UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                  FORM 10-KSB

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

     For the fiscal year ended June 30, 1996

                                      OR

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF THE  SECURITIES
     EXCHANGE  ACT OF  1934  [No  Fee  Required]  For  the  transition  period
     from______________to___________________


                       Commission File Number: 0-021297

                           Foundation Bancorp, Inc.
                ----------------------------------------------
                (Name of small business issuer in its charter)


             Ohio                                   31-1465239
-------------------------------                ----------------------
(State or other jurisdiction of                  (I.R.S. Employer
 incorporation or organization)                Identification Number)


                25 Garfield Place, Cincinnati, Ohio       45202
             ----------------------------------------   ----------
             (Address of principal executive offices)   (Zip Code)

                   Issuer's telephone number: (513) 721-0120

          Securities registered pursuant to Section 12(b) of the Act:

                                     None
                                    ------


          Securities registered pursuant to Section 12(g) of the Act:

                  None                      Common Stock, no par value per share
------------------------------------------- ------------------------------------
(Name of each exchange on which registered)           (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 past 12 months (or for
such shorter  period that the issuer was required to file such  reports),  and
(2) has been subject to such requirements for the past 90 days. Yes No X

     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 aggregate market value of the voting stock held by  non-affiliates of
the  registrant,  computed  by  reference  to the average of the bid and asked
prices of such stock on the National Daily Quotation Service as of October 18,
1996, was  $3,959,277.  (The exclusion from such amount of the market value of
the  shares  owned by any  person  shall  not be deemed  an  admission  by the
registrant that such person is an affiliate of the registrant.)

     As of October 18,  1996,  there were 462,875  shares of the  Registrant's
common stock issued and outstanding.

     Pursuant to Rule 15d-2 of the Securities  Exchange Act of 1934, this Form
10-KSB contains only the Registrant's financial statements for the fiscal year
ended June 30, 1996.



<PAGE>



                         Independent Auditors' Report



The Board of Directors
Foundation Savings Bank:


     We have  audited the  statements  of financial  condition  of  Foundation
Savings  Bank as of June 30,  1996 and 1995,  and the  related  statements  of
income,  retained earnings,  and cash flows for each of the three years in the
period ended June 30, 1996. These financial  statements are the responsibility
of the Corporation's  management.  Our responsibility is to express an opinion
on these financial statements based on our audits.

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

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

     As  discussed  in Note 1 to the  financial  statements,  the  Corporation
adopted the provisions of Statement of Financial  Accounting Standards No. 109
"Accounting  for  Income  Taxes" at July 1, 1993 and  Statement  of  Financial
Accounting  Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" at July 1, 1994.



CLARK, SCHAEFER, HACKETT & CO.



Cincinnati, Ohio
August 1, 1996


                                     -2-
<PAGE>


                            FOUNDATION SAVINGS BANK

                       Statements of Financial Condition

                            June 30, 1996 and 1995

                                    Assets
                                  ----------
                                                                June 30,
                                                          --------------------
                                                           1996          1995
                                                          ------        ------

Cash                                                   $    61,081   $    57,374
Interest-bearing deposits in other
  financial institutions                                 1,111,408     3,885,606
                                                       -----------   -----------

                                                         1,172,489     3,942,980

Investment securities - at amortized cost
  (fair value of $900,635 and $1,034,812 at
  June 30, 1996 and 1995 respectively)                     899,687     1,050,000
Mortgage-backed securities - at amortized
  cost (fair value of $4,553,889 and $5,409,400
  at June 30, 1996 and 1995, respectively)               4,640,509     5,532,399
Loans receivable, net                                   23,266,664    20,510,541
Accrued interest receivable:
   Loans                                                    99,150        79,335
   Investments and interest bearing deposits                14,198        16,389
   Mortgage-backed securities                               36,817        41,522

Federal Home Loan Bank stock - at cost                     278,800       260,400
Property and equipment, net                                313,281       323,773
Refundable federal income tax                                2,522        31,927
Prepaid expenses and other assets                          111,038        60,050
                                                       -----------   -----------

                                                       $30,835,155   $31,849,316
                                                       ===========   ===========


                      Liabilities and Retained Earnings
                     -----------------------------------

Deposits                                               $26,950,784   $27,737,204
Advances from Federal Home Loan Bank                       824,847     1,191,577
Advances by borrowers for taxes,
   insurance and other                                      70,179        39,076
Accrued expenses                                           135,985       114,747
Deferred federal income tax                                 60,800        60,600
                                                       -----------   -----------
                                                        28,042,595    29,143,204

Retained earnings, substantially restricted              2,792,560     2,706,112
                                                       -----------   -----------
                                                       $30,835,155   $31,849,316
                                                       ===========   ===========

See accompanying notes to financial statements.


                                     -3-
<PAGE>
                            FOUNDATION SAVINGS BANK

                             Statements of Income

                        Three Years Ended June 30, 1996

                                                         June 30,
                                        ----------------------------------------
                                                1996         1995        1994
                                               ------       ------      ------
Interest income:
   Loans                                    $1,807,332   $1,655,223   $1,594,174
   Mortgage-backed securities                  303,835      320,376      286,084
   Investment securities                        69,453       69,104       27,620
   Interest-bearing deposits                   178,338      117,309      160,799
                                            ----------   ----------   ----------

          Total interest income              2,358,958    2,162,012    2,068,677
                                            ----------   ----------   ----------

Interest expense:
   Deposits                                  1,540,535    1,308,686    1,297,024

   Borrowings                                   51,017       59,265       41,966
                                            ----------   ----------   ----------

          Total interest expense             1,591,552    1,367,951    1,338,990
                                            ----------   ----------   ----------

Net interest income                            767,406      794,061      729,687
Provision for loan losses                       43,990       12,000       32,600
                                            ----------   ----------   ----------

          Net interest income after
             provision for loan losses         723,416      782,061      697,087
                                            ----------   ----------   ----------

Other income:
   Gain on sale of investment securities          --           --        132,431
   Gain on sale of loans                         7,889       12,179         --
   Net investment property income               49,495       50,446       64,926
   Gain on sale of equipment                      --           --          1,164
   Other operating income                        7,066        7,051        5,395
                                            ----------   ----------   ----------

          Total other income                    64,450       69,676      203,916
                                            ----------   ----------   ----------

General, administrative and other expense:
    Employee compensation and benefits         362,233      364,607      292,230
    Occupancy and equipment                     78,565       76,604       77,488
    Deposit insurance                           62,353       61,911       65,527

    Franchise tax                               34,173       31,916       31,372
    Computer processing costs                   32,347       32,268       29,387
    Other operating expense                    104,905      111,267      131,386
                                            ----------   ----------   ----------

          Total general, administrative
             and other operating expense       674,576      678,573      627,390
                                            ----------   ----------   ----------

          Income before income taxes           113,290      173,164      273,613
                                            ----------   ----------   ----------

Federal income taxes (credits):
   Current                                      26,642       30,000       62,263
   Deferred                                        200       17,800       16,100
                                            ----------   ----------   ----------

                                                26,842       47,800       78,363
                                            ----------   ----------   ----------

          Net income                        $   86,448   $  125,364   $  195,250
                                            ==========   ==========   ==========




See accompanying notes to financial statements.


                                     -4-
<PAGE>



                            FOUNDATION SAVINGS BANK

                        Statements of Retained Earnings

                        Three Years Ended June 30, 1996




       Balance at June 30, 1993                       $2,385,498

          Net income for the year ended
             June 30, 1994                               195,250
                                                      ----------

       Balance at June 30, 1994                        2,580,748

          Net income for the year ended
             June 30, 1995                               125,364
                                                      ----------

       Balance at June 30, 1995                        2,706,112

          Net income for the year ended
             June 30, 1996                                86,448
                                                      ----------

       Balance at June 30, 1996                       $2,792,560
                                                      ==========





See accompanying notes to financial statements.


                                     -5-
<PAGE>

<TABLE>

                            FOUNDATION SAVINGS BANK

                           Statements of Cash Flows

                        Three Years Ended June 30, 1996


                                                         Years Ended June 30,
                                                 -------------------------------------       
                                                  1996            1995           1994
                                                 ------          ------         ------
<S>                                           <C>            <C>            <C>        
Cash flows from operating activities:
   Interest received                          $ 2,335,168    $ 2,145,841    $ 2,065,169
   Interest paid                               (1,589,414)    (1,365,659)    (1,339,074)
   Cash paid to suppliers and employees          (677,971)      (679,261)      (648,076)
   Fees and commissions received                    7,066          7,051          6,332
   Income taxes (paid) refunded                     2,763        (39,527)       (67,463)
   Rental income received                          68,400         68,400         83,000
                                              -----------    -----------    -----------

              Net cash provided by
                 operating activities             146,012        136,845         99,888
                                              -----------    -----------    -----------

Cash flows from investing activities:
   Purchase of mortgage-backed securities         (82,714)          --       (3,143,631)
   Repayments of mortgage-backed securities       944,043      1,029,624      1,798,427
   Maturities of certificates of deposit             --        1,400,000           --
   Purchase of investment securities             (499,687)          --       (1,050,000)
   Proceeds from sale of investment                  --             --          143,272
securities
   Maturities of investment securities            650,000           --             --
   Loan disbursements                          (8,014,053)    (5,637,576)    (2,961,358)
   Loan principal repayments                    4,543,414      3,354,330      3,700,533
   Proceeds from sale of loans                    701,447        576,584           --
   Purchase of property and equipment              (5,803)        (4,249)        (5,526)
                                              -----------    -----------    -----------

              Net cash provided by (used
                 in) investing activities      (1,763,353)       718,713     (1,518,283)
                                              -----------    -----------    -----------

Cash flows from financing activities:
   Net increase (decrease) in deposits           (786,420)       389,042     (1,713,715)
   Proceeds from Federal Home Loan Bank
     advances                                        --          300,000      1,000,000
   Repayment of Federal Home Loan Bank
     advances                                    (366,730)       (63,211)       (45,212)
                                              -----------    -----------    -----------

              Net cash provided by (used
                 in) financing activities      (1,153,150)       625,831       (758,927)
                                              -----------    -----------    -----------

Net increase (decrease) in cash and
   cash equivalents                            (2,770,491)     1,481,389     (2,177,322)

Cash and cash equivalents at beginning
   of period                                    3,942,980      2,461,591      4,638,913
                                              -----------    -----------    -----------

Cash and cash equivalents
   at end of period                           $ 1,172,489    $ 3,942,980    $ 2,461,591
                                              ===========    ===========    ===========

</TABLE>

See accompanying notes to financial statements.


                                     -6-
<PAGE>
<TABLE>

                            FOUNDATION SAVINGS BANK

                           Statements of Cash Flows

                        Three Years Ended June 30, 1996

                   Reconciliation of Net Income to Net Cash
                       Provided By Operating Activities
                      ----------------------------------


                                                    1996        1995         1994
                                                   ------      ------       ------
<S>                                             <C>          <C>          <C>      
Net income                                      $  86,448    $ 125,364    $ 195,250
   Adjustments to reconcile net income to net
     cash provided by operating activities:
       Gain on sale of loans                       (7,889)     (12,179)        --
       Gain on sale of investment securities         --           --       (132,431)
       Depreciation and amortization               16,295       15,778       16,497
       Amortization of premiums and discounts
         on mortgage-backed securities             30,561       30,721       55,881

       Federal Home Loan Bank stock dividends     (18,400)     (22,600)     (11,300)
       Provision for loan losses                   43,990       12,000       32,600
       Amortization of deferred loan fees         (23,032)      (9,567)     (17,118)

       Increase in deferred loan fees                --           --            937

       Deferred federal income tax                    200       17,800       16,100

       Effects of change in operating assets
         and liabilities:
           Accrued interest receivable            (12,919)     (14,725)     (30,971)
               Federal income taxes                29,405       (9,527)      (5,200)
           Prepaid expenses and other assets      (50,988)     (20,380)       1,067

           Advances by borrowers for taxes,
             insurance and other                   31,103       17,462      (10,783)
           Accrued expenses                        21,238        6,698      (10,641)
                                                ---------    ---------    ---------

          Net cash provided by operating
               activities                       $ 146,012    $ 136,845    $  99,888
                                                =========    =========    =========

</TABLE>

Supplemental disclosure of non-cash investing activities:

The Corporation  compensated  the widow of the former managing  officer with a
car with a net book value of $10,135 in 1994.


See accompanying notes to financial statements.


                                     -7-
<PAGE>


                            FOUNDATION SAVINGS BANK

                         Notes to Financial Statements

                Three Years Ended June 30, 1996, 1995 and 1994


1.   Organization and Summary of Significant Accounting Policies:

     The following  describes the organization and the significant  accounting
     policies followed in the preparation of these financial statements.

          Organization

          The  Corporation is a state chartered  savings and loan  association
          and a member of the  Federal  Home Loan Bank  System and  subject to
          regulation by the Office of Thrift  Supervision  (OTS), an office of
          the U. S.  Department of the  Treasury.  As a member of this system,
          the Corporation  maintains a required investment in capital stock of
          the Federal Home Loan Bank of Cincinnati.  The Corporation  provides
          loans to customers and receives deposits from customers primarily in
          the metropolitan Cincinnati area.

          Savings  accounts are insured by the Savings  Association  Insurance
          Fund  (SAIF),   administered  by  the  Federal   Deposit   Insurance
          Corporation (FDIC), within certain limitations. An annual premium is
          required by the SAIF for the insurance of such savings accounts.

          Cash and cash equivalents

          For the purpose of reporting cash flows,  the Corporation  considers
          all highly  liquid debt  instruments  with  original  maturity  when
          purchased of three months or less to be cash equivalents.

          Investment and mortgage-backed securities

          In  May  1993,  the  Financial  Accounting  Standards  Board  issued
          Statement of Financial Accounting Standards No. 115, "Accounting for
          Certain  Investments in Debt and Equity  Securities."  This standard
          addresses  the  accounting  and reporting  for  securities  based on
          management's intent and ability to hold such securities to maturity.
          The Corporation adopted this standard on July 1, 1994. Statement No.
          115 requires the  classification  of  investments in debt and equity
          securities into three  categories;  held to maturity,  trading,  and
          available for sale.  Debt  securities  that the  Corporation has the
          positive  intent and ability to hold to maturity are  classified  as
          held to maturity securities and reported at amortized cost. Debt and
          equity  securities  that are  bought  and held  principally  for the
          purpose  of  selling  in the near  term are  classified  as  trading
          securities  and reported at fair value,  with  unrealized  gains and
          losses  included  in  earnings.   The  Corporation  has  no  trading
          securities. Debt and equity securities not classified as either held
          to maturity  securities  or trading  securities  are  classified  as
          available  for sale  securities  and  reported at fair  value,  with
          unrealized  gains or losses excluded from earnings and reported as a
          separate  component of stockholders'  equity, net of deferred taxes.
          At the date of  implementation of Statement No. 115, the Corporation
          had not identified any investment or  mortgage-backed  securities as
          available for sale.


                                     -8-
<PAGE>



          Premiums and discounts on investment  securities and mortgage-backed
          securities are amortized and accreted using the interest method over
          the expected lives of the related securities.

          The Corporation  presently  classifies all investment  securities as
          held  to  maturity,   and  carries  such  investment  securities  at
          amortized cost.

          Loans receivable

          Loans  held  in  portfolio  are  stated  at  the  principal   amount
          outstanding,  adjusted for deferred loan origination fees and costs,
          the allowance  for loan losses,  and premiums and discounts on loans
          purchased.  Premiums and discounts on loans  purchased are amortized
          and  accreted  to  operations  using the  interest  method  over the
          estimated life of the underlying loans.

          Loan  origination  fees and  certain  direct  origination  costs are
          capitalized  and  recognized  as an  adjustment  of the yield on the
          related loan over the contractual life of the loan.

          Interest is accrued as earned unless the  collectibility of the loan
          is in doubt.  Uncollectible interest on loans that are contractually
          past due is charged  off, or an allowance  is  established  based on
          management's periodic evaluation.  The allowance is established by a
          charge to interest income equal to all interest  previously accrued,
          and income is  subsequently  recognized only to the extent that cash
          payments  are  received  until,  in   management's   judgment,   the
          borrower's  ability to make periodic interest and principal payments
          has  returned  to  normal,  in which  case the loan is  returned  to
          accrual status.

          Loans  held for sale are  carried  at the  lower of cost or  market,
          determined  in the  aggregate.  In  computing  cost,  deferred  loan
          origination  fees  and  costs  are  aggregated  with  the  principal
          balances  of the  related  loans.  At June 30,  1996 and  1995,  the
          Corporation had not identified any loans held for sale.

          The Corporation  will either sell the related  servicing on loans or
          retain  the  servicing  on  loans  sold  and  agree  to remit to the
          investor loan principal and interest at agreed-upon rates. For loans
          where  servicing  is retained by the Savings  Bank,  these rates can
          differ from the loan's  contractual  interest  rate  resulting  in a
          "yield  differential."  In  addition  to  previously  deferred  loan
          origination  fees  and  cash  gains,  gains  on  sale of  loans  can
          represent the present value of the future yield  differential less a
          normal  servicing  fee,  capitalized  over the estimated life of the
          loans sold. Normal servicing fees are determined by reference to the
          stipulated  minimum  servicing  fee  set  forth  by  the  government
          agencies  to whom  the  loans  are  sold.  Such  servicing  fees are
          representative of the Corporation's normal servicing costs.

          The  resulting  capitalized  excess  servicing  fee is  amortized to
          operations over the life of the loans using the interest method.  If
          prepayments  are  higher  than  expected,  an  immediate  charge  to
          operations  is made.  If  prepayments  are lower,  then the  related
          adjustments are made prospectively.


                                     -9-
<PAGE>



          It is the Corporation's  policy to provide valuation  allowances for
          estimated losses on loans based on past loss  experience,  trends in
          the level of delinquent and problem loans,  adverse  situations that
          may affect the borrower's  ability to repay,  the estimated value of
          any  underlying  collateral  and  current and  anticipated  economic
          conditions  in the primary  lending area.  When the  collection of a
          loan  becomes  doubtful,  or  otherwise  troubled,  the  Corporation
          records a loan loss provision  equal to the  difference  between the
          fair value of the property securing the loan and the loan's carrying
          value. Major loans and major lending areas are reviewed periodically
          to determine  potential problems at an early date. The allowance for
          loan losses is  increased  by charges to earnings  and  decreased by
          charge-offs  (net of  recoveries).  The amount of actual  write-offs
          could differ from the estimate. Because of uncertainties inherent in
          the  estimation  process,  management's  estimate  of credit  losses
          inherent in the loan portfolio and the related  allowance may change
          in the  near  term.  However,  the  amount  of the  change  that  is
          reasonably possible cannot be estimated.

          In  May  1993,  the  Financial  Accounting  Standards  Board  issued
          Statement of Financial  Accounting Standards No. 114, "Accounting by
          Creditors for Impairment of a Loan." This standard amends  Statement
          No. 5 to clarify that a creditor should evaluate the  collectibility
          of both contractual interest and contractual  principal on all loans
          when  assessing the need for a loss accrual.  In October,  1994, the
          Financial  Accounting  Standards Board issued Statement of Financial
          Accounting   Standards  No.  118,   "Accounting   by  Creditors  for
          Impairment of a Loan - Income  Recognition  and  Disclosure,"  which
          amends Statement No. 114 to allow a creditor to use existing methods
          for recognizing  interest  income on impaired loans.  The statements
          were  effective  for the fiscal  year  beginning  July 1, 1995.  The
          Corporation  adopted the statement  effective July 1, 1995,  without
          material effect on financial condition or results of operations.

          For  impairment  recognized  in  accordance  with SFAS No.  114,  as
          amended,  the entire  change in present value of expected cash flows
          is  reported  as bad  debt  expense  in the  same  manner  in  which
          impairment  initially was recognized or as a reduction in the amount
          of bad debt expense that  otherwise  would be reported.  Interest on
          impaired  loans is reported on the cash  basis.  Impaired  loans are
          loans that are considered to be permanently  impaired in relation to
          principal or interest based on the original contract. Impaired loans
          would be  charged  off in the same  manner as all loans  subject  to
          charge off. The  Corporation  considers  its  investment  in one- to
          four-family  and  multi-family  residential  loans,  non-residential
          loans and consumer  loans to be homogeneous  and therefore  excluded
          from  separate  identification  for  evaluation of  impairment.  The
          Corporation's  policy is that collateral  dependent loans, which are
          more than ninety days delinquent,  are considered to constitute more
          than a minimum delay in repayment  and are evaluated for  impairment
          under SFAS No. 114 at that time.  For the year ended June 30,  1996,
          the  Corporation had no loans that were impaired as described in the
          pronouncement  and  therefore no interest  income was  recognized or
          received on impaired loans.


                                     -10-
<PAGE>



          Real estate acquired through foreclosure

          Real estate  acquired  through  foreclosure  results  when  property
          collateralizing  a loan is foreclosed upon or otherwise  acquired by
          the Corporation in satisfaction of the loan. Real estate acquired in
          settlement  of  loans  is  recorded  at the  lower  of the  recorded
          investment  in the loan  satisfied  or the fair  value of the assets
          received at the time of acquisition  less estimated costs to sell at
          the date of  foreclosure.  The fair value of the assets  received is
          based upon a current appraisal  adjusted for estimated  carrying and
          selling costs.  Valuations are periodically performed by management,
          and an allowance for losses is established by a charge to operations
          if the  carrying  value of a  property  exceeds  its  estimated  net
          realizable value.

          Property and equipment

          Property and equipment is stated at cost.  Depreciation  of property
          and  equipment  is  provided  by the  straight-line  method over the
          estimated useful lives (range of lives five to fifteen years) of the
          related classes of assets.

          Income taxes

          Effective July 1, 1993, the Corporation adopted Financial Accounting
          Standards Board Statement No. 109 (FAS 109),  "Accounting for Income
          Taxes." The adoption of FAS 109 changed the method of accounting for
          income  taxes  from the  deferred  method to an asset and  liability
          approach which requires the  recognition of deferred tax liabilities
          and assets for the  expected  future tax  consequences  of temporary
          differences between the carrying amounts and the tax basis of assets
          and  liabilities.  The  impact  of  adopting  this  standard  had no
          material effect on the financial statements.

          Under FAS 109,  deferred  income  tax  assets  and  liabilities  are
          computed  annually for differences  between the financial  statement
          and tax basis of assets and liabilities  that will result in taxable
          or  deductible  amounts in the future  based on enacted tax laws and
          rates  applicable  to the  periods  in  which  the  differences  are
          expected to affect taxable  income.  Deferred tax assets are reduced
          by a valuation  allowance when, in the opinion of management,  it is
          more likely than not that some  portion or all of the  deferred  tax
          assets will not be realized. Deferred tax assets and liabilities are
          adjusted  for the  effects  of  changes in tax laws and rates on the
          date  of  enactment.  Income  tax  expense  is the  tax  payable  or
          refundable for the period plus or minus the change during the period
          in deferred tax assets and liabilities.

          Accounting estimates

          The   presentation  of  financial   statements  in  conformity  with
          generally accepted accounting principles requires management to make
          estimates and assumptions that affect the reported amounts of assets
          and liabilities and disclosure of contingent  assets and liabilities
          at the date of the financial  statements and the reported amounts of
          revenues and expenses  during the reporting  period.  Actual results
          could differ from those estimates.


                                     -11-
<PAGE>



          Concentrations of credit risk

          The  Corporation  grants first mortgage and other loans to customers
          located primarily in the metropolitan  Cincinnati area. Accordingly,
          a  substantial  portion  of its  debtors'  ability  to  honor  their
          contracts  is  dependent  upon the  financial  health  of the  local
          economy and market.

          Management may, at times,  maintain  deposit accounts with financial
          institutions in excess of federal deposit insurance limits.

          Recent accounting pronouncements

          Financial Accounting Standards Board Statement No. 107, "Disclosures
          About Fair Value of Financial  Statements,"  requires  disclosure of
          fair value information about financial  instruments,  whether or not
          recognized in the statement of condition,  for which it is practical
          to estimate that value. Statement No. 107 excludes certain financial
          instruments  and all  nonfinancial  instruments  from its disclosure
          requirements. The Corporation adopted Statement No. 107 for the year
          ending June 30, 1996.

          In October,  1994, the Financial  Accounting  Standards Board issued
          Statement of Financial  Accounting  Standards No. 119,  "Disclosures
          about Derivative  Financial  Instruments and Fair Value of Financial
          Instruments." This statement requires disclosures about the amounts,
          nature and terms of derivative  financial  instruments  that are not
          subject to Statement  No. 105,  "Disclosures  of  Information  about
          Financial  Instruments  and  Off-Balance-Sheet  Risk  and  Financial
          Instruments with Concentrations of Credit Risk," because they do not
          result in off-balance-sheet risk of accounting loss.

          It requires that a distinction be made between financial instruments
          held or issued for  trading  purposes  (including  dealing and other
          trading  activities  measured  at fair  value  with gains and losses
          recognized in earnings) and financial instruments held or issued for
          purposes  other than  trading.  Statement  No. 119 is effective  for
          financial  statements  issued for fiscal years ending after December
          15, 1995.  The adoption of this  standard has not had a  significant
          impact on the Corporation.

          In  May  1995,  the  Financial  Accounting  Standards  Board  issued
          Statement of Financial Accounting Standards No. 122, "Accounting for
          Mortgage  Servicing Rights." This statement requires that a mortgage
          banking  enterprise  recognize as separate  assets rights to service
          mortgage  loans  for  others  however  those  servicing  rights  are
          acquired.  A mortgage  banking  enterprise  that  acquires  mortgage
          servicing  rights  through  either the  purchase or  origination  of
          mortgage loans and sells or  securitizes  those loans with servicing
          rights  retained would allocate the total cost of the mortgage loans
          to the  mortgage  servicing  rights  and the  loans  based  on their
          relative fair value. Statement No. 122 is effective for fiscal years
          beginning  after December 31, 1995.  Management has determined  that
          the impact of this pronouncement is presently immaterial.

          In June 1996 the FASB issued SFAS No. 125  "Accounting for Transfers
          and   Servicing  of   Financial   Assets  and   Extinguishments   of
          Liabilities"  which established  accounting and reporting  standards
          for transfers and servicing of financial assets and  extinguishments
          of liabilities.  The standards are based on a consistent application
          of a financial  components  approach that focuses on control.  Under
          that  approach,  after a transfer  of  financial  assets,  an entity


                                     -12-
<PAGE>



          recognizes  the financial  and servicing  assets it controls and the
          liabilities  it has  incurred,  derecognizes  financial  assets when
          control has been  surrendered,  and  derecognizes  liabilities  when
          extinguished.   SFAS  No.  125  provides  consistent  standards  for
          distinguishing  transfers  of  financial  assets that are sales from
          transfers that are secured  borrowings.  This  statement  supersedes
          SFAS No. 122. SFAS No. 125 is effective for  transactions  occurring
          after December 31, 1996.  Management  does not expect an impact from
          adoption of SFAS No. 125.

2.   Investment Securities:

          The amortized cost, gross unrealized gains,  gross unrealized losses
          and fair values of investment securities are as follows:

<TABLE>

                                                              June 30, 1996
                                           -------------------------------------------------
                                                            Gross         Gross
                                           Amortized     Unrealized    Unrealized      Fair
                                             Cost           Gains        Losses        Value
                                           ---------     ----------    ----------      -----
<S>                                        <C>            <C>          <C>           <C>     
        Obligations of U.S.
                Government agencies        $899,687       $    948             -     $900,635
                                           ========       ========      ========     ========



                                                              June 30, 1995
                                           -------------------------------------------------
                                                            Gross         Gross
                                           Amortized     Unrealized    Unrealized      Fair
                                             Cost           Gains        Losses        Value
                                           ---------     ----------    ----------      -----

        Obligations of U.S.
             Government agencies         $1,050,000     $           -    $15,189    $1,034,812
                                         ==========     =============    =======    ==========

</TABLE>

          The amortized  cost and fair value of investment  securities at June
          30, 1996 and 1995 by  contractual  maturity are shown below.  Actual
          maturities may differ from contractual  maturities because borrowers
          may have the right to call or  prepay  obligations  with or  without
          call or prepayment penalties.

                                                             June 30, 1996
                                                     ---------------------------
                                                      Amortized           Fair
                                                        Cost              Value
                                                      ---------          -------
        Due or callable in one year
           or less                                  $   899,687       $  900,635
        Due after one year through
           five years                                         -                -
                                                    -----------       ----------

                                                    $   899,687       $  900,635
                                                    ===========       ==========



                                                             June 30, 1995
                                                     ---------------------------
                                                      Amortized           Fair
                                                        Cost              Value
                                                      ---------          -------
        Due or callable in one year
           or less                                  $   900,000          890,624
        Due after one year through
           five years                                   150,000          144,188
                                                   ------------     ------------

                                                     $1,050,000       $1,034,812
                                                   ============     ============


          Included in  investments  at June 30, 1996, are $500,000 of callable
          notes with a final maturity in the year 2001.


                                     -13-
<PAGE>


3.   Mortgage-Backed Securities:

     The amortized cost, gross unrealized  gains,  gross unrealized losses and
     fair value of mortgage-backed securities are as follows:

       
                                                  June 30, 1996
                               -------------------------------------------------
                                                Gross        Gross
                                  Amortized   Unrealized   Unrealized      Fair
                                     Cost       Gains       Losses        Value
                                  ---------   ----------   ----------   --------
      Federal Home Loan
        Mortgage Corp.            $2,117,050      --     $   33,746   $2,083,304
      Federal National
        Mortgage Association       2,308,198      --         52,063    2,256,135
      Government National
        Mortgage Association         215,261      --            811      214,450
                                  ----------   -------   ----------   ----------

                                  $4,640,509      --     $   86,620   $4,553,889
                                  ==========   =======   ==========   ==========



                                                  June 30, 1995
                               -------------------------------------------------
                                                Gross        Gross
                                  Amortized   Unrealized   Unrealized      Fair
                                     Cost       Gains       Losses        Value
                                  ---------   ----------   ----------   --------
      Federal Home Loan
        Mortgage Corp.           $2,641,753       --     $   59,504   $2,582,249
      Federal National
        Mortgage Association      2,658,239       --         59,770    2,598,469
      Government National
        Mortgage Association        232,407       --          3,725      228,682
                                 ----------   --------   ----------   ----------

                                 $5,532,399       --     $  122,999   $5,409,400
                                 ==========   ========   ==========   ==========

     The maturity of the mortgage-backed  securities is based on the repayment
     of the underlying mortgages.

4.   Loans Receivable:


     Loans receivable consists of the following:

                                                     June 30
                                        ----------------------------------
                                             1996                1995
                                        --------------      --------------
       Residential one- to four-
         family real estate             $ 20,949,519        $ 18,299,896
       Multi-family residential
         real estate                         903,137             636,068
       Commercial real estate              1,286,992           1,124,131
       Consumer                              296,332             500,643
       Passbook                               56,331             111,282
                                        ------------        ------------

                                          23,492,311          20,672,020
       Less:
          Loans in process                   (89,191)            (15,000)
          Allowance for loan losses         (111,147)            (98,138)
          Deferred loan fees                 (25,309)            (48,341)
                                        ------------        ------------
                                        $ 23,266,664        $ 20,510,541
                                        ============        ============


     At June 30, 1996 and 1995, adjustable rate loans approximated  $9,240,000
     and $10,862,000.


                                     -14-
<PAGE>


     Activity in the allowance for loan losses are as follows:

                                                   Year Ended June 30,
                                         ---------------------------------------
                                            1996           1995          1994
                                         ----------     ----------    ----------

Beginning balance                        $  98,138       $72,107      $ 100,725
Provision for loan losses                   43,990        12,000         32,600
Net (charge-offs) recoveries               (30,981)       14,031        (61,218)
                                         ---------       -------      ---------

Ending balance                           $ 111,147       $98,138      $  72,107
                                         =========       =======      =========

     Gross proceeds on sales of loans were $701,447 and $576,584 for the years
     ended June 30, 1996 and 1995, respectively. Gross realized gains on sales
     of loans were  $7,889,  $2,702 and  $12,179  for the years ended June 30,
     1996, 1995 and 1994.  Loans serviced for others as of June 30, 1996, 1995
     and 1994 were $251,280, $198,076 and $-0-, respectively.

     At June 30, 1996 and 1995, the Corporation had no non-accrual loans.

     Loans to officers, directors and employees totalled approximately $93,521
     and $98,866 at June 30, 1996 and 1995, respectively.  An analysis of loan
     activity to such persons for the fiscal year ended June 30, 1996 and 1995
     is as follows:

                                                         Year Ended June 30,
                                                     -------------------------
                                                       1996             1995
                                                     --------         --------

               Outstanding balance, beginning        $98,866         $104,031
               New loans issued                            -                -
               Repayments                              5,345            5,165
                                                     -------          -------
               Outstanding balance, ending           $93,521        $  98,866
                                                     =======        =========

5.   Property and Equipment:

     Property and equipment are summarized as follows:

                                                       1996             1995
                                                      ------           ------
               Real estate owned - investment
                 property                            $251,847         $251,847
               Furniture and equipment                153,264          154,913
               Leasehold improvements                  34,246           34,246
                                                     --------         --------
                                                      439,357          441,006
               Less accumulated depreciation          126,076          117,233
                                                     --------         --------
                                                     $313,281         $323,773
                                                     ========         ========

     The  Savings   Bank  leases  its  office   facility   under  a  ten  year
     non-cancelable  lease  which  expires  in March of 2001  with  additional
     renewal options.  Rent expense for each of the years ended June 30, 1996,
     1995 and 1994 was $53,355.

     Minimum commitments under the term of the lease are as follows:

                             Year Ended June 30,
                             -------------------

                                    1997             $  51,628
                                    1998                51,628
                                    1999                51,628
                                    2000                51,628
                              Subsequent years          38,722
                                                      --------
                                                      $245,234
                                                      ========


                                     -15-
<PAGE>


6.   Investment Property:

     The  Corporation  acquired real estate at the southeast  corner of Eighth
     and Vine Streets in 1980.  The Corporation  has a lease  agreement on the
     property  as a parking  lot under a three  year lease  beginning  July 1,
     1994. The lease payments will be $5,700 per month for the first two years
     and $6,100 per month for the third year.  Rent income for the years ended
     June  30,  1996,  1995  and  1994  was  $68,400,   $68,400  and  $83,000,
     respectively.

7.   Deposits:

<TABLE>

     Deposits consist of the following:

                                                                    June 30,
                                              -------------------------------------------------
                                                        1996                      1995
                                               ---------------------     ----------------------

                                               Weighted                  Weighted
                                                Average                   Average
                                                 Rate        Amount         Rate       Amount
                                               --------     --------     --------     --------
<S>                                              <C>      <C>              <C>      <C>        
        Passbook                                 2.50%    $  995,905       2.87     $ 1,287,943
        NOW and money market accounts            2.49      1,947,215       2.66       2,507,150
                                                           ---------                  ---------

                                                 2.50      2,943,120       2.77       3,795,093
                                                           ---------                  ---------

        Certificates of deposit:
           3 months                              4.42        291,311       4.42         203,356
           6 months                              4.33      1,416,086       5.79       1,192,710
          10/11 months                           2.81         22,961       6.31       4,900,236
          12 months                              5.62      9,976,064       5.71       4,454,225
          18 months                              6.42      5,538,925       6.19       8,514,317
           2 years                               6.12      4,735,688       5.62       3,065,798
           3 years                               5.94        829,830       5.53         556,922
           4 years                               5.38        209,055       5.24         127,306
           5 years                               5.76        987,744       6.56         927,241
                                                          ----------                    -------

                                                 5.82     24,007,664       6.01      23,942,111
                                                          ----------                 ----------

                                                 5.46%    $26,950,784      5.57     $27,737,204
                                                          ===========               ===========

</TABLE>


     Maturities  of  outstanding  certificates  of deposit are  summarized  as
     follows:

                                                            June 30,
                                                   -------------------------
                                                    1996               1995
                                                   ------             ------
                                                         (In Thousands)

        One year or less                           $19,151            $15,647
        1 - 2 years                                  3,476              7,445
        2 - 3 years                                    859                549
        Over 3 years                               $   522            $   301
                                                   -------            -------
                                                   $24,008            $23,942
                                                   =======            =======



          Interest expense on deposits is summarized as follows:


<TABLE>

                                                                June 30,
                                               -------------------------------------------
                                                1996              1995               1994
                                               ------            ------             ------
<S>                                        <C>              <C>                <C>         
        Passbook                           $    33,469      $     45,278       $     66,769
        NOW and money market accounts           54,233            79,124             98,787
        Certificates of deposit              1,452,833         1,184,284          1,131,468
                                             ---------         ---------          ---------
                                            $1,540,535        $1,308,686         $1,297,024
                                            ==========        ==========         ==========

</TABLE>



                                     -16-
<PAGE>



     The aggregate  amount of  certificates  of deposits in  denominations  of
     $100,000 or more was $2,639,352 and $3,088,352 at June 30, 1996 and 1995,
     respectively.  Deposit  accounts  exceeding  $100,000  are not  federally
     insured.

8.   Advances from Federal Home Loan Bank:

     The  Corporation  borrowed  $1,000,000 in 1994 from the Federal Home Loan
     Bank under a mortgage matched advance program. Interest is charged on the
     advance  at a  weighted  average  rate of 5.50%  and is due in 120 to 180
     monthly  installments  of $9,517  including  interest.  The Savings  Bank
     borrowed an  additional  $300,000 in 1995.  The note is an interest  only
     note,  bearing an interest rate of 6.85%.  The note matured  September 1,
     1995.

     Future maturities on the advance are as follows:

                      Year Ended June 30,
                      -------------------

                      1997                    $ 70,445
                      1998                      74,366
                      1999                      78,506
                      2000                      82,878
                      2001                      87,494
                      2002 and subsequent     $431,158
                                              --------
                                              $824,847
                                              ========

     The advances are  collateralized  by a blanket  agreement on  residential
     mortgage  loans  held by the  Savings  Bank.  The  Savings  Bank has also
     pledged its Federal Home Loan Bank stock and  mortgage  notes with unpaid
     principal balances of approximately $1,245,000 for future advances.

9.   Financial Instruments:

     The following  fair value  disclosures  are made in  accordance  with the
     requirements of SFAS No. 107,  "Disclosures About Fair Value of Financial
     Instruments."  SFAS  No.  107  requires  the  disclosure  of  fair  value
     information  about both on- and off-balance  sheet financial  instruments
     where it is  practical  to  estimate  that value.  In cases where  quoted
     market  prices were not  available,  fair values were based on  estimates
     using present value or other valuation  methods,  as described below. The
     use  of  different  assumptions  (e.g.,  discount  rates  and  cash  flow
     estimates) and estimation methods could have a significant effect on fair
     value  amounts.  Accordingly,  the  estimates  presented  herein  are not
     necessarily  indicative of the amounts the Corporation could realize in a
     current market exchange.  Because SFAS No. 107 excludes certain financial
     instruments  and  all  non-financial   instruments  from  its  disclosure
     requirements,  any aggregation of the fair value amounts  presented would
     not represent the underlying value of the Corporation.

     The following  methods and  assumptions  were used in estimating the fair
     values of financial  instruments,  cash,  interest  bearing  deposits and
     investment in FHLB stock. The carrying value of cash and interest bearing
     deposits approximates those assets' fair value.

          Investments and mortgage-backed securities

          For investment  securities (debt  instruments)  and  mortgage-backed
          securities,  fair values are based on quoted  market  prices,  where
          available. If a quoted market price is not available,  fair value is
          estimated using quoted market prices of comparable instruments.

          Loans receivable

          The fair value of the loan  portfolio  is  estimated  by  evaluating
          homogeneous    categories   of   loans   with   similar    financial
          characteristics.  Loans are segregated by types, such as residential


                                     -17-

<PAGE>

          mortgage, commercial real estate and consumer. Each loan category is
          further  segmented into fixed and adjustable  rate interest,  terms,
          and by performing and nonperforming categories.

          The fair value of  performing  loans,  except  residential  mortgage
          loans,  is calculated by  discounting  contractual  cash flows using
          estimated  market  discount  rates  which  reflect  the  credit  and
          interest rate risk inherent in the loan. For performing  residential
          mortgage loans,  fair value is estimated by discounting  contractual
          cash flows  adjusted for prepayment  estimates  using discount rates
          based on secondary  market  sources.  The fair value for significant
          nonperforming   loans  is  based  on  recent  internal  or  external
          appraisals.  Assumptions  regarding  credit  risk,  cash  flow,  and
          discount rates are judgmentally determined by using available market
          information.

          Savings accounts

          The fair values of passbook accounts, NOW accounts, and money market
          savings and demand deposits  approximates their carrying values. The
          fair value of fixed  maturity  certificates  of deposit is estimated
          using a discounted cash flow calculation that applies interest rates
          currently offered for deposits of similar remaining maturities.

          Off-balance sheet items

          Carrying  value  is a  reasonable  estimate  of  fair  value.  These
          instruments  are  generally  variable  rate or short-term in nature,
          with minimal fees charged.

          The  estimated   fair  values  of  the  Savings   Bank's   financial
          instruments were as follows at:

                                                      June 30, 1996
                                            ---------------------------------
                                               Carrying              Fair
                                                Amount               Value
                                            --------------       ------------
        Financial assets:
           Cash and due from banks,
             interest-bearing deposits
             with banks and federal
             funds sold                     $  1,172,489       $  1,172,489

           Investment securities                 899,687            900,635
           Mortgage-backed securities          4,640,509          4,553,889
           Loans receivable                   23,266,664         23,191,000
           Accrued interest receivable           150,165            150,165

        Financial liabilities:
           Deposit liabilities                26,950,784         27,001,000
           Advances from Federal Home
             Loan Bank                      $    825,000       $    667,000

        Off balance sheet items                     -                  -


10.  Capital Requirements:

     The Corporation  is subject to minimum  regulatory  capital  requirements
     promulgated  by the  Office  of Thrift  Supervision  (OTS).  The  minimum
     capital standards generally require the maintenance of regulatory capital
     sufficient  to meet each of three  tests,  hereinafter  described  as the
     tangible  capital  requirement,  the  core  capital  requirement  and the
     risk-based capital requirement.

     The tangible  capital  requirement  provides for minimum tangible capital
     (defined as  stockholders'  equity less all  intangible  assets) equal to
     1.5% of adjusted total assets. The core capital requirement  provides for
     minimum core capital  (tangible capital plus certain forms of supervisory


                                     -18-

<PAGE>



     goodwill  and  other  qualifying  intangible  assets)  equal  to  3.0% of
     adjusted  total assets.  The  risk-based  capital  requirement  currently
     provides for the maintenance of core capital plus general loss allowances
     equal to 8.0% of risk-weighted assets. In computing risk-weighted assets,
     the  Corporation  multiplies  the value of each asset on its statement of
     financial  condition by a defined  risk-weighing  factor,  e.g.,  one- to
     four- family residential loans carry a risk-weighting factor of 50%.

     The  Savings  Bank's  regulatory   capital  exceeds all  minimum  capital
     requirements as shown in the following table:

<TABLE>
                                                               June 30, 1996
                                             -------------------------------------------------
                                                            Regulatory Capital
                                                                                  Risk-
                                             Tangible           Core              based
                                             Capital     %    Capital     %      Capital    %
                                             --------   ---   -------    ---     -------   ---
                                                              (In Thousands)

<S>                                           <C>              <C>               <C>   
Capital under generally
  accepted accounting
  principles                                  $2,792           $2,792            $2,792
General valuation
  allowances                                       -                -               111
                                              ------           ------            ------
Regulatory capital computed                    2,792    9.05    2,792    9.05     2,903    19.4

Minimum capital requirements                     462    1.50      925    3.00     1,198     8.0
                                            --------    ----  -------    ----   -------    ----

Regulatory capital-excess                     $2,330    7.55   $1,867    6.05    $1,705    11.4
                                              ======    ====   ======    ====    ======    ====


                                                               June 30, 1995
                                             -------------------------------------------------
                                                            Regulatory Capital
                                                                                  Risk-
                                             Tangible           Core              based
                                             Capital     %    Capital     %      Capital    %
                                             --------   ---   -------    ---     -------   ---
                                                              (In Thousands)
Capital under generally
  accepted accounting
  principles                                  $2,706            $2,706            $2,706
General valuation
  allowances                                       -                 -                70
                                            --------           -------          --------
Regulatory capital computed                    2,706     8.5     2,706   8.5       2,776   19.3

Minimum capital requirements                     478     1.5       955   3.0       1,153    8.0
                                            --------     ---   -------   ---     -------   ----

Regulatory capital-excess                     $2,228     7.0    $1,751   5.5      $1,623   11.3
                                              ======     ===    ======   ===      ======   ====

</TABLE>

11.  Commitments:

     At June 30, 1996,  the Savings Bank had  commitments  to originate  loans
     totaling  $1,026,900.  The entire  amount was for fixed-rate  residential
     loans.  No portion of these loans were disbursed  prior to June 30, 1996,
     and the  financial  statements  do not  reflect  any  liability  for such
     commitments.  Management anticipates that all originations will be funded
     from existing  liquidity and normal monthly cash flows.  Loan commitments
     as of June 30, 1995 were $411,000.

12.  Retirement Plan:

     The Corporation has a 401(K)  Salary  Savings Plan with the  Ohio Savings


                                     -19-
<PAGE>

     and Loan  League.  During  years  ended  June 30,  1996,  1995 and  1994,
     respectively,   retirement  expense  amounted  to  $12,700,  $10,585  and
     $10,167.  The plan  covers all  employees  having  completed  one year of
     service and having  attained  the age of  twenty-one.  The  employee  can
     contribute up to six percent with the employer  matching  contribution of
     three  percent  and  a  discretionary  three  percent  employer  matching
     contribution.

13.  Federal Income Taxes:

     The Corporation has qualified  under  provisions of the Internal  Revenue
     Code which  permits the Savings  Bank to deduct  from  taxable  income an
     allowance  for bad debts based on a percentage  of taxable  income before
     such  deduction.  The Tax  Reform  Act of  1969  gradually  reduced  this
     reduction to 40% for years  beginning in 1979. The Tax Reform Act of 1986
     reduced this deduction to 8% beginning in 1988.

     Appropriated and unappropriated retained income at June 30, 1996 included
     earnings of approximately $653,000, representing such bad debt deductions
     for which no provision  for federal  income  taxes has been made.  In the
     future,  if the  Savings  Bank  does  not  meet the  federal  income  tax
     requirements necessary to permit it to deduct an allowance for bad debts,
     the  Savings  Bank will be  subject  to  federal  income  tax at the then
     current corporate rate.  Management does not contemplate any action which
     would cause such  cumulative  bad debt deduction to be subject to federal
     income taxes,  although it is possible that changes in legislation could,
     at a  future  date  require  recapture  of all or part of this  bad  debt
     deduction.

     An  analysis  of income tax  expense,  setting  forth the reasons for the
     variations from the statutory rate is as follows:

<TABLE>
                                                               Year Ended June 30
                                                    ----------------------------------------
                                                      1996            1995            1994
                                                    --------        --------        --------
<S>                                                 <C>             <C>             <C>    
        Federal income taxes at the statutory
          rate of 34%                               $38,519         $58,876         $93,028
        Bad debt deduction                                -               -         (13,300)
        Other, primarily surtax exemptions          (11,677)        (11,076)         (1,365)
                                                    -------          ------          ------

                                                    $26,842         $47,800         $78,363
                                                    =======         =======         =======

                                                       23.7%           27.6%           28.6%
                                                    =======         =======         =======

     The tax effect of  temporary  differences  that give rise to  significant
     portions of  deferred  tax assets and  deferred  tax  liabilities  are as
     follows:

                                                                    June 30
                                                    ----------------------------------------
                                                      1996            1995            1994
                                                    --------        --------        --------
        Deferred tax assets arising from:
           Loan loss reserve                     $   26,800         $15,000         $13,300
           Deferred loan fees and costs              11,100          15,500          19,700
           Basis of investments                       2,000           2,000           2,000
                                                    -------          ------          ------
        Total deferred tax assets                    39,900          32,500          35,000
                                                  ---------          ------          ------

        Deferred tax liabilities arising from:
           Accrual to cash conversion                32,300          30,300          19,500
           Depreciation                              20,200          20,800          21,700
           FHLB stock                                48,200          42,000          36,600
                                                    -------          ------          ------
                Total deferred tax liabilities     (100,700)        (93,100)        (77,800)
                                                    -------          ------          ------

        Net deferred tax liability               $    60,800        $60,600         $42,800
                                                 ===========        =======         =======

</TABLE>

                                     -20-
<PAGE>



     The Corporation has not recorded a valuation  allowance,  as the deferred
     tax assets are presently  considered to be realizable  based on the level
     of anticipated  future taxable  income.  Net deferred tax liabilities and
     federal income tax expense in future years can be significantly  affected
     by changes in enacted tax rates.

     The components of deferred income tax expense (credit) are as follows:

                                                   Year Ended June 30
                                          ------------------------------------
                                            1996         1995         1994
                                          --------     --------     --------

        Loan origination fees          $   4,400     $  4,200      $   5,500
        FHLB stock dividend                6,200        5,400          3,900
        Depreciation                        (600)        (900)           200
        Accrual to cash conversion         2,000       10,800         19,800
        Bad debt reserves and other      (11,800)      (1,700)       (13,300)
                                          ------       ------         ------

                                       $     200      $17,800       $ 16,100
                                       =========      =======       ========


14.  Contingency - SAIF Recapitalization:

     The  deposits  of  savings  associations  such as the  Savings  Bank  are
     presently  insured by the SAIF,  which together with the BIF, are the two
     insurance funds  administered by the FDIC. On November 14, 1995, the FDIC
     revised the premium schedule for BIF-insured  banks to provide a range of
     .00% to .27%  (subject to a $2,000  minimum) of deposits  (as compared to
     the  current  range  of  .23%  to  .31%  of  deposits  for   SAIF-insured
     institutions)  due to the BIF achieving its statutory reserve ratio. As a
     result,  BIF members generally pay substantially  lower premiums than the
     SAIF  members.  It is  anticipated  that the SAIF will not be  adequately
     recapitalized until 2002, absent a substantial  increase in premium rates
     or  the   imposition  of  special   assessments   or  other   significant
     developments,  such as a merger  of the SAIF and the BIF.  As a result of
     this  disparity,   SAIF  members  have  been  placed  at  a  significant,
     competitive  disadvantage  to BIF members due to higher costs for deposit
     insurance.  A recapitalization  plan under  consideration by the Treasury
     Department,  the FDIC, the OTS and the Congress reportedly provides for a
     one-time  assessment  of  .80%  to .85%  to be  imposed  on all  deposits
     assessed  at the  SAIF  rates  in  order  to  recapitalize  the  SAIF and
     eliminate the disparity, and an eventual merger of the SAIF and the BIF.

     The  Savings  Bank  currently  is unable to  predict  the  likelihood  of
     legislation  effecting these changes,  although a consensus appears to be
     developing in this regard.  If such an assessment  was effected  based on
     deposits as of June 30,  1996,  the  Savings  Bank's pro rata share would
     amount to approximately  $142,000 to $151,000 after taxes,  respectively,
     assuming a 34% tax rate.

15.  Bad Debt Reserve Recapture:

     A bill repealing the thrift bad debt reserve has been signed into law and
     is effective for taxable years  beginning  after  December 31, 1995.  All
     Savings  Banks and Thrifts  will be required to account for tax  reserves
     for bad debts in the same manner as banks. Such entities with assets less
     than $500 million will be required to maintain a moving average expense -
     based  reserve and no longer will be able to calculate a reserve based on
     a percentage of taxable income.

     Tax  reserves  accumulated  after 1987 will  automatically  be subject to
     recapture.  The  recapture  will  occur in equal  amounts  over six years
     beginning  in 1997 and can be deferred up to two years,  depending on the
     level of loans originated.

     As a  result  of the tax law  change,  the  Corporation  is  expected  to
     ultimately  recapture  approximately  $32,500 of tax reserves accumulated
     after  1987,  resulting  in  additional  tax  payments  of  $11,000.  The
     recapture of these  reserves  will not result in any  significant  income
     statement effect to the Corporation.  Pre-1988 tax reserves will not have
     to  be  recaptured  unless  the  Corporation  or  successor   institution
     liquidates,  redeems  shares or pays a dividend in excess of earnings and
     profits.

                                     -21-



16.  Plan of Conversion:

     On May 31, 1996, the  Corporation's  Board of Directors adopted a Plan of
     Conversion  (the  "Plan")  to  convert  the  Savings  Bank  from a  state
     chartered  mutual savings bank to a state  chartered  stock savings bank,
     which will then become a wholly  owned  subsidiary  of a holding  company
     formed in connection with the Conversion.  The holding company will issue
     common stock to be sold in the  conversion  and will use a portion of the
     net  proceeds  thereof  which it does not retain to purchase  the capital
     stock  of the  Savings  Bank.  The Plan is  subject  to  approval  by the
     regulatory  authorities  and the members of the  Corporation at a special
     meeting.

     At the time of conversion,  the Corporation  will establish a liquidation
     account in an amount  equal to its net worth as  reflected  in its latest
     balance sheet used in its final  conversion  Prospectus.  The liquidation
     account will be maintained  for the benefit of eligible  deposit  account
     holders who continue to maintain  their  deposit  accounts in the Savings
     Bank after conversion.  Only in the event of a complete  liquidation will
     each  deposit  account  holder  be  entitled  to  receive  a  liquidation
     distribution  from the  liquidation  account  in the  amount  of the then
     current adjusted subaccount balance for deposit accounts then held before
     any  liquidation  distribution  may be made with respect to common stock.
     Dividends paid by the Corporation  subsequent to the conversion cannot be
     paid from this liquidation account.

     The  Corporation  may not declare or pay a cash dividend on or repurchase
     any of its common stock if its net worth would  thereby be reduced  below
     either the aggregate amount then required for the liquidation  account or
     the minimum  regulatory capital  requirements  imposed by the federal and
     state regulations.

     Conversion  costs of $47,261 have been  incurred as of June 30, 1996.  If
     the  conversion  is  ultimately  successful,  conversion  costs  will  be
     accounted for as a reduction of the stock proceeds.  If the conversion is
     unsuccessful,  conversion  costs will be charged  to the  Savings  Bank's
     operations.  The  Corporation  expects to complete its  conversion in the
     first quarter of the fiscal year ended June 30, 1997.


                                     -22-
<PAGE>



                                  SIGNATURES

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

                           FOUNDATION BANCORP, INC.


                            By:  Laird L. Lazelle, Chief Executive
                                 Officer (Duly Authorized Representative)

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.



    Laird L. Lazelle                               Mardelle Dickhaut
    President and Director                         Director


    Date: September 4, 1996                      Date: September 4, 1996




    Ruth C. Emden                                  Robert E. Levitch
    Director                                       Director

    Date:  September 4, 1996                     Date:  September 4, 1996




    Michael S. Schwartz                            Paul L. Silverglade
    Director                                       Director

    Date:  September 4, 1996                     Date:  September 4, 1996




    Ivan J. Silverman
    Director

    Date:  September 4, 1996