<PAGE>   1
                                                                    EXHIBIT 13.0

                 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
                             (Dollars in Thousands)

         The following tables set forth certain financial and other data of the
Company at the dates and for the periods indicated.  For additional financial
information about the Company, reference is made to "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements of the Company and related notes included
elsewhere herein.

<TABLE>
<CAPTION>
                                                                               At September 30,
                                                       ----------------------------------------------------------
                                                         1996        1995         1994         1993        1992
                                                       --------    -------      -------      -------     --------
 <S>                                                    <C>        <C>          <C>          <C>         <C>
 SELECTED FINANCIAL CONDITION DATA(1):                          
 Total assets                                           $50,231    $48,309      $42,578      $38,655     $35,051
 Interest-bearing deposits in other financial                   
   institutions(2)                                        1,938      3,449        3,723        7,165       7,364
 Investment securities - at cost                          1,994      1,991        1,989        1,010          --
 Investment securities available for sale - at market       486      1,006           --           --          --
 Mortgage-backed securities - at cost                       245      7,311        8,150        5,773         433
 Mortgage-backed securities available for sale -                
   at market                                              4,529         --           --           --          --
 Loans receivable, net                                   30,009     32,559       27,594       22,657      24,824
 Loan held for sale                                       9,322        213           --        1,017       1,386
 Deposits                                                41,636     44,428       38,837       35,171      32,454
 FHLB advances                                            3,653        194          212           --          --
 Stockholders' equity(3)                                  4,239      3,216        3,205        3,101       2,288
</TABLE>                                                        
                                                                
<TABLE>                                                         
<CAPTION>                                                       
                                                                         Year Ended September 30,
                                                       -----------------------------------------------------------
                                                         1996        1995         1994         1993         1992
                                                       --------   ---------     --------     --------    ---------
 <S>                                                    <C>         <C>          <C>          <C>         <C>
 SELECTED OPERATING DATA(1):                                    
 Total interest income                                   $3,423     $3,194       $2,511       $2,559      $2,673
 Total interest expense                                   2,534      2,310        1,621        1,600       1,835
                                                          -----      -----        -----        -----       -----
   Net interest income                                      889        884          890          959         838
 Provision for losses on loans                               14         12           11           27          23
                                                          -----      -----        -----        -----       -----
   Net interest income after provision                          
     for losses on loans                                    875        872          879          932         815
 Other income                                               221         62           79          352         247
 General, administrative and other expense                1,248        807          726          660         556
                                                          -----      -----        -----        -----       -----
 Income (loss) before income taxes                         (152)       127          232          624         506
 Federal income taxes                                       (48)        46           72          212         163
                                                         ------      -----        -----        -----       -----
 Net income (loss)                                       $ (104)      $ 81        $ 160       $  412      $  343
                                                          =====        ===         ====        =====       =====
 Earnings (loss) per share(4)                            $ (.37)      $.53        $1.06        $ N/A       $ N/A
                                                         ======        ===         ====         ====        ====
 Dividends per share(4)                                  $  .49       $.56        $1.06        $ N/A       $ N/A
                                                         ======        ===         ====         ====        ====
</TABLE>





                                       4
<PAGE>   2
<TABLE>
<CAPTION>
                                                                    At or For the Year Ended September 30,
                                                      -----------------------------------------------------------------
                                                           1996          1995         1994         1993         1992
                                                      ------------   -----------   ----------   ----------   ----------
 <S>                                                     <C>            <C>          <C>          <C>         <C>
 SELECTED OPERATING RATIOS(1)(5):
 Return on average assets(6)                               (.21)%          .18%         .39%        1.12%       1.04%
 Return on average equity(6)                              (2.81)          2.52         5.07        15.29       16.21
 Average equity to average assets                          7.62           6.98         7.76         7.31        6.44
 Equity to assets at end of period                         8.44           6.66         7.53         8.02        6.53
 Interest rate spread(7)                                   1.54           1.65         1.94         2.30        2.26
 Net interest margin(7)                                    1.88           1.96         2.32         2.64        2.60
 Average interest-earning assets to average
   interest-bearing liabilities                          106.42         106.07       109.09       107.78      105.86
 Net interest income after provision for
   losses on loans to total general
   administrative and other expenses(6)(8)                 70.1         108.05       121.07       141.21      146.58
 General, administrative and other
   expenses to average total assets(6)(8)                  2.57           1.76         1.86         1.78        1.69
 Non-performing loans to total loans at
   end of period(9)                                          --             --          .12          .21         .41
 Non-performing assets to total
   assets at end of period(9)                                --             --          .08          .19         .31
 Allowance for loan losses to total
   loans at end of period                                   .24            .25          .25          .25         .13
</TABLE>

-----------------------
(1)      Financial condition data and operating data as of and for the year
         ended September 30, 1992 are those of the Mutual Association prior to
         the MHC Reorganization.  Financial condition data and operating data
         as of and for the years ended September 30, 1993, 1994, 1995 and up
         through June 28, 1996 are those of the Savings Bank prior to the
         Conversion and Reorganization.

(2)      Includes certificates of deposit.

(3)      Consists solely of retained earnings as of September 30, 1992.

(4)      Earnings per share and dividends per share are not applicable for the
         years ended September 30, 1993 and 1992, as the Mutual Association
         converted to the stock form of ownership on November 13, 1992.

(5)      With the exception of end of period ratios, all ratios are based on
         average monthly balances during the periods.

                                         (Footnotes continued on following page)





                                       5
<PAGE>   3
(6)      Excluding the one-time SAIF recapitalization assessment of $289,000 in
         fiscal 1996, return on average assets was .19%, return on average
         equity was 2.53%, net interest income after provision for losses on
         loans to general administrative and other expenses was 91.24% and
         general, administrative and other expenses to average total assets was
         1.97%, respectively, for the year ended September 30, 1996.

(7)      Interest rate spread represents the difference between the weighted
         average yield on interest-earning assets and the weighted average rate
         on interest-bearing liabilities.  Net interest margin represents net
         interest income as a percentage of average interest-earning assets.

(8)      Includes effect of the one-time SAIF recapitalization assessment of
         $289,000.

(9)      Non-performing loans consist of non-accrual loans and accruing loans
         that are contractually past due 90 days or more, and non-performing
         assets consist of non-performing loans and real estate acquired by
         foreclosure or deed-in-lieu thereof.





                                       6
<PAGE>   4
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


GENERAL

         The Company, through the Savings Bank, is primarily engaged in
attracting deposits from the general public and using those and other available
sources of funds to originate permanent loans secured by one-to-four family
residences located primarily in Hamilton County in southwestern Ohio.  To a
lesser extent, the Savings Bank also originates consumer and other loans
(primarily home equity lines of credit), residential construction loans and
loans which are secured by existing multi-family residential and nonresidential
real estate, as well as invests in interest-bearing deposits in other financial
institutions (including certificates of deposit), mortgage-backed securities
and U.S. Government and federal agency obligations.

         The profitability of the Company depends primarily on its net interest
income, which is the difference between interest and dividend income on
interest-earning assets, principally loans, mortgage-backed securities and
investment securities, and interest expense on savings deposits and borrowings.
The Company's net income also is dependent on the level of its other income,
including gains on the sale of loans and other assets, servicing fees and other
fees, and its general, administrative and other expense, such as employee
compensation and benefits, occupancy and equipment expense, deposit insurance
premiums, franchise taxes and miscellaneous other expenses, as well as federal
income tax expense.

         In general, financial institutions are vulnerable to an increase in
interest rates to the extent that interest-bearing liabilities mature or
reprice more rapidly than interest-earning assets.  The lending activities of
financial institutions, including the Savings Bank, have historically
emphasized the origination of long-term, fixed-rate loans secured by
single-family residences, and the primary source of funds of such institutions
has been deposits, which largely mature or are subject to repricing within a
short period of time.  This factor, in combination with substantial investments
in long-term, fixed-rate loans, has historically caused the income earned by
the Savings Bank on its loan portfolio to adjust more slowly to changes in
interest rates than its cost of funds.  While having liabilities that reprice
more frequently than assets is generally beneficial to net interest income in
times of declining interest rates, such an asset/liability mismatch is
generally detrimental during periods of rising interest rates.  To reduce the
effect of adverse changes in interest rates on its operations, the Savings Bank
has implemented the asset and liability management policies described below.

ASSET AND LIABILITY MANAGEMENT

         The Savings Bank's Board of Directors has in recent years implemented
various asset and liability management policies designed to better match the
maturities and repricing





                                       7
<PAGE>   5
terms of the Savings Bank's interest-earning assets and interest-bearing
liabilities in order to minimize the adverse effects on the Savings Bank's
results of operations of material and prolonged increases in interest rates.
Such policies include (i) emphasizing investment in adjustable-rate
single-family residential loans; (ii) selling long-term, fixed-rate
single-family residential loans into the secondary market; and (iii) managing
interest expense through the utilization of core deposits and outside
borrowings.

         As a result of implementing the assets portfolio aspects of those
policies, at September 30, 1996, $21.1 million, or 53.0%, of the Company's
total loan portfolio consisted of adjustable-rate loans.  In addition, as of
such date, $20.9 million, or 54.0%, of the Company's portfolio of single-family
residential mortgage loans consisted of adjustable-rate loans.  However, due to
competitive pressures in its primary market area, as of September 30, 1996, the
Company's core deposits (passbook, money market and NOW accounts) amounted to
$7.8 million, or only 18.8% of total deposits.  This percentage is a slight
improvement from fiscal 1995 but is significantly below its target core
deposits of 30% of total deposits.

         The effect of interest rate changes on a financial institution's
assets and liabilities may be analyzed by examining the extent to which such
assets and liabilities are "interest rate sensitive" and by monitoring an
institution's interest rate sensitivity "gap."  An asset or liability is said
to be interest rate sensitive within a specific time period if it will mature
or reprice within that time period.  The interest rate sensitivity "gap" is
defined as the difference between interest-earning assets and interest-bearing
liabilities maturing or repricing within a given time period.  A gap is
considered positive when the amount of interest rate sensitive assets exceeds
the amount of interest rate sensitive liabilities.  A gap is considered
negative when the amount of interest rate sensitive liabilities exceeds
interest rate sensitive assets.  During a period of falling interest rates, a
positive gap would tend to adversely affect net interest income, while a
negative gap would tend to result in an increase in net interest income.
During a period of rising interest rates, a positive gap would tend to result
in an increase in net interest income while a negative gap would tend to affect
net interest income adversely.

         Notwithstanding the foregoing asset and liability strategies, the
Company's one-year interest rate sensitivity gap amounted to (28.46)% of total
assets at September 30, 1996.  The one-year interest rate sensitivity gap is
defined as the difference between the Company's interest-earning assets which
are scheduled to mature or reprice within one year and its interest-bearing
liabilities which are scheduled to mature or reprice within one year.  At
September 30, 1996, the Company's interest-earning assets maturing or repricing
within one year totalled $13.4 million while the Company's interest-bearing
liabilities maturing or repricing within one year totalled $27.7 million,
providing an excess of interest-bearing liabilities over interest-earning
assets of $14.3 million.  At September 30, 1996, the percentage of the
Company's interest-earning assets to interest-bearing liabilities maturing or
repricing within one year was 48.3%.  While the Company's one-year interest
rate sensitivity gap is considered by management and the Board of Directors to
be within the





                                       8
<PAGE>   6
intended range of acceptable positions based upon management's asset and
liability management strategy, the Board plans to continue to follow policies
that are designed to better match the maturities and repricing terms of the
Company's portfolio.

         The following table presents the difference between the Savings Bank's
interest-earning assets and interest-bearing liabilities within specified
maturities at September 30, 1996.  This table does not necessarily indicate the
impact of general interest rate movements on the Savings Bank's net interest
income because the repricing of certain assets and liabilities is subject to
competitive and other limitations.  As a result, certain assets and liabilities
indicated as maturing or otherwise repricing within a stated period may in fact
mature or reprice at different times and at different volumes.


<TABLE>
<CAPTION>
                                                                Over
                                                   Over One     Three                   Over Ten
                                                   Through     Through     Over Five     Through      Over
                                   One Year         Three        Five       Through      Twenty      Twenty
                                   or Less          Years       Years      Ten Years      Years       Years         Total
                                 -----------     ---------    ---------    ----------   ---------   ---------     ----------
                                                                       (Dollars in Thousands)
 <S>                                <C>           <C>         <C>           <C>         <C>         <C>             <C>
 Interest-earning assets:

 Real estate mortgages:
   Adjustable-rate(1)(2)              $7,276      $12,816      $1,275       $    --     $    --      $   --         $21,367
   Fixed-rate(1)(3)                       11          218       3,433         7,620       3,964       2,675          17,921
 Other loans(1)                           41                        2                                                    43
 Mortgage-backed securities(1)         4,190          339                                               245           4,774
 Investment securities and other
   earning assets(4)                   1,843        1,575       1,000            --          --         430           4,848
                                      ------       ------       -----         -----      ------       -----          ------
   Total interest-earning assets     $13,361      $14,948      $5,710        $7,620     $ 3,964      $3,350         $48,953
                                      ======       ======       =====         =====      ======       =====          ======

 Interest-bearing liabilities:

 Passbook savings(5)                 $   633      $ 1,026     $   688       $   856     $   567      $  161         $ 3,931
 NOW accounts and demand                 423          464         124           167          91          16           1,285
 deposits(5)
 Money market deposits(5)              1,597          534         254           122          85          24           2,616
 Certificates of deposit(5)           21,945        7,709       4,150            --          --          --          33,804
 FHLB advances                         3,060          130         146           317          --          --           3,653
                                      ------        -----      ------        ------      ------      ------          ------
   Total interest-bearing            $27,658      $ 9,863     $ 5,362       $ 1,462     $   743     $   201         $45,289
                                      ======       ======      ======        ======      ======      ======          ======
 liabilities

 Interest rate sensitivity gap      $(14,297)     $ 5,085     $   348       $ 6,158     $ 3,221      $3,149         $ 3,664
                                     =======       ======      ======        ======      ======       =====          ======
 Cumulative interest rate           $(14,297)     $(9,212)    $(8,864)      $(2,706)    $   515      $3,664         $ 3,664
                                     =======       ======      ======        ======      ======       =====          ======
 sensitivity gap
 Percentage of cumulative gap to
   total assets                       (28.46)%     (18.34)%    (17.65)%       (5.39)%      1.03%       7.29%           7.29%
                                      ======       ======      ======        ======      ======       =====          ====== 
 Cumulative ratio of
   interest-earning assets to  
   interest-bearing liabilities        48.31%       75.45%      79.33%        93.90%     101.14%     108.09%         108.09%
                                      ======       ======      ======        ======      ======      ======          ====== 
</TABLE>

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

(1)      The dollar amount of loans and mortgage-backed securities reflected
         within a repricing period includes the scheduled amortization with
         respect to fixed-rate loans and mortgage-backed securities and the
         scheduled repricing with respect to adjustable-rate loans and
         mortgage-backed securities.

(2)      Includes all adjustable-rate single-family residential (including
         loans designated as held for sale) and multi-family residential and
         non-residential real estate loans, net of the undisbursed portion of
         loans in process, allowance for loan losses and deferred loan
         origination fees.

                                         (Footnotes continued on following page)





                                       9
<PAGE>   7
(3)      Includes all fixed-rate single-family residential (including loans
         designated as held for sale) and multi-family residential and
         non-residential real estate loans, net of the undisbursed portion of
         loans in process, allowance for loan losses and deferred loan
         origination fees.

(4)      Includes interest-bearing deposits, investment securities and FHLB of
         Cincinnati stock.

(5)      Based on the following decay rate assumptions: (i) passbook decay will
         occur at the following annual rates during the time periods shown in
         the above table:  17%, 17%, 16%, 14%, 14% and 14%; (ii) NOW and demand
         deposit account decay will occur at the following annual rates during
         the time periods shown in the above table:  37%, 32%, 17%, 17%, 17%
         and 17%; (iii) money market decay will occur at the following annual
         rates during the time periods shown in the above table:  79%, 31%,
         31%, 31%, 31% and 31%; and (iv) certificates of deposit will not be
         withdrawn prior to maturity.

         Management also presently monitors and evaluates the potential impact
of interest rate changes upon the market value of the Savings Bank's portfolio
equity and the level of net interest income on a quarterly basis.  In August
1993, the OTS adopted a final rule incorporating an interest rate risk
component into the risk-based capital rules.  Under the rule, an institution
with a greater than "normal" level of interest rate risk will be subject to a
deduction of its interest rate component from total capital for purposes of
calculating the risk-based capital requirement.  An institution with a greater
than "normal" interest rate risk is defined as an institution that would suffer
a loss of net portfolio value ("NPV") exceeding 2.0% of the estimated market
value of its assets in the event of a 200 basis point increase or decrease in
interest rates.  NPV is the difference between incoming and outgoing discounted
cash flows from assets, liabilities, and off-balance sheet contracts.  A
resulting change in NPV of more than 2% of the estimated market value of an
institution's assets will require the institution to deduct from its capital
50% of that excess change.  The rule provides that the OTS will calculate the
interest rate risk component quarterly for each institution.  The OTS has
recently indicated that no institution will be required to deduct capital for
interest rate risk until further notice.





                                       10
<PAGE>   8
         The following table presents the Savings Bank's NPV as of September
30, 1996, as calculated by the OTS, based on information provided to the OTS by
the Company.

<TABLE>
<CAPTION>
                                          Net Portfolio Value
  ---------------------------------------------------------------------------------------------------
                                                Estimated
      Change in                                  NPV as a                               Change as a
   Interest Rates           Estimated           Percentage            Amount             Percentage
   (basis points)             NPV               of Assets            of Change           of Assets
   ---------------        ------------         ------------         -----------        --------------
                                        (Dollars in Thousands)
        <S>                  <C>                    <C>              <C>                   <C>
        +400                 $  844                 1.84%            $(3,651)              (7.26)%
        +300                  1,869                 3.95              (2,626)              (5.23)
        +200                  2,868                 5.89              (1,627)              (3.24)
        +100                  3,769                 7.54                (726)              (1.45)
          --                  4,495                 8.80                  --                  --
        -100                  4,992                 9.60                 496                 .98
        -200                  5,221                 9.92                 725                1.44
        -300                  5,273                 9.93                 777                1.55
        -400                  5,355                 9.99                 859                1.71
</TABLE>


         Certain shortcomings are inherent in the method of analysis presented
in both the computation of NPV and in the analysis presented in the prior table
setting forth the maturing and repricing of interest-earning assets and
interest-bearing liabilities.  Although certain assets and liabilities may have
similar maturities or periods within which they will reprice, they may react
differently to changes in market interest rates.  The interest rates on certain
types of assets and liabilities may fluctuate in advance of changes in market
interest rates, while interest rates on other types may lag behind changes in
market rates.  Additionally, adjustable-rate mortgages have features which
restrict changes in interest rates on a short-term basis and over the life of
the asset.  The proportion of adjustable-rate loans could be reduced in future
periods if market interest rates would decrease and remain at lower levels for
a sustained period, due to increased refinance activity.  Further, in the event
of a change in interest rates, prepayment and early withdrawal levels would
likely deviate significantly from those assumed in the table.  Finally, the
ability of many borrowers to service their adjustable-rate debt may decrease in
the event of a sustained interest rate increase.


CHANGES IN FINANCIAL CONDITION

         The Company had total assets of $50.2 million at September 30, 1996,
an increase of $1.9 million, or 3.9%, from September 30, 1995.  The growth in
total assets was primarily





                                       11
<PAGE>   9
funded by the proceeds from the Conversion and Reorganization, which amounted
to $1.2 million.  The remaining growth was funded by advances from the FHLB of
Cincinnati.

         Liquid assets (i.e. cash, interest-bearing deposits, and certificates
of deposit) decreased $1.6 million, or 38.9%, during the year ended September
30, 1996.  This reduction in liquid assets reflected the Company's emphasis on
loan growth as the funds were used for loan originations, some of which are
held for sale.  At September 30, 1996, the Savings Bank's regulatory liquidity
amounted to 8.9%, which exceeded the minimum OTS requirement of 5% by $1.7
million.  See "- Liquidity and Capital Resources."

         Loans receivable (including loans held for sale) increased $6.6
million, or 20.0%, to total $39.3 million at September 30, 1996, as compared to
$32.8 million at September 30, 1995.  Loan originations of $25.6 million were
offset by loan sales of $12.6 million and repayments of $6.4 million.  The
Company has seen a significant increase in its secondary market activity, due
primarily to the lower interest rate environment and the consumer demand for
fixed rate loan products, but also to the growth of the Company's mortgage
loan origination office and additional loan originators.  The Company is also
in the process of selling approximately $8.0 million in adjustable rate loans
to a mortgage company.  The proceeds from the sale will be used to originate
loans, purchase investments and repay FHLB advances.  The sale was completed in
November 1996 with a recognized  gain of $72,000, net of deferred costs.

         As of September 30, 1996, the Company's allowance for loan losses
amounted to $95,000, which represented an increase of $14,000 over the
allowance for loan losses maintained at September 30, 1995.  The increase in
the provision for loan losses in 1996 was solely attributable to the
aforementioned growth in the loan portfolio and the inherent risk related to
mortgage lending.  As of September 30, 1996, the allowance for loan loss
consisted entirely of a general loss allowance, which is includable as a
component of regulatory risk-based capital.  As of such date, the allowance for
loan losses amounted to .24% of total loans.  As of September 30, 1996, the
Company had no non-performing loans. Management will continue to monitor its
allowance for loan losses and make additions to the allowance through the
provision for loan losses as economic conditions dictate.  Although the Savings
Bank maintains its allowance for loan losses at a level which it considers to
be adequate to provide for loan losses, there can be no assurance that future
losses will not exceed estimated amounts or that additional provisions for loan
losses will not be required in the future.  See Note 1 of the Notes to
Financial Statements.

         Mortgage-backed securities (including securities available for sale)
decreased by $2.5 million, or 34.7%, during the year ended September 30, 1996.
As of December 31, 1995, the Company had transferred all of its adjustable rate
mortgage-backed securities from held to maturity to available for sale in order
to provide the Company with additional flexibility in the future to sell
individual securities if it chooses to do so.  During the year ended September
30, 1996, the Company sold $1.7 million of mortgage-backed securities at a loss
of $2,000.  The Company also purchased $513,000 of available for sale
mortgage-backed





                                       12
<PAGE>   10
securities during the year ended September 30, 1996, and had principal
repayments of $1.3 million during such period.  At September 30, 1996, the
Company had classified $4.5 million of its mortgage-backed securities as
available for sale and had net unrealized gains with respect to such securities
of $30,000.

         Investment securities (including securities classified as available
for sale) decreased $517,000, or 17.3%, during the year ended September 30,
1996.  The Company replaced two investments that were called during fiscal 1996
with similar investments and sold one investment at a gain of $13,000 during
the year ended September 30, 1996.  As of September 30, 1996, the Company had
classified $486,000 of its investment securities as available for sale and had
net unrealized losses of $13,000 with respect to such investment securities.

         Total deposits amounted to $41.6 million at September 30, 1996, a
decrease of $2.8 million, or 6.3%, from the $44.4 million in deposits as of
September 30, 1995.  Deposits which are subject to daily repricing (passbook,
statement savings, money market and checking accounts), increased by $1.1
million, or 15.8%, from September 30, 1995 to September 30, 1996.  The increase
in deposit accounts subject to daily repricing was due to new products offered
by the Company, which included automated teller machine access, debit card
availability, statement savings, and tiered interest rates on demand accounts
based on outstanding balances.  During the year ended September 30, 1996,
certificates of deposit decreased $3.9 million, or 10.3%, as compared to the
year ended September 30, 1995.  The reduction in certificates was due to
consumer demand for other types of savings vehicles.  The Company has generally
not engaged in offering the highest rates available in its deposit market
except upon specific occasions when market conditions have created
opportunities to attract longer-term deposits.

         The Company had FHLB advances of $3.7 million at September 30, 1996, a
significant increase in the balance outstanding at September 30, 1995 of
$194,000.  The increase in borrowings were used to fund the loan growth and the
reduction in deposits as discussed above.  The Company has used FHLB advances
as a short term funding of the asset growth versus offering special rates on
short term deposits.  The average rate paid on the FHLB advances amounted to
5.48% for the year ended September 30, 1996.

         Stockholders' equity increased $1.0 million, or 31.8%, to $4.2 million
at September 30, 1996 from $3.2 million as of September 30, 1995.  The increase
was due primarily to the proceeds from the Conversion and Reorganization of the
Company which was completed in June 1996.  Total proceeds from the Conversion,
net of the unearned shares in the Company's employee stock ownership plan
("ESOP"), was $1.2 million.  The increase was partially offset by $62,000 of
dividends declared during the year ended September 30, 1996, and the net loss
of the Company for fiscal 1996 of $126,000.





                                       13
<PAGE>   11
AVERAGE BALANCES, NET INTEREST INCOME AND YIELDS EARNED AND RATES PAID

         The following table presents for the periods indicated the total
dollar amount of interest from average interest-earning assets and the
resultant yields, as well as the interest expense on average interest-bearing
liabilities, expressed both in dollars and rates, and the net interest margin.
The table does not reflect any effect of income taxes.  All average balances
are based on month-end balances.


<TABLE>
<CAPTION>                                                                                                                 
                                                                   Year Ended September 30,      
                                         --------------------------------------------------------------------------
                                                        1996                                    1995                 
                                         ----------------------------------    ------------------------------------
                                          Average                  Yield/        Average                   Yield/    
                                          Balance     Interest      Rate         Balance       Interest     Rate     
                                         ---------   ----------  ----------    ------------  ----------- ----------
 <S>                                       <C>         <C>        <C>             <C>           <C>        <C>       
 INTEREST-EARNING ASSETS:                                                                                            
   Loans receivable(1)                     $35,234     $2,670       7.58%         $30,792       $2,402       7.80%   
   Mortgage-backed securities(2)             7,055        457       6.48            7,847          452       5.76    
   Investment securities(2)                  3,046        189       6.20            2,477          140       5.65    
   Other interest-earning assets(3)          1,829        107       5.85            3,933          200       5.09    
                                            ------      -----                      ------        -----               
   Total interest-earning assets            47,164     $3,423       7.26%          45,049       $3,194       7.09%   
                                                        =====     ======                         =====       ====    
   Non-interest-earning assets               1,410                                    928                            
                                            ------                                 ------                            
   Total assets                            $48,574                                $45,977                            
                                            ======                                 ======                            
 INTEREST-BEARING LIABILITIES:                                                                                       
   Deposits                                $43,006     $2,462       5.72%         $41,753       $2,267       5.43%   
   FHLB advances                             1,313         72       5.48              720           43       5.97    
                                            ------      -----                      ------        -----               
   Total interest-bearing liabilities       44,319     $2,534       5.72%          42,473       $2,310       5.44%   
                                                        =====     ======                         =====       ====    
 NON-INTEREST-BEARING LIABILITIES:             552                                    293                            
                                            ------                                 ------                            
   Total liabilities                        44,871                                 42,766                            
   Stockholders' equity                      3,703                                  3,211                            
                                            ------                                 ------                            
     Total liabilities and                                                                                           
       stockholders' equity                $48,574                                $45,977                            
                                            ======                                 ======                            
   Net interest income; interest                                                                                     
     rate spread                                       $  889       1.54%                       $  884       1.65%   
                                                        =====     ======                         =====       ====    
   Net interest margin(4)                                           1.88%                                    1.96%   
                                                                  ======                                     ====    
   Average interest-earning assets                                                                                   
     to average interest-bearing                                                                                     
     liabilities                                                  106.42%                                  106.07%   
                                                                  ======                                   ======    
</TABLE>                                                 


<TABLE>
<CAPTION>
                                                   Year Ended September 30,                           
                                         ----------------------------------------     At September 30,
                                                          1994                              1996
                                         ----------------------------------------     ----------------
                                          Average                       Yield/             Yield/
                                          Balance       Interest         Rate               Rate
                                         ----------    ----------      ----------     ----------------
 <S>                                       <C>            <C>            <C>                  <C>
 INTEREST-EARNING ASSETS:               
   Loans receivable(1)                     $23,884        $1,836           7.69%              7.46%
   Mortgage-backed securities(2)             6,866           385           5.61               6.63
   Investment securities(2)                  2,000           101           5.05               6.00
   Other interest-earning assets(3)          5,669           189           3.33               5.53
                                            ------         -----                              ----
   Total interest-earning assets            38,419        $2,511           6.54%              7.21%
                                                           =====         ======               ==== 
                                        
   Non-interest-earning assets                 694
                                            ------
   Total assets                            $39,113
                                            ======
 INTEREST-BEARING LIABILITIES:          
   Deposits                                $34,698        $1,597           4.60%              5.64%
   FHLB advances                               521            24           4.61               5.46
                                            ------         -----                                  
   Total interest-bearing liabilities       35,219        $1,621           4.60%              5.63%
                                                           =====         ======              ===== 
 NON-INTEREST-BEARING LIABILITIES:             741
                                            ------
   Total liabilities                        35,960
   Stockholders' equity                      3,153
                                            ------
     Total liabilities and              
       stockholders' equity                $39,113
                                            ======
   Net interest income; interest        
     rate spread                                          $  890           1.94%              1.58%
                                                           =====         ======               ==== 
   Net interest margin(4)                                                  2.32%
                                                                         ====== 
   Average interest-earning assets      
     to average interest-bearing        
     liabilities                                                         109.09%
                                                                         ====== 
</TABLE>



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

(1)      Includes loans held for sale.

(2)      Includes securities classified as available for sale.

(3)      Consists primarily of interest-bearing deposits (including
         certificates of deposit).

(4)      Net interest margin is net interest income divided by average
         interest-earning assets.





                                       14
<PAGE>   12
RATE/VOLUME ANALYSIS

         The following table describes the extent to which changes in interest
rates and changes in volume of interest-related assets and liabilities have
affected the Company's interest income and expense during the periods
indicated.  For each category of interest-earning assets and interest-bearing
liabilities, information is provided on changes attributable to (i) changes in
volume (change in volume multiplied by prior year rate), (ii) changes in rate
(change in rate multiplied by prior year volume), and (iii) total change in
rate and volume.  The combined effect of changes in both rate and volume has
been allocated proportionately to the change due to rate and the change due to
volume.

<TABLE>
<CAPTION>
                                                                     Year Ended September 30,
                                             -------------------------------------------------------------------------
                                                       1996 vs. 1995                           1995 vs. 1994
                                             ----------------------------------    -----------------------------------
                                              Increase (Decrease)                    Increase (Decrease)      
                                                   Due to               Total              Due to              Total 
                                             --------------------     Increase     ----------------------    Increase
                                              Rate        Volume     (Decrease)      Rate        Volume     (Decrease)
                                             -------     --------    ----------    --------    ----------   ----------
 <S>                                          <C>         <C>           <C>          <C>         <C>           <C>
 INTEREST-EARNING ASSETS:
   Loans(1)                                   $ (79)      $  347         $ 268       $  35        $ 531        $566
   Mortgage-backed securities(2)                 51          (46)            5          12           55          67
   Investment securities(2)                      17           32            49          15           24          39
   Other interest-earnings assets(3)             14         (107)          (93)         69          (58)         11
                                               ----         ----           ---         ---          ---         ---
     Total interest-earning assets            $   3       $  226         $ 229       $ 131        $ 552        $683
                                               ====        =====          ====         ===          ===         ===
 INTEREST-BEARING LIABILITIES:
   Deposits                                   $ 127       $   68         $ 195       $ 345        $ 325        $670
   FHLB advances                                 (6)          35            29          10            9          19
                                               -----       -----          ----         ---          ---         ---
     Total interest-bearing
       liabilities                            $ 121       $  103         $ 224       $ 355        $ 334         689
                                                ===        =====          ====         ===          ===         ---
 Decrease in net interest income                                         $   5                                 $ (6)
                                                                          ====                                  === 
</TABLE>

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

(1)      Includes loans held for sale.

(2)      Includes securities classified as available for sale.

(3)      Consists primarily of interest-bearing deposits (including
         certificates of deposit).


RESULTS OF OPERATIONS COMPARISON OF THE YEARS ENDED SEPTEMBER 30, 1996 AND
SEPTEMBER 30, 1995

         The Company reported a net loss for the year ended September 30, 1996
of $104,000.  The loss reflects the one-time SAIF recapitalization assessment
of $289,000 which was accounted for in the fourth quarter of the Company's
current fiscal year.  Prior to this assessment, the Company would have reported
net income of $99,000, as compared to $81,000 of net income for the year ended
September 30, 1995, an increase of $17,000, or 21.0% from fiscal 1995.  The
increase in net income prior to the SAIF assessment resulted primarily from a
slight increase in net interest income and from an increase in gain on sale





                                       15
<PAGE>   13
of loans, partially offset by an increase in general administrative and other
expenses, as well as an increase in the provision for loan losses.

         Interest income increased $229,000, or 7.2%, to $3.4 million for the
year ended September 30, 1996, from $3.2 million for the year ended September
30, 1995.  Interest income on loans increased $268,000, or 11.2%, to $2.7
million for the year ended September 30, 1996.  The increase in interest on
loans was due to the increase in the average balance outstanding on loans of
$4.4 million for the year ended September 30, 1996, offset by a reduction in
the average yield from 7.80% at September 30, 1995 to 7.58% at September 30,
1996.  The reduction in average yield was due to the lower interest rates seen
in the mortgage market during fiscal 1996.  Interest income on mortgage-backed
securities increased $5,000, or 1.1%, to $457,000 for the year ended September
30, 1996.  Such increase was due to an increase in the average yield earned
thereon from 5.76% to 6.48% as the adjustable rate mortgage-backed securities
adjusted upwards during fiscal 1996.  The increase in interest on
mortgage-backed securities was partially offset by a reduction in the average
balance of mortgage-backed securities as the Company sold $1.7 million of
mortgage-backed securities along with normal repayments of $1.3 million during
fiscal 1996.  Interest income on investments increased $49,000, or 35.0%,
during fiscal 1996 due to an increase in average balances outstanding from $2.5
million to $3.1 million year-to-year, and the average yield increase from 5.65%
during fiscal 1995 to 6.20% during fiscal 1996.  Interest income on other
interest earning assets decreased $93,000, or 46.5%, to $107,000, for the year
ended September 30, 1996 from $200,000 for the year ended September 30, 1995.
The decrease in interest income during the year ended September 30, 1996, was
also due to the reduction in the average balance outstanding of $2.1 million,
as the Company converted other interest earning assets into loans and
investments which earned higher yields.

         Interest expense increased $224,000, or 9.7%, to $2.5 million for the
year ended September 30, 1996 as compared to $2.3 million for the year ended
September 30, 1995.  Interest expense on deposits increased $195,000, or 8.6%,
to $2.5 million for the year ended September 30, 1996.  This increase was due
to the increase in the average balance of deposits outstanding year-to-year as
well as an increase in the average rate of 29 basis points.  Interest expense
on FHLB advances increased $29,000, or 67.4%, during fiscal 1996 due
exclusively to the increase in the average balance outstanding offset by a
reduction in the average rate paid thereon.  The Company has used the
availability of the FHLB advances to fund the recent outflow of deposits and to
fund loan demand.

         As a result of the foregoing changes in interest income and interest
expense, net interest income has increased $5,000, or less than 1%, during the
year ended September 30, 1996 as compared to the year ended September 30, 1995.
The interest rate spread decreased from 1.65% during 1995, to 1.54% during
fiscal 1996, while the net interest margin decreased from 1.96% during fiscal
1995 to 1.88% during fiscal 1996.  The decrease in the Company's interest rate
spread and net interest margin resulted from a faster increase





                                       16
<PAGE>   14
in rates paid by the Company on its interest bearing liabilities than in the
rates earned on its interest earning assets, which is partially due to the
Company's negative gap position.

         The Company's provision for losses on loans totalled $14,000 for the
year ended September 30, 1996, as compared to $12,000 for the year ended
September 30, 1995.  The provision for the year ended September 30, 1996 was
influenced by the increase in the total loan portfolio and the related inherent
risk in mortgage lending.

         Other income increased by $159,000, or 300.56%, during the year ended
September 30, 1996, as compared to the year ended September 30, 1995.  The
increase was due primarily to the $147,000 increase in gain on sale of mortgage
loans in the secondary market during fiscal 1996 over the level achieved during
fiscal 1995.  The Company also recognized an $11,000 gain on sale of available
for sale securities during fiscal 1996 with no such corresponding sales in
fiscal 1995.  The current interest market and the demand for fixed rate loans
allowed the Company to increase its secondary market activity  during fiscal
1996.  During the year ended September 30, 1996, the Company originated $13.2
million in loans originated for sale on the secondary market, as compared to
$3.4 million for the year ended September 30, 1995.  The ability to generate
gains from the sale of loans and investments is dependent on market and
economic conditions and, accordingly, there can be no assurance that gains
similar to those reported in the current fiscal year can be achieved in the
future.

         General, administrative and other expenses increased $441,000, or
54.6%, for the year ended September 30, 1996, as compared to the year ended
September 30, 1995.  Included as part of this increase is the one-time SAIF
assessment of $289,000, which if excluded, would have shown an increase of
$152,000, or 18.8%, in such expenses compared to fiscal 1995.  This increase
was due primarily to a $65,000, or 17.5%, increase in employee compensation and
benefits, and an increase in other operating expenses of $58,000 or 29.9%,
during fiscal 1996.  The increase in employee compensation and benefits
resulted from normal merit pay increases coupled with the growth in the
Company's mortgage loan origination staff.  Other operating expenses increased
during fiscal 1996 due primarily to a full year of costs associated with the
mortgage loan origination office which was opened in March 1995.

         The Company reported a benefit for federal income taxes of $48,000 for
the year ended September 30, 1996, due to the loss before income taxes of
$152,000.  The loss before income taxes was due to the one-time SAIF assessment
discussed previously.  The effective tax rates for the years ended September
30, 1996 and 1995, were 31.6% and 36.2%, respectively.





                                       17
<PAGE>   15
RESULTS OF OPERATIONS COMPARISON OF THE YEARS ENDED SEPTEMBER 30, 1995 AND
SEPTEMBER 30, 1994

         Net income for the year ended September 30, 1995 totalled $81,000, a
decrease of $79,000 or 49.4% from the $160,000 in net income recorded for the
year ended September 30, 1994.  The decline in net income resulted primarily
from a $21,000 decrease in gain on sale of mortgage loans and an $81,000
increase in general, administrative and other expense, which were partially
offset by a $26,000 decrease in the federal income tax provision.

         Interest income on loans for the year ended September 30, 1995
increased by $566,000, or 30.8%, due to a $6.9 million, or 28.9%, increase in
the average balance of loans outstanding year-to-year and, to a much lesser
extent, an 11 basis point increase in the average yield earned thereon.
Interest income on mortgage-backed securities increased by $67,000, or 17.4%,
due to an increase of approximately $981,000, or 14.3%, in the average balance
outstanding year-to-year.  Interest income on investment securities and other
interest-earning assets increased by $50,000, or 17.2%.

         Interest expense on deposits increased by $670,000, or 42.0%, during
the year ended September 30, 1995.  This increase was the result of an increase
of $7.1 million, or 20.3%, in the average balance of deposits outstanding
year-to-year as well as an increase in the average rate paid thereon of 83
basis points.  Interest expense on borrowings increased by $19,000, or 79.2%,
for the year ended September 30, 1995, as compared to the year ended September
30, 1994.  This increase was the result of a $199,000, or 38.2%, increase in
average balance of FHLB advances outstanding year-to-year coupled with an
increase in the average rate paid thereon of 136 basis points.

         As a result of the foregoing changes in interest income and interest
expense, net interest income decreased by $6,000, or .7%, during the year ended
September 30, 1995, as compared to the year ended September 30, 1994.  The
interest rate spread decreased from 1.94% during fiscal 1994 to 1.65% during
fiscal 1995, while the net interest margin decreased from 2.32% during fiscal
1994 to 1.96% during fiscal 1995.

         The Company's provision for losses on loans totalled $12,000 for the
year ended September 30, 1995, as compared to $11,000 for the year ended
September 30, 1994.  The provision during fiscal 1995 was influenced by
management's assessment of current and anticipated economic conditions and was
primarily the result of loan portfolio growth during the year.





                                       18
<PAGE>   16
         Other income decreased by $17,000, or 21.5%, during the year ended
September 30, 1995, as compared to the year ended September 30, 1994.  This
decrease was due primarily to a decline of $21,000 in gain on sale of mortgage
loans.  The Savings Bank's secondary market activities declined during fiscal
1995, primarily as a result of the rising interest rate environment, as
previously discussed.

         General, administrative and other expense increased by $81,000, or
11.2%, during the year ended September 30, 1995, as compared to the year ended
September 30, 1994, due primarily to a $48,000, or 14.8%, increase in employee
compensation and benefits.  Such increase resulted from normal merit pay
increases coupled with a $13,000 decline in deferred loan origination costs due
to the decline in loan origination volume year-to-year.  Occupancy and
equipment expense increased by $16,000, or 17.0%, due primarily to the leasing
of additional office space for the Savings Bank's mortgage banking operations,
while federal deposit insurance premiums increased by $10,000, or 12.5%, due to
deposit growth.

         The provision for federal income taxes decreased by $26,000, or 36.1%,
during the year ended September 30, 1995, as compared to the year ended
September 30, 1994, due primarily to a decrease in income before income taxes
of $105,000, or 45.3%.  The Savings Bank's effective tax rates amounted to
36.2% and 31.0% during the years ended September 30, 1995 and 1994,
respectively.  The increase in the effective tax rate from fiscal 1994 to
fiscal 1995 was due to a change in the estimated rate on deferred income taxes.

LIQUIDITY AND CAPITAL RESOURCES

         The Savings Bank is required under applicable federal regulations to
maintain specified levels of "liquid" investments in qualifying types of U.S.
Government, federal agency and other investments having maturities of five
years or less.  Current OTS regulations require that a savings institution
maintain liquid assets of not less than 5% of its average daily balance of net
withdrawable deposit accounts and borrowings payable in one year or less, of
which short-term liquid assets must consist of not less than 1%.  Monetary
penalties may be imposed for failure to meet applicable liquidity requirements.

         The liquidity of the Savings Bank, as measured by the ratio of cash,
cash equivalents (not committed, pledged or required to liquidate specific
liabilities), investment and qualifying mortgage-backed securities to the sum
of total deposits plus borrowings payable within one year, was 10.0% at
September 30, 1996, as compared to 13.7% and 14.9% at September 30, 1995 and
1994, respectively.  At September 30, 1996, the Savings Bank's "liquid" assets
totalled approximately $2.0 million, which was $1.5 million in excess of the
current OTS minimum requirement.

         The Company's liquidity, represented by cash and cash equivalents, is
a product of its operating, investing and financing activities.  The Company's
primary sources of funds are deposits, borrowings, amortization, prepayments
and maturities of outstanding loans and mortgage-backed securities, maturities
of investment and mortgage-backed securities and





                                       19
<PAGE>   17
other short-term investments, sales of loans and securities and funds provided
from operations.  While scheduled loan and mortgage-backed securities
amortization and maturing investment securities and short-term investments are
relatively predictable sources of funds, deposit flows and loan prepayments are
greatly influenced by general interest rates, economic conditions and
competition.  The Company manages the pricing of its deposits to maintain a
steady deposit balance.  In addition, the Company invests excess funds in
overnight deposits and other short-term interest-earning assets which provides
liquidity to meet lending requirements.  The Company generates cash through the
retail deposit market and, to the extent deemed necessary, utilizes borrowings
for liquidity purposes (primarily consisting of advances from the FHLB of
Cincinnati).  At September 30, 1996, the Company had $3.7 million of
outstanding advances from the FHLB of Cincinnati.  Furthermore, the Company has
access to the Federal Reserve Bank discount window.

         Liquidity management is both a daily and long-term function of
business management.  Excess liquidity is generally invested in short-term
investments such as overnight deposits.  On a longer-term basis, the Company
maintains a strategy of investing in various loans, mortgage-backed securities
and investment securities.  The Company uses its sources of funds primarily to
meet its ongoing commitments, to pay maturing savings certificates and savings
withdrawals, fund loan commitments and maintain a portfolio of investment and
mortgage-backed securities.

         At September 30, 1996, the Company had outstanding commitments to
originate residential real estate loans of approximately $413,000.  At the same
date, the total amount of certificates of deposit which were scheduled to
mature by September 30, 1997 was $21.9 million.  The Company believes that it
has adequate resources to fund all of its commitments and that it can adjust
the rates on savings certificates to retain deposits in changing interest rate
environments.

IMPACT OF INFLATION AND CHANGING PRICES

         The financial statements and related financial data presented herein
have been prepared in accordance with generally accepted accounting principles,
which require the measurement of financial position and operating results in
terms of historical dollars, without considering changes in relative purchasing
power over time due to inflation.

         Unlike most industrial companies, virtually all of the Company's
assets and liabilities are monetary in nature.  As a result, interest rates
generally have a more significant impact on a financial institution's
performance than does the effect of inflation.





                                       20
<PAGE>   18
                  [CLARK, SCHAEFER, HACKETT & CO. LETTERHEAD]

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Kenwood Bancorp Inc. and Subsidiary:

We have audited the accompanying consolidated statements of financial condition
of Kenwood Bancorp Inc. (formerly Kenwood Savings and Loan Association) and
Subsidiary as of September 30, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the years
then ended.  The financial statements are the responsibility of the Bancorp's
management.  Our responsibility is to express an opinion on these financial
statements based on our audit.  The financial statements of Kenwood Savings and
Loan Association as of September 30, 1994 were audited by other auditors whose
report dated November 16, 1994 expressed an unqualified opinion on those
statements.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Kenwood Bancorp Inc.
and Subsidiary as of September 30, 1996 and 1995, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.



/s/ CLARK, SCHAEFER, HACKETT & CO.

Cincinnati, Ohio
November 1, 1996





                                    - 21 -
<PAGE>   19
                        [GRANT THORNTON LLP LETTERHEAD]


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors
Kenwood Bancorp Inc. and Subsidiary:

We have audited the accompanying consolidated statements of financial condition
of Kenwood Bancorp Inc. (formerly Kenwood Savings and Loan Association) and
Subsidiary as of September 30, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the years
then ended.  These financial statements are the responsibility of the Bancorp's
management.  Our responsibility is to express an opinion on these financial
statements based on our audit.  The financial statements of Kenwood Savings and
Loan Association as of September 30, 1994 were audited by other auditors whose
report dated November 16, 1994 expressed an unqualified opinion on those
statements.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Kenwood Bancorp
Inc. and Subsidiary as of September 30, 1996 and 1995, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.




/s/ GRANT THRONTON LLP

Cincinnati, Ohio
November 1, 1996


                                     - 22 -
<PAGE>   20
                      KENWOOD BANCORP INC. AND SUBSIDIARY

                 Consolidated Statements of Financial Condition

                          September 30, 1996 and 1995
                                 (In thousands)

<TABLE>
<CAPTION>
                                                        Assets 
                                                        -------

                                                                          1996               1995
                                                                          ----               ----
<S>                                                                   <C>                   <C>
Cash and due from banks                                                $    588                689
Interest-bearing deposits in other
    financial institutions                                                1,558              2,119
                                                                         ------             ------

             Cash and cash equivalents                                    2,146              2,808

Certificates of deposit in other financial
    institutions                                                            380              1,330
Investment securities - held to maturity, at
    amortized cost, approximate market value
    of $1,959 and $1,971 as of September 30,
    1996 and 1995                                                         1,994              1,991
Investment securities - available for sale
    (amortized cost of $499 and $999 at
    September 30, 1996 and 1995)                                            486              1,006
Mortgage-backed securities - held to maturity,
    at cost, approximate market value of $250
    and $7,364 at September 30, 1996 and 1995                               245              7,311
Mortgage backed securities - available for
    sale (amortized cost of $4,499 at September 30,
    1996)                                                                 4,529                -
Loans receivable                                                         30,009             32,559
Loans held for sale - at lower of cost or market                          9,322                213
Property and equipment, net                                                 362                380
Federal Home Loan Bank stock - at cost                                      430                401
Accrued interest receivable:
    Loans                                                                   199                144
    Mortgage-backed securities                                               26                 38
    Investments and interest-bearing deposits                                20                 29
Prepaid expenses and other assets                                            74                 70
Prepaid Federal income taxes                                                  9                 29
                                                                         ------             ------

         Total assets                                                 $  50,231             48,309
                                                                         ======             ======
</TABLE>





See accompanying notes to financial statements.

                                     - 23 -
<PAGE>   21

<TABLE>
<CAPTION>
                                     Liabilities and Stockholders' Equity
                                     ------------------------------------
                                                                                           1996                 1995
                                                                                           ----                 ----
<S>                                                                                    <C>                    <C>
Deposits                                                                               $ 41,636               44,428
Advances from the Federal Home Loan Bank                                                  3,653                  194
Accounts payable on mortgage loans serviced
   for others                                                                                37                  107
Advances by borrowers for taxes and insurance                                               215                  181
Other liabilities                                                                           417                   85
Deferred federal income taxes                                                                34                   98
                                                                                         ------               ------

      Total liabilities                                                                  45,992               45,093
                                                                                         ------               ------

Commitments                                                                                  -                   -


Stockholders' equity
    Preferred stock - authorized 1,000,000
      shares of $ .10 par value, none issued                                                 -                   -

    Common stock - authorized 4,000,000 shares
      $ .01 and $ .10 par value, 295,133 and
      and 151,656 shares issued and outstanding
      at September 30, 1996 and 1995                                                          3                   15
    Additional paid-in capital                                                            1,771                  452
    Retained earnings - substantially restricted                                          2,597                2,763
    Shares acquired by Management Recognition
      Plan                                                                                  (18)                 (19)
    Less unearned ESOP shares                                                              (126)                  -

    Unrealized gain on available for sale
      securities, net of income taxes                                                        12                    5
                                                                                         ------               ------

              Total stockholders' equity                                                  4,239                3,216
                                                                                         ------               ------


              Total liabilities and stockholders equity                                $ 50,231               48,309
                                                                                         ======               ======
</TABLE>





                                     - 24 -
<PAGE>   22
                      KENWOOD BANCORP INC. AND SUBSIDIARY

                     Consolidated Statements of Operations

                            Year Ended September 30,
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                             1996             1995              1994
                                                                             ----             ----              ----
<S>                                                                       <C>                 <C>              <C>
Interest income:
   Loans                                                                    $2,670            2,402            1,836
   Mortgage-backed securities                                                  457              452              385
   Investment securities                                                       189              140              101
   Interest-bearing deposits and other                                         107              200              189
                                                                             -----            -----            -----
                 Total interest income                                       3,423            3,194            2,511

Interest expense:
   Deposits                                                                  2,462            2,267            1,597
   Borrowings                                                                   72               43               24
                                                                             -----            -----            -----
                 Total interest expense                                      2,534            2,310            1,621
                                                                             -----            -----            -----

                 Net interest income                                           889              884              890

Provision for losses on loans                                                   14               12               11
                                                                             -----            -----            -----
                 Net interest income after
                   provision for losses on
                   loans                                                       875              872              879

Other income:
   Gain on sale of mortgage loans                                              193               46               67
   Gain on sale of investments                                                  11               -                -
   Other operating                                                              17               16               12
                                                                             -----            -----            -----
                 Total other income                                            221               62               79

General, administrative and other expense:
   Employee compensation and benefits                                          437              372              324
   Occupancy and equipment                                                     124              110               94
   Federal deposit insurance premiums                                          393               90               80
   Franchise taxes                                                              42               41               40
   Other                                                                       252              194              188
                                                                             -----            -----            -----
                 Total general, administrative
                   and other expense                                         1,248              807              726
                                                                             -----            -----            -----
                                                                                
                 Income (loss) before income                                    
                   taxes (benefits)                                           (152)             127              232   
                                                                                                                  
Federal income taxes (benefits)                                                                                   
   Current                                                                      19               26               66   
   Deferred                                                                    (67)              20                6   
                                                                             -----            -----            -----   
                                                                               (48)              46               72   
                                                                             -----            -----            -----   
                                                                                                                       
                 Net Income (loss)                                         $  (104)              81              160   
                                                                             =====            =====            =====   
                                                                                                                       
Earnings per share, restated for effects                                                                               
   of conversion from mutual holding company                               $  (.37)             .29              .57   
                                                                             =====            =====            =====   
</TABLE>      
              




The accompanying notes are an integral part of these statements.

                                     - 25 -
<PAGE>   23
                      KENWOOD BANCORP INC. AND SUBSIDIARY

                Consolidated Statements of Stockholders' Equity

                 Years Ended September 30, 1996, 1995 and 1994
                                 (In Thousands)


<TABLE>
<CAPTION>
                                                                           Unrealized                                        
                                                                            Gain on                                          
                                                 Additional                 Available     Shares       Unearned              
                                        Common     Paid-In     Retained     for Sale     Acquired       ESOP                 
                                         Stock     Capital     Earnings    Securities     By MRP        Shares      Total  
                                         -----     -------     --------    ----------     ------        ------      -----  
   <S>                                  <C>        <C>         <C>           <C>           <C>          <C>        <C>
   Balance at September 30, 1993        $   15       436       2,671            -           (21)           -        3,101  
      Issuance of shares under stock                                                                                       
        option plan                         -         16          -             -            -             -           16  
   Amortization of MRP expense              -         -           -             -             3            -            3  
      Net income for the year                                                                                              
        ended September 30, 1994            -         -          160            -            -             -          160  
      Cash dividends of $1.06 per share     -         -          (75)           -            -             -          (75) 
                                           ---       ---       -----           ---          ---           ---       -----  
                                                                                                                           
   Balance at September 30, 1994            15       452       2,756            -           (18)           -        3,205  
      Amortization of MRP expense           -         -           -             -            (1)           -           (1) 
      Net income for the year ended                                                                                        
        September 30, 1995                  -         -           81            -            -             -           81  
      Increase in unrealized gain on                                                                                       
        available sale securities -                                                                                        
        net of tax                          -         -           -              5           -             -            5  
      Cash dividends of $.56 per share      -         -          (74)           -            -             -          (74) 
                                           ---     -----       -----           ---          ---           ---       ----- 
                                                                                                                           
   Balance at September 30, 1995            15       452       2,763             5          (19)           -        3,216  
      Amortization of MRP expense           -         -           -             -             1            -            1  
      Net loss for the year ended                                                                                          
        September 30, 1996                  -         -         (104)           -            -             -         (104) 
      Increase in unrealized gain on                                                                                       
        available for sale securities                                                                                      
        net of tax                          -         -           -              7           -             -            7  
      Cash dividends of $.49 per share      -         -          (62)           -            -             -          (62) 
      Shares acquired by ESOP               -         -           -             -            -           (126)       (126) 
      Reorganization with issuance of                                                                                      
        common stock in second step                                                                                        
        conversion                         (12)    1,319          -             -            -             -        1,307  
                                           ---     -----       -----           ---          ---           ---       -----  
                                                                                                                           
   Balance at September 30, 1996         $   3     1,771       2,597            12          (18)         (126)      4,239  
                                           ===     =====       =====           ===          ===           ===       =====  
</TABLE>





   The accompanying notes are an integral part of these statements.

                                     - 26 -
<PAGE>   24
                      KENWOOD BANCORP INC. AND SUBSIDIARY
                     Consolidated Statements of Cash Flows
                            Year Ended September 30,
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                              1996          1995           1994
                                                              ----          ----           ----
<S>                                                       <C>            <C>            <C>
Cash flows from operating activities:
   Net income (loss) for the year                         $   (104)           81            160
   Adjustments to reconcile net income (loss)
     to net cash provided by (used in) operating
     activities:
       Depreciation and amortization                            30            21             37
       Loans disbursed for sale in the
         secondary market                                  (13,218)       (3,388)        (5,997)
       Proceeds from sale of loans in
        the secondary market                                12,788         3,221          7,081
       Gain on sale of mortgage loans                         (193)          (46)           (67)
       Gain on sale of investments                             (11)           -               -
       Federal Home Loan Bank stock dividends                  (29)          (24)           (17)
       Amortization of deferred loan origination
         (fees) costs                                          (39)          (14)             8
       Amortization of expense of management
        recognition plan                                         1            (1)             3
       Provision for losses on loans                            14            12             11
       Increase (decrease) in cash due to changes in:
         Accrued interest receivable                           (34)          (25)           (67)
         Prepaid expenses and other assets                      (4)           (9)            (6)
         Accounts payable on mortgage loans serviced
           on others                                           (70)           66            (29)
         Other liabilities                                     332            (3)           (10)
         Federal income taxes:
           Current                                              20            14            (99)
           Deferred                                            (67)           36              6
                                                           --------      -------        -------

          Net cash provided by (used in) operating
            activities                                        (584)          (59)         1,014
                                                           -------       -------        -------

Cash flows from investing activities:
   Principal repayments on loans and mortgage-backed
     securities                                              7,777         6,469          8,567
   Loan disbursements                                      (12,356)      (10,593)       (12,812)
   Purchase of mortgage-backed securities                       -             -          (3,090)
   Purchase of mortgage-backed securities available
     for sale                                                 (513)           -               -
   Proceeds from sale of mortgage-backed securities
     available for sale                                      1,743            -               -
   Proceeds from sale of real estate acquired
     through foreclosure                                        -             -              24
   Maturity of investment securities                           500            -           1,000
   Purchase of investment securities                          (500)           -          (1,987)
   Maturity of investment securities available
     for sale                                                  500            -               -
   Purchase of investment securities available
     for sale                                                 (500)       (1,000)             -
   Proceeds from sale of investment securities
     available for sale                                        513            -               -
   Purchase of Federal Home Loan Bank stock                     -            (50)            (3)
   Purchase of office premises and equipment                   (12)           (9)           (15)
   (Increase) decrease in certificates of deposit
     in other financial institutions                           950           725           (619)
                                                            ------        ------         ------ 

       Net cash used in investing activities                (1,898)       (4,458)        (8,935)
                                                            ------        ------         ------ 

       Net cash flows used in operating and
         investing activities (subtotal carried
         forward)                                           (2,482)       (4,517)        (7,921)
                                                            ------        ------         ------ 
</TABLE>

See accompanying notes to financial statements.

                                     - 27 -
<PAGE>   25
                      KENWOOD BANCORP INC. AND SUBSIDIARY

               Consolidated Statements of Cash Flows (Continued)

                           Years Ended September 30,
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                   1996          1995           1994
                                                                   ----          ----           ----
<S>                                                            <C>             <C>            <C>
     Net cash flows used in operating and
        investing activities (subtotal   
        brought forward                                        $ (2,482)       (4,517)        (7,921)

Cash flows from financing activities:
   Net increase (decrease) in deposits                           (2,792)        5,591          3,666
   Proceeds from Federal Home Loan Bank advances                  6,000            -           1,725
   Repayment of Federal Home Loan Bank advances                  (2,541)          (18)        (1,513)
   Advances by borrowers for taxes and insurance                     34            48             30
   Net proceeds from the issuance of common stock                 1,181            -               -
   Proceeds from exercise of stock options                           -             -              16
   Dividends paid on common stock                                   (62)          (74)           (75)
                                                                 ------        ------         ------ 

     Net cash provided by financing activities                    1,820         5,547          3,849
                                                                 ------        ------         ------

Net increase (decrease) in cash and cash equivalents               (662)        1,030         (4,072)

Cash and cash equivalents at beginning of year                    2,808         1,778          5,850
                                                                 ------        ------         ------

Cash and cash equivalents at end of year                       $  2,146         2,808          1,778
                                                                 ======        ======         ======

Supplemental disclosure of cash flow information:
   Cash paid (refunded) during the year for:
     Federal income taxes                                      $     (2)           12             98
                                                                 ======        ======         ======

     Interest on deposits and borrowings                       $  2,533         2,301          1,594
                                                                 ======        ======         ======

Supplemental disclosure of noncash investing
   activities:
     Transfers of investment securities to
        available for sale classification                      $  7,253            -               -
                                                                 ======        ======          =====

Change in unrealized gains (losses) on securities
   available for sale - net of related tax effects                    7             5              -
                                                                 ======        ======          =====
</TABLE>





See accompanying notes to financial statements.


                                     - 28 -
<PAGE>   26
                      KENWOOD BANCORP INC. AND SUBSIDIARY

                         Notes to Financial Statements


 1.  Organization and Summary of Significant Accounting Policies:

     The following describes the organization and the significant accounting
     policies followed in the preparation of these financial statements.
     Certain amounts in the financial statements have been reclassified from
     previously issued financial statements to conform to the presentation
     included herein.
     
            Nature of operations and principles of consolidation

            Kenwood Bancorp Inc. (the Bancorp) is a holding company formed in
            1996 in conjunction with the "second step" conversion of Kenwood
            Savings Bank from a mutual holding company to a stock savings bank
            on June 28, 1996.  The Bancorp's financial statements include the
            accounts of its wholly-owned subsidiary, Kenwood Savings Bank.  All
            significant intercompany transactions have been eliminated.

            Kenwood Savings Bank is a state chartered savings bank and a member
            of the Federal Home Loan Bank system (FHLB) and subject to
            regulation by the Office of Thrift Supervision (OTS), an office of
            the U.S. Department of Treasury.  As a member of the FHLB system,
            Kenwood Savings Bank maintains a required investment in capital
            stock of the Federal Home Loan Bank of Cincinnati.

            The Bancorp's business consists of attracting deposits from the
            general public and applying those funds in the origination of
            residential, consumer and nonresidential loans.

            Savings accounts are insured by the Savings Association Insurance
            Fund (SAIF), a division of the Federal Deposit Insurance
            Corporation (FDIC), within certain limitations.  Semi-annual
            premiums are required by the SAIF for the insurance of such savings
            accounts.

            Use of estimates

            The preparation of financial statements in conformity with
            generally accepted accounting principles requires management to
            make estimates and assumptions that affect the reported amounts of
            assets and liabilities and disclosure of contingent assets and
            liabilities at the date of the financial statements and that affect
            the reported amounts of revenues and expenses during the reporting
            period.  Actual results could differ from those estimates.  Areas
            where management's estimates and assumptions are more susceptible
            to change in the near term include the allowance for loan losses
            and the fair value of certain securities.

            Concentrations of credit risk

            The Bancorp grants first mortgage and other loans to customers
            located primarily in the Metropolitan Cincinnati area.
            Accordingly, a  substantial portion of its debtor's ability to
            honor their contracts is dependent upon the financial health of the
            local economy and market.

            Management may at times, maintain deposit accounts with financial
            institutions in excess of federal deposit insurance limits.

            Cash and cash equivalents

            For the purpose of presentation in the statements of cash flows,
            the Bancorp considers all highly liquid debt instruments with
            original maturity when purchased of three months or less to be cash
            equivalents.


                                     - 29 -
<PAGE>   27
            Investment and mortgage-backed securities

            The Bancorp adopted Statement of Financial Accounting Standards No.
            115, "Accounting for Certain Investments in Debt and Equity
            Securities," as of October 1, 1994.  Statement No. 115 requires the
            classification of investments in debt and equity securities into
            three categories; held to maturity, trading, and available for
            sale.  Debt securities that the Bancorp has the positive intent and
            ability to hold to maturity are classified as held to maturity
            securities and reported at amortized cost. Debt and equity
            securities that are bought and held principally for the purpose of
            selling in the near-term are classified as trading securities and
            reported at fair value, with unrealized gains and losses included
            in earnings.

            The Bancorp has no trading securities.  Debt and equity securities
            that are not classified as either held to maturity securities or
            trading securities are classified as available for sale securities
            and reported at fair value, with unrealized gains or losses
            excluded from earnings and reported as a separate component of
            equity, net of deferred taxes.  At the date of implementation of
            Statement No. 115, the Bancorp had not identified any investments
            or mortgage-backed securities as available for sale.

            The Bancorp designates investment securities and mortgage-backed
            securities as held to maturity or available for sale upon
            acquisition. At December 31, 1995, the Bancorp made a one-time
            reassessment of the classification of certain mortgage-backed
            securities in accordance with "A Guide to Implementation of
            Statement No. 115 on Accounting for Certain Investments in Debt and
            Equity Securities" issued in November 1995.  The Bancorp
            transferred mortgage-backed securities with an amortized cost of
            $7.2 million from the held-to-maturity classification to the
            available for sale classification to the available for sale
            classification at December 31, 1995 to reflect management's intent
            as to the classification of these securities.  Gains or losses on
            the sales of investment securities and mortgage-backed securities
            available for sale are determined on the specific identification
            method.

            Premiums and discounts on investment securities and mortgage-backed
            securities are amortized or accreted using the interest method over
            the expected lives of the related securities.

            Loans receivable

            Loans held in portfolio are stated at the principal amount
            outstanding, adjusted for deferred loan origination fees and costs,
            the allowance for loan losses, and premiums and discounts on loans
            purchased. Premiums and discounts on loans purchased are amortized
            and accreted to operations using the interest method over the
            estimated life of the underlying loans.

            Loan origination fees and certain direct origination costs are
            capitalized and recognized as an adjustment of the yield on the
            related loan.

            Interest in accrued as earned unless the collectibility of the loan
            is in doubt.  Uncollectible interest on loans that are
            contractually past due is charged off, or an allowance is
            established based on management's periodic evaluation.  The
            allowance is established by a charge to interest income equal to
            all interest previously accrued, and income is subsequently
            recognized only to the extent that cash payments are received
            until, in management's judgment, the borrower's ability to make
            periodic interest and principal payments has returned to normal, in
            which case the loan is returned to accrual status.





                                     - 30 -
<PAGE>   28
            Loans held for sale are carried at the lower of cost or market,
            determined in the aggregate.  In computing cost, deferred loan
            origination fees and costs are aggregated with the principal
            balances of the related loans.  At September 30, 1996 and 1995,
            loans held for sale were carried at cost.

            The Bancorp will either sell the related servicing on loans or
            retain the servicing on loans sold and agree to remit to the
            investor loan principal and interest at agreed-upon rates.  These
            rates can differ from the loan's contractual interest rate
            resulting in a "yield differential."  In addition to previously
            deferred loan origination fees and cash gains, gains on sale of
            loans can represent the present value of the future yield
            differential less a normal servicing fee, capitalized over the
            estimated life of the loans sold.  Normal servicing fees are
            determined by reference to the stipulated minimum servicing fee set
            forth by the government agencies to whom the loans are sold.  Such
            servicing fees are representative of the Bancorp's normal servicing
            costs.  The resulting capitalized excess servicing fee is amortized
            to operations over the life of the loans using the interest method.
            If prepayments are higher than expected, an immediate charge to
            operations is made.  If prepayments are lower, then the related
            adjustments are made prospectively.

            It is the Bancorp's policy to provide valuation allowances for
            estimated losses on loans based on past loss experience, trends in
            the  level of delinquent and problem loans, adverse situations that
            may affect the borrower's ability to repay the estimated value of
            any underlying collateral and current and anticipated economic
            conditions in the primary lending area.  When the collection of a
            loan becomes doubtful, or otherwise troubled, the Bancorp records a
            loan loss provision equal to the difference between the fair value
            of the property securing the loan and the loan's carrying value.
            Major loans and major lending areas are reviewed periodically to
            determine potential problems at an early date.  The allowance for
            loan losses is increased by charges to earnings and decreased by
            charge-off (net of recoveries).  The amount of actual write-offs
            could differ from the estimate.

            In May 1993, the Financial Accounting Standards Board issued
            Statement of Financial Accounting  Standards No. 114, "Accounting
            by Creditors for Impairment of a Loan".  This standard amends
            Statement No. 5 to clarify that a creditor should evaluate the
            collectibility of both contractual interest and contractual
            principal on all loans when assessing the need for a loss accrual.
            In October 1994, the Financial Accounting Standards Board issued
            Statement of Financial Accounting Standards No. 118 "Accounting by
            Creditors for Impairment of a Loan - Income Recognition and
            Disclosure", which amends Statement No. 114 to allow a creditor to
            use existing methods for recognizing interest income on impaired
            loans.  The statements are effective for the fiscal year beginning
            October 1, 1995 and the adoption of these statements did not have a
            material effect on the Bancorp's financial statements.

            A loan is defined as impaired under SFAS No. 114 when it is
            probable that a creditor will be unable to collect all amounts due
            according to contractual terms of the loan agreement.  In applying
            the provisions of SFAS No. 114, the Bancorp considers its
            investment in one-to-four family residential loans and consumer
            loans to be homogeneous and therefore excluded from separate
            identification for evaluation of impairment.  With respect to the
            Bancorp's investment in impaired multi-family and non-residential
            real estate loans, such loans are collateral dependent and as a
            result are carried as a practical expedient at the lower of cost or
            fair value.

            It is the Bancorp's policy to consider collateral dependent loans
            which are more than ninety days delinquent to constitute more than
            a minimum delay in repayment and evaluated for impairment under
            SFAS No. 114 at


                                     - 31 -
<PAGE>   29
            that time.  Interest on impaired loans is reported on the cash
            basis. Impaired loans would be charged off in the same manner as
            all loans subject to charge off.  At September 30, 1996, the
            Bancorp had no loans that would be defined as impaired under SFAS
            No. 114.

            Foreclosed real estate

            Real estate properties acquired through, or in lieu of, loan
            foreclosures are initially recorded at lower of cost or fair value
            less estimated costs to sell at the date of foreclosure.
            Subsequent declines in value are charged to operations.  The
            Bancorp has no real estate acquired by foreclosure at September
            30, 1996 and 1995.

            Property and equipment

            Property and equipment are carried at cost, less accumulated
            depreciation and amortization computed by straight-line and
            accelerated methods over the estimated useful lives of the
            respective assets.

            Income taxes

            The Bancorp accounts for income taxes under Statement of Financial
            Accounting Standards No. 109, "Accounting for Income Taxes".  Under
            this standard, deferred tax assets and liabilities represent the
            tax effects of the temporary differences in the basis of certain
            assets and liabilities for tax and financial statement purposes,
            calculated at currently effective tax rates, of future deductible
            or taxable amounts attributable to events that have been recognized
            on a cumulative basis in the financial statements.

            The Bancorp's principal temporary differences between pretax
            financial income and taxable income result from different methods
            of accounting for deferred loan origination fees and costs, Federal
            Home Loan Bank stock dividends, the accretion of unearned discounts
            arising from loans sold in a reciprocal loan sale transaction, the
            general loan loss allowance and the post-1987 percentage of
            earnings bad debt deduction. For certain assets acquired after
            December 31, 1980, a temporary difference is also recognized for
            depreciation utilizing accelerated methods for Federal income tax
            purposes.

            Off balance sheet instruments

            In the ordinary course of business the Bancorp has entered into
            off-balance sheet financial instruments consisting of commitments
            to extend credit and commitments under line of credit loans.  Such
            financial instruments are recorded in the financial statements when
            they are funded or related fees are incurred or received.

            Recent accounting pronouncements

            In May 1995, the Financial Accounting Standards Board Issued
            Statement of Financial Accounting Standards No. 122, "Accounting
            for Mortgage Servicing Rights".  This statement requires that a
            mortgage banking enterprise recognize as separate assets rights to
            service mortgage loans for others, however those servicing rights
            are acquired.  A mortgage banking enterprise that acquires mortgage
            servicing rights through either the purchase or origination of
            mortgage loans and sells or securitizes those loans with servicing
            rights retained would allocate the total cost of the mortgage loans
            to the mortgage servicing rights and the loans based on their
            relative fair value.  Statement No. 122 is effective for fiscal
            years beginning after December 15, 1995. Management is currently
            assessing the impact of this standard.

            In October 1995, the Financial Accounting Standards Board issued
            Statement of Financial Accounting No. 123, "Accounting for
            Stock-Based



                                     - 32 -
<PAGE>   30
            Compensation". This statement establishes accounting and reporting
            standards for stock-based employee compensation plans including
            stock options.  The statement defines a "fair value based method"
            for employee stock options and encourages all entities to adopt
            that method for such options.  However, it allows an entity to
            continue to measure compensation cost for those plans using the
            "intrinsic value based method" of accounting prescribed by APB
            Opinion No. 25.  Entities electing to remain with the accounting in
            Opinion 25 must make proforma disclosures of net income and
            earnings per share, as if the fair value method of accounting
            defined in this statement had been applied.  SFAS No. 123 is
            effective for transactions entered into in fiscal years that begin
            after December 15, 1995, and therefore will not be applied until
            fiscal year ended September 30, 1997.  Management is currently
            assessing the impact of this standard.

            In June 1996, the FASB issued SFAS No. 125 "Accounting for
            Transfers and Servicing of Financial Assets and Extinguishments of
            Liabilities" which established accounting and reporting standards
            for transfers and servicing of financial assets and extinguishments
            of liabilities.  The standards are based on a consistent
            application of a financial components approach that focuses on
            control.  Under that approach, after a transfer of financial
            assets, an entity recognizes the financial and servicing assets it
            controls and the liabilities it has incurred, derecognizes
            financial assets when control has been surrendered, and
            derecognizes liabilities when extinguished.  SFAS No. 125 provides
            consistent standards for distinguishing transfers of financial
            assets that are sales from transfers that are secured borrowings.
            SFAS No. 125 supercedes SFAS No. 122.  SFAS No. 125 is effective
            for transactions occurring after December 31, 1996. Management is
            currently assessing the impact of this standard.

            Earnings per share

            Earnings per share for the fiscal years ended September 30, 1996,
            1995 and 1994 is based on net income (loss) divided by 282,521,
            282,521 and 282,288 weighted average shares outstanding during the
            respective period.  Weighted average shares for fiscal years 1995
            and 1994 were adjusted for the reorganization from the mutual
            holding company form to the stock holding company form effected in
            the 1996 fiscal year.  There is no material dilutive effect
            attendant to the Stock Option Plan.

            Reclassification

            Certain reclassifications were made to the prior years financial
            statements to conform to the current year presentation.





                                     - 33 -
<PAGE>   31
 2.    Investments and Mortgage-Backed Securities:

       The amortized cost, gross unrealized gains, gross unrealized losses, and
       approximate market values of investment securities held to maturity at
       September 30, are summarized as follows:


<TABLE>
<CAPTION>
                                                                     1996                      
                                      ------------------------------------------------------------------
                                                            Gross               Gross
                                      Amortized          Unrealized           Unrealized          Market
                                         Cost               Gains               Losses            Value
                                         ----               -----               ------            -----
       <S>                             <C>                     <C>                  <C>            <C>
       U.S. Government
          agency obligations           $ 1,994                 -                    35             1,959
                                         =====             ======               ======             =====
</TABLE>


<TABLE>
<CAPTION>
                                                                      1995                      
                                      ------------------------------------------------------------------
                                                           Gross               Gross
                                      Amortized          Unrealized           Unrealized          Market
                                         Cost               Gains               Losses             Value
                                         ----               -----               ------             -----
       <S>                             <C>                     <C>                  <C>            <C>
       U.S. Government
          agency obligations           $  1,991                9                    29             1,971
                                         ======            =====                ======             =====
</TABLE>


       At each of the dates presented, all investment securities held to
       maturity are due within one to five years.

       The amortized costs, gross unrealized gains, gross unrealized losses,
       and market value of investment securities available for sale at
       September 30, are summarized as follows:


<TABLE>
<CAPTION>
                                                                      1996                      
                                      ------------------------------------------------------------------
                                                           Gross               Gross
                                      Amortized          Unrealized           Unrealized          Market
                                         Cost               Gains               Losses             Value
                                         ----               -----               ------             -----
       <S>                             <C>                     <C>                  <C>             <C>
       U.S. Government
          agency obligations           $   499                 -                    13              486
                                         =====             ======               ======            =====
</TABLE>

<TABLE>
<CAPTION>
                                                                        1995                      
                                      ------------------------------------------------------------------
                                                           Gross               Gross
                                      Amortized          Unrealized           Unrealized           Market
                                         Cost               Gains               Losses             Value
                                         ----               -----               ------             -----
       <S>                             <C>                     <C>                  <C>            <C>
       U.S. Government
          agency obligations           $   999                 7                    -              1,006
                                         =====             =====                ======             =====
</TABLE>


       The amortized cost and market value of investment securities available
       for sale at September 30, by contractual maturity are shown below:


<TABLE>
<CAPTION>
                                                             1996                                   1995      
                                                  --------------------------            -------------------------
                                                   Amortized         Market              Amortized        Market
                                                     Cost             Value                Cost           Value
                                                     ----             -----                ----           -----
       <S>                                           <C>             <C>                   <C>          <C>
       Due in one to five years                      $ 499           486                     -              -
       Due in five to ten                               -             -                     500            506
       After ten years                                  -             -                     499            500
                                                       ---           ---                    ---            ---
                                             
                                                     $ 499           486                    999          1,006
                                                       ===           ===                    ===          =====
</TABLE>                                     





                                     - 34 -
<PAGE>   32
The amortized cost, gross unrealized gains, gross unrealized losses, and market
value of mortgage-backed securities held to maturity at September 30, are
summarized as follows:


<TABLE>
<CAPTION>
                                                                      1996                      
                                      ---------------------------------------------------------------------
                                                              Gross               Gross
                                         Amortized          Unrealized          Unrealized          Market
                                           Cost               Gains               Losses            Value
                                           ----               -----               ------            -----
       <S>                                  <C>                   <C>                <C>            <C>
       Government National
       Mortgage Association               $ 245                   5                  -              250
                                            ===                ====                ====             ===
</TABLE>


<TABLE>
<CAPTION>
                                                                      1995                      
                                      -----------------------------------------------------------------------
                                                            Gross               Gross
                                      Amortized          Unrealized           Unrealized        Market
                                         Cost               Gains               Losses          Value
                                         ----               -----               ------          -----
       <S>                                <C>                  <C>                <C>          <C>
       Federal Home Loan                                                    
          Mortgage Corporation            $   397               -                   1            396
       Federal National                                                     
          Mortgage Association                881                7                 -             888
       Government National                                                  
          Mortgage Association              6,033               55                  8          6,080
                                            -----             ----               ----          -----
                                                                            
                                          $ 7,311               62                  9          7,364
                                            =====             ====               ====          =====
</TABLE>                                               

       The amortized cost, gross unrealized gains, gross unrealized losses, and
       market value of mortgage backed securities available for sale at
       September 30, 1996 are summarized as follows:

<TABLE>
<CAPTION>
                                                                      1996                      
                                      --------------------------------------------------------------------
                                                            Gross               Gross
                                      Amortized          Unrealized           Unrealized          Market
                                         Cost               Gains               Losses            Value
                                         ----               -----               ------            -----
       <S>                                <C>                 <C>                  <C>            <C>
       Federal Home Loan                                                                   
          Mortgage Corporation            $   348              -                     9            $   339
       Federal National                                                                    
          Mortgage Association                560              13                   -                 573
       Government National                                                                 
          Mortgage Association              3,591              28                    2              3,617
                                            -----           -----                -----              -----
                                                                                           
                                          $ 4,499              41                   11            $ 4,529
                                            =====           =====                =====              =====
</TABLE>

       The amortized cost and market value of all mortgage-backed securities at
       September 30, by contractual terms to maturity is shown below.  Expected
       maturities will differ from contractual maturities because borrowers may
       generally  prepay obligations without prepayment penalties.



<TABLE>
<CAPTION>
                                                               1996                         1995      
                                                      ---------------------         --------------------
                                                      Amortized      Market         Amortized     Market
                                                        Cost          Value           Cost        Value
                                                        ----          -----           ----        -----
       <S>                                             <C>            <C>             <C>         <C>
       Due in one to five years                        $  348           339             397         396
       Due after twenty years                           4,396         4,440           6,914       6,968
                                                        -----         -----           -----       -----
                                                                                              
                                                       $4,744         4,779           7,311       7,364
                                                        =====         =====           =====       =====
</TABLE>





                                     - 35 -
<PAGE>   33
Proceeds and resulting gains and loses realized from sale of investments and
mortgage-backed securities from the year ended September 30, 1996 were as
follows:


<TABLE>
<CAPTION>
                                                                                                   Net
                                        Gross               Gross               Gross            Realized
                                       Proceeds             Gains               Losses         Gain/(Loss)
                                       --------             -----               ------         -----------
       <S>                             <C>                   <C>                  <C>             <C>
       Investments                     $   513                13                  -                  13
       Mortgage-backed                                                                         
          securities                     1,743                -                     2                (2) 
                                         -----              -----                 ---               -----
                                                                                               
                                       $ 2,256                13                    2              $ 11
                                         =====              ====                  ===               ===
</TABLE>


 3.    Loans Receivable:

       The composition of the loan portfolio at September 30 is as follows:

<TABLE>
<CAPTION>
                                                                                        1996             1995
                                                                                        ----             ----
       <S>                                                                          <C>                <C>
       One-to-four family residential real estate                                   $ 37,699           31,464
       Multi-family residential  real estate                                             126              239
       Construction                                                                    1,016              226
       Nonresidential real estate                                                        142              232
       Home equity line of credit                                                        817              366
       Consumer and other                                                                 43              341
                                                                                      ------           ------
                                                                                      39,843           32,868
       Add/(less):
          Undisbursed portion of loans-in-process                                       (502)             (61)
          Deferred loan origination costs                                                 85               46
          Allowance for loan losses                                                      (95)             (81)
                                                                                       -----            ----- 

                                                                                    $ 39,331           32,772
                                                                                      ======           ======
</TABLE>

       The Bancorp's lending efforts have historically focused on one-to-four
       family and multi-family residential real estate loans, which comprise
       approximately $38.3 million, or 97% of the total loan portfolio at
       September 30, 1996 and $31.9 million, or 97% of the total loan portfolio
       at September 30, 1995.  Generally, such loans have been  underwritten on
       the basis of no more than an 80% loan-to-value ratio, which has
       historically provided the Bancorp with adequate collateral coverage in
       the event of default.  Any loan with loan to value exceeding 80%
       requires PMI insurance.  Nevertheless, the Bancorp, as with any lending
       institution, is subject to the risk that residential real estate values
       could deteriorate in its primary lending area of southwestern Ohio,
       thereby impairing collateral values.  However, management is of the
       belief that real estate values in the Bancorp's primary lending area are
       presently stable.

       As discussed previously, the Bancorp has sold certain whole loans and
       participating interests in the loans in the secondary market, retaining
       servicing on the loans sold.  Loans sold and serviced for others totaled
       approximately $18.2 million, $20.3 million, and $22.7 million at
       September 30, 1996, 1995 and 1994.  All of the loans held for sale at
       September 30, 1996, will be sold with the servicing not retained by the
       Bancorp.

       The activity in the allowance for loan losses at September 30 is as
       follows:

<TABLE>
<CAPTION>
                                                     1996          1995          1994
                                                     ----          ----          ----
       <S>                                          <C>              <C>           <C>
       Beginning balance                            $  81            69            60
       Charge-offs                                     -             -             (2)
       Provision for loan losses                       14            12            11
                                                      ---           ---           ---

       Ending balance                               $  95            81            69
                                                      ===           ===           ===
</TABLE>


                                     - 36 -
<PAGE>   34

       At September 30, 1996, the Bancorp's allowance for loan losses was
       comprised solely of a general loan loss allowance, which is includible
       as a component of regulatory risk-based capital.

       The Bancorp had no non-accrual loans at September 30, 1996 and 1995.
       The balance of loans not accruing interest at September 30, 1994 was
       $33,000.

 4.    Property and Equipment:

       Property and equipment consist of the following at September 30:

<TABLE>
<CAPTION>
                                                      1996               1995
                                                      ----               ----
       <S>                                           <C>                  <C>
       Land and improvements                         $ 148                148
       Building and improvements                       325                325
       Furniture and equipment                         172                160
                                                       ---                ---
                                                       645                633
       Less accumulated depreciation
         and amortization                              283                253
                                                       ---                ---

                                                     $ 362                380
                                                       ===                ===
</TABLE>





                                     - 37 -
<PAGE>   35
e 5.    Deposits:

       Deposits on account bearing interest and certificates by original
maturity are summarized as follows:

<TABLE>
<CAPTION>
                                                     1996                                                 1995              
                                 ---------------------------------------------        --------------------------------------------
                                 Weighted                            Percent           Weighted                           Percent
                                 Average                                of              Average                             of
                                   Rate            Amount            Deposits            Rate           Amount            Deposits
                                   ----            ------            --------            ----           ------            --------
<S>                               <C>             <C>              <C>                    <C>         <C>                <C>
Passbook savings                   2.94%          $ 1,396             3.35%                2.95%       1,509                3.40%
Statement savings                  4.55             2,535             6.09                 3.85          401                 .90
Demand deposits                    3.73             1,285             3.09                 3.39          741                1.67
Money market deposits              3.65             2,616             6.28                 3.67        4,082                9.19
Christmas club                      -                 -               -                     -             29                0.06
                                                    -----             -----                            -----               -----
                                                    7,832            18.81                             6,762               15.22
                                                                                                 
Certificates                                                                                     
    3 month                        5.25             1,007             2.42                 5.31        1,190                2.68
    6 month                        5.17             2,612             6.27                 5.62        3,367                7.58
   11 month                        5.34             2,831             6.80                 6.19        4,948               11.14
   12 month                        5.39             3,915             9.40                 5.94        3,389                7.63
   18 month                        5.58             1,258             3.02                 6.02        2,518                5.67
   18 month IRA                    5.92               113             0.27                 4.98          128                0.29
   22 month                        6.66             4,999            12.01                 6.99        3,495                7.87
   24 month                        6.30             5,236            12.57                 6.13        5,817               13.09
   30 month                        6.27             1,465             3.52                 5.94        1,743                3.92
   36 month                        6.25             3,046             7.32                 6.02        3,476                7.82
   60 month                        6.52             7,322            17.59                 6.66        7,595               17.09
                                                    -----            -----                             -----               -----
                                                                                                 
                                                   33,804            81.19                            37,666               84.78
                                                   ------            -----                            ------               -----
                                                                                                 
                                                   41,636           100.00%                           44,428              100.00%
                                                   ======           =======                           ======              ====== 
</TABLE>





                                     - 38 -
<PAGE>   36
       Interest expense on deposits at September 30 is summarized as follows:

<TABLE>
<CAPTION>
                                                              1996             1995             1994
                                                              ----             ----             ----
                                                                          (In thousands)
       <S>                                                  <C>                <C>              <C>
       Passbook                                             $    45               50               62
       Certificates of deposit                                2,179            2,016            1,284
       NOW, money market deposit
           accounts and statement savings                       238              201              251
                                                              -----            -----            -----

                                                            $ 2,462            2,267            1,597
                                                              =====            =====            =====
</TABLE>

       Maturities of outstanding certificates of deposit at September 30 are
       summarized as follows:

<TABLE>
<CAPTION>
                                                                               1996             1995
                                                                               ----             ----
                                                                                   (In thousands)
       <S>                                                                  <C>                <C>
       Less than one year                                                   $ 21,945           19,829
       One year to three years                                                 7,709           14,007
       More than three years                                                   4,150            3,830
                                                                              ------           ------

                                                                            $ 33,804           37,666
                                                                              ======           ======
</TABLE>

       The aggregate amount of certificates of deposit in denominations of
       $100,000 or more was $3.5 million and $4.0 million at September 30, 1996
       and 1995 respectively.  Deposit accounts exceeding $100,000 are not
       federally insured.

       Financial Instruments:

       The following fair value disclosures are made in accordance with the
       requirements of SFAS No. 107, "Disclosure about Fair Value of Financial
       Instruments."  SFAS No. 107 requires the disclosure of fair value
       information about both on-and-off-balance sheet financial instruments
       where it is practical to estimate that value.  In cases where quoted
       market prices were not available, fair values were based on estimates
       using present value of other valuation methods, as described below.  The
       use of different assumptions (e.g., discount rates and cash flow
       estimates) and estimation methods could have a significant effect on
       fair value amounts.  Accordingly, the estimates presented herein are not
       necessarily indicative of the amounts the Bancorp could realize in a
       current market exchange.  Because SFAS No. 107 excludes certain
       financial instruments and all nonfinancial instruments from its
       disclosure requirements, any aggregation of the fair value amounts
       presented would not represent the underlying value of the Bancorp.

       The following methods and assumptions were used in estimating the fair
       values of financial instruments, cash, interest bearing deposits and
       investment in FHLB stock.  The carrying value of cash and interest
       bearing deposits approximates those assets' fair value.

       Investments and mortgage-backed securities

       For investment securities (debt instruments) and mortgage-backed
       securities, fair values are based on quoted market prices, where
       available.  If a quoted market price is not available, fair value is
       estimated using quoted market prices of comparable instruments.

       Loans receivable

       The fair value of the loan portfolio is estimated by evaluating
       homogeneous categories of loans with similar financial characteristics.
       Loans are segregated by types, such as residential mortgage, commercial
       real estate, and consumer.  Each loan category is further segmented into
       fixed and adjustable rate interest, terms, and by performing and
       nonperforming categories.





                                     - 39 -
<PAGE>   37
       The fair value of performing loads, except residential mortgage loans,
       is calculated by discounting contractual cash flows using estimated
       market discount rates which reflect the credit and interest rate risk
       inherent in the loan.  For performing residential mortgage loans, fair
       value is estimated by discounting contractual cash flows adjusted for
       prepayment estimates using discount rates based on secondary market
       sources.  The fair value for significant nonperforming loans is based on
       recent internal or external appraisals.  Assumptions regarding credit
       risk, cash flow, and discount rates are judgmentally determined by using
       available market information.

       Savings accounts

       The fair values of passbook accounts, NOW accounts, and money market
       savings and demand deposits approximates their carrying values.  The
       fair value of fixed maturity certificates of deposit is estimated using
       a discounted cash flow calculation that applies interest rates currently
       offered for deposits of similar remaining maturities.

       Commitments to extend credit

       The fair value of commitments to extend credit approximates the
       contractual amount due to the comparability of current levels of
       interest rates and the committed rates.

       Fair values for off-balance-sheet lending commitments are based on fees
       currently charged to enter into similar agreements, taking into account
       the remaining terms of the agreements and the counterparties' credit
       standings.

       The estimated fair values of the Bancorp's financial instruments at
       September 30, 1996, are as follows:

<TABLE>
<CAPTION>
                                                                              September 30, 1996     
                                                                     -----------------------------------
                                                                     Carrying                      Fair
                                                                      Amounts                     Value
                                                                      -------                     -----
       <S>                                                              <C>                       <C>
       Financial assets:
           Cash and interest bearing deposits                           $ 2,146                   $2,146
           Certificates of deposit                                          380                      380
           Investment securities available
               for sale                                                     486                      486
           Investment securities held to
               maturity                                                   1,994                    1,959
           Loans receivable                                              39,331                   39,520
           Mortgage-backed securities
               available for sale                                         4,529                    4,529
           Mortgage-backed securities held
               to maturity                                                  245                      250
           Investment in FHLB stock                                         430                      430
       Financial liabilities:
           Savings accounts                                              41,636                   41,860
           Federal Home Loan Bank advances                                3,653                    3,653
<CAPTION>
                                                                      Contractual                  Fair
                                                                        Amount                     Value
                                                                        ------                     -----
       <S>                                                                <C>                      <C>
       Unrecognized financial instruments
           Commitments to extend credit                                   1,301                    1,301
</TABLE>





                                     - 40 -
<PAGE>   38
 6.    Advances From the Federal Home Loan Bank:

       Pursuant to a collateral agreement with the FHLB advances are secured by
       all stock owned in the FHLB and qualifying first mortgage loans totaling
       150% of the advanced balance.

       Advances consist of the following at September 30, 1996 and 1995:

<TABLE>
<CAPTION>
                                                             1996          1995
                                                             ----          ----
       <S>                                                  <C>             <C>
       Short term (advances at variable rates                         
          (5.45% at September 30, 1996)                     $ 3,000          -
       Long term note (interest at 5.65%)                       175         194
       Long term note (interest at 5.45%)                       478          - 
                                                              -----         ---
                                                                      
                                                            $ 3,653         194
                                                              =====         ===
</TABLE>


       Maturities on these advances at September 30, 1996, are as follows:

<TABLE>
<CAPTION>
                                                            Amount 
                                                            ------ 
                          <S>                               <C>    
                          1997                              $ 3,060
                          1998                                   63
                          1999                                   67
                          2000                                   71
                          2001                                   75
                          Subsequent years                      317
                                                              -----
                                                                   
                                                            $ 3,653
                                                              =====
</TABLE>

       Interest expense on borrowed funds was $72,000 and $43,000 for the years
       ended September 30, 1996 and 1995.

 7.    Benefit plans

       The Bancorp maintains a 401(k) profit sharing plan which covers all
       employees who have attained the age of 20 1/2 and have completed six
       months of service.  Employer contributions are made at the discretion of
       the Board of Directors.  The Bancorp's contribution to such plan totaled
       approximately $12,000, $8,000 and $14,000 for the years ended September
       30, 1996, 1995 and 1994 respectively.

       Additionally, in conjunction with the initial public offering, the
       Bancorp adopted a Management Recognition Plan (MRP).  The MRP purchased
       2,070 shares of the common stock issued in the offering which were
       converted to 4,027 shares in the second step conversion.  Common stock
       granted under the MRP will vest ratably over a five-year period,
       commencing on the date of grant.  During fiscal 1995, the Bancorp
       granted additional 140 shares to plan participants and recognized a
       credit of approximately $1,000 of amortization expense.  Total shares
       granted under the plan total 941 shares as of September 30, 1996.  The
       Bancorp recognized $1,000 and $3,000 of amortization expense in 1996 and
       1994 respectively.

       The Bancorp has a Stock Option Plan that provides for the issuance of
       2,070 shares of authorized, but unissued shares.  Shares exercised under
       option totaled 1,656 leaving 414 unexercised shares under option at an
       exercise price of $10.  The unexercised shares were converted to 805
       unexercised shares in the second step conversion.

       Concurrent with the conversion from the mutual holding company form to
       the stock holding company form or organization, on June 29, 1996,
       Kenwood Savings Bank established an Employee Stock Ownership Plan (ESOP)
       which provides retirement benefits for substantially all employees who
       have completed one year of service and have attained age 21.  The ESOP
       initially acquired 12,612 shares of common stock in the conversion
       offering.  The funds used by the ESOP to purchase the stock were
       provided by a loan from the Bancorp which will be repaid by
       contributions to the


                                     - 41 -
<PAGE>   39
       ESOP by the company in the future.  Management intends to allocate these
       shares to eligible employees' accounts over the next ten years. No
       shares have been allocated as of September 30, 1996.

 8.    Federal Income Taxes:

       The provision for federal income taxes (benefits) differs from the
       amounts computed at the statutory corporate tax rate as follows at
       September 30:

<TABLE>
<CAPTION>
                                                              1996         1995         1994
                                                              ----         ----         ----
                                                                     (In thousands)
       <S>                                                   <C>            <C>          <C>
       Federal income taxes (benefit) at             
          the statutory rate                                 $  (52)         42           79
       Other, primarily surtax exemptions                         4          (9)          (7)
       Effect of change in estimated tax rate        
          for deferred taxes                                     -           13            -  
                                                               ----        ----        -----
                                                     
       Federal income tax provision (benefit) per    
          financial statements                               $  (48)         46           72
                                                               =====       ====         ====
                                                     
       Effective tax rate                                      31.6%       36.2%        31.0%
                                                               =====      ======       ======
</TABLE>

       Deferred federal income tax expense results from temporary differences
       in the recognition of revenue and expense for tax reporting and
       financial reporting purposes.  A reconciliation of the sources of the
       Bancorp's temporary differences at the statutory corporate tax rate to
       the amount of deferred tax expense is as follows at September 30:

<TABLE>
<CAPTION>
                                                                 1996         1995         1994
                                                                 ----         ----         ----
       <S>                                                       <C>           <C>          <C>
       Effect of temporary differences at statutory    
          corporate tax rate:                          
       Loan origination fees deferred for financial    
          reporting but recognized currently for       
          tax purposes                                           $  11            5           7
       Federal Home Loan Bank stock dividends                        8            8           4
       Unearned discount on loans purchased in         
          reciprocal sale transaction                               (2)          (4)         (7)
       SAIF assessment not deductible until paid                   (80)           -           -
       Effective of change in estimated tax rate       
          for deferred taxes                                         -           13           -
       Other                                                        (4)          (2)          2
                                                                   ----         ---          --
                                                       
       Deferred Federal income tax expense (benefit)   
          per financial statements                               $ (67)          20           6
                                                                   ====         ===          ==
</TABLE>

       The composition of the Bancorp's net deferred tax liability at September
       30 is as follows:

<TABLE>
<CAPTION>
                                                                       1996                        1995
                                                                       ----                        ----
                                                                                (In thousands)
       <S>                                                             <C>                           <C>
       Taxes (payable) refundable on temporary
           differences at statutory rate:
       Deferred loan origination fees (costs)                          $   24                         13
       Federal Home Loan Bank stock dividends                              54                         46
       Unearned discount on loans purchased in
           reciprocal sale transaction                                     21                         23
       SAIF assessment not deductible until paid                          (80)                         -
       Unrealized gain on investments available
           for sale                                                         5                          2
       Book/tax depreciation                                               14                         16
       General loan loss allowance                                        (26)                       (22)
       Percentage of earnings bad debt deduction                           22                         20
                                                                          ---                        ---

       Net deferred tax liability                                      $   34                         98
                                                                          ===                        ===
</TABLE>


                                     - 42 -
<PAGE>   40
       The Kenwood Savings Bank is allowed a special bad debt deduction,
       generally limited to 8% of otherwise taxable income, and subject to
       certain limitations based on aggregate loans and deposit account
       balances at the end of the year. If the amounts that qualify as
       deductions for federal income taxes are later used for purposes other
       than bad debt losses, including distributions in liquidation, such
       distributions will be subject to federal income taxes at the then
       current corporate income tax rate.  Retained earnings at September 30,
       1996 include approximately $250,000 for which federal income taxes have
       not been provided.  The approximate amount of unrecognized deferred tax
       liability relating to the cumulative bad debt deduction was
       approximately $100,000 at September 30, 1996.

       A bill repealing the thrift bad debt reserve has been signed into law
       and is effective for taxable years beginning after December 31, 1995.
       All saving banks and thrifts will be required to account for tax
       reserves for bad debts in the same manner as banks.  Such entities with
       assets less than $500 million will be required to maintain a moving
       average experience based reserve and no longer will be able to calculate
       a reserve based on a percentage of taxable income.

       Tax reserves accumulated after 1987 will automatically be subject to
       recapture.  The recapture will be done in equal amounts over six years
       beginning in 1997 and can be deferred up to two years, depending on the
       level of loans originated.

       As a result of the tax law change, the Bancorp is expected to ultimately
       recapture approximately $80,000 of tax reserves accumulated after 1987,
       results in addition tax payments of $22,000.  The recapture of these
       reserves will not result in any significant income statement effect to
       the Bancorp.  Pre-1988 tax reserves will not have to be recaptured
       unless the thrift or successor institution liquidates, redeems shares or
       pays a dividend in excess of earnings and profits.

 9.    Commitments:

       The Bancorp is a party to financial instruments with off-balance-sheet
       risk in the normal course of business to meet the financing needs of
       their customers including commitments to extend credit.  Such
       commitments involve, to varying degrees, elements of credit and
       interest-rate risk in excess of the amount recognized in the statement
       of financial condition. The contract or notional amounts of the
       commitments reflect the extent of the Bancorp's involvement in such
       financial instruments.

       The Bancorp's exposure to credit loss in the event of nonperformance by
       the other party to the financial instrument for commitments to extend
       credit is represented by the contractual notional amount of those
       instruments.  The Bancorp uses the same credit policies in making
       commitments and conditional obligations as those utilized for
       on-balance-sheet instruments.

       The following schedule lists commitments and off-balance-sheet items at
       September 30, 1996 and 1995.

<TABLE>
<CAPTION>
                                                                                                 Unused
                                                                  Loan                        Home Equity
                                                               Commitments                   Line of Credit
                                                               -----------                   --------------
                 <S>                                             <C>                               <C>
                 September 30, 1996                              $ 413                             888
                 September 30, 1995                                946                             445
</TABLE>

       In the opinion of management, the loan commitments equaled or exceeded
       prevalent market interest rates as of September 30, 1996, and all
       commitments will be funded via cash flow from operations and existing
       excess liquidity.  Of the total loan commitments, $267,000 was fixed
       rate residential loans, with rates ranging from 7.50% to 8.125%,
       $207,000 of which were designated for sale.  Management expects no
       losses as a result of these transactions.

       The Bancorp leases office space for its loan origination office under
       annual lease with monthly lease expense of $1,370.  Rent expense for
       the


                                     - 43 -
<PAGE>   41
       year ended September 30, 1996, and 1995, totaled $14,280 and $8,000. 
       Future minimum rents are $5,480 for 1997.  The lease in renewable on an
       annual basis.

10.    Capital Requirements:

       The Savings Bank is subject to minimum regulatory capital requirements
       promulgated by the OTS.  The minimum capital standards generally require
       the maintenance of regulatory capital sufficient to meet each of three
       tests, hereinafter described as the tangible capital requirement, the
       core capital requirement and the risk-based capital requirement.

       The tangible capital requirement provides for minimum tangible capital
       (defined as stockholders' equity less all intangible assets) equal to
       1.5% of adjusted total assets.  The core capital requirement provides
       for minimum core capital (tangible capital plus certain forms of
       supervisory goodwill and other qualifying intangible assets) equal to
       3.0% of adjusted total assets.  The risk-based capital requirement
       currently provides for the maintenance of core capital plus general loss
       allowances equal to 8.0% of risk-weighted assets.  In computing
       risk-weighted assets, the Savings Bank multiplies the value of each
       asset on its statement of financial condition by a defined
       risk-weighting factor, e.g., one-to-four family residential loans carry
       a risk-weighted factor of 50%.

       As of September 30, 1996, the Savings Bank's regulatory capital exceed
       all minimum capital requirements as shows in the following table:

<TABLE>
<CAPTION>
                                                                      Regulatory Capital
                                           Taxable                    Core                  Risk-based
                                           Capital      Percent      Capital      Percent    Capital      Percent
                                           -------      -------      -------      -------    -------      -------
       <S>                                  <C>           <C>          <C>         <C>          <C>       <C>
       Capital under generally
          accepted accounting
          principles                        $ 4,007         -          4,007         -          4,007        -
       Unrealized gain on
          available for sale
          securities                            (12)        -            (12)        -            (12)       -
       General valuation
          allowances                            -           -            -           -             95        -  
                                             ------       ---         ------       ---          -----     ----
       Regulatory capital
          computed                            3,995       7.9          3,995       7.9          4,090     18.5
       Minimum capital
          requirements                          757       1.5          1,513       3.0          1,767      8.0
                                              -----      ----          -----      ----          -----    -----

       Regulatory capital-
          excess                              3,238       6.4          2,482       4.9          2,323     10.5
                                              =====      ====          =====      ====          =====    =====
</TABLE>

11.    Reorganization and Change of Corporate Form:

       On June 28, 1996, Kenwood Savings Bank, and Ohio-chartered stock savings
       and loan association ("Kenwood" or the "Savings Bank") completed its
       reorganization from the mutual holding company form of organization to
       the stock holding company form of organization.  Pursuant to the terms
       of a Plan of Conversion and Agreement and Plan of Reorganization adopted
       by  Kenwood and Kenwood Federal Mutual Holding company, a federally
       chartered mutual holding company (the "Mutual Holding Company"), (i)
       Kenwood incorporated Kenwood Bancorp, Inc. (the "Bancorp") as a wholly
       owned subsidiary of Kenwood, (ii) the Mutual Holding Company converted
       to an interim federal stock savings institution and simultaneously
       merged with and into Kenwood, pursuant to which the Mutual Holding
       Company ceased to exist and the 81,000 or 53.4% on the shares of common
       stock of Kenwood held by the Mutual Holding Company were and (iii) an
       interim institution ("Interim") formed as a wholly owned subsidiary of
       the Bancorp, merged with and into Kenwood.  As a result of the merger of
       the Interim with and into Kenwood, Kenwood became a wholly owned
       subsidiary of the Bancorp and the outstanding shares of common stock of
       Kenwood which amounted to 70,756 shares or 46.6% (other than those held
       by the Mutual Holding Company) were converted pursuant to a specified
       exchange ratio into shares of common stock of the Bancorp (collectively,
       the "Conversion and Reorganization"). In connection with the foregoing,
       Kenwood amended its articles of incorporation to change its corporate
       title from "Kenwood Savings and Loan


                                     - 44 -
<PAGE>   42
       Association" to "Kenwood Savings Bank" and the Bancorp also offered and
       sold additional shares of its common stock to certain depositors and
       employee benefit plans of Kenwood (the "Offering").

       In November 1992, The Kenwood Savings and Loan Association (Kenwood)
       completed its reorganization pursuant to its plan of reorganization (the
       Plan) into a federally-chartered mutual holding company.  The Plan was
       approved by the Board of Directors, Kenwood's members, the Office of
       Thrift Supervision, and the Federal Deposit Insurance Corporation prior
       to its implementation.

       In accordance with the Reorganization, Kenwood organized Kenwood Savings
       and Loan Association (the Association), a state-chartered, stock savings
       and loan association, and transferred all but $100,000 of its assets and
       all of its liabilities to the Association in exchange for 81,000 shares
       of common stock, $ .10 par value per share, and reorganized from a
       state-chartered mutual savings and loan association to a
       federally-chartered mutual holding company known as Kenwood Federal
       Mutual Holding Company (the Company).

       Concurrent with the Reorganization, the Association issued an additional
       69,000 shares of its common stock to members of the public at $10 per
       share.

       The rights of the Savings Banks depositors in liquidation in the
       conversion to stock form are maintained by the Savings Bank in an amount
       equal to the retained earnings of the Savings Bank reflected in the
       statement of financial condition used in the conversion offering
       circular. The liquidation account will be maintained for the benefit of
       eligible savings account holders who maintained deposit accounts in the
       Savings Bank after conversion.

12.    Summarized Financial Information of the Parent Company:

       The following condensed financial statements summarize the financial
       position of Kenwood Bancorp, Inc. as of September 30, 1996, and the
       results of its operations for the year ended September 30, 1996.


                             KENWOOD BANCORP, INC.

                        Statement of Financial Condition
                                 (In Thousands)


<TABLE>
       <S>                                               <C>
       Assets:
         Cash                                                $   239
         Investment in Kenwood Savings Bank                      926
                                                               -----
                                                             $ 1,165
                                                               =====

       Liabilities and stockholders' equity:
         Liabilities:
            Accounts payable - Kenwood Savings Bank          $     6
                                                               -----

         Stockholders' equity:
            Common stock                                           3
            Additional paid in capital                         1,304
            Retained earnings                                    (22)
            Less unearned ESOP shares                           (126)
                                                               ----- 

                                                               1,159
                                                               -----

                                                               1,165
                                                               =====


                           Statement of Income
                           -------------------


       Interest income                                       $     2

       Director's fees                                            (3)
                                                               ----- 

            Net loss                                         $     1
                                                               =====
</TABLE>



                                     - 45 -
<PAGE>   43
13.    SAIF Special Assessment:

       The deposits of the Savings Bank are presently insured by the SAIF,
       which together with the BIF, are the two insurance funds administered by
       the FDIC.  On November 8, 1995, the FDIC revised the premium schedule
       for BIF-insured banks to provide a range of .00% to .31% of deposits (as
       compared to the current range of .23% to 31.% of deposits for
       SAIF-insured institutions) due to the BIF achieving its statutory
       reserve ratio.  As a result, BIF members generally would pay
       substantially lower premiums than SAIF members.  It was previously
       anticipated that the SAIF will not be adequately recaptialized until
       2002, absent a substantial increase in premium rates or the imposition
       of special assessments or other significant developments.

       On September 30, 1996, the President signed an omnibus appropriations
       package which included the recapitalization of the Savings Association
       Insurance Fund (SAIF).  All SAIF members will be required to pay a
       one-time assessment of 65.7 cents per $100 in deposits held on March 31,
       1995. Savings Bank's special assessment will be approximately $289,000.
       The assessment was charged against earnings during the 1996 fiscal year
       and is being carried as a payable until actually paid during the first
       quarter of the 1997 fiscal year.  Beginning January 1, 1997, SAIF
       members will be assessed a premium of 6.4 cents per $100 of deposits to
       cover the FICO obligation plus a regular insurance premium.  At the
       present time the regular insurance premium which applies to Bancorp is 3
       cents per $100 of deposits.  Other provisions of the appropriations
       package require the Treasury Department to provide Congress, by March
       31, 1997, with a report on merging of the bank and thrift charters and
       merging the SAIF and Bank Insurance Fund (BIF) by January 1, 1999,
       provided that the bank and thrift charters have been merged by that
       date.  It also required BIF and SAIF members to begin sharing the FICO
       obligation on a pro-rata basis at the earlier of January 1, 2000, or
       when the BIF and SAIF funds are merged.





                                     - 46 -
<PAGE>   44
                               STOCK INFORMATION

       The reorganization of the Savings Bank into the mutual holding company
form of organization was completed effective November 13, 1992.  In connection
with the reorganization, the Savings Bank issued 69,000 shares of common stock
to certain members of the general public at the initial price of $10.00 per
share and an additional 81,000 shares of common stock to Kenwood Federal Mutual
Holding Company.  On June 28, 1996, the Savings Bank completed its
reorganization into the stock holding company form of organization.  In
connection therewith, shares of common stock of the Savings Bank were converted
into shares of common stock of the Company, the Savings Bank's newly formed
stock holding company, pursuant to a specified exchange ratio.  In addition,
the Company also offered and sold additional shares of common stock to certain
depositors and employee benefit plans of the Savings Bank.

       At December 16, 1996, and as a result of the foregoing, the Company had
295,133 shares of common stock outstanding which were held by approximately 185
stockholders.  There is no active and liquid public trading market for shares
of the Company's common stock.

       During fiscal 1994, 1995 and 1996, the Boards of Directors of the
Savings Bank and the Company declared and paid cash dividends as follows:

<TABLE>
<CAPTION>
                                 AMOUNT PER
 DECLARATION DATE                 SHARE(2)       RECORD DATE            DISTRIBUTION DATE
 ----------------------------    -----------     ------------------     ---------------------
 <S>                                  <C>        <C>                    <C>
 October 14, 1993(1)                  .07        November 1, 1993       November 15, 1993
 December 9, 1993(1)                  .26        December 31, 1993      January 17, 1994
 January 13, 1994(1)                  .07        February 1, 1994       February 15, 1994
 April 7, 1994(1)                     .07        May 1, 1994            May 16, 1994
 July 14, 1994(1)                     .07        August 1, 1994         August 16, 1994
 October 13, 1994(1)                  .07        November 1, 1994       November 15, 1994
 January 12, 1995                     .07        February 1, 1995       February 15, 1995
 April 13, 1995                       .07        May 1, 1995            May 15, 1995
 July 6, 1995                         .07        August 1, 1995         August 15, 1995
 October 5, 1995                      .07        November 1, 1995       November 15, 1995
 January 11, 1996(1)                  .07        February 1, 1996       February 15, 1996
 April 11, 1996(1)                    .07        May 1, 1996            May 15, 1996
 July 9, 1996                         .07        August 1, 1996         August 15, 1996
</TABLE>                      

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

(1)    Cash dividends were waived by Kenwood Federal Mutual Holding Company.

(2)    Cash dividends declared per share prior to June 28, 1996, have been
       adjusted to account for the exchange of one share of the Bank's common
       stock for 1.9463 shares of the Company's common stock in the Conversion
       and Reorganization.


                                      47
<PAGE>   45
                            DIRECTORS AND OFFICERS
<TABLE>
 <S>                            <C>
 DIRECTORS

 Robert P. Isler                President and Chairman of the Board of Kenwood Bancorp, Inc. and Kenwood
                                Savings Bank

 P. Lincoln Mitchell            Secretary of Kenwood Bancorp, Inc. and Kenwood Savings
                                  Bank and Real Estate Appraiser

 James N. Murphy                Owner of Kenwood Pharmacy

 Richard C. Kent                Owner of Kent Insurance Agency, Inc.

 Donald G. Ashcraft             Owner of Vintage Title Agency, Inc.

 EXECUTIVE OFFICERS

 Robert P. Isler                President and Chairman of the Board of Kenwood Bancorp,
                                  Inc. and Kenwood Savings Bank

 Thomas W. Burns                Executive Vice President and Chief Executive Officer of
                                  Kenwood Bancorp, Inc. and Kenwood Savings Bank


 P. Lincoln Mitchell            Secretary of Kenwood Bancorp, Inc. and Kenwood Savings
                                  Bank
</TABLE>



                                OFFICE LOCATIONS


7711 Montgomery Road
Cincinnati, Ohio 45236

10999 Reed Hartman Highway
Cincinnati, Ohio  45242
(loan origination office)



                                      48
<PAGE>   46
                             CORPORATE INFORMATION



CORPORATE HEADQUARTERS:                    ANNUAL MEETING:

Kenwood Bancorp, Inc.                      January 30, 1997, 4:00 p.m.
7711 Montgomery Road                       Kenwood Bancorp, Inc.
Cincinnati, Ohio 45326                     7711 Montgomery Road
(513) 791-2834                             Cincinnati, Ohio 45236


TRANSFER AGENT AND REGISTRAR:

The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45202

INDEPENDENT AUDITORS:

Clark, Schaefer, Hackett & Co.
105 East Fourth Street
16th Floor
Cincinnati, Ohio  45273-9287


SPECIAL LEGAL COUNSEL:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W., 12th Floor
Washington, D.C. 20005



                                      49