<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 For the fiscal year ended June 30, 1999


OR


[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

      For the transition period from ______________ to ___________________

                         Commission File Number: 0-21297

                            FOUNDATION BANCORP, INC.
                 ----------------------------------------------
                 (Name of small business issuer in its charter)

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

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

                    Issuer's telephone number: (513) 721-0120
                                               --------------
           Securities registered pursuant to Section 12(b) of the Act:

          None                                           None
    ----------------                            ----------------------
    (Title of Class)                            (Name of each exchange
                                                  on which registered)

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

                      Common shares, no par value per share
                      -------------------------------------
                                (Title of Class)

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the issuer was required to file such reports), and (2) has
been subject to such requirements for the past 90 days. Yes  X  No
                                                            ---    ---
         Check if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

         The aggregate market value of the voting stock held by non-affiliates
of the registrant, computed by reference to the price of shares of the
Registrant in the most recent trade reported by the National Daily Quotation
Service, as of September 1, 1999, was approximately $4,772,000. (The exclusion
from such amount of the market value of the shares owned by any person shall not
be deemed an admission by the registrant that such person is an affiliate of the
registrant).

         As of September 1, 1999, there were 462,875 of the Registrant's common
shares issued and outstanding.

         The Registrant's revenues for the fiscal year ended June 30, 1999, were
$2,528,084.

                       DOCUMENTS INCORPORATED BY REFERENCE

    Part II of Form 10-KSB - Portions of 1999 Annual Report to Shareholders

             Part III of Form 10-KSB - Portions of Proxy Statement
                  for the 1999 Annual Meeting of Shareholders


<PAGE>   2

                                     PART I


ITEM 1.    DESCRIPTION OF BUSINESS

GENERAL

         Foundation Bancorp, Inc. (the "Company"), was incorporated under Ohio
law in April 1996 at the direction of the Board of Directors of Foundation
Savings Bank ("Foundation") for the purpose of purchasing all of the capital
stock of Foundation to be issued in connection with the conversion of Foundation
from mutual to stock form (the "Conversion"). On September 25, 1996, the
effective date of the Conversion, the Company acquired 100 common shares of
Foundation. The principal business of the Company since the effective date of
the Conversion has been holding all of the issued and outstanding shares of
Foundation.

         Foundation is a permanent capital stock savings and loan association
which was organized under Ohio law in 1888 as "The Foundation Building and Loan
Company." In February 1942, the name of Foundation was changed to "The
Foundation Savings and Loan Company" and in October 1990 Foundation adopted its
present name. As an Ohio savings and loan association, Foundation is subject to
supervision and regulation by the Office of Thrift Supervision (the "OTS"), the
Ohio Department of Commerce, Division of Financial Institutions (the
"Division"), and the Federal Deposit Insurance Corporation (the "FDIC").
Foundation is a member of the Federal Home Loan Bank (the "FHLB") of Cincinnati
and the deposits of Foundation are insured up to applicable limits by the FDIC
in the Savings Association Insurance Fund (the "SAIF").

         Foundation conducts business from its office at 25 Garfield Place in
Cincinnati, Ohio. The principal business of Foundation is the origination of
permanent mortgage loans secured by first mortgages on one- to four-family
residential real estate. Foundation also originates mortgage loans secured by
multifamily real estate (over four units) and nonresidential real estate. In
addition to real estate lending, Foundation originates a limited number of
secured and unsecured consumer loans. For liquidity and interest rate risk
management purposes, Foundation invests in interest-bearing deposits in other
financial institutions, U.S. Government and agency obligations, mortgage-backed
securities and other investments permitted by applicable law. Funds for lending
and other investment activities are obtained primarily from savings deposits,
which are insured up to applicable limits by the FDIC, and principal repayments
on loans. Advances from the FHLB of Cincinnati are utilized from time to time
when other sources of funds are inadequate to fund loan demand.

         Interest on loans and investments is Foundation's primary source of
income. Foundation's principal expense is interest paid on deposit accounts.
Operating results are dependent to a significant degree on the net interest
income of Foundation, which is the difference between interest income earned on
loans, mortgage-backed securities and other investments and interest paid on
deposits and borrowings. Like most thrift institutions, Foundation's interest
income and interest expense are significantly affected by general economic
conditions and by the policies of various regulatory authorities.

MARKET AREA

         Foundation conducts business from its office in downtown Cincinnati,
Ohio. Foundation's primary market area for lending and deposit activity is
Hamilton County, Ohio. Foundation also frequently receives deposits from, and
makes loans to, customers in the contiguous Ohio counties of Clermont, Butler
and Warren and the Kentucky counties of Kenton and Boone.

LENDING ACTIVITIES

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


                                      -1-
<PAGE>   3

         LOAN PORTFOLIO COMPOSITION. The following table presents certain
information regarding the composition of the loan portfolio of Foundation at the
dates indicated:
<TABLE>
<CAPTION>

                                                               At June 30,
                                 -------------------------------------------------------------------------
                                           1999                     1998                    1997
                                 ----------------------     --------------------     ---------------------
                                               Percent                  Percent                   Percent
                                               of total                 of total                  of total
                                  Amount        loans        Amount      loans        Amount       loans
                                 --------      --------     --------    --------     --------     --------
<S>                              <C>            <C>         <C>           <C>        <C>           <C>
Real estate loans:
   One- to four-family           $ 18,013       88.01%      $ 19,278      88.25%     $ 23,817      91.82%
   Nonresidential                   1,197        5.85          1,269       5.81         1,118       4.31
   Multifamily                      1,489        7.27          1,285       5.88           968       3.73
Consumer loans:
   Passbook loans                      22         .11             26        .12            27       0.10
   Other consumer loans               198         .97            132        .60           389       1.50
                                 --------      ------       --------     ------      --------     ------

Total loans                        20,919      102.21         21,990     100.66        26,319     101.46

Less:
   Loans in process                   306        1.50              -          -           237       0.91
   Allowance for loan losses          150         .73            138        .63           126       0.49
   Deferred loan fees                  (5)       (.02)             6        .03            17       0.07
                                 --------      ------       --------     ------      --------     ------

     Net loans                   $ 20,468      100.00%      $ 21,846     100.00%     $ 25,939     100.00%
                                 ========      ======       ========     ======      ========     ======

</TABLE>

         LOAN MATURITY. The following table sets forth certain information as of
June 30, 1999, regarding the dollar amount of loans maturing in the portfolio of
Foundation based on their contractual terms to maturity. Demand loans, home
equity loans and other loans having no stated schedule of repayments or no
stated maturity are reported as due in one year or less.
<TABLE>
<CAPTION>

                                                               Due 4-5     Due 6-10   Due 11-20   Due more
                              Due during the year ending        years       years       years     than 20
                                        June 30,                after       after       after    years after
                           -------------------------------
                             2000        2001       2002       6/30/99     6/30/99     6/30/99     6/30/99      Total
                           -------     -------     -------     -------     -------     -------     -------     -------
<S>                        <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
Real estate loans:
   One- to four-family     $   520     $   638     $   673     $ 1,350     $ 3,400     $ 3,592     $ 7,840     $18,013
   Multifamily                  45          57          59         125         423         433         347       1,489
   Nonresidential               47          50          53         115         370         383         179       1,197
Consumer loans                  79          37          31          26          19          28        --           220
                           -------     -------     -------     -------     -------     -------     -------     -------
Total                      $   691     $   782     $   816     $ 1,616     $ 4,212     $ 4,436     $ 8,366     $20,919
                           =======     =======     =======     =======     =======     =======     =======     =======
</TABLE>


         The table below sets forth the dollar amount of all loans due after one
year from June 30, 1999, which have predetermined interest rates and loans which
have floating or adjustable interest rates:

                                Due more than one year after
                                       June 30, 1999
                                ----------------------------
                                       (In thousands)

Fixed rates of interest                    $14,225
Adjustable rates of interest                 6,001
                                           -------
                                           $20,226
                                           =======


                                      -2-
<PAGE>   4


         LOANS SECURED BY ONE- TO FOUR-FAMILY REAL ESTATE. The principal lending
activity of Foundation is the origination of permanent conventional loans
secured by one- to four-family residences, primarily single-family residences,
located within Foundation's primary market area. Each of such loans is secured
by a first mortgage on the underlying real estate and improvements thereon, if
any. At June 30, 1999, Foundation's one- to four-family residential real estate
loan portfolio was approximately $18.0 million, or 88.01% of total loans.

         OTS regulations and Ohio law limit the amount which Foundation may lend
in relationship to the appraised value at the time of loan origination of the
real estate and improvements which will serve as collateral for the loan. In
accordance with such regulations and laws, Foundation typically makes loans on
owner-occupied one- to four-family residences of up to 80% of the value of the
real estate and improvements (the "Loan-to-Value Ratio" or "LTV"), although
Foundation occasionally makes loans with higher LTVs. Since 1994, Foundation has
required that the principal amount of any loan which exceeds 80% LTV at the time
of origination be covered by private mortgage insurance at the expense of the
borrower. Foundation makes loans on non-owner-occupied or investment properties
with maximum LTVs of 75%.

         Fixed-rate loans are offered by Foundation, currently for terms of up
to 30 years. Adjustable-rate residential real estate loans ("ARMs") are also
offered by Foundation for terms of up to 30 years. The interest rate adjustment
periods on ARMs are one and three years, with adjustments tied to the one-year
and three-year U.S. Treasury bill rate. In addition, Foundation offers loans on
which the interest rates remain fixed for a period of three, five, seven or ten
years and then adjust annually according to the one-year U.S. Treasury bill
rate. The new interest rate at each change date is determined by adding 2.5% to
3.0% to the prevailing index. The maximum allowable adjustment at each
adjustment date is 2%, with a maximum adjustment of 6% over the term of the
loan.

         The initial rate on ARMs originated by Foundation is sometimes less
than the sum of the index at the time of origination plus the specified margin.
Such loans may be subject to greater risk of default as the interest rate
adjusts to the fully-indexed level. Foundation attempts to reduce the risks by
underwriting such loans on the basis of the payment amount the borrower will be
required to pay, assuming the maximum possible rate increase at the first
adjustment date.

         Adjustable-rate loans decrease Foundation's interest rate risk but
involve other risks, primarily credit risk, because as interest rates rise the
payment by the borrower rises to the extent permitted by the terms of the loan,
thereby increasing the potential for default. At the same time, the
marketability of the underlying property may be adversely affected by higher
interest rates. Foundation believes that these risks have not had a material
adverse effect on Foundation to date.

         LOANS SECURED BY MULTIFAMILY REAL ESTATE. In addition to loans secured
by one- to four-family properties, Foundation originates loans secured by
multifamily properties containing over four units. Multifamily loans are offered
with fixed or adjustable rates for terms of up to 20 years and have maximum LTVs
of 75%.

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

         At June 30, 1999, loans secured by multifamily properties totaled
approximately $1.5 million, or 7.27% of total loans.

         LOANS SECURED BY NONRESIDENTIAL REAL ESTATE. At June 30, 1999,
approximately $1.2 million, or 5.85%, of Foundation's total loans were secured
by permanent mortgages on nonresidential real estate. Such loans have both fixed
and adjustable rates, terms of up to 20 years and LTVs of up to 70%. Among the
properties securing nonresidential real estate loans are office buildings and
other nonresidential properties located in Foundation's primary market area.

         Although loans secured by nonresidential real estate typically have
higher interest rates than one- to four-family residential real estate loans,
nonresidential real estate lending is generally considered to involve a higher
degree of risk than residential lending due to the relatively larger loan
amounts and the effects of general economic conditions on the successful
operation of income-producing properties. Foundation has endeavored to reduce
such risk by limiting loan amounts and evaluating the credit history, past
performance, and financial condition of the borrower, the location of the real
estate


                                      -3-
<PAGE>   5

securing the loan, the quality and characteristics of the income stream
generated by the property and appraisals supporting the property's valuation and
by obtaining personal guarantees from borrowers.

         COMMERCIAL LOANS. In the past, Foundation has made commercial loans to
businesses in its primary market area. Such loans are typically secured by a
security interest in inventory, accounts receivable or other assets of the
borrower. At June 30, 1999, Foundation had no commercial loans in its portfolio.

         CONSUMER LOANS. Foundation occasionally makes various types of consumer
loans, including loans made to depositors and secured by their deposit accounts,
automobile loans and other secured loans and unsecured personal loans. Consumer
loans are made at fixed rates of interest and for terms of up to five years. At
June 30, 1999, Foundation had approximately $220,000, or 1.08% of total loans,
invested in consumer loans.

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

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

         Loan applications for permanent real estate loans are taken by a loan
originator. Foundation typically obtains a credit report, verification of
employment and other documentation concerning the creditworthiness of the
borrower. An appraisal of the fair market value of the real estate which will
secure the loan is prepared by a fee appraiser approved by the Board of
Directors. Upon the completion of the appraisal and the receipt of information
on the credit history of the borrower, the loan application is submitted for
review in accordance with Foundation's underwriting guidelines. Loans of amounts
less than $250,000 and which meet secondary market standards or have low
loan-to-value ratios may be approved by management, while loans of amounts
greater than $250,000 or which do not meet secondary market standards must be
submitted to the full Board of Directors.

         Under Foundation's loan guidelines, if a real estate loan application
is approved, an attorney's title opinion or title insurance is obtained on the
real estate which will secure the mortgage loan. Borrowers are required to carry
satisfactory fire and casualty insurance and flood insurance, if applicable, and
to name Foundation as an insured mortgagee.

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

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

         LOAN ORIGINATIONS, PURCHASES AND SALES. Foundation has sold a limited
number of loans in the secondary market in prior years. The volume of loan sales
increased significantly during the second half of 1998 fiscal year due to the
significant decline in market rates. Foundation sells loans in order to improve
its liquidity or to manage its interest rate risk. Foundation has released the
right to service virtually all of the loans it has sold.


                                      -4-
<PAGE>   6

         The following table presents the loan origination activity of
Foundation for the periods indicated:

                                                   Year ended June 30,
                                         -----------------------------------
                                           1999          1998         1997
                                         --------      --------    ---------
                                                    (In thousands)

Loans receivable-beginning of period     $ 21,846      $ 25,939     $ 23,267
Loans originated:
   One- to four-family residential         11,251        10,266        7,210
   Nonresidential                             188           166           58
   Multifamily                                326           609          120
   Consumer                                    85           378          264
                                         --------      --------     --------
     Total loans originated                11,850        11,419        7,652

Reductions:
Principal repayments                        6,030         8,051        3,748
Loans sold                                  6,491         7,643        1,077
Transferred to real estate owned             --              54         --
                                         --------      --------     --------
Total reductions                           12,521        15,748        4,825
Other items, net (1)                         (307)          236         (155)
                                         --------      --------     --------
Loans receivable, end of period          $ 20,868      $ 21,846     $ 25,939
                                         ========      ========     ========
------------------------------------
(1)      Other items consist of loans in process, deferred loan fees and
         allowances for loan losses

         FEDERAL LENDING LIMIT. OTS regulations impose a lending limit on the
aggregate amount that a savings association can lend to one borrower to an
amount equal to 15% of the association's (i) core capital and supplementary
capital, as defined in the regulations, plus (ii) any loan loss reserves not
already included in the calculation of supplementary capital, and (iii) the
amount of loans and advances to the association's subsidiaries not already
included in the calculation of core capital (collectively, "Lending Limit
Capital"). A savings association may lend to one borrower an additional amount
not to exceed 10% of the association's Lending Limit Capital, if the additional
amount is fully secured by certain forms of "readily marketable collateral."
Real estate is not considered "readily marketable collateral." In applying this
limit, the regulations require that loans to certain related or affiliated
borrowers be aggregated.

         Based on such limits, Foundation was able to lend $864,000 to one
borrower at June 30, 1999. The largest amount Foundation had outstanding to one
borrower and related persons or entities at June 30, 1999, was approximately
$670,000, consisting of seven loans, the largest of which was approximately
$299,000. Each of such loans is secured by commercial or residential real
estate.

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

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

         DELINQUENT LOANS, NONPERFORMING ASSETS AND CLASSIFIED ASSETS.
Foundation attempts to maintain a high level of asset quality through sound
underwriting policies and aggressive collection efforts.

         A borrower who becomes one to 30 days delinquent is not considered
seriously delinquent unless delinquency at such level continues for several
months, in which case the borrower is treated as chronically delinquent.
Chronically delinquent borrowers are referred to debt counseling, are advised to
consider selling the subject property and, if such efforts are unsuccessful,
foreclosure proceedings are initiated. In the absence of chronic delinquency, a
borrower who is one to 30 days delinquent receives a delinquency notice at the
end of the month. A borrower who is 30 to 59 days delinquent for two consecutive
months or who is 60 to 89 days delinquent receives a telephone call or a
personalized letter. A borrower who becomes more than 90 days delinquent
receives a default notice and, absent corrective action, foreclosure proceedings
are instituted.


                                      -5-
<PAGE>   7

         Nonperforming assets include nonaccruing loans, accruing loans which
are delinquent 90 days or more, real estate acquired by foreclosure or by
deed-in-lieu thereof, in-substance foreclosures and repossessed assets.
Foundation ceases to accrue interest on real estate loans when the value of
collateral becomes inadequate, in the opinion of management, to cover the
outstanding principal and interest.

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

                                                                     At June 30,
                                                         -----------------------------------
                                                            1999          1998        1997
                                                         ---------      -------      -------
                                                                 (Dollars in thousands)
<S>                                                      <C>            <C>          <C>
Accruing loans delinquent 90+ days                       $       -      $     -      $     -

   Nonperforming loans                                   $       -      $     -      $     -
                                                         =========      =======      =======

   Real estate owned                                             -      $    54            -
                                                         ---------      -------      -------

     Total nonperforming assets                          $       -      $    54      $     -
                                                         =========      =======      =======

     Allowance for loan losses                           $     150      $   138      $   126
                                                         =========      =======      =======

     Nonperforming assets as a percent of total assets        0.00%        0.15%        0.00%

     Nonperforming loans as a percent of total loans          0.00%        0.00%        0.00%

     Allowance for loan losses as a percent of
       nonperforming loans                                    0.00%        0.00%        0.00%
</TABLE>

         For the year ended June 30, 1999, Foundation had no interest income
which would have been recorded had nonaccruing loans been current in accordance
with their original terms. During such period, Foundation recorded no interest
on such loans. At June 30, 1999, there was one loan that was almost 90 days
delinquent. Management estimated that there will be a loss of $8,000 and has
established a specific reserve for this purpose.

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

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


                                      -6-
<PAGE>   8

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

                                  At June 30,
                             ----------------------
                             1999     1998     1997
                             ----     ----     ----
                                 (In thousands)

Classified assets:
Special mention              $  -     $ 54     $216
Substandard                    77        -        -
Doubtful                        -        -        -
Loss                            8        -        -
                             ----     ----     ----
 Total classified assets     $ 85     $ 54     $216
                             ====     ====     ====


         Foundation establishes general allowances for loan losses for any loan
classified as substandard or doubtful. If an asset, or portion thereof, is
classified as loss, Foundation must either establish a specific allowance for
loss in the amount of 100% of the portion of the asset classified loss or charge
off the amount of the loss classification. Generally, Foundation has elected to
charge off the portion of any real estate loan deemed to be uncollectible.

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

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

         The foregoing statement regarding the adequacy of the allowance for
loan losses is a "forward-looking" statement within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Factors that could affect the adequacy of the
loan loss allowance include, but are not limited to, the following: (1) changes
in the national and local economy which may negatively impact the ability of
borrowers to repay their loans and which may cause the value of real estate and
other properties that secure outstanding loans to decline; (2) unforeseen
adverse changes in circumstances with respect to certain large loans; (3)
decreases in the value of collateral securing consumer loans to amounts less
than the outstanding balances of the consumer loans; and (4) determinations by
various regulatory agencies that the Association must recognize additions to its
loan loss allowance based on such regulators' judgment of information available
to them at the time of their examinations.


                                      -7-
<PAGE>   9

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

                                              Year ended June 30,
                                          ------------------------
                                          1999      1998      1997
                                          ----      ----      ----
                                           (Dollars in thousands)

Balance at beginning of period            $138      $126      $111

Charge-offs (1)                              -         -         -
Recoveries (1)                               -         -         -
                                          ----      ----      ----
Net (charge-offs) recoveries (1)             -         -         -

Provision for loan losses                   12        12        15
                                          ----      ----      ----

Balance at end of period                  $150      $138      $126
                                          ====      ====      ====

Ratio of net (charge-offs) recoveries
   to average loans outstanding
   during the period                         -         -         -

Ratio of allowance for loan losses
   to total loans                          .73%     0.63%     0.47%

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

(1) All charge-offs and recoveries relate to loans secured by one- to
    four-family real estate.


         Management does not allocate portions of the allowance for loan losses
to particular types of loans.

INVESTMENT ACTIVITIES

         Federal regulations and Ohio law permit Foundation to invest in
interest-bearing deposits in other financial institutions, U.S. Treasury and
agency obligations, mortgage-backed securities and certain other specified
investments. The Board of Directors of Foundation has adopted an investment
policy which authorizes management, under the supervision of the Investment
Committee of the Board, to make investments in U.S. Government and agency
securities, deposits in the FHLB, certificates of deposit in federally-insured
financial institutions, banker's acceptances issued by major U.S. banks,
corporate debt securities rated by a major statistical rating firm as at least
"AA," or equivalent, and municipal or other tax free obligations. Laird L.
Lazelle, Foundation's President, Michael S. Schwartz, the Chairman of the Board
and Dianne K. Rabe, its Vice President, have primary responsibility for
implementation of the investment policy. Foundation's investment policy is
designed primarily to provide and maintain liquidity within regulatory
guidelines, to maintain a balance of high quality investments to minimize risk
and to maximize return without sacrificing liquidity and safety.


                                      -8-
<PAGE>   10

         The following table sets forth the composition of Foundation's
interest-bearing deposits and investment securities at the dates indicated:
<TABLE>
<CAPTION>

                                                                          At June 30,
                                  ----------------------------------------------------------------------------------------
                                               1999                           1998                         1997
                                  ---------------------------    ----------------------------   --------------------------
                                  Carrying value   Fair value    Carrying value    Fair value   Carrying value  Fair value
                                  --------------   ----------    --------------    ----------   --------------  ----------
                                                                   (Dollars in thousands)
<S>                                   <C>            <C>            <C>            <C>            <C>            <C>
Interest-bearing deposits             $    48        $    48        $    97        $    97        $    54        $    54
Certificates of deposit                 1,206          1,206            300            300              -              -

Investment securities:
   Federal funds                        2,287          2,287          6,016          6,016          3,065          3,065
   U.S. Government obligations          3,754          3,702          2,947          2,944            946            949
   FHLB stock                             344            344            321            321            299            299
   Mortgage-backed securities           5,018          4,920          3,966          3,905          4,288          4,168
                                      -------        -------        -------        -------        -------        -------

     Total investments                $12,657        $12,507        $13,647        $13,583        $ 8,652        $ 8,535
                                      =======        =======        =======        =======        =======        =======
</TABLE>


                                      -9-
<PAGE>   11


         The maturities of Foundation's interest-bearing deposits and investment
securities at June 30, 1999, are indicated in the following table:
<TABLE>
<CAPTION>
                                                          At June 30,  1999
                             --------------------------------------------------------------------------------
                                                           After one through               After five
                                 One year or less             five years             through ten years
                             ----------------------    -----------------------     ----------------------
                             Carrying       Average    Carrying        Average     Carrying       Average
                              value          yield       value          yield       value          yield
                              -----          -----       -----          -----       -----          -----
                                                                                   (Dollars in thousands)

<S>                          <C>             <C>       <C>              <C>        <C>             <C>
Interest-bearing deposits    $     48        5.25%     $      -            -%      $      -            -%

Investment securities:
   Federal funds                2,287        5.73             -            -              -            -
   U.S. Government agency
     obligations                    -           -           750         6.42          2,704         6.85
   Mortgage-backed
     securities                     -           -           378         6.51            431         5.95
   FHLB stock                       -           -             -            -              -            -
   Certificates of deposit      1,206        5.59             -            -              -            -
                             --------                  --------                    --------
     Total                     $3,541        5.68%     $  1,128         6.45%      $  3,135         6.73%
                             ========                  ========                    ========
</TABLE>


<TABLE>
<CAPTION>
                                                 At June 30,  1999
                             ----------------------------------------------------------
                                       After ten
                                         years                       Total
                                -----------------------      --------------------------
                                Carrying        Average      Carrying      Weighted
                                 value           yield        value      average yield
                                 -----           -----        -----      -------------


<S>                              <C>             <C>         <C>            <C>
Interest-bearing deposits        $    -             -%       $    48        5.25%

Investment securities:
   Federal funds                      -             -          2,287        5.73
   U.S. Government agency
     obligations                    300          7.54          3,754        6.82
   Mortgage-backed
     securities                   4,209          6.37          5,018        6.34
   FHLB stock                       344          6.75            344        6.75
   Certificates of deposit            -                        1,206        5.59
                                 ------                      -------
     Total                       $4,853          6.48%       $12,657        6.31%
                                 ======                      =======
</TABLE>


                                      -10-
<PAGE>   12


DEPOSITS AND BORROWINGS

         GENERAL. Deposits have traditionally been the primary source of
Foundation's funds for use in lending and other investment activities. In
addition to deposits, Foundation derives funds from interest payments and
principal repayments on loans and income on earning assets. Loan payments are a
relatively stable source of funds, while deposit inflows and outflows fluctuate
in response to prevailing interest rates and money market conditions. Foundation
also utilizes FHLB advances as an alternative source of funds.

         DEPOSITS. Deposits are attracted principally from within Foundation's
primary market area. Although Foundation offers a broad selection of deposit
instruments, including NOW accounts, demand deposit accounts, money market
accounts, regular passbook savings accounts, term certificate accounts, IRAs and
Keogh accounts, certificates of deposit have historically been Foundation's
principal source of deposits. The Bank's single location in downtown Cincinnati
is not conducive to attracting lower-cost transaction accounts.

         At June 30, 1999, Foundation's certificates of deposit totaled $23.8
million, or 92.25% of total deposits. Of such amount, approximately $16.1
million in certificates of deposit mature within one year. Based on past
experience and Foundation's prevailing pricing strategies, management believes
that a substantial percentage of such certificates will be renewed with
Foundation at maturity. If there is a significant deviation from historical
experience, Foundation can utilize borrowings from the FHLB of Cincinnati as an
alternative source of funds.

         Interest rates paid, maturity terms, service fees and withdrawal
penalties for the various types of accounts are established periodically by
management of Foundation based on Foundation's liquidity requirements, growth
goals and interest rates paid by competitors. Foundation does not use brokers to
attract deposits.
The amount of deposits at Foundation from outside its primary market area is not
significant.

         The following table presents the amount of Foundation's certificates of
deposit of $100,000 or more by the time remaining until maturity at June 30,
1999:

                   Maturity                             Amount
                   --------                         --------------
                                                    (In thousands)

         Three months or less                         $   944
         Over 3 months to 6 months                        961
         Over 6 months to 12 months                       420
         Over 12 months                                   775
                                                     --------
             Total                                     $3,100
                                                       ======

         The following table sets forth Foundation's deposit account balance
activity for the fiscal years ended June 30, 1999, 1998 and 1997:

                                          Year ended June  30,
                                 ------------------------------------
                                   1999          1998          1997
                                 --------      --------      --------
                                            (In thousands)

Beginning balance                $ 28,022      $ 27,292      $ 26,951
Net decrease before interest
   credited                        (3,686)         (871)       (1,146)
Interest credited                   1,418         1,601         1,487
                                 --------      --------      --------
Ending balance                   $ 25,754      $ 28,022      $ 27,292
                                 ========      ========      ========

  Net increase (decrease)        $ (2,268)     $    730      $    341
                                 ========      ========      ========


         BORROWINGS. The FHLB functions as a central reserve bank providing
credit for its member institutions and certain other financial institutions. As
a member in good standing of the FHLB of Cincinnati, Foundation is authorized to
apply for advances from the FHLB of Cincinnati, provided certain standards of
creditworthiness have been met. Under current


                                      -11-
<PAGE>   13


regulations, an association must meet certain qualifications to be eligible for
FHLB advances. The extent to which an association is eligible for such advances
will depend upon whether it meets the Qualified Thrift Lender Test (the "QTL
Test"). If an association meets the QTL Test, it will be eligible for 100% of
the advances it would otherwise be eligible to receive. If an association does
not meet the QTL Test, it will be eligible for such advances only to the extent
it holds specified QTL Test assets. At June 30, 1999, Foundation was in
compliance with the QTL Test.

         In prior years, Foundation had obtained advances from the FHLB of
Cincinnati as indicated in the following table:
<TABLE>
<CAPTION>
                                                                       Year ended June  30,
                                                             ---------------------------------------
                                                             1999             1998              1997
                                                             ----             ----              ----
                                                                      (Dollars in thousands)
<S>                                                          <C>              <C>               <C>
Average balance outstanding                                  $638             $714              $790
Maximum amount outstanding at any month end during
    the period                                                674              748               819
Balance outstanding at end of period                          602              680               754
Weighted average interest rate during the period             5.59%            5.58%             5.59%
Weighted average interest rate at end of period              5.55%            5.53%             5.52%

</TABLE>

COMPETITION

         Foundation competes for deposits with other savings associations,
savings banks, commercial banks and credit unions and with the issuers of
commercial paper and other securities, such as shares in money market mutual
funds. The primary factors in competing for deposits are interest rates and
convenience of office location. In making loans, Foundation competes with other
savings associations, savings banks, commercial banks, mortgage brokers,
consumer finance companies, credit unions, leasing companies and other lenders.
Foundation competes for loan originations primarily through the interest rates
and loan fees it charges and through the efficiency and quality of services it
provides to borrowers.

         Competition in Hamilton County is intense due to the number of
financial institutions serving the area. Competition is affected by, among other
things, the general availability of lendable funds, general and local economic
conditions, current interest rate levels and other factors which are not readily
predictable. Foundation does not offer all of the products and services offered
by some of its competitors, particularly commercial banks. Foundation monitors
the product offerings of its competitors and adds new products when it can do so
competitively and cost effectively. Foundation's deposit market share in
Hamilton County is negligible.

         The size of financial institutions competing with Foundation is likely
to increase as a result of changes in statutes and regulations eliminating
various restrictions on interstate and inter-industry branching and
acquisitions. Such increased competition may have an adverse effect upon
Foundation.

EMPLOYEES

         As of June 30, 1999, Foundation had eight full-time employees and no
part-time employees.

YEAR 2000

         Foundation's operations, like those of most financial institutions,
depend almost entirely on computer systems. Foundation is addressing the
potential problems associated with the possibility that the computers which
control or operate Foundation's operating systems, facilities 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. Foundation is working
with the companies that supply or service its computer-operated or
computer-dependent systems to identify and remedy any year-2000 related
problems.

         At this time, no specific material expenses have been identified which
are reasonably likely to be incurred by Foundation in connection with year-2000
issues and Foundation does not expect to incur significant expense to implement
corrective measures. No assurance can be given at this time, however, that
significant expense will not be incurred in future periods. In the event that
Foundation is ultimately required to purchase replacement computer systems,
programs


                                      -12-
<PAGE>   14

and equipment, or that substantial expense must be incurred to make Foundation's
current systems, programs and equipment year-2000 compliant, the Company's net
income and financial condition could be adversely affected. While Foundation is
endeavoring to ensure that its computer-dependent operations are year-2000
compliant, no assurance can be given that some year-2000 problems will not
occur.

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


                                   REGULATION

GENERAL

         The Company is a savings and loan holding company within the meaning of
the Home Owners Loan Act, as amended (the "HOLA"). Consequently, the Company is
subject to regulation, examination and oversight by the OTS and must submit
periodic reports to the OTS concerning its activities and financial condition.
In addition, as a corporation organized under Ohio law, the Company is subject
to provisions of the Ohio Revised Code applicable to corporations generally.

         As a savings and loan association chartered under the laws of Ohio,
Foundation is subject to regulation, examination and oversight by the
Superintendent of the Division (the "Ohio Superintendent"). Because Foundation's
deposits are insured by the FDIC, Foundation also is subject to regulatory
oversight by the FDIC. Foundation must file periodic reports with the OTS
concerning its activities and financial condition. The OTS issues regulations
governing the operation of savings associations, regularly examines such
associations and imposes assessments on savings associations based on their
asset size to cover the costs of general supervision and examination. The OTS
also may initiate enforcement actions against savings associations and certain
persons affiliated with them for violations of laws or regulations or for
engaging in unsafe or unsound practices. If the grounds provided by law exist,
the OTS may appoint a conservator or receiver for a savings association.

         Savings associations are subject to regulatory oversight under various
consumer protection and fair lending laws. These laws govern, among other
things, truth-in-lending disclosures, equal credit opportunity, fair credit
reporting and community reinvestment. Failure to abide by federal laws and
regulations governing community reinvestment could limit the ability of an
association to open a new branch or engage in a merger. Community reinvestment
regulations evaluate how well and to what extent an institution lends and
invests in its designated service area, with particular emphasis on low- to
moderate-income communities and borrowers in that area. Foundation is a member
of the FHLB and is subject to certain regulations promulgated by the Board of
Governors of the Federal Reserve System (the "FRB").

         Congress is considering legislation that may change the range of
activities in which Foundation may engage. In addition, the Company might become
subject to a different set of holding company regulations limiting the
activities in which the Company may engage and subjecting the Company to
additional regulatory requirements. At this time, the Company cannot predict
when or whether Congress may actually pass legislation regarding the Company's
and Foundation's regulatory requirements or charter. Although such legislation,
if enacted, may change the activities in which the Company or Foundation are
authorized to engage, it is not anticipated that the current activities of
either the Company or Foundation will be materially affected by those limits.

OHIO SAVINGS AND LOAN REGULATION

         The Ohio Superintendent is responsible for the regulation and
supervision of Ohio savings and loan associations in accordance with the laws of
the State of Ohio and imposes assessments on Ohio associations based on their
asset size to cover the costs of supervision and examination. Ohio law
prescribes the permissible investments and activities of Ohio savings and loan
associations, including the types of lending that such associations may engage
in and the investments in real estate, subsidiaries and corporate or government
securities that such associations may make. The ability of Ohio associations


                                      -13-
<PAGE>   15


to engage in these state-authorized investments and activities is subject to
oversight and approval by the FDIC, if such investments or activities are not
permissible for a federally-chartered savings association. The Ohio
Superintendent also has approval authority over any mergers involving, or
acquisitions of control of, Ohio savings and loan associations. The Ohio
Superintendent may initiate certain supervisory measures or formal enforcement
actions against Ohio associations. Ultimately, if the grounds provided by law
exist, the Superintendent may place an Ohio association in conservatorship or
receivership.

OFFICE OF THRIFT SUPERVISION

         REGULATORY CAPITAL REQUIREMENTS. Foundation is required by OTS
regulations to meet certain minimum capital requirements. The tangible capital
requirement requires savings associations to maintain "tangible capital" of not
less than 1.5% of their adjusted total assets. Tangible capital is defined in
OTS regulations as core capital minus any intangible assets.

         "Core capital" is comprised of common stockholders' equity (including
retained earnings), noncumulative preferred stock and related surplus, minority
interests in consolidated subsidiaries, certain nonwithdrawable accounts and
pledged deposits of mutual associations. OTS regulations require savings
associations to maintain core capital of at least 3% of their total assets.
Those associations that do not have the highest examination rating and exceed an
acceptable level of risk are required to maintain core capital of from 4% to 5%,
depending on the association's examination rating and overall risk. Foundation
does not anticipate that it will be adversely affected if the core capital
requirement regulation is amended as proposed.

         OTS regulations require that savings associations maintain "risk-based
capital" in an amount not less than 8% of their risk-weighted assets. Risk-based
capital is defined as core capital plus certain additional items of capital,
which in the case of Foundation includes allowances for loan and lease losses at
June 30, 1999.

         The OTS also may adjust the risk-based capital requirement on an
individualized basis to take into account risks due to concentrations of credit
and non-traditional activities.

         The OTS has adopted regulations governing prompt corrective action to
resolve the problems of capital deficient and otherwise troubled savings
associations. At each successively lower defined capital category, an
association is subject to more restrictive and more numerous mandatory or
discretionary regulatory actions or limits, and the OTS has less flexibility in
determining how to resolve the problems of the institution. In addition, the OTS
generally can downgrade an association's capital category, notwithstanding its
capital level, if, after notice and opportunity for hearing, the association is
deemed to be engaging in an unsafe or unsound practice because it has not
corrected deficiencies that resulted in it receiving a less than satisfactory
examination rating on matters other than capital or it is deemed to be in an
unsafe or unsound condition. Foundation's capital at June 30, 1999, met the
standards for the highest category, a "well-capitalized" institution.

         LIQUIDITY. OTS regulations require that a savings association maintain
an average daily balance of liquid assets (cash, certain time deposits, bankers'
acceptances and specified United States government, state or federal agency
obligations) equal to a monthly average of not less than 4% of its net
withdrawable savings deposits plus borrowings payable in one year or less.
Monetary penalties may be imposed upon associations failing to meet these
liquidity requirements. The eligible liquidity of Foundation at June 30, 1999,
was approximately $4.9 million, or 18.5%, and exceeded the applicable 4%
liquidity requirement by approximately $3.9 million.

         QUALIFIED THRIFT LENDER TEST. Savings associations are required to meet
the QTL test. Prior to September 30, 1996, the QTL test required savings
associations to maintain a specified level of investments in assets that are
designated as qualifying thrift investments ("QTI"), which are generally related
to domestic residential real estate and manufactured housing and include credit
card, student and small business loans and stock issued by any FHLB, the FHLMC
or the FNMA. Under such test, 65% of an institution's "portfolio assets" (total
assets less goodwill and other intangibles, property used to conduct business
and 20% of liquid assets) must consist of QTI on a monthly average basis in nine
out of every 12 months. Effective September 30, 1996, a savings association may
also qualify as a QTL by meeting the definition of "domestic building and loan
association" under the Internal Revenue Code of 1986, as amended (the "Code").
In order for an institution to meet the definition of a "domestic building and
loan association" under the Code, at least 60% of such institution's assets must
consist of specified types of property, including cash loans secured by
residential real estate or deposits, educational loans and certain governmental
obligations. The OTS may grant exceptions to the QTL test under certain
circumstances. If a savings association fails to meet the QTL test, the
association and its holding company become


                                      -14-
<PAGE>   16


subject to certain operating and regulatory restrictions. A savings association
that fails to meet the QTL test will not be eligible for new FHLB advances. At
June 30, 1999, Foundation met the QTL test.

         LENDING LIMIT. OTS regulations generally limit the aggregate amount
that a savings association can lend to one borrower to an amount equal to 15% of
the association's Lending Limit Capital. A savings association may lend to one
borrower an additional amount not to exceed 10% of the association's Lending
Limit Capital, if the additional amount is fully secured by certain forms of
"readily marketable collateral." Real estate is not considered "readily
marketable collateral." Certain types of loans are not subject to the lending
limit. A general exception to the 15% limit provides that an association may
lend to one borrower up to $500,000, for any purpose. In applying the limit on
loans to one borrower, the regulations require that loans to certain related
borrowers be aggregated. At June 30, 1999, Foundation was in compliance with
this lending limit.

         TRANSACTIONS WITH INSIDERS AND AFFILIATES. Loans to executive officers,
directors and principal shareholders and their related interests must conform to
the lending limit on loans to one borrower, and the total of such loans to
executive officers, directors, principal shareholders and their related
interests cannot exceed the association's Lending Limit Capital (or 200% of
Lending Limit Capital for qualifying institutions with less than $100 million in
deposits). Most loans to directors, executive officers and principal
shareholders must be approved in advance by a majority of the "disinterested"
members of the board of directors of the association, with any "interested"
director not participating. All loans to directors, executive officers and
principal shareholders must be made on terms substantially the same as offered
in comparable transactions with the general public or as offered to all
employees in a company-wide benefit program. Loans to executive officers are
subject to additional limitations. Foundation had no loans to directors,
officers or employees at June 30, 1999.

         All transactions between savings associations and their affiliates must
comply with Sections 23A and 23B of the Federal Reserve Act (the "FRA"). An
affiliate of a savings association is any company or entity that controls, is
controlled by or is under common control with the savings association. The
Company is an affiliate of Foundation . Generally, Sections 23A and 23B of the
FRA (i) limit the extent to which a savings association or its subsidiaries may
engage in "covered transactions" with any one affiliate to an amount equal to
10% of such institution's capital stock and surplus, (ii) limit the aggregate of
all such transactions with all affiliates to an amount equal to 20% of such
capital stock and surplus, and (iii) require that all such transactions be on
terms substantially the same, or at least as favorable to the association, as
those provided in transactions with a non-affiliate. The term "covered
transaction" includes the making of loans, purchasing of assets, issuance of a
guarantee and other similar types of transactions. In addition to the limits in
Sections 23A and 23B, a savings association may not make any loan or other
extension of credit to an affiliate unless the affiliate is engaged only in
activities permissible for a bank holding company and may not purchase or invest
in securities of any affiliate except shares of a subsidiary. Foundation had no
loans to directors, officers or employees at June 30, 1999.

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

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

         Tier 2 associations may make capital distributions of up to 75% of net
income over the most recent four quarters. Tier 3 associations do not meet
current minimum capital requirements and must obtain OTS approval of any capital
distribution.

         HOLDING COMPANY REGULATION. The Company is a savings and loan holding
company within the meaning of the HOLA. As such, the Company has registered with
the OTS and is subject to OTS regulations, examination, supervision and
reporting requirements.


                                      -15-
<PAGE>   17


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

         As a unitary savings and loan holding company, the Company generally
has no restrictions on its activities. Such companies are the only financial
institution holding companies which may engage in any commercial, securities and
insurance activities without restriction. Congress is considering legislation
which may limit the Company's ability to engage in these activities. It cannot
be predicted whether and in what form these proposals might become law. However,
such limits would not impact the Company's current activities, which consist
solely of holding stock of Foundation. Notwithstanding the foregoing rules as to
permissible business activities of a unitary savings and loan holding company,
if the savings association subsidiary of a holding company fails to meet the QTL
test, then such unitary holding company would become subject to the activities
restrictions applicable to multiple holding companies. At June 30, 1999,
Foundation met both those tests.

         FEDERAL REGULATION OF ACQUISITIONS OF CONTROL OF THE COMPANY AND
FOUNDATION. In addition to the Ohio law limitations on the merger and
acquisition of Foundation and the Company, federal limitations generally require
regulatory approval of acquisitions at specified levels. Under pertinent federal
law and regulations, no person, directly or indirectly, or acting in concert
with others, may acquire control of Foundation or the Company without 60 days'
prior notice to the OTS. "Control" is generally defined as having more than 25%
ownership or voting power; however, ownership or voting power of more than 10%
may be deemed "control" if certain factors are in place. If the acquisition of
control is by a company, the acquiror must obtain approval, rather than give
notice, of the acquisition as a savings and loan holding company.

         In addition, any merger of Foundation must be approved by the OTS as
well as the Superintendent. Further, any merger of the Company in which the
Company is not the resulting company must also be approved by both the OTS and
the Superintendent.

FEDERAL DEPOSIT INSURANCE CORPORATION

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

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

FEDERAL  RESERVE BANK RESERVE REQUIREMENTS

         Federal Reserve Bank regulations currently require savings associations
to maintain reserves of 3% of net transaction accounts (primarily NOW accounts)
up to $46.5 million (subject to an exemption of up to $4.9 million), and of 10%
of net transaction accounts in excess of $46.5 million. At June 30, 1999,
Foundation was in compliance with the new reserve requirements.


                                      -16-
<PAGE>   18


FEDERAL HOME LOAN BANKS

         The FHLBs provide credit to their members in the form of advances.
Foundation is a member of the FHLB of Cincinnati and must maintain an investment
in the capital stock of the FHLB of Cincinnati in an amount equal to the greater
of 1.0% of the aggregate outstanding principal amount of Foundation's
residential mortgage loans, home purchase contracts and similar obligations at
the beginning of each year, or 5% of its advances from the FHLB of Cincinnati.
Foundation was in compliance with this requirement with an investment in stock
of the FHLB of Cincinnati of $343,800 at June 30, 1999.

         FHLB advances to member institutions who meet the QTL test are
generally limited to the lower of (i) 25% of the member's assets or (ii) 20
times the member's investment in FHLB stock. At June 30, 1999, Foundation's
maximum limit on advances was approximately $6.9 million. The granting of
advances is also subject to the FHLB's collateral and credit underwriting
guidelines.

         Upon the origination or renewal of a loan or advance, the FHLB is
required by law to obtain and maintain a security interest in collateral in one
or more specified categories.

         The FHLB is required to establish standards of community investment or
service that its members must maintain for continued access to long-term
advances. The standards take into account a member's performance under the
Community Reinvestment Act and its record of lending to first-time home buyers.
All long-term advances by the FHLB must be made only to provide funds for
residential housing finance.


                                    TAXATION

FEDERAL TAXATION

         The Company and Foundation are each subject to the federal tax laws and
regulations which apply to corporations generally. In addition to the regular
income tax, the Company and Foundation may be subject to the alternative minimum
tax which is imposed at a minimum tax rate of 20% on "alternative minimum
taxable income" (which is the sum of a corporation's regular taxable income,
with certain adjustments, and tax preference items), less any available
exemption. Such tax preference items include interest on certain tax-exempt
bonds issued after August 7, 1986. In addition, 75% of the amount by which a
corporation's "adjusted current earnings" exceeds its alternative minimum
taxable income computed without regard to this preference item and prior to
reduction by net operating losses, is included in alternative minimum taxable
income. Net operating losses can offset no more than 90% of alternative minimum
taxable income. The alternative minimum tax is imposed to the extent it exceeds
the corporation's regular income tax. Payments of alternative minimum tax may be
used as credits against regular tax liabilities in future years. However, the
Taxpayer Relief Act of 1997 repealed the alternative minimum tax for certain
"small corporations" for tax years beginning after December 31, 1997. A
corporation initially qualifies as a small corporation if it had average gross
receipts of $5,000,000 or less for the three tax years ending with its first tax
year beginning after December 31, 1996. Once a corporation is recognized as a
small corporation, it will continue to be exempt from the alternative minimum
tax for as long as its average gross receipts for the prior three-year period
does not exceed $7,500,000. In determining if a corporation meets this
requirement, the first year that it achieved small corporation status is not
taken into consideration.

         Foundation's average gross receipts for the three tax years ending on
June 30, 1999, is $2.7 million and as a result, Foundation does qualify as a
small corporation exempt from the alternative minimum tax.

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


                                      -17-
<PAGE>   19


the close of the base year. A thrift institution could elect annually to compute
its allowable addition to bad debt reserves for qualifying loans either under
the experience method or the percentage of taxable income method. For tax years
1995, 1994, and 1993, Foundation used the percentage of taxable income method.

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

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

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

         The balance of the pre-1988 reserves is subject to the provisions of
Section 593(e), as modified by the Act, which require recapture in the case of
certain excessive distributions to shareholders. The pre-1988 reserves may not
be utilized for payment of cash dividends or other distributions to a
shareholder (including distributions in dissolution or liquidation) or for any
other purpose (except to absorb bad debt losses). Distribution of a cash
dividend by a thrift institution to a shareholder is treated as made: first, out
of the institution's post-1951 accumulated earnings and profits; second, out of
the pre-1988 reserves; and third, out of such other accounts as may be proper.
To the extent a distribution by Foundation to the Company is deemed paid out of
its pre-1988 reserves under these rules, the pre-1988 reserves would be reduced
and the gross income of Foundation for tax purposes would be increased by the
amount which, when reduced by the income tax, if any, attributable to the
inclusion of such amount in its gross income, equals the amount deemed paid out
of the pre-1988 reserves. As of June 30, 1999, the pre-1988 reserves of
Foundation for tax purposes totaled approximately $653,000. Foundation believes
it had approximately $2.4 million of accumulated earnings and profits for tax
purposes as of June 30, 1999, which would be available for dividend
distributions, provided regulatory restrictions applicable to the payment of
dividends are met. See Notes 6 and 15 to the financial statements. No
representation can be made as to whether Foundation will have current or
accumulated earnings and profits in subsequent years.

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


                                      -18-
<PAGE>   20


OHIO TAXATION

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

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

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

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


ITEM 2.    DESCRIPTION OF PROPERTY

         Foundation leases the property at 25 Garfield Place where its office is
located. There are approximately one and three-quarters years remaining in the
term of the lease.


ITEM 3.    LEGAL PROCEEDINGS

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


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

        Not applicable.


                                     PART II


ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        The information contained in the 1999 Annual Report to Shareholders (the
"Annual Report"), a copy of which is attached as Exhibit 13 hereto, under the
caption "Common Stock and Related Information" is incorporated herein by
reference.


                                      -19-
<PAGE>   21


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

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


ITEM 7.    FINANCIAL STATEMENTS

        The Consolidated Financial Statements and the report of Clark, Schaefer,
Hackett & Co. dated August 23, 1999, appearing in the Annual Report are
incorporated herein by reference.


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

         Not applicable.


                                    PART III


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

        The information contained in the definitive Proxy Statement for the 1999
Annual Meeting of Shareholders of the Company (the "Proxy Statement"), a copy of
which is attached as Exhibit 99 hereto, under the captions "Board of Directors"
and "Executive Officers" is incorporated herein by reference.


ITEM 10.   EXECUTIVE COMPENSATION

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


ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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


ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        Not applicable.


                                      -20-
<PAGE>   22

ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K

(a)     EXHIBITS

<TABLE>
<CAPTION>

     Exhibit
     -------

<S>                                                      <C>
      3(i)  Articles of Incorporation                    Incorporated by reference to the Registration Statement
                                                         on Form S-1 filed by the Company on June 18, 1996,
                                                         and amended on August 2, 1996 (the "Form S-1"),
                                                         Exhibit 3.1

            Amended Articles of Incorporation

                                                         Incorporated by reference to the Form 10-KSB for the
                                                         fiscal year ended June 30, 1997, filed with the SEC on
                                                         September 26, 1997 (the "1997 10-KSB"), Exhibit 3(b)

      3(ii) Code of Regulations                          Incorporated by reference to the Form S-1, Exhibit 3.2

     10(a)  Employment Agreement between                 Incorporated by reference to the Form S-1, Exhibit 10.4
            Foundation Bancorp, Inc. and Laird
            L. Lazelle

     10(b)  Employment Agreement between                 Incorporated by reference to the Form S-1, Exhibit 10.5
            Foundation Savings Bank and Laird L.
            Lazelle

     10(c)  Lease Agreement                              Incorporated by reference to the Form S-1, Exhibit 10.6

       13   1999 Annual Report to Shareholders

       20   Proxy Statement for 1999 Annual
            Meeting

       21   Subsidiaries of the Registrant               Incorporated by reference to the 1997 10-KSB, Exhibit 21

       27   Financial Data Schedule

</TABLE>

(b)     REPORTS ON FORM 8-K

        No reports on Form 8-K were filed by the Company during the quarter
ended June 30, 1999.


                                      -21-
<PAGE>   23


                                   SIGNATURES

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



                                           FOUNDATION BANCORP, INC.

                                           By:  /s/ Laird L. Lazelle
                                                ---------------------------
                                                Laird L. Lazelle, President
                                                (Duly Authorized Representative)

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


/s/ Ruth C. Emden                             /s/ Mardelle Dickhaut
------------------------                      ---------------------------
Ruth C. Emden                                 Mardelle Dickhaut
Director                                      Director

Date: September 27, 1999                      Date: September 27, 1999


/s/ Laird L. Lazelle                          /s/ Robert E. Levitch
------------------------                      ---------------------------
Laird L. Lazelle                              Robert E. Levitch
Director                                      Director

Date: September 27, 1999                      Date: September 27, 1999


/s/ Michael S. Schwartz                       /s/ Paul L. Silverglade
------------------------                      ---------------------------
Michael S. Schwartz                           Paul L. Silverglade
Director                                      Director

Date: September 27, 1999                      Date: September 27, 1999


/s/ Ivan J. Silverman                         /s/ Dianne K. Rabe
------------------------                      ---------------------------
Ivan J. Silverman                             Dianne K. Rabe
Director                                      Principal Financial Officer

Date: September 27, 1999                      Date: September 27, 1999


                                      -22-