<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10-K

Mark One                                             

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

For the fiscal year ended December 31, 1998

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

For the transition period from________to________


                         Commission File Number: 0-18279
                                                --------

                    WESTWOOD HOMESTEAD FINANCIAL CORPORATION
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                            <C>       
                  Indiana                                           31-1463057
---------------------------------------------                   ------------------      
(State or other jurisdiction of incorporation                    (I.R.S. Employer
or organization)                                                Identification No.)

3002 Harrison Avenue, Cincinnati, Ohio                              45211-5789
----------------------------------------                            ----------   
(Address of principal executive offices)                             Zip Code
</TABLE>

Registrant's telephone number, including area code  (513) 661-5735
                                                    --------------  

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 (l) 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
filing 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]

         As of March 2, 1999, there were issued and outstanding 2,288,818 shares
of the registrant's common stock.

         As of March 2, 1999, the aggregate market value of the voting stock
held by non-affiliates of the registrant, based on the closing sales price of
the registrant's common stock as quoted on the National Association of
Securities Dealers, Inc. Automated Quotation National Market, was $19.7 million
($10.125 per share). For purposes of this calculation, the shares held by
directors and executive officers of the registrant and by any stockholder
beneficially owning more than 5% of the registrant's outstanding common stock
are deemed to be shares held by affiliates.


                       DOCUMENTS INCORPORATED BY REFERENCE

1.       Portions of Annual Report to Stockholders for the Fiscal Year Ended
         December 31, 1998. (Parts I and II)

2.       Portions of Proxy Statement for the 1998 Annual Meeting of
         Stockholders. (Part III)


<PAGE>   2



                                     PART I

ITEM 1.  BUSINESS

         The Company. Westwood Homestead Financial Corporation (the "Company")
was incorporated under the laws of the State of Indiana in March, 1996 for the
purpose of becoming the holding company of Westwood Homestead Savings Bank
("Westwood Homestead" or the "Bank"). Prior to the acquisition of all the
outstanding stock of the Bank on September 27, 1996, the Company had no assets
or liabilities and engaged in no business activities. Following its acquisition
of Westwood Homestead, the Company had no significant assets other than the
outstanding capital stock of the Bank and a portion of the net proceeds of the
Bank's stock conversion. The Company is headquartered in Cincinnati, Ohio, and
its business activities are limited to the State of Ohio. At December 31, 1998,
the Company had consolidated total assets of $129.9 million, deposits of $87.3
million, net loans receivable of $118.6 million and stockholders' equity of
$24.0 million.

         The executive offices of the Company are located at 3002 Harrison
Avenue, Cincinnati, Ohio 45211-5789, and its telephone number is (513) 661-5735.

         The Bank. The Bank is an Ohio chartered stock savings bank conducting
operations from its main office in Cincinnati, Ohio, which it has occupied since
1922, and its branch facility located in the Mount Adams section of Cincinnati,
Ohio which opened in June 1996. The Bank is principally engaged in the business
of accepting deposits from the general public through a variety of deposit
programs and investing these funds by originating loans secured by properties
located in its market area.

         Westwood Homestead's business strategy is to operate a well
capitalized, profitable community savings bank dedicated to financing home
ownership in its market area and providing quality service to its customers.

         The Bank's deposits are insured by the Savings Association Insurance
Fund ("SAIF"), which is administered by the Federal Deposit Insurance
Corporation ("FDIC"), up to applicable limits for each depositor. The Bank is a
member of the Federal Home Loan Bank ("FHLB") of Cincinnati, which is one of the
12 district banks comprising the FHLB System. The Bank is subject to
comprehensive examination, supervision and regulation by the Superintendent of
the Ohio Division of Financial Institutions (the "Superintendent") and the FDIC.
Such regulation is intended primarily for the protection of depositors.


LENDING AND INVESTMENT ACTIVITIES

         General. Westwood Homestead's primary lending activity is the
origination of conventional mortgage loans for the purpose of purchasing or
refinancing one- to four-family residential properties in its primary market
area. In addition, the Bank has originated multi-family residential loans,
non-residential real estate loans, and a minor amount of residential
construction loans and non-mortgage loans. In recent years, the Bank has
purchased participation interests in loans secured by multi-family and
non-residential real estate located in the Bank's market area.



                                        1

<PAGE>   3



         Loan Portfolio Composition. The following table sets forth selected
data relating to the composition of the Bank's loan portfolio by type of loan at
the dates indicated. As part of a balance sheet realignment in 1998, the Bank
sold $9.1 million in existing one- to four-family fixed rate loans. At December
31, 1998, the Bank had no concentrations of loans exceeding 10% of total loans
that are not otherwise disclosed below.


<TABLE>
<CAPTION>

                                                                         At December 31,                                            
                                               -----------------------------------------------------------------                    
                                                      1998                     1997                 1996          
                                               --------------------  --------------------   --------------------              
                                               Amount        %          Amount       %        Amount       %  
                                               ------        -          ------       -        ------       -  
                                                                  (Dollars in thousands)
<S>                                           <C>          <C>       <C>           <C>        <C>         <C>   
Type of Loan:

Real estate loans:
   One- to four-family residential            $ 75,427     62.37%     $ 87,234     73.26%    $ 62,851     73.21%
   Multi-family residential..................   19,170     15.85        14,795     12.42       11,537     13.44
   Construction..............................    4,221      3.49         4,709      3.95        1,799      2.10
   Other residential and non-
      residential (1)........................   20,772     17.17        11,683      9.81        9,275     10.80
Consumer loans...............................    1,053       .87           441       .37          264       .31
Commercial loans.............................      300       .25           217       .19          119       .14
                                              --------    ------      --------    ------     --------    ------
     Total...................................  120,943    100.00%      119,079    100.00%      85,845    100.00%
                                                          ======                  ======                 ======

Less:
   Loans in process..........................    1,766                     958                  1,018
   Deferred loan fees........................      245                     207                    136
   Allowance for loan losses.................      294                     266                    166
                                              --------                --------               --------
      Total                                   $118,638                $117,648               $ 84,525
                                              ========                ========               ========
</TABLE>
--------------
(1)     Includes home equity loans.


                                        2
<PAGE>   4



LOAN MATURITY SCHEDULE

         The following table sets forth certain information at December 31, 1998
regarding the dollar amount of loans maturing in the Bank's portfolio based on
their contractual terms to maturity, including scheduled repayments of
principal. The table does not include any estimate of prepayments which
significantly shorten the average life of all mortgage loans and may cause the
Bank's repayment experience to differ from that shown below.

<TABLE>
<CAPTION>
                                                        Due after
                                                       1 through           Due after
                                          Due by     5 years after       5 years after
                                       December 31,    December 31,        December 31,
                                           1999            1998               1998                Total   
                                           ----            ----               ----                -----   
                                                                   (In thousands)
<S>                                     <C>              <C>                 <C>                 <C>     
One- to four-family residential.....    $   259          $  2,359            $ 73,490            $ 76,108
Multi-family and non-residential....         --             7,791              35,691              43,482
Consumer............................        109               944                  --               1,053
Commercial..........................         --               300                  --                 300
                                        -------          --------            --------            --------
     Total                              $   368          $ 11,394            $109,181            $120,943
                                        =======          ========            ========            ========
</TABLE>
 

         The next table sets forth at December 31, 1998, the dollar amount of
all loans due one year or more after December 31, 1998 which have predetermined
interest rates and have floating or adjustable interest rates.

<TABLE>
<CAPTION>
                                        Predetermined            Floating or
                                             Rate             Adjustable Rates
                                             ----             ----------------
                                                  (In thousands)
<S>                                      <C>                   <C>      
One- to four-family residential........  $  49,300             $  26,808
Multi-family and non-residential.......     27,740                15,742
Consumer...............................        870                   183
Commercial.............................         --                   300
                                         ---------             ---------
 Total.................................  $  77,910             $  43,033
                                         =========             =========
</TABLE>


         Scheduled contractual principal repayments of loans do not necessarily
reflect the actual life of such assets. The average life of long-term loans is
substantially less than their contractual terms, due to prepayments. In
addition, the Bank's mortgage loans generally give Westwood Homestead the right
to declare a loan due and payable in the event, among other things, that a
borrower sells the real property subject to the mortgage and the loan is not
repaid.

         One- to Four-Family Real Estate Loans. The primary emphasis of the
Bank's lending activity is the origination of loans secured by first mortgages
on one- to four-family residential properties. At December 31, 1998, $76.1
million, or 62.9%, of the Bank's gross loan portfolio consisted of loans secured
by one- to four-family residential real properties primarily located in the
Bank's market area.

         The Bank originates both fixed rate and adjustable rate mortgage loans
("ARMs"). The Bank generally offers fixed rate mortgage loans with terms of 15
to 30 years. Adjustable rate loans are originated for terms of up to 30 years.
Currently, ARM loans offered by the Bank have six month, one year, three year or
seven year adjustment terms that are indexed to the six month or one year
constant maturity treasury yields on U.S. securities, with a margin ranging from
2.75 to 4.50 percentage points. Most of the Bank's ARMs have minimum rates,
which are currently between 6% and 8%. The Bank's ARM products with six month
adjustment periods are subject to 0.75% adjustment caps per six month period
with 4% to 6% lifetime adjustment limits. All other ARM loans are subject to 1%
or 2% adjustment caps with 5% or 6% lifetime adjustment limits. At December 31,
1998, approximately 64.4% of the Bank's one- to four-family mortgage loans were
fixed rate loans and approximately 35.6% were ARMs.


                                        3

<PAGE>   5



         Prior to 1994 the Bank's lending policies generally limited the maximum
loan-to-value ratio on one- to four-family mortgage loans to 80% of the lesser
of the appraised value or the purchase price of the property. As such, the
amount of the Bank's one- to four-family mortgage loans having loan-to-value
ratios in excess of 80% were negligible prior to 1994. In early 1994, the Bank
began to offer one- to four-family mortgage loans at loan to value ratios above
80%, and at December 31, 1998, approximately 12.5% of the Bank's one- to
four-family mortgage loans held loan to value ratios greater than 80%. Private
mortgage insurance or additional collateral is generally required for mortgage
loans with loan to value ratios in excess of 80%, except for loans originated
under the Bank's special loan programs for first-time home buyers and the 100%
and 125% loan to value programs.

         In December 1995, the Bank began offering, on a limited basis, one- to
four-family mortgage loans to qualified borrowers with loan-to-value ratios of
100%. The Bank loans the borrower 80% of the lesser of the appraised value or
purchase price of the property as a first mortgage, and up to the additional 20%
needed to purchase the property as a second mortgage. The interest charged under
the second mortgage loan is a fixed rate. Private mortgage insurance is not
required for this type of mortgage loan. The Board of Directors has authorized
the Bank to lend up to $4.0 million of these second mortgage loans, which would
allow the Bank to lend up to $20.0 million of mortgages with combined
loan-to-value ratios of 100%. At December 31, 1998, the Bank had 128 of these
loans outstanding, with an aggregate balance of second mortgages of $2.7
million.

         The retention of ARMs in the portfolio helps reduce Westwood
Homestead's exposure to increases in interest rates. However, there are credit
risks resulting from potential increased costs to the borrower as a result of
repricing of ARMs. It is possible that during periods of rising interest rates,
the risk of default on ARMs may increase due to the upward adjustment of
interest costs to the borrower. Although ARMs allow Westwood Homestead to
increase the sensitivity of its asset base to changes in interest rates, the
extent of this interest sensitivity is limited by the periodic and lifetime
interest rate ceiling contained in ARM contracts. Accordingly, there can be no
assurance that yields on Westwood Homestead's ARMs will adjust sufficiently to
compensate for increases in its cost of funds.

         Multi-family and Non-residential Real Estate Loans. The Bank is also
active in the origination of loans secured by non-residential real estate and
multi-family properties. At December 31, 1998, multi-family and non-residential
real estate loans totaled $19.1 million and $20.8 million, respectively, and
represented 15.9% and 17.2%, respectively, of the Bank's gross loan portfolio. A
few of these loans have been participation interests with other financial
institutions on non-residential and multi-family properties located within the
Bank's market area.

         Multi-family and non-residential real estate loans are made in amounts
generally up to 80% of the appraised value of the property and may be on a fixed
or adjustable rate basis with fixed rate loans underwritten for terms generally
up to 25 years and amortization schedules of up to 30 years. A majority of the
loans have adjustable rates of interest. Prior to committing to make a
multi-family or non-residential real estate loan, the Bank requires that the
prospective borrower provide a cash flow statement indicating sufficient cash
flow from the property to service the loan. The Bank reviews any tenant leases
and requires that the payments under such leases be assigned to the Bank. The
Bank follows strict underwriting guidelines before originating this type of
loan, and the Bank does not originate such loans beyond its normal lending
territory.

         The Bank's multi-family real estate loans consist primarily of loans
secured by apartment buildings which are primarily located in the Bank's market
area. The Bank's largest multi-family real estate loan amounted to $1.8 million
at December 31, 1998 and was secured by a 72 unit apartment complex. The Bank's
second largest multi-family real estate loan amounted to $1.7 million at
December 31, 1998 and was secured by a 66 unit apartment building. Both of these
loans are located in the Bank's primary lending area and were performing
according to their terms at December 31, 1998.

         The Bank's non-residential real estate portfolio consists of loans
secured by medical office buildings, office condominiums, retail properties and
commercial offices. The Bank's largest non-residential real estate loan is
secured by an office building located in Roselawn, Ohio. Such loan had a balance
of $1.6 million at December 31, 1998. The Bank's second largest non-residential
real estate loan also amounted to $1.6 million at December 31, 1998 and was
secured by a retail shopping center. Both of these loans are located in the
Bank's market area and were performing according to their terms at December 31,
1998.


                                        4

<PAGE>   6



         Multi-family and non-residential real estate lending entails
significant additional risks as compared to one-to four-family residential
lending. Such loans typically involve large loans to single borrowers or related
borrowers, though the average size of the Bank's multi-family and
non-residential real estate loans has declined significantly in recent years.
Such loans also involve a greater repayment risk as repayment is typically
dependent on the successful operation of the project such that the income
generated by the project is sufficient to cover operating expenses and debt
service, and these risks can be significantly affected by the supply and demand
conditions in the market for non-residential property and multi-family
residential units. In addition, non-residential real estate is more likely to be
subject to some form of environmental contamination. The interest rates charged
by the Bank on multi-family and non-residential loans it originates are
generally higher than the rates charged on its one-to four-family real estate
loans and, therefore, reflect a premium to compensate the Bank for these
additional risks. To minimize the additional risks associated with this type of
lending, the Bank generally limits itself to loans secured by properties located
in the Bank's market area and follows strict underwriting guidelines before
originating these types of loans.

         Construction Loans. Westwood Homestead engages in construction lending
involving loans to qualified borrowers generally for construction of one- to
four-family or multi-family residential properties. These properties are
primarily located in the Bank's market area. At December 31, 1998, the Bank's
loan portfolio included $4.2 million of loans secured by properties under
construction. All construction loans are secured by a first lien on the property
under construction. Loan proceeds are disbursed as construction progresses and
as inspections warrant. Construction/permanent loans may have either an
adjustable or fixed rate and are underwritten in accordance with the same terms
and requirements as the Bank's permanent mortgages. Interest that has accrued
during the construction phase is due monthly. Monthly principal and interest
payments commence when the loan is converted to permanent financing. Borrowers
must satisfy all credit requirements which would apply to the Bank's permanent
mortgage loan financing for the subject property.

         Construction financing generally is considered to involve a higher
degree of risk of loss than long-term financing on improved, occupied real
estate. Risk of loss on a construction loan is dependent largely upon the
accuracy of the initial estimate of the property's value at completion of
construction or development and the estimated cost (including interest) of
construction. During the construction phase, a number of factors could result in
delays and cost overruns. If the estimate of construction costs proves to be
inaccurate, the Bank may be required to advance funds beyond the amount
originally committed to permit completion of the development. If the estimate of
value proves to be inaccurate, the Bank may be confronted, at or prior to the
maturity of the loan, with collateral having a value which is insufficient to
assure full repayment. The Bank has sought to minimize this risk by limiting
construction lending to qualified borrowers (i.e., borrowers who satisfy all
credit requirements and whose loans satisfy all other underwriting standards
which would apply to the Bank's permanent mortgage loan financing for the
subject property) in the Bank's market area.

         Consumer Loans. The consumer loans currently originated by the Bank
primarily include automobile and signature loans. Management is seeking to
expand the Bank's consumer loan portfolio. At December 31, 1998, the Bank's
consumer loans totaled $1.1 million, or .87%, of the Bank's gross loan
portfolio. The Bank's efforts in this area have met with stiff competition. As a
result, consumer loans outstanding to date are slightly less than anticipated.

         Consumer loans tend to be originated at higher interest rates than
mortgage loans and for shorter terms. However, consumer loans generally involve
more risk than one- to four-family residential real estate loans. Repossessed
collateral for a defaulted loan may not provide an adequate source of repayment
of the outstanding loan balance as a result of damage, loss or depreciation, and
the remaining deficiency often does not warrant further substantial collection
efforts against the borrower. In addition, loan collections are dependent on the
borrower's continuing financial stability, and thus are more likely to be
adversely affected by job loss, divorce, illness or personal bankruptcy.
Further, the application of various state and federal laws, including federal
and state bankruptcy and insolvency law, may limit the amount which may be
recovered. In underwriting consumer loans, the Bank considers the borrower's
credit history, an analysis of the borrower's income and ability to repay the
loan, and the value of the collateral.

         Loan Solicitation and Processing. Loan originations are derived from a
number of sources, including walk-in customers and referrals, realtors,
depositors, telemarketing, mailings, newspaper advertising, the Internet and
previous borrowers. It is management's intention to aggressively grow the
mortgage loan portfolio and is currently negotiating with

                                        5

<PAGE>   7



an outside originator. The Bank encounters substantial lending competition, and
as such, there can be no assurance that this objective will be achieved.

         Upon receipt of a loan application from a prospective borrower, a
credit report and employment and other verifications are ordered to verify
specific information relating to the loan applicant's employment, income and
credit standing. An appraisal of the real estate intended to secure the proposed
loan is undertaken by an appraiser approved by the Bank.

         All loans above $300,000 are required to be presented to the Board
appointed Loan Committee for final approval. One- to eight-family loans below
$250,000, 240,000 and $100,000 may be approved by the President, Vice President
and Assistant Vice President of the Bank, respectively. Together, the President
and Vice President can approve mortgage loans up to $300,000. Non-residential
real estate loans must be approved by the Loan Committee. Loan applicants are
promptly notified of the decision of the Bank. Interest rates on 1-4 residential
approved loans are subject to change if the loan is not funded within 45 days
after application, although the Bank will commit to provide the financing for a
longer period depending on the circumstances causing the delay. It has been
management's experience that substantially all approved loans are funded. Fire
and casualty insurance, as well as flood insurance, are required for all loans
as appropriate, and a title opinion is required for most loans secured by real
estate.


                                        6

<PAGE>   8



         Originations and Sales of Loans. The Bank's loans are primarily
originated by salaried officers of the Bank. The following table sets forth
certain information with respect to originations and sales (there were no
purchases) of loans during the periods indicated. The Bank does not anticipate
being active in purchasing loans from others except perhaps on a case by case
basis provided such loans are in conformance with the Bank's underwriting
standards.


<TABLE>
<CAPTION>
                                                                      Year Ended December 31,   
                                                     ----------------------------------------------------                       
                                                          1998                1997                1996 
                                                          ----                ----                ---- 
                                                                        (In thousands)
<S>                                                  <C>                 <C>                 <C>         
Loans originated:
    One- to four-family...........................   $    34,436         $    33,946         $     18,811
    Multi-family residential......................         6,846               6,925                  724
    Construction..................................         3,906               5,746                1,733
    Other residential and non-residential                  9,505               6,095                4,653
                                                     -----------         -----------         ------------
       Total loans originated.....................   $    54,693         $    52,712         $     25,921
                                                     ===========         ===========         ============
Loans sold........................................   $    21,910         $       824         $      2,172
                                                     ===========         ===========         ============
</TABLE>


         The Bank originates residential mortgage loans for sale in the
secondary market to the Federal Home Loan Mortgage Corporation ("FHLMC").
Westwood Homestead does not retain any participation interest in any loans which
are sold, but in most cases the Bank retains servicing rights on the loans sold
at rates from 1/4 of 1% of the loan amount. In managing the Bank's interest rate
risk, $9.1 million of existing fixed rate loans were sold with servicing
retained in the second quarter. An additional $12.8 million of current
originations were sold in the secondary market.

         Interest Rates and Loan Fees. Interest rates charged by the Bank on
mortgage loans are primarily determined by adding 1/4 to 3/8 percent to the
published rates of FHLMC. Mortgage loan rates reflect factors such as general
interest rate levels, the supply of money available to the savings industry ,
competition and the demand for such loans. These factors are in turn affected by
general economic conditions, the monetary policies of the Federal government,
including the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), the general supply of money in the economy, tax policies and
governmental budget matters.

         In addition to the interest earned on loans, the Bank receives fees in
connection with originations, late payments and for miscellaneous services
related to its loans. The Bank generally charges an origination fee for its
adjustable and fixed-rate nonowner-occupied and owner-occupied mortgage loans.
However, due to current market conditions, origination fees are generally not
charged for owner-occupied residential mortgage loans.

         Asset Classification and Allowance for Loan Losses. Federal regulations
require savings associations to review their assets on a regular basis and to
classify them as "substandard," "doubtful" or "loss," if warranted. Assets
classified as substandard or doubtful require the institution to establish
general allowances for loan losses. If an asset or portion thereof is classified
loss, the insured institution must either establish specified allowances for
loan losses in the amount of 100% of the portion of the asset classified loss,
or charge off such amount. Currently, general loss allowances established to
cover possible losses related to assets classified substandard or doubtful may
be included in determining an institution's regulatory capital, while specific
valuation allowances for loan losses do not qualify as regulatory capital. See
"Regulation -- Regulation of the Bank -- Capital Requirements." FDIC examiners
may disagree with the insured institution's classifications and amounts
reserved. If an institution does not agree with an examiner's classification of
an asset, it may appeal this determination to the FDIC. The Board of Directors
of the Bank reviews assets, valuation allowances and all classified assets on a
quarterly basis and at the end of each quarter management prepares an asset
classification listing in conformity with the FDIC regulations.

         In originating loans, the Bank recognizes that credit losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made, the creditworthiness of the borrower over the term of
the loan, general economic conditions and, in the case of a secured loan, the
quality of the security for the loan. It is management's policy to maintain an
appropriate allowance for loan losses based on, among other things, the Bank's
and the industry's historical loan loss experience, evaluation of economic
conditions and regular reviews of delinquencies and loan portfolio quality. The

                                        7

<PAGE>   9



Bank increases its allowance for loan losses by charging provisions for loan
losses against the Bank's income. Management anticipates that the Bank's
provisions for loan losses will increase in the future as it implements the
Board's strategy of continuing existing lines of business while gradually
expanding one- to four-family residential non-conforming loans to secondary
market guidelines and consumer lending.

         General allowances are made pursuant to management's assessment of risk
in the Bank's loan portfolio as a whole. Specific allowances are provided for
individual loans when ultimate collection is considered questionable by
management after reviewing the current status of loans which are contractually
past due and considering the net realizable value of the security for the loan.
Management also reviews individual loans for which full collectibility may not
be reasonably assured and evaluates among other things the net realizable value
of the underlying collateral. General allowances are included in calculating the
Bank's risk-based capital, while specific allowances are not so included.
Management continues to actively monitor the Bank's asset quality and will
charge off loans against the allowance for loan losses when appropriate or
provide specific loss reserves when necessary. Although management believes it
uses the best information available to make determinations with respect to the
allowance for loan losses, future adjustments may be necessary if economic
conditions differ substantially from the economic conditions in the assumptions
used in making the initial determinations.


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

<TABLE>
<CAPTION>
                                                                           Year Ended December 31,                       
                                                     ----------------------------------------------------
                                                          1998               1997                1996 
                                                          ----               ----                ----
<S>                                                  <C>                 <C>                  <C>         
Balance at beginning of period....................   $   266,263         $   165,513          $   101,709

Loans charged off.................................       (14,038)                 --                   --
Recoveries - real estate mortgage -
  residential.....................................            --                  --                   --
Provision for loan losses.........................        41,460             100,750               63,804
                                                     -----------         -----------          -----------
Balance at end of period..........................   $   293,685         $   266,263          $   165,513
                                                     ===========         ===========          ===========
Ratio of net charge-offs to average
   loans outstanding during the period............          0.01%                 --%                  --%
                                                     ===========         ===========          ===========
</TABLE>



                                        8

<PAGE>   10



         The following table sets forth the breakdown of the allowance for loan
losses by loan category at the dates indicated. Management believes that the
allowance can be allocated by category only on an approximate basis. The
allocation of the allowance to each category is not necessarily indicative of
future losses and does not restrict the use of the allowance to absorb losses in
any category.

<TABLE>
<CAPTION>

                                                                             At December 31,                                       
                                                 ---------------------------------------------------------------------------
                                                        1998                     1997                      1996                     
                                                        ----                     ----                      ----                     
                                                             Percent of                 Percent of               Percent of
                                                           Loans in Each              Loans in Each            Loans in Each
                                                            Category to                Category to              Category to
                                                  Amount    Total Loans      Amount    Total Loans    Amount    Total Loans 
                                                  ------    -----------      ------    -----------    ------    ----------- 
<S>                                              <C>            <C>         <C>           <C>       <C>             <C>   
One- to four-family............................  $ 90,250       62.37%      $189,105      73.26%    $ 91,815        73.38%
Multi-family and non-residential                  176,177       33.02         58,797      22.23       66,262        24.10
Construction...................................     6,136        3.49         11,773       3.95        4,497         2.08
Consumer.......................................    10,522         .87          4,414        .37        2,641          .30
Commercial.....................................    10,600         .25          2,174        .19          298          .14
                                                 --------      ------       --------     ------     --------       ------  
     Total allowance for loan losses...........  $293,685      100.00%      $266,263     100.00%    $165,513       100.00%
                                                 ========      ======       ========     ======     ========       ====== 
</TABLE>


                                        9

<PAGE>   11



         Non-Performing Loans and Other Problem Assets. Management reviews the
Bank's loans on a regular basis. Loans are placed on a non-accrual status when
the loan is past due in excess of 90 days and collection of principal and
interest is doubtful.

         Real estate acquired by the Bank as a result of foreclosure is
classified as real estate owned until such time as it is sold. The Bank
generally tries to sell the property at a price no less than its net book value,
however, it will consider slight discounts to the appraised value to expedite
the return of the funds to an earning status. When such property is acquired, it
is recorded at its fair value less estimated costs of sale. Any required
write-down of the loan to its appraised fair market value upon foreclosure is
charged against the allowance for loan losses. Subsequent to foreclosure, in
accordance with generally accepted accounting principles, a valuation allowance
is established if the carrying value of the property exceeds its fair value net
of related selling expenses.

         The following table sets forth information with respect to the Bank's
non-performing assets at the dates indicated. No loans were recorded as
restructured loans within the meaning of SFAS No. 114 and 118 at the dates
indicated. In addition, the Bank had no real estate acquired as a result of
foreclosure or loans accounted for on a nonaccrual basis.


<TABLE>
<CAPTION>
                                                                          At December 31,                             
                                                           ----------------------------------------------             
                                                            1998                1997                1996 
                                                           ------              ------              ------
                                                                         (Dollars in thousands)
<S>                                                      <C>                 <C>                 <C>      
Loans accounted for on a nonaccrual basis:
   Real estate - Residential.........................    $     167           $      --           $      --
   Commercial........................................           --                  --                  --
   Consumer..........................................           --                  --                  --
                                                         ---------           ---------           ---------
      Total..........................................    $     167           $      --           $      --
                                                         =========           =========           =========
Accruing loans which are contractually past 
  due 90 days or more:
   Real estate - Residential.........................    $     319           $     155           $      --
   Commercial........................................           --                  --                  --
   Consumer..........................................           --                  --                  --
                                                         ---------           ---------           ---------
      Total..........................................    $     319           $     155           $      --
                                                         =========           =========           =========
      Total nonperforming loans......................    $     486           $     155           $      --
                                                         =========           =========           =========
Percentage of total loans............................          .40%                .13%                 --%
                                                         =========           =========           =========
Other non-performing assets..........................    $      --           $      --           $      --
                                                         =========           =========           =========
Loans modified in troubled debt
  restructurings.....................................    $      --           $      --           $      --
                                                         =========           =========           =========
</TABLE>


         At December 31, 1998, the Bank did not have any loans which are not
currently classified as non-accrual, 90 days past due or restructured but where
known information about possible credit problems of borrowers caused management
to have serious concerns as to the ability of the borrowers to comply with
present loan repayment terms and may result in disclosure as non-accrual, 90
days past due or restructured.

         The $167,000 of non performing loans includes two loans of which one
for $91,000 has a sale contract pending. The remaining $76,000 represents two
loans to one borrower that, as of March 1999, has agreed to a payment plan to
bring the loans current.

                                       10

<PAGE>   12



INVESTMENT ACTIVITIES

         Westwood Homestead is permitted to make certain investments, including
investments in securities issued by various federal agencies and state and
municipal governments, deposits at the FHLB of Cincinnati, certificates of
deposits in federally insured institutions, certain bankers' acceptances and
federal funds. The Bank may also invest, subject to certain limitations, in
commercial paper having one of the two highest investment ratings of a
nationally recognized credit rating agency, and certain other types of corporate
debt securities and mutual funds. Federal regulations require the Bank to
maintain an investment in FHLB of Cincinnati stock and a minimum amount of
liquid assets which may be invested in cash and specified securities. From time
to time, the FDIC adjusts the percentage of liquid assets which savings
institutions are required to maintain. For additional information, see
"Regulation -- Regulation of the Bank -- Liquidity Requirements."

         The Bank invests in investment securities in order to diversify its
assets, manage cash flow, obtain yield and maintain the minimum levels of liquid
assets required by regulatory authorities. The investment activities of the Bank
consist primarily of investments in mortgage-backed and related securities and
other investment securities, consisting primarily of securities issued or
guaranteed by the U.S. government or agencies thereof. The Board of Directors is
responsible for approving the Investment Policy of the Bank and delegates to the
Asset Liability Committee the responsibility for investment management of the
portfolio. Day to day investment portfolio activity is conducted by the chief
financial officer with approval by the chief executive officer.

         Mortgage-Backed Securities. The Bank also invests in traditional
mortgage-backed securities. Mortgage- backed securities represent a
participation interest in a pool of single-family or multi-family mortgages, the
principal and interest payments on which are passed from the mortgage
originators through intermediaries that pool and repackage the participation
interest in the form of securities to investors such as the Bank. Such
intermediaries may include quasi-governmental agencies such as FHLMC, FNMA and
GNMA which guarantee the payment of principal and interest to investors.
Mortgage-backed securities generally increase the quality of the Bank's assets
by virtue of the guarantees that back them, are more liquid than individual
mortgage loans and may be used to collateralize borrowings or other obligations
of the Bank.

         Mortgage-backed securities typically are issued with stated principal
amounts and the securities are backed by pools of mortgages that have loans with
interest rates that are within a range and have similar maturities. The
underlying pool of mortgages can be composed of either fixed-rate or
adjustable-rate mortgage loans. Mortgage-backed securities generally are
referred to as mortgage participation certificates or pass-through certificates.
As a result, the interest rate risk characteristics of the underlying pool of
mortgages, i.e., fixed-rate or adjustable-rate, as well as prepayment risk, are
passed on to the certificate holder. The life of a mortgage-backed pass-through
security is equal to the life of the underlying mortgages.

         The actual maturity of a mortgage-backed security varies, depending on
when the mortgagors prepay or repay the underlying mortgages. Prepayments of the
underlying mortgages may shorten the life of the investment, thereby adversely
affecting its yield to maturity and the related market value of the
mortgage-backed security. The yield is based upon the interest income and the
amortization of the premium or accretion of the discount related to the
mortgage-backed security. Premiums and discounts on mortgage-backed securities
are amortized or accreted over the estimated term of the securities using a
level yield method. The prepayment assumptions used to determine the
amortization period for premiums and discounts can significantly affect the
yield of the mortgage-backed security, and these assumptions are reviewed
periodically to reflect the actual prepayment. The actual prepayments of the
underlying mortgages depend on many factors, including the type of mortgage, the
coupon rate, the age of the mortgages, the geographical location of the
underlying real estate collateralizing the mortgages and general levels of
market interest rates. The difference between the interest rates on the
underlying mortgages and the prevailing mortgage interest rates is an important
determinant in the rate of prepayments. During periods of falling mortgage
interest rates, prepayments generally increase, and, conversely, during periods
of rising mortgage interest rates, prepayments generally decrease. If the coupon
rate of the underlying mortgage significantly exceeds the prevailing market
interest rates offered for mortgage loans, refinancing generally increases and
accelerates the prepayment of the underlying mortgages. Prepayment experience is
more difficult to estimate for adjustable-rate mortgage-backed securities.


                                       11

<PAGE>   13



         The Bank's mortgage-backed securities portfolio consists primarily of
seasoned fixed-rate and adjustable-rate mortgage-backed securities insured or
guaranteed by FNMA, FHLMC or GNMA. At December 31, 1998, these securities had a
market value of $1,529,000 and an amortized cost of $1,510,000, representing
1.2% of the Company's total assets. See Notes 3 and 4 to the Company's
Consolidated Financial Statements incorporated herein by reference.

         Mortgage-Related Securities. The Bank invests in mortgage-related
securities such as CMOs, primarily as an alternative to mortgage loans or
mortgage-backed securities and may purchase them in the future. As part of a
balance sheet realignment in the fourth quarter of fiscal 1997 the Bank sold the
$12.0 million portfolio of CMOs.

         The following table sets forth the carrying value of the Bank's
investments at the dates indicated.



<TABLE>
<CAPTION>
                                                                           At December 31,                             
                                                           -----------------------------------------------                 
                                                            1998                1997                1996 
                                                           ------              ------              ------
                                                                          (In thousands)
<S>                                                      <C>                 <C>                 <C>      
Securities available for sale :
   U.S. government and agency securities.............    $      --           $   1,000           $   3,969
   Collateralized mortgage obligations...............           --                  --              11,990
   Mortgage-backed securities........................        1,529               2,151               3,044
                                                             -----           ---------           ---------
      Total investment securities....................        1,529               3,151              19,003

Cash and cash equivalents............................        5,010              10,368              13,420
FHLB stock...........................................        1,141               1,024                 954
                                                         ---------           ---------           ---------
      Total investments..............................    $   7,680           $  14,543           $  33,377
                                                         =========           =========           =========
</TABLE>



                                       12

<PAGE>   14



         The following table sets forth the scheduled maturities, carrying
values, market values and average yields for the Bank's investment securities at
December 31, 1998.


<TABLE>
<CAPTION>
                                          One Year or Less     One to Five Years        Five to Ten Years               
                                          ----------------     -----------------        -----------------      
                                        Carrying   Average   Carrying      Average     Carrying      Average   
                                          Value     Yield      Value        Yield        Value        Yield    
                                          -----     -----      -----        -----        -----        -----    
                                                              (Dollars in thousands)
<S>                                       <C>        <C>      <C>          <C>          <C>           <C>      
Securities available for sale:
   Mortgage-backed securities...            --        --         147         7.45%          86         8.01%    
                                           ---                ------                     -----      

     Total......................          $ --                $  147                     $  86              
                                           ===                ======                     =====      
</TABLE>



<TABLE>
<CAPTION>
                                        More than Ten Years           Total Investment Portfolio 
                                        -------------------           -------------------------- 
                                        Carrying     Average        Carrying      Market      Average   
                                          Value       Yield          Value        Value        Yield    
                                          -----       -----          -----        -----        -----    
                                                              (Dollars in thousands)
<S>                                       <C>          <C>          <C>          <C>          <C>                
Securities available 
  for sale:
   Mortgage-backed 
    securities...........                   1,276      7.24%           1,510        1,529      7.30
                                          -------                    -------      -------    
     Total...............                 $ 1,276                    $ 1,510      $ 1,529
                                          =======                    =======      =======    
</TABLE>


                                       13

<PAGE>   15



DEPOSIT ACTIVITY AND OTHER SOURCES OF FUNDS

         General. Deposits are the primary source of the Bank's funds for
lending and other investment purposes. In addition to deposits, Westwood
Homestead derives funds primarily from loan principal repayments, maturing
investment securities, and interest payments. Loan repayments and interest
payments are a relatively stable source of funds, while deposit inflows and
outflows are significantly influenced by general interest rates and money market
conditions.

         Deposits. Deposits are attracted principally from within the Bank's
primary market area through the offering of a variety of deposit instruments,
including passbook and statement accounts and certificates of deposit currently
ranging in term from 30 days to 5 years. The majority of deposits at the Bank
are C.Ds, which at December 31, 1998 represented 75.8% of total deposits.
Deposit account terms vary, principally on the basis of the minimum balance
required, the time periods the funds must remain on deposit and the interest
rate. The Bank also offers individual retirement accounts ("IRAs").

         The Bank's policies are designed primarily to attract deposits from
local residents rather than to solicit deposits from areas outside its primary
market. The Bank attracts local deposits by offering a wide variety of accounts,
extended service hours and competitive interest rates and fees. Interest rates
paid, maturity terms, service fees and withdrawal penalties are established by
the Bank on a periodic basis. Determination of rates and terms are predicated
upon funds acquisition and liquidity requirements, rates paid by competitors,
growth goals and state and federal regulations.

         In January 1996, the Bank introduced "Hassle Free Checking" and "No
Hassle Checking" to attract more deposit accounts. These products do not have a
minimum balance requirement, a monthly service charge or a per check charge.
Both of these products were designed to meet the needs of the community and, in
management's view, have made it easier for potential customers to establish a
banking relationship with Westwood Homestead. The building renovation and
drive-thru which was completed this past year have increased the Bank's
visibility and accessibility for our customers. Increased advertising and
employee incentives have also contributed to a 59% increase in checking accounts
during 1998. The Bank's Mount Adams branch, opened in June 1996, had $3.0
million in deposits outstanding as of December 31, 1998. Transaction accounts
made up 74% of the deposits which contributed to the 3.78% cost of funds for the
branch. The branch has started to generate a monthly profit after 21 months of
operation.

         Several years ago, when interest rates were significantly higher than
at present, the Bank initiated a 10 year certificate of deposit program. At
December 31, 1997, such certificates of deposit represented $9.1 million, or
approximately 10.3%, of total deposits with a weighted average interest rate of
9.4%. Such certificates of deposit are, in large part, responsible for the
Bank's high costs of funds. These deposits started to reach maturity beginning
in late 1997 and continue to mature through the end of 1999. Certificates of
deposit in amounts of $100,000 or more ("Jumbos"), totaled $12.2 million, or
14.6%, of the Bank's total savings portfolio at December 31, 1998. The majority
of these Jumbos represent deposits by individuals. This large amount of Jumbos
as a percentage of total deposits makes the Bank susceptible to large deposit
withdrawals if one or more depositors withdraw deposits from the Bank. Such
withdrawals may adversely affect the Bank's liquidity and funds available for
lending if the Bank is unable to obtain funds from alternative sources.



                                       14

<PAGE>   16



         The following table sets forth, for the periods indicated, the average
balances and interest rates based on month-end balances for interest-bearing
demand deposits and time deposits.

<TABLE>
<CAPTION>
                                                     Year Ended December 31, 
                                 ----------------------------------------------------------------                
                                         1998                  1997                   1996              
                                         ----                  ----                   ----              
                                 Average    Average      Average    Average     Average   Average
                                 Balance     Rate        Balance     Rate       Balance    Rate 
                                 -------     ----        -------     ----       -------    ---- 
                                                        (Dollars in thousands)
<S>                              <C>         <C>        <C>          <C>       <C>          <C>  
Savings deposits...............  $  3,561    1.98%      $   3,769    1.98%     $    6,063   1.91%
NOW accounts...................     7,399    2.93           4,646    3.03           1,996   1.91
Money market accounts..........     9,406    3.65          10,046    3.64          12,089   3.67
Certificates of deposit........    63,771    6.17          63,961    6.69          63,474   6.63
                                 --------    ----       ---------    ----      ----------   ---- 
     Total.....................  $ 84,137    5.43       $  82,422    5.90      $   83,622   5.75
                                 ========               =========              ==========
</TABLE>


         The following table sets forth the amount and maturities of time
deposits at December 31, 1998.

<TABLE>
<CAPTION>
                                                                 Amount Due
                                  --------------------------------------------------------------------------            
                                  Less Than                                          After
Rate                              One Year        1-2 Years        2-3 Years       3 Years           Total
----                              --------        ---------        ---------       -------           -----
                                                                (In thousands)
<S>                              <C>             <C>            <C>             <C>              <C>       
 4.00 -  5.99%..................  $  30,065       $    8,749     $    1,612      $      831       $   41,257
 6.00 -  7.99%..................      7,142            3,196          1,286           7,266           18,890
 8.00 -  9.99%..................      3,083            1,492            641              --            5,216
                                  ---------       ----------     ----------      ----------       ----------
                                  $  40,290       $   13,437     $    3,539      $    8,097       $   65,363
                                  =========       ==========     ==========      ==========       ==========
</TABLE>



         The following table indicates the amount of the Bank's certificates of
deposit of $100,000 or more by time remaining until maturity as of December 31,
1998.

<TABLE>
<CAPTION>
                                                    Certificates
       Maturity Period                              of Deposits
       ---------------                              -----------
                                                    (In thousands)
      <S>                                           <C>       
       Three months or less.......................  $    3,661
       Over three through six months..............         805
       Over six through 12 months.................       3,498
       Over 12 months.............................       4,280
                                                    ----------
           Total..................................  $   12,244
                                                    ==========
</TABLE>



                                       15

<PAGE>   17



         Borrowings. Savings deposits historically have been the primary source
of funds for the Bank's lending and investment activities and for its general
business activities. The Bank is authorized, however, to use advances from the
FHLB of Cincinnati to supplement its supply of lendable funds, to meet deposit
withdrawal requirements, or to be used in connection with the FHLB's affordable
housing program. Westwood Homestead has a $10 million line of credit in addition
to other advance programs with the FHLB of Cincinnati. Advances from the FHLB
are secured by the Bank's one-to-four-family mortgage loans. In addition, the
Bank has agreements to purchase federal funds from correspondent banks totaling
$7.0 million, as needed. At December 31, 1998, $17.5 million of FHLB advances
were outstanding.

         The FHLB of Cincinnati functions as a central reserve bank providing
credit for savings institutions and certain other member financial institutions.
As a member, Westwood Homestead is required to own capital stock in the FHLB and
is authorized to apply for advances on the security of such stock and certain of
its home mortgages and other assets (principally, securities which are
obligations of, or guaranteed by, the United States) provided certain standards
related to creditworthiness have been met. See "Regulation -- Regulation of the
Bank -- Federal Home Loan Bank System."

         The following table sets forth certain information regarding the Bank's
federal funds purchased and FHLB advances at the dates and for the periods
indicated.


<TABLE>
<CAPTION>
                                                                       At December 31,  
                                                         ---------------------------------------------                      
                                                         1998                1997                 1996 
                                                         ----                ----                 ----
                                                                        (In thousands)
<S>                                                      <C>               <C>                   <C>
Amounts outstanding at end of period:
   FHLB advances...................................      17,454              14,765                127

Weighted average rate paid on:
   FHLB advances...................................        6.22%               6.33%              8.18%
</TABLE>



<TABLE>
<CAPTION>
                                                                     Year Ended December 31,
                                                         ---------------------------------------------                      
                                                         1998                 1997                1996 
                                                         ----                 ----                ---- 
                                                                        (In thousands)
<S>                                                     <C>                <C>               <C>     
Maximum amount of borrowings outstanding
   at any month end:
   Federal funds purchased.........................     $   --              $  1,200          $  1,600
   FHLB advances...................................      17,455               18,775             1,000

Approximate average short-term borrowings
   outstanding with respect to:
   Federal funds purchased.........................     $   --              $  4,064          $  1,000
   FHLB advances...................................      15,863                7,043             1,000
Approximate weighted average rate paid on: (1)
   Federal funds purchased ........................         --                  5.77%             5.84%
   FHLB advances...................................        6.22%                5.89%             5.50%
</TABLE>

------------------
[FN]
(1) Based on rates and amounts during periods borrowings were outstanding.
</FN>



                                       16

<PAGE>   18



COMPETITION

         The Bank experiences competition both in attracting and retaining
savings deposits and in the making of mortgage and other loans. Direct
competition for savings deposits and loans in Hamilton County and the other
counties in the Bank's market area comes from other savings institutions, credit
unions, commercial banks, money market mutual funds, brokerage firms and
insurance companies. The Bank's primary competitors have resources substantially
greater than that of the Bank and can offer a wide variety of deposit and loan
products. The primary factors in competing for loans are interest rates and loan
origination fees and the range of services offered by various financial
institutions.

         Additionally, the Bank may face increased competition due to recent
changes to federal interstate banking law. See "Regulation -- Interstate
Banking.

REGULATION

         GENERAL. As an Ohio-chartered stock savings bank, Westwood Homestead is
subject to extensive regulation by the Superintendent. In addition, as a
state-chartered insured bank that is not a member of the Federal Reserve System,
Westwood Homestead is subject to regulation by the FDIC. These regulations are
intended primarily for the protection of depositors.

         REGULATION OF THE COMPANY. The Company is a bank holding company
subject to regulation by the Federal Reserve Board under the Bank Holding
Company Act (the "BHCA"). As a result, the activities of the Company are subject
to certain limitations, which are described below. In addition, as a bank
holding company, the Company is required to file annual and quarterly reports
with the Federal Reserve Board and to furnish such additional information as the
Federal Reserve Board may require pursuant to the BHCA. The Company is also
subject to regular examination by the Federal Reserve Board.

         With certain exceptions, the BHCA prohibits a bank holding company from
acquiring direct or indirect ownership or control of more than 5% of the voting
shares of a company that is not a bank or a bank holding company, or from
engaging directly or indirectly in activities other than those of banking,
managing or controlling banks, or providing services for its subsidiaries. The
principal exceptions to these prohibitions involve certain non-bank activities
which, by statute or by Federal Reserve Board regulation or order, have been
identified as activities closely related to the business of banking. The
activities of the Company are subject to these legal and regulatory limitations
under the BHCA and the related Federal Reserve Board regulations.
Notwithstanding the Federal Reserve Board's prior approval of specific
nonbanking activities, the Federal Reserve Board has the power to order a
holding company or its subsidiaries to terminate any activity, or to terminate
its ownership or control of any subsidiary, when it has reasonable cause to
believe that the continuation of such activity or such ownership or control
constitutes a serious risk to the financial safety, soundness or stability of
any bank subsidiary of that holding company.

         Under the BHCA, a bank holding company must obtain the prior approval
of the Federal Reserve Board before (1) acquiring direct or indirect ownership
or control of any voting shares of any bank or bank holding company if, after
such acquisition, the bank holding company would directly or indirectly own or
control more than 5% of such shares; (2) acquiring all or substantially all of
the assets of another bank or bank holding company; or (3) merging or
consolidating with another bank holding company. Satisfactory financial
condition, particularly with regard to capital adequacy, and satisfactory
Community Reinvestment Act ("CRA") ratings generally are prerequisites to
obtaining federal regulatory approval to make acquisitions.

         The BHCA prohibits the Federal Reserve Board from approving an
application by a bank holding company to acquire voting shares of a bank located
outside the state in which the operations of the holding company's bank
subsidiaries are principally conducted, unless such an acquisition is
specifically authorized by state law. See " -- Interstate Banking." The BHCA
does not place territorial restrictions on the activities of non-bank
subsidiaries of bank holding companies.

         Under the BHCA, any company must obtain approval of the Federal Reserve
Board prior to acquiring control of the Company or the Bank. For purposes of the
BHCA, "control" is defined as ownership of more than 25% of any class of

                                       17

<PAGE>   19

voting securities of the Company or the Bank, the ability to control the
election of a majority of the directors, or the exercise of a controlling
influence over management or policies of the Company or the Bank. In addition,
the Change in Bank Control Act and the related regulations of the Federal
Reserve Board require any person or persons acting in concert (except for
companies required to make application under the BHCA), to file a written notice
with the Federal Reserve Board before such person or persons may acquire control
of the Company or the Bank. The Change in Bank Control Act defines "control" as
the power, directly or indirectly, to vote 25% or more of any voting securities
or to direct the management or policies of a bank holding company or an insured
bank.

         The Federal Reserve Board has adopted guidelines regarding the capital
adequacy of bank holding companies, which require bank holding companies to
maintain specified minimum ratios of capital to total assets and capital to
risk-weighted assets. See "-- Capital Requirements."

         HOLDING COMPANY DIVIDENDS AND STOCK REPURCHASES. The Federal Reserve
Board has the power to prohibit dividends by bank holding companies if their
actions constitute unsafe or unsound practices. The Federal Reserve Board has
issued a policy statement on the payment of cash dividends by bank holding
companies, which expresses the Federal Reserve Board's view that a bank holding
company should pay cash dividends only to the extent that the company's net
income for the past year is sufficient to cover both the cash dividends and a
rate of earnings retention that is consistent with the company's capital needs,
asset quality, and overall financial condition. The Federal Reserve Board also
indicated that it would be inappropriate for a bank holding company experiencing
serious financial problems to borrow funds to pay dividends. Under the prompt
corrective action regulations adopted by the Federal Reserve Board pursuant to
FDICIA, the Federal Reserve Board may prohibit a bank holding company from
paying any dividends if the holding company's bank subsidiary is classified as
"undercapitalized." See "-- Prompt Corrective Regulatory Action."

         As a bank holding company, the Company is required to give the Federal
Reserve Board prior written notice of any purchase or redemption of its
outstanding equity securities if the gross consideration for the purchase or
redemption, when combined with the net consideration paid for all such purchases
or redemptions during the preceding 12 months, is equal to 10% or more of the
Company's consolidated net worth. The Federal Reserve Board may disapprove such
a purchase or redemption if it determines that the proposal would violate any
law, regulation, Federal Reserve Board order, directive, or any condition
imposed by, or written agreement with, the Federal Reserve Board. This
requirement does not apply to bank holding companies that are
"well-capitalized," received one of the two highest examination ratings at their
last examination and are not the subject of any unresolved supervisory issues.

         BANK REGULATION. As a state-chartered savings bank which is not a
member of the Federal Reserve System (a "state non-member bank"), the Bank is
subject to the primary federal supervision of the FDIC under the Federal Deposit
Insurance Act (the "FDIA"). The Bank also is subject to comprehensive regulation
and supervision by the Superintendent. The prior approval of the FDIC and of the
Superintendent is required for the Bank to establish or relocate a branch office
or to engage in any merger, consolidation or significant purchase of assets. In
addition, the Bank is subject to numerous federal and state laws and regulations
that set forth specific restrictions and procedural requirements with respect to
the establishment of branches, investments, interest rates on loans, credit
practices, the disclosure of credit terms and discrimination in credit
transactions.

         The FDIC and the Superintendent regularly examine the operations and
condition of the Bank, including but not limited to capital adequacy, reserves,
loans, investments and management practices. These examinations are for the
protection of the Bank's depositors and the SAIF and not its stockholders. In
addition, the Bank is required to furnish quarterly and annual reports to the
FDIC as well as annual reports to the Superintendent. The FDIC's enforcement
authority includes the power to remove officers and directors and the authority
to issue orders to prevent a bank from engaging in unsafe or unsound practices
or violating laws or regulations governing its business. Any Ohio savings bank
that does not operate in accordance with the regulations, policies and
directives of the Superintendent may be subject to sanctions for non-compliance.

                                       18

<PAGE>   20

         The CRA requires that, in connection with examinations of financial
institutions within their jurisdiction, the Federal Reserve Board and the FDIC
evaluate the record of the financial institutions in meeting the credit needs of
their local communities, including low and moderate income neighborhoods,
consistent with the safe and sound operation of those banks. These factors are
also considered by the Federal Reserve Board and the FDIC in evaluating mergers,
acquisitions and applications to open a branch or facility. The Bank's current
CRA rating is "satisfactory."

         CAPITAL REQUIREMENTS. The Federal Reserve Board and the FDIC have
established guidelines with respect to the maintenance of appropriate levels of
capital by bank holding companies with consolidated assets of $150 million or
more and state non-member banks, respectively. For bank holding companies with
less than $150 million in consolidated assets, the Federal Reserve Board applies
the guidelines on a bank-only basis unless the bank holding company has publicly
held debt securities or is engaged in non-bank activities involving significant
leverage. The regulations impose two sets of capital adequacy requirements:
minimum leverage rules, which require bank holding companies and state
non-member banks to maintain a specified minimum ratio of capital to total
assets, and risk-based capital rules, which require the maintenance of specified
minimum ratios of capital to "risk-weighted" assets. The regulations of the FDIC
and the Federal Reserve Board require bank holding companies and state
non-member banks, respectively, to maintain a minimum leverage ratio of "Tier 1
capital" to total assets of 3.0%. Tier 1 capital is the sum of common
stockholders' equity, certain perpetual preferred stock (which must be
noncumulative with respect to banks), including any related surplus, and
minority interests in consolidated subsidiaries; minus all intangible assets
(other than certain purchased mortgage servicing rights and purchased credit
card receivables), identified losses and investments in certain subsidiaries. As
a SAIF-insured, state-chartered bank, the Bank must also deduct from Tier 1
capital an amount equal to its investments in, and extensions of credit to,
subsidiaries engaged in activities that are not permissible for national banks,
other than debt and equity investments in subsidiaries engaged in activities
undertaken as agent for customers or in mortgage banking activities or in
subsidiary depository institutions or their holding companies. Although setting
a minimum 3.0% leverage ratio, the capital regulations state that only the
strongest bank holding companies and banks, with composite examination ratings
of 1 under the rating system used by the federal bank regulators, would be
permitted to operate at or near such minimum level of capital. All other bank
holding companies and banks are expected to maintain a leverage ratio of at
least 1% to 2% above the minimum ratio, depending on the assessment of an
individual organization's capital adequacy by its primary regulator. Any bank or
bank holding companies experiencing or anticipating significant growth would be
expected to maintain capital well above the minimum levels. In addition, the
Federal Reserve Board has indicated that whenever appropriate, and in particular
when a bank holding company is undertaking expansion, seeking to engage in new
activities or otherwise facing unusual or abnormal risks, it will consider, on a
case-by-case basis, the level of an organization's ratio of tangible Tier 1
capital to total assets in making an overall assessment of capital.

         In addition to the leverage ratio, the regulations of the Federal
Reserve Board and the FDIC require bank holding companies and state-chartered
nonmember banks to maintain a minimum ratio of qualifying total capital to
risk-weighted assets of at least 8.0% of which at least four percentage points
must be Tier 1 capital. Qualifying total capital consists of Tier 1 capital plus
Tier 2 or supplementary capital items which include allowances for loan losses
in an amount of up to 1.25% of risk-weighted assets, cumulative preferred stock
and preferred stock with a maturity of 20 years or more and certain other
capital instruments. The includable amount of Tier 2 capital cannot exceed the
institution's Tier 1 capital. Qualifying total capital is further reduced by the
amount of the bank's investments in banking and finance subsidiaries that are
not consolidated for regulatory capital purposes, reciprocal cross-holdings of
capital securities issued by other banks and certain other deductions. The
risk-based capital regulations assign balance sheet assets and the credit
equivalent amounts of certain off-balance sheet items to one of four broad risk
weight categories. The aggregate dollar amount of each category is multiplied by
the risk weight assigned to that category based principally on the degree of
credit risk associated with the obligor. The sum of these weighted values equals
the bank holding company or the bank's risk-weighted assets.

         The federal bank regulators, including the Federal Reserve Board and
the FDIC, have proposed to revise their risk-based capital requirements to
ensure that such requirements provide for explicit consideration of interest
rate risk. Under the proposed rule, a bank's interest rate risk exposure would
be quantified using either the measurement system set forth in the proposal or
the bank's internal model for measuring such exposure, if such model is
determined to be adequate by the bank's examiner. If the dollar amount of a
bank's interest rate risk exposure, as measured under either measurement system,
exceeds 1% of the bank's total assets, the bank would be required under the
proposed rule to hold additional capital equal to the dollar amount of the
excess. Management of the Bank has not determined what effect, if any, the
FDIC's proposed interest rate risk component would have on the Bank's capital if
adopted as proposed. The FDIC has adopted a regulation that provides that the
FDIC may take into account whether a bank has significant risks from
concentrations of credit or nontraditional activities in determining the
adequacy of its capital. The Bank has not been advised that it will be required
to maintain any additional capital under this regulation. The proposed interest
rate risk component would not apply to bank holding companies on a consolidated
basis.


                                       19


<PAGE>   21



         The table below provides information with respect to the Bank's
compliance with its regulatory capital requirements at December 31, 1998.

<TABLE>
<CAPTION>
                                                                    Percent of
                                                    Amount           Assets (1)
                                                    ------           ----------
                                                       (Dollars in thousands)
<S>                                                <C>                <C>   
Tangible capital..................................  $23,535            18.56%
Tangible capital requirement......................    1,902             1.50
                                                    -------            -----
  Excess..........................................  $21,633            17.06%
                                                    =======            =====

Tier 1/Core capital(2)............................  $23,535            18.56%
Tier 1/Core capital requirement...................    3,804             3.00
                                                    -------            -----
  Excess..........................................  $19,731            15.56%
                                                    =======            =====

Risk-based capital................................  $23,828            31.32%
Risk-based capital requirement....................    6,087             8.00
                                                    -------            -----
  Excess..........................................  $17,741            23.32%
                                                    =======            =====
</TABLE>

[FN]
(1)      Based on average adjusted total assets for purposes of the tangible
         capital and core capital requirements and risk-weighted assets for
         purpose of the risk-based capital requirement.

(2)      Reflects the capital requirement which the Bank must satisfy to avoid
         regulatory restrictions that may be imposed pursuant to prompt
         corrective action regulations.
</FN>

         PROMPT CORRECTIVE REGULATORY ACTION. Under the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"), the federal banking
regulators are required to take prompt corrective action if an insured
depository institution fails to satisfy certain minimum capital requirements.
All institutions, regardless of their capital levels, are restricted from making
any capital distribution or paying any management fees if the institution would
thereafter fail to satisfy the minimum levels for any of its capital
requirements. An institution that fails to meet the minimum level for any
relevant capital measure (an "undercapitalized institution") may be: (I) subject
to increased monitoring by the appropriate federal banking regulator; (ii)
required to submit an acceptable capital restoration plan within 45 days; (iii)
subject to asset growth limits; and (iv) required to obtain prior regulatory
approval for acquisitions, branching and new lines of businesses. The capital
restoration plan must include a guarantee by the institution's holding company
that the institution will comply with the plan until it has been adequately
capitalized on average for four consecutive quarters, under which the holding
company would be liable up to the lesser of 5% of the institution's total assets
or the amount necessary to bring the institution into capital compliance as of
the date it failed to comply with its capital restoration plan. A "significantly
undercapitalized" institution, as well as any undercapitalized institution that
did not submit an acceptable capital restoration plan, may be subject to
regulatory demands for recapitalization, broader application of restrictions on
transactions with affiliates, limitations on interest rates paid on deposits,
asset growth and other activities, possible replacement of directors and
officers, and restrictions on capital distributions by any bank holding company
controlling the institution. Any company controlling the institution could also
be required to divest the institution or the institution could be required to
divest subsidiaries. The senior executive officers of a significantly
undercapitalized institution may not receive bonuses or increases in
compensation without prior approval and the institution is prohibited from
making payments of principal or interest on its subordinated debt. In their
discretion, the federal banking regulators may also impose the foregoing
sanctions on an undercapitalized institution if the regulators determine that
such actions are necessary to carry out the purposes of the prompt corrective
action provisions. If an institution's ratio of tangible capital to total assets
falls below a "critical capital level," the institution will be subject to
conservatorship or receivership within 90 days unless periodic determinations
are made that forbearance from such action would better protect the deposit
insurance fund. Unless appropriate findings and certifications are made by the
appropriate federal bank regulatory agencies, a critically undercapitalized
institution must be placed in receivership if it


                                       20





<PAGE>   22



remains critically undercapitalized on average during the calendar quarter
beginning 270 days after the date it became critically undercapitalized.

         Pursuant to regulations implementing the prompt corrective action
provisions of FDICIA the federal banking regulators generally measure a
depository institution's capital adequacy on the basis of the institution's
total risk-based capital ratio (the ratio of its total capital to risk-weighted
assets), Tier 1 risk-based capital ratio (the ratio of its core capital to
risk-weighted assets) and leverage ratio (the ratio of its core capital to
adjusted total assets). Under the regulations, a savings association that is not
subject to an order or written directive to meet or maintain a specific capital
level will be deemed "well capitalized" if it also has: (I) a total risk-based
capital ratio of 10% or greater; (ii) a Tier 1 risk-based capital ratio of 6.0%
or greater; and (iii) a leverage ratio of 5.0% or greater. An "adequately
capitalized" savings association is a savings association that does not meet the
definition of well capitalized and has: (I) a total risk-based capital ratio of
8.0% or greater; (ii) a Tier 1 capital risk-based ratio of 4.0% or greater; and
(iii) a leverage ratio of 4.0% or greater (or 3.0% or greater if the savings
association has a composite 1 CAMELS rating). An "undercapitalized institution"
is a savings association that has (I) a total risk-based capital ratio less than
8.0%; or (ii) a Tier 1 risk-based capital ratio of less than 4.0%; or (iii) a
leverage ratio of less than 4.0% (or 3.0% if the association has a composite 1
CAMELS rating). A "significantly undercapitalized" institution is defined as a
savings association that has: (I) a total risk-based capital ratio of less than
6.0%; or (ii) a Tier 1 risk-based capital ratio of less than 3.0%; or (iii) a
leverage ratio of less than 3.0%. A "critically undercapitalized" savings
association is defined as a savings association that has a ratio of "tangible
equity" to total assets of less than 2.0%. Tangible equity is defined as core
capital plus cumulative perpetual preferred stock (and related surplus) less all
intangibles other than qualifying supervisory goodwill and certain purchased
mortgage servicing rights. The FDIC may reclassify a well capitalized savings
association as adequately capitalized and may require an adequately capitalized
or undercapitalized association to comply with the supervisory actions
applicable to associations in the next lower capital category (but may not
reclassify a significantly undercapitalized institution as critically
under-capitalized) if the FDIC determines, after notice and an opportunity for a
hearing, that the savings association is in an unsafe or unsound condition or
that the association has received and not corrected a less-than-satisfactory
rating for any CAMELS rating category. Westwood Homestead is classified as "well
capitalized" under the regulations.

         DIVIDEND LIMITATIONS. The Bank may not pay dividends on its capital
stock if its regulatory capital would thereby be reduced below the amount then
required for the liquidation account established for the benefit of certain
depositors of the Bank at the time of the Conversion to stock form.

         Earnings of the Bank appropriated to bad debt reserves and deducted for
Federal income tax purposes are not available for payment of cash dividends or
other distributions to stockholders without payment of taxes at the then current
tax rate by the Bank on the amount of earnings removed from the reserves for
such distributions. The Bank intends to make full use of this favorable tax
treatment and does not contemplate use of any earnings in a manner which would
limit the Bank's bad debt deduction or create federal tax liabilities.

         Under FDIC regulations, the Bank is prohibited from making any capital
distributions if after making the distribution, the Bank would have: (I) a total
risk-based capital ratio of less than 8.0%; (ii) a Tier 1 risk-based capital
ratio of less than 4.0%; or (iii) a leverage ratio of less than 4.0%.

         The Company is subject to limitations on dividends imposed by the
Federal Reserve Board. See "Holding Company Dividends And Stock Repurchases."

         SAFETY AND SOUNDNESS GUIDELINES. Guidelines of the Federal banking
agencies, including the FDIC, require savings institutions to maintain internal
controls and information systems and internal audit systems that are appropriate
for the size, nature and scope of the institution's business. The guidelines
also establish certain basic standards for loan documentation, credit
underwriting, interest rate risk exposure, and asset growth. The guidelines
further provide that savings institutions should maintain safeguards to prevent
the payment of compensation, fees and benefits that are excessive or that could
lead to material financial loss, and should take into account factors such as
comparable compensation practices at comparable institutions. If the agency
determines that a savings institution is not in compliance with the safety and
soundness guidelines, it may require the institution to submit an acceptable
plan to achieve compliance with the guidelines. A savings institution must
submit an acceptable compliance plan to the agency within 30 days of receipt of
a request for such a plan.

                                       21

<PAGE>   23



Failure to submit or implement a compliance plan may subject the institution to
regulatory sanctions. Management believes that Westwood Homestead has met
substantially all the standards adopted in the interagency guidelines.

         DEPOSIT INSURANCE. Westwood Homestead is required to pay assessments
based on a percent of its insured deposits to the FDIC for insurance of their
deposits by the SAIF. The Bank is required to pay assessments based on a
percentage of its insured deposits to the FDIC for insurance of its deposits by
the SAIF. Under the FDIC's risk-based deposit insurance assessment system, the
assessment rate for an insured depository institution depends on the assessment
risk classification assigned to the institution by the FDIC, which is determined
by the institution's capital level and supervisory evaluations. Based on the
data reported to regulators for the date closest to the last day of the seventh
month preceding the semi-annual assessment period, institutions are assigned to
one of three capital groups -- well capitalized, adequately capitalized or
undercapitalized -- using the same percentage criteria as in the prompt
corrective action regulations. See "-- Prompt Corrective Regulatory Action."
Within each capital group, institutions are assigned to one of three subgroups
on the basis of supervisory evaluations by the institution's primary supervisory
authority and such other information as the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance fund. Subgroup A consists of financially sound institutions with only
a few minor weaknesses. Subgroup B consists of institutions that demonstrate
weaknesses which, if not corrected, could result in significant deterioration of
the institution and increased risk of loss to the deposit insurance fund.
Subgroup C consists of institutions that pose a substantial probability of loss
to the deposit insurance fund unless effective corrective action is taken.

         LIQUIDITY REQUIREMENTS. FDIC policy requires that savings banks
maintain an average daily balance of liquid assets (cash, certain time deposits,
bankers' acceptances and specified United States government, state, or federal
agency obligations) in an amount which it deems adequate to protect safety and
soundness of the savings bank. The FDIC currently has no specific level which it
requires. Management calculated, under the FDIC's calculation method, Westwood
Homestead's liquidity ratio as 7.3% of interest-bearing liabilities at December
31, 1998, which management believes is adequate.

          LIMITS ON LOANS TO ONE BORROWER. Westwood Homestead generally is
prohibited by both FDIC regulations and Ohio law from making loans or otherwise
extending credit to any one borrower, including related entities, in an amount
exceeding the greater of $500,000 or 15% of Westwood Homestead's unimpaired
capital and surplus plus, as to loans and extensions of credit fully secured by
readily marketable collateral, an additional 10% of unimpaired capital and
surplus. At December 31, 1998, the maximum amount Westwood Homestead could lend
to one borrower was approximately $3.5 million, and Westwood Homestead's largest
amount lent to one borrower was $3.4 million.

         FEDERAL HOME LOAN BANK SYSTEM. Westwood Homestead is a member of the
FHLB System, which consists of 12 district FHLBs subject to supervision and
regulation by the Federal Housing Finance Board ("FHFB"). The FHLBs provide a
central credit facility primarily for member institutions. As a member of the
FHLB of Cincinnati, Westwood Homestead is required to acquire and hold shares of
capital stock in the FHLB of Cincinnati in an amount at least equal to 1% of the
aggregate unpaid principal of its home mortgage loans, home purchase contracts,
and similar obligations at the beginning of each year, or 1/20 of their advances
(borrowings) from the FHLB of Cincinnati, whichever is greater. Westwood
Homestead was in compliance with this requirement with investment in FHLB of
Cincinnati stock at December 31, 1998, of $1.1 million. The FHLB of Cincinnati
serves as a reserve or central bank for its member institutions within its
assigned district. It is funded primarily from proceeds derived from the sale of
consolidated obligations of the FHLB System. It offers advances to members in
accordance with policies and procedures established by the FHFB and the Board of
Directors of the FHLB of Cincinnati. At December 31, 1998, Westwood Homestead
had $17.5 million in FHLB advances outstanding.

         FEDERAL RESERVE SYSTEM. Pursuant to regulations of the Federal Reserve
Board, Westwood Homestead must maintain average daily reserves against their
transaction accounts. No reserves are required to be maintained on the first
$4.7 million of transaction accounts, reserves equal to 3% must be maintained on
the next $47.8 million of transaction accounts, plus 10% on the remainder. This
percentage is subject to adjustment by the Federal Reserve Board. Because
required reserves must be maintained in the form of vault cash or in a
noninterest bearing account at a Federal Reserve Bank, the effect of the reserve
requirement is to reduce the amount of the institutions interest-earning assets.
As of December 31, 1998, Westwood Homestead met its reserve requirements.


                                       22

<PAGE>   24




         TRANSACTIONS WITH AFFILIATES. Transactions between savings institutions
and any affiliate are governed by Sections 23A and 23B of the Federal Reserve
Act. An affiliate of a savings institution is any company or entity which
controls, is controlled by or is under common control with the savings
institution. In a holding company context, the parent holding company of a
savings institution and any companies which are controlled by such parent
holding company are affiliates of the savings institution. Generally, Sections
23A and 23B (I) limit the extent to which the savings institution or its
subsidiaries may engage in "covered transactions" with any one affiliate to an
amount equal to 10% of such institution's capital stock and surplus, and contain
an aggregate limit on all such transactions with all affiliates to an amount
equal to 20% of such capital stock and surplus, and (ii) require that all such
transactions be on terms substantially the same, or at least as favorable, to
the institution or subsidiary as those provided to a non-affiliate. The term
"covered transaction" includes the making of loans, purchase of assets, issuance
of a guarantee and similar other types of transactions. In addition to the
restrictions imposed by Sections 23A and 23B, no savings institution may (I)
loan or otherwise extend credit to an affiliate, except for any affiliate which
engages only in activities which are permissible for bank holding companies, or
(ii) purchase or invest in any stocks, bonds, debentures, notes or similar
obligations of any affiliate, except for affiliates which are subsidiaries of
the savings institution.

         Savings institutions are also subject to the restrictions contained in
Section 22(h) of the Federal Reserve Act on loans to executive officers,
directors and principal stockholders. Under Section 22(h), loans to an executive
officer and to a greater than 10% stockholder of a savings institution, and
certain affiliated entities of either, may not exceed, together with all other
outstanding loans to such person and affiliated entities the institution's loan
to one borrower limit (generally equal to 15% of the institution's unimpaired
capital and surplus and an additional 10% of such capital and surplus for loans
fully secured by certain readily marketable collateral). Section 22(h) also
prohibits loans, above amounts prescribed by the appropriate federal banking
agency, to directors, executive officers and greater than 10% stockholders of a
savings institution, and their respective affiliates, unless such loan is
approved in advance by a majority of the board of directors of the institution
with any "interested" director not participating in the voting. The Federal
Reserve Board has prescribed the loan amount (which includes all other
outstanding loans to such person), as to which such prior board of director
approval if required, as being the greater of $25,000 or 5% of capital and
surplus (up to $500,000). Further, the Federal Reserve Board pursuant to Section
22(h) requires that loans to directors, executive officers and principal
stockholders be made on terms substantially the same as offered in comparable
transactions to other persons.

         Savings institutions are also subject to the requirements and
restrictions of Section 22(g) of the Federal Reserve Act on loans to executive
officers and the restrictions of Section 106(b) of the Bank Holding Company Act
Amendments of 1970 on certain tying arrangements and extensions of credit by
correspondent banks. Section 22(g) of the Federal Reserve Act requires that
loans to executive officers of depository institutions not be made on terms more
favorable than those afforded to other borrowers, requires approval for such
extensions of credit by the board of directors of the institution, and imposes
reporting requirements for and additional restrictions on the type, amount and
terms of credits to such officers. Section 106(b) prohibits (I) a depository
institution from extending credit to or offering any other services, or fixing
or varying the consideration for such extension of credit or service, on the
condition that the customer obtain some additional service from the institution
or certain of its affiliates or not obtain services of a competitor of the
institution, subject to certain exceptions, and (ii) extensions of credit to
executive officers, directors, and greater than 10% stockholders of a depository
institution by any other institution which has a correspondent banking
relationship with the institution, unless such extension of credit is on
substantially the same terms as those prevailing at the time for comparable
transactions with other persons and does not involve more than the normal risk
of repayment or present other unfavorable features.

         RESTRICTIONS ON CERTAIN ACTIVITIES. Under FDICIA, state-chartered banks
with deposits insured by the FDIC are generally prohibited from acquiring or
retaining any equity investment of a type or in an amount that is not
permissible for a national bank. The foregoing limitation, however, does not
prohibit FDIC-insured state banks from acquiring or retaining an equity
investment in a subsidiary in which the bank is a majority owner.
State-chartered banks are also prohibited from engaging as principal in any type
of activity that is not permissible for a national bank and subsidiaries of
state-chartered, FDIC-insured state banks may not engage as principal in any
type of activity that is not permissible for a subsidiary of a national bank
unless in either case the FDIC determines that the activity would pose no
significant risk to the appropriate deposit insurance fund and the bank is, and
continues to be, in compliance with applicable capital standards.


                                       23

<PAGE>   25




         The FDIC has adopted regulations to clarify the foregoing restrictions
on activities of FDIC-insured state-chartered banks and their subsidiaries.
Under the regulations, the term activity refers to the authorized conduct of
business by an insured state bank and includes acquiring or retaining any
investment other than an equity investment. A bank or subsidiary is considered
acting as principal w hen conducted other than as an agent for a customer, as
trustee, or in a brokerage, custodial, advisory or administrative capacity. An
activity permissible for a national bank includes any activity expressly
authorized for national banks by statute or recognized as permissible in
regulations, official circulars or bulletins or in any order or written
interpretation issued by the Office of the Comptroller of the Currency ("OCC").
In its regulations, the FDIC indicates that it will not permit state banks to
directly engage in commercial ventures or directly or indirectly engage in any
insurance underwriting activity other than to the extent such activities are
permissible for a national bank or a national bank subsidiary or except for
certain other limited forms of insurance underwriting permitted under the
regulations. Under the regulations, the FDIC permits state banks that meet
applicable minimum capital requirements to engage as principal in certain
activities that are not permissible to national banks including guaranteeing
obligations of others, activities which the Federal Reserve Board has found by
regulation or order to be closely related to banking and certain securities
activities conducted through subsidiaries.

         INTERSTATE BANKING. The BHCA prohibits the acquisition by a bank
holding company of any voting shares of, any interest in, or all or
substantially all of the assets of, a bank located outside of the state in which
the operations of the bank holding company's banking subsidiaries are
principally conducted, unless such an acquisition is specifically authorized by
the laws of the state in which the bank to be acquired is located. Ohio law
authorizes the acquisition of savings banks with their principal place of
business in Ohio if the Superintendent determines that the laws of the other
state permit an Ohio savings bank or Ohio savings bank holding company to
charter or otherwise acquire a savings bank or savings bank holding company
having its principal place of business in the other state on terms that are, on
the whole, substantially no more restrictive than those established under Ohio
law.

         On September 29, 1994, the Riegle-Neal Interstate Banking and Branching
Efficiency of 1994 (the "Riegle-Neal Act") was enacted to ease restrictions on
interstate banking. Effective September 29, 1995, the Riegle-Neal Act allows the
Federal Reserve Board to approve an application of an adequately capitalized and
adequately managed bank holding company to acquire control of, or acquire all or
substantially all of the assets of, a bank located in a state other than such
holding company's home state, without regard to whether the transaction is
prohibited by the laws of any state. The Federal Reserve Board may not approve
the acquisition of a bank that has not been in existence for the minimum time
period (not exceeding five years) specified by the statutory law of the host
state. The Riegle-Neal Act also prohibits the Federal Reserve Board from
approving an application if the applicant (and its depository institution
affiliates) controls or would control more than 10% of the insured deposits in
the United States or 30% or more of the deposits in the target bank's home state
or in any state in which the target bank maintains a branch. The Riegle-Neal Act
does not affect the authority of states to limit the percentage of total insured
deposits in the state which may be held or controlled by a bank or bank holding
company to the extent such limitation does not discriminate against out-of-state
banks or bank holding companies. Individual states may also waive the 30%
state-wide concentration limit contained in the Riegle-Neal Act.

         Additionally, federal banking agencies are authorized to approve
interstate merger transactions without regard to whether such transaction is
prohibited by the law of any state, unless the home state of one of the banks
opts out of the Riegle-Neal Act by adopting a law after the date of enactment of
the Riegle-Neal Act and prior to June 1, 1997 which applies equally to all
out-of-state banks and expressly prohibits merger transactions involving
out-of-state banks. Interstate acquisitions of branches will be permitted only
if the law of the state in which the branch is located permits such
acquisitions. Interstate mergers and branch acquisitions will also be subject to
the nationwide and statewide insured deposit concentration amounts described
above.

         OHIO SAVINGS BANK LAW. The Superintendent is responsible for the
regulation and supervision of Ohio savings banks in accordance with the laws of
the State of Ohio. Ohio law prescribes the permissible investments and
activities of Ohio savings banks, including the types of lending that such banks
may engage in and the investments in real estate, subsidiaries and corporate or
government securities that such banks may make. The ability of Ohio savings
banks to engage in these state-authorized investments generally is subject to
oversight and approval by the FDIC.


                                       24

<PAGE>   26




         Merger or Acquisition. The Superintendent must approve any mergers
involving, or acquisitions of control of, Ohio savings banks. The Superintendent
may initiate certain supervisory measures or formal enforcement actions against
Ohio savings banks. Ultimately, if the grounds provided by law exist, the
Superintendent may place an Ohio savings bank in conservatorship or
receivership.

         Examination. The Superintendent conducts regular examinations of Ohio
savings banks approximately once every eighteen months. Such examinations are
usually conducted jointly with the FDIC. The Superintendent imposes assessments
on Ohio savings banks based on the savings bank's asset size to cover the cost
of supervision and examination.

         Governing Law. In addition to being governed by the laws of Ohio
specifically governing Ohio-chartered savings banks, Westwood Homestead is also
governed by Ohio corporate law, to the extent such law does not conflict with
the laws specifically governing savings banks.

         Activities and Investments. Since the enactment of FIRREA, all
state-chartered institutions have generally been limited to activities and
investments of the type and in the amount authorized for federally chartered
institutions, notwithstanding state law. The FDIC is authorized to permit such
associations to engage in state authorized activities or investments that do not
meet this standard (other than nonsubsidiary equity investments and investments
in junk bonds) for institutions that meet fully phased-in capital requirements
if it is determined that such activities or investments do not pose a
significant risk to the SAIF.


                                    TAXATION

FEDERAL INCOME TAXATION

         Thrift institutions are subject to the provisions of the Internal
Revenue Code of 1986, as amended (the "Code") in the same general manner as
other corporations. Through tax years beginning before December 31, 1995,
savings associations such as the Bank which meet certain definitional tests and
other conditions prescribed by the Code benefitted from certain favorable
provisions regarding their deductions from taxable income for annual additions
to their bad debt reserve. For purposes of the bad debt reserve deduction, loans
are separated into "qualifying real property loans," which generally are loans
secured by interests in real property, and nonqualifying real property loans,
which are all other loans. The bad debt reserve deduction with respect to
nonqualifying loans must be based on actual loss experience. The amount of the
bad debt reserve deduction with respect to qualifying real property loans may be
based upon actual loss experience (the "experience method") or a percentage of
taxable income determined without regard to such deduction (the "percentage of
taxable income method"). The Bank generally elected to use the method which
resulted in the greatest deduction for federal income tax purposes in any given
year.

         Legislation that is effective for tax years beginning after December
31, 1995 requires institutions to recapture into taxable income over a six
taxable year period the portion of the tax loan reserve that exceeds the
pre-1988 tax loan loss reserve. The Bank will no longer be allowed to use the
reserve method for tax loan loss provisions, but would be allowed to use the
experience method of accounting for bad debts. There will be no future effect on
net income from the recapture because the taxes on these bad debt reserves has
already been accrued as a deferred tax liability.

         Westwood Homestead's federal corporate income tax returns have not been
audited within the past three years.

STATE INCOME TAXATION

         The Bank is a "financial institution" for State of Ohio tax purposes.
As such, it is subject to Ohio corporate franchise tax on "financial
institutions," which is imposed annually at a rate of 1.5% of the Bank's book
net worth determined in accordance with GAAP. As a "financial institution," the
Bank is not subject to any tax based upon net income or net profits imposed by
the State of Ohio.


                                       25

<PAGE>   27




         The Company is subject to the Ohio corporation franchise tax, which, as
applied to the Company, is a tax measured by both net earnings and net worth.
The rate of tax is the greater of (I) 5.1% on the first $50,000 of computed Ohio
taxable income and 8.9% of computed Ohio taxable income in excess of $50,000 or
(ii) .582% times taxable net worth.

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

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

PERSONNEL

         As of December 31, 1998, Westwood Homestead had 22 full-time employees
and seven part-time employees, none of whom was represented by a collective
bargaining agreement. Westwood Homestead believes that it enjoys good relations
with its personnel.

ITEM 2. PROPERTIES

         The following table sets forth the location and certain additional
information regarding the Bank's offices at December 31, 1998.

<TABLE>
<CAPTION>
                                                              Book Value at                          Deposits at
                            Year          Owned or            December 31,        Approximate        December 31,
                           Opened          Leased                  1998         Square Footage           1998       
                           ------          ------                  ----         --------------           ----       
<S>                         <C>            <C>               <C>                    <C>             <C>          
3002 Harrison Avenue        1922            Owned             $1.7 million           9,640           $84.3 million
Cincinnati, Ohio

1101 St. Gregory Street     1996           Leased                      N/A             285             3.0 million
Cincinnati, Ohio
</TABLE>



                                       26

<PAGE>   28



ITEM 3. LEGAL PROCEEDINGS

         Although Westwood Homestead, from time to time, is involved in various
legal proceedings in the normal course of business, there are no material legal
proceedings to which Westwood Homestead is a party or to which any of its
property is subject.


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

         No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended December 31, 1998.


                                     PART II

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

         The information contained in the section captioned "Market Information"
in the Annual Report is hereby incorporated by reference.

ITEM 6. SELECTED FINANCIAL DATA

         The information contained in the section captioned "Selected
Consolidated Financial and Other Data" in the Annual Report is hereby
incorporated by reference.

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

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The information contained in the section captioned "Asset Liability
Management" in the Annual Report is hereby incorporated by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The financial statements contained in the Annual Report which are
listed in Item 14 herein are incorporated herein by reference.

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

         KPMG LLP (KPMG) has been principal accountants for Westwood Homestead
Financial Corporation (Westwood Homestead) since 1989 and were engaged to audit
the consolidated financial statements for the year ended December 31, 1998. On
December 21, 1998, the decision was made to terminate KPMG's appointment as
principal accountants upon completion by KPMG of the audit for the year ended
December 31, 1998 and issuance of the auditors report thereon. This change in
principal accountants is intended to be effective for the year ended December
31, 1999. The decision to change accountants was approved by the Audit Committee
and Board of Directors of Westwood Homestead.

         In connection with the audits of the two fiscal years ended December
31, 1998 and 1997, and the subsequent interim period through January 29, 1999,
there were no disagreements with KPMG on any matter of accounting principles or
practices, financial statement disclosure, or audit scope or procedures, which
if not resolved to the satisfaction of KPMG,

                                       27

<PAGE>   29



would have caused them to refer to the nature of such disagreements in their
reports on the consolidated financial statements of Westwood Homestead.

         The audit reports of KPMG on the consolidated financial statements of
Westwood Homestead as of and for the years ended December 31, 1998 and 1997 did
not contain any adverse opinion or disclaimer of opinion nor were they qualified
or modified as to uncertainty, audit scope or accounting principles.

         On December 21, 1998, the Board of Directors of Westwood Homestead
approved and appointed Crowe, Chizek and Company LLP as Westwood Homestead's
principal accountants for the year ended December 31, 1999. Crowe, Chizek and
Company LLP will be engaged as principal accountants upon completion by KPMG of
the audit for the year ended December 31, 1998 and issuance of the auditors'
report thereon.



                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information contained under the section captioned "Proposal I --
Election of Directors" in the Corporation's definitive proxy statement for the
Corporation's 1999 Annual Meeting of Stockholders (the "Proxy Statement") is
incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

         The information contained under the section captioned "Proposal I --
Election of Directors - Executive Compensation" in the Proxy Statement is
incorporated herein by reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         a) Security Ownership of Certain Owners

         The information required by this item is incorporated herein by
reference to the sections captioned "Proposal I -- Election of Directors" and
"Voting Securities and Principal Holders Thereof" of the Proxy Statement.

         b) Security Ownership of Management

         Information required by this item is incorporated herein by reference
to the section captioned "Proposal I -- Election of Directors" of the Proxy
Statement.

         c) Changes in Control

         Management of the Corporation knows of no arrangements, including any
pledge by any person of securities of the Corporation, the operation of which
may at a subsequent date result in a change in control of the registrant.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this item is incorporated herein by
reference to the section captioned "Proposal I -- Election of Directors" of the
Proxy Statement.


                                    PART IV



                                       28

<PAGE>   30
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

         a)1.     Report of Independent Auditors*

                  Westwood Homestead Financial Corporation*

                  a)       Consolidated Statements of Financial Condition at
                           December 31, 1998 and 1997
                  b)       Consolidated Statements of Operations for the Years
                           Ended December 31, 1998, 1997 and 1996
                  c)       Consolidated Statements of Changes in Stockholders'
                           Equity for the Years Ended December 31, 1998, 1997
                           and 1996
                  d)       Consolidated Statements of Cash Flow for the Years
                           Ended December 31, 1998, 1997 and 1996
                  e)       Notes to Consolidated Financial Statements

------------------                   
         *        Incorporated by reference to the Annual Report.

         2.       All schedules have been omitted as the required information is
                  either inapplicable or included in the Notes to Consolidated
                  Financial Statements.

         3.       Exhibits

                  3.1      Articles of Incorporation of Westwood Homestead
                           Financial Corporation*
                  3.2      Bylaws of Westwood Homestead Financial Corporation *
                  10.1     First Amendment to Employment Agreement between
                           Michael P. Brennan and The Westwood Homestead Savings
                           Bank *
                  10.2     Employment Agreement between Michael P. Brennan and
                           The Westwood Homestead Savings Bank *
                  10.3     Severance Agreements between Messrs. John E. Essen
                           and Gerald T. Mueller, The Westwood Homestead Savings
                           Bank, and Westwood Homestead Financial Corporation *
                  10.4     The Westwood Homestead Savings Bank Directors'
                           Retirement Plan, as amended *
                  13       1998 Annual Report to Stockholders
                  21       Subsidiaries of the Registrant.
                  27       Financial Data Schedule

         b)       With the exception of the Form 8-K filed on December 29, 1998
                  to report a change in accountants, there were no reports on
                  Form 8-K filed during the last quarter of the fiscal year
                  covered by this report.

         c)       The exhibits required by Item 601 of Regulation S-K are either
                  filed as part of this Annual Report on Form 10-K or
                  incorporated by reference herein.

         d)       There are no other financial statements and financial
                  statement schedules which were excluded from the Annual Report
                  pursuant to Rule 14a-3(b)(1) which are required to be included
                  herein.

------------------
         *        Incorporated by reference to the registrant's Form S-1
                  Registration Statement No. 333-2298.


                                       29

<PAGE>   31



                                   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.

   
                                        WESTWOOD HOMESTEAD FINANCIAL
                                        CORPORATION


Date:  March 29, 1999                   By:  /s/ Michael P. Brennan           
                                             ---------------------------------
                                             Michael P. Brennan
                                             President and Chief Executive
                                             Officer
                                             (Duly Authorized Representative)

         Pursuant to the requirement 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.

<TABLE>
<CAPTION>
<S>                                                   <C>
By:   /s/ Michael P. Brennan                          By    /s/ Robert H. Bockhorst
      ------------------------------------                  ------------------------------------
      Michael P. Brennan                                    Robert H. Bockhorst
      (Director and Chief Executive                         Director
      Officer

Date: March 29, 1999                                  Date: March 29, 1999


By:   /s/ John E. Essen                               By:   /s/ Raymond J. Brinkman                
      ------------------------------------                  ------------------------------------
      John E. Essen                                         Raymond J. Brinkman
      (Chief Financial and Accounting Officer               Director
      and Treasurer)

Date: March 29, 1999                                  Date: March 29, 1999


By:   /s/ Carl H. Heimerdinger                        By:   /s/ Roger M. Higley                    
      ------------------------------------                  ------------------------------------
      Carl H. Heimerdinger                                  Roger M. Higley
      Chairman of the Board                                 Director

Date: March 29, 1999                                  Date: March 29, 1999


By:   /s/ John B. Bennet, Sr.                          By:  /s/ Mary Ann Jacobs                    
      ------------------------------------                  ------------------------------------
      John B. Bennet, Sr.                                   Mary Ann Jacobs
      Vice Chairman of the Board                            Director

Date: March 29, 1999                                  Date: March 29, 1999

By:   /s/James D. Kemp                         
      ------------------------------------                      
      James D. Kemp
      Director

Date: March 27, 1999
    
</TABLE>


<PAGE>   32



                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit No.                      Description
-----------                      -----------
<S>           <C>                                                                    
3.1           Articles of Incorporation of Westwood Homestead Financial
              Corporation*

3.2           Bylaws of Westwood Homestead Financial Corporation *

10.1          First Amendment to Employment Agreement between Michael P. Brennan
              and The Westwood Homestead Savings Bank *

10.2          Employment Agreement between Michael P. Brennan and The Westwood
              Homestead Savings Bank *

10.3          Severance Agreements between Messrs. John E. Essen and Gerald T.
              Mueller, The Westwood Homestead Savings Bank, and Westwood
              Homestead Financial Corporation *

10.4          The Westwood Homestead Savings Bank Directors' Retirement Plan, as
              amended*

13            1998 Annual Report to Stockholders

21            Subsidiaries of the Registrant.

27            Financial Data Schedule
</TABLE>

--------------
[FN]
*             Incorporated by reference to the registrant's Form S-1
              Registration Statement No. 333-2298.
</FN>