                                                        -----         -------         -------
             Net cash provided by investing activities                     43             562           1,187

     Cash flows from financing activities:
       Purchase of shares for Management Recognition Plan                  --              --            (315)
       Purchase of treasury shares                                         --            (521)           (282)
       Distributions paid on common stock                                (108)         (2,656)           (118)
                                                                        -----         -------         -------
             Net cash used in financing activities                       (108)         (3,177)           (715)
                                                                        -----         -------         -------

     Net increase (decrease) in cash and cash equivalents                 (47)           (663)            456

     Cash and cash equivalents at beginning of year                       138             801             345
                                                                        -----         -------         -------

     Cash and cash equivalents at end of year                           $  91         $   138         $   801
                                                                        =====         =======         =======
</TABLE>



                                       47
<PAGE>   48



                          LONDON FINANCIAL CORPORATION
                                       AND
                           THE CITIZENS BANK OF LONDON
                             DIRECTORS AND OFFICERS
================================================================================
John J. Bodle                                      President
President
The Citizens Bank of London

John I. Andrix                                     Director
President
Andrix Insurance Agency

Rodney A. Bell                                     Director
Salesman
Buckeye Ford

Donovan D. Forrest                                 Director
President
Forest Trucking Company

Edward D. Goodyear                                 Director
Treasurer of Dispatch Printing Co.

Shirley C. Hansgen                                 Director
Attorney

Kennison A. Sims                                   Director
Owner-Operator
The Sims Construction Company

Steven C. Adams                                    Executive Vice President
Executive Vice President
The Citizens Bank of London

Joyce E. Bauerle                                   Vice President and Treasurer
Vice President
The Citizens Bank of London

Rebecca A. Lohr                                    Secretary
Secretary
The Citizens Bank of London




                                       48