##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For Quarterly Period ended June 30, 2002

Commission File Number 0-24120

WESTERN OHIO FINANCIAL CORPORATION

---

|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 31-1403116                       
|                                                               |  |                                  
|(State or
other jurisdiction of
incorporation or organization) |  | (IRS Employer
Identification No.)

|                                                   
|---------------------------------------------------
|28 East Main Street, Springfield, Ohio 45501-0509  
|                                                   
|(Address of
principal executive offices)
(Zip Code)

|                                                    
|----------------------------------------------------
|(937) 325-9990                                      
|                                                    
|(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes
X          
No

Indicate the number of shares outstanding of each of the registrants classes of
common stock, as of the latest practicable date.

|                                    |  |                                                       
|----------------------------------- |  | ------------------------------------------------------
|Class:
Common stock, $.01 par value |  | Outstanding at August 12, 2002
common shares 1,755,961





---

TABLE OF CONTENTS



|                                                                                              |                                                            |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------------- |  |  |  |  |  |  | 
|PART I - FINANCIAL INFORMATION (UNAUDITED)                                                   
|Item 1. Condensed Financial Statements                                                       
|                                                                                              | CONSOLIDATED BALANCE SHEETS                               
|                                                                                              | CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
|                                                                                              | CONSOLIDATED STATEMENTS OF CASH FLOWS                     
|                                                                                              | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS      
|Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
|Item 3. Quantitative and Qualitative Disclosure About Market Risk                            
|PART II  OTHER INFORMATION                                                                  
|Item 1   Legal Proceedings                                                                  
|Item 2   Changes in Securities and Use of Proceeds                                          
|Item 3   Defaults Upon Senior Securities                                                    
|Item 4   Submission of Matters to a Vote of Security Holders                                
|Item 5   Other Information                                                                  
|Item 6   Exhibits and Reports on Form 8-K                                                   
|SIGNATURES                                                                                   
|EX-99.1 Certification by CEO                                                                 
|EX-99.2 Certification by CFO                                                                 



---



##### Table of Contents



WESTERN OHIO FINANCIAL CORPORATION

INDEX

|                                                                                                                 |  |     
|---------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                 |  | Page
|                                                                                                                 |  |     
|PART I  FINANCIAL INFORMATION (UNAUDITED)                                                                       |  |     
|                                                                                                                
|Item 1. Condensed Financial Statements                                                                           |  |     
|                                                                                                                
|Consolidated Balance Sheets                                                                                      |  | 3   
|                                                                                                                
|Consolidated Statements of Income and Comprehensive Income                                                       |  | 4   
|                                                                                                                
|Consolidated Statements of Cash Flows                                                                            |  | 5   
|                                                                                                                
|Notes to Condensed Consolidated Financial Statements                                                             |  | 6   
|                                                                                                                
|Item 2.
Managements Discussion and Analysis of
           
       Financial Condition and Results of Operations |  | 11  
|                                                                                                                
|Item 3. Quantitative and Qualitative Disclosure About Market Risk                                                |  | 16  
|                                                                                                                
|PART II  OTHER INFORMATION                                                                                      |  |     
|                                                                                                                
|Item 1. Legal Proceedings                                                                                        |  | 17  
|                                                                                                                
|Item 2. Changes in Securities and Use of Proceeds                                                                |  | 17  
|                                                                                                                
|Item 3. Defaults Upon Senior Securities                                                                          |  | 17  
|                                                                                                                
|Item 4. Submission of Matters to a Vote of Security Holders                                                      |  | 17  
|                                                                                                                
|Item 5. Other Information                                                                                        |  | 17  
|                                                                                                                
|Item 6. Exhibits and Reports on Form 8-K                                                                         |  | 17  
|                                                                                                                
|SIGNATURES                                                                                                       |  | 18  
|                                                                                                                
|CERTIFICATIONS                                                                                                   |  |     

2.



---



##### Table of Contents



WESTERN OHIO FINANCIAL CORPORATION

---







Item 1. Condensed Financial Statements




(Amounts in thousands, except share data)

|                                     |                                                                                   |                            |                                            |         |          |         |              |         |         |         | 
|------------------------------------ | --------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ------- | -------- | ------- | ------------ | ------- | ------- | ------- | 
|                                     |                                                                                   |                            |                                            |         | June 30, |         | December 31,
|                                     |                                                                                   |                            |                                            |         | 2002     |         | 2001        
|                                     |                                                                                   |                            |                                            |         |          |         |             
|ASSETS                               |                                                                                   |                            |                                            |         |          |         |              |        
|                                    
|                                    
|                                    
|                                    
|                                     | Cash and cash equivalents                                                         |                            | $                                          | 7,721   |          |         | $            | 16,915  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Securities available for sale                                                     |                            |                                            | 51,562  |          |         |              | 39,648  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Federal Home Loan Bank stock                                                      |                            |                                            | 8,765   |          |         |              | 8,568   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Loans, net                                                                        |                            |                                            | 271,115 |          |         |              | 269,300 |        
|                                    
|                                    
|                                    
|                                    
|                                     | Premises and equipment, net                                                       |                            |                                            | 4,636   |          |         |              | 4,888   |        
|                                    
|                                    
|                                    
|                                    
|                                     | Other assets                                                                      |                            |                                            | 2,944   |          |         |              | 2,392   |        
|                                     |                                                                                   |                            |                                            |         |          |         |              |         |        
|                                     |                                                                                   |                            | Total assets                               |         | $        | 346,743 |              |         | $       | 341,711 | 
|                                     |                                                                                   |                            |                                            |         |          |         |              |         |        
|LIABILITIES
AND SHAREHOLDERS EQUITY |                                                                                   |                            |                                            |         |          |         |              |        
|                                    
|                                    
|                                    
|                                    
|                                     | Deposits                                                                          |                            | $                                          | 216,720 |          |         | $            | 220,287 |        
|                                    
|                                    
|                                    
|                                    
|                                     | Borrowed funds                                                                    |                            |                                            | 84,449  |          |         |              | 76,655  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Other liabilities                                                                 |                            |                                            | 2,878   |          |         |              | 2,824   |        
|                                     |                                                                                   |                            |                                            |         |          |         |              |         |        
|                                     |                                                                                   | Total liabilities          |                                            |         | 304,047  |         |              |         | 299,766 |        
|                                     |                                                                                   |                            |                                            |         |          |         |              |         |        
|Shareholders equity                 |                                                                                   |                            |                                            |         |          |         |              |        
|                                    
|                                    
|                                    
|                                    
|                                     | Common stock, $.01 par value, 7,250,000 shares
authorized,2,645,000 shares issued |                            |                                            | 26      |          |         |              | 26      |        
|                                    
|                                    
|                                    
|                                    
|                                     | Additional paid-in capital                                                        |                            |                                            | 40,632  |          |         |              | 40,622  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Accumulated other comprehensive income                                            |                            |                                            | 493     |          |         |              | 63      |        
|                                    
|                                    
|                                    
|                                    
|                                     | Unearned employee stock ownership plan shares                                     |                            |                                            | (476    | )        |         |              | (595    | )      
|                                    
|                                    
|                                    
|                                    
|                                     | Unearned management recognition plan shares                                       |                            |                                            | (72     | )        |         |              | (72     | )      
|                                    
|                                    
|                                    
|                                    
|                                     | Shares held by deferred compensation plan                                         |                            |                                            | (260    | )        |         |              | (173    | )      
|                                    
|                                    
|                                    
|                                    
|                                     | Treasury stock; 889,039 and 889,499 shares at cost,
respectively                  |                            |                                            | (18,095 | )        |         |              | (18,157 | )      
|                                    
|                                    
|                                    
|                                    
|                                     | Retained earnings                                                                 |                            |                                            | 20,448  |          |         |              | 20,231  |        
|                                     |                                                                                   |                            |                                            |         |          |         |              |         |        
|                                     |                                                                                   | Total shareholders equity |                                            |         | 42,696   |         |              |         | 41,945  |        
|                                     |                                                                                   |                            |                                            |         |          |         |              |         |        
|                                     |                                                                                   |                            | Total liabilities and shareholders equity |         | $        | 346,743 |              |         | $       | 341,711 | 
|                                     |                                                                                   |                            |                                            |         |          |         |              |         |        

See accompanying notes to condensed consolidated financial statements.

3.



---



##### Table of Contents



WESTERN OHIO FINANCIAL CORPORATION




---

(Amounts in thousands, except per
share data)

|                                                    |                                               |   |                    |       |                  |   |       |       |      |   |        |       |  |   |        |        | 
|--------------------------------------------------- | --------------------------------------------- | - | ------------------ | ----- | ---------------- | - | ----- | ----- | ---- | - | ------ | ----- |  | - | ------ | ------ | 
|                                                    |                                               |   | Three Months Ended |       | Six Months Ended
|                                                    |                                               |   | June 30,           |       | June 30,        
|                                                    |                                               |   | 2002               |       | 2001             |   | 2002  |       | 2001
|                                                    |                                               |   |                    |       |                  |   |       |       |     
|Interest
and dividend income                        |                                               |   |                    |       |                  |   |       |       |      |   |        |       |  |   |        |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Loans, including fees                         |   | $                  | 4,781 |                  |   | $     | 5,502 |      |   | $      | 9,526 |  |   | $      | 11,181 | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Securities                                    |   |                    | 708   |                  |   |       | 677   |      |   |        | 1,310 |  |   |        | 1,444  | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Interest-bearing deposits and overnight funds |   |                    | 1     |                  |   |       | 31    |      |   |        | 28    |  |   |        | 41     | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Other interest and dividend income            |   |                    | 103   |                  |   |       | 148   |      |   |        | 198   |  |   |        | 291    | 
|                                                    |                                               |   |                    |       |                  |   |       |       |      |   |        |       |  |   |        |        | 
|                                                    |                                               |   | 5,593              |       |                  |   | 6,358 |       |      |   | 11,062 |       |  |   | 12,957 |       
|                                                    |                                               |   |                    |       |                  |   |       |       |      |   |        |       |  |   |        |        | 
|Interest
expense                                    |                                               |   |                    |       |                  |   |       |       |      |   |        |       |  |   |        |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Deposits                                      |   |                    | 1,898 |                  |   |       | 2,712 |      |   |        | 3,933 |  |   |        | 5,428  | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Borrowed funds                                |   |                    | 1,069 |                  |   |       | 1,259 |      |   |        | 2,106 |  |   |        | 2,657  | 
|                                                    |                                               |   |                    |       |                  |   |       |       |      |   |        |       |  |   |        |        | 
|                                                    |                                               |   | 2,967              |       |                  |   | 3,971 |       |      |   | 6,039  |       |  |   | 8,085  |       
|                                                    |                                               |   |                    |       |                  |   |       |       |      |   |        |       |  |   |        |        | 
|Net
interest income                                 |                                               |   | 2,626              |       |                  |   | 2,387 |       |      |   | 5,023  |       |  |   | 4,872  |       
|                                                   
|                                                   
|                                                   
|                                                   
|Provision for loan losses                           |                                               |   | 84                 |       |                  |   | 84    |       |      |   | 168    |       |  |   | 189    |       
|                                                    |                                               |   |                    |       |                  |   |       |       |      |   |        |       |  |   |        |        | 
|Net
interest income after provision for loan losses |                                               |   | 2,542              |       |                  |   | 2,303 |       |      |   | 4,855  |       |  |   | 4,683  |       
|                                                    |                                               |   |                    |       |                  |   |       |       |      |   |        |       |  |   |        |        | 
|Noninterest
income                                  |                                               |   |                    |       |                  |   |       |       |      |   |        |       |  |   |        |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Service charges                               |   |                    | 552   |                  |   |       | 327   |      |   |        | 1,060 |  |   |        | 702    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Net gain on sale of loans                     |   |                    | 134   |                  |   |       | 41    |      |   |        | 194   |  |   |        | 63     | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Net gain on sale of securities                |   |                    | 28    |                  |   |       |      |      |   |        | 28    |  |   |        | 3      | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Other                                         |   |                    | 6     |                  |   |       | 5     |      |   |        | 12    |  |   |        | 10     | 
|                                                    |                                               |   |                    |       |                  |   |       |       |      |   |        |       |  |   |        |        | 
|                                                    |                                               |   | 720                |       |                  |   | 373   |       |      |   | 1,294  |       |  |   | 778    |       
|                                                   
|                                                   
|                                                   
|                                                   
|Noninterest
expense                                 |                                               |   |                    |       |                  |   |       |       |      |   |        |       |  |   |        |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Salaries and employee benefits                |   |                    | 1,180 |                  |   |       | 1,026 |      |   |        | 2,308 |  |   |        | 2,041  | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Occupancy and equipment                       |   |                    | 261   |                  |   |       | 215   |      |   |        | 488   |  |   |        | 426    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Federal deposit insurance                     |   |                    | 10    |                  |   |       | 10    |      |   |        | 19    |  |   |        | 20     | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | State franchise taxes                         |   |                    | 139   |                  |   |       | 132   |      |   |        | 273   |  |   |        | 267    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Professional services                         |   |                    | 188   |                  |   |       | 118   |      |   |        | 273   |  |   |        | 236    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Advertising                                   |   |                    | 70    |                  |   |       | 63    |      |   |        | 153   |  |   |        | 133    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Data processing                               |   |                    | 208   |                  |   |       | 211   |      |   |        | 410   |  |   |        | 396    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Other                                         |   |                    | 246   |                  |   |       | 243   |      |   |        | 586   |  |   |        | 469    | 
|                                                    |                                               |   |                    |       |                  |   |       |       |      |   |        |       |  |   |        |        | 
|                                                    |                                               |   | 2,302              |       |                  |   | 2,018 |       |      |   | 4,510  |       |  |   | 3,988  |       
|                                                    |                                               |   |                    |       |                  |   |       |       |      |   |        |       |  |   |        |        | 
|Income before income taxes                          |                                               |   | 960                |       |                  |   | 658   |       |      |   | 1,639  |       |  |   | 1,473  |       
|                                                   
|                                                   
|                                                   
|                                                   
|Income tax expense                                  |                                               |   | 328                |       |                  |   | 226   |       |      |   | 558    |       |  |   | 519    |       
|                                                    |                                               |   |                    |       |                  |   |       |       |      |   |        |       |  |   |        |        | 
|Net
income                                          |                                               |   | 632                |       |                  |   | 432   |       |      |   | 1,081  |       |  |   | 954    |       
|                                                   
|                                                   
|                                                   
|                                                   
|Other comprehensive income                          |                                               |   | 620                |       |                  |   | 110   |       |      |   | 430    |       |  |   | 537    |       
|                                                    |                                               |   |                    |       |                  |   |       |       |      |   |        |       |  |   |        |        | 
|Comprehensive income                                |                                               | $ | 1,252              |       |                  | $ | 542   |       |      | $ | 1,511  |       |  | $ | 1,491  |       
|                                                    |                                               |   |                    |       |                  |   |       |       |      |   |        |       |  |   |        |        | 
|Earnings per common share                           |                                               |   |                    |       |                  |   |       |       |      |   |        |       |  |   |        |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Basic                                         |   | $                  | .37   |                  |   | $     | .25   |      |   | $      | .63   |  |   | $      | .55    | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Diluted                                       |   | $                  | .36   |                  |   | $     | .25   |      |   | $      | .62   |  |   | $      | .55    | 
|                                                   
|                                                   
|                                                   
|                                                   
|Dividends per common share                          |                                               | $ | .25                |       |                  | $ | .25   |       |      | $ | .50    |       |  | $ | .50    |       

See accompanying notes to condensed consolidated financial statements.

4.



---



##### Table of Contents



WESTERN OHIO FINANCIAL CORPORATION




---

|                                                 |                                                                 |                                    |        |                  |         |      |       |         |         |  
|------------------------------------------------ | --------------------------------------------------------------- | ---------------------------------- | ------ | ---------------- | ------- | ---- | ----- | ------- | ------- | -
|                                                 |                                                                 |                                    |        | Six Months Ended
|(Amount in thousands)                            |                                                                 | June 30,                          
|                                                 |                                                                 |                                    |        | 2002             |         | 2001
|                                                 |                                                                 |                                    |        |                  |         |     
|Net
cash from operating activities               |                                                                 | $                                  | 1,454  |                  |         | $    | 1,667 |        
|                                                
|                                                
|                                                
|                                                
|Cash
flows from investing activities             |                                                                 |                                    |        |                  |         |      |       |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Securities available for sale:                                  |                                    |        |                  |         |      |       |         |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                 | Maturities and principal payments  |        |                  | 6,041   |      |       |         | 3,742   |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                 | Purchases                          |        |                  | (20,482 | )    |       |         | (1,459  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                 | Sales                              |        |                  | 3,056   |      |       |         | 4,585   |  
|                                                
|                                                
|                                                
|                                                
|                                                 | Net (increase) decrease in loans                                |                                    |        | 8,896            |         |      |       | 5,009   |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchases of loans                                              |                                    |        | (10,857          | )       |      |       | (1,582  | )      
|                                                
|                                                
|                                                
|                                                
|                                                 | Premises and equipment expenditures                             |                                    |        | (88              | )       |      |       | (273    | )      
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from sale of premises and equipment                    |                                    |        | 2                |         |      |       | 20      |        
|                                                 |                                                                 |                                    |        |                  |         |      |       |        
|                                                 |                                                                 | Net cash from investing activities |        |                  | (13,432 | )    |       |         | 10,042  |  
|                                                 |                                                                 |                                    |        |                  |         |      |       |        
|Cash
flows from financing activities             |                                                                 |                                    |        |                  |         |      |       |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Net change in deposits                                          |                                    |        | (3,567           | )       |      |       | 4,143   |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Net decrease in advances from borrowers for taxes and insurance |                                    |        | (477             | )       |      |       | (220    | )      
|                                                
|                                                
|                                                
|                                                
|                                                 | Purchase of treasury stock                                      |                                    |        | (342             | )       |      |       | (853    | )      
|                                                
|                                                
|                                                
|                                                
|                                                 | Cash dividends paid                                             |                                    |        | (883             | )       |      |       | (873    | )      
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from exercise of stock options                         |                                    |        | 259              |         |      |       | 35      |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Net increase (decrease) in short-term borrowings                |                                    |        | (1,040           | )       |      |       | (14,650 | )      
|                                                
|                                                
|                                                
|                                                
|                                                 | Proceeds from FHLB advances                                     |                                    |        | 12,538           |         |      |       | 2,500   |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Repayments on FHLB advances                                     |                                    |        | (3,704           | )       |      |       | (459    | )      
|                                                 |                                                                 |                                    |        |                  |         |      |       |        
|                                                 |                                                                 | Net cash from financing activities |        |                  | 2,784   |      |       |         | (10,377 | )
|                                                 |                                                                 |                                    |        |                  |         |      |       |        
|Net change in cash and cash equivalents          |                                                                 |                                    | (9,194 | )                |         |      | 1,332 |        
|                                                
|                                                
|                                                
|                                                
|Cash and cash equivalents at beginning of period |                                                                 |                                    | 16,915 |                  |         |      | 4,805 |        
|                                                 |                                                                 |                                    |        |                  |         |      |       |        
|Cash and cash equivalents at end of period       |                                                                 | $                                  | 7,721  |                  |         | $    | 6,137 |        
|                                                 |                                                                 |                                    |        |                  |         |      |       |        

See accompanying notes to condensed consolidated financial statements.

5.



---



##### Table of Contents



WESTERN OHIO FINANCIAL CORPORATION




---

NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance accounting principles
generally accepted in the United States for interim financial reporting and with
the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. These unaudited condensed consolidated financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Corporations annual report on Form 10-K for the year ended December 31,
2001. The financial data and results of operations for interim periods presented
may not necessarily reflect the results to be anticipated for the entire year.
Internal financial information is primarily reported and aggregated solely in
the line of the banking business.

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

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

Income Taxes: Income tax expense is the total of the current-year income tax due
or refundable and the change in deferred tax assets and liabilities. Deferred
tax assets and liabilities are the expected future tax amounts for the temporary
differences between the carrying amounts and tax basis of assets and
liabilities, computed using enacted tax rates. A valuation allowance, if needed,
reduces deferred tax assets to the amount expected to be realized. Income tax
expense is based on the effective rate expected to be applicable for the entire
year.

Earnings Per Common Share: Basic earnings per common share is based on net
income divided by the weighted average number of common shares outstanding
during the period. Employee Stock Ownership Plan (ESOP) shares are considered
to be outstanding for the calculation unless unearned. Management Recognition
Plan (MRP) shares are considered outstanding as they become vested. Diluted
earnings per common share include the dilutive effect of additional potential
common shares issuable under stock options.

New Accounting Standards: A new accounting standard dealing with asset
retirement obligations will apply for 2003. The Corporation does not believe
this standard will have a material affect on its financial condition or results
of operations.

Effective January 1, 2002, the Corporation adopted a new accounting standard
issued by the Financial Accounting Standards Board on impairment and disposal of
long-lived assets. The effect of this standard on the financial position and
results of operations of the Corporation was not material.

6.



---



##### Table of Contents



WESTERN OHIO FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

---

NOTE 2  SECURITIES

The amortized cost and fair values of securities available for sale were as
follows:

|                       |                            |  |           |            |            |       |      |       |       |  |   |      |   |  |   |        | 
|---------------------- | -------------------------- |  | --------- | ---------- | ---------- | ----- | ---- | ----- | ----- |  | - | ---- | - |  | - | ------ | 
|(Amounts in thousands) |                            |  |           |            |            | Gross |      | Gross |       |  |   |     
|                       |                            |  | Amortized | Unrealized | Unrealized | Fair 
|                       |                            |  | Cost      |            | Gains      |       | Loss |       | Value
|                       |                            |  |           |            |            |       |      |       |      
|June 30,
2002          |                            |  |           |            |            |       |      |       |       |  |   |      |   |  |   |       
|                      
|                      
|                      
|                      
|                       | U.S. government agencies   |  | $         | 4,156      |            |       | $    | 60    |       |  | $ |     |   |  | $ | 4,216  | 
|                      
|                      
|                      
|                      
|                       | Municipal securities       |  |           | 1,633      |            |       |      |      |       |  |   | (16  | ) |  |   | 1,617  | 
|                      
|                      
|                      
|                      
|                       | Mortgage-backed securities |  |           | 45,026     |            |       |      | 704   |       |  |   | (1   | ) |  |   | 45,729 | 
|                       |                            |  |           |            |            |       |      |       |       |  |   |      |   |  |   |        | 
|                       | Total                      |  | $         | 50,815     |            |       | $    | 764   |       |  | $ | (17  | ) |  | $ | 51,562 | 
|                       |                            |  |           |            |            |       |      |       |       |  |   |      |   |  |   |        | 
|December 31,
2001      |                            |  |           |            |            |       |      |       |       |  |   |      |   |  |   |       
|                      
|                      
|                      
|                      
|                       | U.S. government agencies   |  | $         | 2,105      |            |       | $    | 4     |       |  | $ | (30  | ) |  | $ | 2,079  | 
|                      
|                      
|                      
|                      
|                       | Municipal securities       |  |           | 1,634      |            |       |      |      |       |  |   | (71  | ) |  |   | 1,563  | 
|                      
|                      
|                      
|                      
|                       | Mortgage-backed securities |  |           | 35,814     |            |       |      | 254   |       |  |   | (62  | ) |  |   | 36,006 | 
|                       |                            |  |           |            |            |       |      |       |       |  |   |      |   |  |   |        | 
|                       | Total                      |  | $         | 39,553     |            |       | $    | 258   |       |  | $ | (163 | ) |  | $ | 39,648 | 
|                       |                            |  |           |            |            |       |      |       |       |  |   |      |   |  |   |        | 

Gross proceeds from sales of securities during the six-month period ending June
30, 2002 were $3,056,000, with gross gains of $28,000 included in earnings.
Gross proceeds from sales of securities during the six-month period ending June
30, 2001 were $4,585,000, with gross gains of $3,000 included in earnings.

NOTE 3  LOANS

Loans were as follows:

|                                 |                                                |             |         |              |         |   |         |         |         | 
|-------------------------------- | ---------------------------------------------- | ----------- | ------- | ------------ | ------- | - | ------- | ------- | ------- | 
|(Amounts in thousands)           |                                                | June 30,    |         | December 31,
|                                 |                                                | 2002        |         | 2001        
|                                 |                                                |             |         |              |         |  
|First mortgage loans secured by: |                                                |             |         |              |         |   |         |        
|                                
|                                
|                                
|                                
|                                 | One to four family residential                 |             | $       | 139,908      |         |   | $       | 154,915 |        
|                                
|                                
|                                
|                                
|                                 | Other properties                               |             |         | 84,280       |         |   |         | 68,841  |        
|                                
|                                
|                                
|                                
|                                 | Construction properties                        |             |         | 5,885        |         |   |         | 3,737   |        
|                                 |                                                |             |         |              |         |   |         |         |        
|                                 |                                                |             | 230,073 |              |         |   | 227,493 |        
|                                
|                                
|                                
|                                
|Consumer and other loans         |                                                |             |         |              |         |   |         |        
|                                
|                                
|                                
|                                
|                                 | Consumer                                       |             |         | 1,114        |         |   |         | 1,289   |        
|                                
|                                
|                                
|                                
|                                 | Commercial                                     |             |         | 23,456       |         |   |         | 24,415  |        
|                                
|                                
|                                
|                                
|                                 | Home equity                                    |             |         | 20,965       |         |   |         | 19,468  |        
|                                 |                                                |             |         |              |         |   |         |         |        
|                                 |                                                |             | 45,535  |              |         |   | 45,172  |        
|                                 |                                                |             |         |              |         |   |         |         |        
|                                 |                                                | Total loans |         |              | 275,608 |   |         |         | 272,665 | 
|                                
|                                
|                                
|                                
|Less:                            |                                                |             |         |              |         |   |         |        
|                                
|                                
|                                
|                                
|                                 | Net deferred loan fees, premiums and discounts |             |         | (178         | )       |   |         | (117    | )      
|                                
|                                
|                                
|                                
|                                 | Loans in process                               |             |         | (2,513       | )       |   |         | (1,553  | )      
|                                
|                                
|                                
|                                
|                                 | Allowance for loan losses                      |             |         | (1,802       | )       |   |         | (1,695  | )      
|                                 |                                                |             |         |              |         |   |         |         |        
|                                 |                                                | $           | 271,115 |              |         | $ | 269,300 |        
|                                 |                                                |             |         |              |         |   |         |         |        

7.



---



##### Table of Contents



WESTERN OHIO FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 3  LOANS (Continued)

Activity in the allowance for loan losses was as follows:

|                          |  |                    |       |                  |  |      |       |      |  |   |       |   |  |   |       |  
|------------------------- |  | ------------------ | ----- | ---------------- |  | ---- | ----- | ---- |  | - | ----- | - |  | - | ----- | -
|(Amount in thousands)     |  |                    |       |                  |  |      |       |      |  |   |       |   |  |   |       |  
|                          |  | Three Months Ended |       | Six Months Ended
|                          |  | June 30,           |       | June 30,        
|                          |  |                    |       |                 
|                          |  | 2002               |       | 2001             |  | 2002 |       | 2001
|                          |  |                    |       |                  |  |      |       |     
|Beginning balance         |  | $                  | 1,752 |                  |  | $    | 1,740 |      |  | $ | 1,695 |   |  | $ | 1,665 |  
|                         
|                         
|                         
|                         
|Provision for loan losses |  |                    | 84    |                  |  |      | 84    |      |  |   | 168   |   |  |   | 189   |  
|                         
|                         
|                         
|                         
|Recoveries                |  |                    | 42    |                  |  |      | 16    |      |  |   | 293   |   |  |   | 36    |  
|                         
|                         
|                         
|                         
|Charge-offs               |  |                    | (76   | )                |  |      | (229  | )    |  |   | (354  | ) |  |   | (279  | )
|                          |  |                    |       |                  |  |      |       |      |  |   |       |   |  |   |       |  
|Ending balance            |  | $                  | 1,802 |                  |  | $    | 1,611 |      |  | $ | 1,802 |   |  | $ | 1,611 |  
|                          |  |                    |       |                  |  |      |       |      |  |   |       |   |  |   |       |  

Nonperforming loans were $2,010,270 and $2,818,000 at June 30, 2002 and December
31, 2001.

Impaired loans were as follows:

|                                                  |  |          |     |              |  |   |       | 
|------------------------------------------------- |  | -------- | --- | ------------ |  | - | ----- | 
|                                                  |  | June 30, |     | December 31,
|                                                  |  | 2002     |     | 2001        
|                                                  |  |          |     |             
|Loans with no allocated allowance for loan losses |  | $        | 203 |              |  |   | 829   | 
|                                                 
|                                                 
|                                                 
|                                                 
|Loans with allocated allowance for loan losses    |  |          |    |              |  |   | 208   | 
|                                                  |  |          |     |              |  |   |       | 
|Total                                             |  | $        | 203 |              |  | $ | 1,037 | 
|                                                  |  |          |     |              |  |   |       | 
|Amount of the allowance for loan losses allocated |  | $        |    |              |  | $ | 86    | 

NOTE 4  DEPOSITS

Deposits were as follows:

|                               |                                      |          |         |              |  |   |         |         | 
|------------------------------ | ------------------------------------ | -------- | ------- | ------------ |  | - | ------- | ------- | 
|(Amounts in thousands)         |                                      | June 30, |         | December 31,
|                               |                                      | 2002     |         | 2001        
|                               |                                      |          |         |              | 
|Checking  Noninterest bearing |                                      | $        | 9,909   |              |  | $ | 8,637   |        
|                              
|                              
|                              
|                              
|Checking   Interest bearing   |                                      |          | 14,377  |              |  |   | 13,094  |        
|                              
|                              
|                              
|                              
|Money market accounts          |                                      |          | 58,538  |              |  |   | 57,500  |        
|                              
|                              
|                              
|                              
|Passbook and savings accounts  |                                      |          | 11,467  |              |  |   | 11,465  |        
|                              
|                              
|                              
|                              
|Certificates of deposit:       |                                      |          |         |              |  |   |         |        
|                              
|                              
|                              
|                              
|                               | In denominations under $100,000      |          |         | 100,883      |  |   |         | 107,843 | 
|                              
|                              
|                              
|                              
|                               | In denominations of $100,000 or more |          |         | 21,546       |  |   |         | 21,748  | 
|                               |                                      |          |         |              |  |   |         |        
|                               |                                      | $        | 216,720 |              |  | $ | 220,287 |        
|                               |                                      |          |         |              |  |   |         |        

8.



---



##### Table of Contents



WESTERN OHIO FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

---

NOTE 5  BORROWED FUNDS

Borrowed funds consisted of advances from the Federal Home Loan Bank of
Cincinnati (FHLB) and are summarized by contractual maturity as follows:

|                           |                         |  |               |        |                   |  |          |      |              |  |   |        |          |  |  |      |  
|-------------------------- | ----------------------- |  | ------------- | ------ | ----------------- |  | -------- | ---- | ------------ |  | - | ------ | -------- |  |  | ---- | -
|(Amount in
thousands)      |                         |  |               |        |                   |  |          |      |              |  |   |        |          |  |  |     
|                           |                         |  | June 30, 2002 |        | December 31, 2001
|                           |                         |  |               |        |                  
|                           |                         |  |               |        |                   |  | Weighted |      |              |  |   |        | Weighted
|                           |                         |  | Balance       |        | Average Rate      |  | Balance  |      | Average Rate
|                           |                         |  |               |        |                   |  |          |      |             
|FHLB advances maturing in: |                         |  |               |        |                   |  |          |      |              |  |   |        |          |  |  |     
|                          
|                          
|                          
|                          
|                           | One year or less        |  | $             | 13,015 |                   |  |          | 4.93 | %            |  | $ | 14,325 |          |  |  | 5.75 | %
|                          
|                          
|                          
|                          
|                           | Over 1 year to 3 years  |  |               | 17,409 |                   |  |          | 4.64 |              |  |   | 9,335  |          |  |  | 6.58 |  
|                          
|                          
|                          
|                          
|                           | Over 3 years to 5 years |  |               | 1,305  |                   |  |          | 4.65 |              |  |   | 730    |          |  |  | 6.60 |  
|                          
|                          
|                          
|                          
|                           | Over 5 years            |  |               | 52,720 |                   |  |          | 5.15 |              |  |   | 52,265 |          |  |  | 5.15 |  
|                           |                         |  |               |        |                   |  |          |      |              |  |   |        |          |  |  |      |  
|                           | Total                   |  | $             | 84,449 |                   |  |          | 5.00 | %            |  | $ | 76,655 |          |  |  | 5.45 | %
|                           |                         |  |               |        |                   |  |          |      |              |  |   |        |          |  |  |      |  

NOTE 6  EARNINGS PER COMMON SHARE

The factors used in the earnings per share computation were as follows:

(Amounts in thousands, except per share data)

|                                |                                            |  |  |  |  |  |                    |       |   |  |  |  |                  |  |          |       |   |  |  |  |      |  |   |       |   |  |  |  |  |  |   |       |  
|------------------------------- | ------------------------------------------ |  |  |  |  |  | ------------------ | ----- | - |  |  |  | ---------------- |  | -------- | ----- | - |  |  |  | ---- |  | - | ----- | - |  |  |  |  |  | - | ----- | -
|                                |                                            |  |  |  |  |  | Three Months Ended |       |   |  |  |  | Six Months Ended
|                                |                                            |  |  |  |  |  | June 30,           |       |   |  |  |  |                  |  | June 30, |       |   |  | 
|                                |                                            |  |  |  |  |  | 2002               |       |   |  |  |  | 2001             |  | 2002     |       |   |  |  |  | 2001
|                                |                                            |  |  |  |  |  |                    |       |   |  |  |  |                  |  |          |       |   |  |  |  |     
|Basic earnings per common share |                                            |  |  |  |  |  |                    |       |   |  |  |  |                  |  |          |       |   |  |  |  |      |  |   |       |   |  |  |  |  |  |   |      
|                               
|                               
|                               
|                               
|                                | Net income                                 |  |  |  |  |  | $                  | 632   |   |  |  |  |                  |  | $        | 432   |   |  |  |  |      |  | $ | 1,081 |   |  |  |  |  |  | $ | 954   |  
|                                |                                            |  |  |  |  |  |                    |       |   |  |  |  |                  |  |          |       |   |  |  |  |      |  |   |       |   |  |  |  |  |  |   |       |  
|                                | Weighted average common shares
outstanding |  |  |  |  |  |                    | 1,765 |   |  |  |  |                  |  |          | 1,774 |   |  |  |  |      |  |   | 1,762 |   |  |  |  |  |  |   | 1,789 |  
|                               
|                               
|                               
|                               
|                                | Less: Average unallocated ESOP
shares      |  |  |  |  |  |                    | (34   | ) |  |  |  |                  |  |          | (48   | ) |  |  |  |      |  |   | (35   | ) |  |  |  |  |  |   | (50   | )
|                               
|                               
|                               
|                               
|                                | Less: Average nonvested MRP shares         |  |  |  |  |  |                    | (3    | ) |  |  |  |                  |  |          | (4    | ) |  |  |  |      |  |   | (3    | ) |  |  |  |  |  |   | (4    | )
|                                |                                            |  |  |  |  |  |                    |       |   |  |  |  |                  |  |          |       |   |  |  |  |      |  |   |       |   |  |  |  |  |  |   |       |  
|                                | Average shares                             |  |  |  |  |  |                    | 1,728 |   |  |  |  |                  |  |          | 1,722 |   |  |  |  |      |  |   | 1,724 |   |  |  |  |  |  |   | 1,735 |  
|                                |                                            |  |  |  |  |  |                    |       |   |  |  |  |                  |  |          |       |   |  |  |  |      |  |   |       |   |  |  |  |  |  |   |       |  
|                                | Basic earnings per common share            |  |  |  |  |  | $                  | .37   |   |  |  |  |                  |  | $        | .25   |   |  |  |  |      |  | $ | .63   |   |  |  |  |  |  | $ | .55   |  
|                                |                                            |  |  |  |  |  |                    |       |   |  |  |  |                  |  |          |       |   |  |  |  |      |  |   |       |   |  |  |  |  |  |   |       |  

9.



---



##### Table of Contents



WESTERN OHIO FINANCIAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

---

NOTE 6  EARNINGS PER COMMON SHARE (Continued)

|                                  |                                                                                |  |  |  |  |  |   |       |  |  |  |  |  |  |   |       |  |  |  |  |  |  |   |       |  |  |  |  |  |  |   |       | 
|--------------------------------- | ------------------------------------------------------------------------------ |  |  |  |  |  | - | ----- |  |  |  |  |  |  | - | ----- |  |  |  |  |  |  | - | ----- |  |  |  |  |  |  | - | ----- | 
|Diluted
earnings per common share |                                                                                |  |  |  |  |  |   |       |  |  |  |  |  |  |   |       |  |  |  |  |  |  |   |       |  |  |  |  |  |  |   |      
|                                 
|                                 
|                                 
|                                 
|                                  | Net income                                                                     |  |  |  |  |  | $ | 632   |  |  |  |  |  |  | $ | 432   |  |  |  |  |  |  | $ | 1,081 |  |  |  |  |  |  | $ | 954   | 
|                                  |                                                                                |  |  |  |  |  |   |       |  |  |  |  |  |  |   |       |  |  |  |  |  |  |   |       |  |  |  |  |  |  |   |       | 
|                                  | Weighted average common shares
outstanding for basic earnings per
common share |  |  |  |  |  |   | 1,728 |  |  |  |  |  |  |   | 1,722 |  |  |  |  |  |  |   | 1,724 |  |  |  |  |  |  |   | 1,735 | 
|                                 
|                                 
|                                 
|                                 
|                                  | Add: Dilutive effects of average
nonvested MRP shares                          |  |  |  |  |  |   |      |  |  |  |  |  |  |   |      |  |  |  |  |  |  |   |      |  |  |  |  |  |  |   |      | 
|                                 
|                                 
|                                 
|                                 
|                                  | Add: Dilutive effects of stock options                                         |  |  |  |  |  |   | 19    |  |  |  |  |  |  |   | 11    |  |  |  |  |  |  |   | 17    |  |  |  |  |  |  |   | 11    | 
|                                  |                                                                                |  |  |  |  |  |   |       |  |  |  |  |  |  |   |       |  |  |  |  |  |  |   |       |  |  |  |  |  |  |   |       | 
|                                  | Average shares and dilutive potential
common shares                            |  |  |  |  |  |   | 1,747 |  |  |  |  |  |  |   | 1,733 |  |  |  |  |  |  |   | 1,741 |  |  |  |  |  |  |   | 1,746 | 
|                                  |                                                                                |  |  |  |  |  |   |       |  |  |  |  |  |  |   |       |  |  |  |  |  |  |   |       |  |  |  |  |  |  |   |       | 
|                                  | Diluted earnings per common share                                              |  |  |  |  |  | $ | .36   |  |  |  |  |  |  | $ | .25   |  |  |  |  |  |  | $ | .62   |  |  |  |  |  |  | $ | .55   | 
|                                  |                                                                                |  |  |  |  |  |   |       |  |  |  |  |  |  |   |       |  |  |  |  |  |  |   |       |  |  |  |  |  |  |   |       | 

Stock options covering 74,136 and 79,136 shares of common stock were not
considered in computing diluted earnings per common share for the three and six
months ended June 30, 2002, as they were antidilutive. In addition, nonvested
MRP awards for 3,402 and 3,457 shares of common stock and 4,531 and 4,029 were
not considered in computing diluted earnings per common share for the three and
six months ended June 30, 2002 and June 30, 2001 respectively.

10.



---



##### Table of Contents



WESTERN OHIO FINANCIAL CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

---




|        |  |                                                                                      
|------- |  | -------------------------------------------------------------------------------------
|Item 2. |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations

The following discusses the financial condition of the Company as of June 30,
2002 as compared to December 31, 2001, and the results of operations for the
three and six months ended June 30, 2002, compared with the same periods in
2001. This discussion should be read in conjunction with the interim financial
statements and footnotes included herein.

Forward-Looking Statements

When used in this filing and in future filings by the Company with the
Securities and Exchange Commission, in the Companys press releases or other
public or shareholder communications, or in oral statements made with the
approval of an authorized executive officer, the words or phrases would be,
will allow, intends to, will likely result, are expected to, will
continue, is anticipated, estimate, project or similar expressions are
intended to identify forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
risks and uncertainties, including but not limited to changes in economic
conditions in the Companys market area, changes in policies by regulatory
agencies, fluctuations in interest rates, demand for loans in the Companys
market area and competition, all or some of which could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made and
advises readers that various factors, including regional and national economic
conditions, substantial changes in levels of market interest rates, credit and
other risks of lending and investment activities and competitive and regulatory
factors, could affect the Companys financial performance and could cause the
Companys actual results for future periods to differ materially from those
anticipated or projected.

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

Analysis of Financial Condition

Consolidated assets of the Company totaled $346.7 million at June 30, 2002, an
increase of $5.0 million from the December 31, 2001, total of $341.7 million.
The increase in assets is a result of an increase of $11.9 million in securities
available for sale and $1.8 million in loans and a decrease in deposits of $3.6
million. This activity was funded by a decrease of $9.2 million in cash and cash
equivalents and an increase in FHLB advances of $7.8 million.

Net loans increased $1.8 million, or .7%, from $269.3 million at December 31,
2001 to $271.1 million at June 30, 2002. Traditional one-to-four family
residential mortgage loans decreased $15.0 million to $139.9 at June 30, 2002
from $154.9 million at December 31, 2001, primarily due to the sale of $11.7
million of new originations during the period. For the period, this decrease was
offset by other real estate mortgage loans increasing $15.5 million to $84.3
million at June 30, 2002 from $68.8 million at December 31, 2001. These loans
are non-residential participation loans originated within the Columbus, OH area
and secured by real estate. These changes continue Cornerstones effort to
diversify its portfolio into more commercial and other real estate mortgage type
loans.

11.



---



##### Table of Contents



WESTERN OHIO FINANCIAL CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

---

Cash and cash equivalents decreased by $9.2 million to $7.7 million on June 30,
2002, from $16.9 million on December 31, 2001. Cash and cash equivalents consist
of cash, checking deposits and federal funds deposited at other financial
institutions. The decrease was primarily the result of purchasing securities and
loans.

Securities available for sale increased $12.0 million from $39.6 million at
December 31, 2001, to $51.6 million on June 30, 2002. The increase was due to
purchases of securities of $20.1 million offset by a $3.0 million
mortgage-backed security sale and principal repayments on existing
mortgage-backed securities available for sale. The new purchases of
mortgage-backed securities are fixed rate and have a weighted average remaining
term of 61 months.

Deposits at June 30, 2002 totaled $216.7 million, a decrease of $3.6 million, or
1.6% from $220.3 million at December 31, 2001. The decrease occurred primarily
in certificates of deposits, which decreased $7.2 million, or 5.6%, as deposits
moved to shorter-term more liquid accounts. Deposits in checking accounts
increased $2.6 million to $24.3 million at June 30, 2002 from $21.7 million at
December 31, 2001. Money market accounts increased $1.0 million to $58.5 million
at June 30, 2002 compared to $57.5 million on December 31, 2001.

FHLB advances at June 30, 2002 totaled $84.4 million, an increase of $7.7
million or 10.0% from $76.7 million at December 31, 2001. The Bank increased its
advances from the FHLB during the period to fund security purchases. The
majority of borrowed funds are invested in loans to leverage the Companys
excess capital and improve the Companys return on equity over time.

Total shareholders equity increased $751,000 from $41.9 million at December 31,
2001, to $42.7 million at June 30, 2002. This increase is primarily due to net
income for the period, an improvement of $430,000 in accumulated other
comprehensive income and stock options exercised. This is offset by dividend
payments of $883,000 and the Company purchasing $342,000, or 17,100 shares, of
its common stock during the first six months of 2002.

As of June 30, 2002, the Company had commitments to make $2.4 million of
residential loans and $7.5 million of non-residential real estate loans. It is
expected that these loans will be funded within 30-90 days. The Company also had
$2.5 million in commitments to fund loans on residential properties under
construction as well as commitments to disburse $1.1 million on other mortgage
loans. These commitments are anticipated to be filled within three to six
months. Unused commercial lines of credit were $6.7 million and unused home
equity lines of credit were $15.4 million. Commitments to originate nonmortgage
loans total $499,400.

Results of Operations

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

The Companys net income is primarily dependent on its net interest income (the
difference between interest income generated on interest-earning assets and
interest expense incurred on interest-bearing liabilities). Net income is also
affected by provisions for loan losses, service charges, gains on sale of

12.



---



##### Table of Contents



WESTERN OHIO FINANCIAL CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

---

assets, other income, noninterest expense and income taxes. The Companys net
income of $632,000 and $1,081,000 for the three and six months ended June 30,
2002, represented an increase of $200,000, or 46.3%, for the three months and an
increase of $127,000, or 13.3%, for the six months ended June 30, 2002. The
returns on average assets for the three and six months ended June 30, 2002 were
0.72% and 0.62%, respectively, compared to 0.50% and 0.54% for the same period
in 2001. The returns on average shareholders equity for the three and six
months ended June 30, 2002 were 5.92% and 5.08%, respectively, compared to 4.15%
and 4.58% for the same periods ended June 30, 2001. Basic earnings per share
increased $.12 from $.25 per share for the three month period ended June 30,
2001 to $.37 per share for the period ended June 30, 2002. Basic earnings per
share for the six-month period ended June 30, 2002 was $.63 per share compared
to $.55 per share for the same period ended June 30, 2001, an increase of $.08,
or 14.5%.

Net interest income is the largest component of the Companys income and is
affected by the interest rate environment and volume and composition of
interest-earning assets and interest-bearing liabilities. Net interest income
totaled $2,626,000 and $5,023,000 for the three and six months ended June 30,
2002, compared to $2,387,000 and $4,872,000 for the same periods in 2001. The
increases of $239,000 and $151,000 for the three and six month periods are due
to lower interest rates on interest bearing liabilities and the transfer of
certificate of deposits to money market and checking accounts. The Company
remains liability sensitive whereby its interest-bearing liabilities will
generally reprice more quickly than its interest-earning assets. Therefore, the
Companys net interest margin will generally increase in periods of falling
interest rates in the market and will decrease in periods of rising interest
rates. Cornerstone is more sensitive to rising rates than declining rates. In a
rising interest rate environment, because Cornerstone has primarily fixed-rate
loans in its loan portfolio, the amount of interest Cornerstone would receive on
its loans would increase relatively slowly as loans are slowly prepaid and new
loans at higher rates are made. Moreover, the interest Cornerstone would pay on
its deposits would increase relatively rapidly because Cornerstones deposits
generally have shorter periods to repricing.

Interest and fees on loans totaled $4,781,000 and $9,526,000 for the three and
six months ended June 30, 2002 compared to $5,502,000 and $11,181,000 the three
and six months ended June 30, 2001. The decreases were due primarily to a
decrease in loan rates from the same period in 2001.

Interest and dividends on securities totaled $708,000 and $1,310,000 for the
three and six months ended June 30, 2002, and $677,000 and $1,444,000 for the
three and six months ended June 30, 2001. The increase for the three months was
due to an increase in securities outstanding while the decrease for the
six-month period was due to lower interest rates partially offset by an increase
in average securities held for sale.

Interest on deposits totaled $1,898,000 and $3,933,000 for the three and six
months ended June 30, 2002 compared to $2,712,000 and $5,428,000 for the three
and six months ended June 30, 2001. The decreases were due to lower interest
rates on all deposits and the change from certificate of deposits to checking
and money market accounts.

Interest on FHLB advances was $1,069,000 and $2,106,000 for the three and six
months ended June 30, 2002 compared to $1,259,000 and $2,657,000 for the three
and six months ended June 30, 2001. The decrease for the three and six months
ended June 30, 2002 is due to a decrease in average outstanding borrowings from
the FHLB of approximately $11.5 million during the period and the lower cost of
new advances.

The Company maintains an allowance for loan losses in an amount, which, in
managements judgment, is adequate to absorb probable losses in the loan
portfolio. While management utilizes its best judgment and information
available, ultimate adequacy of the allowance is dependent on a variety of
factors,

13.



---



##### Table of Contents



WESTERN OHIO FINANCIAL CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

---

including performance of the Companys loan portfolio, the economy,
changes in real estate values and interest rates and the view of the regulatory
authorities toward loan classifications. The provision for loan losses is
determined by management as the amount to be added to the allowance for loan
losses after net charge-offs have been deducted to bring the allowance to a
level considered adequate to absorb probable losses in the loan portfolio. The
amount of the provision is based on managements regular review of the loan
portfolio and consideration of such factors as historical loss experience,
changes in size and composition of the loan portfolio and specific borrower
considerations, including ability of the borrower to repay the loan and the
estimated value of the underlying collateral. The provision for loan losses
totaled $84,000 and $168,000 for the three and six months ended June 30, 2002,
compared to $84,000 and $189,000 for the three and six months ended June 30,
2001.

Net charge-offs were $34,000 and $61,000 for the three and six months ended June
30, 2002 compared to $213,000 and $243,000 for the same periods in 2001. Due to
the decrease in net charge-offs, the collateral supporting non-performing loans,
area economic conditions, and the level of impaired and non-performing loans,
management believes that the total allowance of $1.8 million on total loans of
$275 million at June 30, 2002 is adequate. The Corporation will continue to
review its allowance for loan losses and make further provisions as economic and
asset quality conditions dictate.

Noninterest income totaled $719,000 and $1,294,000 for the three and six months
ended June 30, 2002 compared to $373,000 and $778,000 for the same periods in
2001. Service charges on loans and deposits increased $225,000 from $327,000 to
$552,000 for the three month period and $358,000 from $702,000 to $1.1 million
for the six month period. Service charges on deposits, including non-sufficient
funds, increased $192,000 and $289,000 for the three and six month period
respectively. In November 2001, the Company initiated the overdraft honor
program, which provides to most customers the courtesy of honoring checks drawn
on insufficient balances, up to limits established by management. Standard
non-sufficient fund fees and overdraft fees still apply. This program is the
primary reason for the increase in service charges on deposits. Loan service and
prepayment fees increased $33,000 and $69,000 from the period June 30, 2001 to
June 30, 2002. Additionally, the Company recognized loan sale gains of $134,000
on loan sales of $8.0 million for the three months ended June 30, 2002 compared
to $41,000 on loan sales of $2.6 million for the same period in 2001. For the
six months ended June 30, 2002, gains totaled $194,000 on loan sales of $11.7
million compared to $63,000 on loan sales of $3.8 million for the same period
last year.

Noninterest expense increased $284,000 and $522,000 for the three and six months
ended June 30, 2002 to $2.3 million and $4.5 million from $2.0 million and $4.0
million in 2001. The increases are primarily due to increases in salaries and
benefits of $154,000 and $267,000 for the three and six month periods
respectively. Other noninterest expense increased $39,000 and $117,000 for the
three and six month periods ending June 30, 2002. Other noninterest expense
consists of items such as telephone, printing and supplies, and loan expenses.
Additionally, included in the total for the three and six months ended June 30,
2002 is approximately $96,000 and $219,000 of expenses related to the Companys
Centerville, Ohio branch opened in September 2001. It is anticipated the new
branch will continue to have an impact on noninterest expense for the comparison
periods in 2002.

The change in income tax is primarily attributable to the change in income
before income taxes. Income tax expense totaled $327,000 and $558,000, or an
effective rate of 34.1% and 34.0%, for the three and six months ended June 30,
2002, compared to $226,000 and $519,000, or an effective rate of 34.4% and
35.2%, for the three and six months ended June 30, 2001.

14.



---



##### Table of Contents



WESTERN OHIO FINANCIAL CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

---

Liquidity

Office of Thrift Supervision (OTS) regulations presently require Cornerstone
Bank to maintain sufficient liquidity to assure its safe and sound operation. To
that end, Cornerstone Bank maintains investments having maturities of 5 years or
less, sells loans into the secondary market and borrows funds from the FHLB.
These activities are intended to provide a source of relatively liquid funds on
which Cornerstone may rely, if necessary, to fund deposit withdrawals or other
short-term funding needs. At June 30, 2002 Cornerstone had commitments to
originate residential loans totaling $2.4 million and $7.5 million of
non-residential real estate loans. In addition, Cornerstone had $2.5 million in
commitments to fund loans on residential properties under construction as well
as $1.1 million in commitments to fund other mortgage loans. Unused commercial
lines of credit were $6.7 million and unused home equity lines of credit were
$15.4 million. Commitments to originate nonmortgage loans total $499,400.
Cornerstone considers its liquidity and capital reserves sufficient to meet its
outstanding short and long-term needs.

Capital Resources

Cornerstone is required by regulations to meet certain minimum capital
requirements, which must be generally as stringent as standards established for
commercial banks. Current capital requirements call for tangible capital of 1.5%
of adjusted total assets, core capital (which, for Cornerstone, consists solely
of tangible capital) of 4.0% of adjusted total assets, except for institutions
with the highest examination rating and acceptable levels of risk, and
risk-based capital (which, for Cornerstone, consists of core capital and general
valuation allowances) of 8.0% of risk-weighted assets (assets are weighted at
percentage levels ranging from 0% to 100% depending on their relative risk).

The following table summarizes Cornerstones regulatory capital requirements and
actual capital at June 30, 2002.

|                       |  |                |        |                     |  |             |            |         |  |        |        |         |  |             |     |   |  |                      |        |  |  |  |      |   |  |   |         | 
|---------------------- |  | -------------- | ------ | ------------------- |  | ----------- | ---------- | ------- |  | ------ | ------ | ------- |  | ----------- | --- | - |  | -------------------- | ------ |  |  |  | ---- | - |  | - | ------- | 
|                       |  |                |        |                     |  |             |            |         |  |        |        |         |  |             |     |   |  | Excess of actual     |        |  |  | 
|                       |  |                |        |                     |  |             |            |         |  |        |        |         |  |             |     |   |  | capital over current |        |  |  | 
|                       |  | Actual capital |        | Current requirement |  | requirement |            |         |  |       
|                       |  |                |        |                     |  |             | Applicable
|(Dollars in thousands) |  | Amount         |        | Percent             |  | Amount      |            | Percent |  | Amount |        | Percent |  | Asset Total
|                       |  |                |        |                     |  |             |            |         |  |        |        |         |  |            
|Tangible capital       |  | $              | 41,207 |                     |  |             | 11.9       | %       |  | $      | 5,188  |         |  |             | 1.5 | % |  | $                    | 36,019 |  |  |  | 10.4 | % |  | $ | 345,896 | 
|                      
|                      
|                      
|                      
|Core capital           |  |                | 41,207 |                     |  |             | 11.9       |         |  |        | 13,866 |         |  |             | 4.0 |   |  |                      | 26,369 |  |  |  | 7.9  |   |  |   | 345,896 | 
|                      
|                      
|                      
|                      
|Risk-based capital     |  |                | 42,981 |                     |  |             | 17.5       |         |  |        | 19,650 |         |  |             | 8.0 |   |  |                      | 23,331 |  |  |  | 9.5  |   |  |   | 245,626 | 

15.



---



##### Table of Contents



WESTERN OHIO FINANCIAL CORPORATION
QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK

---




Item 3. Quantitative and Qualitative Disclosure About Market Risk

There have been no material changes in the quantitative and qualitative
disclosures about market risk as of June 30, 2002, from that presented in the
Companys Annual Report on Form 10-K for the fiscal year ended December 31,
2001.

16.



---



##### Table of Contents



WESTERN OHIO FINANCIAL CORPORATION




---




Item 1   Legal
Proceedings

None




Item 2   Changes in
Securities and Use of Proceeds

None




Item 3   Defaults Upon
Senior Securities

None




Item 4   Submission of
Matters to a Vote of Security Holders

|                                                                                                                                      |  | 
|------------------------------------------------------------------------------------------------------------------------------------- |  | 
|The annual meeting of
shareholders was held on April 25, 2000. Two
items were presented to shareholders for consideration and
action:

|   |  |                                                                                                                                                                                                                                                                                                                                                            
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1) |  | The re-election of two directors Aristides G.
Gianakopoulos and Jeffrey L. Levine for terms expiring
in 2005. Both directors were re-elected receiving
1,398,514 and 1,400,014 votes respectively. The
remaining directors continuing after the meeting are:  
David L. Dillahunt, John W. Raisbeck, Howard V. Dodds,
William N. Scarff, and John E. Field.
|  
|2) |  | The ratification of Crowe, Chizek and Company LLP as
auditors for the Company for the fiscal year ending
December 31, 2002. The appointment of auditors was
ratified with votes cast for 1,411,283 and 9,802
against.                                                                                                                                      




Item 5   Other Information

None




Item 6   Exhibits and
Reports on Form 8-K

|    |  |                                                                                                    
|--- |  | ---------------------------------------------------------------------------------------------------
|(a) |  | Exhibits                                                                                           
|   
|   
|   
|   
|(b) |  | No current reports on Form 8-K were filed by the Registrant
during the quarter ended June 30, 2002.

17.



---



##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                         |  |                                                                                                
|------------------------ |  | -----------------------------------------------------------------------------------------------
|                         |  | WESTERN OHIO FINANCIAL CORPORATION
(Registrant)                                                
|                        
|                        
|Date:    August 12, 2002 |  | /s/ John W. Raisbeck                                                                           
|                         |  |                                                                                                
|                         |  | John W. Raisbeck
President and Chief Executive Officer
(Principal Executive Officer)           
|                        
|                        
|Date:    August 12, 2002 |  | /s/ Craig F. Fortin                                                                            
|                         |  |                                                                                                
|                         |  | Craig F. Fortin
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)

18.