<PAGE>   1


                                   FORM 10-KSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(Mark One)

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

          For the fiscal Year Ended June 30, 1998

                                       OR

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

          For the transition period from ________________ to ________________

                         Commission File Number: 0-27916

                            FFD FINANCIAL CORPORATION
              ----------------------------------------------------
                 (Name of small business issuer in its charter)

                   Ohio                                      34-1921148
      --------------------------------              ----------------------------
       (State or other jurisdiction                       (I.R.S. Employer
            of incorporation or                        Identification Number)
               organization)

                   321 North Wooster Avenue, Dover, Ohio 44622
              ----------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                           Issuer's telephone number:
                                 (330) 364-7777
                          ----------------------------

         Securities registered under Section 12(b) of the Exchange Act:
                                      None
              ----------------------------------------------------

         Securities registered under Section 12(g) of the Exchange Act:
                        Common Shares, without par value
              ----------------------------------------------------
                                (Title of class)

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X  No
                                                                      ---   ---
         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this Form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

         The issuer's revenues for the fiscal year ended June 30, 1998, were
$7.0 million.

         The aggregate market value of the voting stock held by non-affiliates
of the registrant, computed by reference to the average of the bid and asked
prices quoted by the Nasdaq SmallCap Market, was $19.3 million on September 22,
1998.

         1,445,350 of the registrant's common shares were issued and outstanding
on September 23, 1998.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Part II of Form 10-KSB - Portions of the Annual Report to Shareholders
                    for the fiscal year ended June 30, 1998.

   Part III of Form 10-KSB - Portions of the Proxy Statement for 1998 Annual
                            Meeting of Shareholders.




<PAGE>   2



                                                          PART I

ITEM 1.       DESCRIPTION OF BUSINESS

GENERAL

         FFD Financial Corporation ("FFD") is a unitary savings and loan holding
company organized under Ohio law in November 1995 which owns all of the issued
and outstanding common shares of First Federal Savings Bank of Dover (the
"Bank"), a federal savings bank chartered under the laws of the United States.
On April 2, 1996, FFD acquired all of the common shares issued by the Bank upon
its conversion from a mutual savings bank to a stock savings bank (the
"Conversion").

         The Bank has conducted business in Tuscarawas County since it was
incorporated in 1898 as an Ohio savings and loan association under the name
"Dover Building & Loan Company." The Bank obtained a federal savings and loan
charter in 1937 under the name "First Federal Savings & Loan Association." In
1983, the Bank changed its charter to a federal savings bank charter, at which
time the present name was adopted.

         As a savings and loan holding company, FFD is subject to regulation and
examination by the Office of Thrift Supervision (the "OTS"). As a federal
savings bank, the Bank is subject to supervision and regulation by the OTS and
the Federal Deposit Insurance Corporation (the "FDIC") and is a member of the
Federal Home Loan Bank (the "FHLB") of Cincinnati. The deposits of the Bank are
insured up to applicable limits by the Savings Association Insurance Fund (the
"SAIF") administered by the FDIC.

         The Bank is principally engaged in the business of making permanent
first mortgage loans secured by one- to four-family residential real estate
located in Tuscarawas County, Ohio. The Bank also originates construction loans,
commercial loans and loans secured by multifamily real estate (over four units),
nonresidential real estate and land. The origination of consumer loans
constitutes a small part of the lending activity of the Bank. Loan funds are
obtained primarily from savings deposits and loan repayments. In addition,
advances from the Federal Home Loan Bank (the "FHLB") of Cincinnati are utilized
from time to time when other sources of funds are inadequate to fund loan
demand. The Bank also invests in U.S. Government agency obligations,
interest-bearing deposits in other financial institutions, mortgage-backed
securities and other investments permitted by applicable law.

         Interest on loans, mortgage-backed securities and investments is the
Bank's primary source of income. The Bank's principal expense is interest paid
on deposit accounts. Operating results are dependent to a significant degree on
the net interest income of the Bank, which is the difference between interest
earned on loans, mortgage-backed securities and other investments and interest
paid on deposits and borrowings. Like most thrift institutions, the Bank's
interest income and interest expense are significantly affected by general
economic conditions and by the policies of various regulatory authorities.

LENDING ACTIVITIES

         GENERAL. The Bank's principal lending activity is the origination of
conventional real estate loans, including construction loans, secured by one- to
four-family homes located in the Bank's primary market area. Loans secured by
multifamily properties containing five units or more and nonresidential
properties are also offered by the Bank. The Bank also originates commercial
loans for businesses located in its primary market area. The Bank does not issue
any letters of credit for commercial, business or agricultural purposes, other
than loans secured by real estate.


<PAGE>   3



         LOAN PORTFOLIO COMPOSITION. The following table presents certain
information with respect to the composition of the Bank's loan portfolio at the
dates indicated:

<TABLE>
<CAPTION>
                                                            At June 30,
                                     -------------------------------------------------------------
                                           1998                 1997                  1996
                                     ------------------   -----------------     ------------------
                                               Percent               Percent               Percent
                                               of total             of total              of total
                                     Amount     loans     Amount      loans     Amount      loans
                                     ------     -----     ------      -----     ------      -----
                                                        (Dollars in thousands)

<S>                                   <C>         <C>      <C>         <C>       <C>         <C>  
  One- to four-family                 $62,010     85.4%    $52,842     92.3%     $44,763     90.2%
  Multifamily                           1,058      1.4       1,158      2.0        1,336      2.7
  Construction                          1,572      2.2       1,474      2.6          982      2.0
  Nonresidential, commercial and
    land                                6,722      9.3       1,192      2.1        1,124      2.3
  Consumer                              1,263      1.7         583      1.0        1,390      2.8
                                     --------    -----   ---------    -----     --------   ------

     Total loans                       72,625    100.0%     57,249    100.0%      49,595    100.0%
                                                 =====                =====                 =====

  Less:
  Undisbursed portion of loans in
    process                             1,079                1,185                   614
  Deferred loan origination fees          286                  290                   296
  Allowance for losses on loans           270                  270                   146
                                      -------            ---------             ---------

     Loans receivable, net            $70,990              $55,504               $48,539
                                      =======              =======               =======
</TABLE>


         LOAN MATURITY SCHEDULE. The following table sets forth certain
information as of June 30, 1998, regarding the dollar amount of loans maturing
in the Bank's portfolio based on their contractual terms to maturity. Demand
loans and loans having no stated schedule of repayments and no stated maturity
are reported as due in one year or less.

<TABLE>
<CAPTION>
                           Due during the year ending     Due 4-5      Due 6-10     Due 11-15     Due 15 or 
                                  June 30,                 years         years        years       more years
                           --------------------------      after         after        after         after   
                             1999      2000     2001      6/30/98       6/30/98      6/30/98       6/30/98        Total
                             ----      ----     ----      -------       -------      -------       -------        -----

                                                                   (In thousands)

<S>                        <C>         <C>      <C>      <C>            <C>         <C>            <C>           <C>    
Residential real estate    $1,448      $ 24     $ 63     $   764        $3,529      $17,965        $40,847       $64,640
   (1)
Nonresidential and land     1,145        46      157         323           862        3,043          1,146         6,722
Consumer loans                144        92      163         265            17          582              -         1,263
                         --------    ------    -----    --------     ---------    ---------      ---------     ---------
   Total loans             $2,737      $162     $383      $1,352        $4,408      $21,590        $41,993       $72,625
                           ======      ====     ====      ======        ======      =======        =======       =======
</TABLE>


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

(1)      Includes one- to four-family, multifamily and construction loans.


         The following table sets forth the dollar amount of all loans due after
one year from June 30, 1998, which have predetermined interest rates and which
have floating or adjustable interest rates:

<TABLE>
<CAPTION>
                                                                  Due more than one year after
                                                                          June 30, 1998
                                                                  ----------------------------
                                                                         (In thousands)

<S>                                                                          <C>    
                  Fixed rate of interest                                     $21,082
                  Adjustable rate of interest                                 48,806
                                                                             -------
                                                                             $69,888
                                                                             =======

</TABLE>


                                      -3-
<PAGE>   4



         ONE- TO FOUR-FAMILY RESIDENTIAL REAL ESTATE LOANS. The primary lending
activity of the Bank has been the origination of permanent conventional loans
secured by first mortgages on existing one- to four-family residences, primarily
single-family residences, located in Tuscarawas County. The Bank also originates
a limited amount of home equity loans secured by second mortgages on one- to
four-family residential real estate. Each of such loans is secured by a mortgage
on the underlying real estate and improvements thereon, if any. The aggregate
amount of the Bank's one- to four-family residential real estate loans equaled
approximately $62.0 million at June 30, 1998, and represented 85.4% of total
loans at such date.

         Between 1982 and 1994, the Bank originated only adjustable-rate
mortgage loans ("ARMs"). ARMs are offered by the Bank for terms up to 30 years.
The interest rate adjustment periods on the ARMs are one year, three years or
five years, although most of the ARMs originated by the Bank are one-year ARMs.
The rates on ARMs are tied to the average monthly mortgage contract rate for
previously occupied homes published by the Federal Housing Finance Board. The
maximum allowable adjustment at each adjustment date is 2%. Some of the Bank's
ARMs have a maximum adjustment of 6% over the term of the loan.

         Adjustable-rate loans decrease the Bank's interest rate risk but
involve other risks, primarily credit risk, because as interest rates rise the
payment by the borrower rises to the extent permitted by the terms of the loan,
thereby increasing the potential for default. At the same time, the
marketability of the underlying property may be adversely affected by higher
interest rates. The Bank believes that these risks have not had a material
adverse effect on the Bank to date.

         In September 1994 the Bank resumed originating fixed-rate loans with
terms of up to 15 years. All fixed-rate loans originated by the Bank since that
time have been held in the Bank's portfolio.

         OTS regulations limit the amount that the Bank may lend in relationship
to the appraised value of the real estate and improvements (the "Loan-to-Value
Ratio" or "LTV") at the time of loan origination. Most of the Bank's one- to
four-family loans have a LTV of 80% or less, although the Bank will make first
mortgage loans on one- to four-family residences up to 89% of the value of the
real estate and improvements. The Bank has an affordable housing loan program
under which it originates a small number of variable-rate loans with LTVs of up
to 95%.

         Included in one- to four-family loans are lines of credit secured by
the equity in the borrower's principal residence. The Bank makes home equity
lines of credit in an amount which, when added to any prior indebtedness secured
by the real estate, does not exceed 89% of the estimated value of the real
estate. Home equity loans are secured by a second mortgage on the real estate.
The Bank's home equity loans have a term of 15 years. The interest rates charged
by the Bank on home equity loans adjust monthly and are tied to the base rate on
corporate loans, posted by at least 75% of the nation's 30 largest banks, as
reported in THE WALL STREET JOURNAL. At June 30, 1998, the Bank had $1.5 million
in home equity loans.

         MULTIFAMILY RESIDENTIAL REAL ESTATE LOANS. In addition to loans on one-
to four-family properties, the Bank makes loans secured by multifamily
properties containing over four units. Such loans are made with adjustable
interest rates and a maximum LTV of 80% for terms of up to 30 years.

         Multifamily lending is generally considered to involve a higher degree
of risk because the loan amounts are larger and the borrower typically depends
upon income generated by the project to cover operating expenses and debt
service. The profitability of a project can be affected by economic conditions,
government policies and other factors beyond the control of the borrower. The
Bank attempts to reduce the risk associated with multifamily lending by
evaluating the credit-worthiness of the borrower and the projected income from
the project and by obtaining personal guarantees on loans made to corporations
and partnerships.

         At June 30, 1998, loans secured by multifamily properties totaled
approximately $1.1 million, or 1.4% of total loans.

         CONSTRUCTION LOANS. The Bank makes loans for the construction of
residential real estate. Such loans are structured as permanent loans with fixed
or adjustable rates of interest and for terms of up to 30 years. Construction
loans originated by the Bank are primarily made to owner-occupants for the
construction of single-family homes by a general contractor, although the Bank
also makes construction loans to developers for the construction of
single-family homes.


                                      -4-
<PAGE>   5



         Construction loans generally involve greater underwriting and default
risks than do loans secured by mortgages on existing properties due to the
concentration of principal in a limited number of loans and borrowers and the
effects of general economic conditions on real estate developments, developers,
managers and builders. In addition, such loans are more difficult to evaluate
and monitor. Loan funds are advanced upon the security of the project under
construction, which is more difficult to value before the completion of
construction. Moreover, because of the uncertainties inherent in estimating
construction costs, it is relatively difficult to evaluate accurately the LTVs
and the total loan funds required to complete a project. In the event a default
on a construction loan occurs and foreclosure follows, the Bank must take
control of the project and attempt either to arrange for completion of
construction or dispose of the unfinished project.

         At June 30, 1998, a total of $1.6 million, or approximately 2.2%, of
the Bank's total loans, consisted of construction loans.

         NONRESIDENTIAL REAL ESTATE, COMMERCIAL AND LAND LOANS. The Bank makes
loans secured by nonresidential real estate consisting of retail stores, office
buildings and other commercial properties. Such loans are originated with terms
of up to 30 years and a maximum LTV of 80%. The Bank also makes loans secured by
improved and unimproved lots for the construction of single-family residences.
Unimproved lot loans have terms of up to five years and a maximum LTV of 65%.
Improved lot loans have terms of up to five years and a maximum LTV of 89%. The
Bank has also originated a limited number of commercial loans which are secured
by a security interest in inventory, accounts receivable, machinery or other
assets of the borrower. As a result of the addition of an experienced loan
officer and the implementation of enhanced underwriting procedures, the Bank
anticipates an increase in its commercial loan volume in the future.

         The Bank's loan portfolio also includes two participation interests in
loans originated by another financial institution headquartered in Ohio. The
loans are secured by a first mortgage and a second mortgage on a nursing home
property located in Westerville, Ohio.

         Nonresidential real estate lending is generally considered to involve a
higher degree of risk than residential lending due to the relatively larger loan
amounts and the effects of general economic conditions on the successful
operation of income-producing properties. If the cash flow on the property is
reduced, for example, as leases are not obtained or renewed, the borrower's
ability to repay may be impaired. The Bank has endeavored to reduce such risk by
evaluating the credit history and past performance of the borrower, the location
of the real estate, the quality of the management constructing and operating the
property, the debt service ratio, the quality and characteristics of the income
stream generated by the property and appraisals supporting the property's
valuation. None of the Bank's nonresidential real estate loans was nonperforming
at June 30, 1998, 1997 or 1996.

         Commercial loans are generally deemed to entail significantly greater
risk than real estate lending. The repayment of commercial loans is typically
dependent on the income stream and successful operation of a business, which can
be affected by economic conditions. The collateral for commercial loans, if any,
often consists of rapidly depreciating assets.

         At June 30, 1998, the Bank had a total of $6.7 million invested in
nonresidential real estate, commercial and land loans, including the
participation interests. Such loans comprised approximately 9.3% of the Bank's
total loans at such date.

         Federal regulations limit the amount of nonresidential mortgage and
land loans which an association may make to 400% of its capital. At June 30,
1998, the Bank's nonresidential mortgage loans totaled 46.4% of the Bank's
capital.

         CONSUMER LOANS. The Bank makes various types of consumer loans,
including unsecured loans and loans secured by savings accounts and motor
vehicles. Such loans are made at fixed or adjustable rates of interest. Consumer
loans may entail greater credit risk than do residential mortgage loans. The
risk of default on consumer loans increases during periods of recession, high
unemployment and other adverse economic conditions. Although the Bank has not
had significant delinquencies on consumer loans, no assurance can be provided
that delinquencies will not increase. Unsecured loans are made with terms of up
to two years. Motor vehicle loans are made with terms of up to five and a half
years.

         At June 30, 1998, the Bank had approximately $1.3 million, or 1.7% of
its total loans, invested in consumer loans.

         LOAN SOLICITATION AND PROCESSING. Loan originations are developed from
a number of sources, including continuing business with depositors, borrowers
and real estate developers, periodic newspaper, television, and radio
advertisements, solicitations by the Bank's lending staff and walk-in customers.


                                      -5-
<PAGE>   6



         Loan applications for permanent real estate loans are taken by loan
personnel. The Bank typically obtains a credit report, verification of income
and other documentation concerning the creditworthiness of the borrower. An
appraisal or evaluation of the fair market value of the real estate which will
be given as security for the loan is prepared by a staff appraiser or a fee
appraiser approved by the Board of Directors. Upon the completion of the
appraisal or evaluation and the receipt of information on the credit history of
the borrower, the application for a loan is submitted for review in accordance
with the Bank's underwriting guidelines to the Bank's Executive Committee. All
loans are ratified by the full Board of Directors.

         Under the Bank's current loan guidelines, if a real estate loan
application is approved, title insurance is usually obtained on the real estate
which will secure the mortgage loan. In the past, the Bank used an attorney's
opinion for single-family loans, whereas title insurance was typically used for
nonresidential real estate loans. Borrowers are required to carry satisfactory
fire and casualty insurance and flood insurance, if applicable, and to name the
Bank as an insured mortgagee.

         The procedure for approval of construction loans is the same as for
permanent real estate loans, except that an appraiser evaluates the building
plans, construction specifications and estimates of construction costs. The Bank
also evaluates the feasibility of the proposed construction project and the
experience and record of the builder.

         Consumer loans are underwritten on the basis of the borrower's credit
history and an analysis of the borrower's income and expenses, ability to repay
the loan and the value of the collateral, if any.

         LOAN ORIGINATIONS, PURCHASES AND SALES. Currently, the Bank is
originating both fixed-rate and ARM loans for its portfolio. The Bank does not
sell fixed-rate loans in the secondary market. Because the Bank does not require
property surveys and certain other documentation that does not relate to the
creditworthiness of the borrower, the loans in the Bank's portfolio do not
conform to the secondary market standards of the Federal Home Loan Mortgage
Corporation ("FHLMC") or the Federal National Mortgage Association (the "FNMA").
By originating non-conforming loans, however, the Bank is able to process and
close loans with lower out-of-pocket expenses and in a shorter time than some of
its competitors. As reflected by the relatively low levels of the Bank's
delinquent loans and nonperforming assets in recent years, management believes
that the origination of non-conforming loans has not adversely affected the
Bank's overall asset quality.

         The following table presents the activity in the Bank's loan portfolio
for the periods indicated. The Bank occasionally purchases participation
interests in loans originated by other financial institutions. No loans were
purchased during the periods presented, although the Bank's loan portfolio at
June 30, 1998, includes two participations purchased in the 1992 fiscal year.
See "Nonresidential Real Estate and Land Loans."


<TABLE>
<CAPTION>
                                                          Year ended June 30,
                                                 -------------------------------------
                                                   1998          1997           1996
                                                 --------      --------       --------
                                                            (In thousands)
<S>                                              <C>           <C>            <C>     
Loans originated:
   One- to four-family                           $ 19,424      $ 13,899       $ 15,241
   Construction                                     2,391         2,710          1,224
   Nonresidential and land                          6,818           162              -
   Consumer                                           606           302            362
                                                 --------      --------       --------
     Total loans originated                        29,239        17,073         16,827

Principal loan repayments                          13,826        10,049          9,797
Increase (decrease) in other items, net (1)            73           (59)            15
                                                 --------      --------       --------
Net increase in loans receivable                 $ 15,486      $  6,965       $  7,045
                                                 ========      ========       ========
        
<FN>
-----------------------------

(1)      Other items consist of amortization of deferred loan origination fees 
         and the provision for losses on loans.
</TABLE>

         OTS regulations impose a lending limit on the aggregate amount that a
savings association may lend to any one borrower to an amount equal to 15% of
the association's total capital for risk-based capital purposes plus any loan
reserves not already included in total capital (the "Lending Limit Capital"). A
savings association may loan to one borrower an additional amount not to exceed
10% of the association's Lending Limit Capital if the additional amount is fully
secured by 



                                      -6-
<PAGE>   7


certain forms of "readily marketable collateral." Real estate is not considered
"readily marketable collateral." In applying this limit, the regulations require
that loans to certain related or affiliated borrowers be aggregated. An
exception to this limit permits loans to one borrower of up to $500,000. In
addition, the OTS, under certain circumstance, may permit exceptions to the
lending limit on a case-by-case basis.

         Based on the 15% limit, the Bank was able to lend approximately $2.2
million to one borrower at June 30, 1998. The largest amount the Bank had
outstanding to one borrower at June 30, 1998, was $1.7 million. Such loan was
secured by a hotel located in New Philadelphia, Ohio.

         LOAN ORIGINATION AND OTHER FEES. The Bank realizes loan origination
fees and other fee income from its lending activities. In addition, the Bank
realizes income from late payment charges, application fees and fees for other
miscellaneous services.

         Loan origination fees and other fees are a volatile source of income,
varying with the volume of lending, loan repayments and general economic
conditions. All nonrefundable loan origination fees and certain direct loan
origination costs are deferred and recognized as an adjustment to yield over the
life of the related loan.

         DELINQUENT LOANS, NONPERFORMING ASSETS AND CLASSIFIED ASSETS. The Bank
endeavors to maintain a high level of asset quality through sound underwriting
practices and efficient collection practices.

         To discourage late payments, the Bank charges a late fee of 5% of the
payment amount after 15 days for fixed-rate loans and 30 days for ARMs. When a
loan is 30 days or more delinquent, the borrower is sent a delinquency notice.
When a loan is 60 days delinquent, the Bank may contact the borrower by
telephone. When a loan becomes 90 days delinquent, it is generally referred to
an attorney for foreclosure, unless the Board of Directors authorizes
appropriate alternative payment arrangements to eliminate the arrearage. A
decision as to whether and when to initiate foreclosure proceedings is based on
such factors as the amount of the outstanding loan in relation to the original
indebtedness, the extent of the delinquency and the borrower's ability and
willingness to cooperate in curing delinquencies.

         If a foreclosure occurs, the real estate is sold at public sale and may
be purchased by the Bank. Real estate acquired by the Bank as a result of
foreclosure proceedings is classified as real estate owned ("REO") until it is
sold. When property is so acquired it is initially recorded by the Bank at the
lower of cost or fair value of the real estate, less estimated costs to sell.
Real estate loss provisions are recorded if the properties' fair value
substantially 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 are capitalized. Costs relating to holding real
estate acquired through foreclosure, net of rental income, are charged against
earnings as incurred. The Bank had no REO at June 30, 1998.

         The following table reflects the amount of loans in a delinquent status
as of the dates indicated:

<TABLE>
<CAPTION>
                                    June 30, 1998                   June 30, 1997                     June 30,1996
                            -----------------------------    ----------------------------     ----------------------------
                                                  Percent                         Percent                          Percent
                                                 of total                         of total                         of total
                            Number     Amount      loans     Number    Amount      loans      Number     Amount     loans
                            ------     ------      -----     ------    ------      -----      ------     ------     -----
                                                                (Dollars in thousands)
<S>                           <C>        <C>        <C>         <C>      <C>        <C>         <C>        <C>       <C> 
 Loans delinquent for:
    30 - 59 days               2         $ 75       .10%        -        $  -        -%          -         $  -       -%
    60 - 89 days               7          193       .27         7         333       .58          3          131      .26
    90 days and over           5           96       .13         2          64       .11          7          117      .24
                             ---        -----       ---         -      ------       ---        ---        -----      ---
 Total delinquent loans       14         $364       .50%        9        $397       .69%        10         $248      .50%
                              ==         ====       ===         =        ====       ===         ==         ====      ===
</TABLE>


         Nonperforming assets include nonaccruing loans, real estate acquired by
foreclosure or by deed-in-lieu, and repossessed assets. The Bank ceases to
accrue interest on real estate loans that are delinquent 90 days or more. The
accrual of interest may stop before a loan is 90 days delinquent if the
collateral value is not adequate, in the opinion of management, to cover the
outstanding principal and interest. The Bank places a loan on nonaccrual status
when, in the judgment of management, the collection of interest on loans
contractually past due is unlikely.


                                      -7-
<PAGE>   8


         The following table sets forth information with respect to the Bank's
nonaccruing loans at the dates indicated. The Bank had no other nonperforming
assets at any of the dates presented.

<TABLE>
<CAPTION>
                                                       At June 30,
                                                ---------------------------
                                                1998       1997       1996
                                                ----       ----       ----
                                                  (Dollars in thousands)
<S>                                             <C>        <C>        <C> 
Loans accounted for on a nonaccrual basis:
   Residential real estate                      $ 82       $ 64       $117
   Consumer and other                              -          -          -
                                                ----       ----       ----
     Total nonaccrual loans                       82         64        117
                                                ----       ----       ----

Total nonperforming loans                       $ 82       $ 64       $117
                                                ====       ====       ====

Allowance for losses on loans                   $270       $270       $146
                                                ====       ====       ====

Nonperforming loans as a percent of total
   loans                                         .11%       .11%      0.24%

Allowance for losses on loans as a percent
   of nonperforming loans                     329.27%    421.88%    124.79%
</TABLE>


         For the year ended June 30, 1998, $2,000 would have been recorded on
nonaccruing loans had such loans been accruing pursuant to contractual terms.
During such period, no interest income was recorded on such loans.

         OTS regulations require that each thrift institution classify its own
assets on a regular basis. Problem assets are classified as "substandard,"
"doubtful" or "loss." "Substandard" assets have one or more defined weaknesses
and are characterized by the distinct possibility that the insured institution
will sustain some loss if the deficiencies are not corrected. "Doubtful" assets
have the same weaknesses as "substandard" assets, with the additional
characteristics that (i) the weaknesses make collection or liquidation in full
on the basis of currently existing facts, conditions and values questionable and
(ii) there is a high possibility of loss. An asset classified "loss" is
considered uncollectible and of such little value that its continuance as an
asset of the institution is not warranted. The regulations also contain a
"special mention" category, consisting of assets which do not currently expose
an institution to a sufficient degree of risk to warrant classification but
which possess credit deficiencies or potential weaknesses deserving management's
close attention.

         The aggregate amounts of the Bank's classified assets at the dates
indicated were as follows:

<TABLE>
<CAPTION>
                                                     At June 30,
                                        ------------------------------------
                                        1998            1997            1996
                                        ----            ----            ----
                                                   (In thousands)
<S>                                     <C>             <C>             <C> 
Classified assets:
  Substandard                           $ 93            $ 64            $140
  Doubtful                                 -               -               -
                                        ----            ----            ----
     Total classified assets            $ 93            $ 64            $140
                                        ====            ====            ====

</TABLE>


         Federal examiners are authorized to classify an association's assets.
If an association does not agree with an examiner's classification of an asset,
it may appeal the determination to the Regional Director of the OTS. The Bank
had no disagreements with the examiners regarding the classification of assets
at the time of its last examination.

         OTS regulations require that the Bank establish prudent general
allowances for loan losses for any loan classified as substandard or doubtful.
If an asset, or portion thereof, is classified as loss, the association must
either establish specific allowances for losses in the amount of 100% of the
portion of the asset classified loss, or charge off such amount.

         ALLOWANCE FOR LOSSES ON LOANS. The Bank maintains an allowance for
losses on loans based upon a number of relevant factors, including, but not
limited to, growth and changes in the composition of the loan portfolio, trends
in the level 



                                      -8-
<PAGE>   9


of delinquent and problem loans, current and anticipated economic conditions in
the primary lending area, past loss experience and possible losses arising from
specific problem assets.

         The single largest component of the Bank's loan portfolio consists of
one- to four-family residential real estate loans. Substantially all of these
loans are secured by property in the Bank's lending area of Tuscarawas County,
which has a fairly stable economy. The Bank's practice of making loans primarily
in its local market area has contributed to a low historical charge-off rate. In
addition to one- to four-family residential real estate loans, the Bank makes
home equity, multifamily residential real estate, nonresidential real estate and
construction loans. These real estate loans are also secured by property in the
Bank's lending area. The Bank has not experienced any significant charge-offs
from these other real estate loan categories in recent years.

         A small portion of the Bank's total loans consists of consumer loans.
Some of these loans are unsecured and others are secured by collateral that
declines in value. Such loans therefore carry a higher degree of risk than the
real estate loans.

         Large loans are reviewed periodically to determine potential problems
at an early date. While the Board of Directors believes that it uses the best
information available to determine the allowance for loan losses, unforeseen
market conditions could result in material adjustments, and net earnings could
be significantly adversely affected, if circumstances differ substantially from
the assumptions used in making the final determination.

         The following table sets forth an analysis of the Bank's allowance for
losses on loans for the periods indicated:

<TABLE>
<CAPTION>
                                                        Year ended June 30,
                                                 ---------------------------------
                                                 1998          1997           1996
                                                 ----          ----           ----
                                                      (Dollars in thousands)

<S>                                              <C>           <C>            <C>  
Balance at beginning of period                   $ 270         $ 146          $  96
Charge-offs                                          -            (1)             -
Recoveries                                           -             -              -
                                                 -----         -----          -----
Net charge-offs                                      -            (1)             -
Provision for losses on loans                        -           125             50
                                                 -----         -----          -----
Balance at end of period                         $ 270         $ 270          $ 146
                                                 =====         =====          =====

Ratio of net charge-offs to average loans
   outstanding during the period                     -             -              -

Ratio of allowance for loan losses to
   total loans                                    0.37%         0.47%          0.29%
</TABLE>


         The following table sets forth the allocation of the Bank's allowance
for loan losses by type of loan at the dates indicated:

<TABLE>
<CAPTION>
                                                          At June 30,
                           -------------------------------------------------------------------------- 
                                  1998                       1997                    1996
                           ---------------------      ----------------------  -----------------------
                                      Percent of               Percent of                Percent of
                                    loans in each             loans in each             loans in each
                                     category to               category to               category to
                           Amount    total loans      Amount   total loans    Amount     total loans
                           ------    -----------      ------   -----------    ------     -----------

                                                   (Dollars in thousands)
<S>                         <C>         <C>           <C>         <C>           <C>         <C>  
Balance at year end
 applicable to:
   Real estate loans        $142         98.3%        $  77        99.0%        $ 71         97.2%
   Consumer loans              4          1.7             2         1.0            6          2.8
   Unallocated               124            -           191           -           69            -
                            ----        -----         -----       -----         ----        -----
     Total                  $270        100.0%        $ 270       100.0%        $146        100.0%
                            ====        =====         =====       =====         ====        =====
</TABLE>



                                      -9-
<PAGE>   10


         Because the loan loss allowance is based on estimates, it is monitored
monthly and adjusted as necessary to provide an adequate allowance.

INVESTMENT ACTIVITIES

         OTS regulations require that the Bank maintain a minimum amount of
liquid assets, which may be invested in U. S. Treasury obligations, securities
of various federal agencies, certificates of deposit at insured banks, bankers'
acceptances and federal funds. The Bank is also permitted to make investments in
certain commercial paper, corporate debt securities rated in one of the four
highest rating categories by one or more nationally recognized statistical
rating organizations, and mutual funds, as well as other investments permitted
by federal regulations.

         The Bank maintains a significant portfolio of mortgage-backed
securities in the form of FHLMC, Government National Mortgage Association
("GNMA") and Federal National Mortgage Association ("FNMA") participation
certificates. Mortgage-backed securities generally entitle the Bank to receive a
portion of the cash flows from an identified pool of mortgages. FHLMC, GNMA and
FNMA securities are guaranteed by the issuing agency as to principal and
interest. Although mortgage-backed securities generally yield less than
individual loans originated by the Bank, management believes they are a prudent
investment alternative during periods of decreased loan demand.



                                      -10-
<PAGE>   11


         The following table sets forth the composition of the Bank's investment
securities portfolio, including those designated as available for sale, and
mortgage-backed securities at the dates indicated:

<TABLE>
<CAPTION>
                                                                        At June 30,
                          ----------------------------------------------------------------------------------------------------------
                                         1998                                1997                              1996
                          ----------------------------------  ---------------------------------  -----------------------------------
                          Amortized  % of    Market    % of   Amortized   % of   Market   % of   Amortized  % of     Market   % of
                            cost     total    value    total    cost     total   value    total    cost     total    value    total
                            ----     -----    -----    -----    ----     -----   -----    -----    ----     -----    -----    -----
                                               (Dollars in thousands)
<S>                        <C>        <C>    <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>     <C>      <C>   
Investment securities                         
   designated as held
   to maturity:
   U.S. Government
     agency obligations    $   977      6.4%  $  993     6.3%  $ 1,469     5.5%  $ 1,459     5.5%  $ 2,460     9.5%  $ 2,427    9.1%
Investment securities
  designated as available
  for sale:
  U.S. Government and
     agency obligations      2,496     16.3    2,498    16.0     9,931    37.5     9,924    37.3     8,184    31.8     8,134   30.4
   FHLMC stock                   3        -      157     1.0         -       -         -       -        51     0.2     1,122    4.2
                           -------    -----  -------   -----   -------   -----   -------   -----   -------   -----   -------  ----- 
Total investment
   securities designated
   as available for sale     2,499     16.3    2,655    17.0     9,931    37.5     9,924    37.3     8,235    32.0     9,256   34.6
                           -------    -----  -------   -----   -------   -----   -------   -----   -------   -----   -------  ----- 
Total investment
   securities                3,476     22.7    3,648    23.3    11,400    43.0    11,383    42.8    10,695    41.5    11,683   43.7

Mortgage-backed
   securities
   designated as held
   to maturity               5,960     38.9    6,073    38.8     7,165    27.1     7,304    27.4     5,932    23.0     6,073   22.7
Mortgage-backed
   securities
   designated as
   available for sale        5,879     38.4    5,935    37.9     7,906    29.9     7,944    29.8     9,140    35.5     9,007   33.6
                           -------    -----  -------   -----   -------   -----   -------   -----   -------   -----   -------  ----- 
Total mortgage-backed
   securities               11,839     77.3   12,008    76.7    15,701    57.0    15,248    57.2    15,072    58.5    15,080   56.3
                           -------    -----  -------   -----   -------   -----   -------   -----   -------   -----   -------  ----- 

Total investment
   and mortgage-backed
   securities              $15,315    100.0% $15,656   100.0%  $26,471   100.0%  $26,631   100.0%  $25,767   100.0%  $26,763  100.0%
                           =======    =====  =======   =====   =======   =====   =======   =====   =======   =====   =======  ===== 
</TABLE>


         The maturities of the Bank's U. S. Government and agency obligations
and mortgage-backed securities at June 30, 1998, are indicated in the following
table:

<TABLE>
<CAPTION>
                                                                    At June 30, 1998
                     ---------------------------------------------------------------------------------------------------------------
                                         After one through      After five         After ten
                      One year or less       five years      through ten years        years                    Total
                     ------------------  ------------------ ------------------  ------------------  --------------------------------
                     Amortized  Average  Amortized  Average Amortized  Average  Amortized  Average  Amortized   Market   Weighted
                       cost      yield     cost      yield    cost      yield     cost      yield     cost      value  average yield
                       ----      -----     ----      -----    ----      -----     ----      -----     ----      -----  -------------

                                          (Dollars in thousands)
<S>                     <C>      <C>      <C>         <C>     <C>        <C>     <C>         <C>     <C>       <C>        <C>  
U.S. Government and
  agency obligations    $499     4.75%    $1,977      5.79%   $    -        -%   $   997     6.13%   $ 3,473   $ 3,491    5.74%
Mortgage-backed
  securities               -        -          -         -     1,343     6.83     10,496     7.64     11,839    12,008    7.54
                        ----     ----     ------      ----    ------     ----    -------     ----    -------   -------    ---- 
                        $499     4.75%    $1,977      5.79%   $1,343     6.83%   $11,493     7.51%   $15,312   $15,499    7.13%
                        ====     ====     ======      ====    ======     ====    =======     ====    =======   =======    ==== 
</TABLE>


                                      -11-
<PAGE>   12


DEPOSITS AND BORROWINGS

         GENERAL. Deposits have traditionally been the primary source of the
Bank's funds for use in lending and other investment activities. In addition to
deposits, the Bank derives funds from interest payments and principal repayments
on loans and mortgage-backed securities, income on interest-earning assets and
service charges. Loan payments are a relatively stable source of funds, while
deposit inflows and outflows fluctuate more in response to changes in general
interest rates and money market conditions.

         DEPOSITS. Deposits are attracted principally from within the Bank's
primary market area through the offering of a broad selection of deposit
instruments, including NOW accounts, passbook savings accounts, individual
retirement accounts ("IRAs") and term certificate accounts. Interest rates paid,
maturity terms, service fees and withdrawal penalties for the various types of
accounts are established periodically by the management of the Bank based on the
Bank's liquidity requirements, growth goals and interest rates paid by
competitors. The Bank does not use brokers to attract deposits.

         At June 30, 1998, the Bank's certificates of deposit totaled $37.0
million, or 59.8% of total deposits. Of such amount, approximately $22.8 million
in certificates of deposit mature within one year. Based on past experience and
the Bank's prevailing pricing strategies, management believes that a substantial
percentage of such certificates will renew with the Bank at maturity. If there
is a significant deviation from historical experience, the Bank can utilize
borrowings from the FHLB as an alternative to this source of funds.

         The following table sets forth the dollar amount of deposits in the
various types of accounts offered by the Bank at the dates indicated:

<TABLE>
<CAPTION>
                                                                     At June 30,
                                           ----------------------------------------------------------------
                                                  1998                    1997                   1996
                                           ------------------     -------------------    ------------------
                                                     Percent                 Percent                Percent
                                                     of total                of total              of total
                                           Amount    deposits     Amount     deposits    Amount    deposits
                                           ------    --------     ------     --------    ------    --------
                                                                (Dollars in thousands)

<S>                                        <C>         <C>        <C>         <C>        <C>         <C>   
Transaction accounts:
  NOW and money market accounts (1)        $ 5,954       9.6%     $ 5,219       9.1%     $ 4,388       8.4%
  Passbook savings accounts (2)             18,955      30.6       17,568      30.8       14,909      28.6
                                           -------     -----      -------     -----      -------     -----

  Total transaction accounts                24,909      40.2       22,787      39.9       19,297      37.0

Certificates of deposit:
   2.01 - 4.00%                                  -         -            -         -          412       0.8
   4.01 - 6.00%                             34,419      55.6       24,420      42.8       23,592      45.2
   6.01 - 8.00%                              2,628       4.2        9,883      17.3        8,907      17.0
                                           -------     -----      -------     -----      -------     -----
     Total certificates of deposit (3)      37,047      59.8       34,303      60.1       32,911      63.0
                                           -------     -----      -------     -----      -------     -----

     Total deposits                        $61,956     100.0%     $57,090     100.0%     $52,208     100.0%
                                           =======     =====      =======     =====      =======     =====
<FN>


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

(1)      The weighted average interest rates on NOW and money market accounts 
         were 1.62% at June 30, 1998, 1.66% at June 30, 1997, and 2.03% at 
         June 30, 1996.

(2)      The weighted average interest rate on passbook accounts were 3.86% at 
         June 30, 1998, 3.95%  at June 30, 1997, and 3.76% at June 30, 1996.

(3)      The weighted average rate on all certificates of deposit was 5.62%,
         5.67% and 5.63%, at June 30, 1998, 1997 and 1996, respectively.

</TABLE>

                                      -12-
<PAGE>   13



         The following table shows rate and maturity information for the Bank's
certificates of deposit at June 30, 1998:

<TABLE>
<CAPTION>
                                                               Amount Due
                                            -------------------------------------------------
                                                           Over          Over
                                             Up to       1 year to    2 years to
                Rate                        one year      2 years      3 years        Total
                ----                        -------       -------      -------       --------
                                                              (In thousands)

<S>                                         <C>           <C>           <C>           <C>    
                4.01 - 6.00%                $21,194       $10,584       $2,641        $34,419
                6.01 - 8.00%                  1,639           858          131          2,628
                                            -------       -------      -------        -------

                  Total                     $22,833       $11,442       $2,772        $37,047
                                            =======       =======       ======        =======
</TABLE>


         The following table presents the amount of the Bank's certificates of
deposit of $100,000 or more by the time remaining until maturity at June 30,
1998:

<TABLE>
<CAPTION>
                      Maturity                                                Amount
                      --------                                                ------
                                                                          (In thousands)

<S>                                                                         <C>    
                      Three months or less                                   $  105
                      Over 3 months to 6 months                                 100
                      Over 6 months to 12 months                              1,220
                      Over 12 months                                            469
                                                                             ------

                         Total                                               $1,894
                                                                             ======
</TABLE>

         The following table sets forth the Bank's deposit account balance
activity for the periods indicated:


<TABLE>
<CAPTION>
                                            Year ended June 30,
                                 -------------------------------------------
                                    1998            1997             1996
                                 ---------        ---------        ---------
                                            (Dollars in thousands)

<S>                              <C>              <C>              <C>      
Beginning balance                $  57,090        $  52,208        $  50,601

Deposits                           113,942           96,413           86,546
Withdrawals                       (110,996)         (93,434)         (86,907)
                                 ---------        ---------        ---------
Net increase (decrease) in
   deposits before interest          2,946            2,979             (361)
   credited
Interest credited                    1,920            1,903            1,968
                                 ---------        ---------        ---------
Ending balance                   $  61,956        $  57,090        $  52,208
                                 =========        =========        =========

Net increase                     $   4,866        $   4,882        $   1,607
                                 =========        =========        =========

Percent increase                       8.5%             9.4%             3.2%
                                       ===              ===              === 
</TABLE>


         BORROWINGS. The Bank's other sources of funds include advances from the
FHLB. As a member of the FHLB, the Bank is required to own capital stock in the
FHLB and is authorized to apply for advances from the FHLB. Each FHLB credit
program has its own interest rate, which may be fixed or variable, and range of
maturities. The FHLB may prescribe the acceptable uses for these advances, as
well as limitations on the size of the advances and repayment provisions.


                                      -13-
<PAGE>   14



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

<TABLE>
<CAPTION>
                                                                        At June 30,
                                                    --------------------------------------------------------
                                                    1998                    1997                      1996
                                                    ----                    ----                      ----
                                                                    (Dollars in thousands)

<S>                                                <C>                       <C>                      <C>   
FHLB advances                                      $12,519                   $8,382                   $5,184
Weighted average interest rate of
   FHLB advances                                      5.11%                    5.76%                    5.79%
</TABLE>


         The following table sets forth the maximum balance, the average balance
and the weighted average interest rate of the Bank's FHLB advances during the
periods indicated:

<TABLE>
<CAPTION>
                                                                    Year ended June 30,
                                                   --------------------------------------------------------
                                                    1998                    1997                       1996
                                                    ----                    ----                       ----
                                                                    (Dollars in thousands)

<S>                                                <C>                      <C>                       <C>   
Maximum balance                                    $18,031                  $10,782                   $5,184
Average balance                                     11,685                    8,887                      104
Weighted average interest rate                        5.62%                    5.68%                    6.73%
</TABLE>


         The Bank had no other borrowings during the last three fiscal years.

COMPETITION

         The Bank competes for deposits with other savings associations,
commercial banks and credit unions and with the issuers of commercial paper and
other securities, such as shares in money market mutual funds. The primary
factors in competing for deposits are interest rates and convenience of office
location. In making loans, the Bank competes with other savings associations,
commercial banks, consumer finance companies, credit unions, leasing companies,
mortgage companies and other lenders. The Bank competes for loan originations
primarily through the interest rates and loan fees offered and through the
efficiency and quality of services provided. Competition is affected by, among
other things, the general availability of lendable funds, general and local
economic conditions, current interest rate levels and other factors which are
not readily predictable.

SUBSIDIARIES

         The Bank owns all of the outstanding shares of Dover Service
Corporation ("DSC"). The principal assets of DSC consist of an investment in a
data processing service center for financial institutions and a savings account
in the Bank. The net book value of the Bank's investment in DSC at June 30,
1998, was approximately $17,000.

PERSONNEL

         At June 30, 1998, the Bank had 24 full-time employees and 4 part-time
employees. The Bank believes that relations with its employees are good. The
Bank offers health, disability and life insurance benefits. None of the
employees of the Bank are represented by a collective bargaining unit.

YEAR 2000

         As with most providers of financial services, the Bank's operations are
heavily dependent on information technology systems. The Bank is addressing the
potential problems associated with the possibility that the computers that
control or operate The Bank 's 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. The Bank is working
with the companies that supply or service its information technology systems to
identify and remedy any year 2000 related problems.


                                      -14-
<PAGE>   15



         The Bank's primary data processing applications are handled by a
third-party service bureau which has advised FFD that it has transferred to a
fully year 2000-compliant processing system that will be fully tested by January
1, 1999. Management has also reviewed the Bank's ancillary equipment and is in
the process of providing the appropriate remedial measures without material
cost.

         As a result of the foregoing, FFD has not identified any material
specific expenses that are reasonably likely to be incurred by the Bank in
connection with this issue and does not expect to incur significant expense to
implement the necessary corrective measures. No assurance can be given, however,
that significant expense will not be incurred in future periods. In the unlikely
event that the Bank is ultimately required to purchase replacement computer
systems, programs and equipment, or incur substantial expense to make the Bank's
current systems, programs and equipment year 2000 compliant, FFD's net earnings
and financial condition could be adversely affected. While the Bank is
endeavoring to ensure that its computer-dependent operations are year 2000
compliant, no assurance can be given that some year 2000 problems will not
occur.

         In addition to possible expense related to its own systems, FFD could
incur losses if year 2000 issues adversely affect the Bank's depositors or
borrowers. Such problems could include delayed loan payments due to year 2000
problems affecting any significant borrowers or impairing the payroll systems of
large employers in the Bank's primary market area. Because the Bank's loan
portfolio is highly diversified with regard to individual borrowers and types of
businesses and the Bank's primary market area is not significantly dependent
upon one employer or industry, the Bank does not expect any significant or
prolonged difficulties that will affect net earnings or cash flow.


                                   REGULATION

         GENERAL. FFD, as the holding company of the Bank, is subject to
regulation, examination and oversight by the OTS and is required to submit
periodic reports to the OTS. As a savings association organized under the laws
of the United States, the Bank is also subject to regulatory oversight by the
OTS, and, because the Bank's deposits are insured by the FDIC, the Bank is also
subject to examination and regulation by the FDIC. The Bank must file periodic
reports with the OTS concerning its activities and financial condition.
Examinations are conducted periodically by the OTS and the FDIC to determine
whether the Bank is in compliance with various regulatory requirements and is
operating in a safe and sound manner. The Bank is a member of the FHLB of
Cincinnati.

        Congress is considering legislation to eliminate the federal savings and
loan charter and the separate federal regulation of savings and loan
associations. Pursuant to such legislation, Congress may eliminate the OTS and
the Bank may be regulated under federal law as a bank or may be required to
change its charter. Such change in regulation or charter would likely change the
range of activities in which the Bank may engage and would probably subject the
Bank to more regulation by the FDIC. In addition, FFD might become subject to a
different form of holding company regulation which may limit the activities in
which FFD may engage and subject FFD to additional regulatory requirements,
including separate capital requirements. FFD cannot predict when or whether
Congress may actually pass legislation regarding the Company's and the Bank's
regulatory requirements or charter. Although such legislation may change the
activities in which FFD and the Bank may engage, it is not anticipated that the
current activities of either FFD or the Bank will be materially affected by
those activity limits.

         OFFICE OF THRIFT SUPERVISION. The OTS is an office in the Department of
the Treasury and is responsible for the regulation and supervision of all
federally chartered savings associations and all other savings associations, the
deposits of which are insured by the FDIC in the SAIF. The OTS issues
regulations governing the operation of savings associations, regularly examines
such associations and imposes assessments on savings associations based on their
asset size to cover the costs of general supervision and examination. It also
promulgates regulations that prescribe the permissible investments and
activities of federally chartered savings associations, including the type of
lending that such associations may engage in and the investments in real estate,
subsidiaries and securities they may make. The OTS also may initiate enforcement
actions against savings associations and certain persons affiliated with them
for violations of laws or regulations or for engaging in unsafe or unsound
practices. If the grounds provided by law exist, the OTS may appoint a
conservator or receiver for a savings association.

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




                                      -15-
<PAGE>   16



         OTS REGULATORY CAPITAL REQUIREMENTS. The Bank is required by OTS
regulations to meet certain minimum capital requirements. The following table
sets forth the amount and percentage level of regulatory capital of the Bank at
June 30, 1998, and the amount by which it exceeds the minimum capital
requirements. Tangible and core capital are reflected as a percentage of
adjusted total assets. Total (or risk-based) capital, which consists of core and
supplementary capital, is reflected as a percentage of risk-weighted assets.
Assets are weighted at percentage levels ranging from 0% to 100% depending on
their relative risk.

<TABLE>
<CAPTION>
                                                                          At June 30, 1998
                                                                 ---------------------------------
                                                                  Amount                   Percent
                                                                  ------                   -------
                                                              (In thousands)

<S>                                                               <C>                        <C>   
                      Tangible capital                            $14,502                    16.00%
                      Requirement                                   1,361                     1.50
                                                                  -------                    -----
                      Excess                                      $13,141                    14.50%
                                                                  =======                    =====

                      Core capital                                $14,502                    16.00%
                      Requirement                                   2,721                     3.00
                                                                  -------                    -----
                      Excess                                      $11,781                    13.00%
                                                                  =======                    =====

                      Total capital                               $14,772                    29.70%
                      Risk-based requirement                        3,981                     8.00
                                                                  -------                    -----
                      Excess                                      $10,791                    21.70%
                                                                  =======                    =====
</TABLE>


         Current capital requirements call for tangible capital (which for the
Bank is equity capital under generally accepted accounting principles less the
unrealized gain on available-for-sale securities) of 1.5% of adjusted total
assets, core capital (which for the Bank consists of tangible capital) of 3.0%
of adjusted total assets and risk-based capital (which for the Bank consists of
core capital plus general valuation reserves of $270,000) of 8% of risk-weighted
assets. The OTS has proposed to amend the core capital requirement so that those
associations that do not have the highest examination rating and exceed an
acceptable level of risk will be required to maintain core capital of from 4% to
5%, depending on the association's examination rating and overall risk. The Bank
does not anticipate that it will be adversely affected if the core capital
requirement regulation is amended as proposed. The Bank's current core capital
level is 16.0% of adjusted total assets.

         The OTS has adopted an interest rate risk component to the risk-based
capital requirement, though the implementation of that component has been
delayed. Pursuant to that requirement, a savings association would have to
measure the effect of an immediate 200 basis point change in interest rates on
the value of its portfolio, as determined under the methodology established by
the OTS. If the measured interest rate risk is above the level deemed normal
under the regulation, the association will be required to deduct one-half of
that excess exposure from its total capital when determining its level of
risk-based capital. In general, an association with less than $300 million in
assets and a risk-based capital ratio of greater than 12% will not be subject to
the interest rate risk component. The Bank currently qualifies for such
exemption. Pending implementation of the interest rate risk component, the OTS
has the authority to impose a higher individualized capital requirement on any
savings association it deems to have excess interest rate risk. The OTS also may
adjust the risk-based capital requirement on an individual basis for any
association to take into account risks due to concentrations of credit and
non-traditional activities.

         The OTS has adopted regulations governing prompt corrective action to
resolve the problems of capital deficient and otherwise troubled savings
associations. At each successively lower defined capital category, an
association is subject to more restrictive and numerous mandatory or
discretionary regulatory actions or limits, and the OTS has less flexibility in
determining how to resolve the problems of the institution. The OTS has defined
these capital levels as follows: (1) well-capitalized associations must have
total risk-based capital of at least 10%, core risk-based capital (consisting
only of items that qualify for inclusion in core capital) of at least 6% and
core capital of at least 5%; (2) adequately capitalized associations are those
that meet the regulatory minimum of total risk-based capital of at least 8%,
core risk-based capital (consisting only of items that qualify for inclusion in
core capital) of at least 4% and core capital of at least 4% (except for
associations receiving the highest examination rating and with an acceptable
level of risk, in which case the level is at least 3%); (3) undercapitalized
associations are those that do not meet regulatory limits, but that are not
significantly undercapitalized; (4) significantly undercapitalized associations
have total risk-based capital of less than 6%, core risk-based capital
(consisting only of items that qualify for inclusion in core capital) of less
than 3% or core capital of less than 3%; and (5) critically 



                                      -16-
<PAGE>   17


undercapitalized associations are those with tangible equity of less than 2% of
total assets. In addition, the OTS generally can downgrade an association's
capital category, notwithstanding its capital level, if, after notice and
opportunity for hearing, the association is deemed to be engaging in an unsafe
or unsound practice because it has not corrected deficiencies that resulted in
it receiving a less than satisfactory examination rating on matters other than
capital or it is deemed to be in an unsafe or unsound condition. An
undercapitalized association must submit a capital restoration plan to the OTS
within 45 days after it becomes undercapitalized. Such an association will be
subject to increased monitoring and asset growth restrictions and will be
required to obtain prior approval for acquisitions, branching and engaging in
new lines of business. Furthermore, critically undercapitalized institutions
must be placed in conservatorship or receivership within 90 days of reaching
that capitalization level, except under limited circumstances. The Bank's
capital at June 30, 1998, meets the standards for a well-capitalized
institution.

         Federal law prohibits an insured institution from making a capital
distribution to anyone or paying management fees to any person having control of
the association if, after such distribution or payment, the association would be
undercapitalized. In addition, each company controlling an undercapitalized
association must guarantee that the association will comply with its capital
plan until the association has been adequately capitalized on an average during
each of four preceding calendar quarters and must provide adequate assurances of
performance. The aggregate liability pursuant to such guarantee is limited to
the lesser of (a) an amount equal to 5% of the association's total assets at the
time the institution became undercapitalized or (b) the amount that is necessary
to bring the association into compliance with all capital standards applicable
to such association at the time the association fails to comply with its capital
restoration plan.

         LIMITATIONS ON CAPITAL DISTRIBUTIONS. The OTS imposes various
restrictions or requirements on the ability of associations to make capital
distributions, including dividend payments. An association which has converted
to stock form is prohibited from declaring or paying any dividends or from
repurchasing any of its stock if, as a result, the net worth of the association
would be reduced below the amount required to be maintained for the liquidation
account established in connection with its mutual to stock conversion. OTS
regulations also establish a three-tier system limiting capital distributions
according to ratings of associations based on their capital level and
supervisory condition.

         Tier 1 consists of associations that, before and after the proposed
distribution, meet their fully phased-in capital requirements. Associations in
this category may make capital distributions during any calendar year equal to
the greater of 100% of net income, current year-to-date, plus 50% of the amount
by which the lesser of the association's tangible, core or risk-based capital
exceeds its capital requirement for such capital component, as measured at the
beginning of the calendar year, or the amount authorized for a Tier 2
association. A Tier 1 association deemed to be in need of more than normal
supervision by the OTS may be downgraded to a Tier 2 or Tier 3 association. Tier
2 consists of associations that before and after the proposed distribution meet
their current minimum, but not fully phased-in, capital requirements.
Associations in this category may make capital distributions of up to 75% of net
income over the four most recent quarters. Tier 3 associations do not meet
current minimum capital requirements and must obtain OTS approval of any capital
distribution.

         The Bank meets the requirements for a Tier 1 association and has not
been notified of any need for more than normal supervision. As a subsidiary of
FFD, the Bank is required to give the OTS 30 days notice prior to declaring any
dividend on its common shares. The OTS may object to the dividend during that
30-day period based on safety and soundness concerns. Moreover, the OTS may
prohibit any capital distribution otherwise permitted by regulation if the OTS
determines that such distribution would constitute an unsafe or unsound
practice. The Bank paid no dividends to FFD during fiscal 1998.

         In January 1998, the OTS issued a proposal to amend the capital
distribution limits. Under that proposal, an association owned by a holding
company would still be required to provide either a notice or an application to
the OTS, although under certain circumstances a savings association without a
holding company having an examination rating of 1 or 2 could make a capital
distribution without notice to the OTS, if it would remain adequately
capitalized after the distribution is made.

         LIQUIDITY. OTS regulations require that each savings association
maintain an average daily balance of liquid assets (cash, certain time deposits,
bankers' acceptances and specified United States government, state or federal
agency obligations) in each calendar quarter equal to not less than 4% of (1)
its net withdrawable savings deposits plus borrowings payable in one year or
less at the end of the preceding quarter or (2) the average daily balance of its
net withdrawable savings deposits plus borrowings payable in one year or less
during the preceding quarter. Monetary penalties may be imposed upon
associations failing to meet liquidity requirements. The eligible liquidity of
the Bank, as computed under current regulations, at June 30, 1998, was $18.7
million, or 31.0% and exceeded the 4.0% liquidity requirement by approximately
$16.3 million.


                                      -17-
<PAGE>   18


         QUALIFIED THRIFT LENDER TEST. Savings associations are required to meet
the Qualified Thrift Lender ("QTL") Test. Prior to September 30, 1996, the QTL
Test required savings associations to maintain a specified level of investments
in assets that are designated as qualifying thrift investments ("QTI"), which
are generally related to domestic residential real estate and manufactured
housing and include stock issued by any FHLB, the FHLMC or the FNMA. Under this
test 65% of an institution's "portfolio assets" (total assets less goodwill and
other intangibles, property used to conduct business and 20% of liquid assets)
must consist of QTI on a monthly average basis in 9 out of every 12 months.
Congress created a second QTL Test, effective September 30, 1996, pursuant to
which a savings association may also qualify as a QTL thrift if at least 60% of
the institution's assets (on a tax basis) consist of specified assets (generally
loans secured by residential real estate or deposits, educational loans, cash
and certain governmental obligations). The OTS may grant exceptions to the QTL
Test under certain circumstances. If a savings association fails to meet the QTL
Test, the association and its holding company become subject to certain
operating and regulatory restrictions. A savings association that fails to meet
the QTL Test will not be eligible for new FHLB advances. At June 30, 1998, the
Bank met the QTL Test.

         LENDING LIMIT. OTS regulations generally limit the aggregate amount
that a savings association may lend to one borrower (the "Lending Limit") to an
amount equal to 15% of the savings association's total capital under the
regulatory capital requirements plus any additional loan reserve not included in
total capital (the "Lending Limit Capital"). A savings association may loan to
one borrower an additional amount not to exceed 10% of total capital plus
additional reserves if the additional loan amount is fully secured by certain
forms of "readily marketable collateral." Real estate is not considered "readily
marketable collateral." Certain types of loans are not subject to these limits.
In applying these limits, loans to certain borrowers may be aggregated.
Notwithstanding the specified limits, an association may lend to one borrower up
to $500,000 "for any purpose." At June 30, 1998, the Bank was in compliance with
this lending limit.

         TRANSACTIONS WITH INSIDERS AND AFFILIATES. Loans to executive officers,
directors and principal shareholders and their related interests must conform to
the Lending Limit, and the total of such loans cannot exceed the association's
Lending Limit Capital. Most loans to directors, executive officers and principal
shareholders must be approved in advance by a majority of the "disinterested"
members of board of directors of the association with any "interested" director
not participating. All loans to directors, executive officers and principal
shareholders must be made on terms substantially the same as offered in
comparable transactions with the general public or as offered to all employees
in a company-wide benefit program. Loans to executive officers are subject to
additional restrictions. The Bank was in compliance with such restrictions at
June 30, 1998.

         All transactions between savings associations and their affiliates must
comport with Sections 23A and 23B of the Federal Reserve Act ("FRA"). An
affiliate of a savings association is any company or entity that controls, is
controlled by or is under common control with the savings association. FFD is an
affiliate of the Bank. Generally, Sections 23A and 23B of the FRA (i) limit the
extent to which a savings association or its subsidiaries may engage in "covered
transactions" with any one affiliate to an amount equal to 10% of such
institution's capital stock and surplus, (ii) limit the aggregate of all such
transactions with all affiliates to an amount equal to 20% of such capital stock
and surplus, and (iii) require that all such transactions be on terms
substantially the same, or at least as favorable to the association, as those
provided in transactions with a non-affiliate. The term "covered transaction"
includes the making of loans, purchase of assets, issuance of a guarantee and
other similar types of transactions. In addition to the limits in Sections 23A
and 23B, a savings association may not make any loan or other extension of
credit to an affiliate unless the affiliate is engaged only in activities
permissible for a bank holding company and may not purchase or invest in
securities of any affiliate except shares of a subsidiary. The Bank was in
compliance with these requirements and restrictions at June 30, 1998.

        FEDERAL DEPOSIT INSURANCE CORPORATION REGULATIONS. The FDIC is an
independent federal agency that insures the deposits of federally insured banks
and thrifts, up to prescribed statutory limits, and safeguards the safety and
soundness of the banking and thrift industries. The FDIC administers two
separate insurance funds, the Bank Insurance Fund ("BIF") for commercial banks
and state savings banks and the SAIF for savings associations. The Bank is a
member of the SAIF and its deposit accounts are insured by the FDIC, up to the
prescribed limits. The FDIC has examination authority over all insured
depository institutions, including the Bank, and has authority to initiate
enforcement actions against federally insured savings associations, if the FDIC
does not believe the OTS has taken appropriate action to safeguard safety and
soundness and the deposit insurance fund.

         The FDIC is required to maintain designated levels of reserves in each
fund. The FDIC may increase assessment rates for either fund if necessary to
restore the fund's ratio of reserves to insured deposits to its target level
within a reasonable time and may decrease such rates if such target level has
been met. The FDIC has established a risk-based 



                                      -18-
<PAGE>   19


assessment system for both SAIF and BIF members. Under this system, assessments
vary based on the risk the institution poses to its deposit insurance fund. The
risk level is determined based on the institution's capital level and the FDIC's
level of supervisory concern about the institution.

        Because of the differing reserve levels of the funds, deposit insurance
assessments paid by healthy banks were reduced significantly below the level
paid by healthy savings associations effective in mid-1995. Federal legislation,
which was effective September 30, 1996, provided for the recapitalization of the
SAIF by means of a special assessment of $.657 per $100 of SAIF deposits held at
March 31, 1995, in order to increase SAIF reserves to the level required by law.
The Bank had $49.2 million in deposits at March 31, 1995, and paid a special
assessment of $332,000, which was accounted for and recorded as of September 30,
1996. BIF assessments for healthy banks in 1997 and the first half of 1998 were
$.013 per $100 in deposits and SAIF assessments for healthy institutions in 1997
and the first half of 1998 were $.064 per $100 in deposits.

         FRB RESERVE REQUIREMENTS. FRB regulations currently require that
reserves of 3% of net transaction accounts (primarily NOW accounts) up to $47.8
million (subject to an exemption of up to $4.7 million), and of 10% of net
transaction accounts in excess of $47.8 million. At June 30, 1998, the Bank was
in compliance with its reserve requirements.

         FEDERAL HOME LOAN BANKS. The FHLBs provide credit to their members in
the form of advances. The Bank is a member of the FHLB of Cincinnati and must
maintain an investment in the capital stock of that FHLB in an amount equal to
the greater of 1.0% of the aggregate outstanding principal amount of the Bank's
residential mortgage loans, home purchase contracts and similar obligations at
the beginning of each year, or 5% of its advances from the FHLB. The Bank is in
compliance with this requirement with an investment in stock of the FHLB of
Cincinnati of $933,000 at June 30, 1998.

         Upon the origination or renewal of a loan or advance, the FHLB of
Cincinnati is required by law to obtain and maintain a security interest in
collateral in one or more of the following categories: fully disbursed, whole
first mortgage loans on improved residential property or securities representing
a whole interest in such loans; securities issued, insured or guaranteed by the
United States government or an agency thereof; deposits in any FHLB; or other
real estate related collateral (up to 30% of the member association's capital)
acceptable to the applicable FHLB, if such collateral has a readily
ascertainable value and the FHLB can perfect its security interest in the
collateral.

         Each FHLB is required to establish standards of community investment or
service that its members must maintain for continued access to long-term
advances from the FHLBs. The standards take into account a member's performance
under the Community Reinvestment Act and its record of lending to first-time
home buyers. All long-term advances by each FHLB must be made only to provide 
funds for residential housing finance.

         HOLDING COMPANY REGULATION. FFD is a unitary savings and loan holding
company within the meaning of the Home Owners' Loan Act (the "HOLA"). As such,
FFD is registered with the OTS and is subject to OTS regulations, examination,
supervision and reporting requirements.

         There are generally no restrictions on the activities of unitary
savings and loan holding companies and such companies are the only financial
institution holding companies that may engage in commercial, securities and
insurance activities without limitation. The broad latitude to engage in
activities under current law can be restricted if the OTS determines that there
is reasonable cause to believe that the continuation of an activity by a savings
and loan holding company constitutes a serious risk to the financial safety,
soundness or stability of its subsidiary savings association. The OTS may impose
such restrictions as deemed necessary to address such risk, including limiting
(i) payment of dividends by the savings association, (ii) transactions between
the savings association and its affiliates, and (iii) any activities of the
savings association that might create a serious risk that the liabilities of the
holding company and its affiliates may be imposed on the savings association.
Notwithstanding the foregoing rules as to permissible business activities of a
unitary savings and loan holding company, if the savings association subsidiary
of a holding company fails to meet the QTL Test, then such unitary holding
company would become subject to the activities restrictions applicable to
multiple holding companies. At June 30, 1998, the Bank met the QTL Test.

         The HOLA generally prohibits a savings and loan holding company from
controlling any other savings association or savings and loan holding company,
without prior approval of the OTS, or from acquiring or retaining more than 5%
of the voting shares of a savings association or holding company thereof, which
is not a subsidiary. Under certain circumstances, a savings and loan holding
company is permitted to acquire, with the approval of the OTS, up to 15% of the
previously unissued voting shares of an undercapitalized savings association for
cash without such savings association being deemed to 



                                      -19-
<PAGE>   20


be controlled by the holding company. Except with the prior approval of the OTS,
no director or officer of a savings and loan holding company or person owning or
controlling by proxy or otherwise more than 25% of such company's stock may also
acquire control of any savings institution, other than a subsidiary institution,
or any other savings and loan holding company.

         If FFD were to acquire control of another savings institution, other
than through a merger or other business combination with the Bank, FFD would
become a multiple savings and loan holding company. Unless the acquisition is an
emergency thrift acquisition and each subsidiary savings association meets the
QTL Test, the activities of FFD and any of its subsidiaries (other than the Bank
or other subsidiary savings associations) would thereafter be subject to
activity restrictions. The HOLA provides that, among other things, no multiple
savings and loan holding company or subsidiary thereof that is not a savings
institution shall commence or continue for a limited period of time after
becoming a multiple savings and loan holding company or subsidiary thereof, any
business activity other than (i) furnishing or performing management services
for a subsidiary savings institution, (ii) conducting an insurance agency or
escrow business, (iii) holding, managing or liquidating assets owned by or
acquired from a subsidiary savings institution, (iv) holding or managing
properties used or occupied by a subsidiary savings institution, (v) acting as
trustee under deeds of trust, (vi) those activities previously directly
authorized by federal regulation as of March 5, 1987, to be engaged in by
multiple holding companies, or (vii) those activities authorized by the FRB as
permissible for bank holding companies, unless the OTS by regulation prohibits
or limits such activities for savings and loan holding companies. Those
activities described in (vii) above must also be approved by the OTS prior to
being engaged in by a multiple holding company.

         The OTS may approve acquisitions resulting in the formation of a
multiple savings and loan holding company that controls savings associations in
more than one state only if the multiple savings and loan holding company
involved controls a savings association that operated a home or branch office in
the state of the association to be acquired as of March 5, 1987, or if the laws
of the state in which the institution to be acquired is located specifically
permit institutions to be acquired by state-chartered institutions or savings
and loan holding companies located in the state where the acquiring entity is
located (or by a holding company that controls such state-chartered savings
institutions). The OTS may approve an acquisition resulting in a multiple
savings and loan holding company controlling savings associations in more than
one state in the case of certain emergency thrift acquisitions.

         MERGER MORATORIUM STATUTE. Chapter 1704 of the Ohio Revised Code
regulates certain takeover bids affecting certain public corporations with
significant ties to Ohio. The statute prohibits, with some exceptions, any
merger, combination or consolidation and any of certain other sales, leases,
distributions, dividends, exchanges, mortgages or transfers between such an Ohio
corporation and any person who has the right to exercise, alone or with others,
10% or more of the voting power of such corporation (an "Interested
Shareholder"), for three years following the date on which such person first
becomes an Interested Shareholder. Such a business combination is permitted only
if, prior to the time such person first becomes an Interested Shareholder, the
Board of Directors of the issuing corporation has approved the purchase of
shares that resulted in such person first becoming an Interested Shareholder.

         After the initial three-year moratorium, such a business combination
may not occur unless (1) an exception specifically enumerated in the statute is
applicable to the combination, (2) the combination is approved, at a meeting
held for such purpose, by the affirmative vote of the holders of the issuing
public corporation entitling them to exercise at least two-thirds of the voting
power of the issuing public corporation in the election of directors or of such
different proportion as the articles may provide, provided the combination is
also approved by the affirmative vote of the holders of at least a majority of
the disinterested shares, or (3) the business combination meets certain
statutory criteria designed to ensure that the issuing public corporation's
remaining shareholders receive fair consideration for their shares.

         An Ohio corporation may, under certain circumstances, "opt out" of the
statute by specifically providing in its articles of incorporation that the
statute does not apply to any business combination of such corporation. However,
the statute still prohibits for twelve months any business combination that
would have been prohibited but for the adoption of such an opt-out amendment.
The statute also provides that it will continue to apply to any business
combination between a person who became an Interested Shareholder prior to the
adoption of such an amendment as if the amendment had not been adopted. The
Articles of Incorporation of FFD do not opt out of the protection afforded by
Chapter 1704.

         CONTROL SHARE ACQUISITION. Section 1701.831 of the Ohio Revised Code
(the "Control Share Acquisition Statute") requires that, with certain
exceptions, acquisitions of voting securities which would result in the
acquiring shareholder owning 20%, 33 1/3%, or 50% of the outstanding voting
securities of an Ohio corporation (a "Control Share Acquisition") must be
approved in advance by (a) the holders of at least a majority of the outstanding
voting shares of such corporation 



                                      -20-
<PAGE>   21


represented at a meeting at which a quorum is present, and (b) a majority of the
portion of the outstanding voting shares represented at such a meeting excluding
the voting shares owned by the acquiring shareholder, by certain other persons
who acquire or transfer voting shares after public announcement of the
acquisition or by certain officers of the corporation or directors of the
corporation who are employees of the corporation. The Control Share Acquisition
Statute was intended, in part, to protect shareholders of Ohio corporations from
coercive tender offers.

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

FEDERAL TAXATION

         FFD and the Bank are each subject to the federal tax laws and
regulations which apply to corporations generally. In addition to the regular
income tax, FFD and the Bank may be subject to the alternative minimum tax which
is imposed at a minimum tax rate of 20% on "alternative minimum taxable income"
(which is the sum of a corporation's regular taxable income, with certain
adjustments, and tax preference items), less any available exemption. Such tax
preference items include interest on certain tax-exempt bonds issued after
August 7, 1986. In addition, 75% of the amount by which a corporation's
"adjusted current earnings" exceeds its alternative minimum taxable income
computed without regard to this preference item and prior to reduction by net
operating losses, is included in alternative minimum taxable income. Net
operating losses can offset no more than 90% of alternative minimum taxable
income. The alternative minimum tax is imposed to the extent it exceeds the
corporation's regular income tax. Payments of alternative minimum tax may be
used as credits against regular tax liabilities in future years. However, the
Taxpayer Relief Act of 1997 repealed the alternative minimum tax for certain
"small corporations" for tax years beginning after December 31, 1997. A
corporation initially qualifies as a small corporation if it had average gross
receipts of $5,000,000 or less for the three tax years ending with its first tax
year beginning after December 31, 1996. Once a corporation is recognized as a
small corporation, it will continue to be exempt from the alternative minimum
tax for as long as its average gross receipts for the prior three-year period
does not exceed $7,500,000. In determining if a corporation meets this
requirement, the first year that it achieved small corporation status is not
taken into consideration.

         The Bank's average gross receipts for the three tax years ending on
December 31, 1997, is $1.2 million and as a result, the Bank does qualify as a
small corporation exempt from the alternative minimum tax.

         Prior to the enactment of the Small Business Jobs Protection Act (the
"Act"), which was signed into law on August 21, 1996, certain thrift
institutions, such as the Bank , were allowed deductions for bad debts under
methods more favorable than those granted to other taxpayers. Qualified thrift
institutions could compute deductions for bad debts using either the specific
charge-off method of Section 166 of the Code or one of two reserve methods of
Section 593 of the Code. The reserve methods under Section 593 of the Code
permitted a thrift institution annually to elect to deduct bad debts under
either (i) the "percentage of taxable income" method applicable only to thrift
institutions, or (ii) the "experience" method that also was available to small
banks. Under the "percentage of taxable income" method, a thrift institution
generally was allowed a deduction for an addition to its bad debt reserve equal
to 8% of its taxable income (determined without regard to this deduction and
with additional adjustments). Under the "experience" method, a thrift
institution was generally allowed a deduction for an addition to its bad debt
reserve equal to the greater of (i) an amount based on its actual average
experience for losses in the current and five preceding taxable years, or (ii)
an amount necessary to restore the reserve to its balance as of the close of the
base year. A thrift institution could elect annually to compute its allowable
addition to bad debt reserves for qualifying loans either under the experience
method or the percentage of taxable income method. For tax years 1995, 1994, and
1993, the Bank used the percentage of taxable income method.

         The Act eliminated the percentage of taxable income method of
accounting for bad debts by thrift institutions, effective for taxable years
beginning after 1995. Thrift institutions that are treated as small banks are
allowed to utilize the 



                                      -21-
<PAGE>   22


experience method applicable to such institutions, while thrift institutions
that are treated as large banks are required to use only the specific charge off
method.

         A thrift institution required to change its method of computing
reserves for bad debt will treat such change as a change in the method of
accounting, initiated by the taxpayer and having been made with the consent of
the Secretary of the Treasury. Section 481(a) of the Code requires certain
amounts to be recaptured with respect to such change. Generally, the amounts to
be recaptured will be determined solely with respect to the "applicable excess
reserves" of the taxpayer. The amount of the applicable excess reserves will be
taken into account ratably over a six-taxable year period, beginning with the
first taxable year beginning after 1995, subject to the residential loan
requirement described below. In the case of a thrift institution that is treated
as a large bank, the amount of the institution's applicable excess reserves
generally is the excess of (i) the balances of its reserve for losses on
qualifying real property loans (generally loans secured by improved real estate)
and its reserve for losses on nonqualifying loans (all other types of loans) as
of the close of its last taxable year beginning before January 1, 1996, over
(ii) the balances of such reserves as of the close of its last taxable year
beginning before January 1, 1988 (i.e., the "pre-1988 reserves"). In the case of
a thrift institution that is treated as a small bank, like the Bank , the amount
of the institution's applicable excess reserves generally is the excess of (i)
the balances of its reserve for losses on qualifying real property loans and its
reserve for losses on nonqualifying loans as of the close of its last taxable
year beginning before January 1, 1996, over (ii) the greater of the balance of
(a) its pre-1988 reserves or (b) what the thrift's reserves would have been at
the close of its last year beginning before January 1, 1996, had the thrift
always used the experience method.

         For taxable years that begin after December 31, 1995, and before
January 1, 1998, if a thrift meets the residential loan requirement for a tax
year, the recapture of the applicable excess reserves otherwise required to be
taken into account as a Code Section 481(a) adjustment for the year will be
suspended. A thrift meets the residential loan requirement if, for the tax year,
the principal amount of residential loans made by the thrift during the year is
not less than its base amount. The "base amount" generally is the average of the
principal amounts of the residential loans made by the thrift during the six
most recent tax years beginning before January 1, 1996. A residential loan is a
loan as described in Section 7701(a)(19)(C)(v) (generally a loan secured by
residential or church property and certain mobile homes), but only to the extent
that the loan is made to the owner of the property.

         The balance of the pre-1988 reserves is subject to the provisions of
Section 593(e), as modified by the Act, which require recapture in the case of
certain excessive distributions to shareholders. The pre-1988 reserves may not
be utilized for payment of cash dividends or other distributions to a
shareholder (including distributions in dissolution or liquidation) or for any
other purpose (except to absorb bad debt losses). Distribution of a cash
dividend by a thrift institution to a shareholder is treated as made: first, out
of the institution's post-1951 accumulated earnings and profits; second, out of
the pre-1988 reserves; and third, out of such other accounts as may be proper.
To the extent a distribution by the Bank to FFD is deemed paid out of its
pre-1988 reserves under these rules, the pre-1988 reserves would be reduced and
the gross income of the Bank for tax purposes would be increased by the amount
which, when reduced by the income tax, if any, attributable to the inclusion of
such amount in its gross income, equals the amount deemed paid out of the
pre-1988 reserves. As of June 30, 1998, the pre-1988 reserves of the Bank for
tax purposes totaled approximately $1.6 million. The Bank believes it had
approximately $8.3 million of accumulated earnings and profits for tax purposes
as of June 30, 1998, which would be available for dividend distributions,
provided regulatory restrictions applicable to the payment of dividends are met.
See Notes A and L to the financial statements. No representation can be made as
to whether the Bank will have current or accumulated earnings and profits in
subsequent years.

         The tax returns of the Bank have been audited or closed without audit
through fiscal year 1994. In the opinion of management, any examination of open
returns would not result in a deficiency which could have a material adverse
effect on the financial condition of the Bank .

OHIO TAXATION

         FFD is subject to the Ohio corporation franchise tax, which, as applied
to FFD, is a tax measured by both net earnings and net worth. The rate of tax is
the greater of (i) 5.1% on the first $50,000 of computed Ohio taxable income and
8.9% of computed Ohio taxable income in excess of $50,000 or (ii) 0.582% times
taxable net worth. For tax years beginning after December 31, 1998, the rate of
tax is the greater of (i) 5.1% on the first $50,000 of computed Ohio taxable
income and 8.5% of computed Ohio taxable income in excess of $50,000 or (ii)
 .400% times taxable net worth.



                                      -22-
<PAGE>   23


         In computing its tax under the net worth method, FFD may exclude 100%
of its investment in the capital stock of the Bank , as reflected on the balance
sheet of FFD in computing its taxable net worth as long as it owns at least 25%
of the issued and outstanding capital stock of the Bank . The calculation of the
exclusion from net worth is based on the ratio of the excludable investment (net
of any appreciation or goodwill included in such investment) to total assets
multiplied by the net value of the stock. As a holding company, FFD may be
entitled to various other deductions in computing taxable net worth that are not
generally available to operating companies.

         A special litter tax is also applicable to all corporations, including
FFD, subject to the Ohio corporation franchise tax other than "financial
institutions." If the franchise tax is paid on the net income basis, the litter
tax is equal to .11% of the first $50,000 of computed Ohio taxable income and
 .22% of computed Ohio taxable income in excess of $50,000. If the franchise tax
is paid on the net worth basis, the litter tax is equal to .014% times taxable
net worth.

         The Bank is a "financial institution" for State of Ohio tax purposes.
As such, it is subject to the Ohio corporate franchise tax on "financial
institutions," which is imposed annually at a rate of 1.5% of the book net worth
of the Bank determined in accordance with generally accepted accounting
principles. For tax year 1999, however, the franchise tax on financial
institutions will be 1.4% of the book net worth and for tax year 2000 and years
thereafter the tax will be 1.3% of the book net worth. As a "financial
institution," the Bank is not subject to any tax based upon net income or net
profits imposed by the State of Ohio.




                                      -23-
<PAGE>   24


ITEM 2.       DESCRIPTION OF PROPERTY

              The following table sets forth certain information at June 30,
1998, regarding the properties on which the main office of the Bank and a branch
office are located:

<TABLE>
<CAPTION>
                                                 Owned                Date                 Net
Location                                       or leased            acquired          book value(1)
--------                                       ---------            --------          -------------

<S>                                              <C>                  <C>                <C>
321 North Wooster Avenue
Dover, Ohio  44622                               Owned                1/96               $577,000

224 West High Avenue
New Philadelphia, OH  44663                      Owned                11/97              $415,000
        
<FN>
-----------------------------

(1)      At June 30, 1998, the Bank's office equipment had a total net book
         value of approximately $391,000. For additional information regarding
         the Bank's office premises and equipment, see Notes A-7 and E of Notes
         to Consolidated Financial Statements.
</TABLE>

ITEM 3.       LEGAL PROCEEDINGS

              Neither FFD nor the Bank is presently involved in any legal
proceedings of a material nature. From time to time, the Bank is a party to
legal proceedings incidental to its business to enforce its security interest in
collateral pledged to secure loans made by the Bank.

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

              Not applicable.

ITEM 5.       MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

              The information contained in the FFD Financial Corporation Annual
Report to Shareholders for the fiscal year ended June 30, 1998 (the "Annual
Report"), under the caption "Market Price of FFD Common Shares and Related
Shareholder Matters" is incorporated herein by reference.

ITEM 6.       MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

              The information contained in the Annual Report under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" is incorporated herein by reference.

ITEM 7.       FINANCIAL STATEMENTS

              The Consolidated Financial Statements appearing in the Annual
Report and the report of Grant Thornton LLP dated August 21, 1998, are
incorporated herein by reference.

ITEM 8.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
              FINANCIAL DISCLOSURE

              Not applicable.


                                      -24-
<PAGE>   25



                                    PART III

ITEM 9.       DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; 
              COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

              The information contained in the definitive Proxy Statement for
the 1998 Annual Meeting of Shareholders of FFD (the "Proxy Statement"), under
the caption "Board of Directors" is incorporated herein by reference.

ITEM 10.      EXECUTIVE COMPENSATION

              The information contained in the Proxy Statement under the caption
"Compensation of Executive Officers and Directors" is incorporated herein by
reference.

ITEM 11.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

              The information contained in the Proxy Statement under the caption
"Voting Securities and Ownership of Certain Beneficial Owners and Management" is
incorporated herein by reference.

ITEM 12.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

              Not Applicable.

ITEM 13.      EXHIBITS AND REPORTS ON FROM 8-K

(a)      EXHIBITS

         3           Articles of Incorporation and Code of Regulations

         10.1        FFD Financial Corporation 1996 Stock Option and Incentive
                     Plan

         10.2        First Federal Savings Bank of Dover Recognition and
                     Retention Plan and Trust Agreement

         13          Annual Report to Shareholders (the following parts of which
                     are incorporated herein by reference; "Market Price of
                     FFD's Common Shares and Related Shareholders' Matters,"
                     "Management's Discussion and Analysis of Financial
                     Condition and Results of Operations" and Consolidated
                     Financial Statements).

         20          Proxy Statement for 1998 Annual Meeting of Shareholders

         21          Subsidiaries of FFD Financial Corporation

         27          Financial Data Schedule

(b)      REPORTS ON FORM 8-K

         No reports on Form 8-K have been filed by FFD during the quarter ended
June 30, 1998.


                                      -25-
<PAGE>   26



                                   SIGNATURES

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

                                            FFD FINANCIAL CORPORATION


                                            By:/s/ Robert R. Gerber
                                               --------------------------------
                                               Robert R. Gerber, President
                                               (Principal Executive Officer)

                                            Date: September ___, 1998

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


/s/ Robert R. Gerber                        /s/ Charles A. Bradley
-------------------------------             ----------------------------------
Robert R. Gerber,                           Charles A. Bradley,
President and Director                      Treasurer
                                            (Principal Financial Officer)

Date: September ___, 1998                   Date: September ___, 1998



/s/ Stephen G. Clinton                      /s/ Roy O. Mitchell, Jr.
-------------------------------             ----------------------------------
Stephen G. Clinton                          Roy O. Mitchell, Jr.
Director                                    Director


Date: September ___, 1998                   Date: September ___, 1998



/s/ J. Richard Gray                         /s/ Robert D. Sensel
-------------------------------             ----------------------------------
J. Richard Gray                             Robert D. Sensel
Director                                    Director


Date: September ___, 1998                   Date: September ___, 1998



/s/ Richard J. Herzig                       /s/ Enos L. Loader
-------------------------------             ----------------------------------
Richard J. Herzig                           Enos L. Loader
Director                                    Director


Date: September ___, 1998                   Date:  September ___, 1998



                                      -26-
<PAGE>   27



                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
    EXHIBIT
     NUMBER       DESCRIPTION                                  PAGE NUMBER
     ------       -----------                                  -----------

<S>               <C>                                          <C>
     3.1          Articles of Incorporation of FFD Financial   Incorporated by reference to the Registration Statement on
                  Corporation                                  Form S-1 filed by FFD on December 15, 1995 (the "S-1") with
                                                               the Securities and Exchange Commission (the "SEC"), Exhibit
                                                               3.1.

     3.2          Certificate of Amendment to Articles of      Incorporated by reference to Pre-Effective Amendment No. 1 to
                  Incorporation of FFD Financial Corporation   the S-1 filed with the SEC on February 1, 1996 ("Pre-Effective 
                                                               Amendment No. 1"), Exhibit 3.2.

     3.3          Certificate of Amendment to Articles of      Incorporated by reference to Pre-Effective Amendment No. 1,
                  Incorporation of FFD Financial Corporation   Exhibit 3.3.

     3.4          Code of Regulations of FFD Financial         Incorporated by reference to the S-1, Exhibit 3.3.
                  Corporation

     10.1         FFD Financial Corporation 1996 Stock
                  Option and Incentive Plan

     10.2         First Federal Savings Bank of Dover
                  Recognition and Retention Plan and Trust
                  Agreement

     13           FFD Financial Corporation 1998 Annual
                  Report to Shareholders

     20           Proxy Statement for 1998 Annual Meeting of
                  Shareholders

     21           Subsidiaries of FFD Financial Corporation    Incorporated by reference to the Annual Report on Form 10-KSB
                                                               for the fiscal year ended June 30, 1996, filed with the SEC
                                                               on September 30, 1996, Exhibit 21.

     27           Financial Data Schedule
</TABLE>



                                      -27-