<PAGE>   1

                                                                      Exhibit 13


                                     MARKET
                                    FINANCIAL
                                   CORPORATION




                                      1998
                                     ANNUAL
                                     REPORT
                                       TO
                                  SHAREHOLDERS



<PAGE>   2



Dear Shareholder,

         On behalf of the directors, officers, and employees of Market Financial
Corporation ("Market") and its wholly-owned subsidiary, The Market Building and
Saving Company, I am pleased to present our second Annual Report to Shareholders
for the fiscal year ended September 30, 1998.

         Market's net earnings for fiscal 1998 totaled a record $552,000,
representing a solid 10% increase over the $502,000 in net earnings reported for
fiscal 1997. Our fiscal 1998 operating performance was the product of both
internally and externally focused strategic initiatives.

         From an internal perspective, we reduced our excess capital position
through the payment of $3.78 per share in cash distributions. These
distributions, all of which are presently deemed to be tax-free, should have a
future beneficial effect on Market's return on equity. In fiscal 1999, we
continued our commitment to a sound capital management strategy through the
announcement of a share repurchase program in November.

         Externally, we considered growth in the loan and savings portfolios to
be a critical operating objective. To this end, we are pleased to report that
our loan portfolio increased by $6.3 million, or 23.8%, during fiscal 1998,
while our savings deposits grew by $2.4 million, or 6.9%. These two favorable
trends were integral factors in our $327,000, or 18%, increase in net interest
income during fiscal 1998. Growth will continue to be an operating priority for
your management in fiscal 1999.

         I would like to thank you, our shareholders, for the support you placed
in us through your investment in Market Financial Corporation. The directors,
officers, and employees are committed to increasing the value of your investment
in the future.

                                        Very truly yours,

                                        MARKET FINANCIAL CORPORATION




                                        John T. Larimer
                                        President



<PAGE>   3



                    BUSINESS OF MARKET FINANCIAL CORPORATION

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

Market Financial Corporation ("MFC"), a unitary savings and loan holding company
incorporated under the laws of the State of Ohio, owns all of the issued and
outstanding common stock of The Market Building and Saving Company ("Market"), a
savings and loan association incorporated under the laws of the State of Ohio.
In March 1997, MFC acquired all of the common stock issued by Market upon its
conversion from a mutual savings association to a stock savings association (the
"Conversion"). Since its formation, MFC's activities have been limited primarily
to holding the common shares of Market.

Market is a stock savings and loan association principally engaged in the
business of making permanent first mortgage loans secured by one- to four-family
residential real estate located in Market's primary market area of Hamilton
County, Ohio, and portions of the contiguous counties. Market also originates a
limited number of loans for the construction of residential real estate and
loans secured by multifamily real estate (over four units) and nonresidential
real estate. In addition to real estate lending, Market originates a limited
number of loans secured by deposits at Market. For liquidity and interest rate
risk management purposes, Market invests in U.S. Government and agency
obligations, interest-bearing deposits in other financial institutions and
mortgage-backed securities. Funds for lending and investment activities are
obtained primarily from deposits, which are insured up to applicable limits by
the Federal Deposit Insurance Corporation ("FDIC"), and loan repayments. Market
conducts business from its main office located at 7522 Hamilton Avenue,
Cincinnati, Ohio, and its full-service branch office at 125 Miami Avenue, North
Bend, Ohio.

As a savings and loan holding company, MFC is subject to regulation, supervision
and examination by the Office of Thrift Supervision of the United States
Department of the Treasury (the "OTS"). As a savings and loan association
incorporated under the laws of the State of Ohio, Market is subject to
regulation, supervision and examination by the OTS and the Ohio Division of
Financial Institutions (the "Division"). Market is also a member of the Federal
Home Loan Bank (the "FHLB") of Cincinnati.


                              MARKET PRICE OF MFC'S
                  COMMON SHARES AND RELATED SHAREHOLDER MATTERS
================================================================================

There were 1,335,725 common shares of MFC outstanding on December 10, 1998, held
of record by approximately 670 shareholders. The number of shareholders does not
reflect all of the persons or entities who may hold stock in nominee or "street"
name through brokerage firms or others. Price information with respect to MFC's
common shares is quoted on the Nasdaq Small-Cap Market ("Nasdaq") under the
symbol "MRKF." The table below sets forth the high and low bid prices for the
common shares of MFC, together with dividends declared per share, for each
quarter of the 1998 fiscal year and the 1997 fiscal year ending after March 27,
1997, the date of completion 



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<PAGE>   4

of the Conversion. Price quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not represent actual transactions.


<TABLE>
<CAPTION>

                                                                        Cash dividends
                                 High Ask              Low Bid        declared per share
                                 --------              -------        ------------------
<S>                              <C>                   <C>            <C>
 FISCAL 1998
    Quarter ended:
     December 31, 1997             $16.80              $14.75             $  .07
     March 31, 1998                 17.75               15.38                .07
     June 30, 1998                  20.81               12.75               3.57
     September 30, 1998             14.00               10.75                .07

FISCAL 1997
    Quarter ended:
March 31, 1997 (1)                 $13.00              $12.50             $   --
June 30, 1997                       13.00               12.50                 --
September 30, 1997                  14.75               14.00                .07
</TABLE>
-------------------------

(1)   Reflects the period from March 27, 1997, the date the Conversion closed, 
      through March 31, 1997.


Dividends are subject to determination and declaration by the Board of Directors
of MFC which takes into account MFC's financial condition, results of
operations, tax considerations, industry standards, economic conditions,
regulatory restrictions and other factors which affect the payment of dividends.

The income of MFC consists of dividends which may periodically be declared and
paid by the Board of Directors of Market on the common shares of Market held by
MFC and earnings on the monies retained by MFC from the sale of MFC's common
shares in connection with the Conversion.

In addition to certain federal income tax considerations, OTS regulations impose
limitations on the payment of dividends and other capital distributions by
savings associations. Under OTS regulations applicable to converted savings
associations, Market is not permitted to pay a cash dividend on its common
shares if the regulatory capital of Market 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 Market in the event of a complete liquidation to those members of
Market before the Conversion who maintain a savings account at Market after the
Conversion) or applicable regulatory capital requirements prescribed by the OTS.

OTS regulations applicable to all savings associations provide that a savings
association which immediately prior to, and on a pro forma basis after giving
effect to, a proposed capital distribution (including a dividend) has total
capital (as defined by OTS regulations) that is equal to or greater





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<PAGE>   5

than the amount of its capital requirements is generally permitted without OTS
approval (but subsequent to 30 days' prior notice to the OTS) to make capital
distributions, including dividends, during a calendar year in an amount not to
exceed the greater of (1) 100% of its net earnings to date during the calendar
year, plus an amount equal to one-half the amount by which its total capital to
assets ratio exceeded its required capital to assets ratio at the beginning of
the calendar year, or (2) 75% of its net earnings for the most recent
four-quarter period. Savings associations with total capital in excess of the
capital requirements that have been notified by the OTS that they are in need of
more than normal supervision will be subject to restrictions on dividends. A
savings association that fails to meet current minimum capital requirements is
prohibited from making any capital distributions without the prior approval of
the OTS.

Market currently meets all of its regulatory capital requirements and, unless
the OTS determines that Market is an institution requiring more than normal
supervision, Market may pay dividends in accordance with the foregoing
provisions of the OTS regulations.







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<PAGE>   6




                              SELECTED CONSOLIDATED
                      FINANCIAL INFORMATION AND OTHER DATA
================================================================================

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

                                                                          At September 30,
                                                        ----------------------------------------------------
SELECTED FINANCIAL CONDITION:                           1998        1997        1996        1995        1994
                                                        ----        ----        ----        ----        ----
                                                                          (In thousands)
<S>                                                   <C>         <C>         <C>         <C>         <C>    
Total amount of:
    Assets                                            $54,608     $56,121     $45,547     $45,734     $45,340
    Cash and cash equivalents                           5,381       2,248       4,082       4,013       6,380
    Certificates of deposit in other financial
     institutions                                       3,790       6,690       7,040       7,139       6,139
    Investment securities - at cost                     9,300      17,257       9,062       7,984       5,919
    Investment securities designated as available
     for sale - at market                               1,448       1,029         712         504          --
    Mortgage-backed securities - at cost                  859       1,268       1,549       2,211       2,441
    Loans receivable - net                             32,816      26,502      21,996      23,018      23,658
    Real estate acquired through foreclosure               --          --          --          --          --
    Deposits                                           37,745      35,303      37,282      38,056      38,674
    Unrealized gains on securities designated as
     available for sale - net (1)                         937         660         451         314          --
    Shareholders' equity-restricted (2) (3)            15,078      19,895       7,514       7,153       6,372

<CAPTION>

                                                                      Year ended September 30,
                                                       ------------------------------------------------------
SELECTED OPERATING DATA:                               1998        1997         1996        1995        1994
                                                       ----        ----         ----        ----        ----
                                                                           (In thousands)
<S>                                                   <C>          <C>         <C>         <C>         <C>    
Interest income                                        $3,885      $3,513      $3,261      $3,182      $2,908
Interest expense                                        1,734       1,689       1,758       1,622       1,478
                                                       ------      ------      ------      ------      ------
Net interest income                                     2,151       1,824       1,503       1,560       1,430
Provision for losses on loans                              --          --          13          --          --
                                                       ------      ------      ------      ------      ------
Net interest income after provision for losses on
  loans                                                 2,151       1,824       1,490       1,560       1,430
Other operating income                                      7           6           7           8          12
General, administrative and other expense               1,322       1,069       1,153         861         836
                                                       ------      ------      ------      ------      ------
Earnings before income taxes                              836         761         344         707         606
Federal income taxes                                      284         259         120         240         194
                                                       ------      ------      ------      ------      ------
Net earnings                                           $  552      $  502      $  224      $  467      $  412
                                                       ======      ======      ======      ======      ======
</TABLE>
-------------------------

(1)  Market adopted Statement of Financial Accounting Standards ("SFAS") No.
     115, "Accounting for Certain Investments in Debt and Equity Securities," on
     October 1, 1994. As of and subsequent to that date, Market carries
     securities designated as available for sale at fair value.

(2)  See Notes H, J, L and M of the Notes to Consolidated Financial Statements
     regarding restrictions on equity.

(3)  Consists solely of retained earnings at September 30, 1996, 1995 and 1994.





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<PAGE>   7


<TABLE>
<CAPTION>
                                                                At or for the year ended September 30,
                                                         ----------------------------------------------------
SELECTED FINANCIAL RATIOS AND OTHER DATA:                1998        1997        1996        1995        1994
                                                         ----        ----        ----        ----        ----
<S>                                                      <C>         <C>         <C>         <C>         <C>  
Performance ratios:
   Return on average assets (1)(2)(3)                    1.00%       0.99%       0.49%       1.03%       0.89%
   Return on average equity (2)(3)(4)                    3.16        3.66        3.05        6.91        6.68
   Interest rate spread (5)                              2.60        2.42        2.66        2.93        2.98
   Net interest margin (6)                               4.07        3.67        3.36        3.55        3.29
   Operating expenses to average assets (2) (3)          2.39        2.10        2.53        1.89        1.81
   Equity to assets (7)                                 27.61       35.45       16.50       15.64       14.05

Asset quality ratios:
   Nonperforming assets to total assets                  0.31        0.34        0.31          --          --
   Nonperforming loans to total loans                    0.52        0.72        0.63          --          --
   Allowance for losses on loans to total loans          0.16        0.20        0.24        0.17        0.16
   Allowance for losses on loans to
     nonperforming loans                                30.41       27.23       37.41       N/M(8)      N/M(8)
   Net charge-offs to average loans                        --          --          --          --          --
   Average interest-earning assets to average
     interest-bearing liabilities                      144.88      136.77      117.78      116.62      109.04

Other data:
   Number of full service offices                           2           2           2           2           2
</TABLE>
-------------------------

(1)  Net earnings divided by average assets.

(2)  Based on arithmetic average of beginning and ending balances.

(3)  Excluding the effect of the one-time Savings Association Insurance Fund
     (the "SAIF") recapitalization assessment, the return on average assets, the
     return on average equity and the operating expenses to average assets
     ratios would have been .85%, 5.21% and 1.99%, respectively, for the fiscal
     year ended September 30, 1996.

(4)  Net earnings divided by average equity capital.

(5)  Average yield on interest-earning assets less average cost of
     interest-bearing liabilities.

(6)  Net interest income as a percentage of average interest-earning assets.

(7)  At the end of the respective periods.

(8)  Not meaningful, as Market had no nonperforming loans at September 30, 1995
     or 1994.




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<PAGE>   8



                      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 MFC and Market should be read in conjunction with and with
reference to the consolidated financial statements, and the notes thereto,
included in this Annual Report.

MFC was incorporated for the purpose of owning all of Market's outstanding stock
upon conversion to stock form. As a result, the discussion that follows focuses
on Market's financial condition and results of operations.

In addition to the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Economic circumstances, the operations of Market and MFC's actual
results could differ significantly from those discussed in the forward-looking
statements. Some of the factors that could cause or contribute to such
differences are discussed herein but also include changes in the economy and
interest rates in the nation and MFC's market area.

Without limiting the generality of the foregoing, some of the statements in the
following referenced sections of this discussion and analysis are forward
looking and are, therefore, subject to certain risks and uncertainties:

     1.   Management's analysis of the interest rate risk of Market as set forth
          under "Asset and Liability Management;"

     2.   Management's discussion of the liquidity of Market's assets and the
          regulatory capital of Market as set forth under "Liquidity and Capital
          Resources;"

     3.   Management's determination of the amount and adequacy of the allowance
          for loan losses as set forth under "Changes in Financial Condition,"
          "Comparison of Operating Results for the Years Ended September 30,
          1998 and 1997," and "Comparison of Operating Results for the Years
          Ended September 30, 1997 and 1996;"

     4.   Management's estimate as to the effects of recent accounting
          pronouncements as set forth under "Recent Accounting Pronouncements;"
          and

     5.   Management's determination of the effect of the year 2000 on MFC's
          information technology systems as set forth under "Year 2000
          Compliance Matters."






                                       6
<PAGE>   9

                         CHANGES IN FINANCIAL CONDITION
--------------------------------------------------------------------------------

         MFC's assets at September 30, 1998, totaled approximately $54.6
million, a $1.5 million, or 2.7%, decrease from the $56.1 million total at
September 30, 1997. The decrease was primarily attributable to a special cash
distribution to shareholders of $4.7 million paid on April 30, 1998, to
shareholders of record on April 15, 1998, and quarterly cash dividends of
$374,000, which were partially offset by a $2.4 million growth in deposits, a
$725,000 increase in other borrowed money, net earnings for the year of $552,000
and a net increase in unrealized gains on securities designated as available for
sale of $277,000.

         Liquid assets (cash and cash equivalents, certificates of deposit and
investment securities) totaled $19.9 million at September 30, 1998, a decrease
of $7.3 million, or 26.8%, from the total at September 30, 1997. This decrease
resulted primarily from the use of proceeds from maturities of investment
securities to fund the special cash distribution as well as loan portfolio
growth during the fiscal year ended September 30, 1998. Repayments from
mortgage-backed securities and an increase in deposits also provided funds for
the growth in loans during the period.

         Loans receivable totaled $32.8 million at September 30, 1998, an
increase of $6.3 million, or 23.8%, over September 30, 1997. This increase
resulted primarily from loan originations of $12.5 million, which exceeded
principal repayments of $6.2 million. Loan origination volume during fiscal 1998
exceeded that of fiscal 1997 by $4.8 million, or 61.6%. Growth in the loan
portfolio consisted primarily of loans secured by one- to four-family
properties, which increased by $4.6 million, or 18.5%. Loans secured by
multifamily and nonresidential properties increased by $934,000, or 163.0% and
$1.1 million, or 202.7%, respectively.

         MFC's allowance for loan losses totaled $52,000 at both September 30,
1998 and 1997. The allowance represented .16% and .20% of total loans at
September 30, 1998 and 1997. Nonperforming loans totaled $171,000 and $191,000,
or .52% and .72% of total loans, at September 30, 1998 and 1997, respectively.
Although management believes that its allowance for loan losses at September 30,
1998, was adequate based upon the available facts and circumstances, there can
be no assurances that additions to such allowance will not be necessary in
future periods, which could adversely affect MFC's results of operations.

         Deposits totaled $37.7 million at September 30, 1998, an increase of
$2.4 million, or 6.9%, over the total at September 30, 1997. Demand accounts
decreased by approximately $781,000, while certificates of deposit increased by
$3.2 million during the year ended September 30, 1998. At September 30, 1998,
certificates of deposit that will mature within one year accounted for 53.0% of
MFC's deposit liabilities.

         Other borrowed money totaled $725,000 at September 30, 1998, and
consisted of a one-year, unsecured note from another financial institution.





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<PAGE>   10


         Shareholders' equity totaled $15.1 million at September 30, 1998, a
$4.8 million, or 24.2%, decrease from the September 30, 1997 amount. The
decrease was primarily attributable to the $4.7 million, or $3.50 per share,
special cash distribution paid to shareholders in April 1998, coupled with
regular quarterly dividends totaling $374,000, which were partially offset by
net earnings of $552,000.


                         COMPARISON OF OPERATING RESULTS
                 FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
--------------------------------------------------------------------------------

GENERAL. Net earnings totaled $552,000 for the year ended September 30, 1998, a
$50,000, or 10.0%, increase over the $502,000 of net earnings recorded for the
year ended September 30, 1997. The increase in earnings resulted primarily from
a $327,000 increase in net interest income, which was partially offset by a
$253,000 increase in general, administrative and other expense and a $25,000
increase in the provision for federal income taxes.

NET INTEREST INCOME. Total interest income amounted to $3.9 million for the year
ended September 30, 1998, a $372,000, or 10.6% increase over the comparable 1997
period. The increase in total interest income was attributable to an increase of
$437,000, or 22.1%, in interest income on loans, due primarily to an increase of
$5.6 million, to $30.5 million, of weighted-average balances outstanding during
fiscal 1998, which was partially offset by a 2 basis point (100 basis points
equals one percent) decrease in the weighted-average yield. Interest income on
investment securities and interest-bearing deposits totaled $1.4 million in
fiscal 1998, a decrease of $41,000, or 2.9%, from fiscal 1997. The decrease
resulted primarily from a decrease of $2.2 million in weighted-average balances
outstanding, which was partially offset by a 44 basis point increase in the
weighted-average yield, from 6.04% in fiscal 1997 to 6.48%, in fiscal 1998.
Interest income on mortgage-backed securities decreased by $24,000, or 19.2%,
during fiscal 1998, as compared to 1997, as a result of a decline of $255,000 in
the weighted-average balance outstanding, coupled with a decrease of 11 basis
points in the weighted-average yield, from 8.92% in fiscal 1997 to 8.81% in
fiscal 1997.

Interest expense on deposits totaled $1.7 million for fiscal 1998, an increase
of $36,000, or 2.1%, from the comparable 1997 period. This increase was due
primarily to a 10 basis point increase in the average cost of deposits, from
4.64% in fiscal 1997 to 4.74% in fiscal 1998.

As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $327,000, or 17.9%, for fiscal 1998, compared
to fiscal 1997. The interest rate spread increased by 18 basis points, from
2.42% in fiscal 1997 to 2.60% in fiscal 1998 and the net interest margin
increased by 40 basis points, from 3.67% in fiscal 1997 to 4.07% in fiscal 1998.

PROVISION FOR LOSSES ON LOANS. A provision for losses on loans is charged to
earnings to bring the total allowance to a level considered appropriate by
management based on historical experience, the volume and type of lending
conducted by Market, the status of past due principal






                                       8
<PAGE>   11

and interest payments, general economic conditions, particularly as such
conditions relate to Market's market area, and other factors related to the
collectibility of Market's loan portfolio. As a result of such analysis,
management decided no additional provision for losses on loans was necessary
during the year ended September 30, 1998. There can be no assurance, however,
that the allowance for loan losses of Market will be adequate to cover losses on
nonperforming assets in the future.

OTHER OPERATING INCOME. Other operating income, primarily service fees on money
orders and travelers' checks, totaled $7,000 and $6,000 for the years ended
September 30, 1998 and 1997, respectively.

GENERAL, ADMINISTRATIVE AND OTHER EXPENSE. General, administrative and other
expense increased by $253,000, or 23.7%, for the year ended September 30, 1998,
compared to fiscal 1997. The increase resulted primarily from a $119,000, or
18.1%, increase in employee compensation and benefits, due to normal merit
increases and expenses related to stock benefit plans, an $87,000, or 89.7%,
increase in franchise taxes due to an increase in shareholders' equity as a
result of the proceeds from the stock conversion in 1997, and a $43,000, or
25.7%, increase in other operating expenses primarily due to operating expenses
of MFC in the 1998 period.

FEDERAL INCOME TAXES. The provision for federal income taxes totaled $284,000
for the year ended September 30, 1998, compared to $259,000 for the 1997 fiscal
year. The $25,000, or 9.7%, increase resulted from a $75,000, or 9.9%, increase
in earnings before taxes. The effective tax rate was 34.0% for each of the years
ended September 30, 1998 and 1997.


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

GENERAL. MFC's net earnings for fiscal 1997 totaled $502,000, an increase of
$278,000, or 124.1%, over the $224,000 in net earnings recorded for fiscal 1996.
The increase in earnings resulted primarily from a $321,000 increase in net
interest income, an $84,000 decrease in general, administrative and other
expense, due primarily to a one-time deposit insurance assessment during 1996,
and a $13,000 decrease in the provision for losses on loans, which were
partially offset by a $139,000 increase in the provision for federal income
taxes.

NET INTEREST INCOME. Total interest income amounted to $3.5 million for the year
ended September 30, 1997, a $252,000, or 7.7%, increase over the comparable 1996
period. The increase in total interest income was attributable to an increase of
$189,000, or 15.4%, in interest income on investment securities and
interest-bearing deposits, due primarily to an increase of $3.2 million, to
$23.4 million, of weighted-average balances outstanding during fiscal 1997,
which was partially offset by a 3 basis point (100 basis points equals one
percent) decrease in the weighted-average yield. Interest income on loans
totaled $2.0 million in 1997, an increase of $107,000, or 5.7%, from 1996. The
increase resulted primarily from an increase of $2.3 million in weighted-average
balances outstanding, which was partially offset by a 32 basis point decrease





                                       9
<PAGE>   12

in the weighted-average yield, from 8.24% in fiscal 1996 to 7.92% in fiscal
1997. Interest income on mortgage-backed securities decreased by $44,000, or
26.0%, during fiscal 1997, as compared to 1996, as a result of a decline of
$471,000 in the weighted-average balance outstanding, coupled with a decrease of
10 basis points in the weighted-average yield, from 9.02% in fiscal 1996 to
8.92% in fiscal 1997.

Interest expense on deposits totaled $1.7 million for fiscal 1997, a decrease of
$69,000, or 3.9%, from the comparable 1996 period. This decrease was due
primarily to a $1.6 million decrease in the weighted-average balances
outstanding, which can be primarily attributed to withdrawal by customers to
fund purchases of MFC common stock in the Conversion.

As a result of the foregoing changes in interest income and interest expense,
net interest income increased by $321,000, or 21.4%, for fiscal 1997, compared
to fiscal 1996. The interest rate spread declined by 24 basis points, from 2.66%
in fiscal 1996 to 2.42% in fiscal 1997, while the net interest margin increased
by 31 basis points, from 3.36% in fiscal 1996 to 3.67% in fiscal 1997.

PROVISION FOR LOSSES ON LOANS. The provision for losses on loans decreased by
$13,000 for fiscal 1997, compared to fiscal 1996. During fiscal 1996, management
increased the allowance for losses on loans due to an increase in internally
classified assets of $36,000 and an increase of $139,000 in loans delinquent
more than 90 days. The $13,000 increase in the provision for losses on loans in
the prior year equaled approximately 10% of the increase in the amount of loans
delinquent more than 90 days, which were in the process of collection.

A provision for losses on loans is charged to earnings to bring the total
allowance to a level considered appropriate by management based on historical
experience, the volume and type of lending conducted by Market, the status of
past due principal and interest payments, general economic conditions,
particularly as such conditions relate to Market's market area, and other
factors related to the collectibility of Market's loan portfolio. As a result of
such analysis, management decided no additional provision for losses on loans
was necessary during fiscal 1997.

OTHER OPERATING INCOME. Other operating income, primarily service fees on money
orders and travelers' checks, totaled $6,000 for fiscal 1997, a decrease of
$1,000, or 14.3%, from the fiscal 1996 amount.

GENERAL, ADMINISTRATIVE AND OTHER EXPENSE. General administrative and other
expense totaled $1.1 million for fiscal 1997, a decrease of $84,000, or 7.3%,
from the 1996 fiscal year amount. The decrease resulted primarily from a
$292,000, or 89.3%, decrease in federal deposit insurance premiums, a $3,000, or
2.6%, decline in occupancy and equipment expense and a $3,000, or 3.0%, decrease
in franchise taxes, which were partially offset by a $197,000, or 42.6%,
increase in employee compensation and benefits, and a $17,000, or 11.3%,
increase in other operating expense. The decrease in federal deposit insurance
premiums was primarily attributable to the absence of the one-time SAIF
recapitalization assessment in fiscal 1996 of approximately $246,000, or 65.7
basis points of the deposit base at March 31, 1995. The increase in employee
compensation and benefits resulted primarily from the hiring of a chief




                                       10
<PAGE>   13


executive officer, a chief financial officer and a vice president of lending
during fiscal 1996, coupled with expenses related to the ESOP and normal merit
increases.

FEDERAL INCOME TAXES. The provision for federal income taxes totaled $259,000
for fiscal 1997, an increase of $139,000, or 115.8%, over the provision recorded
in fiscal 1996. The increase resulted primarily from a $417,000, or 121.2%,
increase in earnings before taxes. The effective tax rates were 34.0% and 34.9%
for fiscal 1997 and 1996, respectively.










                                       11
<PAGE>   14



                  AVERAGE BALANCE, YIELD, RATE AND VOLUME DATA
--------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>

                                                                   Year ended September 30,
                            ---------------------------------------------------------------------------------------------------

                                         1998                              1997                              1996
                            --------------------------------  ------------------------------  ---------------------------------

                              Average     Interest   Average    Average    Interest  Average     Average     Interest   Average
                            outstanding    earned/   yield/   outstanding  earned/   yield/    outstanding    earned/   yield/
                              balance       paid      rate      balance     paid      rate       balance       paid      rate
                              -------       ----      ----      -------     ----      ----       -------       ----      ----
                                                                  (Dollars in thousands)
<S>                         <C>           <C>        <C>      <C>         <C>        <C>       <C>          <C>         <C>  
Interest-earning assets:
  Loans receivable             $30,524     $2,411      7.90%    $24,921    $1,974      7.92%    $22,648      $1,867       8.24%
  Mortgage-backed securities     1,147        101      8.81       1,402       125      8.92       1,873         169       9.02
  Investment securities         13,249        890      6.72      11,812       708      5.99       9,123         590       6.47
  Other interest-earning
   assets                        7,954        483      6.07      11,598       706      6.09      11,070         635       5.74
                               -------     ------      ----     -------    ------      ----     -------      ------       ---- 
    Total interest-earning
     assets                     52,874      3,885      7.35      49,733     3,513      7.06      44,714       3,261       7.29
Non-interest-earning assets      2,559                            2,210                           1,485
                               -------                          -------                         -------
    Total assets               $55,433                          $51,943                         $46,199
                               =======                          =======                         =======
Interest-bearing
liabilities:
  Passbook and club accounts    $9,875        279      2.83     $10,421       300      2.88     $11,159         324       2.90
  Money market demand
  accounts                       2,254         64      2.84       2,872        81      2.82       3,621         104       2.87
  Certificate of deposits       24,246      1,382      5.70      23,069     1,308      5.67      23,183       1,330       5.74
  Borrowings                       121          9      7.44          --        --        --          --          --         --
                               -------     ------      ----     -------    ------      ----     -------      ------       ---- 
    Total interest-bearing
     liabilities                36,496      1,734      4.75      36,362     1,689      4.64      37,963       1,758       4.63
                                           ------      ----                 -----      ----                  ------       ----
Non-interest-bearing
  liabilities                    1,113                              909                             834
                               -------                          -------                         -------
    Total liabilities           37,609                           37,271                          38,797
Shareholders' equity (1)        17,824                           14,672                           7,402
                               -------                           ------                         -------
    Total liabilities and
     shareholders' equity      $55,433                          $51,943                         $46,199
                               =======                          =======                         =======
  Net interest income and
   spread                                  $2,151      2.60%               $1,824      2.42%                 $1,503       2.66%
                                           ======      ====                ======      ====                  ======       ====
  Net interest margin (net
   interest income as a
   percent of average
   interest-earning assets)                            4.07%                           3.67%                              3.36%
                                                       ====                            ====                               ====
Average interest-earning
  assets to
  interest-bearing
  liabilities                                        144.88%                         136.77%                            117.78%
                                                     ======                          ======                             ======
</TABLE>

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

(1)  Consists solely of retained earnings for fiscal 1996.



                                       12
<PAGE>   15


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

<TABLE>
<CAPTION>

                                                         Year ended September 30,
                                       -----------------------------------------------------------
                                               1998 vs. 1997                  1997 vs. 1996
                                       --------------------------    -----------------------------
                                           Increase                       Increase
                                       (decrease) due to             (decrease) due to
                                       -----------------             -----------------
                                       Volume      Rate     Total     Volume      Rate       Total
                                       ------      ----     -----     ------      ----       -----
                                                              (In thousands)
<S>                                    <C>        <C>       <C>        <C>        <C>       <C>  
Interest income attributable to:
    Loans receivable                   $ 442      $ (5)     $ 437      $ 182      $(75)     $ 107
    Mortgage-backed securities           (22)       (2)       (24)       (42)       (2)       (44)
    Investment securities                 96        86        182        164       (46)       118
    Interest-bearing deposits           (221)       (2)      (223)        31        40         71
                                       -----      ----      -----      -----      ----      -----
Total interest income                    295        77        372        335       (83)       252
Interest expense attributable to:
    Deposits                              33         3         36        (74)        5        (69)
    Borrowings                             9        --          9         --        --         --
                                       -----      ----      -----      -----      ----      -----
Total interest expense                    42         3         45        (74)        5        (69)
                                       -----      ----      -----      -----      ----      -----
   Increase in net interest income     $ 253      $ 74      $ 327      $ 409      $(88)     $ 321
                                       =====      ====      =====      =====      ====      =====
</TABLE>




                         ASSET AND LIABILITY MANAGEMENT
--------------------------------------------------------------------------------

Market, 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, Market uses the "net portfolio value" ("NPV") methodology
adopted by the OTS as part of its capital regulations. Although Market is not
currently subject to the NPV regulation because such regulation does not apply
to institutions with less than $300 million in assets and risk-based capital in
excess of 12%, the application of the NPV methodology illustrates certain
aspects of Market's interest rate risk.

Generally, NPV is the discounted present value of the difference between
incoming cash flows on interest-earning and other assets and outgoing cash flows
on interest-bearing and other liabilities. The application of the methodology
attempts to quantify interest rate risk as the change in the NPV which would
result from a theoretical 200 basis point change in market interest rates. Both
a 200 basis point increase in market interest rates and a 200 basis point





                                       13
<PAGE>   16


decrease in market interest rates are considered. If the NPV would decrease more
than 2% of the present value of the institution's assets with either an increase
or a decrease in market rates, the institution must deduct 50% of the amount of
the decrease in excess of such 2% in the calculation of the institution's
risk-based capital. See "Liquidity and Capital Resources."

At September 30, 1998, 2% of the present value of Market's assets was
approximately $1.1 million. Because the interest rate risk of a 200 basis point
increase in market interest rates (which was greater than the interest rate risk
of a 200 basis point decrease) was $2.1 million at September 30, 1998, Market
would have been required to deduct approximately $500,000 (50% of the $1.0
million difference) from its capital in determining whether Market met its
risk-based capital requirement. Regardless of such restriction, however,
Market's risk-based capital at September 30, 1998, would still have exceeded the
regulatory requirement by $11.3 million.

Presented below, as of September 30, 1998, is an analysis of Market's interest
rate risk as measured by changes in NPV for instantaneous and sustained parallel
shifts of 100 basis points in market interest rates. The table also contains the
policy limits set by the Board of Directors of Market as the maximum change in
NPV that the Board of Directors deems advisable in the event of various changes
in interest rates. Such limits have been established with consideration of the
dollar impact of various rate changes and Market's strong capital position.

<TABLE>
<CAPTION>

                                                       September 30, 1998
                                                  -----------------------------
Change in interest rate      Board limit          $ change             % change
     (basis points)           % change            in NPV               in NPV
-----------------------      -----------          --------             ------
                                                      (Dollars in thousands)
<S>                          <C>                  <C>                  <C>  
          +400                 (70)%              $(4,681)               (28)%
          +300                 (50)                (3,439)               (21)
          +200                 (35)                (2,172)               (13)
          +100                 (20)                  (993)                (6)
             0                   -                      -                  -
          -100                  20                    730                  4
          -200                  35                  1,488                  9
          -300                  50                  2,358                 14
          -400                  70                  3,249                 20
</TABLE>


As illustrated in the table, 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 Market has a significant amount of fixed-rate loans in its loan
portfolio, the amount of interest Market 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 Market would pay on its deposits would
increase rapidly because Market's deposits generally have shorter periods to
repricing. The assumptions used in calculating the amounts in this table are OTS
assumptions.



                                       14
<PAGE>   17


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.

In a rising interest rate environment, Market's net interest income could be
expected to be negatively affected. Moreover, rising interest rates could
negatively affect Market's earnings due to diminished loan demand.



                         LIQUIDITY AND CAPITAL RESOURCES
--------------------------------------------------------------------------------

Liquidity refers to the ability of Market to generate sufficient cash to fund
current loan demand, meet deposit withdrawals and pay operating expenses.
Liquidity is influenced by financial market conditions, fluctuations in interest
rates, general economic conditions and regulatory requirements. Market's liquid
assets, primarily represented by cash and cash equivalents and interest-bearing
deposits in other financial institutions, are a result of its operating,
investing and financing activities.
These activities are summarized in the following table for the years ended
September 30, 1998, 1997 and 1996:

<TABLE>
<CAPTION>

                                                        Year ended September 30,
                                                 ------------------------------------
                                                     1998         1997         1996
                                                     ----         ----         ----
                                                             (In thousands)

<S>                                              <C>           <C>           <C>    
Net cash from operating activities               $    798      $    517      $   153
Net cash from (used in) investing activities        4,938       (12,041)         697
Net cash from (used in) financing activities       (2,603)        9,690         (781)
                                                 --------      --------      -------
Net change in cash and cash equivalents             3,133        (1,834)          69
Cash and cash equivalents at the beginning
   of the year                                      2,248         4,082        4,013
                                                 --------      --------      -------
Cash and cash equivalents at the end of the
   year                                          $  5,381      $  2,248      $ 4,082
                                                 ========      ========      =======
</TABLE>


Market's principal sources of funds are deposits, loan and mortgage-backed
securities repayments, maturities of securities and other funds provided by
operations. Market also has the ability to borrow from the FHLB of Cincinnati.
While scheduled loan repayments and maturing investments




                                       15
<PAGE>   18

are relatively predictable, deposit flows and early loan and mortgage-backed
security prepayments are influenced to a greater degree by interest rates,
general economic conditions and competition. Market maintains investments in
liquid assets 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 Market's asset and liability management program.

At September 30, 1998, Market's certificates of deposit totaled approximately
$26.0 million, or 68.9% of total deposits. Of such amount, approximately $20.0
million in certificates of deposit mature within one year. Based on past
experience and Market's prevailing pricing strategies, management believes that
a substantial percentage of such certificates will be renewed with Market at
maturity. If Market is unable to renew the maturing certificates for any reason,
however, borrowings of up to $8.4 million are available from the FHLB of
Cincinnati.

OTS regulations presently require Market 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 having maturities
of five years or less, in an amount equal to 4% of the sum of Market's average
daily balance of net withdrawable deposit accounts and borrowings payable in one
year or less. The liquidity requirement, which may be changed from time to time
by the OTS to reflect changing economic conditions, is intended to provide a
source of relatively liquid funds upon which Market may rely if necessary to
fund deposit withdrawals or other short-term funding needs. At September 30,
1998, Market's regulatory liquidity ratio was 41.72%. At such date, Market had
commitments to originate loans totaling $967,000 and undisbursed loans in
process of less than $1,000 and no commitments to purchase or sell loans. Market
considers its liquidity and capital resources sufficient to meet its outstanding
short-term and long-term needs. See Note I to the Consolidated Financial
Statements.

Market is required by applicable law and regulations to meet certain minimum
capital standards. Such capital standards include a tangible capital
requirement, a core capital requirement or leverage ratio and a risk-based
capital requirement. Market exceeded all of its regulatory capital requirements
at September 30, 1998.

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

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

OTS regulations require that a savings and loan association maintain "risk-based
capital" in an amount not less than 8% of its risk-weighted assets. Risk-based
capital is defined as core capital



                                       16
<PAGE>   19


plus certain additional items of capital, which in the case of Market includes a
general loan loss allowance of $50,000 at September 30, 1998.

The following table summarizes Market's regulatory capital requirements and
actual capital at September 30, 1998:

<TABLE>
<CAPTION>

                                                                               Excess of actual
                                                            Current          capital over current     Applicable
                                  Actual capital          requirement             requirement         asset total
                              --------------------        -----------        --------------------     -----------

September 30, 1998            Amount       Percent      Amount    Percent     Amount     Percent
------------------            ------       -------      ------    -------     ------     -------
                                                           (Dollars in thousands)
<S>                           <C>          <C>          <C>       <C>         <C>        <C>          <C>    
Tangible capital              $13,619        25.6%      $  797      1.5%      $12,822      24.1%         $53,160
Core capital                   13,619        25.6        1,595      3.0        12,024      22.6           53,160
Risk-based capital             13,669        59.6        1,835      8.0        11,834      51.6           22,942
</TABLE>


At September 30, 1998, Market had entered into a commitment to purchase
properties adjacent to the main office for approximately $325,000.


                   EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------------------------------------------------------

In June 1996, the Financial Accounting Standards Board (the "FASB") issued SFAS
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," that provides accounting guidance on transfers
of financial assets, servicing of financial assets and extinguishment of
liabilities. SFAS No. 125 introduces an approach to accounting for transfers of
financial assets that provides a means of dealing with more complex transactions
in which the seller disposes of only a partial interest in the assets, retains
rights or obligations, makes use of special purpose entities in the transaction,
or otherwise has continuing involvement with the transferred assets. The new
accounting method, the financial components approach, provides that the carrying
amount of the financial assets transferred be allocated to components of the
transaction based on their relative fair values. SFAS No. 125 provides criteria
for determining whether control of assets has been relinquished and whether a
sale has occurred. If the transfer does not qualify as a sale, it is accounted
for as a secured borrowing. Transactions subject to the provisions of SFAS No.
125 include, among others, transfers involving repurchase agreements,
securitizations of financial assets, loan participations, factoring arrangements
and transfers of receivables with recourse.

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




                                       17
<PAGE>   20


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

SFAS No. 125 is effective for transfers and servicing of financial assets and
extinguishment of liabilities occurring after December 31, 1997, and is to be
applied prospectively. Earlier or retroactive application is not permitted.
Management adopted SFAS No. 125 during fiscal 1998, as required, without
material effect on MFC's consolidated financial position or results of
operations.

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 establishes standards for reporting and display of comprehensive
income and its components (revenue, expenses, gains and losses) in a full set of
general-purpose financial statements. SFAS No. 130 requires that all items that
are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. It does not require a
specific format for that financial statement but requires that an enterprise
display an amount representing total comprehensive income for the period in the
financial statement.

SFAS No. 130 requires that an enterprise (a) classify items of other
comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial condition. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. SFAS No. 130 is not expected to
have a material adverse effect on MFC's consolidated financial statements.

In June 1997, the FASB issued SFAS No. 131," Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 significantly changes the way
that public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about reportable segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS No. 131 uses a
"management approach" to disclose financial and descriptive information about
the way that management organizes the segments within the enterprise for making
operating decisions and assessing information. For many enterprises, the
management approach will likely result in more segments being reported. In
addition, SFAS No. 131 requires significantly more information to be disclosed
for each reportable segment than is presently being reported in annual financial
statements and also requires that selected information be reported in interim
financial statements. SFAS No. 131 is effective for fiscal years beginning after
December 15, 1997. SFAS No. 131 is not expected to have a material adverse
effect on MFC's consolidated financial statements.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which requires entities to recognize all
derivatives in their financial statements






                                       18
<PAGE>   21

as either assets or liabilities measured at fair value. SFAS No. 133 also
specifies new methods of accounting for hedging transactions, prescribes the
items and transactions that may be hedged, and specifies detailed criteria to be
met to qualify for hedge accounting.

The definition of a derivative financial instrument is complex, but in general,
it is an instrument with one or more underlyings, such as an interest rate or
foreign exchange rate, that is applied to a notional amount, such as an amount
of currency, to determine the settlement amount(s). It generally requires no
significant initial investment and can be settled net or by delivery of an asset
that is readily convertible to cash. SFAS No. 133 applies to derivatives
embedded in other contracts, unless the underlying of the embedded derivative is
clearly and closely related to the host contract.

SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. On
adoption, entities are permitted to transfer held-to-maturity debt securities to
the available-for-sale or trading category without calling into question their
intent to hold other debt securities to maturity in the future. SFAS No. 133 is
not expected to have a material impact on MFC's financial statements.


                          YEAR 2000 COMPLIANCE MATTERS
--------------------------------------------------------------------------------

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

Market has appointed a Year 2000 Coordinator who, with support and oversight
from management and the Boards of Directors of both Market and MFC, shall
analyze the risk of potential problems that might arise from the failures of
computers and microprocessors to recognize the Year 2000, and to develop a plan
to mitigate such risks. The Year 2000 Coordinator submits monthly and quarterly
progress reports to the Board of Directors. The impact upon MFC's results of
operations, liquidity and capital resources will be immaterial; however,
approximately $16,000 has been budgeted to ensure Year 2000 compliance. Through
December 1998, Year 2000 expenditures have totaled approximately $3,200.

The Year 2000 Coordinator has determined that the greatest potential impact upon
Market and MFC is the risk related to vendors used by Market, particularly its
data processing service bureau. The service bureau has advised Market that it
has changed to a fully Year 2000 compliant processing system that will be fully
tested by January 1, 1999.

Management and the Board of Directors of Market and MFC have reviewed the
reports regarding Year 2000 testing results to date and are in the process of
the appropriate remedial measures without material cost. No assurance can be
given, however, that significant expense will not be





                                       19
<PAGE>   22

incurred in future periods. In the unlikely event that Market is ultimately
required to purchase replacement computer systems, programs and equipment, or
incur substantial expense to make Market's current systems, programs and
equipment year 2000 compliant, MFC's net earnings and financial condition could
be adversely affected.

The Year 2000 Coordinator has written a contingency plan to provide options for
the Boards of Directors and management in order to ensure that Market's core
business functions can continue to operate in the event of a Year 2000 problem.

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

In addition, financial institutions may experience increases in problem loans
and credit losses in the event that borrowers fail to prepare properly for Year
2000, and higher funding costs could result if consumers react to publicity
about the issue by withdrawing deposits. MFC could also be materially adversely
affected if other third parties, such as governmental agencies, clearing houses,
telephone companies, utilities and other service providers fail to prepare
properly. Market is therefore attempting to assess these risks and take action
to minimize their effect.




                                       20
<PAGE>   23

                         REPORT OF INDEPENDENT CERTIFIED
                             PUBLIC ACCOUNTANTS AND
                        CONSOLIDATED FINANCIAL STATEMENTS
================================================================================

                                                                         PAGE

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                        22

FINANCIAL STATEMENTS
     CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION                       23
     CONSOLIDATED STATEMENTS OF EARNINGS                                  24
     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY                      25
     CONSOLIDATED STATEMENTS OF CASH FLOWS                                26
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                           28










                                       21
<PAGE>   24


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Market Financial Corporation

We have audited the accompanying consolidated statements of financial condition
of Market Financial Corporation as of September 30, 1998 and 1997, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the years ended September 30, 1998, 1997 and 1996. These
financial statements are the responsibility of the Company'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 consolidated financial position of Market Financial
Corporation as of September 30, 1998 and 1997, and the consolidated results of
its operations and its cash flows for each of the years ended September 30,
1998, 1997 and 1996, in conformity with generally accepted accounting
principles.





Cincinnati, Ohio
December 4, 1998



<PAGE>   25

<TABLE>
<CAPTION>


                          MARKET FINANCIAL CORPORATION

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                  September 30,
                        (In thousands, except share data)

                                                                           1998          1997
<S>                                                                    <C>           <C>     
          ASSETS
Cash and due from banks                                                $    615      $    550
Federal funds sold                                                        4,493         1,494
Interest-bearing deposits in other financial institutions                   273           204
                                                                       --------      --------
          Cash and cash equivalents                                       5,381         2,248

Certificates of deposit in other financial institutions                   3,790         6,690
Investment securities - at amortized cost, approximate market
  value of $9,394 and $17,316 at September 30,
  1998 and 1997                                                           9,300        17,257
Investment securities designated as available for sale - at market        1,448         1,029
Mortgage-backed securities - at cost, approximate
  market value of $902 and $1,338 at
  September 30, 1998 and 1997                                               859         1,268
Loans receivable - net                                                   32,816        26,502
Office premises and equipment - at depreciated cost                         127           147
Federal Home Loan Bank stock - at cost                                      419           390
Accrued interest receivable                                                 319           520
Prepaid expenses and other assets                                           149            70
                                                                       --------      --------

          Total assets                                                 $ 54,608      $ 56,121
                                                                       ========      ========

     LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits                                                               $ 37,745      $ 35,303
Other borrowed money                                                        725            -- 
Advances by borrowers for taxes and insurance                                57            49
Accrued interest payable                                                     95            99
Other liabilities                                                           175           137
Accrued federal income taxes                                                 18            48
Deferred federal income taxes                                               715           590
                                                                       --------      --------
          Total liabilities                                              39,530        36,226

Commitments                                                                  --            -- 

Shareholders' equity
  Preferred stock - 1,000,000 shares without par value authorized;
    no shares issued                                                         --            -- 
  Common stock - 4,000,000 shares without par value authorized;
    1,335,725 shares issued and outstanding                                  --            -- 
  Additional paid-in capital                                              8,191        12,832
  Retained earnings - substantially restricted                            7,650         7,472
  Shares acquired by stock benefit plans                                 (1,700)       (1,069)
  Unrealized gains on securities designated as available for sale,
    net of related tax effects                                              937           660
                                                                       --------      --------
          Total shareholders' equity                                     15,078        19,895
                                                                       --------      --------

          Total liabilities and shareholders' equity                   $ 54,608      $ 56,121
                                                                       ========      ========
</TABLE>



The accompanying notes are an integral part of these statements.



<PAGE>   26



                          MARKET FINANCIAL CORPORATION

                       CONSOLIDATED STATEMENTS OF EARNINGS

                            Year ended September 30,
                      (In thousands, except per share data)

<TABLE>
<CAPTION>

                                                         1998        1997        1996
<S>                                                   <C>          <C>        <C>    
Interest income
  Loans                                               $ 2,411      $1,974     $ 1,867
  Mortgage-backed securities                              101         125         169
  Investment securities                                   890         708         590
  Interest-bearing deposits and other                     483         706         635
                                                      -------      ------     -------
          Total interest income                         3,885       3,513       3,261

Interest expense
  Deposits                                              1,725       1,689       1,758
  Borrowings                                                9          --          -- 
                                                      -------      ------     -------
          Total interest expense                        1,734       1,689       1,758
                                                      -------      ------     -------

          Net interest income                           2,151       1,824       1,503

Provision for losses on loans                              --          --          13
                                                      -------      ------     -------

          Net interest income after provision for
            losses on loans                             2,151       1,824       1,490

Other operating income                                      7           6           7

General, administrative and other expense
  Employee compensation and benefits                      778         659         462
  Occupancy and equipment                                 122         111         114
  Federal deposit insurance premiums                       28          35         327
  Franchise taxes                                         184          97         100
  Other operating                                         210         167         150
                                                      -------      ------     -------
          Total general, administrative and
            other expense                               1,322       1,069       1,153
                                                      -------      ------     -------

          Earnings before income taxes                    836         761         344

Federal income taxes
  Current                                                 301          88         187
  Deferred                                                (17)        171         (67)
                                                      -------      ------     -------
          Total federal income taxes                      284         259         120
                                                      -------      ------     -------

          NET EARNINGS                                $   552      $  502     $   224
                                                      =======      ======     =======

          EARNINGS PER SHARE
            Basic                                     $   .45         N/A         N/A
                                                      =======      ======     =======

            Diluted                                   $   .45         N/A         N/A
                                                      =======      ======     =======
</TABLE>



The accompanying notes are an integral part of these statements.



<PAGE>   27



                          MARKET FINANCIAL CORPORATION

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                  Years ended September 30, 1998, 1997 and 1996
                        (In thousands, except share data)

<TABLE>
<CAPTION>

                                                                                          UNREALIZED GAINS      SHARES
                                                                                             ON SECURITIES    ACQUIRED
                                                                  ADDITIONAL                 DESIGNATED AS    BY STOCK
                                                         COMMON      PAID-IN     RETAINED        AVAILABLE     BENEFIT
                                                          STOCK      CAPITAL     EARNINGS         FOR SALE       PLANS        TOTAL

<S>                                                      <C>         <C>       <C>        <C>                  <C>         <C>     
Balance at October 1, 1995                                 $ --     $     --      $ 6,839             $314     $    --     $  7,153

Unrealized gains on securities designated as available
  for sale, net of related tax effects                       --           --           --              137          --          137
Net earnings for the year ended September 30, 1996           --           --          224               --          --          224
                                                           ----     --------      -------             ----     -------     --------

Balance at September 30, 1996                                --           --        7,063              451          --        7,514

Net proceeds from issuance of common shares                  --       12,832           --               --          --       12,832
Disbursement of loan to ESOP                                 --           --           --               --      (1,069)      (1,069)
Cash dividends of $.07 per share                             --           --          (93)              --          --          (93)
Unrealized gains on securities designated as available
  for sale, net of related tax effects                       --           --           --              209          --          209
Net earnings for the year ended September 30, 1997           --           --          502               --          --          502
                                                           ----     --------      -------             ----     -------     --------

Balance at September 30, 1997                                --       12,832        7,472              660      (1,069)      19,895

Purchase of shares for stock benefit plans                   --           --           --               --        (729)        (729)
Amortization of expense related to stock benefit plans       --           34           --               --          98          132
Cash distributions of $3.78 per share                        --       (4,675)        (374)              --          --       (5,049)
Unrealized gains on securities designated as available
  for sale, net of related tax effects                       --           --           --              277          --          277
Net earnings for the year ended September 30, 1998           --           --          552               --          --          552
                                                           ----     --------      -------             ----     -------     --------

Balance at September 30, 1998                              $ --     $  8,191      $ 7,650             $937     $(1,700)    $ 15,078
                                                           ====     ========      =======             ====     =======     ========
</TABLE>


The accompanying notes are an integral part of these statements.




<PAGE>   28



                          MARKET FINANCIAL CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                            Year ended September 30,
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                              1998          1997         1996
<S>                                                                       <C>           <C>           <C>    
Cash flows from operating activities:
  Net earnings for the year                                               $    552      $    502      $   224
  Adjustments to reconcile net earnings to net cash
  provided by (used in) operating activities:
    Amortization of premiums and discounts on
      investments and mortgage-backed securities, net                            1           (36)         (54)
    Depreciation and amortization                                               36            31           31
    Amortization of deferred loan origination fees                              (3)           (3)         (29)
    Amortization of expense related to stock benefit plans                     132            --           -- 
    Provision for losses on loans                                               --            --           13
    Federal Home Loan Bank stock dividends                                     (29)          (26)         (25)
    Increase (decrease) in cash due to changes in:
      Accrued interest receivable                                              201          (181)           2
      Accrued interest payable                                                  (4)          (18)         (17)
      Prepaid expenses and other assets                                        (79)          126         (132)
      Other liabilities                                                         38          (136)         260
      Federal income taxes
        Current                                                                (30)           87          (53)
        Deferred                                                               (17)          171          (67)
                                                                          --------      --------      -------
         Net cash provided by operating activities                             798           517          153

Cash flows provided by (used in) investing activities:
  Purchase of investment securities designated as held to maturity          (6,600)      (14,057)      (5,322)
  Proceeds from maturity of investment securities                           14,560         5,900        4,300
  Principal repayments on mortgage-backed securities                           405           279          660
  Loan disbursements                                                       (12,494)       (7,732)      (2,583)
  Principal repayments on loans                                              6,183         3,229        3,621
  Purchase of office premises and equipment                                    (16)          (10)         (78)
  Decrease in certificates of deposit in other
    financial institutions - net                                             2,900           350           99
                                                                          --------      --------      -------
                  Net cash provided by (used in) investing activities        4,938       (12,041)         697

Cash flows provided by (used in) financing activities:
  Net increase (decrease) in deposits                                        2,442        (1,979)        (774)
  Advances by borrowers for taxes and insurance                                  8            (1)          (7)
  Disbursement of loan to ESOP                                                  --        (1,069)          -- 
  Shares acquired by stock benefit plans                                      (729)           --           -- 
  Proceeds from other borrowed money                                           725            --           -- 
  Net proceeds from issuance of common shares                                   --        12,832           -- 
  Capital distributions and dividends paid on common stock                  (5,049)          (93)          -- 
                                                                          --------      --------      -------
         Net cash provided by (used in) financing activities                (2,603)        9,690         (781)
                                                                          --------      --------      -------

         Net increase (decrease) in cash and cash equivalents
           (balance carried forward)                                         3,133        (1,834)          69
                                                                          --------      --------      -------
</TABLE>





<PAGE>   29



                          MARKET FINANCIAL CORPORATION

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                            Year ended September 30,
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                                       1998        1997        1996
<S>                                                                                  <C>        <C>          <C>   
         Net increase (decrease) in cash and cash
           equivalents (balance brought forward)                                     $3,133     $(1,834)     $   69

Cash and cash equivalents at beginning of year                                        2,248       4,082       4,013
                                                                                     ------     -------      ------

Cash and cash equivalents at end of year                                             $5,381     $ 2,248      $4,082
                                                                                     ======     =======      ======


Supplemental disclosure of cash flow information: 
  Cash paid during the year for:
    Federal income taxes                                                             $  340     $    --      $  159
                                                                                     ======     =======      ======

    Interest on deposits and borrowings                                              $1,738     $ 1,707      $1,775
                                                                                     ======     =======      ======


Supplemental disclosure of noncash investing activities:
  Unrealized gains on securities designated as available for sale,
    net of related tax effects                                                       $  277     $   209      $  137
                                                                                     ======     =======      ======
</TABLE>








The accompanying notes are an integral part of these statements.




<PAGE>   30



                          MARKET FINANCIAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        September 30, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES

    On April 16, 1996, the Board of Directors of The Market Building and Saving
    Company (the "Company") unanimously adopted a Plan of Conversion to convert
    the Company from a mutual savings and loan association under Ohio law to a
    stock savings and loan association under Ohio law with the concurrent
    formation of a newly chartered holding company, Market Financial Corporation
    (the "Corporation"). The conversion was accomplished through amendment of
    the Company's Articles of Incorporation and the sale of the Corporation's
    common shares in an amount equal to the pro forma market value of the
    Company after giving effect to the conversion. A subscription offering of
    the shares of the Corporation to the Company's members and to an employee
    stock benefit plan was conducted.

    The conversion was completed on March 27, 1997, and resulted in the issuance
    of 1,335,725 common shares of the Corporation which, after consideration of
    offering expenses totaling approximately $525,000 and shares purchased by
    the ESOP of approximately $1.1 million, resulted in net proceeds of $11.8
    million.

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

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

    The following is a summary of significant accounting policies which have
    been consistently applied in the preparation of the accompanying
    consolidated financial statements.







<PAGE>   31



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    1.  Principles of Consolidation

    The consolidated financial statements include the accounts of the
    Corporation and its wholly-owned subsidiary, the Company. All significant
    intercompany balances and transactions have been eliminated. The
    consolidated financial statements for fiscal years prior to March 27, 1997,
    contained herein, are those of the Company prior to the completion of its
    conversion to stock form.

    2.  Investment Securities and Mortgage-Backed Securities

    The Corporation accounts for investment and mortgage-backed securities in
    accordance with Statement of Financial Accounting Standards ("SFAS") No. 115
    "Accounting for Certain Investments in Debt and Equity Securities." SFAS No.
    115 requires that investments be categorized as held-to-maturity, trading,
    or available-for-sale. Securities classified as held-to-maturity are carried
    at cost only if the Corporation has the positive intent and ability to hold
    these securities to maturity. Trading securities and securities
    available-for-sale are carried at fair value with resulting unrealized gains
    or losses charged to operations or shareholders' equity, respectively.

    The Corporation's shareholders' equity reflected unrealized gains on
    securities designated as available for sale, net of applicable tax effects,
    totaling approximately $937,000 and $660,000 at September 30, 1998 and 1997,
    respectively.

    Realized gains and losses on the sale of investment and mortgage-backed
    securities are recognized using the specific identification method.

    3.  Loans Receivable

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

    The Company accounts for loan origination fees in accordance with SFAS No.
    91, "Accounting for Nonrefundable Fees and Costs Associated with Originating
    or Acquiring Loans and Initial Direct Costs of Leases". Pursuant to the
    provisions of SFAS No. 91, origination fees received from loans, net of
    direct origination costs, are deferred and amortized to interest income
    using the level yield method, giving effect to actual loan prepayments.
    Additionally, SFAS No. 91 generally limits the definition of loan
    origination costs to direct costs attributable to originating a loan, i.e.,
    principally actual personnel costs.




<PAGE>   32



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    4.  Allowance for Losses on Loans

    It is the Company's policy to provide valuation allowances for estimated
    losses on loans based on past loss experience, current trends in the level
    of delinquent and specific problem loans, loan concentrations, changes in
    the composition of the loan portfolio, 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 areas. When the collection of a loan becomes doubtful, or otherwise
    troubled, the Company records a charge-off equal to the difference between
    the fair value of the property securing the loan and the loan's carrying
    value. Major loans and major lending areas are reviewed periodically to
    determine potential problems at an early date. The allowances are increased
    by charges to earnings and decreased by charge-offs (net of recoveries).

    The Company accounts for impaired loans in accordance with SFAS No. 114,
    "Accounting by Creditors for Impairment of a Loan," which requires that
    impaired loans be measured based upon the present value of expected future
    cash flows discounted at the loans' effective interest rate or, as an
    alternative, at the loans' observable market price or fair value of the
    collateral.

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

    At September 30, 1998 and 1997, the Company had no loans that would be
    defined as impaired under SFAS No. 114.















<PAGE>   33



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    5.  Office Premises and Equipment

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

    6.  Real Estate Acquired Through Foreclosure

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

    7.  Federal Income Taxes

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

    The Corporation's principal temporary differences between pretax financial
    income and taxable income result primarily from the practice of preparing
    tax returns on the cash basis of accounting, while the consolidated
    financial statements are prepared on the accrual basis of accounting, and
    from different methods of accounting for deferred loan origination fees,
    Federal Home Loan Bank stock dividends and the Company's general loan loss
    allowance. A temporary difference is also recognized for depreciation
    utilizing accelerated methods for federal income tax purposes.






<PAGE>   34



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    8.  Benefit Plans

    The Corporation has an Employee Stock Ownership Plan ("ESOP") which provides
    retirement benefits for substantially all employees who have completed one
    year of service and have attained the age of 21. The Corporation accounts
    for the ESOP in accordance with Statement of Position ("SOP") 93-6,
    "Employers' Accounting for Employee Stock Ownership Plans". SOP 93-6
    requires that compensation expense recorded by employers equal the fair
    value of ESOP shares allocated to participants during a given fiscal year.
    Expense related to the ESOP totaled approximately $85,000 and $97,000 for
    the years ended September 30, 1998 and 1997, respectively.

    During fiscal 1998, the Corporation established a Recognition and Retention
    Plan ("RRP") which provides for the issuance of shares to members of the
    board of directors, management and employees. Upon shareholder approval, the
    RRP purchased 53,429 shares of the Corporation's common stock in the open
    market. At September 30, 1998, 45,415 shares had been awarded. Common stock
    awarded under the RRP vests ratably over a five year period, commencing with
    the date of the award. Expense recognized under the RRP totaled
    approximately $36,000 for the fiscal year ended September 30, 1998.

    The Company previously had a defined benefit pension plan which covered
    substantially all employees who had completed one year of service. This plan
    was terminated in fiscal 1997 upon receipt of all required regulatory
    approvals. The pension plan was funded with an annuity policy using the
    individual level premium method. It was the Company's policy to fund pension
    costs accrued up through the date of termination. Annual pension expense for
    the fiscal years ended September 30, 1997 and 1996, totaled approximately
    $3,000 and $38,000, respectively. The required disclosure under SFAS No. 87,
    "Accounting for Pensions," has not been provided herein based on
    materiality.

    9.  Cash and Cash Equivalents

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

    10.  Advertising

    Advertising costs are expensed when incurred.










<PAGE>   35



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    11.  Earnings Per Share and Dividends Per Share

    Basic earnings per share is computed based upon the weighted-average shares
    outstanding during the period, less shares in the Corporation's ESOP that
    are unallocated and not committed to be released. Weighted-average common
    shares outstanding, which gives effect to 95,863 unallocated ESOP shares,
    totaled 1,239,862 for the fiscal year ended September 30, 1998.

    Diluted earnings per share is computed taking into consideration common
    shares outstanding and dilutive potential common shares to be issued under
    the Corporation's stock option plan. Options to purchase 113,526 shares of
    common stock with a weighted-average exercise price of $13.50 were
    outstanding at September 30, 1998, but were excluded from the computation of
    common stock equivalents because their exercise price was greater than the
    average market price of the common shares. Weighted-average common shares
    deemed outstanding for purposes of computing diluted earnings per share
    totaled 1,239,862 for the fiscal year ended September 30, 1998.

    The provisions of SFAS No. 128, "Earnings Per Share," are not applicable to
    the years ended September 30, 1997 and 1996, as the conversion from mutual
    to stock form was completed in March 1997.

    During fiscal 1998, the Corporation declared dividends of $3.78 per common
    share. Of this amount, $3.50 per share was paid in April 1998 from funds
    retained by the Corporation in the conversion to stock form and was deemed
    by management to constitute a return of excess capital. Accordingly, the
    Corporation charged the return of capital distribution to additional
    paid-in-capital. Management estimates that all of the 1998 fiscal year
    distributions constitute a tax-free return of capital.

    12.  Fair Value of Financial Instruments

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

    The methods used are greatly affected by the assumptions applied, including
    the discount rate and estimates of future cash flows. Because of the
    judgment and subjective considerations required in determining appropriate
    and reasonable assumptions, the derived fair value estimates cannot be
    substantiated by comparison to independent markets. Further, the amounts
    which could be realized in immediate settlement of the instruments could
    vary significantly from the fair value estimate depending upon bulk versus
    individual settlements or sales as well as other factors. SFAS No. 107
    excludes certain financial instruments and all nonfinancial instruments from
    its disclosure requirements. Accordingly, the aggregate net fair value
    amounts presented do not represent the underlying value of the Company.





<PAGE>   36



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    12.  Fair Value of Financial Instruments (continued)

    The following methods and assumptions were used by the Company in estimating
    its fair value disclosures for financial instruments at September 30, 1998
    and 1997:

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

                  Certificates of Deposit in Other Financial Institutions: The
                  carrying amounts presented in the statements of financial
                  condition for certificates of deposit in other financial
                  institutions are deemed to approximate fair value.

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

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

                  Federal Home Loan Bank Stock: The carrying amount presented in
                  the consolidated statements of financial condition is deemed
                  to approximate fair value since a quoted market price is not
                  available on Federal Home Loan Bank stock.

                  Deposits: The fair value of passbook and club accounts, and
                  money market demand accounts are deemed to approximate the
                  amount payable on demand at September 30, 1998 and 1997,
                  respectively. Fair values for fixed-rate certificates of
                  deposit have been estimated using a discounted cash flow
                  calculation using the interest rates currently offered for
                  deposits of similar remaining maturities.

                  Other Borrowed Money: The fair value of variable rate
                  borrowings is deemed to approximate the carrying value at 
                  September 30, 1998.









<PAGE>   37



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE A - SUMMARY OF ACCOUNTING POLICIES (continued)

    12.  Fair Value of Financial Instruments (continued)

                  Commitments to Extend Credit: For fixed-rate and
                  adjustable-rate loan commitments, the fair value estimate
                  considers the difference between current levels of interest
                  rates and committed rates. The difference between the fair
                  value and notional amount of outstanding loan commitments at
                  September 30, 1998 and 1997 was not material.

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

<TABLE>
<CAPTION>

                                                                      1998                    1997
                                                             CARRYING        FAIR    CARRYING        FAIR
                                                                VALUE       VALUE       VALUE       VALUE
                                                                                (In thousands)
<S>                                                          <C>            <C>      <C>            <C>
Financial assets:
  Cash and cash equivalents                                   $ 5,381     $ 5,381     $ 2,248     $ 2,248
  Certificates of deposit in other financial institutions       3,790       3,790       6,690       6,690
  Investment securities held to maturity                        9,300       9,394      17,257      17,316
  Investment securities designated as available for sale        1,448       1,448       1,029       1,029
  Mortgage-backed securities                                      859         902       1,268       1,338
  Loans receivable - net                                       32,816      33,843      26,502      27,281
  Federal Home Loan Bank stock                                    419         419         390         390
                                                              -------     -------     -------     -------

                                                              $54,013     $55,177     $55,384     $56,292
                                                              =======     =======     =======     =======

Financial liabilities:
  Deposits                                                    $37,745     $37,873     $35,303     $35,334
  Other borrowed money                                            725         725          --          -- 
  Advances by borrowers for taxes and insurance                    57          57          49          49
                                                              -------     -------     -------     -------

                                                              $38,527     $38,655     $35,352     $35,383
                                                              =======     =======     =======     =======
</TABLE>

    13.  Reclassifications

    Certain prior year amounts have been reclassified to conform to the fiscal
    1998 consolidated financial statement presentation.









<PAGE>   38



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE B - INVESTMENT AND MORTGAGE-BACKED SECURITIES

    The amortized cost and estimated fair values of investment securities at
    September 30 are summarized below. Certain securities with maturities of one
    to ten years are subject to call provisions and, therefore, may not be held
    to maturity.

<TABLE>
<CAPTION>

                                                     1998                   1997
                                                      ESTIMATED                ESTIMATED
                                          AMORTIZED        FAIR   AMORTIZED         FAIR
                                               COST       VALUE        COST        VALUE
                                                         (In thousands)
<S>                                       <C>         <C>         <C>          <C>    
    HELD TO MATURITY:
      U.S. Government agency obligations
        Due within:
          One year                           $4,000     $ 4,026     $ 6,399     $ 6,413
          One to three years                  1,800       1,832       5,858       5,882
          Three to five years                 1,500       1,525       4,000       4,016
          Five to ten years                   2,000       2,011       1,000       1,005
                                             ------     -------     -------     -------

         Total investment securities
           held to maturity                   9,300       9,394      17,257      17,316

    AVAILABLE FOR SALE:
      FHLMC stock                                29       1,448          29       1,029
                                             ------     -------     -------     -------

         Total investment securities         $9,329     $10,842     $17,286     $18,345
                                             ======     =======     =======     =======
</TABLE>

    At September 30, 1998, the market value appreciation of the Company's held
    to maturity investment portfolio in excess of the cost carrying value
    totaled $94,000, consisting solely of gross unrealized gains.

    At September 30, 1997, the market value appreciation of the Company's held
    to maturity investment portfolio in excess of the cost carrying value
    totaled $59,000, consisting of gross unrealized gains of $63,000 and gross
    unrealized losses of $4,000.

    Mortgage-backed securities at September 30, 1998 and 1997, were comprised
    solely of Government National Mortgage Association participation
    certificates. At September 30, 1998 and 1997, the market value appreciation
    of the Company's mortgage-backed securities in excess of cost was
    approximately $43,000 and $70,000, respectively, comprised solely of gross
    unrealized gains. Maturities of mortgage-backed securities are due ratably
    over the next fifteen fiscal years based on the contractual repayment terms
    of the underlying loans.







<PAGE>   39



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE C - LOANS RECEIVABLE

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

<TABLE>
<CAPTION>

                                                  1998         1997
                                                   (In thousands)
<S>                                           <C>           <C>    
Real estate mortgage loans
  One- to four-family                         $ 29,225      $24,669
  Multifamily                                    1,507          573
  Nonresidential                                 1,879          811
  Construction                                     150          527
Passbook loans                                     106          134
                                              --------      -------
                                                32,867       26,714
Less:
  Undisbursed portion of loans in process           --          156
  Deferred loan origination fees (costs)            (1)           4
  Allowance for loan losses                         52           52
                                              --------      -------

                                              $ 32,816      $26,502
                                              ========      =======
</TABLE>

    As depicted above, the Company's lending efforts have historically focused
    on residential real estate loans, which comprised approximately $30.9
    million, or 94%, of the total loan portfolio at September 30, 1998 and $25.6
    million, or 97%, of the total loan portfolio at September 30, 1997.
    Generally, such loans have been underwritten on the basis of no more than an
    80% loan-to-value ratio, which has historically provided the Company with
    adequate collateral coverage in the event of default. Nevertheless, the
    Company, as with any lending institution, is subject to the risk that
    residential real estate values could deteriorate in its primary lending area
    of southwestern Ohio, thereby impairing collateral values. However,
    management is of the belief that real estate values in the Company's primary
    lending area are presently stable.

    The Company, in the ordinary course of business, has granted loans to some
    of its directors, officers, employees and their related interests. Related
    party loans are made on substantially the same terms, including interest
    rates and collateral, as those prevailing at the time for comparable
    transactions with unrelated persons and do not involve more than normal risk
    of collectibility. The aggregate dollar amount of these loans was
    approximately $705,000 and $740,000 at September 30, 1998 and 1997,
    respectively.

    Additionally, the Company has paid a retainer of $20,000 to a related party
    for legal services, principally related to the loan origination function,
    during each of the fiscal years ended September 30, 1998 and 1997.
    Management believes that the fees paid for such services are at, or below,
    the comparable cost of such services from unrelated parties.







<PAGE>   40



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE D - ALLOWANCE FOR LOSSES ON LOANS

    The activity in the allowance for losses on loans is summarized as follows
    for the years ended September 30:

<TABLE>
<CAPTION>

                                 1998    1997    1996
                                    (In thousands)

<S>                              <C>     <C>     <C>
    Beginning balance             $52     $52     $39
    Provision for loan losses      --      --      13
                                  ---     ---     ---

    Ending balance                $52     $52     $52
                                  ===     ===     ===
</TABLE>

    At September 30, 1998 and 1997, the Company's allowance for losses on loans
    was comprised primarily of a general loan loss allowance, which is
    includible as a component of regulatory risk-based capital.

    Nonperforming loans totaled approximately $171,000 and $191,000 and $139,000
    at September 30, 1998, 1997 and 1996, respectively.

    As of and for the year ended September 30, 1998, the Company had no loans
    which would be defined as impaired under SFAS No. 114. As a result, there
    was no interest income recognized or received on impaired loans for the year
    ended September 30, 1998.


NOTE E - OFFICE PREMISES AND EQUIPMENT

    Office premises and equipment at September 30 are comprised of the
    following:

<TABLE>
<CAPTION>

                               1998     1997
                               (In thousands)

<S>                            <C>      <C> 
Land                           $ 40     $ 34
Buildings and improvements      161      161
Furniture and equipment         246      236
                               ----     ----
                                447      431
  Less accumulated
    depreciation                320      284
                               ----     ----

                               $127     $147
                               ====     ====
</TABLE>

    At September 30, 1998, the Company had entered into a commitment to purchase
    properties adjacent to its main office for approximately $325,000.






<PAGE>   41



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE F - DEPOSITS

    Deposits consist of the following major classifications at September 30:

<TABLE>
<CAPTION>

    DEPOSIT TYPE AND
    WEIGHTED-AVERAGE                                 1998                   1997
    INTEREST RATE                           AMOUNT          %      AMOUNT          %
                                                    (Dollars in thousands)
<S>                                        <C>            <C>     <C>            <C>  
Passbook accounts -
  2.83% in 1998 and 1997                   $ 9,510        25.2%   $10,094        28.6%
Club accounts - 5.07% in 1998 and 1997          51          .1         52          .2
Money market demand accounts -
  2.83% in 1998 and 1997                     2,178         5.8      2,374         6.7
                                           -------       -----    -------       -----
     Total demand accounts                  11,739        31.1     12,520        35.5

Certificates of deposit -
  5.89% in 1998 and 5.97% in 1997           26,006        68.9     22,783        64.5
                                           -------       -----    -------       -----

     Total deposits                        $37,745       100.0%   $35,303       100.0%
                                           =======       =====    =======       =====
</TABLE>


    At September 30, 1998 and 1997, the Company had deposit accounts with
    balances greater than $100,000 totaling $2.7 million and $2.0 million,
    respectively.

    Interest expense on deposits for the fiscal years ended September 30 is
    summarized as follows:

<TABLE>
<CAPTION>

                                     1998             1997              1996
                                                 (In thousands)

<S>                                <C>              <C>               <C>   
    Passbook and club accounts     $  279           $  300            $  324
    Money market accounts              64               81               104
    Certificates of deposit         1,382            1,308             1,330
                                   ------           ------            ------

                                   $1,725           $1,689            $1,758
                                   ======           ======            ======
</TABLE>

    Maturities of outstanding certificates of deposit are summarized as follows
    at September 30:
<TABLE>
<CAPTION>

                                       1998              1997
                                            (In thousands)

<S>                                 <C>               <C>    
    Less than six months            $ 8,655           $ 8,000
    Six months to one year           11,364            10,407
    One year to three years           5,987             4,376
                                    -------           -------

                                    $26,006           $22,783
                                    =======           =======
</TABLE>




<PAGE>   42



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE G - OTHER BORROWED MONEY

    Other borrowed money at September 30, 1998 consists of a one year, unsecured
    note from another financial institution bearing interest at the prime rate,
    or 8.50%, at September 30, 1998. The note matures in July 1999.


NOTE H - FEDERAL INCOME TAXES

    The provision for federal income taxes on earnings for the years ended
    September 30, 1998, 1997 and 1996, does not differ materially from that
    computed at the statutory corporate tax rate.

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

<TABLE>
<CAPTION>

                                                               1998       1997
TAXES (PAYABLE) REFUNDABLE ON TEMPORARY
DIFFERENCES AT ESTIMATED CORPORATE TAX RATE:                   (In thousands)

<S>                                                           <C>        <C>   
Deferred tax assets:
  General loan loss allowance                                 $  17      $  17
  Other                                                          --          1
                                                              -----      -----
     Total deferred tax assets                                   17         18

Deferred tax liabilities:
  Unrealized gains on securities designated as
    available for sale                                         (482)      (340)
  Difference between cash and accrual basis of accounting      (116)      (157)
  Federal Home Loan Bank stock dividends                        (78)       (69)
  Difference between book and tax depreciation                  (33)       (31)
  Percentage of earnings bad debt deduction                      (5)        (7)
  Deferred loan origination costs                               (18)        (4)
                                                              -----      -----
     Total deferred tax liabilities                            (732)      (608)
                                                              -----      -----

     Net deferred tax liability                               $(715)     $(590)
                                                              =====      =====
</TABLE>

    The Company was allowed a special bad debt deduction based on a percentage
    of earnings, generally limited to 8% of otherwise taxable income, or the
    amount of qualifying and nonqualifying loans outstanding and subject to
    certain limitations based on aggregate loans and savings account balances at
    the end of the calendar year. If the amounts that qualified as deductions
    for federal income tax purposes are later used for purposes other than for
    bad debt losses, including distributions in liquidation, such distributions
    will be subject to federal income taxes at the then current corporate income
    tax rate. Retained earnings at September 30, 1998 includes approximately
    $1.3 million for which federal income taxes have not been provided. The
    amount of the unrecognized deferred tax liability relating to the cumulative
    percentage of earnings bad debt deduction totaled approximately $430,000 at
    September 30, 1998. See Note N for additional information regarding the
    Company's future percentage of earnings bad debt deductions.




<PAGE>   43



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE I - COMMITMENTS

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

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

    At September 30, 1998 and 1997, the Company had outstanding commitments of
    approximately $967,000 and $873,000 to originate fixed-rate residential real
    estate loans at interest rates ranging from 7.00% to 8.25% and 7.25% to
    8.00%, respectively. In the opinion of management, the loan commitments
    equaled or exceeded prevalent market interest rates as of those dates, and
    such commitments have been underwritten on the same basis as the existing
    loan portfolio. Management believes that all commitments will be funded
    through cash flow from operations and existing excess liquidity. Fees
    received in connection with these commitments have not been recognized in
    earnings.

    Commitments to extend credit are agreements to lend to a customer as long as
    there is no violation of any condition established in the contract.
    Commitments generally have fixed expiration dates or other termination
    clauses and may require payment of a fee. Since many of the commitments may
    expire without being drawn upon, the total commitment amounts do not
    necessarily represent future cash requirements. The Company evaluates each
    customer's creditworthiness on a case-by-case basis. The amount of
    collateral obtained, if it is deemed necessary by the Company upon extension
    of credit, is based on management's credit evaluation of the counterparty.
    Collateral on loans may vary but the preponderance of loans granted
    generally include a mortgage interest in real estate as security.


NOTE J - REGULATORY CAPITAL

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




<PAGE>   44



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE J - REGULATORY CAPITAL (continued)

    The minimum capital standards of the OTS generally require the maintenance
    of regulatory capital sufficient to meet each of three tests, hereinafter
    described as the tangible capital requirement, the core capital requirement
    and the risk-based capital requirement. The tangible capital requirement
    provides for minimum tangible capital (defined as shareholders' equity less
    all intangible assets) equal to 1.5% of adjusted total assets. The core
    capital requirement provides for minimum core capital (tangible capital plus
    certain forms of supervisory goodwill and other qualifying intangible
    assets) equal to 3.0% of adjusted total assets. An OTS proposal, if adopted
    in present form, would increase the core capital requirement to a range of
    4.0% - 5.0% of adjusted total assets for substantially all savings
    associations. Management anticipates no material change to the Company's
    excess regulatory capital position as a result of this proposed change in
    the regulatory capital requirement. The risk-based capital requirement
    currently provides for the maintenance of core capital plus general loss
    allowances equal to 8.0% of risk-weighted assets. In computing risk-weighted
    assets, the Company multiplies the value of each asset on its statement of
    financial condition by a defined risk-weighting factor, e.g., one- to
    four-family residential loans carry a risk-weighted factor of 50%.

    As of September 30, 1998 and 1997, management believes that the Company met
    all capital adequacy requirements to which it is subject.

<TABLE>
<CAPTION>

                                                   AS OF SEPTEMBER 30, 1998
                                                                                       TO BE "WELL-
                                                                                    CAPITALIZED" UNDER
                                                           FOR CAPITAL              PROMPT CORRECTIVE
                                   ACTUAL               ADEQUACY PURPOSES           ACTION PROVISIONS
                                   ------               -----------------           -----------------
                              AMOUNT    RATIO           AMOUNT     RATIO            AMOUNT       RATIO
                                                       (Dollars in thousands)

<S>                          <C>        <C>           <C>         <C>             <C>           <C> 
    Tangible capital         $13,619    25.6%         >$  797     >1.5%           >$2,658      > 5.0%

    Core capital             $13,619    25.6%         >$1,595     >3.0%           >$3,190      > 6.0%

    Risk-based capital       $13,669    59.6%         >$1,835     >8.0%           >$2,294      >10.0%



<CAPTION>
                                                   AS OF SEPTEMBER 30, 1997
                                                                                       TO BE "WELL-
                                                                                    CAPITALIZED" UNDER
                                                           FOR CAPITAL              PROMPT CORRECTIVE
                                   ACTUAL               ADEQUACY PURPOSES           ACTION PROVISIONS
                                   ------               -----------------           -----------------
                              AMOUNT    RATIO           AMOUNT     RATIO            AMOUNT       RATIO

    Tangible capital         $12,885    23.4%          >$  827     >1.5%           >$2,756      > 5.0%

    Core capital             $12,885    23.4%          >$1,654     >3.0%           >$3,307      > 6.0%

    Risk-based capital       $12,935    68.2%          >$1,518     >8.0%           >$1,898      >10.0%
</TABLE>




<PAGE>   45



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE J - REGULATORY CAPITAL (continued)

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


NOTE K - STOCK OPTION PLAN

    During fiscal 1998 the Board of Directors adopted the Market Financial
    Corporation 1998 Stock Option and Incentive Plan (the "Plan") that provided
    for the issuance of 133,572 shares of authorized, but unissued shares of
    common stock at fair value at the date of grant. In June 1998, the
    Corporation granted options to purchase 113,526 shares at the fair value of
    $13.50 per share, all of which were fully exercisable at the grant date,
    with an expiration term of ten years.

    In 1998, the Corporation adopted SFAS No. 123, "Accounting for Stock-Based
    Compensation," which contains a fair value-based method for valuing
    stock-based compensation that entities may use, which measures compensation
    cost at the grant date based on the fair value of the award. Compensation is
    then recognized over the service period, which is usually the vesting
    period. Alternatively, SFAS No. 123 permits entities to continue to account
    for stock options and similar equity instruments under Accounting Principles
    Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees."
    Entities that continue to account for stock options using APB Opinion No. 25
    are required to make pro forma disclosures of net earnings and earnings per
    share, as if the fair value-based method of accounting defined in SFAS No.
    123 had been applied.

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

<TABLE>
<CAPTION>

                                                              1998
<S>                                   <C>                     <C>
    Net earnings (In thousands)       As reported             $552

                                        Pro-forma             $321
    Earnings per share
      Basic                           As reported             $.45

                                        Pro-forma             $.26

      Diluted                         As reported             $.45

                                        Pro-forma             $.26
</TABLE>




<PAGE>   46



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE K - STOCK OPTION PLAN (continued)

    The fair value of each option grant is estimated on the date of grant using
    the modified Black-Scholes options-pricing model with the following
    weighted-average assumptions used for grants in fiscal 1998: dividend yield
    of 4.0%, expected volatility of 20.0%, a risk-free interest rate of 6.5% and
    expected lives of ten years.

    A summary of the status of the Corporation's stock option plan as of and for
    the fiscal year ended September 30, 1998, is presented below:

<TABLE>
<CAPTION>

                                                                                             WEIGHTED-
                                                                                               AVERAGE
                                                                                              EXERCISE
                                                                                   SHARES        PRICE
<S>                                                                               <C>        <C>
    Outstanding at beginning of year                                                   --      $     --
    Granted                                                                       113,526         13.50
    Exercised                                                                          --            --
    Forfeited                                                                          --            --
                                                                                  -------      --------
    Outstanding at end of year                                                    113,526      $  13.50
                                                                                  =======      ========
    Options exercisable at year-end                                               113,526      $  13.50
                                                                                  =======      ========
    Weighted-average fair value of
      options granted during the year                                                          $   3.08
                                                                                               ========
    The following information applies to options outstanding at
    September 30, 1998:

    Number outstanding                                                                          113,526
    Range of exercise prices                                                                   $  13.50
    Weighted-average exercise price                                                            $  13.50
    Weighted-average remaining contractual life                                              9.75 years
</TABLE>









<PAGE>   47



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE L - CORPORATE REORGANIZATION TO STOCK FORM

    In April 1996, the Company's Board of Directors adopted an overall plan of
    conversion and reorganization (the "Plan") whereby the Company would convert
    to the stock form of ownership, followed by the issuance of all the
    Company's outstanding stock to a newly formed holding company, Market
    Financial Corporation. Pursuant to the Plan, as amended, the Company offered
    for sale up to 1,335,725 common shares at $10.00 per share to its
    depositors, members of the community, and a newly formed ESOP. The offering
    was completed in March 1997, with the issuance of 1,335,725 common shares
    which, after consideration of expenses totaling approximately $525,000,
    resulted in net capital proceeds of $12.8 million.

    At the completion of the conversion to stock form, the Company established a
    liquidation account in the amount of retained earnings contained in the
    final offering circular. The liquidation account will be maintained for the
    benefit of eligible savings account holders who maintain deposit accounts in
    the Company after conversion.

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

    The Company may not declare, pay a cash dividend on, or repurchase any of
    its common stock, if the effect thereof would cause retained earnings to be
    reduced below either the amount required for the liquidation account or the
    regulatory capital requirements for SAIF insured institutions.




















<PAGE>   48



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE M - CONDENSED FINANCIAL STATEMENTS OF MARKET FINANCIAL CORPORATION

    The following condensed financial statements summarize the financial
    position of Market Financial Corporation as of September 30, 1998 and 1997,
    and the results of its operations and its cash flows for the periods ended
    September 30, 1998 and 1997.

                          MARKET FINANCIAL CORPORATION
                        STATEMENTS OF FINANCIAL CONDITION
                                  September 30,
                                 (In thousands)
<TABLE>
<CAPTION>

ASSETS                                                                         1998          1997

<S>                                                                        <C>           <C>     
Interest-bearing deposits in The Market Building and Saving Co.            $    213      $  5,256
Interest-bearing deposits in other financial institutions                         1             1
Loan receivable from ESOP                                                       971         1,069
Investment in The Market Building and Saving Co.                             14,556        13,546
Accrued interest receivable                                                      51            38
Prepaid expenses and other assets                                                29            -- 
Prepaid federal income taxes                                                     34            -- 
                                                                           --------      --------

      Total assets                                                         $ 15,855      $ 19,910
                                                                           ========      ========

LIABILITIES AND SHAREHOLDERS' EQUITY

Other borrowed money                                                       $    725      $     -- 
Other liabilities                                                                40             2
Accrued federal income taxes                                                     --            13
Deferred federal income taxes                                                    12            -- 
                                                                           --------      --------
      Total liabilities                                                         777            15

Shareholders' equity
  Common stock and additional paid-in capital                                 8,191        12,832
  Retained earnings                                                           7,650         7,472
  Shares acquired by stock benefit plans                                     (1,700)       (1,069)
  Unrealized gains on securities designated as available for sale, net          937           660
                                                                           --------      --------
      Total shareholders' equity                                             15,078        19,895
                                                                           --------      --------

      Total liabilities and shareholders' equity                           $ 15,855      $ 19,910
                                                                           ========      ========
</TABLE>









<PAGE>   49



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE M - CONDENSED FINANCIAL STATEMENTS OF MARKET FINANCIAL CORPORATION
(continued)

                          MARKET FINANCIAL CORPORATION
                             STATEMENTS OF EARNINGS
                           Period ended September 30,
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                    1998      1997
    Revenue

<S>                                                                <C>        <C> 
      Interest income                                              $ 157      $113
      Equity in earnings of The Market Building and Saving Co.       600       314
                                                                   -----      ----
          Total revenue                                              757       427

    Interest expense                                                   9        -- 

    General and administrative expenses                              221        74
                                                                   -----      ----

    Earnings before income taxes (credits)                           527       353

    Federal income taxes (credits)                                   (25)       13
                                                                   -----      ----

          NET EARNINGS                                             $ 552      $340
                                                                   =====      ====
</TABLE>






<PAGE>   50



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE M - CONDENSED FINANCIAL STATEMENTS OF MARKET FINANCIAL CORPORATION
(continued)

                          MARKET FINANCIAL CORPORATION
                            STATEMENTS OF CASH FLOWS
                           Period ended September 30,
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                      1998          1997
<S>                                                                <C>          <C>     
    Cash provided by (used in) operating activities:
      Net earnings for the year                                    $   552      $    340
      Adjustments to reconcile net earnings to net
      cash provided by (used in) operating activities
        Undistributed earnings of consolidated subsidiary             (600)         (314)
        Increase (decrease) in cash due to changes in:
          Accrued interest receivable                                  (13)          (38)
          Prepaid expenses and other assets                            (30)           -- 
          Other liabilities                                             38             2
          Federal income taxes - current                               (47)           13
          Federal income taxes - deferred                               12            -- 
                                                                   -------      --------
            Net cash provided by (used in) operating activities        (88)            3

    Cash flows used in investing activities:
      Investment in The Market Building and Saving Co.                  --        (6,416)

    Cash flows provided by (used in) financing activities:
      Disbursement of loan to ESOP                                      --        (1,069)
      Repayment of loan to ESOP                                         98            -- 
      Shares acquired by stock benefit plans                          (729)           -- 
      Proceeds from other borrowed money                               725            -- 
      Net proceeds from issuance of common shares                       --        12,832
      Capital distributions and dividends paid on common stock      (5,049)          (93)
                                                                   -------      --------
            Net cash provided by (used in) financing activities     (4,955)       11,670
                                                                   -------      --------

    Net increase (decrease) in cash and cash equivalents            (5,043)        5,257

    Cash and cash equivalents at beginning of period                 5,257            -- 
                                                                   -------      --------

    Cash and cash equivalents at end of period                     $   214      $  5,257
                                                                   =======      ========
</TABLE>






<PAGE>   51



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE M - CONDENSED FINANCIAL STATEMENTS OF MARKET FINANCIAL CORPORATION
(continued)

    As a condition to regulatory approval of the stock conversion and
    reorganization to the holding company form of ownership, the Company agreed
    to limit the amount of dividends payable to the Corporation. Regulations of
    the Office of Thrift Supervision ("OTS") impose limitations on the payment
    of dividends and other capital distributions by savings associations. Under
    such regulations, a savings association that, immediately prior to, and on a
    pro forma basis after giving effect to, a proposed capital distribution, has
    total capital (as defined by OTS regulation) that is equal to or greater
    than the amount of its fully phased-in capital requirement is generally
    permitted without OTS approval (but subsequent to 30 days prior notice to
    the OTS of the planned dividend) to make capital distributions during a
    calendar year in the amount of up to the greater of (i) 100% of its net
    earnings to date during the year plus an amount equal to one-half of the
    amount by which its total capital-to-assets ratio exceeded its fully
    phased-in capital-to-assets ratio at the beginning of the year or (ii) 75%
    of its net earnings for the most recent four quarters. Pursuant to such OTS
    dividend regulations, the Company had the ability to pay dividends of
    approximately $6.3 million to the Corporation at September 30, 1998.

NOTE N - LEGISLATIVE DEVELOPMENTS

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

    Legislation was enacted to recapitalize the SAIF that provided for a special
    assessment totaling $.657 per $100 of SAIF deposits held at March 31, 1995,
    in order to increase SAIF reserves to the level required by law. The Company
    held $37.6 million in deposits at March 31, 1995, resulting in an assessment
    of approximately $246,000, or $162,000 after-tax, which was charged to
    operations in fiscal 1996.









<PAGE>   52



                          MARKET FINANCIAL CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                        September 30, 1998, 1997 and 1996


NOTE N - LEGISLATIVE DEVELOPMENTS (continued)

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

    Under separate legislation related to the recapitalization plan, the Company
    is required to recapture as taxable income approximately $22,000 of its tax
    bad debt reserve, which represents the post-1987 additions to the reserve,
    and will be unable to utilize the percentage of earnings method to compute
    its bad debt deduction in the future. The Company has provided deferred
    taxes for this amount and is permitted to amortize the recapture of the bad
    debt reserve in taxable income over a six year period commencing in fiscal
    1997.


<PAGE>   53
                          MARKET FINANCIAL CORPORATION
                                       AND
                     THE MARKET BUILDING AND SAVING COMPANY
                             DIRECTORS AND OFFICERS
================================================================================
<TABLE>
<S>                                                      <C>
           BOARD OF DIRECTORS OF                                 BOARD OF DIRECTORS OF               
        MARKET FINANCIAL CORPORATION                     THE MARKET BUILDING AND SAVING COMPANY      
                                                                                                     
            Robert Gandenberger                                     John T. Larimer                  
            Supervisor - Retired                                       President                     
 Hamilton County of Ohio Recorder's Office                    Market Financial Corporation           
                                                         The Market Building and Saving Company      
              John T. Larimer                                                                        
                 President                                          L. Craig Martin                  
        Market Financial Corporation                                   President                     
   The Market Building and Saving Company                        Environmentrics, Inc.               
                                                                                                     
            Rae Skirvin Larimer                                       Edgar H. May                   
                  Attorney                                         Partner - Retired                 
                                                                   Ed May Realty Co.                 
                Edgar H. May                                                                         
             Partner - Retired                                      R. C. Meyerenke                  
             Ed May Realty Co.                                 Managing Officer - Retired            
                                                         The Market Building and Saving Company      
              R. C. Meyerenke                                                                        
         Managing Officer - Retired                                Una Schaeperklaus                 
   The Market Building and Saving Company                              Secretary                     
                                                         The Market Building and Saving Company      
              Wilbur H. Tisch                                                                        
            President - Retired                                                                      
            General Metal Works                                       OFFICERS OF                    
                                                         THE MARKET BUILDING AND SAVING COMPANY      
             Kathleen A. White                                                                       
         Real Estate Title Examiner                                 John T. Larimer                  
                                                             President and Managing Officer          
                OFFICERS OF                                                                          
        MARKET FINANCIAL CORPORATION                                R. C. Meyerenke                  
                                                                       Treasurer                     
              John T. Larimer                                                                        
                 President                                         Una Schaeperklaus                 
                                                                       Secretary                     
               R.C. Meyerenke                                                                        
                 Treasurer                                          Julie M. Bertsch                 
                                                                Chief Financial Officer              
            Rae Skirvin Larimer                                                                      
                 Secretary

              Julie M. Bertsch
          Chief Financial Officer
</TABLE>



                                       51
<PAGE>   54



                              SHAREHOLDER SERVICES
================================================================================

The Fifth Third Bank serves as transfer agent and dividend distributing agent
for MFC's shares. Communications regarding change of address, transfer of
shares, lost certificates and dividends should be sent to:

                              The Fifth Third Bank
                            Stock Transfer Department
                                Mail Drop 10AT66
                            38 Fountain Square Plaza
                             Cincinnati, Ohio 45263
                                 (513) 579-5320
                                 (800) 837-2755


                                 ANNUAL MEETING
================================================================================

The 1999 Annual Meeting of Shareholders of Market Financial Corporation will be
held on January 26, 1999, at 10:00 a.m., Eastern Time, at Shuller's Wigwam
Restaurant, 6210 Hamilton Avenue, Cincinnati, Ohio 45224. Shareholders are
cordially invited to attend.


                          ANNUAL REPORT ON FORM 10-KSB
================================================================================

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

                          Market Financial Corporation
                              7522 Hamilton Avenue
                             Cincinnati, Ohio 45231
                              Attention: President

                                       52