<PAGE>   1
                     MILTON FEDERAL FINANCIAL CORPORATION
                               EXHIBIT NO. 99.1

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



                      MILTON FEDERAL FINANCIAL CORPORATION
                                 25 LOWRY DRIVE
                             WEST MILTON, OHIO 45383
                                 (937) 698-4168

                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

   Notice is hereby given that the 2000 Annual Meeting of Shareholders of Milton
Federal Financial Corporation ("MFFC") will be held at the American Legion
building, at 2334 South Miami Street, West Milton, Ohio 45383, on January 26,
2000, at 2:00 p.m., local time (the "Annual Meeting"), for the following
purposes, all of which are more completely set forth in the accompanying Proxy
Statement:

      1.    To reelect three directors of MFFC for terms expiring in 2002;

      2.    To elect one director of MFFC for a term expiring in 2002;

      3.    To ratify the selection of Crowe, Chizek and Company as the auditors
            of MFFC for the current fiscal year;

      4.    To transact such other business as may properly come before the
            Annual Meeting or any adjournments thereof.

   Only shareholders of MFFC of record at the close of business on December 3,
1999, will be entitled to receive notice of and to vote at the Annual Meeting
and at any adjournments thereof. Whether or not you expect to attend the Annual
Meeting, we urge you to consider the accompanying Proxy Statement carefully and
to SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY SO THAT YOUR SHARES MAY BE
VOTED IN ACCORDANCE WITH YOUR WISHES AND THE PRESENCE OF A QUORUM MAY BE
ASSURED. The giving of a Proxy does not affect your right to vote in person in
the event you attend the Annual Meeting.

                                             By Order of the Board of Directors





December 27, 1999                            E. Lynn App, Secretary




                                     -105-
<PAGE>   2
                     MILTON FEDERAL FINANCIAL CORPORATION
                                25 LOWRY DRIVE
                           WEST MILTON, OHIO 45383
                                (937) 698-4168

                               PROXY STATEMENT

                                   PROXIES

   The enclosed Proxy is being solicited by the Board of Directors of Milton
Federal Financial Corporation ("MFFC") for use at the 2000 Annual Meeting of
Shareholders of MFFC to be held at the American Legion building at 2334 South
Miami Street, West Milton, Ohio 45383, on January 26, 2000, at 2:00 p.m., local
time, and at any adjournments thereof (the "Annual Meeting"). Without affecting
any vote previously taken, the Proxy may be revoked by a shareholder executing a
later dated proxy which is received by MFFC before the Proxy is exercised or by
giving notice of revocation to MFFC in writing or in open meeting before the
Proxy is exercised. Attendance at the Annual Meeting will not revoke, of itself,
a Proxy.

   Each properly executed Proxy received prior to the Annual Meeting and not
revoked will be voted as specified thereon or, in the absence of specific
instructions to the contrary, will be voted:

      FOR the reelection of Messrs. App, Hine and Long as directors of MFFC
      for terms expiring in 2002;

      FOR the election of Mr. Ratliff as director of MFFC for a term expiring
      in 2002;

      FOR the ratification of the selection of Crowe, Chizek and Company ("Crowe
      Chizek") as the auditors of MFFC for the current fiscal year.

   Proxies may be solicited by the directors, officers and other employees of
MFFC and Milton Federal Savings Bank ("Milton Federal") in person or by
telephone, telegraph or mail only for use at the Annual Meeting. Such Proxies
will not be used for any other meeting. The cost of soliciting Proxies will be
borne by MFFC.

   Only shareholders of record as of the close of business on December 3, 1999
(the "Voting Record Date") are eligible to vote at the Annual Meeting. Each such
shareholder will be entitled to cast one vote for each share owned. MFFC's
records disclose that, as of the Voting Record Date, there were 2,099,995 votes
entitled to be cast at the Annual Meeting.

   This Proxy Statement is first being mailed to shareholders of MFFC on or
about December 27, 1999.


                                VOTE REQUIRED

ELECTION OF DIRECTORS

   Under Ohio law and MFFC's Code of Regulations (the "Regulations"), the four
nominees receiving the greatest number of votes will be elected as directors. No
shareholder may cumulate votes in the election of directors. Shares as to which
the authority to vote is withheld are not counted toward the election of
directors or toward the election of the individual nominees specified on the
form of proxy. If the accompanying Proxy is signed and dated by the shareholder,
but no vote is specified thereon, the shares held by such shareholder will be
voted FOR the election of the four nominees.




                                     -106-
<PAGE>   3
RATIFICATION OF SELECTION OF AUDITORS

   The affirmative vote of the holders of a majority of the shares represented
in person or by proxy at the Annual Meeting is necessary to ratify the selection
of Crowe Chizek as the auditors of MFFC for the current fiscal year. The effect
of an abstention is the same as a vote against ratification or approval. If the
accompanying Proxy is signed and dated by the shareholder but no vote is
specified thereon, the shares held by such shareholder will be voted FOR the
ratification of the selection of Crowe Chizek as auditors.


            VOTING SECURITIES AND OWNERSHIP OF CERTAIN BENEFICIAL
                            OWNERS AND MANAGEMENT

   The following table sets forth certain information with respect to the only
persons known to MFFC to own beneficially more than five percent of the
outstanding common shares of MFFC as of November 30, 1999:

<TABLE>
<CAPTION>

                                Amount and Nature of       Percent of
Name and Address                Beneficial Ownership   Shares Outstanding
----------------                --------------------   ------------------

<S>                                 <C>                      <C>
United National Bank & Trust        187,339 (1)              8.92 %
220 Market Avenue South
Canton, Ohio 44702
</TABLE>


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

(1)   Consists of shares held by United National Bank & Trust as the Trustee for
      the Milton Federal Financial Corporation Employee Stock Ownership Plan
      (the "ESOP").


   The following table sets forth certain information with respect to the number
of common shares of MFFC beneficially owned by each nominee and director of MFFC
and by all directors and executive officers of MFFC as a group as of November
30, 1999:

<TABLE>
<CAPTION>

                                   Amount and Nature
                                of Beneficial Ownership
                                -----------------------
                          Sole Voting and   Shared Voting and  Percent of Shares
Name and Address(1)       Investment Power  Investment Power   Outstanding
-------------------       ----------------  --------------     -----------

<S>                          <C>             <C>                <C>
Glenn E. Aidt                 65,695 (2)     10,000              3.54%
E. Lynn App                   15,436 (3)     47,067 (4)          2.96%
Kenneth J. Faze               14,454 (3)     15,000              1.40%
David R. Hayes                14,436 (3)     50,120 (4)          3.06%
Robert E. Hine                20,650 (3)      6,397              1.28%
Christopher S. Long           24,436 (3)     44,370 (4)          3.26%
Thomas L. Ratliff                  0         40,000              1.90%
All directors and
  executive officers
  of MFFC as a group
  (7 persons)                214,195 (5)     84,314 (6)         13.42%
</TABLE>


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

(1)   Each of the persons listed in this table, except Mr. Ratliff, may be
         contacted at the address of MFFC. Because Mr. Ratliff is not currently
         a director, his shares are not included in-group totals.

(Footnotes continued on next page)



                                     -107-
<PAGE>   4
(2)   This number includes 41,260 shares that may be acquired upon the exercise
         of options awarded pursuant to the Milton Federal Financial Corporation
         1995 Stock Option and Incentive Plan (the "Stock Option Plan") and
         17,214 shares allocated to Mr. Aidt's ESOP account, with respect to
         which Mr. Aidt has voting control.

(3)   This number includes 10,312 shares that may be acquired upon the exercise
         of options awarded pursuant to the Stock Option Plan.

(4)   This number includes 44,370 shares held by the Milton Federal Savings Bank
         Recognition and Retention Plan and Trust (the "RRP"), with respect to
         which Messrs. App, Hayes and Long have shared voting power as Trustees
         of the RRP.

(5)   This number includes 123,764 shares that may be acquired upon the exercise
         of options awarded pursuant to the Stock Option Plan and 27,105 shares
         allocated to the ESOP accounts of executive officers.

(6)   The 44,370 shares held by the RRP Trust are reflected in each of three
         directors' amounts, but counted only once in the total amount
         beneficially owned by all directors and executive officers of MFFC as a
         group.


                              BOARD OF DIRECTORS

ELECTION OF DIRECTORS

   The Regulations provide for a Board of Directors consisting of seven persons.
Each of the directors of MFFC is also a director of Milton Federal.

   In accordance with Section 2.03 of the Regulations, nominees for election as
directors may be proposed only by the directors or by a shareholder entitled to
vote for directors if such shareholder has submitted a written nomination to the
Secretary of MFFC by the later of the November 30 immediately preceding the
annual meeting of shareholders or the sixtieth day before the first anniversary
of the most recent annual meeting of shareholders held for the election of
directors. Each such written nomination must state the name, age, business or
residence address of the nominee, the principal occupation or employment of the
nominee, the number of common shares of MFFC owned either beneficially or of
record by each such nominee and the length of time such shares have been so
owned.

   The Board of Directors proposes the reelection of the following persons to
terms that will expire in 2002:

<TABLE>
<CAPTION>
                                                                      Director
                                                    Director      of Milton Federal
Name                   Age(1) Position(s) Held      Since (2)         Since
----                   ---    ----------------     ----------         -----
<S>                     <C>                           <C>             <C>
E. Lynn App             57    Director and            1994            1986
                                Secretary
Robert E. Hine          70    Director and            1994            1973
                                Chairman
Christopher S. Long     57    Director                1994            1989
</TABLE>



   On April 21, 1999, Cletus G. Minnich Jr. retired as a director and officer
of MFFC.  To fill this vacancy, the Board of Directors proposes the election
of the following person to a term that expires in 2002:

Thomas L. Ratliff       59
 -----------------------------

(1)   As of November 30, 1999.

(2)   Each director nominee became a director of MFFC in connection with the
         conversion of Milton Federal from mutual to stock form (the
         "Conversion") and the formation of MFFC as the holding company for
         Milton Federal.




                                     -108-
<PAGE>   5
   The following directors will continue to serve after the Annual Meeting for
the terms indicated:

<TABLE>
<CAPTION>                                                          Director
                                                                  of Milton
                                                      Director     Federal
Name              Age(1) Position(s) Held             Since (2)     Since       Term Expires
----              ---    ----------------             --------    ---------     ------------
<S>                <C>                                <C>          <C>           <C>
Glenn E. Aidt      59    Director, Vice Chairman,     1994         1989          2001
                           President and Chief
                           Executive Officer
Kenneth J. Faze    66    Director                     1994         1985          2001
David R. Hayes     50    Director                     1994         1986          2001
</TABLE>


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

(1) As of November 30, 1999.

(2) Each director became a director of MFFC in connection with the Conversion.


   MR. AIDT has served as the President, the Chief Executive Officer and a
director of Milton Federal since November 1989 and has served as Vice Chairman
of the board since January 1999.

   MR. APP has served as a director of Milton Federal since 1986 and is the
principal shareholder and President of E Lynn App, Inc., Architects, in
Englewood, Ohio.

   DR. FAZE has served as a director of Milton Federal since 1985.  Dr. Faze
was the Chief Executive Officer of Milton Union Medical Center, Inc. in West
Milton, Ohio, from 1984 to March 1, 1998, where he retired from the active
practice of medicine.

   DR. HAYES has served as a director of Milton Federal since 1986 and has been
the President of West Milton Veterinary Clinic, Inc., West Milton, Ohio, since
1984.

   MR. HINE has served as Chairman of the Board of Milton Federal since
January 1999 and has served as a director of Milton Federal since 1973.  From
1993 to 1999, Mr. Hine served as Vice Chairman of the Board of Directors of
Milton Federal.  Mr. Hine has been a co-owner of Hine's, Inc., in Vandalia
and Troy, Ohio, since 1954.

   MR. LONG, who has served as a director of Milton Federal since 1989, has been
the President and co-owner of Long & Associates, Inc., an association management
firm in West Milton, Ohio, since 1984.

   MR. RATLIFF is a new candidate for director of Milton Federal.  He has
been the owner and Vice President of Freedom Electric in Dayton, Ohio, since
1981.


MEETINGS OF DIRECTORS

   The Board of Directors of MFFC met 18 times for regularly scheduled and
special meetings during the fiscal year ended September 30, 1999. Each director
attended at least 75% of the aggregate of such meetings and all meetings of
committees of the Board of Directors of which such director was a member.

   Each director of MFFC is also a director of Milton Federal. The Board of
Directors of Milton Federal met 18 times for regularly scheduled and special
meetings during the fiscal year ended September 30, 1999. Each director attended
at least 75% of the aggregate of such meetings and all meetings of committees of
the Board of Directors of which such director was a member.


                                     -109-
<PAGE>   6
COMMITTEES OF DIRECTORS

   The Board of Directors of MFFC has an Audit Committee, an ESOP Committee and
a Stock Option Committee.

   The Audit Committee recommends audit firms to the full Board of Directors and
reviews and approves the annual independent-audit report. Such Committee also
monitors management's responses to Office of Thrift Supervision ("OTS")
examination reports. The members of the Audit Committee are Messrs. App, Hine
and Long. The Audit Committee met 4 times during fiscal year 1999.

   The ESOP Committee administers the ESOP and presently consists of Messrs.
Faze, App, Hayes and Long. The ESOP Committee met 7 times during the fiscal year
ended September 30, 1999.

   The Stock Option Committee is responsible for administering the Stock Option
Plan, including interpreting the Stock Option Plan and awarding options pursuant
to its terms. Its members are Messrs. Faze, App, Hayes and Long. The Stock
Option Committee met 7 times during the fiscal year ended September 30, 1999.

   The Board of Directors of MFFC does not have a nominating committee or a
compensation committee. Nominees for election to the Board of Directors are
selected by the entire Board of Directors.

   The Board of Directors of Milton Federal has several committees, including
Compensation, RRP, Executive and Loan Committees.

   The Compensation Committee reviews the President's salary and recommends
salary increases to the full Board of Directors for approval. The Compensation
Committee also reviews the President's recommendations with respect to salary
increases for the other executive officers and reports thereon to the Board of
Directors, which makes the final salary determinations. Messrs. Faze, Hayes, App
and Long are the members of the Compensation Committee. Such Committee met 7
times during fiscal year 1999.

   The RRP Committee administers the RRP.  Such Committee consists of Messrs.
Faze, App, Hayes and Long.  The RRP Committee met 7 times during fiscal year
1999.

   The Executive Committee is authorized to act, with certain limitations, on
behalf of the Board of Directors between meetings of the Board of Directors.
Messrs. Aidt and Hine are the members of the Executive Committee. The Executive
Committee met five times during fiscal year 1999.

   The Loan Committee reviews the recommendations of Milton Federal's loan
officers and approves or disapproves loans of up to $400,000. Any loans of
amounts exceeding $400,000 are referred to the full Board of Directors. The
members of the Loan Committee are Messrs. Aidt and Hine. The Loan Committee met
52 times during fiscal year 1999.




                                     -110-
<PAGE>   7
                              EXECUTIVE OFFICERS

   In addition to Mr. Aidt, the President of both MFFC and Milton Federal, and
Mr. App, the Secretary of MFFC, the following persons are executive officers of
MFFC and Milton Federal and hold the designated positions:


<TABLE>
<CAPTION>

      Name                      Age(1)        Position(s) Held
      ----                      ------        ----------------
<S>                              <C>          <C>
      Thomas P. Eyer             45           Treasurer and Chief
                                              Financial Officer of
                                              MFFC, Executive Vice
                                              President/Financial
                                              Operations, Treasurer
                                              and Chief Financial
                                              Officer of Milton
                                              Federal

      Dennis L. Piper            53           Senior Vice
                                              President/Lending
                                              Operations of Milton
                                              Federal

      Debbie A. Jones            51           Executive Vice
                                              President/Banking
                                              Operations of Milton
                                              Federal
</TABLE>

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

(1)   As of November 30, 1999.

   MR. EYER has served as Executive Vice President /Financial Operations, Chief
Financial Officer, and Treasurer of Milton Federal since 1998. He served as
Senior Vice President/Financial Operations, Chief Financial Officer and
Treasurer of Milton Federal since January 1993 and served as Vice President,
Chief Financial Officer and Treasurer of Milton Federal from 1992 until 1993.
From 1991 to 1992, Mr. Eyer was Assistant Controller of First National Bank,
Dayton, and from 1975 to 1991 was employed by Gem Savings Association, last
serving as Controller.

   MR. PIPER has served as Senior Vice President/Lending Operations for
Milton Federal since May 1999.  From 1990 to 1999 Mr. Piper was employed by
DEI Inc. last serving as Executive Vice President and Sales Manager.  From
1977 to 1990, he was employed by the Peoples Bank Company of Coldwater, Ohio
last serving as President and CEO.

   MRS. JONES has served as Executive Vice President/Banking Operations of
Milton Federal since July 1998. She served as Senior Vice President/Banking
Operations for Milton Federal since January 1994 and has worked for Milton
Federal since 1979.

   Under the federal securities laws, MFFC's directors, executive officers and
persons holding more than ten percent of the common shares of MFFC are required
to report their ownership of common shares and any changes in such ownership to
the Securities and Exchange Commission (the "SEC") and to MFFC. Based upon a
review of such reports, MFFC must disclose any failure to file such reports
timely in Proxy Statements used in connection with annual meetings of
shareholders. MFFC has determined that no failure to file such reports timely
occurred during fiscal year 1999.




                                     -111-
<PAGE>   8
               COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS

EXECUTIVE COMPENSATION

   The following table sets forth the compensation paid to Glenn E. Aidt, the
President and Chief Executive Officer of both MFFC and Milton Federal, for the
fiscal years ended September 30, 1999, 1998 and 1997. No other executive officer
of MFFC earned salary and bonus in excess of $100,000 during such period.

<TABLE>
<CAPTION>
                                    Summary Compensation Table
                                    -----------------------------

                                  Annual Compensation       Long Term Compensation
                                 -------------------------------------------------
                                                                            Awards
                                                                 ------------------------------
     Name and               Year       Salary         Bonus ($)   Restricted        Securities      All Other
     Principal                         ($)(1)                    Stock Awards       Underlying     Compensation
     Position                                                        ($)             Options/
                                                                                      SARs(#)
     ------------------------------------------------------------------------------------------------------------
<S>                         <C>     <C>               <C>            <C>                <C>          <C>
     Glenn E. Aidt          1999    $143,686 (2)      $25,859         --                 --          $59,352 (5)
       President, Chief     1998    $137,035 (3)      $24,628         --                 --          $40,727 (6)
       Executive Officer    1997    $129,332 (4)      $22,187         --                 --          $43,049 (7)
</TABLE>


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

(1)   Does not include amounts attributable to other miscellaneous benefits
      received by executive officers. The cost to Milton Federal of providing
      such benefits to Mr. Aidt was less than 10% of his cash compensation.

(2)   Includes salary of $133,897 and directors' fees of $9,789.

(3)   Includes salary of $127,876 and directors' fees of $9,159.

(4)   Includes salary of $120,323 and directors' fees of $9,009.


(5)   Consists of Milton Federal's matching contribution to Mr. Aidt's defined
      contribution plan account in the amount of $1,294; the $58,022 aggregate
      value at the date of allocation of 4,991 common shares of MFFC allocated
      to Mr. Aidt's account pursuant to the ESOP; and the premium of $36 paid by
      Milton Federal for insurance on the life of Mr. Aidt payable to a
      beneficiary designated by Mr. Aidt.

(6)   Consists of Milton Federal's matching contribution to Mr. Aidt's defined
      contribution plan account in the amount of $1,416; the $39,207 aggregate
      value at the date of allocation of 3,075 common shares of MFFC allocated
      to Mr. Aidt's account pursuant to the ESOP; and the premium of $104 paid
      by Milton Federal for insurance on the life of Mr. Aidt payable to a
      beneficiary designated by Mr. Aidt.

(7)   Consists of Milton Federal's matching contribution to Mr. Aidt's defined
      contribution plan account in the amount of $1,323; the $41,509 aggregate
      value at the date of allocation of 2,721 common shares of MFFC allocated
      to Mr. Aidt's account pursuant to the ESOP; and the premium of $217 paid
      by Milton Federal for insurance on the life of Mr. Aidt payable to a
      beneficiary designated by Mr. Aidt.


STOCK OPTION PLAN

   At the 1995 Annual Meeting of the Shareholders of MFFC, the shareholders
approved the Stock Option Plan. The Board of MFFC reserved 257,887 commons
shares, which is equal to 10% of the common shares issued in connection with the
Conversion, for issuance by MFFC upon the exercise of options to be granted to
certain directors, officers and employees of Milton Federal and MFFC from
time-




                                     -112-
<PAGE>   9
to-time under the Stock Option Plan. Options to purchase 225,651 common
shares of MFFC have been awarded pursuant to the Stock Option Plan. Options have
a five-year vesting schedule.


   The following table sets forth information regarding the number and value of
unexercised options held by Mr. Aidt at September 30, 1999:

Aggregated Option/SAR Exercises In Last Fiscal Year and 9/30/99 Option/SAR
Values


<TABLE>
<CAPTION>

                                                          Number of
                                                          Securities         Value of
                                                          Underlying        Unexercised
                                                         Unexercised         In-the-Money
                                                        Options/SARs at     Options/SARs at
                                                         9/30/99 (#)          9/30/99 ($)
                  Shares Acquired
Name              on Exercise (#)   Value Realized ($)   Exercisable/       Exercisable/
                                                         Unexercisable      Unexercisable
-------------------------------------------------------------------------------------------

<S>                   <C>           <C>                  <C>
Glenn E. Aidt         --             N/A                 41,260/10,318(1)
</TABLE>



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

(1)   Such options are not deemed to have any value as of September 30, 1999,
      because their exercise price of $13.69 exceeded the $11.625 closing sale
      price reported by The Nasdaq Stock Market on September 30,1999.

RECOGNITION AND RETENTION PLAN AND TRUST

   At the 1995 Annual Meeting of the Shareholders of MFFC, the shareholders of
MFFC approved the RRP. With funds contributed by Milton Federal, the RRP
purchased 103,155 shares of MFFC, 74,784 of which were awarded to directors and
executive officers of Milton Federal in October 1995. The awards have a
five-year vesting schedule.


EMPLOYMENT AGREEMENTS

   Milton Federal and Mr. Aidt are parties to an employment agreement with an
expiration date of December 21, 2001 (the "Employment Agreement"). A salary and
performance review must be conducted by the Board of Directors not less often
than annually. The Employment Agreement requires the inclusion of Mr. Aidt in
any formally established employee benefit, bonus, pension and profit-sharing
plans for which senior management personnel are eligible. The Employment
Agreement also provides for vacation and sick leave.

   The Employment Agreement is terminable by Milton Federal at any time. In the
event of termination by Milton Federal for "just cause," as defined in the
Employment Agreement, Mr. Aidt will have no right to receive any compensation or
other benefits for any period after such termination. In the event of
termination by Milton Federal other than for just cause, at the end of the term
of the Employment Agreement or in connection with a "change of control," as
defined in the Employment Agreement, Mr. Aidt will be entitled to a continuation
of salary payments for a period of time equal to the term of the Employment
Agreement and a continuation of benefits substantially equal to those being
provided at the date of termination of employment until the end of the term of
the Employment Agreement or the date Mr. Aidt becomes employed full-time by
another employer, whichever occurs first.

   The Employment Agreement also contains provisions with respect to the
occurrence within one year of a "change of control" of (1) the termination of
employment for any reason other than just cause,




                                     -113-
<PAGE>   10
retirement or termination at the end of the term of the agreement, (2) a change
in the capacity or circumstances in which Mr. Aidt is employed or (3) a material
reduction in Mr. Aidt's responsibilities, authority, compensation or other
benefits provided under the Employment Agreement without Mr. Aidt's written
consent. In the event of any such occurrence, Mr. Aidt will be entitled to
payment of an amount equal to three times his average annual compensation for
the three taxable years immediately preceding the termination of employment. In
addition, Mr. Aidt will be entitled to continued coverage under all benefit
plans until the earliest of the end of the term of the Employment Agreement or
the date on which Mr. Aidt is included in another employer's benefit plans as a
full-time employee. The maximum that Mr. Aidt may receive, however, is limited
to an amount that will not result in the imposition of a penalty tax pursuant to
Section 280G(b)(3) of the Code. "Control," as defined in the Employment
Agreement, generally refers to the acquisition by any person or entity of the
ownership or power to vote 10% or more of the voting stock of Milton Federal or
MFFC, the control of the election of a majority of Milton Federal's or MFFC's
directors or the exercise of a controlling influence over the management or
policies of Milton Federal or MFFC.


DEFINED BENEFIT PLAN

   Milton Federal sponsors a defined benefit pension plan (the "Pension Plan")
covering all employees age 21 or older who have completed at least one year of
service to Milton Federal.

   The normal Pension Plan retirement benefit payable upon retirement at or
after age 65 is the product of (a) 1%, multiplied by (b) years of service,
multiplied by (c) average annual salary for the five consecutive years of
highest salary. Employees become 100% vested in the Pension Plan after five
years of employment. Participants are automatically 100% vested at 65 years of
age regardless of years of service. The Pension Plan also includes provisions
for early retirement, disability retirement and a death benefit. The
compensation covered by the Pension Plan includes only the employee's basic
annual salary, exclusive of bonuses, fees or other special payments.


                              PENSION PLAN TABLE

<TABLE>
<CAPTION>

    HIGH-5      15 YEARS   20 YEARS     25 YEARS     30 YEARS    35 YEARS
   AVERAGE      BENEFIT     BENEFIT     BENEFIT      BENEFIT      BENEFIT
 COMPENSATION   SERVICE    SERVICE      SERVICE      SERVICE     SERVICE

<S>             <C>        <C>         <C>          <C>         <C>
$  15,000       $  2,300   $  3,000    $  3,800     $  4,500    $  5,300
   30,000          4,500      6,000       7,500        9,000      10,500
   45,000          6,800      9,000      11,300       13,500      15,800
   60,000          9,000     12,000      15,000       18,000      21,000
   75,000         11,300     15,000      18,800       22,500      26,300
   90,000         13,500     18,000      22,500       27,000      31,500
  105,000         15,800     21,000      26,300       31,500      36,800
  120,000         18,000     24,000      30,000       36,000      42,000
  135,000         20,300     27,000      33,800       40,500      47,300
  150,000         22,500     30,000      37,500       45,000      52,500
</TABLE>

   Milton Federal had no Pension Plan expense for fiscal year 1998 because the
Pension Plan was overfunded. Mr. Aidt has ten years of credited service under
the Pension Plan. The base salary of Mr. Aidt for 1999 is set forth in the
Summary Compensation Table under the "Salary" heading. Benefits under the
Pension Plan are computed based on the straight-life annuity method and are not
subject to deduction for social security or any other offset amount.



                                     -114-
<PAGE>   11
DIRECTOR COMPENSATION

   MFFC pays no directors' fees. Effective January 1, 1999, each director of
Milton Federal receives a fee of $9,789 per year for service as a director of
Milton Federal. Each non-employee director also receives $125 per hour for
attending committee meetings.

   In October 1993, Milton Federal instituted a deferred compensation program
for its directors pursuant to which the directors may defer payment of their
directors' fees. Under an agreement between each of six of the directors and
Milton Federal, such fees are credited to an account for the director. The
amount credited bears interest at a rate determined by the Board of Directors,
currently an annual rate of seven percent. The deferred amounts plus interest
will be paid from the general assets of Milton Federal to the director at the
time of his termination of board service. If the director dies while serving as
a director of Milton Federal, an annual payment will be made for five years to
the director's beneficiary. Such death benefit payments will total the amount
that would have accrued to the director's account assuming deferral of $7,000
per year until age 70. The plan may be amended or terminated by Milton Federal
at any time.

   Milton Federal has purchased insurance contracts on the lives of the
participants in the deferred compensation plan and named Milton Federal as the
beneficiary. While the insurance contracts are not committed to fund the
deferred compensation plan and the plan is an unsecured obligation of Milton
Federal, management currently intends to use the insurance for such purpose.

   The directors of MFFC are also eligible for awards under the Stock Option
Plan and the RRP. During fiscal year 1999, no awards were granted under the
Stock Option Plan and the RRP.


COMPENSATION COMMITTEE REPORT

   As a unitary savings and loan holding company, the business of MFFC consists
principally of holding the stock of Milton Federal. The functions of the
executive officers of MFFC, who are also executive officers of Milton Federal,
pertain primarily to the operations of Milton Federal. The executive officers
receive their compensation, therefore, from Milton Federal, rather than from
MFFC. The Compensation Committee of the Milton Federal Board of Directors (the
"Committee") has furnished the following report concerning executive
compensation.


PROCESS FOR DETERMINING COMPENSATION

   MFFC has not paid any cash compensation to its executive officers since its
formation. All executive officers of MFFC also currently hold positions with
Milton Federal and receive cash compensation from Milton Federal.

   The compensation levels of the executive officers, including the Chief
Executive Officer/ President (the "CEO"), are reviewed each year by the
Committee. The Committee reviews independent surveys of compensation of officers
in the thrift industry. In addition, it assesses each executive officer's
contribution to MFFC and Milton Federal, the skills and experiences required by
such officer's position and the potential of the officer to contribute to MFFC
and Milton Federal in the future. Based on the foregoing assessment, the
Committee makes recommendations to the full Board of Directors of Milton
Federal. The Board of Directors reviews such recommendations and makes final
determinations with respect to the compensation of the executive officers,
except that directors who are also executive officers do not participate in
discussions regarding their own respective compensation.








                                     -115-
<PAGE>   12
COMPENSATION POLICIES

   The Committee's executive compensation policies are designed to provide
competitive levels of compensation that will assist Milton Federal and MFFC in
attracting and retaining qualified executives and that will also integrate
compensation with the short and long-term performance goals of Milton Federal
and MFFC and reward individual performance, initiative and achievements. The
cash compensation program for executive officers consists of the following two
elements: a base salary and an officer incentive bonus. The executive officers
of Milton Federal are also eligible for discretionary awards under the Stock
Option Plan and the RRP. The combination of base salary, bonus and stock benefit
plan awards is designed to relate total compensation levels to the performance
of Milton Federal and MFFC and each individual executive officer's contribution
thereto.

   The objectives of the discretionary officer cash bonuses are to motivate and
reward the executive officers in connection with the accomplishment of annual
objectives of Milton Federal and MFFC, to reinforce a strong performance
orientation with differentiation and variability in individual awards based on
contribution to annual and long-range business results and to provide a
competitive compensation package that will attract, reward and retain
individuals of the highest quality. For executive officers of Milton Federal and
MFFC, including the CEO, bonuses are determined as a percentage of annual base
salary, which percentage is calculated based upon the achievement of certain
goals which relate to levels of profitability of MFFC and Milton Federal. The
corporate profitability measurement used was return on average equity.

   No stock option awards or RRP awards were considered during fiscal year 1999.


DETERMINATION OF CEO'S COMPENSATION

   The Committee determined the compensation of the CEO in fiscal year 1999
pursuant to the policies described above for executive officers. The corporate
profitability measurement considered was return on average equity. Additional
corporate goals considered were implementation of stock repurchases,
implementation of a strategic plan, and successful completion of the fiscal 1999
Business Plan.

   The individual goals considered were related to the CEO's efforts in Milton
Federal achieving certain regulatory ratings, implementation of strategic goals,
shareholder relations, community involvement, and industry involvement.

Submitted by the Compensation Committee of Milton Federal's Board of
Directors:

Kenneth J. Faze, Chairman
David R. Hayes
E. Lynn App
Christopher S. Long


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

   MFFC pays no cash compensation to officers or employees of MFFC or Milton
Federal and therefore has no compensation committee. The Board of Directors
does, however, have a Stock Option Committee, whose members are Messrs. Faze,
App, Hayes and Long, none of whom are or ever have been officers of MFFC or
Milton Federal Savings Bank.

   The Board of Directors of Milton Federal has a Compensation Committee, the
members of which are Messrs. App, Faze, Hayes and Long, none of whom are or ever
have been officers of MFFC or Milton Federal. The Board of Directors of Milton
Federal also has an RRP Committee, composed of Messrs. Faze,



                                     -116-
<PAGE>   13
Long, Hayes and App, which determines RRP awards and administers the RRP. During
fiscal year 1999, there were no other reportable relationships between the
members of the aforementioned committees and MFFC or Milton Federal.


PERFORMANCE GRAPH

   The following line graph compares the yearly percentage change in MFFC's
cumulative total shareholder return against the cumulative return of a broad
index of The Nasdaq National Market and an index of savings associations with
assets of less than $250 million for the period from October 7, 1994, the date
on which trading of MFFC's shares commenced, and September 30, 1999. The graph
assumes the investment of $100 on October 7, 1994. Cumulative total shareholder
return is measured by dividing (i) the sum of (A) the cumulative amount of
dividends for the measurement period, assuming dividend reinvestment, and (B)
the difference between the price of MFFC's common shares at the end and at the
beginning of the measurement period; by (ii) the price of MFFC's common shares
at the beginning of the measurement period.


<TABLE>
<CAPTION>
MILTON FEDERAL FINANCIAL CORPORATION

-------------------------------------------------------------------------------
<S>                       <C>       <C>     <C>      <C>      <C>      <C>
                                                   Period Ending
                                -----------------------------------------------
Index                      10/7/94  9/30/95  9/30/96  9/30/97  9/30/98  9/30/99
-------------------------------------------------------------------------------
Milton Federal
 Financial Corporation      100.00   159.82   149.80   210.10  182.55   174.29
Nasdaq - Total US*          100.00   140.65   166.91   229.17  233.05   378.63
SNL <$250M Thrift Index     100.00   128.34   144.16   210.05  192.36   182.27
------------------------------------------------------------------------------
</TABLE>

CERTAIN TRANSACTIONS WITH MFFC

   During the fiscal year ended September 30, 1999, certain directors of MFFC
had loans from Milton Federal with balances in excess of $60,000. All of such
loans were made in the ordinary course of business, were made on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons, and did not involve
more than the normal risk of collectibility or present other unfavorable
features.





                                     -117-
<PAGE>   14
                            SELECTION OF AUDITORS

   The Board of Directors has selected Crowe Chizek as the auditors of MFFC and
Milton Federal for the current fiscal year and recommends that the shareholders
ratify the selection. Management expects that a representative of Crowe Chizek
will be present at the Annual Meeting, will have the opportunity to make a
statement if he or she so desires and will be available to respond to
appropriate questions.


PROPOSALS OF SHAREHOLDERS

   Any proposals of qualified shareholders intended to be included in the proxy
statement for the 2001 Annual Meeting of shareholders of MFFC should be sent to
MFFC by certified mail and must be received by MFFC no later than August 29,
2000. In addition, if a shareholder intends to present a proposal at the 2001
Annual Meeting without including the proposal in the proxy materials related to
that meeting, and if the proposal is not received by November 13, 2000, then the
proxies designated by the Board of Directors of MFFC for the 2001 Annual Meeting
of shareholders of MFFC may vote in their discretion on any such proposal any
shares for which they have been appointed proxies without mention of such matter
in the proxy statement or on the proxy card for such a meeting.


                                OTHER MATTERS

   Management knows of no other business that may be brought before the Annual
Meeting. It is the intention of the persons named in the enclosed Proxy to vote
such Proxy in accordance with their best judgment on any other matters that may
be brought before the Annual Meeting.

   IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU EXPECT
TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO FILL IN, SIGN AND RETURN THE
PROXY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE.

                                          By Order of the Board of Directors


December 27, 1999             E. Lynn App, Secretary



                                     -118-