<PAGE>   1
                                                                      Exhibit 13









[COVER HAS MAP OF OHIO WITH A STAR INDICATING THE LOCATION OF BRIDGEPORT, OHIO]







                                      OHIO
                                      STATE
                                    FINANCIAL
                                    SERVICES
                                      INC.






                               1998 ANNUAL REPORT




<PAGE>   2


Dear Shareholder:


On behalf of the management and Board of Directors of Ohio State Financial
Services, Inc., I would like to present the 1998 Annual Report to Shareholders.
This Annual Report will give you an account of our activities during the 1998
fiscal year.

1998, which marks our first full year as a public company, was interesting for
OSFS and for our thrift, Bridgeport Savings and Loan Association.

During 1998, the Board of Directors took steps in an effort to increase
shareholder value. In December 1998, we distributed a special capital
distribution to our shareholders, which enabled us to reduce the excess capital
position of OSFS. Additionally, we completed the repurchase of 5.0% of our
outstanding common shares and initiated a second 5.0% repurchase program which
we successfully completed in February 1999. OSFS also paid four consecutive
quarterly dividends to shareholders during 1998.

Thank you for your investment in OSFS and your patronage of Bridgeport Savings.
Please be assured that OSFS and Bridgeport Savings remain committed to
supporting our local community, providing friendly professional service and to
following our mission statement that requires that we continue to run both
organizations in a safe and sound manner.

I look forward to seeing you at our Annual Meeting on April 21, 1999, at 1:00
p.m. at the McClure Hotel. If I may be of any service, please call me.

Sincerely,





Jon W. Letzkus
Chairman of the Board and President




<PAGE>   3

                 BUSINESS OF OHIO STATE FINANCIAL SERVICES, INC.

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

Ohio State Financial Services, Inc. ("OSFS"), a savings and loan holding company
incorporated under the laws of the State of Ohio, owns all of the issued and
outstanding common stock of Bridgeport Savings and Loan Association
("Bridgeport"), a savings and loan association incorporated under Ohio law. In
September 1997, OSFS acquired all of the common stock issued by Bridgeport upon
its conversion from a mutual savings and loan association to a stock savings and
loan association (the "Conversion"). The activities of OSFS have been limited
primarily to holding the common shares of Bridgeport.

Bridgeport conducts business from its main office located in Bridgeport, Ohio,
and one full-service branch office located in Shadyside, Ohio. The principal
business of Bridgeport is the origination of permanent mortgage loans secured by
first mortgages on one- to four-family residential real estate located in
Bridgeport's primary market area which consists of Belmont County, Ohio, and
Ohio and Marshall Counties, West Virginia. Bridgeport also originates a limited
number of loans for the construction of one- to four-family residences and
permanent mortgage loans secured by multi-family and nonresidential real estate
in its market area. In addition to real estate lending, Bridgeport originates
secured and unsecured consumer loans. For liquidity and interest rate risk
management purposes, Bridgeport invests in interest-bearing deposits in other
financial institutions, U.S. Government and agency obligations and
mortgage-backed securities. Funds for lending and other investment activities
are obtained primarily from savings deposits, which are insured up to applicable
limits by the Federal Deposit Insurance Corporation (the "FDIC"), principal
repayments on loans and maturities of investment securities.

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



                                       1
<PAGE>   4


                      MARKET PRICE OF COMMON SHARES OF OSFS
                         AND RELATED SHAREHOLDER MATTERS

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

There were 572,337 shares of OSFS outstanding on March 10, 1999, held of record
by approximately 176 shareholders. Price information with respect to the common
shares of OSFS is quoted on the OTC Bulletin Board under the symbol "OSFS."

The table below sets forth the high and low bid prices for the common shares of
OSFS, together with the dividends declared per share for each quarter of 1998
and for the 1997 quarters ending after September 26, 1997, the date of
completion of the Conversion. Price quotations reflect interdealer prices,
without retail mark-up, mark-down or commission, and may not represent actual
transactions.

                                High Bid     Low Bid    Cash Dividends Declared
                                --------     -------    -----------------------
1998
   Quarter Ended:
     March 31, 1998              $17.50      $15.13             $.05
     June 30, 1998                19.50       15.25              .05
     September 30, 1998           16.00       13.50              .05
     December 31, 1998 (1)        13.75       10.00              .05


1997
   Quarter Ended:
     September 30, 1997 (2)      $15.50      $14.50               --
     December 31, 1997            15.50       14.75               --

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

(1)  Additionally, in December 1998, OSFS paid a $2.00 cash per share return of
     capital distribution.

(2)  Reflects the period from September 26, 1997 through September 30, 1997.


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



                                       2
<PAGE>   5

                              SELECTED CONSOLIDATED
                      FINANCIAL INFORMATION AND OTHER DATA

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

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

<TABLE>
<CAPTION>
                                                                     At December 31,
                                       --------------------------------------------------------------------
                                       1998               1997             1996           1995         1994
SELECTED FINANCIAL CONDITION           ----               ----             ----           ----         ----
       AND OTHER DATA:                                            (Dollars in thousands)
<S>                                   <C>                <C>              <C>            <C>         <C>
     Total amount of:
         Assets                       $35,437            $37,344          $33,929        $34,553     $33,699
         Cash and cash
          equivalents                   5,700              3,178            2,436          1,177       1,624
         Investment securities          3,789              8,263            4,936          5,505       7,062
         Mortgage-backed
          securities                      667                847              984          1,191       1,522
         Loans receivable, net         24,595             24,377           24,892         25,972      22,783
         Deposit accounts              25,450             26,333           28,791         29,615      29,198
         Short-term notes
          payables                        893                 --               --             --          --
         Shareholders' equity           8,702             10,561            4,770          4,558       4,197
     Number of full-service
        offices                             2                  2                2              2           2

<CAPTION>
                                                                   Year ended December 31,
                                       --------------------------------------------------------------------
                                       1998               1997             1996           1995         1994
                                       ----               ----             ----           ----         ----
SUMMARY OF EARNINGS:                                              (Dollars in thousands)
<S>                                   <C>                <C>              <C>            <C>         <C>
     Interest and dividend
       income                          $2,579           $2,534            $2,515       $2,478         $2,298
     Interest expense                   1,030            1,146             1,158        1,108            982
                                       ------           ------            ------       ------         ------
     Net interest income                1,549            1,388             1,357        1,370          1,316
     Provision for losses on
       loans                               41               --                --           --             17
                                       ------           ------            ------       ------         ------
     Net interest income after
        provision for losses on
        loans                           1,508            1,388             1,357        1,370          1,299
     Noninterest income                    25               34                45           42             78
     Noninterest expense (1)            1,157              866             1,083          865            848
                                       ------           ------            ------       ------         ------
     Net income before
        provision for income
        taxes                             376              557               319          547            529
     Provision for income taxes           149              194               107          186            174
                                       ------           ------            ------       ------         ------
        Net income                     $  227           $  363            $  212       $  361         $  355
                                       ======           ======            ======       ======         ======
</TABLE>

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

(1)  Includes a non-recurring pre-tax expense of $190,000 for the year ended
     December 31, 1996, for a special one-time assessment to recapitalize the
     Savings Association Insurance Fund (the "SAIF") administered by the FDIC.



                                       3
<PAGE>   6

<TABLE>
<CAPTION>
                                                                At or for the year ended December 31,
                                                  --------------------------------------------------------------
                                                  1998            1997           1996          1995         1994
SELECTED FINANCIAL RATIOS:                        ----            ----           ----          ----         ----
<S>                         <C>                     <C>           <C>             <C>           <C>         <C>
Performance ratios:
   Return on average assets (1)                     .62%          1.02%           0.62%         1.06%       1.04%
   Return on average equity (1)                    2.21           5.48            4.53          8.25        8.87
   Interest rate spread                            3.33           3.41            3.62          3.76        3.66
   Net interest margin                             4.38           4.07            4.08          4.17        3.97
   Non-interest expense to average assets (1)      3.16           2.44            3.15          2.54        2.47
   Efficiency ratio (2)                           73.50          60.88           77.27         61.28       60.83
   Net interest income to operating
      expenses (1)                               133.91         160.31          125.27        158.36      155.09
   Average interest-earning assets to
     average interest-bearing liabilities        136.15         119.52          113.28        112.04      110.59

Capital ratios:
   Average equity to average assets               27.93          18.60           13.64         12.87       11.69
   Equity to assets, end of period                24.56          28.28           14.06         13.19       12.45

Asset quality ratios:
   Nonperforming assets to average assets (3)        --           0.28            0.20          0.02        0.02
   Nonperforming assets to total assets (3)          --           0.26            0.50          0.02        0.02
   Nonperforming loans to total loans                --           0.40            0.28          0.02        0.03
   Allowance for loans losses to gross loans       0.56           0.57            0.57          0.55        0.62
   Allowance for loans losses to
     nonperforming loans                             --         143.86          207.25       2383.33     2042.86
   Net (charge-offs) recoveries to average
     loans                                         1.65           0.01              --            --       (0.08)
</TABLE>

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

(1)  Includes a nonrecurring pre-tax expense of $190,000 for the year ended
     December 31, 1996, for a special one-time assessment to recapitalize the
     SAIF.

(2)  Non-interest expense as a percentage of net interest income plus
     non-interest income.

(3)  Nonperforming assets include non-accrual loans, accruing loans more than 90
     days past due and real estate acquired in settlement of loans.



                                       4
<PAGE>   7

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

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

                                     GENERAL

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

OSFS was incorporated for the purpose of owning all of Bridgeport's outstanding
stock. As a result, the discussion that follows focuses on Bridgeport's
financial condition and results of operations. The following discussion and
analysis of the financial condition and results of operations of OSFS and
Bridgeport should be read in conjunction with and with reference to the
consolidated financial statements, and the notes thereto, included in this
Annual Report.


                         CHANGES IN FINANCIAL CONDITION

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


OSFS' total assets decreased by approximately $1.9 million, or 5.1%, to $35.4
million at December 31, 1998, from $37.3 million at December 31, 1997. The
decrease in total assets was primarily due to an outlay of approximately $1.0
million for the purchase of OSFS common shares for employee benefit and stock
plans, the payment of $1.2 million in dividends and a $883,000 decline in
deposits. These decreases were partially offset by short-term borrowings of
$893,000.

Total cash and cash equivalents increased by $2.5 million, or 79.4%, to $5.7
million at December 31, 1998, from $3.2 million at December 31, 1997, as
management evaluated investment opportunities. Management maintains a level of
cash equivalents which is desirable for meeting Bridgeport's normal cash flow
requirements for the funding of loans and repayment of deposits.

Interest-bearing time deposits decreased $1.5 million, or 32.6%, from $4.6
million at December 31, 1997, to $3.1 million at December 31, 1998, reflecting
current maturities.

Investment securities held-to-maturity decreased $3.2 million, or 76.7%, from
$4.1 million at December 31, 1997, to $967,000 at December 31, 1998. This
decrease resulted from the maturity of $3.0 million of U.S. Government and
agency securities and principal reductions on mortgage-backed securities of
$180,000.

Loans receivable increased approximately $217,000, or .9%, to $24.6 million at
December 31, 1998, from $24.4 million at December 31, 1997. The increase was
primarily attributable to a $484,000 increase in one- to four-family residential
mortgage loans and a $341,000 increase in construction loans, which were
partially offset by a $513,000 decrease in consumer loans.

Total deposits decreased by $883,000, or 3.4%, to $25.5 million at December 31,
1998, from $26.3 million at December 31, 1997, primarily as a result of a
$621,000, or 4.8%, decline in certificates of deposit from $13.0 million at
December 31, 1997, to $12.4 million at December 31, 1998. The decline was
primarily attributable to higher rate certificates maturing in the current year
which depositors elected not to renew.



                                       5
<PAGE>   8

Shareholders' equity decreased $1.9 million, or 17.6%, to $8.7 million at
December 31, 1998, compared to $10.6 million at December 31, 1997. The decrease
resulted from the use of $494,000 to repurchase OSFS common shares for treasury
and $523,000 for funding of the Recognition and Retention Plan (the "RRP") and
the Ohio State Financial Services, Inc. Employee Stock Ownership Plan (the
"ESOP") and dividends of $1.2 million. Partially offsetting this decline were
increases in shareholders' equity resulting from net income of $227,000 and
recognition of shares in the RRP and the ESOP of $133,000.


                         COMPARISON OF OPERATING RESULTS
                 FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

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

GENERAL. Net income decreased by $136,000, or 37.5%, from net income of $363,000
for the year ended December 31, 1997, to net income of $227,000 for the year
ended December 31, 1998. The decline in net income was primarily the result of
an increase in noninterest expense of $291,000 and an increase in the provision
for loan losses of $41,000, which were offset by an increase in net interest
income of $161,000 and a decrease in the provision for income taxes of $44,000.

NET INTEREST INCOME. Net interest income increased $161,000, or 11.6%, from
$1,388,000 for 1997 to $1,549,000 for 1998. The increase was attributable to an
increase in interest and dividend income of $45,000 from $2,534,000 for 1997,
compared to $2,579,000 for 1998, and by a decrease in interest expense of
$116,000, or 10.1%, from $1,146,000 for 1997 compared to $1,030,000 for 1998.

INTEREST AND DIVIDEND INCOME. The increase in interest and dividend income
resulted from a $55,000, or 11.0%, increase in interest on investments
securities and interest-bearing deposits for 1998 compared to 1997, and from a
$7,000, or .4%, increase in interest earned on loans year to year. These
increases were partially offset by a $16,000, or 19.0%, decrease in interest
income from mortgage-backed securities. The increase in interest on investments
was due to an increase in the average balance of interest-bearing deposits of
$3.7 million, which was offset by a $2.4 million decrease in the average balance
of investment securities, representing maturities of U. S. Government and agency
obligations. In addition, the yield on interest-bearing deposits increased from
5.32% for the year ended December 31, 1997, to 5.48% for the year ended December
31, 1998. The decrease in interest income from mortgage-backed securities was
due to a $164,000 decrease in the average balance, from $913,000 for 1997 to
$749,000 for 1998. The increase in interest on loans resulted from a $176,000,
or .7%, increase in the average balance of loans outstanding from $24.7 million
for 1997 to $24.9 million for 1998, which was partially offset by a decline in
the yield from 7.91% to 7.88%.

INTEREST EXPENSE. Total interest expense decreased $116,000, or 10.1%, from $1.1
million for 1997 to $1.0 million for 1998. The decline for the year ended
December 31, 1998, was primarily due to a $2.6 million decrease in the average
volume of deposits, from $28.5 million for 1997 to $25.9 million for 1998. The
decrease in interest-bearing liabilities resulted from higher rates offered by
competing institutions in Bridgeport's market area and by alternative investment
products available to depositors. The decrease in interest on deposits was also
due to a 7 basis points decrease in the cost of funds from 4.01% for 1997 to
3.94% for 1998. The decrease in interest on deposits was partially offset by an
$8,000 increase in interest on borrowed funds, from $1,000 for 1997 to $9,000
for 1998.



                                       6
<PAGE>   9

PROVISION FOR LOAN LOSSES. The provision for loan losses increased to $41,000
for the year ended December 31, 1998, compared to no provision in 1997. The
allowance for loan losses was negatively impacted by a single charge-off of
$42,000 for a one- to four-family residential mortgage loan. While overall asset
quality did not decline during the year, the charge to expense was necessary in
order to maintain the allowance at a desirable level based on management's
evaluation of the nature of the portfolio, credit concentrations, trends in
historical loss experience, known and inherent risks in the portfolio, adverse
situations that may affect the ability of borrowers to repay their loans, the
estimated value of any underlying collateral and current economic conditions.
There can be no assurance, however, that future losses will not exceed estimated
amounts or that additional provisions for loan losses will not be required in
future periods.

NON-INTEREST INCOME. Non-interest income decreased $9,000, or 27.4%, from
$34,000 for the year ended December 31, 1997, to $25,000 for 1998. The decline
was due to decreases in fee income primarily from service charges which was
partially offset by an $8,000 increase in the gain on the sale of other real
estate.

NON-INTEREST EXPENSE. Non-interest expense increased $291,000, or 33.6%, from
$866,000 for the year ended December 31, 1997, to $1.2 million for 1998.
Salaries and benefits increased $119,000, or 30.2%, from $395,000 for 1997 to
$514,000 for 1998. The increase was attributable to increases of $64,000 and
$50,000 relating to the ESOP and RRP, respectively. The RRP was initiated in
April 1998, while expenses attributable to the ESOP began in September, 1997.
Legal and accounting fees increased by $58,000, or 148.6%, from $39,000 for 1997
to $97,000 for 1998, due to an increase in services for compliance with
regulatory requirements and employee benefit plans. Franchise, payroll, and
other taxes increased $58,000, or 64.7%, from $90,000 for 1997 to $148,000 for
1998, primarily as a result of Ohio franchise taxes assessed on the additional
net worth of OSFS resulting from its sale of shares in 1997. Other operating
expenses increased $45,000, or 51.5%, from $88,000 for 1997 to $133,000 for
1998, as a result of additional administrative expenses associated with the
holding company structure, the ESOP, and the RRP.

INCOME TAXES. The provision for income taxes for the year ended December 31,
1998, decreased by $44,000, or 22.9%, to $149,000 in 1998 from $193,000 for
1997, as a result of a $181,000, or 32.4%, decrease in net income before income
taxes.


                         COMPARISON OF OPERATING RESULTS
                 FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

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

GENERAL. Net income increased $150,000, or 70.8%, from $213,000 for the year
ended December 31, 1996, to $363,000 for the year ended December 31, 1997. The
increase in net income was primarily the result of a decrease in non-interest
expense of $217,000 and a $31,000 increase in net interest income.



                                       7
<PAGE>   10

NET INTEREST INCOME. Net interest income increased $31,000, or 2.3%, from
$1,357,000 for the year ended December 31, 1996, to $1,388,000 for the year
ended December 31, 1997. The increase was attributable to an increase in
interest and dividend income of $19,000 for 1996, compared to 1997, and a
decrease in interest expense of $12,000, or 1.1%, from $1,158,000 for the year
ended December 31, 1996, compared to $1,146,000 for the year ended December 31,
1997.

The increase in interest income resulted primarily from an increase in interest
on investments of $80,000, or 20.5%, year to year which was partially offset by
a decrease in interest on loans of $46,000, or 2.3%, and by a decrease in
interest on mortgage-backed securities of $17,000, or 16.5%. The increase in
interest on investments was due to an increase in the average balance of
interest-bearing deposits of $1.9 million representing the investment of $5.8
million of the net proceeds from the Offering which was completed in September
1997. The decrease in interest on loans resulted from a $599,000 decrease in the
average balance of loans outstanding. The decline in interest income on
mortgage-backed securities was attributable to a lower balance as a result of
prepayments of principal.

Total interest expense decreased $12,000, or 1.1%, from $1,158,000 for 1996, to
$1,146,000 for 1997. The decrease year to year was primarily due to a decrease
in the average volume of interest-bearing liabilities of $791,000, from $29.3
million for 1996 to $28.5 million for 1997. The decrease in interest-bearing
liabilities was the result of customers electing not to renew maturing
certificates of deposit at prevailing interest rates, and the withdrawal of
deposits for the purchase of OSFS common shares in connection with the
Conversion.

PROVISION FOR LOSSES ON LOANS. There were no provisions for losses on loans
during the years ended December 31, 1997 and 1996. Based on management's
evaluation of the collectibility of the loan portfolio, including the nature of
the portfolio, credit concentrations, trends in historical loss experience,
known and inherent risks in the portfolio, adverse situations that may affect
the ability of borrowers to repay their loans, the estimated value of any
underlying collateral and current economic conditions, the amount of the
allowance was deemed adequate in 1997 with no additional provision necessary.

NONINTEREST INCOME. Noninterest income decreased $11,000 from $45,000 for the
year ended December 31, 1996, to $34,000 for the year ended December 31, 1997.
The decline was due to the absence of a non-recurring income item in 1996
involving an adjustment to the principal balance of mortgage-backed securities.

NONINTEREST EXPENSES. Noninterest expense decreased $217,000, or 20.1%, from
$1.1 million for the year ended December 31, 1996, to $866,000 for the year
ended December 31, 1997. The decrease in non-interest expenses was primarily
attributable to the absence of the one-time SAIF-recapitalization assessment of
$190,000. In addition, Bridgeport benefited from a lower base deposit insurance
premium, as a result of the SAIF recapitalization, from $.23 per $100 of
deposits to $.065 per $100 of deposits.

Furniture and equipment expense decreased $30,000, from $65,000 in 1996 to
$35,000 in 1997. The decrease is due to lower depreciation expense as a result
of certain fixed assets that were fully depreciated as of December 31, 1996.
Nonrecurring maintenance costs incurred in 1996 also contributed to the lower
expense for 1997. In 1997, salaries and employee benefits increased $45,000, or
13%, due to the hiring of an additional employee and merit increases for
existing employees.

PROVISION FOR INCOME TAXES. The provision for income taxes for the year ended
December 31, 1997, was $194,000, an increase of $88,000, or 82.3%, from $106,000
for the year ended December 31, 1996. The increase resulted from an increase in
net income before income taxes. The effective rate on taxes for the year ended
December 31, 1997, was 34.8% compared to 33.4% for the year ended December 31,
1996.



                                       8
<PAGE>   11

                  AVERAGE BALANCE, YIELD, RATE AND VOLUME DATA

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

The following table sets forth certain information relating to the average
balance sheet information of OSFS and reflects the average yield on
interest-earning assets and the average cost of interest-bearing liabilities for
the years indicated. Such yields and costs are derived by dividing income or
expense by the average balance of interest-earning assets or interest-bearing
liabilities, respectively, for the years presented. Average balances are derived
from month-end balances.

<TABLE>
<CAPTION>
                                                                          Year ended December 31,
                                  --------------------------------------------------------------------------------------------------
                                                   1998                              1997                            1996
                                  -----------------------------------  -----------------------------  ------------------------------
                                    Average      Interest     Average    Average   Interest  Average    Average    Interest  Average
                                  outstanding     earned/      yield/  outstanding  earned/   yield/  outstanding   earned/  yield/
                                    balance        paid         rate     balance     paid     rate      balance      paid     rate
                                    -------        ----         ----     -------     ----     ----      -------      ----     ----
                                                                          (Dollars in thousands)
<S>                                  <C>          <C>           <C>      <C>        <C>        <C>      <C>        <C>        <C>
Interest-earning assets:
  Interest-bearing deposits          $ 8,171      $   448       5.48%    $ 4,455    $  237     5.32%    $ 2,592    $  144     5.56%
  Investment securities (1)            1,597          101       6.32       4,032       258     6.40       4,274       269     6.29
  Mortgage-backed securities             749           69       9.21         913        85     9.31       1,091       102     9.35
  Loans receivable (2)                24,884        1,961       7.88      24,708     1,954     7.91      25,267     2,000     7.92
                                     -------      -------       ----     -------    ------     ----     -------    ------     ----
    Total                                                                                              
    interest-earning assets           35,401        2,579       7.29      34,108     2,534     7.43      33,224     2,515     7.57
                                                                                                       
  Non-interest-earning                                                                                 
    assets                             1,252                               1,447                          1,186
                                     -------                             -------                        -------
    Total assets                     $36,653                             $35,555                        $34,410
                                     =======                             =======                        =======
                                                                                                       
Interest-bearing liabilities:                                                                          
  NOW and money market accounts      $ 3,274      $    80       2.44     $ 3,837        95     2.48     $ 4,910       127     2.59
                                                                                                      
  Regular savings accounts             9,836          296       3.01      10,295       314     3.05       9,807       297     3.00
  Certificates of deposit             12,771          645       5.05      14,390       736     5.11      14,611       734     5.03
                                     -------      -------       ----     -------        --     ----     -------       ---     ----

    Total deposits                    25,881        1,021       3.94      28,522     1,145     4.01      29,328     1,158     3.95
                                                                                                       
  FHLB advances and                                                                                    
   short-term notes                      121            9       7.44          15         1     6.67          --        --
                                     -------      -------       ----     -------        --     ----     -------       ---     ----
    Total                                                                                              
    interest-bearing liabilities      26,002        1,030       3.96      28,537     1,146     4.02      29,328     1,158     3.95
                                                                                                       
Non-interest-bearing liabilities         413                                 404                            389
                                     -------                             -------                        -------
                                                                                                       
    Total liabilities                 26,415                              28,941                         29,717
                                                                                                       
Shareholders' equity                  10,238                               6,614                          4,693
                                     -------                             -------                        -------
    Total liabilities and                                                                              
     shareholders' equity            $36,653                             $35,555                        $34,410
                                     =======                             =======                        =======
                                                                                                       
Net interest income                                $1,549                           $1,388                         $1,357
                                                   ======                           ======                         ======
                                                                                                       
Interest rate spread                                            3.33%                          3.41%                          3.62%
                                                                ====                           ====                           ==== 

Net interest margin                                             4.38%                          4.07%                          4.08%
                                                                ====                           ====                           ==== 
Average interest-earning                                                                               
  assets to average                                                                                    
  interest-bearing liabilities                                136.15%                        119.52%                        113.28%
                                                              ======                         ======                         ====== 
</TABLE>

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

(1)  Includes dividends on FHLB stock.

(2)  Includes nonperforming loans



                                       9
<PAGE>   12

The table below describes the extent to which changes in interest rates and
changes in volume of interest-earning assets and interest-bearing liabilities
have affected Bridgeport's interest income and interest expense during the
periods indicated. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable to
(i) changes in volume (change in volume multiplied by prior period rate), (ii)
changes in rate (change in rate multiplied by prior period volume) and (iii)
total changes in rate and volume. The combined effects of changes in both volume
and rate, which cannot be separately identified, have been attributed to the
mix.

<TABLE>
<CAPTION>
                                                              Year ended December 31,
                                    ---------------------------------------------------------------------------
                                                1998 vs. 1997                          1997 vs. 1996
                                    -------------------------------------  ------------------------------------
                                            Increase                                 Increase
                                        (decrease) due to        Total         (decrease) due to        Total
                                    -------------------------   increase   -------------------------   increase
                                    Volume      Rate      Mix  (decrease)  Volume      Rate      Mix  (decrease)
                                    ------      ----      ---  ----------  ------      ----      ---  ----------
<S>                                 <C>         <C>       <C>   <C>        <C>         <C>       <C>   <C>
Interest income attributable to:
   Interest-bearing deposits         $ 198      $  7      $6     $ 211      $103      $ (6)     $(4)     $ 93
   Investment securities              (156)       (3)      2      (157)      (15)        4       --       (11)
   Mortgage-backed securities          (15)       (1)      -       (16)      (17)       --       --       (17)
   Loans receivable                     14        (7)      -         7       (44)       --       (2)      (46)
                                     -----      ----      --     -----      ----      ----      ---      ----
     Total interest income              41        (4)      8        45        27        (2)      (6)       19

Interest-bearing liabilities
   Deposits                           (106)      (20)      2      (124)      (32)       18        1       (13)
   FHLB advances and short-term
     notes                               7        --       1         8         1        --       --         1
                                     -----      ----      --     -----      ----      ----      ---      ----

     Total interest expense            (99)      (20)      3      (116)      (31)       18        1       (12)
                                     -----      ----      --     -----      ----      ----      ---      ----

Increase (decrease) in net
  interest income                    $ 140      $ 16      $5     $ 161      $ 58      $(20)     $(7)     $ 31
                                     =====      ====      ==     =====      ====      ====      ===      ====
</TABLE>


                         ASSET AND LIABILITY MANAGEMENT

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

Bridgeport, like other financial institutions, is subject to interest rate risk
to the extent that its interest-earning assets reprice differently than its
interest-bearing liabilities. Interest rate risk is defined as the sensitivity
of an institution's earnings and net asset values to changes in interest rates.
As part of its effort to monitor and manage the interest rate risk of
Bridgeport, the Board of Directors has adopted an interest rate risk policy
which sets exposure limits for Bridgeport, specifies certain transactions that
Bridgeport may not engage in without prior Board authorization and provides for
quarterly review by the Board of Directors of various interest rate risk
reports.

One of the methods utilized by Bridgeport to monitor interest rate risk is the
rate shock risk estimates contained in the quarterly rate shock risk reports
prepared by an outside consulting firm that specializes in interest rate risk
assessments. The reports assess Bridgeport's interest rate risk 



                                       10
<PAGE>   13

based on the percent and dollar changes in Bridgeport's net portfolio value
("NPV") projected over permanent and instantaneous parallel shifts in interest
rates. The rate shock methodology attempts to quantify interest rate risk as the
change in Bridgeport's NPV which would result from a theoretical change in
current interest rates. The management and the Board of Directors of Bridgeport
attempt to maintain the projected change in NPV within limits established by the
Board of Directors.

Presented below, as of December 31, 1998, is an analysis of Bridgeport's
interest rate risk as measured by changes in NPV for instantaneous and parallel
shifts of 100 basis points in market interest rates, assuming rates would stay
constant over a twelve-month period. The table also contains the policy limits
set by the Board of Directors of Bridgeport as the maximum change in NPV that
the Board of Directors deems advisable in the event of various changes in
interest rates. Such limits have been established with consideration of the
dollar impact of various rate changes and Bridgeport's strong capital position.

<TABLE>
<CAPTION>
                                                   December 31, 1998
                                    ---------------------------------------------- 
    Change in interest rate         $ Change in NPV                % Change in NPV            % Change in NPV
         (basis points)             ---------------                ---------------               Board limit
    -----------------------                     (Dollars in thousands)                        --------------

    <S>                                  <C>                              <C>                      <C>
              +400                       $(1,925)                         (24)%                    (50)%
              +300                        (1,499)                         (19)                     (38)
              +200                        (1,007)                         (12)                     (25)
              +100                          (502)                          (6)                     (15)
                 0                             0                            0                        0
              -100                           250                            3                       15
              -200                           246                            3                       25
              -300                            66                            1                       38
              -400                           473                            6                       50
</TABLE>

The Board of Directors and management of Bridgeport believe that certain factors
afford Bridgeport the ability to operate successfully despite its exposure to
interest rate risk. Although Bridgeport originates predominantly fixed-rate
loans, such loans are typically secured by residential real estate and for terms
of 15 years or less. Bridgeport also manages its interest rate risk by
maintaining capital well in excess of regulatory requirements and by maintaining
a high level of investments in short-term instruments with maturities of five
years or less. At December 31, 1998, Bridgeport's tangible capital was 24.4% of
total assets and its liquidity ratio was 31.6%.

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



                                       11
<PAGE>   14

                        LIQUIDITY AND CAPITAL MANAGEMENT

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

The liquidity of OSFS and Bridgeport, which is primarily represented by cash and
cash equivalents, is a result of the funds used in or provided by Bridgeport's
operating, investing and financing activities. These activities are summarized
below for the years ended December 31, 1998, 1997, and 1996.

<TABLE>
<CAPTION>
                                                             Year ended December 31,
                                               -----------------------------------------------
                                                1998                 1997                 1996
                                                ----                 ----                 ----
                                                                (In thousands)
<S>                                            <C>                  <C>                  <C>   
Net income                                     $  227               $  363               $  212
Adjustments to reconcile net income
   to net cash from operating activities           63                  123                    5
                                               ------               ------               ------
Net cash from operating activities                290                  486                  217
Net cash provided by (used in)
   investment activities                        4,411               (2,694)               1,860
Net cash provided by (used in)
   financing activities                        (2,179)               2,950                 (818)
                                               ------               ------               ------
Net change in cash and cash
   equivalents                                  2,522                  742                1,259
Cash and cash equivalents at
   beginning of period                          3,178                2,436                1,177
                                               ------               ------               ------
Cash and cash equivalents at
   end of period                               $5,700               $3,178               $2,436
                                               ======               ======               ======
</TABLE>

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

OTS regulations presently require Bridgeport to maintain an average daily
balance of liquid assets, which may include, but are not limited to, investments
in U.S. Treasury and federal agency obligations in an amount equal to 4% of the
sum of Bridgeport's average daily balance of net withdrawable deposit accounts
and borrowings payable in one year or less. The liquidity requirement, which may
be changed from time to time by the OTS to reflect changing economic conditions,
is intended to provide a source of relatively liquid funds upon which Bridgeport
may rely if necessary to fund loan originations, deposit withdrawals or other
short-term funding needs. At December 31, 1998, Bridgeport's regulatory
liquidity ratio was 31.6%. At such date, Bridgeport had commitments to originate
loans and loans in process totaling approximately $1.4 million and no
commitments to purchase or sell loans. Bridgeport considers its liquidity and
capital resources sufficient to meet its outstanding short-term and long-term
needs. See Note 6 to the Consolidated Financial Statements.



                                       12
<PAGE>   15

Bridgeport is required by applicable law and regulations to meet certain minimum
capital standards, which include a tangible capital requirement, a core capital
requirement or leverage ratio and a risk-based capital requirement.
Bridgeport exceeded all of its regulatory capital requirements at December 31,
1998.

OTS regulations require a savings and loan association to maintain core capital
of at least 4% of Bridgeport's total assets. "Core capital" is comprised of
common shareholders' equity (including retained earnings), noncumulative
preferred stock and related surplus, minority interests in consolidated
subsidiaries, certain nonwithdrawable accounts, pledged deposits of mutual
associations and intangible assets, primarily certain purchased mortgage
servicing rights.

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

OTS regulations require that a savings and loan association maintain "risk-based
capital" in an amount not less than 8% of its risk-weighted assets. Risk-based
capital is defined as core capital plus certain additional items of capital,
which in the case of Bridgeport included $131,000 of Bridgeport's allowance for
loan losses at December 31, 1998.

The following table summarizes Bridgeport's regulatory capital requirements and
actual capital at December 31, 1998:

<TABLE>
<CAPTION>
                                                                           Excess of actual
                                                                         capital over current
                            Actual capital        Current requirement         requirement     Applicable asset total
                         -------------------      ------------------      ------------------  ----------------------
                         Amount      Percent      Amount     Percent      Amount      Percent
                         ------      -------      ------     -------      ------      -------
                                                          (Dollars in thousands)
<S>                      <C>          <C>         <C>          <C>       <C>            <C>         <C>    
Tangible capital         $8,315       24.4%       $  512       1.5%      $7,803         22.9%       $34,124
Tier 1 (core) capital     8,315       24.4         1,365       4.0        6,950         20.4         34,124
Risk-based capital        8,446       50.4         1,340       8.0        7,106         42.4         16,746
</TABLE>


                   EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS

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

In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and displaying comprehensive
income and its components (revenues, expenses, gains, and losses) in a full set
of general-purpose financial statements. SFAS No. 130 requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements and requires that an
enterprise (a) classify items of other 



                                       13
<PAGE>   16

comprehensive income by their nature in a financial statement and (b) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of the statement
of financial position. Under existing accounting standards, other comprehensive
income is classified separately into foreign currency items, minimum pension
liability adjustments, and unrealized gains and losses on certain investments in
debt and equity securities. The provisions of SFAS No. 130 are effective for
fiscal years beginning after December 15, 1997. Management does not believe the
adoption of SFAS No. 130 will have a material impact on the disclosure
requirements of OSFS.

In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share," which
establishes standards for computing and presenting earnings per share ("EPS") by
entities with publicly held common stock or potential common stock. SFAS No. 128
simplifies the standards for computing earnings per share previously found in
Accounting Principles Board ("APB") Opinion No. 15, "Earnings Per Share." Basic
EPS excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted EPS is computed similarly to fully
diluted EPS pursuant to APB Opinion No. 15. SFAS No. 128 supersedes APB Opinion
No. 15 and is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods. The adoption of SFAS No. 128 at
December 31, 1997, did not have a material impact on the disclosure requirements
of OSFS.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 provides accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, by requiring the recognition of those
items as assets or liabilities in the statement of financial position, recorded
at fair value. SFAS No. 133 precludes a held-to-maturity security from being
designated as a hedged item, however, at the date of initial application of SFAS
No. 133, an entity is permitted to transfer any held-to-maturity security into
the available-for-sale or trading categories. The unrealized holding gain or
loss on such transferred securities shall be reported consistent with the
requirements of SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." Such transfers do not raise an issue regarding an entity's
intent to hold other debt securities to maturity in the future. SFAS No. 133
applies prospectively for all fiscal quarters of all years beginning after June
15, 1999. Earlier adoption is permitted for any fiscal quarter that begins after
the issue date of SFAS No. 133.


                          YEAR 2000 COMPLIANCE MATTERS

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

GENERAL. As with most providers of financial services, Bridgeport's operations
are heavily dependent on information technology systems and rapid and accurate
data processing is essential to Bridgeport's operations. Many computer programs
that can only distinguish the final two digits of the year entered (a common
programming practice in earlier years) are expected to read entries for 



                                       14
<PAGE>   17

the Year 2000 as the year 1900 or as zero and incorrectly attempt to compute
payment, interest, delinquency and other data. Bridgeport has been evaluating
both information technology (computer systems) and non-information technology
systems (e.g., vault timers and electronic door lock). Based upon such
evaluations, management had determined that Bridgeport has Year 2000 risk in
three areas: (1) Bridgeport's own computers (2) the computers of others used by
Bridgeport's borrowers, and (3) the computers of others who provide Bridgeport
with data processing.

BRIDGEPORT'S OWN COMPUTERS. Bridgeport has upgraded its computer system to
eliminate the Year 2000 risk. Bridgeport does not expect to have material
additional costs to address this risk. The upgrade costs did not have a material
impact on the consolidated financial position or results of operations of OSFS.

COMPUTERS OF OTHERS USED BY BRIDGEPORT BORROWERS. Bridgeport has evaluated most
of its borrowers and does not believe the Year 2000 problem should, on an
aggregate basis, impact their ability to make payments to Bridgeport. Bridgeport
believes that most of its residential borrowers are not dependent on their home
computers for income and that none of its commercial borrowers is so large that
a Year 2000 problem would render it unable to collect revenue or rent and, in
turn, continue to make loan payments to Bridgeport. Bridgeport does not
anticipate any material costs to address this risk area and believes it is Year
2000 compliant in this risk area.

COMPUTERS OF OTHERS WHO PROVIDE BRIDGEPORT WITH DATA PROCESSING. This risk is
primarily focused on one third-party service bureau that provides virtually all
of Bridgeport's data processing. This service bureau is not Year 2000 compliant
but has advised Bridgeport that it expects to be compliant before January 1,
2000. If this problem is not solved before January 1, 2000, Bridgeport would
likely experience significant delays, mistakes, or failures, which could have a
significant impact on Bridgeport's financial condition and result of operations.

CONTINGENCY PLAN. Bridgeport is monitoring its service bureau to evaluate
whether its data processing system will fail and is being provided with periodic
updates on the status of testing and upgrades being made by the service bureau.
If Bridgeport's service bureau fails, Bridgeport will attempt to locate an
alternative service bureau that is Year 2000 compliant. If Bridgeport is
unsuccessful, Bridgeport will manually enter deposit balances and interest with
its existing computer system. If this labor intensive approach is necessary,
management and employees will become much less efficient. Bridgeport, however,
believes that it would be able to operate in this manner indefinitely, until its
existing service bureau, or its replacement, is able to again provide data
processing services. If few financial institution service bureaus were operating
in the Year 2000, Bridgeport's replacement costs, assuming Bridgeport could
negotiate an agreement, could be material.



                                       15
<PAGE>   18


                         REPORT OF INDEPENDENT CERTIFIED
                             PUBLIC ACCOUNTANTS AND
                        CONSOLIDATED FINANCIAL STATEMENTS

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

                                                                           PAGE

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                          17



FINANCIAL STATEMENTS

   CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION                           18

   CONSOLIDATED STATEMENTS OF OPERATIONS                                    20

   CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY               21

   CONSOLIDATED STATEMENTS OF CASH FLOWS                                    22



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                  23



                                       16
<PAGE>   19


                          INDEPENDENT AUDITOR'S REPORT
                          ----------------------------


Board of Directors
Ohio State Financial Services, Inc.

We have audited the accompanying consolidated statements of financial condition
of Ohio State Financial Services, Inc. and subsidiary as of December 31, 1998
and 1997, and the related consolidated statements of operations, changes in
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ohio State Financial
Services, Inc. and subsidiary as of December 31, 1998 and 1997, and the results
of their operations and cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.


S.R. Snodgrass, A.C.


Wheeling, West Virginia
January 22, 1999



                                       17
<PAGE>   20

<TABLE>
<CAPTION>
                               OHIO STATE FINANCIAL SERVICES, INC.
                                          AND SUBSIDIARY
                          CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION



                                                                             December 31,
                                                                       -------------------------
                                                                          1998          1997
                                                                       -----------   -----------
<S>                                                                    <C>           <C>
ASSETS

Cash and cash equivalents:
    Cash and amounts due from banks                                    $   907,682   $   523,987
    Interest-bearing deposits with other institutions                    4,792,090     2,653,845
                                                                       -----------   -----------
            Total cash and cash equivalents                              5,699,772     3,177,832

Interest bearing time deposits                                           3,100,000     4,600,000

Investment securities:
    Available for sale (cost approximates market value)                    388,500       363,000
    Held to maturity (market value of $1,018,809
      at 12/31/98 and $4,224,064 at 12/31/97)                              967,117     4,146,588

Loans receivable, net                                                   24,594,506    24,377,054

Office properties and equipment, net                                       466,335       482,950

Accrued interest receivable, loans and
  investments (net of reserve for uncollected interest
  of $-0- at 12/31/98 and $7,709 at 12/31/97)                              157,227       173,639

Other assets                                                                63,262        22,965
                                                                       -----------   -----------

          TOTAL ASSETS                                                 $35,436,719   $37,344,028
                                                                       ===========   ===========
</TABLE>


               The accompanying notes are an integral part of the
                       consolidated financial statements.



                                       18
<PAGE>   21


<TABLE>
<CAPTION>
                               OHIO STATE FINANCIAL SERVICES, INC.
                                          AND SUBSIDIARY
                    CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (CONTINUED)



                                                                             December 31,
                                                                       -------------------------
                                                                           1998         1997
                                                                       -----------   -----------
<S>                                                                    <C>           <C>
LIABILITIES

Deposit accounts                                                       $25,450,404   $26,333,439
Short-term notes payable                                                   892,543          -
Advances by borrowers for taxes and
 insurance                                                                 182,061       152,136
Accrued interest payable and other liabilities                             137,798       221,978
Deferred federal income taxes                                               72,264        75,005
                                                                       -----------   -----------
       TOTAL LIABILITIES                                                26,735,070    26,782,558
                                                                       -----------   -----------

SHAREHOLDERS' EQUITY

Common stock, no par or stated value, 3,000,000 
   shares authorized; 598,460 shares issued and 
   outstanding at December 31, 1998; 634,168 at
   December 31, 1997                                                           --             --
Additional paid in capital                                               5,947,185     5,922,360
Treasury stock (35,708 shares at cost)                                    (494,283)           --
Unearned recognition and retention plan shares (RRP)                      (371,859)           --
Unearned-employee stock ownership plan shares (ESOP)                      (536,735)     (493,867)
Retained earnings-substantially restricted                               4,157,341     5,132,977
                                                                       -----------   -----------
    TOTAL SHAREHOLDERS' EQUITY                                           8,701,649    10,561,470
                                                                       -----------   -----------

        TOTAL LIABILITIES AND
         SHAREHOLDERS' EQUITY                                          $35,436,719   $37,344,028
                                                                       ===========   ===========
</TABLE>


               The accompanying notes are an integral part of the
                       consolidated financial statements.



                                       19
<PAGE>   22

<TABLE>
<CAPTION>
                            OHIO STATE FINANCIAL SERVICES, INC.
                                      AND SUBSIDIARY
                           CONSOLIDATED STATEMENTS OF OPERATIONS


                                                              Year Ended December 31,       
                                                    -------------------------------------
                                                       1998          1997        1996 
                                                    ----------   -----------   ----------
<S>                                                 <C>          <C>           <C>
INTEREST AND DIVIDEND INCOME
    Loans                                           $1,960,533   $ 1,953,696   $2,000,015
    Mortgage-backed certificates                        69,268        85,485      102,351
    Interest-bearing deposits and investment
     securities                                        523,661       470,891      390,802
    Dividends on Federal Home Loan Bank
     stock                                              25,690        23,939       21,746
                                                    ----------   -----------   ----------
           Total interest and dividend income        2,579,152     2,534,011    2,514,914
                                                    ----------   -----------   ----------

INTEREST EXPENSE
    Savings deposits                                 1,021,288     1,144,619    1,157,860
    Federal Home Loan Bank advances and
      notes payable                                      8,737           961           --
                                                    ----------   -----------   ----------
           Total interest expense                    1,030,025     1,145,580    1,157,860
                                                    ----------   -----------   ----------

           Net interest income                       1,549,127     1,388,431    1,357,054

PROVISION FOR LOSSES ON LOANS                           41,191            --           --
                                                    ----------   -----------   ----------

           Net interest income after
            provision for loan losses                1,507,936     1,388,431    1,357,054
                                                    ----------   -----------   ----------

NONINTEREST INCOME
    Service charges                                      6,514        15,433       16,313
    Gains on sale of other real estate                  10,705         2,245          -
    Other income and fees                                7,612        16,502       28,658
                                                    ----------   -----------   ----------
           Total noninterest income                     24,831        34,180       44,971
                                                    ----------   -----------   ----------

NONINTEREST EXPENSES
    Salaries and benefits                              514,198       394,955      349,554
    Occupancy expense                                   62,126        61,419       59,245
    Furniture and equipment expense                     26,881        35,191       65,632
    Machine rental and service bureau expense           60,810        50,814       55,489
    Stationery, printing, and office expenses           49,538        39,856       29,022
    Advertising and public relations                    35,039        39,978       32,204
    Franchise, payroll and other taxes                 148,418        90,128       91,559
    Federal insurance premium                           29,394        26,717      270,218
    Legal and accounting fees                           97,152        39,077       29,217
    Other operating expenses                           133,258        87,959      101,180
                                                    ----------   -----------   ----------
           Total noninterest expense                 1,156,814       866,094    1,083,320
                                                    ----------   -----------   ----------

           Income before income taxes                  375,953       556,517      318,705

PROVISION FOR INCOME TAXES                             149,449       193,883      106,343
                                                    ----------   -----------   ----------

           Net income                               $  226,504   $   362,634   $  212,362
                                                    ==========   ===========   ==========

PER SHARE DATA (FROM OCTOBER 1, 1997)
    Basic                                             $   .40          $ .17       $   --
                                                      =======          =====       ======
    Diluted                                           $   .39          $ .17       $   --
                                                      =======          =====       ======
</TABLE>


               The accompanying notes are an integral part of the
                       consolidated financial statements.



                                       20
<PAGE>   23

<TABLE>
<CAPTION>
                                              OHIO STATE FINANCIAL SERVICES, INC.
                                                        AND SUBSIDIARY
                                  CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY


                                                          Retained
                                           Additional     Earnings                  Unearned      Unearned          Total
                                   Common    Paid in    Substantially   Treasury    Shares in     Shares in     Shareholders'
                                   Stock     Capital      Restricted      Stock        RRP          ESOP            Equity
                                   -----    ----------    -----------   ---------   ---------     ---------       -----------
<S>                                 <C>     <C>           <C>           <C>         <C>           <C>             <C> 
Balance, December 31, 1995          $--     $       --    $ 4,557,981   $      --   $      --     $      --       $ 4,557,981

    Net income                       --             --        212,362          --          --            --           212,362
                                    -----   ----------    -----------   ---------   ---------     ---------       -----------

Balance, December 31, 1996           --             --      4,770,343          --          --            --         4,770,343

    Net income                       --             --        362,634          --          --            --           362,634
    Sale of common stock             --      5,916,081            --           --          --      (506,530)        5,409,551
    Accrued compensation
     expense-ESOP                    --          6,279            --           --          --        12,663            18,942
                                    -----   ----------    ----------    ---------   ---------     ---------       -----------

Balance, December 31, 1997           --      5,922,360      5,132,977          --          --      (493,867)       10,561,470

    Net income                       --             --        226,504          --          --            --           226,504
    Purchase of treasury stock       --             --             --    (494,283)         --            --          (494,283)
    Purchase of Plan shares          --             --             --          --    (421,465)     (101,306)         (522,771)
    ESOP shares earned               --         24,825             --          --          --        58,438            83,263
    RRP shares earned                --             --             --          --      49,606            --            49,606
    Dividends ($2.20/share)          --             --     (1,202,140)         --          --            --        (1,202,140)
                                    -----   ----------    -----------   ---------   ---------     ---------       -----------

Balance, December 31, 1998          $--     $5,947,185    $ 4,157,341   $(494,283)  $(371,859)    $(536,735)      $ 8,701,649
                                    =====   ==========    ===========   =========   =========     =========       ===========
</TABLE>



               The accompanying notes are an integral part of the
                       consolidated financial statements.



                                       21
<PAGE>   24

<TABLE>
<CAPTION>
                             OHIO STATE FINANCIAL SERVICES, INC. AND SUBSIDIARY
                                   CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                        Year Ended December 31,
                                                             ---------------------------------------------
                                                                1998              1997             1996 
                                                             -----------      -----------      -----------
<S>                                                          <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
      Net income                                             $   226,504      $   362,634      $   212,362
      Adjustments:
          Depreciation                                            37,685           38,437           70,225
          Gain on real estate owned                              (10,705)          (2,245)              --
          Deferred federal income tax                             (2,741)          19,497           11,695
          Accretion of investment security discounts                (822)          (3,743)         (10,714)
          Provision for loan losses                               41,191               --               --
          ESOP and RRP amortization                              132,869           18,942               --
          Federal Home Loan Bank stock dividend                  (25,500)         (23,700)         (21,600)
          Accrued interest receivable and other assets           (23,885)          11,889          14 ,347
          Accrued interest payable and other liabilities         (84,180)          64,541          (30,490)
                                                             -----------      -----------      -----------
                 Net cash provided by
                  operating activities                           290,416          486,252          217,131
                                                             -----------      -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES
      Term deposits, net                                       1,500,000       (3,800,000)         200,000
      Proceeds from maturities of held
       to maturity securities                                  3,000,000          500,000          400,000
      Proceeds from redemptions of mortgage-
       backed certificates                                       180,293          138,361          207,075
      Net change in loans (excluding participations
       purchased)                                               (309,530)         497,647        1,510,892
      Participation loans purchased                                   --               --         (431,000)
      Acquisition of office properties and equipment             (21,070)         (49,715)         (27,295)
      Disposition of real estate owned                            61,592           19,865               -- 
                                                             -----------      -----------      -----------
                 Net cash provided by (used in)
                  investing activities                         4,411,285       (2,693,842)       1,859,672
                                                             -----------      -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES
      Proceeds from sale of common stock                              --        5,409,551               --
      Change in deposits, net                                   (883,035)      (2,457,682)        (823,674)
      Short-term borrowings, net                                 892,543               --               --
      Purchase of treasury stock                                (494,283)              --               --
      Transfers to ESOP and RRP                                 (522,771)              --               --
      Payment of dividends                                    (1,202,140)              --               --
      Change in mortgage escrow funds, net                        29,925           (2,109)           5,510
                                                             -----------      -----------      -----------
                 Net cash provided by (used in)
                  financing activities                        (2,179,761)       2,949,760         (818,164)
                                                             -----------      -----------      -----------

                 Change in cash and cash equivalents           2,521,940          742,170        1,258,639

CASH AND CASH EQUIVALENTS,
 BEGINNING OF YEAR                                             3,177,832        2,435,662        1,177,023
                                                             -----------      -----------      -----------

CASH AND CASH EQUIVALENTS,
 END OF YEAR                                                 $ 5,699,772      $ 3,177,832      $ 2,435,662
                                                             ===========      ===========      ===========
</TABLE>



               The accompanying notes are an integral part of the
                       consolidated financial statements.



                                       22
<PAGE>   25

                       OHIO STATE FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1998, 1997, AND 1996


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      This summary of significant accounting policies is presented to assist the
      reader in understanding and evaluating the consolidated financial
      statements of Ohio State Financial Services, Inc. and Subsidiary. The
      accounting and reporting policies of the Company conform to generally
      accepted accounting principles and to general practice within the savings
      and loan industry. The following is a description of the more significant
      of those policies.

      Nature of Operations - Ohio State Financial Services, Inc. (the "Company")
      was organized under Ohio law in March 1997. The Company acquired 100% of
      the common stock of Bridgeport Savings and Loan Association (the
      "Association"), a savings and loan association organized under Ohio law,
      on September 26, 1997, upon its conversion from mutual to stock form. The
      operating results of the Company depend primarily upon the operating
      results of the Association. The Association provides banking services to
      customers through its Bridgeport and Shadyside Ohio offices. The principal
      business of the Association is the origination of permanent mortgage loans
      on one-to-four family residential real estate located in the Association's
      primary market area, which consists of Belmont County in Ohio and Ohio and
      Marshall Counties in West Virginia.

      Use of Estimates - The financial statements have been prepared in
      conformity with generally accepted accounting principles and, as such,
      include amounts based on informed estimates and judgments of management
      with consideration given to materiality. Actual results could differ from
      those estimates.

      Principles of Consolidation - The consolidated financial statements
      include the accounts of the Company and its wholly-owned subsidiary,
      Bridgeport Savings and Loan Association. All significant intercompany
      accounts and transactions have been eliminated in consolidation.

      Reclassification - Certain amounts for the years ended December 31, 1997
      and 1996, have been reclassified to conform with the current period's
      presentation.

      Office Properties and Equipment - Land is carried at cost; buildings and
      equipment are stated at cost, less accumulated depreciation. Maintenance,
      repairs, and minor improvements are charged to operating expenses as
      incurred. Major improvements and betterments are capitalized.

      Depreciation is computed on the straight-line method for financial
      reporting purposes over the following estimated useful lives:

              Building and improvements                   10 - 50 years
              Furniture, fixtures and equipment            3 - 50 years
              Automobiles                                  5 years



                                       23
<PAGE>   26


                       OHIO STATE FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      Real Estate - Real estate acquired in the settlement of loans is carried
      at the lower of the recorded investment in the property or its fair value
      minus estimated costs of sale.

      Loan Fees, Discounts, and Premiums - Loan fees are accounted for in
      conformity with requirements of the Statement of Financial Accounting
      Standards No. 91. Accordingly, loan origination and commitment fees and
      certain direct loan origination costs are deferred, and the net amount
      amortized over the contractual lives of the related loans or commitments
      as an adjustment of the related loan's yield using the interest method.

      Loans Receivable - Loans receivable are stated at their unpaid principal
      balance, net of the allowance for loan losses. Interest on loans is
      credited to income as earned and is accrued only if it is considered
      collectible. An allowance for uncollected interest on mortgage loans is
      provided for all accrued interest on loans which are delinquent more than
      90 days, resulting in interest previously accrued on those loans being
      reversed from income, and thereafter, interest is recognized only to the
      extent of payments received. Loans are returned to accrual status when
      less than 90 days delinquent and when, in management's judgment,
      collection is probable.

      Effective January 1, 1995, the Company adopted Statement of Financial
      Accounting Standards No. 114, "Accounting by Creditors for Impairment of a
      Loan" and Statement of Financial Accounting Standards No. 118, "Accounting
      by Creditors for Impairment of a Loan-Income Recognition and Disclosures"
      (FAS 114 and 118). Impaired loans as defined by FAS 114 and 118 exclude
      certain consumer loans and residential real estate loans. Loan impairment
      is measured based on the present value of expected cash flows discounted
      at the loan's effective interest rate or at the fair value of the
      collateral if the loan is collateral dependent. Since the adoption of FAS
      114 and 118, the Company had no loans which management has determined to
      be impaired.

      Allowance for Loan Losses - The allowance for loan losses is maintained at
      a level which, in management's judgment, is adequate to absorb credit
      losses inherent in the loan portfolio. The amount of the allowance is
      based on management's evaluation of the collectibility of the loan
      portfolio, including the nature of the portfolio, credit concentrations,
      trends in historical loss experience, specific impaired loans, and
      economic conditions. Allowances for impaired loans are generally
      determined based on collateral values or the present value of estimated
      cash flows. The allowance is increased by a provision for loan losses,
      which is charged to expense and reduced by charge-offs, net of recoveries.
      Changes in the allowance relating to impaired loans are charged or
      credited to the provision for loan losses. Because of uncertainties
      inherent in the estimation process, management's estimate of credit losses
      inherent in the loan portfolio and the related allowance may change in the
      near term.


                                       24
<PAGE>   27

                       OHIO STATE FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      Investment Securities - Debt securities, including mortgage-backed
      securities acquired with the intent and ability to hold to maturity are
      stated at cost and adjusted for amortization of premium and accretion of
      discount, which are computed using a level yield method and are recognized
      as adjustments of interest income. Under FAS No. 115, investment
      securities in the portfolio are classified as either available for sale or
      held to maturity. The Company does not currently conduct short term
      purchase and sale transactions of investment securities which would be
      classified as trading securities.

      The initial determination of investments classified as available for sale
      was based principally on the Company's asset/liability position and
      potential liquidity needs. These securities are available for sale at any
      time based upon management's assessment of changes in economic or
      financial market conditions, interest rate or prepayment risk, liquidity
      considerations, and other factors. Securities classified as available for
      sale are carried at market value. Unrealized holding gains and losses, net
      of tax, on available-for-sale securities are reported as a net amount in a
      separate component of equity until realized. No unrealized gain or loss is
      applicable to the Company's equity securities due to the restricted nature
      of the securities.

      Income Taxes - Deferred tax assets and liabilities are recognized for the
      future tax consequences attributable to differences between the financial
      statement carrying amounts of existing assets and liabilities and their
      respective tax bases. Deferred tax assets and liabilities are measured
      using enacted tax rates expected to apply to taxable income in the years
      in which those temporary differences are expected to be recovered or
      settled. Under FAS No. 109, the effect on deferred tax assets and
      liabilities of a change in tax rates is recognized in income in the period
      that includes the enactment date.

      Earnings Per Share - On September 26, 1997, the Company issued 634,168
      shares of common stock. Earnings per share data for the 1997 period has
      been determined by dividing net income since October 1, 1997, of $100,667
      by the weighted average number of shares issued and outstanding since the
      original issue date. Earnings from September 26, 1997 through September
      30, 1997, were determined not to be meaningful. As discussed in Note 10,
      the Company accounts for the shares acquired by the ESOP in accordance
      with Statement of Position 93-6; shares controlled by the ESOP are not
      considered in the weighted average shares outstanding until the shares are
      committed for allocation to employee accounts.

      In February, 1997, the Financial Accounting Standards Board issued
      Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
      ("SFAS No. 128"). SFAS No. 128 differs from prior accounting guidance in
      that earnings per share is classified as basic earnings per share and
      diluted earnings per share, compared to primary earnings per share and
      fully diluted earnings per share under prior standards. Basic earnings per
      share differs from primary earnings per share in that it includes only the
      weighed average common shares outstanding and does not include any
      dilutive common stock equivalents in the calculation. Diluted earnings per
      share under the new standard differs in certain calculations compared to
      fully diluted earnings per share under prior standards. The application of
      SFAS No. 128 did not have an effect on the earnings per share calculation
      for the periods ended December 31, 1997 and 1996.


                                       25
<PAGE>   28

                       OHIO STATE FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      The following table sets forth the computation of basic and diluted
      earnings per share. There were no convertible securities which would
      affect the numerator in calculating basic and diluted earnings per share;
      therefore, net income as presented on the Consolidated Statement of
      Operations for 1998, and net income, since inception, October 1, 1997, of
      $100,667 for 1997 will be used as the numerator. The following tables set
      forth a reconciliation of the denominator of the basic and diluted
      earnings per share computation:

<TABLE>
<CAPTION>
      Denominator                                                               1998              1997
                                                                                ----              ----
          <S>                                                                  <C>               <C>
          Denominator for basic earnings per share-weighted-
            average shares                                                     563,977           584,148
          Employee stock options (antidilutive)                                     --                --
          Unvested RRP shares                                                   14,517                --  
                                                                               -------           -------

          Denominator for diluted earnings per share-adjusted
             weighted-average assumed conversions                              578,494           584,148
                                                                               =======           =======
</TABLE>

NOTE 2 - INVESTMENTS

      The carrying amounts and fair values of the Company's investment
      securities at December 31, 1998 and 1997, are summarized as follows:

<TABLE>
<CAPTION>
                                                                       December 31, 1998
                                                        ---------------------------------------------
                                                                       Gross     Gross
                                                         Amortized   Unrealized Unrealized     Fair
                                                           Cost         Gains    Losses       Value  
                                                        ----------    -------     ----     ----------
          <S>                                           <C>           <C>         <C>      <C>
          Securities Available for Sale:

          Federal Home Loan Bank stock (restricted)     $  373,500    $    --     $ --     $  373,500
          Intrieve Incorporated                             15,000         --       --         15,000
                                                        ----------    -------     ----     ----------
                 Total available for sale                  388,500         --       --        388,500
                                                        ----------    -------     ----     ----------

          Securities to be Held to Maturity:

          U. S. Government and federal agencies            300,000      6,702       --        306,702
          Mortgage-backed securities                       667,117     44,990       --        712,107
                                                        ----------    -------     ----     ----------
                 Total held to maturity                    967,117     51,692       --      1,018,809
                                                        ----------    -------     ----     ----------

                 Total                                  $1,355,617    $51,692     $ --     $1,407,309
                                                        ==========    =======     ====     ==========
</TABLE>



                                       26
<PAGE>   29

<TABLE>
<CAPTION>

                                 OHIO STATE FINANCIAL SERVICES, INC.
                                            AND SUBSIDIARY
                      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 2 - INVESTMENTS (CONTINUED)

                                                                       December 31, 1997
                                                        --------------------------------------------
                                                                        Gross     Gross
                                                        Amortized    Unrealized Unrealized    Fair
                                                           Cost         Gains     Losses      Value
                                                        ----------    -------     ------   ----------
          <S>                                           <C>           <C>         <C>      <C>
          Securities Available for Sale:

          Federal Home Loan Bank stock (restricted)     $  348,000    $    --     $   --   $  348,000
          Intrieve Incorporated                             15,000         --         --       15,000
                                                        ----------    -------     ------   ----------
                 Total available for sale                  363,000         --         --      363,000
                                                        ----------    -------     ------   ----------

           Securities to be Held to Maturity:

           U. S. Government and federal agencies         3,299,577     15,685      5,160    3,310,102
           Mortgage-backed securities                      847,011     66,951         --      913,962
                                                        ----------    -------     ------   ----------
                 Total held to maturity                  4,146,588     82,636      5,160    4,224,064
                                                        ----------    -------     ------   ----------

                  Total                                 $4,509,588    $82,636     $5,160   $4,587,064
                                                        ==========    =======     ======   ==========
</TABLE>

      The book value and fair value of investment securities at December 31,
      1998 and 1997, by contractual maturity, are shown below. Expected
      maturities will differ from contractual maturities because borrowers may
      have the right to call or prepay obligations with or without call or
      prepayment penalties.

<TABLE>
<CAPTION>
                                                                       December 31, 1998
                                                      ------------------------------------------------  
                                                        Securities To Be Held          Securities
                                                             To Maturity           Available For Sale
                                                      ------------------------    ---------------------
                                                       Amortized                  Amortized
                                                          Cost      Fair Value      Cost     Fair Value
                                                      ----------    ----------    --------   ----------
         <S>                                            <C>         <C>           <C>         <C>
         Due in one year or less                      $  300,000    $  306,702    $     --    $     --
         Due from one year through five years                 --            --          --          --
         Equity securities                                    --            --     388,500     388,500
         Mortgage-backed securities                      667,117       712,017          --          --
                                                      ----------    ----------    --------    --------

                Total                                 $  967,117    $1,018,809    $388,500    $388,500
                                                      ==========    ==========    ========    ========

<CAPTION>
                                                                       December 31, 1997
                                                      ------------------------------------------------  
                                                        Securities To Be Held          Securities
                                                             To Maturity           Available For Sale
                                                      ------------------------    ---------------------
                                                       Amortized                  Amortized
                                                          Cost      Fair Value      Cost     Fair Value
                                                      ----------    ----------    --------   ----------
         <S>                                            <C>         <C>           <C>         <C>

         Due in one year or less                      $2,999,577    $2,997,025    $     --    $     --
         Due from one year through five years            300,000       313,077
         Equity securities                                    --            --     363,000     363,000
         Mortgage-backed securities                      847,011       913,962          --          -- 
                                                      ----------    ----------    --------    --------

                Total                                 $4,146,588    $4,224,064    $363,000    $363,000
                                                      ==========    ==========    ========    ========
</TABLE>



                                       27
<PAGE>   30

<TABLE>
<CAPTION>
                                  OHIO STATE FINANCIAL SERVICES, INC.
                                             AND SUBSIDIARY
                       NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



NOTE 3 - LOANS RECEIVABLE

     Loans receivable consisted of the following:

                                                                                    December 31,
                                                                            --------------------------
                                                                                1998           1997   
                                                                            -----------    -----------
          <S>                                                               <C>            <C>
          Mortgage loans:
                Construction                                                $   708,100    $   123,700
                1-4 family                                                   20,237,712     19,753,899
                Commercial                                                      584,856        572,315
                Land                                                              1,535         18,224
                                                                            -----------    -----------
                                                                             21,532,203     20,468,138
                                                                            -----------    -----------

          Consumer loans:
                Passbook loans                                                  354,735        370,408
                Other consumer loans                                          3,185,366      3,682,412
                                                                            -----------    -----------
                                                                              3,540,101      4,052,820
                                                                            -----------    -----------

          Commercial loans:                                                      35,771         69,529
                                                                            -----------    -----------

                        Total                                                25,108,075     24,590,487
                                                                            -----------    -----------

          Less:
                Loans in process                                                367,387         36,457
                Allowance for loan losses                                       141,170        140,978
                Deferred loan fees                                                5,012         35,998
                                                                            -----------    -----------
                                                                                513,569        213,433
                                                                            -----------    -----------

                        Loans receivable, net                               $24,594,506    $24,377,054
                                                                            ===========    ===========
</TABLE>

     Activity in the allowance for loan losses is summarized as follows:

<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                                                --------------------------------------
                                                                  1998          1997          1996
                                                                ---------   -----------    -----------
          <S>                                                   <C>         <C>            <C>
          Balance, beginning of period                          $140,978    $   143,000    $   143,000
          Provision charged to income                             41,191             --             --
          Charge-offs, net                                       (40,999)        (2,022)            --
                                                                ---------   -----------    -----------

          Balance, end of period                                $141,170    $   140,978    $   143,000
                                                                ========    ===========    ===========
</TABLE>



                                       28
<PAGE>   31

                       OHIO STATE FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 4 - OFFICE PROPERTIES AND EQUIPMENT

     Office properties and equipment are summarized as follows:

<TABLE>
<CAPTION>
                                                                                      December 31,
                                                                                ------------------------
                                                                                   1998           1997
                                                                                ----------    ----------
          <S>                                                                   <C>           <C>
          Land                                                                  $  137,638    $  137,638
          Office buildings and improvements                                        631,486       631,486
          Furniture, fixtures and equipment                                        458,990       437,920
          Automobile                                                                23,403        23,403
                                                                                ----------    ----------
                        Total                                                    1,215,517     1,230,447
          Less accumulated depreciation                                            785,182       747,497
                                                                                ----------    ----------

                        Net office properties and equipment                     $  466,335    $  482,950
                                                                                ==========    ==========
</TABLE>

     Depreciation charged to operations was $37,685, $38,437, and $70,225, for
     the years ended December 31, 1998, 1997, and 1996.


NOTE 5 - DEPOSIT ANALYSIS

     The Association's deposits by type are summarized as follows:

<TABLE>
<CAPTION>
                                                                        December 31,                
                                                 --------------------------------------------------------
                                                            1998                           1997           
                                                 -------------------------       ------------------------
                                                    Amount         Percent         Amount         Percent
                                                 -----------       -------       -----------      -------
          <S>                                    <C>               <C>           <C>               <C>
          NOW and Super NOW accounts             $ 1,227,432         4.82%       $   973,059         3.70%
          Money Market                             2,135,896         8.39          2,391,372         9.10
          Regular Savings                          9,685,779        38.06          9,946,727        37.80
          Certificates of Deposit                 12,401,297        48.73         13,022,281        49.40
                                                 -----------       ------        -----------       ------

                Total                            $25,450,404       100.00%       $26,333,439       100.00%
                                                 ===========       ======        ===========       ======
</TABLE>

     Scheduled maturities of certificates of deposit are as follows:

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                            --------------------------
                                                                                1998           1997   
                                                                            -----------    -----------
          <S>                                                               <C>            <C>
          Within one year                                                   $ 9,308,191    $ 9,494,591
          One to two years                                                    1,931,502      2,508,791
          Two to three years                                                    709,792        507,676
          Beyond three years                                                    451,812        511,223
                                                                            -----------    -----------

                  Total                                                     $12,401,297    $13,022,281
                                                                            ===========    ===========
</TABLE>


                                       29
<PAGE>   32


                       OHIO STATE FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 5 - DEPOSIT ANALYSIS (CONTINUED)

     The aggregate amount of certificates of deposit with a minimum denomination
     of $100,000 was $3,926,000 at December 31, 1998, and $4,220,000 at December
     31, 1997. Deposits in excess of $100,000 are not federally insured.

     Interest expense by deposit category is as follows:

<TABLE>
<CAPTION>
                                                                     December 31,
                                                       --------------------------------------
                                                          1998           1997         1996    
                                                       ----------    ----------    ----------
          <S>                                          <C>           <C>           <C>
          NOW and Super NOW Accounts                   $   19,178    $   19,092    $   17,552
          Money Market                                     60,471        76,042       108,629
          Regular Savings                                 296,128       313,974       296,929
          Certificates of Deposit                         645,511       735,511       734,750
                                                       ----------    ----------    ----------

              Total                                    $1,021,288    $1,144,619    $1,157,860
                                                       ==========    ==========    ==========
</TABLE>


NOTE 6 - SHORT-TERM BORROWINGS

     Short-term borrowings at December 31, 1998, consist of notes payable from
     local financial institutions and are summarized as follows:

                                             Interest             Remaining
                       Maturity                Rate               Principal  
                       --------                ----               ---------  

                        1-21-99                8.42%               $ 92,436
                        2-11-99                8.01%                100,040
                        3-01-99                7.75%                700,000
                                                                   --------

          Total                                                    $892,436
                                                                   ========

     The above borrowings are collateralized with term deposits.



                                       30
<PAGE>   33

                       OHIO STATE FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 7 - REGULATORY MATTERS

     The Association is subject to various regulatory capital requirements
     administered by its primary federal regulator, the Office of Thrift
     Supervision. Failure to meet the minimum regulatory capital requirements
     can initiate certain mandatory, and possible additional discretionary
     actions by regulators, that if undertaken, could have a direct material
     affect on the Association's financial statements. Under the regulatory
     capital adequacy guidelines and the regulatory framework for prompt
     corrective action, the Association must meet specific capital guidelines
     involving quantitative measures of the Association's assets, liabilities,
     and certain off-balance-sheet items as calculated under regulatory
     accounting practices. The Association's capital amounts and classification
     under the prompt corrective action guidelines are also subject to
     qualitative judgment by the regulators about components, risk weighting,
     and other factors.

     Quantitative measures established by regulation to ensure capital adequacy
     require the Association to maintain minimum amounts and ratios of tangible
     capital, core capital (Tier 1), and risk-based capital.

     The most recent notification from the OTS categorized the Association as
     "well capitalized" under the regulatory framework for prompt corrective
     action. To be categorized as "well capitalized", the Association must
     maintain minimum total risk-based, core (Tier 1), and tangible ratios set
     forth in the table below. There are no conditions or events since that
     notification that management believes have changed the institution's
     category.

     The Association's actual capital amounts and ratios are also presented in
     the table. Risk-based capital includes tangible capital plus $131,000 of
     the Association's allowance for loan losses.

<TABLE>
<CAPTION>
                                                                                                  To Be Well
                                                                                                Capitalized Under
                                                                           For Capital          Prompt Corrective
                                                      Actual            Adequacy Purposes       Action Provisions
                                                 ----------------       -----------------       -----------------
                                                 Amount     Ratio       Amount      Ratio       Amount      Ratio
                                                 ------     -----       ------      -----       ------      -----
                                                   (In thousands)         (In thousands)         (In thousands)
       <S>                                       <C>         <C>        <C>         <C>         <C>         <C>
       As of December 31, 1997:
       
         Total risk-based capital                 $8,221     48.7%       $1,351      8.0%        $1,689     10.0%
           (To risk weighted assets)
         Core (Tier 1) capital                     8,087     47.9%          676      4.0%         1,013      6.0%
           (To risk weighted assets)
         Core (Tier 1) capital                     8,087     22.5%        1,077      3.0%         1,796      5.0%
           (To total assets)
         Tangible capital                          8,087     22.5%          539      1.5%       Not Defined
           (To total assets)
</TABLE>



                                       31
<PAGE>   34


                       OHIO STATE FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 7 - REGULATORY MATTERS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                    To Be Well
                                                                                                 Capitalized Under
                                                                            For Capital          Prompt Corrective
                                                      Actual             Adequacy Purposes       Action Provisions
                                                  ---------------        -----------------       -----------------
                                                  Amount    Ratio        Amount     Ratio         Amount    Ratio
                                                  ------    -----        ------     -----         ------    -----
                                                   (In thousands)          (In thousands)         (In thousands)

       <S>                                         <C>       <C>         <C>         <C>         <C>        <C>
       As of December 31, 1997:

         Total risk-based capital                 $8,221     48.7%       $1,351      8.0%        $1,689     10.0%
           (To risk weighted assets)
         Core (Tier 1) capital                     8,087     47.9%          676      4.0%         1,013      6.0%
           (To risk weighted assets)
         Core (Tier 1) capital                     8,087     22.5%        1,077      3.0%         1,796      5.0%
           (To total assets)
         Tangible capital                          8,087     22.5%          539      1.5%       Not Defined
           (To total assets)
</TABLE>


NOTE 8 - FEDERAL INCOME TAX

  The Association was permitted until 1996 a special bad debts deduction limited
  generally to eight percent of otherwise taxable income and subject to certain
  limitations based on aggregate loans and savings account balances at the end
  of the year. In 1996, the Small Business Job Protection Act (the "Act") was
  signed into law. The Act eliminated the percentage of taxable income bad debt
  deduction for thrift institutions and requires that bad debts for federal
  income taxes be determined based primarily on the experience method. The Act
  provides that bad debt reserves accumulated after 1987 are subject to
  recapture over a six year period which began in 1996. The Act provides that
  bad debt reserves accumulated prior to 1988 be exempt from recapture. If the
  amounts that qualify as deductions for federal income tax purposes are later
  used for purposes other than for bad debt losses, they will be subject to
  federal income tax at the then corporate rate. Retained income at December 31,
  1998 and 1997, included approximately $830,000 (pre 1988 reserves) for which
  federal income tax has not been provided.

  The provisions for Federal income taxes consist of:

                                             Year Ended December 31,
                                     ------------------------------------
                                        1998          1997         1996
                                     --------     ----------    ---------

         Current                     $152,190      $ 174,386     $ 94,648
         Deferred                      (2,741)        19,497       11,695
                                     --------     ----------    ---------

            Total                    $149,449      $193,883      $106,343
                                     ========      ========      ========


                                       32
<PAGE>   35


                       OHIO STATE FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 8 - FEDERAL INCOME TAX (CONTINUED)

     The following temporary differences gave rise to the deferred tax (asset)
liability:

<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                                ---------------------
                                                                                   1998        1997
                                                                                --------    ---------
         <S>                                                                    <C>         <C>
         Income and expense recognized in the
          financial statements on the accrual basis,
          but on the cash basis for tax purposes                                $ 30,802    $ 20,411
         Depreciation                                                              3,085       1,350
         FHLB stock dividends (incl. redemptions)                                 99,088      90,418
         Difference in bad debt deduction                                        (44,486)    (23,748)
         Deferred compensation                                                   (15,008)         --
         Other                                                                    (1,217)    (13,426)
                                                                                --------    --------

                Total                                                           $ 72,264    $ 75,005
                                                                                ========    ========
</TABLE>

     A reconciliation between the amount of reported income tax expense and the
     amount computed by applying the Federal income tax rate to income before
     income taxes is as follows:

<TABLE>
<CAPTION>
                                                                     Year Ended December 31,
                                                              -----------------------------------
                                                                1998          1997         1996
                                                              --------      --------     --------
         <S>                                                  <C>           <C>          <C>
         Tax at statutory rate (34%)                          $127,824      $189,216     $108,360
         Increase (decrease) in taxes
          resulting from:
         Stock compensation                                     14,005         2,135           --
         Nontaxable income                                        (850)       (1,103)      (2,017)
         Other                                                   8,470         3,635           --  
                                                              --------      --------     --------

              Total                                           $149,449      $193,883     $106,343
                                                              ========      ========     ========

         Effective rate                                           39.8%         34.8%        33.4%
</TABLE>

NOTE 9 - RETIREMENT PLAN AND 401(K) THRIFT PLAN

     The Association has a defined benefit plan for all eligible employees
     through the Financial Institutions Retirement Fund. The plan covers and
     enrolls as active members all employees who are expected to complete 1,000
     hours of service in twelve consecutive months and have attained age
     twenty-one. Because the plan is a multi-employer plan, plan information for
     the Association separately is not determinable. Pension expense for the
     years ended December 31, 1998, 1997, and 1996, was $-0-, $6,836, and
     $10,899, respectively.

     The Association has a profit-sharing plan which qualifies under Section
     401(k) of the Internal Revenue Code. The plan is for all eligible employees
     and allows the Association to match employee contributions to a maximum of
     6% of their compensation. The Association suspended matching contributions
     effective April, 1995. The Association's plan expenses for the years ended
     December 31, 1998, 1997, and 1996, amounted to $1,900, $1,632, and $940,
     respectively. Plan expense amounts include any employer's matching
     contributions and administrative costs.


                                       33
<PAGE>   36


                       OHIO STATE FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 10 - EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")

     During the year ended December 31,1997, the Association adopted an ESOP for
     the benefit of officers and employees who have met certain eligibility
     requirements related to age and length of service. An ESOP trust was
     created, and acquired 50,653 shares of common stock in the Company's
     initial public offering, using proceeds of a loan obtained from the
     Company, which bears interest at an annual rate of 6.55%. The loan, which
     is secured by the shares of stock purchased, calls for annual interest over
     a ten year period and annual principal payments of $50,653 with the initial
     installment due September 26, 1998.

     The Association is scheduled to make annual contributions to the trust to
     allow the trust to make the required loan payments to the Company. Shares
     are released from collateral based upon the proportion of annual principal
     payments made on the loan each year and allocated to qualified employees.
     As shares are committed to be released from collateral based on the terms
     of the loan, the Association reports compensation expense based upon the
     fair value of the shares. Dividends, when paid on allocated ESOP shares,
     are charged to retained earnings. Dividends paid on unallocated shares are
     reported as compensation cost if used to repay debt. The Trust also used
     dividends on unallocated shares to purchase additional shares of common
     stock at a cost of $101,306. Compensation expense for the ESOP for the
     years ended December 31, 1998 and 1997 was $85,317 and $18,942,
     respectively.

     The following table represents the components of the ESOP shares at
     December 31, 1998:

                                                      1998        1997   
                                                    --------    --------

         Allocated shares                              6,780          --
         Shares distributed                               --          --
         Unallocated shares                           50,873      50,653
                                                    --------    --------

                Total ESOP shares                     57,653      50,653
                                                    ========    ========

         Fair value of ESOP shares
            Allocated                               $ 81,360    $     --
            Unallocated                              610,476     772,458
                                                    --------    --------

                Total                               $691,836    $772,458
                                                    ========    ========


NOTE 11 - RECOGNITION AND RETENTION PLAN (RRP)

     The Board of Directors adopted the RRP for directors and certain officers
     and employees which was approved by shareholders at the annual meeting held
     on April 15, 1998. The objective of the RRP is to enable the Association to
     retain its corporate officers, key employees, and directors who have the
     experience and the ability necessary to manage these entities. Directors,
     officers, and key employees who are selected by members of the
     Board-appointed committee are eligible to receive benefits under the RRP.
     Directors of the Association serve as Trustees for the RRP, and have the
     responsibility to invest all funds contributed by the Association to the
     Trust created for the RRP.


                                       34
<PAGE>   37

                       OHIO STATE FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 11 - RECOGNITION AND RETENTION PLAN (RRP) (CONTINUED)

     In June, 1998, the Trust purchased, with funds contributed by the
     Association, shares of the Company and 20,925 shares were awarded to
     directors and employees and 4,442 shares remained unawarded. Directors,
     officers, and employees who terminate their employment with the Association
     shall forfeit the right to any shares which were awarded but not earned,
     except in the event of death or disability.

     The Association granted a total of 20,925 shares of common stock on April
     15, 1998. These shares become earned and non-forfeitable over a five-year
     period on each anniversary date of the award beginning April 15, 1999. The
     RRP shares purchased initially will be excluded from shareholders' equity.
     The Company recognizes compensation expense in the amount of fair value of
     the common stock at the grant date, over the years during which the shares
     are earned and recorded as an addition to shareholders' equity. Net
     compensation expense attributable to the RRP amounted to $49,606 for the
     year ended December 31, 1998.


NOTE 12 - STOCK OPTION PLAN

     The Board of Directors adopted a Stock Option Plan for the directors,
     officers, and employees which was approved by shareholders at the annual
     meeting held on April 15, 1998. An aggregate of 63,417 authorized but
     unissued common shares of the Company were reserved for future issuance
     under the Stock Option Plan. On April 1, 1998, the Company granted options
     to purchase 55,808 common shares. The options are exercisable over a
     five-year period beginning April 15, 1999. The stock options typically have
     expiration terms of ten years. The per share exercise price of a stock
     option shall be, at a minimum, equal to the fair value of a common share on
     the date the option is granted. Proceeds from the exercise of the stock
     options are credited to additional paid-in capital.

     The Company adopted Statement of Financial Accounting Standards Statement
     No. 123, "Accounting for Stock-Based Compensation". This statement
     encourages, but does not require the Company to recognize compensation
     expense for all awards of equity instruments issued. The statement
     established a fair value based method of accounting for stock-based
     compensation plans. The standard applies to all transactions in which an
     entity acquires goods or services by issuing equity instruments or by
     incurring liabilities in amounts based on the price of the entity's common
     stock or other equity instruments. Statement No. 123 permits companies to
     continue to account for such transactions under Accounting Principles Board
     No. 25, "Accounting for Stock Issued to Employees," but requires disclosure
     of pro forma net income and earnings per share as if the Company had
     applied the new method.



                                       35
<PAGE>   38

                       OHIO STATE FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 12 - STOCK OPTION PLAN (CONTINUED)

     Under Accounting Principles Board Opinion 25, no compensation expense has
     been recognized with respect to the options granted under the stock option
     plans. Had compensation expense been determined on the basis of fair value
     pursuant to Statement No. 123, net income and earnings per share would have
     been reduced as follows:

                                                                  1998
                                                                  ----
                Net income:
                   As reported                                  $226,504
                   Pro forma                                    $174,381

                Basic earnings per share:
                   As reported                                  $    .40
                   Pro forma                                    $    .31

                Diluted earnings per share:
                   As reported                                  $    .39
                   Pro forma                                    $    .30


     The following table presents share data related to the Stock Option Plan:

                                                       Shares Under Option
                                                       -------------------
                                                         1998        1997
                                                         ----        ----

                Outstanding, beginning of year              --           -- 
                Granted during the period               55,808           -- 
                Forfeited during the period              3,805           --
                Exercised during the period                 --           --
                                                        ------      -------

                   Outstanding, end of period 
                      (option price of $17.375 
                      per share)                        52,003           --
                                                        ======      =======


NOTE 13 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

     Ohio State Financial Services, Inc. is a party to financial instruments
     with off-balance-sheet risk in the normal course of business to meet the
     financing needs of its customers. These instruments involve, to varying
     degrees, elements of credit risk in excess of the amount recognized in the
     statement of financial condition. The contract amounts of these instruments
     reflect the extent of involvement the institution has in particular classes
     of financial instruments. The institution uses the same credit policies in
     making commitments and conditional obligations as it does for
     on-balance-sheet instruments.



                                       36
<PAGE>   39


                       OHIO STATE FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 13 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (CONTINUED)

     The following represents financial instruments whose contract amounts
represent credit risk:

<TABLE>
<CAPTION>
                                                                    December 31,
                                                              ------------------------
                                                                 1998          1997   
                                                              ----------      --------
         <S>                                                  <C>             <C>
         Loans in process                                     $  367,387      $ 36,457
         Commitments to originate loans - fixed rates          1,010,000      $512,000
</TABLE>

     The interest rate range on fixed rate loan commitments was 6.50% to 7.75%
     at December 31, 1998.  

     Commitments to extend credit are agreements to lend to a customer as long
     as there is no violation of any condition established in the contract.
     Commitments generally have fixed expiration dates or other termination
     clauses and may require payment of a fee. The institution evaluates each
     customer's credit worthiness on a case-by-case basis. The amount of
     collateral obtained, if deemed necessary by the institution upon extension
     of credit, is based on management's credit evaluation of the borrower.
     Collateral held consists primarily of single-family residences.

     Concentration of Credit Risk

     The mortgage-backed securities held by Ohio State Financial Services, Inc.
     consist of FHLMC and GNMA pass-through securities which are directly or
     inherently backed by the full faith and credit of the United States
     Government.

     The Company's real estate loans and loan commitments are primarily for
     properties located throughout Eastern Ohio and Northern West Virginia.
     Repayment of these loans is in part dependent upon the economic conditions
     in this region. The Company evaluates each customer's creditworthiness on a
     case-by-case basis and requires collateral on all real estate loans which
     consists primarily of residential properties.


NOTE 14 - RELATED PARTY TRANSACTIONS

     Directors and officers of the Company and its wholly-owned subsidiary were
     customers of, and had other transactions with the Company in the ordinary
     course of business during the years ended December 31, 1998, 1997, and
     1996.

     Loans and commitments included in such transactions were made with
     substantially the same terms and collateral as those prevailing at the time
     for comparable transactions with other persons. Loans to directors and
     officers did not involve more than the normal risk of collectibility, or
     present other unfavorable features. The loans to directors and officers at
     December 31, 1998 and 1997, were not material in the aggregate amount.



                                       37
<PAGE>   40

                       OHIO STATE FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 15 - CASH FLOWS INFORMATION

     Cash equivalents include amounts due from banks and Federal Home Loan Bank
     overnight accounts and term deposits with original maturities of ninety
     days or less.

     In addition, the Company made federal income tax payments during the years
     ended December 31, 1998, 1997, and 1996, of $251,778, $49,369, and
     $125,888, respectively. Cash payments for interest for the years ended
     December 31, 1998, 1997, and 1996 were $1,030,275, $1,146,763, and
     $1,177,830, respectively.


NOTE 16 - DEPOSIT INSURANCE

     Saving Association Insurance Fund member institutions were assessed a
     one-time deposit insurance premium to recapitalize the Fund on September
     30, 1996. The assessment totaled approximately $190,300 and was recorded in
     the year ended December 31, 1996. The premium was based on deposits as of
     March 31, 1995. As a result of the assessment, the Association's deposit
     premium insurance rate was reduced from $.23 to $.065 per $100 of deposit
     for periods subsequent to September 30, 1996.


NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS

     Statement of Financial Accounting Standards No. 107, "Disclosures about
     Fair Value of Financial Instruments", requires disclosure of fair value
     information about financial instruments, whether or not recognized in the
     balance sheet. In cases where quoted market prices are not available, fair
     values are based on estimates using present value or other valuation
     techniques. Those techniques are significantly affected by the assumptions
     used, including the discount rate and estimates of future cash flows. In
     that regard, the derived fair value estimates cannot be substantiated by
     comparison to independent markets and, in many cases, could not be realized
     in immediate settlements of the instruments. Statement 107 excludes certain
     financial instruments and all nonfinancial instruments from its disclosure
     requirements. In addition, the value of long-term relationships with
     depositors and other customers are not reflected. The value of these items
     is significant. Accordingly, the aggregate fair value amounts presented do
     not represent the underlying value of the corporation.

     The following methods and assumptions were used in estimating fair value of
     financial instruments as disclosed herein:

     Cash and Cash Equivalents: For those short-term instruments, the carrying
     amount is a reasonable estimate of fair value.

     Time Deposits: For those short-term instruments, the carrying amount is a
     reasonable estimate of fair value.



                                       38
<PAGE>   41


                       OHIO STATE FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

     Investment Securities and Securities Held for Sale: For debt securities and
     marketable equity securities held for investment purposes and for sale,
     fair values are based on quoted market prices or dealer quotes. If a quoted
     market price is not available, fair value is estimated using quoted market
     prices for similar securities.

     Loans: For certain homogeneous categories of loans, such as some
     residential mortgages, fair value is estimated using the quoted market
     prices for securities backed by similar loans. The fair value of other
     types of loans is estimated by discounting the future cash flows using the
     current rates at which similar loans would be made to borrowers with
     similar credit ratings and for the same remaining maturities.

     Short-term Notes Payable and Advance Payments by Borrowers for Taxes and
     Insurance: The fair value is equal to the current carrying value.

     Deposit Liabilities: The fair value of demand deposits, savings accounts,
     and certain money market deposits is the amount payable on demand at the
     reporting date. The fair value of fixed-maturity certificates of deposit is
     estimated using the rates currently offered for deposits of similar
     remaining maturities.

     The estimated fair values of the Company's financial instruments are as
     follows:

<TABLE>
<CAPTION>
                                                                December 31, 1998
                                                             ------------------------
                                                               Carrying     Estimated
                                                                Amount      Fair Value   
                                                             -----------   -----------
            <S>                                              <C>           <C>
            Financial Assets:
               Cash and cash equivalents                     $ 5,699,772   $ 5,699,772
               Interest bearing time deposits                  3,100,000     3,100,000
               Securities available for sale                     388,500       388,500
               Securities held to maturity                       967,117     1,018,809
               Loans, net                                     24,594,506    24,376,611

            Financial Liabilities:
               Deposits                                       25,450,404    25,547,278
               Advance payments by borrowers for
                 taxes and insurance                             182,061       182,061
               Short-term notes payable                          892,543       892,543
</TABLE>



                                       39
<PAGE>   42


                       OHIO STATE FINANCIAL SERVICES, INC.
                                 AND SUBSIDIARY
           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                December 31, 1997
                                                             ------------------------
                                                               Carrying     Estimated
                                                                Amount      Fair Value   
                                                             -----------   -----------
            <S>                                              <C>           <C> 
         Financial Assets:
               Cash and cash equivalents                     $ 3,177,832   $ 3,177,832
               Interest bearing time deposits                  4,600,000     4,600,000
               Securities available for sale                     363,000       363,000
               Securities held to maturity                     4,146,588     4,224,064
               Loans, net                                     24,377,054    24,578,310

         Financial Liabilities:
               Deposits                                       26,333,439    26,441,633
               Advance payments by borrowers for
                 taxes and insurance                             152,136       152,136
</TABLE>

NOTE 18 - CONVERSION AND REORGANIZATION

     On March 24, 1997, the Board of Directors of the Association approved a
     plan of conversion (the "Plan") pursuant to which the Association converted
     from a mutual savings and loan association to a capital stock savings and
     loan association incorporated under Ohio law and simultaneously issue all
     of its outstanding stock to a newly-formed holding company, Ohio State
     Financial Services, Inc. After approval by the regulatory authorities and
     the Association's members, the conversion was completed on September 26,
     1997. The Company became a unitary savings and loan holding company with
     its principal assets being the capital stock of the Association, the
     investments made with the net proceeds retained from the sale of common
     shares in the Offering and a loan made to the ESOP to facilitate the ESOP's
     purchase of common shares in the Conversion.

     In connection with the conversion, the Company completed the sale of
     634,168 shares of common stock at $10.00 per share. From the proceeds,
     $5,916,081 was allocated to additional paid in capital, which is net of
     conversion costs of $425,599. The common shares of the Company carry no par
     or stated value per share.

     In accordance with regulations, at the time that the Association converted
     from a mutual savings and loan association to a permanent capital stock
     savings and loan association, a portion of retained earnings was restricted
     by establishing a liquidation account. The liquidation account will be
     maintained for the benefit of eligible account holders who continue to
     maintain their accounts at the Association after the Conversion. The
     liquidation account will be reduced annually to the extent that eligible
     account holders have reduced their qualifying deposits. Subsequent
     increases will not restore an eligible account holder's interest in the
     liquidation account. In the event of a complete liquidation of the
     Association each account holder will be entitled to receive a distribution
     from the liquidation account in an amount proportionate to the current
     adjusted qualifying balances for accounts then held.



                                       40
<PAGE>   43

                       OHIO STATE FINANCIAL SERVICES, INC.
                                       AND
                     BRIDGEPORT SAVINGS AND LOAN ASSOCIATION
                        DIRECTORS AND EXECUTIVE OFFICERS

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

                 BOARD OF DIRECTORS OF
        OHIO STATE FINANCIAL SERVICES, INC. AND
        BRIDGEPORT SAVINGS AND LOAN ASSOCIATION

                    John O. Costine
                        Partner
                    Costine Law Firm

                     Anton M. Godez
                       President
             General Welding Supply Company

                     Jon W. Letzkus
                       President
        Ohio State Financial Services, Inc. and
        Bridgeport Savings and Loan Association

                   William E. Reline
                       Consultant
               Wheeling Machine Products

                    Manuel C. Thomas
                        Officer
           M.C. Thomas Insurance Agency, Inc.



                   EXECUTIVE OFFICERS OF
            OHIO STATE FINANCIAL SERVICES, INC.

                      Jon W. Letzkus
                         President

                      Marianne Doyle
                      Vice President

                      Michael P. Eddy
           Treasurer and Chief Financial Officer

                     Sherri Yarbrough
                         Secretary

                   EXECUTIVE OFFICERS OF
          BRIDGEPORT SAVINGS AND LOAN ASSOCIATION

                      Jon W. Letzkus
                         President

                      Marianne Doyle
                 Assistant Vice President

                   Darlene V. Bennington
                  Treasurer and Secretary

                      Michael P. Eddy
                        Comptroller

                     Sherri Yarbrough
              Director of Information Systems



                                       41
<PAGE>   44


                              SHAREHOLDER SERVICES

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

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

                              The Fifth Third Bank
                            Stock Transfer Department
                             Mail Drop 1090F 5-3212
                            38 Fountain Square Plaza
                             Cincinnati, Ohio 45263
                                 (513) 579-5320
                                 (800) 837-2755


                                 ANNUAL MEETING

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

The Annual Meeting of Shareholders of OSFS will be held on April 21, 1999, at
1:00 p.m., Eastern Time, at the McClure Hotel, 1200 Market Street, Wheeling,
West Virginia 26003. Shareholders are cordially invited to attend.


                          ANNUAL REPORT ON FORM 10-KSB

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

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

                       Ohio State Financial Services, Inc.
                                 435 Main Street
                             Bridgeport, Ohio 43912
                              Attention: Secretary



                                       42