UNITED STATES
                         SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C. 20549

                                     FORM 10-K

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(D) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 [FEE REQUIRED]

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                                       OR

[ ]  TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(D) OF THE  SECURITIES
     EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

           FOR THE TRANSITION PERIOD FROM ____________ TO ____________

                         COMMISSION FILE NUMBER 0-24120

                         WESTERN OHIO FINANCIAL CORPORATION
               (Exact name of registrant as specified in its charter)

            DELAWARE                                    31-1403116
(State or other jurisdiction of                     (I.R.S. Employer
incorporation or organization)                      Identification No.)


       28 EAST MAIN STREET
        SPRINGFIELD, OHIO                                45501-0719
(Address of principal executive offices)                 (Zip Code)

       Registrant's telephone number, including area code: (937) 325-4683

           Securities Registered Pursuant to Section 12(b) of the Act:
                                      NONE
           Securities Registered Pursuant to Section 12(g) of the Act:
                     COMMON STOCK, PAR VALUE $.01 PER SHARE
                                (Title of class)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant  was required to file such  reports) and (2) has been subject to such
requirements for the past 90 days. YES X . NO ___.

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[X]

     The aggregate  market value of the voting stock held by  non-affiliates  of
the registrant,  computed by reference to the closing price of such stock on the
Nasdaq  National  Stock Market as of March 23,  1999,  was  approximately  $28.6
million. (The exclusion from such amount of the market value of the shares owned
by any  person  shall not be deemed an  admission  by the  registrant  that such
person is an affiliate of the registrant.)

     As of March 23, 2000, there were issued and outstanding 1,972,364 shares of
the Registrant's Common Stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

Parts II and IV of Form 10-K - Portions of the Annual Report to Shareholders for
the fiscal year ended December 31, 1999.

Part III of Form 10-K - Portions of the Proxy  Statement  for Annual  Meeting of
Shareholders.


<PAGE>

FORWARD-LOOKING STATEMENTS

         Western  Ohio   Financial   Corporation   (the   "Company"),   and  its
wholly-owned subsidiary, Cornerstone Bank, may from time to time make written or
oral "forward-looking statements," including statements contained in its filings
with the Securities and Exchange Commission.  These  forward-looking  statements
may be included in this Annual Report on Form 10-K and the exhibits  attached to
it, in the Company's reports to shareholders and in other communications,  which
are made in good faith by us pursuant  to the "safe  harbor"  provisions  of the
Private Securities Litigation Reform Act of 1995.

         These forward-looking  statements include statements about our beliefs,
plans, objectives, goals, expectations, anticipations, estimates and intentions,
that are  subject to  significant  risks and  uncertainties,  and are subject to
change based on various factors, some of which are beyond our control. The words
"may",  "could",  "should",   "would",  "believe",   "anticipate",   "estimate",
"expect",  "intend",  "plan" and similar  expressions  are  intended to identify
forward-looking statements. The following factors, among others, could cause our
financial   performance  to  differ  materially  from  the  plans,   objectives,
expectations,   estimates  and  intentions   expressed  in  the  forward-looking
statements:

         o        the strength of the United  States  economy in general and the
                  strength   of  the  local   economies   in  which  we  conduct
                  operations;
         o        the effects of, and changes in, trade, monetary and fiscal
                  policies and laws, including interest rate policies of the
                  Federal Reserve Board;
         o        inflation, interest rate, market and monetary fluctuations;
         o        the timely  development  of and acceptance of our new products
                  and services and the perceived overall value of these products
                  and services by users,  including  the  features,  pricing and
                  quality compared to competitors' products and services;
         o        the willingness of users to substitute our products and
                  services for products and services of our competitors;
         o        our success in gaining regulatory approval of our products and
                  services, when required;
         o        the impact of changes in financial services' laws and
                  regulations (including laws concerning taxes,  banking,
                  securities and insurance);
         o        the impact of technological changes;
         o        acquisitions;
         o        changes in consumer spending  and saving  habits;  and
         o        our success at managing  the risks involved in the foregoing.


         The list of important factors stated above is not exclusive.  We do not
undertake to update any forward-looking statement, whether written or oral, that
may be made  from time to time by or on behalf  of the  Company  or  Cornerstone
Bank.


                                     PART I

ITEM 1.  BUSINESS

GENERAL

Western Ohio Financial Corporation (the "Company"), a Delaware corporation,  was
organized  in March 1994 for the purpose of becoming a savings and loan  holding
company.  During fiscal 1997, the Company owned all of the outstanding  stock of
Springfield Federal Savings Bank ("Springfield"), Mayflower Federal Savings Bank
("Mayflower") and Seven Hills Savings Association ("Seven Hills") (collectively,
the "Banks").  During fiscal 1997, the Company combined these three institutions
into one  institution  under the name  "Cornerstone  Bank" (the "Bank").  Unless
otherwise noted,  reference during fiscal 1997 includes  Springfield,  Mayflower
and Seven Hills.

The  Company  is  subject to  supervision  by the Office of Thrift  Supervision,
Department  of  Treasury  ("OTS")  and the  Bank  is  subject  to  comprehensive
regulation,  examination  and  supervision by the OTS and by the Federal Deposit
Insurance  Corporation  ("FDIC").  The Bank is a member of the Federal Home Loan
Bank ("FHLB") system and its deposits are backed by the full faith and credit of
the United  States  Government  and are insured up to  applicable  limits by the
FDIC.

The Company's  primary  market area covers Clark and Greene  counties,  Ohio and
parts of  contiguous  counties,  and is  serviced  through  its main  office  in
Springfield,  Ohio and five branch offices in Enon,  New Carlisle,  Springfield,
Yellow  Springs and  Beavercreek.  At December 31,  1999,  the Company had total
assets of $329.7 million, deposits of $202.3 million and shareholders' equity of
$43.0 million, or 13.0% of total assets. The Company's common stock is traded on
the Nasdaq National Market under the symbol "WOFC."

The  Company  has been,  and  intends to  continue  to be, a  community-oriented
savings and loan holding  company  offering a variety of  financial  services to
meet the needs of the  communities  it serves.  The  principal  business  of the
Company  consists of  attracting  retail  deposits  from the general  public and
investing those funds primarily in one- to four-family  residential real estate,
commercial and multi-family real estate, and construction loans and, to a lesser
extent,  consumer  and  commercial  business  loans,  all  primarily  within the
Company's market areas.

     The  executive  offices of the Company are located at 28 East Main  Street,
Springfield,  Ohio 45501-0719, and the telephone number at that address is (937)
325-4683.


     The Company's  primary market area consists of Clark county and portions of
contiguous  counties.  Located in  west-central  Ohio,  Clark county's  economic
environment  consists  of a  traditional  industrial  base  supplemented  by the
service and support industries, and its close proximity to a major U.S. military
installation,  Wright Patterson Air Force Base.  Navistar Truck Manufacturers is
the largest industrial  employer in the county. Its Clark county operations have
provided  stable  employment  for the area over the last  several  decades.  The
Community  Hospital  and  Clark  State  Community  College  are also  two  major
employers in the area. In 1998, Clark county had an unemployment rate of 3.7% as
compared  to the  State  of Ohio at 4.0% and the  United  States  at  5.1%.  The
unemployment  rate in Clark county  increased  to 3.9% in 1999 as compared  with
3.8% for the State of Ohio and 4.1% for the United States.

     The population of Clark county has maintained steady growth in recent years
with total population  increasing to approximately 148,000 in 1999. From 1990 to
1995,  Clark  County's  population  grew .24%. For 1999,  Clark County's  median
housing value was  approximately  $59,900 in 1999. In the event that real estate
prices in Ohio or the market area  substantially  weaken or economic  conditions
decline, the Company may be adversely affected.

LENDING ACTIVITIES

GENERAL.  While the Company  primarily  focuses its  lending  activities  on the
origination of loans secured by first mortgages on  owner-occupied,  one-to-four
family real estate,  it also originates  commercial and multi-family real estate
and construction loans and, to a lesser extent, consumer and commercial business
loans  in its  market  area.  At  December  31,  1999,  the  Company's  net loan
portfolio,  including loans held for sale,  totaled $254.9 million.  At December
31, 1999, the Company's  gross loan  portfolio,  including  loans held for sale,
totaled $262.2  million,  of which $178.3 million,  or 68.01%,  was comprised of
permanent loans secured by one-to-four family real estate.

The  aggregate  amount  of  loans  that  the  Bank is  permitted  to make  under
applicable federal regulations to any one borrower,  including related entities,
or the aggregate amount that the Bank could have invested in any one real estate
project,  is generally the greater of 15% of  unimpaired  capital and surplus or
$500,000.  See  "Regulation - Federal  Regulation of Savings  Institutions."  At
December  31, 1999,  the maximum  amount which the Bank could have loaned to any
one borrower and the borrower's  related entities was $6.2 million.  At December
31,  1999,  the Bank  did not  have any  loans  outstanding  in  excess  of such
limitation.  The largest  principal  balance and  commitment  to lend to any one
borrower, or group of related borrowers, at the Bank was $2.3 million secured by
a first  security  mortgage  on  multi-family  properties.  In  addition,  three
borrowers had a combined principal and commitment outstanding of $5.9 million at
December 31, 1999. The first  borrower's  outstanding  credit is secured by land
and speculation homes. The second borrower's  outstanding credit is secured by a
first mortgage on  multi-family  properties.  The third  borrower's  outstanding
credit is secured by one- to four-family dwellings and multi-family  properties.
The security  properties  on all of these loans are located in the Bank's market
areas. All of these loans are performing in accordance with their terms.

     Management  always  reserves the right to change its emphasis on the amount
or type of  lending  in which the  Company  engages to adjust to market or other
factors, including changes in the Company's asset/liability management policies.

<PAGE>

LOAN PORTFOLIO  COMPOSITION.  The following information reflects the composition
of the  Company's  loan  portfolio,  excluding  loans  held for sale,  in dollar
amounts and in percentage (before deductions for loans in process, deferred fees
and discounts and allowance for losses) as of the dates indicated.

<TABLE>

                                                                          December 31,
                               ------------------------------------------------------------------------------------------------
                                     1999                1998                1997               1996                 1995
                               -----------------   -----------------   -----------------   -----------------  -----------------
                                AMOUNT   PERCENT    AMOUNT   PERCENT    AMOUNT   PERCENT    AMOUNT   PERCENT   AMOUNT   PERCENT
                               --------  -------   --------  -------   --------  -------   --------  -------  --------  -------
<CAPTION>
                                                                     (Dollars in Thousands)
<S>                            <C>       <C>       <C>       <C>      <C>        <C>       <C>      <C>      <C>        <C>
REAL ESTATE LOANS:
 One-to-four family            $178,304    68.01%  $177,109    74.87%   $224,289  79.10%   $242,600   82.21%   $131,262   84.93%
 Multi-family                    30,233    11.53     12,422     5.25      11,247   3.97      12,476    4.23       4,502    2.91
 Commercial real estate          22,339     8.52     20,675     8.74      21,583   7.61      20,531    6.96      10,531    6.81
 Construction                     6,923     2.64      3,908     1.65       7,275   2.57      10,965    3.71       5,405    3.50
                               --------   ------   --------   ------    -------- ------    --------  ------    --------  ------

 Total real estate loans        237,799    90.70    214,114    90.51     264,394  93.25     286,572   97.11     151,700   98.15
                               --------   ------   --------   ------    -------- ------    --------  ------    --------  ------

OTHER LOANS:
 Consumer Loans:
   Home equity                   15,369     5.86     10,054     4.25       6,906   2.43       2,188    0.74         474    0.31
   Deposit account                  146      .06        257      .11         485    .17         384    0.13         363    0.24
   Home improvement                  --       --         15       --          18     --          31    0.01          --      --
   Other secured                  1,664      .64      3,173     1.34       5,374   1.90       3,689    1.25         942    0.61
   Other                          1,679      .64      2,034      .86       2,493    .88          --      --          21    0.01
                               --------   ------   --------   ------    -------- ------     -------   -----     -------  ------
   Total consumer loans          18,858     7.20     15,533     6.56      15,276   5.38       6,292    2.13       1,800    1.17
                               --------   ------   --------   ------    -------- ------     -------  ------     -------  ------
 Commercial business loans        5,499     2.10      6,914     2.93       3,886   1.37       2,244    0.76       1,056    0.68
                               --------   ------   --------   ------    -------- ------      ------  ------     -------
    Total other loans            24,357     9.30     22,447     9.49      19,162   6.75       8,536    2.89       2,856    1.85
                               --------   ------   --------   ------    -------- ------     -------  ------    --------  ------

    Total loans                 262,156   100.00%   236,561   100.00%    283,556 100.00%    295,108  100.00%    154,556  100.00%
                                          ======              ======             ======              ======              ======

LESS:
 Loans in process                (4,659)             (2,364)              (1,784)           (5,651)              (2,768)
 Deferred fees and discounts        (62)                (83)                (119)             (130)                (538)
 Allowance for losses            (2,781)             (3,200)              (3,922)           (1,716)                (774)
                               --------            --------             --------          --------            --------
 Total loans receivable, net   $254,654            $230,914             $277,731          $287,611             $150,476
                               ========            ========             ========          ========             ========
</TABLE>


<PAGE>


     The following  table shows the  composition of the Company's loan portfolio
by fixed and adjustable rates at the dates indicated.


<TABLE>
<CAPTION>

                                                                          December 31,
                               ------------------------------------------------------------------------------------------------
                                     1999                1998                1997               1996                 1995
                               -----------------   -----------------   -----------------   -----------------  -----------------
                                AMOUNT   PERCENT    AMOUNT   PERCENT    AMOUNT   PERCENT    AMOUNT   PERCENT   AMOUNT   PERCENT
                               --------  -------   --------  -------   --------  -------   --------  -------  --------  -------
                                                                     (Dollars in Thousands)
<S>                            <C>         <C>     <C>       <C>      <C>       <C>        <C>        <C>      <C>        <C>
 FIXED-RATE LOANS:
  Real estate:
   One-to-four family           $127,966    48.81%   $109,550   46.31%   $126,375   44.57%   $155,232   52.61%  $111,117   71.89%
   Multi-family                   18,828     7.18       8,141    3.44       3,355    1.18       5,036    1.71      3,873    2.51
   Commercial                      8,450     3.22      12,759    5.39       8,533    3.01       9,276    3.14      9,307    6.02
   Construction                    5,538     2.11       2,597    1.10         477     .17       7,649    2.59      5,105    3.30
                                --------   ------       -----   -----    --------   -----    -------    -----    -------    ----
    Total fixed-rate real
      estate loans               160,782    61.32     133,047   56.24     138,740   48.93     177,193   60.05    129,402   83.72
   Commercial business               768      .29         791     .33         804     .28         178     .06        401    0.26
   Consumer                        3,547     1.35       4,536    1.92       7,161    2.53       3,642    1.23      1,326    0.86
                                --------   ------        ----   -----      ------   -----    --------    ----     ------   -----
    Total fixed-rate loans       165,097    62.96     138,374   58.49     146,705   51.74     181,013   61.34    131,129   84.84
                                                      -------   -----     -------   -----     -------   -----    -------   -----
 ADJUSTABLE-RATE LOANS
  Real estate:
   One-to-four family             50,338    19.20      67,559  28.56       97,969   34.55     87,368    29.61     20,145   13.04
   Multi family                   11,405     4.35       4,281   1.81        7,892    2.78      7,440     2.52        629    0.41
   Commercial                     13,889     5.30       7,916   3.35       13,049    4.60     11,255     3.81      1,224    0.79
   Construction                    1,385      .53       1,311    .55        6,798    2.40      3,316     1.12        300    0.19
                                   -----    -----       -----    ---      -------   -----     ------    -----
     Total adjustable-rate
       real estate loans          77,017    29.38      81,067  34.27      125,708   44.33    109,379    37.06     22,298   14.43
   Commercial business             4,731     1.81       6,123   2.59        3,082    1.09      2,066      .70        655    0.42
   Consumer                       15,311     5.84      10,997   4.65        8,061    2.84      2,650      .90        474    0.31
                                  ------    -----      ------   ----      -------   -----      -----    -----     ------  ------
   Total adjustable-rate loans    97,059    37.03      98,187  41.51      136,851   48.26    114,095    38.66     23,427   15.16
                                  ------    -----      ------  -----      -------   -----    -------    -----     ------   -----
    Total loans                  262,156   100.00%    236,561 100.00%     283,556  100.00%   295,108   100.00%   154,556  100.00%
                                           ======             ======               ======              ======             ======

 LESS:
  Loans in process                (4,659)              (2,364)             (1,784)            (5,651)             (2,768)
  Deferred fees and discounts        (62)                 (83)               (119)              (130)               (538)
  Allowance for loan losses       (2,781)              (3,200)             (3,922)            (1,716)               (774)
                                 -------               ------             -------            -------                -----
   Total loans receivable, net  $254,654             $230,914            $277,731           $287,611            $150,476
                                ========             ========            ========           ========            ========
</TABLE>


<PAGE>


     The following  schedule  illustrates  the  maturities of the Company's loan
portfolio at December  31, 1999.  Loans which have  adjustable  or  renegotiable
interest  rates are shown as maturing in the period during which the contract is
due.  The  schedule  does not reflect the  effects of  possible  prepayments  or
enforcement of due-on-sale clauses.

<TABLE>

<CAPTION>
                   ------------------------------------ --------------------------------- --------------------------------------
                                                                                 Construction and
                    ONE-TO-FOUR FAMILY     NON-RESIDENTIAL        COMMERCIAL        DEVELOPMENT      CONSUMER          TOTAL
                    ------------------    ----------------    -----------------  ----------------  ----------------  -----------
                              Weighted             Weighted           Weighted           Weighted          Weighted
                               Average              Average            Average           Average           Average
                     AMOUNT     RATE     AMOUNT      RATE    AMOUNT      RATE    AMOUNT   RATE     AMOUNT   RATE    AMOUNT  RATE
                     ------     ----     ------      ----    ------      ----   ------    ----     ------   ----   ------   ----

<S>                 <C>        <C>       <C>       <C>     <C>       <C>       <C>       <C>      <C>      <C>     <C>    <C>

 Due During                                                           (Dollars in Thousands)
Periods Ending
 December 31

2000(1)(2)            $ 383     7.81%    $2,811     7.87%   $2,721      9.04%    $5,598    8.11%   $1,312    11.60% $12,825  8.62%

2001 to 2004          5,143     7.72%     8,440     8.30%    1,535      8.35%     1,288    8.83%    2,551    10.70%  18,957  8.50%

2005 and following  172,778     7.59%    41,321     8.03%    1,243      8.67%        37    8.70%   14,995     8.60% 230,374  7.74%

                   $178,304             $52,572            $ 5,499               $6,923          $ 18,858          $262,156

</TABLE>

(1) Includes construction loans.

(2) Includes demand loans and loans having no stated maturity.

     At December 31, 1999, the total amount of loans due after December 31, 2000
which have predetermined  interest rates was $159.1 million, while $90.8 million
loans due after such dates have floating or adjustable interest rates.



<PAGE>



     ONE-TO-FOUR  FAMILY  RESIDENTIAL  MORTGAGE AND  CONSTRUCTION  LENDING.  The
Company focuses its lending efforts on the origination of loans secured by first
mortgages on owner-occupied,  one-to-four  family  residences.  Residential loan
originations of this type are generated by the Company's marketing efforts,  its
present  customers,  walk-in customers and referrals from real estate agents and
builders.  At December 31, 1999, the Company's  one-to-four  family  residential
permanent  mortgage  loans totaled  $178.3  million,  or 68.01% of the Company's
total gross loan portfolio.

     At December 31, 1999,  $128.0 million of the Company's  one-to-four  family
residential  mortgage  loans,  or  48.81%  of the  Company's  total  gross  loan
portfolio, had fixed interest rates. From time to time, the Company may purchase
loans secured by one-to-four family residences. See "Originations, Purchases and
Sales of Loans and Mortgage-Backed Securities."

     The Company currently originates up to a maximum of 30-year, owner occupied
one-to-four  family  residential  mortgage  loans  in  amounts  up to 97% of the
appraised  value  of  the  security  property  provided  that  private  mortgage
insurance is obtained in an amount  sufficient to reduce the Company's  exposure
to at or below the 80%  loan-to-value  level.  Interest  rates  charged on these
loans are priced on a regular basis according to market conditions.  Residential
loans do not include prepayment  penalties.  The Company also originates up to a
maximum of 30-year  one-to-four family residential loans to  nonowner-occupants,
with loan-to-value ratios of up to 80%.

     In  underwriting  one-to-four  family  residential  real estate loans,  the
Company  evaluates,  among other  things,  both the  borrower's  ability to make
monthly  payments  and  the  value  of the  property  securing  the  loan.  Most
properties  securing  real estate  loans made by the Company  are  appraised  by
independent  licensed fee  appraisers  approved by the Board of  Directors.  The
Company  requires  borrowers  to  obtain  title,  fire  and  property  insurance
(including flood insurance,  if necessary) in an amount not less than the amount
of the loan.  In prior years,  the Company had  accepted  title  opinions.  Real
estate loans originated by the Company  generally contain a "due on sale" clause
allowing  the  Company to declare the unpaid  principal  balance due and payable
upon the sale or disposition of the secured property.

     The  Company   originates  a  limited   number  of  loans  to  finance  the
construction of one-to-four family residences. At December 31, 1999, the Company
had loans to finance the construction of one-to-four family residences  totaling
$6.9 million,  or 2.6% of the Company's  loan  portfolio.  Substantially  all of
these  loans are made to  individuals  who propose to occupy the  premises  upon
completion of construction.  Construction loans are generally  structured for up
to a 30-year term with a six month construction phase, during which the borrower
pays interest  only.  Upon  completion of the  construction  phase,  these loans
continue as permanent  loans of the  Company.  Loan  proceeds  are  disbursed in
increments as construction progresses and as inspections warrant.

     MULTI-FAMILY  AND COMMERCIAL REAL ESTATE LENDING.  The Company also engages
in commercial and  multi-family  real estate lending.  At December 31, 1999, the
Company had $52.6 million of permanent  commercial and multi-family  real estate
loans, which represented 20.0% of the Company's gross loan portfolio.

     The Company's  commercial  and  multi-family  real estate loan portfolio is
secured  primarily by apartment  buildings,  office  buildings,  strip  shopping
centers,  motels,  nursing  homes,  restaurants  and  churches  located  in  the
Company's market areas.  Multi-family and commercial real estate loans generally
have terms that do not exceed 15 years. Generally, the loans are made in amounts
up to 75% of the appraised value of the secured  property.  The Company analyzes
the financial condition of the borrower,  the borrower's credit history, and the
reliability  and  predictability  of the cash  flow  generated  by the  property
securing the loan. Currently, appraisals on properties securing multi-family and
commercial  real  estate  loans  originated  by the  Company  are  performed  by
independent licensed fee appraisers.

     Construction  loans on multi-family and commercial real estate projects are
structured  to be converted to  permanent  loans at the end of the  construction
phase, which generally runs up to 12 months. These construction loans have rates
and terms which  generally  match any permanent  multi-family or commercial real
estate loan then  offered by the  Company,  except that during the  construction
phase,  the borrower pays interest only.  These loans generally  provide for the
payment of interest and loan fees from loan proceeds.

     Construction  and  development  loans  are  obtained   principally  through
continued  business from  developers and builders who have  previously  borrowed
from the  Company,  as well as referrals  from  existing  customers  and walk-in
customers.  The  application  process  includes a  submission  to the Company of
accurate   plans,    specifications   and   costs   of   the   project   to   be
constructed/developed.  These  items  are  used  as a  basis  to  determine  the
appraised  value of the  subject  property.  Loans  are  based on the  lesser of
current appraised value or the cost of construction (land plus building).

     In addition,  the Company from time to time has purchased  loans secured by
multi-family real estate.  The Company purchased  approximately  $6.3 million of
multi-family real estate participation loans in fiscal 1999.

     Loans secured by commercial  and  multi-family  real estate  properties are
generally  larger and involve a greater  degree of credit risk than  one-to-four
family  residential  mortgage  loans.  Because  payments  on  loans  secured  by
commercial  real  estate  properties  are  often  dependent  on  the  successful
operation  or  management  of the  properties,  repayment  of such  loans may be
subject to adverse  conditions in the real estate market or the economy.  If the
cash flow from the project is reduced (for  example,  if leases are not obtained
or renewed),  the borrower's ability to repay the loan may be impaired.  The one
largest loan is $2.3 million and is secured by multi-family properties.

     CONSUMER LENDING.  The Company offers secured and unsecured consumer loans,
including home improvement  loans,  home equity loans,  loans secured by savings
deposits and equity  securities,  and retail mobile home loans.  The Company has
plans to expand its consumer lending portfolio. The Company currently originates
all of its consumer  loans in its primary market areas.  The Company  originates
consumer loans on a direct basis by extending credit directly to the borrower.

     At December 31, 1999,  deposit loans were $146,000 or .06% of the Company's
gross loan  portfolio.  Home  equity  loans  were  $15.4  million or 5.9% of the
Company's gross loan portfolio as of December 31, 1999.



<PAGE>


     Consumer  loan terms vary  according  to the type and value of  collateral,
length of  contract  and  creditworthiness  of the  borrower.  Loans  secured by
deposit  accounts at the Company are currently  originated  for up to 90% of the
account balance with a hold placed on the account  restricting the withdrawal of
the account balance.

     The  underwriting  standards  employed by the Company for  consumer  loans,
other than loans secured by deposits, include an application, a determination of
the  applicant's  payment history on other debts and an assessment of ability to
meet  existing   obligations  and  payments  on  the  proposed  loan.   Although
creditworthiness of the applicant is a primary  consideration,  the underwriting
process also  includes a  comparison  of the value of the  security,  if any, in
relation to the proposed loan amount.

     Consumer loans may entail greater credit risk than do residential  mortgage
loans,  particularly in the case of consumer loans which are unsecured.  In such
cases, any repossessed  collateral for a defaulted consumer loan may not provide
an adequate source of repayment of the  outstanding  loan balance as a result of
the greater likelihood of damage, loss, depreciation or fluctuation in value. In
addition,  consumer loan collections are dependent on the borrower's  continuing
financial stability, and thus are more likely to be affected by adverse personal
circumstances.  Furthermore,  the application of various federal and state laws,
including  bankruptcy  and  insolvency  laws,  may limit the amount which can be
recovered on such loans.

     COMMERCIAL  BUSINESS LENDING.  Commercial business loans have been added to
the  list of the  Company's  products.  The  outstanding  balance  of  unsecured
commercial lines of credit was $1.8 million as of December 31, 1999.  Commercial
loans secured other than by mortgage had outstanding balances of $3.1 million as
of December 31, 1999.  The purpose of these loans will  generally be for working
capital or  expansion  of existing  businesses.  These loans have been priced at
prime plus a specified  spread,  or at the one year constant  maturity  treasury
index plus a specified spread. Some of these loans are payable on demand.

     Unlike residential mortgage loans, which generally are made on the basis of
the  borrower's  ability to make  repayment from his or her employment and other
income and which are  secured by real  property  the value of which  tends to be
more easily  ascertainable,  commercial business loans typically are made on the
basis of the  borrower's  ability  to make  repayment  from the cash flow of the
borrower's business. As a result, the availability of funds for the repayment of
commercial  business loans may be substantially  dependent on the success of the
business  itself  (which,  in turn,  is likely to be dependent  upon the general
economic  environment).  The Bank's commercial  business loans may be secured by
business assets.  However, the collateral securing the loans may depreciate over
time,  may be  difficult  to appraise  and may  fluctuate  in value based on the
success of the business.  The Bank's  largest loan is a $2.3 million  commercial
business loan secured by a first security mortgage and multi-family properties.



<PAGE>


ORIGINATIONS, PURCHASES AND SALES OF LOANS

     Loan originations are developed from advertising,  continuing business with
depositors and borrowers,  soliciting  realtors and builders,  walk-in customers
and  correspondent  relationships  in other  markets.  Loans are  originated  by
salaried  loan  officers  and  field  originators   compensated  by  salary  and
commission.

     While the Company offers fixed-rate and adjustable-rate  loans, its ability
to originate  loans is dependent upon the relative  customer demand for loans in
its market areas,  which is affected by the interest rate  environment and other
factors.  In fiscal 1999,  the Company  originated  $45.9  million in fixed-rate
loans and $37.7 million in adjustable-rate loans.

     In periods of economic uncertainty,  the ability of financial  institutions
to  originate  large dollar  volumes of real estate  loans may be  substantially
reduced or  restricted,  with a resultant  decrease in related loan  origination
fees, other fee income and operating earnings.




<PAGE>


     The following  table shows the  origination,  purchase,  sale and repayment
activities of the Company for the periods indicated.


<TABLE>
<CAPTION>
                                           Year Ended December 31,
                                    ---------------------------------
                                      1999        1998         1997
                                    -------     --------     --------
<S>                                <C>         <C>          <C>

                                              (In Thousands)
ORIGINATIONS BY TYPE:
Adjustable-rate:
  Construction                      $   896      $ 2,494      $11,521
Real estate - one to four family      1,210        7,205       23,600
  - multi-family                     12,923        2,017          593
  - commercial                        3,833        1,060        3,276
Commercial business                   7,806        2,435        1,894
Consumer - home equity                9,576        7,226        5,996
Other consumer                        1,423        1,188        2,247
Fixed-rate:
  Construction                        3,806          526          280
  Commercial business                11,886        1,656          627
  Consumer                              958          895        7,213
  Real estate - one-to-four family   26,053       24,100        4,263
  - multi-family                      2,407           11          ---
  - commercial                        3,240        1,269          141
                                    -------      -------       ------
    Total loans originated           86,017       52,082       61,651


PURCHASES:
One-to-four family                  21,525           ---          ---
Multi-Family                         6,317           ---          ---
                                   -------       -------       ------
  Total purchased                   27,842           ---          ---
                                   -------       -------       ------

SALES AND REPAYMENTS:
  Loan sale                            ---           ---       (15,751)
  Loan payments                    (89,838)      (95,260)      (57,604)
                                  --------      --------      --------

  Total reductions                 (89,838)      (95,260)      (73,355)
Increase (decrease) in other
  items, net                         1,574        (3,639)       (1,824)
                                  --------      --------      --------
    Net increase (decrease)       $ 25,595      $(46,817)     $ (9,880)
                                  ========      ========      ========

</TABLE>



<PAGE>


NON-PERFORMING ASSETS AND CLASSIFIED ASSETS

     When a borrower  fails to make a required  payment on real  estate  secured
loans and  consumer  loans a notice is sent 30 days after  payment is due. At 60
days after the  payment  is due,  the  Company  generally  initiates  collection
procedures by written notice and/or telephone. In most cases,  delinquencies are
cured promptly,  however,  if a loan secured by real estate or other  collateral
has been  delinquent for more than 90 days,  satisfactory  payment  arrangements
must be adhered to or the Company will initiate  proceedings  for foreclosure or
repossession.

     When a loan becomes  delinquent  90 days or more or when the  collection of
principal  or interest  becomes  doubtful,  the  Company  will place the loan on
non-accrual  status and, as a result,  previously accrued interest income on the
loan is taken out of current income.  The loan will remain on non-accrual status
as long as the loan is 90 days or more delinquent.

     The following table sets forth information  concerning  delinquent loans at
December 31, 1999. The amounts presented represent the total remaining principal
balances of the related loans,  rather than the actual payment amounts which are
overdue and are reflected as a percentage of the type of loan category.



<TABLE>
                                                           LOANS DELINQUENT FOR:
                            ------------------------------------------------------------------------------------------
                                                                                     TOTAL LOANS DELINQUENT 60
                                60-89 DAYS                    90 DAYS AND OVER             DAYS AND OVER
                            ------------------------    ------------------------    -----------------------------
                                             PERCENT                     PERCENT                       PERCENT
                                             OF LOAN                     OF LOAN                       OF LOAN
                            NUMBER  AMOUNT  CATEGORY    NUMBER  AMOUNT  CATEGORY    NUMBER   AMOUNT   CATEGORY
                            ------  ------  --------    ------  ------  --------    ------   ------   --------
                                                          (Dollars in Thousands)

<S>                         <C>      <C>       <C>        <C>  <C>        <C>         <C>    <C>        <C>
Real Estate:
One-to-four family           7       $256      .14%       19   $1,274      .71%       26     $1,530      .94%
Construction               ---        ---      ---         1      230     3.32         1        230     3.32
Commercial Real Estate       1         94      .42         5      959     4.29         6      1,053     7.37
Multi-Family               ---        ---      ---         1      272      .90         1        272     1.00
Consumer/Commercial          7          9      .04         6       20      .08        13         29     1.59
                           ---       ----      ---       ---   ------     ----        --     ------    -----
      Total                 15       $359      .60%       32   $2,755     9.30%       47     $3,114     9.90%
                           ===       ====      ===       ===   ======     ====        ==     ======    =====
</TABLE>



<PAGE>


     The table  below sets forth the amounts and  categories  of  non-performing
assets in the Company's loan portfolio.  For all periods presented,  the Company
has had no troubled debt  restructurings  (which involve  forgiving a portion of
interest or  principal on any loans or making  loans at a rate  materially  less
than that of  market  rates).  Foreclosed  assets  include  assets  acquired  in
settlement of loans.

<TABLE>
<CAPTION>
                                                                 At December 31,
                                              ----------------------------------------------------
                                                1999        1998     1997     1996      1995
                                              -------     -------   ------   ------    -------
                                                               (Dollars in Thousands)
<S>                                          <C>         <C>       <C>       <C>       <C>
Non-accruing loans:
  One-to-four family                          $1,504      $1,740     $ 612     $ 674    $ 579
  Consumer                                        20         373       213        10      ---
  Commercial real estate/Business Loans        1,231       2,428     1,170     1,266      ---
                                               -----       -----     -----     -----      ---
     Total                                     2,755       4,541     1,995     1,950      579
                                               -----       -----     -----     -----      ---

Accruing loans delinquent more than 90 days      ---         ---       ---        94      ---

Foreclosed assets                                ---          56        56        55      ---
                                               -----       -----     -----     -----      ---

Total non-performing assets                   $2,755      $4,597    $2,051    $2,099     $579
                                              ======      ======    ======    ======     ====
Total as a percentage of total assets            .84%        1.4%      .55%     .52%      .25%
                                                ====         ===       ===      ===       ===
</TABLE>


     For the year ended December 31, 1999, gross interest income that would have
been recorded had the  non-accruing  loans been current in accordance with their
original terms amounted to approximately $110,000.

     NON-PERFORMING   ASSETS.   Included  in  the  table  above  in  nonaccruing
one-to-four  family  loans  at  December  31,  1999,  were 20 loans  secured  by
single-family  residences  located in the Company's  primary  market area.  Also
included in non-performing  assets are 1 multi-family  loan, 4 consumer loans, 2
commercial loans and 5 commercial real estate loans.

     POTENTIAL  PROBLEM  LOANS.  Not  categorized  as  non-performing  assets at
December  31,  1999,  were  $946,000  million of potential  problem  loans.  The
potential  problem  loans  consisted of eleven  single  family  residences,  two
commercial real estate loans, one multi-family loan and seven consumer loans.

     TROUBLED DEBT RESTRUCTURED LOANS. Not applicable.

     CLASSIFIED ASSETS.  Federal  regulations  provide for the classification of
loans and other assets such as debt and equity securities  considered by the OTS
to be of lesser  quality,  as  "substandard,"  "doubtful" or "loss." An asset is
considered  "substandard"  if it is  inadequately  protected  by the current net
worth and paying capacity of the obligor or of the collateral  pledged,  if any.
"Substandard"  assets include those characterized by the "distinct  possibility"
that the Bank will sustain "some loss" if the  deficiencies  are not  corrected.
Assets  classified as "doubtful"  have all of the  weaknesses  inherent in those
classified  "substandard,"  with the added  characteristic  that the  weaknesses
present  make  "collection  or  liquidation  in full," on the basis of currently
existing facts,  conditions,  and values,  "highly questionable and improbable."
Assets  classified as "loss" are those  considered  "uncollectible"  and of such
little value that their  continuance  as assets without the  establishment  of a
specific loss reserve is not warranted. Assets which do not currently expose the
Bank to sufficient risk to warrant  classification in one of the  aforementioned
categories,  but possess  weaknesses,  are  required to be  designated  "special
mention" by management.

     When a bank classifies problem assets as either substandard or doubtful, it
may establish general  allowances for loan losses in an amount deemed prudent by
management.  General  allowances  represent  loss  allowances  which  have  been
established to recognize the inherent risk associated  with lending  activities,
but which,  unlike  specific  allowances,  have not been allocated to particular
problem assets.  When a savings bank classifies  problem assets as "loss," it is
required  either to establish a specific  allowance  for losses equal to 100% of
that portion of the asset so classified or to charge-off such amount.  A savings
bank's  determination as to the  classification  of its assets and the amount of
its  valuation  allowances is subject to review by the savings  bank's  Regional
Director  at the  regional  OTS  office,  who may  order  the  establishment  of
additional general or specific loss allowances.

     In connection  with the filing of its periodic  reports with the OTS and in
accordance with its  classification of assets policy, the Bank regularly reviews
the loans in its portfolio to determine whether any loans require classification
in accordance with applicable  regulations.  On the basis of management's review
of its assets,  at December  31, 1999,  the Bank had  classified a total of $3.2
million of its assets as  substandard,  none as  doubtful  and none as loss.  At
December 31, 1998,  total  classified  assets were $4.0 million,  or 1.2% of the
Bank's assets.

     ALLOWANCE FOR LOAN LOSSES.  The  allowance  for loan losses is  established
through a provision for loan losses based on management's evaluation of the risk
inherent in its loan  portfolio and changes in the nature and volume of its loan
activity.  Such  evaluation,  which  includes  a review of loans for which  full
collectibility may not be reasonably assured, considers among other matters, the
estimated  fair  value  of  the  underlying  collateral,   economic  conditions,
historical  loan loss  experience and other factors that warrant  recognition in
providing for an adequate loan loss allowance.

     Real estate  properties  acquired through  foreclosure are recorded at fair
value. If fair value at the date of foreclosure is lower than the balance of the
related loan, the difference will be charged-off to the allowance at the time of
transfer.  Valuations  are  periodically  updated by management and if the value
declines,  a specific  provision for losses on such property is established by a
charge to operations.

     Although management believes that it uses the best information available to
determine  the  allowances,   unforeseen   market  conditions  could  result  in
adjustments and net earnings could be  significantly  affected if  circumstances
differ   substantially   from  the   assumptions   used  in  making   the  final
determination.  Future additions to the Company's  allowances will be the result
of periodic loan,  property and collateral  reviews and thus cannot be predicted
in advance.  At December 31, 1999,  the Company had a total  allowance  for loan
losses of $2.8  million,  or 1.1% of total loans  receivable.  See Note 4 of the
Notes to  Consolidated  Financial  Statements in the Company's  Annual Report to
Shareholders filed as Exhibit 13 hereto.


<PAGE>


     The following  table sets forth an analysis of the Company's  allowance for
loan losses.

<TABLE>
<CAPTION>
                                                                                    Year Ended December 31,
                                                        ------------------------------------------------------------------------
                                                            1999            1998           1997           1996            1995
                                                        -----------      ---------      ---------      ----------      ---------
                                                                                    (Dollars in Thousands)

Balance at beginning of period                          $3,200           $3,922          $1,716           $ 774            $774
Beginning balance acquisition                              ---              ---             ---             577             ---

Charge-offs:
  One-to-four family                                      (215)             (28)            (79)            (34)             (6)
  Consumer                                                (373)            (228)             ---             ---             ---
  Commercial                                              (148)            (122)             ---             ---             ---
Recoveries                                                  71               19              ---             ---             ---
                                                        ------           ---------        -------        -------        --------

Net charge-offs                                           (665)            (359)            (79)            (34)             (6)
Additions charged to operations                            246             (363)          2,285             399               6
                                                        ------           ---------       --------        -------        --------
Balance at end of period                                $2,781           $3,200          $3,922          $1,716            $774
                                                        ======           =========       ========        =======            ====

Ratio of net charge-offs during the period to              .27%             .14%             ---            .01%             ---
                                                        ======           =========        =======        =======        ========
   average loans outstanding during the period

Ratio of net charge-offs during the period to             20.3%            8.6%           3.81%           1.66%           2.99%
   average non- performing assets                       ======           =========        ====            ====            ====



<PAGE>


            The  distribution of the Company's  allowance for losses on loans at
the dates indicated is summarized as follows:

                                                                         December 31,
                            ---------------------------------------------------------------------

                                 1999                      1998                        1997
                            --------------           ----------------           -----------------
                                    Percent                    Percent                    Percent
                                    of Loans                   of Loans                   of Loans
                                    in Each                    in Each                    in Each
                                    Category                   Category                   Category
                                    to Total                   to Total                   to Total
                         AMOUNT      LOANS         AMOUNT       LOANS           AMOUNT     LOANS
                                                  (Dollars in Thousands)
<S>                      <C>       <C>            <C>          <C>            <C>        <C>


One-to-four family         $474       68.01%        $519         74.87%          $ 669       79.10%
Multi-family                170       11.53           55          5.25             190        3.97
Commercial real estate      728        8.52          828          8.74           1,338        7.61
Construction                  3        2.64            3          1.65              72        2.57
Consumer                    173        7.20          510          6.56             548        5.38

Commercial Business         598        2.10          585          2.93             432        1.37
Unallocated                 635         ---          700           ---             673
                            ---       -----          ----         ----           -----      ------
                                                                                                                               ---
     Total               $2,781      100.00%      $3,200        100.00%         $3,922      100.00%
                        =======      ======       ======        ======          ======      ======
</TABLE>


INVESTMENT ACTIVITIES

     The Bank must maintain minimum levels of investments that qualify as liquid
assets under OTS regulations.  Liquidity may increase or decrease depending upon
the  availability of funds and comparative  yields on investments in relation to
the return on loans.  Historically,  the Bank has  maintained  its liquid assets
above the minimum  requirements  imposed by the OTS  regulations  and at a level
believed adequate to meet requirements of normal daily activities,  repayment of
maturing  debt and  potential  deposit  outflows.  As of December 31, 1999,  the
Bank's  liquidity  ratios  (liquid  assets as a percentage  of net  withdrawable
savings  deposits and current  borrowings)  was in  compliance  with  applicable
regulations. See "Regulation - Liquidity."

     Federally  chartered  savings  institutions have the authority to invest in
various types of liquid assets,  including  United States Treasury  obligations,
securities  of various  federal  agencies,  certain  certificates  of deposit of
insured banks and savings institutions, certain bankers' acceptances, repurchase
agreements  and  federal  funds.  Subject  to  various  restrictions,  federally
chartered savings institutions may also invest their assets in commercial paper,
investment grade corporate debt securities and mutual funds whose assets conform
to the investments that a federally  chartered savings  institution is otherwise
authorized to make directly.

     The  investment  policy of the  Company is to invest  funds  among  various
categories of investments and maturities  based upon the need for liquidity,  to
achieve the proper  balance  between its desire to  minimize  risk and  maximize
yield,  to provide  collateral  for  borrowings,  and to fulfill  the  Company's
asset/liability management policies.

     At December 31, 1999, the Company's cash and  interest-bearing  deposits in
other financial  institutions totaled $9.6 million, or 2.9% of total assets. The
Company  also has a $7.5 million  investment  in the common stock of the FHLB of
Cincinnati in order to satisfy the requirement for membership therein.

     OTS  regulations   restrict   investments  in  corporate  debt  and  equity
securities  by  the  Bank.  These  restrictions   include  prohibitions  against
investments  in the debt  securities  of any one  issuer in excess of 15% of the
Bank's  unimpaired   capital  and  unimpaired  surplus  as  defined  by  federal
regulations,  plus an  additional  10% if the  investments  are fully secured by
readily marketable collateral.  At December 31, 1999, the Bank was in compliance
with  this  regulation.   See  "Regulation  -  Federal   Regulation  of  Savings
Institutions"  for  a  discussion  of  additional  restrictions  on  the  Bank's
investment activities.
<PAGE>

     The following table sets forth the composition of the Company's  investment
portfolio at the dates indicated (excluding mortgage-backed securities).

<TABLE>
<CAPTION>

                                                                             December 31,
                                               ----------------------------------------------------------------------

                                                      1999                       1998                      1997
                                                ----------------          ------------------         ----------------
                                              Book          % of          Book          % of        Book        % of
                                             VALUE          TOTAL         VALUE         TOTAL      VALUE        TOTAL
                                                                           (Dollars in Thousands)
<S>                                          <C>            <C>         <C>          <C>          <C>         <C>


Securities:
  U.S. Treasury                               $  ---         ---%        $  502          1.56%      $ 501        .88%
  U.S. Government Agencies                     8,775       45.27         14,900         46.25      21,820      38.24
                                              ------       -----         ------         -----      ------      -----
     Subtotal                                  8,775       45.27         15,402         47.81      22,321      39.12
                                              ------       -----         ------         -----      ------      -----
FHLB stock                                     7,451       38.44          6,948         21.57       6,470      11.34
Freddie Mac stock                                ---         ---            ---           ---         134        .23
                                            --------      ------        --------      -------      ------      -----

     Total securities and
        FHLB/Freddie Mac stock                16,226       83.71         22,350         69.38      28,925      50.69
                                             -------      ------         -------       ------      ------      -----
Average remaining life of securities
                                               13.84 years                12.88 years                7.51 years


Other Interest-Earning Assets:
  Interest-bearing deposits with banks         3,159       16.29          4,550         14.12      22,022     38.60
  Federal funds sold                                                      5,317         16.50       6,110     10.71
                                             -------      ------         -------        -----      ------     -----
     Total                                   $19,385      100.00%       $32,217        100.00%    $57,057    100.00%
                                             =======      ======        =======        ======     =======    ======
Average remaining life or term to
repricing of investment securities and
other interest-earning assets, excluding
FHLB/Freddie Mac stock                          6.26 years                 7.88 years                3.32 years

</TABLE>


<PAGE>


     The  composition  and  maturities of the investment  securities  portfolio,
excluding FHLB of Cincinnati stock, are indicated in the following table.
<TABLE>
<CAPTION>

                                December 31, 1999
                             --------------------------------------------------------------------------------------------------
                              Less Than         1 to 5         Over 5
                                1 YEAR          YEARS          YEARS           TOTAL INVESTMENT SECURITIES
                              -----------     ----------     ----------        ---------------------------

                             BOOK VALUE       BOOK VALUE      BOOK VALUE        BOOK VALUE     MARKET VALUE
                             -------------   ------------    -----------        -----------    ------------
                                                            (Dollars in Thousands)
<S>                           <C>            <C>            <C>                 <C>            <C>

U.S. Treasury securities        $---            $ ---           $  ---            $ ---            $---
Federal agency obligations       ---              ---            8,775            8,775           8,775
                                 ---            -----           ------            -----           -----                 -----

Total investment securities     $---             $---           $8,775           $8,775          $8,775
                                ====             ====           ======           ======          ======

Weighted average yield           ---%             ---%            6.15%            6.15%           6.15%
</TABLE>


     MORTGAGE-BACKED  SECURITIES.  The Company had a $41.6 million  portfolio of
mortgage-backed  securities  at December 31, 1999,  all of which were insured or
guaranteed  by Fannie Mae,  Ginnie Mae or Freddie Mac.  Accordingly,  management
believes  that the  Company's  mortgage-backed  securities  are  generally  more
resistant to credit problems than loans,  which generally lack such insurance or
guarantees.  Because these securities  represent a pass through of principal and
interest  from  underlying  individual  30-year  mortgages,  such  securities do
present  prepayment risk. Any such individual  security contains  mortgages that
can be prepaid at any time over the life of the security.  In a rising  interest
rate  environment  the  underlying  mortgages  are likely to extend  their lives
versus a stable or declining rate environment.  A declining rate environment can
result in rapid  prepayment.  There is no certainty  as to the security  life or
speed of prepayment. The geographic makeup and correlated economic conditions of
the underlying mortgages also play an important role in determining  prepayment.
In addition to  prepayment  risk,  interest rate risk is inherent in holding any
debt  security.  As interest  rates rise the value of the security  declines and
conversely   as   interest   rates   decline   values   rise.    Adjustable-rate
mortgage-backed  securities  have the  advantage of moving their  interest  rate
within  limits  with  the  contractual  index  used,  subject  to  the  risk  of
prepayment.   Interest  rate  adjustments  to  $1.4  million  of  the  Company's
adjustable-rate  mortgage-backed  securities  are tied to the One Year  Constant
Maturity  Treasury  Index,  $5.6 million are tied to the 11th  District  cost of
funds and $95,000 are tied to the six month  treasury.  At  December  31,  1999,
17.4% of the Company's  mortgage-backed  securities consisted of adjustable-rate
mortgage-backed securities.

     Mortgage-backed  securities  can serve as collateral  for  borrowings  and,
through  sales  and  repayments,  as a  source  of  liquidity.  For  information
regarding  the  carrying  and  market  values of the  Company's  mortgage-backed
securities  portfolio,  see  Note  3 of  the  Notes  to  Consolidated  Financial
Statements in the Company's  Annual Report to  Shareholders  filed as Exhibit 13
hereto. Under the OTS risk-based capital requirement, mortgage-backed securities
have a risk  weight of 20% (or 0% in the case of  Government  National  Mortgage
Association   securities)  in  contrast  to  the  50%  risk  weight  carried  by
residential  loans. See "Regulation."  Management has purchased  mortgage-backed
securities in order to supplement loan originations and includes adjustable-rate
mortgage-backed   securities  to  mitigate  the   consequences  of  an  entirely
fixed-rate  mortgage  portfolio.  The CMO  securities  held by the Company carry
certain risks. The principal represented by such securities may be repaid over a
longer period than that assumed in management's  initial purchase analysis which
may hinder certain aspects of the Company's asset/liability management strategy.
In  addition,  these  securities  have  maximum  interest  rate caps.  As market
interest rate levels  approach these caps, the value of the underlying  security
will  decline.  As of December  31,  1999,  the Company held $8.3 million of CMO
securities.
<PAGE>


     The following table sets forth the contractual  maturities of the Company's
mortgage-backed securities at December 31, 1999.

<TABLE>
<CAPTION>

                               Due in              Due in            Due In Over         December 31, 1999
                            1 TO 5 YEARS        6 TO 10 YEARS         10 YEARS         BALANCE OUTSTANDING
                          ----------------    -----------------    ----------------    ---------------------
                                                    (Dollars in Thousands)
<S>                      <C>                 <C>                      <C>            <C>


Freddie Mac                    $ 28                $ 618                   $3,594           $4,240

Fannie Mae                      ---                  ---                    7,388            7,388
CMOs                            ---                  484                    7,782            8,266
Ginnie Mae                        9                  ---                   21,688           21,697
                               ----                  ---                   ------           ------
Total mortgage-backed           $37               $1,102                  $40,452          $41,591
                                ===               ======                  =======          =======
securities

Weighted average yield         6.16%                7.24%                    6.38%            6.40%

</TABLE>


SOURCES OF FUNDS

     GENERAL.  The Company's primary sources of funds are deposits,  borrowings,
repayment of loan principal, sales and repayments of mortgage-backed securities,
maturing  investments  in  certificates  of  deposit,  and funds  provided  from
operations.  Borrowings,  consisting of FHLB  advances,  may be used at times to
compensate for seasonal  reductions in deposits or deposit  inflows at less than
projected  levels,  and may be used on a longer-term  basis to support  expanded
lending activities.

     DEPOSITS.  The Company offers a variety of deposit  accounts  having a wide
range of interest rates and terms.  The Company's  deposits  consist of passbook
and statement savings accounts,  NOW, demand and money market fund accounts, and
certificate  accounts ranging in terms from six months to ten years. The Company
only  solicits  deposits from its market area and does not currently use brokers
to  obtain  deposits.  The  Company  relies  primarily  on  competitive  pricing
policies, advertising and customer service to attract and retain these deposits.

     The variety of deposit accounts offered by the Company has allowed it to be
competitive  in obtaining  funds and to respond with  flexibility  to changes in
consumer  demand.   The  Company  has  become  more  susceptible  to  short-term
fluctuations  in deposit  flows,  as customers  have become more  interest  rate
conscious.  The  Company  endeavors  to manage the  pricing of its  deposits  in
keeping with its asset/liability  management and profitability  objectives.  The
ability of the Company to attract and maintain  certificates of deposit accounts
and  the  rates  paid on  these  deposits  has  been  and  will  continue  to be
significantly affected by market conditions.

     The following  table sets forth the savings flows at the Company during the
periods indicated.  The flow of deposits is influenced  significantly by general
economic conditions,  changes in money market and prevailing interest rates, and
competition.

<TABLE>
<CAPTION>

                                                     Year Ended December 31,
                                        --------------------------------------------------

                                          1999              1998                1997
                                         -------           ------              ------
                                                    (Dollars in Thousands)
<S>                                   <C>              <C>                 <C>


Opening balance                         $192,966         $246,909             $233,203
Net deposits (withdrawals)                (4,036)         (70,114)(1)           (4,220)
Interest credited                         13,401           16,171               17,926
                                         -------         --------            ---------

Ending balance                          $202,331         $192,966             $246,909
                                        ========         ========             ========

Net increase (decrease)                   $9,365         $(53,943)            $ 13,706
                                          ======        =========             ========

Percent increase (decrease)                  4.9%            21.8%                 5.8 %
                                             ===             ====                 ====

</TABLE>

(1)  Net deposit  decrease is  primarily  due to the sale of $84,365 in deposits
     related to the Cincinnati area branch sales in 1998.
<PAGE>


     The following table sets forth the dollar amount of deposits in the various
types of deposit programs offered by the Company for the periods indicated.

<TABLE>
<CAPTION>
                                                                                      Year Ended December 31,
                                               -------------------------------------------------------------------------------------

                                                      1999                        1998                         1997
                                               ------------------          ------------------          ------------------
                                                          Percent                      Percent                    Percent
                                               AMOUNT     OF TOTAL         AMOUNT      OF TOTAL         AMOUNT    OF TOTAL
                                                                                      (Dollars in Thousands)
<S>                                          <C>        <C>              <C>         <C>              <C>          <C>

TRANSACTIONS AND SAVINGS DEPOSITS:

Passbook savings accounts                     $12,065       5.96%           $13,629        7.06%          $22,115      8.96%
NOW accounts                                   13,529       6.69             12,708        6.59            12,186      4.94
Money market accounts                          49,149      24.29             49,084       25.44            37,182     15.06
                                              -------      -----            -------       -----            ------     -----

Total Non-Certificates                         74,743      36.94             75,421       39.09            71,483     28.96
                                               ------      -----             ------       -----            ------     -----

CERTIFICATES:

 0.00 -  3.49%                                    353        .17                534        .28                785       .32
 3.50 -  5.49%                                 45,756      22.62             28,353      14.69             27,688     11.21
 5.50 -  7.49%                                 81,098      40.08             88,100      45.65            146,319     59.26
 7.50 -  9.49%                                    381        .19                558        .29                634       .25
                                               ------      -----             ------      -----            -------    ------


Total Certificates                            127,588      63.06            117,545      60.91            175,426     71.04
                                              -------      -----            -------      -----            -------     -----
Total Deposits                               $202,331     100.00%          $192,966     100.00%          $246,909    100.00%
                                             ========     ======           ========     ======           ========    ======
</TABLE>


     The following  table shows rate and maturity  information for the Company's
certificates of deposit as of December 31, 1999.

<TABLE>
<CAPTION>


                                                    0.00-      3.50-       5.50-       7.50-                        Percent
                                                    3.49%      5.49%       7.49%       9.49%          TOTAL         OF TOTAL
                                                    -----      -----       -----       -----          -----         --------
<S>                                               <C>         <C>         <C>        <C>           <C>             <C>
                                                                                  (Dollars in Thousands)
Certificate accounts maturing in quarter ending:


March 31, 2000                                       $88       $7,586       $16,440      $0            $24,114          18.90%
June 30, 2000                                         23        9,238        17,338       0             26,599          20.85
September 30, 2000                                    31        8,031         5,386       0             13,448          10.54
December 31, 2000                                      0        6,260         2,752      27              9,039           7.08
March 31, 2001                                        18        3,473         1,216       0              4,707           3.69
June 30, 2001                                         76        2,344         4,801      29              7,250           5.68
September 30, 2001                                     7          890        10,007       0             10,904           8.55
December 31, 2001                                      3        2,414         6,749     165              9,331           7.31
March 31, 2002                                         2        2,677         2,439       0              5,118           4.02
June 30, 2002                                          3        1,684           136       0              1,823           1.43
September 30, 2002                                    16           72         5,992      72              6,152           4.82
December 31, 2002                                      0            2         3,782      44              3,828           3.00
Thereafter                                            86        1,085         4,060      44              5,275           4.13
                                                      --        -----         -----      --              -----

   Total    .                                       $353      $45,756       $81,098    $381           $127,588
                                                    ====      =======       =======    ====           ========

   Percent of total                                 .28%       35.86%        63.56%     .30%            100.00%
                                                    ===        =====         =====      ===             ======
</TABLE>


     The following table  indicates the amount of the Company's  certificates of
deposit and other deposits by time  remaining  until maturity as of December 31,
1999.
<TABLE>
<CAPTION>


                                                                                      Maturity
                                           -----------------------------------------------------------------------
                                                              Over            Over
                                            3 Months         3 to 6          6 to 12        Over
                                                             OR LESS          MONTHS        12 MONTHS     TOTAL
                                           ------------      ----------      ---------     ---------     ---------
                                                                      (Dollars in Thousands)
<S>                                       <C>               <C>            <C>            <C>            <C>

Certificates of deposit less
 than $100,000                              $21,476            $23,117        $20,589        $50,143       $115,325
Certificates of deposit of                    2,638              3,482          1,898          4,245         12,263
                                            -------            -------        -------        -------       --------
 $100,000 or more
Total certificates of deposit               $24,114            $26,599        $22,487        $54,388       $127,588
                                            =======            =======        =======        =======       ========

</TABLE>



     BORROWINGS.  Another  source of funds  includes  advances  from the FHLB of
Cincinnati.  As a member of the FHLB of Cincinnati,  the Bank is required to own
capital stock and is authorized to apply for advances.  Each FHLB credit program
has its own interest rate, which may be fixed or variable,  and includes a range
of maturities. The FHLB of Cincinnati may prescribe the acceptable uses to which
these  advances may be put, as well as  limitations  in the size of the advances
and repayment provisions.


<PAGE>



     Beginning in 1995,  the Bank utilized a higher level and a wider variety of
FHLB  advances  than  it had in the  past.  These  advances  were  utilized  for
increased  investments and lending.  The FHLB advances are secured by the Bank's
blanket  agreement  for  advances  and  security  agreement  and are not tied to
specific investments or loans.

     The following  table sets forth the maximum  month-end  balance and average
balance of FHLB advances for the periods indicated.
<TABLE>
<CAPTION>

                                 Year Ended December 31,
                  ------------------------------------------------------

                     1999                1998             1997
                  ----------          ----------        ---------
                                 (Dollars in Thousands)
<S>            <C>                 <C>                 <C>

Maximum Balance:
  FHLB advances      $90,247           $88,256          $113,112

Average Balance:
  FHLB advances      $76,449           $62,803          $ 97,414

</TABLE>

     The following  table sets forth certain  information  as to the Bank's FHLB
advances at the dates indicated.

                                                      December 31,
                                       -----------------------------------------

                                          1999           1998           1997
                                       ----------     ----------     ----------
                                                   (Dollars in Thousands)


FHLB advances                             $82,183        $85,252       $68,339

Weighted average interest rate of
 FHLB advances                               5.41%          5.30%         5.85%



SERVICE CORPORATION ACTIVITIES

     Federal savings  institutions  generally may invest a limited percentage of
their assets in service corporations.  In addition, federal savings institutions
may invest up to 50% of their  regulatory  capital in conforming  loans to their
service  corporations.  In  addition  to  investments  in service  corporations,
federal  savings  institutions  are  permitted to invest an unlimited  amount in
operating  subsidiaries  engaged  solely in activities in which federal  savings
institutions may engage directly.

     At December  31,  1999,  the Bank had a net  negative  book  investment  of
$155,382 in CornerstoneBanc  Financial Services, an operating subsidiary created
to generate mortgage lending in areas outside of the Bank's normal lending area.

COMPETITION

     The Company faces strong  competition,  both in originating real estate and
other loans and in attracting  deposits.  Competition in originating real estate
loans comes primarily from commercial banks, other savings institutions,  credit
unions and mortgage  bankers  making loans secured by real estate located in the
Company's  market  area.  The Company  competes  for real estate and other loans
principally  on the basis of the quality of  services it provides to  borrowers,
and loan fees it charges, and the types of loans it originates.

     The  Company  attracts  all of its  deposits  through  its  retail  banking
offices,  primarily from the  communities in which those retail banking  offices
are located;  therefore,  competition  for those  deposits is  principally  from
commercial banks, other savings institutions,  credit unions and brokerage firms
located in the same  communities.  The Company  competes  for these  deposits by
offering a variety of deposit accounts at competitive rates, convenient business
hours, and convenient  branch locations with interbranch  deposit and withdrawal
privileges at each.

     On  November  12,  1999,  the  Gramm-Leach-Bliley  Act (the "GLB  Act") was
enacted into law. The GLB Act makes sweeping  changes in the financial  services
in which various types of financial institutions may engage. The Glass-Steagall
Act, which had generally  prevented banks from  affiliation  with securities and
insurance firms, was repealed.  A new "financial  holding  company",  which owns
only  well  capitalized  and  well  managed  depository  institutions,  will  be
permitted to engage in a variety of financial  activities,  including  insurance
and securities underwriting and agency activities.

     The  GLB  Act  permits  unitary  savings  and loan  holding  companies  in
existence on May 4, 1999, including the Corporation to continue to engage in all
activities  that they were  permitted to engage in prior to the enactment of the
Act.  Such  activities  are  essentially  unlimited,  provided  that the  thrift
subsidiary  remains a qualified thrift lender. Any thrift holding company formed
after May 4r, 1999 will be subject to the same restrictions as a multiple thrift
holding company.  In addition,  a unitary thrift holding company in existence at
May 4,  1999  may be  sold  only  to a  financial  holding  company  engaged  in
activities permissible for multiple savings and loan holding companies.

     The GLB Act is not expected to have a material  effect on the activities in
which  the  Corporation  is  currently  engaged,   except  to  the  extent  that
competition  with other types of  financial  institutions  may  increase as they
engage in activities not permitted prior to enactment of the GLB Act.


                                  REGULATION
GENERAL

     The Bank is a federally  chartered savings bank.  Accordingly,  the Bank is
subject to broad federal regulation extending to all its operations. The Bank is
a member of the FHLB of Cincinnati and subject to certain limited  regulation by
the Board of Governors of the Federal Reserve System ("Federal  Reserve Board").
As a savings and loan  holding  company,  the Company also is subject to federal
regulation and oversight. The purpose of the regulation of the Company and other
holding  companies is to protect  subsidiary  savings  associations.  The Bank's
deposits  are  federally  insured  by the  Savings  Association  Insurance  Fund
("SAIF"),  which  together with the Bank  Insurance Fund (the "BIF") are the two
deposit insurance funds administered by the FDIC, and their deposits are insured
by the FDIC.  As a  result,  the FDIC has  certain  regulatory  and  examination
authority over the Bank.

     Certain of these  regulatory  requirements  and  restrictions are discussed
below or elsewhere in this document.

FEDERAL REGULATION OF SAVINGS INSTITUTIONS

     The OTS has extensive  authority  over the  operations  of federal  savings
institutions.  As part of this authority,  the Bank is required to file periodic
reports with the OTS and is subject to periodic  examinations by the OTS and the
FDIC.  When  these  examinations  are  conducted  by the OTS and the  FDIC,  the
examiners may require an  institution  to provide for higher general or specific
loan  loss  reserves.   All  federal  savings  institutions  are  subject  to  a
semi-annual  assessment,  based upon the institution's total assets, to fund OTS
operations.  The Bank's OTS  assessment  for the fiscal year ended  December 31,
1999 was $77,000.

     The OTS also has extensive  enforcement  authority over all federal savings
institutions  and  their  holding   companies,   including  the  Company.   This
enforcement authority includes,  among other things, the ability to assess civil
money  penalties,  to issue  cease-and-desist  or removal orders and to initiate
injunctive actions.  In general,  these enforcement actions may be initiated for
violations  of laws and  regulations  and  unsafe or  unsound  practices.  Other
actions or inactions  may provide the basis for  enforcement  action,  including
misleading  or  untimely  reports  filed  with the  OTS.  Except  under  certain
circumstances,  public  disclosure  of final  enforcement  actions by the OTS is
required.

     In addition, the investment, lending and branching authority of the Bank is
prescribed  by  federal  laws and  they  are  prohibited  from  engaging  in any
activities  not  permitted  by such  laws.  For  instance,  no  federal  savings
institution may invest in  non-investment  grade corporate debt  securities.  In
addition,  the permissible level of investment by federal  institutions in loans
secured by  non-residential  real property may not exceed 400% of total capital,
except with approval of the OTS. Federal savings institutions are also generally
authorized  to  branch  nationwide.  The Bank is in  compliance  with the  noted
restrictions.

     The Bank's general permissible lending limit for  loans-to-one-borrower  is
equal to the  greater of  $500,000  or 15% of  unimpaired  capital  and  surplus
(except for loans fully secured by certain  readily  marketable  collateral,  in
which case this limit is increased to 25% of unimpaired capital and surplus). At
December 31, 1999,  the Bank's  lending  limit under this  restriction  was $6.2
million. The Bank is in compliance with the loans-to-one-borrower limitation.

     The  OTS,  as well as the  other  federal  banking  agencies,  has  adopted
guidelines  establishing  safety and soundness standards on such matters as loan
underwriting and  documentation,  asset quality,  earnings  standards,  internal
controls and audit  systems,  interest rate risk exposure and  compensation  and
other  employee  benefits.  Any  institution  which  fails to comply  with these
standards must submit a compliance plan.

INSURANCE OF ACCOUNTS AND REGULATION BY THE FDIC

     The Bank's  deposits are insured by the SAIF,  which is administered by the
FDIC.  Deposits  are  insured  up to  applicable  limits  by the  FDIC  and such
insurance  is  backed  by  the  full  faith  and  credit  of the  United  States
Government.  As insurer,  the FDIC  imposes  deposit  insurance  premiums and is
authorized to conduct  examinations of and to require  reporting by FDIC-insured
institutions. It also may prohibit any FDIC-insured institution from engaging in
any activity the FDIC  determines  by regulation or order to pose a serious risk
to the SAIF or the BIF. The FDIC also has the authority to initiate  enforcement
actions  against  savings  associations,  after giving the OTS an opportunity to
take such action,  and may terminate the deposit insurance if it determines that
the institution has engaged in unsafe or unsound  practices,  or is in an unsafe
or unsound condition.

     The FDIC's  deposit  insurance  premiums are assessed  through a risk-based
system under which all insured  depository  institutions  are placed into one of
nine  categories  and  assessed  insurance  premiums  based upon their  level of
capital and supervisory evaluation. Under the system, institutions classified as
well  capitalized  (I.E., a core capital ratio of at least 5%, a ratio of Tier 1
or core capital to  risk-weighted  assets  ("Tier 1  risk-based  capital") of at
least 6% and a risk-based  capital ratio of at least 10%) and considered healthy
pay the  lowest  premium  while  institutions  that  are  less  than  adequately
capitalized (I.E., core or Tier 1 risk-based capital ratios of less than 4% or a
risk-based  capital  ratio  of less  than  8%)  and  considered  of  substantial
supervisory concern pay the highest premium.  Risk classification of all insured
institutions is made by the FDIC for each semi-annual assessment period.

     The FDIC is authorized to increase assessment rates, on a semiannual basis,
if it  determines  that the  reserve  ratio of the  SAIF  will be less  than the
designated  reserve  ratio of 1.25% of SAIF insured  deposits.  In setting these
increased  assessments,  the FDIC must seek to restore the reserve ratio to that
designated  reserve  level,  or such higher  reserve ratio as established by the
FDIC.  The FDIC may also impose  special  assessments  on SAIF  members to repay
amounts  borrowed from the United States Treasury or for any other reason deemed
necessary by the FDIC.

     Effective  January 1, 1997,  the premium  schedule for BIF and SAIF insured
institutions ranged from 0 to 27 basis points. However SAIF-insured institutions
are required to pay a Financing  Corporation  ("FICO")  assessment,  in order to
fund the interest on bonds issued to resolve thrift failures in the 1980s, equal
to approximately 6.48 basis points for each $100 in domestic deposits, while BIF
insured  institutions pay an assessment equal to approximately 1.52 basis points
for each $100 in domestic deposits.  The assessment is expected to be reduced to
2.43 basis points no later than January 1, 2000,  when BIF insured  institutions
fully participate in the assessment..  These  assessments,  which may be revised
based  upon the level of BIF and SAIF  deposits  will  continue  until the bonds
mature in the year 2017.

REGULATORY CAPITAL REQUIREMENTS

     Federally  insured  savings  association are required to maintain a minimum
level  of  regulatory  capital.  The  OTS  has  established  capital  standards,
including a tangible  capital  requirement,  a leverage  ratio (or core capital)
requirement  and a risk-based  capital  requirement  applicable  to such savings
associations.  These capital  requirements must be generally as stringent as the
comparable  capital  requirements for national banks. The OTS is also authorized
to  impose  capital  requirements  in excess of these  standards  on  individual
associations on a case-by-case basis.

     The  capital  regulations  require  tangible  capital  of at least  1.5% of
adjusted total assets (as defined by  regulation).  Tangible  capital  generally
includes  common   shareholders'   equity  and  retained  income,   and  certain
noncumulative  perpetual  preferred stock and related income.  In addition,  all
intangible  assets,  other than a limited amount of purchased mortgage servicing
rights,  must be deducted from tangible capital.  At December 31, 1999, the Bank
had no intangible assets included in its financial statements.

     The OTS  regulations  establish  special  capitalization  requirements  for
savings associations that own subsidiaries.  In determining  compliance with the
capital requirements,  all subsidiaries engaged solely in activities permissible
for national  banks or engaged in certain other  activities  solely as agent for
its customers are  "includable"  subsidiaries  that are consolidated for capital
purposes in proportion to the association's  level of ownership.  For excludable
subsidiaries,  the debt and equity investments in such subsidiaries are deducted
from assets and capital. The Bank's subsidiaries are includable subsidiaries.

     At December 31, 1999, the Bank had tangible  capital of $40.0  million,  or
12.1% of  adjusted  total  assets,  which is $35.1  million  above  the  minimum
requirement of 1.5% of adjusted total assets in effect on that date.

     The capital  standards  also require  core capital  equal to at least 3% of
adjusted total assets.  Core capital generally consists of tangible capital plus
certain intangible  assets,  including a limited amount of purchased credit card
relationships.  At December 31,  1999,  the Bank had no  intangibles  which were
subject to these tests. As a result of the prompt  corrective  action provisions
discussed  below,  however,  a savings  association must maintain a core capital
ratio  of at  least  4% to  be  considered  adequately  capitalized  unless  its
supervisory condition is such to allow it to maintain a 3% ratio.

     At December 31, 1999, the Bank had core capital equal to $40.0 million,  or
12.1% of  adjusted  total  assets,  which is $26.8  million  above  the  minimum
leverage ratio requirement of 4% as in effect on that date.

     The OTS risk-based  requirement requires savings associations to have total
capital of at least 8% of risk-weighted  assets.  Total capital consists of core
capital,  as defined above, and  supplementary  capital.  Supplementary  capital
consists of certain  permanent  and  maturing  capital  instruments  that do not
qualify as core capital and general  valuation loan and lease loss allowances up
to a maximum of 1.25% of risk-weighted assets. Supplementary capital may be used
to satisfy the risk-based  requirement  only to the extent of core capital.  The
OTS is  also  authorized  to  require  a  savings  association  to  maintain  an
additional  amount of total capital to account for  concentration of credit risk
and the risk of non-traditional  activities.  At December 31, 1999, the Bank had
no capital instruments that qualify as supplementary capital and $1.4 million of
general loss reserves, which was less than 1.0% of risk-weighted assets.

     Certain  exclusions from capital and assets are required to be made for the
purpose  of  calculating  total  capital.  Such  exclusions  consist  of  equity
investments  (as  defined  by  regulation)  and that  portion  of land loans and
nonresidential  construction  loans in excess of an 80% loan-to-value  ratio and
reciprocal  holdings of  qualifying  capital  instruments.  The Bank had no such
exclusions from capital and assets at December 31, 1999.

     In determining the amount of risk-weighted  assets,  all assets,  including
certain  off-balance sheet items,  will be multiplied by a risk weight,  ranging
from 0% to 100%,  based on the risk inherent in the type of asset.  For example,
the OTS has assigned a risk weight of 50% for prudently  underwritten  permanent
one-to-four  family first lien mortgage  loans not more than 90 days  delinquent
and  having a  loan-to-value  ratio of not more than 80% at  origination  unless
insured to such ratio by an insurer approved by the Fannie Mae or Freddie Mac.

     OTS regulations also require that every savings  association with more than
normal  interest  rate risk  exposure  to deduct  from its  total  capital,  for
purposes of determining compliance with such requirement, an amount equal to 50%
of its  interest-rate  risk  exposure  multiplied  by the  present  value of its
assets. This exposure is a measure of the potential decline in the net portfolio
value of a savings  association,  greater  than 2% of the  present  value of its
assets,  based upon a  hypothetical  200 basis  point  increase  or  decrease in
interest rates (whichever results in a greater decline).  Net portfolio value is
the  present  value  of  expected  cash  flows  from  assets,   liabilities  and
off-balance  sheet  contracts.  The rule will not become effective until the OTS
evaluates the process by which savings  associations may appeal an interest rate
risk deduction determination.  It is uncertain as to when this evaluation may be
completed.  Any savings  institution with less than $300 million in assets and a
total capital ratio in excess of 12% is exempt from this requirement  unless the
OTS determines otherwise.

     On December  31,  1999,  the Bank had total  capital (as defined  above) of
$41.4 million  (including $40.0 million in core capital and $1.4 of general loss
reserves) and risk-weighted  assets of $209.2 million; or total capital of 19.8%
of  risk-weighted   assets.  This  amount  was  $24.7  million  above  the  8.0%
requirement in effect on that date.

     The OTS and the  FDIC  are  authorized  and,  under  certain  circumstances
required, to take certain actions against savings associations that fail to meet
their  capital  requirements.  The OTS is  generally  required to take action to
restrict the activities of an "undercapitalized  association" (generally defined
to be  one  with  less  than  either  a 4%  core  capital  ratio,  a 4%  Tier  1
risked-based  capital  ratio  or an  8%  risk-based  capital  ratio).  Any  such
association  must  submit a  capital  restoration  plan and  until  such plan is
approved by the OTS may not increase its assets,  acquire  another  institution,
establish a branch or engage in any new  activities,  and generally may not make
capital   distributions.   The  OTS  is  authorized  to  impose  the  additional
restrictions that are applicable to significantly undercapitalized associations.

     As a condition to the approval of the capital restoration plan, any company
controlling an undercapitalized association must agree that it will enter into a
limited  capital  maintenance   guarantee  with  respect  to  the  institution's
achievement of its capital requirements.

     Any savings  association  that fails to comply with its capital  plan or is
"significantly undercapitalized" (I.E., Tier 1 risk-based or core capital ratios
of less  than 3% or a  risk-based  capital  ratio of less  than 6%) must be made
subject  to  one  or  more  of  additional   specified   actions  and  operating
restrictions  which may cover all aspects of its operations and include a forced
merger  or  acquisition  of  the   association.   An  association  that  becomes
"critically  undercapitalized" (I.E., a tangible capital ratio of 2% or less) is
subject to further mandatory restrictions on its activities in addition to those
applicable to significantly  undercapitalized associations. In addition, the OTS
must appoint a receiver (or conservator  with the concurrence of the FDIC) for a
savings  association,  with certain limited exceptions,  within 90 days after it
becomes critically  undercapitalized.  Any undercapitalized  association is also
subject to the general enforcement  authority of the OTS and the FDIC, including
the appointment of a conservator or a receiver.

     The OTS is also generally  authorized to reclassify an  association  into a
lower capital category and impose the  restrictions  applicable to such category
if the institution is engaged in unsafe or unsound  practices or is in an unsafe
or unsound condition.

     The  imposition by the OTS or the FDIC of any of these measures on the Bank
may  have  a  substantial  adverse  effect  on  the  Company's   operations  and
profitability.  The Company's  shareholders do not have preemptive  rights,  and
therefore, if the Company is directed by the OTS or the FDIC to issue additional
shares of  Common  Stock,  such  issuance  may  result  in the  dilution  in the
percentage of ownership of the Company.



<PAGE>


LIMITATIONS ON DIVIDENDS AND OTHER CAPITAL DISTRIBUTIONS

     OTS regulations  impose various  restrictions on savings  associations with
respect  to  their  ability  to make  distributions  of  capital  which  include
dividends,  stock  redemptions  or  repurchases,   cash-out  mergers  and  other
transactions  charged to the capital  account.  OTS regulations  also prohibit a
savings  association from declaring or paying any dividends or from repurchasing
any of its stock if, as a result,  the  regulatory  capital  of the  association
would be reduced below the amount  required to be maintained for the liquidation
account established in connection with its mutual to stock conversion.

        The Bank may make a capital  distribution  without the  approval of the
OTS provided the Bank  notifies the OTS, 30 days before the  declaration  of the
capital  distribution and the Bank 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 the Bank's net income
for the  calendar  year-to-date  plus  retained  net income for the previous two
calendar years (less any dividends  previously  paid). If the Bank does not meet
the above  stated  requirements,  prior  approval of the OTS is required  before
declaring any proposed distributions.

LIQUIDITY

     All savings  associations are required to maintain an average daily balance
of liquid  assets equal to a certain  percentage of the average daily balance of
its liquidity base during the preceding  calendar quarter or a percentage of the
amount of its liquidity  base at the end of the preceding  quarter.  This liquid
asset  ratio  requirement  may  vary  from  time to time  (between  4% and  10%)
depending   upon   economic   conditions   and  savings  flows  of  all  savings
associations.  At the present  time,  the minimum  liquid  asset ratio is 4%. At
December 31, 1999,  the Bank was in  compliance  with its  regulatory  liquidity
ratio.


<PAGE>



QUALIFIED THRIFT LENDER TEST

     All savings  associations  are required to meet a qualified  thrift  lender
("QTL")  test to avoid  certain  restrictions  on their  operations.  This  test
requires a savings  association to have at least 65% of its portfolio assets (as
defined by regulation) in qualified thrift  investments on a monthly average for
nine out of every 12 months on a rolling basis. As an  alternative,  the savings
association may maintain 60% of its assets in those assets  specified in Section
7701(a)(19)  of the  Internal  Revenue  Code.  Under  either  test,  such assets
primarily  consist of  residential  housing  related loans and  investments.  At
December 31,  1999,  the Bank met the test and has always met the test since its
effective date.

     Any savings  association  that fails to meet the QTL test must convert to a
national bank charter,  unless it requalifies as a QTL and thereafter  remains a
QTL. If an  association  does not  requalify  and  converts  to a national  bank
charter,  it must remain  SAIF-insured  until the FDIC permits it to transfer to
the BIF.  If such an  association  has not yet  requalified  or  converted  to a
national  bank,  its  new  investments  and  activities  are  limited  to  those
permissible  for both a  savings  association  and a  national  bank,  and it is
limited to national bank branching  rights in its home state.  In addition,  the
association is immediately  ineligible to receive any new FHLB borrowings and is
subject to national  bank limits for payment of dividends.  If such  association
has not requalified or converted to a national bank within three years after the
failure,  it must  divest  of all  investments  and  cease  all  activities  not
permissible  for a  national  bank.  In  addition,  it must repay  promptly  any
outstanding FHLB borrowings,  which may result in prepayment  penalties.  If any
institution  that fails the QTL test is  controlled by a holding  company,  then
within one year after the failure,  the holding  company must register as a bank
holding  company  and  become  subject  to  all  restrictions  on  bank  holding
companies. (See "- Holding Company Regulation.")

COMMUNITY REINVESTMENT ACT

     Under  the  Community   Reinvestment   Act  ("CRA"),   every  FDIC  insured
institution has a continuing and affirmative obligation consistent with safe and
sound banking  practices to help meet the credit needs of its entire  community,
including  low and moderate  income  neighborhoods.  The CRA does not  establish
specific lending requirements or programs for financial institutions nor does it
limit an institution's  discretion to develop the types of products and services
that it believes are best suited to its particular  community,  consistent  with
the CRA. The CRA requires the OTS, in  connection  with the  examination  of the
Banks,  to assess the  institution's  record of meeting the credit  needs of its
community  and to take such record  into  account in its  evaluation  of certain
applications, such as a merger or the establishment of a branch, by the Bank. An
unsatisfactory  rating may be used as the basis for the denial of an application
by the OTS.

     The federal banking agencies,  including the OTS, have recently revised the
CRA regulations and the methodology for determining an institution's  compliance
with the CRA. Due to the heightened attention being given to the CRA in the past
few years,  the Bank may be required to devote  additional  funds for investment
and lending in its local community.  The Bank was examined for CRA compliance in
1997 and received a rating of satisfactory.


<PAGE>



TRANSACTIONS WITH AFFILIATES

     Generally,  transactions  between a savings association or its subsidiaries
and its affiliates  are required to be on terms as favorable to the  association
as transactions with non-affiliates. In addition, certain of these transactions,
such  as  loans  to  an  affiliate,  are  restricted  to  a  percentage  of  the
association's  capital.  Affiliates  of the Bank  include  the  Company  and any
company  which is under  common  control with the Bank.  In addition,  a savings
association may not lend to any affiliate  engaged in activities not permissible
for a bank  holding  company  or  acquire  the  securities  of most  affiliates.
Springfield-Home is not deemed an affiliate; however, the OTS has the discretion
to treat  subsidiaries  of savings  institutions as affiliates on a case by case
basis.

     Certain  transactions with directors,  officers or controlling  persons are
also  subject to  conflict of interest  regulations  enforced by the OTS.  These
conflict of interest  regulations and other statutes also impose restrictions on
loans to such persons and their  related  interests.  Among other  things,  such
loans must be made on terms  substantially the same as for loans to unaffiliated
individuals.

HOLDING COMPANY REGULATION

     The Company is a unitary  savings and loan  Company  subject to  regulatory
oversight  by the OTS. As such,  the  Company is  required to register  and file
reports with the OTS and is subject to regulation and examination by the OTS. In
addition, the OTS has enforcement authority over the Company and its non-savings
association  subsidiaries  which also  permits  the OTS to  restrict or prohibit
activities  that are determined to be a serious risk to the  subsidiary  savings
association.

     As a unitary savings and loan company, the Company generally is not subject
to activity  restrictions.  If the Company  acquires  control of another savings
association  as a separate  subsidiary,  it would become a multiple  savings and
loan  company,  and the  activities  of the Company and any of its  subsidiaries
(other than the Bank or any other SAIF-insured savings association) would become
subject to such  restrictions  unless such other  associations each qualify as a
QTL and were acquired in a supervisory acquisition.

     If the Bank fails the QTL test, the Company must obtain the approval of the
OTS prior to  continuing  after such  failure,  directly  or  through  its other
subsidiaries,  any  business  activity  other than those  approved  for multiple
savings and loan holding companies or their  subsidiaries.  In addition,  within
one year of such failure the Company must  register as, and will become  subject
to, the  restrictions  applicable  to bank  holding  companies.  The  activities
authorized  for a bank holding  company are more limited than are the activities
authorized for a unitary or multiple savings and loan company.  See "- Qualified
Thrift Lender Test."

     The Company must obtain approval from the OTS before  acquiring  control of
any other SAIF-insured  association.  Such acquisitions are generally prohibited
if they  result in a  multiple  savings  and loan  company  controlling  savings
associations in more than one state. However,  such interstate  acquisitions are
permitted based on specific state authorization or in a supervisory  acquisition
of a failing savings association.


<PAGE>



FEDERAL SECURITIES LAW

     The stock of the Company is  registered  with the SEC under the  Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly,  the Company
is subject to the information, proxy solicitation,  insider trading restrictions
and other requirements of the SEC under the Exchange Act.

     Company  stock  held by persons  who are  affiliates  (generally  officers,
directors and principal  shareholders)  of the Company may not be resold without
registration or unless sold in accordance with certain resale  restrictions.  If
the Company  meets  specified  current  public  information  requirements,  each
affiliate  of the  Company  is  able  to  sell  in the  public  market,  without
registration, a limited number of shares in any three-month period.

FEDERAL RESERVE SYSTEM

     The Federal Reserve Board requires all depository  institutions to maintain
non-interest  bearing  reserves at specified  levels  against their  transaction
accounts (primarily checking, NOW and Super NOW checking accounts).  At December
31,  1999,  the Bank was in  compliance  with these  reserve  requirements.  The
balances  maintained  to meet the  reserve  requirements  imposed by the Federal
Reserve Board may be used to satisfy liquidity  requirements that may be imposed
by the OTS. (See "--Liquidity.")

     Savings associations are authorized to borrow from the Federal Reserve Bank
"discount window," but Federal Reserve Board regulations require associations to
exhaust  other  reasonable   alternative   sources  of  funds,   including  FHLB
borrowings, before borrowing from the Federal Reserve Bank.

FEDERAL HOME LOAN BANK SYSTEM

     The Bank is a member of the FHLB of Cincinnati, which is one of 12 regional
FHLBs,   that   administers  the  home  financing  credit  function  of  savings
associations.  Each FHLB  serves as a reserve  or central  bank for its  members
within its assigned  region.  It is funded  primarily from proceeds derived from
the sale of  consolidated  obligations  of the FHLB  System.  It makes  loans to
members (I.E.,  advances) in accordance with policies and procedures established
by the board of directors of the FHLB, which are subject to the oversight of the
Federal  Housing  Finance  Board.  All advances from the FHLB are required to be
fully secured by  sufficient  collateral as determined by the FHLB. In addition,
all  long-term  advances  are  required to provide  funds for  residential  home
financing.

     As a member,  the Bank is required to purchase  and  maintain  stock in the
FHLB of  Cincinnati.  At December  31,  1999,  the Bank had $7.5 million in FHLB
stock,  which was in compliance with this  requirement.  In past years, the Bank
had  received  substantial  dividends  on its FHLB  stock.  Over  the past  five
calendar years such dividends have averaged 7.10% and were 7.06% for 1999.


<PAGE>



     Under  federal  law  the  FHLBs  are  required  to  provide  funds  for the
resolution  of  troubled  savings  associations  and to  contribute  to low- and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income  housing
projects.  These  contributions  have  affected  adversely  the  level  of  FHLB
dividends  paid and could continue to do so in the future.  These  contributions
could also have an adverse  effect on the value of FHLB stock in the  future.  A
reduction  in value of the  Bank's  FHLB  stock may  result  in a  corresponding
reduction in the Bank's capital.

     For the  year  ended  December  31,  1999,  dividends  paid by the  FHLB of
Cincinnati to the Bank totaled  $505,000,  which  constituted a $27,000 increase
over the amount of dividends received in 1998.

FEDERAL AND STATE TAXATION

     Savings  associations such as the Bank, are permitted to establish reserves
for bad debts and to make annual  additions  thereto which may, within specified
formula limits,  be taken as a deduction in computing taxable income for federal
income  tax  purposes.  The  amount  of  the  bad  debt  reserve  deduction  for
"non-qualifying  loans" is computed under the experience  method.  The amount of
the bad debt reserve  deduction for "qualifying real property loans"  (generally
loans  secured  by  improved  real  estate)  may be  computed  under  either the
experience method or the percentage of taxable income method (based on an annual
election).

     Under the experience  method,  the bad debt reserve  deduction is an amount
determined under a formula based generally upon the bad debts actually sustained
by the savings association over a period of years.

     Since 1987,  the percentage of  specially-computed  taxable income that was
used to compute a savings  association's  bad debt reserve  deduction  under the
percentage of taxable income method (the  "percentage  bad debt  deduction") was
8%. The  percentage  bad debt  deduction thus computed was reduced by the amount
permitted as a deduction for  non-qualifying  loans under the experience method.
The availability of the percentage of taxable income method permitted qualifying
savings  associations to be taxed at a lower  effective  federal income tax rate
than that applicable to corporations generally (approximately 31.3% assuming the
maximum percentage bad debt deduction). Under changes in federal tax law enacted
in August 1996, the  percentage  bad debt deduction has been  eliminated for tax
years  beginning after December 31, 1995.  Accordingly,  this method will not be
available to the Bank for its tax years ending December 31, 1996 and thereafter.

     The  federal  tax  legislation  enacted  in  August  1996  also  imposes  a
requirement  to recapture  into taxable income the portion of the qualifying and
non-qualifying  loan  reserves  in excess of the  "base-year"  balances  of such
reserves.  For the Bank, the base-year  reserves are the balances as of December
31, 1988.  Recapture of the excess  reserves  will occur over a six-year  period
which  could  begin for the Bank as early as the tax year  ending  December  31,
1996.  Commencement of the recapture period may be delayed,  however,  for up to
two years provided the Bank meets certain residential lending requirements). The
Bank  previously  established,  and will  continue to  maintain,  a deferred tax
liability  with  respect to its federal  tax bad debt  reserves in excess of the
base-year balances;  accordingly, the legislative changes will have no effect on
total income tax expense for financial reporting purposes.


<PAGE>



     Also, under the August 1996  legislation,  the Bank's base-year federal tax
bad debt  reserves are "frozen"  and subject to current  recapture  only in very
limited circumstances. Generally, recapture of all or a portion of the base-year
reserves  will be  required if the Bank pays a dividend in excess of the greater
of its current or accumulated earnings and profits, redeems any of its stock, or
is  liquidated.  The Bank has not  established a deferred  federal tax liability
under SFAS No. 109 for its base-year  federal tax bad debt reserves,  as it does
not  anticipate  engaging  in any of the  transactions  that  would  cause  such
reserves to be recaptured.

     In addition to the regular  income  tax,  corporations,  including  savings
associations  such as the Bank,  generally  are  subject  to a minimum  tax.  An
alternative  minimum tax is imposed at a minimum tax rate of 20% on  alternative
minimum  taxable  income,  which is the sum of a  corporation's  regular taxable
income (with certain  adjustments) and tax preference  items, less any available
exemptions.  The alternative minimum tax is imposed to the extent it exceeds the
corporation's  regular  income tax and net  operating  losses can offset no more
than 90% of alternative  minimum  taxable  income.  For taxable years  beginning
after 1986 and before 1996, corporations, including savings associations such as
the Bank, are also subject to an environmental  tax equal to 0.12% of the excess
of alternative  minimum taxable income for the taxable year (determined  without
regard to net operating losses and the deduction for the environmental tax) over
$2 million.

     The Bank files  federal  income tax returns on a calendar  year basis using
the accrual method of  accounting.  The Company files federal income tax returns
separately from the Bank.

     The Bank has not been audited by the IRS  recently  with respect to federal
income tax returns. In the opinion of management,  any examination of still open
returns  would not result in a  deficiency  which could have a material  adverse
effect on the financial condition of the Bank.

     OHIO TAXATION.  The Bank is subject to an Ohio franchise tax based on their
net worth plus  certain  reserve  amounts.  Total net worth for this  purpose is
reduced by certain exempted assets.  The resultant net taxable value of stock is
taxed at a rate of 1.5% for 1998.

     Ohio companies in a consolidated group,  including the Company, are subject
to an Ohio franchise tax based on the greater of the tax on net worth or the tax
on net income,  subject to various adjustments and varying rates. Local taxes on
property and income will also be imposed in certain jurisdictions.

     DELAWARE TAXATION.  As a Delaware holding company,  the Company is exempted
from Delaware corporate income tax but is required to file an annual report with
and pay an annual fee to the State of  Delaware.  The Company is also subject to
an annual franchise tax imposed by the State of Delaware.



<PAGE>


EXECUTIVE OFFICERS

     The executive  officers of the Company are elected annually and hold office
until their  respective  successors  have been  elected and  qualified  or until
death, resignation or removal by the Board of Directors.  Each executive officer
of the  Company  is  also  an  executive  officer  of  the  Bank.  There  are no
arrangements  or  understandings  between the persons named and any other person
pursuant to which such officers were selected.

       NAME             AGE               POSITIONS HELD WITH THE COMPANY
----------------       ------        ----------------------------------------

John W. Raisbeck         60            President and Chief Executive Officer
Craig F. Fortin          39            Senior Vice President, Treasurer and
                                         Chief Financial Officer
John T. Heckman          48            Executive Vice President
Gary L. Hicks            48            Executive Vice President
Robert P. Brezing        55            Senior Vice President


     The  business  experience  of  each  executive  officer  who is not  also a
Director of the Company is set forth below.

     CRAIG F. FORTIN.  Mr. Fortin is Senior Vice President,  Treasurer and Chief
Financial  Officer of the  Company  and the Bank,  a position  he has held since
February 1, 1999.  From 1991 to January  1999,  Mr.  Fortin  served as the Chief
Financial Officer of The Ohio Bank, Findlay, Ohio.

     JOHN T. HECKMAN.  Mr. Heckman is Executive Vice  President,  Operations and
Administration of the Company and the Bank. Mr. Heckman has  responsibility  for
all operational areas of banking activity other than lending. From 1987 to April
1995,  Mr.  Heckman  served as an  Assistant  Director  at the  Office of Thrift
Supervision.

     GARY L. HICKS.  Mr. Hicks is Executive Vice President of Mortgage  lending.
Mr. Hicks has responsibility for all mortgage banking functions. Prior positions
he has held include Chief Executive  Officer for a mortgage services company and
senior manager for a major Ohio bank.

     ROBERT P. BREZING.  Mr.  Brezing is Senor Vice President of the Company and
the Bank,  positions he has held since  October  1997. He is manager of Business
Banking  responsible  for all commercial  loans,  commercial real estate and all
consumer loans.  From 1988 to 1997, Mr. Brezing served as Vice President of Banc
One Corporation, Columbus, Ohio.

EMPLOYEES

     At December  31,  1999,  the Company and its  subsidiary  had a total of 84
employees,  including 11 part-time  employees.  The Company's  employees are not
represented  by  any  collective  bargaining  group.  Management  considers  its
employee relations to be good.


<PAGE>



ITEM 2. PROPERTIES

     The Company conducts its business at its main office,  which also serves as
executive  office and the Bank's five branch offices located in its market area.
The  following  table sets forth  information  relating to each of the Company's
offices as of December 31, 1999.

                                                 Total
                                               Approximate         Net Book
                                   Date          Square            Value at
    LOCATION                     ACQUIRED       FOOTAGE       DECEMBER 31, 1999
    --------                     --------       -------       -----------------
                                        (In Thousands)
Main Office:
  28 E. Main Street               1900           5,721          $ 1,019
  Springfield, Ohio

Branch Offices:
  7601 Dayton Springfield Road    1983           2,528               25
  Enon, Ohio

  210 N. Main Street              1987           2,369              339
  New Carlisle, Ohio

  1480 Upper Valley Pike          1950           3,777              416
  Springfield, Ohio

  50 Kahoe Lane                   1993           2,369              359
  Yellow Springs, Ohio

  3216 Seajay Drive               1996           1,925              272
  Beavercreek, Ohio


     The  Company  owns all of its  offices.  The  total  net book  value of the
Company's  premises  and  equipment  (including  land,  building  and  leasehold
improvements  and  furniture,  fixtures and  equipment) at December 31, 1999 was
$3.5  million.  The Company  considers all  properties  to be in good  operating
condition  and  suitable  for the purpose for which it is used.  The property is
unencumbered  by any  mortgage  or  security  interest  and is, in  management's
opinion,  adequately insured. See Note 5 of the Notes to Consolidated  Financial
Statements in the Annual Report to Shareholders filed as Exhibit 13 hereto.

     The Company conducts its data processing  through a service bureau. The net
book value of the data processing and computer equipment utilized by the Company
at December  31, 1999 was  approximately  $714,000.  In March 2000,  the Company
converted its data processing  operations to its own in-house  system  utilizing
software from Information Technology, Inc., Lincoln, Nebraska.

ITEM 3.  LEGAL PROCEEDINGS

     The Company and its  subsidiary are involved from time to time as plaintiff
or  defendant in various  legal  actions  arising in the normal  course of their
businesses.  While  the  ultimate  outcome  of  pending  proceedings  cannot  be
predicted with certainty,  it is the opinion of management,  after  consultation
with  counsel  representing  the  Company,  the  Bank or its  subsidiary  in the
proceedings, that the resolution of these proceedings should not have a material
effect  on  the  Company's   consolidated   financial  position  or  results  of
operations.

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

     No  matter  was  submitted  to a vote  of  security  holders,  through  the
solicitation  of proxies or  otherwise,  during the quarter  ended  December 31,
1999.


                                      PART II

ITEM 5. MARKET FOR THE  REGISTRANT'S  COMMON EQUITY AND RELATED  SECURITY HOLDER
MATTERS

     Page 7 of the  Company's  1999  Annual  Report  to  Shareholders  is herein
incorporated by reference.

ITEM 6.  SELECTED FINANCIAL DATA

     Pages 6 and 7 of the Company's 1999 Annual Report to Shareholders is herein
incorporated by reference.

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     Pages 8 through 15 of the Company's 1999 Annual Report to Shareholders  are
herein incorporated by reference.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     In an  attempt  to manage  its  exposure  to  changes  in  interest  rates,
management  monitors the Company's  interest  rate risk.  The Board of Directors
meets at least quarterly to review the Company's interest rate risk position and
profitability.  The Board of  Directors  also reviews the  Company's  portfolio,
formulates  investment  strategies and oversees the timing and implementation of
transactions  to  assure  attainment  of the  Company's  objectives  in the most
effective  manner. In addition,  the Board anticipates  reviewing on a quarterly
basis the  Company's  asset/liability  position,  including  simulations  of the
effect on the Company's capital of various interest rate scenarios.

     In  managing  its  asset/liability  mix,  the  Company,  depending  on  the
relationship  between long- and short-term interest rates, market conditions and
consumer preference,  often places more emphasis on managing net interest margin
than on  better  matching  the  interest  rate  sensitivity  of its  assets  and
liabilities  in an effort to enhance net interest  income.  Management  believes
that the increased net interest income resulting from a mismatch in the maturity
of its asset and liability portfolios can, during periods of declining or stable
interest rates, provide high enough returns to justify the increased exposure to
sudden and unexpected increases in interest rates.

     The primary  objective of the Company's  investment  strategy is to provide
liquidity necessary to meet funding needs as well as to address daily,  cyclical
and  long-term  changes  in  the  asset/liability  mix,  while  contributing  to
profitability  by providing a stable flow of  dependable  earnings.  Investments
generally include interest-bearing deposits in other federally insured financial
institutions, FHLB stock and U.S. Government securities.

     Generally,  the  investment  policy of the Company is to invest funds among
various  categories of investments and maturities  based upon the Company's need
for liquidity, to achieve the proper balance between its desire to minimize risk
and maximize  yield, to provide  collateral for  borrowings,  and to fulfill the
Company's asset/liability management policies.

     The Company's  cost of funds  responds to changes in interest  rates due to
the relatively  short-term nature of its deposit  portfolio.  Consequently,  the
results  of  operations  are  heavily  influenced  by the  levels of  short-term
interest rates. The Company offers a range of maturities on its deposit products
at  competitive  rates and  monitors the  maturities  on an ongoing  basis.  For
additional  information  regarding  market  risk,  see  pages  13 to  14 of  the
Company's Annual Report to Shareholders.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Pages 16 through 37 of the Company's 1999 Annual Report to Shareholders are
herein incorporated by reference.

ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

     The Company filed a Current Report on Form 8-K on February 5, 1998,
to report a change of  accountants,  and an  amendment on Form 8-K/A on February
23,  1998,  to report  the  letter  on the  change  of  certifying  accountants.
Management has had no disagreements with the independent  accountants on matters
of  accounting  principals  or  financial  statement  disclosure  required to be
reported under this item.


<PAGE>



                                   PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information  concerning  Directors of the Company is incorporated herein by
reference from the Company's  definitive  Proxy Statement for the Annual Meeting
of  Shareholders  scheduled to be held on April 27, 2000 (except for information
contained  under  the  headings  "Compensation  Committee  Report  on  Executive
Compensation"  and "Stock  Performance  Presentation"),  a copy of which will be
filed  not  later  than  120  days  after  the  close of the  fiscal  year.  For
information  concerning  executive  officers  of the  Company  who are not  also
Directors,  see  "Executive  Officers"  in Part I of this Annual  Report on Form
10-K.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors  and  executive  officers,  and  persons  who own more than 10% of the
Company's Common Stock (or any other equity securities, of which there is none),
to file with the Securities and Exchange  Commission (the "SEC") initial reports
of ownership and reports of changes in ownership of the Company's  Common Stock.
Officers,  directors  and  greater  than 10%  shareholders  are  required by SEC
regulations  to furnish the Company with copies of all Section  16(a) forms they
file.

     To the Company's knowledge,  based solely on a review of the copies of such
reports  furnished  to the  Company and  written  representations  that no other
reports  were  required  during the fiscal year ended  December  31,  1999,  all
Section 16(a) filing  requirements  applicable  to its  officers,  directors and
greater than 10% beneficial  owners were complied with except that Mr. Dillahunt
inadvertently  failed to report one transaction on his timely filed Form 5 dated
February 10, 1999.  Mr.  Dillahunt  reported the  transaction  on a Form 5 dated
February 9, 2000.

ITEM 11.  EXECUTIVE COMPENSATION

     Information  concerning  executive  compensation is incorporated  herein by
reference from the Company's  definitive  Proxy Statement for the Annual Meeting
of  Shareholders  scheduled to be held on April 27, 2000 (except for information
contained  under  the  headings  "Compensation  Committee  Report  on  Executive
Compensation"  and "Stock  Performance  Presentation"),  a copy of which will be
filed not later than 120 days after the close of the fiscal year.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information  concerning security ownership of certain beneficial owners and
management is  incorporated  herein by reference  from the Company's  definitive
Proxy Statement for the Annual Meeting of  Shareholders  scheduled to be held on
April  27,  2000   (except  for   information   contained   under  the  headings
"Compensation Committee Report on Executive Compensation" and "Stock Performance
Presentation"),  a copy of which will be filed not later than 120 days after the
close of the fiscal year.


<PAGE>



ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information   concerning   certain   relationships   and   transactions  is
incorporated  herein by reference from the Company's  definitive Proxy Statement
for the Annual  Meeting of  Shareholders  scheduled to be held on April 27, 2000
(except for  information  contained under the headings  "Compensation  Committee
Report on Executive Compensation" and "Stock Performance Presentation"),  a copy
of which  will be filed not later  than 120 days  after the close of the  fiscal
year.


                                   PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(A) (1)  FINANCIAL STATEMENTS:

     The  following  information  appearing in the  Company's  Annual  Report to
Shareholders  for the year ended December 31, 1999, is incorporated by reference
in this Annual Report on Form 10-K as Exhibit 13.

                                                                      Pages in
                             ANNUAL REPORT SECTION                     Annual
                                                                       REPORT

Report of Independent Auditors                                          16
Consolidated Balance Sheets
                                                                        17
Consolidated Statements of Income
                                                                        18
Consolidated Statements of Comprehensive Income
                                                                        19
Consolidated Statements of Shareholders' Equity
                                                                        20
Consolidated Statements of Cash Flows                                  21-22
Notes to Consolidated Financial Statements                             23-37

(A) (2)  FINANCIAL STATEMENT SCHEDULES:

     Financial statement schedules are omitted as they are not applicable or the
required  information in the financial  statements or notes therein found in the
Company's Annual Report to Shareholders.


<PAGE>


(A) (3)  EXHIBITS:

                                                          Reference to Prior
Regulation                                                 Filing or Exhibit
S-K Exhibit                                                 Number Attached
 NUMBER                    DOCUMENT                              HERETO

 2          Plan of acquisition, reorganization,
            arrangement, liquidation or succession                None

 3 (i)      Certificate of Incorporation                          *
 3 (ii)     Amended and Restated Bylaws                           *****
 4          Instruments defining the rights of security
            holders, including indentures                         *

 9          Voting trust agreement                                None
 10         Material contracts:
            (a) 1995 Stock Option and Incentive Plan               **
            (b) Management Recognition Plan                        **
            (c) Employment Agreement with John T. Heckman         ***
            (d) Employment Agreement with John W. Raisbeck        *****
            (e) Employment Agreement with Gary L. Hicks           ****
            (f) Employment Agreement with Robert P. Brezing,
                   as amended                                     *****
            (g) Employment Agreement with Craig F. Fortin         *****
            (h) 1998 Omnibus Incentive Plan                       ****
            (i) Cornerstone Bank Deferred Compensation Plan
                   as amended                                     *****

 11         Statement regarding computation of per share
               earnings                                           None
 12         Statements regarding computation of ratios            None
 13         Annual report to security holders                     13
 16         Letter regarding change in certifying accountant      None
 18         Letter regarding change in accounting principles      None
 21         Subsidiaries of the registrant                        21
 22         Published report regarding matters submitted to
               vote of security holders                           None
 23         Consent of Crowe, Chizek and Company LLP              23.1
            Consent of Clark, Schaefer, Hackett & Co.             23.2
 24         Power of attorney                                     None
 27         Financial data schedule                                 27
 99         Additional exhibits--report of predecessor
               independent accountants                              99



*    Incorporated  by  reference to the  Company's  Registration  Statement  No.
     33-76734.

**   Incorporated  by reference to the Company's  Annual Report on Form 10-K for
     the year ended December 31, 1994.

***  Incorporated  by reference to the Company's  Quarterly  Report on Form 10-Q
     for the quarterly period ended June 30, 1995.

**** Incorporated  by reference to the Company's  Annual Report on Form 10-K for
     the year ended December 31, 1997.

*****Incorporated by reference to the Company's Annual Report on Form 10-K for
     the year ended December 31, 1998.

     (B) REPORTS ON FORM 8-K:

     No reports on Form 8-K were filed  during the quarter  ended  December  31,
1999.


<PAGE>

                                    SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                           WESTERN OHIO FINANCIAL CORPORATION


Date:   MARCH 30, 2000                     By: /S/ JOHN W. RAISBECK
       ----------------------------        ---------------------
                                           John W. Raisbeck, President and Chief
                                              Executive Officer
                                           (DULY AUTHORIZED REPRESENTATIVE)

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

By: /S/ JOHN W. RAISBECK                       By:   /S/ DAVID L. DILLAHUNT
   -----------------------------------------  ----------------------------------
       John W. Raisbeck, President and Chief   David L. Dillahunt, Chairman of
         Executive Officer                       the Board
       (PRINCIPAL EXECUTIVE OFFICER)

Date:   MARCH 30, 2000                         Date:   MARCH 30, 2000
       -----------------------------                   ---------------


By:   /S/ HOWARD V. DODDS                      By:   /S/ JOHN E. FIELD
    ---------------------------------------    ---------------------------------
       Howard V. Dodds, Director               John E. Field, Director

Date:   MARCH 30, 2000                         Date:   MARCH 30, 2000
       -----------------------------                  ---------------


By:   /S/ ARISTIDES G. GIANAKOPOULOS           By:   /S/ WILLIAM N. SCARFF
    --------------------------------------      -------------------------------
       Aristides G. Gianakopoulos, Director     William N. Scarff, Director

Date:   MARCH 30, 2000                         Date:   MARCH 30, 2000
       -----------------------------                   ---------------


By:   /S/ JEFFREY L. LEVINE                    By:   /S/ CRAIG F. FORTIN
      ------------------------------------     --------------------------------
       Jeffrey L. Levine, Director             Craig F. Fortin, Senior Vice
                                                  President, Treasurer and
                                                  Chief Financial Officer
                                               (PRINCIPAL FINANCIAL AND
                                                  ACCOUNTING OFFICER)


Date:   MARCH 30, 2000                        Date:   MARCH 30, 2000
       -----------------------------                 ---------------