<PAGE>   1

                                   FORM 10-KSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

[ X ]    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [Fee Required]

For the Fiscal Year Ended June 30, 1998
                          -------------

                                       OR

[   ]    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [No Fee Required]

For the transition period from______________to________________

                         Commission File Number: 0-25906

                               ASB FINANCIAL CORP.
                 ----------------------------------------------
                 (Name of small business issuer in its charter)

              Ohio                                            31-1429488
-------------------------------                           ----------------------
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                           Identification Number)

  503 Chillicothe Street, Portsmouth, Ohio 45662      Issuer's telephone number:
---------------------------------------------------   --------------------------
(Address of principal executive offices) (Zip Code)        (740) 354-3177

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

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

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

         Check if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

         The issuer's revenues for the fiscal year ended June 30, 1998 were $8.8
million.

         Based upon the average of the bid and asked prices quoted by the Nasdaq
National Market, the aggregate market value of the voting stock held by
non-affiliates of the issuer on September 23, 1998, was approximately $15.5
million.

         1,654,788 of the issuer's common shares were issued and outstanding on
September 24, 1998.

                       DOCUMENTS INCORPORATED BY REFERENCE

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


<PAGE>   2



                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

         ASB Financial Corp. ("ASB"), an Ohio corporation, is a unitary savings
and loan holding company which owns all of the issued and outstanding common
shares of American Savings Bank, fsb ("American"), a federal savings bank
chartered under the laws of the United States. On May 10, 1995, ASB acquired all
of the common shares issued by American upon its conversion from a mutual
savings association to a stock savings association (the "Conversion").

GENERAL

         American is principally engaged in the business of originating real
estate loans secured by first mortgages on one- to four-family residential real
estate located in American's primary market area, which consists of the City of
Portsmouth and contiguous areas of Scioto County, Ohio. American also makes
loans secured by multifamily real estate (over four units) and nonresidential
real estate and secured and unsecured consumer loans. In addition, American
purchases interests in multifamily real estate and nonresidential real estate
loans originated and serviced by other lenders. American also invests in
mortgage-backed securities, U.S. Government agency obligations, obligations of
state and political subdivisions, and other investments permitted by applicable
law. Funds for lending and other investment activities are obtained primarily
from savings deposits, which are insured up to applicable limits by the Federal
Deposit Insurance Corporation (the "FDIC"), and loan principal and
mortgage-backed security repayments.

         American conducts business from its office in Portsmouth, Ohio.
American's primary market area for lending consists of Scioto County, Ohio, and
for deposits consists of Scioto County and adjacent communities in the North
Central Kentucky area.

         As a savings and loan holding company, ASB 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 federal savings bank,
American is subject to regulation, supervision and examination by the OTS and
the FDIC.

         ASB's activities have been limited primarily to holding the common
stock of American since acquiring such common stock in connection with the
Conversion. Consequently, the following discussion focuses primarily on the
business of American.

LENDING ACTIVITIES

         GENERAL. American's principal lending activity is the origination of
conventional real estate loans, including construction loans, secured by one- to
four-family residential real estate located in American's primary market area.
Loans secured by multifamily properties containing five units or more and
nonresidential properties, including construction loans, are also offered by
American. American also purchases interests in multifamily real estate loans and
nonresidential real estate loans originated and serviced by other financial
institutions. American does not originate first mortgage loans insured by the
Federal Housing Authority or guaranteed by the Veterans Administration. In
addition to real estate lending, American originates consumer loans, including
automobile loans, loans secured by deposit accounts, home improvement loans and
a limited number of unsecured loans.

                                      -2-
<PAGE>   3


         LOAN PORTFOLIO COMPOSITION. The following table presents certain
information with respect to the composition of American's loan portfolio at the
dates indicated:
<TABLE>
<CAPTION>
                                                                           At June 30,
                                             --------------------------------------------------------------------------
                                                    1998                      1997                        1996
                                             --------------------     --------------------         --------------------
                                                         Percent                  Percent                      Percent
                                                         of total                 of total                     of total
                                              Amount      loans        Amount      loans            Amount      loans
                                             -------     --------     --------    --------         -------     --------
                                                                        (Dollars in thousands)

<S>                                          <C>            <C>        <C>            <C>          <C>             <C>  
Real estate loans:
    One- to four-family residential          $55,707        70.6%      $50,481        66.3%        $48,302         68.0%
    Multifamily                                5,184         6.6         7,721        10.1           8,265         11.6
    Nonresidential and land                    5,712         7.2         5,520         7.3           3,401          4.8
    Construction                               1,425         1.8           926         1.2           2,318          3.3
    Home equity                                4,485         5.7         3,464         4.6           1,800          2.5
    Commercial                                 1,929         2.4         2,824         3.7           2,412          3.4
                                             -------     -------      --------    --------         -------     --------
      Total real estate loans                 74,442        94.3        70,936        93.2          66,498         93.6
Consumer and other loans:
    Passbook                                     744          .9           556          .7             586           .8
    Home improvement                           1,286         1.6         1,462         1.9           1,433          2.0
    Automobile                                 1,772         2.3         2,087         2.8           2,199          3.1
    Other                                        707          .9         1,091         1.4             350           .5
                                             -------     -------      --------    --------         -------     --------
      Total consumer and other loans           4,509         5.7         5,196         6.8           4,568          6.4
                                             -------     -------      --------    --------         -------     --------


Total loans                                   78,951      100.00%       76,132       100.0%         71,066        100.0%
                                                         =======                  ========                     ========
Less:

    Loans in process                           1,452                       978                       1,529
    Net deferred loan origination fees and
      unearned discounts                         190                       198                         198
    Allowance for loan losses                    759                       820                         884
                                             -------                  --------                     -------   


Total loans net                              $76,550                   $74,136                     $68,455
                                             =======                  ========                     =======

</TABLE>


         LOAN MATURITY. The following table sets forth the contractual maturity
of American's total loans at June 30, 1998, before consideration of net items:

<TABLE>
<CAPTION>


Due during the fiscal          One- to                                                 Consumer
year ending June 30,       four-family (1)    Multifamily     Nonresidential (2)    and other (3)        Total
--------------------       ---------------    ------------    ------------------    -------------        -----
                                                               (In thousands)

<S>                            <C>                 <C>                <C>               <C>              <C>   
1999                           $2,237              $440               $491              $6,005           $9,173
2000                            2,416               474                530               1,179            4,599
2001                            2,609               512                571                 890            4,582
2002-2003                       5,862             1,147              1,281               1,303            9,593
2004-2008                      19,292             2,611              1,750                 793           24,446
2009-2013                      14,093                 -              1,089                 753           15,935
2014 and thereafter            10,623                 -                  -                   -           10,623
                             --------        ----------        -----------        ------------         --------

                              $57,132            $5,184             $5,712             $10,923          $78,951
                             ========        ==========        ===========        ============         ========

</TABLE>
-----------------------------

(1) Includes construction loans.

(2) Includes land development loans.

(3) Includes commercial and home equity loans.

                                      -3-


<PAGE>   4

         LOANS SECURED BY ONE- TO FOUR-FAMILY REAL ESTATE. The principal lending
activity of American is the origination of permanent conventional loans secured
by one- to four-family residences, primarily single-family homes, located within
American's primary market area. Each of such loans is secured by a first
mortgage on the underlying real estate and improvements thereon, if any. At June
30, 1998, American's one- to four-family residential real estate loan portfolio,
including certain construction loans secured by one- to four-family residences,
was approximately $57.0 million, or 72.1% of total loans.

         OTS regulations limit the amount which American may lend in
relationship to the appraised value of the real estate and improvements (the
"Loan-to-Value Ratio" or "LTV") at the time of loan origination. In accordance
with such regulations, American makes loans on one- to four-family residences
with LTVs of up to 95%. The principal amount of any loan which exceeds an 85%
LTV at the time of origination is usually covered by private mortgage insurance
at the expense of the borrower.

         Fixed-rate loans are offered by American, currently for terms of up to
30 years, however, most of the fixed-rate loans in American's portfolio have
terms of 15 years or less.

         Adjustable-rate residential real estate loans ("ARMs") are offered by
American for terms of up to 30 years. The interest rate adjustment periods on
the ARMs are either one year or three years. The interest rate adjustments on
one-year and three-year ARMs presently originated by American are tied to the
one-year and three-year U.S. Treasury securities rates or the Previously
Occupied Homes index published by the Federal Home Loan Bank (the "FHLB"). The
maximum allowable adjustment at each adjustment date is 2% with a maximum
adjustment of 6% over the term of the loan. The initial rate on a three-year ARM
is typically higher than the initial rate on a one-year ARM to compensate for
the reduced interest rate sensitivity.

         Adjustable-rate loans decrease American's interest rate risk but
involve other risks, primarily credit risk. As interest rates rise, the payment
by the borrower rises to the extent permitted by the terms of the loan, thereby
increasing the potential for default. At the same time, the marketability of the
underlying property may be adversely affected by higher interest rates.

         American also offers home equity loans for current mortgage customers
on one- to four-family residences with LTV's of up to 100%. At June 30, 1998,
American's home equity loans totaled $4.5 million, or 5.7% of total loans.

         LOANS SECURED BY MULTIFAMILY REAL ESTATE. In addition to loans on one-
to four-family properties, American originates and purchases interests in loans
secured by multifamily properties containing over four units. Multifamily loans
originated by American have terms of up to 15 years and a maximum LTV of 75%.
Approximately 70% of the multifamily real estate loans held by American are
participation interests in loans originated and serviced by other financial
institutions and secured by real estate located in Ohio, Kentucky, Florida and
North Carolina. See "Loan Originations, Purchases and Sales."

         Multifamily lending is generally considered to involve a higher degree
of risk than one- to four-family residential lending because the borrower
typically depends upon income generated by the project to cover operating
expenses and debt service. The profitability of a project can be affected by
economic conditions, government policies and other factors beyond the control of
the borrower. American attempts to reduce the risk associated with multifamily
lending by evaluating the creditworthiness of the borrower and the projected
income from the project and by obtaining personal guarantees on loans made to
corporations and partnerships. American requires that borrowers submit rent
rolls and that all borrowers submit financial statements annually to enable
American to monitor the loan.

         At June 30, 1998, loans secured by multifamily properties totaled
approximately $5.2 million, or 6.6% of total loans.

         LOANS SECURED BY NONRESIDENTIAL REAL ESTATE AND LAND. At June 30, 1998,
approximately $5.7 million, or 7.2% of American's total loans, were secured by
nonresidential real estate and land. The majority of such loans have adjustable
rates and terms of up to 15 years. Among the properties securing nonresidential
real estate loans are office buildings, retail properties, warehouses, a hotel
and an automobile dealership located in American's primary market area. Also
included in

                                      -4-

<PAGE>   5


American's nonresidential real estate loan portfolio are $895,000 in
participation interests which have been purchased in loans originated by other
financial institutions.

         American has one land loan with a principal balance of $607,000 secured
by developed land which has been subdivided for single-family home construction
in Scioto County. Loans for the construction of nonresidential real estate are
occasionally made by American. At June 30, 1998, American had outstanding
nonresidential real estate construction loans with an aggregate balance of
$177,000.

         Although the loans secured by nonresidential real estate typically have
higher interest rates and shorter terms to maturity than one- to four-family
residential real estate loans, nonresidential real estate lending is generally
considered to involve a higher degree of risk than residential lending due to
the relatively larger loan amounts and the effects of general economic
conditions on the successful operation of income-producing properties. American
has endeavored to reduce such risk by evaluating the credit history and past
performance of the borrower, the location of the real estate, the financial
condition of the borrower, the quality and characteristics of the income stream
generated by the property and appraisals supporting the property's valuation.

         CONSTRUCTION LOANS. Loans for the construction of single-family houses
are made to individuals for the construction and permanent financing of their
primary residences. Such loans are offered with adjustable and fixed rates for
terms of up to 30 years. During the first year, while the residence is being
constructed, the borrower is required to pay interest only.

         Construction loans generally involve greater underwriting and default
risks than do loans secured by mortgages on existing properties. Loan funds are
advanced upon the security of the project under construction, which is more
difficult to value before the completion of construction. Moreover, because of
the uncertainties inherent in estimating construction costs, it is relatively
difficult to evaluate accurately the LTV and the total loan funds required to
complete a project. In the event a default on a construction loan occurs and
foreclosure follows, American would have to take control of the project and
attempt either to arrange for completion of construction or dispose of the
unfinished project. At June 30, 1998, construction loans, in the aggregate,
totaled $1.4 million, or 1.8% of American's total loans. Approximately 94% of
American's construction loans are secured by property in Scioto County.

         COMMERCIAL REAL ESTATE LOANS. At June 30, 1998, approximately $1.9
million, or 2.4% of American's total loans were secured by commercial real
estate. American originates commercial loans for a maximum term of 15 years and
which are secured by real estate with a LTV of up to 75%. These extensions of
credit are typically secured by office buildings, retail stores and other
commercial properties.

         CONSUMER AND OTHER LOANS. American makes various types of consumer
loans, including loans made to depositors on the security of their deposit
accounts, automobile loans, home improvement loans and other secured loans,
including a loan to an automobile dealer leasing group, and unsecured personal
loans. Consumer loans, other than loans on deposits, are made at fixed rates of
interest only and for varying terms based on the type of loan. At June 30, 1998,
American had approximately $4.5 million, or 5.7% of total loans, invested in
consumer and other loans.

         Home improvement loans include loans insured by the Federal Housing
Administration. Home improvement loans typically have a five-year term and fixed
rates of interest.

         Consumer loans, particularly consumer loans which are unsecured or are
secured by rapidly depreciating assets such as automobiles, may entail greater
risk than do residential real estate loans. Repossessed collateral for a
defaulted consumer loan may not provide an adequate source of repayment of the
outstanding loan balance. The risk of default on consumer loans increases during
periods of recession, high unemployment and other adverse economic conditions.

         LOAN SOLICITATION AND PROCESSING. Loan originations are developed from
a number of sources, including continuing business with depositors, other
borrowers and real estate developers, solicitations by American's lending staff
and walk-in customers.

         Loan applications for permanent real estate loans are taken by loan
personnel. American obtains a credit report, verification of employment and
other documentation concerning the creditworthiness of the borrower. An
appraisal of the fair market value of the real estate which will be given as
security for the loan is prepared by a fee appraiser approved by the

                                      -5-

<PAGE>   6


Board of Directors. Upon the completion of the appraisal and the receipt of
information on the credit history of the borrower, the application for a loan is
submitted for review in accordance with American's underwriting guidelines to
American's Executive Committee, the members of which are Directors Smith,
Jenkins, Burke and Schoettle. Any loan for more than $100,000 must be reviewed
and approved by the full Board of Directors.

         If a real estate loan application is approved, either an attorney's
opinion or title insurance is obtained on the real estate which will secure the
mortgage loan. Most of the loans in American's portfolio have an attorney's
opinion. Borrowers are required to carry satisfactory fire and casualty
insurance and flood insurance, if applicable, and to name American as an insured
mortgagee.

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

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

         LOAN ORIGINATIONS, PURCHASES AND SALES. Currently, American is
originating both fixed-rate and ARM loans for its portfolio and not with the
intention of selling such loans in the secondary market. The documentation for
most of the loans in American's portfolio does not conform to the secondary
market standards of the Federal Home Loan Mortgage Corporation ("FHLMC") or the
Federal National Mortgage Association (" FNMA").

         To supplement loan demand in its primary market area, American
purchases participation interests in multifamily and nonresidential real estate
loans originated and serviced by other financial institutions. See "Loans
Secured by Multifamily Real Estate" and "Loans Secured by Nonresidential Real
Estate and Land." American does not purchase participation interests through
brokers. Recent loan participations have been purchased primarily from a savings
bank and a mortgage banking affiliate of a commercial bank headquartered in
Ohio. Whole loans or participation interests purchased by American conform to
American's underwriting criteria for loans originated by American. American
intends to continue to purchase loans as suitable investment opportunities
become available.

                                      -6-
<PAGE>   7




         The following table presents American's loan origination, purchase and
sale activity for the periods indicated:

<TABLE>
<CAPTION>
                                                        Year ended June 30,
                                                 ------------------------------
                                                   1998       1997       1996
                                                 --------   --------   --------
                                                          (In thousands)
<S>                                              <C>        <C>        <C>     
Loans originated:
  Adjustable-rate:

   One- to four-family real estate ...........   $  1,499   $  1,385   $  1,827
   Multifamily real estate ...................         55        352        636
   Nonresidential real estate ................        528      2,298        112
                                                 --------   --------   --------
    Total adjustable-rate ....................      2,082      4,035      2,575

  Fixed-rate:

   One- to four-family real estate ...........     15,022      9,886     11,324
   Nonresidential real estate ................        446       --          424
   Consumer ..................................      7,563      8,582      9,562
                                                 --------   --------   --------
    Total fixed-rate .........................     23,031     18,468     21,310

Loans purchased ..............................      2,183        773      1,711
                                                 --------   --------   --------

    Total loans originated and purchased .....     27,296     23,276     25,596

Reductions:

   Principal repayments ......................     24,815     17,697     18,715
   Transfers from loans to real estate
    owned and repossessed assets .............        157       --          138
                                                 --------   --------   --------
     Total reductions ........................     24,972     17,697     18,853
Increase (decrease) in other

   items, net (1) ............................         90        102       (441)
                                                 --------   --------   --------
Net increase .................................   $  2,414   $  5,681   $  6,302
                                                 ========   ========   ========
</TABLE>

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

(1) Consists of loans in process, unearned discounts and deferred loan
    origination fees and allowance for loan losses.


         FEDERAL LENDING LIMIT. OTS regulations impose a lending limit on the
aggregate amount that a savings association can lend to any one borrower to an
amount equal to 15% of the association's total capital for risk-based capital
purposes plus any loan reserves not already included in total capital (the
"Lending Limit Capital"). A savings association may loan to one borrower an
additional amount not to exceed 10% of the association's Lending Limit Capital,
if the additional amount is fully secured by certain forms of "readily
marketable collateral." Real estate is not considered "readily marketable
capital." In applying this limit, the regulations require that loans to certain
related or affiliated borrowers be aggregated. An exception to this limit
permits loans of any type to one borrower of up to $500,000. In addition, the
OTS, under certain circumstances, may permit exceptions to the lending limit on
a case-by-case basis.

         Based on the 15% limit, American was able to lend approximately $2.3
million to one borrower at June 30, 1998. The largest loan American had
outstanding to one borrower at June 30, 1998, was $1.4 million. Such loan was
secured by automobile titles, assignments of leases and a guarantee of the
leasing company and was current at June 30, 1998.

         LOAN ORIGINATION AND OTHER FEES. American realizes loan origination
fees and other fee income from its lending activities and also realizes income
from late payment charges, application fees and fees for other miscellaneous
services.

         Loan origination fees and other fees are a volatile source of income,
varying with the volume of lending, loan repayments and general economic
conditions. All nonrefundable loan origination fees and certain direct loan
origination costs are deferred and recognized in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 91 as an adjustment to yield over
the life of the related loan.

                                      -7-


<PAGE>   8


         DELINQUENT LOANS, NONPERFORMING ASSETS AND CLASSIFIED ASSETS.
Delinquent loans are loans for which payment has not been received within 30
days of the payment due date. Loan payments are due on the first day of the
month with the portion of the payment applicable to interest to accrue during
the current month. When loan payments have not been made by the thirtieth of the
month, late notices are sent. If payment is not received by the sixtieth day,
second notices are sent and telephone calls are made to the borrower. Each loan
bears a late payment penalty which is assessed as soon as such loan is more than
30 days delinquent. The late penalty for real estate loans is 3% and for
consumer loans is 5% of the payment due.

         When a loan secured by real estate becomes delinquent more than 90
days, the Board of Directors reviews the loan and foreclosure proceedings are
normally instituted and an appraisal of the collateral is performed. If the
appraisal indicates that the value of the collateral is less than the book value
of the loan, a valuation allowance is established for such loan. When a consumer
loan becomes more than 90 days past due, a specific allowance for loss is
established for the amount of the loan.

                                      -8-

<PAGE>   9



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

 
<TABLE>
<CAPTION>
                                                                     At June 30, 1998
                          ---------------------------------------------------------------------------------------------------------
                            Residential real estate    Nonresidential real estate          Consumer                  Total
                          ---------------------------  -------------------------  ------------------------   ----------------------

                          Number      Amount    % (1)   Number    Amount   % (1)  Number    Amount   % (1)   Number    Amount  % (1)
                          ------     -------    -----   ------    ------   -----  ------    ------   -----   ------    ------  ----
                                                                      (Dollars in thousands)

<S>                        <C>      <C>         <C>      <C>       <C>     <C>     <C>     <C>        <C>     <C>     <C>       <C> 
Loans delinquent for:
  30-59 days                40       $1,117      1.4%      -       $ -      -%      13     $  60      .1%      53     $1,177    1.5%
  60-89 days                 7          276       .4       -         -      -        4        24       -       11        300     .4
  90 days and over           8          168       .2       -         -      -       12        72      .1       20        240     .3
                          ------     -------    -----   ------    ------   -----  ------    ------   -----   ------   ------   ----

  Total delinquent
  loans                     55       $1,561      2.0%      -       $ -      -%      29     $ 156      .2%      84     $1,717    2.2%
                          ======     =======    =====   ======    ======   =====  ======   =======   =====   ======   ======   ====

</TABLE>


<TABLE>
<CAPTION>
                                                                     At June 30, 1997
                          ---------------------------------------------------------------------------------------------------------
                            Residential real estate    Nonresidential real estate          Consumer                  Total
                          ---------------------------  -------------------------  ------------------------   ----------------------

                          Number      Amount    % (1)   Number    Amount   % (1)  Number    Amount   % (1)   Number    Amount  % (1)
                          ------     -------    -----   ------    ------   -----  ------    ------   -----   ------    ------  ----
                                                                      (Dollars in thousands)

<S>                        <C>      <C>         <C>      <C>       <C>     <C>     <C>     <C>        <C>     <C>     <C>       <C> 

Loans delinquent for:
  30-59 days                39       $1,199      1.6%      -       $ -      - %     10     $  41      .1%      49     $1,240    1.7%
  60-89 days                17          830      1.1       -         -      -        8        32       -       25        862    1.1
  90 days and over           6        1,052      1.4       -         -      -       10        93      .1       16      1,145    1.5
                          ------     -------    -----   ------    ------   -----  ------    ------   -----   ------   ------   ----

  Total delinquent
  loans                     62       $3,081      4.1%      -       $ -      - %     28     $ 166      .2%      90     $3,247    4.3%

                          ======     =======    =====   ======    ======   =====  ======   =======   =====   ======   ======   ====


</TABLE>


<TABLE>
<CAPTION>

                                                                     At June 30, 1996
                          ---------------------------------------------------------------------------------------------------------
                            Residential real estate    Nonresidential real estate          Consumer                  Total
                          ---------------------------  -------------------------  ------------------------   ----------------------

                          Number      Amount    % (1)   Number    Amount   % (1)  Number    Amount   % (1)   Number    Amount  % (1)
                          ------     -------    -----   ------    ------   -----  ------    ------   -----   ------    ------  ----
                                                                      (Dollars in thousands)

<S>                        <C>      <C>         <C>      <C>       <C>     <C>     <C>     <C>        <C>     <C>     <C>       <C> 
Loans delinquent for:
  30-59 days                42       $1,386      2.0%      -      $  -      - %     17     $  65      .1%      59     $1,451    2.0%
  60-89 days                14        1,317      1.8       1        38      -        9        41      .1       24      1,396    2.0
  90 days and over           9        1,026      1.4       1       115     .2        8        17       -       18      1,158    1.6
                          ------     -------    -----   ------    ------   -----  ------    ------   -----   ------   ------   ----

  Total delinquent
  loans                     65       $3,729      5.2%      2      $153     .2%      34     $ 123      .2%     101     $4,005    5.6%
                          ======     =======    =====   ======    ======   =====  ======   =======   =====   ======   ======   ====

</TABLE>

------------------------------------
(1) Percentages correlate to total loans before net items.

                                      -9-


<PAGE>   10


         Nonperforming assets include non-accrual loans, accruing loans which
are delinquent 90 days or more, restructured loans, real estate acquired by
foreclosure or by deed-in-lieu thereof and repossessed assets. Loans are placed
on non-accrual status when, in the judgment of management, the probability of
collection of interest is deemed insufficient to warrant further accrual.

         The following table sets forth information with respect to the accrual
and nonaccrual status of American's loans and other nonperforming assets at the
dates indicated:

<TABLE>
<CAPTION>

                                                                       At June 30,
                                                      --------------------------------------------
                                                        1998              1997               1996
                                                      --------          --------           -------
<S>                                                       <C>            <C>               <C>    
Non-accrual loans:
  One- to four-family                                     $168           $    87           $   164
  Nonresidential                                             -                 -               115
  Multifamily                                                -               862               862
  Consumer                                                   -                42                17
                                                      --------          --------           -------
   Total                                                   168               991             1,158

Accruing loans delinquent
  90 days or more:                                          72               154                 -
                                                      --------          --------           -------
   Total nonperforming loans                               240             1,145             1,158

Real estate acquired through foreclosure:
  One- to four-family                                      157                 -                 -
  Nonresidential                                             -                 -               663
  Multifamily                                                -                 -                 -
                                                      --------          --------           -------
   Total real estate acquired through
    foreclosure                                            157                 -               663
                                                      --------          --------           -------

  Total nonperforming assets                              $397            $1,145            $1,821
                                                      ========          ========           =======
  Allowance for loan losses                               $759           $   820           $   884
                                                      ========          ========           =======

  Nonperforming assets as a percent
    of  total assets (1)                                  .34%              1.02%             1.61%

  Allowance for loan losses as a percent of
    nonperforming loans                                316.25%             71.62%            76.34%

  Allowance for loan losses as a percent of
    nonperforming assets                               191.18%             71.62%            48.54%

</TABLE>

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

(1) The applicable asset totals are $116.4 million, $112.5 million and
    $112.9 million for the fiscal years ended June 30, 1998, 1997 and 1996,
    respectively.


         For the year ended June 30, 1998, gross interest income which would
have been recorded had non-accrual loans been current in accordance with their
original terms was $6,000 and no interest was recorded on such loans during such
period.

         Real estate acquired by American as a result of foreclosure proceedings
is classified as real estate owned ("REO") until it is sold. When property is so
acquired it is recorded by American at the estimated fair value of the real
estate, less estimated selling expenses, at the date of acquisition, and any
write-down resulting therefrom is charged to the allowance for loan losses.
Interest accrual, if any, ceases no later than the date of acquisition of the
real estate, and all costs incurred from

                                      -10-

<PAGE>   11

such date in maintaining the property are expensed. Costs relating to the
development and improvement of the property are capitalized to the extent of
fair value.

         American classifies its own assets on a regular basis in accordance
with federal regulations. Problem assets are classified as "substandard,"
"doubtful" or "loss." "Substandard" assets have one or more defined weaknesses
and are characterized by the distinct possibility that American will sustain
some loss if the deficiencies are not corrected. "Doubtful" assets have the same
weaknesses as "substandard" assets, with the additional characteristics that (i)
the weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable and (ii) there is a high
possibility of loss. An asset classified "loss" is considered uncollectible and
of such little value that its continuance as an asset of American is not
warranted.

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

<TABLE>
<CAPTION>
                                                      At June 30,
                                     --------------------------------------------
                                        1998             1997              1996
                                     ----------       ----------        ---------

<S>                                      <C>              <C>             <C>   
Classified assets
  Substandard                            $  993           $949            $1,804
  Doubtful                                    -              -                 -
  Loss                                        8             42                59
                                     ----------       ----------        ---------

   Total classified assets               $1,001           $991            $1,863
                                     ==========       ==========        =========

</TABLE>


         American establishes general allowances for loan losses for loans
classified as substandard or doubtful. Generally, American charges off the
portion of any real estate loan deemed to be uncollectible, whereas a loss
classification and corresponding reserve is used for consumer loans.

         American analyzes each classified asset on a monthly basis to determine
whether changes in the classifications are appropriate under the circumstances.
Such analysis focuses on a variety of factors, including the amount of any
delinquency and the reasons for the delinquency, if any, the use of the real
estate securing the loan, the status of the borrower and the appraised value of
the real estate. As such factors change, the classification of the asset will
change accordingly.

         ALLOWANCE FOR LOAN LOSSES. Senior management, with oversight by the
Board of Directors, reviews on a monthly basis the allowance for loan losses as
it relates to a number of relevant factors including, but not limited to, trends
in the level of delinquent and nonperforming assets and classified loans,
current and anticipated economic conditions in American's primary lending area,
such as unemployment data and the consumer price index, past loss experience and
losses arising from specific problem assets. To a lesser extent, management also
considers loan concentrations to single borrowers and changes in the composition
of the loan portfolio. While management believes that it uses the best
information available to determine the allowance for loan losses, unforeseen
market conditions could result in adjustments, and net earnings could be
adversely affected if circumstances differ substantially from the assumptions
used in making the final determination.

                                      -11-


<PAGE>   12


         The following table sets forth an analysis of American's allowance for
loan losses for the periods indicated:

<TABLE>
<CAPTION>

                                                              For the year ended June 30,
                                                          ------------------------------------
                                                            1998           1997         1996
                                                          --------       --------     --------
                                                                   (Dollars in thousands)

<S>                                                           <C>            <C>          <C> 
Balance at beginning of period                                $820           $884         $893
Charge-offs:
  Residential real estate loans (1)                            (47)           (22)          (9)
  Nonresidential real estate loans                               -            (64)           -
  Consumer loans                                                (9)            (6)           -
                                                          --------       --------     --------
  Total charge-offs                                            (56)           (92)          (9)
Recoveries                                                       -              -            -
                                                          --------       --------     --------
Net charge-offs                                                (56)           (92)          (9)
                                                          --------       --------     --------
Provision for (recoveries of) losses on loans                   (5)            28            -
                                                          --------       --------     --------

  Balance at end of period                                    $759           $820         $884
                                                          ========       ========     ========


  Ratio of net charge-offs to average loans
     outstanding during the period                             .07%           .13%        .01%
</TABLE>
------------------------------

(1) Includes multifamily loans.

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

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

<S>                                         <C>          <C>          <C>             <C>             <C>            <C>  
Balance at year end applicable to:

   Real estate loans                        $47          94.3%        $216            93.2%           $309           93.6%
   Consumer loans                            11           5.7           42             6.8              13            6.4
   Unallocated                              701             -          562              -              562              -
                                         ------    -------------     ------      -------------      ------      -------------
   Total                                   $759         100.0%        $820           100.0%           $884          100.0%
                                         ======    =============     ======      =============      ======      =============

</TABLE>


INVESTMENT ACTIVITIES

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

                                      -12-

<PAGE>   13


         The following table sets forth the composition of American's
investments, other than mortgage-backed securities, at the dates indicated:
<TABLE>
<CAPTION>
                                                                         At June 30,
                                           ------------------------------------------------------------------------
                                                    1998                     1997                      1996
                                           ---------------------     ---------------------     --------------------
                                           Carrying      Percent     Carrying      Percent     Carrying     Percent
                                             Value      of total       Value      of total       Value     of total
                                           ---------     --------     --------     --------     --------    --------
                                                                     (Dollars in thousands)

<S>                          <C>             <C>            <C>       <C>             <C>       <C>           <C>  
Investments designated as held to maturity:
    Interest-bearing deposits in other
      financial institutions (1)             $15,399        56.5%     $  7,732        29.3%     $10,127       34.4%

Investments designated as available for sale:
    U.S. Government agency obligations        10,766        39.5        17,960        68.0       18,771       63.8
    Corporate equity securities                  128          .5             -           -            -          -
    FHLMC stock                                  941         3.5           700         2.7          513        1.8
                                           ---------     --------     --------     --------     --------    --------

    Total investments designated
      as available for sale                   11,835        43.5        18,660        70.7       19,284       65.6
                                           ---------     --------     --------     --------     --------    --------


Total investments                            $27,234       100.0%      $26,392       100.0%     $29,411      100.0%
                                           =========     ========     ========     ========     ========    ========

</TABLE>
-----------------------------

(1) Includes interest-bearing deposits and certificates of deposit.

(2) At June 30, 1998, 1997 and 1996, the market value of American's investment
    securities, held to maturity, totaled $15.4 million, $7.7 million and
    $10.1 million, respectively.

         The following table sets forth information regarding the maturities,
book value and weighted average yields of American's investment securities,
other than mortgage-backed securities, at June 30, 1998:

<TABLE>
<CAPTION>

                             Less than 1 Year          1-5 Years              5-10 Years           10-20 Years           Total
                            -------------------  --------------------   --------------------   ------------------  -----------------
                                       Weighted              Weighted               Weighted             Weighted
                            Amortized   average  Amortized    average   Amortized   average    Amortized  average  Amortized  Market
                              cost       yield     cost        yield      cost       yield       cost      yield     cost     value
                            ---------  --------  ---------   --------   ---------   --------   --------- --------  ---------  ------
                                                                 (Dollars in thousands)
 
<S>                           <C>        <C>      <C>         <C>      <C>                     <C>                   <C>      <C>   
Investments designated as
  held to maturity:
  Certificates of deposit
    in other financial
    institutions              $1,266     6.46%    $  738      6.36%    $      -         -%     $     -         -%    $2,004   $2,004
Investments designated as
  available for sale:
  U.S. Government
    agency obligations           995     5.53      1,500      6.24        5,166      7.06        3,068      7.25     10,729   10,766
  Corporate equity                 -        -          -         -            -         -            -         -        140      128
    securities
  FHLMC stock                      -        -          -         -            -         -           20       941
                            ---------  --------  ---------   --------   ---------   --------   --------- --------  ---------  ------

       Total                  $2,261     6.05%    $2,238      6.28%    $  5,166      7.06%      $3,068      7.25%   $12,893  $13,839
                            =========  ========  =========   ========   =========   ========   ========= ========  =========  ======

</TABLE>


         In addition to the foregoing investment securities, American has been
an active purchaser of mortgage-backed securities. At June 30, 1998,
mortgage-backed securities totaled $8.9 million, or 7.66% of total assets. All
of the mortgage-backed securities in American's portfolio are
government-guaranteed securities, primarily participations or pass-through
securities, issued by the Government National Mortgage Association ("GNMA"), the
FHLMC or the FNMA. In addition, American does invest in collateralized mortgage
obligations ("CMOs").

                                      -13-

<PAGE>   14


         American generally purchases mortgage-backed securities at or near par
in order to avoid prepayment risk. The following table sets forth details of
American's investment in mortgage-backed securities, of which all are designated
as available for sale, at the dates indicated.
<TABLE>
<CAPTION>

                                                    At June 30, 1998                                  At June 30, 1997            
                                -----------------------------------------------   ----------------------------------------------  
                                              Gross       Gross                                  Gross       Gross                
                                Amortized   unrealized  unrealized    Estimated    Amortized   unrealized  unrealized Estimated   
                                  cost        gains       losses     fair value      cost        gains       losses   fair value  
                                ------       ------       -----       ------    ---------     --------      ------   ---------   
                                                                                                  (In thousands)

<S>                             <C>           <C>          <C>        <C>          <C>             <C>         <C>      <C>       
Available for sale:
  FHLMC participation
     certificates               $2,007        $  41        $  4       $2,044       $3,067          $34         $34      $3,067    
  FNMA participation
     certificates                  850           26           9          867        1,637           23          21       1,639    
  GNMA participation
     certificates                4,919           86           3        5,002        3,817           61          24       3,854    
  Collateralized mortgage
     obligations                 1,014            4           7        1,011            -            -           -           -    
                                ------       ------       -----       ------    ---------     --------      ------   ---------  
    Total mortgage-backed
    securities                  $8,790         $157        $ 23       $8,924       $8,521         $118         $79      $8,560    
                                ======         ====        ====       ======       ======         ====         ===      ======    

</TABLE>


<TABLE>
<CAPTION>

                                                    At June 30, 1996
                                 --------------------------------------------
                                             Gross       Gross
                                Amortized  unrealized  unrealized  Estimated
                                  cost       gains       losses    fair value
                               ------------ --------   --------  -----------
                               

<S>                               <C>            <C>       <C>     <C>    
Available for sale:
  FHLMC participation
     certificates                 $4,119         $38       $ 57    $ 4,100
  FNMA participation
     certificates                  2,135          30         27      2,138
  GNMA participation
     certificates                  4,463          81         54      4,490
  Collateralized mortgage
     obligations                          -        -          -            -
                               ------------ --------   --------  -----------
    Total mortgage-backed
    securities                   $10,717        $149       $138    $10,728
                                 =======        ====       ====    =======
</TABLE>

                                      -14-



<PAGE>   15


DEPOSITS AND BORROWINGS

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

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

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

<TABLE>
<CAPTION>

                                           1998                       1997                       1996
                                   ---------------------      --------------------      ----------------------
                                                Percent                   Percent                      Percent
                                                of total                  of total                    of total
                                    Amount      deposits       Amount     deposits       Amount       deposits
                                   --------    ---------      --------    --------      --------      --------
                                                              (Dollars in thousands)

<S>                                 <C>           <C>         <C>           <C>         <C>              <C> 
  Transaction accounts:
    Passbook accounts               $7,440        8.0%        $ 7,379       8.2%        $ 7,225          8.7%
    Demand, NOW and Super NOW
     accounts                        5,867        6.3           4,435       4.9           3,448          4.1
    Money market deposit
     accounts                        7,999        8.5           7,785       8.7           9,001         10.8
                                   --------    ---------      --------    --------      --------      --------

      Total transaction             21,306       22.8          19,599      21.8          19,674         23.6
        accounts

  Certificates of deposit:
     4.00 - 4.99%                      421         .5             402        .4             474           .5
     5.00 - 5.99%                   45,033       48.2          52,404      58.4          27,525         33.0
     6.00 - 6.99%                   26,630       28.5          17,265      19.2          35,638         42.7
     7.00 - 7.99%                       31          -              30        .1              36           .1
     8.00 - 8.99%                       56          -              52        .1              48           .1
                                   --------    ---------      --------    --------      --------      --------

      Total certificates of
       deposit                      72,171       77.2          70,153      78.2          63,721         76.4
                                   --------    ---------      --------    --------      --------      --------

    Total deposits                 $93,477      100.0%        $89,752     100.0%        $83,395        100.0%
                                   ========    =========      ========    ========      ========      ========

</TABLE>

                                      -15-

<PAGE>   16



         The following table sets forth the remaining maturities of American's
certificates of deposit at the dates indicated:
<TABLE>
<CAPTION>
                                                                      June 30,
                                              -------------------------------------------------------------
                                                 1998                     1997                      1996
                                              ----------               ----------                 ---------
                                                                     (In thousands)

<S>                                              <C>                      <C>                       <C>    
  Less than one year                             $51,581                  $42,468                   $44,345
  One to two years                                18,247                   22,606                    10,065
  Two to three years                               1,928                    4,095                     5,748
  Over three years                                   415                      984                     3,563
                                              ----------               ----------                 ---------

                                                 $72,171                  $70,153                   $63,721
                                                 =======                  =======                   =======

</TABLE>


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

<TABLE>
<CAPTION>

                                                                                   At June 30, 1998
                                                                                ----------------------
  Certificates of deposit with balances of $100,000                             (In thousands) or more
     maturing in quarter ending (1):

<S>                                                                                    <C>     
      September 30, 1998                                                                $    679
      December 31, 1998                                                                    2,589
      March 31, 1999                                                                       2,546
      June 30, 1999                                                                        1,942
      After  June 30, 1999                                                                 3,764
                                                                                        --------


       Total certificates of deposit with balances of $100,000 or more                  $ 11,520
                                                                                        ========
</TABLE>

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

(1) Account balances over $100,000 are not insured by the FDIC.


         The following table sets forth American's deposit account balance
activity for the periods indicated:
<TABLE>
<CAPTION>
                                             Year ended June 30,
                                   -------------------------------------------
                                      1998            1997              1996
                                   ---------        ---------        ---------
                                             (Dollars in thousands)


<S>                                <C>              <C>              <C>      
  Beginning balance .........      $  89,752        $  83,395        $  78,888
  Deposits ..................        120,166          118,033           91,423
  Withdrawals ...............       (119,802)        (114,836)         (89,410)
  Interest credited .........          3,361            3,160            2,494
                                   ---------        ---------        ---------
  Ending balance ............      $  93,477        $  89,752        $  83,395
                                   =========        =========        =========

  Net increase ..............      $   3,725        $   6,357        $   4,507
                                   =========        =========        =========
  Percent increase ..........           4.15%            7.62%            5.71%
                                   =========        =========        =========

</TABLE>


         BORROWINGS. American's other sources of funds include advances from the
FHLB. As a member of the FHLB, American is required to own capital stock in the
FHLB and is authorized to apply for advances from the FHLB. Each FHLB credit
program has its own interest rate, which may be fixed or variable, and range of
maturities. The FHLB may prescribe the acceptable uses for these advances, as
well as limitations on the size of the advances and repayment provisions. In
addition to American's advances from the FHLB, ASB has borrowed money at June
30, 1998 and 1997, totaling $2.5 million and $500,000 at respective interest
rates of 8.50% and 8.88%, maturing in 1999 and 2001, respectively.

                                      -16-

<PAGE>   17



         The following table sets forth certain information as to American's
FHLB advances and ASB's other borrowings at the dates indicated:
<TABLE>
<CAPTION>
                                                                        At June 30,
                                                    -----------------------------------------------------
                                                     1998                     1997                  1996
                                                    ------                   ------                ------
                                                                 (Dollars in thousands)

<S>                                                 <C>                      <C>                   <C>   
FHLB advances                                       $4,354                   $2,884                $2,413
Weighted  average  interest  rate of FHLB
   advances                                           5.16%                    5.65%                 4.95%

Other borrowed money                                $2,500                     $500                     -
Weighted  average  interest rate of other
   borrowed money                                     8.50%                    8.88%                    -
</TABLE>

         The following table sets forth the maximum balance and average balance
of FHLB advances and other borrowings during the periods indicated:

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

<S>                                                 <C>                      <C>                   <C>   
FHLB advances:
   Maximum balance                                  $4,354                   $2,889                   $2,413
   Average balance                                   3,130                    2,489                      684
   Weighted average interest rate                     5.90%                    5.65%                    5.12%

Other borrowed money:
   Maximum balance                                  $2,500                     $500                        -
   Average balance                                     378                      333                        -
   Weighted average interest rate                     8.84%                    8.88%                       -
</TABLE>


COMPETITION

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

SUBSIDIARY ACTIVITIES

         American has one wholly-owned subsidiary, A.S.L. Services, Inc.
("ASL"), which owns stock in American's data processing service provider. At
June 30, 1998, the stock held by the service corporation had a book value of
$15,000. Additionally, during the year ended June 30, 1996, American distributed
$18,000 to ASL which was invested in the Money Concepts Financial Planning
Center, bringing the total assets of ASL to approximately $33,000 at June 30,
1998.

PERSONNEL

         As of June 30, 1998, American had 20 full-time employees and 4
part-time employees. American believes that relations with its employees are
excellent. American offers health, disability and life benefits and has
established the ASB

                                      -17-

<PAGE>   18


Financial Corp. Employee Stock Ownership Plan. None of the employees of American
are represented by a collective bargaining unit.

YEAR 2000

         As with most providers of financial services, American's operations are
heavily dependent on information technology systems. American is addressing the
potential problems associated with the possibility that the computers that
control or operate American's information technology system and infrastructure
may not be programmed to read four-digit date codes and, upon arrival of the
year 2000, may recognize the two-digit code "00" as the year 1900, causing
systems to fail to function or to generate erroneous data. American is working
with the companies that supply or service its information technology systems to
identify and remedy any year 2000 related problems.

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

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

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

                                   REGULATION

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

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

                                      -18-

<PAGE>   19

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

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

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

                                                                        At June 30, 1998
                                                              ------------------------------------
                                                                  Amount                   Percent
                                                                 --------                   -----
                                                              (In thousands)

<S>                                                               <C>                        <C>  
                      Tangible capital                            $14,690                    12.8%
                      Requirement                                   1,725                     1.5
                                                                 --------                   -----
                      Excess                                      $12,965                    11.3%
                                                                 ========                   =====

                      Core capital                                $14,690                    12.8%
                      Requirement                                   3,451                     3.0
                                                                 --------                   -----
                      Excess                                      $11,239                     9.8%
                                                                 ========                   =====

                      Total capital                               $15,391                    27.5%
                      Risk-based requirement                        4,479                     8.0
                                                                 --------                   -----
                      Excess                                      $10,912                    19.5%
                                                                 ========                   =====

</TABLE>


         Current capital requirements call for tangible capital (which for
American is equity capital under generally accepted accounting principles less
the unrealized gain on available-for-sale securities) of 1.5% of adjusted total
assets, core capital (which for American consists of tangible capital) of 3.0%
of adjusted total assets and risk-based capital (which for American consists of
core capital plus general valuation reserves of $701,000) of 8% of risk-weighted
assets. The OTS has proposed to amend the core capital requirement so that those
associations that do not have the highest examination rating and exceed an
acceptable level of risk will be required to maintain core capital of from 4% to
5%, depending on the association's examination rating and overall risk. American
does not anticipate that it will be adversely affected if the core capital
requirement regulation is amended as proposed. American's current core capital
level is 12.8% of adjusted total assets.

         The OTS has adopted an interest rate risk component to the risk-based
capital requirement, though the implementation of that component has been
delayed. Pursuant to that requirement, a savings association would have to
measure the effect of an immediate 200 basis point change in interest rates on
the value of its portfolio, as determined under the methodology established by
the OTS. If the measured interest rate risk is above the level deemed normal
under the

                                      -19-


<PAGE>   20



regulation, the association will be required to deduct one-half of that excess
exposure from its total capital when determining its level of risk-based
capital. In general, an association with less than $300 million in assets and a
risk-based capital ratio of greater than 12% will not be subject to the interest
rate risk component. American does not currently qualify for such exemption.
Pending implementation of the interest rate risk component, the OTS has the
authority to impose a higher individualized capital requirement on any savings
association it deems to have excess interest rate risk. The OTS also may adjust
the risk-based capital requirement on an individual basis for any association to
take into account risks due to concentrations of credit and non-traditional
activities.

         The OTS has adopted regulations governing prompt corrective action to
resolve the problems of capital deficient and otherwise troubled savings
associations. At each successively lower defined capital category, an
association is subject to more restrictive and numerous mandatory or
discretionary regulatory actions or limits, and the OTS has less flexibility in
determining how to resolve the problems of the institution. The OTS has defined
these capital levels as follows: (1) well-capitalized associations must have
total risk-based capital of at least 10%, core risk-based capital (consisting
only of items that qualify for inclusion in core capital) of at least 6% and
core capital of at least 5%; (2) adequately capitalized associations are those
that meet the regulatory minimum of total risk-based capital of at least 8%,
core risk-based capital (consisting only of items that qualify for inclusion in
core capital) of at least 4% and core capital of at least 4% (except for
associations receiving the highest examination rating and with an acceptable
level of risk, in which case the level is at least 3%); (3) undercapitalized
associations are those that do not meet regulatory limits, but that are not
significantly undercapitalized; (4) significantly undercapitalized associations
have total risk-based capital of less than 6%, core risk-based capital
(consisting only of items that qualify for inclusion in core capital) of less
than 3% or core capital of less than 3%; and (5) critically undercapitalized
associations are those with tangible equity of less than 2% of total assets. In
addition, the OTS generally can downgrade an association's capital category,
notwithstanding its capital level, if, after notice and opportunity for hearing,
the association is deemed to be engaging in an unsafe or unsound practice
because it has not corrected deficiencies that resulted in it receiving a less
than satisfactory examination rating on matters other than capital or it is
deemed to be in an unsafe or unsound condition. An undercapitalized association
must submit a capital restoration plan to the OTS within 45 days after it
becomes undercapitalized. Such an association will be subject to increased
monitoring and asset growth restrictions and will be required to obtain prior
approval for acquisitions, branching and engaging in new lines of business.
Furthermore, critically undercapitalized institutions must be placed in
conservatorship or receivership within 90 days of reaching that capitalization
level, except under limited circumstances. American's capital at June 30, 1998,
meets the standards for a well-capitalized institution.

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

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

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

                                      -20-

<PAGE>   21


of net income over the four most recent quarters. Tier 3 associations do not
meet current minimum capital requirements and must obtain OTS approval of any
capital distribution.

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

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

         LIQUIDITY. OTS regulations require that each savings association
maintain an average daily balance of liquid assets (cash, certain time deposits,
bankers' acceptances and specified United States government, state or federal
agency obligations) equal to a monthly average of not less than 4% of its net
withdrawable savings deposits plus borrowings payable in one year or less.
Monetary penalties may be imposed upon associations failing to meet liquidity
requirements. The eligible liquidity of American, as computed under current
regulations, at June 30, 1998, was approximately $19.6 million, or 19.8% and
exceeded the 4.0% liquidity requirement by approximately $15.6 million.

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

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

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

         All transactions between savings associations and their affiliates must
comport with Sections 23A and 23B of the Federal Reserve Act ("FRA"). An
affiliate of a savings association is any company or entity that controls, is
controlled by or

                                      -21-

<PAGE>   22


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

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

         The FDIC is required to maintain designated levels of reserves in each
fund. The FDIC may increase assessment rates for either fund if necessary to
restore the fund's ratio of reserves to insured deposits to its target level
within a reasonable time and may decrease such rates if such target level has
been met. The FDIC has established a risk-based assessment system for both SAIF
and BIF members. Under this system, assessments vary based on the risk the
institution poses to its deposit insurance fund. The risk level is determined
based on the institution's capital level and the FDIC's level of supervisory
concern about the institution.

         Because of the differing reserve levels of the funds, deposit insurance
assessments paid by healthy banks were reduced significantly below the level
paid by healthy savings associations effective in mid-1995. Federal legislation,
which was effective September 30, 1996, provided for the recapitalization of the
SAIF by means of a special assessment of $.657 per $100 of SAIF deposits held at
March 31, 1995, in order to increase SAIF reserves to the level required by law.
American had $83.8 million in deposits at March 31, 1995, and paid a special
assessment of $551,000, which was accounted for and recorded as of September 30,
1996. BIF assessments for healthy banks in 1997 were $.013 per $100 in deposits
and SAIF assessments for healthy institutions in 1997 were $.064 per $100 in
deposits. American paid $57,000 in SAIF assessments in fiscal 1998 compared to
$114,000 in fiscal 1997, exclusive of the special assessment.

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

         FEDERAL HOME LOAN BANKS. The FHLBs provide credit to their members in
the form of advances. American is a member of the FHLB of Cincinnati and must
maintain an investment in the capital stock of that FHLB in an amount equal to
the greater of 1.0% of the aggregate outstanding principal amount of American's
residential mortgage loans, home purchase contracts and similar obligations at
the beginning of each year, or 5% of its advances from the FHLB. American is in
compliance with this requirement with an investment in stock of the FHLB of
Cincinnati of $725,000 at June 30, 1998.

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

         Each FHLB is required to establish standards of community investment or
service that its members must maintain for continued access to long-term
advances from the FHLBs. The standards take into account a member's performance
under

                                      -22-

<PAGE>   23


the Community Reinvestment Act and its record of lending to first-time home
buyers. All long-term advances by each FHLB must be made only to provide funds
for residential housing finance.

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

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

         The HOLA generally prohibits a savings and loan holding company from
controlling any other savings association or savings and loan holding company,
without prior approval of the OTS, or from acquiring or retaining more than 5%
of the voting shares of a savings association or holding company thereof, which
is not a subsidiary. Under certain circumstances, a savings and loan holding
company is permitted to acquire, with the approval of the OTS, up to 15% of the
previously unissued voting shares of an undercapitalized savings association for
cash without such savings association being deemed to be controlled by the
holding company. Except with the prior approval of the OTS, no director or
officer of a savings and loan holding company or person owning or controlling by
proxy or otherwise more than 25% of such company's stock may also acquire
control of any savings institution, other than a subsidiary institution, or any
other savings and loan holding company.

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

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

         MERGER MORATORIUM STATUTE. Chapter 1704 of the Ohio Revised Code
regulates certain takeover bids affecting certain public corporations with
significant ties to Ohio. The statute prohibits, with some exceptions, any
merger, combination or consolidation and any of certain other sales, leases,
distributions, dividends, exchanges, mortgages or transfers

                                      -23-

<PAGE>   24


between such an Ohio corporation and any person who has the right to exercise,
alone or with others, 10% or more of the voting power of such corporation (an
"Interested Shareholder"), for three years following the date on which such
person first becomes an Interested Shareholder. Such a business combination is
permitted only if, prior to the time such person first becomes an Interested
Shareholder, the Board of Directors of the issuing corporation has approved the
purchase of shares that resulted in such person first becoming an Interested
Shareholder.

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

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

         CONTROL SHARE ACQUISITION. Section 1701.831 of the Ohio Revised Code
(the "Control Share Acquisition Statute") requires that, with certain
exceptions, acquisitions of voting securities which would result in the
acquiring shareholder owning 20%, 33 1/3%, or 50% of the outstanding voting
securities of an Ohio corporation (a "Control Share Acquisition") must be
approved in advance by (a) the holders of at least a majority of the outstanding
voting shares of such corporation represented at a meeting at which a quorum is
present, and (b) a majority of the portion of the outstanding voting shares
represented at such a meeting excluding the voting shares owned by the acquiring
shareholder, by certain other persons who acquire or transfer voting shares
after public announcement of the acquisition or by certain officers of the
corporation or directors of the corporation who are employees of the
corporation. The Control Share Acquisition Statute was intended, in part, to
protect shareholders of Ohio corporations from coercive tender offers.

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

FEDERAL TAXATION

         ASB and American are each subject to the federal tax laws and
regulations which apply to corporations generally. In addition to the regular
income tax, ASB and American may be subject to the alternative minimum tax which
is imposed at a minimum tax rate of 20% on "alternative minimum taxable income"
(which is the sum of a corporation's regular taxable income, with certain
adjustments, and tax preference items), less any available exemption. Such tax
preference items include interest on certain tax-exempt bonds issued after
August 7, 1986. In addition, 75% of the amount by which a corporation's
"adjusted current earnings" exceeds its alternative minimum taxable income
computed without regard to this preference item and prior to reduction by net
operating losses, is included in alternative minimum taxable income. Net
operating losses can offset no more than 90% of alternative minimum taxable
income. The alternative minimum tax is imposed to the extent it exceeds the
corporation's regular income tax. Payments of alternative minimum tax may be
used as credits against regular tax liabilities in future years. However, the
Taxpayer Relief Act of 1997 repealed the alternative minimum tax for certain
"small corporations" for tax years beginning after December 31, 1997. A
corporation initially qualifies as a small corporation

                                      -24-

<PAGE>   25


if it had average gross receipts of $5,000,000 or less for the three tax years
ending with its first tax year beginning after December 31, 1996. Once a
corporation is recognized as a small corporation, it will continue to be exempt
from the alternative minimum tax for as long as its average gross receipts for
the prior three-year period does not exceed $7,500,000. In determining if a
corporation meets this requirement, the first year that it achieved small
corporation status is not taken into consideration.

         American's average gross receipts for the three tax years ending on
December 31, 1997, is approximately $8.6 million and as a result, American does
not qualify as a small corporation exempt from the alternative minimum tax.

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

         The Act eliminated the percentage of taxable income method of
accounting for bad debts by thrift institutions, effective for taxable years
beginning after 1995. Thrift institutions that are treated as small banks are
allowed to utilize the experience method applicable to such institutions, while
thrift institutions that are treated as large banks are required to use only the
specific charge off method.

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

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

         The balance of the pre-1988 reserves is subject to the provisions of
Section 593(e), as modified by the Act, which require recapture in the case of
certain excessive distributions to shareholders. The pre-1988 reserves may not
be utilized for

                                      -25-
<PAGE>   26


payment of cash dividends or other distributions to a shareholder (including
distributions in dissolution or liquidation) or for any other purpose (except to
absorb bad debt losses). Distribution of a cash dividend by a thrift institution
to a shareholder is treated as made: first, out of the institution's post-1951
accumulated earnings and profits; second, out of the pre-1988 reserves; and
third, out of such other accounts as may be proper. To the extent a distribution
by American to ASB is deemed paid out of its pre-1988 reserves under these
rules, the pre-1988 reserves would be reduced and the gross income of American
for tax purposes would be increased by the amount which, when reduced by the
income tax, if any, attributable to the inclusion of such amount in its gross
income, equals the amount deemed paid out of the pre-1988 reserves. As of June
30, 1998, the pre-1988 reserves of American for tax purposes totaled
approximately $1.9 million. American believes it had approximately $2.2 million
of accumulated earnings and profits for tax purposes as of June 30, 1998, which
would be available for dividend distributions, provided regulatory restrictions
applicable to the payment of dividends are met. See Notes A and N to the
financial statements. No representation can be made as to whether American will
have current or accumulated earnings and profits in subsequent years.

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

OHIO TAXATION

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

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

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

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

ITEM 2.           DESCRIPTION OF PROPERTY

                  American owns the property at 503 Chillicothe Street,
Portsmouth, Ohio, on which its main office is located. At June 30, 1998, the net
book value of the main office property was $520,000, and American's office
premises and equipment had a total net book value of $932,000. For additional
information regarding American's office premises and equipment, see Notes A and
E of Notes to Consolidated Financial Statements.

                  American also owns two parcels of real estate in downtown
Portsmouth, Ohio, with a book value of approximately $200,000. The properties
were purchased in November 1994 and April 1997. American plans to construct or
expand a drive-through and ATM facility on the properties.

                                      -26-

<PAGE>   27


ITEM 3.           LEGAL PROCEEDINGS

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

                                     PART II

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

                  Not applicable

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

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

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

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

ITEM 7.           CONSOLIDATED FINANCIAL STATEMENTS

                  The Consolidated Financial Statements contained in the Annual
Report and the opinion of Grant Thornton LLP, dated August 14, 1998, are
incorporated herein by reference.

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

                  Not applicable.

                                    PART III

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

                  The information contained in the definitive Proxy Statement
for the 1998 Annual Meeting of Shareholders of ASB Financial Corp. (the "Proxy
Statement") under the captions "Board of Directors," "Executive Officers" and
"Voting Securities and Ownership of Certain Beneficial Owners and Management" is
incorporated herein by reference.

ITEM 10.          EXECUTIVE COMPENSATION

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

ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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

ITEM 12.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                  Not applicable.

                                      -27-

<PAGE>   28


ITEM 13.          EXHIBITS AND REPORTS ON FORM 8-K

                  (a)      Exhibits

                           3.1      Articles of Incorporation (incorporated by
                                    reference)

                           3.2      Code of Regulations (incorporated by
                                    reference)

                           10.1     ASB Financial Corp. 1995 Stock Option and
                                    Incentive Plan (incorporated by reference)

                           10.2     American Savings Bank, fsb Management
                                    Recognition and Retention Plan and Trust
                                    Agreement (incorporated by reference)

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

                           20       Proxy Statement

                           21       Subsidiaries of ASB Financial Corp.
                                    (incorporated by reference)

                           27       Financial Data Schedule

                  (b)      No reports on Form 8-K have been filed during the
                           last quarter of the fiscal year covered by this
                           Report.

                                      -28-

<PAGE>   29


                                   SIGNATURES

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

                                            ASB FINANCIAL CORP.

                                            By /s/ Robert M. Smith
                                               -----------------------------
                                               Robert M. Smith
                                               President and Director
                                               (Principal Executive Officer
                                               and Principal Financial Officer)

                                            Date: September 28, 1998

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

  By /s/ Gerald R. Jenkins                           By  /s/ Lee O. Fitch
     ----------------------------------                  -----------------------
     Gerald R. Jenkins                                   Lee O. Fitch
     Director and Chairman of the Board                  Director

  Date: September 28, 1998                           Date: September 28, 1998



  By /s/ William J. Burke                            By  /s/ Louis M. Schoettle
     ----------------------------------                  -----------------------
     William J. Burke                                    Louis M. Schoettle
     Director                                            Director

  Date: September 28, 1998                           Date: September 28, 1998


  By /s/ Victor W. Morgan
     ---------------------------------- 
     Victor W. Morgan
     Director

  Date: September 28, 1998

                                      -29-

<PAGE>   30

<TABLE>
<CAPTION>
                                INDEX TO EXHIBITS

     EXHIBIT
     NUMBER     DESCRIPTION
     -------    -----------
<S>    <C>       <C>                                                           <C>
       3.1       Articles of Incorporation of ASB Financial Corp.              Incorporated by reference to the Form
                                                                               10-KSB for fiscal year ended June 30,
                                                                               1995 filed by ASB on September 28, 1995
                                                                               (the "1995 Form 10-KSB") with the
                                                                               Securities and Exchange Commission (the
                                                                               "SEC"), Exhibit 3.3

       3.4       Code of Regulations of ASB Financial Corp.                    Incorporated by reference to the Form
                                                                               10-KSB, Exhibit 3.5

       10.1      ASB Financial Corp. 1995 Stock Option and Incentive Plan      Incorporated by reference to the Form
                                                                               10-KSB for the fiscal year ended June 30,
                                                                               1996 filed with the SEC on September 30,
                                                                               1996, (the "1996 Form 10-KSB") Exhibit
                                                                               10.1

       10.2      American Savings Bank, fsb Recognition and Retention Plan     Incorporated by reference to the 1996
                 and Trust Agreement                                           Form 10-KSB, Exhibit 10.2

       13        1998 Annual Report to Shareholders

       20        Proxy Statement for 1998 Annual Meeting

       21        Subsidiaries of ASB Financial Corp.                           Incorporated by reference to the 1995
                                                                               Form 10-KSB, Exhibit 21

       27        Financial Data Schedule

</TABLE>



                                      -29-