<PAGE>   1

WESTERN OHIO
FINANCIAL CORPORATION                                     [PICTURE OF BUILDING]

                                                                     MAIN OFFICE


CONNECTING
WITH OUR
COMMUNITIES




                                                             [PICTURE OF OFFICE]

                                                              CENTERVILLE OFFICE

[PICTURE OF OFFICE]

UPPER VALLEY OFFICE

                                                2000
                                              ANNUAL
                                              REPORT


<PAGE>   2


TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S>                                                                                                           <C>
Letter to Shareholders..........................................................................................3

Market Price of Western Ohio Financial Corporation's Common Shares and Related Shareholder Matters..............6

Selected Consolidated Financial Information.................................................................... 6

Management's Discussion and Analysis of Financial Condition and Results of Operations

   General..................................................................................................... 8

   Forward-Looking Statements.................................................................................. 8

   Analysis of Financial Condition............................................................................. 8

   Comparison of Years Ended December 31, 2000 and December 31, 1999........................................... 9

   Comparison of Years Ended December 31, 1999 and December 31, 1998...........................................10

   Average Balances, Interest Rates and Yields.................................................................12

   Rate/Volume Analysis........................................................................................13

Asset/Liability Management and Market Risk.....................................................................13

   Liquidity and Capital Resources.............................................................................14

   Impact of New Accounting Standards..........................................................................15

   Impact of Inflation and Changing Prices.....................................................................15

Report of Independent Auditors.................................................................................16

   Consolidated Financial Statements...........................................................................17

   Notes to Consolidated Financial Statements..................................................................23

Western Ohio Financial Corporation and Subsidiary Shareholder Information......................................38

Board of Directors and Officers................................................................................38

Market Makers..................................................................................................39
</TABLE>

                                              Western Ohio Financial Corporation


2
<PAGE>   3

DEAR SHAREHOLDERS,

The year 2000 was another year of substantial income improvement as well as new
business development for Western Ohio and its sole subsidiary, Cornerstone Bank.

-  Our net income improved 10% over 1999. Also, net income per share on a fully
   diluted basis increased 18.8% as a result of stock repurchases and
   improvement in net income.

-  Continued growth in business banking loans and services produced a greater
   share of our income which helped to balance a cyclical slowdown in
   residential mortgage lending activity.

-  Actions are underway in our branch banking network to enhance our ability to
   connect even better with customers in the communities we serve.

-  We have completed our data processing upgrades which enable us to improve our
   design and delivery of products and services for the present and longer term
   in an increasingly competitive environment.

The past year was challenging for the banking industry, particularly thrifts.
Like most thrifts Cornerstone Bank is "liability sensitive" which means net
interest margins compressed as a result of funding costs increasing faster than
earning asset yields in 2000. Fortunately, the company was able to offset margin
compression with an 11.4% increase in net loans outstanding and a 3.7% reduction
in non-interest expense.

[PICTURE OF DAVID L. DILLAHUNT, CHAIRMAN OF THE BOARD AND JOHN W. RAISBECK,
PRESIDENT AND CEO]

    Recently, the Federal Reserve has taken action to lower rates to help avoid
a recession. If the Fed continues on this path, Cornerstone's liability
sensitivity should help its net interest margin improve. If we can manage to
avoid a recession, and in particular the unemployment and rising loan
delinquencies often associated with higher joblessness, then

2000 Annual Report to Shareholders                                            3


<PAGE>   4
[PICTURE (Seated) John W. Raisbeck, Director, President, and Chief Executive
Officer Craig F. Fortin, Senior Vice President, Treasurer and Chief Financial
Officer John T. Heckman, Executive Vice President, Operations and Administration
(Standing) Gary L. Hicks, Executive Vice President, Mortgage Banking Robert P.
Brezing, Senior Vice President, Business Banking]

MANAGEMENT COMMITTEE

2001 should be another good year. So far so good. We will continue to monitor
our asset quality very closely. We also continue to manage closely those
variables that we can control such as non-interest expenses and our loan
underwriting practices.

    Business banking experienced healthy growth particularly in the Springfield
market area where we are very competitive. We have a seasoned lending staff and
the service capability to attract more meaningful and profitable
"relationships." In past reports we have spoken about shifting the mix of
earning assets to higher yielding business loans which is starting to happen.
These new relationships also provide a valuable source of lower cost demand
deposits which bodes well strategically for lowering our overall funding costs.

   On the mortgage front we anticipate a moderate surge in refinancing activity
resulting from lower rate trends. We will continue to pursue new purchase
financing, however, this financing has slowed down in our defined markets.

    Actions have been underway in our branch banking network to improve the
efficiency and effectiveness of product and service delivery. We have committed
more resources in teams of technology, training and staffing to improve cross-
selling and response time at the point of sale. This is a continuing process
enabling us to connect even better with customers in the communities we serve.
Late last year we announced that Cornerstone Bank had received regulatory
approval to establish a new branch within attractive proximity to its existing
branch network. The Bank purchased a site in Centerville, Ohio. The new branch
will provide full loan and deposit services including mortgage and business
banking. The branch is scheduled to open the first half of 2001.

4                                             Western Ohio Financial Corporation

<PAGE>   5

[PICTURE John W. Raisbeck, Director, President,
  and Chief Executive Officer
David L. Dillahunt, Chairman
Aristides G. Gianakopoulos, Director
Howard V. Dodds, Director
John E. Field, Director
Jeffrey L. Levine, Director
William N. Scarff, Director
(left to right)]

BOARD OF DIRECTORS

    We successfully completed our electronic data processing conversion during
the year 2000. While the major work is done, we continue to learn and find
better ways to serve customers and ourselves. The quality and timeliness of
retrieving a customer's entire relationship and internal financial information
has been substantially increased. This is a real customer convenience. We now do
client research in minutes as opposed to days. This improved customer service is
also enhanced by shorter development times for the design of new products and
services. The Windows(R)-based environment allows employees to be trained more
quickly and be more efficient with customers.

    Last year we addressed the significant stock price deflation experienced by
our company and a large number of smaller and mid-sized banks and thrifts. Last
year was a mixed year depending on your viewpoint. From ours it was an
opportunity to repurchase 180,000 shares, increasing our earnings per share
18.8% to $1.01, and to continue our efforts to reward long-term shareholders.

    The spectacular collapse of tech stocks in the second half of 2000 may have
caused investors to return to neglected sectors with solid fundamentals and
earnings. Our stock price and those of many of our peers have recently begun to
turn around, as well they should, given the strong capital, continued strength
of asset quality in community banks as well as earnings trends.

    If the Federal Reserve sees clear to a succession of interest rate decreases
as we saw in January 2001 then there is strong historical evidence to suggest
that bank and thrift stocks should benefit. The key will be to avoid significant
asset quality issues.

    We continue to head in the right direction. We are a community bank with
quality people, strong capital and modern technology, and a firm commitment to
winning more profitable relationships. 2001 should be another year of
improvement.

    We sincerely appreciate the continuing support of our shareholders, the
Board of Directors, our valued customers and staff.

/s/ John W. Raisbeck
John W. Raisbeck
President and Chief Executive Officer


/s/ David L. Dillahunt
David L. Dillahunt
Chairman of the Board


2000 Annual Report to Shareholders                                             5

<PAGE>   6

MARKET PRICE OF WESTERN OHIO FINANCIAL
CORPORATION'S COMMON SHARES
AND RELATED SHAREHOLDER MATTERS


There were 1,815,834 common shares of WOFC outstanding, excluding unearned
employee benefit plan shares, on December 31, 2000, held of record by
approximately 649 registered shareholders and 1,230 beneficial holders behind
brokers, banks, and depositories. Price information with respect to WOFC's
common shares is quoted on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") National Market System. The Wall Street
Journal publishes daily trading information for our stock under the abbreviation
"WstnOH Fnl" in the National Market Listing.

    The Company has repurchased shares and intends to continue to repurchase
shares in order to enhance shareholder value. During 2000, the Company
repurchased 180,000 shares and 140,892 in 1999. The Company is no longer subject
to quantitative regulatory limitations imposed by the Office of Thrift
Supervision ("OTS") on stock repurchases and intends to continue repurchases of
stock when the Board of Directors considers it to be in the best interest of the
Company's shareholders.

    There were no sales of unregistered securities during 2000.

                         Fiscal Year 2000               Fiscal Year 1999
                      Low    High   Dividend         Low    High   Dividend
                     ------------------------       ------------------------
First quarter .....  $ 14.25 $ 17.19   $  .25       $ 21.75 $ 23.00   $  .25
Second quarter ....    13.75   15.50      .25         21.75   29.00      .25
Third quarter .....    14.63   17.00      .25         17.50   26.00      .25
Fourth quarter ....    14.63   17.25      .25         16.38   19.25      .25

SELECTED CONSOLIDATED FINANCIAL INFORMATION

<TABLE>
<CAPTION>

                                                                                     December 31,
                                                             2000           1999          1998          1997          1996
                                                             -----          ----          ----          ----          ----
<S>                                                      <C>           <C>           <C>           <C>           <C>
Selected Financial Ratios and Other Data:

Performance Ratios:
   Return on assets (ratio of net income to
     average total assets)                                    0.54  %       0.52  %       0.36  %       0.05  %       0.33  %
   Interest rate spread information:
     Average during year                                      2.44          2.57          2.40          2.42          2.42
     End of year                                              2.65          2.37          2.55          2.31          2.23
   Net interest margin                                        2.99          3.13          2.91          2.95          3.26
   Ratio of operating expense to
     average total assets                                     2.32          2.51          2.69          2.39          2.72
   Return on equity (ratio of net income
     to average equity)                                       4.50          3.75          2.42          0.34          2.00

Quality Ratios:
   Non-performing assets to total assets at end
     of year                                                  1.02          0.83          1.39          0.54          0.52
   Allowance for loan losses to non-performing
     loans                                                   46.24        100.94         70.47        196.59         83.95
   Allowance for loan losses to total loans, net              0.58          1.09          1.39          1.41          0.60
   Allowance for loan losses to classified assets            42.30         75.14         68.89        130.08         73.74

Capital Ratios:
   Total equity to total assets at end of year               11.86         13.04         14.52         14.67         13.76
   Average equity to average assets                          12.09         13.87         14.80         13.44         16.50
   Ratio of average interest-earning assets to
     average interest-bearing liabilities                     1.12  x       1.13  x       1.11  x       1.11  x       1.19  x

Per Share Data:
   Earnings per common share - Basic                     $    1.01      $   0.86      $   0.60       $  0.08       $  0.47
   Earnings per common share - Diluted                        1.01          0.85          0.58          0.08          0.46
   Dividend payout ratio                                      0.99  x       1.18  x       1.67  x      12.50  x       2.13  x
   Book value per share                                  $   23.15      $  21.82      $  23.45       $ 22.91       $ 23.48

Number of full service offices                                   6             6             6            10            10
</TABLE>

6                                            Western Ohio Financial Corporation

<PAGE>   7

SELECTED CONSOLIDATED FINANCIAL INFORMATION

<TABLE>
<CAPTION>

                                                                  December 31,
                                        ------------------------------------------------------------------
                                           2000         1999           1998          1997           1996
                                        ---------     ---------     ---------      ---------     ---------
                                                             (Dollars in thousands)
<S>                                     <C>           <C>           <C>            <C>           <C>
Selected Financial Condition Data:

Total assets                            $ 352,562     $ 329,685     $ 327,728      $ 371,988     $ 392,765
Loans and loans held for sale, net        283,604       254,871       234,812        277,731       287,611
Cash and cash equivalents                   4,805         9,614        13,854         31,239        15,611
Mortgage-backed securities                 39,219        41,591        50,044         22,433        36,843
Securities                                  9,434         8,775        15,402         22,455        35,729
Deposits                                  208,332       202,331       192,966        246,909       233,203
Borrowed funds                            100,225        82,183        85,252         68,339       102,602
Total shareholders' equity                 41,810        42,989        47,594         54,600        54,048

Selected Operations Data:

Total interest income                   $  25,624     $  23,415     $  25,856      $  29,039     $  24,160
Total interest expense                     15,730        13,632        15,992         17,934        13,783
                                        ---------     ---------     ---------      ---------     ---------
Net interest income                         9,894         9,783         9,864         11,105        10,377
Provision for loan losses                     349           246          (363)         2,285           399
                                        ---------     ---------     ---------      ---------     ---------
Net interest income after provision
  for loan losses                           9,545         9,537        10,227          8,820         9,978

Non-interest income:
  Loan fees and service charges             1,182         1,085         1,005            650           156
  Gain on sales of loans,
    mortgage-backed securities
    and securities                             84           111           652            311           340
  Gain on sale of branches                      -             -         2,054              -             -
  Other non-interest income                    28            65           (22)            31            54
                                        ---------     ---------     ---------      ---------     ---------
Total non-interest income                   1,294         1,261         3,689            992           550
Total non-interest expense                  7,899         8,127         9,757          9,471         8,759
                                        ---------     ---------     ---------      ---------     ---------
Income before income taxes and
  cumulative effect of accounting
  changes                                   2,940         2,671         4,159            341         1,769
Income tax expense                          1,089           988         2,864            158           707
                                        ---------     ---------     ---------      ---------     ---------
Net income                              $   1,851     $   1,683     $   1,295      $     183     $   1,062
                                        =========     =========     =========      =========     =========
</TABLE>

2000 Annual Report to Shareholders                                            7

<PAGE>   8

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


General

As a unitary savings and loan association holding company, Western Ohio
Financial Corporation ("the Company" or "WOFC"), holds Cornerstone Bank
("Cornerstone"), whose principal business has traditionally consisted of
attracting deposits from the general public, and making loans secured by
residential real estate. Cornerstone's profitability and consequently the
Company's profitability is primarily dependent upon its net interest income,
which is the difference between interest income on its loan and investment
portfolio and interest paid on deposits and other borrowed funds. Net interest
income is directly affected by the relative amounts of interest-earning assets
and interest-bearing liabilities and the interest rates earned or paid on such
amounts. Cornerstone's profitability is also affected by the provision for loan
losses and the level of non-interest income and expense. Non-interest income
consists primarily of service charges and other fees, gains (losses) on sales of
securities and other assets, and income from real estate operations.
Non-interest expense includes salaries and employee benefits, real estate
operations, occupancy of premises, federal deposit insurance premiums, franchise
taxes, data processing expenses, and other operating expenses. In October 1997,
the Company formed another subsidiary, Cornerstonebanc Financial Services,
Incorporated (formerly West Central Mortgage Services, Incorporated), ("CFSI").
The primary business of CFSI is to engage in mortgage banking activities.

    The operating results of the Company are also affected by general economic
conditions, the monetary and fiscal policies of federal agencies and the
policies of agencies that regulate financial institutions. The Company's cost of
funds is influenced by interest rates on competing investments and general
market rates of interest. Lending activities are influenced by the demand for
real estate loans and other types of loans, which is, in turn, affected by the
interest rates at which such loans are made, general economic conditions
affecting loan demand and the availability of funds for lending activities.

    The Company offers a range of customer services and products, including
deposit accounts and loans with a special emphasis on one-to-four family
mortgage lending, multi-family and commercial real estate lending. Smaller
portions of the Company's loans receivable consist of construction, commercial
and consumer loans. Management has expanded and intends to continue to expand
its consumer lending portfolio by soliciting its existing customer base and has
increased efforts to solicit commercial loans.

    Management and the Board of Directors of the Company have sought to enhance
shareholder value by using excess capital to repurchase outstanding shares when
business and market conditions warrant.

FORWARD-LOOKING STATEMENTS

When used throughout this document, the words or phrases "will likely result,"
"are expected to," "will continue," "is anticipated," "estimated," "projected,"
or similar expressions are intended to identify "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties including changes in
economic conditions in the Bank's market area, changes in policies by regulatory
agencies, fluctuations in interest rates, demand for loans in the Bank's market
area and competition, that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. Factors listed
above could affect the Company's financial performance and could cause actual
results for future periods to differ materially from any statements expressed
with respect to future periods.

    The Company does not undertake, and specifically disclaims any obligation,
to publicly revise any forward-looking statements to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.

ANALYSIS OF FINANCIAL CONDITION
Total assets of the Company increased $22.9 million from $329.7 million in 1999
to $352.6 million in 2000. This increase was reflective of increases in loans
receivable partially offset by reductions in cash and cash equivalents and
securities. Cash and cash equivalents decreased $4.8 million from $9.6 million
at December 31, 1999 to $4.8 million at December 31, 2000. Securities decreased
$1.7 million from $50.4 million at December 31, 1999, to $48.7 million at
December 31, 2000. The primary reasons for the reduction in cash, cash
equivalents and securities was to fund the net increase in loans and a reduction
in excess cash and cash equivalents held in contingency at December 31, 1999 for
unrealized Year 2000 computer problems.

    Net loans and loans held for sale increased from $254.9 million at December
31, 1999, to $283.6 million at December 31, 2000, an increase of $28.7 million,
or 11.3%. The increase was primarily the result of purchasing participations,
originating commercial and multi-family mortgage loans, originating commercial
non-mortgage loans and originating new consumer home equity loans. During the
year, the Company purchased approximately $11.9 million of first mortgage loans
and $10.1 million commercial, primarily real estate, loans. The purchases were
made to continue leveraging the Company's borrowing ability, provide more
interest rate sensitive assets, and supplement a slow down in the local mortgage
market. The Company originated approximately $20.1 million in mortgage loans and
$64.4 million in commercial and commercial real estate during 2000. The Company
intends to rely more on direct origination in the future, however, it will
continue to evaluate purchase opportunities.

    Liabilities increased from $286.7 million at December 31, 1999, to $310.8
million at December 31, 2000, an increase of $24.1 million, or 8.4%. The primary
reason for the increase in



8                                             Western Ohio Financial Corporation

<PAGE>   9

total liabilities was an increase in advances from the Federal Home Loan Bank of
Cincinnati ("FHLB"). Advances increased $18.0 million, or 22.0%, to $100.2
million at December 31, 2000 from $82.2 million at December 31, 1999. Rates on
advances drawn during the year ranged from 5.68% to 7.68%. At December 31, 2000,
$87.5 million of the $100.2 million total advances were fixed rate. The above
mentioned advances are secured by a blanket pledge of mortgages to the FHLB and
are not tied to specific securities or mortgages. Under the blanket pledge, the
Company had approximately $55 million in additional borrowing capacity with the
FHLB at December 31, 2000.

    Deposits increased during 2000 by $6.0 million as a result of competitive
pricing and increased checking account sales efforts. For the year, deposits
increased 3.0% to $208.3 million at December 31, 2000, from $202.3 million at
December 31, 1999.

    Total shareholders' equity decreased $1.2 million, or 2.7%, primarily due to
the $2.9 million repurchase of shares during 2000. The increase in treasury
stock was offset by the net unrealized gain on securities available for sale of
$1.4 million. Earnings and dividends for the year ended December 31, 2000 were
each approximately $1.9 million. The Company is no longer subject to regulatory
limitations on stock repurchases and intends to continue modest stock
repurchases.

COMPARISON OF RESULTS OF OPERATIONS

COMPARISON OF YEARS ENDED DECEMBER 31, 2000
AND DECEMBER 31, 1999

The Company's results of operations depend primarily on the level of its net
interest income and non-interest income and the level of its operating expenses.
Net interest income depends upon the volume of interest-earning assets and
interest-bearing liabilities and the interest rate earned or paid on them. In
addition, the Company receives fees from loan originations, late payments, loan
servicing and payments for service related to transaction and other deposit
accounts, and from dividends on its FHLB stock.

GENERAL. Net income for the year ended December 31, 2000, was $1.9 million, an
increase of $168,000 compared to the year ended December 31, 1999. The increase
was primarily the result of decreasing operating expenses in 2000 by $228,000.
Both net interest income and noninterest income of $9.9 million and $1.3
million, respectively, in 2000 are similar to the results in 1999. The returns
on average assets and average shareholders' equity in 2000 were 0.54% and 4.50%,
respectively, compared to 0.52% and 3.75% in 1999. Basic earnings per share
increased $.15 per share from $.86 per share for 1999 to $1.01 per share for
2000.
    Net interest income is the largest component of the Company's income and is
affected by the interest rate environment and volume and composition of
interest-earning assets and interest-bearing liabilities. Net interest income
increased $111,000 from $9,783,000 to $9,894,000, or less than 1.2%, primarily
due to an increase in loan volumes at higher rates partially offset by higher
rates and volumes of interest-bearing liabilities. The Company remains liability
sensitive whereby its interest-bearing liabilities will generally reprice more
quickly than its interest-earning assets. Therefore, the Company's net interest
margin will generally increase in periods of falling interest rates in the
market and will decrease in periods of rising interest rates. The general
increase in market rates during the year 2000 negatively impacted the Company's
net interest margin which decreased 14 basis points from 3.13% in 1999 to 2.99%
in 2000.
    The provision for loan losses for the year ended December 31, 2000, was
$349,000, an increase of $103,000 compared to $246,000 for the year ended
December 31, 1999. Non-interest income increased $33,000 to $1,294,000 primarily
due to an increase in deposit fees and service charges. Non-interest expense
decreased $228,000, from $8.1 million at December 31, 1999, to $7.9 million at
December 31, 2000, primarily the result of reductions in deposit insurance
costs, Ohio franchise taxes and outside legal fees. Income taxes increased
$101,000 from $1.0 million at December 31, 1999, to $1.1 million at December 31,
2000, as a result of the $269,000 increase in income before tax for the year.

INTEREST INCOME. Total interest income increased $2.2 million, or 9.4% for the
year ended December 31, 2000, compared to the prior year. This increase is due
primarily to an increase in loan volumes at higher rates. Total gross loans
increased 9.8% with the growth primarily in commercial and commercial real
estate loans. The Company has focused growth in this area to increase loan
yields, provide more rate sensitive assets, and develop deposit relationships.
With the overall increase in rates during the year, new loans were added with
higher rates during 2000 compared to new loans added during 1999. Interest from
securities and other sources fell by $401,000 primarily due to lower volumes.

INTEREST EXPENSE. Total interest expense increased $2.1 million or 15.4% for the
year ended December 31, 2000, compared to the prior year. The increase was due
primarily to funding the loan growth with higher costing certificates of
deposits and FHLB advances. Certificates of deposit and advances increased $24.0
million during 2000 while lower costing NOW and savings accounts had a net
decrease of $61,000. Additionally, with the overall increase in rates during the
year, new certificates of deposits and advances had higher rates than new funds
in 1999. Overall, interest on deposits increased $827,000 or 8.6% for the year
ended December 31, 2000, compared to the prior year due to higher volumes and
rates on certificates of deposits. Interest on borrowings increased $1,271,000
or 32.1% over the prior year due to higher volumes and rates.

2000 Annual Report to Shareholders                                             9

<PAGE>   10

PROVISION FOR LOAN LOSSES. The provision for loan losses for the year ended
December 31, 2000, was $349,000, an increase of $103,000 compared to $246,000
for the year ended December 31, 1999. The provision for loan losses is a result
of management's periodic analysis of the adequacy of the allowance for loan
losses and any specific losses applied to that allowance. The increase in 2000
was due to an 11.3% increase in the loan portfolio and a corresponding shift of
the loan mix to more commercial and commercial real estate type loans.
Management believes that the total allowance of $1.7 million on total loans of
$285 million at December 31, 2000, is adequate given the area economic
conditions, the level of impaired and nonperforming loans, and the composition
of the loan portfolio. At December 31, 2000, the Company was aware of no
regulatory directives or suggestions that the Company make additional provisions
for losses on loans.
    Loan charge-offs were $1,588,000 for the year ended December 31, 2000
compared to $736,000 for the same period in 1999. During the year 2000, the
Company resolved two large problem loans and charged-off portions of two other
problem loan relationships. These loans were previously identified and reported
as impaired and specific loan loss reserves had been established for them. The
two resolved loans included principal repayments of $366,000 and principal
losses of $233,000 against which $209,000 of specific reserves had been
established. Based on a lack of current progress in resolving the other two
problem loans management charged-off approximately $1,115,000 of loan principal
against the allowance. Specific reserves of approximately the same amount had
previously been established. The Company continues to actively pursue collection
of these two relationships.
    Non-performing loans increased to $3.6 million at December 31, 2000, from
$2.8 million at December 31, 1999. This increase occurred primarily in
one-to-four family mortgages where the Company is well secured and has low loan
loss experience. Additionally, the non-performing mortgage loans had higher
average balances than the prior year. At December 31, 2000, approximately $2.4
million, or 67% of the non-performing loans were secured by one-to-four family
mortgages compared to $1.1 million, or 39% at December 31, 1999. Management
believes the current allowance for loan losses is adequate considering the
improvement in collateral supporting the non-performing loans.
    The Company will continue to review its allowance for loan losses and make
further allowances as economic and asset quality conditions dictate. Although
the Company maintains its allowance for loan losses at a level that it considers
to be adequate to provide for probable incurred losses, there can be no
assurance that future losses will not exceed estimated amounts or that
additional provisions for loan losses will not be required in future periods. In
addition, the Company's determination as to the amount of the allowance for loan
losses is subject to review by the Office of Thrift Supervision ("OTS") and the
Federal Deposit Insurance Corporation ("FDIC"), which can order the
establishment of additional allowances.

NON-INTEREST INCOME. Non-interest income increased $33,000 from $1,261,000 in
1999 to $1,294,000 in 2000. Service charges increased approximately $97,000
during 2000 due primarily to an increase in deposit fees and service charges.
The increase in service charges was partially offset by a decrease in loan
sales. Gain on loan sales in 2000, primarily the sale of the bank's credit card
portfolio, was down $36,000 from the prior year due to lower mortgage loan
originations and sales compared to the prior year ended.

NON-INTEREST EXPENSE. Total non-interest expense decreased 2.8% in 2000, from
$8.1 million in 1999 to $7.9 million. The decrease is primarily the result of
reductions in deposit insurance costs, Ohio franchise taxes and outside legal
fees. Additionally, the Company maintained other costs during 2000 at similar
levels to 1999.
    The Company recently announced its intent to open a new full service branch
office. This new office will be located in Centerville, Ohio, and is expected to
open during the first half of 2001. The branch opening will contribute to an
increase in operating expenses.

INCOME TAX EXPENSE. Income tax expense was $1.1 million for the year ended
December 31, 2000, an increase of $101,000 from the same period the prior year.
Income taxes increased primarily due to the increase in income before tax. The
Company's effective tax rate for 2000 and 1999 was 37.0%.

COMPARISON OF YEARS ENDED DECEMBER 31, 1999
AND DECEMBER 31, 1998

GENERAL. Net income for the year ended December 31, 1999, was $1.7 million, an
increase of $388,000 compared to the year ended December 31, 1998. The increase
was primarily the result of lower operating expenses and income tax expense due
to exiting the Cincinnati market in 1998. During 1998, management determined the
branch investment in the Cincinnati area was not in line with the Company's
long-term goals. As a result, the Company sold the Cincinnati area deposits and
closed or sold four branches. The net gain on the sale of deposits and branches
was $2.1 million before taxes.
    Net interest income decreased $81,000 from $9.9 million to $9.8 million, or
less than 1.0%, primarily as a result of a combination of lower rates and
volumes of average interest-earning assets partially offset by lower rates and
volumes of average interest-bearing liabilities. The provision for loan losses
for the year ended December 31, 1999, was $246,000, an increase of $609,000
compared to the year ended December 31, 1998, which was a recapture of $363,000.
Non-interest income decreased $2.4 million as a result of the net gain before
taxes on sale of the Cincinnati area deposits. Non-interest expense decreased
$1.6 million, from $9.8 million at December 31, 1998, to $8.1 million at
December 31, 1999, primarily due to lower expenses of approximately $1.3 million
related to exiting the Cincinnati area. Income taxes decreased $1.9 million from
$2.9 million at December 31, 1998, to $1.0 million at December 31, 1999,

10                                            Western Ohio Financial Corporation

<PAGE>   11

as a result of the tax effect of intangible asset disposition associated with
the Cincinnati area branch closing.

INTEREST INCOME. Total interest income decreased $2.4 million, or 9.4% for the
year ended December 31, 1999, compared to the prior year. This decrease is due
to a combination of lower rates and lower average volume of interest earning
assets. This lower volume is due mostly to lower short-term funds held by the
company which had been accumulated in 1998 in anticipation of Cincinnati area
deposit sale. The lower rates were primarily due to lower rates on new loans
originated than previously held. Interest income from loans decreased $590,000
and $725,000 as a result of the decreased volume and rates, respectively.
Interest from securities and other sources fell by $1.1 million primarily due to
reducing volumes generated to fund the deposit sale.

INTEREST EXPENSE. Total interest expense decreased $2.4 million or 14.8% for the
year ended December 31, 1999, compared to the prior year. The decrease was due
primarily to a lower average volume of time deposits as a result of the
Cincinnati area branch sale. Interest on deposits decreased $2.8 million or
22.3% for the year ended December 31, 1999, compared to the prior year. Interest
on borrowings increased $408,000 or 11.5% over the prior year due to average
higher volumes.

PROVISION FOR LOAN LOSSES. The provision for loan losses is a result of
management's periodic analysis of the adequacy of the allowance for loan losses
and any specific losses applied to that allowance. During the year ended
December 31, 1999, the provision for loan loss was $246,000. This is a change of
$609,000 from a $363,000 recapture of the provision during the prior year. The
reduction of the loan loss provision in 1998 was due to the decreasing overall
loan portfolio and the successful resolution of a major loan concern. The
increase in 1999 was due to an increase in the loan portfolio. Management
believes that the total allowance of $2.8 million on total loans of $262 million
at December 31, 1999, is adequate given the area economic conditions, the level
of impaired and nonperforming loans, and the composition of the loan portfolio.
At December 31, 1999, the Company was aware of no regulatory directives or
suggestions that the Company make additional provisions for losses on loans.

    The Company will continue to review its allowance for loan losses and make
further allowances as economic and asset quality conditions dictate. Although
the Company maintains its allowance for loan losses at a level that it considers
to be adequate to provide for probable losses, there can be no assurance that
future losses will not exceed estimated amounts or that additional provisions
for loan losses will not be required in future periods. In addition, the
Company's determination as to the amount of the allowance for loan losses is
subject to review by the OTS and the FDIC, which can order the establishment of
additional allowances.

NON-INTEREST INCOME. Non-interest income decreased from $3.7 million in 1998 to
$1.3 million in 1999. This decrease is due primarily to 1998 including the net
gain before taxes on sale of the Cincinnati area branches of $2.1 million. Gain
on sales of securities decreased due to selling a Federal Home Loan Mortgage
Corporation ("FHLMC") certificate and a FHLMC investment security in 1998 for a
total gain of $307,000. Additionally, gains on sales of loans declined $234,000
due to lower mortgage loan originations and sales compared to the prior year.

NON-INTEREST EXPENSE. Total non-interest expense decreased 16.7% in 1999, from
$9.8 million in 1998 to $8.1 million. The decrease is primarily the result of
reducing costs by approximately $1.3 million associated with the divestiture of
the Cincinnati area branches. Additionally, the Company reduced outside
consultant expenses and Ohio franchise taxes for Cornerstone.

INCOME TAX EXPENSE. Income tax expense was $1.0 million for the year ended
December 31, 1999, a decrease of $1.9 million from the same period the prior
year. Income taxes decreased primarily as a result of prior year's tax effect of
the intangible asset disposition associated with the Cincinnati area branch
sale. The 1998 write-off of the $1.4 million intangible asset originally
associated with the Cincinnati area acquisition is not deductible for tax
purposes, and is a permanent tax difference for computing the Company's tax
expense. As a result, the Company's effective tax rate for 1998 was 68.9%
compared to 37.0% in 1999.


2000 Annual Report to Shareholders                                            11

<PAGE>   12

<TABLE>
<CAPTION>

                                                            Year Ended December 31,
                                      -------------------------------------------------------------------
                                                   2000                                1999
                                      -------------------------------    --------------------------------
                                        Average    Interest                Average     Interest
                                      Outstanding  Earned/     Yield/    Outstanding    Earned/    Yield/
                                        Balance     Paid        Rate       Balance       Paid       Rate
                                        -------     ----        ----       -------       ----       ----
                                                                           (Dollars in thousands)
<S>                                   <C>           <C>        <C>       <C>            <C>        <C>
Interest-earning assets:
  Loans receivable                     $ 272,724    21,706      7.96%     $ 244,824     $19,096     7.80 %
  Securities                              48,811     3,265      6.69         55,957       3,567     6.37
  Interest-bearing deposits                1,308        91      6.96          4,163         247     5.93
  FHLB stock                               7,661       562      7.34          7,135         505     7.06
                                       ---------   -------                ---------     -------
    Total interest-earning assets        330,504    25,624      7.75        312,079      23,415     7.50
                                                   -------                              -------
  Non-earning assets                       9,957                             12,071
                                       ---------                          ---------
    Total assets                         340,461                          $ 324,150
                                       =========                          =========

Interest-bearing liabilities:
  Time deposits                          129,822     7,810      6.02      $ 122,992     $ 6,987     5.68
  Demand and NOW deposits                 16,729       145      0.87         12,767         145     1.14
  Savings deposits                        58,437     2,539      4.34         64,387       2,535     3.94
  Borrowings                              91,189     5,236      5.74         76,449       3,965     5.19
                                       ---------   -------                ---------     -------
    Total interest-bearing liabilities   296,177    15,730      5.31        276,595      13,632     4.93
                                                   -------                              -------
  Non-earning liabilities                  3,134                              2,643
                                       ---------                          ---------
    Total liabilities                    299,311                            279,238
  Equity                                  41,150                             44,912
                                       ---------                          ---------
    Total liabilities/equity           $ 340,461                          $ 324,150
                                       =========                          =========
Net interest income                                 $9,894                              $ 9,783
                                                   =======                              =======
Net interest rate spread                                        2.44%                              2.57  %
                                                                ====                               ====
Net earning assets                     $  34,327                          $  35,484
                                       =========                          =========
Net yield on average interest-
  earning assets                                                2.99%                              3.13  %
                                                                ====                               ====
Average interest-earning assets to
  average interest-bearing liabilities              1.12 x                               1.13 x
                                                    ======                               ======
</TABLE>


<TABLE>
<CAPTION>


                                        -----------------------------
                                                      1998
                                        -----------------------------
                                           Average    Interest
                                        Outstanding    Earned/  Yield/
                                           Balance      Paid    Rate
                                           -------      ----    ----

<S>                                        <C>         <C>      <C>
Interest-earning assets:
  Loans receivable                         $252,232    $20,411  8.09 %
  Securities                                 42,407      2,588  6.10
  Interest-bearing deposits                  37,399      2,379  6.36
  FHLB stock                                  6,649        478  7.19
                                           --------    -------
    Total interest-earning assets           338,687     25,856  7.63
                                                       -------
  Non-earning assets                         23,508
                                           --------
    Total assets                           $362,195
                                           ========

Interest-bearing liabilities:
  Time deposits                            $164,302    $ 9,641  5.87
  Demand and NOW deposits                    12,990        180  1.39
  Savings deposits                           65,709      2,614  3.98
  Borrowings                                 62,802      3,557  5.66
                                           --------    -------
    Total interest-bearing liabilities      305,803     15,992  5.23
                                                       -------
  Non-earning liabilities                     2,775
                                           --------
    Total liabilities                       308,578
  Equity                                     53,617
                                           --------
    Total liabilities/equity               $362,195
                                           ========
Net interest income                                    $ 9,864
                                                       =======
Net interest rate spread                                        2.40 %
                                                                ====
Net earning assets                         $ 32,884
                                           ========
Net yield on average interest-
  earning assets                                                2.91 %
                                                                ====
Average interest-earning assets to
  average interest-bearing liabilities                  1.11 x
                                                        ======
</TABLE>

AVERAGE BALANCES, INTEREST RATES AND YIELDS. The above table presents for the
periods indicated the total dollar amount of interest income from average
interest-earning assets and the resultant yields, as well as the interest
expense on average interest-bearing liabilities, expressed both in dollars and
rates. No tax equivalent adjustments were made. All average balances are monthly
average balances. Non-accruing loans have been included in the table as loans
carrying a zero yield. The average balance of mortgage-backed securities and
securities available for sale includes unrealized gains and losses while yield
is based on amortized cost.

12                                           Western Ohio Financial Corporation

<PAGE>   13

<TABLE>
<CAPTION>

                                                  Year Ended December 31,                Year Ended December 31,
                                              -------------------------------       ----------------------------------
                                                       1999 vs. 2000                          1998 vs. 1999
                                              -------------------------------       ----------------------------------
                                                   Increase                               Increase
                                                  (Decrease)                             (Decrease)
                                                    Due to             Total               Due to               Total
                                              ------------------     Increase       --------------------      Increase
                                              Volume      Rate      (Decrease)      Volume         Rate      (Decrease)
                                              ------     -------    ----------      ------      --------     ----------
                                                                         (Dollars in thousands)
<S>                                           <C>         <C>         <C>           <C>          <C>          <C>
Interest-earning assets:
   Loans receivable                           $2,214      $  396      $2,610        $  (590)     $  (725)     $(1,315)
   Securities                                   (472)        170        (302)           833          146          979
   Other                                        (155)         56         (99)        (1,947)        (158)      (2,105)
                                              ------      ------      ------        --------     --------     --------
     Total interest-earning assets            $1,587      $  622      $2,209        $(1,704)     $  (737)      (2,441)
                                              ======      ======      ======        ========     ========     ========
Interest-bearing liabilities:
   Time deposits                              $  399      $  424      $  823        $(2,337)     $  (316)      (2,653)
   Demand and NOW deposits                        39         (39)          -             (3)         (33)         (36)
   Savings deposits                             (246)        250           4            (52)         (27)         (79)
   Borrowings                                    817         454       1,271            726         (318)         408
                                              ------      ------      ------        --------     --------     --------
     Total interest-bearing liabilities       $1,009      $1,089      $2,098        $(1,666)     $  (694)      (2,360)
                                              ======      ======      ------        ========     ========     --------

Net interest income                                                   $  111                                  $   (81)
                                                                      ======                                  ========
</TABLE>


RATE/VOLUME ANALYSIS. The above schedule presents the dollar amount of changes
in interest income and interest expense for major components of interest-earning
assets and interest-bearing liabilities. It distinguishes between the increase
or decrease related to changes in average outstanding balances and that due to
the volatility of interest rates. For each category of interest-earning assets
and interest-bearing liabilities, information is provided on changes
attributable to (i) changes in volume (i.e., changes in volume multiplied by new
rate) and (ii) changes in rate (i.e., changes in rate multiplied by old volume).
For purposes of this table, changes attributable to both rate and volume which
cannot be segregated have been allocated proportionately to the change due to
volume and the change due to rate.

ASSET/LIABILITY MANAGEMENT
AND MARKET RISK

The Company's primary market risk exposure is interest rate risk and, to a
lesser extent, liquidity risk. Interest rate risk is the risk that the Company's
financial condition will be adversely affected due to movements in interest
rates. The income of financial institutions is primarily derived from the excess
of interest earned on interest-earning assets over the interest paid on
interest-bearing liabilities. Accordingly, the Company places great importance
on monitoring and controlling interest rate risk. The measurement and analysis
of the exposure of the Company's primary operating subsidiary, Cornerstone Bank,
to changes in the interest rate environment are referred to as asset/liability
management. One method used to analyze the Company's sensitivity to changes in
interest rates is the "net portfolio value" ("NPV") methodology used by the OTS
as part of its capital regulations.
    NPV is generally considered to be the present value of the difference
between expected incoming cash flows on interest-earning and other assets and
expected outgoing cash flows on interest-bearing and other liabilities. The
application attempts to quantify interest rate risk as the change in the NPV
which would result from a theoretical 200 basis point (1 basis point equals
 .01%) change in market interest rates. Both a 200 basis point increase in market
interest rates and a 200 basis point decrease in market interest rates are
considered.
    Presented on the following page is an analysis of Cornerstone's interest
rate risk as of December 31, 2000, and December 31, 1999, as measured by changes
in NPV for instantaneous and sustained parallel shifts of 100 to 300 basis
points in market interest rates. The tables also contain the policy limits set
by the Board of Directors as the maximum change in NPV the Board of Directors
deems advisable in the event of various changes in interest rates. Such limits
have been established with consideration to the impact on the NPV capital
position of various rate changes and the institution's strong capital position.
    As illustrated in the tables, the institution's NPV is more sensitive to
rising rates than declining rates. From an overall perspective, such difference
in sensitivity occurs principally because, as rates rise, borrowers do not
prepay fixed-rate loans as quickly as they do when interest rates are declining.
Thus, in a rising interest rate environment, because Cornerstone has primarily
fixed-rate loans in its loan portfolio, the amount of interest Cornerstone would
receive on its loans

2000 Annual Report to Shareholders                                            13

<PAGE>   14

<TABLE>
<CAPTION>

                                                  December 31, 2000                          December 31, 1999
  Change in           Board limit       ---------------------------------         ------------------------------------
 Interest Rate        Minimum             $ change      % change      NPV            $ change      % change      NPV
(Basis Points)       NPV Ratio            In NPV        In NPV      Ratio            In NPV        In NPV      Ratio
--------------       ---------            ------        ------      -----            ------        ------      -----
                                                (Dollars in thousands)
<S>                     <C>             <C>              <C>        <C>            <C>              <C>        <C>
    +300                6.00%           $ (17,462)       (41) %      6.69 %        $ (17,132)       (42) %      7.72 %
    +200                6.75              (11,751)       (28)        8.21            (11,389)       (28)        9.35
    +100                7.25               (5,872)       (14)        9.71             (5,565)       (14)       10.92
     -                  8.00                    -          -        11.13                  -          -        12.33
   (100)                9.00                4,305         10        12.10              4,439         11        13.38
   (200)                9.00                5,838         14        12.37              7,262         18        13.98
   (300)                9.00                8,098         19        12.80              9,341         23        14.37
</TABLE>

would increase relatively slowly as loans are slowly prepaid and new loans at
higher rates are made. Moreover, the interest Cornerstone would pay on its
deposits would increase rapidly because Cornerstone's deposits generally have
shorter periods to repricing. Assumptions used in calculating the amounts in
these tables correspond with OTS assumptions.
    As of December 31, 2000, the percentage change in NPV resulting from certain
changes in interest rates were within the policy limits of the institution's
Board of Directors. It should be noted that the table above only pertains to
Cornerstone Bank and does not apply to the holding company. The holding
company's assets are all of a short term or short term to repricing nature and
therefore are not subject to significant interest rate risk.
    As with any method of measuring interest rate risk, certain shortcomings are
inherent in the NPV approach. For example, although certain assets and
liabilities may have similar maturities or periods of repricing, they may react
in different degrees to changes in market interest rates. Also, the interest
rates on certain types of assets and liabilities may fluctuate in advance of
changes in market interest rates, while interest rates on other types may lag
behind changes in market rates. Further, in the event of a change in interest
rates, expected rates of prepayment on loans and mortgage-backed securities and
early withdrawal levels from certificates of deposit would likely deviate
significantly from those assumed in making risk calculations.
    In a rising interest rate environment, Cornerstone's net interest income
could be negatively affected. Moreover, rising interest rates could negatively
affect Cornerstone's earnings and thereby the Company's earnings due to
diminished loan demand. As part of its interest rate risk strategy, Cornerstone
has attempted to utilize adjustable-rate and short-term-duration loans and
investments.
    Cornerstone fully intends to limit the addition of fixed-rate long-duration
loans and securities to its portfolio. In addition to this restructuring, the
Bank offers home equity products that reprice on a monthly basis and has pursued
more aggressively commercial and commercial real estate loans with shorter
average lives and variable interest rates. It is expected that as the size of
these portfolio segments grows, the interest rate risk will be lessened, though
not eliminated.

LIQUIDITY AND CAPITAL RESOURCES

Western Ohio Financial Corporation's liquidity, primarily represented by cash
equivalents, is a result of its operating, investing and financing activities.
These activities are summarized below for the years ended December 31, 2000,
1999 and 1998.

                                        Year Ended December 31,
                                -------------------------------------
                                  2000          1999          1998
                                --------      --------      ---------
                                        (Dollars in thousands)

Net income                      $  1,851      $  1,683      $  1,295
Adjustments to reconcile
  net income to net cash
  from operating activities        1,502         5,135        (2,173)
                                --------      --------      --------
Net cash from operating
  activities                       3,353         6,818          (878)
Net cash from investment
  activities                     (27,131)      (12,606)       23,025
Net cash from financing
  activities                      18,969         1,548       (39,532)
                                --------      --------      --------
Net change in cash and
  cash equivalents                (4,809)       (4,240)      (17,385)
Cash and cash equivalents
  at beginning of period           9,614        13,854        31,239
                                --------      --------      --------
Cash and cash equivalents
  at end of period              $  4,805      $  9,614      $ 13,854
                                ========      ========      ========

At December 31, 2000, the Company had no outstanding commitments to sell loans
or securities.
    The OTS requires minimum levels of liquid assets. OTS regulations presently
require Cornerstone to maintain an average daily balance of liquid assets
(United States Treasury and federal agency obligations, of any maturity) equal
to at least 4% of the sum of its average daily balance of net withdrawable
deposit accounts and borrowings payable in one year or less. Such requirements
may be changed from time to time by the OTS to reflect changing economic
conditions.
    Such investments are intended to provide a source of relatively liquid funds
upon which Cornerstone may rely, if

14                                            Western Ohio Financial Corporation

<PAGE>   15

<TABLE>
<CAPTION>

                                                                                    Excess of Actual
                                                                                  Capital Over Current
                          Actual Capital             Current Requirement               Requirement
                         --------------------      ----------------------         ---------------------
                         Amount      Percent         Amount        Percent         Amount       Percent
                         ------      --------      ----------      ------         ---------     -------
                                                   (Dollars in thousands)
<S>                      <C>          <C>            <C>            <C>            <C>           <C>
Tangible capital         $ 39,097     11.05 %        $  5,306       1.50 %         $ 33,791      9.55 %
Core capital               39,097     11.05            14,150       4.00             24,947      7.05
Risk-Based capital         40,521     17.15            18,903       8.00             21,618      9.15
</TABLE>

necessary, to fund deposit withdrawals and other short-term funding needs.
Cornerstone's average regulatory liquidity at December 31, 2000, was 17.2%.
    The Company's primary sources of funds consist of deposits and repayments of
loans and interest earned on securities. The Bank maintains a higher ratio of
loans to deposits in comparison with other similarly sized financial
institutions. Historically, this has not had a material effect on the Company's
liquidity as it has utilized other potential sources of funds including
borrowings from the FHLB of Cincinnati to maintain liquidity and to meet
operating expenses. Management believes that loan repayments and other sources
of funds will be adequate to meet the Company's foreseeable liquidity needs.
    The Company's primary financing source during 2000 was borrowings from the
FHLB of $18.0 million. Also a major financing source was the net increase in
savings deposits of $6.0 million. The Company paid $1.8 million in dividends and
acquired treasury stock for $2.9 million in 1999. Liquidity management is a
daily and long-term responsibility of management. The Company adjusts its
investments in liquid assets based upon assessment of (i) expected loan demand,
(ii) expected deposit flows, (iii) yields available on interest-bearing
deposits and (iv) the objectives of its asset/liability management program.
Excess liquidity is invested generally in interest-bearing overnight deposits
and other short-term government and agency obligations. If the Company requires
additional funds beyond its internal ability to generate, it has additional
borrowing capacity with the FHLB of Cincinnati.
    The Company anticipates that it will have sufficient funds available to meet
current loan commitments. At December 31, 2000, the Company had outstanding
commitments to extend credit that amounted to $14.5 million.
    OTS regulations require that institutions maintain "tangible capital" of not
less than 1.5% of the institution's adjusted total assets. Tangible capital is
defined as "core capital" less any intangible assets. Core capital is comprised
of common shareholders' equity (including retained earnings). OTS prompt
corrective action regulations require core capital to be maintained at 3% of
total institution assets. The following table indicates the requirement for core
capital is 4% because that is the level that the OTS prompt corrective action
regulations require to be considered adequately capitalized.
    OTS regulations require the institution to maintain "risk-based capital" in
an amount not less than 8% of risk-weighted assets. Risk-based capital is
defined as core capital plus certain additional items. Cornerstone's adjustment
to core capital included the portion of the loan and lease loss allowance over
the amount required for loans classified as loss. This adjustment is $1.4
million as of December 31, 2000.
    The above table summarizes Cornerstone's regulatory capital requirements and
actual capital at December 31, 2000.

IMPACT OF NEW ACCOUNTING STANDARDS

Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," requires companies to record
derivatives on the balance sheet as assets or liabilities, measured at fair
value. Gains or losses resulting from changes in the values of those derivatives
would be accounted for depending on the use of the derivative and whether it
qualifies for hedge accounting. The key criterion for hedge accounting is that
the hedging relationship must be highly effective in achieving offsetting
changes in fair value or cash flows. SFAS 133 does not allow hedging of a
security which is classified as held to maturity, accordingly, upon adoption of
SFAS 133, companies may reclassify any security from held to maturity to
available for sale if they wish to be able to hedge the security in the future.
SFAS 133 became effective for the Company beginning January 1, 2001. The
adoption of SFAS 133 did not have a significant impact on the Company's
financial statements since no derivatives are currently held.

IMPACT OF INFLATION AND CHANGING PRICES

The consolidated financial statements and related data presented herein have
been prepared according to generally accepted accounting principles which
require the measurement of financial position and operating results in terms of
historical dollars without considering changes in the relative purchasing power
of money over time due to inflation. An exception to historical cost
presentation is the valuation of securities available for sale under FASB No.
115. The primary assets and liabilities of the Company are monetary in nature.
As a result, interest rates have a more significant impact on the Company's
performance than the effects of general levels of inflation. Interest rates do
not necessarily move in the same direction or magnitude as the prices of goods
and services.

2000 Annual Report to Shareholders                                           15

<PAGE>   16

                           [CROWE CHIZEK LETTERHEAD]

                         REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Western Ohio Financial Corporation
Springfield, Ohio

We have audited the accompanying consolidated balance sheets of Western Ohio
Financial Corporation as of December 31, 2000 and 1999, and the related
consolidated statements of income, comprehensive income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 2000. These financial statements are the responsibility of
the Corporation's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Western Ohio
Financial Corporation as of December 31, 2000 and 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2000, in conformity with generally accepted accounting principles.

                                      /s/ Crowe, Chizek and Company LLP

                                      Crowe, Chizek and Company LLP

February 8, 2001
Columbus, Ohio

16                                            Western Ohio Financial Corporation

<PAGE>   17

WESTERN OHIO FINANCIAL CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 2000 and 1999
(Dollars in thousands, except share data)

<TABLE>
<CAPTION>

ASSETS
                                                                        2000           1999
                                                                     ---------      ---------
<S>                                                                  <C>            <C>
    Cash and due from financial institutions                         $   3,596      $   6,455
    Overnight deposits in other financial institutions                   1,096          3,052
    Interest-bearing deposits in other financial institutions              113            107
                                                                     ---------      ---------
        Total cash and cash equivalents                                  4,805          9,614
    Securities available for sale                                       48,653         50,366
    Federal Home Loan Bank stock                                         8,014          7,451
    Loans, net of allowance of $1,665 in 2000 and $2,781 in 1999       283,604        254,654
    Loans held for sale                                                      -            217
    Premises and equipment, net                                          4,566          3,475
    Accrued interest receivable                                          2,045          1,806
    Other assets                                                           875          2,102
                                                                     ---------      ---------
            Total assets                                             $ 352,562      $ 329,685
                                                                     =========      =========

LIABILITIES
    Deposits                                                         $ 208,332      $ 202,331
    Borrowed funds                                                     100,225         82,183
    Advance payments from borrowers for taxes and insurance                570            864
    Other liabilities                                                    1,625          1,318
                                                                     ---------      ---------
        Total liabilities                                              310,752        286,696

SHAREHOLDERS' EQUITY
    Common stock, $.01 par value; 7,250,000 shares authorized;
     2,645,000 shares issued                                                26             26
    Additional paid-in capital                                          40,617         40,452
    Retained earnings                                                   20,065         20,060
    Unearned employee stock ownership plan shares                         (833)        (1,071)
    Unearned management recognition plan shares                           (102)          (200)
    Shares held by deferred compensation plan                             (168)             -
    Treasury stock; 829,166 and 649,166 shares, at cost                (17,055)       (14,121)
    Accumulated other comprehensive income                                (740)        (2,157)
                                                                     ---------      ---------
        Total shareholders' equity                                      41,810         42,989
                                                                     ---------      ---------
            Total liabilities and shareholders' equity               $ 352,562      $ 329,685
                                                                     =========      =========
</TABLE>

 See accompanying notes to consolidated financial statements.


2000 Annual Report to Shareholders                                           17


<PAGE>   18

WESTERN OHIO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 2000, 1999, and 1998
(Dollars in thousands except
earnings per common share data)

<TABLE>
<CAPTION>

                                                              2000         1999          1998
                                                            --------     --------      --------
<S>                                                         <C>          <C>           <C>
Interest and dividend income
  Loans, including fees                                     $ 21,706     $ 19,096      $ 20,411
  Securities                                                   3,265        3,567         2,588
  Interest-bearing deposits and overnight funds                   91          247         2,379
  Other interest and dividend income                             562          505           478
                                                            --------     --------      --------
    Total interest income                                     25,624       23,415        25,856

Interest expense
  Deposits                                                    10,494        9,667        12,435
  Borrowed funds                                               5,236        3,965         3,557
                                                            --------     --------      --------
    Total interest expense                                    15,730       13,632        15,992
                                                            --------     --------      --------
Net interest income                                            9,894        9,783         9,864
Provision for loan losses                                        349          246          (363)
                                                            --------     --------      --------
Net interest income after provision for loan losses            9,545        9,537        10,227

Noninterest income
  Service charges                                              1,182        1,085         1,005
  Net gain on sale of securities                                   -            -           307
  Net gain on sale of portfolio loans                             75            -             -
  Net gain on sale of loans held for sale                          -          111           345
  Net gain (loss) on disposal of premises and equipment            7           (6)          (82)
  Net gain on sale of branches                                     -            -         2,054
  Other                                                           30           71            60
                                                            --------     --------      --------
    Total noninterest income                                   1,294        1,261         3,689

Noninterest expense
  Salaries and employee benefits                               3,804        3,955         4,491
  Occupancy and equipment                                        819          846           853
  Federal deposit insurance                                       37          128           148
  State franchise taxes                                          514          620           748
  Professional services                                          410          454           703
  Advertising                                                    372          340           436
  Amortization of goodwill                                         -            -           295
  Data processing                                                827          855           829
  Other                                                        1,116          929         1,254
                                                            --------     --------      --------
    Total noninterest expense                                  7,899        8,127         9,757
                                                            --------     --------      --------

Income before income taxes                                     2,940        2,671         4,159
Income tax expense                                             1,089          988         2,864
                                                            --------     --------      --------
Net income                                                  $  1,851     $  1,683      $  1,295
                                                            ========     ========      ========
Earnings per common share:
  Basic                                                     $   1.01     $   0.86      $   0.60
                                                            ========     ========      ========
  Diluted                                                   $   1.01     $   0.85      $   0.58
                                                            ========     ========      ========
</TABLE>

See accompanying notes to consolidated financial statements.



18                                           Western Ohio Financial Corporation

<PAGE>   19

WESTERN OHIO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 2000, 1999, and 1998
(Dollars in thousands)

<TABLE>
<CAPTION>

                                                            2000        1999         1998
                                                          -------     -------      -------
<S>                                                       <C>         <C>          <C>
Net income                                                $ 1,851     $ 1,683      $ 1,295

Other comprehensive income (loss), net of tax
  Unrealized gain (loss) on available for sale
   securities arising during the period                     1,417      (2,037)        (226)

  Reclassification adjustment for amounts realized on
   securities sales included in net income                      -           -         (203)
                                                          -------     --------     -------
    Total other comprehensive income (loss)                 1,417      (2,037)        (429)
                                                          -------     --------     -------

Comprehensive income (loss)                               $ 3,268     $  (354)     $   866
                                                          =======     ========     =======
</TABLE>


See accompanying notes to consolidated financial statements.



2000 Annual Report to Shareholders                                           19

<PAGE>   20

WESTERN OHIO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
Years Ended December 31, 2000, 1999, and 1998
(Dollars in thousands)

<TABLE>
<CAPTION>

                                                                                                                Unearned
                                                                              Additional                        Employee
                                                  Shares           Common       Paid-In          Retained        Benefit
                                                Outstanding         Stock       Capital          Earnings      Plan Shares
                                                -----------         -----       -------          --------      -----------

<S>                                            <C>            <C>            <C>             <C>             <C>
Balance at January 1, 1998                       2,383,435      $       26     $   40,458      $   21,198      $   (1,943)

  Net income                                             -               -              -           1,295               -
  Cash dividends - $1.00 per share                       -               -              -          (2,142)              -
  Purchase of treasury shares                     (280,585)              -              -               -               -
  Commitment to release employee
    stock ownership plan shares                          -               -            120               -             238
  Reclassification of management
    recognition plan shares                              -               -              -               -            (148)
  Shares earned under management
    recognition plan, including tax benefit
    realized on vesting of plan shares               5,656               -              -               -             172
  Stock options exercised, including
    tax benefit                                     19,882               -           (126)              -               -
  Change in net unrealized gain (loss)
    on securities available for sale, net
    of reclassification and tax effects                  -               -              -               -               -
                                                 ---------      ----------     ----------      ----------      -----------
Balance at December 31, 1998                     2,128,388      $       26     $   40,452      $   20,351      $   (1,681)
  Net income                                             -               -              -           1,683               -
  Cash dividends - $1.00 per share                       -               -              -          (1,974)              -
  Purchase of treasury shares                     (140,882)              -              -               -               -
  Commitment to release employee
    stock ownership plan shares                          -               -             83               -             238
  Shares earned under management
    recognition plan, including tax benefit
    realized on vesting of plan shares                   -               -              -               -             159
  Management recognition plan shares
    awarded, net of forfeitures                       (735)              -              -               -              13
  Stock options exercised, including
    tax benefit                                      9,063               -            (83)              -               -
  Change in net unrealized gain (loss)
    on securities available for sale, net
    of reclassification and tax effects                  -               -              -               -               -
                                                 ---------      ----------     ----------      ----------      -----------
Balance at December 31, 1999                     1,995,834      $       26     $   40,452      $   20,060      $   (1,271)

  Net income                                             -               -              -           1,851               -
  Cash dividends - $1.00 per share                       -               -              -          (1,846)              -
  Purchase of treasury shares                     (180,000)              -              -               -               -
  Commitment to release employee
    stock ownership plan shares                          -               -             (3)              -             238
  Shares earned under management
    recognition plan, including tax benefit
    realized on vesting of plan shares                   -               -              -               -              98
  Shares purchased for deferred
    compensation plan                                    -               -            168               -               -
  Change in net unrealized gain (loss)
    on securities available for sale, net
    of reclassification and tax effects                  -               -              -               -               -
                                                 ---------      ----------     ----------      ----------      -----------
Balance at December 31, 2000                     1,815,834      $       26     $   40,617      $   20,065      $     (935)
                                                 =========      ==========     ==========      ==========      ===========
</TABLE>


<TABLE>
<CAPTION>

                                                                 Accumulated
                                                                    Other
                                                    Treasury     Comprehensive
                                                      Stock          Income            Total
                                                      -----          ------            -----

<S>                                              <C>             <C>             <C>
Balance at January 1, 1998                         $   (5,448)     $      309      $   54,600

  Net income                                                -               -           1,295
  Cash dividends - $1.00 per share                          -               -          (2,142)
  Purchase of treasury shares                          (6,611)              -          (6,611)
  Commitment to release employee
    stock ownership plan shares                             -               -             358
  Reclassification of management
    recognition plan shares                             1,487               -               -
  Shares earned under management
    recognition plan, including tax benefit
    realized on vesting of plan shares                      -               -             172
  Stock options exercised, including
    tax benefit                                           477               -             351
  Change in net unrealized gain (loss)
    on securities available for sale, net
    of reclassification and tax effects                     -            (429)           (429)
                                                   ----------      ----------      ----------
Balance at December 31, 1998                       $  (11,434)     $     (120)     $   47,594
  Net income                                                -               -           1,683
  Cash dividends - $1.00 per share                          -               -          (1,974)
  Purchase of treasury shares                          (2,826)              -          (2,826)
  Commitment to release employee
    stock ownership plan shares                             -               -             321
  Shares earned under management
    recognition plan, including tax benefit
    realized on vesting of plan shares                      -               -             159
  Management recognition plan shares
    awarded, net of forfeitures                           (13)              -               -
  Stock options exercised, including
    tax benefit                                           152               -              69
  Change in net unrealized gain (loss)
    on securities available for sale, net
    of reclassification and tax effects                     -          (2,037)         (2,037)
                                                   ----------      ----------      ----------
Balance at December 31, 1999                       $  (14,121)     $   (2,157)     $   42,989

  Net income                                                -               -           1,851
  Cash dividends - $1.00 per share                          -               -          (1,846)
  Purchase of treasury shares                          (2,934)              -          (2,934)
  Commitment to release employee
    stock ownership plan shares                             -               -             235
  Shares earned under management
    recognition plan, including tax benefit
    realized on vesting of plan shares                      -               -              98
  Shares purchased for deferred
    compensation plan                                    (168)              -               -
  Change in net unrealized gain (loss)
    on securities available for sale, net
    of reclassification and tax effects                     -           1,417           1,417
                                                   ----------      ----------      ----------
Balance at December 31, 2000                       $  (17,223)     $     (740)     $   41,810
                                                   ==========      ==========      ==========
</TABLE>

See accompanying notes to consolidated financial statements.

20                                           Western Ohio Financial Corporation

<PAGE>   21

WESTERN OHIO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2000, 1999, and 1998
(Dollars in thousands)

<TABLE>
<CAPTION>

                                                                          2000           1999          1998
                                                                          ----           ----          ----
<S>                                                                     <C>           <C>           <C>
 Cash flows from operating activities
  Net income                                                            $  1,851      $  1,683      $  1,295
  Adjustments to reconcile net income to net cash
   from operating activities:
    Net amortization on securities                                            99           137            78
    Compensation expense on ESOP shares                                      235           321           358
    Compensation expense on MRP shares                                        98           159           172
    Depreciation and amortization                                            558           313           711
    FHLB stock dividends                                                    (562)         (503)         (478)
    Net deferred loan fees                                                    25           (21)          (16)
    Deferred income taxes                                                    568           342           (71)
    Provision for loan losses                                                349           246          (363)
    Net gain on sale of branches                                               -             -        (2,054)
    Net realized gain on sales of securities                                   -             -          (307)
    Net gain on sale of loans                                                (75)         (111)         (345)
    Net (gain) loss on sale or disposal of premises
     and equipment                                                            (7)            6            82
    Net loss on sale of real estate owned                                      -             1            32
    Net change in:
      Loans held for sale                                                    217         3,792        (1,131)
      Other assets and other liabilities                                     237           362           351
      Accrued interest receivable                                           (240)           91           808
                                                                        ---------     ---------     --------
       Net cash from operating activities                               $  3,353      $  6,818      $   (878)

Cash flows from investing activities
  Securities available for sale:
    Purchases                                                             (1,118)            -       (50,179)
    Maturities and principal payments                                      4,880        11,857         6,888
    Sales                                                                      -             -        22,312
  Purchases of loans                                                     (21,959)      (27,842)            -
  Proceeds from sale of portfolio loans                                    1,590             -             -
  Net (increase) decrease in loans                                        (8,881)        3,877        44,406
  Premises and equipment expenditures                                     (1,672)       (1,076)         (397)
  Proceeds from sale of premises and equipment                                29           523            27
  Purchase of real estate                                                      -             -          (249)
  Proceeds from sale of real estate owned                                      -            55           217
                                                                        ---------     ---------     --------
       Net cash from investing activities                               $(27,131)     $(12,606)     $ 23,025
</TABLE>

(continued)




2000 Annual Report to Shareholders                                            21

<PAGE>   22

WESTERN OHIO FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2000, 1999, and 1998
(Dollars in thousands)

<TABLE>
<CAPTION>

                                                              2000          1999          1998
                                                              ----          ----          ----
<S>                                                        <C>           <C>           <C>
Cash flows from financing activities
  Cash paid for sale of branches                                  -             -       (78,453)
  Net change in deposits                                      6,001         9,365        30,422
  Net change in advance payments from borrowers
   for taxes and insurance                                     (294)          (17)          (12)
  Net increase (decrease) in short-term borrowings            7,700       (31,040)       13,700
  Proceeds from FHLB advances                                15,795        39,981         6,290
  Repayments on FHLB advances                                (5,453)      (12,010)       (3,077)
  Cash dividends paid                                        (1,846)       (1,974)       (2,142)
  Proceeds from exercise of stock options                         -            69           351
  Purchase of treasury stock                                 (2,934)       (2,826)       (6,611)
                                                           --------      --------      --------
     Net cash from financing activities                      18,969         1,548       (39,532)
                                                           --------      --------      --------
Net change in cash and cash equivalents                      (4,809)       (4,240)      (17,385)

Cash and cash equivalents at beginning of year                9,614        13,854        31,239
                                                           --------      --------      --------
Cash and cash equivalents at end of year                   $  4,805      $  9,614      $ 13,854
                                                           ========      ========      ========

Supplemental disclosures of cash flow information
  Cash paid during the year for
    Interest                                               $ 15,584      $ 13,401      $ 16,171
    Income taxes                                                640           540         2,425
  Noncash activities
    Transfer of portfolio loans to loans held for sale            -             -         2,767
</TABLE>

See accompanying notes to consolidated financial statements.



22                                            Western Ohio Financial Corporation

<PAGE>   23

WESTERN OHIO FINANCIAL CORPORATION
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 2000, 1999, and 1998
(Dollars in thousands, except per share data)

1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPALS OF CONSOLIDATION: The consolidated financial statements include the
accounts of Western Ohio Financial Corporation (Western) and its wholly owned
subsidiary, Cornerstone Bank (Bank), together referred to as the Corporation.
The financial statements of the Bank include the accounts of its wholly-owned
subsidiaries, CornerstoneBanc Financial Services, Inc. (CFSI) and West Central
Financial Services, Inc. (WCFS). Intercompany transactions and balances are
eliminated in consolidation.

NATURE OF OPERATIONS: The Corporation's revenues, operating income and assets
are primarily from the banking industry. The Corporation operates six offices in
west central Ohio. Loan customers include a wide range of individuals,
businesses and other organizations. Major portions of loans are secured by
various forms of collateral including real estate, business assets, consumer
property and other items. The Corporation's primary funding source is deposits
from customers in its market area. The Corporation also purchases investments
and engages in mortgage banking operations.

USE OF ESTIMATES: To prepare financial statements in conformity with generally
accepted accounting principles, management makes estimates and assumptions based
on available information. These estimates and assumptions affect the amounts
reported in the financial statements and the disclosures provided, and future
results could differ. The allowance for loan losses, fair values of financial
instruments and status of contingencies are particularly subject to change.

CASH FLOW REPORTING: Cash and cash equivalents include cash on hand, amounts due
from depository institutions, federal funds sold and interest bearing deposits
in other financial institutions with original maturities of 90 days or less. Net
cash flows are reported for customer loan and deposit transactions.

SECURITIES: Securities are classified as held to maturity and carried at
amortized cost when management has the positive intent and ability to hold them
to maturity. Securities are classified as available for sale when they might be
sold before maturity. Securities available for sale are carried at fair value
with unrealized holding gains and losses reported in other comprehensive income.
Securities are classified as trading when held for short-term periods in
anticipation of market gains and are carried at fair value. Other securities
such as Federal Home Loan Bank stock are carried at cost.
    Interest income includes amortization of purchase premiums and discounts.
Gains and losses on sales are based on the amortized cost of the specific
security sold. Securities are written down to fair value when a decline in fair
value is not temporary.

LOANS: Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at the principal
balance outstanding, net of deferred loan fees and costs and an allowance for
loan losses. Loans held for sale are reported at the lower of cost or market, on
an aggregate basis.
    Interest income is reported on the interest method and includes amortization
of net deferred loan fees and costs over the loan term. Interest income is not
reported when full loan repayment is in doubt, typically when the loan is
impaired or payments are past due over 90 days. Payments received on such loans
are reported as principal reductions.

ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses is a valuation
allowance for probable incurred credit losses, increased by the provision for
loan losses and decreased by charge-offs less recoveries. Management estimates
the allowance balance required using past loan loss experience, the nature and
volume of the portfolio, information about specific borrower situations and
estimated collateral values, economic conditions and other factors. Allocations
of the allowance may be made for specific loans, but the entire allowance is
available for any loan that, in management's judgment, should be charged-off.
Loan losses are charged against the allowance when management believes the
uncollectibility of a loan balance is confirmed.
    A loan is impaired when full payment under the loan terms is not expected.
Impairment is evaluated in total for smaller-balance loans of similar nature
such as residential mortgage, consumer, and credit card loans, and on an
individual loan basis for other loans. If a loan is impaired, a portion of the
allowance is allocated so that the loan is reported, net, at the present value
of estimated future cash flows using the loan's existing rate or at the fair
value of collateral if repayment is expected solely from the collateral.

FORECLOSED ASSETS: Assets acquired through or instead of loan foreclosure are
initially recorded at fair value when acquired, establishing a new cost basis.
If fair value declines, a valuation allowance is recorded through expense. Costs
after acquisition are expensed.

PREMISES AND EQUIPMENT: Land is carried at cost. Premises and equipment are
stated at cost less accumulated depreciation. Depreciation is computed over the
assets' useful lives using straight-line and accelerated methods. These assets
are reviewed for impairment when events indicate the carrying amount may not be
recoverable. Maintenance and repairs are expensed and major improvements are
capitalized.

2000 Annual Report to Shareholders                                           23

<PAGE>   24

SERVICING RIGHTS: Servicing rights are recognized as assets for purchased rights
and for the allocated value of retained servicing rights on loans sold.
Servicing rights are expensed in proportion to, and over the period of,
estimated net servicing revenues. Impairment is evaluated based on the fair
value of the rights, using groupings of the underlying loans as to interest
rates and then, secondarily, as to geographic and prepayment characteristics.
Fair value is determined using prices for similar assets with similar
characteristics when available, or based upon discounted cash flows using
market-based assumptions. Any impairment of a grouping is reported as a
valuation allowance. In 1999 the Corporation sold its servicing rights in loans
previously sold. The Corporation did not have any servicing rights at year end
2000.

INTANGIBLES: Purchased intangibles, primarily goodwill and core deposit value,
are recorded at cost and amortized over the estimated life. Goodwill
amortization was straight-line over twenty years and core deposit amortization
was accelerated over ten years. These intangibles were eliminated in connection
with the sale of branch offices as more fully disclosed in Note 2. Goodwill
amortization expense was $295 in 1998.

INCOME TAXES: Income tax expense is the total of the current year income tax due
or refundable and the change in deferred tax assets and liabilities. Deferred
tax assets and liabilities are the expected future tax amounts for the temporary
differences between carrying amounts and tax bases of assets and liabilities,
computed using enacted tax rates. A valuation allowance, if needed, reduces
deferred tax assets to the amount expected to be realized.

FINANCIAL INSTRUMENTS: Financial instruments include off-balance sheet credit
instruments, such as commitments to make loans and standby letters of credit
issued to meet customer financing needs. The face amount for these items
represent the exposure to loss, before considering customer collateral or
ability to repay. Such financial instruments are recorded when they are funded.

STOCK COMPENSATION: Employee compensation expense under stock option plans is
reported if options are granted below market price at grant date. Pro forma
disclosures of net income and earnings per share are shown using the fair value
method of SFAS No. 123 to measure expense for options granted after 1994, using
an option pricing model to estimate fair value.

EMPLOYEE STOCK OWNERSHIP PLAN: The cost of shares issued to the employee stock
ownership plan ("ESOP"), but not yet allocated to participants, is shown as a
reduction of shareholders' equity. Compensation expense is based on the market
price of shares as they are committed to be released to participant accounts.
Dividends on allocated ESOP shares reduce retained earnings; dividends on
unearned ESOP shares reduce debt and accrued interest.

MANAGEMENT RECOGNITION PLAN: The cost of unearned shares held by the management
recognition plan ("MRP") is shown as a reduction of shareholders' equity. The
cost of shares awarded to participants is amortized to expense as the shares are
earned over the vesting periods of the awards on a straight-line method.

EARNINGS PER COMMON SHARE: Basic earnings per common share is based on net
income divided by the weighted average number of shares outstanding during the
period. ESOP shares are considered outstanding for the calculation unless
unearned. Diluted earnings per common share includes the dilutive effect of
additional potential common shares issuable under stock options. MRP shares are
considered outstanding as they become vested.

COMPREHENSIVE INCOME: Comprehensive income consists of net income and other
comprehensive income. Other comprehensive income includes unrealized gains and
losses on securities available for sale, which are also recognized as a separate
component of shareholders' equity.

LOSS CONTINGENCIES: Loss contingencies, including claims and legal actions
arising in the ordinary course of business, are recorded as liabilities when the
likelihood of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there now are such matters that will have
a material effect on the financial statement.

RESTRICTIONS OF CASH: The Corporation was required to have $489 and $651 of cash
on hand or on deposit with the Federal Reserve Bank to meet regulatory reserve
and clearing requirements at year end 2000 and 1999. These balances do not earn
interest.

FAIR VALUE OF FINANCIAL INSTRUMENTS: Fair values of financial instruments are
estimated using relevant market information and other assumptions, as more fully
disclosed in a separate note. Fair value estimates involve uncertainties and
matters of significant judgment regarding interest rates, credit risk,
prepayments, and other factors, especially in the absence of broad markets for
particular items. Changes in assumptions or in market conditions could
significantly affect the estimates.

NEW ACCOUNTING PRONOUNCEMENT: Beginning January 1, 2001, a new accounting
standard requires all derivatives to be recorded at fair value. Unless
designated as hedges, changes in these fair values are recorded in the income
statement. Fair value changes involving hedges will generally be recorded by
offsetting gains and losses on the hedge and on the hedged item, even if the
fair value of the hedged item is not otherwise recorded. Adoption of this
standard on January 1, 2001 did not have a material effect on the Corporation's
financial statements, as no derivatives are currently held.

24                                            Western Ohio Financial Corporation

<PAGE>   25

DIVIDEND RESTRICTION: Banking regulations require the maintenance of certain
capital levels and may limit the amount of dividends paid by the Bank to Western
or Western to shareholders.

BUSINESS SEGMENT: Internal financial information is primarily reported and
aggregated solely in the line of business of banking.

RECLASSIFICATIONS: Some items in prior financial statements have been
reclassified to conform with the current presentation.

2. SALE OF BRANCH OFFICES

In 1998, the Corporation sold its Cincinnati, Ohio, area branch offices. Details
of the assets and liabilities sold with the branch offices are as follows:
----------------------------------------------------
  ASSETS

  Cash and cash equivalents              $78,453
  Loans                                       23
  Premises and equipment                     586
                                         -------
                                         $79,602
                                         =======

  LIABILITIES
  Deposits                               $84,365
                                         =======
----------------------------------------------------
The net gain realized in connection with the sale was determined as follows:
----------------------------------------------------
  Premium on deposits sold               $ 5,426
  Write-off of intangible assets          (3,255)
  Loss on premises and equipment            (117)
                                          ------
    Net gain on sale of branch offices   $ 2,054
                                          ======
----------------------------------------------------
3.  SECURITIES
---------------------------------------------------------------------------
Year-end securities available for sale were as follows:

<TABLE>
<CAPTION>

                                            Gross      Gross
                              Amortized   Unrealized Unrealized      Fair
                                Cost        Gains      Losses        Value
                              ---------   ---------- ----------     ------
<S>                            <C>        <C>          <C>          <C>
2000
U.S. government agencies       $10,000    $      -     $  (566)     $ 9,434
Mortgage-backed securities      39,774          39        (594)      39,219
                               -------    --------     -------      -------
    Total                      $49,774    $     39     $(1,160)     $48,653
                               =======    ========     =======      =======

1999
U.S. government agencies       $10,000    $      -     $(1,125)     $ 8,775
Mortgage-backed securities      43,635          28      (2,072)      41,591
                               -------    --------     -------      -------
    Total                      $53,635    $     28     $(3,297)     $50,366
                               =======    ========     =======      =======
</TABLE>
----------------------------------------------------------------------------
2000 Annual Report to Shareholders                                           25

<PAGE>   26

At year-end 2000 and 1999, there were no holdings of securities of any one
issuer, other than the U.S. government and its agencies, in an amount greater
than 10% of shareholders' equity.

Contractual maturities of debt securities at year-end 2000 were as follows:
-------------------------------------------------------
                                  Amortized      Fair
                                     Cost        Value
                                  ---------   ---------
Due after ten years               $  10,000   $   9,434
Mortgage-backed securities           39,774      39,219
                                  ---------   ---------
                                  $  49,774   $  48,653
                                  =========   =========
-------------------------------------------------------
Proceeds of available for sale securities and the gross gains and losses were as
follows:
-------------------------------------------------------
                         2000         1999      1998
                      -------         ----     -------
Securities
  Proceeds            $    -            -      $22,312
  Gross gains              -            -          312
  Gross losses             -            -            5
-------------------------------------------------------
Securities pledged at year-end 2000 and 1999 had a carrying amount of $13,954
and $12,969 and were pledged to secure public deposits, borrowings, and for
other purposes as required or permitted by law.

4.  LOANS

Year-end loans were as follows:
-----------------------------------------------------------
                                     2000            1999
                                   ---------      ---------

First mortgage loans secured by:
 One-to-four family residences     $ 178,106      $ 178,304
 Other properties                     67,919         52,572
 Construction properties               8,476          6,923
Consumer and other loans:
 Consumer                              1,523          3,332
 Commercial                           14,090          5,499
 Home equity                          17,766         15,369
 Other                                    85            157
                                    --------       --------
     Total loans                     287,965        262,156

Less:
 Net deferred loan fees,
     premiums and discounts              (87)           (62)
 Loans in process                     (2,609)        (4,659)
 Allowance for loan losses            (1,665)        (2,781)
                                   ---------      ---------
     Net loans                     $ 283,604      $ 254,654
                                   =========      =========
------------------------------------------------------------
Activity in the allowance for loan losses was as follows:
----------------------------------------------------------------
                                2000         1999         1998
                               -------      -------      -------
Beginning balance              $ 2,781      $ 3,200      $ 3,922
 Provision for loan losses         349          246         (363)
 Loans charged-off              (1,588)        (736)        (396)
 Recoveries of previous
   charge-offs                     123           71           37
                               -------      -------      -------
 Balance at end of year        $ 1,665      $ 2,781      $ 3,200
                               =======      =======      =======
-----------------------------------------------------------------
Impaired loans were as follows:
-----------------------------------------------------------------
                                    2000       1999
                                   ------     ------
Year-end loans with no
  allocated allowance
  for loan losses                  $1,709     $  479
Year-end loans with
  allocated allowance
  for loan losses                     352      1,909
                                   ------     ------
  Total                            $2,061     $2,388
                                   ======     ======

Amount of the allowance
  for loan losses allocated        $  241     $1,159

Average of impaired loans
  during the year                   1,536      2,409

Interest income recognized
  during impairment                   156        110

Cash-basis interest income
  recognized during impairment        156        110
-----------------------------------------------------------------
Non-performing loans were as follows:
-----------------------------------------------------------------

                                         2000        1999
                                      ---------   ---------
 Loans past due over 90 days
   still on accrual                   $       -   $       -
 Nonaccrual loans                         3,601       2,755

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

26                                            Western Ohio Financial Corporation

<PAGE>   27

Nonaccrual loans include substantially all impaired loans and smaller balance
homogeneous loans, such as residential mortgage and consumer loans, that are
collectively evaluated for impairment.

    Certain directors and executive officers and their related interests were
loan customers of the Corporation. A summary of activity on related party loans
is as follows:
----------------------------------------
                                  2000
                               ---------
  Beginning balance            $   1,494
    New loans                      2,865
  Repayments                        (962)
                               ---------
  Ending balance               $   3,397
                               =========
----------------------------------------
Other changes represent loans reportable at the end of one period that are
excludable from the other period due to changes in borrowers and other
circumstances.

5.  PREMISES AND EQUIPMENT

Year-end premises and equipment were as follows:
----------------------------------------------------------
                                         2000       1999
                                         ----       ----
  Land                                $    976   $     815
  Buildings and improvements             3,118       3,102
  Furniture, fixtures and equipment      3,386       2,648
  Construction in progress                 631           -
                                      --------   ---------
                                         8,111       6,565
  Accumulated depreciation              (3,545)     (3,090)
                                      --------   ---------
                                      $  4,566   $   3,475
                                      ========   =========
----------------------------------------------------------
Depreciation expense was $558,000, $313,000, and $346,000 for 2000, 1999, and
1998.
    Certain facilities and equipment are leased under various noncancelable
operating leases, which expire at various dates through 2004. Rental expense on
lease commitments amounted to $197 and $165 in 2000 and 1999. Future minimum
lease payments on lease obligations are as follows:
---------------------------------------
  2001                         $     38
  2002                               18
  2003                               18
  2004                               18
                               --------
                               $     92
                               ========
---------------------------------------
6.  DEPOSITS

Year-end deposits were as follows:
-----------------------------------------------------------------
                                               2000        1999
                                            ---------   ---------

 Checking - noninterest-bearing             $   8,112   $   5,578
 Checking - interest-bearing                   10,839       7,951
 Money market accounts                         44,859      49,149
 Passbook and savings accounts                 10,994      12,065
 Certificates of deposit:
   In denominations
     under $100,000                           112,882     115,325
   In denominations of
     $100,000 or more                          20,646      12,263
                                            ---------   ---------
                                            $ 208,332   $ 202,331
                                            =========   =========
-----------------------------------------------------------------
At year-end 2000, scheduled maturities of certificates of deposit were as
follows:
-----------------------------------------------------------------------
   2001                       $  74,695
   2002                          41,910
   2003                          11,098
   2004                           2,114
   2005                           2,919
   Thereafter                       792
                              ---------
                               $133,528
                              =========
------------------------------------------------------------------------
7.  BORROWED FUNDS

Borrowed funds at year-end 2000 and 1999 consisted of advances from the Federal
Home Loan Bank of Cincinnati ("FHLB") and were as follows:
--------------------------------------------------------
<TABLE>
<CAPTION>
                      2000              1999
              ------------------  -----------------
    FHLB                Weighted            Weighted
  advances              Average             Average
 maturing in:  Balance   Rate      Balance    Rate
              --------   ----      -------   ----
<S>          <C>        <C>       <C>       <C>
    2000      $      -   -         $11,400   5.94%
    2001        26,281   6.51%       5,340   5.51
    2002         6,387   6.50          700   6.81
    2003         3,816   6.41          222   5.89
    2004         5,330   6.67        5,158   6.56
    2005           405   6.97          113   7.02
    2008        46,006   4.98       50,000   5.09
    2009         9,000   6.42            -   -
    2010         3,000   6.60        9,000   5.72
    2019             -   -             250   3.50
              --------   ----      -------   ----
    Total     $100,225   5.82%     $82,183   5.41%
              ========   ====      =======   ====
--------------------------------------------------
2000 Annual Report to Shareholders                                            27
</TABLE>
<PAGE>   28

Average balances of borrowings outstanding during 2000 and 1999 were $91,189 and
$76,449. Advances under the borrowing agreements are collateralized by a blanket
pledge of the Corporation's residential mortgage loan portfolio and FHLB stock.
Mortgage loans and all shares of FHLB stock owned by the Bank totaling $125,281
and $8,014 at December 31, 2000, and $123,275 and $7,451 at December 31, 1999
were pledged as collateral for the FHLB advances. Advances of $45.0, $4.0 and
$3.0 million maturing in 2008, 2009, and 2010 are fixed rate advances
convertible to quarterly adjustable at the option of the FHLB after certain
preestablished dates. Advances of $23.0, $4.0, and $25.0 million are convertible
in 2001, 2002, and 2003 respectively.

8.  EMPLOYEE BENEFIT PLANS

EMPLOYEE STOCK OWNERSHIP PLAN: The Corporation offers an ESOP for the benefit of
all salaried employees who meet age and service requirements. The ESOP borrowed
funds from the Corporation with which to acquire common shares of the
Corporation. The loan is secured by the shares purchased with the loan proceeds
and will be repaid by the ESOP with funds from the Corporation's discretionary
contributions to the ESOP and earnings on ESOP assets. The shares are being
allocated to eligible employees' accounts over a ten year period which started
in 1994. Expense for shares committed to be allocated during 2000, 1999 and 1998
was $235, $321 and $358.

    The ESOP shares at year-end 2000 and 1999 were as follows:
--------------------------------------------------
                                   2000      1999
                                 -------   -------
 Allocated shares                 81,829    66,951
 Shares committed to be
   released for allocation        14,878    14,878
 Unreleased shares                52,074    66,952
                                 -------   -------
     Total ESOP shares           148,781   148,781
                                 =======   =======

 Fair value of unreleased shares $   895   $ 1,105
                                 =======   =======
--------------------------------------------------
MANAGEMENT RECOGNITION PLAN: The Corporation maintains an MRP for the benefit of
directors and certain key employees of the Corporation. The MRP is used to
provide such individuals ownership interest in the Corporation in a manner
designed to compensate such directors and key employees for services to the
Corporation. As of December 31, 2000, 64,770 shares of the initial 105,800
shares reserved for grants have been awarded. One-fifth of such shares will be
earned and nonforfeitable on each of the first five anniversaries of the dates
of the awards. Grantees have all the benefits of shareholders, including the
right to receive dividends, except for certain restrictions on the
transferability of the shares. Compensation expense, which is based upon the
cost of the shares, was $98, $159 and $172 for 2000, 1999 and 1998.

DEFERRED COMPENSATION PLANS: In 1996, the Corporation adopted a non-qualified
deferred compensation plan for two officers. Under the plan, those covered
agreed to defer a portion of their current compensation in exchange for future
payments. The liability for the future payments is secured by single-premium
life insurance policies on each of the individuals covered.

    In 1998, the Corporation established a non-qualified deferred compensation
plan for the benefit of certain officers and directors. Eligible employees may
allocate up to 100% of compensation (base salary, bonus, MRP, annual retainer or
meeting fees) to their deferred compensation accounts.

401(k) PROFIT SHARING PLAN: The Corporation offers a 401(k) profit sharing plan
covering substantially all employees. The annual expense of the plan is based on
a partial matching of voluntary employee contributions of up to 6% of individual
compensation. The matching percentage was 50% for 2000, 1999 and 1998. Employee
contributions are vested at all times and the Corporation's matching
contributions become fully vested after an individual has completed 5 years of
service. The cash contribution expense included in salaries and employee
benefits was $51, $46 and $45 for 2000, 1999 and 1998.

STOCK OPTION AND INCENTIVE PLANS: In January 1995, shareholders approved an
Incentive Stock Option Plan. Under the provisions of the Plan, 264,500 shares
have been allocated for non-qualified and incentive stock options to be granted
to directors and selected employees. Grantees are awarded 10-year options to
acquire shares at the market price on the date the option is granted. The
options fully vest and become exercisable in five equal annual installments
commencing one year after the date of the grant.

    In April 1998, shareholders approved an Omnibus Incentive Plan. Under the
provisions of the plan, 235,224 shares have been allocated for non-qualified and
incentive stock options to be granted to directors and selected employees.
Grantees are awarded 10-year options to acquire shares at the market price on
the date the option is granted. The options are fully vested and exercisable on
the date of the grant.

28                                            Western Ohio Financial Corporation

<PAGE>   29

    The following is a summary of activity in the stock option and incentive
plan:

                                 Stock Options
                      -------------------------------------
                                                 Weighted-
                       Options                    Average
                      Available      Options      Exercise
                      for Grant    Outstanding     Price
                      ---------    -----------   ----------
January 1, 1998          6,229       190,370       18.17

  Plan adopted         235,224             -           -
  Granted              (32,936)       32,936       23.00
  Forfeited              1,690        (1,690)      15.23
  Exercised                  -       (19,882)      18.39
                       -------       -------
December 31, 1998      210,207       201,734       19.22

  Granted               (6,000)        6,000       21.89
  Forfeited              4,630        (4,630)      17.50
  Exercised                  -        (9,063)      13.77
                       -------       -------
December 31, 1999      208,837       194,041      $19.60

  Granted              (52,605)       52,605       14.75
  Forfeited              5,300        (5,300)      18.75
  Exercised                  -             -
                       -------       -------
December 31, 2000      161,532       241,346      $18.56
                       =======       =======

The following table summarizes information about stock options outstanding at
year-end 2000:

           Weighted Average
 Exercise      Remaining       Number
  Price     Contractual Life Outstanding   Exercisable
 --------  ----------------- -----------   -----------
 $ 11.47        6.29 years      7,151        7,151
   14.75        9.43           52,605       52,605
   17.50        4.08           76,282       76,282
   18.50        4.38           23,172       23,172
   19.75        4.39            5,000        5,000
   20.50        4.55            5,000        5,000
   21.75        6.37            1,000          600
   22.00        6.48           25,000       15,000
   22.13        8.13            4,000        4,000
   22.19        8.15              500          500
   22.50        8.32            1,000        1,000
   23.00        7.86           32,636       32,636
   26.63        6.81            8,000        4,800
                              -------      -------
                              241,346      227,746
                              =======      =======

No stock appreciation rights or restricted stock awards have been granted.
    The fair value of options granted in 2000 was estimated using the
Black-Scholes option pricing model using the following assumptions: risk-free
interest rate of 6.35%, expected life of 5 years, expected volatility of stock
price of 22.82% and expected dividend rate of 6.78%. Based on these assumptions,
the estimated fair value of options granted in 2000 was $2.03 per option.
    The fair value of options granted in 1999 was estimated using the
Black-Scholes option pricing model using the following assumptions: risk-free
interest rate of 5.10%, expected life of 5 years, expected volatility of stock
price of 13.32% and expected dividend rate of 4.60%. Based on these assumptions,
the estimated fair value of options granted in 1999 was $2.22 per option.
    The fair value of options granted in 1998 was estimated using the
Black-Scholes option pricing model using the following assumptions: risk-free
interest rate of 4.81%, expected life of 5 years, expected volatility of stock
price of 18.48% and expected dividend rate of 4.44%. Based on these assumptions,
the estimated fair value of options granted in 1998 was $3.16 per option.
    SFAS No. 123, "Accounting for Stock Based Compensation," requires pro forma
disclosures for companies not adopting its fair value accounting method for
stock-based employee compensation. Accordingly, the following pro forma
information presents net income and earnings per share for 2000, 1999 and 1998
had the Standard's fair value method been used to measure compensation cost for
stock option plans. No compensation expense related to stock options was
actually recognized.

                         2000      1999       1998
                         ----      ----       ----
 Net income:
   As reported         $ 1,851    $1,683     $1,295
   Pro forma             1,612     1,534      1,051

 Earnings per share:
   As reported
     Basic             $ 1.01     $  .86     $  .60
     Diluted             1.01        .85        .58
   Pro forma

     Basic             $  .88     $  .78     $  .48
     Diluted              .88        .77        .47


2000 Annual Report to Shareholders                                            29

<PAGE>   30

9.  COMMITMENTS, OFF-BALANCE SHEET RISK
    AND CONTINGENCIES

Some financial instruments, such as loan commitments, credit lines, letters of
credit and overdraft protection are issued to meet customer financing needs.
These are arrangements to provide credit or to support the credit of others, as
long as conditions established in the contract are met, and usually have
expiration dates. Commitments may expire without being used. Off-balance sheet
risk to credit losses exists up to the face amount of these instruments,
although material losses are not anticipated. The same credit policies are used
to make such commitments as are used for loans, including obtaining collateral
at exercise of the commitment.

At year-end 2000 and 1999, the Corporation had commitments to originate loans
and amounts available on approved lines of credit as follows:

                                FIXED    VARIABLE
                                RATE       RATE        TOTAL
                                ----       ----        -----

 2000
 First mortgage loans          $   256   $     -      $   256
 Consumer and other loans            -       314          314
 Commercial loans                    -         -            -
 Home equity lines of credit         -     9,849        9,849
 Commercial lines of credit                4,058        4,058
 Stand-by letters of credit          -        48           48
                               -------   -------      -------
                               $   256   $14,269      $14,525
                               =======   =======      =======

 1999
 First mortgage loans          $   488   $ 1,619      $ 2,107
 Consumer and other loans            -     1,903        1,903
 Commercial loans                    -         -            -
 Home equity lines of credit         -     9,267        9,267
 Commercial lines of credit                1,716        1,716
 Stand-by letters of credit          -         -            -
                               -------   -------      -------
                               $   488   $14,505      $14,993
                               =======   =======      =======

The interest rates on fixed-rate loan commitments ranged from 7.13% to 8.13% at
year-end 2000 and 7.63% to 8.25% at year-end 1999.

EMPLOYMENT AGREEMENTS: The Corporation has employment agreements with certain
officers of the Corporation and Cornerstone. The agreements provide for a term
of employment for up to four years and a salary and performance review not less
often than annually, as well as inclusion of the employee in any formally
established employee benefit plan for which such personnel are eligible. The
employment agreements also contain provisions with respect to payment should a
change in control occur.

LIQUIDATION ACCOUNT: In conjunction with its conversion to a stock institution
in 1994, the Corporation established a liquidation account of $21,664, which was
equal to its total net worth as of the date of the latest statement of financial
condition appearing in the final conversion prospectus. The liquidation account
is maintained for the benefit of eligible depositors who continue to maintain
their accounts with the Corporation after the conversion. The liquidation
account is reduced annually to the extent that eligible depositors have reduced
their qualifying deposits. Subsequent increases do not restore an eligible
account holder's interest in the liquidation account. In the event of a complete
liquidation, each eligible depositor 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.



30                                            Western Ohio Financial Corporation
<PAGE>   31

10.  DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS

The carrying amounts and estimated fair values of financial instruments at
year-end were as follows:

<TABLE>
<CAPTION>

                                              2000                           1999
                                    ------------------------      ------------------------
                                     Carrying         Fair        Carrying         Fair
                                      Amount          Value        Amount          Value
                                    ---------      ---------      ---------      ---------
<S>                                 <C>            <C>            <C>            <C>
 Financial assets:
  Cash and cash equivalents         $   4,805      $   4,805      $   9,614      $   9,614
  Securities available for sale        48,653         48,653         50,366         50,366
  FHLB stock                            8,014          8,014          7,451          7,451
  Loans, net                          283,604        284,388        254,654        247,421
  Loans held for sale                       -              -            217            217
  Accrued interest receivable           2,045          2,045          1,806          1,806

Financial liabilities:
  Deposits                           (208,332)      (209,280)      (202,331)      (201,617)
  Borrowed funds                     (100,225)       (99,748)       (82,183)       (79,655)
  Advance payments by borrowers
   for taxes and insurance               (570)          (570)          (864)          (864)
  Accrued interest payable             (1,087)        (1,087)          (717)          (717)
</TABLE>

The estimated fair value approximates carrying amount for all items except those
described below. Estimated fair value for securities is based on quoted market
values for the individual securities or for equivalent securities. Estimated
fair values of fixed-rate loans and loans that reprice less frequently than each
year, are based on the rates charged at year-end for new loans with similar
maturities, applied until the loan is assumed to reprice or be paid. Estimated
fair values for certificates of deposit and long-term debt are based on the
rates paid at year-end for new deposits or borrowings applied until maturity.
Estimated fair values for other financial instruments and off-balance-sheet
loan commitments are considered nominal.



2000 Annual Report to Shareholders                                            31

<PAGE>   32
11. INCOME TAXES

Income tax expense consisted of the following:

                       2000        1999       1998
                      -------    -------     ------
 Current              $   521    $   646     $2,935
 Deferred                 568        342        (71)
                      -------    -------     ------
                      $ 1,089    $   988     $2,864
                      =======    =======     ======

The sources of year-end gross deferred income tax assets and liabilities were as
follows:

                                      2000         1999
                                      ----         ----
 Deferred tax assets
   Deferred compensation and
    management recognition plan     $    89      $    88
  Allowance for loan losses             513          875
  Unrealized loss on securities
    available for sale                  381        1,111
  Other                                   5           21
                                    -------      -------
                                        988        2,095
Deferred tax liabilities
  FHLB stock dividends                1,115          924
                                    -------      -------
                                    $  (127)       1,171
                                    =======      =======

Total income tax expense differed from the amounts computed by applying the U.S.
federal income tax rate of 34% to income before income taxes as a result of the
following:

                                      2000        1999        1998
                                      ----        ----        ----
 Income tax computed at
  the statutory tax rate            $ 1,000      $  908      $1,414
Tax effect of:
    Intangible assets                     -           9       1,372
    Other                                89          71          78
                                    -------      ------      ------
                                     $1,089      $  988      $2,864
                                    =======      ======      ======

  Effective tax rate                   37.0%       37.0%       68.9%
                                       ====        ====        ====

Retained earnings at December 31, 2000 and 1999, include $8,709 for which no
provision for federal income taxes has been made. This amount represents the
qualifying and nonqualifying tax bad debt reserve as of December 31, 1987 which
is the Corporation's base year for purposes of calculating the bad debt
deduction for tax purposes. The related amount of unrecognized deferred tax
liability was $2,961 at December 31, 2000 and 1999. If this portion of retained
earnings is used in the future for any purpose other than to absorb bad debts,
it will be added to future taxable income.

12. REGULATORY CAPITAL REQUIREMENTS

Banks are subject to regulatory capital requirements administered by federal
regulatory agencies. Capital adequacy guidelines and prompt corrective action
regulations involve quantitative measures of assets, liabilities and certain
off-balance-sheet items calculated under regulatory accounting practices.
Capital amounts and classifications are also subject to qualitative judgments by
the regulators. Failure to meet capital requirements can initiate regulatory
action.
    Prompt corrective action regulations provide five classifications: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized, although these terms are not
used to represent overall financial condition. If adequately capitalized,
regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and plans for capital restoration are required. At year-end 2000 and
1999, management believes Cornerstone is in compliance with all regulatory
capital requirements. Cornerstone is considered well capitalized under the
Federal Deposit Insurance Act at year-end 2000 and 1999. Management is not aware
of any matters subsequent to December 31, 2000 that would cause Cornerstone's
capital category to change.
    The following is a reconciliation of capital under generally accepted
accounting principles, as shown on the accompanying consolidated balance sheets,
to the Bank's regulatory capital at year-end 2000 and 1999:

                                         2000          1999
                                         ----          ----

Total shareholders' equity
  per financial statements             $ 41,810      $ 42,989
Nonallowable items:
  Parent company equity                  (3,453)       (5,105)
  Unrealized loss on
   securities available for sale            740         2,157
                                       --------      --------
Tier 1 (core) and tangible capital       39,097        40,041
Additional capital items:
  General valuation

   allowances (limited)                   1,424         1,394
                                       --------      --------
Total risk-based capital               $ 40,521      $ 41,435
                                       ========      ========



32                                            Western Ohio Financial Corporation

<PAGE>   33

At year-end 2000 and 1999, Cornerstone's actual capital levels and minimum
required levels were as follows:

<TABLE>
<CAPTION>

                                                                                 Minimum             Minimum Required
                                                                                 Required        to be Well Capitalized
                                                                               for Capital             Under Prompt
                                                           Actual            Adequacy Purposes     Action Regulations
                                                     -------------------    -------------------   ----------------------
                                                     Amount       Ratio     Amount        Ratio    Amount        Ratio
                                                     ------       ------    ------        -----   -------      ---------
<S>                                                  <C>          <C>       <C>           <C>      <C>          <C>
2000
Total capital (to risk-weighted assets)              $40,521       17.2%    $18,903        8.0%    $23,629        10.0%
Tier 1 (core) capital (to risk-weighted assets)       39,097       16.6       9,452        4.0      14,177         6.0
Tier 1 (core) capital (to adjusted total assets)      39,097       11.1      14,150        4.0      17,687         5.0
Tangible capital (to adjusted total assets)           39,097       11.1       5,306        1.5         N/A

1999
Total capital (to risk-weighted assets)              $41,435       19.8%    $16,735        8.0%    $20,918        10.0%
Tier 1 (core) capital (to risk-weighted assets)       40,041       19.1       8,367        4.0      12,551         6.0
Tier 1 (core) capital (to adjusted total assets)      40,041       12.1      13,258        4.0      16,572         5.0
Tangible capital (to adjusted total assets)           40,041       12.1       4,972        1.5         N/A
</TABLE>

Banking regulations limit capital distributions by banks. Generally, capital
distributions are limited to the current year to date undistributed net income
and prior two years' undistributed net income, as long as the institution
remains well capitalized after the proposed distribution.
    Cornerstone may make a capital distribution without the approval of the OTS
provided it notifies the OTS 30 days before it declares the capital distribution
and it meets the following requirements: (i) has a regulatory rating in one of
the two top examination categories, (ii) is not of supervisory concern, and will
remain adequately- or well-capitalized, as defined in the OTS prompt corrective
action regulations, following the proposed distribution, and (iii) the
distribution does not exceed its net income for the calendar year-to-date plus
retained net income for the previous two calendar years (less any dividends
previously paid). Currently, Cornerstone does not meet requirement (iii) above
and consequently, must obtain prior approval of the OTS before declaring any
proposed distributions.




2000 Annual Report to Shareholders                                            33

<PAGE>   34

13.  PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENT

Condensed financial information of Western Ohio Financial Corporation is as
follows:

CONDENSED BALANCE SHEETS
December 31, 2000 and 1999

                                                     2000        1999
                                                   -------     -------
Assets
  Cash and cash equivalents                        $ 2,531     $ 4,059
  Investment in bank subsidiary                     38,357      37,884
  Intercompany receivables                           1,133       1,070
  Other assets                                          50         185
                                                   -------     -------
    Total assets                                   $42,071     $43,198
                                                   =======     =======

Liabilities and shareholders' equity
  Other liabilities                                $   261     $   209
  Shareholders' equity                              41,810      42,989
                                                   -------     -------
    Total liabilities and shareholders' equity     $42,071     $43,198
                                                   =======     =======

CONDENSED STATEMENTS OF INCOME
Years ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>

                                                                      2000         1999         1998
                                                                    -------      -------      -------
<S>                                                                 <C>          <C>          <C>
Interest and dividend income
  Dividends from subsidiaries                                       $ 3,000      $ 3,000      $ 6,000
  Loan to ESOP                                                           72           90          128
  Other                                                                  48           47           53
                                                                    -------      -------      -------
    Total interest and dividend income                                3,120        3,137        6,181

Operating expenses                                                     (429)        (516)        (608)
                                                                    -------      -------      -------
Income before income taxes and distributions
 in excess of earnings of subsidiary                                  2,691        2,621        5,573

Income tax benefit                                                      105          129          145
                                                                    -------      -------      -------

Income before distributions in excess of earnings of subsidiary       2,796        2,750        5,718

Distributions in excess of earnings of subsidiary                      (945)      (1,067)      (4,423)
                                                                    -------      -------      -------

Net Income                                                          $ 1,851      $ 1,683      $ 1,295
                                                                    =======      =======      =======
</TABLE>




34                                            Western Ohio Financial Corporation

<PAGE>   35

CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>

                                                            2000         1999         1998
                                                          -------      -------      -------
<S>                                                       <C>          <C>          <C>
Cash flows from operating activities:
Net income                                                $ 1,851      $ 1,683      $ 1,295
  Adjustments to reconcile net income to cash
   provided by operations:
    Distributions in excess of earnings of subsidiary         945        1,067        4,423
    Compensation expense on ESOP and MRP shares               333          480          530
    Changes in:
     Other assets                                             134          116          (43)
     Other liabilities                                         52          (16)         101
                                                          -------      -------      -------
      Net cash from operating activities                    3,315        3,330        6,306

Cash flows from investing activities
  Change in intercompany advances                             (63)        (166)       4,960
                                                          -------      -------      -------
      Net cash from investing activities                      (63)        (166)       4,960

Cash flows from financing activities
  Cash dividends paid                                      (1,846)      (1,974)      (2,142)
  Proceeds from stock options exercised                         -           69          351
  Purchase of treasury stock                               (2,934)      (2,826)      (6,611)
                                                          -------      -------      -------
      Net cash from financing activities                   (4,780)      (4,731)      (8,402)
                                                          -------      -------      -------

Net change in cash and cash equivalents                    (1,528)      (1,567)       2,864

Cash and cash equivalents at beginning of year              4,059        5,626        2,762
                                                          -------      -------      -------

Cash and cash equivalents at end of year                  $ 2,531      $ 4,059      $ 5,626
                                                          =======      =======      =======
</TABLE>


2000 Annual Report to Shareholders                                            35

<PAGE>   36

14.  EARNINGS PER COMMON SHARE

The factors used in the earnings per share computation were as follows: (Amounts
in thousands, except per share data)

<TABLE>
<CAPTION>

                                                                   2000            1999             1998
                                                              -----------      -----------      -----------
<S>                                                           <C>              <C>              <C>
Basic earnings per common share
    Net income                                                $     1,851      $     1,683      $     1,295
                                                              ===========      ===========      ===========

    Weighted average common shares outstanding                  1,897,851        2,052,433        2,277,305
    Less: Average unallocated ESOP shares                         (61,352)         (72,496)         (87,374)
    Less: Average nonvested MRP shares                             (6,004)         (13,072)         (16,791)
                                                              -----------      -----------      -----------
  Average shares                                                1,830,495        1,966,875        2,173,140
                                                              ===========      ===========      ===========

  Basic earnings per common share                             $      1.01      $      0.86      $      0.60
                                                              ===========      ===========      ===========

Diluted earnings per common share
    Net income                                                $     1,851      $     1,683      $     1,295
                                                              ===========      ===========      ===========

    Weighted average common shares outstanding for basic
      earnings per common share                                 1,830,495        1,966,875        2,173,140
    Add: Dilutive effects of stock options                          2,827           15,874           32,509
    Add: Dilutive effects of average nonvested MRP shares               -                -           13,263
                                                              -----------      -----------      -----------
  Average shares and dilutive potential common shares           1,833,322        1,982,749        2,218,912
                                                              ===========      ===========      ===========

  Diluted earnings per common share                           $      1.01      $      0.85      $      0.58
                                                              ===========      ===========      ===========
</TABLE>

Stock options covering 181,590, 72,436 and 8,000 shares of common stock were not
considered in computing diluted earnings per common share for 2000, 1999 and
1998, respectively. In addition, nonvested MRP awards for 5,035 and 7,820 shares
of common stock were not considered in computing diluted earnings per common
share for 2000 and 1999, as they were antidilutive.



36                                            Western Ohio Financial Corporation

<PAGE>   37


15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tables summarize selected quarterly results of operations for 2000
and 1999.

<TABLE>
<CAPTION>

                                               Three months ended
                                               ------------------
December 31, 2000                March 31     June 30   September 30   December 31
                                 --------     -------   ------------   -----------
                                        (In thousands except per share data)

<S>                              <C>          <C>          <C>          <C>
Interest and dividend income     $ 5,986      $ 6,402      $ 6,552      $ 6,613
Interest expense                   3,564        3,887        4,136        4,143
                                 -------      -------      -------      -------
Net interest income                2,422        2,515        2,416        2,470
Provision for loan losses             84           84           84           97
                                 -------      -------      -------      -------
Net interest income after
 provision for loan losses         2,338        2,421        2,332        2,373
Non-interest income                  299          301          352          342
Non-interest expense              (2,006)      (1,980)      (1,924)      (1,918)
                                 -------      -------      -------      -------
Income before income tax             631          752          760          797
Income tax expense                   226          267          271          325
                                 -------      -------      -------      -------
Net income                       $   405      $   485      $   489      $   472
                                 =======      =======      =======      =======
Earnings per common share
 Basic                           $  0.22      $  0.26      $  0.27      $  0.26
                                 =======      =======      =======      =======
 Diluted                         $  0.22      $  0.26      $  0.27      $  0.26
                                 =======      =======      =======      =======

Dividends declared per share     $  0.25      $  0.25      $  0.25      $  0.25
                                 =======      =======      =======      =======
</TABLE>

<TABLE>
<CAPTION>

                                                Three months ended
                                                ------------------
December 31, 1999                March 31     June 30    September 30  December 31
                                 --------     -------    ------------  -----------
                                       (In thousands except per share data)

<S>                              <C>          <C>          <C>          <C>
Interest and dividend income     $ 5,834      $ 5,821      $ 5,849      $ 5,911
Interest expense                   3,407        3,359        3,393        3,473
                                 -------      -------      -------      -------
Net interest income                2,427        2,462        2,456        2,438
Provision for loan losses             33           75           74           63
                                 -------      -------      -------      -------
Net interest income after
 provision for loan losses         2,394        2,387        2,382        2,375
Non-interest income                  374          321          274          291
Non-interest expense              (2,031)      (2,096)      (2,048)      (1,952)
                                 -------      -------      -------      -------
Income before income tax             737          612          608          714
Income tax expense                   286          212          229          261
                                 -------      -------      -------      -------
Net income                       $   451      $   400      $   379      $   453
                                 =======      =======      =======      =======

Earnings per common share
 Basic                           $  0.22      $  0.20      $  0.19      $  0.23
                                 =======      =======      =======      =======
 Diluted                         $  0.22      $  0.19      $  0.19      $  0.23
                                 =======      =======      =======      =======

Dividends declared per share     $  0.25      $  0.25      $  0.25      $  0.25
                                 =======      =======      =======      =======
</TABLE>




2000 Annual Report to Shareholders                                            37

<PAGE>   38

SHAREHOLDER
INFORMATION

BOARD OF DIRECTORS OF WESTERN OHIO FINANCIAL
CORPORATION AND CORNERSTONE BANK

DAVID L. DILLAHUNT
  Senior Vice President, Advest, Inc.
JOHN W. RAISBECK
  President and Chief Executive Officer, Cornerstone Bank
HOWARD V. DODDS
  President, Howard's Foods, Inc.
JOHN E. FIELD
  Vice Chairman of the Board, Wallace & Turner, Inc.
JEFFREY L. LEVINE
  President, Larry Stein Realty and Levine Realty Co.
WILLIAM N. SCARFF
  President, Scarff's Nursery, Inc. and Scarff's Land Co.
ARISTIDES G. GIANAKOPOULOS
  President, The Champion Company

OFFICERS OF WESTERN OHIO FINANCIAL CORPORATION

JOHN W. RAISBECK
  President and Chief Executive Officer
JOHN T. HECKMAN
  Executive Vice President
GARY L. HICKS
  Executive Vice President
ROBERT P. BREZING
  Senior Vice President
CRAIG F. FORTIN
  Senior Vice President, Treasurer and Chief Financial Officer
SUZANNE E. MOELLER
  Corporate Secretary


Officers of Cornerstone Bank
JOHN W. RAISBECK
  President and Chief Executive Officer
JOHN T. HECKMAN
  Executive Vice President, Operations and Administration
GARY L. HICKS
  Executive Vice President, Mortgage Lending
ROBERT P. BREZING
  Senior Vice President, Business Banking
CRAIG F. FORTIN
  Senior Vice President, Treasurer and Chief Financial Officer
SUZANNE E. MOELLER
  Corporate Secretary

ANNUAL REPORT ON FORM 10-K

A copy of the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission will be available without charge upon request to:

  Investor Relations
  Western Ohio Financial Corporation
  28 East Main Street
  P.O. Box 509
  Springfield, Ohio 45501-0509
  (937)325-9990

ANNUAL MEETING

The Annual Meeting of Shareholders of Western Ohio Financial Corporation will be
held at 9:00 AM on Thursday, April 26, 2001, at the Springfield Inn, 100 South
Fountain Avenue, Springfield, Ohio 45502.

TRANSFER AGENT

Computershare Trust Company, Inc. serves as the transfer agent for Western Ohio
Financial Corporation's shares. Communications regarding change of address,
transfer of shares, and lost certificates should be sent to:

   Computershare Trust Company, Inc.
   12039 W. Alameda Parkway, Suite Z-2
   Lakewood CO 80228

LEGAL COUNSEL

LOCAL COUNSEL
MARTIN BROWNE HULL & HARPER
1 South Limestone Street
Springfield, OH 45502

SPECIAL COUNSEL
SILVER, FREEDMAN & TAFF, L.L.P.
1100 New York Avenue N.W.
Washington D.C. 20005



38                                            Western Ohio Financial Corporation

<PAGE>   39

MARKET MAKERS

ADVEST, INC.
One Commercial Plaza
280 Trumbull Street
Hartford, CT 06103
(203)525-1421

DAIN RAUSCHER
Suite 3000
500 West Madison Street
Chicago, IL 60604
(315)855-7600

EVEREN SECURITIES, INC.
77 West Wacker Drive
Chicago, IL 60601
(312)574-6000

FRIEDMAN BILLINGS RAMSEY & CO.
Potomac Tower
18th Floor
1001 19th Street North
Arlington, VA 22209
(703)312-9600

KEEFE, BRUYETTE & WOODS, INC.
2 World Trade Center
89th Floor
New York, NY 10048
(212)323-8300

MCDONALD INVESTMENTS, INC.
800 Superior Ave.
Cleveland, OH 44114-2603
(216) 443-2300

SANDLER O'NEILL & PARTNERS, L.P.
2 World Trade Center
104th Floor
New York, NY 10048
(212)466-7744


VISIT ANY OF OUR BRANCH OFFICE
LOCATIONS AND GET CONNECTED!


We invite you to call on the Cornerstone Bank office           [CORNERSTONE BANK
nearest you for your personal and business banking needs.       LOGO]
Stop by the office in your community to learn more, or
call 1-800-600-1884.

MAIN SPRINGFIELD OFFICE - 937-325-4683
28 E Main Street
Springfield, OH 45502-1306

UPPER VALLEY OFFICE - 937-323-8381
1480 Upper Valley Pike
Springfield, OH 45504-4024

NEW CARLISLE OFFICE - 937-845-3256
210 N Main Street
New Carlisle, OH 45344-1837

BEAVERCREEK OFFICE - 937-427-6361
3216 Seajay Drive
Beavercreek, OH 45430-1355

YELLOW SPRINGS OFFICE - 937-767-2060
50 Kahoe Lane
Yellow Springs, OH 45387-1237

ENON OFFICE - 937-864-1928
7601 Dayton Road
Fairborn, OH 45324-1903

CENTERVILLE OFFICE - OPENING SOON!
6291 Wilmington Pike
Dayton, OH 45459-7108

COLUMBUS LOAN OFFICE - 614-985-3810


2000 Annual Report to Shareholders                                            39
<PAGE>   40

[PICTURE OF BUILDING]

Enon Office

                         New Carlisle Office

                        [PICTURE OF BUILDING]

                                                        Yellow Springs Office

                                                        [PICTURE OF BUILDING]

Beavercreek Office

[PICTURE OF BUILDING]


                                             Western Ohio Financial Corporation
                                             28 East Main Street
                                             Springfield, OH 45502
                                             1-800-600-1884

                                             Member FDIC

     (C) Copyright 2001 Western Ohio Financial Corporation, All Rights Reserved.