<PAGE>   1
                                                                      EXHIBIT 13


                            FOUNDATION BANCORP, INC.


                    Parent Company of Foundation Savings Bank

                            (Foundation Bancorp logo)




                                      2000

                                  ANNUAL REPORT




<PAGE>   2








TO OUR SHAREHOLDERS:

On behalf of the Board of Directors of Foundation Bancorp, Inc. (the "Company"),
I am pleased to present the Company's third annual report.

Net income for the 2000 fiscal year ended June 30, 2000 was $154,366, down from
the $169,227 for the 1999 fiscal year. As previously reported, the 2000 fiscal
year results included an increase in professional fees of $56,281 incurred in
connection with the evaluation and negotiation of corporate opportunities that
the Company subsequently concluded did not warrant further consideration.

The Company continues to pursue strict collection policies, which has resulted
in low delinquency and excellent asset quality. As reported in the initial
offering circular, the ESOP is being expensed at IRS maximums, which has a
negative impact on earnings. It is estimated that the ESOP will be fully
expensed at December 31, 2001.

The Company continues to evaluate all opportunities to enhance shareholder
value. Keefe, Bruyette & Woods, Inc., specialists in financial services,
continues to serve as the Company's advisor in this respect.

Thank you for being a shareholder of the Company. You may reach me personally at
513-721-0120 with questions or comments.


<PAGE>   3



                      BUSINESS OF FOUNDATION BANCORP, INC.

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

Foundation Bancorp, Inc. (the "Company"), a unitary savings and loan holding
company incorporated under the laws of the State of Ohio, owns all of the issued
and outstanding common shares of Foundation Savings Bank ("Foundation"), a
savings association chartered under the laws of the State of Ohio. In September
1996, the Company acquired all of the common shares issued by Foundation upon
its conversion from a mutual savings association to a permanent capital stock
savings association (the "Conversion"). Since its formation, the Company's
activities have been limited primarily to holding the common shares of
Foundation.

As a savings and loan holding company, the Company is subject to regulation,
supervision and examination by the Office of Thrift Supervision of the United
States Department of the Treasury (the "OTS"). As an Ohio savings association,
Foundation is subject to regulation, supervision and examination by the OTS and
the Ohio Department of Commerce, Division of Financial Institutions (the
"Division") and the Federal Deposit Insurance Corporation. Foundation is also a
member of the Federal Home Loan Bank (the "FHLB") of Cincinnati.

                          MARKET PRICE OF THE COMPANY'S
                  COMMON SHARES AND RELATED SHAREHOLDER MATTERS

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

There were 462,875 common shares of the Company outstanding on June 30, 2000,
and held of record by approximately 157 shareholders. Price information with
respect to the Company's common shares is published by the National Quotation
Bureau ("NQB"). The high and low bids for the common shares of the Company for
the periods indicated, as reported by NQB, were as follows:

FISCAL 1999                                                     CASH DIVIDENDS
QUARTER ENDED               HIGH              LOW                   DECLARED
-------------               ----              ---                   --------

September 30, 1998         $17.50             $13.00                  $ .40
December 31, 1998          $14.00             $12.875                     -
March 31, 1999             $17.00             $12.50                      -
June 30, 1999              $13.625            $12.75                      -

FISCAL 2000                                                     CASH DIVIDENDS
QUARTER ENDED               HIGH              LOW                   DECLARED
-------------               ----              ---                   --------

September 30, 1999         $13.875            $13.50                  $ .50
December 31, 1999          $13.625            $12.625                     -
March 31, 2000             $13.25             $10.50                      -
June 30, 2000              $10.625            $ 9.00                      -




                                       1
<PAGE>   4

The income of the Company consists of dividends which may periodically be
declared and paid by the Board of Directors on the common shares of Foundation
held by the Company and earnings on the net proceeds retained by the Company in
connection with the Conversion. In addition to certain federal income tax
considerations, OTS regulations impose limitations on the payment of dividends
and other capital distributions by savings associations. Under OTS regulations
applicable to converted savings associations, Foundation is not permitted to pay
a cash dividend on its common shares if its regulatory capital would, as a
result of the payment of such dividend, be reduced below the amount required for
the liquidation account (which was established for the purpose of granting a
limited priority claim on the assets of Foundation, in the event of a complete
liquidation, to those members of Foundation before the Conversion who maintain a
savings account at Foundation after the Conversion) or applicable regulatory
capital requirements prescribed by the OTS.

Foundation must obtain approval of a proposed dividend from the OTS (1) if the
proposed distribution would cause total distributions for that calendar year to
exceed net income for that year to date plus Foundation's retained net income
for the preceding two years; (2) if Foundation will not be at least adequately
capitalized following the capital distribution; (3) if the proposed distribution
would violate a prohibition contained in any applicable statute, regulation or
agreement between Foundation and the OTS (or the FDIC), or a condition imposed
on Foundation in an OTS-approved application or notice; or (4) if Foundation has
not received certain favorable examination ratings from the OTS. If Foundation
is not required to file an application, it must file a notice with the OTS 30
days before declaring a dividend.






                                       2
<PAGE>   5



                              SELECTED CONSOLIDATED
                      FINANCIAL INFORMATION AND OTHER DATA

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

The following tables set forth certain information concerning the consolidated
financial condition, earnings and other data regarding the Company at the dates
and for the periods indicated.
<TABLE>
<CAPTION>

                                                              At June 30,
                                       ---------------------------------------------------------------------
SUMMARY OF FINANCIAL CONDITION:          2000           1999            1998           1997            1996
                                       --------        -------       ---------      ---------        -------
                                                                   (In thousands)
<S>                                     <C>            <C>            <C>             <C>            <C>
Total amount of:
    Assets                              $33,382        $33,762        $36,189         $35,271        $30,835
    Cash and cash equivalents               374          2,414          6,196           3,289          1,172
    Investment securities                 5,250          5,304          3,568           1,245          1,179
    Mortgage-backed securities            4,355          5,018          3,966           4,288          4,641
    Loans receivable, net (1)            22,442         20,468         21,846          25,939         23,267
    Deposits                             25,505         25,754         28,023          27,292         26,951
    FHLB advances                           519            602            680             754            825
    Shareholders' equity (2)              7,075          7,072          7,140           6,934          2,793
<CAPTION>

                                                                 Year ended June 30,
                                      ----------------------------------------------------------------------
SUMMARY OF EARNINGS:                     2000           1999            1998            1997          1996
                                      ---------       --------       --------         -------       --------
                                                                   (In thousands)

<S>                                      <C>            <C>            <C>             <C>            <C>
Interest income                          $2,399         $2,402         $2,698          $2,558         $2,359
Interest expense                          1,353          1,454          1,641           1,530          1,592
                                      ---------       --------       --------         -------       --------
Net interest income                       1,046            948          1,057           1,028            767
Provision for loan losses                     -             12             12              15             44
                                      ---------       --------       --------         -------       --------
Net interest income after
   provision for loan losses              1,046            936          1,045           1,013            723
Other income                                 55            126            116              63             64
General, administrative and other
  expense                                   863            793            792             919            674
                                       --------       --------       --------         -------       --------
Earnings before income taxes                238            269            369             157            113
Federal income taxes                         84            100            137              45             27
                                      ---------       --------       --------         -------       --------
Net earnings                          $     154       $    169       $    232         $   112       $     86
                                      =========       ========       ========         =======       ========
<FN>

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

(1)      Includes  $475,000  of loans held for sale at June 30,  1998,  and  $89,200 of loans held for sale at June 30,
         1997.  There were no loans held for sale at June 30, 2000, 1999, or 1996.

(2)      Consisted solely of retained earnings at June 30, 1996.
</TABLE>





                                       3
<PAGE>   6

<TABLE>
<CAPTION>
                                                                                 At June 30,
                                                      -------------------------------------------------------------
SELECTED FINANCIAL RATIOS:                              2000         1999          1998         1997          1996
                                                       ------       ------        ------       ------        ------

<S>                                                   <C>           <C>          <C>           <C>          <C>
Performance ratios:
   Return on average assets                             0.46%         0.49%        0.63%         0.33%        0.27%
   Return on average equity                             2.19          2.39         3.31          1.82         3.11
   Interest rate spread                                 2.12          1.70         1.82          2.10         2.04
   Net interest margin                                  3.22          2.79         2.92          3.06         2.48
   Non-interest expense to average total assets         2.60          2.29         2.16          2.68         2.13
   Average equity to average assets                    21.16         20.43        19.12         17.89         8.72
   Equity to assets, end of period                     21.19         21.01        19.73         19.66         9.06
Asset quality ratios:
   Nonperforming assets to average total assets         0.24            --         0.15            --           --
   Nonperforming loans to total loans                   0.36            --           --            --           --
   Allowance for loan losses to total loans             0.64          0.73         0.63          0.48         0.47
   Allowance for loan losses to nonperforming loans
                                                      178.75            --           --            --           --
   Net charge-offs to average loans                    (0.03)           --           --            --        (0.14)
   Average interest-earning assets to average
     interest-bearing liabilities                     126.29        125.46       124.17        121.15       108.51




</TABLE>




                                       4
<PAGE>   7



                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

                                     GENERAL

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

The following discussion and analysis of the financial condition and results of
operations of the Company and Foundation should be read in conjunction with and
with reference to the consolidated financial statements and the notes thereto
presented in this Annual Report.

The Company was incorporated for the purpose of owning all of the outstanding
common shares of Foundation following the Conversion. As a result, the
discussion and analysis that follows pertains primarily to the financial
condition and results of operations of Foundation.

                               FINANCIAL CONDITION

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


At June 30, 2000, assets totaled $33.4 million, a decrease of $0.4 million, or
1.1%, compared to June 30, 1999 totals. The decrease in assets primarily funded
a decrease in deposits and repayment of advances from the Federal Home Loan
Bank.

Cash and cash equivalents decreased $2.0 million, or 84.5%, certificates of
deposit decreased $1.2 million, or 100.0%, and mortgage-backed securities
decreased $0.7 million, or 13.2%. These funded an increase in investment
securities of $1.5 million, or 39.9%, an increase in loans receivable-net of
$2.0 million, or 9.6%, a decrease in deposits of $0.3 million, or 1.0%, and a
decrease in advances from the Federal Home Loan Bank of $82,878, or 13.8%.

Unallocated shares held by the Foundation Bancorp, Inc. Employee Stock Ownership
Plan (the "ESOP"), decreased $52,900, or 26.0%, resulting from the 1999 calendar
year allocation.

Retained earnings decreased $77,070, or 2.6%, the result of the $.50 per share
dividend paid in September 1999, partially offset by fiscal 2000 earnings.
Shares held for the RRP decreased $22,853, or 18.5%, the result of the fiscal
2000 distribution.






                                       5
<PAGE>   8


                       COMPARISON OF RESULTS OF OPERATIONS
                   FOR THE YEARS ENDED JUNE 30, 2000 AND 1999

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

Net earnings for the year ended June 30, 2000 totaled $154,366, a decrease of
$14,861, or 8.8%, from the $169,227 in net earnings for the year ended June 30,
1999. The decrease in earnings was comprised of an increase in net interest
income after provision for losses on loans of $110,054, or 11.8%, and a decrease
in federal income taxes of $15,900, or 15.9%, offset by a decrease in other
income of $71,089, or 56.4%, and an increase in general, administrative and
other expense of $69,726, or 8.8%.

Total interest income for the fiscal year ended June 30, 2000 decreased $2,721,
or 0.1%, as compared to fiscal 1999 totals. Interest on loans increased $12,363,
or 0.8%, and interest on investment securities increased $251,735, or 184.9%,
both the result of higher yields on larger portfolios. These increases were
offset by a decrease in interest on mortgage-backed securities of $23,295, or
7.7%, the result of a smaller portfolio due to repayments, and a decrease in
interest on interest bearing deposits of $243,524, or 74.9%, as funds were
redeployed into higher yielding loans and investment securities.

Total interest expense for the fiscal year ended June 30, 2000 decreased
$110,775, or 6.9%, as compared to fiscal 1999 totals. Interest expense on
deposits decreased $99,090, or 7.0%, the result of lower weighted average costs
on a smaller portfolio. Interest expense on borrowings decreased $1,685, or
4.7%, due to a lower balance as a result of scheduled repayments.

Other income for the fiscal year ended June 30, 2000 decreased $71,089, or
56.4%, as compared to fiscal year 1999 totals. Gains on sales of loans decreased
$59,607, or 94.3%, as loan volume declined and higher yielding loans were placed
in the loan portfolio. Net investment property income decreased $3,077, or 6.0%,
primarily due to higher real estate taxes, and other operating income decreased
$8,405, or 74.3%, primarily due to the gain on sale of real estate owned in
fiscal 1999. There was no real estate owned in fiscal 2000.

General, administrative and other expense for fiscal 2000 increased $69,726, or
8.8%, as compared to fiscal 1999 totals. Employee compensation and benefits
increased $28,198, or 6.3%, primarily as a result of the amortization of the RRP
expense. Occupancy and equipment expense increased $2,972, or 3.7%, resulting
from the depreciation of the new computer system required to meet Y2K operating
standards. Professional services fees increased $56,281, or 252.9%, in
connection with the evaluation and negotiation of corporate opportunities that
Foundation subsequently concluded did not warrant further consideration. These
increases were partially offset by a decrease in federal deposit insurance
premiums of $6,257, or 37.9%, a decrease in data processing expense of $1,958,
or 5.4%, and a decrease in other operating expense of $9,865, or 8.7%. Federal
income taxes decreased $15,900, or 15.9%, primarily due to the lower earnings.





                                       6
<PAGE>   9


                       COMPARISON OF RESULTS OF OPERATIONS
                   FOR THE YEARS ENDED JUNE 30, 1999 AND 1998

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

Net earnings for the year ended June 30, 1999 totaled $169,227, a decrease of
$62,886, or 27.1%, from the $232,113 in net earnings for the year ended June 30,
1998. The decrease in earnings was comprised of a decrease in interest income of
$296,446, or 11.0%, and a slight increase of $1,062, or 0.1%, in general,
administrative and other expense. These changes were partially offset by a
decrease in interest expense of $187,133, or 11.4%, an increase in other income
of $10,289, or 8.9%, and a decrease in federal income tax of $37,200, or 27.1%.

Total interest income for the fiscal year ended June 30, 1999 decreased
$296,446, or 11.0% , as compared to fiscal 1998 totals. Interest rates reached
historic lows during fiscal 1999 and existing borrowers refinanced to obtain the
lower mortgage rates. Foundation followed a strategy of selling the low rate
loans in the secondary market rather than holding them in the loan portfolio.
The investment in mortgage loans was reduced and the average rate of return
decreased as the higher yielding loans were refinanced. This resulted in a
decrease in interest on loans of $409,479, or 20.0%. This decrease was partially
offset by increases in interest on mortgage-backed securities of $60,049, or
24.9%, interest on investments of $46,860, or 52.5%, and interest on
interest-bearing deposits and other of $6,124, or 1.9%, as the cash flow from
loan payoffs was re-invested in short-term, lower yielding instruments.

As the availability of attractive yields on investments decreased and liquidity
increased, Foundation lowered the rates paid on deposit which resulted in
outflows. Interest expense on deposits decreased $182,992, or 11.4%, as the
result of a lower weighted average cost of deposits on a smaller portfolio.
Interest expense on borrowings decreased $4,141, or 10.4%, resulting from
scheduled repayments.

Other operating income increased $10,289, or 8.9%, resulting from an increase in
gains on sales of loans of $5,693, or 9.9%, and an increase in other operating
income of $6,609, or 140.7%, partially offset by a decrease in investment
property income of $2,013, or 3.8%, due to higher real estate taxes. Other
income included a one-time gain on the sale of real estate owned in the amount
of $7,400.

The increase of $1,062, or 0.1%, in general, administrative and other expense
was principally due to the increase in franchise taxes of $18,594, or 31.5%, an
increase in occupancy and equipment of $2,411, or 3.1%, and an increase in data
processing of $2,810, or 8.4%, offset by a decrease in employee compensation and
benefits of $6,581, or 1.5%, a decrease in professional fees of $13,792, or
38.3%, and a decrease in other expenses of $1,345, or 1.2%. The increases in
data processing and occupancy and equipment were Year 2000 related and involved
new computer equipment and testing. Federal income taxes decreased $37,200, or
27.1%, due to the lower earnings.



                                       7
<PAGE>   10



The following table sets forth certain average balance sheet information,
including the average yield on interest-earning assets and the average cost of
interest-bearing liabilities for the years indicated. Such yields and costs are
derived by dividing income or expense by the average monthly balance of
interest-earning assets or interest-bearing liabilities, respectively, for the
years presented. Average balances are derived from monthly balances, which
include nonaccruing loans in the loan portfolio.
<TABLE>
<CAPTION>

                                                                                    Year ended June 30,
                                                       ----------------------------------------------------------------------------
                                                                       2000                                   1999
                                                       -------------------------------------   ------------------------------------
                                     Weighted average     Average     Interest      Average      Average      Interest      Average
                                        yield/rate      outstanding    earned/      yield/     outstanding     earned/      yield/
                                     at June 30, 2000     balance        paid         rate        balance        paid         rate
                                     ----------------  ------------    --------    ---------   ------------    --------    --------
<S>                                         <C>              <C>           <C>        <C>           <C>            <C>        <C>
Interest-earning assets:
  Interest-bearing deposits                 6.85%         $  1,269      $   81        6.38%      $  5,999      $   325        5.42%
  Investment securities                     7.02             5,606         388        6.92          2,228          136        6.10
  Mortgage-backed securities                6.30             4,571         278        6.08          5,068          301        5.94
  Loans receivable                          7.92            21,086       1,652        7.83         20,717        1,640        7.92
                                                           -------      ------                   --------      -------
     Total interest-earning assets                          32,532       2,399        7.37         34,012        2,402        7.06
Non-interest-earning assets                                    678                                    554
                                                           -------                               --------

    Total assets                                          $ 33,210                               $ 34,566
                                                          ========                               ========

Interest-bearing liabilities:
  Deposits                                  5.53          $ 25,140       1,319        5.25        $26,471        1,418        5.36
  FHLB advances                             5.56               619          34        5.49            638           36        5.64
                                                          --------                               --------
    Total interest-bearing liabilities                      25,759       1,353        5.25         27,109        1,454        5.36
                                                                        ------                                 -------
Non-interest-bearing liabilities                               424                                    394
                                                          --------                               --------

    Total liabilities                                       26,183                                 27,503

Stockholders' equity                                         7,027                                  7,063
                                                          --------                               --------
    Total liabilities and
     stockholders' equity                                 $ 33,210                               $ 34,566
                                                          ========                               ========

Net interest income                                                     $1,046                                 $   948
                                                                        ======                                 =======
Interest rate spread                                                                  2.12%                                   1.70%
                                                                                      ====                                    ====
Net interest margin (net interest
  income as a percentage of average
  interest-earning assets)                                                            3.22%                                   2.79%
                                                                                      ====                                    ====
Average interest-earning assets to
  average interest-bearing  liabilities                                             126.29%                                 125.46%
                                                                                    ======                                  ======

<CAPTION>
                                                         1998
                                       ------------------------------------
                                          Average     Interest      Average
                                        outstanding    earned/      yield/
                                          balance        paid         rate
                                       ------------   ---------    --------
<S>                                      <C>          <C>             <C>
Interest-earning assets:
  Interest-bearing deposits              $   5,809    $    319        5.49%
  Investment securities                      1,451          89        6.13
  Mortgage-backed securities                 4,020         241        6.00
  Loans receivable                          24,871       2,049        8.24
                                          --------      ------
     Total interest-earning assets          36,151       2,698        7.46
Non-interest-earning assets                    517
                                         ---------

    Total assets                           $36,668
                                           =======

Interest-bearing liabilities:
  Deposits                                 $28,400       1,606        5.65
  FHLB advances                                714          35        4.90
                                         ---------    --------
    Total interest-bearing liabilities      29,114       1,641        5.64
                                                      --------
Non-interest-bearing liabilities               542
                                         ---------

    Total liabilities                       29,656

Stockholders' equity                         7,012
                                         ---------
    Total liabilities and
     stockholders' equity                  $36,668
                                           =======

Net interest income                                     $1,057
                                                        ======
Interest rate spread                                                  1.82%
                                                                      ====
Net interest margin (net interest
  income as a percentage of average
  interest-earning assets)                                            2.92%
                                                                      ====
Average interest-earning assets to
  average interest-bearing liabilities                              124.17%
                                                                    ======

</TABLE>



                                       8
<PAGE>   11

The table below describes the extent to which changes in interest rates and
changes in volume of interest-earning assets and interest-bearing liabilities
have affected the interest income and interest expense of Foundation during the
years indicated. For each category of interest-earning assets and
interest-bearing liabilities, information is provided for changes attributable
to (i) increases and decreases in volume (change in volume multiplied by prior
year rate), (ii) increases and decreases in rate (change in rate multiplied by
prior year volume) and (iii) total increases and decreases in rate and volume.
The combined effects of changes in both volume and rate, which cannot be
separately identified, have been allocated proportionately to the change due to
volume and the change due to rate.
<TABLE>
<CAPTION>

                                                                      Year ended June 30,
                                      ---------------------------------------------------------------------------------
                                                    2000 vs. 1999                             1999 vs. 1998
                                      --------------------------------------      -------------------------------------
                                             Increase                                    Increase
                                        (decrease) due to            Total          (decrease) due to             Total
                                      ---------------------        increase        ---------------------        increase
                                       Volume         Rate        (decrease)       Volume           Rate       (decrease)
                                       -----          -----       ----------       ------          -----       ----------

<S>                                    <C>            <C>            <C>            <C>            <C>            <C>
Interest income attributable to:
   Interest-bearing deposits           $(294)         $  50          $(244)         $  10          $  (4)         $   6
   Investments                           231             21            252             48             (1)            47
   Mortgage-backed securities            (30)             7            (23)            62             (2)            60
   Loans receivable                       29            (17)            12           (332)           (77)          (409)
                                       -----          -----          -----          -----          -----          -----
     Total interest income               (64)            61             (3)          (212)           (84)          (296)

Interest-bearing liabilities
   Deposits                              (70)           (29)           (99)          (106)           (77)          (183)
   FHLB advances                          (1)            (1)            (2)            (4)          --               (4)
                                       -----          -----          -----          -----          -----          -----

     Total interest expense              (71)           (30)          (101)          (110)           (77)          (187)
                                       -----          -----          -----          -----          -----          -----

Increase (decrease) in net
  interest income                      $   7          $  91          $  98          $(102)         $  (7)         $(109)
                                       =====          =====          =====          =====          =====          =====
</TABLE>


                         ASSET AND LIABILITY MANAGEMENT

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

Foundation, like other financial institutions, is subject to interest rate risk
to the extent that its interest-earning assets reprice differently than its
interest-bearing liabilities. As part of its effort to monitor and manage
interest rate risk, Foundation uses the guidance issued in Thrift Bulletin 13a
(TB 13a), published by the OTS December 1, 1998. Under TB 13a, the Board of
Directors looks at Foundation's actual capital-to-assets ratio under various
interest rate scenarios. In this way, current levels of capital are considered
when risk is assessed.





                                       9
<PAGE>   12

Presented below, as of June 30, 2000, is an analysis of Foundation's interest
rate risk as measured by changes in net portfolio value (NPV). Generally, NPV is
the discounted present value of the difference between incoming cash flows on
interest-earning and other assets and outgoing cash flows on interest-bearing
and other liabilities. The table below attempts to quantify interest rate risk
as the change in the NPV ratio which would result from a theoretical 100 basis
point (1 basis point equals .01%) change in market interest rates (rate shock).
The table also contains the policy limits set by the Board of Directors of
Foundation in the event of various changes in interest rates.

                                                            June 30, 2000
                                                           --------------
  Change in interest rate          Board limit             Projected NPV
       (basis points)          (Minimum NPV Ratio)             Ratio
       --------------          -------------------         --------------

            +300                     6%                          9.15%
            +200                     7%                         11.91%
            +100                     8%                         14.58%
               0                     9%                         17.01%
            -100                     9%                         18.65%
            -200                     9%                         19.15%
            -300                     9%                         19.39%

As illustrated by the table, Foundation's NPV is more sensitive to rising rates
than declining rates. Such difference in sensitivity occurs principally because,
as rates rise, borrowers do not prepay fixed-rate loans as quickly as they do
when interest rates are declining. Thus, in a rising interest rate environment,
because Foundation has a significant amount of fixed-rate loans in its loan
portfolio, the amount of interest Foundation would receive on its loans would
increase relatively slowly as loans are slowly prepaid and new loans are made at
higher rates. Moreover, the interest Foundation would pay on its deposits would
increase rapidly because Foundation's deposits generally have shorter periods to
repricing.

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

A decrease or a significant increase in interest rates from the recent levels
could be expected to affect negatively the net interest income of Foundation.
Moreover, rising interest rates could negatively affect the earnings of
Foundation due to diminished loan demand. Foundation attempts to mitigate
interest rate risk by selling fixed-rate loans originated at low interest rates.





                                       10
<PAGE>   13

                         LIQUIDITY AND CAPITAL RESOURCES

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

Foundation's liquidity, primarily represented by cash and cash equivalents, is a
result of the funds used in or provided by Foundation's operating, investing and
financing activities. These activities are summarized below for the years ended
June 30, 2000, 1999 and 1998.
<TABLE>
<CAPTION>

                                                                    Year ended June 30,
                                                     ---------------------------------------------------
                                                       2000                  1999                 1998
                                                     -------               -------               -------
                                                                           (In thousands)

<S>                                                  <C>                   <C>                   <C>
Net income                                           $   154               $   169               $   232
Adjustments to reconcile net income to
   net cash from operating activities                    (32)                   15                    36
                                                     -------               -------               -------
Net cash from operating activities                       122                   184                   268
Net cash provided by (used in)
   investment activities                              (1,599)                (1310)                2,098
Net cash provided by (used in)
   financing activities                                 (563)               (2,656)                  541
                                                     -------               -------               -------
Net change in cash and cash equivalents               (2,040)               (3,782)                2,907
Cash and cash equivalents at
   beginning of period                                 2,414                 6,196                 3,289
                                                     -------               -------               -------
Cash and cash equivalents at
   end of period                                     $   374               $ 2,414               $ 6,196
                                                     =======               =======               =======
</TABLE>

The principal sources of funds for Foundation are deposits, loan and
mortgage-backed security repayments, maturities of investment securities and
funds generated through operations. Foundation also has the ability to borrow
from the FHLB of Cincinnati. While scheduled loan repayments and maturing
investments are relatively predictable, deposit flows and loan prepayments are
heavily influenced by interest rates, general economic conditions and
competition. Foundation maintains a level of investment in liquid assets which
is based upon management's assessment of (i) the need for funds, (ii) expected
deposit flows, (iii) the yields available on short-term liquid assets and (iv)
the objectives of the asset and liability management program of Foundation.

OTS regulations presently require Foundation to maintain an average daily
balance of liquid assets, which may include, but are not limited to, investments
in U. S. Treasury and federal agency obligations and other investments in an
amount equal to at least 4% of the sum of Foundation's net withdrawable deposit
accounts and borrowings payable in one year or less computed as of the end of
the prior quarter or based on the average daily balance during the prior
quarter. The liquidity requirement, which may be changed from time to time by
the OTS to reflect changing economic conditions, is intended to provide a source
of relatively liquid funds upon which Foundation may rely if necessary to fund
deposit withdrawals or other short-term funding needs. At June 30, 2000,
Foundation's liquid assets totaled approximately $8.9 million, which exceeded
the OTS minimum requirements by $7.9 million. At such date, Foundation had
commitments to originate loans and loans in process totaling $345,000.
Foundation considers its liquidity and capital reserves sufficient to meet its
outstanding short-term and long-term needs.





                                       11
<PAGE>   14

                         CLARK, SCHAEFER, HACKETT & CO.
                          CERTIFIED PUBLIC ACCOUNTANTS
                              BUSINESS CONSULTANTS

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------



The Board of Directors
Foundation Bancorp, Inc.:


We have audited the consolidated statements of financial condition of Foundation
Bancorp, Inc. and its subsidiary as of June 30, 2000 and 1999, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended June 30, 2000. 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 Bancorp, Inc. and
its Subsidiary as of June 30, 2000 and 1999, and the results of its operations
and its cash flows for each of the three years in the period ended June 30,
2000, in conformity with generally accepted accounting principles.


/s/ Clark, Schaefer, Hackett & Co.

Cincinnati, Ohio
July 17, 2000

                                       12

<PAGE>   15



                            FOUNDATION BANCORP, INC.

                 Consolidated Statements of Financial Condition

                             June 30, 2000 and 1999

<TABLE>
<CAPTION>
                             ASSETS

                                                                                     June 30,
                                                                           ----------------------------
                                                                               2000            1999
                                                                           ------------    ------------

<S>                                                                        <C>             <C>
Cash                                                                       $     13,279          79,041
Interest-bearing deposits in other financial institutions                       360,262       2,335,212
                                                                           ------------    ------------
                                                                                373,541       2,414,253

Certificates of deposit                                                            --         1,206,398
Investment securities - at amortized cost (fair value of $5,097,605 and
      $3,701,563 at June 30, 2000 and 1999, respectively)                     5,250,000       3,753,920
Mortgage-backed securities - at amortized cost (fair value of $4,152,316
      and $4,920,386 at June 30, 2000 and 1999, respectively)                 4,355,022       5,017,882
Loans receivable, net                                                        22,441,795      20,468,039
Accrued interest receivable:
      Loans                                                                     100,882          96,078
      Investments and interest-bearing deposits                                  73,151          21,866
      Mortgage-backed securities                                                 29,841          33,591
Real estate owned                                                                  --              --
Federal Home Loan Bank stock - at cost                                          368,800         343,800
Property and equipment, net                                                     281,405         299,787
Prepaid expenses and other assets                                               107,459         105,966
                                                                           ------------    ------------

              Total assets                                                 $ 33,381,896      33,761,580
                                                                           ============    ============

                    LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits                                                                   $ 25,505,422      25,754,436
Advances from Federal Home Loan Bank                                            518,652         601,530
Advances by borrowers for taxes, insurance and other                             57,872          59,551
Accrued expenses                                                                123,330         183,241
Accrued federal income tax                                                         --            16,378
Deferred federal income tax                                                     101,300          74,300
                                                                           ------------    ------------
              Total liabilities                                              26,306,576      26,689,436

Common stock, no par value; 2,000,000 shares authorized; 462,875 shares
      issued and outstanding as of June 30, 2000 and 1999                          --              --
Additional paid in capital                                                    4,398,922       4,394,429
Retained earnings, substantially restricted                                   2,927,918       3,004,988
Shares acquired for restricted stock plan                                      (100,647)       (123,500)
Less unallocated ESOP shares                                                   (150,873)       (203,773)
                                                                           ------------    ------------
      Total stockholders' equity                                              7,075,320       7,072,144
                                                                           ------------    ------------

              Total liabilities and stockholders' equity                   $ 33,381,896      33,761,580
                                                                           ============    ============
</TABLE>

See accompanying notes to financial statements.


                                      13
<PAGE>   16

                            FOUNDATION BANCORP, INC.

                        Consolidated Statements of Income

                         Three Years Ended June 30, 2000

<TABLE>
<CAPTION>
                                                                                        June 30,
                                                                           ------------------------------------
                                                                              2000         1999         1998
                                                                           ----------   ----------   ----------
<S>                                                                        <C>           <C>          <C>
Interest income:
      Loans                                                                $1,651,921    1,639,558    2,049,037
      Mortgage-backed securities                                              277,949      301,244      241,195
      Investment securities                                                   387,850      136,115       89,255
      Interest-bearing deposits                                                81,507      325,031      318,907
                                                                           ----------   ----------   ----------

              Total interest income                                         2,399,227    2,401,948    2,698,394
                                                                           ----------   ----------   ----------

Interest expense:
      Deposits                                                              1,319,298    1,418,388    1,601,380
      Borrowings                                                               34,008       35,693       39,834
                                                                           ----------   ----------   ----------

              Total interest expense                                        1,353,306    1,454,081    1,641,214
                                                                           ----------   ----------   ----------

Net interest income                                                         1,045,921      947,867    1,057,180
Provision for loan losses                                                        --         12,000       12,000
                                                                           ----------   ----------   ----------

              Net interest income after provision for loan losses           1,045,921      935,867    1,045,180
                                                                           ----------   ----------   ----------

Other income:
      Gain on sale of loans                                                     3,598       63,205       57,512
      Net investment property income                                           48,549       51,626       53,639
      Other operating income                                                    2,900       11,305        4,696
                                                                           ----------   ----------   ----------

              Total other income                                               55,047      126,136      115,847
                                                                           ----------   ----------   ----------

General, administrative and other expense:
      Employee compensation and benefits                                      473,700      445,502      452,083
      Occupancy and equipment                                                  83,922       80,950       78,539
      Deposit insurance                                                        10,249       16,506       17,541
      Franchise tax                                                            77,981       77,626       59,032
      Professional fees                                                        78,539       22,258       36,050
      Computer processing costs                                                34,470       36,428       33,618
      Other operating expense                                                 103,741      113,606      114,951
                                                                           ----------   ----------   ----------

              Total general, administrative and other operating expenses      862,602      792,876      791,814
                                                                           ----------   ----------   ----------

              Income before income taxes                                      238,366      269,127      369,213
                                                                           ----------   ----------   ----------

Federal income taxes:
      Current                                                                  57,000       97,000      119,600
      Deferred                                                                 27,000        2,900       17,500
                                                                           ----------   ----------   ----------

                                                                               84,000       99,900      137,100
                                                                           ----------   ----------   ----------

              Net income                                                   $  154,366      169,227      232,113
                                                                           ==========   ==========   ==========

Basic and diluted earnings per share                                       $     0.35         0.38         0.53
                                                                           ==========   ==========   ==========
</TABLE>




See accompanying notes to financial statements.


                                      14
<PAGE>   17


                            FOUNDATION BANCORP, INC.

                 Consolidated Statements of Stockholders' Equity

                         Three Years Ended June 30, 2000

<TABLE>
<CAPTION>
                                                    Additional                 Restricted   Unallocated
                                         Common      Paid-In      Retained       Stock         ESOP
                                          Stock      Capital      Earnings        Plan         Shares         Total
                                       ----------   ----------   ----------    ----------    ----------    ----------

<S>                                    <C>           <C>          <C>          <C>             <C>          <C>
Balance at June 30, 1997               $     --      4,341,126    2,904,516          --        (311,781)    6,933,861

      ESOP shares to be
          allocated at average
          market price                       --         34,268         --            --          55,108        89,376

      Dividends paid                         --           --       (115,718)         --            --        (115,718)

      Net income for the
          year ended
          June 30, 1998                      --           --        232,113          --            --         232,113
                                       ----------   ----------   ----------    ----------    ----------    ----------

Balance at June 30, 1998               $     --      4,375,394    3,020,911          --        (256,673)    7,139,632

      ESOP shares to be
          allocated at average
          market price                       --         19,035         --            --          52,900        71,935

      Dividends paid                         --           --       (185,150)         --            --        (185,150)

      Shares acquired for restricted
          stock plan                         --           --           --        (123,500)         --        (123,500)

      Net income for the
          year ended
          June 30, 1999                      --           --        169,227          --            --         169,227
                                       ----------   ----------   ----------    ----------    ----------    ----------

Balance at June 30, 1999                     --      4,394,429    3,004,988      (123,500)     (203,773)    7,072,144

      ESOP shares to be
          allocated at average
          market price                       --          4,493         --            --          52,900        57,393

      Dividends paid                         --           --       (231,436)         --            --        (231,436)

      Shares redeemed for restricted
          stock plan                         --           --           --          22,853          --          22,853

      Net income for the
          year ended
          June 30, 2000                      --           --        154,366          --            --         154,366
                                       ----------   ----------   ----------    ----------    ----------    ----------

Balance at June 30, 2000                     --      4,398,922    2,927,918      (100,647)     (150,873)    7,075,320
                                       ==========   ==========   ==========    ==========    ==========    ==========
</TABLE>

See accompanying notes to financial statements.


                                       15
<PAGE>   18

                            FOUNDATION BANCORP, INC.

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                  Years Ended June 30,
                                                      -----------------------------------------
                                                          2000           1999           1998
                                                      -----------    -----------    -----------
<S>                                                   <C>              <C>            <C>
Cash flows from operating activities:
      Interest received                               $ 2,322,591      2,397,761      2,665,353
      Interest paid                                    (1,352,153)    (1,455,203)    (1,642,190)
      Cash paid to suppliers and employees               (862,795)      (648,355)      (756,657)
      Fees and commissions received                         2,901          3,829          4,696
      Income taxes paid                                   (62,282)      (187,357)       (76,521)
      Rental income received                               73,200         73,200         73,200
                                                      -----------    -----------    -----------

              Net cash provided by operating
                 activities                               121,462        183,875        267,881
                                                      -----------    -----------    -----------

Cash flows from investing activities:
      Purchase of mortgage-backed securities                 --       (1,951,453)      (454,477)
      Repayments of mortgage-backed securities            652,000        885,347        758,290
      Redemption (purchase) of certificates of
          deposit                                       1,206,398       (906,398)      (300,000)
      Purchase of investment securities                (1,500,000)    (4,459,514)    (2,801,193)
      Maturities of investment securities                    --        3,650,000        800,000
      Loan disbursements                               (6,166,978)   (11,849,619)   (11,418,611)
      Loan principal repayments                         3,916,797      6,736,060      8,285,610
      Proceeds from sale of loans                         294,104      6,554,310      7,228,530
      Proceeds from sale of other real estate owned          --           61,707           --
      Purchase of property and equipment                   (1,167)       (30,797)          --
                                                      -----------    -----------    -----------

              Net cash provided by (used in)
                 investing activities                  (1,598,846)    (1,310,357)     2,098,149
                                                      -----------    -----------    -----------

Cash flows from financing activities:
      Net increase (decrease) in deposits                (249,014)    (2,268,478)       731,149
      Borrowings from Federal Home Loan Bank              750,000           --             --
      Repayment of Federal Home Loan Bank
          advances                                       (832,878)       (78,507)       (74,366)
      Shares purchased for restricted stock plan             --         (123,500)          --
      Dividends paid                                     (231,436)      (185,150)      (115,718)
                                                      -----------    -----------    -----------

              Net cash provided by (used in)
                 financing activities                    (563,328)    (2,655,635)       541,065
                                                      -----------    -----------    -----------

Net increase (decrease) in cash and
      cash equivalents                                 (2,040,712)    (3,782,117)     2,907,095

Cash and cash equivalents at beginning
      of period                                         2,414,253      6,196,370      3,289,275
                                                      -----------    -----------    -----------

Cash and cash equivalents at end of period            $   373,541      2,414,253      6,196,370
                                                      ===========    ===========    ===========
</TABLE>


See accompanying notes to financial statements.


                                        16
<PAGE>   19


                            FOUNDATION BANCORP, INC.

                      Consolidated Statement of Cash Flows

                         Three Years Ended June 30, 2000

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

<TABLE>
<CAPTION>
                                                                    2000         1999         1998
                                                                 ---------    ---------    ---------

<S>                                                              <C>            <C>          <C>
Net income                                                       $ 154,366      169,227      232,113
      Adjustments to reconcile net income to net cash
          provided by operating activities:
              Gain on sale of loans                                 (3,598)     (63,205)     (57,512)
              Gain on sale of other real estate owned                 --         (7,476)        --
              Depreciation                                          19,549       16,401       13,545
              Amortization of premiums and discounts
                 on investments and mortgage-backed securities      14,780       17,247       18,027
              Federal Home Loan Bank stock dividends               (25,000)     (23,000)     (22,000)
              Provision for loan losses                               --         12,000       12,000
              Amortization of deferred loan fees                   (14,081)     (12,033)     (10,302)
              Deferred federal income tax                           27,000        2,900       17,500
              ESOP expense                                          57,393       71,935       89,376
              Restricted stock plan expense                         22,853         --           --
              Effects of change in operating assets and
                 liabilities:
                     Accrued interest receivable                   (52,339)      13,599      (18,761)
                     Prepaid expenses and other assets              (1,493)       2,733      (44,221)
                     Advances by borrowers for taxes,
                        insurance and other                         (1,679)      (1,482)      (4,238)
                     Accrued expenses                              (59,911)      38,184         (725)
                     Accrued federal income tax                    (16,378)     (53,155)      43,079
                                                                 ---------    ---------    ---------

                     Net cash provided by operating
                        activities                               $ 121,462      183,875      267,881
                                                                 =========    =========    =========
</TABLE>


SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

The Company acquired real estate in settlement of a loan receivable of $54,231
during the year ended June 30, 1998.

The Company redeemed shares in the restricted stock plan of $22,853 during the
year ended June 30, 2000.



See accompanying notes to financial statements.


                                      17
<PAGE>   20

                            FOUNDATION BANCORP, INC.

                          Notes to Financial Statements

                 Three Years Ended June 30, 2000, 1999 and 1998

 1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

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

           NATURE OF OPERATIONS AND PRINCIPLES OF CONSOLIDATION

           Foundation Bancorp, Inc. (the Company) is a holding company formed in
           1996 in conjunction with the conversion of Foundation Savings Bank
           from a mutual savings bank to a stock savings bank in September 1996.
           The conversion culminated in the Corporation's issuance of 462,875
           shares. The Company's financial statements include the accounts of
           its wholly owned subsidiary, Foundation Savings Bank (the Savings
           Bank). All significant intercompany transactions have been
           eliminated.

           The Savings Bank 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
           Savings Bank maintains a required investment in capital stock of the
           Federal Home Loan Bank of Cincinnati. The Savings Bank 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 Company considers all
           highly liquid debt instruments with original maturity when purchased
           of three months or less to be cash equivalents.

           COMPREHENSIVE INCOME

           As described, the Company has no items of comprehensive income,
           therefore no statement of comprehensive income is presented.


           INVESTMENT AND MORTGAGE-BACKED SECURITIES

           Investments and mortgage-backed securities are classified upon
           acquisition into one of three categories; held to maturity, trading,
           and available for sale. Debt securities that the Savings Bank has the
           positive intent and ability to hold to maturity are classified as
           held to maturity securities and reported at amortized cost.
           Presently, the Savings Bank has classified all investments and
           mortgage backed securities as held to maturity.

           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.

           LOANS RECEIVABLE

           Loans held in portfolio are stated at the principal amount
           outstanding, adjusted for deferred loan origination fees and costs,
           and the allowance for loan losses.

           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.


                                        18

<PAGE>   21

           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 the interest accrued past the
           first 90 days, 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.

           It is the Savings Bank'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 Savings Bank 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.

           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 Savings Bank 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 Savings Bank'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 years ended June 30, 2000 and 1999, the
           Savings Bank had no loans that were impaired as described in the
           pronouncement and therefore no interest income was recognized or
           received on impaired loans.

           REAL ESTATE ACQUIRED THROUGH FORECLOSURE

           Real estate acquired through foreclosure results when property
           collateralizing a loan is foreclosed upon or otherwise acquired by
           the Savings Bank 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 the
           allowance for loan losses if the carrying value of a property exceeds
           its estimated net realizable value. The Savings Bank acquired real
           estate through foreclosure at June 30, 1998 for $54,231. The real
           estate acquired through foreclosure was sold in 1999.


                                        19
<PAGE>   22

           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

           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.

           CONCENTRATIONS OF CREDIT RISK

           The Savings Bank 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.

           EMPLOYEE STOCK OWNERSHIP PLAN

           Shares committed to be allocated to the Employee Stock Ownership Plan
           (ESOP) are charged to expense at the average market price for the
           year. The excess of average market value over cost is added to
           additional paid-in capital.

           RECENT ACCOUNTING PRONOUNCEMENTS

           SFAS No. 133 "Accounting for Derivative Instruments and Hedging
           Activities" was issued by the FASB which established standards for
           derivative instruments, including derivative instruments imbedded in
           other contracts, and for hedging activities. It requires that an
           entity recognize all derivatives as either assets or liabilities in
           the statement of financial position and measure those instruments at
           fair value. SFAS No. 133, as amended by SFAS No. 137, is effective
           for all fiscal quarters beginning after June 15, 2000. Management
           does not believe that the adoption of this standard will impact the
           Company because at the current time the Company does not hold any
           instruments covered by this standard.

           EARNINGS PER SHARE

           Earnings per common share have been computed on the basis of weighted
           average number of common shares outstanding, and when applicable,
           those stock options that are dilutive. Weighted-average shares
           outstanding do not include unallocated shares purchased by the ESOP.


                                        20
<PAGE>   23

2.     INVESTMENT SECURITIES:

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

<TABLE>
<CAPTION>
                                                                              June 30, 2000
                                                   -----------------------------------------------------------------
                                                                         Gross             Gross
                                                      Amortized       Unrealized        Unrealized          Fair
                                                        Cost             Gains            Losses            Value
                                                        ----             -----            ------            -----
<S>                                               <C>              <C>                 <C>                <C>
       Obligations of U.S.
           Government agencies                    $  5,250,000               -            152,395         5,097,605
                                                     =========      ============          =======         =========
</TABLE>

<TABLE>
<CAPTION>
                                                                              June 30, 2000
                                                   -----------------------------------------------------------------
                                                                         Gross             Gross
                                                      Amortized       Unrealized        Unrealized          Fair
                                                        Cost             Gains            Losses            Value
                                                        ----             -----            ------            -----
<S>                                               <C>              <C>                 <C>                <C>
       Obligations of U.S.
           Government agencies                    $  3,753,920               -             52,357         3,701,563
                                                     =========      ============           ======         =========
</TABLE>

       The amortized cost and fair value of investment securities at June 30,
       2000 and 1999 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.

<TABLE>
<CAPTION>
                                                                              June 30, 2000
                                                               ---------------------------------------
                                                                  Amortized                   Fair
                                                                    Cost                      Value
                                                                    ----                      -----

<S>                                                             <C>                         <C>
       Due or callable in one year or less                      $ 5,250,000                 5,097,605
                                                                  =========                 =========
</TABLE>

       Included in investments at June 30, 2000, are $500,000 of callable notes
       with a final maturity in 2003, $4,450,000 of callable notes with a final
       maturity between of 2004 and 2009 and $300,000 of callable notes with
       final maturity of 2014.

<TABLE>
<CAPTION>
                                                                              June 30, 1999
                                                               -----------------------------------------
                                                                   Amortized                    Fair
                                                                     Cost                       Value
                                                                     ----                       -----

<S>                                                             <C>                           <C>
       Due or callable in one year or less                      $ 3,453,920                   3,401,563
       Due or callable in three years                               300,000                     300,000
                                                                 ----------                  ----------
                                                                $ 3,753,920                   3,701,563
                                                                  =========                   =========
</TABLE>

       Included in investments at June 30, 1999, are $500,000 of callable notes
       with a final maturity in 2003, $2,950,000 of callable notes with a final
       maturity between 2004 and 2009 and $300,000 of callable notes with final
       maturity of 2014.


                                        21
<PAGE>   24

3.     MORTGAGE-BACKED SECURITIES:

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

<TABLE>
<CAPTION>
                                                                                 June 30, 2000
                                                        --------------------------------------------------------------
                                                                                Gross          Gross
                                                             Amortized       Unrealized     Unrealized      Fair
                                                               Cost             Gains         Losses        Value
                                                               ----             -----         ------        -----
<S>                                                         <C>                  <C>           <C>          <C>
       Federal Home Loan Mortgage Corp.                     $ 1,486,686          1,456         43,759       1,444,383

       Federal National Mortgage Association                  1,744,504          2,078         71,978       1,674,604
       Government National Mortgage
           Association                                           84,832            597            -            85,429
       Collateralized Mortgage Obligations                    1,039,000            -           91,100         947,900
                                                              ---------       --------       --------      ----------

                                                            $ 4,355,022          4,131        206,837       4,152,316
                                                              =========       ========        =======       =========
</TABLE>

<TABLE>
<CAPTION>
                                                                                June 30, 1999
                                                        ---------------------------------------------------------------
                                                                                Gross          Gross
                                                             Amortized       Unrealized     Unrealized        Fair
                                                               Cost             Gains         Losses          Value
                                                               ----             -----         ------          -----
<S>                                                         <C>                    <C>         <C>          <C>
       Federal Home Loan Mortgage Corp.                     $ 1,744,966            256         29,602       1,715,620
       Federal National Mortgage Association                  2,132,527            294         45,979       2,086,842
       Government National Mortgage
           Association                                          101,389            815            -           102,204
       Collateralized Mortgage Obligations                    1,039,000            -           23,280       1,015,720
                                                              ---------     ----------         ------       ---------

                                                            $ 5,017,882          1,365         98,861       4,920,386
                                                              =========     ==========         ======       =========
</TABLE>

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


4.     LOANS RECEIVABLE:

       Loans receivable, including loans held for sale, consists of the
       following:

<TABLE>
<CAPTION>
                                                                                              June 30
                                                                                -----------------------------------
                                                                                      2000                1999
                                                                                      ----                ----

<S>                                                                                <C>                   <C>
       Residential one-to-four family real estate                                  $ 20,182,585          18,013,796
       Multi-family residential real estate                                           1,354,682           1,489,085
       Commercial real estate                                                           906,488           1,196,702
       Consumer                                                                         150,105             198,467
       Passbook                                                                          26,312              22,019
                                                                                   ------------          ----------
                                                                                     22,620,172          20,920,069
       Less:
                Loans in process                                                        (54,970)           (307,302)
                Allowance for loan losses                                              (142,907)           (150,147)
                Deferred loan (fees) costs                                               19,500               5,419
                                                                                   ------------          ----------
                                                                                   $ 22,441,795          20,468,039
                                                                                   ============          ==========
</TABLE>

       At June 30, 2000 and 1999, adjustable rate loans approximated $5,663,000
       and $6,001,000.


                                        22
<PAGE>   25

       Activity in the allowance for loan losses was as follows:

<TABLE>
<CAPTION>
                                                                               Year Ended June 30,
                                                               --------------------------------------------------
                                                                     2000             1999              1998
                                                                     ----             ----              ----

<S>                                                               <C>                 <C>              <C>
       Beginning balance                                          $ 150,147           138,147          126,147
       Provision for loan losses                                        -              12,000           12,000
       Write-offs net of recoveries                                  (7,240)               -                -
                                                                    --------          -------      ----------

       Ending balance                                             $ 142,907           150,147          138,147
                                                                    =======           =======          =======
</TABLE>

       Gross proceeds on sales of loans were $294,104, $6,544,310 and $7,228,530
       for the years ended June 30, 2000, 1999 and 1998, respectively. Net
       realized gains on sales of loans were $3,598, $63,205 and $57,512 for the
       years ended June 30, 2000, 1999 and 1998. Loans serviced for others as of
       June 30, 2000, 1999 and 1998, were $-0-, $249,270, and $-0- respectively.

       At June 30, 2000, the Company had one non-accrual loan with a balance of
       $73,243 and non-accrual interest of $1,038. The Company had no
       non-accrual loans at June 30, 1999.

       The Company had no loans to officers, directors and employees at June 30,
       2000 and 1999.


5.     PROPERTY AND EQUIPMENT:

       Property and equipment are summarized as follows:

<TABLE>
<CAPTION>
                                                                                      2000             1999
                                                                                      ----             ----

<S>                                                                                 <C>                <C>
       Real estate owned - investment property                                      $ 251,847          251,847
       Furniture and equipment                                                        173,351          172,184
       Leasehold improvements                                                          34,246           34,246
                                                                                      -------         --------
                                                                                      459,444          458,277
       Less accumulated depreciation                                                  178,039          158,490
                                                                                      -------         --------
                                                                                    $ 281,405          299,787
                                                                                      =======         ========
</TABLE>

       The Company leases its office facility under a ten-year non-cancelable
       lease, which expires in March 2001 with additional renewal options. Rent
       expense for each of the years ended June 30, 2000, 1999 and 1998, was
       $53,356.

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

<TABLE>
<CAPTION>
                               YEAR ENDED JUNE 30,

<S>                                                                       <C>
                                      2001                                $   38,722
                                                                            ========
</TABLE>



6.     INVESTMENT PROPERTY:

       The Savings Bank acquired real estate at the southeast corner of Eighth
       and Vine Streets in 1980. The Savings Bank has a lease agreement on the
       property as a parking lot under a three-year lease beginning July 1,
       1997. The lease payments are $6,100 per month. Rent income for the years
       ended June 30, 2000, 1999 and 1998, was $73,200, $73,200 and $73,200,
       respectively.


                                        23
<PAGE>   26

7.     DEPOSITS:

       Deposits consist of the following:

<TABLE>
<CAPTION>
                                                                          June 30,
                                                --------------------------------------------------------------------
                                                             2000                              1999
                                                -----------------------------     -----------------------------------
                                                 Weighted                           Weighted
                                                  Average                            Average
                                                   Rate             Amount            Rate             Amount
                                                   ----             ------            ----             ------

<S>                                                <C>         <C>                    <C>          <C>
       Passbook                                    2.54%       $     707,885          2.54%        $     706,509
       NOW and money market accounts               2.24            1,471,154          2.30             1,290,500
                                                                 -----------                         -----------

                                                   2.34            2,179,039          2.37             1,997,009
                                                                 -----------                         -----------


       Certificates of deposit:
           3 months                                4.43              103,227          4.41               151,565
           6 months                                5.78              991,092          4.64             1,121,367
           12 months                               5.84           10,160,547          5.05             9,974,359
           18 months                               5.79               97,399          2.45                21,023
           2 years                                 5.74            7,242,018          5.64             8,043,601
           3 years                                 5.78            1,443,136          5.84             1,679,207
           4 years                                 5.86              245,375          5.78               291,498
           5 years                                 6.07            3,043,589          5.99             2,474,807
                                                                 -----------                         -----------

                                                   5.82           23,326,383          5.38            23,757,427
                                                                  ----------                          ----------

                                                   5.53%        $ 25,505,422          5.15%         $ 25,754,436
                                                                  ==========                          ==========
</TABLE>

       Maturities of outstanding certificates of deposit are summarized as
       follows:

<TABLE>
<CAPTION>
                                                                                     June 30,
                                                                         ---------------------------------
                                                                              2000               1999
                                                                              ----               ----
                                                                                 (In Thousands)

<S>                                                                         <C>                   <C>
                  One year or less                                          $ 15,438              16,164
                  1 - 2 years                                                  5,454               4,723
                  2 - 3 years                                                  1,087               1,482
                  Over 3 years                                                 1,347               1,388
                                                                              ------              ------

                                                                            $ 23,326              23,757
                                                                              ======              ======
</TABLE>

       Interest expense on deposits is summarized as follows:

<TABLE>
<CAPTION>
                                                                               Year Ended June 30,
                                                              ----------------------------------------------------
                                                                     2000             1999              1998
                                                                     ----             ----              ----

<S>                                                            <C>                      <C>              <C>
       Passbook                                                $      18,701            16,163           18,300
       NOW and money market account                                   43,811            36,931           43,819
       Certificates of deposit                                     1,256,786         1,365,294        1,539,261
                                                                   ---------         ---------        ---------

                                                                 $ 1,319,298         1,418,388        1,601,380
                                                                   =========         =========        =========
</TABLE>

       The aggregate amount of certificates of deposits in denominations of
       $100,000 or more was $2,970,366 and $3,100,010 at June 30, 2000 and 1999,
       respectively. Deposit accounts exceeding $100,000 are not federally
       insured.

                                        24
<PAGE>   27


8.     ADVANCES FROM FEDERAL HOME LOAN BANK:

       The Savings Bank 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.

       Future maturities on the advance are as follows:

<TABLE>
<CAPTION>
                               Year Ended June 30,
                               -------------------
<S>                                                                       <C>
                                      2001                                $   87,494
                                      2002                                    92,368
                                      2003                                    97,512
                                      2004                                    53,809
                                      2005                                    40,091
                               2006 and subsequent                           147,378
                                                                             -------

                                                                           $ 518,652
                                                                             =======
</TABLE>

       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 $790,000 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 Company 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 Company.

       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
           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

                                       25
<PAGE>   28

           appraisals. Assumptions regarding credit risk, cash flow, and
           discount rates are subjectively 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 Company's financial instruments were as
       follows at:




<TABLE>
<CAPTION>
                                                                                   June 30, 2000
                                                                       --------------------------------------
                                                                            Carrying              Fair
                                                                             Amount               Value
                                                                             ------               -----

<S>                                                                     <C>                        <C>
       Financial assets:
              Cash and due from banks, interest bearing
                  deposits with banks and federal funds sold            $      373,541             373,541
              Investment securities                                          5,250,000           5,097,605
              Mortgage-backed securities                                     4,355,022           4,152,316
              Loans receivable                                              22,441,795          22,087,000
              Accrued interest receivable                                      203,874             203,874

       Financial liabilities:
              Deposit liabilities                                           25,505,422          25,329,000
              Federal Home Loan Bank advance                                   518,652             474,000

       Off balance sheet items                                                     -                   -
</TABLE>

<TABLE>
<CAPTION>
                                                                                   June 30,1999
                                                                       --------------------------------------
                                                                            Carrying             Fair
                                                                             Amount              Value
                                                                             ------              -----

<S>                                                                      <C>                     <C>
       Financial assets:
              Cash and due from banks, interest bearing
                  deposits with banks and federal funds sold             $   3,620,651           3,620,651

              Investment securities                                          3,753,920           3,701,563
              Mortgage-backed securities                                     5,017,882           4,920,386
              Loans receivable                                              20,468,039          20,431,000
              Accrued interest receivable                                      151,535             151,535

       Financial liabilities:
              Deposit liabilities                                           25,754,436          25,722,000
              Federal Home Loan Bank advances                                  601,530             581,000

       Off balance sheet items                                                     -                   -
</TABLE>

                                       26
<PAGE>   29

10.    CAPITAL REQUIREMENTS:

       In connection with the insurance of savings deposits by SAIF, the Savings
       Bank is subject to minimum regulatory capital requirements promulgated by
       the Office of Thrift Supervision (OTS).

       In general, the capital standards established for savings institutions
       must be no less stringent than capital standards applicable to national
       banks set by the Office of the Comptroller of the Currency. At June 30,
       2000, the core capital requirement provides for minimum core capital
       equal to 4.0% of adjusted total assets. The risk-based capital
       requirement at June 30, 2000 provides for the maintenance of core capital
       plus general loss allowances equal to 8.0% of risk-weighted assets. In
       computing risk-weighted assets, the Savings Bank multiplies the value of
       each asset on its statement of financial condition by a defined
       risk-weighing factor, e.g., one-to-four family residential loans carry a
       risk-weighted factor of 50%.

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

<TABLE>
<CAPTION>
                                                                            June 30, 2000
                                                       ---------------------------------------------------------
                                                                         Regulatory Capital
                                                                                          Risk-
                                                           Core                           based
                                                          Capital           %            Capital          %
                                                          -------           -            -------          -
                                                                             (in Thousands)

<S>                                                        <C>            <C>             <C>           <C>
       Capital under generally accepted
           accounting principles                        $  5,795                          5,795
       General valuation allowances                            -                            143
                                                          ------                         ------
       Regulatory capital computed                         5,795          17.4            5,938         39.2

       Minimum capital requirements                        1,336           4.0            1,211          8.0
                                                           -----          ----            -----         ----

       Regulatory capital-excess                         $ 4,459          13.4            4,727         31.2
                                                           =====          ====            =====         ====
</TABLE>

       Capital ratios for June 30, 1999 are shown in the following table.

<TABLE>
<CAPTION>
                                                                            June 30, 1999
                                                       ---------------------------------------------------------
                                                                         Regulatory Capital
                                                                                          Risk-
                                                           Core                           based
                                                          Capital           %            Capital          %
                                                          -------           -            -------          -
                                                                             (in Thousands)

<S>                                                        <C>            <C>             <C>           <C>
       Capital under generally accepted
           accounting principles                        $  5,784                          5,784
       General valuation allowances                            -                            141
                                                          ------                         ------
       Regulatory capital computed                         5,784          17.1            5,925         39.9

       Minimum capital requirements                        1,350           4.0            1,186          8.0
                                                           -----          ----            -----         ----

       Regulatory capital-excess                         $ 4,434          13.1            4,739         31.9
                                                           =====          ====            =====         ====
</TABLE>


11.    COMMITMENTS:

       At June 30, 2000, the Savings Bank had commitments to originate loans
       totaling $290,000. The entire amount was for fixed rate loans. No portion
       of these loans was disbursed prior to June 30, 2000, 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, 1999 were
       $825,000.


                                        27
<PAGE>   30

12.    RETIREMENT PLANS:

       EMPLOYEE STOCK OWNERSHIP PLAN

       Concurrent with the Savings Bank's conversion from the mutual to stock
       form of organization, in September 1996, the Company established an ESOP
       which provides retirement benefits for substantially all employees who
       have completed one year of service and have attained age 21. The ESOP
       initially acquired 37,030 common shares in the conversion offering. The
       funds used by the ESOP to purchase the stock were provided by a loan from
       the Company which will be repaid by contributions to the ESOP by the
       Company in the future. Management intends to allocate these shares to
       eligible employees' accounts over a five to seven year period starting in
       1997. Expense for shares committed to be allocated during 2000, 1999 and
       1998 was $57,393, $71,935 and $89,376, respectively. Remaining unearned
       shares at June 30, 2000 and 1999 was 14,230 and 19,660.

       1997 RECOGNITION AND RETENTION PLAN

       During 1997, the shareholders approved the 1997 Recognition and Retention
       Plan. Under provisions of the Plan, 18,515 shares of common stock can be
       reserved for awards. The Company awarded the maximum number of shares in
       January 1999. A recipient earns plan share awards over a ten year period
       commencing July 1, 1999. The plan released shares of 1,851 during the
       year ended June 30, 2000 and recognized expense of $22,853.

       1997 STOCK OPTION AND INCENTIVE PLAN

       The shareholders approved the 1997 Stock Option and Incentive Plan in
       1997. The Plan allows for 46,288 shares to be reserved for incentive and
       non-incentive stock options. Grantees are awarded 10 year options to
       acquire shares at the market price on the date the option is granted. The
       Company granted 46,288 options on January 25, 1999 at an option price of
       $12.50. As of June 30, 2000 all options remain outstanding and no options
       have been exercised or forfeited.

       The Company applies Accounting Principles Board Opinion 25, "Accounting
       for Stock Issued to Employees", and related Interpretations in accounting
       for its option plan. Accordingly, no compensation cost has been
       recognized. Had compensation cost for the Company's stock-based
       compensation plan been determined based on the fair market value at the
       grant date for awards under the plan consistent with the method of SFAS
       No. 123 "Accounting for Stock-Based Compensation", the effect on net
       income and earning per share would have been reduced to pro-forma amounts
       indicated below:

<TABLE>
<CAPTION>
                                                                          JUNE 30, 2000             JUNE 30, 1999
                                                                          -------------             -------------
<S>                                                                            <C>                     <C>
                  Net income:
                      As reported                                              $154,666                169,227
                      Additional compensation expense                                -                  89,512
                      Pro forma                                                 154,666                 79,715

                 Basic earning per share:
                      As reported                                                 $ .35                    .38
                      Pro forma                                                     .35                    .18
</TABLE>

       The estimated fair value of options granted in 1999 was calculated by the
       Black-Scholes method. Assumptions used in the calculation are as follows:

<TABLE>
<S>                                                  <C>
                 Risk-free interest rate             U.S. Treasury Strips rate on the date of grant
                                                          which was 4.91%

                 Expected life                       Life of the options which is ten years

                 Expected volatility                 0.17% based on the 33 month history of prices

                 Expected dividends                  $.40 per share
</TABLE>


                                        28
<PAGE>   31

13.    FEDERAL INCOME TAXES:

       The Company has qualified under provisions of the Internal Revenue Code
       which permit 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 and starting in 1997, the percentage of
       taxable income method is no longer allowed.

       A bill repealing the thrift bad debt reserve was signed into law and is
       effective for taxable years beginning after December 31, 1995. All
       savings banks and thrifts are 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 Company 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 Company. Pre-1988 tax reserves will not have to be recaptured unless
       the thrift or its successor institution liquidates, redeems shares or
       pays a dividend in excess of earnings and profits.

       Appropriated and unappropriated retained income at June 30, 2000 included
       earnings of approximately $653,000, representing such pre-1988 bad debt
       deductions for which no provision for federal income taxes has been made.
       If the amounts that qualify as deductions for federal income tax purposes
       are later used for purposes other than bad debt losses, including
       distributions in liquidation, such distributions will be subject to
       federal income taxes at the then current corporate income tax rate.
       Management does not contemplate any action which would cause such
       pre-1988 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>
<CAPTION>
                                                                                 Year Ended June 30
                                                                -------------------------------------------------
                                                                      2000              1999            1998
                                                                      ----              ----            ----
<S>                                                                 <C>                 <C>             <C>
       Federal income taxes at the statutory
           rate of 34%                                              $ 81,044            91,503          125,532
       Employee stock ownership plan                                   2,956             8,397           11,568
       Other, primarily surtax exemptions                                -                 -                -
                                                                      ------           -------          -------
       Federal income taxes per consolidated
           financial statements                                     $ 84,000            99,900          137,100
                                                                      ======           =======          =======

       Effective tax rate                                               35.2%             37.1%            37.2%
                                                                      ======           =======          =======
</TABLE>


                                        29
<PAGE>   32

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

<TABLE>
<CAPTION>
                                                                                     June 30
                                                              ---------------------------------------------------
                                                                      2000             1999              1998
                                                                      ----             ----              ----

<S>                                                                 <C>                 <C>              <C>
       Deferred tax assets arising from:
           Allowance for loan losses                                $ 41,800            40,000           35,900
           Deferred loan fees and costs                                3,000             3,700            5,300
           Basis of investments                                        2,000             2,000            2,000
                                                                     -------           -------          -------
                    Total deferred tax assets                         46,800            45,700           43,200
                                                                      ------            ------           ------

       Deferred tax liabilities arising from:
           Accrual to cash conversion                                 58,600            34,500           38,800
           Depreciation                                               10,700            15,200           13,300
           FHLB stock                                                 78,800            70,300           62,500
                                                                     -------           -------           ------
                    Total deferred tax liabilities                  (148,100)         (120,000)        (114,600)
                                                                     -------          ---------         -------

       Net deferred tax liability                                  $ 101,300            74,300           71,400
                                                                     =======          ========           ======
</TABLE>

       The Savings Bank 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:

<TABLE>
<CAPTION>
                                                                               Year Ended June 30
                                                                  ------------------------------------------------
                                                                      2000              1999             1998
                                                                      ----              ----             ----

<S>                                                               <C>                    <C>              <C>
       Loan origination fees                                      $      700             1,700            2,600
       FHLB stock dividend                                             8,500             7,800            7,500
       Depreciation                                                   (4,400)            1,900           (3,700)
       Accrual to cash conversion                                     24,100            (4,400)          15,200
       Bad debt reserves and other                                    (1,900)           (4,100)          (4,100)
                                                                      ------           --------           -----

                                                                    $ 27,000             2,900           17,500
                                                                      ======            ======           ======
</TABLE>

14.    CONVERSION AND LIQUIDATION ACCOUNT:

       On May 31, 1996, the Savings Bank's Board of Directors adopted an overall
       plan of conversion and reorganization (the Plan) whereby the Savings Bank
       would convert to the stock form of ownership, followed by the issuance of
       all of the Savings Bank's outstanding common shares to the Company.

       In September 1996, the Savings Bank completed its conversion to the stock
       form of ownership and issued all of its outstanding common shares to the
       Company.

       In connection with the conversion, the Company sold 462,875 at a price of
       $10.00 per share which, after consideration of offering expenses totaling
       $287,624 and shares purchased by employee benefit plans, resulted in net
       cash proceeds of $3.97 million.

       At the time of the conversion in September 1996, the Savings Bank
       established a liquidation account in an amount of $2,772,105, which is
       equal to the Savings Bank's regulatory capital at March 31, 1996. The
       liquidation account will be maintained for the benefit of eligible
       savings account holders who maintain their savings account in the Savings
       Bank after conversion.


                                        30
<PAGE>   33

       In the event of a complete liquidation (and only in such event), each
       eligible savings account holder will be entitled to receive a liquidation
       distribution from the liquidation account in the amount of the then
       current adjusted balance of savings accounts held before any liquidation
       distribution may be made with respect to capital stock. Except for the
       repurchase of shares and payment of dividends by the Company, the
       existence of the liquidation account will not restrict the use or
       application of such related earnings.

       The Savings Bank may not declare or pay a cash dividend or repurchase any
       of its capital stock if the effect thereof would cause the regulatory
       capital of the Savings Bank to be reduced below either the amount
       required for the liquidation account or the regulatory capital
       requirements imposed by the FDIC.



15.    SUMMARIZED FINANCIAL INFORMATION OF THE PARENT COMPANY:

                            FOUNDATION BANCORP, INC.
                        Statements of Financial Condition
                        ---------------------------------

                                  June 30, 2000

<TABLE>
<CAPTION>
                                                           2000           1999
                                                       -----------    -----------
<S>                                                    <C>            <C>
Assets:
       Cash                                            $    10,795         11,034
       Certificate of deposit                              119,187         96,297
       Investment in Foundation Savings Bank             2,970,826      2,970,826
       Note receivable-Foundation Savings Bank           1,000,000      1,000,000
       Prepaid expenses and other                            8,654            958
                                                       -----------    -----------

                                                       $ 4,109,462      4,079,115
                                                       ===========    ===========

Liabilities and stockholders' equity:
       Liabilities:
           Accrued expenses                            $    13,244         11,020
           Accrued federal income taxes                       --           16,378
           Deferred federal income taxes                    (3,900)        (3,400)
       Stockholders' equity:
           Common stock                                       --             --
           Additional paid in capital                    4,341,126      4,341,126
           Retained earnings                                10,512         41,264
           Less unearned ESOP shares                      (150,873)      (203,773)
           Shares acquired for restricted stock plan      (100,647)      (123,500)
                                                       -----------    -----------

                                                         4,100,118      4,055,117
                                                       -----------    -----------
                                                       $ 4,109,462      4,079,115
                                                       ===========    ===========

                                  STATEMENTS OF INCOME

                                                       Year Ended       Year Ended
                                                      June 30, 2000   June 30, 1999
                                                      -------------   -------------

Interest income                                        $    65,510         71,562
Dividend income                                            215,000        185,000
Other income                                                  --               29
Professional fees                                          (84,539)       (29,586)
Other expenses                                              (2,587)        (2,888)
Income (tax) benefit                                         7,300        (13,300)
                                                       -----------    -----------

           Net income                                  $   200,684        210,817
                                                       ===========    ===========
</TABLE>

                                        31
<PAGE>   34

16.    EARNINGS PER SHARE

       Earnings per share for the years ended June 30, 2000, 1999 and 1998 is
       calculated as follows.

       Basic and diluted earnings per share:

<TABLE>
<CAPTION>
                                                     Income                  Shares          Per Share
                                                   (Numerator)            (Denominator)       Amount
                                                   -----------            -------------       ------

<S>                                                  <C>                     <C>               <C>
                  June 30, 2000
                           Basic                     $ 154,366               443,415           .35
                           Diluted                   $ 154,366               443,415           .35

                  June 30, 1999
                           Basic                     $ 169,227               440,729           .38
                           Diluted                   $ 169,227               446,155           .38

       The only item with a dilutive effect is stock options which were granted in January 1999.

                  June 30, 1998
                           Basic and diluted          $232,113               438,547           .53
</TABLE>

17.    QUARTERLY FINANCIAL INFORMATION (UNAUDITED):

       Summarized quarterly financial information for the year ended June 30,
       2000 and 1999 is as follows:

<TABLE>
<CAPTION>
                                                                        Year Ended June 30, 2000
                                                   ------------------------------------------------------------------

                                                     First            Second              Third            Fourth
                                                    Quarter           Quarter            Quarter           Quarter
                                                    -------           -------            -------           -------

<S>                                                   <C>               <C>                <C>              <C>
       Interest income                                $597              589                597              616
       Interest expense                                333              334                336              350
                                                      ----             ----               ----             ----

           Net interest income                         264              255                261              266

       Other income                                     13               16                 12               14
       Other expenses                                  208              203                249              203
                                                      ----             ----               ----             ----
           Income before
               provision for income taxes               69               68                 24               77

       Provision for income taxes                       25               25                 10               24
                                                      ----             ----               ----             ----

           Net income                              $    44               43                 14               53
                                                      ====            =====              =====             ====
       Basic and diluted earnings
           per share                               $  0.10             0.10               0.03              .12
                                                      ====             ====               ====             ====
</TABLE>

                                        32
<PAGE>   35

<TABLE>
<CAPTION>
                                                                        Year Ended June 30, 1999
                                                 ------------------------------------------------------------------

                                                     First            Second              Third            Fourth
                                                    Quarter           Quarter            Quarter           Quarter
                                                    -------           -------            -------           -------

<S>                                                   <C>               <C>                <C>              <C>
       Interest income                             $   633              615                578              576
       Interest expense                                393              380                339              342
                                                     -----            -----              -----            -----

           Net interest income                         240              235                239              234

       Other income                                     25               59                 27               15
       Other expenses                                  201              203                202              199
                                                     -----            -----              -----            -----
           Income before
               provision for income taxes               64               91                 64               50

       Provision for income taxes                       23               32                 23               22
                                                     -----            -----              -----            -----

           Net income                              $    41               59                 41               28
                                                     =====            =====              =====            =====
       Basic and diluted earnings
               per share                           $  0.09             0.14               0.09             0.06
                                                     =====            =====              =====            =====
</TABLE>



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