<PAGE>   1
                                                                      EXHIBIT 13

Dear Shareholders:

On behalf of the directors, officers and employees of FFD Financial Corporation
and First Federal Savings Bank of Dover, I am pleased to highlight the
accomplishments and events of the fiscal year ended June 30, 1997, which more
than exceeded our primary operating objective of maintaining FFD Financial and
First Federal Savings Bank of Dover as a profitable and growing independent
provider of financial services.

FFD Financial Corporation reported record consolidated net earnings of $1.4
million, or $1.07 per share, for the fiscal year ended June 30, 1997, an
increase of $801,000 or 127.6%, over reported net earnings of $632,000 for the
fiscal year ended June 30, 1996. The increase in net earnings is primarily
attributable to a $665,000, or 31.9%, increase in net interest income and a $1.3
million gain on the sale of Federal Home Loan Mortgage Corporation stock.
Management intends to use the proceeds from the gain on the sale of the Federal
Home Loan Mortgage Corporation stock for loan production in the local economy.

A non-recurring charge significantly affected net earnings for the year, but
will have a positive effect in the future. On September 30, 1996, institutions
insured by the Savings Associations Insurance Fund (SAIF) of the FDIC were
assessed a one-time charge of $0.65 for every $100 of deposits to increase the
SAIF fund to the required level. This one-time assessment resulted in a $332,000
charge ($219,000 after tax). Additionally, 1997 earnings were impacted by an
increase in the allowance for loan losses of $125,000 which was established to
support current and planned growth in the loan portfolio.

We have been pleased with investors' support of and confidence in our common
shares. During the 1997 fiscal year, the price of our common shares increased
from $10.63 per share to $14.50 per share, an increase of 36.47%, and dividends
totaling $.175 per share were paid.

FFD Financial Corporation experienced growth in significant areas in fiscal year
1997. Total assets were $88.0 million as of June 30, 1997, an increase of $8.5
million, or 10.8%, from $79.5 million in the prior year. Deposit account
balances increased from $52.2 million to $57.1 million, or 9.4%, and net loans
increased $7.0 million to $55.5 million.

Asset quality remains excellent. At June 30, 1997, nonperforming loans totaled
less than $150,000, and capital levels were well above regulatory requirements
with our core capital of 16.4% and risk-based capital of 37.5%.


<PAGE>   2



We continue to take steps to position FFD Financial Corporation and First
Federal Savings Bank of Dover for continued growth and increased profitability.
In fiscal year 1997, the following activities have been undertaken:

-        Introduction of ATM and debit card

-        Expansion of lending activities to include commercial loans and deposit
         products

-        Expansion of consumer products and services

-        Announcement of plans for a full service branch in New Philadelphia,
         Ohio

Our directors, management and staff look forward to meeting all of the
challenges of the future. Please be assured that FFD Financial Corporation is
committed to supporting our local community, providing friendly professional
service, offering fairly priced financial services products, and providing local
decision making and focus that our customers have grown to expect.


Very truly yours,

FFD FINANCIAL CORPORATION




Robert R. Gerber
President


<PAGE>   3
                      BUSINESS OF FFD FINANCIAL CORPORATION


FFD Financial Corporation ("FFD"), a unitary savings and loan holding company
incorporated under the laws of the State of Ohio, owns all of the issued and
outstanding common stock of First Federal Savings Bank of Dover ("First
Federal"), a savings bank chartered under the laws of the United States. In
April 1996, FFD acquired all of the common stock issued by First Federal upon
its conversion from a mutual savings association to a stock savings association
(the "Conversion"). Since its formation, FFD's activities have been limited
primarily to holding the common shares of First Federal.

First Federal is a stock savings bank principally engaged in the business of
making permanent first mortgage loans secured by one- to four-family residential
real estate located in First Federal's primary lending area. First Federal also
originates loans for the construction of residential real estate and loans
secured by multifamily real estate (over four units) and nonresidential real
estate. The origination of consumer loans, including unsecured loans, passbook
loans, loans secured by motor vehicles and home improvement loans, constitutes a
small portion of First Federal's lending activities. First Federal has also
recently implemented a commercial lending program. In addition to originating
loans, First Federal invests in U.S. Government and agency obligations,
interest-bearing deposits in other financial institutions and mortgage-backed
securities. Funds for lending and investment activities are obtained primarily
from deposits, which are insured up to applicable limits by the Federal Deposit
Insurance Corporation ("FDIC"), and loan and mortgage-backed securities
repayments. First Federal conducts business from its office located in Dover,
Ohio, and its primary market area consists of Tuscarawas County.

As a savings and loan holding company, FFD is subject to regulation, supervision
and examination by the Office of Thrift Supervision of the United States
Department of the Treasury (the "OTS"). As a savings bank chartered under the
laws of the United States, First Federal is subject to regulation, supervision
and examination by the OTS and the FDIC. First Federal is also a member of the
Federal Home Loan Bank (the "FHLB") of Cincinnati.


                              MARKET PRICE OF FFD'S
                  COMMON SHARES AND RELATED SHAREHOLDER MATTERS


There were 1,454,750 common shares of FFD outstanding on September 3, 1997, held
of record by approximately 744 shareholders. Price information with respect to
FFD's common shares is quoted on the Nasdaq Small-Cap Market ("Nasdaq") under
the symbol "FFDF."

The following table sets forth the high and low bid prices for the common shares
of FFD, together with the respective dividends declared per share, for each
quarter of fiscal 1997 and the quarter ended June 30, 1996. These quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission,
and may not represent actual transactions.

                                       1
<PAGE>   4

<TABLE>
<CAPTION>
                                                      High Bid         Low Bid        Cash Dividends Declared
                                                      --------         -------        -----------------------
<S>                                                    <C>             <C>                       <C>  
FISCAL 1996
   Quarter Ended:
     June 30, 1996                                     $11.000         $ 9.875                   $.050

FISCAL 1997
   Quarter Ended:
     September 30, 1996                                $10.750         $10.125                   $.050
     December 31, 1996                                  11.750          10.750                    .050
     March 31, 1997                                     13.500          13.500                    .050
     June 30, 1997                                      14.000          13.375                    .075
</TABLE>

The income of FFD consists of dividends which may periodically be declared and
paid by the Board of Directors of First Federal on the common shares of First
Federal held by FFD and earnings on the $7.1 million in net proceeds retained by
FFD from the sale of FFD's common shares in connection with the Conversion. In
addition to certain federal income tax considerations, OTS regulations impose
limitations on the payment of dividends and other capital distributions by
savings associations.

Under OTS regulations applicable to converted savings associations, First
Federal is not permitted to pay a cash dividend on its common shares if the
regulatory capital of First Federal would, as a result of the payment of such
dividend, be reduced below the amount required for the liquidation account
(which was established for the purpose of granting a limited priority claim on
the assets of First Federal, in the event of a complete liquidation, to those
members of First Federal before the Conversion who maintain a savings account at
First Federal after the Conversion) or applicable regulatory capital
requirements prescribed by the OTS.

OTS regulations applicable to all savings associations provide that a savings
association which immediately prior to, and on a pro forma basis after giving
effect to, a proposed capital distribution (including a dividend) has total
capital (as defined by OTS regulations) that is equal to or greater than the
amount of its capital requirements is generally permitted without OTS approval
(but subsequent to 30 days' prior notice to the OTS) to make capital
distributions, including dividends, during a calendar year in an amount not to
exceed the greater of (1) 100% of its net earnings to date during the calendar
year, plus an amount equal to one-half the amount by which its total capital to
assets ratio exceeded its required capital to assets ratio at the beginning of
the calendar year, or (2) 75% of its net earnings for the most recent
four-quarter period. Savings associations with total capital in excess of the
capital requirements that have been notified by the OTS that they are in need of
more than normal supervision will be subject to restrictions on dividends. A
savings association that fails to meet current minimum capital requirements is
prohibited from making any capital distributions without the prior approval of
the OTS. First Federal currently meets all of its regulatory capital
requirements and, unless the OTS determines that First Federal is an institution
requiring more than normal supervision, First Federal may pay dividends in
accordance with the foregoing provisions of the OTS regulations.


                                       2
<PAGE>   5
                              SELECTED CONSOLIDATED
                      FINANCIAL INFORMATION AND OTHER DATA


The following table sets forth certain information concerning the consolidated
financial condition, earnings and other data regarding FFD at the dates and for
the periods indicated.

<TABLE>
<CAPTION>
  SELECTED CONSOLIDATED FINANCIAL                                      At June 30,
   CONDITION:                                 1997          1996          1995          1994          1993
                                             -------       -------       -------       -------       -------
                                                                      (In thousands)
Total amount of:
<S>                                          <C>           <C>           <C>           <C>           <C>    
  Assets                                     $88,000       $79,458       $58,955       $54,635       $56,718
  Interest-bearing
     deposits (1)                              3,547         1,793         3,659         5,420         4,676
  Investment securities designated as
     available for sale - at market            9,924         9,256           903            --            --
  Investment securities - at cost              1,469         2,460         3,353            51            51
  Mortgage-backed securities
     designated as available for sale
     - at market                               7,944         9,007            --            --            --
  Mortgage-backed securities - at cost
                                               7,165         5,932         8,153         8,814         9,230
  Loans receivable - net                      55,504        48,539        41,494        38,981        41,418
  Deposits                                    57,090        52,208        50,601        47,639        50,201
  Advances from the FHLB                       8,382         5,184            26            --            --
  Shareholders' equity (2) (3)                21,480        21,411         7,787         6,746         6,212
</TABLE>

<TABLE>
<CAPTION>
                                                          For the year ended June 30,
SUMMARY OF EARNINGS:                       1997         1996         1995         1994         1993
                                          ------       ------       ------       ------       ------
                                                                 (In thousands)
<S>                                       <C>          <C>          <C>          <C>          <C>   
Interest income                           $5,880       $4,555       $3,718       $3,576       $4,125
Interest expense                           3,101        2,471        1,951        1,731        2,187
                                          ------       ------       ------       ------       ------
Net interest income                        2,779        2,084        1,767        1,845        1,938
Provision for losses on loans                125           50           --           27           25
                                          ------       ------       ------       ------       ------
Net interest income after provision
   for losses on loans                     2,654        2,034        1,767        1,818        1,913
Other income                               1,337           88           37           37           59
General, administrative and other
   expense                                 1,859        1,163        1,077        1,044          975
                                          ------       ------       ------       ------       ------
Earnings before income taxes               2,132          959          727          811          997
Federal income taxes                         705          327          248          277          318
                                          ------       ------       ------       ------       ------
Net earnings                              $1,427       $  632       $  479       $  534       $  679
                                          ======       ======       ======       ======       ======
</TABLE>

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

(1)      Includes short-term interest-bearing deposits in other banks.

(2)      Consists solely of retained earnings at June 30, 1993 through 1995,
         inclusive.

(3)      At June 30, 1997, 1996 and 1995, includes $20,000, $586,000 and
         $562,000, respectively, of net unrealized gains on investment and
         mortgage-backed securities designated as available for sale, net of
         related tax effects, pursuant to Statement of Financial Accounting
         Standards ("SFAS") No. 115.


                                       3
<PAGE>   6


<TABLE>
<CAPTION>
SELECTED FINANCIAL RATIOS                                    At or for the year ended June 30,
   AND OTHER DATA:                           1997           1996           1995           1994           1993
                                            -------        -------        -------        -------        -------
<S>                                          <C>            <C>             <C>            <C>            <C>  
Return on average assets                       1.65%          0.99%          0.86%          0.96%          1.17%
Return on average equity                       6.65           5.72           6.86           8.24          11.56
Interest rate spread                           2.15           2.41           2.77           2.98           3.00
Net interest margin                            3.30           3.28           3.24           3.36           3.40
General, administrative and other
   expense to average assets                   2.15           1.82           1.93           1.87           1.69
Average equity to average
   assets                                     24.83          17.29          12.49          11.59          10.16
Nonperforming assets to
   total assets                                0.07           0.15           0.22           0.66           1.12
Nonperforming loans to total loans
                                               0.11           0.24           0.31           0.91           1.52
Total delinquent loans to total loans(1)       0.69           0.51           1.06           2.20           3.31
Allowance for loan losses to
   total loans                                 0.47           0.29           0.23           0.25           0.18
Allowance for loan losses to
   nonperforming loans                       421.88         124.79          73.28          27.42          11.77
Net charge-offs to average
   loans (2)                                     --             --            .01            .01             --
Average interest-earning
   assets to average interest-bearing
   liabilities                               131.46         122.47         113.11         111.89         110.40
Number of full service offices                    1              1              1              1              1
</TABLE>

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

(1)      Delinquent loans are loans as to which a scheduled payment has not been
         made within 30 days after the due date.

(2)      For the years ended June 30, 1997, 1996 and 1993, First Federal did not
         have any charge-offs.


                                       4
<PAGE>   7
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


                                     GENERAL


FFD was incorporated for the purpose of owning all of First Federal's
outstanding stock. As a result, the discussion that follows focuses on First
Federal's financial condition and results of operations. The following
discussion and analysis of the financial condition and results of operations of
FFD and First Federal should be read in conjunction with and with reference to
the consolidated financial statements, and the notes thereto, included in this
Annual Report.


                         CHANGES IN FINANCIAL CONDITION


Consolidated assets at June 30, 1997, totaled $88.0 million representing an
increase of $8.5 million, or 10.8%, over June 30, 1996 levels. Asset growth
during the fiscal year ended June 30, 1997, resulted primarily from a $4.9
million, or 9.4%, increase in savings deposits and a $3.2 million increase in
FHLB advances. The increase in deposits during fiscal 1997 generally reflects
management's efforts to aggressively market FFD's savings programs to leverage
FFD's capital position. During fiscal 1997, a portion of the $16.0 million of
proceeds from maturities and sales of investment securities were redeployed to
fund growth in the loan portfolio, as loans receivable increased by $7.0
million, or 14.4%. Management utilized the remaining investment securities
proceeds, funds from FHLB advances and proceeds from maturities and sales of
mortgage-backed securities to fund purchases of adjustable-rate mortgage-backed
securities and investment securities. Cash and cash equivalents increased
approximately $1.4 million as management chose to increase liquid assets to fund
loan commitments.

FFD's allowance for loan losses at June 30, 1997, totaled $270,000, or .47% of
total loans, compared to $146,000, or .29%, of total loans at June 30, 1996. The
allowance for loan losses constituted 421.88% of non-performing loans at June
30, 1997, compared to a 124.79% coverage ratio at June 30, 1996. The increase in
the allowance for loan losses during fiscal 1997 related solely to growth in the
loan portfolio during the year, as nonperforming loans totaled $64,000, or .11%
of total loans, at June 30, 1997, compared to $117,000, or .24% of total loans,
at June 30, 1996.


                         COMPARISON OF OPERATING RESULTS
                   FOR THE YEARS ENDED JUNE 30, 1997 AND 1996


The earnings of FFD depend primarily on its level of net interest income, which
is the difference between interest earned on FFD's interest-earning assets and
the interest paid on interest-bearing liabilities. Net interest income is
substantially affected by FFD's interest rate spread, which is the difference
between the average yield earned on interest-earning assets and the average rate
paid on 

                                       5
<PAGE>   8

interest-bearing liabilities, as well as by the average balance of
interest-earning assets compared to interest-bearing liabilities.

GENERAL. Net earnings for fiscal 1997 totaled $1.4 million, representing an
increase of $795,000, or 125.8%, over the $632,000 in net earrings recorded
during the fiscal year ended June 30, 1996. The growth in earnings in fiscal
1997 resulted primarily from a $620,000, or 30.5%, increase in net interest
income after provision for losses on loans, and a $1.2 million increase in other
income, which were partially offset by a $696,000, or 59.8% increase in general,
administrative and other expense and a $378,000 increase in the provision for
federal income taxes.

NET INTEREST INCOME. Total interest income for fiscal 1997 amounted to $5.9
million, an increase of $1.3 million, or 29.1%, over the $4.6 million recorded
in fiscal 1996. Interest income on loans and mortgage-backed securities
increased during fiscal 1997 by $980,000, or 24.5%, primarily reflecting the
$16.0 million growth in the weighted average portfolio outstanding year to year.
Interest income on investment securities and interest-bearing deposits increased
during fiscal 1997 by $345,000, or 62.4%, reflecting a $4.7 million increase in
the weighted average balances outstanding year to year. The growth in weighted
average interest-earning assets outstanding is indicative of the beneficial
effects of the conversion of First Federal from mutual to stock form (the
"Conversion") in fiscal 1996 and FFD's deposit growth in fiscal 1997.

Interest expense on deposits increased during fiscal 1997 by $134,000, or 5.4%.
The increase in expense resulted primarily from a $3.5 million increase in the
weighted average balance outstanding, which was partially offset by a .05%
decline in the weighted average yield during fiscal 1997. During fiscal 1997
interest expense on borrowings increased by $496,000, reflecting the increase in
weighted average balance outstanding year to year.

As a result of the foregoing changes in interest income and interest expense,
net interest income increased by approximately $695,000, or 33.3%, to a total of
$2.8 million for fiscal 1997. The interest rate spread decreased by 26 basis
points during the year from 2.41% in fiscal 1996 to 2.15% in fiscal 1997, while
the net interest margin increased by 2 basis points from 3.28% in fiscal 1996 to
3.30% in fiscal 1997.

PROVISION FOR LOSSES ON LOANS. The provision for losses on loans amounted to
$125,000 for fiscal 1997, compared to $50,000 for fiscal 1996. The increase in
the provision for losses on loans is due primarily to the growth in the loan
portfolio as well as First Federal's recent implementation of a commercial
lending program. Management generally provides for additions to the allowance
for loan losses based upon the inherent risk of loss related to the lending
activities, the outstanding portfolio balance, current and anticipated economic
conditions as measured by leading economic indicators and local unemployment
data, the level of nonperforming loans and past loss experience. Although
management believes that its allowance for loan losses at June 30, 1997, was
adequate based on the available facts and circumstances, there can be no
assurances that additions to such allowance will not be necessary in future
periods, which could adversely affect FFD's results of operations.

The foregoing statement is a "forward-looking" statement within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Factors that could affect the
adequacy of the loan loss allowance include, but are not limited to, the
following: (1) changes in the national and local economy which may negatively
impact the ability of borrowers to repay their loans and which may cause the
value of real estate and other properties that 

                                       6
<PAGE>   9
secure outstanding loans to decline; (2) unforeseen adverse changes in
circumstances with respect to certain large loan borrowers; (3) decrease in the
value of collateral securing consumer loans to amounts equal to or less than the
outstanding balances of the consumer loans; and (4) determinations by various
regulatory agencies that First Federal must recognize additions to its allowance
for loan losses based on such regulators' judgment of information available to
them at the time of their examinations.

OTHER INCOME. Other income increased during fiscal 1997 by $1.2 million due
primarily to the $1.3 million gain on sale of securities recorded in fiscal
1997. Most of this gain resulted from the sale of FFD's investment in Federal
Home Loan Mortgage Corporation ("FHLMC") common stock.

GENERAL, ADMINISTRATIVE AND OTHER EXPENSE. General, administrative and other
expense increased during fiscal 1997 by $696,000, or 59.8%. The growth in
operating expense resulted primarily from a $249,000, or 47.2% increase in
employee compensation and benefits, a $278,000, or 240.5%, increase in federal
deposit insurance expense, and a $111,000, or 46.3%, increase in other operating
expenses. The increase in employee compensation generally reflects the cost of
employee stock benefit plans which were implemented in connection with the
Conversion, the termination of First Federal's defined benefit retirement
program, implementation of the commercial lending program and the hiring of
additional personnel in anticipation of the opening of a branch office in the
fall, while the increase in deposit insurance reflects the $332,000 assessment
related to recapitalizing the SAIF. The increase in other operating expense is
primarily attributable to increased professional fees related to the reporting
requirements of a public company.

FEDERAL INCOME TAXES. The provision for federal income taxes totaled $705,000
during fiscal 1997, an increase of $378,000, or 115.6%, over the $327,000
provision recorded in fiscal 1996. The increase primarily resulted from a $1.2
million, or 122.3%, increase in earnings before taxes. FFD's effective tax rates
were 33.1% and 34.1% for fiscal 1997 and 1996, respectively.


                         COMPARISON OF OPERATING RESULTS
                   FOR THE YEARS ENDED JUNE 30, 1996 AND 1995


GENERAL. Net earnings totaled $632,000 for fiscal 1996, an increase of $153,000,
or 31.9%, over the $479,000 in net earnings reported in fiscal 1995. The
increase resulted primarily from a $317,000 increase in net interest income and
a $51,000 increase in other income, which were partially offset by a $50,000
increase in the provision for losses on loans, an $86,000 increase in general,
administrative and other expense and a $79,000 increase in the provision for
federal income taxes.

NET INTEREST INCOME. Total interest income for fiscal 1996 amounted to $4.6
million, an increase of $837,000, or 22.5%, over the amount recorded in fiscal
1995. Interest income on loans and mortgage-backed securities increased by
$612,000, or 18.1%. The increase resulted primarily from a $5.0 million increase
in the average portfolio balance, coupled with a 49 basis point increase in the
average yield from 6.98% in fiscal 1995 to 7.47% in fiscal 1996. Interest income
on investment securities and interest-bearing deposits increased by $225,000, or
68.6%, to a total of $553,000. The increase was due primarily to a $4.0 million
increase in the average balance outstanding. The increase in interest-earning

                                       7
<PAGE>   10
assets reflects the deployment of the Conversion proceeds which were used to
purchase intermediate-term U.S. Government agency obligations yielding 6.6% and
to fund growth in the loan portfolio.

Total interest expense for fiscal 1996 amounted to $2.5 million, an increase of
$520,000, or 26.7%, over the $2.0 million recorded in fiscal 1995. Interest
expense on deposits increased by $515,000, or 26.4%, due to the increase in the
average deposit balance outstanding year to year of $3.5 million coupled with an
increase of 71 basis points in the average rate paid from 4.05% in 1995 to 4.76%
in 1996.

As a result of the foregoing changes in interest income and interest expense,
net interest income increased by approximately $317,000, or 17.9%, to a total of
$2.1 million for fiscal 1996. The interest rate spread declined by 36 basis
points during the year from 2.77% in fiscal 1995 to 2.41% in fiscal 1996, while
the net interest margin increased by 4 basis points from 3.24% in fiscal 1995 to
3.28% in fiscal 1996.

PROVISION FOR LOSSES ON LOANS. The provision for losses on loans amounted to
$50,000 for fiscal 1996. The increase in the provision for loan losses was due
primarily to the growth in the loan portfolio.

OTHER INCOME. Other income totaled $88,000 for fiscal 1996, compared to $37,000
for the same period in fiscal 1995. During fiscal 1996, FFD sold its former
office building and acquired its present location at 321 North Wooster Avenue.
The sale resulted in a gain of $50,000, which accounted for the increase in
other income.

GENERAL, ADMINISTRATIVE AND OTHER EXPENSE. General, administrative and other
expense totaled $1.2 million for fiscal 1996, an increase of $86,000, or 8.0%,
over the $1.1 million recorded in fiscal 1995. The increase resulted primarily
from an $18,000, or 22.5%, increase in occupancy and equipment, a $10,000, or
10.2%, increase in franchise taxes, and an increase of $45,000, or 23.1%, in
other operating expenses. The increase in occupancy and equipment expense
resulted from higher depreciation expense on First Federal's new main office.
The franchise tax increase is primarily due to the increase in shareholders'
equity as a result of the Conversion. The increase in other expenses is due to
an increase of $13,000 in office supplies relative to the formation of the
holding company and the change of address, a $6,000 increase in advertising and
pro-rata increases in operating costs attendant to FFD's growth.

FEDERAL INCOME TAXES. The provision for federal income taxes totaled $327,000
for fiscal 1996, an increase of $79,000, or 31.9%, over the $248,000 total
recorded in fiscal 1995. The increase resulted primarily from the increase in
net earnings before taxes of $232,000, or 31.9%. FFD's effective tax rates were
34.1% for fiscal 1996 and 1995.



                                       8
<PAGE>   11
                  AVERAGE BALANCE, YIELD, RATE AND VOLUME DATA


The following table sets forth certain information relating to FFD's average
balance sheet information and reflects the average yield on interest-earning
assets and the average cost of interest-bearing liabilities for the periods
indicated. Such yields and costs are derived by dividing income or expense by
the average monthly balance of interest-earning assets or interest-bearing
liabilities, respectively, for the periods presented. Average balances are
derived from month-end balances, which include nonaccruing loans in the loan
portfolio, net of the allowance for loan losses.

                                                                                
<TABLE>
<CAPTION>
                                                                                Year ended June 30,
                                                        1997                           1996                        1995
                                          ------------------------------ ----------------------------- -----------------------------
                                            Average   Interest   Average   Average   Interest  Average   Average   Interest  Average
                                          outstanding  earned/   yield/  outstanding  earned/  yield/  outstanding  earned/   yield/
                                            balance     paid      rate     balance     paid     rate     balance     paid      rate
                                            -------     ----      ----     -------     ----     ----     -------     ----      ----
                                                                           (Dollars in thousands)
Interest-earning assets:
<S>                                           <C>       <C>        <C>     <C>       <C>         <C>     <C>      <C>          <C>  
   Loans receivable                           $52,295   $3,807     7.28%   $44,855   $ 3,402     7.58%   $40,172  $ 2,852      7.10%
   Mortgage-backed securities                  17,228    1,175     6.82      8,713       600     6.89      8,404      538      6.40
   Investment securities                       12,198      782     6.41      5,323       363     6.82        701       44      6.28
   Interest-bearing deposits and other          2,444      116     4.75      4,570       190     4.16      5,237      284      5.42
                                              -------   ------   ------    -------   -------   ------    -------  -------    ------
    Total interest-earning assets              84,165    5,880     6.99     63,461     4,555     7.18     54,514    3,718      6.82

Non-interest-earning assets                     2,255                          474                         1,432                   
                                              -------                      -------                       -------
    Total assets                              $86,419                      $63,935                       $55,946                   
                                              =======                      =======                       =======

Interest-bearing liabilities:
   Deposits                                   $55,166    2,598     4.71    $51,713     2,464     4.76    $48,170    1,949      4.05
   Advances from the FHLB                       8,857      503     5.68        104         7     6.73         26        2      7.69
                                              -------   ------   ------    -------   -------   ------    -------  -------    ------
    Total interest-bearing liabilities         64,023    3,101     4.84     51,817     2,471     4.77     48,196    1,951      4.05
                                                        ------   ------              -------   ------    -------  -------

Non-interest-bearing liabilities                  937                        1,063                           764                   
                                              -------                      -------                       -------

    Total liabilities                          64,960                       52,880                        48,960                   
 Shareholders' equity                          21,459                       11,055                         6,986                   
                                              -------                      -------                       -------

    Total liabilities and shareholders' 
      equity                                  $86,419                      $63,935                       $55,946                   
                                              =======                      =======                       =======
Net interest income                                     $2,779                       $ 2,084                      $ 1,767          
                                                        ======                       =======                      =======

Interest rate spread                                               2.15%                         2.41%                         2.77%
                                                                =======                       =======                        ======

Net interest margin (net interest 
   income as a percent of average 
   interest-earning assets)                                        3.30%                         3.28%                         3.24%
                                                                =======                       =======                        ======
Average interest-earning assets to 
    average interest-bearing liabilities                         131.46%                       122.47%                       113.11%
                                                                =======                       =======                        ======
</TABLE>

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

                                       9
<PAGE>   12

<TABLE>
<CAPTION>
                                                                  Year ended June 30,
                                                      1997 vs. 1996                   1996 vs. 1995
                                             ------------------------------    ----------------------------
                                                  Increase                         Increase
                                                 (decrease)                       (decrease)
                                                   due to                           due to
                                             Volume       Rate      Total      Volume     Rate      Total
                                                                       (In thousands)
Interest income attributable to:
<S>                                          <C>        <C>        <C>        <C>        <C>        <C>    
   Loans receivable                          $   545    $  (140)   $   405    $   348    $   202    $   550
   Mortgage-backed securities                    581         (6)       575         20         42         62
   Investment securities                         442        (23)       419        314          5        319
   Interest-bearing deposits and other
                                                 (98)        24        (74)       (31)       (63)       (94)
                                             -------    -------    -------    -------    -------    -------
Total interest income                          1,470       (145)     1,325        651        186        837
                                             -------    -------    -------    -------    -------    -------

Interest expense attributable to:
   Deposits                                      161        (27)       134        156        359        515
   FHLB advances                                 511        (15)       496          6         (1)         5
                                             -------    -------    -------    -------    -------    -------

Total interest expense                           672        (42)       630        162        358        520
                                             -------    -------    -------    -------    -------    -------

Increase (decrease) in net interest income
                                             $   798    $  (103)   $   695    $   489    $  (172)   $   317
                                             =======    =======    =======    =======    =======    =======
</TABLE>


                         ASSET AND LIABILITY MANAGEMENT


First Federal, like other financial institutions, is subject to interest rate
risk to the extent that its interest-earning assets reprice differently than its
interest-bearing liabilities. As part of its effort to monitor and manage
interest rate risk, First Federal uses the "net portfolio value" ("NPV")
methodology adopted by the OTS as part of its capital regulations. Although
First Federal is not currently subject to the NPV regulation because such
regulation does not apply to institutions with less than $300 million in assets
and risk-based capital in excess of 12%, the application of the NPV methodology
illustrates certain aspects of First Federal's interest rate risk.

Generally, NPV is the discounted present value of the difference between
incoming cash flows on interest-earning and other assets and outgoing cash flows
on interest-bearing and other liabilities. The application of the methodology
attempts to quantify interest rate risk as the change in the NPV which would
result from a theoretical 200 basis point (1 basis point equals .01%) change in
market interest rates. Both a 200 basis point increase in market interest rates
and a 200 basis point decrease in market interest rates are considered. If the
NPV would decrease more than 2% of the present value of the institution's assets
with either an increase or a decrease in market rates, the institution must
deduct 50% of the amount of the decrease in excess of such 2% in the calculation
of the institution's risk-based capital. See "Liquidity and Capital Resources."

                                       10
<PAGE>   13
At June 30, 1997, 2% of the present value of First Federal's assets was
approximately $1.6 million, and the interest rate risk of a 200 basis point
decrease in market interest rates (which was greater than the interest rate risk
of a 200 basis point increase) was $732,000.

Presented below, as of June 30, 1997, is an analysis of First Federal's interest
rate risk as measured by changes in NPV for instantaneous and sustained parallel
shifts of 100 basis points in market interest rates. The table also contains the
policy limits set by the Board of Directors of First Federal as the maximum
change in NPV that the Board of Directors deems advisable in the event of
various changes in interest rates. Such limits have been established with
consideration of the dollar impact of various rate changes and First Federal's
strong capital position.


<TABLE>
<CAPTION>
                                                                           June 30, 1997
Change in interest rate                Board limit                $ change               % change
       (basis points)                   % change                     in NPV                 in NPV
-----------------------------    --------------------------      -------------        ----------------
                                    (Dollars in thousands)

<S>                                     <C>                      <C>                   <C>    
         +400                             +40.0%                    $(847)                (6.33)%
         +300                             +30.0                      (286)                (2.14)
         +200                             +20.0                       150                  1.12
         +100                             +10.0                       132                  0.99
           0                                  0                         0                      0
         -100                             -10.0                      (266)                (1.99)
         -200                             -20.0                      (732)                (5.48)
         -300                             -30.0                      (668)                (4.99)
         -400                             -40.0                      (484)                (3.62)
</TABLE>

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


                         LIQUIDITY AND CAPITAL RESOURCES


First Federal's principal sources of funds are deposits, loan and
mortgage-backed securities repayments, maturities of securities and other funds
provided by operations. First Federal also has the ability to borrow from the
FHLB of Cincinnati. While scheduled loan repayments and maturing investments are
relatively predictable, deposit flows and loan and mortgage-backed securities
prepayments are more influenced by interest rates, general economic conditions
and competition. First Federal maintains investments in liquid assets based upon
management's assessment of (i) the need for funds, (ii) expected 

                                       11
<PAGE>   14
deposit flows, (iii) the yields available on short-term liquid assets and (iv)
the objectives of the asset/liability management program. During fiscal 1997,
First Federal was able to increase total deposits through a combined strategy
involving both advertising and deposit pricing.

OTS regulations presently require First Federal to maintain an average daily
balance of investments in United States Treasury securities, federal agency
obligations and other investments having maturities of five years or less in an
amount equal to 5% of the sum of First Federal's average daily balance of net
withdrawable deposit accounts and borrowings payable in one year or less. The
liquidity requirement, which may be changed from time to time by the OTS to
reflect changing economic conditions, is intended to provide a source of
relatively liquid funds upon which First Federal may rely, if necessary, to fund
deposit withdrawals or other short-term funding needs. At June 30, 1997, First
Federal's regulatory liquidity ratio was 10.5%. At such date, First Federal had
commitments to originate loans totaling $1.8 million and no commitments to
purchase or sell loans. Additionally, as of June 30, 1997, First Federal had
entered into a commitment to construct a new branch for a total cost of
approximately $261,000. First Federal considers its liquidity and capital
sufficient to meet its outstanding short- and long-term needs.

First Federal's liquidity, primarily represented by cash and cash equivalents,
is a result of the funds used in or provided by First Federal's operating,
investing and financing activities. These activities are summarized below for
the years ended June 30, 1997, 1996 and 1995:

<TABLE>
<CAPTION>
                                                          Year ended June 30,
                                                    1997        1996        1995
                                                  --------    --------    --------
                                                           (In thousands)

<S>                                               <C>         <C>         <C>     
Net earnings                                      $  1,427    $    632    $    479
Adjustments to reconcile net earnings to
   net cash from operating activities                 (490)        (91)        (79)
                                                  --------    --------    --------
Net cash from operating activities                     937         541         400
Net cash from investing activities                  (6,814)    (21,456)     (5,192)
Net cash from financing activities                   7,259      19,733       2,987
                                                  --------    --------    --------
Net change in cash and cash equivalents              1,382      (1,182)     (1,805)
Cash and cash equivalents at
   beginning of period                               2,698       3,880       5,685
                                                  --------    --------    --------
Cash and cash equivalents at
   end of period                                  $  4,080    $  2,698    $  3,880
                                                  ========    ========    ========
</TABLE>


First Federal is required by applicable law and regulation to meet certain
minimum capital standards. Such capital standards include a tangible capital
requirement, a core capital requirement or leverage ratio and a risk-based
capital requirement.

The tangible capital requirement requires savings associations to maintain
"tangible capital" of not less than 1.5% of the association's adjusted total
assets. Tangible capital is defined in OTS regulations as core capital minus any
intangible assets.

                                       12
<PAGE>   15

"Core capital" is comprised of common shareholders' equity (including retained
earnings), noncumulative preferred stock and related surplus, minority interests
in consolidated subsidiaries, certain nonwithdrawable accounts and pledged
deposits of mutual associations. OTS regulations require savings associations to
maintain core capital of at least 3% of the association's total assets. The OTS
has proposed to increase such requirement to 4% or 5%, except for those
associations with the highest examination rating and acceptable levels of risk.

OTS regulations require that savings associations maintain "risk-based capital"
in an amount not less than 8% of risk-weighted assets. Risk-based capital is
defined as core capital plus certain additional items of capital, which in the
case of First Federal includes a general loan loss allowance of $270,000 at June
30, 1997.

First Federal exceeded all of its capital requirements at June 30, 1997. The
following table summarizes First Federal's regulatory capital requirements and
regulatory capital at June 30, 1997:

<TABLE>
<CAPTION>
                                                                           Excess of regulatory capital
                                                                                   over current
                           Regulatory capital         Current requirement          requirement
                            Amount     Percent       Amount      Percent      Amount         Percent
                                                     (Dollars in thousands)
<S>                         <C>          <C>           <C>         <C>          <C>            <C>  
Tangible capital            $13,320      16.4%         $1,216      1.5%         $12,104        14.9%
Core capital                 13,320      16.4           2,432      3.0           10,888        13.4
Risk-based capital           13,590      37.5           2,895      8.0           10,695        29.5
</TABLE>



                   EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS


In October 1995, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 123, "Accounting for Stock-Based Compensation", establishing financial
accounting and reporting standards for stock-based compensation plans. SFAS No.
123 encourages all entities to adopt a new method of accounting to measure the
compensation cost of all stock compensation plans based on the estimated fair
value of the award at the date it is granted. Companies are, however, allowed to
continue to measure compensation cost for those plans using the intrinsic value
based method of accounting, which generally does not result in compensation
expense recognition for most plans. Companies that elect to remain with the
existing accounting are required to disclose in a footnote to the financial
statements pro forma net earnings and, if presented, earnings per share, as if
SFAS No. 123 had been adopted. The accounting requirements of SFAS No. 123 are
effective for transactions entered into during fiscal years that begin after
December 15, 1995; however, companies are required to disclose information for
awards granted in their first fiscal year beginning after December 15, 1994.
Management has determined that FFD will continue to account for stock-based
compensation pursuant to Accounting Principles Board Opinion No. 25, and
therefore the disclosure provisions of SFAS No. 123 will have no effect on its
consolidated financial condition or results of operations.

In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers of
Financial Assets, Servicing Rights, and Extinguishment of Liabilities", that
provides accounting guidance on transfers of 

                                       13
<PAGE>   16

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

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

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

SFAS No. 125 is effective for transfers and servicing of financial assets and
extinguishment of liabilities occurring after December 31, 1997, and is to be
applied prospectively. Earlier or retroactive application is not permitted.
Management does not believe that adoption of SFAS No. 125 will have a material
adverse effect on the FFD's consolidated financial position or results of
operations.

In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which
requires companies to present basic earnings per share and, if applicable,
diluted earnings per share, instead of primary and fully diluted earnings per
share, respectively. Basic earnings per share is computed without including
potential common shares, i.e., no dilutive effect. Diluted earnings per share is
computed taking into consideration common shares outstanding and potentially
dilutive common shares, including options, warrants, convertible securities and
contingent stock agreements. SFAS No. 128 is effective for periods ending after
December 15, 1997. Early application is not permitted. Based upon the provisions
of SFAS No. 128, FFD's basic and diluted earnings per share for the fiscal year
ended June 30, 1997, would each have been $1.07.

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
which requires entities presenting a complete set of financial statements to
include details of comprehensive income that arise in the reporting period.
Comprehensive income consists of net earnings or loss for the current period and
other comprehensive income, expense, gains and losses that bypass the income
statement and are reported in a separate component of equity, i.e., unrealized
gains and losses on certain investment securities. SFAS No. 130 is effective for
fiscal years beginning after December 15, 1997. Management does not believe that
adoption of SFAS No. 130 will have a material adverse effect on the FFD's
consolidated financial position or results of operations.


                                       14
<PAGE>   17
                         REPORT OF INDEPENDENT CERTIFIED
                             PUBLIC ACCOUNTANTS AND
                        CONSOLIDATED FINANCIAL STATEMENTS


                                                                            PAGE

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                            16


FINANCIAL STATEMENTS

         CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION                       17

         CONSOLIDATED STATEMENTS OF EARNINGS                                  18

         CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY                      19

         CONSOLIDATED STATEMENTS OF CASH FLOWS                                20

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                           22



                                       15
<PAGE>   18
                          [GRANT THORNTON LETTERHEAD]


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
FFD Financial Corporation

We have audited the accompanying consolidated statements of financial condition
of FFD Financial Corporation as of June 30, 1997 and 1996, and the related
consolidated statements of earnings, shareholders' equity and cash flows for
each of the years ended June 30, 1997, 1996 and 1995. These consolidated
financial statements are the responsibility of the Corporation's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of FFD Financial
Corporation as of June 30, 1997 and 1996, and the consolidated results of its
operations and its cash flows for each of the years ended June 30, 1997, 1996
and 1995, in conformity with generally accepted accounting principles.



/s/ Grant Thornton LLP
    ----------------------


Cincinnati, Ohio
August 22, 1997





                                       16
<PAGE>   19



                            FFD FINANCIAL CORPORATION

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                    June 30,
                        (In thousands, except share data)


<TABLE>
<CAPTION>
         ASSETS                                                        1997            1996

<S>                                                                <C>             <C>     
Cash and due from banks                                            $    533        $    905
Interest-bearing deposits in other financial institutions             3,547           1,793
                                                                   --------        --------
         Cash and cash equivalents                                    4,080           2,698

Investment securities designated as available
  for sale - at market                                                9,924           9,256
Investment securities - at cost, approximate market value of
  $1,459 and $2,427 as of June 30, 1997 and 1996                      1,469           2,460
Mortgage-backed securities designated as available for
  sale - at market                                                    7,944           9,007
Mortgage-backed securities - at amortized cost, approximate
  market value of $7,304 and $6,073 as of June 30,
  1997 and 1996                                                       7,165           5,932
Loans receivable - net                                               55,504          48,539
Office premises and equipment - at depreciated cost                     865             545
Stock in Federal Home Loan Bank - at cost                               642             598
Accrued interest receivable                                             267             283
Prepaid expenses and other assets                                       140             140
                                                                   --------        --------

         Total assets                                              $ 88,000        $ 79,458
                                                                   ========        ========

         LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits $57,090                                                   $ 57,090        $ 52,208
Advances from the Federal Home Loan Bank                              8,382           5,184
Accrued interest payable                                                 82              37
Other liabilities                                                       340             204
Accrued federal income taxes                                            609              40
Deferred federal income taxes                                            17             374
                                                                   --------        --------
         Total liabilities                                           66,520          58,047

Commitments                                                              --              --

Shareholders' equity
  Preferred stock - authorized 1,000,000 shares without par
    value; no shares issued                                              --              --
  Common stock - authorized 5,000,000 shares without par or
    stated value; 1,454,750 shares issued and outstanding                --              --
  Additional paid-in capital                                         14,137          14,132
  Retained earnings - substantially restricted                        8,957           7,857
  Unrealized gains on securities designated as available
    for sale, net of related tax effects                                 20             586
  Shares acquired by stock benefit plans                             (1,634)         (1,164)
                                                                   --------        --------
         Total shareholders' equity                                  21,480          21,411
                                                                   --------        --------

         Total liabilities and shareholders' equity                $ 88,000        $ 79,458
                                                                   ========        ========
</TABLE>




The accompanying notes are an integral part of these statements.


                                       17
<PAGE>   20

                            FFD FINANCIAL CORPORATION

                       CONSOLIDATED STATEMENTS OF EARNINGS

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

<TABLE>
<CAPTION>
                                                                    1997           1996          1995
Interest income
<S>                                                              <C>            <C>           <C>    
  Loans                                                          $ 3,807        $ 3,402       $ 2,852
  Mortgage-backed securities                                       1,175            600           538
  Investment securities                                              782            363            44
  Interest-bearing deposits and other                                116            190           284
                                                                 -------        -------       -------
         Total interest income                                     5,880          4,555         3,718

Interest expense
  Deposits                                                         2,598          2,464         1,949
  Borrowings                                                         503              7             2
                                                                 -------        -------       -------
         Total interest expense                                    3,101          2,471         1,951
                                                                 -------        -------       -------

         Net interest income                                       2,779          2,084         1,767

Provision for losses on loans                                        125             50            --
                                                                 -------        -------       -------

         Net interest income after
           provision for losses on loans                           2,654          2,034         1,767

Other income
  Gain on sale of investment securities designated
    as available for sale                                          1,284             --            --
  Gain on sale of real estate acquired through foreclosure             2             --            --
  Gain on sale of office premises and equipment                       --             50            --
  Other operating income                                              51             38            37
                                                                 -------        -------       -------
         Total other income                                        1,337             88            37

General, administrative and other expense
  Employee compensation and benefits                                 777            528           532
  Occupancy and equipment                                            118             98            80
  Franchise taxes                                                    144            108            98
  Federal deposit insurance premiums                                 394            116           109
  Data processing                                                     75             73            63
  Other operating                                                    351            240           195
                                                                 -------        -------       -------
         Total general, administrative
           and other expense                                       1,859          1,163         1,077
                                                                 -------        -------       -------

         Earnings before income taxes                              2,132            959           727

Federal income taxes
  Current                                                            769            318           260
  Deferred                                                           (64)             9           (12)
                                                                 -------        -------       -------
                                                                     705            327           248
                                                                 -------        -------       -------

         NET EARNINGS                                            $ 1,427        $   632       $   479
                                                                 =======        =======       =======

         EARNINGS PER SHARE                                      $  1.07            N/A           N/A
                                                                 =======        =======       =======
</TABLE>



The accompanying notes are an integral part of these statements.



                                       18
<PAGE>   21



                            FFD FINANCIAL CORPORATION


                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                For the years ended June 30, 1997, 1996 and 1995
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                              UNREALIZED
                                                                                 SHARES          GAIN ON
                                                                            ACQUIRED BY       SECURITIES
                                                                ADDITIONAL        STOCK        DESIGNATED
                                                        COMMON     PAID-IN      BENEFIT     AS AVAILABLE     RETAINED
                                                         STOCK     CAPITAL        PLANS         FOR SALE     EARNINGS       TOTAL
<S>                                                      <C>     <C>          <C>           <C>           <C>           <C>     
Balance at July 1, 1994                                   $--     $     --     $     --      $     --      $  6,746      $  6,746

Designation of securities as available for sale upon
  adoption of SFAS No. 115                                 --           --           --           490            --           490
Net earnings for the year ended June 30, 1995              --           --           --            --           479           479
Unrealized gain on securities designated as available
  for sale, net of related tax effects                     --           --           --            72            --            72
                                                          ---     --------     --------      --------      --------      --------

Balance at June 30, 1995                                   --           --           --           562         7,225         7,787

Reorganization to common stock form and issuance
  of shares in connection therewith - net                  --       14,132       (1,164)           --            --        12,968
Net earnings for the year ended June 30, 1996              --           --           --            --           632           632
Unrealized gain on securities designated as available
  for sale, net of related tax effects                     --           --           --            24            --            24
                                                          ---     --------     --------      --------      --------      --------

Balance at June 30, 1996                                   --       14,132       (1,164)          586         7,857        21,411

Net earnings for the year ended June 30, 1997              --           --           --            --         1,427         1,427
Purchase of shares for stock benefit plan                  --           --         (494)           --            --          (494)
Amortization expense of stock benefit plans                --            5           24            --            --            29
Realized gain on securities designated as available
  for sale, net of related tax effects                     --           --           --          (566)           --          (566)
Dividends paid of $.225 per share                          --           --           --            --          (327)         (327)
                                                          ---     --------     --------      --------      --------      --------

Balance at June 30, 1997                                  $--     $ 14,137     $ (1,634)     $     20      $  8,957      $ 21,480
                                                          ===     ========     ========      ========      ========      ========
</TABLE>


The accompanying notes are an integral part of these statements.


                                       19
<PAGE>   22


                            FFD FINANCIAL CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                               Year ended June 30,
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                    1997          1996          1995
Cash flows from operating activities:
<S>                                                             <C>           <C>           <C>     
  Net earnings for the year                                     $  1,427      $    632      $    479
  Adjustments to reconcile net earnings to net cash
  provided by (used in) operating activities:
    Amortization of premiums and discounts
      on investments and mortgage-backed securities - net            (13)           (8)            8
    Amortization of deferred loan origination fees                   (66)          (65)          (46)
    Depreciation and amortization                                     61            43            41
    Gain on sale of investment and mortgage-backed
      securities designated as available for sale                 (1,284)           --            --
    Gain on sale of office premises and equipment                     --           (50)           --
    Provision for losses on loans                                    125            50            --
    Amortization expense of stock benefit plans                       29            --            --
    Federal Home Loan Bank stock dividends                           (44)          (40)          (34)
    Increase (decrease) in cash due to changes in:
      Accrued interest receivable                                     16          (131)          (42)
      Prepaid expenses and other assets                               --           (23)          (39)
      Other liabilities                                              136            45            16
      Accrued interest payable                                        45             8            (1)
      Federal income taxes
        Current                                                      569            71            30
        Deferred                                                     (64)            9           (12)
                                                                --------      --------      --------
         Net cash provided by operating activities                   937           541           400

Cash flows provided by (used in) investing activities:
  Purchase of mortgage-backed securities                          (2,528)           --          (915)
  Purchase of mortgage-backed securities designated
    as available for sale                                         (4,737)       (9,148)           --
  Principal repayments on mortgage-backed securities               3,257         2,228         1,568
  Proceeds from sale of mortgage-backed securities
    designated as available for sale                               3,970            --            --
  Purchase of investment securities designated as available
    for sale                                                     (15,391)       (8,182)           --
  Purchase of investment securities designated as
    held to maturity                                                  --            --        (3,352)
  Proceeds from maturity of investment securities                 13,648           900            --
  Proceeds from sale of investment securities designated
    as available for sale                                          2,372            --            --
  Loan principal repayments                                       10,049         9,797         5,773
  Loan disbursements                                             (17,073)      (16,827)       (8,241)
  Purchase of office premises and equipment                         (381)         (498)          (25)
  Proceeds from sale of office premises and equipment                 --           274            --
                                                                --------      --------      --------
         Net cash used in investing activities                    (6,814)      (21,456)       (5,192)
                                                                --------      --------      --------

         Net cash used in operating and investing
           activities (subtotal carried forward)                  (5,877)      (20,915)       (4,792)
                                                                --------      --------      --------
</TABLE>



                                       20
<PAGE>   23


                            FFD FINANCIAL CORPORATION

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                               Year ended June 30,
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                                         1997          1996          1995

         Net cash used in operating and investing
<S>                                                                                  <C>           <C>           <C>      
           activities (subtotal brought carried forward)                             $ (5,877)     $(20,915)     $ (4,792)

Cash flows provided by (used in) financing activities:
  Net increase in deposit accounts                                                      4,882         1,607         2,961
  Proceeds from Federal Home Loan Bank advances                                         8,900         5,160            30
  Repayments on Federal Home Loan Bank advances                                        (5,702)           (2)           (4)
  Net proceeds from issuance of common stock                                               --        12,968            --
  Purchase of shares for stock benefit plans                                             (494)           --            --
  Dividends paid on common stock                                                         (327)           --            --
                                                                                     --------      --------      --------
         Net cash provided by financing activities                                      7,259        19,733         2,987
                                                                                     --------      --------      --------

Net increase (decrease) in cash and cash equivalents                                    1,382        (1,182)       (1,805)

Cash and cash equivalents at beginning of year                                          2,698         3,880         5,685
                                                                                     --------      --------      --------

Cash and cash equivalents at end of year                                             $  4,080      $  2,698      $  3,880
                                                                                     ========      ========      ========


Supplemental disclosure of cash flow information: Cash paid during the year for:
    Federal income taxes                                                             $    116      $    234      $    214
                                                                                     ========      ========      ========

    Interest on deposits and borrowings                                              $  3,056      $  2,445      $  1,950
                                                                                     ========      ========      ========


Supplemental disclosure of noncash investing activities:
  Securities transferred to available for sale classification
    upon adoption of SFAS No. 115                                                    $     --      $     --      $     51
                                                                                     ========      ========      ========

  Unrealized (realized) gains on securities designated as
    available for sale, net of applicable tax effects                                $   (566)     $     24      $    562
                                                                                     ========      ========      ========
</TABLE>

The accompanying notes are an integral part of these statements.


                                       21
<PAGE>   24


                            FFD FINANCIAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                          June 30, 1997, 1996 and 1995


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    During fiscal 1996, the Board of Directors of First Federal Savings Bank of
    Dover (the "Savings Bank") adopted a Plan of Conversion (the "Plan") whereby
    the Savings Bank would convert to the stock form of ownership, followed by
    the issuance of all of the Savings Bank's outstanding stock to a newly
    formed holding company, FFD Financial Corporation (the "Corporation").
    Pursuant to the Plan, the Corporation offered for sale up to 1,454,750
    common shares to certain depositors of the Savings Bank and members of the
    community. The conversion was completed on April 2, 1996, and resulted in
    the issuance of 1,454,750 common shares of the Corporation which, after
    consideration of offering expenses totaling approximately $400,000 and $1.2
    million in shares purchased by the ESOP, resulted in net proceeds of $13.0
    million. Condensed financial statements of the Corporation are presented in
    Note L. Future references are made either to the Corporation or the Savings
    Bank as applicable.

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

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

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

    1.  Principles of Consolidation

    The consolidated financial statements include the accounts of the
    Corporation and the Savings Bank, and its wholly-owned subsidiary, Dover
    Service Corporation ("Dover"). At June 30, 1997 and 1996, Dover's principal
    assets consisted of an investment in the stock of the Savings Bank's data
    processor and a deposit account in the Savings Bank. All intercompany
    balances and transactions have been eliminated in the accompanying
    consolidated financial statements.




                                       22
<PAGE>   25

                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    2.  Investment Securities and Mortgage-backed Securities

    The Corporation accounts for investment and mortgage-backed securities in
    accordance with Statement of Financial Accounting Standards ("SFAS") No. 115
    "Accounting for Certain Investments in Debt and Equity Securities". SFAS No.
    115 requires that investments be categorized as held-to-maturity, trading,
    or available for sale. Securities classified as held-to-maturity are carried
    at cost only if the Corporation has the positive intent and ability to hold
    these securities to maturity. Trading securities and securities designated
    as available for sale are carried at fair value with resulting unrealized
    gains or losses recorded to operations or shareholders' equity,
    respectively. At June 30, 1997 and 1996, the Corporation's shareholders'
    equity reflected a net unrealized gain on securities designated as available
    for sale totaling $20,000 and $586,000, respectively.

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

    3.  Loans Receivable

    Loans are stated at the principal balance outstanding, reduced by deferred
    loan origination fees and the allowance for loan losses. Interest is accrued
    as earned unless the collectibility of the loan is in doubt. Interest on
    loans that are contractually past due is charged off, or an allowance is
    established based on management's periodic evaluation. The allowance is
    established by a charge to interest income equal to all interest previously
    accrued, and income is subsequently recognized only to the extent that cash
    payments are received until, in management's judgment, the borrower's
    ability to make periodic interest and principal payments has returned to
    normal, in which case the loan is returned to accrual status. If the
    ultimate collectibility of the loan is in doubt, in whole or in part, all
    payments received on nonaccrual loans are applied to reduce principal until
    such doubt is eliminated.

    4.  Loan Origination Fees

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




                                       23
<PAGE>   26


                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    5.  Allowance for Loan Losses

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

    In May 1993, the FASB issued SFAS No. 114, "Accounting by Creditors for
    Impairment of a Loan". This Statement, which was amended by SFAS No. 118 as
    to certain income recognition and financial statement disclosure provisions,
    requires that impaired loans be measured based upon the present value of
    expected future cash flows discounted at the loan's effective interest rate
    or, as an alternative, at the loans observable market price or fair value of
    the collateral if the loan is collateral dependent. The Savings Bank adopted
    SFAS No. 114 effective July 1, 1995, without material effect on consolidated
    financial condition or results of operations.

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

    Collateral dependent loans which are more than ninety days delinquent are
    considered to constitute more than a minimum delay in repayment and are
    evaluated for impairment under SFAS No. 114 at that time.

    At June 30, 1997 and 1996, the Savings Bank had no loans that would be
    defined as impaired under SFAS No. 114.


                                       24
<PAGE>   27
                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    6.  Real Estate Acquired through Foreclosure

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

    7.  Office Premises and Equipment

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

    8.  Federal Income Taxes

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




                                       25
<PAGE>   28

                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    8.  Income Taxes (continued)

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

    9.  Retirement Plans

    The Savings Bank had a defined benefit pension plan covering all employees
    who have attained 21 years of age and have completed one full year of
    service. Annual contributions were made to fund current service costs and
    amortization of past service costs. The plan was terminated during fiscal
    1997. The Savings Bank's provision for pension expense was $25,000 and
    $8,000 for fiscal 1996 and 1995. The disclosure requirements under SFAS No.
    87, "Accounting for Pensions", have not been provided based on materiality.

    In conjunction with its reorganization to stock form, the Corporation
    implemented an Employee Stock Ownership Plan ("ESOP"). The ESOP provides
    retirement benefits for substantially all employees who have completed one
    year of service and have attained the age of 21. The Corporation accounts
    for the ESOP in accordance with Statement of Position (SOP) 93-6,
    "Employers' Accounting for Employee Stock Ownership Plans". SOP 93-6
    requires the measure of compensation expense recorded by employers to equal
    the fair value of ESOP shares allocated to participants during a fiscal
    year. Expense recognized related to the ESOP totaled approximately $120,000
    and $30,000 for fiscal 1997 and 1996, respectively.

    Additionally, the Corporation adopted the First Federal Savings Bank of
    Dover Recognition and Retention Plan ("RRP"). Subsequent to the Conversion,
    the Savings Bank purchased 40,600 shares of the Corporation's common stock
    in the open market. All shares were awarded to certain officers and
    directors of the Savings Bank, under a five year vesting schedule. A
    provision of $61,000 related to the RRP was charged to expense for fiscal
    1997.

    10.  Earnings Per Share

    The provisions of Accounting Principles Board Opinion No. 15, "Earnings Per
    Share", is not applicable for the fiscal years ended June 30, 1996 and 1995,
    as the Corporation completed its conversion to stock form in April 1996.

    Earnings per share is computed based upon weighted-average common shares
    outstanding less shares in the ESOP which are unallocated and not committed
    to be released. Weighted-average shares outstanding, which gives effect to a
    reduction for 114,044 shares held by the ESOP, totaled 1,340,706 for fiscal
    1997.



                                       26
<PAGE>   29

                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    11.  Cash and Cash Equivalents

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

    12.  Fair Value of Financial Instruments

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

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

    The following methods and assumptions were used by the Corporation in
estimating its fair value disclosures for financial instruments at June 30, 1997
and 1996:

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

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

                  Loans receivable: The loan portfolio has been segregated into
                  categories with similar characteristics, such as one- to
                  four-family residential, multi-family residential and
                  nonresidential real estate. These loan categories were further
                  delineated into fixed-rate and adjustable-rate loans. The fair
                  values for the resultant loan categories were computed via
                  discounted cash flow analysis, using current interest rates
                  offered for loans with similar terms to borrowers of similar
                  credit quality. For loans on deposit accounts and consumer and
                  other loans, fair values were deemed to equal the historic
                  carrying values. The historical carrying amount of accrued
                  interest on loans is deemed to approximate fair value.

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





                                       27
<PAGE>   30
                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

    12.  Fair Value of Financial Instruments (continued)

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

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

                  Commitments to extend credit: For fixed-rate and
                  adjustable-rate loan commitments, the fair value estimate
                  considers the difference between current levels of interest
                  rates and committed rates. The difference between the fair
                  value and notional amount of outstanding loan commitments at
                  June 30, 1997 was not material.

    Based on the foregoing methods and assumptions, the carrying value and fair
value of the Corporation's financial instruments at June 30 are as follows:

<TABLE>
<CAPTION>
                                                       1997                    1996
                                              CARRYING       FAIR     CARRYING       FAIR
                                                 VALUE      VALUE        VALUE       VALUE
                                                             (In thousands)
Financial assets
<S>                                            <C>         <C>         <C>         <C>    
  Cash and cash equivalents                    $ 4,080     $ 4,080     $ 2,698     $ 2,698
  Investment securities                         11,393      11,383      11,716      11,683
  Mortgage-backed securities                    15,109      15,248      14,939      15,080
  Loans receivable                              55,504      55,014      48,539      48,373
  Federal Home Loan Bank stock                     642         642         598         598
                                               -------     -------     -------     -------

                                               $86,728     $86,367     $78,490     $78,432
                                               =======     =======     =======     =======

Financial liabilities
  Deposits                                     $57,090     $57,079     $52,208     $52,221
  Advances from the Federal Home Loan Bank       8,382       8,382       5,184       5,187
                                               -------     -------     -------     -------

                                               $65,472     $65,461     $57,392     $57,408
                                               =======     =======     =======     =======
</TABLE>

    13.  Reclassifications

    Certain prior year amounts have been reclassified to conform to the 1997
consolidated financial statement presentation.




                                       28
<PAGE>   31
                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


NOTE B - INVESTMENTS AND MORTGAGE-BACKED SECURITIES

    The amortized cost, gross unrealized gains, gross unrealized losses, and
estimated fair values of investment securities at June 30, 1997 and 1996, are as
follows:

<TABLE>
<CAPTION>
                                                               JUNE 30, 1997
                                                             GROSS        GROSS   ESTIMATED
                                         AMORTIZED      UNREALIZED   UNREALIZED        FAIR
                                              COST           GAINS       LOSSES       VALUE
                                                         (In thousands)
HELD TO MATURITY:
<S>                                        <C>           <C>           <C>           <C>    
  U.S. Government agency obligations       $ 1,469       $    --       $    10       $ 1,459

AVAILABLE FOR SALE:
  U.S. Government and agency
    obligations                              9,931             6            13         9,924
                                           -------       -------       -------       -------

     Total investment securities           $11,400       $     6       $    23       $11,383
                                           =======       =======       =======       =======
</TABLE>

<TABLE>
<CAPTION>
                                                               JUNE 30, 1996
                                                                GROSS        GROSS      ESTIMATED
                                              AMORTIZED    UNREALIZED   UNREALIZED           FAIR
                                                   COST        GAINS        LOSSES          VALUE
                                                                (In thousands)
    HELD TO MATURITY:
<S>                                             <C>           <C>           <C>           <C>    
  U.S. Government agency obligations            $ 2,460       $    --       $    33       $ 2,427

AVAILABLE FOR SALE:
  FHLMC stock                                        51         1,071            --         1,122
  U.S. Government and agency
    obligations                                   8,184            --            50         8,134
                                                -------       -------       -------       -------
     Total investments available for sale         8,235         1,071            50         9,256
                                                -------       -------       -------       -------

     Total investment securities                $10,695       $ 1,071       $    83       $11,683
                                                =======       =======       =======       =======
</TABLE>

    The amortized cost and estimated fair value of U. S. Government and agency
    obligations, including those designated as available for sale, at June 30,
    1997, by term to maturity are shown below.

<TABLE>
<CAPTION>
                                                                              ESTIMATED
                                                            AMORTIZED              FAIR
                                                                 COST             VALUE
                                                                      (In thousands)

<S>                                                          <C>               <C>     
    Due in one year or less                                  $  6,440          $  6,432
    Due after one year through five years                       3,462             3,456
    Due in five to ten years                                    1,498             1,495
                                                             --------          --------

                                                             $ 11,400          $ 11,383
                                                             ========          ========
</TABLE>





                                       29
<PAGE>   32

                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


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

    The amortized cost, gross unrealized gains, gross unrealized losses and
    estimated fair value of mortgage-backed securities at June 30, 1997 and
    1996, are shown below:

<TABLE>
<CAPTION>
                                                                                           1997
                                                                                 GROSS                 GROSS             ESTIMATED
                                                       AMORTIZED            UNREALIZED            UNREALIZED                  FAIR
                                                            COST                 GAINS                LOSSES                 VALUE
                                                                                      (In thousands)
    HELD TO MATURITY:
      Federal Home Loan Mortgage
<S>                                                      <C>                   <C>                   <C>                   <C>    
    Corporation participation certificates               $ 6,450               $   105               $     1               $ 6,554
  Government National Mortgage
    Association participation certificates                   715                    35                    --                   750
                                                         -------               -------               -------               -------
     Total mortgage-backed securities
       held to maturity                                    7,165                   140                     1                 7,304

AVAILABLE FOR SALE:
  Federal National Mortgage
    Association participation certificates                 7,176                    37                    13                 7,200
  Federal Home Loan Mortgage
    Corporation participation certificates                   730                    14                    --                   744
                                                         -------               -------               -------               -------
     Total mortgage-backed securities
       available for sale                                  7,906                    51                    13                 7,944
                                                         -------               -------               -------               -------

     Total mortgage-backed securities                    $15,071               $   191               $    14               $15,248
                                                         =======               =======               =======               =======
</TABLE>

<TABLE>
<CAPTION>
                                                                                          1996
                                                                                 GROSS                 GROSS             ESTIMATED
                                                       AMORTIZED            UNREALIZED            UNREALIZED                  FAIR
                                                            COST                 GAINS                LOSSES                 VALUE
                                                                                    (In thousands)
    HELD TO MATURITY:
      Federal Home Loan Mortgage
<S>                                                      <C>                   <C>                   <C>                   <C>    
    Corporation participation certificates               $ 5,089               $   141               $    --               $ 5,230
  Government National Mortgage
    Association participation certificates                   843                    --                    --                   843
                                                         -------               -------               -------               -------
     Total mortgage-backed securities
       held to maturity                                    5,932                   141                    --                 6,073

AVAILABLE FOR SALE:
  Federal National Mortgage
    Association participation certificates                 4,999                    --                   122                 4,877
  Federal Home Loan Mortgage
    Corporation participation certificates                 4,141                    --                    11                 4,130
                                                         -------               -------               -------               -------
     Total mortgage-backed securities
       available for sale                                  9,140                    --                   133                 9,007
                                                         -------               -------               -------               -------

     Total mortgage-backed securities                    $15,072               $   141               $   133               $15,080
                                                         =======               =======               =======               =======
</TABLE>



                                       30
<PAGE>   33


                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


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

    The amortized cost of mortgage-backed securities, including those designated
    as available for sale at June 30, 1997, by contractual term to maturity are
    shown below. Expected maturities will differ from contractual maturities
    because borrowers may generally prepay obligations without prepayment
    penalties.
<TABLE>
<CAPTION>
                                                               AMORTIZED
                                                                    COST
                                                          (In thousands)

<S>                                                            <C>      
    Due within ten years                                       $     199
    Due after ten years                                           14,872
                                                               ---------

                                                               $  15,071
                                                               ========= 
</TABLE>


NOTE C - LOANS RECEIVABLE

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

<TABLE>
<CAPTION>
                                                                                           1997           1996
                                                                                              (In thousands)
    Residential real estate
<S>                                                                                    <C>             <C>    
      One- to four-family                                                              $ 54,316        $45,745
      Multi-family                                                                        1,158          1,336
    Nonresidential real estate                                                            1,192          1,124
    Consumer and other loans                                                                583          1,390
                                                                                       --------        -------
                                                                                         57,249         49,595
    Less:
      Undisbursed portion of loans in process                                             1,185            614
      Deferred loan origination fees                                                        290            296
      Allowance for losses on loans                                                         270            146
                                                                                       --------       --------
                                                                                       $ 55,504       $ 48,539
                                                                                       ========       ========
</TABLE>

    The Savings Bank's lending efforts have historically focused on one- to
    four-family and multi-family residential real estate loans, which comprise
    approximately $53.7 million, or 97%, of the total loan portfolio at June 30,
    1997, and approximately $46.0 million, or 95%, at June 30, 1996. Generally,
    such loans have been underwritten on the basis of no more than an 80%
    loan-to-value ratio, which has historically provided the Savings Bank with
    adequate collateral coverage in the event of default. Nevertheless, the
    Savings Bank, as with any lending institution, is subject to the risk that
    real estate values could deteriorate in its primary lending area of north
    central Ohio, thereby impairing collateral values. However, management is of
    the belief that real estate values in the Savings Bank's primary lending
    area are presently stable.

    In the ordinary course of business, the Savings Bank has made loans to some
    of its directors, officers and employees and their related business
    interests. In the opinion of management, such loans are consistent with
    sound lending practices and are within applicable regulatory lending
    limitations. The balance of such loans totaled approximately $641,000 and
    $561,000 at June 30, 1997 and 1996, respectively.



                                       31
<PAGE>   34


                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


NOTE D - ALLOWANCE FOR LOAN LOSSES

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

<TABLE>
<CAPTION>
                                                 1997                 1996                1995
                                                                   (In thousands)
<S>                                             <C>                  <C>                 <C>  
    Beginning balance                           $ 146                $  96               $  99
    Provision for losses on loans                 125                   50                  --
    Loan charge-offs                               (1)                  --                  (3)
                                                -----                -----               -----

    Ending balance                              $ 270                $ 146               $  96
                                                =====                =====               =====
</TABLE>

    As of June 30, 1997, the Savings Bank's allowance for loan losses was
    comprised solely of a general loan loss allowance, which is includible as a
    component of regulatory risk-based capital.

    Nonperforming and nonaccrual loans at June 30, 1997, 1996 and 1995, totaled
    $64,000, $117,000 and $131,000, respectively. Interest income that would
    have been recognized had nonaccrual loans performed pursuant to contractual
    terms totaled approximately $2,000, $9,000 and $9,000 for the years ended
    June 30, 1997, 1996 and 1995, respectively.


NOTE E - OFFICE PREMISES AND EQUIPMENT

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

<TABLE>
<CAPTION>
                                                        1997                 1996
                                                             (In thousands)
<S>                                                   <C>                  <C>   
    Land                                              $  314               $  100
    Building and improvements                            502                  382
    Furniture and equipment                              205                  158
                                                      ------               ------
                                                       1,021                  640
      Less accumulated depreciation and
        amortization                                     156                   95
                                                      ------               ------

                                                      $  865               $  545
                                                      ======               ======
</TABLE>

    During fiscal 1996, the Corporation sold its former office building and 
    moved to a new location.  The sale resulted in recognition of a gain 
    totaling $50,000. The new office facility was acquired for a purchase price 
    totaling $438,000.

    During fiscal 1997, the Corporation entered into a commitment for
    construction of a new branch office facility. Construction is estimated to
    be completed before December 1997 at a total cost of approximately $261,000.




                                       32
<PAGE>   35
                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


NOTE F - DEPOSITS

    Deposits consist of the following major classifications at June 30:

<TABLE>
<CAPTION>
    DEPOSIT TYPE AND WEIGHTED-
    AVERAGE INTEREST RATE                                    1997                                     1996
                                                AMOUNT                   %                AMOUNT                  %
                                                                             (In thousands)
<S>                                            <C>                     <C>               <C>                     <C>  
NOW accounts
  1997 - 1.66%                                 $ 5,219                   9.1
  1996 - 2.03%                                                                           $ 4,389                   8.4
Passbook
  1997 - 3.95%                                  17,568                  30.8
  1996 - 3.76%                                                                            14,909                  28.6
                                               -------               -------             -------               -------
Total demand, transaction and
  passbook deposits                             22,787                  39.9              19,298                  37.0

Certificates of deposit
  Original maturities of:
    One year or less
      1997 - 5.24%                              10,236                  17.9
      1996 - 4.90%                                                                         8,433                  16.1
    12 months to 36 months
      1997 - 5.88%                              22,614                  39.6
      1996 - 5.91%                                                                        23,422                  44.9
  Individual retirement accounts
    1997 - 5.60%                                 1,453                   2.6
    1996 - 5.37%                                                                           1,056                   2.0
                                               -------               -------             -------               -------

Total certificates of deposit                   34,303                  60.1              32,911                  63.0
                                               -------               -------             -------               -------

Total deposit accounts                         $57,090                 100.0             $52,208                 100.0
                                               =======               =======             =======               =======
</TABLE>

    The Savings Bank had deposit accounts with balances in excess of $100,000
totaling $3.9 million and $1.9 million at June 30, 1997 and 1996, respectively.

    Interest expense on deposits at June 30 is summarized as follows:

<TABLE>
<CAPTION>
                                            1997                 1996                 1995
                                                             (In thousands)

<S>                                       <C>                  <C>                  <C>   
    Passbook                              $  613               $  473               $  451
    NOW accounts                              85                  103                  102
    Certificates of deposit                1,900                1,888                1,396
                                          ------               ------               ------

                                          $2,598               $2,464               $1,949
                                          ======               ======               ======
</TABLE>




                                       33
<PAGE>   36
                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


NOTE F - DEPOSITS (continued)

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

<TABLE>
<CAPTION>
                                              1997                  1996
                                                  (In thousands)

<S>                                        <C>                   <C>    
    Less than one year                     $23,639               $23,788
    One year to two years                    8,608                 7,656
    Two years to three years                 2,056                 1,467
                                           -------               -------

                                           $34,303               $32,911
                                           =======               =======
</TABLE>


NOTE G - ADVANCES FROM THE FEDERAL HOME LOAN BANK

    Advances from the Federal Home Loan Bank, collateralized at June 30, 1997 by
    a pledge of certain residential mortgage loans totaling $12.6 million and
    the Savings Bank's investment in Federal Home Loan Bank stock, are
    summarized as follows:

<TABLE>
<CAPTION>
    INTEREST                 MATURING IN YEAR
    RATE                     ENDING JUNE 30,               1997                1996

<S>                                  <C>              <C>                    <C>   
    6.20%                            1997             $   -                  $2,200
    5.48% - 5.69%                    1998                   780               1,480
    5.57% - 5.78%                    1998                 1,180               1,480
    5.81% - 5.88%                    1999                 3,900               -
    5.62%                            2004                 2,500               -
    8.15%                            2005                    22                  24
                                                        -------             -------

                                                         $8,382              $5,184
                                                          =====               =====

    Weighted-average interest rate                         5.76%               5.79%
                                                           ====                ==== 
</TABLE>


NOTE H - FEDERAL INCOME TAXES

    Federal income taxes differ from the amounts computed at the statutory 
    corporate tax rate at June 30 as follows:

<TABLE>
<CAPTION>
                                                                            1997           1996           1995
                                                                                     (In thousands)
<S>                                                                        <C>            <C>            <C> 
    Federal income taxes at statutory rate                                  $725           $326           $247
    Increase in taxes resulting from:
      Other (primarily nontaxable interest income in 1997)                   (20)             1              1
                                                                            ----          -----          -----
    Federal income taxes per consolidated
      financial statements                                                  $705           $327           $248
                                                                           =====           ====           ====

    Effective tax rate                                                     33.1%           34.1%          34.1%
                                                                           ====            ====           ==== 
</TABLE>



                                       34
<PAGE>   37


                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


NOTE H - FEDERAL INCOME TAXES (continued)

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

<TABLE>
<CAPTION>
Taxes (payable) refundable on temporary                       1997                1996
differences at statutory rate:                                        (In thousands)
                                               
Deferred tax assets:                           
<S>                                                          <C>                  <C>  
  Deferred loan origination fees                             $  16                $  27
  Retirement expense                                            53                   32
  General loan loss allowance                                   92                   50
  ESOP expense                                                  49                   10
  Other                                                          1                    3
                                                             -----                -----
     Deferred tax assets                                       211                  122

Deferred tax liabilities:
  Federal Home Loan Bank stock dividends                       (99)                 (85)
  Difference between book and tax depreciation                 (22)                 (14)
  Percentage of earnings bad debt deduction                    (95)                 (95)
  Unrealized gains on securities designated
    as available for sale                                      (12)                (302)
                                                             -----                -----
     Deferred tax liabilities                                 (228)                (496)
                                                             -----                -----

     Net deferred tax liability                              $ (17)               $(374)
                                                             =====                =====
</TABLE>

    The Savings Bank was allowed a special bad debt deduction generally limited
    to 8% of otherwise taxable income and subject to certain limitations based
    on aggregate loans and deposit account balances at the end of the year. If
    the amounts that qualify as deductions for federal income taxes are later
    used for purposes other than bad debt losses, including distributions in
    liquidation, such distributions will be subject to federal income taxes at
    the then current corporate income tax rate. Retained earnings at June 30,
    1997, include approximately $1.9 million for which federal income taxes have
    not been provided. The approximate amount of unrecognized deferred tax
    liability relating to the cumulative bad debt deduction was approximately
    $550,000 at June 30, 1997. See Note K for additional information regarding
    the Savings Bank's future percentage of earnings bad debt deductions.



                                       35
<PAGE>   38


                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


NOTE I - LOAN COMMITMENTS

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

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

    At June 30, 1997, the Savings Bank had outstanding commitments of
    approximately $1.8 million to originate loans. Additionally, the Savings
    Bank was obligated under unused lines of credit totaling $785,000. In the
    opinion of management, all loan commitments equaled or exceeded prevalent
    market interest rates as of June 30, 1997, and will be funded from normal
    cash flow from operations.


NOTE J - REGULATORY CAPITAL

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

    The minimum capital standards of the OTS generally require the maintenance
    of regulatory capital sufficient to meet each of three tests, hereinafter
    described as the tangible capital requirement, the core capital requirement
    and the risk-based capital requirement. The tangible capital requirement
    provides for minimum tangible capital (defined as shareholders' equity less
    all intangible assets) equal to 1.5% of adjusted total assets. The core
    capital requirement provides for minimum core capital (tangible capital plus
    certain forms of supervisory goodwill

                                       36
<PAGE>   39


                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


NOTE J - REGULATORY CAPITAL (continued)

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

    As of June 30, 1997, management believes that the Savings Bank met all
    capital adequacy requirements to which it is subject.

                              AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
                                                                                                 TO BE "WELL-
                                                                                              CAPITALIZED" UNDER
                                                                    FOR CAPITAL                PROMPT CORRECTIVE 
                                            ACTUAL               ADEQUACY PURPOSES             ACTION PROVISIONS       
                                        ----------------         -----------------           -------------------
                                        AMOUNT     RATIO         AMOUNT      RATIO           AMOUNT        RATIO
                                        ------     -----         ------      -----           ------        ----- 
                                                                   (In thousands)    
<S>                                     <C>        <C>           <C>         <C>             <C>            <C> 
    Tangible capital                    $13,320    16.4%         =>$1,216    =>1.5%          =>$4,053     =>  5.0%

    Core Capital                        $13,320    16.4%         =>$2,432    =>3.0%          =>$4,863     =>  6.0%

    Risk-based capital                  $13,590    37.5%         =>$2,895    =>8.0%          =>$3,619     =>10.0%
</TABLE>

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




                                       37
<PAGE>   40


                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


NOTE K - LEGISLATIVE DEVELOPMENTS

    The deposit accounts of the Savings Bank and of other savings associations
    are insured by the Federal Deposit Insurance Corporation ("FDIC") through
    the Savings Association Insurance Fund ("SAIF"). The reserves of the SAIF
    were below the level required by law, because a significant portion of the
    assessments paid into the fund were used to pay the cost of prior thrift
    failures. The deposit accounts of commercial banks are insured by the FDIC
    through the Bank Insurance Fund ("BIF"), except to the extent such banks
    have acquired SAIF deposits. The reserves of the BIF met the level required
    by law in May 1995. As a result of the respective reserve levels of the
    funds, deposit insurance assessments paid by healthy savings associations
    exceeded those paid by healthy commercial banks by approximately $.19 per
    $100 in deposits in 1995. In fiscal 1996 and 1997, no BIF assessments were
    required for healthy commercial banks except for a $2,000 minimum fee.

    Legislation was enacted to recapitalize the SAIF that provided for a special
    assessment totaling $.657 per $100 of SAIF deposits held at March 31, 1995,
    in order to increase SAIF reserves to the level required by law. The Savings
    Bank held $49.2 million in deposits at March 31, 1995, resulting in an
    assessment of approximately $332,000, or $219,000 after-tax, which was
    charged to operations in fiscal 1997.

    A component of the recapitalization plan provided for the merger of the SAIF
    and BIF on January 1, 1999. However, the SAIF recapitalization legislation
    currently provides for an elimination of the thrift charter or of the
    separate federal regulation of thrifts prior to the merger of the deposit
    insurance funds. As a result, the Savings Bank would be regulated as a bank
    under federal laws which would subject it to the more restrictive activity
    limits imposed on national banks. In the opinion of management, such
    activity limit restrictions would not have a material effect on the
    Corporation's financial position or results of operations.

    Under separate legislation related to the recapitalization plan, the Savings
    Bank is required to recapture as taxable income approximately $281,000 of
    its tax bad debt reserve, which represents the post-1987 additions to the
    reserve, and will be unable to utilize the percentage of earnings method to
    compute its bad debt deduction in the future. The Savings Bank has provided
    deferred taxes for this amount and will be permitted to amortize the
    recapture of the bad debt reserve in taxable income over six years.





                                       38
<PAGE>   41


                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


NOTE L- CONDENSED FINANCIAL STATEMENTS OF FFD FINANCIAL CORPORATION

    The following condensed financial statements summarize the financial
    position of FFD Financial Corporation as of June 30, 1997 and 1996, and the
    results of its operations for the periods then ended.

                            FFD FINANCIAL CORPORATION
                        STATEMENTS OF FINANCIAL CONDITION
                                    June 30,
                                 (In thousands)

<TABLE>
<CAPTION>
     ASSETS                                                               1997                    1996

<S>                                                                   <C>                     <C>     
Cash and due from banks                                               $    460                $    621
Investment securities                                                    6,430                   1,977
Mortgage-backed securities                                                  --                   4,385
Loan receivable from ESOP                                                1,131                   1,164
Investment in First Federal Savings Bank of Dover                       13,348                  13,190
Accrued interest receivable                                                128                      80
Prepaid expenses and other assets                                           30                      --
                                                                      --------                --------

     Total assets                                                     $ 21,527                $ 21,417
                                                                      ========                ========

     LIABILITIES AND SHAREHOLDERS' EQUITY

Accrued federal income taxes                                          $     47                $     --
Deferred federal income taxes                                               --                       6
                                                                      --------                --------
     Total liabilities                                                      47                       6

Shareholders' equity
  Common stock                                                              --                      --
  Additional paid-in capital                                            14,137                  14,132
  Unrealized gain on securities designated as available
    for sale, net of related tax effects                                    20                     586
  Retained earnings                                                      8,957                   7,857
  Shares acquired by stock benefit plans                                (1,634)                 (1,164)
                                                                      --------                --------
     Total shareholders' equity                                         21,480                  21,411
                                                                      --------                --------

     Total liabilities and shareholders' equity                       $ 21,527                $ 21,417
                                                                      ========                ========
</TABLE>

                                       39
<PAGE>   42

                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995

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

                            FFD FINANCIAL CORPORATION
                             STATEMENTS OF EARNINGS
                              Period ended June 30,
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                            1997                    1996
Revenue
<S>                                                                     <C>                     <C>     
  Interest income                                                       $    476                $    120
  Equity in earnings of subsidiary                                         1,243                     176
                                                                        --------                --------
     Total revenue                                                         1,719                     296

General and administrative expenses                                          219                      22
                                                                        --------                --------

     Earnings before income taxes                                          1,500                     274

Federal income taxes                                                          73                      20
                                                                        --------                --------

     NET EARNINGS                                                       $  1,427                $    254
                                                                        ========                ========

                        FFD FINANCIAL CORPORATION
                        STATEMENTS OF CASH FLOWS
                          Period ended June 30,
                             (In thousands)

                                                                            1997                    1996

Cash provided by (used in) operating activities:
  Net earnings for the year                                             $  1,427                $    254
  Adjustments to reconcile net earnings to net
    cash provided by (used in) operating activities:
    Undistributed earnings of consolidated subsidiary                     (1,243)                   (194)
    Loss on sale of mortgage-backed and investment
      securities                                                              12                      --
    Increase (decrease) in cash due to changes in:
      Prepaid expenses and other assets                                      (10)                    (79)
      Other liabilities                                                       (3)                     50
                                                                        --------                --------
      Net cash provided by operating activities                              203                      31

Cash flows provided by (used in) investing activities:
  Proceeds from repayment of loan to ESOP                                     33                      --
  Proceeds from maturities of investment securities                        9,948                      --
  Purchase of investment securities                                      (15,391)                 (1,999)
  Proceeds from sale of investment securities                                994                      --
  Purchase of mortgage-backed securities                                      --                  (4,479)
  Principal repayment on mortgage-backed securities                          444                      21
  Proceeds from sale of mortgage-backed securities                         3,935                      --
  Purchase of common shares of First Federal Savings
    Bank of Dover                                                             --                  (4,757)
  Issuance of loan to ESOP                                                    --                  (1,164)
                                                                        --------                --------
      Net cash used in investing activities                                  (37)                (12,378)

Cash flows provided by (used in) financing activities:
  Proceeds from issuance of common stock                                      --                  12,968
  Payment of dividends on common stock                                      (327)                     --
                                                                        --------                --------
      Net cash provided by (used in) financing activities                   (327)                 12,968
                                                                        --------                --------

Net (increase) decrease in cash and cash equivalents                        (161)                    621

Cash and cash equivalents at beginning of period                             621                      --
                                                                        --------                --------

Cash and cash equivalents at end of period                              $    460                $    621
                                                                        ========                ========
</TABLE>


                                       40
<PAGE>   43
                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


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

    As a condition to regulatory approval of the stock conversion and
    reorganization to the holding company form of ownership, the Savings Bank
    agreed to limit the amount of dividends payable to the Corporation.
    Regulations of the Office of Thrift Supervision (OTS) impose limitations on
    the payment of dividends and other capital distributions by savings
    associations. Under such regulations, a savings association that,
    immediately prior to, and on a pro forma basis after giving effect to, a
    proposed capital distribution, has total capital (as defined by OTS
    regulation) that is equal to or greater than the amount of its fully
    phased-in capital requirement is generally permitted without OTS approval
    (but subsequent to 30 days prior notice to the OTS of the planned dividend)
    to make capital distributions during a calendar year in the amount of up to
    the greater of (i) 100% of its net earnings to date during the year plus an
    amount equal to one-half of the amount by which its total capital-to-assets
    ratio exceeded its fully phased-in capital-to-assets ratio at the beginning
    of the year or (ii) 75% of its net earnings for the most recent four
    quarters. Pursuant to such OTS dividend regulations, the Savings Bank had
    the ability to pay dividends of approximately $5.0 million to the
    Corporation at June 30, 1997.


    NOTE M- STOCK OPTION PLAN

    The Corporation initiated the FFD Financial Corporation 1996 Stock Option
    and Incentive Plan (the "Plan") in October 1996 upon shareholder approval of
    the Plan that provides for the issuance of 145,475 shares of authorized, but
    unissued shares of common stock. The Board of Directors granted stock
    options to purchase 100,458 shares of the Corporation's common stock to
    officers and directors at a weighted-average exercise price of $11.56 per
    share.

    The Corporation applies Accounting Principles Board Opinion No. 25 and
    related Interpretations in accounting for the Plan. Accordingly, no
    compensation cost has been recognized for the Plan. Had compensation cost
    for the Corporation's stock option plan been determined based on the fair
    value at the grant dates for awards under the Plan consistent with the
    accounting method utilized in SFAS No. 123, the Company's net earnings and
    earnings per share for the year ended June 30, 1997 would have been reduced
    to the pro forma amounts indicated below:


<TABLE>
<CAPTION>
<S>                                                                 <C>   
    Net earnings                            As reported             $1,427
                                                                    ======

                                            Pro-forma               $1,407
                                                                    ======

    Earnings per share                      As reported              $1.07
                                                                     =====

                                            Pro-forma                $1.05
                                                                     =====
</TABLE>




                                       41
<PAGE>   44


                            FFD FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


    NOTE M- STOCK OPTION PLAN (continued)

    The fair value of each option grant is estimated on the date of grant using
    the modified Black-Scholes options-pricing model with the following
    weighted-average assumptions used; dividend yield of 2.25% and expected
    volatility of 30.0%; risk-free interest rate of 6.0% and expected life of
    ten years.

    A summary of the status of the Corporation's fixed stock option plans as of
June 30, 1997, and changes during the year then ended is presented below:

<TABLE>
<CAPTION>
                                                                                                     WEIGHTED-
                                                                                                       AVERAGE
                                                                                                      EXERCISE
                                                                                       SHARES            PRICE

<S>                                                                                <C>                  <C>   
    Outstanding at beginning of year                                                    -               $    -
    Granted                                                                           100,458           $11.56
    Exercised                                                                           -               $    -
    Forfeited                                                                           5,125           $11.25
                                                                                    ---------
    Outstanding at end of year                                                         95,333           $11.58

    Options exercisable at year-end                                                     -
    Weighted-average fair value of
      options granted during the year                                                                   $11.56

    The following information applies to options outstanding at June 30, 1997:

    Number outstanding                                                                                   95,333
    Range of exercise prices                                                                    $11.25 - $13.75
    Weighted-average exercise price                                                                      $11.58
    Weighted-average remaining contractual life in years                                                   9.33
</TABLE>


NOTE N - CORPORATE REORGANIZATION AND CONVERSION TO STOCK FORM

    On November 14, 1995, the Savings Bank's Board of Directors adopted a Plan
    of Conversion whereby the Savings Bank would convert to the stock form of
    ownership, followed by the issuance of all of the Savings Bank's outstanding
    common stock to a newly formed holding company, FFD Financial Corporation.

    On April 2, 1996, the Savings Bank completed its conversion to the stock
    form of ownership, and issued all of the Savings Bank's outstanding common
    shares to the Corporation.




                                       42
<PAGE>   45

                            FFD FINANCIAL CORPORATION


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                          June 30, 1997, 1996 and 1995


NOTE N - CORPORATE REORGANIZATION AND CONVERSION TO STOCK FORM (continued)


    In connection with the conversion, the Corporation sold 1,454,750 shares at
    a price of $10.00 per share which, after consideration of offering expenses
    totaling approximately $416,000, and shares purchased by employee benefit
    plans totaling $1.2 million, resulted in net cash proceeds of approximately
    $13.0 million.

    At the date of the conversion, the Savings Bank established a liquidation
    account in an amount equal to retained earnings reflected in the statement
    of financial condition used in the conversion offering circular. The
    liquidation account will be maintained for the benefit of eligible savings
    account holders who maintained deposit accounts in the Savings Bank after
    conversion.

    In connection with the Conversion, the Corporation paid National Capital
    Companies LLC approximately $170,000. A partner of National Capital
    Companies LLC also serves as an outside director to FFD Financial
    Corporation.




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<PAGE>   46

                               FFD FINANCIAL CORP.
                                       AND
                       FIRST FEDERAL SAVINGS BANK OF DOVER
                        DIRECTORS AND EXECUTIVE OFFICERS



                              BOARD OF DIRECTORS OF
                          FFD FINANCIAL CORPORATION AND
                       FIRST FEDERAL SAVINGS BANK OF DOVER

                               Stephen G. Clinton
                                    President
                         National Capital Companies LLC

                                Robert R. Gerber
                                    President
                     First Federal Savings Bank of Dover and
                            FFD Financial Corporation

                                 J. Richard Gray
                                    Chairman
                              Hanhart Agency, Inc.

                                Richard J. Herzig
                               Chairman - Retired
                        Toland-Herzig Funeral Homes, Inc.

                              Roy O. Mitchell, Jr.
                           Managing Officer - Retired
                       First Federal Savings Bank of Dover

                                Robert D. Sensel
                      President and Chief Executive Officer
                             Dover Hydraulics, Inc.



                              EXECUTIVE OFFICERS OF
                            FFD FINANCIAL CORPORATION

                                Robert R. Gerber
                                    President

                               Charles A. Bradley
                                    Treasurer

                               Shirley A. Wallick
                                    Secretary

                              EXECUTIVE OFFICERS OF
                       FIRST FEDERAL SAVINGS BANK OF DOVER

                                Robert R. Gerber
                                    President

                               Charles A. Bradley
                       Treasurer, Chief Financial Officer
                               and Vice President

                               Shirley A. Wallick
                                    Secretary




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<PAGE>   47
                              SHAREHOLDER SERVICES


Registrar and Transfer Company serves as transfer agent and dividend
distributing agent for FFD's shares. Communications regarding change of address,
transfer of shares, lost certificates and dividends should be sent to:

                         Registrar and Transfer Company
                                10 Commerce Drive
                         Cranford, New Jersey 07016-3572
                                 (800) 368-5948


                                 ANNUAL MEETING


The Annual Meeting of Shareholders of FFD Financial Corporation will be held on
October 14, 1997, at 1:00 p.m., Eastern Time, at the office of FFD, 321 North
Wooster Avenue, Dover, Ohio 44622. Shareholders are cordially invited to attend.


                          ANNUAL REPORT ON FORM 10-KSB


A copy of FFD's Annual Report on Form 10-KSB, as filed with the Securities and
Exchange Commission, will be available at no charge to shareholders upon request
to:

                            FFD Financial Corporation
                            321 North Wooster Avenue
                                Dover, Ohio 44622
                              Attention: Secretary





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