<PAGE>   1
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   ----------

                                    FORM 10-Q

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


For Quarter Ended September 30, 1998              Commission File Number 0-24120


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


             DELAWARE                                   31-1403116
             -----------------------------------------------------
    (State of jurisdiction of                        (I.R.S. Employer
  incorporation or organization)                   Identification Number)


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


                                 (937) 325-4683
                                 --------------
              (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 [ ]



As of November 1, 1998 there were 2,152,732 shares of the Registrant's common
stock outstanding.

<PAGE>   2
                                     INDEX



                       WESTERN OHIO FINANCIAL CORPORATION
                       ----------------------------------


<TABLE>
<CAPTION>

<S>       <C>                                                               <C>
PART I.   FINANCIAL INFORMATION                                           Pages
-------   ---------------------                                           -----


Item 1. Financial Statements:

Condensed Consolidated Balance Sheets ..................................... 3

Condensed Consolidated Statements of Income ............................... 4

Condensed Consolidated Statements of Comprehensive Income.................. 5

Condensed Consolidated Statements of Cash Flows............................ 6

Notes to Condensed Consolidated Financial Statements....................... 7-8


Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............................. 9-14

Item 3. Quantitative and Qualitative Disclosures About Market Risk......... 14


PART II.  OTHER INFORMATION
--------  -----------------

Signatures................................................................. 15
</TABLE>


                                       -2-
<PAGE>   3
<TABLE>
                                   WESTERN OHIO FINANCIAL CORPORATION
                                 CONDENSED CONSOLIDATED BALANCE SHEETS
                                              (Unaudited)
<CAPTION>

                                                                        September 30,  December 31,
(Dollars in thousands)                                                      1998           1997
---------------------------------------------------------------------------------------------------
<S>                                                                       <C>           <C>     
                               ASSETS

Cash and cash equivalents                                                 $ 92,085      $ 31,239
Securities available for sale, at fair value                                 5,535        22,455
Mortgage-backed securities available for sale, at fair value                31,598        22,433
Loans receivable, net                                                      244,636       277,731
Real estate owned                                                              304            56
Federal Home Loan Bank stock, at cost                                        6,827         6,470
Premises and equipment, net                                                  4,013         3,924
Other assets                                                                 3,803         4,099
Goodwill                                                                     3,260         3,581
---------------------------------------------------------------------------------------------------

Total Assets                                                              $392,061       371,988
===================================================================================================


                 LIABILITIES AND STOCKHOLDERS' EQUITY

Savings deposits                                                          $262,553      $246,909
Advances from the Federal Home Loan Bank of Cincinnati                      77,764        68,339
Other liabilities                                                            1,790         2,140
---------------------------------------------------------------------------------------------------

                 Total Liabilities                                         342,107       317,388
---------------------------------------------------------------------------------------------------

Stockholders' equity:
Common stock; $.01 par value; 7,250,000 shares authorized; 2,645,000
       shares issued; 2,215,732 and 2,383,435 shares outstanding                26            26
Additional paid-in capital                                                  40,462        40,458
Unrealized gain on securities available for sale,
  net of income taxes                                                           84           309
Deferred management recognition plan expense                                  (270)         (396)
Unallocated shares held by employee stock ownership plan                    (1,369)       (1,547)
Treasury stock; 429,268 and 261,565 shares at cost respectively             (9,639)       (5,448)
Retained earnings (substantially restricted)                                20,660        21,198
---------------------------------------------------------------------------------------------------

                 Total Stockholders' Equity                                 49,954        54,600
---------------------------------------------------------------------------------------------------

Total Liabilities and Stockholders' Equity                                $392,061      $371,988
===================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements 


                                      -3-
<PAGE>   4
<TABLE>

                                   WESTERN OHIO FINANCIAL CORPORATION
                                    CONSOLIDATED STATEMENTS OF INCOME
                                               (Unaudited)
<CAPTION>

                                                       For the Quarter Ended   For the Nine Months Ended
                                                           September 30,             September 30,
(Dollars in thousands except per share amounts)          1998         1997         1998         1997
--------------------------------------------------------------------------------------------------------
<S>                                                    <C>          <C>          <C>          <C>    
Interest income:
  Interest and fees on loans                           $ 4,871      $ 6,154      $15,514      $17,894
  Interest and dividends on securities                   1,074          863        2,749        2,267
  Interest on mortgage-backed securities                   230          396          923        1,478
  Other interest income                                    139           37          399          340
--------------------------------------------------------------------------------------------------------

     Total interest income                               6,314        7,450       19,585       21,979
--------------------------------------------------------------------------------------------------------

Interest expense:
  Interest on deposits                                   3,308        3,120        9,747        9,090
  Interest on borrowings                                   721        1,471        2,410        4,481
--------------------------------------------------------------------------------------------------------

     Total interest expense                              4,029        4,591       12,157       13,571
--------------------------------------------------------------------------------------------------------

Net interest income                                      2,285        2,859        7,428        8,408

Provision for losses on loans                               --          246         (261)         355

Net interest income after provision for losses           2,285        2,613        7,689        8,053

Gain on sale of investments                                 --           93          307          151

Gain on sale of loans                                       85           --          187           --

Other income                                               297          114          762          494

Other expense                                           (2,331)      (2,688)      (7,140)      (7,236)
--------------------------------------------------------------------------------------------------------

     Income before income tax expense                      336          132        1,805        1,462

Income tax expense                                         150           72          714          577
--------------------------------------------------------------------------------------------------------

     Net income                                        $   186      $    60      $ 1,091      $   885
========================================================================================================
Basic earnings per common and
  common equivalent share                              $  0.09      $  0.03      $  0.49      $  0.39
Diluted earnings per common
  and common equivalent share                          $  0.08      $  0.03      $  0.48      $  0.39
========================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements 


                                       -4-
<PAGE>   5
<TABLE>
                                 WESTERN OHIO FINANCIAL CORPORATION
                           CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                             (Unaudited)
<CAPTION>


                                                    For the Quarter Ended  For the Nine Months Ended
                                                     Sept. 30,   Sept. 30,  Sept. 30,   Sept. 30,
(Dollars in thousands)                                 1998        1997       1998         1997
----------------------------------------------------------------------------------------------------
<S>                                                  <C>         <C>        <C>         <C>   
Net income                                             $186        $ 60      $1,091      $  885
Other comprehensive income, net of tax:
Unrealized gains / (losses) arising during period        62         316          22         499
Less:  reclassification adjustment for accumulated
  gains/losses included in net income                    --         (61)       (203)       (100)
----------------------------------------------------------------------------------------------------
Other comprehensive income                               62         255        (225)        399
----------------------------------------------------------------------------------------------------
Comprehensive income                                   $248        $315      $  866      $1,284
====================================================================================================
</TABLE>

                                      -5-
<PAGE>   6
<TABLE>

                              WESTERN OHIO FINANCIAL CORPORATION
                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                          (Unaudited)
<CAPTION>
                                                                     For the Nine Months Ended
                                                                           September 30,
(Dollars in thousands)                                                   1998         1997
----------------------------------------------------------------------------------------------
<S>                                                                   <C>           <C>     
Cash flows from operating activities                                  $  1,672      $    428
----------------------------------------------------------------------------------------------
  Federal Home Loan Bank Stock Purchases                                    --          (167)
  Loans:
    Originations                                                       (34,660)      (52,243)
    Purchases                                                               --        (3,710)
    Collections                                                         68,011        38,510
    Sales                                                                   --         1,706
  Mortgage-backed securities:
    Collections                                                          3,765         3,015
    Purchases                                                          (20,073)           --
    Sales                                                                7,119        10,684
  Investment securities:
    Purchases                                                                         (2,001)
    Maturities                                                           1,701         4,700
    Sales                                                               15,193            --
  Property and equipment:
    Additions                                                             (369)         (362)
    Sale proceeds                                                           --           185
  Real Estate Owned Purchases                                             (248)           --
                                                                           ---           ---
        Net cash provided by investing activities                       40,439           317
----------------------------------------------------------------------------------------------
Cash flows from financing activities:
  Net increase (decrease) in savings deposits                           15,661         9,120
  Net decrease in advances from borrowers for taxes and insurance         (435)         (220)
  Dividends paid                                                        (1,629)       (1,762)
  Advances from Federal Home Loan Bank:
    Net borrowings                                                      45,690        47,990
    Repayments                                                         (36,266)      (52,600)
  Stock options, net                                                        --         1,433
  Treasury stock repurchase                                             (4,286)         (370)
----------------------------------------------------------------------------------------------

        Net cash provided (used) by financing activities                18,735         3,591
----------------------------------------------------------------------------------------------

Net Increase (decrease) in cash and cash equivalents                    60,846         4,336

Cash and cash equivalents:
  Beginning                                                             31,239        15,611
----------------------------------------------------------------------------------------------

  Ending                                                              $ 92,085      $ 19,947
==============================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements 


                                      -6-
<PAGE>   7
                       WESTERN OHIO FINANCIAL CORPORATION

              Notes to Condensed Consolidated Financial Statements

1.      Principles of consolidation:
        ----------------------------

The financial statements for 1998 are presented for Western Ohio Financial
Corporation ("the Company") and its wholly owned subsidiary, Cornerstone Bank
("Cornerstone"), a combination of the former Springfield Federal Savings Bank
("Springfield"), Mayflower Federal Savings Bank ("Mayflower"), and Seven Hills
Savings Association ("Seven Hills"). All significant intercompany accounts and
transactions have been eliminated in consolidation.

2.      Basis of presentation:
        ----------------------

The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles 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 generally accepted accounting principles 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 financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1997. The
financial data and results of operations for periods presented may not
necessarily reflect the results to be anticipated for the entire year.

3.      Earnings per common and common equivalent share:
        ------------------------------------------------

Basic earnings per share are computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share are computed by dividing income available to
common shareholders by the potential dilution of securities that could share in
earnings such as stock options, warrants or other similar items. The diluted
weighted average number of common shares giving effect to options outstanding
during the three month and nine month periods ended September 30, 1998 were
2,199,692 and 2,272,496, respectively. The basic weighted average number of
common shares during the three month and nine month periods ended September 30,
1998 were 2,169,050 and 2,228,274, respectively. The diluted weighted average
number of common shares giving effect to options outstanding during the three
month and nine month periods ended September 30, 1997 were 2,314,819 and
2,290,927, respectively. The basic weighted average number of common shares
during the three month and nine month periods ended September 30, 1997 were
2,241,987 and 2,218,095, respectively.

4.      Recent accounting pronouncements
        --------------------------------

SFAS No. 130, Reporting Comprehensive Income, establishes standards for
reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. SFAS No. 130 is effective for the Company in 1998. Reclassification
of financial statements for earlier periods provided for comparative purposes is
required.

SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, changes the way public business enterprises report information
about operating segments in annual financial statements and require those
enterprises to report selected information about reportable segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. SFAS No. 131 becomes effective for the Company in 1998.

                                      -7-
<PAGE>   8
SFAS No. 132, Employers' Disclosures about Pensions and Other Postretirement
Benefits", amends the disclosure requirement of previous pension and other
postretirement benefit accounting standards by requiring additional disclosures
about such plans as well as eliminating some disclosures no longer considered
useful. SFAS 132 also allows greater aggregation of disclosures for employers
with multiple defined benefit plans. Non-public companies are subject to reduced
disclosure requirement, however, such entities may elect to follow the full
disclosure requirements of the SFAS 132. SFAS 132 will be effective in fiscal
1999 and is not expected to have a significant impact on Cornerstone's financial
statements.

SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities",
requires companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. The key criterion
for hedge accounting is that the hedging relationship must be highly effective
in achieving offsetting changes in fair value or cash flows. SFAS 133 does no
allow hedging of a security which is classified as held to maturity,
accordingly, upon adoption of SFAS 133, companies may reclassify any security
from held to maturity to available for sale if they wish to be able to hedge the
security in the future. SFAS 133 is effective for fiscal years beginning after
June 15, 1999 with early adoption encouraged for any fiscal quarter beginning
July 1, 1998 or later, with no retroactive application. Management does not
expect the adoption of SFAS 133 to have a significant impact on Cornerstone's
financial statements.

SFAS No. 134, "Accounting for Mortgage-backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking
Enterprise", changes the way companies involved in mortgage banking account for
certain securities and other interests they retain after securitizing mortgage
loans that were held for sale. SFAS 134 allows any retained mortgage-backed
securities after a securitization of mortgage loans held for sale to be
classified based on holding intent in accordance with SFAS 115 except in cases
where the retained mortgage-backed security is committed to be sold before or
during the securitization process in which case it must be classified as
trading. SFAS 134 will be effective on January 1, 1999 and is not expected to
have a significant impact of Cornerstone's financial statements.

                                      -8-
<PAGE>   9
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         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.

         Impact of the Year 2000 - The Company has conducted a comprehensive
review of its computer systems to identify applications that could be affected
by the "Year 2000" issue, and has developed an implementation plan to address
the issue. The Company's data processing is performed primarily by a third-party
service bureau with part of its processing being performed in-house; however
software and hardware utilized are under maintenance agreements with third-party
vendors, consequently the Company is very dependent on those vendors to conduct
its business. The Company has already contacted each vendor to request time
tables for Year 2000 compliance and expected costs, if any, to be passed along
to the Company. To date, the Company has been informed that its primary service
providers anticipate that the majority of reprogramming efforts will be
completed by December 31, 1998, allowing the Company adequate time for testing.
Certain other vendors have not yet responded, however. The Company will pursue
other options if it appears that these vendors will be unable to comply.
Management does not expect these costs to have a significant impact on its
financial position or results of operations. However, there can be no assurance
that the vendors' systems will be Year 2000 compliant. Consequently the Company
could incur incremental costs to convert to another vendor. The Company has
identified certain of its hardware and software equipment that will not be Year
2000 compliant and intends to purchase new equipment and software prior to
December 31, 1998. These capital expenditures are expected to total
approximately $185,000. The Company has attempted to assess the impact of the
"Year 2000" issue upon its customer base. As a part of this effort the
commercial loan area has been asked to assess its customers' business areas to
determine if the Company has high risk in any particular areas. A cursory review
indicates that a large majority of all loan customers both commercial and
non-commercial are based in real estate and are not believed to be high risk.


                                      -9-
<PAGE>   10
FINANCIAL CONDITION
-------------------

         Western Ohio Financial Corporation ("the Company") is the holding
company of Cornerstone Bank ("Cornerstone") formerly a combination of
Springfield Federal Savings Bank, Mayflower Federal Savings Bank, and Seven
Hills Savings Association. Consolidated assets of the Company totaled $392.1
million at September 30, 1998, an increase of $20.1 million from the December
31, 1997, total of $372.0 million. The increase in assets is primarily the
result of an increase of $60.9 million in cash and cash equivalents, and an
increase of $9.2 million in mortgage-backed securities offset by a decrease of
loan receivables of $33.1 million and a decrease of securities of $16.9 million.
Liabilities increased $24.7 million primarily due to an increase in deposits of
$15.6 million coupled with an increase in Federal Home Loan Bank advances of
$9.4 million.

         Loans receivable decreased $33.1 million during the nine months ended
September 30, 1998, decreasing from $277.7 million as of December 31, 1997 to
$244.6 million on September 30, 1998. This decrease is the result of
management's decision to place greater emphasis on selling one- to four-family
loans in the secondary market coupled with an increased rate of repayment on
similar loans in its loan portfolio. Management made the decision to emphasize
selling loan production due to its anticipation of a flat interest rate yield
curve in 1998. While the majority of new loan production will be designated as
held for sale, management has shifted its strategy slightly to include the
possibility of retaining some loans in portfolio. Management believes that
overall it can achieve greater returns through secondary market sales on a
servicing released basis.

         In December 1997, the Company established an additional provision for
loan losses of $2.3 million. Management identified potential losses and
increased its provision for several problem loans during the fourth quarter of
1997. These loans were primarily of a commercial nature. Management reduced the
allowance $261,000 during the quarter ended June 30, 1998, as the result of its
decreasing overall loans receivable portfolio and the successful resolution of a
major loan of concern. Management believes that the reduced allowance remains
adequate given the area economic conditions and its current loan portfolio
composition. In addition, the Company is aware of no regulatory directives or
suggestions that the Company make additional provisions for losses on loans.

         Cash and cash equivalents increased by $60.9 million to $92.1 million
on September 30, 1998, from $31.2 million on December 31, 1997. Cash and cash
equivalents consist of cash, checking deposits and federal funds deposited at
other financial institutions.

         Investment securities available for sale decreased $16.9 million or
75.1% from $22.5 million at December 31, 1997, to $5.5 million on September 30,
1998. The decrease is the result of a sale of $15.2 million of investment
securities in addition to the maturity of securities totaling $1.7 million.

         The Company's mortgage-backed securities available for sale increased
by $9.2 million or 41.1% from $22.4 million on December 31, 1997, to $31.6
million on September 30, 1998. This was due to the purchase of $20.1 million of
mortgage-backed securities available for sale offset by the sale of $7.1 million
of mortgage-backed securities along with principal repayments on existing
mortgage-backed securities available for sale. A portion of these securities is
often referred to as derivatives. The derivative securities were not "high risk"
securities under the criteria set forth by the Federal Financial Institutions
Examination Council ("FFIEC").

         The investment in the stock of the Federal Home Loan Bank of Cincinnati
increased by $357,000 from $6.5 million at December 31, 1997, to $6.8 million at
September 30, 1998. The increase is due primarily to the stock dividends paid by
the Federal Home Loan Bank. This investment is dictated by Cornerstone's
membership in the Federal Home Loan Bank and is a factor of Cornerstone's
borrowings and total assets.

         Other assets decreased by $296,000 over the nine months ended September
30, 1998, primarily due to the decrease in prepaid expenses.


                                      -10-
<PAGE>   11
         Deposits increased by $15.6 million or 6.3% during the nine months
ended September 30, 1998. This increase is generally due to Cornerstone's
aggressive attempt to increase deposits, especially in its checking account
base.

         Advances from the Federal Home Loan Bank of Cincinnati increased by
$9.4 million or 13.8% as the result of $45.7 million in new borrowings offset by
$36.3 million in repayments. The borrowings were used primarily to fund the
purchase of mortgage-backed securities as well as to provide liquidity for the
pending sale of Cincinnati branch deposits. The advances are fixed rate advances
utilized by Cornerstone.

         Other liabilities decreased $350,000 from $2.1 million on December 31,
1997, to $1.8 million on September 30, 1998. This decrease is primarily due to a
decrease in escrow holdings as taxes are paid and the overall loan receivable
portfolio declines. Total stockholders' equity decreased $4.6 million from $54.6
million at December 31, 1997, to $50.0 million at September 30, 1998, a decrease
of 8.5%. This decline is primarily due to an increase in treasury stock
repurchases.

         As of September 30, 1998, the Company had commitments to make $2.4
million of residential loans and no nonresidential mortgage loans. It is
expected that these loans will be funded within 30 days. The Company also had
$1.4 million in commitments to fund loans on residential properties under
construction. These commitments are anticipated to be filled within three to six
months. Unused commercial lines of credit were $495,000 and unused home equity
lines of credit were $7.0 million. Commitments to originate non-mortgage loans
totaled $1.8 million.

         On June 16, 1998, the Company announced the proposed sale of its
deposits in the Cincinnati market. The combined total of deposits that were the
object of the sale was approximately $79.4 million. This transaction represents
a part of management's broader strategy of concentrating more fully on our
traditional strengths and the greater west central Ohio market area. This
divestiture should significantly enhance the Company's efficiency ratio and
allow the Company to improve its financial performance. The Company has revised
its original estimated one-time charge of $913,000 to be made upon completion of
the sale of its Cincinnati offices. Its new estimated one time charge is
$550,000. The lower anticipated charge is primarily due to an increase in the
deposit base in the Cincinnati market.


                                      -11-
<PAGE>   12
CAPITAL RESOURCES AND LIQUIDITY OF CORNERSTONE BANK
---------------------------------------------------

         The Office of Thrift Supervision (OTS) has three minimum regulatory
capital standards. During the three months ended September 30, 1998, Cornerstone
continued to comply with all three requirements. The following is a summary of
Cornerstone's approximate regulatory capital position, in dollars (millions) and
as a percentage of regulatory assets, at September 30, 1998.

<TABLE>
<CAPTION>
                           Actual           Required          Excess
                       ---------------   --------------   ---------------
<S>                    <C>       <C>     <C>       <C>    <C>        <C> 
Tangible Capital       $43.5     11.2%   $ 5.8     1.5%   $37.7      9.7%
Core Capital           $43.5     11.2%   $15.5     4.0%   $28.0      7.2%
Risk-Based Capital     $45.5     22.5%   $16.2     8.0%   $29.3     14.5%
</TABLE>

         Federal regulations require Cornerstone to maintain an average daily
balance of liquid assets equal to at least 4% of the sum of its average daily
balance of net withdrawable deposit accounts and borrowings payable in one year
or less for the preceding calendar quarter. This regulation changed in December
1997 by modifying the requirement to be 4% instead of 5% for overall liquidity
and eliminating the short term requirement of 1%. In addition, the regulation
now allows for mortgage-backed and other securities to be included as part of
liquid assets without any term limitation. Liquidity is measured by cash and
certain investments that are not committed, pledged, or required to liquidate
specific liabilities. The following is a summary of Cornerstone's regulatory
liquidity ratio.

<TABLE>
<CAPTION>
                 September 30,  June 30,   March 31,  Dec. 31,
                     1998         1998       1998       1997
                    -----        -----      -----      -----
<S>              <C>            <C>        <C>        <C>  
Liquid Assets       38.8%        27.4%      26.4%      23.0%
</TABLE>


          The above tables pertain only to Cornerstone. The resources of the
Company are not considered in meeting the above requirements.


                                      -12-
<PAGE>   13
         RESULTS OF OPERATIONS
         ---------------------


General
-------

         For the nine months ended September 30, 1998, net income increased by
$206,000 compared to the nine months ended September 30, 1997. The largest
factor in the increase was the reversal of prior provisions for losses on loans.
Another major factor is the increase of gain on sales of investments and the
increase of gain on sale of loans. These sales included the sale of Federal Home
Loan Mortgage Corporation Stock in addition to sales of mortgage-backed
securities and an agency callable security. For the quarter ended September 30,
1998, net income rose $126,000 compared to the quarter ended September 30, 1997.
No provision for losses on loans during the quarter ended September 30, 1998
along with an increased gain on sale of loans were the primary reasons for the
increase.

Interest Income
---------------

         For the nine months ended September 30, 1998, interest income decreased
by $2.4 million compared to the nine months ended September 30, 1997, from $22.0
million to $19.6 million. Interest and fees on loans decreased by $2.4 million
for the nine months ended September 30, 1998, compared to the nine months ended
September 30, 1997. This is due primarily to lower outstanding balances, which
are attributable to the repayment of loans in portfolio. Interest income
decreased $1.1 million for the three month period ended September 30, 1998,
compared to the three month period ended September 30, 1997. The major causes of
the decline are the reduced average balances of loans and mortgage-backed
securities.

Interest Expense
----------------

         Interest expense decreased by $1.4 million, from $13.6 million for the
nine months ended September 30, 1997, as compared to $12.2 million for the nine
months ended September 30, 1998. The decrease was primarily due to lower average
levels of borrowing from the Federal Home Loan Bank. Funds from the repayment of
loans receivable were used to repay advances owed to the Federal Home Loan Bank
over the majority of the nine month period. Management has also aggressively
marketed its deposit programs using the funds to repay Federal Home Loan Bank
advances. The interest on borrowings decreased $2.1 million from $4.5 million
for the nine months ended September 30, 1997, to $2.4 million for the nine
months ended September 30, 1998. Interest expense decreased by $562,000, from
$4.6 million for the three months ended September 30, 1997, as compared to $4.0
million for the three months ended September 30, 1998. The interest on
borrowings decreased $750,000 from $1.5 million for the three months ended
September 30, 1997, to $721,000 for the three months ended September 30, 1998.
These borrowings were fixed rate in nature.

Net Interest Income
-------------------

         Net interest income decreased $980,000 to $7.4 million for the nine
months ended September 30, 1998, as compared to $8.4 million for the nine months
ended September 30, 1997. This is primarily due to the decline in total
outstanding loans receivable. In addition, the repayment of Federal Home Loan
Bank advances and the increase in deposits contributed to the change in the
interest expense composition affecting net interest income. Net interest income
decreased $574,000 to $2.3 million for the three months ended September 30,
1998, as compared to $2.9 million for the three months ended September 30, 1997.

Provision for Losses on Loans
-----------------------------

There was a reversal of prior provisions of $261,000 shown for the nine month
period ended September 30, 1998. As explained in the financial condition section
of this filing, management reduced the allowance $261,000 during the quarter
ended June 30, 1998, as the result of its decreasing overall loan portfolio and
successful resolution of a major loan of concern. There was no adjustment to the
provision during the three month period ended September 30, 1998. The reduction
of the provision in the second quarter coupled with no adjustment during the
first and third quarters of 1998, provided an increase of $246,000 and $616,000
for the three and nine month periods ended September 30, 1998, respectively as
compared to the three and nine month periods ended September 30, 1997. 


                                      -13-
<PAGE>   14
Gain on Sale of Investments
---------------------------

         The gain on sale of investments was $307,000 for the nine month period
ended September 30, 1998. This is an increase of $156,000 or 103.3% over the
$151,000 reported for the nine month period ended September 30, 1997. There was
no gain on sale of investments for the three month period ended September 30,
1998, compared to $93,000 reported for the three month period ended September
30, 1997. The sales during the nine month period ended September 30, 1998 were
of mortgage-backed securities and agency callable securities.

Gain on Sale of Loans
---------------------

         There was a gain on sale of loans of $85,000 and $187,000 for the three
and nine month periods ended September 30, 1998 respectively. No gain on sale of
loans was reported for the three or nine month periods ended September 30, 1997.

Other Income
------------

         Other income is reported as $762,000 for the nine month period ended
September 30, 1998, an increase of $268,000 or 54.3% over the $494,000 reported
for the nine month period ended September 30, 1997. Other income increased from
$114,000 for the three months ended September 30, 1997, to $297,000 for the
three months ended September 30, 1998. This is related to increased efforts to
generate service fees by Cornerstone with its checking account program.
Management is actively taking steps to increase this area of income generation.

Other Expense
-------------

         Total other expense decreased $96,000 to $7.1 million for the nine
month period ended September 30, 1998 from $7.2 million for the nine month
period ended September 30, 1997. Total other expense decreased by $357,000 to
$2.3 million for the three month period ended September 30, 1998 from $2.7
million for the three month period ended September 30, 1997. Management has
increased expenditures in marketing and operations to generate and support a
higher level of business activity. However, the three month period ended
September 30, 1997 included charges associated with the conversion and name
change of Springfield, Mayflower and Seven Hills to Cornerstone Bank.

Income Tax Expense
------------------

         Income tax expense increased by $78,000 and $137,000 for the three and
nine month periods ended September 30, 1998 respectively. These changes are the
result of changes in earnings before taxes.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------

         There have been no material changes in the quantitative and qualitative
disclosures about market risks as of September 30, 1998 from that presented in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1997.


                                      -14-
<PAGE>   15
                                     PART II
                                     -------

                                   SIGNATURES


         Pursuant to the requirement 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: November 13, 1998                         /s/ John W. Raisbeck
     ---------------------                      --------------------------------
                                                John W. Raisbeck, President
                                                and Chief Executive Officer
                                                (Duly Authorized Officer)





Date: November 13, 1998                         /s/ Thomas A. Estep
     ---------------------                      --------------------------------
                                                Thomas A. Estep, Vice President,
                                                Vice President, Treasurer and 
                                                Chief Financial Officer
                                                (Principal Financial and 
                                                Accounting Officer)


                                      -15-